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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
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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

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Chapter
Chapter 1
Globalization & Economic Trends
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Top Ten Global MNCs


The Top 10 global MNCs Ranked by Market Value, Sales, Profits,
and Share-Price Gain, 2003

Market Value Sales


Billions of U.S. Dollars Billions of U.S. Dollars
1. General Electric 1. Wal-Mart Stores
$328.11 258.68
2. Microsoft 2. BP
284.43 232.57
3. ExxonMobil 3. ExxonMobil
283.61 222.88
4. Pfizer 4. Royal Dutch/Shell
269.66 201.93
5. Wal-Mart Stores 5. General Motors
241.19 183.24
6. Citigroup
McGraw-Hill/Irwin
6. DaimlerChrysler
© 2006 The McGraw-Hill Companies, Inc. All rights rese
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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 Share-Price Gain
1. ExxonMobil 1. Mizuho Financial 636%
20.96 2. Research in Motion 550
2. Citigroup 3. UFJ Holdings 420
17.85 4. SK 383
3. General Electric 5. Rakuten 381
15.00 6. Sumitomo Mitsui Fin. 331
4. HSBC Holdings 7. Elan 311
11.65 8. Bharti Tele-Ventures 276
5. Royal Dutch/Shell 9. Yahoo! Japan 241
11.41 10. Mitsui Trust Hldgs. 229
6. Bodafone Group
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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
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Globalization
 Criticisms of globalization
 Offshoring of business services jobs to lower-wage countries
 Growing trade deficits
 Slow wage growth
 Environmental and social impacts
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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)
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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
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The World’s Largest Economies 2005 and 2020 (Projected) Measured by


GDP at Market Exchange Rates:
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The World’s Largest Economies 2005 and 2020 (Projected) Measured by


GDP at Purchasing Power Parity (ppp)
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Most Populous Countries in 1980, 2000, and


2050 (Projected):
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World Foreign Direct Investment Inflows (in


millions of dollars):
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World Foreign Direct Investment Outflows (in


millions of dollars):
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Trade Flows Among World Regions, 2005 (in billions of dollars or percent)
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Top 10 Trading Partners of


the United States, 2003
(in millions of dollars)
Importing U.S. Exporting U. S.
Rank Country Exports Rank Country Imports
1 Canada 169,924 1 Canada 221,595
2 Mexico 97,412 2 China 152,436
3 Japan 52,004 3 Mexico 138,060
4 United Kingdom 33,828 4 Japan 118,037
5 Germany 28,832 5 Germany 68,113
6 China 28,368 6 United Kingdom 42,795
7 South Korea 24,073 7 South Korea 37,229
8 Netherlands 20,695 8 Taiwan 31,599
9 Taiwan 17,448 9 France 29,219
10 France 17,053 10 Ireland 26,747
Adapted from: Table 1-4: Top 10 Trading partners of the United States, 2003 (in millions of dollars).

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World’s Most
Competitive Nations, 2006
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Market Potential Indicators Ranking for Emerging Markets,


2007
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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
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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
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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?
4. If you were a foreign investor, what asset classes and regions
would you seek to invest in today?
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Chapter
Chapter 2
Political,
Regulatory,
Technological,
Dimensions
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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?
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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
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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
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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
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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)
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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
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Expected Winners/Losers
in Selected Occupations
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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
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Chapter
Chapter 3
Ethics & Social Responsibility
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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
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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
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Ethics and Social Responsibility


 Employment and business practices
 Difficult to establish a universal foundation of employment
practices
 Difficultdilemmas in deciding working conditions, expected
consecutive work hours, and labor regulations.
 Offshoring due to differences in labor costs
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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
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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
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Corruption Index:
Least and Most Corrupt Countries
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Ethics and Social Responsibility


Around the World
Ethical Problems and
China
Concerns
 Ethical issues
 Workers not well paid (often work 12 hours a
day, 7 days a week)
 Piracyof intellectual property, counterfeiting,
and industrial spying
 Human rights violations
 Use of prisoner and child labor
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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
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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.
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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
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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
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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”
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Principles of the Global Compact

http://www.unglobalcompact.org/AboutTheGC/faq.html
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Millennium Development Goals


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Case: AIDS and Pharmaceuticals


 See pages 82-90