Presentation on theme: "Objectives of Session 2 Discussion Topics Chapter 1 Chapter 2"— Presentation transcript:
1 Objectives of Session 2 Discussion Topics Chapter 1 Chapter 2 Next weeks assignmentsRead Chapter 3, Ethics and social responsibility ,Discussion Review Questions, #1 -5
2 Globalization and International Linkage Hodgetts and LuthansChapter OneGlobalization and International Linkage
3 Chapter ObjectivesREVIEW current trends in international investment and tradeEXAMINE the present economic status in the major regions of the global communityANALYZE some of the major developments and issues in various regions of the world
4 International Management IntroductionInternational ManagementThe process of applying management concepts and techniques in a multinational environment
5 Multinational Corporation (MNC) Operates in more than one countrySells its products in international marketsManagers and owners are of different nationalitiesMust learn to work effectively with people from different countries and different cultures.
6 IntroductionSmall and medium-sized businesses are being affected by the trend toward internationalization
9 Globalization Process of integration among countries around the world SocialPoliticalEconomicCulturalTechnologicalBenefits of growing global trade and investmentWealthJobsTechnologyLower prices
10 Globalization Criticisms of globalization Offshoring of business services jobs to lower-wage countriesGrowing trade deficitsSlow wage growthEnvironmental and social impacts
11 Increasing Internationalization Regional DevelopmentsNorth American Free Trade Agreement (NAFTA)Free trade agreement between the U.S., Canada, and Mexico which essentially removed all barriers to tradeMay expand to include Latin American countriesEuropean Union (EU)Consists of countriesMost trade barriers have been removedEuro is the common currency
12 Increasing Internationalization Pacific RimJapan and China are the dominant economiesAssociation of Southeast Asian Nations (ASEAN)BRIC EconomiesBrazil, Russia, India & ChinaWTO – World Trade OrganizationIMF
13 Increasing Internationalization (cont.) International Investment and TradeForeign direct investment is the amount invested in another countryInternational trade has increased substantially over the last two decadesMNCs buy domestic companies rather than trying to export products to that country
14 Top 10 trading Partners of the U.S.: 1999 Importing U.S. Exporting U.S. Rank Country Exports* Rank Country Imports* 1 Canada 166,600 1 Canada 198, Mexico 86, Japan 130, Japan 57, Mexico 109, U.K. 38, China 81, Germany 26, Germany 55, South Korea 22, U.K. 39, Netherlands 19, Taiwan 35, Taiwan 19, South Korea 31, France 18, France 26, Singapore 16, Italy 22,356.5* in millions of dollars
22 Economic Status and Issues of the Major Regions North AmericaNAFTA has resulted in:Elimination of tariffs as well as import and export quotasOpening of government procurement markets to companies in partner countriesIncreased opportunity to make investments in partner countriesIncreased ease of travel between partner countriesRemoval of restrictions select goods
23 Economic Status and Issues of the Major Regions North AmericaUnited StatesU.S. MNCs have holdings throughout the worldForeign MNCs find U.S. to be a lucrative marketWeaken US Dollar compared to foreign currenciesIncreasing National Debt
24 Economic Status and Issues of the Major Regions (cont.) North America (cont.)CanadaU.S.’s largest trading partnerLegal and business environments similar to those of the U.S.Target of increased international investment
25 Economic Status and Issues of the Major Regions (cont.) North America (cont.)MexicoEconomic fortunes have varied in the recent pastMaquiladora industryArrangement created by the government that permits the flow of materials and products in and out of Mexico with only the value added being taxedMexican firms expanding worldwide operations
26 Economic Status and Issues of the Major Regions (cont.) EuropePrivatization of traditionally nationalized industriesEUintended eliminate all trade barriers among member countriesTo gain a foothold in the EU, foreign MNCs have:created acquisitions and alliancesbegun co-operative research and development programsFuture challenge is the absorption of formerly communist Eastern neighbors
27 Economic Status and Issues of the Major Regions (cont.) Europe (cont.) - Central and Eastern EuropeCollapse of the Soviet Union in 1991Glasnost (openness)Perestroika (economic and political restructuring)RussiaUndergone economic reformMany attempts to stimulate the economyGreater privatization requiredCriminal activity increasing
28 Economic Status and Issues of the Major Regions (cont.) Europe (cont.) - Central and Eastern EuropeCzech Republic, Hungary, and PolandFormer communist countries that have become most visible in international arenaSome former communist countries are struggling
29 Economic Status and Issues of the Major Regions (cont.) Asia - JapanPhenomenal economic success in 1970s and 1980sMinistry of International Trade and Industry (MITI)KeiretsusVertically integrated industriesHoldings provide assistance needed in providing goods and services to end usersDecade long recession in 1990sBank loans backed by real estate or projected revenuesBy 2000, most major banks had billions of dollars in uncollectible loansInternational competition has increased
30 Economic Status and Issues of the Major Regions (cont.) Asia - ChinaAnnual real economic growth of 10 percent during the 1980s and early 1990sMore recent growth of 8 percentHealthy and growing economyGDP growth of 91 percent in 2003Attractive to foreign investors despite major political riskProduct pirating is major problemComplicated and high-risk venture
31 Economic Status and Issues of the Major Regions (cont.) Asia - The Four TigersSouth KoreaChaebols (large family-held Korean conglomerates)Affected by declining economies of South east Asia in 1990s)Hong KongNow part of People’s Republic of ChinaUncertainty about role the Chinese government intends to play in local governance
32 Economic Status and Issues of the Major Regions (cont.) Asia (cont.)The Four Tigers (cont)SingaporeLeast hurt by economic downturn of 1990sTaiwanProgression from labor-intensive economy to one dominated by technologically sophisticated industries (banking, electricity generation, petroleum refining and computers)
33 Economic Systems of the world Market EconomyPrivate enterprise reserve the right to own property and decide on what and how much to produce.Contains the least restriction in the allocation of resourcesA general balance between supply and demandCompetition is encouragedGovernment may limit monopolies, or unfair practices.
34 Economic Systems of the world Command EconomyCompared to Monopoly where the government has explicit control over the price and supply.The control is based on theoretical need of the population and might be distortedBusinesses are owned by the state to ensure investment in the best interests of the society.Government subsidies provide security to organizations.Common in communists countriesWhat are some of the issues with this system?
35 Economic Systems of the world Mixed EconomyCombination of market and command economy.Some sectors are private while others are controlled and owned by the government.Allow for competition while enable to provide assistance to individuals or companiesNationalization of major resources.What are some of the issues with this system?
37 Southeast Asia Economic Performance The Baby Tigers Thailand, Malaysia, IndonesiaLarge population baseInexpensive laborConsiderable natural resourcesAttractive to outside investors‘Baby Tigers’ lack the economic prowess of the Four Tigers
38 Characteristics of Less Developed Countries HighunemploymentLowGDPHighinternationaldebtLessDevelopedCountriesSlow (ornegative) GDPgrowth percapitaLargepopulationInexpensiveunskilled orsemi-skilledlabor
39 Developing and Emerging Countries Economic PerformanceDeveloping and Emerging CountriesIndiaLow per capita GDPRecent trend of locating software and high value-added services to this countryAttractive to U.S. and British investors (well educated, English speaking, technologically sophisticated workers)
40 Developing and Emerging Countries Economic PerformanceDeveloping and Emerging CountriesMiddle East and Central AsiaLarge oil reservesHighly unstable geopolitical and religious forcesPlagued by continuing economic problems
41 Developing and Emerging Countries Economic PerformanceDeveloping and Emerging CountriesAfricaConsiderable natural resourcesAfrican nations remain very poor and undevelopedInternational trade is not a major source of incomePopulace divided into 3,000 tribes that speak 1,000 languages and dialectsMajor political instabilityPoverty, starvation, illiteracy, corruption, overcrowding among many social problems negatively affecting economic sector
42 Chapter 1 Question Review 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)?
43 Chapter 1 Question Review 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.
44 Chapter 1 Question Review Why would MNCs be interested in South America, India, the Middle East and Central Asia, Africa, the LDCs of the world? Would MNCs be better off focusing their efforts on more industrialized regions? Explain.
46 Chapter ObjectivesEXAMINE some of the major changes that are currently taking place in the political environments of China, Europe, Russia, and Central and Eastern EuropePRESENT an overview of the legal and regulatory environments in which MNCs operate worldwideREVIEW key technological developments and their impact on MNCs now and in the future
47 Political Environment Components include:Government policies that affect MNCsStability of the government of the host country
48 Political Environment ChinaHas a complex political environmentConvert state enterprises into shareholder-owned corporationsExpanding capital markets by authorizing new stock listingsAllowing government bodies to sell off state enterprisesProviding social servicesreducing tariffsMNCs face major business obstacles ChinaGovernment regulationsLack of qualified employeesActive involvement of government in business affairs
49 Political Environment Change in government policiesMNCs must adjust their strategies and practices to accommodate the new perspectives and actual requirementsLess stable governmentsGreater riskSignificant differences among political systems across countries and regions
50 Political Environment ChinaEmerging economic powerGovernment’s desire to balanceNational, immediate needsChallenge of a free market economy and globalizationGovernment attempting to open up the economySpeed up conversion of state enterprises into corporationsExpand capital markets by authorizing new stock listingsSell off most of the 305,000 state enterprises (or let go bankrupt)Worker retraining, low-cost housing and other programsReduce tariffs to 10 percent
51 Political Environment (cont.) EuropePrivatization and economic liberalization reinforce EU-wide political and economic integrationPolitical power is variable and complexStrong opposition to U.S.-led intervention in Iraq sometimes spill over into business relationships and dealingsEurope is a large interwoven region economically, but contains vast cultural differences
52 Political Environment (cont) RussiaBleak economic outlookGovernment must keep the economy on an even keel while attracting more foreign investmentCorruption interferes with attraction of more foreign investmentCentral and Eastern EuropePolitical situation is in a state of change
55 Political Environment Central and Eastern EuropeMany of these countries have joined the EUMovement from centrally planned to market economy plagued with problems in many countriesHigh unemploymentEconomic slowdownLarge trade deficitsSome countries more successful in economic reformsEstoniaLatviaLithuania
56 Political Environment The Middle EastDoing business requires knowledge ofRegulationsLegal environmentTax regimesAccounting methodsBusiness structuresImport/export regulationsManpower and labor regulationsRestrictions on foreign capital investment
57 Political Environment The Middle EastDoing business in Middle Eastern countries is risky and potentially dangerousWar on terrorismAfghanistan and Iraq warsIsrael—Arab conflictsRising tensionsBusiness requires knowledge of IslamReligion and way of lifeFramework of life and societyIslamic fundamentalists have become aggressive toward U.S. and its allies.
58 Legal and Regulatory Environment Confusion and challenge of international business environment is heightened byDiffering laws and regulations in MNCs’ global business operationsImpact of these laws and regulations on ability to capitalize on economies of scale and scopeMNCs must carefully evaluate legal framework in each market in which they want to do business, before doing so
59 Foundations of the World’s Law IslamicLaw- based on theQur’an andteachings ofthe ProphetMohammed- found in mostcountriesSocialist- derived fromMarxism- continues toinfluenceregulations incountries fromthe formerSoviet UnionCommonEnglish law- foundation forlegal systemsin WesterndemocraciesCivil orCode LawRoman law- found in non-Islamic andnonsocialistLaws of the World
60 Legal and Regulatory Environment Basic Principles of International LawPrincipal of Sovereignty - Governments have the right to rule themselves as they see fitNationality principle - country has jurisdiction over its citizens no matter where they are located
61 Legal and Regulatory Environment Basic Principles of International Law - ContTerritoriality principle - nation has the right of jurisdiction within its legal territoryProtective principle - every country has jurisdiction over behavior that adversely affects its national security, even if the conduct occurred outside that country
62 Legal and Regulatory Issues. (cont.) Doctrine of Comity - Mutual respect for the laws, and government of other countries in the matter of jurisdiction over their own citizensAct of State Doctrine - All acts of other governments are considered to be valid by U.S. courts, even if such acts are inappropriate in the U.S.
63 Legal and Regulatory Issues (cont.) BureaucratizationRestrictive, inefficientProblematicRed tape increased the cost of doing businessBureaucracies make it difficult to open marketsPrivatizationSelling state-owned properties to private enterprisesExample: Deregulation of German telecommunications
64 Legal and Regulatory Issues Foreign Corrupt Practices ActIllegal to influence foreign officials throughPersonal paymentPolitical contributionsWhen bribes removed, MNCs more willing to do business in that countryRestrictive bureaucratizationGovernment controls often inefficient and uncorrectedLocal politics often prevail over national concernsPrivatization
65 Regulation of Trade and Investment Individual countries use legal and regulatory policies to affect the international management environmentCountry is perceived to engage in unfair trade practices (WTO and similar agreements)Government support (subsidies)Require MNCs to accept local partnersResponse may beRetaliatory tariffsRestrictive trade regulations
66 Technologies That Will Influence International Business InternetBiotechnologyArtificialIntelligenceInternationalBusinessSiliconChipsAutomaticTranslationTelephonesSupercomputersSatellitesNanotechnology
67 Technological Environment Technology is rapidly changingE-BusinessTelecommunicationsTechnologic leapfrogging - Moving from no telephones to wireless communicationsEconomic growth hampered by poor communication servicesWireless is more affordable than installed phone linesSome governments recognize the need to privatize this servicePrivatization of telecommunicationsMNCs unwilling to invest in telecommunications without the prospect of good financial return
68 Technological Environment and Global Shifts in Production Technology, outsourcing and offshoringTechnology has reduced and eliminated some work in middle management and white-collar jobsGlobal competition has forces some MNCs to outsource jobs to offshore productions (lower labor and other costs)Emerging technology makes work more portable
69 Technological Environment (cont.) Employment Fallout from TechnologyChanging technology affects the nature and number of employees to conduct operationsEmployee displacement likelyWork more portablePositives of the new technologyLowers cost of doing business worldwideProductivity likely to increasePrices likely to declineNegatives of the new technologyEmployees will lose their jobsWages may be reduced
70 Expected Winners in Selected Occupations Computer software engineers, applications100Computer support specialists97Computer software engineers, systems software90Network and computer systems administrators82Personal and home care aids62Medical assistants52-80-60-40-2020406080100Percentage change forAdapted from: Figure 2-1: Winners and Losers in Selected Occupations: Percentage Change Forecasts for
71 Expected Losers in Selected Occupations Railroad brake, signal, and switch operators-61Telephone operators-35-28Loan interviewers and clerks-26Meter readers, utilities-25Farmers and ranchers-20Order clerksInsurance claims and policy processing clerks-20-80-60-40-2020406080100Percentage change forAdapted from: Figure 2-1: Winners and Losers in Selected Occupations: Percentage Change Forecasts for
72 Chapter 2 Question Review Page 47, #1In what way does the political environment around the world create challenges for MNCs? Would these challenges be less for those operating in the EU than for those in Russia or China? Why or why not?
73 Chapter 2 Question Review Page 47, #4Why are developing countries interested in privatizing their telecommunications industries? What opportunities does this privatization have for telecommunication MNCs?
74 Assignment for Session 3 Next weeks assignmentsRead Chapter 3,Global Competitiveness, PagesDiscussion Review Questions, Page 73, #1-5