Transcript No Slide Title

27.220 International Management
Lecture Presentation Overheads
Total Foreign Trade as Percent GDP - 1995 & 1999
PC '95
90.00
PC '99
80.00
70.00
Percent
60.00
50.00
40.00
30.00
20.00
10.00
0.00
Canada
United
States
Germany
(1994)
Japan
(1994)
Country
United
Kingdom
Mexico
Canada Total Foreign Trade as Percent GDP 1966-1999
90.00
80.00
70.00
50.00
40.00
30.00
20.00
10.00
Year
98
94
96
19
19
92
19
90
19
19
88
19
86
19
84
19
82
19
80
19
78
76
19
74
19
19
72
19
70
19
68
19
66
0.00
19
Percent
60.00
Canadian GDP & Foreign Trade 1966-1999
1200.00
GDP
1000.00
Exports
800.00
Total Forn
600.00
400.00
200.00
Year
19
98
19
96
19
94
19
92
19
90
19
88
19
86
19
84
19
82
19
80
19
78
19
76
19
74
19
72
19
70
19
68
0.00
19
66
Current Cdn $ (Bn)
Imports
Manitoba Economic Performance (Millions Current Dollars)
1995
1996
1997
1998
1999
Farm Cash Receipts
2523
2816
3065
2946
3029
Manufacturing
8334
8972
9999
10613
10338
Mineral Production
1022
1002
1126
967
893
Electric Power Sales
1026
1073
1111
1130
1179
Retail Sales
7432
7920
8589
8772
9023
Total Exports
5456
6220
7314
8067
7946
Provincial GDP
26978
28270
29323
30061
31212
Exports as % GDP
20.22
22.00
24.94
26.84
25.46
Scale
Full scale
production
The Range of FDI
Alternatives
Pack &
Assembly
Warehousing
Sales Office
Type of
None
Majority owned
Equal ownership
Ownership
Arrangement
Minority
Ownership
Partner
Stages Model of Development of International Business
Outward
Inward
1. Indirect/ad hoc exporting
1. Importing/sourcing
2. Active exporting and/or
licensing
2. Act as licensee/franchisee
3. Equity investment in JV’s
3. Partner foreign co in JV
4. Full-scale multinational
marketing and
production
for foreign parent
4. Manage foreign owned
subsidiary
Motivation for FDI
1. Seek resources
2. Seek markets
3. Seek efficiency
4. Seek strategic advantage
-------------------
5. Hubris
“Make or Buy” Decision
Organic growth? Slower but safer?
Acquisition? Most acquisitions fail!
- pay too much
- can’t integrate the managements/ org’n culture
2000 vs 1970
Resource seeking:
Differences: - 2000 puts more emphasis on local processing
- More local skills and partners are available
Same: - issues of availability, price, quality
- infrastructure - transport, banking, community
- government restrictions - capital, dividends
- investment incentives
2000 vs 1970
Market seeking:
Differences: - 2000 more middle class (eg. India, China)
- More regional trade blocs
- more alternatives for suppliers, markets, services
- better infrastructure
- more realistic/favourable host gov’t plicies
- greater need to be close to customers
suppliers
knowledge
Same: - issues of costs - wages, material, transport
- infrastructure - transport, banking, community
- government restrictions - capital, dividends,
protectionism
2000 vs 1970
Efficiency seeking:
Differences: - more choice and availability of skilled labour,
service & supplier firms, infrastructure
- more realistic/favourable host gov’t plicies
- less market distorition
Same: - focus on production costs
- focus on freedom to trade in intermediate and final
production
- importance of “agglomerative” economics - availability
of associated and related businessesd
- investment incentives
2000 vs 1970
Strategic Asset seeking:
Differences: - More geographic dispersion of knowledge based assets
-more support related services (accounting, consulting,
lawyers, financial firms)
- more “two-way” relationships with host/foreign partners,
markets, culture
- more reverse flow of ideas
- need to be “world class” in terms of scale, design
Same: - same issues, but more highly developed. There is a larger
choice, range of alternatives to managers now.
Outline of the course:
Background
The Global Business Environment (Ch 2)
The world of International Trade (Ch3) - trade, trade blocs, STEP
comparative/competitive advantage
exchange rates
No Equity Investment
Exporting (Ch 4)
Global sourcing (Ch 5)
Licensing (Ch 6)Investing Equity
Joint ventures - minority? Equal? Majority? (Ch 7)
International Strategy formation (Ch 8)
Globalization and organization (Ch 9)
The evolving multinational (Ch 10)
The global manager (Ch 11) - Human relations issues in multinational management
MNE - government relations (Ch 12)
Characteristics of global leaders (Ch 13)
Ethics (Ch14)
Managing Global Workforce (Ch15)
Postscript
Remind ourselves that international trade and MNE’s are not new phenomena
International Trade - Phoenicians traded the length of the Mediterranean,
to England and down the coasts of Africa
the Roman Empire traded with China, India, tropical Africa,
England and the Baltic
the Arabs traded from Mozambique to the interior of the Congo
to the southern Philippines to the Baltic
MNE’s - The Muscovy Company
The Levant Company
The East India Company
The Virginia Company
The Company of New France
The Hudson’s Bay Co.
Jardine Matheson, which became the HSBC
All these companies represent not only economics and trade, but also
colonialism and imperialism
Which raises the question:
What is, or ought to be, the role of the MNE in economic development?
-Still half the world is living in absolute poverty
What about ecological issues - timber, fish, mining, petroleum
What about exploitation of the weak?
Lack of regulation and inspection, excess cost cutting eg. Bhopal
use of DDT in the third world
child labour? Abolish it? But it contributes as much as 1/3 of
`
family income
bonded labour? Close to slavery?
The study of international business is not exempt from moral issues!