Global Dimensions 6u2a2m

UNDERSTANDING THE GLOBAL CONTEXT OF BUSINESS “Globalisasi menciptakan lingkungan vortikal: perusahaan harus

bertanding di landasan yang terus bergoyang, sehingga pemanfaatan peluang usaha kian sulit dan resiko gagal kian besar” Rhenald Kasali “There is no longer any such thing as a purely national economy. The rest of the world is just too big to ignore, either as a market or as a competitor. If business schools do nothing other than to train their students to think internationally, they would have accomplished an important task” (John Young, CEO HP)

THE RISE OF INTERNATIONAL BUSINESS 

GLOBAL ECONOMY: resource supplies, product markets, & business competition are worldwide rather than purely local or national scope  GLOBALIZATION: – Is the process of growing interdependence among elements of the global economy – Process by which the world economy is becoming a single interdependent system KEY WORD: GLOBALIZATION, IMPORT, EXPORT

 The

Contemporary Global Economy

– WTO  



 The

ADOPT FAIR TRADE POLICIES & PRACTICES REDUCE TRADE BARRIERS BY PROMOTING MULTILATERAL NEGOTIATIONS AMONG MEMBER NATIONS ESTABLISH FAIR PROCEDURES FOR RESOLVING DISPUTES AMONG MEMBER NATIONS

Major World Marketplaces

– HIGH-INCOME COUNTRIES (> $9,386) – MIDDLE-INCOME COUNTRIES ($9,386 – 765) – LOW-INCOME COUNTRIES (< $765)

 THE

AMERICAS

NAFTA: is the North American Free Trade Agreement linking Canada, the US, & Mexico in a regional economic alliance  Maquiladoras: foreign manufacturing plants that operate in Mexico with special privileges 

– DaimlerChrysler, GM, VW, Nissan & Ford – 1993 – 1999: export increased from $7.2 bill to

$20.4 billion, employs 380,000 workers, growth rate 10& by 2001.

The North American Marketplace

 EUROPE:

15 countries (in the near future 25 )  The Euro: is the new common European currency  Access to market 375 million consumers 

– Unilever, Renault, Royal Dutch/ Shell,

Siemens, Nestle

Europe and the Nations of the European Union

 ASIA

& THE PACIFIC RIM

Japan, China, Thailand, Malaysia, Singapore, Indonesia, South Korea, Taiwan, the Philippines & Australia.  Emerging world-class competitors from Asian countries: Toyota, Toshiba, Samsung & Hyundai  APEC (Asia-Pacific Economic Coop.) 

The Nations of ASEAN

 FORM

OF COMPETITIVE ADVANTAGE

Absolute Advantage  Comparative Advantage  National Competitive Advantage 

– Factors of production – Demand conditions – Related & ing industries

– Strategies, structures & rivalries

NATIONAL DIAMOND

 IMPORT-EXPORT 

BALANCES

Balance of trade – Deficit or surplus



Balance of payments – Inflows & outflows – Exchange rate – Exchange rate & competition

INTERNATIONAL BUSINESS MANAGEMENT 

GOING INTERNATIONAL  AN INTERNATIONAL BUSINESS CONDUCTS COMMERCIAL TRANSACTIONS ACROSS NATIONAL BOUNDARIES – – – – –



PROFIT CUSTOMERS SUPPLIERS CAPITAL LABOURS

ADAPTING TO CUSTOMER NEEDS???

Going International

INTERNATIONAL BUSINESS CHALLENGES 

AN INTERNATIONAL BUSINESS CONDUCTS COMMERCIAL TRANSACTIONS ACROSS NATIONAL BOUNDARIES – PROFIT

– CUSTOMERS – SUPPLIERS – CAPITAL – LABOURS

Maximising the return on competitive advantages 

RESOURCE AVAILABILITY IN THE ASIAN REGION

Resource Competence Raw Materials Components Labour

Components Logistics Flexibility Market Info & Linkages New Materials New Processes

Countries Indonesia China Philippines Thailand Malaysia Korea Taiwan Singapore Hong Kong

Japan

Source of Advantage Sourcing Costs

Sourcing Cost Market Adaptation Service Technology



Achieving locational economies – ex: American buys a pontiac le mans from general motors

- $10,000 (this reflects the following international transactions)  $3000 to South Korea for routine labor & assembly operations  $1750 to Japan for advanced components - engine, transaxles, electronic  $750 to for styling and design engineering)  $400 to Taiwan, Singapore & Japan for small components  $250 to Britain for advertising & marketing services  $50 to Ireland & Barbados for data processing The balance some $4000 is distributed primarily within the US.

FORMS OF INTERNATIONAL BUSINESS

STRATEGY Market entry Global Exporting Licensing & sourcing Importing Franchising

Direct investment t Ventures Wholly owned subsidiaries

 LEVEL OF INVOLVEMENT – EXPORTERS & IMPORTERS – INTERNATIONAL FIRMS – MULTINATIONAL FIRMS 

INTERNATIONAL ORG’L STRUCTURES – INDEPENDENT AGENTS – LICENSING ARRANGEMENTS – BRANCH OFFICES

– STRATEGIC ALLIANCES

– FOREIGN DIRECT INVESTMENT



Expanding growth in the exchange of information & trade in services.  Ex: Montague Corp - designs a unique product (folding mountain bikes) in Cambridge, manufacturers in Taiwan, sells in Europe.

COMPARISON OF INTERNATIONAL-TRADE, COUNTRY-FOCUSED, & GLOBALLY INTEGRATED DESIGNS INTERNATIONAL TRADE DESIGNS

STRAT.FOCUS Standardised product

GLOBALLY INTEGRATED DESIGNS

COUNTRYFOCUSED DESIGNS

Global products Products developed for export adjusted for for specific local market local differences STRAT.RESP’TY Centralised headquarter Shared among global Decentralized to the div. Headquarters & div. SUBUNIT REL. Hierarchical Interdependent Semiautonomous DISTRIBUTION Located in home country Dispersed through- Located in each div OF CRIT.FUNC. out the div.network EXAMPLE: Toyota (1970s) Toyota (1980s) GM (1980) GM (1970s)

GLOBALLY INTEGRATED DESIGN: creates an interdependent network

Country G Division

Country F Division

Country E Division

Country A Division

Country B Division

Global

Country C Division

Headquarters Country D Division

MULTINATIONAL CORPORATIONS 

AN MNC: IS A BUSINESS WITH EXTENSIVE INTERNATIONAL OPERATIONS IN MORE THAN ONE FOREIGN COUNTRY – GE, Exxon, Wal Mart, Mitsubishi, etc



TYPES OF MNC – TRANSNATIONAL CORPORATIONS – PROS & CONS OF MNC

MULTINATIONAL CORPORATIONS MNC-HOST COUNTRY RELATIONSHIPS  WHAT SHOULD GO RIGHT: MUTUAL BENEFITS 

– SHARED OPPORTUNITIES WITH

POTENTIAL FOR GROWTH, INCOME, LEARNING, DEVELOPMENT

MULTINATIONAL CORPORATIONS 

MNC-HOST COUNTRY RELATIONSHIPS  WHAT CAN GO WRONG  HOST-COUNTRY COMPLAINT ABOUT MNCs – EXCESSIVE PROFITS

– ECONOMIC DOMINATION – INTERFERENCE WITH GOV. – HIRE BEST LOCAL TALENT

– LIMITED TECHNOLOGY TRANSFER – DISRESPECT FOR LOCAL CUSTOMS

MULTINATIONAL CORPORATIONS 

MNC-HOST COUNTRY RELATIONSHIPS  WHAT CAN GO WRONG  MNC COMPLAINTS ABOUT HOST COUNTRIES – PROFITS LIMITATIONS

– OVERPRICED RESOURCES – EXPLOITATIVE RULES – FOREIGN EXCHANGE RESTRICTIONS

– FAILURE TO UPHOLD CONTRACTS

MULTINATIONAL CORPORATIONS 

ETHICAL ISSUES FOR MNC OPERATIONS – CORRUPTIONS – SWEATSHOPS – CHILD LABOR

– SUSTAINABLE DEVELOPMENT – ISO 14000

BARRIERS TO INTERNATIONAL TRADE 

SOCIAL & CULTURAL DIFFERENCES  CULTURE SHOCK  POPULAR DIMENSIONS OF CULTURE – LANGUAGE

– INTERPERSONAL SPACE – TIME ORIENTATION: Monochronic or Polychronic – RELIGION

– ROLE OF AGREEMENTS



VALUES & NATIONAL CULTURES

BARRIERS TO INTERNATIONAL TRADE ECONOMIC DIFFERENCES  LEGAL & POLITICAL DIFFERENCES 

– Quotas ( Or Embargo), Tarrifs & Subsidies – Local Content Laws: Cartel

Adjusting to Local Differences: The Coca-Cola Company Thinking Globally & Managing Locally (Morden)   

PRODUCT: COCA COLA PRODUCES & MARKETS THE COKE, FANTA, & SPRITE BRANDS GLOBALLY BUT OTHER PRODUCTS ARE TAILORED TO A SPECIFIC COUNTRY/ TO A SPECIFIC GEOGRAPHY – IN BRAZIL - GUARANA TAI, NORTHERN LATIN AMERICA (ELSAVADOR & VENEZUELA) - FANTAKOLITA (A CREAM SODA TYPE OF DRINK). – IN - A TART ORANGE TASTE IS PREFERRED – IN ITALY - SWEET



MARKETING:  COKE REENTERED CHINA IN 1979, LITERAL REPRESENTATION OF ITS NAME IN CHINESE CHARACTERS WAS “A BITE THE WAX TADPOLE”, LAUNCHED & AD CAMPAIGN IN ASIAN MARKET BASED ON A “COME A LIVE” THEME - TRANSLATED AS “THIS PRODUCT MAKES YOUR ANCESTORS RISE FROM THE DEAD”  DISTRIBUTION:  VENDING MACHINES, SMALL PLACTICS COOLERS ETC



Thinking Globally & Managing Locally (Morden)  Managing locally: – Knowledge of country & its international context

– Knowledge of communication patterns – Knowledge of country’s culture – Control & co-ordination – Commitment