1-1 Chapter 1 WORLDWIDE DEVELOPMENTS

1-2 Regional Developments Impacting Internationalization North American Free Trade Agreement (NAFTA) –U.S., Canada, Mexico  Removed all barriers to trade between countries  created a huge North American market  Agreement will expand to include Latin American countries, Chile, Argentina, and Brazil

1-3 European Union (EU)  Consists of 15 western European nations  Trade barriers between EU members have been removed  a unified currency called the “euro” has been adopted

1-4 General Agreement on Tariffs and Trade (GATT) –reduces or completely eliminates tariffs –has been replaced by the World Trade Organization (WTO)  has more power to enforce rulings on trade disputes and to monitor trade policies

1-5 ASIA –Japan continues to be the primary economic force –China is quickly becoming the biggest economy in the world –the Southeast Asian countries have recently been major export-driven economies –ASEAN (Association of Southeast Asian Nations) promotes exports to other countries

1-6 Central and Eastern Europe/ Russia  The Czech Republic, Poland, and Hungary have transitioned to market economies  Is an untapped area being targeted by MNCs looking for expansion opportunities Example: Coca-cola’s business in Central and Eastern Europe has been expanding at twice the rate of its other foreign operations

1-7 Latin America & Less Developed Nations  Latin America: –economic growth and export volume remain strong –Regional Trade Agreements:  Mercosur  Andean Common Market  Less Developed Nations : India –Recent economic progress –Due to the india’s reduction of bureaucratic red tape, MNCs have recently been attracted to the area

1-8 International Investment & Trade  80% of all international investments come from developed countries (the triad or golden triangle) North America EuropeAsia Pacific Triad or Golden Triangle

1-9 Top Five Trading Partners of the United States U.S. Exports U.S. Imports Importing(in millions ofExporting (in millions of RankCountry dollars)Country dollars) 1Canada132,584Canada 159,746 2Japan 67,536Japan 117,963 3Mexico 56,761Mexico 74,111 4United Kingdom 30,916China 54,409 5Germany 23,474Germany 39,989

1-10 Economic Status & Issues of Major world Regions United States:  world leader in the computer and high-tech area of telecommunications markets  Consumer-goods companies are seizing overseas market opportunities  foreign MNCs are finding the U.S. to be a lucrative market for expansion

1-11 Canada:  largest U.S. trading partner  Similarities (geography, language, and culture) helps to promote trade between the two countries Mexico:  Maquiladora industry  Mexico is increasing exports to other countries outside North America, especially South America South America:  these countries have reduced their debt and are attracting international business  inter-country trade is growing

1-12 Europe:  Privatization of nationalized industries  Emergence of the EU as an operational economic union  elimination of all trade barriers among member countries  creation of a single currency and a regional central bank  By using acquisitions and alliances, foreign MNCs have gained a foothold in the EU Russia:  economic reforms  Dismantling of price controls  Privatization (converting communist-style public enterprises to private ownership)

1-13 Asia: Japan  well poised in all three major economic regions: The Pacific Rim, North America, and Europe China  used as a major manufacturing source by many MNCs  remains a complicated and high-risk venture Southeast Asia  Key managers in firms have attended western universities

1-14 The Top 10 Most Competitive Nations Source: Adapted from World Economic Forum, 1998 Country1998 Rank1997 Rank1996 Rank Singapore Hong Kong United States United Kingdom Canada Taiwan Netherlands Switzerland Norway Luxembourg