Globalization and International Linkages

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Globalization and International Linkages
The specific objectives of this chapter are to
1. ASSESS the implications of globalization for
countries, industries, firms, and communities.
2. REVIEW the major trends in global and
regional integration.
3. EXAMINE the changing balance of global
economic power and trade and investment
flows among countries.
4. ANALYZE the major economic systems and recent
developments among countries that reflect those
systems.
International Management
International management involves
Applying management concepts and techniques in a multinational environment and Adapting management practices to different economic, political, and cultural environments. Multinational corporation (MNC)

Operations in more than one country
International sales
Nationality mix of managers and owners
The World’s Top Nonfinancial MNCs Ranked by Foreign Assets, 2007 The World’s Top Nonfinancial MNCs from Developing Countries Ranked by Foreign Assets, 2007 Globalization and Internationalization

Globalization
Process of social, political, economic, cultural, and technological integration among countries around the world. Hastened by
Offshoring
Process by which companies undertake some activities at offshore locations instead of their countries of origin. Outsourcing
Subcontracting or contracting out of activities to external organizations that had previously been performed by the firm. Map of the World

Globalization: Pros and Cons
Benefits of Globalization
Wealth
Jobs
Technology
Lower prices

Criticisms of Globalization
off-shoring of business service jobs to lower-wage countries growing trade deficits
slow wage growth
environmental and social impacts
Global and Regional Integration
Global Agreements
World Trade Organization (WTO)
General Agreement on Tariffs and Trade (GATT)

Regional Agreements
North American Free Trade Agreement (NAFTA)
U.S.-Central American Free Trade Agreement (CAFTA)
European Union (EU)
Association of Southeast Asian Nations (ASEAN)
Free Trade Agreement of the Americas (FTAA)
International Economic Power in the Global Economy
Shifting landscape due to
Economic integration
Economic potential of emerging markets
BRIC countries (Brazil, Russia, India, and China) could be among the four most dominant economies by 2050 The World’s Largest Economies 2005 and 2020 (Projected) Measured by GDP at Market Exchange Rates The World’s Largest Economies 2005 and 2020 (Projected) Measured by GDP at Purchasing Power Parity Changing Demographics: Developing Countries on the Rise (ranked by size) Trends in Trade and International Investments

International Trade
In 2009 merchandise and commercial services exports declined Foreign direct investment (FDI)
Investment in property, plant, or equipment in another country Growing at healthy rate
Outpacing domestic growth in most countries
Declined in 2009 due to the global recession

World Merchandise Trade by Region and Selected Country, 2009 (in U.S.$ billions or percent) World Foreign Direct Investment Inflows (in U.S.$ millions) World Foreign Direct Investment Inflows (in U.S.$ millions) Global Economic Systems

Market Economy
Command Economy
Mixed Economy
Economic Performance by Major World Region
Established Economies
North America
European Union
Japan
Emerging Economies
Central and Eastern Europe
China
Other Emerging Markets of Asia
India
Developing Economies on the Verge
South America
Middle East and Central Asia
Africa
Map of the Americas
Economic Performance Established Economies
North America
One of the four largest trading blocs in the world
Combined purchasing power of U.S., Canada and Mexico approaches $12 trillion Free-market-based economy is attractive to private firms

United States
Foreign MNC’s find U.S. a lucrative expansion market
Foreign firms welcomed as...
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