The Global Environment

OVERVIEW
1.

International Management and Globalization What is Globalization? Environmental Forces BREAK Class Debate: The Pros and Cons of Globalization Implications for Managers

2. 3.

4.

5.

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

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.
3. 4. 5.

Roots of Globalization
Drivers of Globalization Globalization from a Regional Perspective 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

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

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

Hodgetts, Luthans, and Doh,

Contemporary globalization is a new branch of a very old tree whose roots were planted in antiquity

The Drivers of Globalization

What drives globalization?

Individual and social needs and aspirations Technological innovation Reduced technological and economic barriers to trade

Sustaining forces

Greater policy liberalization Greater efficiency of business Greater market access Increased flows of goods, services, and people

Search for competitive advantage

Development of new technologies

Reduced barriers to trade

Developing and Emerging Economies (1)

Economic characteristics
Low per capita GDP, low (or negative) GDP growth High unemployment - semiskilled or unskilled workforce Considerable government intervention in the economy Political instability, weak infrastructure, corruption

LDCs in Asia and Latin America

Include important regional economic powers (e.g. China, India, Indonesia, Brazil, Argentina) Generally well integrated into the global economy

Convergence or Divergence
Political Systems

Technology

Economic Systems

Information Systems

Belief Systems

Culture

ENVIRONMENTAL FORCES
1. 2. 3. 4.

Economic environment Political environmental Legal/regulatory environment Socio-cultural environment

5.

Technological environment

Economic Environment

Global and regional integration

International agreements (GATT, WTO) Regional agreements (EU, ASEAN, NAFTA)

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

Chinas transition to a market economy European expansion and integration Russias unstable political institutions The emergence of political Islam in the Middle East

Significant differences across countries Change in government policies

Less stable governments increase political risk Uncertain responses to democratization Adjusting to adjust to new perspectives and changing requirements Assessing political risks

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.
2.

Where do you stand?

Key themes to consider
a. Impact on Labor

b.
c. d.

Impact on Equality
Impact on Government 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

Conclusion

Implications for Managers

Lifelong learning
the most valuable asset is the ability to learn how to learn (Thomas Friedman, The World is Flat)

Responsiveness
be alert for changes and quick to respond

Adaptability
knowing how to work with others being comfortable with uncertainty and ambiguity

Both a local and global perspective

see the big picture (global economy/whole organization) understand the details of operating at the local level

Questions or final comments