Chapter
Welcome to MGT 480
International Management
Tonight:
Syllabus & Course Overview
Definition of International Management
Refresher on Global Business Environment
Globalization & Economic Trends
Political/Regulatory/Technological Environment
Ethics & Corporate Social Responsibility
1
2
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 sales,

Nationality mix of managers and owners
McGraw-Hill/Irwin
© 2006 The McGraw-Hill Companies, Inc. All rights reserved.
Chapter
Chapter 1
Globalization & Economic Trends
1
4
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
239.43
7. BP
193.05
8. Aig
191.18
9. Intel
184.66
10. Royal Dutch’ Shell
174.83
McGraw-Hill/Irwin
Sales
Billions of U.S. Dollars
1. Wal-Mart Stores
2. BP
3. ExxonMobil
4. Royal Dutch/Shell
5. General Motors
6. DaimlerChrysler
7. Ford Motor
8. Toyotal Motor
9. Mitsubishi
10. General Electric
258.68
232.57
222.88
201.93
183.24
166.61
164.20
156.48
137.32
134.19
© 2006 The McGraw-Hill Companies, Inc. All rights reserved.
5
Top Ten Global MNCs
The Top 10 global MNCs Ranked by Market Value, Sales, Profits,
Data: Morgan Stanley Capital International Standard & Poor’s 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
2. Citigroup
3. General Electric
4. HSBC Holdings
5. Royal Dutch/Shell
6. Bodafone Group
7. Bank of America
8. Toyota Motor
9. Microsoft
10. BP
McGraw-Hill/Irwin
20.96
17.85
15.00
11.65
11.41
11.36
10.81
10.51
9.99
9.54
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.
6
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

7
Globalization
 Criticisms of globalization

Offshoring of business services jobs to lower-wage countries

Growing trade deficits

Slow wage growth

Environmental and social impacts
8
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 Trade Agreement (CAFTA)

Free Trade Agreement of the Americas (FTAA)

European Union (EU)

Association of Southeast Asian Nations (ASEAN)
9
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 Union

Japan
10
The World’s Largest Economies 2005 and 2020 (Projected) Measured by
GDP at Market Exchange Rates:
11
The World’s 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
Rank
1
2
3
4
5
6
7
8
9
10
Importing
Country
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
World’s 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 valueadded 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
1
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 support (subsidies)

Require 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
1
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 no universally adopted standard

A great 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 humanity’s
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 environment globally

Role 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
 Levi’s
 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
0
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
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