GM - Chapter 1- Globalization and International Linkages Flashcards
International management process
- Applying management concepts and techniques in a multinational environment;
- Adapting management practices to different economic, political, and cultural environments
Multinational corporation (MNC):
1) Operations in more than one country
2) International sales
3) Nationality mix of managers and owners
Globalization:
the process of integration among countries around the world with a vision of a single market entity:
Social Economic Political Technological Cultural
Internationalization:
the process of a business crossing national and cultural borders.
Benefits of Globalization:
wealth, jobs, technology, lower prices.
Criticisms of Globalization:
1) off-shoring of business service jobs to lower-wage countries;
2) growing trade deficits;
3) slow wage growth;
4) environmental and social impacts.
Global Agreements:
World Trade Organization (WTO)
(General Agreement on Tariffs and Trade
(GATT))
Regional Agreements:
1) North American Free Trade Agreement (NAFTA)
2) U.S.-Central American Free Trade Agreement (CAFTA)
3) European Union (EU)
4) Association of Southeast Asian Nations (ASEAN)
5) Free Trade Agreement of the Americas (FTAA)
International economic power in the global economy - Shifting landscape due to:
Economic integration
Economic potential of emerging markets
Trends in International Investments:
1) 80% from developed countries
2) direct investment (FDI)
3) Growing at healthy rate
4) Outpacing domestic growth in most countries
Trends in International Trade:
1) Over ½ of world trade accounted for by United States, European Union and Japan
2) Increased substantially over last two decades
Economic Systems of the World:
1) Market Economy -private enterprise can own property andmontior the production ad disstrbution of goods adn services while the state simply supports competition and efficiatn practices
2) Command Economy- govt has explicit control over the price and supply of a good ro services
3) Mixed Economy - combo of market and command
Economic Performance: United States
- Foreign MNC’s find U.S. a lucrative expansion market
- Foreign firms welcomed as investors in U.S. market
- U.S. firms hold market dominance in many European markets; gaining market share in Asia
Economic Performance: Canada
- U.S.’s largest trading partner
- Most of the largest foreign-owned Canadian companies are totally or heavily U.S.-owned
- Legal and business environment in Canada is similar to that in U.S.
Economic Performance: Mexico
- Strongest Latin American economy
- Very strong maquiladora industry (materials and equipment can be imported on a duty and tariff-free basis for assembly or manuf and re-export mostly in Mexican border towns.)
- Trade with both Europe and Asia has increased
- Now competitive with Asia for the U.S. market
Economic Performance: South America
- South American countries have accumulated heavy foreign debt and experienced severe inflation
- Major development is inter-country trade, including free market policies among South American countries
- South American countries increasingly looking to do business with U.S.
Economic Performance: European Union (EU)
Includes 27 member states:
- Privatization of traditionally nationalized industries
- Emergence of the EU as an operational economic union
- Economic linkages between the EU and newly emerging Central and Eastern European countries
- Challenge is to absorb former communist bloc countries
Economic Performance: Central and Eastern Europe
Russia, Czech Republic, Hungary, Poland:
- Dismantling of Russian price controls
- Perestroika—economic and political restructuring
- Privatization
- Inflation
- Crime
- Membership in International Monetary Fund (IMF)
- Political uncertainty
Economic Performance:Asia - Japan
1) Phenomenal economic success in 1970s and 1980s
2) Ministry of International Trade and Industry (MITI)
3) Keiretsus
- –Vertically integrated industries
- –Holdings provide assistance needed in providing goods and services to end users
4) Decade long recession in 1990s
- —Bank loans backed by real estate or projected revenues
- –By 2000, most major banks had billions of dollars in uncollectible loans
- –International competition has increased
Economic Performance: Asia -China
- Annual real economic growth of 10 percent during the 1980’s and early 1990’s
- More recent growth of 8 percent or higher
- Healthy and growing economy
- GDP growth of 11.1 percent in 1st ¼ of 2007
- Attractive to foreign investors despite major political risk
- Product pirating is a major problem
- Complicated and high-risk venture
Economic Performance: Asia-The Four Tigers
1) South Korea
- Chaebols (large family-held Korean conglomerates)
- Affected by declining economies of Southeast Asia in 1990’s
2) Hong Kong
- Now part of People’s Republic of China
- Uncertainty about the role the Chinese government intends to play in local governance
3) Singapore
- Least hurt by economic downturn of 1990’s
4) Taiwan
- Progression from labor-intensive economy to one dominated by technologically sophisticated industries (banking, electricity generation, petroleum refining and computers)
Economic Performance: Asia-The Baby Tigers
(Thailand, Malaysia, Indonesia):
- Large population base
- Inexpensive labor
- Considerable natural resources
- Attractive to outside investors
Economic Performance:Developing and Emerging Countries- India
- Low per capital GDP
- Recent trend of locating software and high value-added services to this country
- Attractive to U.S. and British investors (well educated, English speaking, technologically sophisticated workers)
Economic Performance:Developing and Emerging Countries- Middle East and Central Asia
- Large oil reserves
- Highly unstable geopolitical and religious forces
- Plagued by continuing economic problems
Economic Performance:Developing and Emerging Countries- Africa
-Considerable natural resources
-African nations remain very poor and undeveloped
-International trade is not a major sources of income
-Populace divided into 3,000 tribes that -speak 1,000 languages and dialects
-Major political instability
Poverty, starvation, illiteracy, corruption, overcrowding among many social problems negatively affecting economic sector
Japan’s Keirtsu system
the formal system through which all Japanese companies (Kaisha) must belong and within which they all cooperate. The Keirtsu system emphasizes strong specialization, widespread cooperation, effective reliance and vast interdependence between companies. Its objective ultimately is to manage and minimize each company’s risk by providing a complex network of relationships, connections and contracts. This network is highly effective in transmitting information between companies and in minimizing transactions costs.
Economic Performance: North America
- Free market base economy in region
- Combined purchasing power of U.S.,
- Canada and Mexico approaches $12 trillion in purchasing power
- Foreign MNC’s find U.S. to be a lucrative market
