BA 447 TOPICS IN INTERNATIONAL BUSINESS

1. BA 447TOPICS IN INTERNATIONAL BUSINESS Instructor: Manolete V. Gonzalez

2. 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?

3. 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

4. Requirements • Read and contribute • Text: The World Is Flat, Thomas Friedman • Readings: Economist, WSJ, NYT, etc. • Websites of similar news sources, reputable organizations • Assignments • Participation – class discussion, in-class writing • Quizzes • Term project

5. Assignments • An article relevant to the subject matter to be covered • A typed statement (one page) that • Summarizes the article • States which aspect of the readings, e.g. chapter assigned, the article adds to, contradicts, illustrates, etc. • Indicate Assignment number on top of page

6. Quizzes • Short essay questions • Will cover general themes in assigned reading • May also cover topics discussed in class

7. Term Project • Focus on a specific issue that is or has the potential to affect a multinational • Study it • 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? • Report on it: 10 page report plus presentation

8. Grading Guidelines • All submissions must be typed and written well, for a professional audience. • Assignments must be ready for submission by the beginning of class. • Late submissions subject to penalties. • Fonts, spacing, penalties, etc. can be found in the syllabus.

9. Course Structure • Focus on companies pursuing global strategies • Friedman book to provide preliminary framework – notion of a flat world, what flattened it (technological, political, social), and how to understand the implications of this ‘flat world” • We will investigate/elaborate on some of the ideas that the book proposes, consider additional ideas • We will challenge those ideas that we think require more scrutiny

10. GOING GLOBAL

11. 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

12. 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

13. 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 • Viewed another way, 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

14. 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

15. 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

16. Typology of Global strategies – factors to consider • Pressures for cost reductions • Pressures for local responsiveness

17. Four Basic Strategies

18. 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.

19. 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

20. 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.

21. 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

22. The World Is Flat Notes on the Friedman book

23. Round World • For a long time, people believed the world was flat; adhering to this belief was convenient: • Dieties (or a diety) were above or below • Humans were in the middle • Royalties/priests could claim access to these dieties and therefore power over their subjects • In the 16th century, Magellan discovered that the world was round. (Columbus got as far as North America in 1492 and opened up the new world.) • Challenged traditional notions of religion • Challenged political status quo • Allowed more exploration

24. Flat World • The 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, and big, exploration/expansion shrank the world • Globalization 2.0 (1800 – 2000): multinationals followed their countries • Globalization 3.0 (2000- ): individuals of diverse backgrounds able to collaborate and compete globally

25. 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.)

26. Flat World • Playing field has been flattened – traditional advantages accruing to one country or another are being challenged • Other countries can compete for global knowledge work as never before • Intellectual work, intellectual capital, can be delivered, distributed, produced, and put back together again . . . with relative freedom in the way we do work

27. Reasons for a Flat World • Information and computer technology (ICT) developments - internet, browsers, open source, cell phones, etc. • Political developments - “more democratic” • Social - more education in less developed but populous countries • Business - innovation using ICT by business organizations

28. Back to Four Basic Strategies

29. Example of Impacts on Multinationals • For companies pursuing global or transnational strategies – supply chain is enhanced by these developments • For companies pursuing international or multi-domestic strategies – selected aspects of value chain are enhanced, e.g. for MTV, delivery system; for Proctor and Gamble, HR, product (re-design)?

30. 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.

31. 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) • Using laptops are ok for note taking or reference to notes. • 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.

32. 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?

33. 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