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EMBA BA 804Managing the Enterprise from a
Global Perspective
Professor Ram Mudambi
Department of
General & Strategic Management
© Ram Mudambi, Temple University, 20072
What is this course about? International business is about business
operations involving activities in more than one country
The main object of study is the multinational corporation (MNC). A company that internalizes operations across national borders leverages resources controlled in one country
in other countries
© Ram Mudambi, Temple University, 20074
Gary Hamel on MNC CEOs
MAJOR CONCERNS in 2003 Efficiency Change Growth Legitimacy Complexity
© Ram Mudambi, Temple University, 20075
Globalization
The shift towards a more integrated and interdependent world economy.
Two components: The globalization of markets – Macro issues –
Macro IB The globalization of operations – Micro issues
– Micro IB
© Ram Mudambi, Temple University, 20076
Global DriversAccelerators
Technology
Open Markets
Economic Integration
Peace
Corporate Strategy
Global Focus
Decelerators
Culture
Market Barriers
National Barriers
War
Corporate Strategy
Local Focus
1-3
© Ram Mudambi, Temple University, 20078
Global Leverage – Value chain disaggregationSwan Optical Manufacturing
Design
© Ram Mudambi, Temple University, 20079
Volume of world trade and production, 1950-2002 TRADE
20 fold increase
OUTPUT7 fold
increase
© Ram Mudambi, Temple University, 200710
Impact of GATT Tariff Rates
05
101520253035404550
1913 1950 1990 2000
FranceGermanyItalyJapanHollandSwedenBritainUnited States
Average Tariff Rates on Manufactured Products % of Value
Table 1.1
© Ram Mudambi, Temple University, 200711
The role of technological change
Microprocessors and telecommunications
The internet and world wide web
Transportation technology
© Ram Mudambi, Temple University, 200712
The Shrinking Globe
1500 -1840 1850 - 1930 1950s 1960s
Best average speed ofhorse-drawn coachesand sailing ships, 10mph.
Steam locomotivesaverage 65 mph.Steamships average36 mph.
Propelleraircraft300 - 400mph.
Jetpassengeraircraft,500 - 700mph.
© Ram Mudambi, Temple University, 200713
The changing pattern of world output and trade
© Ram Mudambi, Temple University, 200715
Volume of FDI inflows, 1994-2002
Fig: 1.4($ billions)
© Ram Mudambi, Temple University, 200716
National origin of largest multinational corporations
Fig: 1.5
© Ram Mudambi, Temple University, 200717
THE WORLD'S 500 LARGEST MNCsCountry/Block Number of MNCs
1998* 2000**US 185 239EU 156 144
Japan 100 64Canada 12 11Australia 7 9
Switzerland 11 11South Korea 9 4China (HK) 6 7
Brazil 4 3Others 10 8
500* Adapted from Fortune , August 1999; ** Adapted from The Financial Times , January 2001
© Ram Mudambi, Temple University, 200718
Globalization - Pro
Lower prices for goods and services. Economic growth stimulation. Increase in consumer income. Creates jobs.
Countries specialize in production of goods and services that are produced most efficiently.
© Ram Mudambi, Temple University, 200719
Globalization - Con
Destroys manufacturing jobs in wealthy, advanced countries.
Wage rates of unskilled workers in advanced countries declines.
Companies move to countries with fewer labor and environment regulations.
Loss of sovereignty.
© Ram Mudambi, Temple University, 200720
Sovereignty and the WTO
“Under the new system, many decisions that affect billions of people are no longer made by local or national governments but instead, if challenged by any WTO member nation, would be deferred to a group of unelected bureaucrats sitting behind closed doors in Geneva.” - Ralph Nader
© Ram Mudambi, Temple University, 200721
International vs Domestic Business
Countries are different. Range of problems are wider and more
complex. Government intervention in trade and
investment creates problems. International investment is impacted by
different currencies.
© Ram Mudambi, Temple University, 200722
Three takeaways Globalization, defined as the shift towards a
more integrated and interdependent world economy, has been rapidly increasing
While the triad remains the dominant economic zone, the international economy is changing to become more inclusive
These changes are causing stresses and strains in both the developed and developing worlds
© Ram Mudambi, Temple University, 200723
Corporate globalists inhabit a world of power and privilege. They see progress everywhere because from their vantage point the drive to privatize public assets and free the market from governmental interference appears to be spreading freedom and prosperity throughout the world, improving the lives of people everywhere, and creating the financial and material wealth necessary to end poverty and protect the environment. They see themselves as champions of an inexorable and beneficial historical process toward erasing the economic and political borders that hinder corporate expansion, eliminating the tyranny of inefficient and meddlesome public bureaucracies,and unleashing the enormous innovation and wealth-creating power of competition and private enterprise.
PRO
© Ram Mudambi, Temple University, 200724
Citizen movements see a starkly different reality. Focused on people and the environment, they see a world in deepening crisis of such magnitude as to threaten the fabric of civilization and the survival of the species - a world of rapidly growing inequality, erosion of relationships of trust, and failing planetary life support systems. Where corporate globalists see the spread of democracy and vibrant market economies, citizen movements see the power to govern shifting away from people and communities to financial speculators and global corporations dedicated to the pursuit of short-term profit. They see corporations replacing democracies of people with democracies of money, self-organizing markets with centrally planned corporate economies,and diverse ethical cultures with cultures of greed and materialism.
CON
