Text Book Deresky, H. (2011, 2008): International Managing Across Borders and Cultures (6th/7th ed.). Pearson Prentice- Hall. The final grading (= Endnote) is based on the following: 1. 10% - Class Participation/Mündliche Mitarbeit 2. 60% - Presentation - - part I 30% during 3rd & 4th week, - part II presentation 3. 30% - Final Report/ Abschlussbericht TOTAL: 100% Both presentations and the final report are intended to be teambased work. The final presentation and the final report is around case studies, which are going to be handed out to the teams on 30.05.
Time Plan Schedule block seminar / Neuer Ablauf Blockseminar Monday mornings 09:15-17:00 h #1 Fri.23.05 #2 Fri 30.05. #3 Fri 06.06. part I Country Briefing Presentation #4 Fri 13.06. part I Country Briefing Presentation #5 - Q&A - Fri 17.06 (9:00-13:00h) Final seminar for presentation of semester project: #6 Fri 20.06. - Part II Case Studies Due Day for handing in the written project report MO 20.07.
Chapter 1: Assessing the Environment: Political, Economic, Legal, Technological PowerPoint by Hettie A. Richardson Louisiana State University 2008 Pearson Prentice Hall 1-2
Chapter 1 Learning Objectives 1. Understand the global business environment and how it affects the strategic and operational decisions which managers must make. 2. Critically assess the developments, advantages, and disadvantages of globalization. 3. Develop an appreciation for the ways in which political, economic, legal, and technological factors and changes impact the opportunities that companies face. 4. Review the role of technology in international business.
Economic Crisis Spreads Through Financial Globalization 1-3 What caused the global economy to collapse? Toxic Assets: Highly leveraged securities Subprime mortgage mess Finance has become one of the most international of industries Failure of banks and other financial institutes: American Fannie Mae & Freddie Mac American Lehman Brothers Hypo Real Estate Holding France's Societe Generale bank (> $7 billion fraud) And many more
What is International Management? The process of developing strategies, designing and operating systems, and working with people around the world to ensure sustained competitive advantage 1-5 Copyright 2011 Pearson Education, Inc. publishing as Prentice Hall
What is Globalism? Global competition characterized by networks of international linkages that bind countries, institutions, and people in an interdependent global economy 2008 Pearson Prentice Hall
Challenges to Globalism Backlash against capitalism and rekindling of nationalism Increased protectionism of high-demand resources Need to develop top managers with international understanding and experience 1-7 Copyright 2011 Pearson Education, Inc. publishing as Prentice Hall
Benefits of Globalism Access to more markets Growth of developing economies Opportunities for flexibility and efficiency Opportunities for small and medium-sized enterprises (SMEs) 1-8 Copyright 2011 Pearson Education, Inc. publishing as Prentice Hall
Regional Trading Blocks The dominance of the United States is already over. What is emerging is a world economy of blocs represented by: NAFTA, EU, and ASEAN. Much of today s world trade takes place within these three regional free-trade blocs: Western Europe, Asia, and the Americas Much of today s world trade are grouped around three dominant currencies: euro, yen, and the dollar
Regional Trading Blocs Much of today s world trade takes place within three regional free-trade blocs: Western Europe Asia The Americas
The European Union A unified market of over 400 million people in 27 nations Two challenges for global managers: Fortress Europe Dealing with multiple cultures within this unified market
Asia China India ASEAN South Asia Association of Regional Cooperation (SAARC) Japan Asian Tigers: Hong Kong Singapore South Korea Taiwan 1-13 Copyright 2011 Pearson Education, Inc. publishing as Prentice Hall
The Americas North American Free Trade Agreement (NAFTA) Central American Free Trade Agreement (CAFTA) Free Trade Area of the Americas (FTAA)
Other Regions of the World The Russian Federation Less Developed Countries (LDCs) Low gross national product (GDP) Low per capita income Large, relatively unskilled populations High international debt
Comparative Management in Focus: China Keeps on Chugging The fastest growing GDP rate (over 9 percent/year) for 30 years Economy has doubled every eight years for 30 years Surpassed Germany in 2009 as the world s largest exporter Investing heavily in energy and other natural resources in 2009 that could give it an economic advantage it has never had before However: Weakening demand for Chinese exports due to global recession Chinese government may not be able to prevent the financial crisis from derailing the country s economic miracle The political, legal, and social environments create unpredictability for businesses 1-16 Copyright 2011 Pearson Education, Inc. publishing as Prentice Hall
Results of India s Opening Economy Increased Indian and foreign investment A growing middle-class Increased productivity and profits A growing reputation for service outsourcing and exporting
Information Technology: Affecting the Management Agenda Making geographic barriers less relevant Lowering cultural barriers Encouraging convergence of consumers tastes and preferences
Technology Trend Manufacturing The third industrial revolution The digitization of manufacturing will transform the way goods are made and change the politics of jobs too http://www.economist.com/node/21553017 Video - http://www.economist.com/
The Globalization of Human Capital The offshoring of manufacturing jobs and outsourcing of white-collar jobs is increasing It has been estimated that 3.3 million US jobs will be lost in service-sector outsourcing by 2015
The Political and Economic Environment Sustainability economic, political, social, and environmental has become a significant worldwide issue Ethnicity a driving force behind political instability around the world Religion religious disputes lie at the heart of regional instabilities: former Yugoslavia, Northern Island, the Middle East
Political Risk Any governmental action or politically motivated event that could adversely affect the long-run profitability or value of a firm Example: Venezuela recently forced oil companies to accept a minority stake in fields they owned and to pay more in taxes and royalties
Common Political Risk Events Expropriation and confiscation Nationalization Terrorism Macropolitical risk vs. micropolitical risk
Political Risk Assessment Helps companies manage exposure to risk and minimize financial loss Two forms: Consultation with experts Development of internal staff capabilities
Other Techniques for Managing Political Risk Computer Modeling Example: American Can s PRISM Ranking systems Early warning systems
Managing Political Risk Avoidance and Adaptation Equity sharing Participating management Localization of the operation Development assistance Dependency and Hedging Input control Market control Position control Staged contribution Political risk insurance (OPIC and FCIA) Local debt financing
Examples of Managing Terrorism Risk IBM and Exxon try to develop benevolent images and maintain low profiles Using teams to monitor terrorist activities Hiring counterterrorism consultants
Economic Risk Is closely related to political risk Is determined by a country s ability or intention to meet its financial obligations
Economic Risk in LDCs LDCs (Less developed countries) tend to pose more risk than developed countries For example, expectations that Argentina s economy would shrink by 15% in 2002 negatively affected foreign firms doing business there
Types of Economic Risk Loss of profitability due to abrupt changes in monetary and fiscal policies Loss of profitability due to changes in foreign investment policies Example: Devaluation of Yen/RMB in 1990s
Four Approaches to Assessing Economic Risk Quantitative Approach Qualitative Approach Checklist Approach A combination of these methods
Assessing Economic Risk The Big Mac index (Jan 12th 2012, The Economist online) http://www.economist.com/blogs/graphicdetail/2012/01/daily-chart-3
The Legal Environment Consists of the local laws and legal systems of those countries in which an international company operates and of international law, which governs relationships between sovereign countries
The Legal Environment Type of Legal Systems Common law Civil law Islamic law Approaches to Contract Law Common law: details must be written in the contract to be enforced Civil law: assumes promises will be enforced without specifying the details In Asia the contract may be in the relationship, not on the paper
Other Regulatory Issues Protectionist policies, such as tariffs or quotas The attractiveness of the tax system The level of government involvement in the economic and regulatory environment
Risks and Issues in the Technological Environment The appropriability of technology The International Convention for the Protection of Industrial Property (the Paris Union)
More Issues and Risks in the Technological Environment Inappropriate use of technology by others Appropriateness of technology for the local environment
Issues in Global E-Business E-business - the integration of systems, processes, organizations, value chains,, and entire markets using Internetbased and related technologies and concepts to conduct businesses E-commerce - marketing and sales processes via the internet B2B (business-to-business) B2C (business-to-customer)
The world connected
1 st Presentation Assignment Assessing the environment (political, economical, legal and technological conditions for foreign investment): Based on Exhibit 1-4, pp. 26, develop a country environmen assessing presentation for 20 30 minutes. Additional topics to be addressed in the presentation: Are risk alone adequate criteria for foreign investment? How likely is it that the profile of the country you have chosen will be the same next year? Over the next five years? Could you envision other criteria that might also be important?