International Business - Chapter 5: The Global Environment

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"International Business - Chapter 5: The Global Environment" describe the nature of international business, including its meaning, recent trends, the management of globalization, and competition in a global environment; discuss the structure of the global economy and how it affects international management;...

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Nội dung Text: International Business - Chapter 5: The Global Environment

CHAPTER 5 The Global Environment PowerPoint Presentation by Charlie Cook Copyright © by Houghton Mifflin Company. All rights reserved.
Learning Objectives After studying this chapter, you should be able to: – Describe the nature of international business, including its meaning, recent trends, the management of globalization, and competition in a global environment. – Discuss the structure of the global economy and how it affects international management. – Identify and discuss the environmental challenges inherent in international management. – Describe the basic issues involved in competing in a global economy, including organization size and the management challenges in a global economy. Copyright © by Houghton Mifflin Company. All rights reserved. 5–2
Chapter Outline • The Nature of International • Environmental Challenges Business of International – The Meaning of International Management Business – The Economic Environment – Trends in International – The Political/Legal Business Environment – Managing the Process of – The Cultural Environment Globalization – Competing in a Global • Competing in a Global Environment Economy • The Structure of the Global – Globalization and Organizational Size Economy – Management Challenges in a – Mature Market Economies and Global Economy Systems – High Potential/High Growth Economies Copyright © by Houghton Mifflin – Other Economies Company. All rights reserved. 5–3
Levels of International Business Activity Lowest Level of International Activity Highest Domestic International Multinational Global business business business business Copyright © by Houghton Mifflin Figure 5.1 Company. All rights reserved. 5–4
The Meaning of International Business • Domestic Business – acquires all of its resources and sells all of its products or services within a single country. • International Business – is primarily based in a single country yet acquires a meaningful share of its resources and/or revenues from other countries. • Multinational Business – transcends national boundaries and buys raw materials, borrows money, and manufactures and sells its products in a world-wide marketplace. • Global Business – Copyright © by Houghton Mifflin and is not committed to a transcends national boundaries single home country. Company. All rights reserved. 5–5
Trends in International Business • Economic Recovery – Industrialized nations in Europe and Asia have rebuilt their economic systems that were devastated in WWII. • Decreasing Isolation from Foreign Competition – U.S. consumer goods markets are open to overseas competitors. • Increasing Globalization of World Markets – Volume of international trade has increased more than 3,000% from 1960 to 2000. Copyright © by Houghton Mifflin Company. All rights reserved. 5–6
Managing The Process of Globalization • Exporting – Making a product in the firm’s domestic market and selling it in another country. • Importing – Bringing a good, service, or capital into a home country from abroad. – Advantages are small cash outlay, little exchange risk, and no adaptation of product or service is necessary. – Disadvantages are tariffs and taxes imposed on cross-border goods, high transportation costs to/from distant markets, and governmental restrictions and regulations. Copyright © by Houghton Mifflin Company. All rights reserved. 5–7
Managing The Process of Globalization (cont’d) • Licensing – Advantages are increased profitability from licensing without additional capital requirements, lower operational costs in foreign markets, and extended profitability from existing technologies. – Disadvantages are inflexibility in the licensing arrangement, loss of profits from licensee failure, and licensing possibly helps competitors learn to compete. • Strategic Alliance and Joint Ventures – Advantages are quick market entry, access to materials and technology, and reduced risk. – Disadvantage is that shared ownership limits control and profitability. Copyright © by Houghton Mifflin Company. All rights reserved. 5–8
Managing The Process of Globalization (cont’d) • Direct Investment – Advantages are enhanced operational control, it allows use of existing infrastructure, and no adaptation of in-country product or service is necessary. – Disadvantages are complexity in managing a foreign operation, greater economic- and political-risk exposure, and greater uncertainty of business risk. – Maquiladoras are light-assembly plants built in northern Mexico close to the U.S. border which are given special tax breaks by the Mexican government. Copyright © by Houghton Mifflin Company. All rights reserved. 5–9
Advantages and Disadvantages of Different Approaches to Internationalization Approaches to Internationalization Advantages Disadvantages Importing or 1. Small cash outlay 1. Tariffs and taxes Exporting 2. Little risk 2. High transportation costs 3. No adaptation necessary 3. Government restrictions Licensing 1. Increased profitability 1. Inflexibility 2. Extended profitability 2. Helps competitors Strategic Alliance/ 1. Quick market entry 1. Shared ownership (limits Joint Venture 2. Access to materials and technology control and profits) Direct Investment 1. Enhances control 1. Complexity 2. Existing infrastructure 2. Greater economic and political risk 3. Greater uncertainty Copyright © by Houghton Mifflin Table 5.1 Company. All rights reserved. 5–10
The Structure of the Global Economy • Market Economies and Systems – Based on the private ownership of business and allows market factors such as supply and demand to determine business strategy. – Characteristics are a mature economy, well-developed infrastructures, and individual wealth. • Market Systems – Clusters of countries that engage in high levels of trade with each other through the elimination of trade barriers such as quotas and tariffs. – North American Free Trade Agreement (NAFTA) covering the United States, Mexico, and Canada. – European Union (EU) of western European countries. – Pacific Asia countries in Southeast Asia. Copyright © by Houghton Mifflin Company. All rights reserved. 5–11
The Global Economy • The global economy is dominated by three relatively mature market systems Copyright © by Houghton Mifflin Figure 5.2 Company. All rights reserved. 5–12
Market Economies and Systems • High Potential/High Growth Economies – Characteristics are underdeveloped and immature markets, weak industrial base, weak currency, and poor consumers. – People’s Republic of China, India, Vietnam, Brazil, Russia. – Challenges to market development: • The need for large investments in distribution systems. • The need to educate/train consumers in product usage. • A lack of infrastructure for support operations. • Unfavorable policy changes affecting investments. Copyright © by Houghton Mifflin Company. All rights reserved. 5–13
Market Economies and Systems (cont’d) • Other Economies – Some economies defy classification due to their possession of critical and valuable resources (e.g., oil-producing countries) or other social or political factors which distort their internal economies and markets. – Challenges of other economies • Political instability • Cultural differences • Ethnic violence Copyright © by Houghton Mifflin Company. All rights reserved. 5–14
Environmental Challenges of International Management Political/Legal Economic Cultural Environment Environment Environment • Government stability • Economic system • Values, symbols, beliefs, • Incentives for • Natural resources and language international trade • Infrastructure • Individual differences • Controls on international across cultures trade • Economic communities International management functions Copyright © by Houghton Mifflin Figure 5.3 Company. All rights reserved. 5–15
Controls on International Management • Key Concepts – Tariffs are collected on goods shipped across national boundaries. – Quotas are limits placed on the number or value of goods that can be traded as exports or imports. – Export restraint agreements are voluntary limits on the volume or value of goods exported to or imported from another country. Copyright © by Houghton Mifflin Company. All rights reserved. 5–16
The Cultural Environment • Language – In Japanese the word “hai” can mean either “yes” or “I understand.” – General Motors’ brand name “Nova” when “va” is pronounced “ba” as “no va” in Spanish means “doesn’t go.” • The Meaning of Colors – Green is popular in Muslim countries, yet it signifies death in other countries. – Pink is associated with feminine characteristics in the U.S.; yellow is the most feminine color in other countries. Copyright © by Houghton Mifflin Company. All rights reserved. 5–17
Individual Behaviors Across Cultures Social Individualism Orientation Collectivism Relative importance The interests of of the interests of The interests of the individual take the individual vs. the group take precedence the interests of precedence the group Power Tolerance Power Respect Power Orientation Individuals assess Authority is inherent authority in view of The appropriateness its perceived right- in one’s position of power/authority ness or their own within a hierarchy within organi- personal interests zations Copyright © by Houghton Mifflin Source: Adapted from R. W. Griffin,/M. Pustay, International Business, (figure 14.1, page 479) © 1996 Addison Wesley Longman. Reprinted by permission of Addison Wesley Longman. Figure 5.4 Company. All rights reserved. 5–18
Individual Behaviors Across Cultures (cont’d) Uncertainty Uncertainty Uncertainty Acceptance Orientation Avoidance Positive response An emotional Prefer structure to change and new response to and a consistent opportunities uncertainty and routine change Goal Passive Goal Aggressive Goal Orientation Behavior Behavior What motivates Value social Value material people to achieve relevance, quality possessions, money, different goals of life, and the and assertiveness welfare of others Copyright © by Houghton Mifflin Source: Adapted from R. W. Griffin,/M. Pustay, International Business, (figure 14.1, page 479) © 1996 Addison Wesley Longman. Reprinted by permission of Addison Wesley Longman. Figure 5.4 Company. All rights reserved. 5–19
Individual Behaviors Across Cultures (cont’d) Time Long-Term Orientation Short-Term Outlook The extent to which Outlook Value dedication, members of a culture Place less emphasis hard work, and adopt a long-term or a on hard work self-image short-term outlook on work and life Copyright © by Houghton Mifflin Source: Adapted from R. W. Griffin,/M. Pustay, International Business, (figure 14.1, page 479) © 1996 Addison Wesley Longman. Reprinted by permission of Addison Wesley Longman. Figure 5.4 Company. All rights reserved. 5–20