1. HAS 3260 Week Three Spring 2006 Dr. Burton

2. 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)

3. 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 2004- 05-01: Cyprus (Greek part), the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovakia and Slovenia. European Union Members € - Adopted the Euro

4. 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

5. 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”

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

7. 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

8. 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) 15-64 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.)

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

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

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

12. 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

13. 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

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

15. 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

16. 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

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

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

19. 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

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

21. 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

22. 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

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

24. 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

25. 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

27. 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 2006 http://www.islamicpopulation.com/index.html

28. 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

29. 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

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

31. 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

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

33. Self Assessment Link