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Globalization and RecentEconomic Developments
Chapter 1
Overview of MGMT 529
The GlobalBusiness
Environment
Culture andInternationalManagement
InternationalStrategic
Management
Global Human
ResourcesManagement
Motivatingand
Leadinga Global
Work Force
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.
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.
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
Globalization as an Integration Process
Process of integration among countries around the world Social Political Economic Cultural Technological
Arguments for GlobalizationWealth creationJob creationTechnology is more widely available
Lower prices
Criticisms of Globalization Offshoring of business services jobs to
lower-wage countries Growing trade deficits Slow wage growth Environmental impacts Social impacts
Example: child labor Loss of local and national culture
World Trade Organization More than 150 member countries Has removed many barriers to free trade in goods 70 countries have agreed to remove barriers to free
trade in financial services and telecommunications Protects intellectual property rights Removes some restrictions on foreign investment There is a dispute resolution process. Most countries have negotiated some exceptions to
the rules. (EU negotiates as a unit.)
World Trade Organization (2) More lenient policies for developing
countries 31 WTO members are considered to be
developing countries. Developing countries
Can impose more tariffs than developed countries
Did not have to comply with intellectual property rights agreement until 2005
Can impose more restrictions on foreign investment
Trends in InternationalInvestment and Trade
International investments 80 percent of foreign direct investment
(FDI) is from developed countries Investments are made in developed
countries and in developing countries Over one-half of world trade is
accounted for by the United States, European Union (EU), and Japan
Gross Domestic Product - 2003
10 Largest Economies
Rank Country
Billion $
1 United States 10,882
2 Japan 4,326
3 Germany* 2,401
4United Kingdom* 1,795
5 France* 1,748
6 Italy* 1,466
7 China 1,410
8 Spain* 836
9 Canada 834
10 Mexico 626
TOTAL 26,324* EU member
GoodsService
sGoods &Services
Exports 713.1 307.4 1,020.5
Imports (1,260.7) (256.3) (1,517.0)
Tradebalance
(547.6) 51.1 (496.5)
CountryU. S. merchandise
trade balance
China (124.0)
Japan (66.0)
Canada (54.7)
Mexico (40.6)
Germany
(39.2)
U. S. Trade Balance – 2003 (Billion $)
5 Largest U. S. Merchandise Trade Deficits - 2003
Economic Power of the EU 450 million people 25 member countries 2002 GDP exceeded 9.1 trillion dollars 5 members in the top 10 economies 11 members in the top 25 economies Most new members are not as
prosperous as those who joined earlier Receive development assistance from the EU
European Union – A Single Market
Free trade in goods and services among member countries
Common tariffs on goods imported from outside the EU
Common trade policy Common (minimum) product standards –
CE mark is required to sell many goods Many regulations that must be met
EU – A Single Market (2) Free movement of capital among
member countries Rights of EU citizens
Travel freely among EU countries To live and work in other EU countries Citizens of new EU member countries will
not have full work and residence rights until 2011
EU Members (1) EU-15 (joined the EU between 1956
and 1999) (dark blue on map) Total population of 375 million Located primarily in western Europe 12 members of the EU-15 use the euro
currency United Kingdom, Denmark, and Sweden
do not use the euro
New EU Members (10 total)
Total population of 75 million Post-Communist countries (8)
Central Europe: Poland, Hungary, Czech Republic, Slovakia, and Slovenia
Major recipients of foreign direct investment
Large automotive industry Financial services industry Poland has a population of 38.6 million
people (6th largest population in the EU)
New EU Members (slide 2) Post-Communist countries (continued)
Baltic countries: Estonia, Latvia, Lithuania
Formerly part of the Soviet Union Small countries Large Russian minorities
Large agricultural sectors Also members of the WTO and NATO
New EU Members (slide 3) Other new members: Cyprus and Malta
Mediterranean islands with small populations
Also WTO members All the new members hope to join the
euro currency by 2010 Slovenia and Estonia will probably
meet requirements for the euro by 2007
Requirements to Join the EU Be a stable democracy, respecting
human rights, the rule of law, and the protection of minorities.
Have a functioning market economy that can compete in the EU.
Adopt EU law – more than 10,000 laws, product standards, and regulations.
Show that the government can enforce EU law and control immigration.
Requirements to Join the Euro Currency
Control inflation. Control the annual budget deficit
of the government. Control the national debt. Control long-term interest rates. Currency must be stable with
respect to the euro for 2 years.
EU Candidate Countries Scheduled to join in 2007 if all
requirements are met (Bulgaria and Romania)
Scheduled to start membership negotiations in October: Turkey
Can start membership negotiations if a war criminal is turned over to the International Court of Justice: Croatia