copyright ©2014 pearson education, inc. 1-1. chapter learning goals 1. understand the global...
TRANSCRIPT
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.
Copyright ©2014 Pearson Education, Inc. 1-2
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
Copyright ©2014 Pearson Education, Inc.1-4
Copyright ©2014 Pearson Education, Inc. 1-5
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.
Chapter Learning GoalsChapter Learning Goals
What is International Management?
Copyright ©2014 Pearson Education, Inc.1-6
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
Copyright ©2014 Pearson Education, Inc. 1-7
Copyright ©2014 Pearson Education, Inc.1-8
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
Copyright ©2014 Pearson Education, Inc. 1-9
Critically assess the developments, advantages, and disadvantages of globalization.
Critically assess the developments, advantages, and disadvantages of globalization.
Chapter Learning GoalsChapter Learning Goals
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
Copyright ©2014 Pearson Education, Inc. 1-10
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
Copyright ©2014 Pearson Education, Inc. 1-11
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
Copyright ©2014 Pearson Education, Inc. 1-12
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
Copyright ©2014 Pearson Education, Inc. 1-13
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
Copyright ©2014 Pearson Education, Inc. 1-14
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)
Copyright ©2014 Pearson Education, Inc. 1-15
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
Copyright ©2014 Pearson Education, Inc. 1-16
Comparative Management in Focus:
China helps prop up the Global Economy
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
Copyright ©2014 Pearson Education, Inc. 1-17
Copyright ©2014 Pearson Education, Inc.1-18
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
Comparative Management in Focus:
China helps prop up the Global Economy
Comparative Management in Focus:
China helps prop up the Global Economy
Copyright ©2014 Pearson Education, Inc.1-19
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.
Copyright ©2014 Pearson Education, Inc. 1-20
Copyright ©2014 Pearson Education, Inc.1-21
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
Copyright ©2014 Pearson Education, Inc. 1-22
Copyright ©2014 Pearson Education, Inc. 1-23
Discuss the complexities of the international manager’s job.
Discuss the complexities of the international manager’s job.
Chapter Learning GoalsChapter Learning Goals
Copyright ©2014 Pearson Education, Inc.1-25
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.
Chapter Learning GoalsChapter Learning Goals
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…
Copyright ©2014 Pearson Education, Inc. 1-26
Political RiskPolitical Risk
Examples:Examples:
Copyright ©2014 Pearson Education, Inc.1-27
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
Copyright ©2014 Pearson Education, Inc.1-28
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
Copyright ©2014 Pearson Education, Inc.1-29
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
Copyright ©2014 Pearson Education, Inc.1-30
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
Copyright ©2014 Pearson Education, Inc. 1-31
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
Copyright ©2014 Pearson Education, Inc. 1-32
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
Copyright ©2014 Pearson Education, Inc.1-34
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
Copyright ©2014 Pearson Education, Inc.1-35
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
Copyright ©2014 Pearson Education, Inc. 1-36
Copyright ©2014 Pearson Education, Inc. 1-37
Review the role of technology in international business.
Review the role of technology in international business.
Chapter Learning GoalsChapter Learning Goals
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
Copyright ©2014 Pearson Education, Inc. 1-38
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
Copyright ©2014 Pearson Education, Inc.1-39
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.