Global Business Today: Asia-Pacific Perspective 5th edition by Charles W. L. Hill Solution manual
The changing world output and world trade picture
B) In the early 1960s, the US was still by far the world’s dominant industrial power. In 1963, for example, the US accounted for 40.3 per cent of world manufacturing output. However, by 2011 it accounted for only 19.1 per cent. This decline in the US position was not an absolute decline; rather, it was a relative decline, reflecting the faster economic growth of several other economies, most notably that of Japan. By the 1990s, a tripolar pattern of dominance had emerged, with the US, Western Europe and Japan being the major economic powers.
C) Given the rapid economic growth now being experienced by countries such as Brazil, China and India, further relative decline in the US, Japanese and Western European shares of world output and world exports seems likely.
D) If we look 20 years into the future, most forecasts now predict a rapid rise in the share of world output accounted for by developing nations such as Brazil, Russia, China, India, Indonesia, Thailand and South Korea, and a commensurate decline in the share enjoyed by rich industrialised countries such as Britain, Japan and the US.
The changing foreign direct investment picture
E) As shown in Table 1.2 and Figure 1.3, the share of world output generated by developed countries has been on the decline since the 1960s, as the stock (total cumulative value of foreign investments) generated by these rich industrial countries has been also on a steady decline. This trend is expected to continue. The growth in the political significance of the Group of Twenty relative to that of the Group of Eight is a reflection of the growing relative strength of the economies of countries as the BRIC group. The recent rapid growth of sovereign wealth funds as a source of FDI has added a new dimension to the FDI picture.
F) Similarly, as shown in Figures 1.4 and 1.5, there has been sustained growth in cross-border flows of foreign direct investment, and the flow of foreign direct investment (amounts invested across national borders each year) has been directed at developing nations, especially China.
The changing nature of the multinational enterprise
G) A multinational enterprise is any business that has productive activities in two or more countries.
Multinationals
H) The globalisation of the world economy, together with the rise of Japan to the top ranks of economic power, has resulted in a relative decline in the dominance of US and UK companies in the global marketplace. Looking to the future, we can reasonably expect the growth of new multinational enterprises from the world’s developing nations, continuing a trend started by the newly developed countries such as South Korea that can now list three of its MNEs among the world’s largest 100 companies.
Teaching tip: Students may be able to trace the change in rankings of the world’s largest multinational non-financial corporations by examining UNCTAD’s annual World Investment Report (www.unctad.org).
The rise of mini-multinationals
I) Another trend in international business has been the growth of medium-sized and small multinationals. These businesses are referred to as mini-multinationals. The internationalisation process of international new ventures (INVs), or ‘born globals’, is examined in Chapter 2.
The changing world order
J) The collapse of Communism in Eastern Europe represented a host of export and investment opportunities for Western businesses. With opportunities there are also substantial risks associated with the instability created by the economic and political reforms. Authoritarian governments persist in many of these former Communist countries.
K) The economic development of China presents huge opportunities and risks, in spite of its continued Communist control. In addition, companies must be aware of the rising competitive threat posed by emerging MNEs from developing countries such as China.
L) The growth and market reforms in India, Central Europe and Latin America also present tremendous new opportunities both as markets and sources of materials and production. To this point in time, the dominant ideology underpinning these reforms has been one of free markets, private ownership and reduced government regulation. The events of the 2007–09 GFC along with the success of the authoritarian model of China, however, have brought into question the efficacy of such a model.
The global economy of the 21st century: The emerging markets century?
M) The path to full economic liberalisation and open markets is not without obstruction. Economic crises in Latin America, South-East Asia and Russia caused difficulties in 1997 and 1998, as did the 2007–09 GFC. In some countries in Central Europe and Latin America there has been a retreat from political and economic liberalisation. While companies must be prepared to take advantage of an ever more integrated global economy, they must also prepare for political and economic disruptions that may throw their plans into disarray.