1. Business and People Management
INTERNATIONAL MANAGEMENT
GLOBAL
Business and People Management
Professor H. Michael Boyd, Ph.D.

3. Globalization and International Linkages
Chapter One
Globalization and International Linkages

4. Globalization and International Linkages
The specific objectives of this chapter are to
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.
ANALYZE the major economic systems and recent developments among countries that reflect those systems.

5. International Management
International management involves
Applying management concepts and techniques in a multinational environment
Adapting management practices to different economic, political, and cultural contexts
Multinational corporation (MNC)
Operations in more than one country
International sales
Nationality mix among managers and owners

6. The World’s Top Nonfinancial TNCs Ranked by Foreign Assets, 2012

7. The World’s Top Nonfinancial TNCs from Developing and Transitioning Economies Ranked by Foreign Assets, 2011

8. Globalization and Internationalization
Process of social, political, economic, cultural, and technological integration among countries around the world.
Hastened by
Offshoring
Process by which companies undertake some activities at offshore locations instead of in their countries of origin.
Outsourcing
Subcontracting or contracting out of activities to external locations instead of in their countries of origin

9. Globalization: Pros and Cons
Benefits of Globalization
Wealth
Jobs
Technology
Lower prices
Availability of goods
Criticisms of Globalization
Off-shoring of business service jobs to lower-wage countries
Growing trade deficits
Slow wage growth
Environmental and social impacts

10. Global and Regional Integration
Global Agreements
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, CAFTA-DR)
European Union (EU)
Association of Southeast Asian Nations (ASEAN)
Trans-Pacific Partnership (TPP)
Free Trade Agreement of the Americas (FTAA)

11. International Economic Power in the Global Economy
Shifting landscape due to
Economic integration and rapid growth of emerging markets
Economic potential of emerging markets
BRIC countries (Brazil, Russia, India, and China) could be among the four most dominant economies by 2050
N-11 (the next wave of emerging markets): Bangladesh, Egypt, Indonesia, Iran, Mexico, Nigeria, Pakistan, Philippines, Turkey, South Korea, and Vietnam
African countries may follow.

12. The World’s Largest Economies 2009 and 2050 (Projected) Measured by GDP at Market Exchange Rates

13. The World’s Largest Economies 2009 and 2050 (Projected) Measured by GDP at Purchasing Power Parity

14. Changing Global Demographics: Developing Countries on the Rise Ranked by Size

15. Trends in Trade and International Investments
International Trade
In 2009 merchandise and commercial services exports declined
By 2014, FDI is estimated to reach $1.9 trillion, surpassing the all-time high set in 2007
Foreign direct investment (FDI)
Investment in property, plant, or equipment in another country
Growing at healthy rate
Outpacing domestic growth in most countries
Declined in 2009 due to the global recession
Recent increases in merchandise exports and foreign direct investment

16. World Merchandise Trade by Region and Selected Country, 2012 (in US$ billions and percentages)
continues

17. World Merchandise Trade by Region and Selected Country, 2012 (in US$ billions and percentages)

18. Foreign Direct Investment Inflows, by Region (in US$ billions)

19. Foreign Direct Investment Outflows, by Region (in US$ billions)

20. Global Economic Systems
Market economy
Command economy
Mixed economy

21. Economic Performance by Major World Region
Established Economies
North America
European Union
Japan
Emerging Economies
Central and Eastern Europe
China
Other Emerging Markets of Asia
India
Developing Economies on the Verge
South America
Middle East and Central Asia
Africa

22. Economic Performance Established Economies
North America
One of the four largest trading blocs in the world
Combined purchasing power of U.S., Canada and Mexico is more than $12 trillion
Free-market-based economy is attractive to private firms
United States
Foreign MNCs find U.S. a lucrative expansion market
Foreign firms welcomed as investors in U.S. market
U.S. firms hold global dominance in technology-intensive industries, telecommunications, media, and biotechnology

23. Economic Performance Established Economies
Canada
U.S.’s largest trading partner
Most of the largest foreign-owned Canadian companies are totally or heavily U.S.-owned
Legal and business environment in Canada is similar to that in U.S.
Mexico
Strongest Latin American economy
Free-trade agreements with over 50 countries
Very strong maquiladora system
Trade with both Europe and Asia has increased
Now competitive with Asia for the U.S. market

24. Economic Performance Established Economies
European Union
Ultimate objective
Eliminate all trade barriers among member countries
Emergence of the EU as an operational economic union
A unified Europe could become the largest economic market in terms of purchasing power in the world
Foreign MNCs trying to gain foothold in EU
Acquisitions, alliances, cooperative R&D efforts
Economic linkages between the EU and Central and Eastern European countries
Challenge is to absorb former communist bloc countries
Pressure on the euro due to financial crises in Greece, Portugal, Spain, and Ireland

25. Economic Performance Established Economies
Japan
Huge economic success in 1970s and 1980s
Ministry of International Trade and Industry (MITI)
Keiretsus
Large, vertically integrated corporations
Holdings provide assistance needed in providing goods and services to end users
Remains a formidable competitor in the Pacific Rim, North America, and Europe

26. Economic Performance Emerging Economies
Central and Eastern Europe
Russia
Dismantling of price controls
Privatization
Membership in International Monetary Fund (IMF) helping to control inflation
Crime and political uncertainty
Hungary, Poland, Czech Republic
Political instability
Struggling to right their economic ships

27. Economic Performance Emerging Economies
China
Real economic growth of 9.1% in 2009, 10.4% in 2010, 9.3% in 2011, and 8% in 2012
Savings glut in corporate sector
Globalization of manufacturing networks
Vast developmental needs
Unemployment concerns
Attractive to investors despite political risk
Product pirating is a major problem
Undervaluation of currency
Government policies favor domestic firms

28. Economic Performance Emerging Economies
South Korea
Chaebols: Very large family-held conglomerates
Solid economy, moderate growth and inflation, low unemployment
Export surplus
Fairly equal distribution of income
Hong Kong
Part of People’s Republic of China
Uncertainty about the role the Chinese government intends to play

29. Economic Performance Emerging Economies
Singapore
Major success story
Urban-plan model, leader, and financial center for region
Taiwan
Progressed from labor-intensive economy to one dominated by technologically sophisticated industries
banking, electricity generation, petroleum refining, and computers

30. Economic Performance Emerging Economies
Thailand, Malaysia, Indonesia, Vietnam
Large population base
Inexpensive labor
Considerable natural resources
Some turmoil in aftermath of recent economic crisis
Attractive to outside investors

31. Economic Performance Emerging Economies
India
Large population
Recent trend of locating software and high value-added services to this country boosting middle- and upper-class market for goods and services
GDP quickly reaching the level of China
Attractive to U.S. and British investors
English speaking, well educated, technologically sophisticated workers
Government funds for economic development

32. Economic Performance Developing Economies on the Verge
South America
Hampered by foreign debt and severe inflation
Most have tried to implement economic reforms to reduce their debt
Experienced periodic economic instability and the emergence of populist leaders
Nevertheless, attractive to business
Brazil
Economy flourishing, attracting MNCs’ investment
Privatization and stable government
Undisputed economic leader of SA

33. Economic Performance Developing Economies on the Verge
Chile
A decade of economic growth
Attracts foreign direct investment
Trade agreements―Mercosur, China, India, the EU, South Korea, Mexico, among others
Argentina
Overall strong economy
Abundant natural resources, highly literate population, export-oriented agriculture, diversified industrial base
Economic problems persist

34. Economic Performance Developing Economies on the Verge
Middle East and Central Asia
Large oil reserves
Highly unstable geopolitical and religious forces
Large investments by Arab countries in U.S. property and businesses
Many people worldwide work for Arab employers
Arab Spring has impacted the political and economic environment

35. Economic Performance Developing Economies on the Verge
Africa
Considerable natural resources
African nations remain very poor and undeveloped
International trade is only beginning to serve as a major sources of income
Populace divided into 3,000 tribes that speak 1,000 languages and dialects
Major political instability
Poverty, malnutrition, illiteracy, corruption, overcrowding among many social problems negatively affecting economic sector

36. Overview of the World Economic Outlook: Projections (percentage change, unless otherwise noted)
continues

37. Overview of the World Economic Outlook: Projections (percentage change, unless otherwise noted)

38. World’s Most Competitive Nations, 2013

39. Market Potential Indicators Ranking for Emerging Markets, 2013

40. 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?
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?
Why are Russia and Eastern Europe of interest to international managers? Identify and describe some reasons for such interest.

41. Review and Discuss
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, 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.

42. Review and Discuss
MMNCs 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?