Environmental Foundation

1. Environmental Foundation The specific objectives of this chapter are: ASSESS the implications of globalization for countries, industries, firms, and communities. REVIEW current trends in international investment and trade. EXAMINE the present economic status in the major regions of the global community. ANALYZE some of the major developments and issues in the various regions of the world.

2. Top Ten Global MNCs The Top 10 global MNCs Ranked by Market Value, Sales, Profits, and Share-Price Gain, 2003 Market Value Billions of U.S. Dollars Sales Billions of U.S. Dollars • General Electric $328.11 • Microsoft 284.43 • ExxonMobil 283.61 • Pfizer 269.66 • Wal-Mart Stores 241.19 • Citigroup 239.43 • BP 193.05 • Aig 191.18 • Intel 184.66 • Royal Dutch’ Shell 174.83 • Wal-Mart Stores 258.68 • BP 232.57 • ExxonMobil 222.88 • Royal Dutch/Shell 201.93 • General Motors 183.24 • DaimlerChrysler 166.61 • Ford Motor 164.20 • Toyotal Motor 156.48 • Mitsubishi 137.32 • General Electric 134.19

3. Top Ten Global MNCs The Top 10 global MNCs Ranked by Market Value, Sales, Profits, and Share-Price Gain, 2003 Data: Morgan Stanley Capital International Standard & Poor’s Compustat Source: http://images.businessweek.com/mz/0o4/30/0430_62intbg1_a.gif Profits Billions of U.S. Dollars Share-Price Gain • ExxonMobil 20.96 • Citigroup 17.85 • General Electric 15.00 • HSBC Holdings 11.65 • Royal Dutch/Shell 11.41 • Bodafone Group 11.36 • Bank of America 10.81 • Toyota Motor 10.51 • Microsoft 9.99 • BP 9.54 • Mizuho Financial 636% • Research in Motion 550 • UFJ Holdings 420 • SK 383 • Rakuten 381 • Sumitomo Mitsui Fin. 331 • Elan 311 • Bharti Tele-Ventures 276 • Yahoo! Japan 241 • Mitsui Trust Hldgs. 229

4. Globalization • Criticisms of globalization • Offshoring of business services jobs to lower-wage countries • Growing trade deficits • Environmental and social impacts

5. Global and Regional Integration • World Trade Organization (WTO) • General Agreement on Tariffs and Trade (GATT) • Regional Agreements • North American Free Trade Agreement (NAFTA) • European Union (EU) • Association of Southeast Asian Nations (ASEAN)

6. Trends in InternationalInvestment and Trade • International investments • 80 percent from developed countries • Foreign direct investment (FDI) • Economic growth potential (esp. Japan, China and Asia in general) • Over one-half of world trade is accounted for by • United States • European Union • Japan

7. Foreign Direct Investment inthe United States (in millions of dollars) 2002 2003 All Countries 1,340,011 1,268,001 Canada 96,437 105,255 Europe 982,062 1,000,532 (select countries) United Kingdom 218,175 230,374 Germany 139,620 148,774 France 141,400 143,341 South and Central America 19,198 20,636 (select countries) Mexico 7,483 6,680 Brazil 997 663

8. Foreign Direct Investment inthe United States (in millions of dollars) 2002 2003 Other Western Hemisphere 50,167 48,921 (select countries) Bermuda 8,088 5,914 Netherland Antilles 4,014 4,048 UK islands, Caribbean 28,260 28,949 Africa 2,298 2,187 Middle East 7,456 7,931 (select countries) Israel 3,699 3,834 Kuwait 986 1,155

9. Foreign Direct Investment inthe United States (in millions of dollars) 2002 2003 Asia and Pacific 183,392 192,539 (select countries) Japan 150,499 159,258 Australia 23,136 24,652 Taiwan 2,569 2,708 Singapore 650 162 Hong Kong 1,879 1,981 Adapted from: Table 1-2: Foreign Direct Investment in the United States, 2002-2004 (in millions of dollars)

10. Foreign Direct Investment bythe United States Abroad (in millions of dollars) 2002 2003 All countries 1,601,414 1,788,911 Canada 170,169 192,409 Europe 848,599 963,087 (select countries) United Kingdom 239,219 272,640 Germany 67,404 80,163 France 42,999 47,914 South and Central America 131,973 141,449 (select countries) Mexico 55,724 61,526 Brazil 27,615 29,915

11. Foreign Direct Investment inthe United States (in millions of dollars) 2002 2003 Other Western Hemisphere 152,597 162,574 (select countries) Bermuda 80,048 84,609 UK islands, Caribbean 49,806 54,507 Africa 16,290 18,960 Middle East 14,671 16,942 (select countries) Israel 5,632 6,208 Saudi Arabia 3,823 4,217

12. Foreign Direct Investment inthe United States (in millions of dollars) 2002 2003 Asia and Pacific 267,125 292,490 (selected countries) Japan 65,939 73,435 Australia 34,409 40,985 Taiwan 7,608 10,961 Singapore 52,449 57,589 Hong Kong 41,571 44,323 China 10,499 11,877 Adapted from: Table 1-3: Foreign Direct Investment by the United States Abroad, 2002-2004 (in millions of dollars)

13. Top 10 Trading Partners of the United States, 2003 (in millions of dollars) Importing U.S. Exporting U. S. Rank Country Exports Rank Country Imports • Canada 169,924 • Mexico 97,412 • Japan 52,004 • United Kingdom 33,828 • Germany 28,832 • China 28,368 • South Korea 24,073 • Netherlands 20,695 • Taiwan 17,448 • France 17,053 • Canada 221,595 • China 152,436 • Mexico 138,060 • Japan 118,037 • Germany 68,113 • United Kingdom 42,795 • South Korea 37,229 • Taiwan 31,599 • France 29,219 • Ireland 26,747 Adapted from: Table 1-4: Top 10 Trading partners of the United States, 2003 (in millions of dollars).

14. What brand is owned by whom? • 1. The BIC pen company is: • A. Japanese • B. British • C. U.S. • D. French

15. What brand is owned by whom? • BIC SA is a French company

16. What brand is owned by whom? • 1. The company that owns Haagen-Dazs ice cream is in: • A. Germany • B. U.S. • C. Sweden • D. Japan

17. What brand is owned by whom? • British MNC Grand Metropolitan PLC sold the brand to Pillsbury—however—the company originated in the U.S.

18. What brand is owned by whom? • 1. The company that owns Holiday Inn is in: • A. Saudi Arabia • B. France • C. U.S. • D. Britain

19. What brand is owned by whom? Holiday Inn is owned by the British firm—Six Continents [formerly Bass PLC]

20. What brand is owned by whom? • 1. The owners of Godiva chocolate are: • A. U.S. • B. Swiss • C. Dutch • D. Belgian

21. What brand is owned by whom? • Godiva is owned by the Campbell Soup Company that is based in Philadelphia

22. Economic Performance North America • Mexico • very strong maquiladora industry • foreign manufacturers can send materials to their Mexican-based plants, process or assemble the products, and then ship them back out of Mexico with only the value added being taxed. • now competitive with Asia for the U.S. market • lower-cost labor • proximity to the American market (lower transportation costs and faster delivery) • Increasingly active in EU and Asian markets

23. Economic Performance South America • South American countries have experienced difficult economic problems • High inflation • Heavy foreign debt • Major factor in success is intercountry trade • Free market policies among South American countries • Survey of business leaders in S.A. countries finds that doing business with U.S. is most important agenda

24. Economic Performance Europe • Important factors • Privatization of traditionally nationalized industries • Emergence of the EU as an operational economic union • Economic linkages between the EU and newly emerging Central and Eastern European countries • Foreign MNCs gain foothold in EU by • Acquisitions • Alliances • Cooperative R&D efforts

25. Economic Performance Central and Eastern Europe • Russia, Czech Republic, Hungary, Poland and ? • Privatization • Crime • Political uncertainty

26. Economic Performance Asia • Japan • Phenomenal economic success in 1970s and 1980s • Ministry of International Trade and Industry (MITI) • Keiretsus • Vertically integrated industries • Holdings provide assistance needed in providing goods and services to end users • Decade long recession in 1990s • Bank loans backed by real estate or projected revenues • By 2000, most major banks had billions of dollars in uncollectible loans

27. Economic Performance Asia • China • Annual real economic growth of 10 percent during the 1980s and early 1990s • More recent growth of 8 percent • Healthy and growing economy • Attractive to foreign investors despite major political risk • Product pirating is major problem

28. Economic Performance Asia • The Four Tigers • South Korea • Chaebols (large family-held Korean conglomerates) • Affected by declining economies of South east Asia in 1990s • Hong Kong • Now part of People’s Republic of China • Uncertainty about role the Chinese government intends to play in local governance

29. Economic Performance Asia • The Four Tigers • Singapore • Least hurt by economic downturn of 1990s • British influence • Taiwan • Progression from labor-intensive economy to one dominated by technologically sophisticated industries (banking, electricity generation, petroleum refining and computers)

30. The World’s Most Competitive Nations, 2003 Ranking Country Rank United States 1 Australia 2 Canada 3 Malaysia 4 Germany 5 Taiwan 6 United Kingdom 7 France 8 Spain 9 Thailand 10 Adapted from Table 1-6: The World’s Most Competitive nations, 2003 Ranking Source: World Competitive Scoreboard, 2004.

31. Economic Performance Southeast Asia • The Baby Tigers • Thailand, Malaysia, Indonesia • Large population base • Inexpensive labor • Considerable natural resources • Attractive to outside investors

32. Economic Performance Developing and Emerging Countries • India • Low per capita GDP • Recent trend of locating software and high value-added services to this country • Attractive to U.S. and British investors (well educated, English speaking, technologically sophisticated workers) • Middle East and Central Asia • Large oil reserves • Highly unstable geopolitical and religious forces • Plagued by continuing economic problems

33. Economic Performance Developing and Emerging Countries • Africa • Considerable natural resources • African nations remain very poor and undeveloped • Populace divided into 3,000 tribes that speak 1,000 languages and dialects • Major political instability • Poverty, starvation, illiteracy, corruption, overcrowding among many social problems negatively affecting economic sector

34. Case: Colgate’s Distasteful Toothpaste • Consumer products company • Ajax, Fab, Hill pet food, Total • Household products: 75% of company revenue • International sales: 50% of company revenue

35. Colgate’s entrance into Asian market • Purchased a 50% partnership with Hawley and Hazel [H&H] • H&H chemical products firm based in Hong Kong • Leading brand—Darkie toothpaste in Taiwan, Hong Kong, Singapore, Malaysia and Thailand • Hawley and Hazel retained the right to make major decisions

37. U.S. reaction to Darkie toothpaste • Dissatisfaction of logo with U.S. action groups and media • Interfaith Center on Corporate Responsibility (institutional investors) • NAACP, National Urban League, Congressional Black Caucus • Shareholder petition to change brandname • Affect on stock market price?

38. How do you select a new brand name? • Darlie? • Darbie? • Hawley? • Dakkie? • Logo—Well dressed black man in silhouette • Time frame: 3 years

39. Transition of Brand Name

40. Discussion Questions • What do you think Colgate should have done to handle the situation? • Is it possible for Colgate and Hawley & Hazel to change the toothpaste’s advertising without sacrificing brand loyalty? Is that a possible reason for Colgate’s not responding quickly to domestic complaints?