Globalization and International Management
Introduction to International Management
Management: The process of completing activities with and through other people.
International Management: Application of management concepts and techniques in a multinational environment, adapting to different economic, political, and cultural contexts.
Multinational Corporation (MNC): A firm having operations in more than one country, international sales, and a mix of nationalities among managers and owners.
Globalization: The phenomenon that has transformed many previously underdeveloped regions into more prosperous areas due to the rise of emerging market MNCs.
Globalization, Antiglobalization, and Pressures for Change
Globalization: Integration across social, political, economic, cultural, and technological aspects among countries worldwide.
Offshoring: Some company activities are carried out in offshore locations instead of the home country.
Outsourcing: Contracting out activities that were previously performed internally to external organizations.
Proponents: Argue that globalization benefits everyone, facilitating economic growth.
Critics: Argue that offshoring does not inherently create greater opportunities domestically and suggest that the poorest countries may relax standards for foreign investment.
Antiglobalization Activists: Express concerns over social and environmental standards, especially in developing nations.
Proponents: Forecast that global firms will employ modern, environmentally friendly technology.
Global and Regional Integration
World Trade Organization (WTO): Global institution overseeing international trade and investment rules.
North American Free Trade Agreement (NAFTA): Removed major trade and investment barriers among the U.S., Canada, and Mexico, soon to be replaced by USMCA.
Bilateral Agreements: Such as CAFTA-DR, also reduce trade barriers.
European Union (EU): Significant progress in becoming a unified market despite challenges such as “Brexit.”
Economic Trends: Growth in China continues; Japan struggles economically post-1990s. The Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) also aims for regional integration.
Challenges in Europe and Russia: Countries in Central and Eastern Europe and around Russia strive for stable market transitions.
Changing Global Demographics
Decline in Global Working-Age Population: Indicates potential economic strains.
Increase in Global Life Expectancy: Contributes to increased healthcare costs without a concurrent growth in demand for goods.
Decreased Global Fertility Rate: Has implications for long-term workforce stability and economic growth.
The Shifting Balance of Economic Power in the Global Economy
BRIC Countries: Brazil, Russia, India, and China expected significant economic growth by 2025.
E7 (Emerging Seven): Projected to have a GDP 50% higher than the G7 (Group of Seven) by 2050.
N-11: The next wave of emerging market growth, with MIST (Mexico, Indonesia, South Korea, and Turkey) seen as particularly attractive.
Foreign Direct Investment (FDI): Represents investment in foreign economies; as nations grow more affluent, they seek to invest in countries with economic growth potential.
Global Economic Systems
Market Economy: Characterized by private ownership and competition overseen by the state promoting efficient practices.
Command Economy: Governed by state control over the prices and supply of goods and services.
Mixed Economy: Incorporates elements of both market and command economies.
Established Economies
North America: One of the world's four largest trading blocs with purchasing power exceeding $24 trillion.
Maquiladora: A type of factory that assembles goods using imported materials on a duty-free and tariff-free basis for re-export.
European Union Goals: The aim is to remove trade barriers among member countries; the challenge involves integrating former communist nations and adapting post-Brexit.
Japan: Once saw unprecedented economic success through the Ministry of International Trade and Industry (MITI) and the utilization of keiretsus, which are large, integrated corporations.
Emerging/Developing Economies – Central/Eastern Europe
Russia: Economy is undergoing changes with a decrease in poverty and expansion of the middle class but is still hindered by pervasive challenges that increase investment risks.
Hungary: Observed state-owned hotel privatization and increasing foreign investment through joint ventures.
Poland: Established the first non-communist government in 1989 and implemented radical economic reforms.
Challenges for Emerging Economies: Maintaining social order, establishing laws, rebuilding infrastructure, and attracting foreign investment are crucial for integration into the global economy.
Emerging/Developing Economies – China
China's GDP Growth: Slowing significantly; presents risks for investors and complicates foreign business operations.
Intellectual Property Concerns: Challenges for MNCs include complex national policies favoring domestic companies.
Trade Relations: Tense, particularly with the U.S. and the EU; tariffs enacted by both sides during trade disputes.
Currency Value Concerns: Claims exist that China's currency value is manipulated, providing unfair competitive advantages.
Policy Fluidity: China's stance on foreign investors continues to evolve, adding unpredictability.
Emerging/Developing Economies - Other Asian Markets
ASEAN Growth: Member countries fostering robust economic development.
South Korea: Hosts major conglomerates (chaebols) such as Samsung, Hyundai, and LG Group.
Hong Kong and Singapore: Act as key financial centers and models for urban development in Southeast Asia.
Taiwan: Shows steady growth due to increasing trade; economic development noted in Thailand, Malaysia, Indonesia, and Vietnam despite limited natural resources.
Emerging/Developing Economies – India
Population: Approximately 1.3 billion, facing various political and economic challenges.
Multinational Attraction: Many Indian nationals are English-speaking, educated, and have advanced IT skills, making India attractive to U.S. and British firms.
GDP Growth: Among the highest globally, signaling potential for international investments.
Developing Economies on the Verge – South America
Economic Challenges: South America faces heavy foreign debt and severe inflation; notably affecting countries like Brazil, Chile, and Argentina.
FDI in Brazil: Although struggling, Brazil's long-term perspectives remain positive.
Chile’s Economy: Recognized for stability and a strong market-based model.
Argentina: Experienced a currency crash in 2018, which resulted in a significant IMF loan.
Intercountry Trade: Notable growth initiated by a push toward free-market policies; South American countries are actively engaging with the U.S. and EU for trade agreements.
Developing Economies - Middle East and Central Asia
Emerging Characteristics: Countries like Israel, Iran, Turkey, and Central Asian republics vary in economic status, often influenced by oil wealth.
Recent Events: This region has been in the international spotlight due to wars and terrorism issues, necessitating an understanding of customs and management practices for those in international management.
Developing Economies – Africa
Resources vs. Poverty: Despite rich natural resources, many African nations remain economically underdeveloped and rely on international trade to generate income.
Diversity Challenges: Incredibly diverse populations (over 3,000 tribes and 1,000 languages) create significant operational challenges for businesses.
Political Instability: Common across many regions, it poses substantial risks for foreign investors.
Health Issues: Pervasive problems such as AIDS, malaria, and Ebola have historically hindered economic growth but recent decades show significant growth potential and dynamism in Africa.
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