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Globalization Globalization: Is the flow of goods and services, capital, and knowledge across country borders Enhances economic interdependence among countries and organizations Has changed the competitive landscape

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Globalization l.jpg
Globalization

Globalization:

  • Is the flow of goods and services, capital, and knowledge across country borders

  • Enhances economic interdependence among countries and organizations

  • Has changed the competitive landscape

  • To compete effectively you must understand the Institutional Environment and the Culture of each country that you operate in


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Country’s Institutional Environment

Institutional Environment: A country’s rules, policies, and enforcement processes

Three dimensions:

  • Economic development dimension

  • Political-legal dimension

  • Physical infrastructure dimension


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Country’s Institutional Environment:Economic Development Dimension

Economies are classified as either:

  • Developed economies

    • Larger economies with effective capital markets

  • Emerging economies

    • Rapidly growing with underdeveloped capital markets

  • Developing economies

    • Weak economies with little capital available for growth


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Country’s Institutional Environment:Political-Legal Dimension

  • Includes a country’s political risk, regulations, laws, and enforcement

  • Governments develop laws to govern behavior of citizens and organizations

  • Some “rules” are excessive and discourage foreign investment


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Country’s Institutional Environment:Physical Infrastructure Dimension

  • Includes amount and quality of roads and highways, telephone lines, and airports

  • Poor infrastructure makes it difficult for foreign firms to distribute products

  • Countries wanting foreign investment must develop infrastructure


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Country’s Culture

  • Culture

    • Learned set of assumptions, values, and beliefs that have been accepted by members of a group and that affect human behavior

  • Focus here is on national cultures

  • Can influence how people observe and interpret the business world around them

  • Can evolve and change with time

  • 4 prominent dimensions



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Extent to which people accept power and authority differences among people

High power distance = people accept power differences

Low power distance = people like to regard themselves as more or less equal

Cultural Dimensions: Power Distance

Power

Distance

Cultural

Dimensions


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Extent to which things need to be clear or ambiguous differences among people

High uncertainty avoidance = prefer clear norms that govern behavior (i.e., avoid uncertainty)

Low uncertainty avoidance = have fewer rules and are comfortable in ambiguous situations (i.e., can accept uncertainty)

Cultural Dimensions: Uncertainty Avoidance

Cultural

Dimensions

Uncertainty

Avoidance


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Individualism: differences among people

Extent to which people’s identities are self-oriented; people take care of themselves and immediate family

High emotional independence

Emphasize and reward individual achievement

Collectivism:

Extent to which a people’s identities are a function of the group(s) to which they belong (family firm, community, etc.)

Emotional dependence on institutions

Emphasize group membership

Cultural Dimensions: Individualism/Collectivism

Cultural

Dimensions

Individualism/

Collectivism


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Extent to which people in a country value masculine or feminine traits

Masculine = activities leading to success, money, possessions

Feminine = activities showing caring of others and enhancing quality of life

Cultural Dimensions: Gender Focus

Gender

Focus

Cultural

Dimensions


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International Market Entry Strategies feminine traits

Exporting

Less Risk

Licensing

Strategic Alliances

Cross-Border Acquisitions

Wholly-Owned Subsidiaries

More Risk


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International Market Entry Strategies feminine traits

Exporting

Advantages:

  • Low cost

  • Low risk to licensor

    Disadvantages:

  • Potential trade barriers

  • Establishment of marketing and distributing systems in foreign market

  • Transportation costs

  • Smaller returns

Manufacturing products in a firm’s home country and shipping them to a foreign market.


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International Market Entry Strategies feminine traits

Advantages:

  • Less capital investment

  • Least amount of risk

    Disadvantages:

  • Licensor has little control over product and use of brand

  • Smaller returns

Licensing

Arrangements that allow a

local firm in the new market

to manufacture and

distribute a firm’s product.


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International Market Entry Strategies feminine traits

Advantages:

  • Share costs and risks between partners

  • Access to resources not previously available

  • Learn capabilities from partner

    Disadvantages:

  • Management disagreement

  • Share profits

    New types of alliances:

  • Outsourcing and Offshoring

Strategic Alliances

Cooperative arrangements between two firms in which they agree to share resources to accomplish a mutually desirable goal.


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International Market Entry Strategies feminine traits

Advantages:

  • Fast way to enter foreign market

  • Can start operations immediately

    Disadvantages:

  • Can cause controversy in local public

  • Integrating two previously independent companies can be challenging

  • Targeted acquisitions may cost a premium

Acquisitions of local firms made by foreign firms to enter a new international market.

Cross-Border Acquisitions


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International Market Entry Strategies feminine traits

Advantages:

  • Maximum control

  • Buffer assets from competitors in the market

    Disadvantages:

  • Complex, risky and expensive to launch

  • Must establish relationships with suppliers, buyers, etc.

  • Must learn about culture and institutional environment on your own

Direct investments to establish a business in a foreign market in which the business is 100% owned and controlled by the focal firm; also called Greenfield Venture.

Wholly-Owned Subsidiaries


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Managing International Operations: feminine traitsGlobal Focus

Global Focus

  • Important decisions made at home office

  • Subsidiaries follow same strategies

    Advantage:

  • Economies of scale

    Disadvantage:

  • No flexibility for subsidiaries to make local market decisions

Centralized to home office


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Managing International Operations: feminine traitsRegion-Country Focus

Region-Country Focus

  • Important decisions made by subsidiaries in local markets

    Advantage:

  • Allows subsidiaries to react quickly to changes in marketplace

    Disadvantage:

  • Expensive; difficult for home office to oversee

Decentralized to subsidiaries


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Managing International Operations: feminine traitsTransnational Focus

Transnational Focus

  • Both home office and subsidiaries make important decisions

    Advantages:

  • Good combination of global efficiency and local responsiveness

  • Outperforms other approaches

Centralized and decentralized


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Managing Across Cultures: feminine traitsLow- and High-Context Cultures

Cultural context: degree to which a situation influences behavior or perception of “appropriateness”

Neither high- nor low-context cultures are right or wrong, just different

HIGH-CONTEXT

People pay close

attention to the

situation and its

various elements in

assessing appropriate

behavior

LOW-CONTEXT

Situation may or may

not make a difference

in what is considered

appropriate behavior


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Managing Across Cultures: feminine traitsManaging Multi-Cultural Teams

Challenges to managing multi-cultural teams:

  • Dependence on electronic communication (virtual teams)

  • Basic communication issues

  • Building trust among team members with different values (swift trust: rapid development of trust in teams about task activities)


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Developing a Global Mindset feminine traits

Global mindset: cognitive attributes that allow an individual to influence individuals, groups, and organizations from diverse socio-cultural and institutional environments

  • Important for companies today

  • Having top managers from different cultures can help


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