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The Globalizing Economy: A Changing (but Not Always Stable) Environment for Business (1 of 4)

• Globalization: the world’s economies are becoming borderless and interlinked.
• Companies are no longer limited by their domestic boundaries, and may conduct any kind of business activity anywhere in the world.
• Globalization creates a changing, but not uniform, and not always stable, environment for business.

© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use.

The Globalizing Economy: A Changing (but Not Always Stable) Environment for Business (2 of 4)

• Negatives of globalization
• Not all economies benefit or participate equally.
• Terrorism, wars, and economic stagnation have limited or reversed some aspects of globalization.
• Globalization produces a scarcity of natural resources, pollution, negative social impacts, and increased interdependence of economies.
• Globalization may be widening the gap between rich and poor countries.

© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use.

The Globalizing Economy: A Changing (but Not Always Stable) Environment for Business (3 of 4)

• Benefits of globalization
• Globalization results in lower prices in many countries, as multinationals become more efficient.
• Globalization benefits many emerging markets such as India and China, as these countries enjoy greater availability of jobs and better access to technology.
• Globalization is the main reason why many new companies from Mexico, Brazil, China, India, and South Korea are the new dominant competitors.

© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use.

The Globalizing Economy: A Changing (but Not Always Stable) Environment for Business (3 of 4)

• 7 key trends of the globalizing economy
• Falling, disintegrating borders
• Growing cross-border trade and investment
• The rise of global products and global customers
• The internet and information technology (IT)
• Privatizations of formerly government-owned firms
• New competitors in the world market
• Increased global quality and production standards

© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use.

Countries of the World:
The Arrived and the Arriving (1 of 4)

• Developed Countries (the Arrived) have mature economies with substantial per capita Gross Domestic Product (GDP), international trade and investments.
• E.g., the United States of America, Britain, Japan, Germany, and many others

© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use.

Countries of the World:
The Arrived and the Arriving (2 of 4)

• Developing Countries (the Arriving) have economies that have grown extensively over past two decades.
• E.g., Hong Kong, Singapore, Taiwan, Malaysia, Indonesia, Thailand.

© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use.

Countries of the World:
The Arrived and the Arriving (3 of 4)

• Transition economies are countries that have changed from mostly communist systems to market/capitalistic systems.
• E.g., the Czech Republic, Hungary, Poland, Russia

© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use.

Countries of the World:
The Arrived and the Arriving (4 of 4)

• Emerging Markets are those countries whose economies are growing rapidly.
• E.g., Brazil, Russia, India, & China (BRIC)

© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use.

Exhibit 1.3:
Selected Economies of the World

© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use.

Exhibit 1.4:
Age Breakdown of Selected Economies

© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use.

Exhibit 1.5:
The Globalizing Economy

© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use.

Disintegrating Borders: The World Trade Organization and Free Trade Areas

• In 1947, nations met to reduce tariffs from 45% to less than 7%; these negotiations resulted in the General Agreement on Tariffs and Trade (GATT).
• In 1986, negotiations began in Uruguay to continue reducing tariffs. The World Trade Organization (WTO) succeeded GATT.
• WTO provides structure for continued negotiations and settling trade disputes among nations.

© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use.

World Trade Organization

• In 1997, WTO countries agreed to end tariffs on software, computers and related products; hi-tech exports to Europe from Asia and the US doubled.
• Since GATT, world trade has grown at more than four times the output of the world’s GDP.
• Some say WTO favors developed nations, encourages environmental damage, and moves jobs from higher-save countries to lower-wage countries.

© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use.

Regional Trade Agreements
(1 of 2)

• Regional Trade Agreements are agreements among nations to reduce tariffs and develop similar technical and economic standards.
• The three largest account for half the world’s trade:
• the European Union (EU)
• the North American Free Trade Association (NAFTA), and
• the Asia-Pacific Economic Cooperation (APEC)

© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use.

Regional Trade Agreements
(2 of 2)

• The European Union (28 European nations, and growing) allows free movement of goods and services and a common currency (EMU).
• The North American Free Trade Agreement (NAFTA) linking the US, Canada, and Mexico, allows the freer exchange of goods and services.
• The Asia-Pacific-Economic Cooperation (12 Asian nations) with goals for free trade by 2020.

© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use.

Sell Anywhere, Locate Anywhere: Trade Growing, but Setbacks (1 of 2)

• World trade grew an average of 6.5% per year between 1990 and 2000, slowed to 4% in 2004, grew again to 6% in 2005 and to 8.5% in 2006.
• WTO reports the global economy is suffering from a very severe slowdown.
• EU countries are suffering the worst debt crisis they have ever faced.
• Change in imports & exports higher for developing and emerging economies than for developed economies.

© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use.

Sell Anywhere, Locate Anywhere: Trade Growing, but Setbacks (1 of 2)

• The latest WTO report suggests a few trends:
• Emerging markets continue to grow dramatically.
• Developing nations have played a more important role in international production networks known as Global Value Chains (GVC).
• Commodities such as energy and minerals have doubled between 2003 and 2008.
• The world has never been more connected.

© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use.

Sell Anywhere, Locate Anywhere: Foreign Direct Investment (FDI)
(1 of 2)

• Foreign Direct Investment (FDI) occurs when a multinational company from one country has an ownership position in an organizational unit located in another country.
• FDI increased by more than 36% from 1996 - 2000.
• Since 2001, there has been a decline in FDI, but FDI grew to its highest level in 2007.
• Emerging markets will continue to attract FDI.

© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use.

Sell Anywhere, Locate Anywhere: Foreign Direct Investment (FDI)
(1 of 2)

• Developing countries provide opportunities and risks.
• MNCs should consider two types of risk:
• Economic risk: includes all factors of a nation’s economic climate that may affect a foreign investor.
• Political risk: anything a government might do or not do that might adversely affect a company.

© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use.

The Internet and Information Technology Are Making It All Easier (1 of 3)

• Email and the internet allow multinationals to communicate with company sites throughout the world.
• Text and graphic information can flow to any part of the world almost instantaneously.
• Headquarters, R&D, manufacturing can be located anywhere in the world.
• Information technology is spurring a borderless financial market.

© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use.

The Internet and Information Technology Are Making It All Easier (2 of 3)

• Information technologies make available many new tools that facilitate business operations:
• Worldwide communication using Voice-Over-Internet Protocol (VOIP) systems such as Skype, MSN Messenger and AOL is cost-effective.
• Collaborative networks can be provided by WIKI firms at very low cost.
• Information can be obtained by increasingly sophisticated search engines like Google.

© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use.

The Internet and Information Technology Are Making It All Easier (3 of 3)

• Information technology presents multinationals with many new opportunities.
• Developments in computing technology mean that the manufacturing sector will no longer see hammers, lathes, drills, and stamping presses.
• One of the most significant recent technologies is the 3D printer.
• The potential for the 3D printer to revolutionize multinational operations is tremendous.

© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use.

The Rise of Global Products and Global Customers

• The needs of customers for many products and services are growing more similar
• E.g., McDonald’s, Boeing, Toyota.
• Global customers search the world for their supplies without regard for national boundaries.
• These factors link economies because companies can produce one product for everyone, and anyone can buy anything from anywhere.

© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use.

New Competitors Are Emerging (1 of 2)

• Two new forms of competitors are having dramatic influences on global business.
• First, experts now recognize the existence of powerful emerging market competitors.
• Secondly, companies worldwide will increasingly have to contend with formidable state competitors.

© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use.

New Competitors Are Emerging (2 of 2)

• Emerging market multinationals: Global companies born in emerging markets
• These multinationals often have the tenacity to succeed at business challenges that developed world multinationals have avoided.
• State multinationals: Multinationals from emerging markets that can rely on state support.
• These enterprises have often been very successful while relying on state support.

© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use.

The Rise of Global Standards (1 of 2)

• When a product standard is accepted globally or regionally, companies can make one or only a few versions of a product for the world market rather than hundreds.
• Products are developed to accommodate different regional standards, such as electrical currents & plugs.
• The company that can establish its standard as dominant has a tremendous strategic advantage.

© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use.

The Rise of Global Standards (2 of 2)

• The drive for consistency in quality led to the International organization for standardization (ISO) in Geneva, Switzerland.
• ISO developed technical standards known as ISO 9001:2000, adopted by law in Europe.
• Many large European MNCs now require ISO certification.

© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use.

Corporate Social Responsibility and Business Ethics (1 of 2)

• Despite their size and clout, MNCs face increased pressure to be socially responsible from both the media and the public.
• Mindful of rankings on ethics, proactive MNCs pay close attention to these issues, and take appropriate action.

© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use.

Corporate Social Responsibility and Business Ethics (2 of 2)

• Some MNCs are becoming more proactive in responding to social and ethical issues that arise from their overseas operations.
• Some issues are:
• Climate change
• Environmental degradation and pollution
• Sweatshop conditions for labor
• Bribery

© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use.

Exhibit 1.7:
Ranking the World’s
Most Ethical Companies

Source: Adapted from Ethisphere Institute, 2015. World’s Most Ethical Companies; http://www.ethisphere.com

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The Next Generation of Multinational Managers (1 of 3)

• The successful Multinational Manager needs these characteristics:
• A global mindset
• Emotional intelligence
• A long-range perspective
• The talent to motivate all employees to achieve excellence

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The Next Generation of Multinational Managers (2 of 3)

• Characteristics of the successful Multinational Manager (continued):
• Accomplished negotiation skills
• A willingness to seek overseas assignments
• An understanding of national cultures

© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use.

The Next Generation of Multinational Managers (3 of 3)

• Research suggests that you need three forms of capital to become a successful international leader.
• Intellectual capital: willingness to learn and build you knowledge base regarding cultural differences and how to adapt to such differences.
• Psychological capital: Ability to be receptive to new ideas and experiences.
• Social capital: Ability to develop networks of individuals who are different from you.

© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use.

Multinational Management:
A Strategic Approach (1 of 2)

• You may well find yourself a multinational manager; foreign competition and doing business in foreign markets are daily facts of life for today’s managers.
• Competing successfully requires a strategic approach; formulate and implement your strategy.
• Multinational strategies must include maneuvers that deal with operating in more than one country and culture.
• Position yourself for an evolving global economy.

© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use.

Multinational Management:
A Strategic Approach (2 of 2)

• In formulating your strategy, consider the trends that will shape the future business environment:
• Blurring of industry boundaries
• The need for flexibility more than size
• The need to find your niche
• Hypercompetition
• Emphasis on innovation and the learning organization

© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use.

Summary and Conclusions

• Chapter 1 provides key background information to support study of multinational management.
• World economies are increasingly linked, creating both threats and opportunities.
• New competitors are coming from developing nations in Asia, the Americas, and Eastern Europe.
• Multinational managers need a global mindset, and strategies for succeeding in different nations and cultures.