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Managing in a Global Environment

Managing in a Global Environment. Global Perspectives?. Parochialism - viewing the world solely through your own perspectives, leading to an inability to recognize differences between people.

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Managing in a Global Environment

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  1. Managing in a Global Environment

  2. Global Perspectives? • Parochialism - viewing the world solely through your own perspectives, leading to an inability to recognize differences between people. • Ethnocentric Attitude - the parochialistic belief that the best work approaches and practices are those of the home country.

  3. Other Global Perspectives • Polycentric Attitude - the view that the managers in the host country know the best work approaches and practices for running their business. • Geocentric Attitude - a world-oriented view that focuses on using the best approaches and people from around the globe.

  4. Understanding the Global Environment – Trading Alliances • European Union (EU) - a union of 27 European nations created as a unified economic and trade entity with the Euro asa single common currency.

  5. Exhibit 3-1European Union Map

  6. Crisis # 1 = PIIGS Portugal Italy Ireland Greece Spain

  7. PIIGS Portugal – already being bailed out by IMF, over-sized government sector, Unemployment at 17%, public debt at 130% of GDP Italy - public debt over 126% of GDP, economy has shrunk 7% in last five years, stagnant economy for the last 20 years, high levels of corruption Ireland – already being bailed out by IMF, financial system insolvent, government implementing huge cuts in spending Greece – Unemployment at 28%, public debt over 170% of GDP and already “restructured” some debt but still over 136% now, economy still shrinking, very bloated government sector Spain – Unemployment 26%, youth unemployment at 55%, persistent unemployment crisis (in 1990s, over 20%), private debt is 200% of GDP,

  8. Ohhhhhh Greece Greece elects Tsipras (Syriza party, left) Wants to end austerity Increase government social programs Likely to default of $ 400 Billion in debt Still a $10 Billion loan to be received Greek Bank stocks drop 40% in two days Greek Govt bonds jump from 14% to 17% interest New York Times, Jan 26, 2015 p1-10

  9. It got soooo bad Banks would not consider Greek government bonds as collateral for loans

  10. Crisis #2 BrexitThe British are leaving… the British are leaving… Updated By Professor Ludlum UCO

  11. The sides: Major political parties, all in favor of staying… Prime Minister David Cameron leads the “Remain” camp, and he could lose his job if his effort fails. Behind him are most of the Conservative government he leads, the Labour Party, the Liberal Democrats and the Scottish National Party, which is strongly pro-Europe.

  12. Leave = 17,410,742 (51.9%) Stay = 16,141,241 (48.1%) Blank = 25,359 ?? 72% of registered voters participated

  13. England is “in” The European Union began in 1951 as the European Coal and Steel Community, an effort by six nations to heal the fissures of World War II through duty-free trade. In 1957, the Treaty of Rome created the European Economic Community, or Common Market. Britain tried to join, but President Charles de Gaulle of France vetoed its application in 1963 and in 1967. Britain finally joined in 1973.

  14. Biggest Issue for “Leave” Immigration Two strains of UK immigration issues: • Low wage migrants – pushing down income for natives • Immigrants that will not assimilate (language, dress, customs, etc.)

  15. When passed the Schengen Agreement: Thoughts were to ease burdens for college students who want to study abroad, Small group and temporarily relocation Now, over a million eastern Europeans have migrated to England searching for unskilled jobs

  16. There is no precedent for a sovereign member state leaving the European Union or any of its predecessor organizations. However, three territories of EU member states have withdrawn: Algeria (1962, independence from France), Greenland (1985) and Saint Barthélemy (2012), the latter two becoming Overseas Countries and Territories of the European Union.

  17. Article 49A of the Treaty of Lisbon, which came into force on 1 December 2009, introduced for the first time a procedure for a member state to withdraw voluntarily from the EU. This is specified in Article 50 of the Treaty on European Union, which states that: Any Member State may decide to withdraw from the Union in accordance with its own constitutional requirements. A Member State which decides to withdraw shall notify the European Council of its intention. In the light of the guidelines provided by the European Council, the Union shall negotiate and conclude an agreement with that State, setting out the arrangements for its withdrawal, taking account of the framework for its future relationship with the Union.

  18. The banking sector is one of the most vocal advocating to stay in the EU, with the British Bankers Association saying: "Businesses don't like that kind of uncertainty". Brexitmight result in the banks' changing domicile. According to Goldman Sachs and the City of London's policy chief, all such factors could impact on the City of London's present status as a European and global market leader in financial services.

  19. Problem 2 – Hyper-regulation Committee in Brussels, Constant over-reaching Once a board (unelected) in Brussels decides, little or no ability to appeal…

  20. 12 languages on laundry soap… Every time a new country is added (Croatia in 2016), another language on your soap box

  21. Latest: Define a “teapot” Must be uniform size, set by Brussels, or cannot be called a “teapot” Labor law “harmonization” Make all employment contracts with identical terms Local labor laws (English, German, Swedish, etc.) are to be ignored

  22. Remember the Purpose Work together economically Might avoid the next war How does the extensive regulation further that purpose? How does large scale migration of low-skilled workers help?

  23. Result: New Prime Minister Theresa May, Conservative Party, Oxford grad. Parliament since 1997 July 13, 2016 -

  24. Trading Alliances (cont.) • North American Free Trade Agreement (NAFTA) - an agreement among the Mexican, Canadian, and U.S. governments in which certain barriers to trade have been eliminated.

  25. NAFTA after TrumpProfessor Ludlum UCO

  26. NAFTA Fundamentals Signed by George H.W. Bush in 1992 The North American Free Trade Agreement was approved by both Houses of Congress in 1993 (by narrow margins). NAFTA became effective in 1994.

  27. Blaming Clinton for NAFTA? Original agreement was NOT self-____________ Bush 1 made the basic agreement Clinton worked out the details…

  28. The North American Free Trade Area Comprised of United States, Canada, and Mexico. Largest free trade area in the world Canada and U.S. are each other’s largest trading partners $575 billion in 2015. U.S. and Mexico trade at $531 billion in 2015.

  29. And then came Trump REPEAL NAFTA Build THE WALL Value of Mexican Peso dropped 7.7% in one DAY after the election.

  30. Four days as President: (Jan. 26, 2017) Presidential Directive: REPEAL NAFTA

  31. Four days as President: (Jan. 26, 2017) Presidential Directive: 20% tax on all Mexican products

  32. 2017 Update In 2008, exchange rate was $1 USD = 13 Pesos In 2017, exchange rate was $1 USD = 22 Pesos Effect? 69% drop in purchasing power of Peso Walmart in Mexico – deposits NIGHTLY are converted into US Dollars!

  33. Economic Analysis Biggest impact from NAFTA: competing among imports, not driving US jobs into Mexico Other words: Mexico now competes with China and Vietnam for products to sell to USA 2.1 J. of Intl. Bus. & Econ. 1-9 (2014)

  34. Global Trade Mechanisms • World Trade Organization (WTO) - a global organization of 153 countries that deals with the rules of trade among nations. • Successor to GATT (1947-1994)

  35. IMF and World Bank Professor Ludlum UCO Anyone been to NYC?

  36. Global Trade Mechanisms International Monetary Fund (IMF) - an organization of 185 countries that promotes international monetary cooperation and provides advice, loans, and technical assistance.

  37. History of IMF http://www.imf.org/external/about/histcoop.htm What is Bretton Woods? When was Bretton Woods? Who were the founders of the IMF?

  38. IMF via DSK http://www.imf.org/external/about/whatwedo.htm How many nations in IMF? When did IMF start? What does the IMF do? Dominique Strauss-Kahn http://www.aol.com/article/2015/02/02/french-pimping-trial-to-start-for-ex-imf-chief-strauss-kahn/21138049/?cps=gravity_1967_5708854411518672345

  39. Problem No Enforcement mechanism No way to stop those who manipulate currency (China?) or those who misuse the IMF (Zimbabwe?) Except to deny them future access to IMF funds

  40. SDR http://www.imf.org/external/about/sdr.htm What is an SDR? How do countries use an SDR? What 4 currencies define the SDR?

  41. IMF = Too Western? Many nations are pushing for re-organization of the IMF steering committee (pending since 2010) Take away veto power of USA and EU (85% rule) Also, some European nations (Belgium, Germany) are being pushed out of steering committee in favor or emerging economies (Brazil, South Korea)

  42. December 2015 update China’s renminbi (yuan) “Peoples’ money” Becomes 5th currency used in SDR Would you put (all) your nation’s savings into Chinese currency? New York Times, December 1, 2015, B1

  43. Developing and Newly Industrialized Countries Difference between a “developed” and “developing” country? Hard Currency – globally traded currency ($) Soft Currency – difficult to exchange

  44. Exchange Rate example Contract to be paid in Argentina Pesos $700,000 A. Pesos per Tractor Exchange rate - - $7 A.P. = $1 USD American firm gets $100,000 per tractor 10 tractors every month for five years

  45. Exchange Rate example Argentina’s economy in trouble $700,000 A. Pesos per Tractor (same) Change Exchange rate - - $8.5 A.P. = $1 USD Now, American firm gets $82,352 per tractor

  46. Exchange Rate example If contract was paid in DOLLARS $100,000 USD per Tractor (same) ($700,000 A. Pesos) Exchange rate - - $8.5 A.P. = $1 USD Now, Argentina cost is $850,000 A. Pesos/tractor

  47. This happened in one day in January, 2014 Wall Street Journal, Jan. 24, 2014 In fact, US airlines selling tickets in Venezuela have seen a devaluation of their local fares of 45% (loss of over $3 billion) Wall Street Journal, Feb. 7, 2014

  48. Happened with Mexico – 2017 Update In 2008, exchange rate was $1 USD = 13 Pesos In 2017, exchange rate was $1 USD = 22 Pesos Effect? 69% drop in purchasing power of Peso Walmart in Mexico – deposits NIGHTLY are converted into US Dollars!

  49. The World Bank • http://web.worldbank.org/WBSITE/EXTERNAL/EXTABOUTUS/0,,contentMDK:20046292~menuPK:51123588~pagePK:50004410~piPK:36602~theSitePK:29708,00.html • http://www.worldbank.org/results/ What is the World Bank? What is their purpose?

  50. Presidents of World Bank, always USA Until 2012… https://en.wikipedia.org/wiki/World_Bank

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