1. Globalization and International Linkages
Chapter 1

2. Course Outline The Global Environment of Business Culture in Global
Strategic
Management
Organizational
Behavior and
Global Human
Resources
Management

3. The Global Environment of Business
Chapter 1: Globalization and international linkages
Chapter 2: The political, legal, and technological environment of business
Chapter 3: Ethics and social responsibility

4. Questions on “Emerging Giants” (pages 1 – 4) – we will discuss on Jan
What is the main point of this article?
How do the emerging corporate giants differ from those of earlier decades?
How has each of the following firms responded to the “emerging giants”?
Deere
Whirlpool
Cisco
Nortel Networks

5. Chapter 1 Outline International business and management Globalization
Outsourcing and offshoring
Advantages and disadvantages
The World Trade Organization
Regional trade blocs
The shifting balance of economic power

6. Chapter 1 Outline (2) Economic systems Regional economic issues Japan
China
Other economies in East Asia
India
Russia
South America
Africa

7. 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
McGraw-Hill/Irwin
© 2006 The McGraw-Hill Companies, Inc. All rights reserved.

8. International Business Activity Exporting and Importing
Exporting: selling products made in one’s own country for use or resale in other countries
Importing: buying products made in other countries for use or resale in one’s own country
1-8

9. International Business Activity (2) International Investments
Foreign direct investment: the investor has control, or shares control, in the management of the asset
Home country: the country in which the parent company's headquarters is located
Host country: any other country in which the company does business
Portfolio investment: the purchase of financial assets, such as stocks and bonds, issued by companies outside your own country
1-9

10. Firms Involved in International Business
Multinational corporations (MNC's)
Operations in more than one country
International sales
Nationality mix of managers and owners
Small and medium-sized enterprises (SME's)
McGraw-Hill/Irwin
© 2006 The McGraw-Hill Companies, Inc. All rights reserved.

11. Globalization of Business
Globalization of business functions
Marketing
Manufacturing and service operations
Finance
Purchasing and supplier networks
Business process outsourcing: call centers, technical service, financial research
Global business environment with global competition

12. Outsourcing and Offshoring
Outsourcing is contracting to buy goods or services that your company produced in the past. When the work is done outside your own country, offshore outsourcing occurs.
Offshoring means performing business activities outside the country where the resulting goods or services are sold.

13. Claims Made by Supporters of Globalization in Developed Countries
Increases corporate profits and shareholder value
Attracts foreign investment
Opens foreign markets to exports and investment
U. S. has a positive balance of trade in services
U.S. farmers are efficient and can compete in world markets
Creates global markets for technology

14. Claims Made by Supporters of Globalization in Developed Countries (2)
Provides access to raw materials
Reduces costs
Creates some high-wage jobs
Reduces prices for consumers
Gives consumers more product choices
As developing countries become more prosperous, they will buy more goods and services from developed countries

15. Claims Made by Opponents of Globalization in Developed Countries
In its present form, free trade is not fair trade – "playing field" is not level.
Eliminates low-wage jobs
Some high-wage jobs are now being outsourced to low-wage countries
Reduces wages or slows wage growth
Creates trade deficits

16. Claims Made by Supporters of Globalization in Developing Countries
Attracts foreign investment
Provides access to prosperous markets
Creates jobs
Makes technology and "know how" available
Often increases wages
Provides access to new products

17. Claims Made by Opponents of Globalization in Developing Countries
Most benefits go to politicians, rich people, and foreign corporations
Loss of natural resources
Foreign companies have too much power in the local economy
Local firms find it hard to compete
Farmers cannot compete with foreign agribusiness companies

18. Claims Made by Opponents of Globalization in Developing Countries (2)
Environmental damage
Health and safety issues
Increased use of child labor
Loss of local culture, languages, and traditional ways of life

19. Trade Definitions A tariff is a tax on an imported good.
A subsidy is a government payment to producers of certain products.
Farm products are often subsidized.

20. World Trade Organization (WTO)
153 member countries
Russia is not a member.
Oversees regulations for
international trade in goods and services
international investment
protection of intellectual property
settling trade and investment disputes between countries

21. World Trade Organization (2)
Developing countries can charge higher tariffs and impose more restrictions on investment than developed countries
Developing countries want the WTO to change its rules so that they will be more competitive in the global economy.
The biggest issue is subsidies that developed countries pay to their own farmers to encourage crop production.

22. North American Free Trade Agreement (NAFTA)
Free trade agreement among Canada, United States, and Mexico
Free trade agreement means that there are no tariffs on goods traded among member countries
This provision applies only to goods that were produced in one of the 3 countries
Most restrictions on foreign investment among the 3 countries have been abolished.
Firms in member countries can compete for government contracts.

23. NAFTA (2) Financial services firms can do business in all 3 countries.
There is a dispute resolution procedure.
Each country agreed to enforce its own laws related to
Environmental protection
Child labor
Minimum wages
Workplace safety

24. Free Trade Agreements in Central and South America and the Caribbean
10-24

25. Other Free Trade Areas in the Americas
Mercosur – includes Brazil, the largest economy in South America
The Andean Community
The Caribbean Community (CARICOM)
Central American Common Market
Tariffs are imposed on U. S. goods exported to Mercosur, the Andean Community, and CARICOM
10-25

26. Other Free Trade Areas in the Americas (2)
ALADI is a free trade area among
Mercosur
The Andean Community
Mexico, Chile, and Cuba
CAFTA-DR is a free trade agreement among the United States, the Central American Common Market, and the Dominican Republic
A proposed Free Trade Area of the Americas has made little progress

27. European Union (EU) Before 2004 Enlargement

28. Countries that joined the EU in 2007 Bulgaria Romania Candidates for
EU Membership
Croatia
Macedonia
Turkey
EU after 2004 Enlargement

29. The European Union (EU)
Almost 500 million people
27 member countries
2006 Gross Domestic Product (GDP) was about 13.5 trillion dollars
Slightly higher than U. S. GDP
16 EU members use the euro currency
The European Central Bank manages the euro currency (similar to the Federal Reserve Bank in the United States)

30. The European Union A Single Market
Free trade in goods and services among member countries
Common tariffs on goods imported from outside the EU
Common (minimum) product standards - CE mark is required to sell many goods
Business is subject to many regulations
The EU Commission settles trade disputes among EU members.

31. Rights of EU Citizens
EU citizens have a right to live and work in any EU country
These rights take effect 7 years after a country joins the EU
2011 for countries that joined in 2004
2014 for Bulgaria and Romania
Individual countries can choose to grant residency and work rights sooner.

32. The Shifting Balance of World Economic Power
For about 20 years, 55 – 60% of global imports and exports have come from four areas: the United States, the EU, Japan, and China
The BRIC countries – Brazil, Russia, India, and China – are expected to be among the fastest growing economies for the next 20 – 40 years
China, India, Brazil, and several Arab countries are increasing their foreign direct investment.

33. Economic Systems
Market economy
Command economy
Mixed economy

34. The Asian Economic Model
Originated in Japan, copied by others
Government targeted industries for growth
Industry restructuring, led by government.
Loans and subsidies
Tax breaks
Cooperative research and development.
Protect the home market, and export aggressively
Also called export-led development

35. Japan Today 127 million people Second largest economy in the world
Parliamentary democracy
Major investor in the U.S., Europe, and Asia

36. Japan Today (2)
Keiretsus – networks of companies under common ownership.
Usually includes a bank and a trading company.
Long-term supplier relationships
South Korean chaebols have a similar structure.
Japanese consumers have high quality standards and often prefer Japanese products.

37. China Ruled by the Chinese Communist party.
Mixed economy: 65% private, 35% government-owned.
GDP growth of 11.4% in 2007.
Average growth rate of 10% for the last ten years.
Fastest growing economy in the world.

38. China (2) Most growth has come from exports.
Global economic crisis has drastically reduced exports.
China is attempting to diversify into other areas, such as software development.
Wages are now higher than in Malaysia and Indonesia

39. Political Environment in China
Growing conflict between the government and the people
Protests against local officials for corruption, endangering people, neglecting people's health needs, and poor management
Central government is determined to remain in control
Internet portals are required to enforce government censorship of Web sites.

40. The Chinese Market
1.3 billion people, ethnically diverse – largest population in the world
A middle class is developing in the cities and new economic zones, where private businesses are encouraged.
Most rural people are still poor.
Good market research is essential. Chinese customers do not always want the same products as Americans or Europeans.

41. Other Economies in East Asia
The "Four Tigers"
South Korea
Hong Kong
Taiwan
Singapore
Emerging economies
Malaysia
Indonesia
Thailand
Vietnam

42. Hong Kong A special autonomous region of China
The head of Hong Kong's government is appointed by China
Members of the legislature are elected.
Hong Kong makes most decisions about its internal affairs.
Market economy with many business links to China
Most manufacturing has been transferred to China

43. India
1.15 billion people.
Average GDP growth rate of 7% per year for the past 10 years.
High tariffs and government regulations limit foreign access to India's markets.
Growing manufacturing sector.
Software development and business process outsourcing are also growing rapidly.
One national language (Hindi), 22 regional languages
About half of India's people are still too poor to buy most consumer goods.
India’s population exceeds 1 billion, but it is one of the world’s poorest countries. It was part of the British Empire until 1947, when the Indian subcontinent was partitioned along religious lines into India (Hindus), and Pakistan (Muslims). The eastern part of Pakistan later became the independent nation of Bangladesh. India adopted many aspects of British government. Many industries are state-owned including power, transportation, and heavy industry. Until 1991, India discouraged FDI, but more recent reforms are beginning to pay off.
2-43 43

44. Russia 141 million people, many ethnic minorities
Russia has large oil reserves and the world's largest reserve of natural gas.
Average economic growth of 7% per year for nine years.
Growing demand for consumer goods and services.
Falling oil and gas prices are hurting Russia's economy.

45. Russia (2) Corruption and organized crime are serious problems.
A 2007 survey of international business executives ranked Russia among the top 20% in terms of corruption.
The government is re-taking control of energy companies. It has also taken control of some heavy industry and agriculture.
The law and the court system do not protect private property or the individual rights.

46. Recent Political Events in South America
Privatization occurs when government-owned businesses are sold to private owners.
Most government-owned businesses in South America were privatized in the 1980's.
In the 1990’s, nearly all South American countries had democratically elected governments and market economies.
In several South American countries, poor and indigenous people did not believe that they had benefited from this system.

47. Recent Political Events in South America (2)
In recent years, Socialist governments have been elected in Venezuela, Bolivia, Ecuador, Paraguay, and Brazil.
Most have focused on increased government ownership of business.
Seizing land from wealthy land owners and giving it to poor people has been proposed in Ecuador.
Brazil has taken a different path.

48. Brazil 192 million people, ethnically diverse
Ninth largest economy in the world
For the past 5 years, inflation and government spending have been tightly controlled.
Government programs to reduce poverty
Small monthly welfare payments to meet basic needs
A micro-finance program makes loans to help poor people start their own businesses
Economic growth has averaged 5% per year.

49. Africa Diverse countries
South Africa is the largest economy and is a democracy
Many authoritarian governments
Ethnic strife
Considerable natural resources in some countries
Most exports are agricultural products and natural resources
Poverty, starvation, illiteracy, corruption, disease, overcrowding are among many social problems that reduce economic growth.