Chapter 5/ Lecture 4and5
Global Dimension of management
1. What are the international management challenges of globalization?
• What are the key concepts in the challenges of globalization?
i. Global economy: resources, markets, and competition are worldwide in
ii. Globalization: the process of growing interdependence among elements of
the global economy
iii. International management: involves managing operations in more than one
iv. Global manager: culturally aware and informed about international affairs.
• What are the potential challenges and opportunities that these areas face in the
context of the global economy?
• What are the important business and economic agreements among these areas?
i. European Union (EU)
o Political and economic alliance European countries that agreed to
support mutual economic growth
o Key agreements
o Common currency
• The Americas
i. North American Free Trade Agreement (NAFTA)
o Agreement for free flow of goods and services between the Canada,
Mexico and United states
ii. Free Trade of the Americas (FTAA) – Alaska to Chile
o A proposed free-trade zone
www.notesolution.com o Maquiladoras
a. Foreign Manufacturing plants that are allowed to operate in
Mexico with special privileges in return for employing Mexican
• Asia and the Pacific Rim
i. Economic power of China and Japan
ii. Growth in other pacific Rim countries
o South Korea, Taiwan, Singapore
o Malaysia, Thailand, Vietnam, and the Philippines
iii. Asian countries represent a third of the global market place
i. Increased attention to stable countries
ii. Post-apartheid South Africa
iii. South African Development Community (SADC) links 15 countries in trade
and economic development.
2. What are the forms and opportunities of international business?
• What are the reasons for engaging in international business?
i. Profits: global operations offer greater profit potential
ii. Customers: global operations offer new markets to sell new products
iii. Suppliers: global operations offer access to raw material
iv. Capital: global operations offer access to financial resources
v. Labor: global operations offer access to lower labor costs
• Market entry strategies
i. Sales of goods or services to foreign markets
ii. Do not require expensive investments
www.notesolution.com • Types of market entry strategies
i. Global sourcing: materials or services are purchased around the world for
iv. Licensing Agreement: one firm pays a fee for rights to make or sell another
v. Franchising: fee is paid for rights to use another firm’s name and operating
• Direct investment strategies
i. Major capital commitments
ii. Rights of ownership and control over foreign operations
• Types of direct investment strategies:
i. Joint ventures: agreements that operates in a foreign country through co
ownership with local partners
ii. Foreign subsidiaries: is a local operation completely owned by a foreign
Figure 5.2 Common forms of international business – from market entry to direct
• What are the criteria for choosing a joint venture partner?
ii. Local workforce
iii. Future expansion
iv. Local market
www.notesolution.com • What are the complications in the global business environment?
i. Complex, dynamic, and highly competitive
ii. Global business executives
iii. World Trade Organization
3. What are multinational corporations and what do they do?
A multinational corporation (MNC) is a business with extensive international
operations in more than one foreign country
• What are the mutual benefits for host country and MNC?
i. Shared growth opportunity
ii. Shared income opportunity
iii. Shared learning opportunity
iv. Shared development opportunity
• Host country complaints about MNCs
i. Excessive profits
ii. Domination of local economy
iii. Interference with local government
iv. Hiring the best local talent
v. Limited technology transfer’
Figure 5.3 what should go right and what can go wrong in MNC-host country
• MNC complaints about host countries
i. Profit limitations
ii. Overpriced resources
iii. Exploitative rules
iv. Foreign exchange restrictions
www.notesolution.com v. Failure to uphold contracts
• Ethical issues for MNCs:
i. Corruption – illegal practices that further one’s business interests
ii. Sweatshops – employing workers at low wages for long hours and in poor
iii. Child labor – full time employment of children for work otherwise done by
iv. Sustainable development – meeting current needs without compromisi