Chapter 1 IntroGlobalization
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Transcript of Chapter 1 IntroGlobalization
Globalization And Worldwide Development
Chapters 1 and 2, Hodgetts, Luthans and Doh, International Management: Culture, Strategy and Behavior , 6th edition (New York: McGraw-Hill Irwin, 2006)
OVERVIEWOVERVIEW
1. International Management and Globalization
2. What is Globalization?
3. Environmental Forces4. Class Debate: The Pros and
Cons of Globalization
5. Implications for Managers
International Management International Management and Globalizationand GlobalizationWhat is 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” (HLD, p. 6)
Why is globalization important?◦ International management is rapidly
gaining in importance in tandem with the quickening pace of globalization
WHAT IS WHAT IS GLOBALIZATION?GLOBALIZATION?
1. Definitions
2. Roots of Globalization
3. Drivers of Globalization4. Globalization from a Regional
Perspective
5. Convergence or Divergence
Globalization: DefinitionsGlobalization: DefinitionsHodgetts, Luthans and Doh,
◦ Globalization is “the process of social, political, economic, cultural, and technological integration among countries around the world” (p. 7)
The Roots of GlobalizationThe Roots of GlobalizationWhen did globalization begin?
◦Ancient trade routes – barter trade◦Standard weights and measures◦Mercantilism – the highways of the sea◦Post WWII – institutions of global
governance◦Past 1980s – ICT, globalization defined
Hodgetts, Luthans, and Doh,◦“Contemporary globalization is a new
branch of a very old tree whose roots were planted in antiquity” (p. 8)
The Drivers of The Drivers of GlobalizationGlobalizationWhat drives globalization?
◦ Individual and social needs and aspirations◦ Technological innovation◦ Reduced technological and economic barriers to
trade Sustaining forces
◦ Greater policy liberalization
◦ Greater efficiency of business
◦ Greater market access◦ Increased flows of
goods, services, and people
Globalization from a Globalization from a Regional PerspectiveRegional PerspectiveDeveloped Economies
U.S. the European Union and Japan account for one-half of world trade
Emerging and Transition Economies Economies in Latin America and Asia are
increasingly important global players BRIC, economic powers with large internal markets Eastward expansion of the EU
Less Developed Countries (LDCs) Some fast growing and increasingly open to the
global system Others, notably in Africa, struggle to compete
globally
North AmericaNorth AmericaImportant global market
Combined purchasing power of the U.S., Canada and Mexico is $12 trillion
United States U.S. outbound FDI $1.8 billion (2003) U.S. inbound FDI $1.4 billion (2003)
Canada Largest U.S. trading partner Legal and business environment similar to the
U.S.Mexico
Strong maquiladora industry Competitive with Asia for the U.S. market Emergence of Mexican MNCs
South AmericaSouth AmericaEconomic challenges
High inflation Heavy foreign debt Entrenched interests (crony capitalism) Political instability
Economic opportunities Important emerging markets
Brazil, Argentina, Venezuela, Columbia, Chile, Peru
Prevalence of free market policies Expanding regional and international trade
Mercosur and Asia-Pacific Economic Cooperation (APEC)
EuropeEuropeMarket factors
Operational integration of the EU Privatization of traditionally nationalized
industries Expanded ties to Central and Eastern Europe
Social factors Maintaining social cohesion Adjusting to local tastes – “Plan globally, act
locally”
Economic challenges For foreign MNCs, gaining a foothold in the EU
Strategies include: acquisitions, alliances, and cooperative R&D
Absorbing the former communist-bloc countries 550 million middle-class consumers across 25 countries Largest economic market in the world
Central and Eastern Central and Eastern EuropeEuropeCollapse of the Soviet Union (1991)
Glasnost (openness) and perestroika (economic and political restructuring)
The fall of the Berlin Wall and German reunification
Russia Dismantling of price controls and privatization Crime, political uncertainty, and inflation Membership in International Monetary Fund (IMF)
Successful transition economies Czech Republic, Hungary, Poland, the Baltic states
Economies caught in transition Albania, Bulgaria, Romania, former Soviet republics
East AsiaEast AsiaJapan
In the 1970s and 1980s Strong government role Vertically integrated industries (keiretsus)
In the 1990s Economic recession Collapse of the real estate bubble Banks reluctant to write-off uncollectible loans Still the world’s second largest economy
China Economic opportunities
High rates of growth (8-10% per year) Large internal market (> 1.3 billion consumers)
Economic challenges Inflation and political instability Regulatory reform and compliance Complex and unpredictable economic
environment
East Asia – The Four TigersEast Asia – The Four TigersSouth Korea
Dominated by family-held conglomerates (chaebols)
Impacted by the Asian financial crisis (1997)Hong Kong
Part of the PRC (one country, two systems) Risk of radical change in business environment
Singapore Corporatist model From entrepot to global city
Taiwan From cheap producer to technology leader Managing relations with the PRC – the 3 Chinas
South and Southeast AsiaSouth and Southeast AsiaSoutheast Asia
The Baby Tigers (TH, MY, IN, VN) Large population base Inexpensive labor Considerable natural resources Attractive to outside investors
Other Southeast Asian nations Philippines, Cambodia, Laos, Myanmar
South Asia India
Large population (300 million middle class consumers)
Increasingly open markets, technology leader Attractive to US and British investors
Other South Asian nations Pakistan, Bangladesh, Nepal, Sri Lanka, Bhutan
Developing and Emerging Developing and Emerging Economies (1)Economies (1)Economic characteristics
Low per capita GDP, low (or negative) GDP growth High unemployment - semiskilled or unskilled
workforce Considerable government intervention in the
economy Political instability, weak infrastructure, corruption
LDCs in Asia and Latin America Include important regional economic powers (e.g.
China, India, Indonesia, Brazil, Argentina) Generally well integrated into the global economy
Developing and Emerging Developing and Emerging Economies (2)Economies (2)LDCs in the Middle East and Central
Asia Large oil reserves Highly unstable geopolitical and religious forces Plagued by continuing economic problems
LDCs in Africa Considerable natural resources Diverse populations Weak and unstable governments Economies negatively impacted by social and
environmental factors (poverty, starvation, illiteracy, corruption, environmental degradation)
Poorly integrated into the global economy
ENVIRONMENTAL ENVIRONMENTAL FORCESFORCES
1. Economic environment
2. Political environmental
3. Legal/regulatory environment
4. Socio-cultural environment
5. Technological environment
Economic EnvironmentEconomic EnvironmentGlobal and regional integration
◦International agreements (GATT, WTO)◦Regional agreements (EU, ASEAN,
NAFTA, CAFTA, FTAA, Mercosur)World trade and investment
◦80% of FDI contributed by developed economies
◦U.S. exports/imports increased by 550% from 1983 to 2003 (to $1.3 and $1.8 trillion)
◦Trade within the EU increased sharply, to > $2 trillion annually
Political EnvironmentPolitical EnvironmentRapid and uncertain change
◦ China’s transition to a market economy◦ European expansion and integration◦ Russia’s unstable political institutions◦ The emergence of political Islam in the
Middle EastSignificant differences across countries
◦ Less stable governments increase political risk
◦ Uncertain responses to democratizationChange in government policies
◦ Adjusting to adjust to new perspectives and changing requirements
◦ Assessing political risks (Chapter 10)
Legal/Regulatory Legal/Regulatory EnvironmentEnvironmentComplex and confusing
◦MNCs must Conform to national laws and standards Abide by the laws of their own countries Be aware of international treaties and obligations
◦Differences in regulatory regimes Increase transaction costs Restrict and distort trade Can result in retaliatory practices or sanctions
Four main legal traditions Common law Civil law Islamic law (theocratic law) Socialist law
Socio-Cultural Socio-Cultural EnvironmentEnvironmentEthics and social responsibility
(Chapter 3)◦Business practices◦Labor standards and workers rights◦Corporate governance◦Intellectual property rights
Values and culture (Part II)◦Responses to authority◦ Individual vs. group recognition and
responsibility◦Balance of work and family obligations◦Managing and resolving conflict
Technological EnvironmentTechnological EnvironmentChanging at “lightning speed”Internet and telecommunications
◦ Increasing bandwidth/high-speed access◦ Reduced costs of entry/leapfrogging
E-business◦ Customization (“the long end of the tail”)◦ E-retailing and financial services
Movement of money across borders “E-cash” – a currency without a country
Outsourcing and offshoring◦ Information as a commodity◦ The 24-hour office – increased productivity/lower
cost
THE PROS AND THE PROS AND CONS OF CONS OF GLOBALIZATIONGLOBALIZATION
1. Where do you stand?
2. Key themes to consider
a. Impact on Labor
b. Impact on Equality
c. Impact on Government
d. Impact on the Environment
e. Impact on Culture and Community
Impact on LaborImpact on LaborPositive effects
Increased job opportunities
Upgraded education system
Increased training
Negative effects Job displacement Loss of industries or
economic groups Lowered labor
standards Downward wage
pressure Decreased union
power Diminished social
contract
Impact on EqualityImpact on Equality
Positive effects Increased income /
reduced poverty Increased wages for
education or technically skilled
Improved economic conditions
Rich become richer Greater access to
goods Lower cost of goods Increased food
supply (in some countries)
Negative effects Greater disparity
between haves and have-nots within and across countries
Some downward pressure on wages for the poorly educated or unskilled
Worsened economic conditions in marginalized countries
Poor become poorer
Impact on GovernmentImpact on Government
Positive effects Increased economic
development Expanded
infrastructure Transfer of modern
management techniques
Greater interdependence among business partners
Negative effects MNC power increased MNCs externalize cost
to countries Competition results in
too many concessions MNCs influence local
policies Companies
incorporate in low tax countries
Pressure to reduce social benefits
Impact on the Impact on the EnvironmentEnvironmentPositive effects
More efficient use of resources
Increased demand for and transfer of more efficient technologies
Increased incomes lead to greater concern for environmental protection
Negative effects Increased consumption Advertising creates
artificial needs Greater use of fossil
fuels (increased travel) Increased surplus and
scarcity Increased degradation
from unregulated businesses
More factories require more infrastructure
Impact on Impact on Culture/CommunityCulture/CommunityPositive effects
Increased cultural exposure and understanding
Closer cross-border ties
Negative effects More mobility
disrupts social life, particularly in remote or rural communities
Disintegration of local communities
Cultural homogenization and monoculture / reduced cultural diversity
Globalization: Pros and Globalization: Pros and ConsConsGlobalization as “moral conflict”Impacts of Globalization
◦Increases economic interdependence◦Creates winners and losers
Implications of the debate◦For academics
Need for more objective research Need to question assumptions and be open to
alternatives◦For companies
Be aware of multiple stakeholder interests Follow the guidelines of the UN Global Compact Consider the “triple bottom line”
ConclusionConclusionImplications for Managers
◦Lifelong learning the “most valuable asset is the ability to learn how
to learn” (Thomas Friedman, The World is Flat)
◦Responsiveness be alert for changes and quick to respond
◦Adaptability knowing how to work with others being comfortable with uncertainty and ambiguity
◦Both a local and global perspective see the big picture (global economy/whole
organization) understand the details of operating at the local level