International Management Mgmt 446 Fall, 2011 Sully Taylor

The Global Manager’s Role 1-2 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 1-3 Copyright ©2011 Pearson Education, Inc. publishing as Prentice Hall

The Impact of Information Technology Making Geographic barriers less relevant Lowering cultural barriers Encouraging convergence of consumers’ tastes and preferences Making Geographic barriers less relevant Lowering cultural barriers Encouraging convergence of consumers’ tastes and preferences 1-4 Copyright ©2011 Pearson Education, Inc. publishing as Prentice Hall

Globalization of Human Capital Increasing trend in the offshoring of manufacturing jobs and outsourcing of white- color jobs Prediction that 3.3 million U.S. jobs in service sector may be lost/outsourced by 2015 Increasing trend in the offshoring of manufacturing jobs and outsourcing of white- color jobs Prediction that 3.3 million U.S. jobs in service sector may be lost/outsourced by Copyright ©2011 Pearson Education, Inc. publishing as Prentice Hall

Powerpoints from McKinsey Report, 2010…Survey of Five Global Trends

Impact of Trends on Companies’ Profitability Over the Next 5 Years

% of respondents Expected Role of Country’s Government in the Market Over the Next 5 years

Benefits of Globalism Access to more markets Growth of developing economies Opportunities for flexibility and efficiency Opportunities for small and medium-sized enterprises (SMEs) Access to more markets Growth of developing economies Opportunities for flexibility and efficiency Opportunities for small and medium-sized enterprises (SMEs) 1-9 Copyright ©2011 Pearson Education, Inc. publishing as Prentice Hall

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 Backlash against capitalism and rekindling of nationalism Increased protectionism of high-demand resources Need to develop top managers with international understanding and experience 1-10 Copyright ©2011 Pearson Education, Inc. publishing as Prentice Hall

What does The Other Side of Outsourcing illustrate? Rising competitiveness of other nations. Competitive advantage of different nations. Wage disparities internationally. Outsourcing by Western firms. Cultural adjustments of societies and individuals; social and cultural backlash. International market opportunities (e.g., for Nike and others).

Different historical and cultural contexts of countries: eg. Caste system in India. Why does it persist? How does it affect competitiveness? Different family systems and their effects on labor (e.g. young woman applying for job). Different/changing perspectives on marriage; consumption; etc. What trends would you predict for the number of children in middle and upper class families going forward?

What pressures or draws industries and companies into doing business globally?

Why did Intel put a $2B plant in Vietnam? Why does Boeing produce parts of its planes in China? Why has Wal-mart franchised itself to Barti in India? Why did Samsung replace its 500+ marketing firms with only one main one?

Some examples An Indian call center operator is paid about $1000/month (in PPP). It costs > $1B to build a new Boeing plane. Mexican middle class wants fashionable jeans at a good price. China has lifted its requirement that foreign firms form JVs with Chinese firms.

There are four general drivers that push or draw industries and the firms within them to operate internationally Market drivers Cost drivers Competitive Governmental

Global Industry Drivers Markets: Common customer needs E.g., Honda with reliability and economy Global customer E.g. Wal-Mart Lead countries E.g., Italy in high end textiles Transferable marketing E.g. Louis Vuitton Adapted from George Yip, Diagnosing Industry Globalization Potential, 2003

Cost: Global scale economies Aerospace industry; consumer electronics. High product development costs E.g. Intel microprocessor Sourcing efficiencies Favorable logistics E.g., containerization Differences in country costs E.g., labor costs

Competitive pressures Competitors from different countries E.g., GM’s activity in China is linked to increase in competitors in US. Competitors globalized Have the ability to leverage their reach Too many competitors at home E.g. Honda’s push into the US Access to knowledge E.g. Japanese biotechnology investments in US

Government Favorable trade policies E.g., recent reform in India of the FDI laws Compatible technical standards E.g., EU unity on standards for elevators Common marketing regulations E.g., use of certain media, ability to make claims. Host government concerns E.g., number of expatriates; local content

In threes, 10 minutes For 2 of the 4 global drivers, identify 2 industries (e.g., automotive, toothpaste, pet care products, high end medical equipment, toys, pharmaceuticals, etc.). One industry should be highly affected by this driver and the other should not be affected much at all. Be sure that you can explain your reasoning for your conclusions.

Regional Trading Blocks The 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 today’s world trade takes place within these three regional free-trade blocs: Western Europe, Asia, and the Americas Much of today’s world trade are grouped around three dominant currencies: euro, yen, and the dollar The 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 today’s world trade takes place within these three regional free-trade blocs: Western Europe, Asia, and the Americas Much of today’s world trade are grouped around three dominant currencies: euro, yen, and the dollar 1-22 Copyright ©2011 Pearson Education, Inc. publishing as Prentice Hall

The European Union EU A unified market over 400 million people living in 27 nations EU poses two challenges for global managers: 1. “Fortress” Europe 2. Dealing with multiple cultures within this unified market A unified market over 400 million people living in 27 nations EU poses two challenges for global managers: 1. “Fortress” Europe 2. Dealing with multiple cultures within this unified market 1-23 Copyright ©2011 Pearson Education, Inc. publishing as Prentice Hall

Asia China India ASEAN South Asia Association of Regional Cooperation (SAARC) Japan Asian Tigers: Hong Kong Singapore South Korea Taiwan China India ASEAN South Asia Association of Regional Cooperation (SAARC) Japan Asian Tigers: Hong Kong Singapore South Korea Taiwan 1-24 Copyright ©2011 Pearson Education, Inc. publishing as Prentice Hall

The Americas North American Free Trade Agreement (NAFTA) Central America Free Trade Agreement (CAFTA) MERCOSUR North American Free Trade Agreement (NAFTA) Central America Free Trade Agreement (CAFTA) MERCOSUR 1-25 Copyright ©2011 Pearson Education, Inc. publishing as Prentice Hall

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 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 1-26 Copyright ©2011 Pearson Education, Inc. publishing as Prentice Hall

The Global Manager’s Role 1-27 Copyright ©2011 Pearson Education, Inc. publishing as Prentice Hall

e_future_of_countries.html

What is International Management? 1-29 The process of developing strategies, designing and operating systems, and working with people around the world to ensure sustained competitive advantage Copyright ©2011 Pearson Education, Inc. publishing as Prentice Hall

International News Article (10 minutes) “China Aims to Rein in Car Sales” Switch and work with someone you haven’t worked with in class yet. In pairs, decide what the article illustrates about the international management topics in Chapter 1. Be specific about how the article illustrates a topic. Describe what you learned from analyzing the article. This could be specific information, and/or an insight into doing business internationally that you did not have before. What discussion question would you create from reading this article that could provoke an fruitful, interesting class discussion?

Political Risk Examples: 1-31 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 president’s 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 Risks Political Risk Assessment 1-32 Expropriation and confiscation Nationalization Terrorism Macro-political risk event Micro-political risk event Discriminatory treatment Barriers to repatriation of funds Interference in managerial decision making Dishonesty by government officials Expropriation and confiscation Nationalization Terrorism Macro-political risk event Micro-political risk event Discriminatory treatment Barriers to repatriation of funds Interference in managerial decision making Dishonesty by government officials Helps companies manage exposure to risk and minimize financial loss Two forms: Consultation with experts Development of internal staff capabilities Helps companies manage exposure to risk and minimize financial loss Two forms: Consultation with experts Development of internal staff capabilities Copyright ©2011 Pearson Education, Inc. publishing as Prentice Hall

For Week 3 Read the international News article assigned today and - Chapter 2, and Case 3: Nokia (pages 82-88). Turn in your team member list and s next time. Be sure to have your top three country choices from the list in the syllabus. Be sure to be on time as we will be going to the library for the first 45 minutes.