Globalization and Worldwide Developments

1
Chapter 1

• Globalization and Worldwide Developments

2
Chapter Outline

• International Management
• Globalization
• Global and Regional Integration
• International Investment and Trade
• Economic Performance of Major Regions
• North America
• South America
• Europe
• Asia
• Other Developing Countries

3
International Management

• International Management
• Applying management concepts in multinational
  environment
• Adapting policies to different economic,
  political, and cultural environments
• 194 countries
• MNC
• Operations in more than 1 country
• International sales
• Nationality mix of managers and owners

4
International Management
The Top 10 MNCs

• Ranked by Sales
• Wal-Mart Stores
• BP
• ExxonMobil
• Royal Dutch/Shell
• General Motors
• DaimlerChrysler
• Ford Motor
• Toyota Motor
• Mitsubishi
• General Electric

• Ranked by Profits
• ExxonMobil
• Citigroup
• General Electric
• HSBC Holdings
• Royal Dutch/Shell
• Vodafone Group
• Bank of America
• Toyota Motor
• Microsoft
• BP

5
International Management
MNCs earning more annual revenue outside the
U.S. than stateside

• Avon Products
• Chevron
• Citicorp
• Coca-Cola
• Colgate Palmolive
• Du Pont
• ExxonMobil
• Eastman Kodak

• Hewlett-Packard
• McDonalds
• Motorola
• Ralston Purina
• Texaco
• 3M Company
• Xerox
• Gillette

6
Globalization

• Globalization
• Process of social, political, economic, cultural,
  and technological integration
• Increased levels of trade and capital flows
• Facilitated by technological advances
• Lower prices, greater availability of goods,
  better jobs, and access to technology

7
Globalization

• Globalization Critics
• Jobs moving abroad
• Offshoring
• Service jobs moving to lower-wage countries
• Growing trade deficits
• Slow wage growth
• Race to the Bottom

8
Global and Regional Integration

• Global Integration
• Reduced tariff and nontariff barriers
• Regional Integration
• North American Free Trade Agreement (NAFTA)
• U.S.-Central American Free Trade Agreement
  (CAFTA)
• Free Trade Agreement of the Americas (FTAA)
• European Union (EU)
• Association of Southeast Asian Nations (ASEAN)
• Central and Eastern Europe, Russia
• Some progress, yet much still needed

9
International Investment and Trade

• FDI
• Amount invested in property, plant, and equipment
  in another country
• Largest investors in the U.S.
• Great Britain, Japan, the Netherlands, Germany,
  and Canada
• Major stake for U.S. investors
• EU, Canada, Japan
• U.S., E.U., and Japan account for over 55 of
  world trade

10
Economic PerformanceNorth America

• United States
• Large international telecommunications market
• Attractive international consumer markets
• MNCs also finding U.S. lucrative market for
  expansion
• Canada
• The U.S. largest trading partner
• U.S. FDI in Canada second only to its FDI in
  United Kingdom
• Similar legal and business environment to U.S.
• Growing population and increasing purchasing power

11
Economic PerformanceNorth America

• Mexico
• Highly competitive textile industry
• Replaced China as the major exporter of garments
  to the U.S.
• Strong maquiladora industry
• Located in Mexican border towns
• Permits foreign manufacturers to send materials
  to Mexican-based plants, process, and ship out of
  Mexico with only value added tax
• Low cost but quality-conscious Mexican workforce
• Increasing trade with the EU and Asia, reducing
  overreliance on U.S. market

12
Economic PerformanceSouth America

• Difficult economic problems
• Heavy foreign debt obligations
• Severe inflation
• Progress toward free market policies has lead to
  growth of intercountry trade
• Increasingly looking for opportunities to do
  business with the U.S.

13
Economic PerformanceEurope

• The EU
• Ultimate objective is to eliminate all trade
  barriers among member countries (like states in
  the U.S.)
• Single currency and a regional central bank
• Differing local tastes, Plan globally, act
  locally
• Challenge for future, absorb eastern neighbors of
  former communist-block countries
• Unified Europe could become largest economic
  market in terms of purchasing power

14
Economic PerformanceEurope

• Central and Eastern Europe
• 1989 Berlin Wall came down
• 1991 Soviet Union break up
• Dismantling of Russian price controls allowing
  supply and demand to determine price
• Privatization of traditionally nationalized
  industries
• Problems with growing crime

15
Economic PerformanceAsia

• Japan
• Appears to be pulling out of decade long
  recession
• Second largest economy behind the U.S.
• Well poised in all 3 major economic regions
  (Pacific Rim, North America, and Europe)
• Relies heavily on exporting to sustain its economy

16
Economic PerformanceAsia

• China
• Economy is healthy and growing stronger
• Attracting foreign investment
• Countrys exports remain high
• Major political risk for investors
• 1 country, 2 systems (communism capitalism)
• Product pirating common
• Contractual agreements often worthless

17
Economic PerformanceAsia

• The Four Tigers
• South Korea
• Chaebols family held conglomerates that have
  considerable political power
• Hong Kong (part of the Peoples Republic of
  China)
• Headquarters for many successful multinational
  operations
• Singapore
• Success story, ranked 2nd most competitive
  country
• Hurt least by economic downturn
• Taiwan
• Progressed from labor-intensive economy to more
  technologically industries

18
Economic PerformanceAsia

• Baby Tigers
• Thailand, Malaysia, Indonesia, Vietnam
• Relatively large populations
• Inexpensive labor
• Considerable natural resources
• Export driven economies
• Attractive to outside investors

19
Economic PerformanceOther Developing Countries

• India
• Worlds second largest population (1 billion)
• Attractive market to MNC, especially U.S. and
  British
• Many speak English
• Well educated and known for information
  technology expertise
• Middle East and Central Asia
• Israel, Arab countries, Iran, Turkey and Central
  Asian countries of former Soviet Union
• Considered LDCs

20
Economic PerformanceOther Developing Countries

• Africa
• Considerable natural resources
• Poor and undeveloped
• Overwhelming diversity (1,000 languages)
• Political instability and corruption
• Lack institutions and infrastructure
• High AIDS and illiteracy rates