ch. 1.1 - Importance of International Management
- Most competition is international
- Need for knowledgeable managers overseas
- Need for knowledgeable managers at home
ch 1.1 - What is international Management?
- IM consists of all “transactions that are carried out across national borders”
- Transactions include the providing of services or goods in exchange for money, services, or goods
- IM is driven by a shift towards globalization
ch 1.2 - What’s globalization? What can we globalize? Whats the difference?
Globalization is the shift toward a more integrated and interdependent world economy.
- Globalization of Markets
- Globalization of Products
When globalizing markets we are expanding our market range (actuating in other markets, ex: coca-cola), when globalizing products, we build a product from “pieces” coming from different parts of the world (ex: Outsourcing of USA Health Care)
ch 1.2 - Talk about Globalization of Markets
- Refers to the merging of distinctly separate national markets into one huge global marketplace
- Falling trade barriers
- Facilitated by offering standardized products and converging tastes and preferences, (i.e.):
- Citicorp (VISA)
- Coca-Cola, Pepsi
- McDonalds, KFC
- IKEA
- Starbucks
ch 1.2 - Talk about Globalization of Products
- Refers to the sourcing of goods and services from locations around the globe to take advantage of national differences in the cost or quality of factors of production (i.e. labor, energy, land, capital)
- Historically: primarily manufacturing firms
- Increasingly: outsourcing of service activities
- Companies are taking advantage of modern communication technologies
ch 1.2 - Globalization of Markets: What can go wrong?
There are limits to Product Standardization
- Direct product transfer works well in many industries (i.e. cameras. software, aricrafts), however, significant differences still exists among national markets (i.e. due to different consumer preferences, cultures, legal systems and so on)
- But after learning with the failures it is possible to do a successful re-entry!
ch 1.2 - Globalization of Markets: Examples of direct transfers that failed
- Philips could not sell coffee machines in Japan because they were too big for Japanese kitchens
- In Spain, Coca Cola had to take the 2-liter-bottles out of the market because they were too big for the local fridges
- Campbell Soup had to cover a loss of 30 Mio. $ in Great Britain with concentrated soups - customers were not instructed that water had to be added
ch 1.2 - Globalization of Products example
Outsourcing of USA Health Care:
- There is a shortage of radiologists in the United States
- Radiologists in India available
- Send images over the Internet to India, interpreted by radiologists there
ch 1.3: Drivers of globalization:
Provide an overview of drivers of globalization.
- Declining Barriers for Trade and Investment
- Technological Change
- New Competitors
- Converging consumer preferences
- Cultural dependency v. ability of standardization
ch 1.3: Drivers of globalization
Reasons for declining barriers for Trade and Investment ?
- Global Integration
- Regional Integration
obs: Protection from government and big corporations is useful but may hinder global market
ch 1.3: Drivers of globalization
Talk about Global Integration.
- GATT (General Agreement on Tariffs and Trade) was established in 1947
- Nine negotiating ‘rounds’ aimed at lowering barriers to the free flow of goods and services and encourage free trade
- In the “Uruguay Round” (1986-1994), nations agreed to further reduce tariffs, and established the World Trade Organization (WTO 1995)
- As of March 2013 there were 159 member nations
- Investment liberalization: Aim is to reduce national regulations on FDI
ch 1.3: Drivers of globalization
Talk about Regional Integration.
- Since 1950s emergence of regional economic integration blocks (for example European Union)
- Aim is to reduce tariffs and develop similar technical and economics standards
- Firms can reduce their production costs by capturing economies of scale
- Lower costs structure will also promote the firm’s international competitiveness outside the trading block
- However, companies face competition on home market from firms located in other member countries
- Privatization and deregulation
ch 1.3: Drivers of globalization
What are the Technological Changes that drives globalization?
- Communication
- Transportation
ch 1.3: Drivers of globalization
Talk about Communication changes
- New markets opened through the world wide web and new technologies
- Videoconferencing, e-mails etc. allow to communicate very fast and at very low costs
- Sophisticated search engines (i.e. Google) or social networks allow anyone to find crucial information
- Information technology is spurring borderless financial markets (due to better information and faster transaction)
ch 1.3: Drivers of globalization
Talk about Transportation changes
- Several major innovations in transportation technology have occurred since World War II
- Advent of commercial jet travel has reduced the time needed to get from one location to another (Traveling reduces cultural distance)
- Super freighters and introduction of containerization have revolutionized the transportation business (Faster and Cheaper)
- Reconfiguration of the value chain
ch 1.3: Drivers of globalization
Talk about new Competitors
Globalization introduces emerging market as potential competitive players
1) Inside emerging markets:
- Free market reforms in emerging countries (i.e. Russia, China)
- Industrialization, economic development and modernization
- Many hungry young and well educated people
2) From industrialized countries to Emerging Markets
- FDI (Foreign Direct Investment) by industrialized countries to benefit from low-cost labor
- Transfer of technology to emerging markets (joint ventures are very popular)
- Companies from emerging markets improve their competitiveness (e.g.: Green industries in china is growing)
3) From Emerging Markets to Industrialized Countries
- Emerging markets are moving from being low value-adding commodity producers, dependent on low cost labor, to sophisticated competitive producers of quality products (a.k.a.: same quality, but lower price)
- Companies from emerging markets are also expanding beyond their own borders
ch 1.3: Drivers of globalization
Converging consumer preferences
This means that similar products can be sold to similar groups of customers in almost any country in the world (global market segments)
- Cultural homogenization: national cultures that once were very different are becoming less so
- Increased international travel
- Global media and communication systems
- Advent of some discernible similarities between consumer tastes across geographical boundaries (“global village”)
- Global product standards, especially in technical industries, are becoming increasingly accepted and carried over
ch 1.3: Drivers of globalization
Example of Converging consumer preferences
Global brands such as Levi’s Jeans become “aspirational” lifestyle symbols that are recognized and admired worldwide
ch 1.3: Drivers of globalization
Talk about Cultural dependency vs ability of standardization
Cultural free are products that have:
- LOW Cultural dependency
- HIGH ability of standardization
On the other hand, culture bound products have:
- HIGH Cultural dependency
- LOW Ability of standardization
ch 1.3: Drivers of globalization
Give a list of products ordered by cultural dependency, i.e., from Culture free to Culture bounod
Culture free
Computer (Hardware) Airlines Cameras Heavy Equipment Machine tools Consumer electronics Computer (Software) Home appliance Wine and spirituous beverages Soft drinks Tobacco products Cosmetics Beer Household cleaner Toiletries Magazines Food
Culture bound
ch 1.4: Global Dynamics
Dimensions of global dynamics: Overview
Dynamics of:
- Global competition
- Value chain configuration
- Global cost pressures
- Global economy
ch 1.4: Global Dynamics
Explain dynamics of global competition
No industry is free from the impacts of global competition, even in local business, global competition is possible:
- Globalization implies a higher intensity and scope of competition
- In most industries competitors, customers and suppliers are global
- This often implies cost pressure and the demand to be present in many locations
ch 1.4: Global Dynamics
Explain dynamics of Value chain configuration
3 Kinds of value chain configurations:
- Globalization of a single value chain activity
- Fragmentation and global dispersion of entire value chain
- Following regional specialization in value adding (add something unique)
ch 1.4: Global Dynamics
Example of dynamics of Value chain configuration
Globalization of entire chain:
- SMART fortwo
- Big Mac in Ukraine
Globalization of single value chain activity
- R&D of Siemens
Following regional specialization in value adding
- Localization
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Exam0
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0 - Introduction0
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1 - Globalization31
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2 - Country Factors: National Differences in Culture44
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3 - Internationalization Theories and Foreign Direct Investment22
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4 - International Strategy I: Basics I (NAO CAI)0
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5 - International Strategy I: Basics II11
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6 - International Strategy II: Going International21
