BA 447 TOPICS IN INTERNATIONAL

BUSINESS

Instructor: Manolete V. Gonzalez

Ice breaker – on a sheet of paper

• Name• Major• As a student of international business,

what topic of a global nature interests you? For example, as you scan a newspaper, what article or news story would attract your attention?

Introduction• Learning Outcomes:

– An awareness of numerous issues of a global nature that multinational enterprises face

– An appreciation of the complexity of selected issues– Understand how multinational enterprises can be

affected– A capacity to investigate one such issue in its

complexity• Approach:

– Exploratory – identify possible topics/issues– Investigative – understand a few select issues– Focus: what may impact a multinational firm

Requirements

• Read and contribute– Text: The World Is Flat, Thomas Friedman– Readings: Economist, WSJ, NYT, etc.– Websites of similar news sources, reputable

organizations• Assignments• Participation – class discussion, in-class writing• Quizzes• Term project

Assignments

• An article relevant to the subject matter to be covered

• A typed statement (one page) that– Summarizes the article– States which aspect of the readings, e.g.

chapter assigned, the article adds to, contradicts, illustrates, etc.

• Indicate Assignment number on top of page

Quizzes

• Short essay questions• Will cover general themes in assigned

reading• May also cover topics discussed in class

Term Project– Focus on a specific issue that is or has the

potential to affect a multinational– Study it

• Describe it objectively• Understand its different aspects through multiple

perspectives• Stakeholders and their interests• What are inherent conflicts and how might these

be resolved?• Why relevant to a global/multinational company?

– Report on it: 10 page report plus presentation

Grading Guidelines

• All submissions must be typed and written well, for a professional audience.

• Assignments must be ready for submission by the beginning of class.

• Late submissions subject to penalties.• Fonts, spacing, penalties, etc. can be

found in the syllabus.

Course Structure

• Focus on companies pursuing global strategies• Friedman book to provide preliminary framework

– notion of a flat world, what flattened it (technological, political, social), and how to understand the implications of this ‘flat world”– We will investigate/elaborate on some of the ideas

that the book proposes, consider additional ideas– We will challenge those ideas that we think require

more scrutiny

GOING GLOBAL

Process of Expansion

• A global company emerges as a result of significant international expansion.

• International expansion is a gradual process and can involve different avenues.– Exporting– Licensing or franchising– Joint-ventures, often with “local” companies– Wholly-owned Subsidiaries

Why Global Expansion

• Competencies that provide advantages– Technological

• Wholly-owned subsidiary is preferred over licensing and joint ventures

– Management competency• Franchising, joint ventures, subsidiaries

• Search for low cost locations– Due to pressures to remain competitive,

improve margins• Exporting and wholly-owned subsidiaries

Factors Leading to Continued Global Expansion

• Location economies– There are economic benefits to performing a value

creation activity in an optimal location– Effects

• Can lower costs• Can enable differentiation

• Viewed another way, the experience curve– Serving a global market from one or a few plants is

consistent with moving down the experience curve and establishing a low-cost position

Factors Leading to Continued Global Expansion (cont’d)

• Transferring distinctive competencies– Companies with distinctive competencies can

realize large returns by expanding to global markets where competitors lack similar competencies and products

• Caveats - – Transportation costs– Trade barriers– Political and economic risks

If one were to take a snap shot of global or international firms, some

would be . . • Exporting from home country• Licensing or franchising• Operating in other countries through joint

ventures• Operating in other countries through

wholly owned subsidiaries• Or a combination of all of these

Typology of Global strategies – factors to consider

• Pressures for cost reductions• Pressures for local responsiveness

Four Basic Strategies

Description of each global strategy

• International strategy– Transfer competencies or products to foreign markets

where indigenous competitors lack those competencies/products

– Makes sense if • company has a valuable competence that indigenous

competitors lack • weak pressure for local responsiveness and cost reductions

• Examples: Proctor and Gamble and Xerox– Develop products at home, establish manufacturing

and marketing functions in each major country/region.

Description of each global strategy (cont’d)

• Multi-domestic or localization strategy– Develop a business model that allows

maximum local responsiveness– Makes sense when there are

• high pressures for local responsiveness and • low pressures for cost reductions

• Examples: MTV

Description of each global strategy (cont’d)

• Global (standardization) strategy– Focus on increasing profitability by reaping cost

reductions that come from experience curve effects and location economies; pursuing a low-cost strategy on a global scale

– Makes sense when there are • strong pressures for cost reductions and • demand for local responsiveness is minimal

• Example: Intel, Motorola, Texas Instrument – market a standardized product worldwide, products which serve universal need.

Description of each global strategy (cont’d)

• Transnational strategy– Simultaneously seek to lower costs, be

locally responsive, and transfer competencies in a way consistent with global learning

• Example: Caterpillar

The World Is Flat

Notes on the Friedman book

Round World• For a long time, people believed the world was

flat; adhering to this belief was convenient:– Dieties (or a diety) were above or below– Humans were in the middle– Royalties/priests could claim access to these dieties

and therefore power over their subjects• In the 16th century, Magellan discovered that the

world was round. (Columbus got as far as North America in 1492 and opened up the new world.)– Challenged traditional notions of religion– Challenged political status quo– Allowed more exploration

Flat World

• The notion of a flat world suggests a challenge to how we think of things– Globalization 1.0 (1492-1800): after discovery

that the earth was round, and big, exploration/expansion shrank the world

– Globalization 2.0 (1800 – 2000): multinationals followed their countries

– Globalization 3.0 (2000- ): individuals of diverse backgrounds able to collaborate and compete globally

Flat world – Southwest Airlines

• Globalization 1.0 – ticket agent issues you your ticket

• Globalization 2.0 – e-ticket machine replaced ticket agent

• Globalization 3.0 – you are your own ticket agent (get your boarding pass at home.)

Flat World

• Playing field has been flattened – traditional advantages accruing to one country or another are being challenged

• Other countries can compete for global knowledge work as never before

• Intellectual work, intellectual capital, can be delivered, distributed, produced, and put back together again . . . with relative freedom in the way we do work

Reasons for a Flat World

• Information and computer technology (ICT) developments - internet, browsers, open source, cell phones, etc.

• Political developments - “more democratic”• Social - more education in less developed

but populous countries• Business - innovation using ICT by

business organizations

Back to Four Basic Strategies

Example of Impacts on Multinationals

• For companies pursuing global or transnational strategies – supply chain is enhanced by these developments

• For companies pursuing international or multi-domestic strategies – selected aspects of value chain are enhanced, e.g. for MTV, delivery system; for Proctor and Gamble, HR, product (re-design)?

House Rules

• Read material before coming to class.• We will discuss topics. Debate with each

other if you wish.• Seek clarification of assignments early and

in class so all may benefit.• Informal, but lets remember why we are

here.

House Rules• Keep distractions to a minimum, respect your peers

– Shut off cell phones or place them in silent mode (note an unattended vibrating cell phone is distracting)

– Using laptops are ok for note taking or reference to notes.– Avoid side discussions with your neighbor.– Come to class on time; if you do arrive late, enter quietly

and unobtrusively, e.g. do not walk in front of the instructor.

– If you have to leave early, let the instructor know and sit where you can leave without disturbing too many students.

• “Multi-tasking” during class is not appreciated, for example reading the newspaper, working on a paper for another class, sleeping, etc.

House Rules• Respect each other. • Tolerate differences of opinion and manner of participating.• If you have strong opinions, voice it and be heard, listen to

responses, engage in an exchange of opinions, and then allow the class to move on.

• Humor, informal, ok. But do remember why we are in class.• Other suggestions?

On your sheets of paper

• State a time during the week, other than class time, that you can set aside for group activity related to this class

• Other preferences