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

2. 2 International Management International management The process of applying management concepts and techniques in a multinational environment and adapting management practices to different economic, political, and cultural environments Multinational corporations (MNC) Operations in more than one country International sales, Nationality mix of managers and owners McGraw-Hill/Irwin© 2006 The McGraw-Hill Companies, Inc. All rights reserved.

3. Chapter 1 Chapter 1 Globalization & Economic Trends

4. 4 Market Value Billions of U.S. Dollars Sales Billions of U.S. Dollars Top Ten Global MNCs McGraw-Hill/Irwin© 2006 The McGraw-Hill Companies, Inc. All rights reserved. 1.General Electric$328.11 2.Microsoft284.43 3.ExxonMobil283.61 4.Pfizer269.66 5.Wal-Mart Stores241.19 6.Citigroup239.43 7.BP193.05 8.Aig191.18 9.Intel184.66 10.Royal Dutch’ Shell174.83 The Top 10 global MNCs Ranked by Market Value, Sales, Profits, and Share-Price Gain, 2003 1.Wal-Mart Stores258.68 2.BP232.57 3.ExxonMobil222.88 4.Royal Dutch/Shell201.93 5.General Motors183.24 6.DaimlerChrysler166.61 7.Ford Motor164.20 8.Toyotal Motor156.48 9.Mitsubishi137.32 10.General Electric134.19

5. 5 Top Ten Global MNCs McGraw-Hill/Irwin© 2006 The McGraw-Hill Companies, Inc. All rights reserved. Profits Billions of U.S. Dollars 1.ExxonMobil20.96 2.Citigroup17.85 3.General Electric15.00 4.HSBC Holdings11.65 5.Royal Dutch/Shell11.41 6.Bodafone Group11.36 7.Bank of America10.81 8.Toyota Motor10.51 9.Microsoft9.99 10.BP9.54 The Top 10 global MNCs Ranked by Market Value, Sales, Profits, and Share-Price Gain, 2003 Share-Price Gain 1.Mizuho Financial636% 2.Research in Motion550 3.UFJ Holdings420 4.SK383 5.Rakuten381 6.Sumitomo Mitsui Fin.331 7.Elan311 8.Bharti Tele-Ventures276 9.Yahoo! Japan241 10.Mitsui Trust Hldgs.229 Data: Morgan Stanley Capital International Standard & Poor’s Compustat Source: http://images.businessweek.com/mz/0o4/30/0430_62intbg1_a.gif

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 by GDP at Market Exchange Rates:

11. 11 The World’s Largest Economies 2005 and 2020 (Projected) Measured by GDP at Purchasing Power Parity (ppp)

12. 12 Most Populous Countries in 1980, 2000, and 2050 (Projected):

13. 13 World Foreign Direct Investment Inflows (in millions of dollars):

14. 14 World Foreign Direct Investment Outflows (in millions of dollars):

15. 15 Trade Flows Among World Regions, 2005 (in billions of dollars or percent)

16. 16 Top 10 Trading Partners of the United States, 2003 McGraw-Hill/Irwin© 2006 The McGraw-Hill Companies, Inc. All rights reserved. Importing U.S. Exporting U. S. Rank CountryExports Rank CountryImports 1Canada169,924 2Mexico97,412 3Japan52,004 4United Kingdom33,828 5Germany28,832 6China28,368 7South Korea24,073 8Netherlands20,695 9Taiwan17,448 10France17,053 (in millions of dollars) 1Canada221,595 2China152,436 3Mexico138,060 4Japan118,037 5Germany68,113 6United Kingdom42,795 7South Korea37,229 8Taiwan31,599 9France29,219 10Ireland26,747 Adapted from: Table 1-4: Top 10 Trading partners of the United States, 2003 (in millions of dollars).

17. 17 World’s Most Competitive Nations, 2006

18. 18 Market Potential Indicators Ranking for Emerging Markets, 2007

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?

22. Chapter 1 Chapter 2 Political, Regulatory, Technological, Dimensions

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)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

29. 29 Expected Winners/Losers in Selected Occupations

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

31. Chapter 1 Chapter 3 Ethics & Social Responsibility

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

37. 37 Corruption Index: Least and Most Corrupt Countries

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 0102030405060 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 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

45. 45 Millennium Development Goals

46. 46 Case: AIDS and Pharmaceuticals See pages 82-90