GLOBALINTERNATIONAL MANAGEMENT

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GLOBAL/INTERNATIONAL MANAGEMENT

• INTRODUCTION

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DEFINITION

• Global/International Business includes
• All commercial transactions
• Both private and governmental
• Across national borders

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WHY COMPANIES DO IT

• Companies get into international business for the
  following reasons
• 1. Build sales
• 2. Obtain resources
• 3. Diversify or minimize risk

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CAUSES OF RECENT GROWTH IN INTERNATIONAL BUSINESS

• 1. Technology expansion?quicker cheaper
  communications and transportation
• 2. Easing of cross border movements? increased
  flow of goods, services, people
• 3. Development of supporting services and
  infrastructure
• 4. Pressures of consumer demand
• 5. Increased foreign competition

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TYPES OF INTERNATIONAL BUSINESS

• 1. Exports imports
• Goods
• Services
• 2. Investments
• Direct?FDI (foreign direct investment)
• Portfolio

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DESCRIPTIVE TERMS

• Several terms have arisen to describe companies
  in international business
• 1. Multinational Enterprise (MNE) ? most general
• 2. Multinational Corporation (MNC)
• 3. Transnational Company (TNC)

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EXTERNAL FACTORS

• 1. Physical factors
• 2. Social factors
• 3. Economic factors
• 4. Geographical influences
• 5. Competition

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COUNTERVAILING FORCESTO MAXIMIZING PROFITS

• 1. Rivalry among countries
• 2. Cross national treaties
• 3. Ethical dilemmas

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EVOLUTION OF GLOBAL PROCESS

• 1. Passive to active expansion
• 2. External intermediary to internal operations
• 3. Deepening commitment
• 4. Geographical diversification

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MERCANTILISM

• Source of wealth of nations
• Favorable balance of trade
• Government control of exports and imports

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LAISSEZ FAIRE

• 1. Minimal government control
• 2. Individual initiative and creativity
• 3. Incent individuals to perform act of empathy
  provide goods and services

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SMITH AND ABSOLUTE ADVANTAGE

• Wealth of Nations in productivity and trade
• Absolute advantage
• Natural advantage
• Acquired advantage
• Comparative advantage

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SPECIALIZATIONASSUMPTIONS LIMITS

• Both absolute and comparative advantage based on
  specialization
• Assume
• A. Resources fully employed not a valid
  assumption
• Economic efficiency many values may conflict
• Resources neither as mobile or immobile as assumed

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GATT AND THE WTO

• GATT formed in 1947
• Open markets
• MFN (Most favored nation clause)
• WTO replaced GATT in 1995
• Adopted GATT principles
• Expanded to include trade in services, etc.

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MAJOR TYPES OF REGIONAL INTEGRATION

• Free Trade Area goal is to have no internal
  tariffs
• Customs Union common tariff on goods from
  nonmembers
• Common Market same as customs union but also
  mobility of factors of production, labor and
  capital
• Economic integration adopt common economic
  policies, common currency

MAJOR TYPES OF INTEGRATION
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MAJOR TRADING GROUPS

• European Union (EU)
• North American Free Trade Agreement (NAFTA)
• MERCOSUR major group in South America (customs
  union between Brazil, Uruguay, Paraguay,
  Argentina)
• Association of Southeast Asian Nations (ASEAN)
• Asia Pacific Economic Cooperation (APEC)

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ECONOMIC ENVIRONMENT

• Managers must understand the economic environment
  of a country to
• A. Accommodate local market needs and practices
• B. Predict trends for products and services
• C. Assure adequate performance

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KEY FACTORS

• 1. Existence of capital markets
• 2. Availability of infrastructure
• 3. Factor endowments and conditions
• A. Human resources
• B. Technology
• C. Physical resources

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TYPES OF ECONOMIES

• 1. Market economy consumer driven
• 2. Command economy centrally planned
• 3. Mixed economy elements of both market
  socialism

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POLITICAL RISK

• Risk resulting from political instability
• Types of Risk
• Changing positions of leaders
• Civil disorder
• External relations

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IMPORTANCE OF CULTURAL AWARENESS

• 1. Cultural awarenessnot easy to build.
• 2. Cultural differences exist, but little
  agreement on what they are.
• 3. Cant assume all subgroups are similar.
• 4. Pitfall of doing it the American Way.