Text Book – Deresky, H. (2011, 2008): InternationalManaging Across Borders and Cultures (6th/7th ed.). Pearson Prentice-Hall.

The final grading (= Endnote) is based on the following:1. 10% - Class Participation/Mündliche Mitarbeit2. 60% - Presentation -

- part I 30% during 3rd & 4th week,- part II presentation

3. 30% - Final Report/ Abschlussbericht

n TOTAL: 100%

Both presentations and the final report are intended to be team-based work.

The final presentation and the final report is around case studies, which are going to be handed out to the teams on 30.05.

Time Plan Schedule block seminar / Neuer Ablauf Blockseminar Monday mornings 09:15 - 17:00 h

#1 Fri.23.05 #2 Fri 30.05. #3 Fri 06.06. – part I Country Briefing Presentation #4 Fri 13.06. – part I Country Briefing Presentation #5 - Q&A - Fri 17.06 (9:00 -13:00h)

#6 Fri 20.06. - Part II Case Studies Final seminar for presentation of semester project:

Due Day for handing in the written project report MO 20.07.

© 2008 Pearson Prentice Hall 1-2

Chapter 1: Assessing the Environment: Political, Economic, Legal, Technological

PowerPoint by Hettie A. Richardson

Louisiana State University

Chapter 1 Learning Objectives1. Understand the global business environment and

how it affects the strategic and operational decisions which managers must make.

2. Critically assess the developments, advantages, and disadvantages of globalization.

3. Develop an appreciation for the ways in which political, economic, legal, and technological factors and changes impact the opportunities that companies face.

4. Review the role of technology in international business.

Economic Crisis Spreads Through Financial Globalization

What caused the global economy to collapse? Toxic Assets: Highly leveraged securities Subprime mortgage mess Finance has become one of the most

international of industries Failure of banks and other financial

institutes: American Fannie Mae & Freddie Mac American Lehman Brothers Hypo Real Estate Holding France's Societe Generale bank (> $7 billion fraud) And many more…

1-3

What is International Management?

1-5

The process of developing strategies, designing and operating systems, and working with people

around the world to ensure sustained competitive advantage

Copyright ©2011 Pearson Education, Inc. publishing as Prentice Hall

What is Globalism?

Global competition characterized bynetworks of international linkages thatbind countries, institutions, and peoplein an interdependent global economy

© 2008 Pearson Prentice Hall

Challenges to Globalism

Backlash against capitalism andrekindling of nationalism

Increased protectionism of high-demandresources

Need to develop top managers withinternational understanding andexperience

1-7 Copyright ©2011 Pearson Education, Inc. publishing as Prentice Hall

Benefits of Globalism

Access to more markets

Growth of developing economies

Opportunities for flexibility and efficiency

Opportunities for small and medium-sizedenterprises (SMEs)

1-8 Copyright ©2011 Pearson Education, Inc. publishing as Prentice Hall

Regional Trading Blocks

The dominance of the United States is alreadyover.

What is emerging is a world economy of blocsrepresented by: NAFTA, EU, and ASEAN.

Much of today’s world trade takes place withinthese three regional free-trade blocs: Western Europe, Asia, and the Americas

Much of today’s world trade are grouped aroundthree dominant currencies: euro, yen, and the dollar

Regional Trading Blocs

Much of today’s world trade takes placewithin three regional free-trade blocs: Western Europe Asia The Americas

The European Union

A unified market of over 400 millionpeople in 27 nations

Two challenges for global managers: “Fortress” Europe Dealing with multiple cultures within this

unified market

Asia

China India ASEAN South Asia Association of Regional

Cooperation (SAARC) Japan Asian Tigers:

Hong Kong Singapore South Korea Taiwan

1-13 Copyright ©2011 Pearson Education, Inc. publishing as Prentice Hall

The Americas

North American Free Trade Agreement(NAFTA)

Central American Free Trade Agreement(CAFTA)

Free Trade Area of the Americas (FTAA)

Other Regions of the World

The Russian Federation

Less Developed Countries (LDCs) Low gross national product (GDP) Low per capita income Large, relatively unskilled populations High international debt

Comparative Management in Focus: China Keeps on Chugging

• The fastest growing GDP rate (over 9percent/year) for 30 years

• Economy has doubled every eight years for 30years

• Surpassed Germany in 2009 as the world’slargest exporter

• Investing heavily in energy and other naturalresources in 2009 that could give it aneconomic advantage it has never had before

However: • Weakening demand for Chinese exports—due

to global recession• Chinese government may not be able to

prevent the financial crisis from derailing thecountry’s economic miracle

• The political, legal, and social environmentscreate unpredictability for businesses

1-16 Copyright ©2011 Pearson Education, Inc. publishing as Prentice Hall

Results of India’s Opening Economy

Increased Indian and foreign investment

A growing middle-class

Increased productivity and profits

A growing reputation for serviceoutsourcing and exporting

Information Technology: Affecting the Management Agenda

Making geographic barriers less relevant

Lowering cultural barriers

Encouraging convergence of consumers’tastes and preferences

Technology Trend

Manufacturing – The third industrial revolution The digitization of manufacturing will transform the way

goods are made—and change the politics of jobs too

http://www.economist.com/node/21553017 Video - http://www.economist.com/

The Globalization of Human Capital

The offshoring of manufacturing jobs andoutsourcing of white-collar jobs isincreasing

It has been estimated that 3.3 million USjobs will be lost in service-sectoroutsourcing by 2015

The Political and Economic Environment

Sustainability—economic, political, social, andenvironmental—has become a significantworldwide issue

Ethnicity—a driving force behind politicalinstability around the world

Religion—religious disputes lie at the heart ofregional instabilities: former Yugoslavia,Northern Island, the Middle East…

Political Risk Any governmental action or politically

motivated event that could adversely affectthe long-run profitability or value of a firm

Example:Venezuela recently forced oil companies to accept a minority stake in fields they owned and to pay more in taxes and royalties

Common Political Risk Events

Expropriation and confiscation

Nationalization

Terrorism

Macropolitical risk vs. micropolitical risk

Political Risk Assessment

Helps companies manage exposure to riskand minimize financial loss

Two forms: Consultation with experts Development of internal staff capabilities

Other Techniques for Managing Political Risk Computer Modeling

Example: American Can’s PRISM

Ranking systems

Early warning systems

Managing Political Risk

Equity sharing

Participating management

Localization of the operation

Development assistance

Dependency and Hedging

Input control Market control Position control Staged contribution Political risk insurance

(OPIC and FCIA) Local debt financing

Avoidance and Adaptation

Examples of Managing Terrorism Risk

IBM and Exxon try to develop benevolent

images and maintain low profiles

Using teams to monitor terrorist activities

Hiring counterterrorism consultants

Economic Risk

Is closely related to political risk

Is determined by a country’s ability orintention to meet its financial obligations

Economic Risk in LDCs

LDCs (Less developed countries) tend to pose more risk than developed countries

For example, expectations that Argentina’seconomy would shrink by 15% in 2002negatively affected foreign firms doingbusiness there

Types of Economic Risk

Loss of profitability due to abruptchanges in monetary and fiscal policies

Loss of profitability due to changes inforeign investment policies

Example: Devaluation of Yen/RMB in 1990s

Four Approaches to Assessing Economic Risk

Quantitative Approach

Qualitative Approach

Checklist Approach

A combination of these methods

Assessing Economic Risk The Big Mac index (Jan 12th 2012, The Economist

online) http://www.economist.com/blogs/graphicdetail/2012/01/daily-chart-3

The Legal Environment

Consists of the local laws and legal systemsof those countries in which an internationalcompany operates and of international law,which governs relationships betweensovereign countries

The Legal Environment

Type of Legal Systems Common law

Civil law

Islamic law

Approaches to Contract Law Common law: details must

be written in the contract tobe enforced

Civil law: assumes promiseswill be enforced withoutspecifying the details

In Asia the contract may bein the relationship, not on thepaper

Other Regulatory Issues

Protectionist policies, such as tariffs orquotas

The attractiveness of the tax system

The level of government involvement inthe economic and regulatory environment

Risks and Issues in the Technological Environment

The appropriability of technology

The International Convention for theProtection of Industrial Property (theParis Union)

More Issues and Risks in the Technological Environment

Inappropriate use of technology byothers

Appropriateness of technology for thelocal environment

Issues in Global E-Business

E-business - the integration of systems, processes,organizations, value chains,, and entire markets using Internet-based and related technologies and concepts to conductbusinesses

E-commerce - marketing and salesprocesses via the internet

B2B (business-to-business)

B2C (business-to-customer)

The world connected

1st Presentation Assignment Assessing the environment (political, economical, legal and

technological conditions for foreign investment): Based on Exhibit 1-4, pp. 26, develop a country environmen

assessing presentation for 20 – 30 minutes.

Additional topics to be addressed in the presentation: Are risk alone adequate criteria for foreign investment?

How likely is it that the profile of the country you have chosen will bethe same next year?

Over the next five years? Could you envision other criteria that might also be important?