Transcript First 4 lectures-IBM

International Business:
Cross-border motivations and
mentalities
Why study International Business?
Pervasive nature of International Business
Need for better managers overseas
Need for better managers at home
Pervasive nature of International Business
Pervasive nature of international business
Need for better managers overseas
20 – 30 percent failure rate for expatriate
managers
25 – 50 percent of the expatriate managers
who complete their assignment are
considered marginally effective or ineffective
by their organizations
Need for better managers at home
Regardless of their size,
All businesses are challenged at home by overseas
businesses
All businesses must consider sourcing materials overseas
All businesses must consider offshore production
All businesses must consider attractive markets overseas
Hence the need for managers who understand
international business even if they are working in
their home country
Management Education in the Future
Prediction:
All classes will be required to have an
international component. For example, you
won’t be able to study human resource
management without a component that looks
at expatriate manager issues
What types of companies will we be
concerned with in this class?
Multinational Corporations (MNCs)
Substantial direct investment in foreign markets
Actively engaged in managing overseas operations
How large are these companies?
Corporate revenues
GM = $168B
Ford = $146B
Mitsui = $144B
GNPs
Denmark = $168B
HK = $153B
Norway = $151B
What’s different about
multinational management?
– Multiple operating environments
–
Diverse pattern of consumer preferences, distribution channels,
legal frameworks, cultural characteristics, and financial
infrastructures
– Political demands and risks
–
Mesh corporate strategy with host country industrial development
policies—always the potential for conflict
What’s different (cont.)?
– Global competitive game
–
Multiple market access and various global scale economics
allow companies new competitive strategic options.
– Currency fluctuation risks
–
Economic performance is measured in multiple currencies
which result in accounting and economic exposure
– Organization complexity and diversity
–
Need to manage these complex and diverse demands across
barriers of distance, time, language, and culture.
Evolving theory of FDI
International Capital Theories
FDI driven by profit potential, portfolio diversification
Location Theories
FDI driven by countries’ comparative advantage
Product Cycle Theory
FDI driven by firms’ management of the product life cycle
• Exploit innovations, protect markets, develop sourcing
Oligopolistic Behavior Theories
FDI driven by firms ‘ search for or defense of competitive
advantage
Theory to strategy: Investment triggers at the managerial level
New Triggers
Classic Triggers
Global Scanning
•Resource alternatives
•Market trends
•Technology
•Competitive behavior
Market Seeking
•Fill capacity
•Protect exports
•Develop scale
IB
Resource Seeking
•Secure Supplies
•Exploit factor cost
differences
Competitive positioning
•Preempt markets or
resources
•Match competitive
advantages (follow leader)
•Develop positional strength
Underlying motivations
To exploit competitive capability
(Product Cycle Theory)
To defend competitive capability
(Oligopolistic Behavior Theory)
Oligopoly – market in which the actions of an individual firm
materially affect the industry price level
To build competitive capability
(Location and Oligopolistic Theories)
Note that the competitive capability a company builds,
defends and exploits will depend in part on the international
environment in which it expands.
Strategic perspectives in MNCs
International perspective
Domestic companies with foreign appendages
Opportunistic approach to FDI
Portfolio approach to management of foreign
operations
Strategic perspectives in MNCs (cont.)
Multi-national perspective
AKA: Multidomestic
Increased realization of importance of
international markets
Manage overseas operations as a federation of
independent companies
Strategic perspectives in MNCs (cont.)
Global perspective
Growing concern about international competition
and inefficiencies of multi-national response
Drive for cost competitiveness through product
standardization and organizational centralization
Manage worldwide operations as a single entity
Evolving motivations: Changing perspectives
High
Global
Transnational
International
Multinational
Global
Coordination
Integration
Low
Low
Local Responsiveness
High
Management philosophies
(Perlmutter):
Ethnocentrism
Domestic and International
Polycentrism
Regiocentrism
Geocentrism
Ethnocentric-Domestic
Domestic expansion only
S
H
A
Y
I don’t care Junior.
We are staying
at home.
Ethnocentric-International
Foreign expansion viewed as an appendage to domestic operations; same
strategies are utilized in all countries.
HQ
You see…our way
works best around
the world.
Polycentrism
Activities and functions are planned and managed, often by local nationals,
on a country-by-country basis (e.g., HRM is decentralized by country)
HQ
Would you look
at this? The GMs
do understand the
local markets
Regiocentrism
Operations are geared towards a particular continental region with similar
economies and cultures
Betaminor
HQ
Alphaland
Betaland
Geocentrism
Products are functional, reliable, and standardized low-cost products (e.g.,
HRM managed on a global basis)
I can see the
whole world
from here.
HQ
The Global Marketplace
Global Marketing into the TwentyFirst Century
The world is shrinking rapidly with the advent of faster
communication, transportation, and financial flows.
International trade is booming and now accounts for a
quarter of the United States’ GDP.
Between 1996 and 2006, U.S. exports are expected to
increase 51%.
Global competition is intensifying and few U.S. industries
are now safe from foreign competition.
Global Marketing into the TwentyFirst Century
To compete, many companies are continuously improving
their products, expanding into foreign markets, and
becoming global firms.
Global firms face several major problems:
High debt, inflation, and unemployment have resulted in highly
unstable governments & currencies,
Governments placing more regulations on foreign firms,
Protectionist tariffs and trade barriers,
Corruption.
Major Decisions in International
Marketing
Looking at the global marketing environment
Deciding whether to go international
Deciding which markets to enter
Deciding how to enter the market
Deciding on the global marketing program
Deciding on the global marketing organization
Looking at the Global Marketing
Environment
The International Trade System
i.e. Tariff, Quota, Embargo, Exchange
Control, and Nontariff Trade Barriers
The World Trade Organization and GATT
Treaty designed to promote world trade by reducing
tariffs and other international trade barriers
Regional Free Trade Zones
Group of nations organized to work toward
common goals in the regulation of international trade
Economic Environment
Subsistence
Economies
Industrial
Economies
Types of
Industrial
Structure
Industrializing
Economies
Raw Material
Exporting
Economies
Political-Legal Environment
At Least Four Political-Legal Factors Should be
Considered in Deciding Whether to do Business in a
Given Country:
Attitudes Toward
International
Buying
Government
Bureaucracy
Monetary
Regulations
Political
Stability
Cultural Environment
Sellers Must Examine the
Following Before
Planning a Marketing
Program Within a Given
Country.
Business
Norms and
Behavior
How Customers
Think About and
Use Products
Cultural Traditions,
Preferences, and
Behaviors
Deciding Whether to Go
International
Reasons companies might consider international expansion:
Global competitors attacking the domestic market,
Foreign markets might offer higher profit opportunities,
Domestic markets might be shrinking,
Need an enlarged customer base to achieve economies of scale,
Reduce dependency on any one market,
Customers might be expanding abroad.
Most companies do not act until some situation or event
thrusts them into the international market.
Deciding Which Markets to Enter
Define Organization’s Marketing Objectives
and Policies
What Volume of Foreign Sales is Desired?
How Many Countries Should the Firm Go Into?
What Types of Countries Should be Entered?
Rank by Market Size & Growth, Cost of Doing
Business, Competitive Advantage, & Risk Level.
Discussion Connections
Assess China as a market for McDonald’s.
What factors make it attractive?
What factors make it less attractive?
Assess Canada as a market for McDonald’s.
In what ways is Canada more attractive than China?
In what ways is it less attractive?
If McDonald’s could operate in only one of these
countries, which one would you choose and why?
Deciding How to Enter the Market
Exporting
•Indirect
•Direct
Joint venturing
Direct investment
•Licensing
•Contract manufacturing
•Management Contracting
•Joint Ownership
•Assembly facilities
•Manufacturing
facilities
Analysis of Global
DEMAND SIDE
Convenience, Flexibility,
Value-added
Customer services
Quality orientation
More product features,
choices
Products tailored to
individual needs
Changing perception of
need
Reduced loyalty to
brands
Customers require:
ALL THIS AT
LOWEST POSSIBLE
PRICE
Analysis of Global
SUPPLY SIDE
Global Operations
Increased competition
Power of Branding
Competitive requirements
Pro-active approach
Develop diversified products
with more features
IT embedded products
Change, Flexibility & Agility
Importance of Information
Customization
Focus on customer service
Focus on quality
Outsourcing of biz activities
Alliances, Mergers,
Acquisitions
Customer retention
Mass customization
TECHNOLOGY & International Business
BPOs
Call Centers
Outsourcing
MOOREs LAW
Metcalfe's law
E commerce
Introduction to E-commerce
EDI
E-tailing or Virtual store front
Fax, Internet Telephony
How Can we benefit
From a business point of view
From a consumer point of view
Types of E-commerce
B2B
B2C
C2B
C2C
The Concept of Web portals
Payment Mechanism
Traditional methods
Virtual money/ Electronic Cash
Merchant Accounts
E comm Contd..
Security
SET
Cyber crimes
Credit cards misuse
Steps to start E-Commerce
Planning the E-commerce
Selecting the Product/Service
Creating the web site
Web hosting
Online Payments
Delivery of the goods
Characteristics of Internet economy
Future of E-commerce
Reasons for lack of E commerce in Pakistan
Impact of E commrce on Global Economy
Ethical dimensions of E commerce ( Social Informatics)
Cyber Marketing
Introduction to Cyber marketing
Use of Meta tags
Use of graphics
Techniques of Web advertisement
Direct marketing
Using communities
Banner Advertising
Opt in email advertising
Advertising in Ezines
Pay per sale affiliate program
Search Engines
Link swapping
Cyber Marketing Contd..
Identify target market on the web
News group
Cyber Laws
Universal Cyber laws