International Management and Globalization International Management and Globalization

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International Management and Globalization

  • International Management and Globalization

  • What is Globalization?

  • Environmental Forces


  • Class Debate: The Pros and Cons of Globalization

  • Implications for Managers

What is international management?

  • What is 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” (HLD, p. 6)
  • Why is globalization important?

    • International management is rapidly gaining in importance in tandem with the quickening pace of globalization


  • Definitions

  • Roots of Globalization

  • Drivers of Globalization

  • Globalization from a Regional Perspective

  • Convergence or Divergence

Hodgetts, Luthans and Doh,

  • Hodgetts, Luthans and Doh,

    • Globalization is “the process of social, political, economic, cultural, and technological integration among countries around the world” (p. 7)
  • Robertson (Globalization: Social Theory and Global Culture, 1992),

When did globalization begin?

  • When did globalization begin?

    • Ancient trade routes – barter trade
    • Standard weights and measures
    • Mercantilism – the highways of the sea
    • Post WWII – institutions of global governance
    • Past 1980s – ICT, globalization defined
  • Hodgetts, Luthans, and Doh,

    • “Contemporary globalization is a new branch of a very old tree whose roots were planted in antiquity” (p. 8)

Developed Economies

  • Developed Economies

      • U.S. the European Union and Japan account for one-half of world trade
  • Emerging and Transition Economies

      • Economies in Latin America and Asia are increasingly important global players
        • BRIC, economic powers with large internal markets
        • Eastward expansion of the EU
  • Less Developed Countries (LDCs)

      • Some fast growing and increasingly open to the global system
      • Others, notably in Africa, struggle to compete globally

Important global market

  • Important global market

      • Combined purchasing power of the U.S., Canada and Mexico is $12 million
  • United States

      • U.S. outbound FDI $1.8 billion (2003)
      • U.S. inbound FDI $1.4 billion (2003)
  • Canada

      • Largest U.S. trading partner
      • Legal and business environment similar to the U.S.
  • Mexico

      • Strong maquiladora industry
      • Competitive with Asia for the U.S. market
      • Emergence of Mexican MNCs

Economic challenges

  • Economic challenges

      • High inflation
      • Heavy foreign debt
      • Entrenched interests (crony capitalism)
      • Political instability
  • Economic opportunities

      • Important emerging markets
          • Brazil, Argentina, Venezuela, Columbia, Chile, Peru
      • Prevalence of free market policies
      • Expanding regional and international trade
          • Mercosur and Asia-Pacific Economic Cooperation (APEC)

Market factors

  • Market factors

      • Operational integration of the EU
      • Privatization of traditionally nationalized industries
      • Expanded ties to Central and Eastern Europe
  • Social factors

      • Maintaining social cohesion
      • Adjusting to local tastes – “Plan globally, act locally”
  • Economic challenges

      • For foreign MNCs, gaining a foothold in the EU
          • Strategies include: acquisitions, alliances, and cooperative R&D
      • Absorbing the former communist-bloc countries
          • 550 million middle-class consumers across 25 countries
          • Largest economic market in the world

Collapse of the Soviet Union (1991)

  • Collapse of the Soviet Union (1991)

      • Glasnost (openness) and perestroika (economic and political restructuring)
      • The fall of the Berlin Wall and German reunification
  • Russia

      • Dismantling of price controls and privatization
      • Crime, political uncertainty, and inflation
      • Membership in International Monetary Fund (IMF)
  • Successful transition economies

      • Czech Republic, Hungary, Poland, the Baltic states
  • Economies caught in transition

      • Albania, Bulgaria, Romania, former Soviet republics


  • Japan

      • In the 1970s and 1980s
          • Strong government role
          • Vertically integrated industries (keiretsus)
      • In the 1990s
          • Economic recession
          • Collapse of the real estate bubble
          • Banks reluctant to write-off uncollectible loans
          • Still the world’s second largest economy
  • China

      • Economic opportunities
          • High rates of growth (8-10% per year)
          • Large internal market (> 1.3 billion consumers)
      • Economic challenges
          • Inflation and political instability
          • Regulatory reform and compliance
          • Complex and unpredictable economic environment

South Korea

  • South Korea

      • Dominated by family-held conglomerates (chaebols)
      • Impacted by the Asian financial crisis (1997)
  • Hong Kong

      • Part of the PRC (one country, two systems)
      • Risk of radical change in business environment
  • Singapore

      • Corporatist model
      • From entrepot to global city
  • Taiwan

      • From cheap producer to technology leader
      • Managing relations with the PRC – the 3 Chinas

Southeast Asia

  • Southeast Asia

      • The Baby Tigers (TH, MY, IN, VN)
          • Large population base
          • Inexpensive labor
          • Considerable natural resources
          • Attractive to outside investors
      • Other Southeast Asian nations
          • Philippines, Cambodia, Laos, Myanmar
  • South Asia

      • India
          • Large population (300 million middle class consumers)
          • Increasingly open markets, technology leader
          • Attractive to US and British investors
      • Other South Asian nations
          • Pakistan, Bangladesh, Nepal, Sri Lanka, Bhutan

Economic characteristics

  • Economic characteristics

      • Low per capita GDP, low (or negative) GDP growth
      • High unemployment - semiskilled or unskilled workforce
      • Considerable government intervention in the economy
      • Political instability, weak infrastructure, corruption
  • LDCs in Asia and Latin America

      • Include important regional economic powers (e.g. China, India, Indonesia, Brazil, Argentina)
      • Generally well integrated into the global economy

LDCs in the Middle East and Central Asia

  • LDCs in the Middle East and Central Asia

      • Large oil reserves
      • Highly unstable geopolitical and religious forces
      • Plagued by continuing economic problems
  • LDCs in Africa

      • Considerable natural resources
      • Diverse populations
      • Weak and unstable governments
      • Economies negatively impacted by social and environmental factors (poverty, starvation, illiteracy, corruption, environmental degradation)
      • Poorly integrated into the global economy

Economic environment

  • Economic environment

  • Political environmental

  • Legal/regulatory environment

  • Socio-cultural environment

  • Technological environment

Global and regional integration

  • Global and regional integration

    • International agreements (GATT, WTO)
    • Regional agreements (EU, ASEAN, NAFTA, CAFTA, FTAA, Mercosur)
  • World trade and investment

    • 80% of FDI contributed by developed economies
    • U.S. exports/imports increased by 550% from 1983 to 2003 (to $1.3 and $1.8 trillion)
    • Trade within the EU increased sharply, to > $2 trillion annually

Rapid and uncertain change

  • Rapid and uncertain change

    • China’s transition to a market economy
    • European expansion and integration
    • Russia’s unstable political institutions
    • The emergence of political Islam in the Middle East
  • Significant differences across countries

    • Less stable governments increase political risk
    • Uncertain responses to democratization
  • Change in government policies

    • Adjusting to adjust to new perspectives and changing requirements
    • Assessing political risks (Chapter 10)

Complex and confusing

  • Complex and confusing

    • MNCs must
        • Conform to national laws and standards
        • Abide by the laws of their own countries
        • Be aware of international treaties and obligations
    • Differences in regulatory regimes
        • Increase transaction costs
        • Restrict and distort trade
        • Can result in retaliatory practices or sanctions
  • Four main legal traditions

        • Common law
        • Civil law
        • Islamic law (theocratic law)
        • Socialist law

Ethics and social responsibility (Chapter 3)

  • Ethics and social responsibility (Chapter 3)

    • Business practices
    • Labor standards and workers rights
    • Corporate governance
    • Intellectual property rights
  • Values and culture (Part II)

    • Responses to authority
    • Individual vs. group recognition and responsibility
    • Balance of work and family obligations
    • Managing and resolving conflict

Changing at “lightning speed”

  • Changing at “lightning speed”

  • Internet and telecommunications

    • Increasing bandwidth/high-speed access
    • Reduced costs of entry/leapfrogging
  • E-business

    • Customization (“the long end of the tail”)
    • E-retailing and financial services
      • Movement of money across borders
      • “E-cash” – a currency without a country
  • Outsourcing and offshoring

    • Information as a commodity
    • The 24-hour office – increased productivity/lower cost

Where do you stand?

  • Where do you stand?

  • Key themes to consider

    • Impact on Labor
    • Impact on Equality
    • Impact on Government
    • Impact on the Environment
    • Impact on Culture and Community

Positive effects

  • Positive effects

      • Increased job opportunities
      • Upgraded education system
      • Increased training

Positive effects

  • Positive effects

      • Increased income / reduced poverty
      • Increased wages for education or technically skilled
      • Improved economic conditions
      • Rich become richer
      • Greater access to goods
      • Lower cost of goods
      • Increased food supply (in some countries)

Positive effects

  • Positive effects

      • Increased economic development
      • Expanded infrastructure
      • Transfer of modern management techniques
      • Greater interdependence among business partners

Positive effects

  • Positive effects

      • More efficient use of resources
      • Increased demand for and transfer of more efficient technologies
      • Increased incomes lead to greater concern for environmental protection

Positive effects

  • Positive effects

      • Increased cultural exposure and understanding
      • Closer cross-border ties

Globalization as “moral conflict”

  • Globalization as “moral conflict”

  • Impacts of Globalization

    • Increases economic interdependence
    • Creates winners and losers
  • Implications of the debate

    • For academics
      • Need for more objective research
      • Need to question assumptions and be open to alternatives
    • For companies
      • Be aware of multiple stakeholder interests
      • Follow the guidelines of the UN Global Compact
      • Consider the “triple bottom line”

Implications for Managers

  • Implications for Managers

    • Lifelong learning
        • the “most valuable asset is the ability to learn how to learn” (Thomas Friedman, The World is Flat)
    • Responsiveness
        • be alert for changes and quick to respond
    • Adaptability
        • knowing how to work with others
        • being comfortable with uncertainty and ambiguity
    • Both a local and global perspective
        • see the big picture (global economy/whole organization)
        • understand the details of operating at the local level
  • Questions or final comments…

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