Copyright ©2014 Pearson Education, Inc. 1-1. Chapter Learning Goals 1. Understand the global...

Chapter Learning GoalsChapter Learning Goals

1. Understand the global business environment and how it affects the strategic and operational decisions which managers must make.

2. Critically assess the developments, advantages, and disadvantages of globalization.

3. Discuss the complexities of the international manager’s job.

4. Develop an appreciation for the ways in which political, economic, legal, and technological factors and changes impact the opportunities that companies face.

5. Review the role of technology in international business.

1. Understand the global business environment and how it affects the strategic and operational decisions which managers must make.

2. Critically assess the developments, advantages, and disadvantages of globalization.

3. Discuss the complexities of the international manager’s job.

4. Develop an appreciation for the ways in which political, economic, legal, and technological factors and changes impact the opportunities that companies face.

5. Review the role of technology in international business.


Opening Profile: The Globalization of RiskOpening Profile: The Globalization of Risk

Top two risks: Severe income disparity Chronic fiscal imbalances

Other issues: natural disasters such as 2011 earthquake in Japan, flood in Thailand, political uncertainty in China and Middle East

Globalization has compounded the types and level of business risks

Top two risks: Severe income disparity Chronic fiscal imbalances

Other issues: natural disasters such as 2011 earthquake in Japan, flood in Thailand, political uncertainty in China and Middle East

Globalization has compounded the types and level of business risks

Copyright ©2014 Pearson Education, Inc.1-3

Opening Profile: Typical Challenges that Managers Face

in the 21st Century

Opening Profile: Typical Challenges that Managers Face

in the 21st Century Political and cultural

differences Global competition Terrorism Technology Finding ways to balance their

social responsibilities, their images, and their competitive strategies

Political and cultural differences

Global competition Terrorism Technology Finding ways to balance their

social responsibilities, their images, and their competitive strategies



Understand the global business environment and how it affects the strategic and operational decisions which managers must make.

Understand the global business environment and how it affects the strategic and operational decisions which managers must make.


What is International Management?


The process of developing strategies, designing and operating systems, and

working with people around the world to ensure sustained

competitive advantage

What is Globalization?What is Globalization?

Global competition characterized by networks of international linkages that bind countries, institutions, and people in an interdependent global

economy



Global TrendsGlobal Trends

• Five key global trends:• Changing balance of growth towards

emerging markets• Need for increased productivity and

consumption in developed countries• Increasing global interconnectivity• Increasing gap between supply and

demand of natural resources• Challenge for governments to develop

policies for economic growth and financial stability

• Five key global trends:• Changing balance of growth towards

emerging markets• Need for increased productivity and

consumption in developed countries• Increasing global interconnectivity• Increasing gap between supply and

demand of natural resources• Challenge for governments to develop

policies for economic growth and financial stability


Critically assess the developments, advantages, and disadvantages of globalization.

Critically assess the developments, advantages, and disadvantages of globalization.


Challenges to GlobalismChallenges to Globalism

Backlash against capitalism and rekindling of nationalism

Increased protectionism of high-demand resources

Need to develop top managers with international understanding and experience

Increasing pressure and publicity for companies to consider the social responsibility of their actions

Backlash against capitalism and rekindling of nationalism

Increased protectionism of high-demand resources

Need to develop top managers with international understanding and experience

Increasing pressure and publicity for companies to consider the social responsibility of their actions


Effects of Globalization on Corporations

Effects of Globalization on Corporations

Global companies are becoming less tied to specific locations

Companies that desire to remain competitive will have to develop a cadre of experienced international managers

Small companies are also affected by and in turn affect globalism

Global companies are becoming less tied to specific locations

Companies that desire to remain competitive will have to develop a cadre of experienced international managers

Small companies are also affected by and in turn affect globalism


Regional Trading BlocsRegional Trading Blocs

Much of today’s world trade takes place within these three regional free-trade blocs:

Western Europe, Asia, and the Americas

Much of today’s world trade is grouped around three dominant currencies:

euro, yen, and the dollar These trade blocs are continually

expanding their borders to include neighboring countries

Much of today’s world trade takes place within these three regional free-trade blocs:

Western Europe, Asia, and the Americas

Much of today’s world trade is grouped around three dominant currencies:

euro, yen, and the dollar These trade blocs are continually

expanding their borders to include neighboring countries


The European Union “EU”

The European Union “EU”

A unified market over 500 million people living in 27 nations

Stability of the euro is in question and the ability of the “EU” to deal with the debt crisis of some members

EU poses two challenges for global managers:

1. “Fortress” Europe2. Dealing with multiple cultures within

this unified market

A unified market over 500 million people living in 27 nations

Stability of the euro is in question and the ability of the “EU” to deal with the debt crisis of some members

EU poses two challenges for global managers:

1. “Fortress” Europe2. Dealing with multiple cultures within

this unified market


AsiaAsia

China India ASEAN South Asia Association of Regional

Cooperation (SAARC) Japan Asian Tigers:

Hong Kong Singapore South Korea Taiwan

China India ASEAN South Asia Association of Regional

Cooperation (SAARC) Japan Asian Tigers:

Hong Kong Singapore South Korea Taiwan


The AmericasThe Americas

North American Free Trade Agreement (NAFTA)

Brazil MERCOSUR Central America Free Trade

Agreement (CAFTA)

North American Free Trade Agreement (NAFTA)

Brazil MERCOSUR Central America Free Trade

Agreement (CAFTA)


Other Regions in the WorldOther Regions in the World

The Russian Federation Middle East The African Union—AU South Africa Less developed countries—LDCs

Low Gross National Product (GNP)Low Gross Domestic Product (GDP)Large, relatively unskilled workforceHigh international debt

The Russian Federation Middle East The African Union—AU South Africa Less developed countries—LDCs

Low Gross National Product (GNP)Low Gross Domestic Product (GDP)Large, relatively unskilled workforceHigh international debt


Comparative Management in Focus:

China helps prop up the Global Economy



The fastest growing GDP rate (over 9 % per/year) for 30 years

In March 2012 Chinese Premier Wen Jiabao announced only 7.5% growth for 2012

China is still a developing country with considerable differences between rural and urban areas

State firms play a significant or dominant role

The fastest growing GDP rate (over 9 % per/year) for 30 years

In March 2012 Chinese Premier Wen Jiabao announced only 7.5% growth for 2012

China is still a developing country with considerable differences between rural and urban areas

State firms play a significant or dominant role



However:Weakening demand for Chinese

exports—due to global recession government is targeting only 7.5% growth in 2012

Chinese labor costs increasing, energy and shipping cost rising; appreciating Yuan

The political, legal, and social environments create unpredictability for businesses

However:Weakening demand for Chinese

exports—due to global recession government is targeting only 7.5% growth in 2012

Chinese labor costs increasing, energy and shipping cost rising; appreciating Yuan

The political, legal, and social environments create unpredictability for businesses






Management Focus: Tips for doing business in China

Management Focus: Tips for doing business in China

Connections are importantNegotiations will be different from

the U.S. and difficultCommunication must be clear,

honest, and fully prepared forCulture matters!

Connections are importantNegotiations will be different from

the U.S. and difficultCommunication must be clear,

honest, and fully prepared forCulture matters!

Management Focus: Intel Brings Changes to Vietnam’s

Economy and Culture

Management Focus: Intel Brings Changes to Vietnam’s

Economy and Culture

United States opened trade relations with Vietnam in 2000.

Vietnam’s rapid growth can be contributed to those aspects of globalization that attracts corporations such as Intel.

Intel is taking advantage of new markets and lower costs of production.

Intel’s success started with awareness of the tight control of the Vietnamese government.

United States opened trade relations with Vietnam in 2000.

Vietnam’s rapid growth can be contributed to those aspects of globalization that attracts corporations such as Intel.

Intel is taking advantage of new markets and lower costs of production.

Intel’s success started with awareness of the tight control of the Vietnamese government.



Globalization of Information Technology

Globalization of Information Technology

The speed and accuracy of information transmission are changing the nature of international manager’s jobs

Cultural barriers are being lowered gradually

Technology gets dispersed around the world by MNEs

Explosive growth of information technology is both a cause and effect of globalism

The speed and accuracy of information transmission are changing the nature of international manager’s jobs

Cultural barriers are being lowered gradually

Technology gets dispersed around the world by MNEs

Explosive growth of information technology is both a cause and effect of globalism

Globalization of Human CapitalGlobalization of Human Capital

Increasing trend in the offshoring of manufacturing jobs and outsourcing of white-collar jobs

The Indian ITES sector has 700,000 jobs worldwide and comprises 35% of BPO market

For global firms, winning the war for talent is a pressing issue

Increasing trend in the offshoring of manufacturing jobs and outsourcing of white-collar jobs

The Indian ITES sector has 700,000 jobs worldwide and comprises 35% of BPO market

For global firms, winning the war for talent is a pressing issue



Discuss the complexities of the international manager’s job.

Discuss the complexities of the international manager’s job.


The Global Manager’s RoleThe Global Manager’s Role



Develop an appreciation for the ways in which political, economic, legal, and technological factors and changes impact the opportunities that companies face.

Develop an appreciation for the ways in which political, economic, legal, and technological factors and changes impact the opportunities that companies face.


The Political and Economic Environment

The Political and Economic Environment

Sustainability—economic, political, social, and environmental—has become a significant worldwide issue

Ethnicity—a driving force behind political instability around the world

Religion—religious disputes lie at the heart of regional instabilities, for example, former Yugoslavia, Northern Island, the Middle East…

Sustainability—economic, political, social, and environmental—has become a significant worldwide issue

Ethnicity—a driving force behind political instability around the world

Religion—religious disputes lie at the heart of regional instabilities, for example, former Yugoslavia, Northern Island, the Middle East…


Political RiskPolitical Risk

Examples:Examples:


Any governmental action or politically motivated event that could adversely affect the long-term profitability or value of a firm

Argentina announced plans to nationalize

Repsol YPF, the Spanish oil co., taking 51%.

In Russia, the Kremlin exploited the financial crisis to take control of

energy companies.

The Political Risk Cont.The Political Risk Cont.

Typical Political RisksTypical Political Risks Political Risk Assessment

Expropriation and confiscation

NationalizationTerrorismDiscriminatory

treatmentBarriers to repatriation

of funds Interference in

managerial decision making

Dishonesty by government officials

Expropriation and confiscation

NationalizationTerrorismDiscriminatory

treatmentBarriers to repatriation

of funds Interference in

managerial decision making

Dishonesty by government officials

Helps companies manage exposure to risk and minimize financial loss

Two forms:Consultation with

expertsDevelopment of

internal staff capabilities – increasingly common

Helps companies manage exposure to risk and minimize financial loss

Two forms:Consultation with

expertsDevelopment of

internal staff capabilities – increasingly common


Managing Political RiskManaging Political Risk

Avoidance and Adaptation

Avoidance and Adaptation

Dependency and Hedging

Equity sharing

Participating management

Localization of the operation

Development assistance

Equity sharing

Participating management

Localization of the operation

Development assistance

Input controlMarket controlPosition controlStaged contribution

Political risk insurance (OPIC and FCIA)

Local debt financing

Input controlMarket controlPosition controlStaged contribution

Political risk insurance (OPIC and FCIA)

Local debt financing


Managing Terrorism RiskManaging Terrorism Risk

Develop a benevolent image (IBM and Exxon).

Maintain a low profile and minimize publicity.

Using teams to monitor terrorist activities

Hiring counterterrorism consultants

Develop a benevolent image (IBM and Exxon).

Maintain a low profile and minimize publicity.

Using teams to monitor terrorist activities

Hiring counterterrorism consultants


Economic RiskEconomic Risk

Closely related to political riskDetermined by a country’s ability or

intention to meet its financial obligationsHistorically, most industrialized nations

have posed little risk of economic instability, however the level of economic risk in the EU is of great concern

Closely related to political riskDetermined by a country’s ability or

intention to meet its financial obligationsHistorically, most industrialized nations

have posed little risk of economic instability, however the level of economic risk in the EU is of great concern


Categories of Economic RiskCategories of Economic Risk

1. Loss of profitability due to abrupt changes in monetary and fiscal policies

2. Loss of profitability due to changes in foreign investment policies

3. Risk of currency exchange rate

1. Loss of profitability due to abrupt changes in monetary and fiscal policies

2. Loss of profitability due to changes in foreign investment policies

3. Risk of currency exchange rate


Managing the Economic RiskManaging the Economic Risk


The Legal EnvironmentThe Legal Environment

Consists of the local laws and legal systems of those countries in which an international company operates, and of international law, which governs relationships between sovereign countries

Consists of the local laws and legal systems of those countries in which an international company operates, and of international law, which governs relationships between sovereign countries


The Legal EnvironmentThe Legal Environment

Types of Legal Systems

Types of Legal Systems

Approaches to Contract Law

Common law

Civil law

Islamic law

Common law

Civil law

Islamic law

Common law: details must be written in the contract to be enforced

Civil law: assumes promises will be enforced without specifying the details

In Asia the contract may be in the relationship, not on the paper

Common law: details must be written in the contract to be enforced

Civil law: assumes promises will be enforced without specifying the details

In Asia the contract may be in the relationship, not on the paper


Other Regulatory IssuesOther Regulatory Issues

Protectionist policies, such as tariffs or quotas

The attractiveness of the tax system

The level of government involvement in the economic and regulatory environment

Protectionist policies, such as tariffs or quotas

The attractiveness of the tax system

The level of government involvement in the economic and regulatory environment



Review the role of technology in international business.

Review the role of technology in international business.


The Technological EnvironmentThe Technological Environment

The appropriability of technologyThe International Convention for the

Protection of Industrial Property (the Paris Union)

Inappropriate use of technology by JVs, franchisees, licensees, and employees

Appropriateness of technology for the local environment

The appropriability of technologyThe International Convention for the

Protection of Industrial Property (the Paris Union)

Inappropriate use of technology by JVs, franchisees, licensees, and employees

Appropriateness of technology for the local environment


The Impact of the Information Technology

The Impact of the Information Technology

Making Geographic barriers less relevant

Both cause and effect of globalization

Lowering cultural barriers Encouraging convergence of

consumers’ tastes and preferences However, China still monitors and

limits electronic information

Making Geographic barriers less relevant

Both cause and effect of globalization

Lowering cultural barriers Encouraging convergence of

consumers’ tastes and preferences However, China still monitors and

limits electronic information


Global E-BusinessGlobal E-Business


4141

All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic,

mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher. Printed in the United States of America.

Copyright © 2014 Pearson Education, Inc. Copyright © 2014 Pearson Education, Inc.

Copyright ©2014 Pearson Education, Inc. 1-1. Chapter Learning Goals 1. Understand the global...

Documents

Transcript of Copyright ©2014 Pearson Education, Inc. 1-1. Chapter Learning Goals 1. Understand the global...