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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
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
country s institutional environment
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
country s institutional environment economic development dimension
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
country s institutional environment political legal dimension
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
country s institutional environment physical infrastructure dimension
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
country s culture
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
cultural dimensions power distance
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

cultural dimensions uncertainty avoidance
Extent to which things need to be clear or ambiguous

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

cultural dimensions individualism collectivism
Individualism:

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

cultural dimensions gender focus
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

international market entry strategies
International Market Entry Strategies

Exporting

Less Risk

Licensing

Strategic Alliances

Cross-Border Acquisitions

Wholly-Owned Subsidiaries

More Risk

international market entry strategies13
International Market Entry Strategies

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.

international market entry strategies14
International Market Entry Strategies

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.

international market entry strategies15
International Market Entry Strategies

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.

international market entry strategies16
International Market Entry Strategies

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

international market entry strategies17
International Market Entry Strategies

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

managing international operations global focus
Managing International Operations:Global 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

managing international operations region country focus
Managing International Operations:Region-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

managing international operations transnational focus
Managing International Operations:Transnational 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

managing across cultures low and high context cultures
Managing Across Cultures:Low- 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

managing across cultures managing multi cultural teams
Managing Across Cultures:Managing 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)
developing a global mindset
Developing a Global Mindset

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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