Environmental Foundation

1
Environmental Foundation

• The specific objectives of this chapter are
• ASSESS the implications of globalization for
  countries, industries, firms, and communities.
• REVIEW current trends in international investment
  and trade.
• EXAMINE the present economic status in the major
  regions of the global community.
• ANALYZE some of the major developments and
  issues in the various regions of the world.

2
Top Ten Global MNCs
The Top 10 global MNCs Ranked by Market Value,
Sales, Profits, and Share-Price Gain, 2003
Market Value Billions of U.S. Dollars
Sales Billions of U.S. Dollars

• General Electric 328.11
• Microsoft 284.43
• ExxonMobil 283.61
• Pfizer 269.66
• Wal-Mart Stores 241.19
• Citigroup 239.43
• BP 193.05
• Aig 191.18
• Intel 184.66
• Royal Dutch Shell 174.83

• Wal-Mart Stores 258.68
• BP 232.57
• ExxonMobil 222.88
• Royal Dutch/Shell 201.93
• General Motors 183.24
• DaimlerChrysler 166.61
• Ford Motor 164.20
• Toyotal Motor 156.48
• Mitsubishi 137.32
• General Electric 134.19

3
Top Ten Global MNCs
The Top 10 global MNCs Ranked by Market Value,
Sales, Profits, and Share-Price Gain, 2003
Data Morgan Stanley Capital International
Standard Poors Compustat Source
http//images.businessweek.com/mz/0o4/30/0430_62in
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Profits Billions of U.S. Dollars
Share-Price Gain

• ExxonMobil 20.96
• Citigroup 17.85
• General Electric 15.00
• HSBC Holdings 11.65
• Royal Dutch/Shell 11.41
• Bodafone Group 11.36
• Bank of America 10.81
• Toyota Motor 10.51
• Microsoft 9.99
• BP 9.54

• Mizuho Financial 636
• Research in Motion 550
• UFJ Holdings 420
• SK 383
• Rakuten 381
• Sumitomo Mitsui Fin. 331
• Elan 311
• Bharti Tele-Ventures 276
• Yahoo! Japan 241
• Mitsui Trust Hldgs. 229

4
Globalization

• Criticisms of globalization
• Offshoring of business services jobs to
  lower-wage countries
• Growing trade deficits
• Environmental and social impacts

5
Global and Regional Integration

• World Trade Organization (WTO)
• General Agreement on Tariffs and Trade (GATT)
• Regional Agreements
• North American Free Trade Agreement (NAFTA)
• European Union (EU)
• Association of Southeast Asian Nations (ASEAN)

6
Trends in InternationalInvestment and Trade

• International investments
• 80 percent from developed countries
• Foreign direct investment (FDI)
• Economic growth potential (esp. Japan, China and
  Asia in general)
• Over one-half of world trade is accounted for by
• United States
• European Union
• Japan

7
Foreign Direct Investment inthe United States
(in millions of dollars)
2002
2003
All Countries 1,340,011 1,268,001 Canada 96,437 10
5,255 Europe 982,062 1,000,532 (select
countries) United Kingdom 218,175
230,374 Germany 139,620 148,774 France
141,400 143,341 South and Central America
19,198 20,636 (select countries) Mexico 7,483
6,680 Brazil 997 663
8
Foreign Direct Investment inthe United States
(in millions of dollars)
2002
2003
Other Western Hemisphere 50,167 48,921 (select
countries) Bermuda 8,088 5,914 Netherland
Antilles 4,014 4,048 UK islands, Caribbean
28,260 28,949 Africa 2,298 2,187 Middle East
7,456 7,931 (select countries) Israel 3,699
3,834 Kuwait 986 1,155
9
Foreign Direct Investment inthe United States
(in millions of dollars)
2002
2003
Asia and Pacific 183,392 192,539 (select
countries) Japan 150,499 159,258 Australia
23,136 24,652 Taiwan 2,569 2,708 Singapore
650 162 Hong Kong 1,879 1,981
Adapted from Table 1-2 Foreign Direct
Investment in the United States, 2002-2004 (in
millions of dollars)
10
Foreign Direct Investment bythe United States
Abroad
(in millions of dollars)
2002
2003
All countries 1,601,414 1,788,911 Canada
170,169 192,409 Europe 848,599
963,087 (select countries) United Kingdom
239,219 272,640 Germany 67,404
80,163 France 42,999 47,914 South and Central
America 131,973 141,449 (select
countries) Mexico 55,724 61,526 Brazil
27,615 29,915
11
Foreign Direct Investment inthe United States
(in millions of dollars)
2002
2003
Other Western Hemisphere 152,597
162,574 (select countries) Bermuda 80,048
84,609 UK islands, Caribbean 49,806
54,507 Africa 16,290 18,960 Middle East
14,671 16,942 (select countries) Israel
5,632 6,208 Saudi Arabia 3,823 4,217
12
Foreign Direct Investment inthe United States
(in millions of dollars)
2002
2003
Asia and Pacific 267,125 292,490 (selected
countries) Japan 65,939 73,435 Australia
34,409 40,985 Taiwan 7,608 10,961 Singapore
52,449 57,589 Hong Kong 41,571 44,323 China
10,499 11,877
Adapted from Table 1-3 Foreign Direct
Investment by the United States Abroad, 2002-2004
(in millions of dollars)
13
Top 10 Trading Partners of the United States,
2003
(in millions of dollars)
Importing U.S. Exporting U. S. Rank
Country Exports Rank Country Imports

• Canada 169,924
• Mexico 97,412
• Japan 52,004
• United Kingdom 33,828
• Germany 28,832
• China 28,368
• South Korea 24,073
• Netherlands 20,695
• Taiwan 17,448
• France 17,053

• Canada 221,595
• China 152,436
• Mexico 138,060
• Japan 118,037
• Germany 68,113
• United Kingdom 42,795
• South Korea 37,229
• Taiwan 31,599
• France 29,219
• Ireland 26,747

Adapted from Table 1-4 Top 10 Trading partners
of the United States, 2003 (in millions of
dollars).
14
What brand is owned by whom?

• 1. The BIC pen company is
• A. Japanese
• B. British
• C. U.S.
• D. French

15
What brand is owned by whom?

• BIC SA is a French company

16
What brand is owned by whom?

• 1. The company that owns Haagen-Dazs ice cream
  is in
• A. Germany
• B. U.S.
• C. Sweden
• D. Japan

17
What brand is owned by whom?

• British MNC Grand Metropolitan PLC sold the brand
  to Pillsburyhoweverthe company originated in
  the U.S.

18
What brand is owned by whom?

• 1. The company that owns Holiday Inn is in
• A. Saudi Arabia
• B. France
• C. U.S.
• D. Britain

19
What brand is owned by whom?

• Holiday Inn is owned by the British firmSix
  Continents formerly Bass PLC

20
What brand is owned by whom?

• 1. The owners of Godiva chocolate are
• A. U.S.
• B. Swiss
• C. Dutch
• D. Belgian

21
What brand is owned by whom?

• Godiva is owned by the Campbell Soup Company that
  is based in Philadelphia

22
Economic Performance
North America

• Mexico
• very strong maquiladora industry
• foreign manufacturers can send materials to their
  Mexican-based plants, process or assemble the
  products, and then ship them back out of Mexico
  with only the value added being taxed.
• now competitive with Asia for the U.S. market
• lower-cost labor
• proximity to the American market (lower
  transportation costs and faster delivery)
• Increasingly active in EU and Asian markets

23
Economic Performance
South America

• South American countries have experienced
  difficult economic problems
• High inflation
• Heavy foreign debt
• Major factor in success is intercountry trade
• Free market policies among South American
  countries
• Survey of business leaders in S.A. countries
  finds that doing business with U.S. is most
  important agenda

24
Economic Performance
Europe

• Important factors
• Privatization of traditionally nationalized
  industries
• Emergence of the EU as an operational economic
  union
• Economic linkages between the EU and newly
  emerging Central and Eastern European countries
• Foreign MNCs gain foothold in EU by
• Acquisitions
• Alliances
• Cooperative RD efforts

25
Economic Performance
Central and Eastern Europe

• Russia, Czech Republic, Hungary, Poland and ?
• Privatization
• Crime
• Political uncertainty

26
Economic Performance
Asia

• Japan
• Phenomenal economic success in 1970s and 1980s
• Ministry of International Trade and Industry
  (MITI)
• Keiretsus
• Vertically integrated industries
• Holdings provide assistance needed in providing
  goods and services to end users
• Decade long recession in 1990s
• Bank loans backed by real estate or projected
  revenues
• By 2000, most major banks had billions of dollars
  in uncollectible loans

27
Economic Performance
Asia

• China
• Annual real economic growth of 10 percent during
  the 1980s and early 1990s
• More recent growth of 8 percent
• Healthy and growing economy
• Attractive to foreign investors despite major
  political risk
• Product pirating is major problem

28
Economic Performance
Asia

• The Four Tigers
• South Korea
• Chaebols (large family-held Korean conglomerates)
• Affected by declining economies of South east
  Asia in 1990s
• Hong Kong
• Now part of Peoples Republic of China
• Uncertainty about role the Chinese government
  intends to play in local governance

29
Economic Performance
Asia

• The Four Tigers
• Singapore
• Least hurt by economic downturn of 1990s
• British influence
• Taiwan
• Progression from labor-intensive economy to one
  dominated by technologically sophisticated
  industries (banking, electricity generation,
  petroleum refining and computers)

30
The Worlds Most Competitive Nations, 2003
Ranking
Country Rank
United States 1 Australia 2 Canada 3 Malaysia 4 Ge
rmany 5 Taiwan 6 United Kingdom 7 France 8 Spain 9
Thailand 10
Adapted from Table 1-6 The Worlds Most
Competitive nations, 2003 Ranking
Source World Competitive Scoreboard, 2004.
31
Economic Performance
Southeast Asia

• The Baby Tigers
• Thailand, Malaysia, Indonesia
• Large population base
• Inexpensive labor
• Considerable natural resources
• Attractive to outside investors

32
Economic Performance
Developing and Emerging Countries

• India
• Low per capita GDP
• Recent trend of locating software and high
  value-added services to this country
• Attractive to U.S. and British investors (well
  educated, English speaking, technologically
  sophisticated workers)
• Middle East and Central Asia
• Large oil reserves
• Highly unstable geopolitical and religious forces
• Plagued by continuing economic problems

33
Economic Performance
Developing and Emerging Countries

• Africa
• Considerable natural resources
• African nations remain very poor and undeveloped
• Populace divided into 3,000 tribes that speak
  1,000 languages and dialects
• Major political instability
• Poverty, starvation, illiteracy, corruption,
  overcrowding among many social problems
  negatively affecting economic sector

34
Case Colgates Distasteful Toothpaste

• Consumer products company
• Ajax, Fab, Hill pet food, Total
• Household products 75 of company revenue
• International sales 50 of company revenue

35
Colgates entrance into Asian market

• Purchased a 50 partnership with Hawley and Hazel
  HH
• HH chemical products firm based in Hong Kong
• Leading brandDarkie toothpaste in Taiwan, Hong
  Kong, Singapore, Malaysia and Thailand
• Hawley and Hazel retained the right to make major
  decisions

36
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37
U.S. reaction to Darkie toothpaste

• Dissatisfaction of logo with U.S. action groups
  and media
• Interfaith Center on Corporate Responsibility
  (institutional investors)
• NAACP, National Urban League, Congressional Black
  Caucus
• Shareholder petition to change brandname
• Affect on stock market price?

38
How do you select a new brand name?

• Darlie?
• Darbie?
• Hawley?
• Dakkie?
• LogoWell dressed black man in silhouette
• Time frame 3 years

39
Transition of Brand Name
40
Discussion Questions

• What do you think Colgate should have done to
  handle the situation?
• Is it possible for Colgate and Hawley Hazel to
  change the toothpastes advertising without
  sacrificing brand loyalty? Is that a possible
  reason for Colgates not responding quickly to
  domestic complaints?