International Management© 2018 by McGraw-Hill Education.

International Management
© 2018 by McGraw-Hill Education. This is proprietary material
solely for authorized instructor use. Not authorized for sale or
distribution in any manner. This document may not be copied,
scanned, duplicated, forwarded, distributed, or posted on a
website, in whole or part.
1
Chapter One
Globalization and International Linkages
solely for authorized instructor use. Not authorized for sal e or
2
Learning Objectives
Assess the implications of globalization for countries,

industries, firms, and communities
Review the major trends in global and regional integration
Examine the changing balance of global economic power and
trade and investment flows among countries
Learning Objectives (continued)
Analyze the major economic systems and recent developments
among countries that reflect those systems
Social Media
Changed the way in which people connect
Changed global business strategy
Changed the way in which international business is conducted
Impacted international diplomacy
Communication Platforms
Can be accessed by individuals and groups from any location

Offer myriad opportunities for companies to identify and target
discrete groups
Revolutionize nature of management by allowing direct
interaction between producers and consumers
Accelerate the already rapid pace of globalization and
integration
Management
Process of completing activities with and through other people
International management is the process of:
Applying management concepts and techniques in a
multinational environment
Adapting management practices to different economic, political,
and cultural contexts
Multinational Corporations (MNCs)
Firms that have:
Operations in more than one country
International sales
Mix of nationality among managers and owners
Managers are required to develop international management
expertise
Increasingly coming from developing nations like China and
India

Globalization and Internationalization
Globalization
Process of social, political, economic, cultural, and
technological integration among countries around the world
Evidence can be seen in increased levels of trade, capital flows,
and migration
Internationalization
Process of a business crossing national and cultural borders
Factors That Facilitate Globalization
Technological advances in transnational communications,
transport, and travel
Offshoring
Companies undertake some activities at offshore locations
instead of in their home countries
Outsourcing
Subcontracting or contracting out of activities that had
previously been performed by the firm to external organizations

Benefits of Globalization
11
Wealth
Better jobs
Access to technology
Lower prices
Availability of goods

Criticisms of Globalization
Offshoring of service jobs to lower-wage countries
Companies and countries place downward pressure on wages
and working conditions
Growing trade deficits and slow wage growth could lead to
economic collapse
Concerns over environmental and social impacts
Global Agreements
General Agreement on Tariffs and Trade (GATT)
Helped in the dramatic reduction of tariff and nontariff barriers
among nations
World Trade Organization (WTO)
Oversees rules and regulations for international trade and
investment

13
Regional Agreements
14
North American Free Trade Agreement (NAFTA)
U.S.–Central American Free Trade Agreement (CAFTA and
CAFTA-DR)
European Union (EU)
Association of Southeast Asian Nations (ASEAN)
Trans-Pacific Partnership (TPP)
U.S.–Singapore Free Trade Agreement
Transatlantic Trade and Investment Partnership (T-TIP)

North American Free Trade Agreement (NAFTA)
Member nations include the United States, Canada, and Mexico
Helped eliminate tariffs and import and export quotas
Opened government procurement markets to companies in the
other two nations
Increased opportunity to make investments in each other’s
country
15
North American Free Trade Agreement (NAFTA) (continued)
Increased the ease of travel between countries

Removed restrictions on agricultural products, auto parts, and
energy goods
16
Changing Global Demographics
Factors contributing to the increase in the median global
population age
Increase in global life expectancy due to improvements in
technology and healthcare
Increase in time spent in retirement due to increase in life
expectancy
Decline in global fertility rate
Shifting Balance of Economic Power in the Global Economy
Result of economic integration and rapid growth of emerging
markets
Emerging and developing nations might play a dominant role in
the global economic system
BRIC countries - Brazil, Russia, India, and China
E7 - Seven major emerging economies (Brazil, China, India,
Indonesia, Mexico, Russia, and Turkey)

Shifting Balance of Economic Power in the Global Economy
(continued)
N-11 - Next wave of emerging markets (Bangladesh, Egypt,
Indonesia, Iran, Mexico, Nigeria, Pakistan, Philippines, Turkey,
South Korea, and Vietnam)
African countries can benefit from the increase in price of
commodities
Gas and oil, agricultural products, and mineral and mining
products
Table 1.7 - Changing Global Demographics: Developing
Countries on the Rise
Source: United Nations: Department of Economic and Social
Affairs, World Population Prospects: The 2015 Revision. --> --
> https://esa.un.org/unpd/wpp/

20
Trends in Trade and International Investments
Since the global recession in 2009 , global trade and investment
have continued to grow
Foreign direct investment (FDI)
Amount invested in property, plant, or equipment in another
country
Growing at a slow but steady rate in the years since the global
recession
May reach $1.7 trillion by 2017
Global Economic Systems

22
Market economy
Command economy
Mixed economy
Market Economy
Exists when private enterprises reserve the right to own
property and monitor production and distribution of goods and
services
Management is effective
Private ownership provides local evaluation and understanding
Least restrictive form of economy
Resource allocation is determined by the law of demand

Market Economy (continued 1)
General balance between supply and demand sustains prices
Imbalance creates price fluctuation
Competition is encouraged
Helps promote innovation, economic growth, high quality, and
efficiency
Market Economy (continued 2)
Optimal growth is facilitated by focusing on how to best serve
the customer
Monopolies or restrictive business practices may be prohibited
to maintain the integrity of the economy
Command Economy
Government holds explicit control over the price and supply of
a good or service
Businesses are owned by the state
Ensures that investments and other business practices are done
in the best interest of the nation
Management ignores demographic information
Creates an environment where little motivation exists

Mixed Economy
Combination of market and command economy
Helps raise the standard of living
Aided by regulations concerning minimum wage standards,
social security, environmental protection, and the advancement
of civil rights
Ownership of organizations that are critical to the nation may
be transferred to the state
Subsidizes costs and allows the firms to flourish
Evaluation of the World’s Economies
28
Established economies

North America
Emerging economies
Central and Eastern Europe
Developing economies
South America
European Union
Japan
China
Other emerging markets of Asia (South Korea, Hong Kong,
Singapore, and Taiwan)
Middle East and Central Asia
Africa

India
North America
One of the four largest trading blocs in the world
Combined purchasing power of the United States, Canada, and
Mexico is more than $19 trillion
Free-market-based economy provides considerable freedom in
decision-making processes
International firms receive the benefit of greater flexibility and
lower barriers
North America (continued 1)
The United States
Firms maintain dominant global positions in technology-
intensive industries
Considered to be a lucrative market for expansion by foreign
MNCs
Canada is the largest trading partner
Most of the largest foreign-owned companies in Canada are
totally or heavily U.S.-owned
Legal and business environments are similar to that in the U.S.

North America (continued 2)
Mexico
Strongest Latin American economy
Has free-trade agreements with over 46 countries
Competes with Asia for the U.S. market and has the benefit of
proximity and lower-cost labor
Facilitated by the maquiladora system
Increased trade with both Europe and Asia
31
European Union (EU)
Objectives and goals
Eliminate all trade barriers among member nations
Follow a single currency (euro) and a regional central bank
Firms have the benefit of:
Manufacturing high-quality, low-cost goods
Shipping manufactured goods across the EU without paying
duties or being subject to quotas

European Union (EU) (continued)
Challenges
Absorbing its eastern neighbors that could result in a giant,
single European market
Large deficits faced by several European governments
Resulted from structural conditions and shorter-term economic
pressures
Placed pressure on the euro
Maintaining a unified EU in the coming decades
Japan
Unprecedented economic success in the 1970s and 1980s
Huge positive trade balance
Strong yen
Gained recognition as the world leader in manufacturing and
consumer goods
Remains a formidable international competitor and is well
poised in all major economic regions

Japan (continued)
Early success can be attributed to:
The Ministry of International Trade and Industry (MITI)
Governmental agency that identifies and ranks national
commercial pursuits and guides the distribution of national
resources to meet these goals
Keiretsus
Large, vertically integrated corporations whose holdings supply
much of the assistance needed in providing goods and services
to end users
Emerging and Developing Economies
Face relatively low GDP per capita
Have an unskilled or semiskilled workforce
Involve considerable government intervention in economic
affairs
Can be viewed as developing economies that exhibit sustained
economic reform and growth

Russia
Dismantled price controls
Privatized businesses previously owned by the government
Direct investment and membership in International Monetary
Fund (IMF) helped to raise GDP and decrease inflation
Russian Economy
Early economy was boosted by abundant oil and high global
energy prices
Recent decreases in demand have pushed Russia into a recession
Likely to undergo many years of economic instability and
recurrent political problems
Challenges - Persistent crime, corruption, and lack of public
security
Central and Eastern Europe
Hungary
Privatization of state-owned businesses
Joint ventures between local and western firms
Receives direct investments from MNCs
Poland
Only economy in the EU to continue to grow during the global

recession of 2008–2009
Central and Eastern Europe (continued)
Key for Albania and other Eastern European countries is to
make themselves less risky and more attractive for international
business
Maintain social order
Establish rule of law
Rebuild collapsed infrastructure
Get factories and other value-added, job-producing firms up and
running
China
Considerable decline in GDP
Current challenges
Massive savings glut in corporate sector
Globalization of manufacturing networks
Vast developmental needs
Unemployment (15–20 million new jobs required annually)
Social unrest

China: Major Risk for Investors
Caused due to:
Delicate nature of the one country, two systems balance
(communism and capitalism)
Concerns about undervaluation of China’s currency
Unpredictable and fluid nature of policies toward foreign firms
Trade relations with developed nations remain tense
Economic Performance in Emerging Markets of Asia
South Korea
Chaebols: Large, family-held conglomerates that have
considerable economic and political power
Has a solid economy with moderate growth and inflation, low
unemployment, an export surplus, and fairly equal distribution
of income
Hong Kong
Headquarters for some of the most successful multinational
operations in Asia

Economic Performance in Emerging Markets of Asia (continued
1)
Singapore
Emerged as an urban planner’s model and the leader and
financial center for Southeast Asia
Taiwan
Progressed from a labor-intensive economy to one dominated by
technologically sophisticated industries
Economic Performance in Emerging Markets of Asia (continued
2)
Thailand, Malaysia, Indonesia, and Vietnam
Have a large population base with inexpensive labor despite
lack of natural resources
Known to have social stability but have suffered from turmoil in
the aftermath of recent economic crisis
India
Recent trend of locating software and higher value-added
services has bolstered middle- and upper-class market for goods
and services
Attractive to U.S. and British investors

Presence of English-speaking, well-educated, and
technologically sophisticated workers
Availability of government funds for economic development
South America
Faced many economic problems
Accumulated heavy foreign debt obligations
Experienced severe inflation
Implemented economic reforms to reduce debt
Periodic economic instability and the emergence of populist
leaders have had an impact on the attractiveness of countries in
this region
South America: Brazil
Attracted considerable foreign investment
Through privatization of power, telecommunications, and other
infrastructure sectors
Benefited from one of the most stable governments throughout
Latin America
Undisputed economic leader of South America

South America: Brazil (continued)
Long-term prospects are still potentially positive due to:
Presence of a large and relatively well-educated population
Availability of ample natural resources
Existing industrial base
Strategic geographic position
Chile
Economic growth has fluctuated between three and six percent
since the 2000s
Attracts FDI, mainly dealing with gas, water, electricity, and
mining
Continues to participate in globalization
Engages in trade agreements with Mercosur, China, India, the
EU, South Korea, and Mexico
Argentina
Has an overall strong economy
Due to abundance of natural resources, highly literate
population, export-oriented agriculture, and diversified
industrial base

Has suffered recurring economic problems
Inflation, external debt, capital flight, and budget deficits
Economic growth has slowed since the global recession
Middle East and Central Asia
Possess large oil reserves
Have highly unstable geopolitical and religious forces
Try to balance these forces with economic viability and activity
in the international business arena
Rely almost exclusively on oil production
Have made large investments in U.S. property and businesses
Africa
Has considerable natural resources but remains very poor and
undeveloped
International trade is only beginning to serve as a major source
of income
Risk for foreign investors arises from:
Overwhelming diversity of the population
Major political instability

Africa (continued 1)
Economic setbacks are caused due to:
Tragic tribal wars
Spread of diseases such as AIDS, malaria, and Ebola
Lack of institutions, infrastructure, and economic capacity to
take full advantage of globalization
Poverty, malnutrition, illiteracy, corruption, social breakdown,
vanishing resources, overcrowded cities, drought, and homeless
refugees
Africa (continued 2)
Economic growth and dynamism have accelerated in recent
years
Rise in GDP
Growth in telecommunications, banking, and retailing
Rate of return on foreign investment in Africa is higher than for
any other region
Be the International Business Consultant: Walmart in India
In light of this situation, what would your recommendation be

to Walmart?
Should it stick with the wholesale focus, or should it pursue
another joint venture with an Indian partner?
Alternatively, should it maintain a “wait and see” approach in
hopes that the Indian government will finally reform its
restrictions on foreign investment?
Review and Discuss
How has globalization affected different world regions?
What are some of the benefits and costs of globalization for
different sectors of society (companies, workers, communities)?
Review and Discuss (continued 1)
How has NAFTA affected the economies of North America and
how has the EU affected Europe?
What importance do these economic pacts have for international
managers in North America, Europe, and Asia?

Why are Russia and Eastern Europe of interest to international
managers?
Identify and describe some reasons for such interest and also
risks associated with doing business in these regions
Many MNCs have secured a foothold in Asia, and many more
are looking to develop business relations there
Why does this region of the world hold such interest for
international management?
Identify and describe some reasons for such interest
Why would MNCs be interested in South America, India, the
Middle East and Central Asia, and Africa, the less developed
and emerging countries of the world?
Would MNCs be better off focusing their efforts on more
industrialized regions? Explain

MNCs from emerging markets (India, China, Brazil) are
beginning to challenge the dominance of developed country
MNCs
How might MNCs from North America, Europe, and Japan
respond to these challenges?

International Management© 2018 by McGraw-Hill Education.

Recommended

Recommended

More Related Content

Similar to International Management© 2018 by McGraw-Hill Education.

Similar to International Management© 2018 by McGraw-Hill Education. (20)

More from TatianaMajor22

More from TatianaMajor22 (20)

Recently uploaded

Recently uploaded (20)

International Management© 2018 by McGraw-Hill Education.