1. EMBA BA 804 Managing the Enterprise from a Global Perspective Professor Ram Mudambi Department of General & Strategic Management

2. © Ram Mudambi, Temple University, 2007 2 What is this course about?  International business is about business operations involving activities in more than one country  The main object of study is the multinational corporation (MNC). A company that  internalizes operations across national borders  leverages resources controlled in one country in other countries

3. © Ram Mudambi, Temple University, 2007 3 BA 804: Lecture 1 Globalization

4. © Ram Mudambi, Temple University, 2007 4 Gary Hamel on MNC CEOs MAJOR CONCERNS in 2003  Efficiency  Change  Growth  Legitimacy  Complexity

5. © Ram Mudambi, Temple University, 2007 5 Globalization  The shift towards a more integrated and interdependent world economy.  Two components:  The globalization of markets – Macro issues – Macro IB  The globalization of operations – Micro issues – Micro IB

6. © Ram Mudambi, Temple University, 2007 6 Global Drivers Accelerators Technology Open Markets Economic Integration Peace Corporate Strategy Global Focus Decelerators Culture Market Barriers National Barriers War Corporate Strategy Local Focus 1-3

7. © Ram Mudambi, Temple University, 2007 7 Global Leverage – Brands 1-4

8. © Ram Mudambi, Temple University, 2007 8 Global Leverage – Value chain disaggregation Swan Optical Manufacturing Design

9. © Ram Mudambi, Temple University, 2007 9 Volume of world trade and production, 1950-2002 TRADE 20 fold increase OUTPUT 7 fold increase

10. © Ram Mudambi, Temple University, 2007 10 Impact of GATT Tariff Rates Average Tariff Rates on Manufactured Products % of Value Table 1.1

11. © Ram Mudambi, Temple University, 2007 11 The role of technological change  Microprocessors and telecommunications  The internet and world wide web  Transportation technology

12. © Ram Mudambi, Temple University, 2007 12

13. © Ram Mudambi, Temple University, 2007 13 The changing pattern of world output and trade

14. © Ram Mudambi, Temple University, 2007 14 Percentage share of total FDI stock

15. © Ram Mudambi, Temple University, 2007 15 Volume of FDI inflows, 1994-2002 Fig: 1.4 ($ billions)

16. © Ram Mudambi, Temple University, 2007 16 National origin of largest multinational corporations Fig: 1.5

17. © Ram Mudambi, Temple University, 2007 17

18. © Ram Mudambi, Temple University, 2007 18 Globalization - Pro  Lower prices for goods and services.  Economic growth stimulation.  Increase in consumer income.  Creates jobs.  Countries specialize in production of goods and services that are produced most efficiently.

19. © Ram Mudambi, Temple University, 2007 19 Globalization - Con  Destroys manufacturing jobs in wealthy, advanced countries.  Wage rates of unskilled workers in advanced countries declines.  Companies move to countries with fewer labor and environment regulations.  Loss of sovereignty.

20. © Ram Mudambi, Temple University, 2007 20 Sovereignty and the WTO “Under the new system, many decisions that affect billions of people are no longer made by local or national governments but instead, if challenged by any WTO member nation, would be deferred to a group of unelected bureaucrats sitting behind closed doors in Geneva.” - Ralph Nader

21. © Ram Mudambi, Temple University, 2007 21 International vs Domestic Business  Countries are different.  Range of problems are wider and more complex.  Government intervention in trade and investment creates problems.  International investment is impacted by different currencies.

22. © Ram Mudambi, Temple University, 2007 22 Three takeaways  Globalization, defined as the shift towards a more integrated and interdependent world economy, has been rapidly increasing  While the triad remains the dominant economic zone, the international economy is changing to become more inclusive  These changes are causing stresses and strains in both the developed and developing worlds

23. © Ram Mudambi, Temple University, 2007 23 Corporate globalists inhabit a world of power and privilege. They see progress everywhere because from their vantage point the drive to privatize public assets and free the market from governmental interference appears to be spreading freedom and prosperity throughout the world, improving the lives of people everywhere, and creating the financial and material wealth necessary to end poverty and protect the environment. They see themselves as champions of an inexorable and beneficial historical process toward erasing the economic and political borders that hinder corporate expansion, eliminating the tyranny of inefficient and meddlesome public bureaucracies,and unleashing the enormous innovation and wealth-creating power of competition and private enterprise. PRO

24. © Ram Mudambi, Temple University, 2007 24 Citizen movements see a starkly different reality. Focused on people and the environment, they see a world in deepening crisis of such magnitude as to threaten the fabric of civilization and the survival of the species - a world of rapidly growing inequality, erosion of relationships of trust, and failing planetary life support systems. Where corporate globalists see the spread of democracy and vibrant market economies, citizen movements see the power to govern shifting away from people and communities to financial speculators and global corporations dedicated to the pursuit of short-term profit. They see corporations replacing democracies of people with democracies of money, self-organizing markets with centrally planned corporate economies,and diverse ethical cultures with cultures of greed and materialism. CON