MGMT3001 International Management

Dr. Subra Ananthram, Curtin University

1-1 Copyright ©2014 Pearson Education

 Learning Goals
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. Discuss the complexities of the international
manager’s job.
4. Develop an appreciation for the ways in which
political, socio-economic, legal, and technological
factors and changes impact the opportunities that
companies face.
5. Review the role of technology in international
business.

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 Complex & Dynamic
Disappearing geo
Exchange of GSITP

Interdependence (N.Korea; Singapore)

http://www.swlearning.com/web_resources/images/global.jpg

Discussion Q: What is GLOBALISATION and what

1-3 constitutes the global environment? [R-I-S-K]?
 Opening Profile: Typical Challenges that
Managers Face in the 21st Century
 Political [RISK] and cultural (N&O)
differences
 Global competition [Monopoly? Ipad – diff to imitate
or Samsung?]
 Terrorism [online – News Corp, mobiles, moles,
NSA syping]
 Technology [e-learning]
 Finding ways to balance their social
responsibilities, their images, and their
competitive strategies
[PR Exercise?]

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 What is International Management?

IM is
unique…
The process of developing strategies,
across all designing and operating systems, and
disciplines
working with people around the world to
ensure sustained competitive advantage

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 What is Globalization?

Global competition characterized

by networks of international
linkages that bind countries,
institutions, and people in an
interdependent global economy

Samsung – Finished in Oz
Higher Education – eMBA
Airbus – 20 countries
SINGAPORE?

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 Challenges to Globalism

 Backlash against capitalism and rekindling of

China –
nationalism [outsourcing? Obama/Romney]
protects
India -  Unequal distribution of wealth
slowly
 Increased protectionism of high-demand resources
[Unobtanium]
 Increasing pressure and publicity for companies to
consider the social responsibility of their actions
 Need to develop top managers with international
understanding and experience

80% 65% 114k 2006

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Copyright ©2014 Pearson Education
 Benefits of Globalism and its Effects
on MNCs
 Global companies are becoming less tied to specific
locations and Access to more markets [McDonalds,
Walmart? – not just sales but resources, US Olympic team,
souvenirs] (sourcing, outsourcing, M&A, JV, FDI)
 Growth of developing economies [BRICs]
 Human capital development [most valuable resource]
 Opportunities for flexibility and efficiency [jv/sa + best
practices + EOS - outsourcing]
 Opportunities for small and medium-sized enterprises
(SMEs)

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 Regional Trading Blocks [Protection]

True
 The dominance of the United States is already
globalisation over.
or  What is emerging is a world economy of blocs
regionalisation
? 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

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 The European Union
EU
 A unified market over 400 million people living
in 27 nations [protectionist]
 Eliminate tariffs, customs, financial and
commercial barriers

 EU poses two challenges for global managers:

1. “Fortress” Europe
2. Dealing with multiple cultures within this unified
market

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 Asia (21st Century – Asian?)

 China
 India
 ASEAN
 South Asia Association of Regional Cooperation
(SAARC)
 Japan
 Asian Tigers:
 Hong Kong
 Singapore
 South Korea
 Taiwan

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 The Americas

 North American Free Trade Agreement (NAFTA)

[US, Canada, Mexico – tripled, 43 nations]

 Central America Free Trade Agreement (CAFTA)

[US and 5 Central American countries]

 MERCOSUR [Argentina, Brazil, Uruguay and

Paraguay + Venezuela 2012]

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 Other Regions in the World

 The Russian Federation

 Middle East
 The African Union—AU
 South Africa
 Less developed countries—LDCs
 Low Gross National Product (GNP)
 Low Gross Domestic Product (GDP)
 Large, relatively unskilled workforce
 High international debt

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 Comparative Management in Focus:
China helps prop up the Global Economy

 The fastest growing GDP rate (over 9 percent/year) for 30 years.

Guided capitalism
 Surpassed Germany in 2009 as the world’s largest exporter.
World is wary…
 Investing heavily in energy and other natural resources in 2009
Trillion $ reserves that could give it an economic advantage it has never had
Low price… before.
Manufacturing…  In March 2012 Chinese Premier Wen Jiabao announced only
7.5% growth for 2012.
Jintao – Human
Rights
 China is still a developing country with considerable
differences between rural and urban areas.
Bubble?
 State firms play a significant or dominant role.
However:
 Weakening demand for Chinese exports—due to global
recession government is targeting only 7.5% growth in 2012
 Chinese labor costs increasing, energy and shipping cost rising;
appreciating yuan
 The political, legal, and social environments create
unpredictability for businesses
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 Management Focus:
Intel Brings Changes to Vietnam’s Economy and Culture

 United States opened trade relations with Vietnam in

2000. [1b$ investment]
 Vietnam’s rapid growth can be contributed to those
aspects of globalization that attracts corporations such as
Intel. [cheap/skilled labour, IT skillsets, govt subsidies]
 Intel is taking advantage of new markets and lower costs
of production.
 Intel’s success started with awareness of the tight control
of the Vietnamese government. [Understanding PESTL]

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 Globalization of Information Technology

 The speed and accuracy of information transmission

Interdependence
Closer
are changing the nature of international manager’s
Revolution jobs
Social media?
 Making Geographic barriers less relevant [Amazon,
Indiaflorist, Webvan/Coles, Travel, Surgeries]
 Lowering cultural barriers by encouraging
convergence of consumers’ tastes and preferences
 Technology gets dispersed around the world by MNEs
 Explosive growth of information technology is both a
cause and effect of globalism

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 Globalization of Human Capital

 Increasing trend in the offshoring of

manufacturing jobs and outsourcing of white-
color jobs (Prediction that 3.3 million U.S. jobs
in service sector may be lost/outsourced by
2015)
 The Indian ITES sector has 700,000 jobs
worldwide and comprises 35% of BPO market
(Why? L+I+E)
 For global firms, winning the war for talent is a
pressing issue

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 The Global Manager’s Role

Is global
business
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RISKY?
 Political Risk

Any governmental action or politically motivated event that could

adversely affect the long-run profitability or value of a firm

Examples:
Venezuela took control of cement
plants and offices belonging to
Mexico, after failing to reach an
agreement in nationalization talks.
Bolivian president’s move to
nationalize the national gas
industry followed that in
Venezuela.

Hosni Mubarak – Egypt [social networking]

Gaddafi – Libya; Syria; unrest in the MEast. + US/Australian election

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© 2008 Pearson Prentice Hall http://jeffboulton.ca/BBB%204M1%20Map%20-%20Political%20Risk.JPG 1-20
 The Political Risk Cont.

Typical Political Risks Political Risk Assessment

 Expropriation and confiscation  Helps companies manage
 Nationalization exposure to risk and minimize
 Terrorism financial loss
 Macro-political risk event
(Iraq invaded Kuwait – 1990)
 Micro-political risk event  Two forms:
(creeping expropriation)
 Discriminatory treatment  Consultation with experts
 Barriers to repatriation of funds  Development of internal staff
 Interference in managerial capabilities
decision making
 Dishonesty by government
officials

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 Managing Political Risk
Avoidance and Adaptation
 Equity sharing [Disney HK]
 Participating management
 Localization of the operation
(trsfming subsidiary into
national firm - Citibank)
 Development assistance
[Microsoft]
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Dependency and Hedging
 Input control
 Market control
 Position control
 Staged contribution
 Political risk insurance (OPIC
and FCIA)
 Local debt financing
http://media.economist.com/images/ga/2007w40/Politics.jpg
South Korea: Voted Most Likely to be Stable

Global Political Risk

Index, Jan 2010
(Eurasia Group)
http://www.privateequitykorea.com/koreas-investment-environment/south-korea-voted-most-likely-to-be-stable

Slide sourced by Dr. Theodora Issa

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 Managing Terrorism Risk

 Develop a benevolent image (IBM and Exxon).

 Maintain a low profile and minimize publicity.

 Using teams to monitor terrorist activities

 Hiring counterterrorism consultants

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 Economic Risk

 Is closely related to political risk

 Is determined by a country’s ability or intention to meet

its financial obligations

Creditworthiness
Copyright ©2011 Pearson Education, Inc. publishing as
1-26 Prentice Hall
 Categories of Economic Risk

1. Loss of profitability due to abrupt changes in monetary

and fiscal policies
2. Loss of profitability due to changes in foreign
investment policies
3. Risk of currency exchange rate
 Example: devaluation of peso in 1990s

Copyright ©2011 Pearson Education, Inc. publishing as

1-27 Prentice Hall
 Managing the Economic Risk

Quantitative Qualitative
Approach Approach

Combination
Checklist
of these
Approach
Methods

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© 2008 Pearson Prentice Hall 1-29
30 Copyright ©2014 Pearson Education Slide sourced by Dr. Theodora Issa
31 Copyright ©2014 Pearson Education http://www.aon.com/terrorismmap/2014-Terrorism-Map.pdf
 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
 - India [jv is a must]
- UAE [local employment]

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 The Legal Environment

Approaches to Contract
Types of Legal Systems
Law
 Common law  Common law: details must be
written in the contract to be
enforced
 Civil law
 Civil law: assumes promises
will be enforced without
 Islamic law specifying the details

 In Asia the contract may be in

the relationship, not on the
paper

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 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

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 The Technological Environment

 The appropriability of technology

 The International Convention for the Protection of
Industrial Property (the Paris Union)
 Inappropriate use of technology by others
 Appropriateness of technology for the local environment

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 The Technological Environment

 The appropriability of technology

 The International Convention for the Protection of
Industrial Property (the Paris Union)
 Inappropriate use of technology by JVs, franchisees,
licensees, and employees
 Appropriateness of technology for the local environment

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 The Impact of the Information Technology

 Making Geographic barriers less relevant

 Both cause and effect of globalization
 Lowering cultural barriers
 Encouraging convergence of consumers’ tastes
and preferences
 However, China still monitors and limits
electronic information

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 Global E-Business

E-Business—the integration of systems, processes,

organizations, value chains, and entire markets using
Internet-based and related technologies and concepts

E-Commerce—marketing and sales process via the

internet

B2B—Business to Business (Example: Alibaba in China,

large proportion is SMEs)
B2C—Business to Customer (Example: Amazon.com)
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 Socio-cultural Environment
 Cultural barriers
 Communication and language barriers

Cross-cultural sensitivity? Imp COMPETENCY

http://www.toothpastefor dinner.c om/031706/culture-cl ash.gif

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 …the Global Environment?
 Dynamic
 Complex
 Unpredictable
 Risky

 ...important to understand PESTL environment

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 Managing in a Global Environment
 YAHOO – Case study

 http://www.youtube.com/watch?v=y7pd5sMORqo
1.25 mns onwards

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 Profile of the INDIAN manager
 Perception – he/she is god’s gift to the organisation
 Likes to prove himself/herself – works long hours and takes enormous pride in
the same… [Individualistic?]
 Team player – depends…
 Over-ambitious and over-zealous
 Extremely committed [too much competition]
 Time – I don’t have a watch/clock [long-term]
 Subservient and kicker [high power distance]
 Risky business – depends [moderate U/A]
 Status – oooooh yes [every tom/dick/harry]
 Bureaucratic to the core
 Bollywoodised – stop dreaming 

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 How to prepare for Workshop - 1

• Go through the workshop activities (Topic 1)

• Jot down bullet points for workshop activities:

• Activity 2 – Discussion questions
• Activity 3 – Businessville case study
• Activity 4 - Apple’s iphones – not “Made in America” (pgs 54-56 of
Deresky text). Jot down solutions for questions 1, 2, 3 and 6.

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