HAS 3260 Week Three Spring 2006 Dr. Burton

The Global Economy The New Europe –European Union (EU) grouping of 25 Western European countries who have agreed to support mutual economic growth 12 have agreed to adopt the Euro (common currency)

Austria € Belgium € Denmark Finland € France € Germany € Greece € Ireland € Italy € Luxembourg € Netherlands € Portugal € Spain € Sweden United Kingdom of Great Britain and Northern Ireland Ten countries have joined the EU on : Cyprus (Greek part), the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovakia and Slovenia. European Union Members € - Adopted the Euro

The Global Economy The Americas –North American Free Trade Agreement (NAFTA) Agreement for free flow of goods and services between the U.S., Canada and Mexico –Free Trade of the Americas (FTAA) is a possibility –Other agreements MERCOSUR Andrean Pact CARICOM

The Global Economy Maquiladoras –foreign manufacturing plants allowed to operate in Mexico allowed special privileges in exchange for hiring Mexican labor –import materials, components and equipment with duty paid are “value added”

The Global Economy Maquiladoras –advantages increased employment and prosperity –disadvantages social costs in border towns exploitation of less expensive Mexican labor

The Global Economy Asia and the Pacific Rim –Asia and Pacific Rim economies are expected to be larger than those of the EU –China is the world’s largest single-country marketplace Population >1.2 Billion –Japanese companies account for many Fortune 500 companies

People’s Republic of China Population: 1,306,313,812 (July 2005 est.) (July 2005 est.) Age structure: 0-14 years: 21.4% (male 148,134,928/female 131,045,415) years: 71% (male 477,182,072/female 450,664,933) 65 years and over: 7.6% (male 47,400,282/female 51,886,182) (2005 est.)

India Population: >1Billion 25% below the poverty line Approx. 20% are middle class >26 million Cell Phones

The Global Economy Africa –beckons international business –increased attention to stable countries

Environmental Challenges in the Global Economy Economic Systems –Central-planning government makes basic economic decisions for entire country –Free-market operate under capitalism

Environmental Challenges in the Global Economy General Agreement on Tariffs and Trade (GATT)/World Trade Organization (WTO) –international accords in which member nations agree to ongoing negotiations and reduction of tariffs and trade restrictions

Environmental Challenges in the Global Economy Laws vary between countries –common legal problems incorporation practices negotiating contracts protecting patents, trademarks and copyrights foreign exchange restrictions

Environmental Challenges in the Global Economy Human resource concerns –illiteracy –absence of appropriate skills –shortage of labor supplies

Environmental Challenges in the Global Economy Pros of MNCs –larger tax bases –increased employment opportunities –technology transfers –introduction of new industries –development of local resources

Environmental Challenges in the Global Economy Cons of MNCs –extract excessive profits –dominate local economy –do not respect local customs and laws –fail to help domestic firms develop –do not transfer most advanced technology

Environmental Challenges in the Global Economy Ethical Issues in Multinational Operations –Foreign Corrupt Practices Act –Sweatshops –Environmental protection

Culture and Global Diversity Culture –shared set of beliefs, values and patterns of behavior common to a group of people

Culture and Global Diversity Culture shock –discomfort a person feels in an unfamiliar culture Ethnocentrism –tendency to view one’s own culture as superior to others

Culture and Global Diversity Popular Dimensions of Culture –language –use of space –time orientation –religion –role of contracts

Culture and Global Diversity Language –varies throughout world –same language varies in usage from one region to another –language training is increasingly important to U.S. managers

Culture and Global Diversity Spoken Language –Low context Explicit spoken and written word Examples: US, Germany –High context Words convey part of the message Examples: Middle East, Asia

Culture and Global Diversity Use of Space (Proxemics) –interpersonal distance used in communication Latin Americans tend to be close Americans value more space

Culture and Global Diversity Time Orientation –Monochronic time is allotted do one thing at a time –Polychronic time is allotted to do many things at once

Culture and Global Diversity Religion –may influence business practices –source of ethical and moral teaching TheismPantheismAtheism Judaism Christianity Islam Hinduism Buddhism New Age Naturalism Humanism Marxism/Leninism Nihilism

ChristianityChristianity: 2.1 billion *Islam: 1.3 billionIslam Secular/Nonreligious/Agnostic/AtheistSecular/Nonreligious/Agnostic/Atheist: 1.1 billion HinduismHinduism: 900 million Chinese traditional religionChinese traditional religion: 394 million BuddhismBuddhism: 376 million primal-indigenousprimal-indigenous: 300 million African Traditional & DiasporicAfrican Traditional & Diasporic: 100 million SikhismSikhism: 23 million JucheJuche: 19 million SpiritismSpiritism: 15 million JudaismJudaism: 14 million Baha'iBaha'i: 7 million JainismJainism: 4.2 million ShintoShinto: 4 million Cao DaiCao Dai: 4 million ZoroastrianismZoroastrianism: 2.6 million TenrikyoTenrikyo: 2 million Neo-PaganismNeo-Paganism: 1 million Unitarian-UniversalismUnitarian-Universalism: 800 thousand RastafarianismRastafarianism: 600 thousand ScientologyScientology: 500 thousand World Distribution of Religious Beliefs *The following website argues that the real Muslim population worldwide is greater than 1.79 Billion in

Culture and Global Diversity Role of Contracts –some cultures view as final and binding –others view as a starting point –some expect contracts to be written –others accept “word” as binding

Culture and Global Diversity Are Management Theories Universal? –U.S. management theories may be ethnocentric emphasis on participation and individual performance is not applicable to other cultures

Culture and Global Diversity Values and National Cultures (Hofstede) –Power Distance –Uncertainty avoidance –Individualism-collectivism –Masculinity-femininity –Short-term – Long-term orientation

Culture and Global Diversity Are Management Theories Universal? –Japanese management practices lifetime employment job rotation and broad career experience shared information collective decision-making quality emphasis –These practices are not easy to translate

Culture and Global Diversity Global Organizational Learning –cultural awareness facilitates more informed transfers of management practices

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