GLOBALIZATION AND

INTERNATIONAL
LINKAGES
CHAPTER 1
INTERNATIONAL MANAGEMENT

Management is the process of A multi-national company (MNC) is a

completing activities with and through firm that has operations in more than one
other people. country, international sales, and a mix of
International management is the nationalities among managers and owners.
process of applying management concepts
and techniques in a multinational
environment and adapting management
practices to different economic, political,
and cultural contexts
GLOBALIZATION AND INTERNATIONALIZATION
Globalization can be defined as the process
of social, political, economic, cultural, and
technological integration among countries
around the world.
Transnational Business: A business
conducting its activities in a large range of
countries across national boundaries, with
varying degrees of coordination, integration
and local differentiation of strategy and
operations, depending on market and
business conditions.
Internationalization is the process of a
business crossing national and cultural
borders, while globalization is the vision of
creating one world unit, a single market
entity
International Business: An organization
operating in more than one country
Organization from different countries trading
across national boundaries
OFFSHORING & OUTSOURCING

Offshoring: The process by which Outsourcing: The subcontracting or

companies undertake some activities at contracting out of activities to endogenous
offshore locations instead of in their organizations that had previously been
countries of origin. performed by the firm.
GLOBALIZATION: PROS AND CONS

BENEFITS OF GLOBALIZATION: CRITICISMS OF GLOBALIZATION:

• lower prices • Off-shoring of business service jobs to lower-wage
• greater availability of goods countries
• better jobs • Growing trade deficits
• access to technology • Slow wage growth
• individuals in established markets will strive for better • Environmental and social impacts
education and training to be prepared for future positions
• citizens in emerging markets and underdeveloped
countries will reap the benefits of large amounts of capital
flowing into those countries, which will stimulate growth
and development
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)
INTERNATIONAL ECONOMIC POWER IN THE
GLOBAL ECONOMY:
Shifting landscape due to:
• Economic integration
• Economic potential of emerging markets
TRENDS IN INTERNATIONAL INVESTMENTS AND
TRADE:
• 80% from developed country International Trade:
• Foreign Direct Investment (FDI) • Over ½ of world trade accounted for by
• Growing at healthy rate United States, European Union and Japan

• Outpacing domestic growth in most • Increased substantially over last two

countries decades
ECONOMIC SYSTEMS OF THE WORLD:

• Market Economy
• Command Economy
• Mixed Economy
MARKET ECONOMY:

• Private enterprise reserve the right own property and decide on what and how much to
produce
• Contains the least restriction in the allocation of resources
• A general balance between supply and demand
• Competition is encouraged
• Government may limit monopolies, or unfair practices
COMMAND ECONOMY:

• Compared to Monopoly where the government has explicit control over the price and
supply
• The control is based on theoretical need of the population and might be distorted
• Business are owned by the state to ensure investment in the best interests of the society
• Government subsidies provide security to organizations
• Common in communists countries
• What are some of the issues with this system?
MIXED ECONOMY:

• Combination of market and command economy

• Some sectors are private while others are controlled and owned by the government
• Allow for competition while enable to provide assistance to individuals or companies
• Nationalization of major resources
• What are some issues with the system?
ECONOMIC PERFORMANCE BY MAJOR WORLD
REGION:
• North America
• South America
• Europe (EU, Central and Eastern Europe)
• Asia (Japan, China, emerging markets of Asia)
• Other developing and emerging countries (India, Middle East, Central Asia, Africa)
ECONOMIC PERFORMANCE: NORTH AMERICA
• Free market base economy in region
• Combine purchasing power of U.S.,
Canada and Mexico approaches $12
trillion in purchasing power
• Foreign MNC’s find U.S. to be a lucrative
market
United States:
• Foreign MNC’s find U.S. a lucrative
expansion market
• U.S. firms hold market dominance in
many European markets; gaining market
share in Asia
ECONOMIC PERFORMANCE: NORTH AMERICA
(CONTINUED)
Canada: Mexico:
• U.S.’s largest trading partner • Strongest Latin American economy
• Most of the largest foreign-owned • Very strong maquiladora industry
Canadian companies are totally or
• Trade with both Europe and Asia has
heavily U.S.-owned
increased
• Legal and business environment in
• Now competitive with Asia for the U.S.
Canada is similar to that in U.S.
market
ECONOMIC PERFORMANCE: SOUTH AMERICA

• South American countries have accumulated heavy foreign debt and experienced severe
inflation
• Major development is inter-country trade, including free market policies among South
American countries
• South American countries increasingly looking to do business with U.S.
ECONOMIC PERFORMANCE: EUROPEAN UNION

• Privatization of traditionally nationalized industries

• Emergence of the EU as an operational economic union
• Economic linkages between the EU and newly emerging Central and Eastern European
countries
• Challenge is to absorb former communist bloc countries
• Foreign MNC’s gain foothold in EU by acquisitions, alliances, cooperative R&D efforts
ECONOMIC PERFORMANCE: CENTRAL AND
EASTERN EUROPE
Russia, Czech Republic, Hungary, Poland:
• Dismantling of Russian price controls
• Perestroika – economic and political restructuring
• Privatization
• Inflation
• Crime
• Membership in International Monetary Fund (IMF)
• Political uncertainty
ECONOMIC PERFORMANCE: ASIA

JAPAN CHINA
• Phenomenal economic success in 1970s and 1980s • Annual real economic growth of 10% during the 1980’s
and early 1990’s
• Ministry of International Trade and Industry (MITI)
• More recent growth of 8% or higher
• Keiretsus
• Healthy and growing economy
• Vertically integrated industries
• GDP growth of 11.1% in 1st ¼ of 2007
• Holding provide assistance needed in providing goods and
services to end users • Atrractive to foreign investors despite major political risk
• Decade long recession in 1990s • Product pirating is a major problem
• Bank loans backed by real estate or projected revenues • Complicated and high-risk venture
• By 2000, most major banks had billions of dollars in
uncollectible loans
• International competition has increased
THANK YOU!!!