The Global Environment Globalization and the International Management
The Global Environment Globalization and the International Management Environment Mark Mc. Kenna BUS 162 (6), International and Comparative Management San Jose State University Chapters 1 and 2, Hodgetts, Luthans and Doh, International Management: Culture, Strategy and Behavior , 6 th edition (New York: Mc. Graw-Hill Irwin, 2006) Adapted from Power. Point slides by R. Dennis Middlemist, Professor of Management, Colorado State University
OVERVIEW 1. International Management and Globalization 2. What is Globalization? 3. Environmental Forces
International Management and Globalization What is 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” (HLD, p. 6) Why is globalization important? ◦ International management is rapidly gaining in importance in tandem with the quickening pace of globalization
WHAT IS GLOBALIZATION? 1. Definitions 2. Roots of Globalization 3. Convergence or Divergence
Globalization: Definitions Hodgetts, Luthans and Doh, ◦ Globalization is “the process of social, political, economic, cultural, and technological integration among countries around the world” (p. 7) Robertson (Globalization: Social Theory and Global Culture, 1992), ◦ Globalization in its most allembracing form “refers to both the compression of the world and the intensification of consciousness of the world as a whole” (p. 8)
The Roots of Globalization �When did globalization begin? ◦ Ancient trade routes – barter trade ◦ Standard weights and measures ◦ Mercantilism – the highways of the sea ◦ Post WWII – institutions of global governance ◦ Past 1980 s – ICT, globalization defined �Hodgetts, Luthans, and Doh, ◦ “Contemporary globalization is a new branch of a very old tree whose roots were planted in antiquity” (p. 8)
Convergence or Divergence Political Systems Technology Economic Systems Information Systems Belief Systems Culture
ENVIRONMENTAL FORCES 1. Economic environment 2. Political environmental 3. Legal/regulatory environment 4. Socio-cultural environment 5. Technological environment
Economic Environment �Global and regional integration ◦ International agreements (GATT, WTO) ◦ Regional agreements (EU, ASEAN, NAFTA, CAFTA, FTAA, Mercosur) �World trade and investment ◦ 80% of FDI contributed by developed economies ◦ U. S. exports/imports increased by 550% from 1983 to 2003 (to $1. 3 and $1. 8 trillion) ◦ Trade within the EU increased sharply, to > $2 trillion annually
Political Environment �Rapid ◦ ◦ and uncertain change China’s transition to a market economy European expansion and integration Russia’s unstable political institutions The emergence of political Islam in the Middle East �Significant differences across countries ◦ Less stable governments increase political risk ◦ Uncertain responses to democratization �Change in government policies ◦ Adjusting to adjust to new perspectives and changing requirements ◦ Assessing political risks (Chapter 10)
Legal/Regulatory Environment �Complex and confusing ◦ MNCs must �Conform to national laws and standards �Abide by the laws of their own countries �Be aware of international treaties and obligations ◦ Differences in regulatory regimes �Increase transaction costs �Restrict and distort trade �Can result in retaliatory practices or sanctions �Four main legal traditions �Common law �Civil law �Islamic law (theocratic law) �Socialist law
Socio-Cultural Environment �Ethics ◦ ◦ and social responsibility (Chapter 3) Business practices Labor standards and workers rights Corporate governance Intellectual property rights �Values and culture (Part II) ◦ Responses to authority ◦ Individual vs. group recognition and responsibility ◦ Balance of work and family obligations ◦ Managing and resolving conflict
Technological Environment �Changing at “lightning speed” �Internet and telecommunications ◦ Increasing bandwidth/high-speed access ◦ Reduced costs of entry/leapfrogging �E-business ◦ Customization (“the long end of the tail”) ◦ E-retailing and financial services �Movement of money across borders �“E-cash” – a currency without a country �Outsourcing and offshoring ◦ Information as a commodity ◦ The 24 -hour office – increased productivity/lower cost
THE PROS AND CONS OF GLOBALIZATION 1. Where do you stand? 2. Key themes to consider a. Impact on Labor b. Impact on Equality c. Impact on Government d. Impact on the Environment e. Impact on Culture and Community
Impact on Labor Positive effects Increased job opportunities Upgraded education system Increased training Negative effects Job displacement Loss of industries or economic groups Lowered labor standards Downward wage pressure Decreased union power Diminished social contract
Impact on Equality Positive effects Increased income / reduced poverty Increased wages for education or technically skilled Improved economic conditions Rich become richer Greater access to goods Lower cost of goods Increased food supply (in some countries) Negative effects Greater disparity between haves and have-nots within and across countries Some downward pressure on wages for the poorly educated or unskilled Worsened economic conditions in marginalized countries Poor become poorer
Impact on Government Positive effects Increased economic development Expanded infrastructure Transfer of modern management techniques Greater interdependence among business partners Negative effects MNC power increased MNCs externalize cost to countries Competition results in too many concessions MNCs influence local policies Companies incorporate in low tax countries Pressure to reduce social benefits
Impact on the Environment �Positive effects �More efficient use of resources �Increased demand for and transfer of more efficient technologies �Increased incomes lead to greater concern for environmental protection �Negative effects �Increased consumption �Advertising creates artificial needs �Greater use of fossil fuels (increased travel) �Increased surplus and scarcity �Increased degradation from unregulated businesses �More factories require more infrastructure
Impact on Culture/Community Positive effects Increased cultural exposure and understanding Closer cross-border ties Negative effects More mobility disrupts social life, particularly in remote or rural communities Disintegration of local communities Cultural homogenization and monoculture / reduced cultural diversity
Globalization: Pros and Cons �Globalization as “moral conflict” �Impacts of Globalization ◦ Increases economic interdependence ◦ Creates winners and losers �Implications of the debate ◦ For academics �Need for more objective research �Need to question assumptions and be open to alternatives ◦ For companies �Be aware of multiple stakeholder interests �Follow the guidelines of the UN Global Compact �Consider the “triple bottom line”
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