GLOBALIZATION AND WORLDWIDE DEVELOPMENTS

1
Chapter 1

• GLOBALIZATION AND WORLDWIDE DEVELOPMENTS

2
Why International?

• 40 of jobs in Orlando are devoted
• to international trade
• Florida ranks 7th in the US and
• 16th in the world for international trade

Which region of the world does Central Florida
do the most trade with?
3
Globalization and Regional Integration
Globalization Process of integration among
countries around the world Social Political Econ
omic Cultural Technological Offshoring
Regional Integration WTO GATT NAFTA FTAA EU ASEAN
4
World Trade Organization (WTO)

• Replaced GATT
• Has the power (that GATT didnt) to resolve
  trade disputes
• Settlement mechanism is faster, more effective
  and binding
• Controls 90 of worlds trade
• Headquarters in Geneva, Switzerland

5

• General Agreement
• on Tariffs and Trade (GATT)
• International organization created in 1947
• Reduces or completely eliminates tariffs to
  increase free trade
• Operating principle Normal trade relations or
  Most favored nation status (MFN)
• Lacks the power to force nations to resolve trade
  disputes
• Last meeting- Uruguay round- GATT revamped

6
Regional Developments Impacting
Internationalization

• North American Free Trade Agreement (NAFTA)
• US, Canada, Mexico
• A free trade agreement between the U.S., Canada,
  and Mexico which has in essence removed all
  barriers to trade
• Elimination of tariffs as well as import and
  export quotas
• Opening of government procurement markets to
  companies in partner countries
• Increased opportunity to make investments in
  partner countries
• Increased ease of travel between partner
  countries
• 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

7

• European Union (EU)
• Consists of Western European nations
• Trade barriers between EU members have been
  removed
• Unified currency called the euro has been
  adopted

8
The

• Why do it?
• How will the euro affect the US?
• How much is the euro worth?
• Who is participating and who is not?

9
Trends in Investment and Trade
Who Invests in the United States?

• United Kingdom 230 Billion
• Japan 159 Billion
• Germany 148 Billion

Who Does the United States Invest in?

• United Kingdom 272 Billion
• Canada 192 Billion

10

• World Populations
• China
• India
• US
• Indonesia
• Brazil

Top World Economies 1 US 2 Japan 3
Germany
11
Economic Status Issues of Major World Regions

• North America
• United States
• World leader -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

12
North America - Canada

• Canada
• Largest US trading partner

Importing U.S. Exporting
U.S. Rank Country
Exports Rank Country Imports
1 Canada 169,924 1 Canada 221,595
2 Mexico 97,412 2 China 152,436
3 Japan 52,004 3 Mexico 138,060 4 U.K.
33,828 4 Japan 118,037 5 Germany
28,832 5 Germany 68,113
13
North America - Canada

• Similarities (geography, language, and culture)
  helps to promote trade between the two countries
• Prime Minister Stephen Harper
• Currency Canadian Dollars Currency equivalent-
  1.17
• Population 30.5 million people
• Main industries energy, agriculture, mining
• US- Canadian relations

14

North America - Mexico

• New President Felipe Calderon
• Wants to strengthen Mexican US relations
• Former President Vicente Fox (Coca-Cola
  executive)
• Ist Democratic election
• Maquiladora industry
• Arrangement created by the government that
  permits the flow of materials and products in and
  out of Mexico with only the value added being
  taxed
• Competitive with Asia for US market
• Proximity to US market- lower transportation cost
  and fast delivery
• Currency Mexican Pesos (MXN)
• Currency Equivalent 10.6 pesos 1USD

15
Latin and South America

• Countries have experienced difficult economic
  problems
• High inflation and heavy foreign debt
• Survey of business leaders in South American
  countries finds that doing business with US is
  most important agenda
• Brazil
• Attracted substantial foreign investment
• Real Plan
• Chile
• Economic success story in South America
• Argentina
• Economic uncertainty
• Venezula
• Pres. Hugo Chavez - becoming dictatorship
• Former President Carter visit to quell coup

16
Europe
EU as an operational economic
union Elimination of all trade barriers among
member countries Creation of a single currency
and a regional central bank Think globally, act
locally Acquisitions and mergers used to gain a
foothold in the EU
17
Central and Eastern Europe

• The BEST
• Czech Republic, Hungary, and Poland have
  transitioned to market economies
• Czech Republic starting to attract outside
  investors
• Hungary currency forint Joint ventures with
  Western firms
• Poland one of top 10 Big Emerging Markets
  Brain Drain, Eastern Europes largest producer
  of food
• An untapped area being targeted by MNCs looking
  for expansion opportunities
• The WORST
• Albania
• Refugee and corruption problems

18
Russia

• Collapse of the Soviet Union in 1991
• Glasnost (openness)
• Perestroika (economic and political
  restructuring)
• Undergone economic reform Many attempts to
  stimulate the economy Criminal activity
  increasing Dismantling of
• price controls inflation political uncertainty
• Privatization (converting communist-style public
  enterprises
• to private ownership)

19
Asia - Japan

• Japan continues to be the primary economic force
• MITI- Ministry of International Trade and
  Industry
• Currency yen
• 119 yen (JPY) 1 USD
• Cultural values
• Keiretsus
• Organizational arrangement in which a large group
  of vertically integrated companies are bound
  together by cross-ownership, interlocking
  directorates, and social ties provide goods and
  services

20

• Japan
• Decade long recession in the 1990s
• Target for foreign investment
• Bank loans backed by real estate
• BY 2000, most major banks had billions of dollars
  in uncollectible loans
• International competition increased
• Well poised in all three major economic regions
  The Pacific Rim, North America, and Europe

21
Asia - China

• Annual real economic growth of 10 during 1980s
  and early 1990s
• Heathy and growing economy
• GDP growth 91 in 2003
• Product piracy major problem
• Major manufacturing source by many MNCs
• Large reported annual growth in GDP
• Attracts substantial foreign investment
• Remains a political risk for investors
• MNCs find it difficult to do business in China
• Currency yuan renminbi 8.08 CNY 1 US

22

• Southeast Asia
• The Four Tigers South Korea, Hong Kong,
  Singapore, Taiwan
• South Korea
• Chaebols Large,family-held conglomerates that
  have considerable political and economic power
• Hit hardest by Southeast Asia economic crisis
• Hong Kong
• Headquarters for successful multinational
  operations in Asia
• Uncertainty regarding governance issues due to
  subservience to China
• Singapore
• Leader and financial center of Southeast Asia
• One of the most competitive nations
• Taiwan
• Economy dominated by technologically
  sophisticated industries
• Uncertainty due to designs on the country by
  China

23

• Baby Tigers
• Thailand, Malaysia, Indonesia
• Large population base
• Inexpensive Labor
• Natural Resources
• Atractive to outside investors

24
The Top Most Competitive Nations
United States 1 Singapore 2 Canada 3 Austra
lia 4 Iceland 5 Hong Kong 6
25
Characteristics of Less Developed Countries
High unemployment
Low GDP
High international debt
Less Developed Countries
Slow (or negative) GDP growth per capita
Large population
Inexpensive unskilled or semi-skilled labor
26
Market Potential Indicators
27
Less Developed Countries

• India
• Steady economic growth in the past few years
• Attractive to investment by MNCs
• Recent trend of locating software and high value
  added services to this country
• Middle East and Central Asia
• Oil reserves are an attractive economic asset
• Balance geopolitical, religious forces with
  economic viability
• Organization of Petroleum Exporting Countries
  (OPEC)
• Africa
• International trade not a major source of income
• Sub-Saharan nations troubled by tribal warfare,
  disease, poverty, starvation, apartheid,
  corruption, AIDS