International Management

1
International Management

• Karin Fladmoe-Lindquist
• Management 4900 Fall 2009
• August 26, 2009

2
The world of business
3
Today and .Looking ahead

• August 26, 2009
• Global Mindset (cont.)
• Globalization and International Linkages (Ch.1)
• BB/WebCT articles
• Photographs

• August 31, 2009
• Political, Legal and Technological environment
  (Ch2)
• In class activity think about how globalization
  affects daily life
• Bring 2 different types of items to class from 2
  different places
• Examples food, clothing, books, events, phones,
  etc.

4
Articles

• WebCT/BlackBoard
• IBM vs Tata Who is more American?
• Paraguayan government withdraws bill for
  Venezuelas Mercosur incorporation
• Handout
• China edges ahead of Germany in race to be 'world
  export champion'

5
Tata of India

• Tata Group is the largest private corporate group
  in India and comprises114 companies in seven
  business sectors
• Involved in communications and information
  technology, engineering, materials, services,
  energy, consumer products and chemicals
• Some firms include Tetley Tea, Eight OClock
  Coffee, Jaguar, LandRover, Taj hotels, Daewoo
  commmercial vehicles

• Operations in more than 85 countries, 6
  continents
• Its companies export products and services to 80
  nations
• Total Revenue US 62.5 billion
• Employs over 300,000 people
• 61 is from business outside India, worth 38.3
  billion in revenue

6
Tatas Business sectors
7
Tata Consultancy Services
8
Globalization.. and Markets Production

• Trend toward greater social, political, economic,
  cultural, and technological interdependence among
  countries, national institutions and economies
• Globalization of markets - Convergence in buyer
  preferences in markets around the world
• Globalization of production - Dispersal of
  production activities worldwide to minimize costs
  or maximize quality

9
Global mindsets - attributes

• Thinking beyond geographic boundaries
• Viewing the firm as having a global identity
• Comprehending the global business environment
• Valuing integration across borders
• Possessing tolerance for unexpected business
  trends
• Appreciating regional and cultural diversity

10
Global Mindset dimensions

• Mindset set of cognitive filters that affect
  what we absorb and how we understand or interpret
  the information knowledge structure
• Knowledge structure
• Diffentiation narrowness vs. breadth of
  knowledge of a particular context
• Low vs. high differentiation
• Integration person or organization can
  integrate disparate knowledge elements
• Low vs. high differentiation

• Global Mindset
• Openness to and awareness of differences across
  and within cultures and markets with an ability
  and tendency to synthesize across the diversity
• Builds cognitive bridges between needs and a
  firms global experience and capabilities
• High Differentiation and High Integration
• (Cultivating the global mindset, Gupta and
  Govindarajan, 2002, AME)

11
Global mindsets - variations

• Global
• High Differentiation and High Integration
• Openness to and awareness of differences across
  and within cultures and markets with an ability
  and tendency to synthesize across the diversity
• Builds cognitive bridges between needs and a
  firms global experience and capabilities
• Parochial
• High Integration and Low Differentiation
• Tendency to focus on narrow knowledge set
• Diffused -
• Low Integration and High Differentiation
• Tendency to focus on each set of local
  differences, without integrating

• Differentiation
• low high
  
• high Parochial Global
  
• Integration
• low NotAppl. Diffused

12
Business globalization approaches

• Two approaches
• Trade export / import
• Investment ownership of a business in a foreign
  country

13
International business distinctiveness

• Forces of globalization
• National business environments
• International business environment
• International firm management
• Global mindsets
• Importance for small firms

14
Key International Business players

• Multinational corporation (MNCs)
• Business that has direct investments abroad in
  multiple countries
• Wholly owned subsidiaries
• Small business and entrepreneurs
• Small companies and individuals becoming
  increasingly active in international trade and
  investment
• Born global firms
• Takes a global perspective on its market and
  engages in international business from or near
  its inception
• Governments and Agencies
• State entities, national interests
• NGOs
• Non-governmental organizations

15
Globalization and International Linkages
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Globalization and International Linkages

• implications of globalization for countries,
  industries, firms, and communities also states,
  and regions within coutries
• major trends in global and regional integration
• changing balance of global economic power and
  trade and investment flows among countries
• major economic systems and recent developments
  among countries that reflect those systems

17
U.S. Clusters of competitive advantage
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State of Utah economic cluster initiativeshttp//
goed.utah.gov/initiatives/clusters/definition.html

• International efforts Canada, Mexico, India,
  China
• State of Utah economic cluster development
  programs
• Life Sciences and Biotechnology
• pharmaceutical research, personalized/predictive
  medicine, genetics, neuroscience, medical devices
  and products along with environmental and
  agricultural technology and bioinformatics.
• Software Development Information Technology

• Aerospace
• Defense and Homeland Security
• Financial Services
• Energy and Natural Resources
• Competitive Accelerators
• nanotechnology, logistics and distribution
  centers, quality of life (personal wellness and
  neutraceuticals, family related products, outdoor
  recreation)

19
Globalization, Internationalization, and
Management processes

• International management process
• Applying management concepts and techniques in a
  multinational environment
• Adapting management practices to different
  economic, political, and cultural environments.

• 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.

20
The Worlds Top Nonfinancial MNCs from Developed
Countries (ranked by foreign assets, 2004)
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The Worlds Top Nonfinancial MNCs from Developing
Countries (ranked by foreign assets, 2004)
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Globalization Pros and Cons

• Benefits of Globalization
• jobs
• wealth
• Technology
• lower prices.
• greater availability of some goods and services

• Criticisms of Globalization
• off-shoring of business service jobs to
  lower-wage countries
• growing trade deficits
• slow wage growth
• environmental and social impacts.

23
Global and Regional Integration

• Global Agreements
• World Trade Organization (WTO)
• (General Agreement on Tariffs and Trade(GATT))
• Regional Agreements
• North American Free Trade Agreement (NAFTA)
• European Union (EU)
• European Free Trade Association (EFTA - Iceland,
  Liechtenstein, Norway, Switzerland)
• Mercado Comun del Sur (MERCOSUR)
• U.S.-Central American/Dominican Republic FTA
  (CAFTA-DR)
• Association of Southeast Asian Nations (ASEAN)
• Other agreements Middle East, African groups
• Other groups BRICs (Brazil, Russia, India, China)

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EU enlargement

• 27 members today
• 2007 Romania and Bulgaria
• 2004 - 10 new members joined the EU Cyprus, the
  Czech Republic, Estonia, Hungary, Latvia,
  Lithuania, Malta, Poland, Slovakia and Slovenia
• Current candidates include Turkey, Croatia,
  Macedonia
• Future members must meet criteria of
• Stable institutions of human rights, democracy,
  and law
• Functioning and capable market economy
• Assume economic, monetary, and political
  obligations
• Currently political shifts in support

25
Southern Common Market Mercosur

• 4 members
• Brazil, Argentina (1988)
• Paraguay, Uruguay (1991)?
• Venezuela pending membership agreement, needs
  approval by the parliaments of Paraguay and
  Brazil
• Ideology and economic hardships
• Very successful early
• UNASUR Union of South American Nations
  future expansion
• Associate members Bolivia, Chile, Colombia,
  Ecuador, Peru

26
Central America - Dominican Republic - US Free
Trade Agreement CAFTA-DR

• Bilateral trade agreement with US passed 2005
• Countries
• Dominican Republic
• Costa Rica
• El Salvador
• Guatemala
• Honduras
• Nicaragua
• Eliminates trade and tariff barriers in region
  over 10 year period

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Association of Southeast Asian Nations(ASEAN)

• Countries Brunei Darussalam, Cambodia,
  Indonesia, Laos, Malaysia, Myanmar, Philippines,
  Singapore, Thailand, Vietnam
• Economic, social and cultural development
• Safeguard economic and political stability and
  regional peace
• Serve as a forum to resolve disputes
• ASEAN Free Trade Area

28
Changes in the Global Economy

• Shifting landscape due to
• Economic integration (such EU, NAFTA, MERCOSUR)
• Economic potential of emerging markets
• Text Table 1.5 Countries expected to Contribute
  most to global growth 2006-2020 (pct
  contribution)

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Most Populous Countries in 1980, 2000, and 2050
(Projected)
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International investments and trade trends

• International Investments
• Foreign direct investment (FDI)
• Majority of investments from developed nations to
  developed nations still
• Has been growing, some slowing during recent
  economic downturns
• International Trade
• Large percentage of world trade accounted for by
  TRIAD countries/regions United States, European
  Union and Japan
• China and Germany primary exporters
• China Exports grew by an average of 25 percent a
  year between 2000 and 2007
• Germany Exports grew at an average of 13 percent
  per year between 2000 and 2007
• Services Germany's 210.8 billion dollars in
  services exports in 2007
• Services Chinas 21.6 billion dollars in
  services exports in 2007
• First 6 months of 2009
• China now biggest goods exporter - 521.7 billion
  dollars
• Germany (has been first) - 521.6 billion dollars

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Trade Flows Among World Regions, 2005 (in
billions of dollars or percent)
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Trade Flows Among World Regions, 2007 (in
billions of dollars or percent latest
statistics)
33
World Foreign Direct Investment Flows (in
millions of dollars)Inflows Outflows
34
Economic Systems

• Market Economy
• Centrally planned (command) Economy
• Mixed Economy
• Impact on policies and alternatives
• Economic Performance by Major World Region -
  update
• Growth domestic product real growth rate
• GDP growth on an annual basis adjusted for
  inflation and expressed as a percent.
• Souce CIA World Factbook

35
Economic systemsEconomic performance update

• Types of general systems
• Market Economy
• Centrally planned (command) Economy
• Mixed Economy
• Impact on policies and alternatives

• Economic Performance by Major World Region -
  update
• Growth domestic product real growth rate
• GDP growth on an annual basis adjusted for
  inflation and expressed as a percent.
• Souce CIA World Factbook

36
Economic Performance North and South America

• North America
• Combined purchasing power of U.S., Canada and
  Mexico approaches 12 trillion in purchasing
  power
• Foreign MNCs find U.S. to be a lucrative market
• Canada
• 0.6 GDP growth rate 2008
• U.S.s largest trading partner
• Legal and business environment in Canada similar
  to that in U.S.
• United States
• 1.3 GDP growth rate 2008
• U.S. considered attractive expansion market
• U.S. firms have held a strong market position in
  many European markets increasing involvement in
  Asia
• Mexico
• 1.4 GDP growth rate 2008
• Major free trade agreements with numerous
  countries
• Trade with both Europe and Asia has increased
• Competitive with Asia for the U.S. market

• South America
• Diverse economies in region
• Issues with heavy foreign debt and severe
  inflation
• Major development is inter-country trade,
  including free market policies among South
  American countries
• Argentina
• 7.1 GDP growth rate 2008
• One of strongest economies in South America
  overall
• Export oriented agriculture
• Diversified industrial based
• Brazil
• 2008 5.2 GDP growth rate
• Large innovator in ethanol use
• Recent oil fields identified and being developed
• Increasing privatization of some industries
• Major leader in BRIC group
• Major producer of soybeans
• Chile
• 2008 4 GDP growth rate
• Strong stable market-based economy

37
Economic Performance EU and Eastern Europe

• European Union
• UK .70 GDP 2008
• Germany 1.3 GDP 2008
• France .70 GDP 2008
• Portugal .20 GDP 2008
• Ireland -1.7 GDP 2008
• 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 integrate former Eastern European
  countries
• Foreign MNCs gain entry into the EU through
  acquisitions, alliances, cooperative RD efforts
• Privatization of traditionally nationalized
  industries

• Russia, Czech Republic, Hungary, Poland
• Russia 6 GDP 2008
• Poland 4.8 GDP 2008
• Czech Rep. 3.9 GDP 2008
• Hungary -1.50 GDP 2008
• Dismantling of previous price controls
• Economic and political restructuring
• Privatization
• Inflation
• Membership in International Monetary Fund (IMF)
• Political instability in places

38
Economic Performance Japan and China

• China
• GDP growth of around 10 percent (2008 slight
  lower)
• Population 1.3 billion
• Attractive to foreign investors despite risks due
  to market size and well developed infrastructure
• Product piracy a concern
• Substantial variation within China not always
  understood by foreign investors
• Hong Kong
• Special Administrative Region status
• Macau also a SAR
• Some continued uncertainty about the role the
  Chinese government intends to play in local
  governance

• Japan
• -0.4 GDP 2008
• Decade long recession in 1990s - by 2000, most
  major banks had billions of dollars in
  uncollectible loans
• Economic success in 1970s (5 average) and 1980s
  (4)
• Ministry of International Trade and Industry
  (MITI) role
• Keiretsus and integrated industries
• International competition has increased
• Significant issues large governement dept and
  aging population

39
Economic Performance other Asian nations

• Thailand, Malaysia, Indonesia
• Thailand 3.6 GDP 2008
• Malaysia .5.1 GDP 2008
• Indonesia 6.10 GDP 2008
• Large population base
• Inexpensive labor
• Considerable natural resources
• Attractive to outside investors
• Singapore
• 1.2 GDP 2008
• 7 average 2004-2007, real GDP
• Considered most free-market economy globally
• Least hurt by economic downturn of 1990s
• Strongly affected by 2008-2009 changes

• South Korea
• 2.5 GDP 2008
• Chaebols (large family-held Korean conglomerates)
• Also affected by declining economies of Southeast
  Asia in 1990s
• Taiwan
• 1.9 GDP 2008
• Progression from labor-intensive economy to one
  dominated by technologically sophisticated
  industries (banking, electricity generation,
  petroleum refining and computers)

40
Economic Performance India and Middle East

• India
• 6.6 GDP 2008
• Population 1.16 billion
• Internal support infrastructure presents
  challenges for development
• Trend of locating software and high value-added
  services to India some recent shifts away
• Attractive to U.S. and British investors (well
  educated, English speaking, technologically
  sophisticated workers)

• Middle East
• Israel 3.9 GDP 2008
• Turkey 1.50 GDP 2008
• Qatar 11.2 GDP 2008
• Highly diverse region politically, economically
• Oil and gas reserves in some countries
• Turkey petition to join EU
• Geopolitical, economic and religious issues

41
Economic Performance African nations

• Africa
• South Africa 2.8 GDP 2008
• Zambia 5.8 GDP 2008
• Kenya 2.2 GDP 2008
• Cote dIvoire 2.7 GDP 2008
• Zimbabwe -12.6 GDP 2008
• Highly diverse ethnically, economically,
  politically
• Substantial natural resources
• Most nations remain very poor and less developed
• International trade is not a major source of
  income
• Population includes over 3,000 tribes that speak
  1,000 languages and dialects
• Concerns with health, poverty, starvation,
  illiteracy, corruption, overcrowding - all which
  make economic development difficult

42
Market Potential Indicators Ranking for Emerging
Markets, 2007
43
(No Transcript)
44
2007 Rank order Exports (top 10
region/countries) ( CIA world factbook - These
figures are calculated on an exchange rate basis )