Description
DiscussionGlobalization and Decision-Making Discuss how you think globalization influenced the decision-making that formed Saudi Vision 2030. What are some of the benefits and challenges of globalization for different sectors of society (for example, companies, workers, and communities)?Discuss the concepts, principles, and theories from your textbook. Cite your textbooks and cite any other sources if appropriate. Your initial post should address all components of the question with a 600-word limit.4- 6 references (APA style)Readings Required:Chapter 1 Globalization and International Linkages in International Management: Culture, Strategy, and BehaviorChapter 1 PowerPoint slides in International Management: Culture, Strategy, and BehaviorGrosse, R., Gamso, J., & Nelson, R. C. (2022). De-Globalization is a Myth. A I B Insights, 22(2), 1-6. Neil, E., & Sprusansky, D. (2017). A look at Saudi Arabia Vision 2030. (WAGING PEACE). Washington Report on Middle East Affairs, 36(1), 53-54. Nurunnabi, M. (2017). Transformation from an oil-based economy to a knowledge-based economy in Saudi Arabia: the direction of Saudi vision 2030.(Report). Journal of the Knowledge Economy, 8(2), 536.
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Chapter One
Globalization and International
Linkages
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Learning Objectives
• Assess the implications of globalization for
countries, industries, firms, and communities
• Review the major trends in global and
regional integration
• Examine the changing balance of global
economic power and trade and investment
flows among countries
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Learning Objectives (continued)
• Analyze the major economic systems and
recent developments among countries that
reflect those systems
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Social Media
• Changed the way in which people connect
• Changed global business strategy
• Changed the way in which international
business is conducted
• Impacted international diplomacy
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Communication Platforms
• Can be accessed by individuals and groups
from any location
• Offer myriad opportunities for companies to
identify and target discrete groups
• Revolutionize nature of management by
allowing direct interaction between producers
and consumers
• Accelerate the already rapid pace of
globalization and integration
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Management
• Process of completing activities with and
through other people
• International management is the process of:
– Applying management concepts and techniques in
a multinational environment
– Adapting management practices to different
economic, political, and cultural contexts
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Multinational Corporations (MNCs)
• Firms that have:
– Operations in more than one country
– International sales
– Mix of nationality among managers and owners
• Managers are required to develop
international management expertise
• Increasingly coming from developing nations
like China and India
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Globalization and Internationalization
• Globalization
– Process of social, political, economic, cultural, and
technological integration among countries around
the world
– Evidence can be seen in increased levels of trade,
capital flows, and migration
• Internationalization
– Process of a business crossing national and
cultural borders
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Factors That Facilitate Globalization
• Technological advances in transnational
communications, transport, and travel
• Offshoring
– Companies undertake some activities at offshore
locations instead of in their home countries
• Outsourcing
– Subcontracting or contracting out of activities that
had previously been performed by the firm to
external organizations
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Benefits of Globalization
Wealth
Better jobs
Access to technology
Lower prices
Availability of goods
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Criticisms of Globalization
• Offshoring of service jobs to lower-wage
countries
– Companies and countries place downward
pressure on wages and working conditions
• Growing trade deficits and slow wage growth
could lead to economic collapse
• Concerns over environmental and social
impacts
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Global Agreements
• General Agreement on Tariffs and Trade
(GATT)
– Helped in the dramatic reduction of tariff and
nontariff barriers among nations
• World Trade Organization (WTO)
– Oversees rules and regulations for international
trade and investment
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Regional Agreements
North American Free Trade Agreement (NAFTA)
U.S.–Singapore Free Trade Agreement
U.S.–Central American Free Trade Agreement (CAFTA and CAFTADR)
European Union (EU)
Transatlantic Trade and Investment Partnership (T-TIP)
Association of Southeast Asian Nations (ASEAN)
Trans-Pacific Partnership (TPP)
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North American Free Trade Agreement
(NAFTA)
• Member nations include the United States,
Canada, and Mexico
• Helped eliminate tariffs and import and export
quotas
• Opened government procurement markets to
companies in the other two nations
• Increased opportunity to make investments in
each other’s country
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North American Free Trade Agreement
(NAFTA) (continued)
• Increased the ease of travel between
countries
• Removed restrictions on agricultural products,
auto parts, and energy goods
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Changing Global Demographics
• Factors contributing to the increase in the
median global population age
– Increase in global life expectancy due to
improvements in technology and healthcare
– Increase in time spent in retirement due to
increase in life expectancy
– Decline in global fertility rate
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Shifting Balance of Economic Power in
the Global Economy
• Result of economic integration and rapid
growth of emerging markets
• Emerging and developing nations might play a
dominant role in the global economic system
– BRIC countries – Brazil, Russia, India, and China
– E7 – Seven major emerging economies (Brazil,
China, India, Indonesia, Mexico, Russia, and
Turkey)
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Shifting Balance of Economic Power in
the Global Economy (continued)
– N-11 – Next wave of emerging markets
(Bangladesh, Egypt, Indonesia, Iran, Mexico,
Nigeria, Pakistan, Philippines, Turkey, South Korea,
and Vietnam)
– African countries can benefit from the increase in
price of commodities
• Gas and oil, agricultural products, and mineral and
mining products
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Table 1.7 – Changing Global Demographics:
Developing Countries on the Rise
Source: United Nations: Department of Economic and Social Affairs, World Population Prospects: The
2015 Revision. –> –> https://esa.un.org/unpd/wpp/
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Trends in Trade and International
Investments
• Since the global recession in 2009 , global
trade and investment have continued to grow
• Foreign direct investment (FDI)
– Amount invested in property, plant, or equipment
in another country
– Growing at a slow but steady rate in the years
since the global recession
– May reach $1.7 trillion by 2017
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Global Economic Systems
Market
economy
Command
economy
Mixed
economy
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Market Economy
• Exists when private enterprises reserve the
right to own property and monitor production
and distribution of goods and services
• Management is effective
– Private ownership provides local evaluation and
understanding
• Least restrictive form of economy
– Resource allocation is determined by the law of
demand
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Market Economy (continued 1)
• General balance between supply and demand
sustains prices
– Imbalance creates price fluctuation
• Competition is encouraged
– Helps promote innovation, economic growth, high
quality, and efficiency
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Market Economy (continued 2)
• Optimal growth is facilitated by focusing on
how to best serve the customer
• Monopolies or restrictive business practices
may be prohibited to maintain the integrity of
the economy
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Command Economy
• Government holds explicit control over the
price and supply of a good or service
• Businesses are owned by the state
– Ensures that investments and other business
practices are done in the best interest of the
nation
– Management ignores demographic information
• Creates an environment where little
motivation exists
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Mixed Economy
• Combination of market and command
economy
• Helps raise the standard of living
– Aided by regulations concerning minimum wage
standards, social security, environmental
protection, and the advancement of civil rights
• Ownership of organizations that are critical to
the nation may be transferred to the state
– Subsidizes costs and allows the firms to flourish
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Evaluation of the World’s Economies
Established
economies
Emerging
economies
Developing
economies
• North America
• European Union
• Japan
• Central and
Eastern Europe
• China
• Other emerging
markets of Asia
(South Korea,
Hong Kong,
Singapore, and
Taiwan)
• India
• South America
• Middle East and
Central Asia
• Africa
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North America
• One of the four largest trading blocs in the
world
– Combined purchasing power of the United States,
Canada, and Mexico is more than $19 trillion
• Free-market-based economy provides
considerable freedom in decision-making
processes
– International firms receive the benefit of greater
flexibility and lower barriers
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North America (continued 1)
• The United States
– Firms maintain dominant global positions in
technology-intensive industries
– Considered to be a lucrative market for expansion
by foreign MNCs
– Canada is the largest trading partner
• Most of the largest foreign-owned companies in
Canada are totally or heavily U.S.-owned
• Legal and business environments are similar to that in
the U.S.
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North America (continued 2)
• Mexico
– Strongest Latin American economy
– Has free-trade agreements with over 46 countries
– Competes with Asia for the U.S. market and has
the benefit of proximity and lower-cost labor
• Facilitated by the maquiladora system
– Increased trade with both Europe and Asia
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European Union (EU)
• Objectives and goals
– Eliminate all trade barriers among member
nations
– Follow a single currency (euro) and a regional
central bank
• Firms have the benefit of:
– Manufacturing high-quality, low-cost goods
– Shipping manufactured goods across the EU
without paying duties or being subject to quotas
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European Union (EU) (continued)
• Challenges
– Absorbing its eastern neighbors that could result
in a giant, single European market
– Large deficits faced by several European
governments
• Resulted from structural conditions and shorter-term
economic pressures
• Placed pressure on the euro
– Maintaining a unified EU in the coming decades
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Japan
• Unprecedented economic success in the
1970s and 1980s
– Huge positive trade balance
– Strong yen
– Gained recognition as the world leader in
manufacturing and consumer goods
• Remains a formidable international
competitor and is well poised in all major
economic regions
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Japan (continued)
• Early success can be attributed to:
– The Ministry of International Trade and Industry
(MITI)
• Governmental agency that identifies and ranks national
commercial pursuits and guides the distribution of
national resources to meet these goals
– Keiretsus
• Large, vertically integrated corporations whose holdings
supply much of the assistance needed in providing
goods and services to end users
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Emerging and Developing Economies
• Face relatively low GDP per capita
• Have an unskilled or semiskilled workforce
• Involve considerable government intervention
in economic affairs
• Can be viewed as developing economies that
exhibit sustained economic reform and growth
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Russia
• Dismantled price controls
• Privatized businesses previously owned by the
government
• Direct investment and membership in
International Monetary Fund (IMF) helped to
raise GDP and decrease inflation
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Russian Economy
• Early economy was boosted by abundant oil
and high global energy prices
– Recent decreases in demand have pushed Russia
into a recession
• Likely to undergo many years of economic
instability and recurrent political problems
• Challenges – Persistent crime, corruption, and
lack of public security
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Central and Eastern Europe
• Hungary
– Privatization of state-owned businesses
– Joint ventures between local and western firms
– Receives direct investments from MNCs
• Poland
– Only economy in the EU to continue to grow
during the global recession of 2008–2009
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Central and Eastern Europe (continued)
• Key for Albania and other Eastern European
countries is to make themselves less risky and
more attractive for international business
– Maintain social order
– Establish rule of law
– Rebuild collapsed infrastructure
– Get factories and other value-added, jobproducing firms up and running
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China
• Considerable decline in GDP
• Current challenges
– Massive savings glut in corporate sector
– Globalization of manufacturing networks
– Vast developmental needs
– Unemployment (15–20 million new jobs required
annually)
– Social unrest
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China: Major Risk for Investors
• Caused due to:
– Delicate nature of the one country, two systems
balance (communism and capitalism)
– Concerns about undervaluation of China’s
currency
– Unpredictable and fluid nature of policies toward
foreign firms
• Trade relations with developed nations remain
tense
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Economic Performance in Emerging
Markets of Asia
• South Korea
– Chaebols: Large, family-held conglomerates that
have considerable economic and political power
– Has a solid economy with moderate growth and
inflation, low unemployment, an export surplus,
and fairly equal distribution of income
• Hong Kong
– Headquarters for some of the most successful
multinational operations in Asia
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Economic Performance in Emerging
Markets of Asia (continued 1)
• Singapore
– Emerged as an urban planner’s model and the
leader and financial center for Southeast Asia
• Taiwan
– Progressed from a labor-intensive economy to one
dominated by technologically sophisticated
industries
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Economic Performance in Emerging
Markets of Asia (continued 2)
• Thailand, Malaysia, Indonesia, and Vietnam
– Have a large population base with inexpensive
labor despite lack of natural resources
– Known to have social stability but have suffered
from turmoil in the aftermath of recent economic
crisis
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India
• Recent trend of locating software and higher
value-added services has bolstered middleand upper-class market for goods and services
• Attractive to U.S. and British investors
– Presence of English-speaking, well-educated, and
technologically sophisticated workers
– Availability of government funds for economic
development
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South America
• Faced many economic problems
– Accumulated heavy foreign debt obligations
– Experienced severe inflation
• Implemented economic reforms to reduce
debt
– Periodic economic instability and the emergence
of populist leaders have had an impact on the
attractiveness of countries in this region
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South America: Brazil
• Attracted considerable foreign investment
– Through privatization of power,
telecommunications, and other infrastructure
sectors
• Benefited from one of the most stable
governments throughout Latin America
– Undisputed economic leader of South America
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South America: Brazil (continued)
• Long-term prospects are still potentially
positive due to:
– Presence of a large and relatively well-educated
population
– Availability of ample natural resources
– Existing industrial base
– Strategic geographic position
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Chile
• Economic growth has fluctuated between
three and six percent since the 2000s
• Attracts FDI, mainly dealing with gas, water,
electricity, and mining
• Continues to participate in globalization
– Engages in trade agreements with Mercosur,
China, India, the EU, South Korea, and Mexico
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Argentina
• Has an overall strong economy
– Due to abundance of natural resources, highly
literate population, export-oriented agriculture,
and diversified industrial base
• Has suffered recurring economic problems
– Inflation, external debt, capital flight, and budget
deficits
• Economic growth has slowed since the global
recession
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Middle East and Central Asia
• Possess large oil reserves
• Have highly unstable geopolitical and religious
forces
– Try to balance these forces with economic viability
and activity in the international business arena
• Rely almost exclusively on oil production
• Have made large investments in U.S. property
and businesses
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Africa
• Has considerable natural resources but
remains very poor and undeveloped
– International trade is only beginning to serve as a
major source of income
• Risk for foreign investors arises from:
– Overwhelming diversity of the population
– Major political instability
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Africa (continued 1)
• Economic setbacks are caused due to:
– Tragic tribal wars
– Spread of diseases such as AIDS, malaria, and
Ebola
– Lack of institutions, infrastructure, and economic
capacity to take full advantage of globalization
– Poverty, malnutrition, illiteracy, corruption, social
breakdown, vanishing resources, overcrowded
cities, drought, and homeless refugees
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Africa (continued 2)
• Economic growth and dynamism have
accelerated in recent years
– Rise in GDP
– Growth in telecommunications, banking, and
retailing
• Rate of return on foreign investment in Africa
is higher than for any other region
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Be the International Business
Consultant: Walmart in India
• In light of this situation, what would your
recommendation be to Walmart?
• Should it stick with the wholesale focus, or
should it pursue another joint venture with an
Indian partner?
• Alternatively, should it maintain a “wait and
see” approach in hopes that the Indian
government will finally reform its restrictions
on foreign investment?
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Review and Discuss
• How has globalization affected different world
regions?
– What are some of the benefits and costs of
globalization for different sectors of society
(companies, workers, communities)?
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Review and Discuss (continued 1)
• How has NAFTA affected the economies of
North America and how has the EU affected
Europe?
– What importance do these economic pacts have
for international managers in North America,
Europe, and Asia?
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Review and Discuss (continued 2)
• Why are Russia and Eastern Europe of interest
to international managers?
– Identify and describe some reasons for such
interest and also risks associated with doing
business in these regions
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scanned, dupl
