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Chapter 8 Internationalization and Globalization. John S. Hill. Internationalization and Globalization Processes. Definition & Measurement. Drivers and Facilitators. Corporate Preparation for Globalization Focusing and restructuring the organization Management Development

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figure 8 1 internationalization and globalization topics

Internationalization and Globalization Processes

Definition & Measurement

Drivers and Facilitators

  • Corporate Preparation for Globalization
  • Focusing and restructuring the organization
  • Management Development
  • Corporate Culture Globalization
  • Globalization Effects on:
  • Industry Structure
  • Organizational Structure
  • Corporate Culture
  • Financing Foreign Operations
  • Capital Structure
  • Internal or External Financing
Figure 8-1 Internationalization and Globalization topics
chapter outline
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
  • Financing International and Global Operations
internationalization and globalization
Internationalization and Globalization
  • Internationalization and Globalization Defined
  • Internationalization: firms extend products and services in overseas markets, usually from their home country
  • 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 is the first stage in the globalization process
internationalization and globalization5
Internationalization and Globalization
  • Measuring Internationalization and Globalization
    • Objective measures
    • Corporate measures
internationalization and globalization6
Internationalization and Globalization
  • Internationalization, Globalization and Industry

High

Pressures

for global

integration

Low

LowPressures for local responsiveness High

Figure 8-2: Industry Success Factors and Strategy

Global Integration Global/Local

Strategy Strategy 

Internationalization Multinational

Strategy Strategy

internationalization and globalization7
Internationalization and Globalization
  • Measuring Globalization
  • Objective Measures (UNCTAD) :
  • Foreign assets to total assets
  • Foreign sales to total sales
  • Foreign employment to total employment
  • Combination of all three gives us a Transnationality Index Tables 8.1

and 8.2

internationalization and globalization8
Internationalization and Globalization
  • Measuring Globalization
  • Corporate Measures of Globalization :
  • Governance and Responsibility: management boards; centralized environmental and ethicalpolicies
  • Strategy and Planning: global missions, visions & strategies
  • Marketing orientation: globally/locally conceived
  • Manufacturing Operations and Technology: centralized/integrated vs. country by country
  • Research and Development: global vs. local needs
  • Organization and Human Resource Management: standardized HR and global leader development
internationalization and globalization9
Internationalization and Globalization
  • Advantages of Internationalization and Globalization
    • Extending successful home market products and strategies
    • Taking advantage of factor resources available in the worldwide marketplace
    • Building scale economies
    • Acquiring economies of scope: build-up of global expertise and contacts
internationalization and globalization10
Internationalization and Globalization
  • Disadvantages of Internationalization and Globalization
    • Significant resource allocations are necessary
    • Internationalization and globalization are learning processes: ‘learning by doing’
  • Internationalization, Globalization, and Industry Strategies: internationalization, multinational, globally integrated and global-local strategies
drivers of corporate internationalization and globalization
Drivers of Corporate Internationalization and Globalization
  • Market Drivers
  • Cost Drivers
  • Competitive Drivers
  • Government Drivers
  • Globalization and Information Technologies
drivers of corporate internationalization and globalization12
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: Japan for consumer electronics, Switzerland for watches, USA for computer software
drivers of corporate internationalization and globalization13
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: airlines, telecommunications, chips, pharmaceuticals
drivers of corporate internationalization and globalization14
Drivers of Corporate Internationalization and Globalization
  • Competitive Drivers
  • Competing with imports and other global rivals have placed increasing pressures on both domestic and international companies to be competitive in national and international markets.
  • Government Drivers
  • United Nations, and its agencies like the IMF, World Bank and WTO: free trade, privatization (but can retard also)
preparing the company for internationalization globalization
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
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
preparing the company for globalization18
Preparing the Company for Globalization
  • Focusing the Organization
  • Supply Chain Restructuring
  • Delayer 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 globalization19
Preparing the Company for Globalization
  • Developing 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 globalization20
Preparing the Company for Globalization
  • Developing Leadership and Management Capabilities
  • Developing Global Leaders
  • International travel
  • Global team experiences
  • Cross-cultural training
  • Overseas assignments
preparing the company for globalization22
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 globalization23
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
preparing the company for globalization24
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
effects of globalization
Effects of Globalization
  • Industry Structure Effects
  • Organizational Structure Effects
  • Corporate Culture Effects
  • Relationships Among Strategies, Structures and Corporate Cultures
effects of globalization26
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 globalization27
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

International Division Structure
worldwide functional structure

Headquarters

Vice Presidents – Worldwide Responsibilities

Manufacturing

Marketing

R & D

Finance

HumanResource

Markets 1----n

Products 1----n

Worldwide Functional Structure
worldwide product structure

Headquarters

Product Division 1

Product Division 2

Product Division 3

Product Division ‘n’

Region 1

Region 2

Region ‘n’

Worldwide Product Structure
geographic structure

Headquarters

Region 1

Region 2

Region 3

Region ‘n’

Country 1

Country 2

Country ‘n’

etc.

Product 1

Product 2

Product ‘n’

Geographic Structure
effects of globalization32
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 globalization33
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
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
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 points36
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 points37
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 points38
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.