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ch 1 IM
Terms in this set (36)
The formulation of strategies and management systems to take advantage of international opportunities and respond to international threats
A ______ _______ is any company that engages in business functions beyond its domestic borders.
Such companies may be large or small.
Most multinational companies (MNCs) are multinational corporations.
The largest MNCs are all public corporations.
the world's economies are becoming borderless and interlinked.
Companies are no longer limited by their domestic boundaries and may conduct any kind of business activity anywhere in the world.
_______ creates a changing, but not uniform, and not always stable, environment for business.
Negatives of globalization
Not all economies benefit or participate equally.
Terrorism, wars, and economic stagnation have limited or reversed some aspects of globalization.
Globalization produces a scarcity of natural resources, pollution, negative social impacts, and increased interdependence of economies.
Globalization may be widening the gap between rich and poor countries.
Benefits of globalization
Globalization results in lower prices in many countries, as multinationals become more efficient.
Globalization benefits many emerging markets such as India and China, as these countries enjoy greater availability of jobs and better access to technology.
Globalization is the main reason why many new companies from Mexico, Brazil, China, India, and South Korea are the new dominant competitors.
7 key trends of the globalizing economy
Falling, disintegrating borders
Growing cross-border trade and investment
The rise of global products and global customers
The internet and information technology (IT)
Privatizations of formerly government-owned firms
New competitors in the world market
Increased global quality and production standards
(the Arrived) have mature economies with substantial per capita Gross Domestic Product (GDP), international trade and investments.
E.g., the United States of America, Britain, Japan, Germany, and many others
are countries that have changed from mostly communist systems to market/capitalistic systems.
E.g., the Czech Republic, Hungary, Poland, Russia
are those countries whose economies are growing rapidly.
E.g., Brazil, Russia, India, & China (BRIC)
Disintegrating Borders: The World Trade Organization and Free Trade Areas
In 1947, nations met to reduce tariffs from 45% to less than 7%; these negotiations resulted in the General Agreement on Tariffs and Trade (GATT).
In 1986, negotiations began in Uruguay to continue reducing tariffs. The World Trade Organization (WTO) succeeded GATT.
WTO provides structure for continued negotiations and settling trade disputes among nations.
World Trade Organization
In 1997, WTO countries agreed to end tariffs on software, computers and related products; hi-tech exports to Europe from Asia and the US doubled.
Since GATT, world trade has grown at more than four times the output of the world's GDP.
Some say WTO favors developed nations, encourages environmental damage, and moves jobs from higher-save countries to lower-wage countries.
Regional Trade Agreements
are agreements among nations to reduce tariffs and develop similar technical and economic standards.
The three largest account for half the world's trade:
-the European Union (EU)
-the North American Free Trade Association (NAFTA), and
-the Asia-Pacific Economic Cooperation (APEC)
The European Union
(28 European nations, and growing) allows free movement of goods and services and a common currency (EMU).
The North American Free Trade Agreement (NAFTA)
linking the US, Canada, and Mexico, allows the freer exchange of goods and services.
The Asia-Pacific-Economic Cooperation
(12 Asian nations) with goals for free trade by 2020.
Sell Anywhere, Locate Anywhere: Trade Growing, but Setbacks
World trade grew an average of 6.5% per year between 1990 and 2000, slowed to 4% in 2004, grew again to 6% in 2005 and to 8.5% in 2006.
WTO reports the global economy is suffering from a very severe slowdown.
EU countries are suffering the worst debt crisis they have ever faced.
Change in imports & exports higher for developing and emerging economies than for developed economies.
The latest WTO report suggests a few trends:
Emerging markets continue to grow dramatically.
Developing nations have played a more important role in international production networks known as Global Value Chains (GVC).
Commodities such as energy and minerals have doubled between 2003 and 2008.
The world has never been more connected.
Foreign Direct Investment (FDI)
occurs when a multinational company from one country has an ownership position in an organizational unit located in another country.
FDI increased by more than 36% from 1996 - 2000.
Since 2001, there has been a decline in FDI, but FDI grew to its highest level in 2007.
Emerging markets will continue to attract FDI.
Developing countries provide opportunities and risks.
MNCs should consider two types of risk:
includes all factors of a nation's economic climate that may affect a foreign investor.
MNCs should consider two types of risk:
anything a government might do or not do that might adversely affect a company.
The Internet and Information Technology Are Making It All Easier
Email and the internet allow multinationals to communicate with company sites throughout the world.
Text and graphic information can flow to any part of the world almost instantaneously.
Headquarters, R&D, manufacturing can be located anywhere in the world.
Information technology is spurring a borderless financial market.
Information technologies make available many new tools that facilitate business operations:
Worldwide communication using Voice-Over-Internet Protocol (VOIP) systems such as Skype, MSN Messenger and AOL is cost-effective.
Collaborative networks can be provided by WIKI firms at very low cost.
Information can be obtained by increasingly sophisticated search engines like Google.
Information technology presents multinationals with many new opportunities.
Developments in computing technology mean that the manufacturing sector will no longer see hammers, lathes, drills, and stamping presses.
One of the most significant recent technologies is the 3D printer.
The potential for the 3D printer to revolutionize multinational operations is tremendous.
The Rise of Global Products and Global Customers
The needs of customers for many products and services are growing more similar
E.g., McDonald's, Boeing, Toyota.
Global customers search the world for their supplies without regard for national boundaries.
These factors link economies because companies can produce one product for everyone, and anyone can buy anything from anywhere.
Two new forms of competitors are having dramatic influences on global business.
First, experts now recognize the existence of powerful emerging market competitors.
Secondly, companies worldwide will increasingly have to contend with formidable state competitors.
Emerging market multinationals:
Global companies born in emerging markets
These multinationals often have the tenacity to succeed at business challenges that developed world multinationals have avoided.
Multinationals from emerging markets that can rely on state support.
These enterprises have often been very successful while relying on state support.
When a product standard is accepted globally or regionally, companies can make one or only a few versions of a product for the world market rather than _______ .
Products are developed to accommodate different regional standards, such as electrical currents & plugs.
The company that can establish its standard as dominant has a tremendous strategic advantage.
The Rise of Global Standards
The drive for consistency in quality led to the International organization for standardization (ISO) in Geneva, Switzerland.
ISO developed technical standards known as ISO 9001:2000, adopted by law in Europe.
Many large European MNCs now require ISO certification.
Some MNCs are becoming more proactive in responding to social and ethical issues that arise from their overseas operations.
Some issues are:
Environmental degradation and pollution
Sweatshop conditions for labor
The successful Multinational Manager needs these characteristics:
A global mindset
A long-range perspective
The talent to motivate all employees to achieve excellence
Accomplished negotiation skills
A willingness to seek overseas assignments
An understanding of national cultures
Research suggests that you need three forms of capital to become a successful international leader.
willingness to learn and build you knowledge base regarding cultural differences and how to adapt to such differences.
Ability to be receptive to new ideas and experiences.
Ability to develop networks of individuals who are different from you.
Multinational Management: A Strategic Approach
You may well find yourself a multinational manager; foreign competition and doing business in foreign markets are daily facts of life for today's managers.
Competing successfully requires a strategic approach; formulate and implement your strategy.
Multinational strategies must include maneuvers that deal with operating in more than one country and culture.
Position yourself for an evolving global economy.
Multinational Management: A Strategic Approach
In formulating your strategy, consider the trends that will shape the future business environment:
-Blurring of industry boundaries
-The need for flexibility more than size
-The need to find your niche
-Emphasis on innovation and the learning organization
THIS SET IS OFTEN IN FOLDERS WITH...
International MGT ch 2
International MGT ch 3
ch 4 IM
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