INTERNATIONAL MANAGEMENT

INS 3027

Instructor: Binh Do, PhD

Email: binhdt@gmail.com
Tel: 0989.956.957
 Chapter One

Globalization and
International Linkages

McGraw-Hill/Irwin Copyright 2012 by The McGraw-Hill Companies, Inc. All Rights Reserved.
 Globalization and
International Linkages
The specific objectives of this chapter are to
1. ASSESS the implications of globalization for
countries, industries, firms, and communities.
2. REVIEW the major trends in global and
regional integration.
3. EXAMINE the changing balance of global
economic power and trade and investment
flows among countries.
4. ANALYZE the major economic systems and recent
developments among countries that reflect those
systems.

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The World of International Management: An Interconnected World

Opening Discussion

1. Discuss the impact of social media on

international business and its implications
for both consumers and companies.

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 International Management
International management involves
Applying management concepts and techniques in a
multinational environment and
Adapting management practices to different economic,
political, and cultural environments.

Multinational corporation (MNC)

Operations in more than one country
International sales
Nationality mix of managers and
owners

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The Worlds Top Nonfinancial MNCs
Ranked by Foreign Assets, 2015

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 The Worlds Top Nonfinancial MNCs
from Developing n transitions economies
Ranked by Foreign Assets, 2014

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Globalization and Internationalization

Globalization
Process of social, political, economic, cultural, and
technological integration among countries around the
world.
Hastened by
Offshoring: Process by which companies undertake
some activities at offshore locations instead of their
countries of origin.
Outsourcing: Subcontracting or contracting out of
activities to external organizations that had previously
been performed by the firm.

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 Globalization: Pros and Cons
Benefits of Globalization
Wealth
Jobs
Technology
Lower prices
Criticisms of
Globalization
off-shoring of business
service jobs to lower-wage
countries
growing trade deficits
slow wage growth
environmental and social
impacts
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1. Consider the pace of globalization as it pertains
to social media and the pros and cons of the
process.
2. Explore the different ways companies can use
social media to support their international
strategies and what companies must do to
remain competitive in this rapidly changing
environment.
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 Global and Regional Integration

Global Agreements
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)
European Union (EU)
Association of Southeast Asian Nations (ASEAN)
Free Trade Agreement of the Americas (FTAA)

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 International Economic Power
in the Global Economy
Shifting landscape due to
Economic integration
Economic potential of emerging markets
BRIC countries (Brazil, Russia, India, and China)
could be among the four most dominant
economies by 2050

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The Worlds Largest Economies 2005 and 2020
(Projected)
Measured by GDP at Market Exchange Rates

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The Worlds Largest Economies 2005 and 2020
(Projected)
Measured by GDP at Purchasing Power Parity

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Changing Demographics: Developing Countries
on the Rise
(ranked by size)

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Trends in Trade and International Investments
1. The slowdown of global trade

The growth of global trade volume slowed to around 1.5%

in 2015, from 2.3% in 2014. This trend, which began in
2012, has been more pronounced than for world output.
- rising protectionism since the
global crisis (Evenett, 2014)

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Trends in Trade and International Investments

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Trends in Trade and International Investments

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Recovery in FDI was strong in 2015 & 2016.

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 FDI trends

Developed countries

Developing Countries

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MNEs from developed
countries maintained
their share of outward
FDI in 2016, despite a
decline in their
investment activity.

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FDI outflows, top 20 home economies
(Billions of Dolars)

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 Global Economic Systems

Market Economy: exists when private enterprise reserves

the right to own property and monitor the production and
distribution of goods and services while the state simply
supports competition and efficient practices.
Command Economy: comparable to a monopoly in the
sense that the organization, in this case the government,
has explicit control over the price and supply of a good or
service
Mixed Economy: a combination of a market and
command economy. While some aspects of this system
include private ownership and the freedom and flexibility of
the law of demand, other sectors are subject to
government planning.
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 Economic Performance
by Major World Region
Established Economies
North America
European Union
Japan
Emerging Economies
Central and Eastern Europe
China
Other Emerging Markets of Asia
India
Developing Economies on the Verge
South America
Middle East and Central Asia
Africa

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 Economic Performance
Established Economies
North America
One of the four largest trading blocs in the world
Combined purchasing power of U.S., Canada and
Mexico approaches $12 trillion
Free-market-based economy is attractive to private
firms

United States
Foreign MNCs find U.S. a lucrative expansion market
Foreign firms welcomed as investors in U.S. market
U.S. firms hold market dominance in many European
markets; gaining market share in Asia

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 Economic Performance
Established Economies
Canada
U.S.s largest trading partner
Most of the largest foreign-owned Canadian
companies are totally or heavily U.S.-owned
Legal and business environment in Canada is similar
to that in U.S.
Mexico
Strongest Latin American economy
Very strong maquiladora industry
Trade with both Europe and Asia has increased
Now competitive with Asia for the U.S. market

Maquiladora a factory, the majority of which are located in Mexican border towns,
that imports materials and equipment on a duty- and tariff-free basis for assembly
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 Economic Performance
Established Economies
European Union
Ultimate objective
Eliminate all trade barriers among member countries
Emergence of the EU as an operational economic union
A unified Europe could become the largest economic market in
terms of purchasing power in the world
Foreign MNCs trying to gain foothold in EU
Acquisitions, alliances, cooperative R&D efforts
Economic linkages between the EU and newly
emerging Central and Eastern European countries
Challenge is to absorb former communist bloc countries
Financial crises in Greece and Ireland putting
pressure on the euro

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 Economic Performance
Established Economies
Japan
Huge economic success in 1970s and 1980s
Ministry of International Trade and Industry (MITI)
Keiretsus
Vertically integrated industries
Holdings provide assistance needed in providing goods and
services to end users
Decade long recession in 1990s
More competition from emerging economies
Poor management decisions
Remains a formidable competitor in the Pacific Rim,
North America, and Europe
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 Economic Performance
Emerging Economies
Central and Eastern Europe
Russia
Dismantling of price controls and privatization
Membership in International Monetary Fund
(IMF) controlling inflation
Crime and political uncertainty
Czech Republic, Hungary, Poland
Privatization
Inflation
Political uncertainty
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 Economic Performance
Emerging Economies
China
Real economic growth of 12 percent in 2007, 9
percent in 2008, and 11.5 percent in 2009
Savings glut in corporate sector
Vast developmental needs
Unemployment concerns
Attractive to investors despite political risk
Product pirating is a major problem
Currency value
Government policies favor domestic firms

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 Economic Performance
Emerging Economies
South Korea
Chaebols
Very large family-held conglomerates
Solid economy, moderate growth and inflation, low
unemployment

Hong Kong
Part of Peoples Republic of China
Uncertainty about the role the Chinese government

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 Economic Performance
Emerging Economies
Singapore
Success story
Leader and financial center for region

Taiwan
Progressed from labor-intensive economy to one
dominated by technologically sophisticated
industries
banking, electricity generation, petroleum refining and
computers

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 Economic Performance
Emerging Economies
Thailand, Malaysia, Indonesia
Large population base
Inexpensive labor
Considerable natural resources
Attractive to outside investors

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 Economic Performance
Emerging Economies
India
Large population
Recent trend of locating software and high value-
added services to this country boosting middle- and
upper-class market for goods and services
Attractive to U.S. and British investors
well educated, English speaking, technologically
sophisticated workers

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 Economic Performance
Developing Economies on the Verge
South America
Hampered by foreign debt and severe inflation
But, intercountry trade is increasing
Countries looking to do business with U.S.

Brazil
Economy is now flourishing and attracting
investment from MNCs
Privatization and stable government

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 Economic Performance
Developing Economies on the Verge
Chile
Uncertain future, but helped by trade agreements

Argentina
Abundant natural resources
Economic problems persist

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 Economic Performance
Developing Economies on the Verge
Middle East and Central Asia
Large oil reserves
Highly unstable geopolitical and religious forces
Plagued by continuing economic problems

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 Economic Performance
Developing Economies on the Verge
Africa
Considerable natural resources
African nations remain very poor and undeveloped
International trade is not a major sources 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

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The Global Competitiveness Index
20162017 Rankings

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Market Potential Index (MPI) - 2017

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 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?

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