Chapter 1: Chapter 1 GLOBALIZATION AND WORLDWIDE DEVELOPMENTS


Why International?: Why International? 40% of jobs in Orlando are devoted to international trade Florida ranks 7th in the US and 16th in the world for international trade Which region of the world does Central Florida do the most trade with?


Globalization and Regional Integration : Globalization and Regional Integration Globalization Process of integration among countries around the world Social Political Economic Cultural Technological Offshoring Regional Integration WTO GATT NAFTA FTAA EU ASEAN


World Trade Organization (WTO): World Trade Organization (WTO) Replaced GATT Has the power (that GATT didn’t’) to resolve trade disputes Settlement mechanism is faster, more effective and binding Controls 90% of world’s trade Headquarters in Geneva, Switzerland


Slide5: General Agreement on Tariffs and Trade (GATT) International organization created in 1947 Reduces or completely eliminates tariffs to increase free trade Operating principle – Normal trade relations or Most favored nation status (MFN) Lacks the power to force nations to resolve trade disputes Last meeting- Uruguay round- GATT revamped


Regional Developments Impacting Internationalization: Regional Developments Impacting Internationalization North American Free Trade Agreement (NAFTA) US, Canada, Mexico A free trade agreement between the U.S., Canada, and Mexico which has in essence removed all barriers to trade Elimination of tariffs as well as import and export quotas Opening of government procurement markets to companies in partner countries Increased opportunity to make investments in partner countries Increased ease of travel between partner countries Removed all barriers to trade between countries Created a huge North American market Agreement will expand to include Latin American countries, Chile, Argentina, and Brazil


Slide7: European Union (EU) Consists of Western European nations Trade barriers between EU members have been removed Unified currency called the “euro” has been adopted


The : The Why do it? How will the euro affect the US? How much is the euro worth? Who is participating and who is not?


Slide9: Who Invests in the United States? Who Does the United States Invest in? United Kingdom $230 Billion Japan $159 Billion Germany $148 Billion United Kingdom $272 Billion Canada $192 Billion Trends in Investment and Trade


Slide10: World Populations China India US Indonesia Brazil Top World Economies 1 US 2 Japan 3 Germany


Economic Status & Issues of Major World Regions: Economic Status & Issues of Major World Regions North America United States: World leader -computer and high-tech area of telecommunications markets Consumer-goods companies are seizing overseas market opportunities Foreign MNCs are finding the U.S. to be a lucrative market for expansion


Slide12: North America - Canada Canada Largest US trading partner Importing U.S. Exporting U.S. Rank Country Exports* Rank Country Imports* 1 Canada 169,924 1 Canada 221,595 2 Mexico 97,412 2 China 152,436 3 Japan 52,004 3 Mexico 138,060 4 U.K. 33,828 4 Japan 118,037 5 Germany 28,832 5 Germany 68,113


North America - Canada: Similarities (geography, language, and culture) helps to promote trade between the two countries Prime Minister Stephen Harper Currency – Canadian Dollars Currency equivalent- 1.17 Population: 30.5 million people Main industries: energy, agriculture, mining US- Canadian relations North America - Canada


Slide14: New President Felipe Calderon Wants to strengthen Mexican – US relations Former President Vicente Fox (Coca-Cola executive) Ist Democratic election Maquiladora industry Arrangement created by the government that permits the flow of materials and products in and out of Mexico with only the value added being taxed Competitive with Asia for US market Proximity to US market- lower transportation cost and fast delivery Currency: Mexican Pesos (MXN) Currency Equivalent: 10.6 pesos = $1USD North America - Mexico


Latin and South America : Countries have experienced difficult economic problems High inflation and heavy foreign debt Survey of business leaders in South American countries finds that doing business with US is most important agenda Brazil Attracted substantial foreign investment Real Plan Chile Economic success story in South America Argentina Economic uncertainty Venezula Pres. Hugo Chavez - becoming dictatorship Former President Carter visit to quell coup Latin and South America


Slide16: EU as an operational economic union Elimination of all trade barriers among member countries Creation of a single currency and a regional central bank Think globally, act locally Acquisitions and mergers used to gain a foothold in the EU Europe


Central and Eastern Europe: Central and Eastern Europe The BEST Czech Republic, Hungary, and Poland have transitioned to market economies Czech Republic – starting to attract outside investors Hungary – currency: forint; Joint ventures with Western firms Poland – one of top 10 Big Emerging Markets; “Brain Drain”, Eastern Europe’s largest producer of food An untapped area being targeted by MNCs looking for expansion opportunities The WORST Albania Refugee and corruption problems


Slide18: Collapse of the Soviet Union in 1991 Glasnost (openness) Perestroika (economic and political restructuring) Undergone economic reform; Many attempts to stimulate the economy; Criminal activity increasing; Dismantling of price controls; inflation; political uncertainty Privatization (converting communist-style public enterprises to private ownership) Russia


Slide19: Japan continues to be the primary economic force MITI- Ministry of International Trade and Industry Currency: yen 119 yen (JPY) = $1 USD Cultural values Keiretsus Organizational arrangement in which a large group of vertically integrated companies are bound together by cross-ownership, interlocking directorates, and social ties provide goods and services Asia - Japan


Slide20: Japan Decade long recession in the 1990s Target for foreign investment Bank loans backed by real estate BY 2000, most major banks had billions of dollars in uncollectible loans International competition increased Well poised in all three major economic regions: The Pacific Rim, North America, and Europe


Slide21: Annual real economic growth of 10% during 1980s and early 1990s Heathy and growing economy GDP growth 91% in 2003 Product piracy major problem Major manufacturing source by many MNCs Large reported annual growth in GDP Attracts substantial foreign investment Remains a political risk for investors MNCs find it difficult to do business in China Currency yuan renminbi 8.08 CNY = 1 US$ Asia - China


Slide22: Southeast Asia The Four Tigers: South Korea, Hong Kong, Singapore, Taiwan South Korea – Chaebols: Large,family-held conglomerates that have considerable political and economic power Hit hardest by Southeast Asia economic crisis Hong Kong Headquarters for successful multinational operations in Asia Uncertainty regarding governance issues due to subservience to China Singapore Leader and financial center of Southeast Asia One of the most competitive nations Taiwan Economy dominated by technologically sophisticated industries Uncertainty due to designs on the country by China


Slide23: Baby Tigers Thailand, Malaysia, Indonesia Large population base Inexpensive Labor Natural Resources Atractive to outside investors


The Top Most Competitive Nations: The Top Most Competitive Nations United States 1 Singapore 2 Canada 3 Australia 4 Iceland 5 Hong Kong 6


Slide25: Characteristics of Less Developed Countries Less Developed Countries Low GDP High international debt Slow (or negative) GDP growth per capita Large population High unemployment Inexpensive unskilled or semi-skilled labor


Market Potential Indicators: Market Potential Indicators


Slide27: Less Developed Countries India Steady economic growth in the past few years Attractive to investment by MNCs Recent trend of locating software and high value added services to this country Middle East and Central Asia Oil reserves are an attractive economic asset Balance geopolitical, religious forces with economic viability Organization of Petroleum Exporting Countries (OPEC) Africa International trade not a major source of income Sub-Saharan nations troubled by tribal warfare, disease, poverty, starvation, apartheid, corruption, AIDS