Tonight:

Syllabus & Course Overview

Definition of International Management
Refresher on Global Business Environment
Globalization & Economic Trends
Political/Regulatory/Technological Environment
Ethics & Corporate Social Responsibility

Chapter

Welcome to MGT 480

International Management

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
Nationality

McGraw-Hill/Irwin

sales,

mix of managers and owners

2006 The McGraw-Hill Companies, Inc. All rights reserved.

Chapter

Chapter 1
Globalization & Economic Trends

Top Ten Global MNCs

The Top 10 global MNCs Ranked by Market Value, Sales, Profits,
and Share-Price Gain, 2003
Market Value
Billions of U.S. Dollars
1. General Electric
$328.11
2. Microsoft
284.43
3. ExxonMobil
283.61
4. Pfizer
269.66
5. Wal-Mart Stores
241.19
6. Citigroup
McGraw-Hill/Irwin

Sales
Billions of U.S. Dollars
1. Wal-Mart Stores
258.68
2. BP
232.57
3. ExxonMobil
222.88
4. Royal Dutch/Shell
201.93
5. General Motors
183.24
6. DaimlerChrysler
2006 The McGraw-Hill Companies, Inc. All rights reserved.

Top Ten Global MNCs

The Top 10 global MNCs Ranked by Market Value, Sales, Profits,
Data: Morgan Stanley Capital International Standard & Poors Compustat
and Share-Price Gain, 2003 Source: http://images.businessweek.com/mz/0o4/30/0430_62intbg1_a.gif
Profits
Billions of U.S. Dollars
1. ExxonMobil
20.96
2. Citigroup
17.85
3. General Electric
15.00
4. HSBC Holdings
11.65
5. Royal Dutch/Shell
11.41
6. Bodafone Group
McGraw-Hill/Irwin

Share-Price Gain
1. Mizuho Financial
2. Research in Motion
3. UFJ Holdings
4. SK
5. Rakuten
6. Sumitomo Mitsui Fin.
7. Elan
8. Bharti Tele-Ventures
9. Yahoo! Japan
10. Mitsui Trust Hldgs.

636%
550
420
383
381
331
311
276
241
229

2006 The McGraw-Hill Companies, Inc. All rights reserved.

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

Globalization
Criticisms of globalization
Offshoring
Growing
Slow

of business services jobs to lower-wage countries

trade deficits

wage growth

Environmental

and social impacts

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

Free Trade Agreement (CAFTA)

Trade Agreement of the Americas (FTAA)

European

Union (EU)

Association

of Southeast Asian Nations (ASEAN)

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
Japan

Union

10

The Worlds Largest Economies 2005 and 2020 (Projected) Measured by

GDP at Market Exchange Rates:

11

The Worlds Largest Economies 2005 and 2020 (Projected) Measured by

GDP at Purchasing Power Parity (ppp)

12

Most Populous Countries in 1980, 2000, and

2050 (Projected):

13

World Foreign Direct Investment Inflows (in

millions of dollars):

14

World Foreign Direct Investment Outflows (in

millions of dollars):

15

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

16

Top 10 Trading Partners of

the United States, 2003
Importing
Rank Country
1
2
3
4
5
6
7
8
9
10

Canada
Mexico
Japan
United Kingdom
Germany
China
South Korea
Netherlands
Taiwan
France

(in millions of dollars)

U.S.
Exporting
Exports
Rank Country
169,924
97,412
52,004
33,828
28,832
28,368
24,073
20,695
17,448
17,053

1
2
3
4
5
6
7
8
9
10

Canada
China
Mexico
Japan
Germany
United Kingdom
South Korea
Taiwan
France
Ireland

U. S.
Imports
221,595
152,436
138,060
118,037
68,113
42,795
37,229
31,599
29,219
26,747

Adapted from: Table 1-4: Top 10 Trading partners of the United States, 2003 (in millions of dollars).
McGraw-Hill/Irwin

2006 The McGraw-Hill Companies, Inc. All rights reserved.

17

Worlds Most
Competitive Nations, 2006

18

Market Potential Indicators Ranking for Emerging Markets,

2007

19

Economic Performance

Developing and Emerging Countries

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

20

Economic Performance

Developing and Emerging Countries

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

21

Review and Discuss

1.

2.

3.

4.

How has globalization affected different world regions? What

are some of the benefits and costs of globalization for different
sectors of society?
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?
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?
If you were a foreign investor, what asset classes and regions
would you seek to invest in today?

Chapter

Chapter 2
Political,
Regulatory,
Technological,
Dimensions

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

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

Legal and Regulatory Issues

Foreign Corrupt Practices Act (

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

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
Require

support (subsidies)

MNCs to accept local partners

Response may be
Retaliatory

tariffs

Restrictive

trade regulations

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

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

Expected Winners/Losers
in Selected Occupations

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

Chapter

Chapter 3
Ethics & Social Responsibility

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

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

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

Ethics and Social Responsibility

Human Rights
Currently
A great

no universally adopted standard

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

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

Corruption Index:
Least and Most Corrupt Countries

38

Ethics and Social Responsibility

Around the World
Ethical Problems and
Concerns
Ethical issues

China

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

39

Ethics and Social Responsibility

Around the World
Ethical Problems and
United States
Concerns
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

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 humanitys

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

Rise of Civil Society and NGOs

Emergence of organized civil society and NGOs altered
Business
Role

environment globally

of MNC within global business environment

NGOs in the U.S. and globally

Save

the Children

Oxfam
CARE
World

Wildlife Fund

Conservation

International

42

Rise of Civil Society and NGOs

Corporations receiving heavy criticism

Nike
Levis
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

Trust in Leaders
NGO leaders

52

Leaders at the U.N.

42

Spiritual/religious leaders

41

Leaders of Western Europe

36

Managers of the global economy

36

Managers of the national economy

35

Executives of MNCs

33

Leaders of the U.S.A.

27

10

20

30

40

50

60

Average Across All 15 Countries Surveyed

Adapted from Figure 3-1: Trust in Leaders: Percentage Saying A Lot and Some Trust

44

Principles of the Global Compact

http://www.unglobalcompact.org/AboutTheGC/faq.html

45

Millennium Development Goals

46

Case: AIDS and Pharmaceuticals

See pages 82-90