Chapter 1 Flashcards
(34 cards)
What is Globalization?
Global competition characterized by networks of international linkages that bind countries, institutions, and people in an interdependent global economy.
Challenges 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
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
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
Globalization of Human Capital
While firms still offshore manufacturing jobs, some are reshoring jobs to lower shipping costs
Firms are outsourcing white-collar jobs to India
For global firms, winning the war for talent is a pressing issue
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
Regional Trading Blocs
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
The European Union “EU
A unified market over 500 million people in 28 nations
Stability of the euro and the debt crisis in question
2014-2015 Global Competitiveness Index shows that Europe has 6 of the top 10 countries
Challenges for global managers:
“Fortress Europe”
Multiple cultures in one market
Asia
China India ASEAN South Asia Association of Regional Cooperation (SAARC) Japan Asian Tigers: Hong Kong Singapore South Korea Taiwan
Other 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 workforce High international debt
Chapter 1 covers what?
Understand the global business environment and how it affects the strategic and operational decisions which managers must make
To develop an appreciation for the ways in which political and economic factors and changes influence the opportunities that companies face
To develop an appreciation of the legal environment for international business
To review the technological environment around the world and how it affects the international manager’s decisions and operations
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
The Americas
North American Free Trade Agreement (NAFTA)
Brazil
MERCOSUR
Central America Free Trade Agreement (CAFTA)
Political Risk
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
Typical Political Risks
Expropriation and confiscation Nationalization Terrorism Discriminatory treatment Barriers to repatriation of funds Interference in managerial decision making Dishonesty by government officials
Political Risk Assessment
Helps companies manage exposure to risk and minimize financial loss
Two forms:
Consultation with experts
Development of internal staff capabilities – increasingly common
Managing Political Risk
Avoidance and Adaptation
Equity sharing
Participating management
Localization of the operation
Development assistance
Managing Political Risk
Dependency and Hedging
Input control
Technology control
Expatriate position control
Distribution control
Political risk insurance (OPIC and FCIA)
Local debt financing
Assessing Risks in Russia
Top two risks:
Sanctions-based retaliatory measures
Decline in business activity
Other issues: threat of backlash in Russia against Western products; continued standoff between Russia and Ukraine; global outcry after Malaysia Airlines Flight 17 shot down
Globalization has compounded the types and level of business risks
Challenges international Managers Face
Politics Cultural differences Global competition Terrorism Technology Sustainability Social obligations
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.
2014–2015 Foreign Direct Investment Confidence Index Top 25 Targets for FDI
The main types of FDI are acquisition of a subsidiary, joint ventures, licensing, and investing in new facilities or expansion
The United States is in the lead since 2013, followed by China, Canada, United Kingdom, and Brazil
India has dropped to seventh from second in two years
Results show confidence in the economic
recovery of the United States and Europe.
Rapidly developing economies continue
Management In Action:
Global Cybertheft of Corporate
Cybertheft: hard to detect and combat In 2014, the U.S. Department of Justice charged Chinese military personnel of stealing trade secrets
Digital reprisal: China targeted firms which contested its policies at the World Trade Organization
Protection of intellectual property is the primary risk in China
China’s goal is to achieve technological superiority by importing and adapting technologies
Comparative Management in Focus: China Loses Its Allure
Until 2010, China grew at 10 percent for 30 years, declining to 7.3 percent in 2014
Growth of 7 percent for 2015 was called “a new normal” by Premier Li Keqiang
China is a developing country, with differences between urban and rural areas
China is the second-largest trading partner with the United States
State firms play a significant or dominant
