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Globalization

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  • 1. Chapter 1 Welcome to MGT 480 International Management Tonight: Syllabus & Course Overview Definition of International Management Refresher on Global Business Environment Globalization & Economic Trends Political/Regulatory/Technological Environment Ethics & Corporate Social Responsibility
  • 2. 2 International Management  International management  The process of applying management concepts and techniques in a multinational environment and adapting management practices to different economic, political, and cultural environments  Multinational corporations (MNC)  Operations in more than one country  International sales,  Nationality mix of managers and owners McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.
  • 3. Chapter 1 Chapter 1 Globalization & Economic Trends
  • 4. 4 Market Value Billions of U.S. Dollars Sales Billions of U.S. Dollars Top Ten Global MNCs McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved. 1. General Electric $328.11 2. Microsoft 284.43 3. ExxonMobil 283.61 4. Pfizer 269.66 5. Wal-Mart Stores 241.19 6. Citigroup The Top 10 global MNCs Ranked by Market Value, Sales, Profits, and Share-Price Gain, 2003 1. Wal-Mart Stores 258.68 2. BP 232.57 3. ExxonMobil 222.88 4. Royal Dutch/Shell 201.93 5. General Motors 183.24 6. DaimlerChrysler
  • 5. 5 Top Ten Global MNCs McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved. Profits Billions of U.S. Dollars 1. ExxonMobil 20.96 2. Citigroup 17.85 3. General Electric 15.00 4. HSBC Holdings 11.65 5. Royal Dutch/Shell 11.41 6. Bodafone Group The Top 10 global MNCs Ranked by Market Value, Sales, Profits, and Share-Price Gain, 2003 Share-Price Gain 1. Mizuho Financial 636% 2. Research in Motion 550 3. UFJ Holdings 420 4. SK 383 5. Rakuten 381 6. Sumitomo Mitsui Fin. 331 7. Elan 311 8. Bharti Tele-Ventures 276 9. Yahoo! Japan 241 10.Mitsui Trust Hldgs. 229 Data: Morgan Stanley Capital International Standard & Poor’s Compustat Source: http://images.businessweek.com/mz/0o4/30/0430_62intbg1_a.gif
  • 6. 6 Globalization  Process of integration among countries around the world  Social  Political  Economic  Cultural  Technological  Benefits of growing global trade and investment  Wealth  Jobs  Technology  Lower prices
  • 7. 7 Globalization  Criticisms of globalization  Offshoring of business services jobs to lower-wage countries  Growing trade deficits  Slow wage growth  Environmental and social impacts
  • 8. 8 Global and Regional Integration  World Trade Organization (WTO)  General Agreement on Tariffs and Trade (GATT)  Regional Agreements  North American Free Trade Agreement (NAFTA)  U.S.—Central American Free Trade Agreement (CAFTA)  Free Trade Agreement of the Americas (FTAA)  European Union (EU)  Association of Southeast Asian Nations (ASEAN)
  • 9. 9 Trends in International Investment and Trade  International investments  80 percent from developed countries  Foreign direct investment (FDI)  Economic growth potential (esp. China and Asia in general)  Trade growing faster than most domestic economies  Over one-half of world trade is accounted for by  United States  European Union  Japan
  • 10. 10 The World’s Largest Economies 2005 and 2020 (Projected) Measured byThe World’s Largest Economies 2005 and 2020 (Projected) Measured by GDP at Market Exchange Rates:GDP at Market Exchange Rates:
  • 11. 11 The World’s Largest Economies 2005 and 2020 (Projected) Measured byThe World’s Largest Economies 2005 and 2020 (Projected) Measured by GDP at Purchasing Power Parity (ppp)GDP at Purchasing Power Parity (ppp)
  • 12. 12 Most Populous Countries in 1980, 2000, andMost Populous Countries in 1980, 2000, and 2050 (Projected):2050 (Projected):
  • 13. 13 World Foreign Direct Investment Inflows (inWorld Foreign Direct Investment Inflows (in millions of dollars):millions of dollars):
  • 14. 14 World Foreign Direct Investment Outflows (inWorld Foreign Direct Investment Outflows (in millions of dollars):millions of dollars):
  • 15. 15 Trade Flows Among World Regions, 2005 (in billions of dollars or percent)Trade Flows Among World Regions, 2005 (in billions of dollars or percent)
  • 16. 16 Top 10 Trading Partners ofTop 10 Trading Partners of the United States, 2003the United States, 2003 McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved. Importing U.S. Exporting U. S. Rank Country Exports Rank Country Imports 1 Canada 169,924 2 Mexico 97,412 3 Japan 52,004 4 United Kingdom 33,828 5 Germany 28,832 6 China 28,368 7 South Korea 24,073 8 Netherlands 20,695 9 Taiwan 17,448 10 France 17,053 (in millions of dollars) 1 Canada 221,595 2 China 152,436 3 Mexico 138,060 4 Japan 118,037 5 Germany 68,113 6 United Kingdom 42,795 7 South Korea 37,229 8 Taiwan 31,599 9 France 29,219 10 Ireland 26,747 Adapted from: Table 1-4: Top 10 Trading partners of the United States, 2003 (in millions of dollars).
  • 17. 17 World’s MostWorld’s Most Competitive Nations, 2006Competitive Nations, 2006
  • 18. 18 Market Potential Indicators Ranking for Emerging Markets,Market Potential Indicators Ranking for Emerging Markets, 20072007
  • 19. 19 Economic Performance  India  Low per capita GDP  Recent trend of locating software and high value-added services to this country  Attractive to U.S. and British investors (well educated, English speaking, technologically sophisticated workers)  Middle East and Central Asia  Large oil reserves  Highly unstable geopolitical and religious forces  Plagued by continuing economic problems Developing and Emerging Countries
  • 20. 20 Economic Performance  Africa  Considerable natural resources  African nations remain very poor and undeveloped  International trade is not a major source of income  Populace divided into 3,000 tribes that speak 1,000 languages and dialects  Major political instability  Poverty, starvation, illiteracy, corruption, overcrowding among many social problems negatively affecting economic sector Developing and Emerging Countries
  • 21. 21 Review and Discuss 1. How has globalization affected different world regions? What are some of the benefits and costs of globalization for different sectors of society? 2. How has NAFTA affected the economies of North America and the EU affected Europe? What importance do these economic pacts have for international managers in North America, Europe and Asia? 3. Why would MNCs be interested in South America, India, the Middle East, Central Asia, and Africa, the less developed and emerging countries of the world? 4. If you were a foreign investor, what asset classes and regions would you seek to invest in today?
  • 22. Chapter 1 Chapter 2 Political, Regulatory, Technological, Dimensions
  • 23. 23 Political Environment:  Ideologies (ideas reflecting beliefs and values influencing behavior/culture of nations and political systems) underlie the actions of governments.  Evaluate a political system along two dimensions: (1) rights of citizens based on a system of government (range democratic to totalitarian); (2) Focus of political system on individualism vs. collectivism.  No pure form of government (how is the US collectivist?)  Democratic tend to emphasize individualism and totalitarian tends to emphasize collectivism.  What challenges are involved in different political environments?
  • 24. 24 Legal and Regulatory Environment  Confusion and challenge for the MNC due to many different laws and regulations in global business operations  MNCs must carefully evaluate legal framework in each market before doing business
  • 25. 25 Legal and Regulatory Issues  Foreign Corrupt Practices Act ( http://www.usdoj.gov/criminal/fraud/docs/dojdocb.html)  Illegal to influence foreign officials through  Personal payment  Political contributions  When bribes removed, MNCs more willing to do business in that country  Restrictive bureaucratization  Government controls often inefficient and uncorrected  Local politics often prevail over national concerns  Privatization
  • 26. 26 Regulation of Trade and Investment  Individual countries use legal and regulatory policies to affect the international management environment  If a country is perceived to engage in unfair trade practices (WTO and similar agreements)  Government support (subsidies)  Require MNCs to accept local partners  Response may be  Retaliatory tariffs  Restrictive trade regulations
  • 27. 27 Technological Environment and Global Shifts in Production  Biotechnology  Nanotechnology  Satellites  Automatic translation telephones  Artificial intelligence and embedded learning technology  Advancements in computer chip technology  Supercomputers  E-business  Business-to-business (B2B)  Business to consumer (B2C) transactions  e-tailing  Financial services (e-cash)
  • 28. 28 Technological Environment and Global Shifts in Production  Telecommunications  Wireless or mobile telephone service  Economic growth hampered by poor communication services  Wireless is more affordable than installed phone lines  Some governments recognize the need to privatize this service  Technology, outsourcing and offshoring  Technology has reduced and eliminated some work in middle management and white-collar jobs  Global competition has forced some MNCs to outsource jobs to offshore productions (lower labor and other costs)  Emerging technology makes work more portable
  • 29. 29 Expected Winners/Losers in Selected Occupations
  • 30. 30 Ethics and Social Responsibility  Ethics:  Study of morality and standards of conduct  Dilemmas arising from conflicts between ethical standards between countries most evident in employment practices  Inferring right vs. wrong in legal sense
  • 31. Chapter 1 Chapter 3 Ethics & Social Responsibility
  • 32. 32 Ethics and Social Responsibility  Ethics:  Study of morality and standards of conduct  Dilemmas arising from conflicts between ethical standards between countries most evident in employment practices  Inferring right vs. wrong in legal sense
  • 33. 33 Ethics and Social Responsibility Corporate Social Responsibility (CSR): Closely related to ethics Actions of a firm to benefit society beyond requirements of law and direct interests of firm CSR involves taking voluntary action CSR concerns include working conditions in factories and service centers as well as environmental impacts of corporate activities
  • 34. 34 Ethics and Social Responsibility  Employment and business practices  Difficult to establish a universal foundation of employment practices  Difficult dilemmas in deciding working conditions, expected consecutive work hours, and labor regulations.  Offshoring due to differences in labor costs
  • 35. 35 Ethics and Social Responsibility  Human Rights  Currently no universally adopted standard  A great deal of subjectivity and culturally biased viewpoints exist  Some basic rights: life, freedom from slavery or torture, freedom of opinion and expression, general ambiance of nondiscriminatory practices  Human rights violations still rampant globally
  • 36. 36 Ethics and Social Responsibility  Corruption  Government corruption pervasive element in international business environment  Scandals in Russia, China, Pakistan, Lesotho, South Africa, Costa Rica, Egypt and elsewhere
  • 37. 37 Corruption Index: Least and Most Corrupt Countries
  • 38. 38 Ethics and Social Responsibility Around the World  Ethical issues  Workers not well paid (often work 12 hours a day, 7 days a week)  Piracy of intellectual property, counterfeiting, and industrial spying  Human rights violations  Use of prisoner and child labor Ethical Problems and Concerns China
  • 39. 39 Ethics and Social Responsibility Around the World  Political campaign contributions & lobbyists  Fraud in mortgage sector  Attitude of caveat emptor  Rising wage inequality  middle class wages stagnant for a decade  Lack of health benefits for workers  Loss of promised retirement benefits Ethical Problems and Concerns United States
  • 40. 40 Corporate Social Responsibility (CSR) and Sustainability  CSR: Action of a firm to benefit society beyond the requirements of the law and direct interests of the firm  Sustainability: Development that meets humanity’s needs without harming future generations  Why are MNCs getting involved in corporate social responsibility? Are they displaying a sense of social responsibility, or is this merely a matter of good business? Defend your answer.
  • 41. 41 Rise of Civil Society and NGOs  Emergence of organized civil society and NGOs altered  Business environment globally  Role of MNC within global business environment  NGOs in the U.S. and globally  Save the Children  Oxfam  CARE  World Wildlife Fund  Conservation International
  • 42. 42 Rise of Civil Society and NGOs  Corporations receiving heavy criticism  Nike  Levi’s  Chiquita  Major criticisms  Exploitation of low-wage workers  Environmental abuses  Intolerable workplace standards  Response to social obligations  Agreements and codes of conduct  Maintenance of standards in domestic and global operations  Cooperation with NGOs regarding certain social issues
  • 43. 43 Trust in Leaders 0 10 20 30 40 50 60 Average Across All 15 Countries Surveyed NGO leaders Leaders at the U.N. Spiritual/religious leaders Leaders of Western Europe Managers of the global economy Managers of the national economy Executives of MNCs Leaders of the U.S.A. 52 42 41 36 36 35 33 27 Adapted from Figure 3-1: Trust in Leaders: Percentage Saying “A Lot” and “Some Trust”
  • 44. 44 Principles of the Global Compact http://www.unglobalcompact.org/AboutTheGC/faq.html
  • 45. 45 Millennium Development Goals
  • 46. 46 Case: AIDS and Pharmaceuticals  See pages 82-90