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TRANSCRIPT
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Part One: Environmental
Foundation
International Management,5th ed.
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International Management,
5th ed.
Chapter One
Hodgetts and Luthans
Worldwide Developments
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REVIEW current trends in international investment and trade
EXAMINE the present economic status in the major regions of the global community
ANALYZE some of the major developments and issues in various regions of the world
Objectives of the Chapter
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Introduction
International Management The process of applying management concepts and
techniques in a multinational environment
Multinational Corporation (MNC) Operates in more than one country Sells its products in international markets Managers and owners are of different nationalities
Must learn to work effectively with people from different countries
Small and medium-sized businesses are being affected by the trend toward internationalization
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Increasing Internationalization
Regional Developments North American Free Trade Agreement (NAFTA)
A free trade agreement between the U.S., Canada, and Mexico which has in essence removed all barriers to trade
May expand to include Latin American countries European Union (EU)
Consists of 15 countries Most trade barriers have been removed Euro is the common currency
Pacific Rim Japan and China are the dominant economies Association of Southeast Asian Nations (ASEAN)
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Increasing Internationalization (cont.)
International Investment and Trade Foreign direct investment (FDI)
The amount invested in another country Approximately 80% of all international investments come
from developed countries International trade has increased substantially over the
last two decades Percentage of world trade accounted for by the three major
trading blocs has remained fairly consistent Groups’ share of imports and exports remains in the range of 55
- 59 percent
MNCs buy domestic companies rather than trying to export products to that country
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Table 1-1FDI in the U.S., 1998-1999*
1998 1999All Countries 793,748 986,668
Canada 74,143 79,716
Europe 528,601 685,845 United Kingdom 143,165 183,145
Germany 94,404 111,138 France 58,051 77,622
South and Central America 9,819 10,606
Other Western Hemisphere 18,034 33,984
Africa 882 1,545
Middle East 6,346 7,087
Asia and Pacific 155,943 167,884 Japan 134,590 148,947
* in millions of dollars
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Table 1-2FDI by the U.S., 1998-1999*
1998 1999All Countries 1,104,012 1,132,622
Canada 101,871 111,707
Europe 528,113 581,791 United Kingdom 192,663 213,070
Germany 46,405 49,617
France 42,064 39,984
South and Central America 74,254 74,839
Other Western Hemisphere 68,459 77,569
Africa 14,241 15,062
Middle East 10,632 11,137
Asia and Pacific 155,364 185,912 Japan 35,633 47,786
* in millions of dollars
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Table 1-4Top 10 trading Partners of the U.S.: 1999
* in millions of dollars
Importing U.S. Exporting U.S.Rank Country Exports* Rank Country Imports* 1 Canada 166,600.0 1 Canada 198,711.1 2 Mexico 86,908.9 2 Japan 130,863.9 3 Japan 57,465.7 3 Mexico 109,720.5 4 U.K. 38,407.1 4 China 81,788.2 5 Germany 26,800.2 5 Germany 55,228.4 6 South Korea 22,958.4 6 U.K. 39,237.2 7 Netherlands 19,436.6 7 Taiwan 35,204.4 8 Taiwan 19,131.4 8 South Korea 31,178.6 9 France 18,877.4 9 France 26,708.6 10 Singapore 16,247.3 10 Italy 22,356.5
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Economic Status and Issues of the Major Regions
North America NAFTA has resulted in:
Elimination of tariffs as well as import and export quotas Opening of government procurement markets to companies in
partner countries Increased opportunity to make investments in partner countries Increased ease of travel between partner countries Removal of restrictions on agricultural products, auto parts,
and energy goods
United States U.S. MNCs have holdings throughout the world Foreign MNCs find U.S. to be a lucrative market
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Economic Status and Issues of the Major Regions (cont.)
North America (cont.) Canada
U.S.’s largest trading partner Legal and business environments similar to those of the U.S. Target of increased international investment
Mexico Economic fortunes have varied in the recent past Maquiladora industry
Arrangement created by the government that permits the flow of materials and products in and out of Mexico with only the value added being taxed
Different views about effect on American jobs Mexican firms expanding worldwide operations
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Economic Status and Issues of the Major Regions (cont.)
South America Countries have experienced difficult economic
problems Brazil
Attracted substantial foreign investment Economic future still uncertain
Chile Economic success story in South America Future still uncertain
Mercosur and Andean Common Market promote economic and social integration and cooperation
Countries increasingly looking to trade with the U.S.
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Economic Status and Issues of the Major Regions (cont.)
Europe Privatization of traditionally nationalized industries EU
intended eliminate all trade barriers among member countries EU-based firms “plan globally, act locally” To gain a foothold in the EU, foreign MNCs have:
created acquisitions and alliances begun co-operative research and development programs
European Research Cooperation Agency (Eureka) EU agency that funds projects in a number of fields to make
Europe more productive and competitive in the world market Future challenge is the absorption of formerly communist
Eastern neighbors
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Economic Status and Issues of the Major Regions (cont.)
Europe (cont.) Central and Eastern Europe
Collapse of the Soviet Union in 1991 Glasnost (openness) Perestroika (economic and political restructuring)
Russia Undergone economic reform Many attempts to stimulate the economy Greater privatization required Criminal activity increasing
Czech Republic, Hungary, and Poland Former communist countries that have become most visible in
international arena Some former communist countries are struggling
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Economic Status and Issues of the Major Regions (cont.)
Asia Japan
Economic success in the 1970s and 1980s attributed to: Cultural values Ministry of International Trade and Industry (MITI)
Government agency that identifies and ranks national commercial pursuits
Guides the distribution of national resources to meet these goals
Keiretsus Organizational arrangement in which a large group of
vertically integrated companies are bound together by cross-ownership, interlocking directorates, and social ties provide goods and services
Severe recession during the past ten years Target for foreign investment
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Economic Status and Issues of the Major Regions (cont.)
Asia (cont.) China
Large reported annual growth in GDP Attracts substantial foreign investment Remains a political risk for investors MNCs find it difficult to do business in China
The Four Tigers South Korea
Chaebols Large,family-held conglomerates that have considerable
political and economic power Hit hardest by Southeast Asia economic crisis
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Economic Status and Issues of the Major Regions (cont.)
Asia (cont.) The Four Tigers (cont)
Hong Kong Headquarters for successful multinational operations in Asia Uncertainty regarding governance issues due to subservience to
China Singapore
Leader and financial center of Southeast Asia One of the most competitive nations
Taiwan Economy dominated by technologically sophisticated industries Uncertainty due to designs on the country by China
Southeast Asian Countries ‘Baby Tigers’ lack the economic prowess of the Four Tigers
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Table 1-6World’s Most Competitive Nations: 2000 Rank
United States 1Singapore 2Finland 3
Netherlands 4Switzerland 5Luxembourg 6Ireland 7
Germany 8Sweden 9
Iceland 10Canada 11
Denmark 12Australia 13
Hong Kong 14United Kingdom 15
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Characteristics of Less Developed Countries
LessDevelopedCountries
LowGDP
Highinternational
debt
Slow (ornegative) GDP
growth percapita
Largepopulation
Highunemployment
Inexpensiveunskilled orsemi-skilled
labor
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Economic Status and Issues of the Major Regions (cont.)
Less Developed Countries (LDCs) India
Steady economic growth in the past few years Attractive to investment by MNCs
Middle East and Central Asia Oil reserves are an attractive economic asset Balance geopolitical, religious forces with economic viability Organization of Petroleum Exporting Countries (OPEC)
Africa International trade not a major source of income Sub-Saharan nations troubled by tribal warfare, disease, poverty,
and starvation