BEHAVIOUR OF A GLOBAL CORPORATION [Hill, pp. 43-57], [Head, pp. 13-18, 23-31] and culture [R/H, Ch.5, 122-139]] NORTEL NEWTWORKS CORP. (formerly Northern Telecom) Headoffice in Toronto, Canada C.E.O. Mike S. Zafirovski (a U.S. citizen),
BEHAVIOUR OF A GLOBAL CORPORATION
[Hill, pp. 43-57], [Head, pp. 13-18, 23-31] and culture [R/H, Ch.5, 122-139]]
NORTEL NEWTWORKS CORP. (formerly Northern Telecom)
Headoffice in Toronto, Canada
C.E.O. Mike S. Zafirovski (a U.S. citizen),
(Former C.E.O., Bill Owens, also a U.S. citizen, was vice chairman of the United States Joint Chiefs of Staff, the second-ranking military office in the United States, in the Clinton administration.)
Less than one fourth of its workforce in Canada:
(At December 31, 2006, approximately 33,760 regular full-time employees)
• 12,950 in the U.S.; • 7,080 in Canada;
• 5,950 EMEA; and • 7,780 in other countries.
Canada accounts for less than 10% of Nortel’s sales revenue
For the Years Ended December 31 ($mil.) 2006 2005 2004
United States . . . . . . . . . . . . . .$ 5,092 $ 5,203 $4,645
EMEA (Europe, M.East, Africa).3,239 2,704 2,483
Canada. . . . . . . . . . . . . . . . . . .720 571 552
Asia . . . . . . . . . . . . . . . . . . . . 1,736 1,422 1,238
CALA (Caribbean and L.America)631 609 560
Consolidated . . . . . . . . . . . . .$11,418 $10,509 $9,478
Most of Nortel's corporate tax is paid in the U.S.
Most of its plant and equipment and key executives are located in the U.S.
Nortel says: the company owes no allegiance to Canada and could decamp if its key workers continue to bolt to lower-
tax climes ("the U.S. states")
Is Canada relevant in Nortel's business decisions?
(I) ASSESSING INTERNATIONAL BUSINESS ENVIRONMENT: MEASUREMENT DIMENSIONS (Sometimes termed “separations,” i.e. what separates a country from other countries? E.g. Head)
Collectivism vs. individualism
Totalitarian vs. democratic systems
Political freedom vs. economic freedom
Market vs. command economies
Level of economic development
Intellectual property rights
Product safety and liability
Implications for IB?
Implications for IB?
II. EVALUATING COUNTRY-SPECIFIC FACTORS
1A. POLITICAL FACTORS (Hill, CH.2)
1B. ECONOMIC FACTORS (Hill, CH.2) 1C. LEGAL FACTORS
2. CULTURE (Rugman/Hodgetts, CH.5)
POLITICAL / ECONOMIC FACTORS How should we evaluate the attractiveness of a country as a market and/or investment site?ASSESS POTENTIAL BENEFITS VS COSTS AND RISKS Benefits of doing business in a country determined by:market size (+),
purchasing power (current wealth) of the consumer (+),
economic growth (future wealth) (+), etc.
EXAMPLES: U.S., MEXICO, FRANCE, CHINA
Correct assessment of foreign markets is very important!
If a firm happens to be the first to succeed in an emerging market, it may reap
Coca-Cola vs Pepsi in Japan,
McDonald vs. ???
CAUTION: A FIRST-MOVER INTO A FOREIGN MARKET DOES NOT ALWAYS SUCCEED
because of the cost to develop a foreign market for the kind of product to be sold. A second mover may not have to pay for the cost to develop the market and/or consumers' taste. THE COSTS OF DOING BUSINESS IN A COUNTRY DEPEND ON 4 FACTORS: A) political factors (which may require the firm to pay bribes for doing business in that country)
B) economic factors
E.g. infrastructure and supporting business; for example, do parts/material supply, service network exist? If not, vertical integration of the firm may be needed (e.g. McDonald in Moscow)
Which countries have more corruption?