Chapter

1. Chapter 10 The Impact of Globalization

2. Globalization: A World Business View • Globalization: • A way of thinking in which a business regards all of its operations all over the world as part of one integrated business. • For many companies going global is a major strategic challenge. McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved.

3. Approaches To Globalization • Global Strategy: • A strategy where a business sells a uniform product of service throughout the world. • Multidomestic Strategy: • A strategy where a business modifies its product or service to address the special needs of local markets. • Exporting: • The situation where a business sells products and services to customers in other countries. • Importing: • The situation where customers buy products and services from producers in other countries. McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved.

4. Issues Affecting Globalization • Economic Issues: • Influences that affect a company’s ability to compete across boarders. • Supply and demand for products • Strength of a country’s currency • Exchange Rates: • The value of currency compared with a foreign currency. • Balance of Payments: • A record of the inflow of money into a country and the outflows of money from that country. • Balance of Trade: • The difference between the value of a country’s imports and exports of goods and services. McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved.

5. The Balance of Payments Report • www.census.gov/indicator/www/ustrade.html • Balance of Payments Report (1960 – 2005) McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved.

6. Government Involvement in Global Issues • Free Trade: • A situation where there are no government-imposed barriers to trade--no tariffs, quotas, or non-tariff barriers. • Tariff: • A tax on an imported product. • Quota: • A government’s restriction on the amount of a specific foreign product it allows into the country. • Free Trade Area: • A geographic area where free trade is permitted among the participating countries but imports from nonparticipating countries are limited. McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved.

7. Free Trade and Free Trade Areas • General Agreement on Tariffs and Trade (GATT): • An agreement between the U.S. and 22 other countries to regularly negotiate the reduction of trade barriers. • Free Trade Area: • A geographic area where free trade is permitted among the participating countries but imports from nonparticipating countries are limited. McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved.

8. Free Trade Agreements Free Trade Area Member Countries NAFTA Canada, Mexico, United States Mercosur Argentina, Brazil, Paraguay, Uruguay Andean Pact Bolivia, Columbia, Ecuador, Peru, Venezuela European Union (EU) Austria, Belgium, Denmark, Finland, France Germany, Greece, Ireland, Italy, Luxembourg, Netherlands, Portugal, Spain, Sweden, United Kingdom ASEAN Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore,Thailand, Vietnam Proposed: Free Trade Area of The Americas All of Central, North, and South America McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved.

9. Government Support of Business • Industrial Policy: • Government assistance of various kinds to create a new industry or enable an existing industry to expand more than it could if market forces were the only determinants of output. McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved.

10. Cultural Differences • Understanding cultural differences is critical to the success of the global organization. • Areas of culture that cause problems: • Language • Customs • Values • Lifestyles McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved.

11. Ethical Issues in Global Operations • Different standards of right and wrong behavior. • Create unique expectations for business interactions and negotiations. • Being asked to do something that is considered unethical back home but perfectly acceptable in the country where the request is made. McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved.

12. Cultural Relativism: The belief that what is right or wrong depends on the culture of the country where business is taking place. Universalism: The belief that there are commonly shared business standards and principles that are accepted throughout the world. Competing Ethical Views McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved.

13. Issues of Ethical Concern • Bribery • Working conditions provided by employers • Whether or not to reduce employment in the home country and move production to foreign countries with cheaper labor McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved.

14. How Businesses Participate in the Global Economy • Import-Oriented Firms • Bringing foreign manufactured goods into the home country for resale. • Nike • The Boeing Company • The Limited • Pier 1 Imports • Huffy Corporation • Oshkosh B’Gosh • Haggar McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved.

15. How Businesses Participate in the Global Economy • Expert-Oriented Domestic Firms • The sale of goods and services produced in the home country to foreign buyers. • Sony • Toyota • Yamaha • Libbey • Briggs and Stratton • Timberland McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved.