1. Management of International Business SupapakYodseranee BBA, 2010 1 BBA, MIB 2010

2. WK1 Agenda Meet and greet, seating chart Syllabus, course structure, tools Travel exercise Video clips Cases and discussion Info search exercise Homework Summary 2 BBA, MIB 2010

3. Travel Exercise In a group of 4-5, plan your trip abroad. What are the issues to consider? Where’s your destination? How did you decide? Tell your class. How does this exercise apply to MIB? 3 BBA, MIB 2010

4. Video Clips Google exit from China (to HK) Why Google entered China? Why Google exit from China? What’s the problem? What’s the company motto mean? “Don’t be evil” Parental control vs. biased media BP Oil Spill in the Gulf of Mexico What will this incident affect? What will change? Important issues of doing international business. Globalization What’s globalization? What are the pros and cons of globalization? 4 BBA, MIB 2010

5. Outsourcing American Health Care Who, What, When, Where, Why, How ??? Pros and Cons Discussion questions What trends have facilitate this process? Is the globalization of health care good or bad for the patients? Is it good for the American economy? Who might benefit? Who might lose? Should the US government restrict outsourcing of medical procedures to developing nations? What do we do in Thailand? Does Thailand involve in medical tourism business? 5 BBA, MIB 2010

6. Thai Political Risk Case What factors affect foreign companies doing business in Thailand? What makes a country attractive to foreign companies? OPIC (Overseas Private Investment Corporation) MIGA(Multilateral Investment Guarantee Agency) 6 BBA, MIB 2010

7. Info Search Exercise List Thai MNEs as much as you can. List Foreign MNEs doing business in Thailand. Categorize their business industries. Where are their headquarters or their branches? What are the size of their business? Any other interesting information? Growth rate? Make a summary. What website would be a good start? 7 BBA, MIB 2010

8. Homework & Summary Register yourself in Facebook with your full name and current picture! Add ajob.ubu@gmail.com Info Search Exercise Get the books Read chapter 1-8 What’s the difference in managing domestic vs. international business? What are the benefits of doing international business? Success factor? BBA, MIB 2010 8

9. WK1.2 Agenda Student News, Hot topic: Political Risk Lecture Mind map Homework 9 BBA, MIB 2010

10. International Business When did we start international trade? What’s the development? International trade International investment Our time What’s the buzz word for our time? Globalization 10 BBA, MIB 2010

11. Globalization Globalization: a shift toward a more integrated and interdependent world economy Globalization has two aspects -The globalization of market -The globalization of production 11 BBA, MIB 2010

12. The Globalization of Markets Globalization of market A merging of historically distinct and separated national markets into one huge global market place Global market examples: Should the companies customize their products? Think globally, act locally. 12 BBA, MIB 2010

13. The Globalization of Markets What help create the globalization of markets? Falling trade barriers Convergence in taste and preference of the consumers Global basic products offering from the firms 13 BBA, MIB 2010

14. The Globalization of Production The globalization of production refers to sourcing of goods and services from locations around the globe to take advantage of national differences in the cost and quality of factors of production like land, labor, and capital Why should we do this? We can compete easier and more effectively with lower cost or better quality. Assemble in Mexico Korean panel Taiwanese Chip Assemble in Thailand Chinese electronic components Processor from the US 14 BBA, MIB 2010

15. Globalization in a book BBA, MIB 2010 15

16. The Emergence of Global Institutions Institutions are needed to Help manage, regulate and police the global market place Promote the establishment of multinational treaties to govern the global business system Institutions created over the half past centuries include: The General Agreement on Tariffs and Trade (GATT) The World Trade Organization (WTO): control the world trading system and promote lower barriers to trade The International Monetary Fund (IMF): maintain order in international monetary system The World Bank: promote economic development The United Nations (UN): maintain peace, security, cooperation and human rights 16 BBA, MIB 2010

17. Drivers of Globalization Two major factors The decline in barriers to the free flow of goods, services, and capital that has occurred since the end of WWII Technological change Tariffs have dropped significantly since 1950 to around 4 % in 2005 BBA, MIB 2010 17

18. Drivers of Globalization BBA, MIB 2010 18

19. The Changing Demographics of the Global Economy A drastic change in demographics of the world economy in the last 30 years The changing world output and world trade picture The changing FDI picture The changing in multinational enterprise The changing world order BBA, MIB 2010 19

20. 1.The Changing World Output and World Trade Picture The share of world output accounted for by developed countries is decreasing. It is the opposite in developing countries and is expecting to be more than 60% by 2020. BBA, MIB 2010 20

21. 2. The changing FDI picture Need to update this chart. http://www.unctad.org/Templates/Page.asp?intItemID=1923&lang=1 BBA, MIB 2010 21 The share of FDI accounted for by developing countries have risen from 2% in 1980 to 12% in 2005

22. 3. The Changing Nature of Multinational Enterprise A multinational enterprise (MNE) is any business that has productive activities in two or more countries. Since 1960, there has been a rise in non US MNE and a growth of mini multinationals http://money.cnn.com/magazines/fortune/global500/2009/full_list/ BBA, MIB 2010 22

23. 4. The Change in World Order Many communist nations in Europe and Asia has committed to democratic politics and free market economies and so create new. opportunities for international business China and Latin America are also moving toward greater free market reforms. BBA, MIB 2010 23

24. Debate: Is globalization a good thing? BBA, MIB 2010 24 Anti globalization, protest at WTO meetings.

25. National Differences in Political Economy Politic or economic first? Think of India and China. What countries are still communist? Can communist countries have economic success? BBA, MIB 2010 25

26. Political System The political economy of a nation refers to how the political, economic, and legal system of a country are interdependent. They interact and influence on each other and they affect the level of economy. Political System refers to the system of government in a nation Assess in two dimensions Degree of collectivism vs. individualism Degree of democratic vs. totalitarian What would be the country in each quadrant? BBA, MIB 2010 26 Political System

27. Collectivism and Individualism Collectivism: collective goals over individual goals Socialistsadvocate state ownership of the basic means of production, distribution, and exchange. State-owned enterprise are managed to benefit society as a whole rather than individual capitalists In the early 20th century, socialism split into: Communism: achieved through violent revolution and totalitarian dictatorship (collapsed in the 90s) Social democrat: achieved through democratic means. The UK, France, and Germany adopted free market economies and privatized their inefficient state owned enterprise. Individualism: an individual should have freedom in his economic and political pursuits Individualism means democratic political system and free market economies Individualism is built on two principles: Emphasis on the importance of guaranteeing individual freedom and self expression The welfare of society is best served by letting people pursue their own economic self interest BBA, MIB 2010 27

28. Democracy and totalitarianism Totalitarianism:government has absolute control over all aspect of human life and prohibit opposing political parties. There are four major forms of totalitarianism Communist: communist party monopolizes power: China, Vietnam, Lao, N Korea, Cuba Theocratic:religious party monopolizes the power: Iran, Saudi Arabia Tribal :a particular tribe monopolizes the power, Tanzania, Uganda, Kenya, Zimbabwe Right Wing: permits individual on economic freedom but restricts on political freedom: Pakistan, Myanmar Democracy: a government is by the people (directly or elected representative) Democracy=> individualism Communism=>collectivism, totalitarianism Pure democracy: citizens should be directly involved in decision making Most democracy countries are representative democracy where citizens are periodically elect individuals to represent them. BBA, MIB 2010

29. Economic System There are three types of economic systems: Market economy: Business: privately owned Production: supply and demand, price system Government: encourage free and fair competition. Command economy: Business: state owned Production: government plan goods and services as well as price Mixed economy: Business: certain sectors are private ownership and free market. Government own their firms that are important to national security Example of state owned enterprise? BBA, MIB 2010 29

30. Legal System Legal system refers to the rule that regulate behavior as well as the processes by which the laws are enforced. Types of legal systems Common law: based on tradition, precedent, and custom Civil law: based on detailed set of laws organized into codes Theocratic law: based on religious teachings Customary law: based on the wisdom of daily experience or important traditions. Depending on the legal system, contracts are approached in different ways. For example, contract tends to be shorter and less specific under civil law because many issues already covered in the civil code. United Nations Convention on Contracts for the International Sale of Goods (CIGS) BBA, MIB 2010 30

31. Legal Issues in International Business BBA, MIB 2010 31

32. Ranking from World Bank 2010 BBA, MIB 2010 32

33. Property Rights and Corruption Property rights refer to the legal rights over the use to which a resource is put and over the use made of any income that may be derived from that resource. Property rights can be violated in two ways Private action:theft, piracy, blackmail, and the like by private individuals or groups. Public action: public officials such as politicians and government extort income, resources, or the property itself from property holders through legal mechanism such as excessive taxation, expensive license, and taking assets into state ownership without compensation to the owner BBA, MIB 2010 33

34. Property Rights and Corruption High corruption reduce FDI, the level of international trade, and the economic growth rate in the country. The Foreign Corrupt Practices Act: illegal for US firms to bribe foreign government officials. Corruption Perception Index 2009 10=clean 0=totally corrupt What’s the map telling you? What do you think of the index? BBA, MIB 2010 34

35. 35 The protections of intellectual property rights Intellectual property refers to property that is the product of intellectual activity—software, music, chemical formula etc. It can be protected using: Patent: exclusive rights for a defined period to the manufacture, use or sale of that invention Copy rights: exclusive rights of authors, composers, play rights or artists and publishers to publish their works as they see fit Trademarks ™: design and names by which merchants and manufacturers designate and differentiate their products We can copy everything except your mother! How do firms avoid piracy? Stay way, file lawsuit, and lobby the government World Intellectual Property Organization, Paris Convention for the Protection of Industrial Property

36. The Determinants of Economic Development Countries have different levels of economic development. Common measure of economic development: Gross national income(GNI) Purchasing power parity(PPP) adjusting GNI by purchasing power Human Development Index(HDI): measure the development by capabilities and opportunities that people enjoy not by the material output life expectancy at birth, educational attainment, and whether average income is sufficient to meet basic needs of life in a country  Quality of life BBA, MIB 2010 36

37. Economic Data Chart Need to update the data. BBA, MIB 2010 37 + + - + - + + + - -

38. Political Economy and Economic Progress What’s the relationship between the two? Innovation and entrepreneurship are the engine of growth i.e. Dell, Microsoft, Cisco Innovation and entrepreneurship require a market economy—free to make money out of his idea Innovation and entrepreneurship require strong property rights Democratic regimes help long term economic growth Economic progress begets democracy i.e. Korean, Taiwan Geography and education also influence economic growth BBA, MIB 2010 38

39. The Spread of Democracy Since 1980s two trends have emerged: Democratic revolutions Centrally planned=>free market economic model Three main reasons account for the spread of democracy: Many totalitarian regimes failedto deliver economic progress to the vast bulk of their populations i.e. the collapse of communism in Eastern Europe New information and communication technologies have reduced the state’s ability to control access to uncensored information i.e. satellite TV, internet The economic advances of the past quarter century have led to the emergence of increasing prosperous middle and working class who have pushed for democratic reforms BBA, MIB 2010 39

40. The New World Order and Global Terrorism Many countries are more difficult to do business because of the inherent violent conflict, or they are a part of a civilization that is in conflict with an enterprise’s home country Terrorism represents one of the major threats to world peace and economic progress in the 21st century BBA, MIB 2010 40

41. Economic Transformation A shift toward a market-based system involve a number of steps: BBA, MIB 2010 41

42. Implications for managers Political economy raise important issues (operational, strategic, human rights, environment, etc.) for doing international business. Political economy clearly influence the attractiveness of that country for investment. BBA, MIB 2010 42 Overall Attractiveness

43. Mind Map Make your own mind map as a summary for our lecture. Submit it to me. BBA, MIB 2010 43

44. Homework Add additional important data to your info search exercise. Make a summary and present to the class on Friday June 4, 2010. Bring your notebook. 44 BBA, MIB 2010

45. WK1.3 Agenda Hot topic: Student News, What happened in Japan? What about here? New PM? Mind map: The good, the bad, and the ugly mind Data search result Use various search engine and well known organizations website Spot unreliable websites by: Sitemap, dead link, strange definition, check with friends, hacker, censor Student needs… India vs. China BBA, MIB 2010 45

46. India vs. China BBC video clips, Fed Article What is the focus of each country? Why China and India walk different path? What kind of business that you will prefer India over China? Apply the concept you’ve learned to compare China and India for the overall attractiveness of the country. What other information would be helpful for your reasoning? Where can you get it? BBA, MIB 2010 46

47. Websites World Bank: www.worldbank.org WTO: www.wto.org Asia Business Connection: www.asiabiz.com CIA fact book: www.cia.gov Bank of Thailand: www.bot.or.th Ministry of commerce: www.moc.go.th Department of foreign trade: www.dft.moc.go.th Board of investment: www.boi.go.th Thai stock exchange: www.set.or.th Thai customs department: www.customs.go.th Thai revenue department: www.rd.go.th The office of industrial economics: www.oie.go.th/select_isic.asp BBA, MIB 2010 47