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Chapter 8 Internationalization and Globalization. Chapter Outline. Introduction: Internationalization and Globalization Drivers of Corporate Internationalization and Globalization: Why Firms Go Abroad Preparing the Company for Internationalization and Globalization Effects of Globalization - PowerPoint PPT Presentation
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Chapter 8Internationalization
and Globalization
Chapter Outline
Introduction: Internationalization and GlobalizationDrivers of Corporate Internationalization and Globalization: Why Firms Go AbroadPreparing the Company for Internationalization and GlobalizationEffects of GlobalizationFinancing International and Global Operations
Internationalization and Globalization
Internationalization Defined: Internationalization: firms extend
products and services in overseas markets, usually from their home country. Internationalization is the first stage in the globalization process
Internationalization and Globalization
Globalization Defined
Globalization: the process by which businesses create value by leveraging their resources and capabilities across borders, and includes the coordination of cross-border manufacturing and marketing strategies
Internationalization and Globalization
Measuring Internationalization and GlobalizationObjective measures: United
Nations Conference on Trade and Development (UNCTAD) has developed an index to show international corporate involvement called Transnationality Index.
Internationalization and Globalization
Measuring Internationalization and GlobalizationObjective measures: United Nations
Conference on Trade and Development (UNCTAD) has developed an index to show international corporate involvement called
Transnationality Index. It is based on:Foreign assets to total assets.
Internationalization and Globalization
Measuring Internationalization and GlobalizationObjective measures: United Nations
Conference on Trade and Development (UNCTAD) has developed an index to show international corporate involvement called Transnationality Index. It is based on:
Foreign assets to total assets.
Foreign sales to total sales
Internationalization and Globalization
Measuring Internationalization and GlobalizationObjective measures: United Nations
Conference on Trade and Development (UNCTAD) has developed an index to show international corporate involvement called Transnationality Index. It is based on:
Foreign assets to total assets. Foreign sales to total sales
Foreign employment to total employment
Internationalization and Globalization
Measuring Internationalization and Globalization
Objective measures:
Corporate measures: Governance and responsibility: who
are controlling to corporation
Internationalization and Globalization
Measuring Internationalization and Globalization
Objective measures:
Corporate measures: Governance and responsibility: who are controlling to corporation
Strategy and planning: of global corporations that
• Produce standardize products could be ventrally planed,
• must meet local needs should be decentralized
Internationalization and Globalization
Measuring Internationalization and Globalization
Objective measures:
Corporate measures: Governance and responsibility: who are controlling to corporation Strategy and planning: of global corporations that
• Produce standardize products could be ventrally planed, • must meet local needs should be decentralized
Market orientation also depends on the orientation of the countries where the company is active. If they are similar, a unified marketing strategy will be use. Otherwise, each country requires its own strategy.
Internationalization and Globalization
Measuring Internationalization and Globalization
Objective measures:
Corporate measures: Governance and responsibility: who are controlling to corporation Strategy and planning: of global corporations that
• Produce standardize products could be ventrally planed, • must meet local needs should be decentralized
Market orientation also depends on the orientation of the countries where the company is active. If they are similar, a unified marketing strategy will be use. Otherwise, each country requires its own strategy.
Manufacturing operations and technology. Customers, country conditions, and competition determine where resources should be allocated. Whether economies of scale could be exploited; whether low cost factors could be utilized;
Internationalization and Globalization
Measuring Internationalization and Globalization
Objective measures:
Corporate measures: Governance and responsibility: who are controlling to corporation Strategy and planning: of global corporations that
• Produce standardize products could be ventrally planed, • must meet local needs should be decentralized
Market orientation also depends on the orientation of the countries where the company is active. If they are similar, a unified marketing strategy will be use. Otherwise, each country requires its own strategy.
Manufacturing operations and technology. Customers, country conditions, and competition determine where resources should be allocated. Whether economies of
scale could be exploited; whether low cost factors could be utilized; R & D intensive industries must balance their
activities across borders when possible and advantageous and safe. R&D are usually centralized due to secrecy as well as need for specific knowledge and resources.
Internationalization and Globalization
Measuring Internationalization and Globalization
Objective measures:
Corporate measures: Governance and responsibility: who are controlling to corporation Strategy and planning: of global corporations that
• Produce standardize products could be ventrally planed, • must meet local needs should be decentralized
Market orientation also depends on the orientation of the countries where the company is active. If they are similar, a unified marketing strategy will be use. Otherwise, each country requires its own strategy.
Manufacturing operations and technology. Customers, country conditions, and competition determine where resources should be allocated. Whether economies of scale could be exploited; whether low cost factors could be utilized;
R & D intensive industries must balance their activities across borders when possible and advantageous and safe. R&D are usually centralized due to secrecy as well as need for specific knowledge and resources.
Organization and human resource management the challenge has been to train and retain managers with local market knowledge as well as with global understanding.
Advantages of Internationalization and Globalization
Extension and expansion of market
Advantages of Internationalization and Globalization
Extension and expansion of market
Exploitation of resources overseas
Advantages of Internationalization and Globalization
Extension and expansion of market Exploitation of resources overseas
Taking advantage of economies of scale
Advantages of Internationalization and Globalization
Extension and expansion of market Exploitation of resources overseas Taking advantage of economies of scale
Acquiring economies of scope: building and using foreign market expertise in against their rivals
Disadvantages of Internationalization and Globalization
Divert resources from dometic to international markets
Disadvantages of Internationalization and Globalization
Divert resources from dometic to international markets
Going overseas is a permanent learning process. You need to constantly adapt to new and changing environment
Internationalization, Globalization, and industry strategy
High
Pressuresfor global integration
Low
Low Pressures for local responsiveness High
Global Integration Strategy Global/Local(cross border branding andsupply chain)
Internationalization Strategy Multinational Strategy (Export /Import) (localized marketing
with supply chain)
Drivers of Corporate Internationalization and Globalization
Market Drivers Cost Drivers Competitive
Drivers Government
Drivers Globalization
and Information Technologies
Drivers of Corporate Internationalization and Globalization
Market Drivers Common customer needs: products
and technology is transferred with its cultural baggage to other countries with similar needs. Some products such as Coca-Cola, McDonalds, KFC, etc. have been palatable to many cultures
Drivers of Corporate Internationalization and Globalization
Market Drivers Common customer needs: Coca-Cola, McDonalds
Global channels: global channels have emerged with free trade as free trade enabled companies to distribute goods and provide services internationally. Carrefour, Toys R Us, Wal-Mart have developed global channels to distribute products.
Drivers of Corporate Internationalization and Globalization
Market Drivers Common customer needs: Coca-Cola, McDonalds
Global channels: Carrefour, Toys R Us, Wal-Mart
Marketing Transfers and Global Branding: IBM, Toyota, Bic, Kodak have become household names throughout the world
Drivers of Corporate Internationalization and Globalization
Market Drivers Common customer needs: Coca-Cola, McDonalds Global channels: Carrefour, Toys R Us, Wal-Mart Marketing Transfers and Global Branding: IBM, Toyota, Bic, Kodak
Lead Countries: Made in xxxx. Countries have developed a name for some products, e.g., Japan for consumer electronics, Switzerland for watches, USA for computer software, etc.
Drivers of Corporate Internationalization and Globalization
Cost Drivers Economies of scale: expensive
to set up production but they could service any market such as steel and microprocessors
Drivers of Corporate Internationalization and Globalization
Cost Drivers Economies of scale: steel and microprocessors
Steep Experience Curves: knowledge and technology intensive sectors: aircraft
Drivers of Corporate Internationalization and Globalization
Cost Drivers Economies of scale: steel and microprocessors Steep Experience Curves: knowledge and technology intensive
sectors: aircraft
Low Cost Production: low cost labor (textiles)
Drivers of Corporate Internationalization and Globalization
Cost Drivers Economies of scale: steel and microprocessors Steep Experience Curves: knowledge and technology intensive
sectors: aircraft Low Cost Production: textiles
Favorable Logistics: transportation costs important as we decide where to produce: lumber, non-specialty chemicals
Drivers of Corporate Internationalization and Globalization
Cost Drivers Economies of scale: steel and microprocessors Steep Experience Curves: knowledge and technology intensive sectors:
aircraft Low Cost Production: textiles Favorable Logistics: transportation costs important) lumber, chemicals
New Product Development Costs: are rising due to short life of their products that require higher return on their investment (airlines, telecommunications, chips, pharmaceuticals )
Drivers of Corporate Internationalization and Globalization
Competitive DriversCompeting with imports and
other global rivals have placed increasing pressures on both domestic and international companies to be competitive in national and international markets.
Drivers of Corporate Internationalization and Globalization
Government DriversUnited Nations, and its agencies
like the IMF, World Bank and WTO: free trade, privatization (but can retard also)
Drivers of Corporate Internationalization and Globalization
Globalization and Information Technologies
Inter-firm linkages International new product development has become more quicker
Customer responsiveness has been reduced from 125 days to about 10 days due to supply chain
Inter-organizational systems (IOS) connecting insurance, banks, customs, immigrations to minimize duplication
Internet-based E-commerce
Extranet: allowing outside parties limited access to the company’s information system
Intranet Groupware technology allowing email, screen sharing, and other forms of global communications have allowed around the clock work on projects
Organizational Memory System that allows access to past information and strategies and therefore enhances the ability of the decision-makers to do a better job
Preparing the Company for Internationalization & Globalization
Focusing the Organization: Corporate Competencies
Focusing the Organization: Supply Chain Restructuring
Developing Leadership and Management Capabilities
Globalizing the Corporate Culture
Preparing the Company for Globalization
Focusing the Organization Corporate Competencies – those activities that have
proven international potential – hard decisions must be made
on activities that do not add value to the globalization move
World Business Analysis & Opinion: What do you think?
100+ year old essentially family-run Italian firm is an automobile producer (all types, from basic to luxury—half the company’s
sales). It also produces trucks, agricultural tractors, construction equipment, trains, and is in chemicals, publishing and insurance.
It needs to internationalize and globalize its operations. What should its first steps be?
-
Preparing the Company for Globalization
Focusing the Organization Supply Chain Restructuring De-layer corporate hierarchies for quicker
decisions Rethink manufacturing systems to close
unproductive plants and consolidate production Reevaluate supplier relationships to focus on a
few, well-positioned providers Reassess distributor capabilities for the global
arena
Preparing the Company for Globalization
Developing Competent Leadership and Management Capabilities
Global Leadership Characteristics Unbridled Inquisitiveness : the desire to
learn and the ability to enjoy the constant stimulation and challenges
Personal characteristics: The ability to connect socially and emotionally with wide varieties of individuals
Duality: senior management’s ability to balance global and local considerations in making
Savvy: Management leaders have instinctive recognitions of strategic tradeoffs
Preparing the Company for Globalization
Developing Leadership and Management Capabilities
Developing Global Leaders International travel to see and learn other
cultures Global team experiences to see and learn
the decision making process and social interaction at the local level with
Cross-cultural training Overseas assignments
Preparing the Company for Globalization
Globalizing the Corporate Culture What is Corporate Culture
Authority structures
Degree of organizational formality
Information flows
Tolerance for maverick behaviors
Competitive or cooperative culture
Decision-making apparatus
Organizational focus
Organizational structure
Gender orientations
Preparing the Company for Globalization
Globalizing the Corporate Culture
Deciding on Corporate Cultures in Foreign Markets: no ‘right’ or wrong answers
Global Standardization of Corporate Cultures is the trend but caution is always required
Preparing the Company for Globalization
Globalizing the Corporate Culture Adapting Corporate Cultures to National
Culture Influences depends on: Societal competitiveness: the amount of
competition within societies—political, economic, social class systems
Shareholder-Stakeholder Orientations: the specific objectives or audiences corporate cultures oriented toward: spread of capitalism vs. local needs
National culture influences on corporate cultures
World Business Analysis & Opinion: What do you think?
8-2: How would you globalize a corporate culture?
-
Preparing the Company for Globalization
National Culture Influences on Corporate Cultures
Power Distance: the extent to which strong social class distinctions are maintained at societal and corporate levels
Individualism/Collectivism: the degree to which individual or group actions are the bases for getting issues resolved
Masculine and Feminine Societies: the tolerance levels for aggressive behaviors and their gender orientations
Uncertainty Avoidance: the extent to which societal behaviors are risk-oriented or risk-averse
Long Versus Short Term Orientations: East-West contrasts
World Business Analysis & Opinion: What do you think?
8-3: A large US multinational operating in Malaysia noticed that US expatriates and local managers were not on the same cultural page. In particular: (i) Malaysian managers took fewer initiatives in front of their bosses; (ii) they often said ‘yes’ when they meant ‘no’; (iii) they were upset when a lower status US engineer openly
disagreed with his boss in a meeting (iv) Malaysian managers copied everyone in their e-mails. Why do you think?
-
Effects of Globalization Industry Structure
Effects Organizational
Structure Effects Corporate Culture
Effects Relationships
Among Strategies, Structures and Corporate Cultures
Effects of Globalization
Industry Structure Effects At the national level, domestic firms must
attain critical mass size to deal with foreign competitors
At the regional level, firms need to attain regional market coverage and scale economies to compete against other global producers
At the worldwide level, industry structures have been affected by a series of ‘mega-mergers’ between large international companies
Effects of Globalization
Organizational Structure Effects
International department Worldwide functional structure Worldwide product structure Geographic structures
International Division Structure Headquarters
Domestic Division
International Division
Regional Managers
Latin America Europe Asia
Worldwide Functional Structure
Headquarters
Vice Presidents – Worldwide Responsibilities
Manufacturing Marketing R & D Finance Human Resource
Markets 1----nProducts 1----n
Worldwide Product Structure
Headquarters
Product Division 1
Product Division 2
Product Division 3
Product Division ‘n’
Region 1 Region 2 Region ‘n’
Geographic Structure Headquarters
Region 1 Region 2 Region 3 Region ‘n’
etc.Country 1 Country 2 Country
‘n’
Product 1 Product 2 Product ‘n’
Effects of Globalization
Corporate Culture Adjustments Ethnocentric corporate cultures emphasize home-
market orientations in strategic decision making and attitudes: ‘made in’ advantages, alcohol, fashion, food
Polycentric operations involve complete host country orientations; competitive advantage based on responsiveness
Regiocentric cultures blend national subsidiaries within regions into cohesive strategy-making units; regional brands, supply chains
Geocentric corporate cultures are totally globally-oriented; no regard for individual national cultures
Effects of Globalization
Relationships Among Strategies, Structures, and Corporate Cultures
Causes of Change: marketplace change and new strategy; new structure (M & A, JVs); leadership changes
Relationships among international strategies, structures, and corporate cultures: ethnocentric and exporting; polycentric and consumer goods; regional, global products=regiocentric/geocentric
Financing International and Global Operations
Equity Options Using Outside Financing: availability of national stock exchanges; appear ‘local’
Equity Options Using Internal Financing: cross-holdings of shares among subsidiaries; good control; protection from takeovers
Debt Options Using External Financing: local financial institutions must be sound; low interest rates
Debt Options and Internal Financing: borrowing from HQ/subsidiaries; can adjust interest rates according to subsidiary/market needs
Key Points Defining internationalization Defining globalization Measuring them? Globalization drivers Preparing for globalization Globalizing corporate cultures Effects of globalization on
industries, organizations, corporate cultures
Financing foreign operations
Key Points
Internationalization occurs as firms extend products and services into foreign markets.
As companies globalize, they must balance pressures to globally integrate their operations with pressures to localize output.
Globalization can be measured objectively through foreign percentages of assets, sales, and employment.
Key Points
Globalization drivers can be based on market, cost, competitor, or government factors.
Companies prepare for globalization by assessing corporate competencies, supply chains, leadership capabilities, and corporate cultures.
Key Points
Globalizing corporate cultures involves defining and critically examining organizational relationships, communication patterns, and employee behaviors.
Effects of globalization must be assessed for industry structure, organizational structure, and corporate culture
International firms have a number of options in financing their internationalization and globalization efforts.