Sweeping political, economic, and social changes around the world present new challenges to global managers. The worldwide move away from communism, together with the trend toward privitization, has had an enormous influence on the world economy; economic freedom is a critical factor in the relative wealth of nations.
One of the most striking changes today is that almost all nations have suddenly begun to develop decentralized, free-market systems in order to manage a global economy of intense competition, the complexity of high-tech industrialization, and an awakening hunger for freedom.
Central and Eastern Europe
An area greatly affected by these recent developments is the Central and Eastern European bloc, where communism proved unworkable and crumbled. World attention is now focused on a new market of 430 million people whose invitingly low wage rates offer investors an unexplored, low-cost manufacturing opportunity. Many impediments remain that will hamper business growth, however, because East European countries lack the capitalist structure and systems to reproduce Western management practices easily. As one researcher notes, Market research is unfamiliar. The closest thing to a market survey that many East Europeans have experienced is a government interrogation17 However, growing stability and economic gains in Central Europe-Poland, Hungary and the Czech Republic-are attracting a flood of foreign investment. These include an Opel car plant in southern Poland, expansion by IBM of its disk-drive plant in Hungary, and a new TV plant by Matsushita in the Czech Republic.
China
China has enjoyed recent success as an export powerhouse, a status built on its strengths of low costs and a constant flow of capital. Its GDP growth rate, though slowing, was the fastest growth rate in the world for several consecutive years.
President Jiang Zemin has made state-enterprise reform his priority. Though it can hardly be called mass privatization, his plan is to save Chinas 1,000 largest state enterprises, and privatize or dissolve smaller, money-losing ones. His goal is to invigorate Chinese industry so it can compete in the global economy. As a result, millions of surplus industrial workers will lose their jobs, and the others will no longer receive free lifelong social benefits.19 In early 2002, China will join the World Trade Organization (WTO), opening its state-dominated economy to imports, foreign investment, and increased exports. Unfortunately, privatization is not as easy as it sounds; whether in Pakistan, China, Russia, or Argentina, the problems involved with selling state-owned companies-monsters of inefficiency that have incurred colossal losses over the years-are not easily solved.
Less Developed Countries
Change in less developed countries (LDCs) has come about more slowly as they struggle with low GNP and low per capita income as well as the burdens of large, relatively unskilled populations and high international debt. Their economic situation and the often unacceptable level of government intervention discourage the foreign investment they need. Many countries in Central and South America, the Middle East, India, and Africa desperately hope to attract foreign investment to stimulate economic growth. For firms willing to take the economic and political risks, there is considerable potential for international business in the LDCs. Assessing the risk-return trade-offs and keeping up with political developments in these developing countries are two of the many demands on international managers.
Other Regions in the World : Economic article from Global Management Catagory Other Regions in the World
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