1. Chapter
1
Welcome to MGT 480
International 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
6. 6
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
7. 7
Globalization
Criticisms of globalization
Offshoring of business services jobs to lower-wage countries
Growing trade deficits
Slow wage growth
Environmental and social impacts
8. 8
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)
9. 9
Trends in International
Investment 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
10. 10
The World’s Largest Economies 2005 and 2020 (Projected) Measured byThe World’s Largest Economies 2005 and 2020 (Projected) Measured by
GDP at Market Exchange Rates:GDP at Market Exchange Rates:
11. 11
The World’s Largest Economies 2005 and 2020 (Projected) Measured byThe World’s Largest Economies 2005 and 2020 (Projected) Measured by
GDP at Purchasing Power Parity (ppp)GDP at Purchasing Power Parity (ppp)
12. 12
Most Populous Countries in 1980, 2000, andMost Populous Countries in 1980, 2000, and
2050 (Projected):2050 (Projected):
13. 13
World Foreign Direct Investment Inflows (inWorld Foreign Direct Investment Inflows (in
millions of dollars):millions of dollars):
14. 14
World Foreign Direct Investment Outflows (inWorld Foreign Direct Investment Outflows (in
millions of dollars):millions of dollars):
15. 15
Trade Flows Among World Regions, 2005 (in billions of dollars or percent)Trade Flows Among World Regions, 2005 (in billions of dollars or percent)
18. 18
Market Potential Indicators Ranking for Emerging Markets,Market Potential Indicators Ranking for Emerging Markets,
20072007
19. 19
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
20. 20
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
21. 21
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?
23. 23
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?
24. 24
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
25. 25
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
26. 26
Regulation of Trade
and 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
27. 27
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)
28. 28
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
30. 30
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
32. 32
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
33. 33
Ethics and Social Responsibility
Corporate Social Responsibility (CSR):
Closely related to ethics
Actions of a firm to benefit society beyond
requirements of law and direct interests of
firm
CSR involves taking voluntary action
CSR concerns include working conditions in
factories and service centers as well as
environmental impacts of corporate activities
34. 34
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
35. 35
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
36. 36
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
38. 38
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
39. 39
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
40. 40
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.
41. 41
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
42. 42
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
43. 43
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
27
Adapted from Figure 3-1: Trust in Leaders: Percentage Saying “A Lot” and “Some Trust”
44. 44
Principles of the Global Compact
http://www.unglobalcompact.org/AboutTheGC/faq.html