Globalization and International Management PDF

Globalization and International Management Cross cultural management HR 51323  This Photo by Unknown Author is licensed under CC BY-SA-NC This Photo by Unknown Author is licensed under CC BY-SA This Photo by Unknown Author is licensed under CC BY-SA...

Globalization and International Management Cross cultural management HR 51323  This Photo by Unknown Author is licensed under CC BY-SA-NC This Photo by Unknown Author is licensed under CC BY-SA This Photo by Unknown Author is licensed under CC BY-SA This Photo by Unknown Author is licensed under CC BY-SA This Photo by Unknown Author is licensed under CC BY-SA This Photo by Unknown Author is licensed under CC BY-NC  An interconnected world This Photo by This Photo by Unknown Author Unknown is licensed under Author is CC BY-SA licensed under CC BY Introduction Management is the process of completing activities with and through other people. International management is the process of applying management concepts and techniques in a multinational environment and adapting management practices to different economic, political, and cultural contexts. Introduction A multinational corporation (MNC) is a firm that has operations in more than one country, international sales, and a mix of nationalities among managers and owners. Globalization, coupled with the rise of emerging market MNCs, has brought prosperity to many previously underdeveloped parts of the world Firms must develop international management expertise. This Photo by Unknown Author is licensed under CC BY-NC This Photo by Unknown Author is licensed under CC BY-SA This Photo by Unknown Author is licensed under CC BY-SA This Photo by Unknown Author is licensed under CC BY-SA This Photo by Unknown Author is licensed under CC BY-SA This Photo by Unknown Author is licensed under CC BY Globalization and Internationalization Globaliza)on is the social, poli)cal, economic, cultural, and technological integra)on among countries around the world. the vision of creating one world unit, a single market entity Interna)onaliza)on is the process of a business crossing na)onal and cultural borders Offshoring and outsourcing have combined to drama)cally intensify the effects of increasing global linkages. Globalization Proponents believe that everyone benefits from globalization. Critics disagree, noting that offshoring of jobs does not inherently create greater opportunities at home. Antiglobalization activists say the poorest countries relax standards for first- world investment. Proponents believe global firms will employ modern, green technology. Global and Regional Integration World Trade Organiza)on (WTO) is the global organiza)on that oversees rules and regula)ons for interna)onal trade and investment. North American Free Trade Agreement (NAFTA) removed most trade and investment barriers between the U.S., Canada, and Mexico. USMCA will replace NAFTA following ratification by each country. Other bilateral agreements, including CAFTA-DR reduce trade barriers. The European Union (EU) has made significant progress over the past two decades in becoming a unified market – even with “Brexit.” Global and Regional Integration Japan has experienced economic problems since the early 1990s but China continues its steady growth. The Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) negotiated an Asia-Pacific trade agreement. Central and Eastern Europe and Russia are still trying to make stable transitions to market economies.  Global and Regional Integration - RP ASEAN Trade in Goods Agreement (ATIGA) Philippines – Japan Economic Partnership Agreement Philippines – European Free Trade Association Free Trade Agreement Regional Comprehensive Economic Partnership https://www.trade.gov/country-commercial-guides/philippines-trade-agreements Changing Global Demographics The global working-age population declined. Global life expectancy increased. Global fertility rate decreased. The most dramatic impact will be seen in the developed nations. Health care spending increases, demand for goods declines.  RP working-age population Refers to population 15-64 years old at a specified time. The working age population is divided into persons in the labor force and persons not in the labor force1. “PSA data showed the working-age population, covering those 15 to 64 years old, makes up 63.9% of Filipinos, up from 63.3% in 2015 and 59.1% in 2000.”2 1 https://psa.gov.ph/content/working-age-population-1 2 https://www.bworldonline.com/the-nation/2022/08/15/468505/steady-growth-in-phl-working-age-population-could-be-a-boon-or-bane-says-popcom/ The Shifting Balance of Economic Power in the Global Economy “BRIC” economies are predicted to grow by 2025. By 2050, the GDP of the E7 is predicted to be 50 percent higher than that of the G7. The N-11 may constitute the next wave of emerging markets growth. The MIST countries are particularly attractive. African countries could be the next wave of dynamic emerging markets. The Shifting Balance of Economic Power in the Global Economy Global trade and investment continue to grow at a healthy rate, outpacing domestic growth in most countries. Foreign direct investment (FDI) is the term used to indicate the amount invested in property, plant, and equipment in another country. As nations become more affluent, they begin looking for countries with economic growth potential where they can invest. Global economic systems Market economy Command economy Mixed economy Evaluating economies Established economies Emerging economies Developing economies Established economies North America North America constitutes one of the world’s four largest trading blocs. The EU The ultimate objective of the EU is to eliminate all trade barriers among member countries. Japan Remains a formidable international competitor in all three major economic regions Emerging/Developing Economies – Central/Eastern Europe Russia’s economy continues to emerge as poverty declines and the middle class expands. In Hungary, state-owned hotels were privatized, and Western firms are entering joint ventures and MNCs are making direct investments. Poland had a head start as they established the first noncommunist government in 1989, followed by radical economic reforms. Although Russia, the Czech Republic, Hungary, and Poland receive the most media coverage, others are struggling. Emerging/Developing Economies – China The growth of China’s GDP has been slowing considerably. China remains a major risk for investors. Trade relations between China and developed countries and regions, such as the United States and the EU, remain tense. Emerging/Developing Economies - Other Asian Markets Countries of the ASEAN bloc are fueling growth and development. South Korea - “chaebols” include Samsung, Hyundai, and the LG Group. Hong Kong - headquarters for some of the most successful multinational operations in Asia. Singapore - urban planner’s ideal model; leader and financial center of Southeast Asia. Taiwan’s economy continues to grow steadily. Thailand, Malaysia, Indonesia, and now Vietnam have developed economically. Emerging/Developing Economies – India With a population of about 1.3 billion and growing, India has traditionally had more than its share of political and economic problems. India is attractive to multinationals, especially to U.S. and British firms as many Indian people speak English, are well educated, and known for advanced IT expertise. India’s GDP growth rate is among the highest in the world. Developing Economies on the Verge – South America Countries in South America have had difficult economic problems, accumulating heavy foreign debt and experiencing severe inflation. A major development in South America is the growth of intercountry trade, spurred on by the progress toward free-market policies. Developing Economies - Middle East and Central Asia Israel, the Arab countries, Iran, Turkey, and the Central Asian countries of the former Soviet Union are a special group of emerging countries. Some of these countries are considered to be economically rich because of oil Developing Economies – Africa Even with considerable natural resources, many African nations remain very poor and underdeveloped. Political instability is pervasive, and generates substantial risks for foreign investors. Sub-Saharan Africa, has had a number of severe problems resulting in serious economic setbacks. Africa’s economic growth and dynamism have rapidly accelerated in the past two decades. References: Luthans and Doh (2021), International Management: Culture, Strategy, and Behavior 11th Ed. McGraw-Hill Education.  How might the rise of social media result in closer connections (and fewer conflicts) among nations? Environmental foundations Political, Legal, and Technological EMC Political Environment The political system or system of government in a country greatly influences how its people manage and conduct business. Underlying the governmental actions is the ideology of the beliefs, values, behavior, and culture of the nation and its political system. A political system can be evaluated along two dimensions. Ideology of the system Degree of individualism or collectivism Ideologies Adopters of individualism adhere to the philosophy that people should be free to pursue economic and political endeavors without constraint. Government interest should not solely influence individual behavior. Collectivism views the needs and goals of society at large as more important than individual desires. Societal goals and the decision of how to keep people focused on them differ greatly among national cultures. Socialism is a moderate form of collectivism in which there is government ownership of institutions, and profit is not the ultimate goal. Social democracy refers to a socialist movement that achieved its goals through nonviolent revolution. Political Systems Democracy Totalitarianism The government is controlled by the One party controls political and human citizens. life. Directly or through elections. Power is often maintained by suppression. Cannot exist without at least a two- The most common form is communism. party system. Some parties govern based on religious They believe every citizen should be principles. involved in decision-making processes. “Right-wing” allows for some economic Individual freedoms are secured. (but not political) freedoms. Legal and Regulatory Environment Foundations on which laws are based around the world Islamic law Socialist law Common law Civil or code law  Legal and Regulatory Environment Philippine legal system a blend of civil law (Roman), common law (Anglo-American), Muslim (Islamic) law and indigenous law two primary sources of the law: Statutes Jurisprudence https://www.nyulawglobal.org/globalex/Philippines1.html#_Legal_System Basic Principles of International Law International law is less coherent than domestic law. Principle of sovereignty—governments can rule as they see fit Jurisdictional principles Nationality principle, territoriality principle, protective principle. Doctrine of comity— mutual respect for the laws, institutions, and governments Act of state doctrine— Legal and regulatory issues: examples Financial services regulation Foreign Corrupt Practices Act (U.S) Bureaucratization Privatization Regulation of trade and investment Technology in the next decade Internet of things Blockchain technology AI and machine learning Robotics paired with any of these Technological Environment and Global Shifts in Production Technological advancements connect the world and aid in the increased quality of products, information gathering, and R&D. Hunger and poor health care are worldwide issues—biotechnology is working to raise the standards. MNCs are trying to improve e-business operations in B2C transactions. Developing economies are “leapfrogging” telecommunications technology. In the future, technology has the potential to displace employees in all industries. Technological Environment and Global Shifts in Production With new technological advancement: Business costs should decline. Productivity should increase. Prices should go down. References: Luthans and Doh (2021), International Management: Culture, Strategy, and Behavior 11th Ed. McGraw-Hill Education. https://www.nyulawglobal.org/globalex/Philippines1.html#_Legal_System Environmental Foundations Ethics, Social Responsibility, and Sustainability EMC What does the term “ethics” mean to you? Ethical scandals and questionable business practices have received considerable media attention.  Ethics A person’s beliefs regarding what is right or wrong in a given situation Ethics Theories and Philosophy Kantian Utilitarianism Aristotelian Eastern Human Rights Human rights issues present challenges for MNCs. China’s human rights record continues to be a challenge for MNCs. Women’s rights and gender equity can be considered a subset of human rights. Labor, employment, and business practices Di cult to agree on a universal foundation of employment practices Working conditions, expected work hours, and labor regulations create challenges in deciding appropriate employment practices. ffi Environmental Protection and Development On conservation of natural resources: Countries di er widely in their values and approach Many poor, developing countries more concerned with improving the quality of life for their citizens than about endangered species or air or water quality Recent progress: The Paris Agreement (rati ed by RP) Many companies still violate laws and/or jeopardize safety and environmental concerns in their operations Globalization and Ethical Obligations of MNCs How much responsibility do MNCs have in changing these practices? One remedy could be to instill a business code of ethics that extends to all countries or to create contracts for situations that may arise. Another response to globalization has been to transfer a large percentage of highly specialized jobs of all types to foreign locations. Individuals moved o shore remain part of a corporate citizenship. ff Reconciling Ethical Differences across Cultures MNCs adhere to a code of ethical conduct while doing business around the world, yet make adjustments to respond to local norms and values. Integrative Social Contracts Theory (ISCT) Provides a framework for gaps but does not provide precise guidance under speci c conditions. fi CSR and sustainability CSR Closely related to ethics but involves taking action Economic Legal Ethical Philanthropic CSR and sustainability Sustainability potential for the long-term well-being of the natural environment Sustainable development - meet present needs without compromising ability of future generations to meet their needs Sustainability and ethical decision-making Sustainability falls into the social responsibility domain of maximizing positive and minimizing negative impacts on stakeholders. Sustainability relates to ethical decision making. Ethical awareness is the ability to perceive an issue or dilemma involving principles, values, and appropriate behavior. Business decisions about sustainability will be assessed as right or wrong by stakeholders. A company with a sustainability agenda or a corporate social responsibility (CSR) report can create long-term favorable stakeholder responses. Sustainability, social responsibility, and ethics should not be used interchangeably. Corporations are now taking strides to be leaders in the “green” movement. Corporate Governance Corporate governance - system by which business corporations are directed and controlled. Provides the structure through which objectives are set and the means of attaining those objectives and monitoring performance normally involves strategic decisions and actions by boards of directors, business owners, top executives, and other managers with high levels of authority and accountability Governance rules and regulations di er among countries and regions. ff Ethics and corporate governance Framing ethical issues Treatment of employees (hiring, ring, wages, working conditions, respect, privacy) How employees treat the organization (con icts of interest, secrecy, con dentiality, personal internet use, unacceptable absenteeism) Treatment of economic agents (customers, competitors, stockholders, suppliers, dealers, unions) Variations in ethical and legal business practices across countries fi fi Corruption Government corruption is a pervasive element in the international business environment. International Assistance Governments and corporations are increasingly collaborating to provide assistance to communities around the world through global partnerships. https://www.un.org/sustainabledevelopment/news/communications-material/ References: Luthans and Doh (2021), International Management: Culture, Strategy, and Behavior 11th Ed. McGraw-Hill Education. O.C. Ferrer, John Fraedrich, Linda Ferrell (13th Edition, 2022). Business Ethics: Ethical Decision Making and Cases. Cengage. Ricky W. Gri n/Jean M. Phillips/Stanley M. Gully (2020). Organizational Behavior: Managing People and Organizations, Thirteenth Edition. Cengage. ffi