Deresky Im7e Student 01

PowerPoint by:Mohamad SepehriJacksonville University

*-1Copyright 2011 Pearson Education, Inc. publishing as Prentice Hall

Copyright 2011 Pearson Education, Inc. publishing as Prentice Hall

Chapter Learning GoalsUnderstand the global business environment and how it affects the strategic and operational decisions which managers must make.Critically assess the developments, advantages, and disadvantages of globalization.Review the role of technology in international business.Develop an appreciation for the ways in which political, economic, legal, and technological factors and changes impact the opportunities that companies face.Discuss the complexities of the international managers job.1-2Copyright 2011 Pearson Education, Inc. publishing as Prentice Hall


Opening Profile: Economic Crisis Spreads Through Financial GlobalizationWhat caused the global economy to collapse?Toxic Assets:Highly leveraged securitiesSubprime mortgage messFinance has become one of the most international of industriesFailure of banks and other financial institutes:Fannie Mae & Freddie MacLehman BrothersAIGAnd many more1-*Copyright 2011 Pearson Education, Inc. publishing as Prentice Hall


Opening Profile: Typical Challenges that Managers Face in the 21st CenturyPolitical and cultural differencesGlobal competitionTerrorismTechnologyFinding ways to balance their social responsibilities, their images, and their competitive strategies1-*Copyright 2011 Pearson Education, Inc. publishing as Prentice Hall


What is Globalization?Global competition characterized by networks of international linkages that bind countries, institutions, and people in an interdependent global economy

1-*Copyright 2011 Pearson Education, Inc. publishing as Prentice Hall


Challenges to GlobalismBacklash against capitalism and rekindling of nationalism

Increased protectionism of high-demand resources

Need to develop top managers with international understanding and experience1-*Copyright 2011 Pearson Education, Inc. publishing as Prentice Hall


Benefits of GlobalismAccess to more markets

Growth of developing economies

Opportunities for flexibility and efficiency

Opportunities for small and medium-sized enterprises (SMEs)1-*Copyright 2011 Pearson Education, Inc. publishing as Prentice Hall


Regional Trading BlocksThe dominance of the United States is already over.What is emerging is a world economy of blocs represented by: NAFTA, EU, and ASEAN. Much of todays world trade takes place within these three regional free-trade blocs: Western Europe, Asia, and the AmericasMuch of todays world trade are grouped around three dominant currencies: euro, yen, and the dollar



The European Union EUA unified market over 400 million people living in 27 nations

EU poses two challenges for global managers:Fortress EuropeDealing with multiple cultures within this unified market



AsiaChinaIndiaASEANSouth Asia Association of Regional Cooperation (SAARC)JapanAsian Tigers: Hong Kong Singapore South Korea Taiwan



The AmericasNorth American Free Trade Agreement (NAFTA)

Central America Free Trade Agreement (CAFTA)

MERCOSUR



Other Regions in the WorldThe Russian FederationMiddle EastThe African UnionAUSouth AfricaLess developed countriesLDCsLow Gross National Product (GNP)Low Gross Domestic Product (GDP)Large, relatively unskilled workforceHigh international debt



Management Focus: Intel Brings Changes to Vietnams Economy and CultureUnited States opened trade relations with Vietnam in 2000.Vietnams rapid growth can be contributed to those aspects of globalization that attracts corporations such as Intel.Intel is taking advantage of new markets and lower costs of productionIntels success started with awareness of the tight control of the Vietnamese government.



The Impact of the Information TechnologyMaking Geographic barriers less relevant

Lowering cultural barriers

Encouraging convergence of consumers tastes and preferences



Globalization of Human CapitalIncreasing trend in the offshoring of manufacturing jobs and outsourcing of white-color jobsPrediction that 3.3 million U.S. jobs in service sector may be lost/outsourced by 20151-*Copyright 2011 Pearson Education, Inc. publishing as Prentice Hall


The Political & Economic EnvironmentSustainabilityeconomic, political, social and environmentalhas become a significant worldwide issue

Ethnicitya driving force behind political instability around the world

Religionreligious disputes lie at the heart of regional instabilities: former Yugoslavia, Northern Island, the Middle East1-*Copyright 2011 Pearson Education, Inc. publishing as Prentice Hall


Political Risk

Examples:1-*Any governmental action or politically motivated event that could adversely affect the long-run profitability or value of a firm

Venezuela took control of cement plants and offices belonging to Mexico, after failing to reach an agreement in nationalization talks.Bolivian presidents move to nationalize the national gas industry followed that in Venezuela. Copyright 2011 Pearson Education, Inc. publishing as Prentice Hall


The Political Risk Cont.Typical Political RisksPolitical Risk Assessment1-*Expropriation and confiscationNationalizationTerrorismMacro-political risk event Micro-political risk eventDiscriminatory treatmentBarriers to repatriation of fundsInterference in managerial decision makingDishonesty by government officialsHelps companies manage exposure to risk and minimize financial loss

Two forms:Consultation with expertsDevelopment of internal staff capabilities



Managing Political RiskAvoidance and AdaptationDependency and Hedging1-*Equity sharing

Participating management

Localization of the operation

Development assistanceInput controlMarket controlPosition controlStaged contribution

Political risk insurance (OPIC and FCIA)Local debt financing



Managing Terrorism RiskDevelop a benevolent image (IBM and Exxon).

Maintain a low profile and minimize publicity.

Using teams to monitor terrorist activities

Hiring counterterrorism consultants1-*Copyright 2011 Pearson Education, Inc. publishing as Prentice Hall


Economic RiskIs closely related to political risk

Is determined by a countrys ability or intention to meet its financial obligations



Categories of Economic RiskLoss of profitability due to abrupt changes in monetary and fiscal policiesLoss of profitability due to changes in foreign investment policies Risk of currency exchange rate Example: devaluation of peso in 1990s



The Legal EnvironmentConsists of the local laws and legal systems of those countries in which an international company operates and of international law, which governs relationships between sovereign countries



The Legal EnvironmentTypes of Legal SystemsApproaches to Contract Law1-*Common law

Civil law

Islamic lawCommon law: details must be written in the contract to be enforced

Civil law: assumes promises will be enforced without specifying the details

In Asia the contract may be in the relationship, not on the paperCopyright 2011 Pearson Education, Inc. publishing as Prentice Hall


Other Regulatory Issues

Protectionist policies, such as tariffs or quotas

The attractiveness of the tax system

The level of government involvement in the economic and regulatory environment1-*Copyright 2011 Pearson Education, Inc. publishing as Prentice Hall


The Technological EnvironmentThe appropriability of technologyThe International Convention for the Protection of Industrial Property (the Paris Union)Inappropriate use of technology by othersAppropriateness of technology for the local environment



Global E-Business1-*Copyright 2011 Pearson Education, Inc. publishing as Prentice Hall


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Deresky Im7e Student 01