OPM 533: Project Management Slide 1

OPM 533: Project Management
Slide 1
Dr. Torky Althaqafi
Email: [email protected]
College of Business Administration
University of Business and Technology
Dr. Torky Althaqafi
Email: [email protected]
College of Business Administration
University of Business and Technology
PhD in Project Management & Entrepreneurship (Australia)
Master of Applied Project Management (Australia)
Project Management Professional (PMP)
Advance Diploma of Occupational Health and Safety (Australia)
Accredited SME Consultant (USA)
Diploma of Quality Auditing (Australia)
Bachelor of Science degree (Jeddah)
Diploma of Computer Applications (Jeddah)
PhD in Project Management & Entrepreneurship (Australia)
Master of Applied Project Management (Australia)
Project Management Professional (PMP)
Advance Diploma of Occupational Health and Safety (Australia)
Accredited SME Consultant (USA)
Diploma of Quality Auditing (Australia)
Bachelor of Science degree (Jeddah)
Diploma of Computer Applications (Jeddah)
Chapter 1
Globalization
Learning Objectives
• 1-1 Understand what is meant by the term globalization.
• 1-2 Recognize the main drivers of globalization.
• 1-3 Describe the changing nature of the global economy.
• 1-4 Explain the main arguments in the debate over the impact
of globalization.
• 1-5 Understand how the process of globalization is creating
opportunities and challenges for management practice.
Opening Case
• Detroit Bikes
• By 2018, about 95 percent of bikes sold in U.S. were
assembled in China; about 65 percent of component parts
were also produced in China.
• American consumers benefitted from lower prices.
• Detroit Bikes is an exception to outsourcing trend but
struggled with production and local sourcing.
• 2018 tariffs and resulting trade war was a mixed blessing for
Detroit Bikes, due to supply chain disruptions.
• Detroit Bikes is trying to avoid raising prices, other companies
say they have no choice.
• VCG/Getty Images
Opening Case
• Many made-in-China goods are now produced in Taiwan, creating an export boom
to the U.S. as tensions rise between Washington and Beijing.
• Link
• VCG/Getty Images
Introduction
• World Economy Today
Fewer self-contained national economies.
More integrated global economic system with lower barriers to trade and investment.
Transformation is called globalization.
Today, benefits of globalization are more in dispute than at any time in the last half century.
 This shift has created many challenges and some opportunities, too.
 Globalization continues to impact almost everything we do.
What Is Globalization?
What Is Globalization? 1
• Globalization
Globalization refers to the trend towards a more integrated global economic system where
barriers to cross-border trade and investment are declining, perceived distance is shrinking thanks
to advances in transportation and telecommunications, and material cultures are more similar
across borders.
Two facets:
 Globalization of markets.
 Globalization of production.
What Is Globalization? 2
• The Globalization of Markets
The merging of historically distinct and separate national markets into one huge global
marketplace.
In many markets, tastes and preferences of consumers in different nations are
converging on some global norm, creating a global market.
 Examples: Coca-Cola, McDonald’s, IKEA, Starbucks, Apple.
• The most global of markets are for industrial goods and materials that serve universal
needs around the world.
 Aluminum, oil, wheat, microprocessors.
What Is Globalization? 3
• The Globalization of Production
– 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 (labor, energy, land,
and capital). thereby allowing them to compete more effectively against their rivals.
– Lower overall cost structure.
– Improvement of the quality or functionality of a product to compete more effectively.
What Is Globalization? 4
• Boeing to outsource some 65 percent of its 787
aircraft.
• Boeing kept key activities such as design and
marketing in the United States.
• 50 suppliers located around the world for much of
the aircraft’s production.
• For Boeing the strategy meant lower costs and
higher value, but it also meant greater risk.
• Is Boeing still an American company?
• What are the benefits to companies of outsourcing production?
What Is Globalization? 4
• The Globalization of Production
continued
– Early outsourcing was primarily for
manufacturing.
– Today, modern communications
technology allows companies to
outsource services.
– Impediments to globalization:
 Formal and informal trade barriers.
 Barriers to foreign direct
investment.
 Transportation costs.
 Economic and political risk.
 Managerial challenge for
coordinating a globally dispersed
supply chain.
The Emergence of Global Institutions
The Emergence of Global Institutions 1
• Global Institutions
– World Trade Organization (WTO)
– General Agreement on Tariffs and Trade (GATT),
– International Monetary Fund (IMF)
– World Bank
– The United Nations (UN)
Over the last half-century, several global institutions have been created to help manage,
regulate, and police the global marketplace, as well as to promote the establishment of
multinational treaties to govern the global business system.
The Emergence of Global Institutions 2
• World Trade Organization (WTO)
• Polices world trading system and ensures nation adhere to the rules established in
WTO treaties.
• Succeeded the General Agreement on Tariffs and Trade (GATT).
• 164 member nations accounted for 98 percent of world trade (2020).
The Emergence of Global Institutions 3
International Monetary Fund (IMF)
– Maintains order in the international monetary system.
– Lender of last resort.
– Requires nation-states to adopt specific economic policies in return for loans.
• World Bank
– Promotes development using low-interest loans.
– Seen as less controversial than IMF.
The Emergence of Global Institutions 4
• United Nations (UN)
Committed to maintaining international peace and security on basis of UN Charter:
 Develops friendly relations among nations.
 Promotes cooperation in solving international problems.
 Promotes respect for human rights.
 A center for harmonizing the actions of nations.
• Includes 193 member countries.
The Emergence of Global Institutions 5
• Group of Twenty (G20)
– Comprised of finance ministers and central bank governors of the 19 largest world
economies plus the EU and European Central Bank.
– Represents 90 percent of global GDP.
– Became a forum for a coordinated policy response to the financial crisis of 2008 and
2009.
Drivers of Globalization
Drivers of Globalization 1
• Two Macro Factors Toward Greater Globalization
1. Decline in barriers to free flow of goods, services, and capital.
2. Technological change.
Drivers of Globalization 2
• Declining Trade and Investment Barriers
International trade occurs when a firm exports goods or services to consumers in another
country.
Foreign direct investment (FDI) occurs when a firm invests resources in business
activities outside its home country.
During 1920s and 1930s, many nations put up barriers to international trade to protect
domestic industries.
After WWII, the industrialized countries of the West started a process of removing barriers
to the free flow of goods, services, and capital between nations. Under GATT, nations
negotiated even further decreases in tariffs and made significant progress on several nontariff issues (e.g. intellectual property, trade in services).
Table 1.1 Average Tariff Rates on Manufactured Products as
Percentage of Value
Country 1913 1950 1990 2018
France 21 percent 18 percent 5.9 percent 3.9 percent
Germany 20 26 5.9 3.9
Italy 18 25 5.9 3.9
Japan 30 — 5.3 2.5
Netherlands 5 11 5.9 3.9
Sweden 20 9 5.9 3.9
United Kingdom — 23 5.9 3.9
United States 44 14 5.7 3.1
• Sources: The 1913 to 1990 data are from “Who Wants to Be a Giant?” The Economist: A Survey of the
Multinationals, June 24, 1995, pp. 3 to 4. The 2018 data are from the World Tariff Profiles 2019, published by the
World Trade Organization.
Drivers of Globalization 3
• Declining Trade and Investment Barriers continued
• Trade in goods and services has been growing faster than
world output for decades.
• By 2019, sales of foreign affiliates of multinational
corporations reached $27 trillion.
Implications of fast-paced volume of world trade:
 More companies dispersing parts production.
 Economies of nation becoming more twisted.
 World becoming significantly wealthier.
• BCFC/Shutterstock
Figure 1.1 Value of World Merchandised Trade and
World Production 1960 to 2019
• Access the text alternative for slide images.
• Sources: World Bank, 2020; World Trade Organization, 2020; United Nations, 2020.
Drivers of Globalization 4
• Declining Trade and Investment Barriers continued
Some firms finding home markets under attack from foreign competitors.
Global financial crisis of 2008 to 2009 and drop in global output that occurred
led to more calls for trade barriers to protect jobs at home.
 Resulting trade wars, such as one between U.S. and China.
 May slow the rate of globalization and production.
• COVID-19 global pandemic has had a significant impact on global supply chains,
and thus on globalization.
Drivers of Globalization 6
• Role of Technological Change continued
The Internet.
 In 2019, 4.5 billion users (58 percent of global population).
 Reduces constraints of location, scale, and time zones.
Transportation Technology.
 Commercial jets, superfreighters.
 Innovation of containers has significantly lowered shipping costs.
Drivers of Globalization 7
• Role of Technological Change continued
Implications for the Globalization of Production.
 Lower transportation costs makes geographically dispersed production system more
economical; allows firms to better respond to demand shifts.
Implications for the Globalization of Markets.
 Low-cost communication networks create electronic global marketplace.
 Low-cost transportation makes shipping products around the world economical.
 Reduced cultural distance.
 Converging consumer tastes and preferences.
The Changing Demographics of the Global Economy
The Changing Demographics of the Global Economy 1
• Global Economy: Early 1960s
– U.S. dominated the world economy, world trade.
– U.S. dominated world FDI.
– U.S. MNEs dominated international business.
– About half the world was off limits to Western international business.
– Today, much has changed.
The Changing Demographics of the Global Economy 2
• The Changing World Output and World Trade Picture
Early 1960s.
 U.S. was dominant in industrial power, accounting for about 38 percent of world
manufacturing output.
• Today:
• U.S. accounts for only 24 percent.
• Germany, France, the U.K., and Canada had similar decline.
• Rapid economic growth now in countries like China, India, Russia, and Brazil.
• Chinese economy could surpass U.S. within a decade.
• Further relative decline by the U.S. and others is likely.
Table 1.2 Changing Demographics of World Output and World Exports
Country
Share of World
Output in 1960
(%)
Share of
World Output
Today (%)
Share of
World Exports
Today (%)
United States 38.3 percent 24.0 percent 8.2 percent
Germany 8.7 4.6 7.1
France 4.6 3.2 2.8
Italy 3.0 2.4 2.4
United Kingdom 5.3 3.3 2.3
Canada 3.0 2.0 2.2
Japan 3.3 6.0 3.6
China NA 15.2 11.1
• Sources: Output data from World Bank database, 2019. Trade data from WTO Statistical Database, 2019.
The Changing Demographics of the Global Economy 3
• The Changing Foreign Direct Investment Picture
– World output generated by developing countries has been steadily increasing since 19
60s.
– Stock of foreign direct investment (total cumulative value of foreign investments)
generated by rich industrial countries is declining.
– Cross-border flows of foreign direct investment is rising.
– Largest developing country recipients of FDI are China, Mexico, and Brazil.
Figure 1.2 FDI Outward Stock as a Percentage of GDP
• Access the text alternative for slide images.
• Sources: OECD data 2020, World Development Indicators 2020, UNCTAD database, 2020..
Figure 1.3 FDI Inflows (in millions of dollars) 1990 to 2019
• Access the text alternative for slide images.
• Source: United Nations Conference on Trade and Development, World Investment Report 2020.
The Changing Demographics of the Global Economy 4
• The Changing Nature of the Multinational Enterprise
– A multinational enterprise (MNE) is any business that has productive activities in two
or more countries.
– In last 50 years, rise of non-U.S. multinationals and growth of mini-multinationals.
– Non-U.S. Multinationals.
 Large number of U.S. multinationals reflects U.S. economic dominance.
 Today, world economy is shifting away from North America and western Europe.
Figure 1.4 National Share of the Largest 2,000 Multinational
Corporations in 2019
• Access the text alternative for slide images.
• Source: Forbes Global 2000 in 2019.
The Changing Demographics of the Global
Economy 5
• The Changing Nature of the Multinational Enterprise continued
– The Rise of Mini-Multinationals.
 More small- and medium-size businesses (mini-multinationals) are involved in international
trade and investment.
 Internet lowers barriers that smaller firms face in building international sales.
The Changing Demographics of the Global
Economy 6
• The Changing World Order
Collapse of communism throughout eastern Europe.
 Greater export and investment opportunities, but political unrest is an
increasing risk.
Economic development in China.
 Huge opportunities despite continued government control, but also new
competition from Chinese firms.
Free market reforms and democracy in Latin America.
 New markets and new sources of materials and production, but
economic and political risk remain high.
The Changing Demographics of the Global
Economy 7
• Global Economy of the Twenty-First Century
A more integrated global economy.
 New opportunities for firms.
 But political and economic disruptions can upset plans.
 Risks associated with global financial crisis.
 Impact of global supply chain disruptions.
• Hedging strategies increasing in importance.
Managing in the Global Marketplace
Managing in the Global Marketplace
• International Business
Any firm that is engaged in international trade or investment.
Managing international business differs from managing domestic business.
– Practices vary by country.
– The range of problems confronted by a manager in an international business is wider and the
problems themselves more complex than those confronted by a manager in a domestic business.
– Need to understand rules governing international trade and investment.
– International transactions involve converting money into different currencies.
• Qilai Shen/In Pictures Ltd./Corbis/Getty Images
Summary
• In this chapter, we have
– Understood what is meant by the term globalization.
– Recognized the main drivers of globalization.
– Described the changing nature of the global economy.
– Explained the main arguments in the debate over the impact
of globalization.
– Understood how the process of globalization is creating
opportunities and challenges for management practice.

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