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TOPICS IN INTERNATIONAL BUSINESS. BA 447 Instructor: Manolete V. Gonzalez. Ice breaker – on a sheet of paper. Name Major

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topics in international business

TOPICS IN INTERNATIONAL BUSINESS

BA 447

Instructor: Manolete V. Gonzalez

ice breaker on a sheet of paper
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
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
Requirements
  • Read and contribute
    • Text: The World Is Flat: Updated and Expanded, Thomas Friedman
    • Readings: Economist, WSJ, NYT, etc.
    • Websites of similar news sources, reputable organizations
  • Quizzes
  • Class Preparation Assignments
    • Relevant to topic assigned for the day
    • Encourage participation and class discussion
    • In-class writing
  • Term project
quizzes
Quizzes
  • Short essay questions, covering
    • Themes discussed in text
    • Issues suggested in additional readings in schedule and other material given to class (including films that may be shown)
    • In general, broad topics discussed in class
class preparation assignments
Class Preparation Assignments
  • An article relevant to the subject matter to be covered in class (see schedule)
  • A typed statement (one page) that
    • Summarizes the article
    • States what it can contribute to class discussion for that day
    • Indicate Assignment number on top of page
term project
Term Project
  • Refer to instructions on website. Focus on a specific issue drawn from current events, i.e. based on a news story
  • Submit proposal by 5th week of classes
    • Article which contains the issue
    • A description of the issue and questions to study
  • Submit proposal end of dead week
    • 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?
  • Requirements: 10-page report plus presentation
other guidelines
Other Guidelines
  • Assignments and Term Projects must be typed and written well, for a professional audience.
  • Assignments must be submitted in class during the session stated in schedule.
  • No late submissions for Assignments. These are intended as preparations for class discussions.
  • Term Projects are due last day of classes.
course structure
Course Structure
  • Friedman book provides preliminary framework for understanding issues affecting multinationals
    • concept of a “flat world”,
    • what flattened it,
    • the implications of this ‘flat world”
  • We will investigate/elaborate on additional themes based on this framework
    • We will challenge those ideas that we think require more scrutiny
  • Note major headings in schedule
review

REVIEW

GLOBAL STRATEGIES

process of expansion
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
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
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
  • Underlying concept, 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
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
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
Typology of Global strategies – factors to consider
  • Pressures for cost reductions
  • Pressures for local responsiveness
description of each global strategy
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
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 d20
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 d21
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
examples of companies pursuing a global strategy
Examples of companies pursuing a global strategy
  • International strategy
    • Proctor and Gamble and Xerox
      • Develop products at home, establish manufacturing and marketing functions in each major country or region.
  • Multi-domestic or localization strategy
    • MTV
  • Global (standardization) strategy
    • Example: Intel, Motorola, Texas Instrument
      • market a standardized product worldwide, products which serve universal need.
  • Transnational strategy
    • Caterpillar
example of international strategy s c johnson sons inc
Example of international strategy: S.C. Johnson & Sons, Inc.
  • 119-year-old, fifth-generation, family-owned and managed.
  • 12,000 employees in 70 countries, US headquarters.
  • Leading manufacturer of consumer household products.
  • Manufactures in over 20 countries, markets to over 110.
  • $6.5 billion in annual sales.
a brief history of lg
A Brief History of LG
  • Established in 1958 as Goldstar, a pioneer Korean electronics manufacturer
  • In 1995 company name was changed to LG Electronics, acquired US-based Zenith
  • Joint venture with Philips in 1999
  • As of 2004, annual sales of US $38 billion, over 66,000 employees (32,000 in Korea) in 76 subsidiaries in 39 countries
lg likes to vertically integrate
LG likes to vertically integrate…
  • LG.Philips
    • Operates vertically integrated plant - research and development, parts, and materials companies as well as the finished products
  • LG Chem
    • Vertically integrated since 1991 after merging LG Advanced Materials, LG Polychemical, and LG Pharmaceutical
  • LG Telecom
    • Network provided by Cisco Systems, Inc.
transnational example nike
Categories

Running

Basketball/Brand Jordan

Training/Walking

Soccer

Cleated/Golf

Outdoor

Tennis

Active Life

Kids

Factories

Korea

Taiwan

China

Thailand

Vietnam

Indonesia

Italy

Transnational example: NIKE
slide28

Pusan, ROK/China

Fuzhou, Putien and

Shanghai, China

Taichung, Taiwan

Guangzhou, China

Bangkok, Thailand

Jakarta, Indonesia

Where We Manufacture

Italy

Qingdao, China

Ho Chi Minh, Vietnam

slide29

Our World - The Manufacturing Pie

  • Currently contract approximately 37 Factories
  • 5 Manufacturing Leadership Partners (T2, PC, FT, PA, CS) Represent Approx. 50% of NIKE Capacity
slide30

A Factory

  • LN (made up of 4 sub-factories)
  • Average Capacity 1.2 million pr/mo
  • 25 Lines
  • Models per PO: 60 SKU
  • Average Daily Output 43,000 prs per day
  • Number of Employees 25,000 +
the world is flat

The World Is Flat

Introduction to the Friedman book

round world
Round World
  • From ancient times to about the middle ages, people believed the world was flat.
    • If one walked too far, one could fall off into a deep abyss.
    • The sky was an inverted bowl covering the surface of the known earth.
  • There were those who tried to claim otherwise, reasoning from observation, etc.
  • However, adhering to this belief was convenient:
    • Security: the “known world” could be understood.
    • “Known world” could be carved up.
round world33
Round World
  • The text talks about Columbus and his discovery of the Americas in 1492.
  • Columbus’s journey revealed the existence of another land mass. (The Vikings seems to have gotten there first but nobody at that time heard too much about it.)
  • In the early 1500s, Magellan started a journey that led to his fleet being the first to circumnavigate the earth.
    • Remember: Columbus basically crossed the Atlantic and got as far as the Caribean islands in 1492.
    • Magellan did not make it past what is now the Philippines, but his fleet was able to make it back to Spain.
  • This later, singular event proved that the world was round, that one could head out east and arrive from the west.
round world34
Round World
  • Columbus’ voyage and subsequent circumnavigation of the world by Magellan’s fleet
    • Challenged boundaries of the “known world.”
    • Presented a challenge/opportunity to political status quo.
    • Exploration to expand dominions, wealth.
  • In terms of international trade
    • There was at that time a search for a way to get to the “Indies” and obtain spices without heading through the middle east.
  • Those who could explore, the wealthy kingdoms, could secure terms of trade by
    • Monopolizing travel in terms of capability to allocate resources to man fleets and to control navigational routes.
    • Knowledge and resources were critical to trade.
flat world
Flat World
  • Friedman’s 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, a flurry of exploration/expeditions shrank the known world. The kingdoms in Europe pursued global expansion that included discovering and controlling international trade.
    • Globalization 2.0 (1800 – 2000): multinationals followed their countries and took over international trade.
    • Globalization 3.0 (2000- ): individuals of diverse backgrounds able to collaborate and compete globally
  • With Globalization 3.0, “playing field” has been leveled.
flat world southwest airlines
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.)
visible signs of a flat world
Visible Signs of a Flat World
  • ..\..\My Videos\conan.wmv
  • Playing on a golf course in Bangalore, India and staring at buildings owned by US companies
    • Also the apparent “westernization” of these campuses
signs of a flat world in text
Signs of a “flat world” in text
  • Accounting: basic returns done in India, tax and financial planning done in US
  • News reporting: wire service (write basic news) is outsourced, analysis in US
  • Medicine: analysis of CAT scans by trained radiologists?
call center examples
Call center examples
  • At take home pay of $200 per month, Indians can live well and at home. No need to migrate
  • Try the statement on p 27
    • Conan film
  • R&D? 1000 patent applications with US patent office from Bangalore units of Cisco, Intel, IBM, TI, GE . .
and it is not just us and them
And it is not just “us and them”
  • Japanese speaking Chinese do work for Japanese companies
  • Outsourcing conversion of hand drawings into digital blueprints – Malaysia and Philippines
  • Home sourcing in UTAH
  • McDonald’s drive through orders
more signs of a flat world
More signs of a “flat world”
  • Key: any activity whose value chain can be digitized, decomposed, and moved around, will be moved.
  • Bill Ardolino and his InDC Journal
flat world and global companies
“Flat world” and global companies
  • Friedman uses his concept of a flat world to describe how the environment of international trade has evolved.
    • He describes what has contributed to this evolution and the implications of this flat world.
    • Global companies have been both instrumental to the creation of and will be affected by this flat world.
  • We will question some of his assumptions and his conclusions by discussing specific issues in more depth.
moving forward
Moving Forward
  • Elaborate on concept of a flat world
  • What were the “flatteners” that resulted in this flat world?
  • Discuss the notion of a “triple convergence” which summarizes these flatteners.
  • NOTE regarding reading the text: read for substance, do not get lost in stories.
house rules
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 rules45
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)
    • 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.
    • Using laptops are ok for note taking or reference to notes.
house rules46
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
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