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Welcome to MGT 480International Management

Tonight:

Syllabus & Course Overview

Definition of International Management

Refresher on Global Business Environment

Globalization & Economic Trends

Political/Regulatory/Technological Environment

Ethics & Corporate Social Responsibility

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International Management

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

Multinational corporations (MNC) Operations in more than one country International sales, Nationality mix of managers and owners

McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.

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Chapter 1

Globalization & Economic Trends

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Market ValueBillions of U.S. Dollars

SalesBillions of U.S. Dollars

Top Ten Global MNCs

McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.

1. General Electric

$328.112. Microsoft

284.433. ExxonMobil

283.614. Pfizer

269.665. Wal-Mart Stores

241.196. Citigroup

239.437. BP

193.058. Aig

191.189. Intel

184.6610.Royal Dutch’ Shell

174.83

The Top 10 global MNCs Ranked by Market Value, Sales, Profits, and Share-Price Gain, 2003

1. Wal-Mart Stores

258.682. BP

232.573. ExxonMobil

222.884. Royal Dutch/Shell

201.935. General Motors

183.246. DaimlerChrysler

166.617. Ford Motor

164.208. Toyotal Motor

156.489. Mitsubishi

137.3210.General Electric

134.19

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Top Ten Global MNCs

McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.

ProfitsBillions of U.S. Dollars1. ExxonMobil

20.962. Citigroup

17.853. General Electric

15.004. HSBC Holdings

11.655. Royal Dutch/Shell

11.416. Bodafone Group

11.367. Bank of America

10.818. Toyota Motor

10.519. Microsoft

9.9910.BP

9.54

The Top 10 global MNCs Ranked by Market Value, Sales, Profits, and Share-Price Gain, 2003

Share-Price Gain1. Mizuho Financial

636%2. Research in Motion

5503. UFJ Holdings

4204. SK

3835. Rakuten

3816. Sumitomo Mitsui Fin.

3317. Elan

3118. Bharti Tele-Ventures

2769. Yahoo! Japan

24110.Mitsui Trust Hldgs.

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Data: Morgan Stanley Capital International Standard & Poor’s Compustat

Source: http://images.businessweek.com/mz/0o4/30/0430_62intbg1_a.gif

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Globalization

Process of integration among countries around the world Social Political Economic Cultural Technological

Benefits of growing global trade and investment Wealth Jobs Technology Lower prices

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Globalization

Criticisms of globalization Offshoring of business services jobs to lower-wage countries Growing trade deficits Slow wage growth Environmental and social impacts

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Global and Regional Integration

World Trade Organization (WTO) General Agreement on Tariffs and Trade (GATT)

Regional Agreements North American Free Trade Agreement (NAFTA) U.S.—Central American Free Trade Agreement (CAFTA) Free Trade Agreement of the Americas (FTAA) European Union (EU) Association of Southeast Asian Nations (ASEAN)

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Trends in InternationalInvestment and Trade

International investments 80 percent from developed countries

Foreign direct investment (FDI) Economic growth potential (esp. China and Asia in general)

Trade growing faster than most domestic economies

Over one-half of world trade is accounted for by United States European Union Japan

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The World’s Largest Economies 2005 and 2020 (Projected) Measured by The World’s Largest Economies 2005 and 2020 (Projected) Measured by GDP at Market Exchange Rates:GDP at Market Exchange Rates:

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The World’s Largest Economies 2005 and 2020 (Projected) Measured by The World’s Largest Economies 2005 and 2020 (Projected) Measured by GDP at Purchasing Power Parity (ppp)GDP at Purchasing Power Parity (ppp)

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Most Populous Countries in 1980, 2000, and Most Populous Countries in 1980, 2000, and 2050 (Projected):2050 (Projected):

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World Foreign Direct Investment Inflows (in World Foreign Direct Investment Inflows (in millions of dollars):millions of dollars):

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World Foreign Direct Investment Outflows (in World Foreign Direct Investment Outflows (in millions of dollars): millions of dollars):

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Trade Flows Among World Regions, 2005 (in billions of dollars or percent)Trade Flows Among World Regions, 2005 (in billions of dollars or percent)

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Top 10 Trading Partners of Top 10 Trading Partners of the United States, 2003the United States, 2003

McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.

Importing U.S. Exporting U. S. Rank Country Exports Rank Country Imports

1 Canada

169,9242 Mexico

97,4123 Japan

52,0044 United Kingdom

33,8285 Germany

28,8326 China

28,3687 South Korea

24,0738 Netherlands

20,6959 Taiwan

17,44810 France

17,053

(in millions of dollars)

1 Canada

221,5952 China

152,4363 Mexico

138,0604 Japan

118,0375 Germany

68,1136 United Kingdom

42,7957 South Korea

37,2298 Taiwan

31,5999 France

29,21910 Ireland

26,747

Adapted from: Table 1-4: Top 10 Trading partners of the United States, 2003 (in millions of dollars).

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World’s Most World’s Most Competitive Nations, 2006Competitive Nations, 2006

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Market Potential Indicators Ranking for Emerging Markets, Market Potential Indicators Ranking for Emerging Markets, 20072007

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Economic Performance

India Low per capita 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)

Middle East and Central Asia Large oil reserves Highly unstable geopolitical and religious forces Plagued by continuing economic problems

Developing and Emerging Countries

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Economic Performance

Africa Considerable natural resources African nations remain very poor and undeveloped International trade is not a major source 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

Developing and Emerging Countries

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Review and Discuss

1. How has globalization affected different world regions? What are some of the benefits and costs of globalization for different sectors of society?

2. How has NAFTA affected the economies of North America and the EU affected Europe? What importance do these economic pacts have for international managers in North America, Europe and Asia?

3. Why would MNCs be interested in South America, India, the Middle East, Central Asia, and Africa, the less developed and emerging countries of the world?

4. If you were a foreign investor, what asset classes and regions would you seek to invest in today?

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Chapter 2

Political,

Regulatory,

Technological,

Dimensions

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Political Environment:

Ideologies (ideas reflecting beliefs and values influencing behavior/culture of nations and political systems) underlie the actions of governments.

Evaluate a political system along two dimensions: (1) rights of citizens based on a system of government (range democratic to totalitarian); (2) Focus of political system on individualism vs. collectivism.

No pure form of government (how is the US collectivist?) Democratic tend to emphasize individualism and

totalitarian tends to emphasize collectivism. What challenges are involved in different political

environments?

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Legal and Regulatory Environment

Confusion and challenge for the MNC due to many different laws and regulations in global business operations

MNCs must carefully evaluate legal framework in each market before doing business

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Legal and Regulatory Issues

Foreign Corrupt Practices Act (http://www.usdoj.gov/criminal/fraud/docs/dojdocb.html) Illegal to influence foreign officials through

Personal payment Political contributions

When bribes removed, MNCs more willing to do business in that country

Restrictive bureaucratization Government controls often inefficient and uncorrected Local politics often prevail over national concerns Privatization

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Regulation of Tradeand Investment

Individual countries use legal and regulatory policies to affect the international management environment

If a country is perceived to engage in unfair trade practices (WTO and similar agreements) Government support (subsidies) Require MNCs to accept local partners

Response may be Retaliatory tariffs Restrictive trade regulations

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Technological Environment and Global Shifts in Production

Biotechnology Nanotechnology Satellites Automatic translation telephones Artificial intelligence and embedded learning technology Advancements in computer chip technology Supercomputers E-business

Business-to-business (B2B) Business to consumer (B2C) transactions e-tailing Financial services (e-cash)

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Technological Environment and Global Shifts in Production

Telecommunications Wireless or mobile telephone service

Economic growth hampered by poor communication services Wireless is more affordable than installed phone lines Some governments recognize the need to privatize this service

Technology, outsourcing and offshoring Technology has reduced and eliminated some work in

middle management and white-collar jobs Global competition has forced some MNCs to outsource jobs

to offshore productions (lower labor and other costs) Emerging technology makes work more portable

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Expected Winners/Losersin Selected Occupations

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Ethics and Social Responsibility

Ethics: Study of morality and standards of conduct Dilemmas arising from conflicts between ethical standards

between countries most evident in employment practices Inferring right vs. wrong in legal sense

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Chapter 3

Ethics & Social Responsibility

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Ethics and Social Responsibility

Ethics: Study of morality and standards of conduct Dilemmas arising from conflicts between ethical standards

between countries most evident in employment practices Inferring right vs. wrong in legal sense

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Ethics and Social Responsibility

Corporate Social Responsibility (CSR):Closely related to ethicsActions of a firm to benefit society beyond

requirements of law and direct interests of firm

CSR involves taking voluntary actionCSR concerns include working conditions in

factories and service centers as well as environmental impacts of corporate activities

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Ethics and Social Responsibility

Employment and business practices Difficult to establish a universal foundation of employment

practices Difficult dilemmas in deciding working conditions, expected

consecutive work hours, and labor regulations. Offshoring due to differences in labor costs

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Ethics and Social Responsibility

Human Rights Currently no universally adopted standard A great deal of subjectivity and culturally biased viewpoints

exist Some basic rights: life, freedom from slavery or torture,

freedom of opinion and expression, general ambiance of nondiscriminatory practices

Human rights violations still rampant globally

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Ethics and Social Responsibility

Corruption Government corruption pervasive element in international

business environment Scandals in Russia, China, Pakistan, Lesotho, South Africa,

Costa Rica, Egypt and elsewhere

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Corruption Index: Least and Most Corrupt Countries

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Ethics and Social Responsibility Around the World

Ethical issues Workers not well paid (often work 12 hours a

day, 7 days a week) Piracy of intellectual property, counterfeiting,

and industrial spying Human rights violations

Use of prisoner and child labor

Ethical Problems and Concerns

China

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Ethics and Social Responsibility Around the World

Political campaign contributions & lobbyists Fraud in mortgage sector

Attitude of caveat emptor Rising wage inequality

middle class wages stagnant for a decade Lack of health benefits for workers

Loss of promised retirement benefits

Ethical Problems and Concerns

United States

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Corporate Social Responsibility (CSR) and Sustainability

CSR: Action of a firm to benefit society beyond the requirements of the law and direct interests of the firm

Sustainability: Development that meets humanity’s needs without harming future generations

Why are MNCs getting involved in corporate social responsibility? Are they displaying a sense of social responsibility, or is this merely a matter of good business? Defend your answer.

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Rise of Civil Society and NGOs

Emergence of organized civil society and NGOs altered Business environment globally Role of MNC within global business environment

NGOs in the U.S. and globally Save the Children Oxfam CARE World Wildlife Fund Conservation International

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Rise of Civil Society and NGOs

Corporations receiving heavy criticism Nike Levi’s Chiquita

Major criticisms Exploitation of low-wage workers Environmental abuses Intolerable workplace standards

Response to social obligations Agreements and codes of conduct Maintenance of standards in domestic and global operations Cooperation with NGOs regarding certain social issues

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Trust in Leaders

0 10 20 30 40 50 60

Average Across All 15 Countries Surveyed

NGO leaders

Leaders at the U.N.

Spiritual/religious leaders

Leaders of Western Europe

Managers of the global economy

Managers of the national economy

Executives of MNCs

Leaders of the U.S.A.

52

42

41

36

36

35

33

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Adapted from Figure 3-1: Trust in Leaders: Percentage Saying “A Lot” and “Some Trust”

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Principles of the Global Compact

http://www.unglobalcompact.org/AboutTheGC/faq.html

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Millennium Development Goals

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Case: AIDS and Pharmaceuticals

See pages 82-90