Transcript Document

BEHAVIOUR OF A GLOBAL CORPORATION
[Hill, pp. 43-57], [Head, pp. 13-18, 23-31] and culture [R/H, Ch.5, 122-139]]
NORTEL NEWTWORKS CORP. (formerly Northern Telecom)
Headoffice in Toronto, Canada
C.E.O. Mike S. Zafirovski (a U.S. citizen),
(Former C.E.O., Bill Owens, also a U.S. citizen, was vice chairman of the United States Joint Chiefs of
Staff, the second-ranking military office in the United States, in the Clinton administration.)
Less than one fourth of its workforce in Canada:
(At December 31, 2006, approximately 33,760 regular full-time employees)
• 12,950 in the U.S.; • 7,080 in Canada;
• 5,950 EMEA; and • 7,780 in other countries.
Canada accounts for less than 10% of Nortel’s sales revenue
For the Years Ended December 31 ($mil.)
United States . . . . . . . . . . . . . .
EMEA (Europe, M.East, Africa).
Canada. . . . . . . . . . . . . . . . . . .
Asia . . . . . . . . . . . . . . . . . . . .
CALA (Caribbean and L.America)
Consolidated . . . . . . . . . . . . .
2006
$ 5,092
3,239
720
1,736
631
$11,418
2005
$ 5,203
2,704
571
1,422
609
$10,509
2004
$4,645
2,483
552
1,238
560
$9,478
Most of Nortel's corporate tax is paid in the U.S.
Most of its plant and equipment and key executives are
located in the U.S.
Nortel says: the company owes no allegiance to Canada and
could decamp if its key workers continue to bolt to lowertax climes ("the U.S. states")
Is Canada relevant in Nortel's business decisions?
Nestle
LG Electronics (part of LG Group,
formerly Goldstar Electronics)
(I) ASSESSING INTERNATIONAL BUSINESS ENVIRONMENT:
MEASUREMENT DIMENSIONS (Sometimes termed “separations,” i.e. what
separates a country from other countries? E.g. Head)
(A)Political Environment:
Collectivism vs. individualism
Totalitarian vs. democratic systems
Political freedom vs. economic freedom
(B)Economic Environment:
Market vs. command economies
Level of economic development
(C)Legal environment
Intellectual property rights
Product safety and liability
Contracts
(A)Political environment
individualism (individual freedom, market orientation)
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totalitarian
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democratic
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collectivism
Implications for IB?
political freedom
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economic freedom
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(B)Economic environment
level of economic development
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-life expectancy, literacy rate, etc.?
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-per capita GDP/income based on PPP?
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command economy
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mixed economy
market economy
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-prices determined by?
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-private ownership?
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-government intervention?
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collectivism
Implications for IB?
II. EVALUATING COUNTRY-SPECIFIC FACTORS
1A. POLITICAL FACTORS (Hill, CH.2)
1B. ECONOMIC FACTORS (Hill, CH.2)
1C. LEGAL FACTORS
2. CULTURE (Rugman/Hodgetts, CH.5)
POLITICAL / ECONOMIC FACTORS
How should we evaluate the attractiveness of a country as a market and/or
investment site?
ASSESS POTENTIAL BENEFITS VS COSTS AND RISKS
Benefits of doing business in a country determined by:
market size (+),
purchasing power (current wealth) of the consumer (+),
economic growth (future wealth) (+), etc.
EXAMPLES: U.S., MEXICO, FRANCE, CHINA
Correct assessment of foreign markets is very important!
If a firm happens to be the first to succeed in an emerging market, it may reap
first-mover advantage.
EXAMPLES:
Coca-Cola vs Pepsi in Japan,
McDonald vs. ???
CAUTION: A FIRST-MOVER INTO A FOREIGN MARKET DOES NOT ALWAYS
SUCCEED
Why?????
Why,
because of the cost to develop a foreign market for the kind of product to be sold.
A second mover may not have to pay for the cost to develop the market and/or
consumers' taste.
THE COSTS OF DOING BUSINESS IN A COUNTRY DEPEND ON 4
FACTORS:
A) political factors (which may require the firm to pay bribes for doing business
in that country)
B) economic factors
E.g. infrastructure and supporting business; for example, do parts/material
supply, service network exist?
If not, vertical integration of the firm may be needed (e.g. McDonald in Moscow)
C) legal factors
E.g. Do they have:
-regulations (or lack thereof) on workplace safety, pollution, product liability?
(E.g. Mattel, the world's biggest toy maker, and its product liability problem?)
- binding business contracts / dispute resolving mechanisms?
- protection of intellectual property rights (IPR)?
D) cultural factors
- does culture drive IB?
- its role in IB?
Which countries have more corruption?