International Management Mgmt 446 Fall, 2011 Sully Taylor

International ManagementMgmt 446

Fall, 2011

Sully Taylor

The Global Manager’s RoleThe Global Manager’s Role

1-2Copyright ©2011 Pearson Education, Inc. publishing as Prentice Hall

What is Globalization?What is Globalization?

Global competition characterized by networks of international linkages that bind countries, institutions, and people in an interdependent global

economy


The Impact of Information Technology

The Impact of Information Technology

Making Geographic barriers less relevant

Lowering cultural barriers

Encouraging convergence of consumers’ tastes and preferences

Making Geographic barriers less relevant

Lowering cultural barriers

Encouraging convergence of consumers’ tastes and preferences


Globalization of Human CapitalGlobalization of Human Capital

Increasing trend in the offshoring of manufacturing jobs and outsourcing of white-color jobs

Prediction that 3.3 million U.S. jobs in service sector may be lost/outsourced by 2015

Increasing trend in the offshoring of manufacturing jobs and outsourcing of white-color jobs

Prediction that 3.3 million U.S. jobs in service sector may be lost/outsourced by 2015


Powerpoints from McKinsey Report, 2010…Survey of Five Global Trends

Impact of Trends on Companies’ Profitability Over the Next 5 Years

% of respondents

Expected Role of Country’s Government in the Market Over the Next 5 years

Benefits of GlobalismBenefits of Globalism

Access to more markets

Growth of developing economies

Opportunities for flexibility and efficiency

Opportunities for small and medium-sized enterprises (SMEs)

Access to more markets

Growth of developing economies

Opportunities for flexibility and efficiency

Opportunities for small and medium-sized enterprises (SMEs)


Challenges to GlobalismChallenges to Globalism

Backlash against capitalism and rekindling of nationalism

Increased protectionism of high-demand resources

Need to develop top managers with international understanding and experience

Backlash against capitalism and rekindling of nationalism

Increased protectionism of high-demand resources

Need to develop top managers with international understanding and experience


What does The Other Side of Outsourcing illustrate?

Rising competitiveness of other nations. Competitive advantage of different

nations. Wage disparities internationally. Outsourcing by Western firms. Cultural adjustments of societies and

individuals; social and cultural backlash. International market opportunities (e.g.,

for Nike and others).

Different historical and cultural contexts of countries: eg. Caste system in India. Why does it persist? How does it affect competitiveness?

Different family systems and their effects on labor (e.g. young woman applying for job).

Different/changing perspectives on marriage; consumption; etc. What trends would you predict for the number of children in middle and upper class families going forward?

What pressures or draws industries and companies into

doing business globally?

Why did Intel put a $2B plant in Vietnam?Why does Boeing produce parts of its

planes in China?Why has Wal-mart franchised itself to Barti

in India?Why did Samsung replace its 500+

marketing firms with only one main one?

Some examplesAn Indian call center operator is paid about

$1000/month (in PPP).It costs > $1B to build a new Boeing plane.Mexican middle class wants fashionable

jeans at a good price.China has lifted its requirement that foreign

firms form JVs with Chinese firms.

There are four general drivers that push or draw industries and the firms within them to operate internationally

Market driversCost driversCompetitiveGovernmental

Global Industry DriversMarkets:

Common customer needsE.g., Honda with reliability and

economy Global customer

E.g. Wal-MartLead countries

E.g., Italy in high end textilesTransferable marketing

E.g. Louis Vuitton

Adapted from George Yip, Diagnosing Industry Globalization Potential, 2003

Cost:Global scale economies

Aerospace industry; consumer electronics. High product development costs

E.g. Intel microprocessor

Sourcing efficienciesFavorable logistics

E.g., containerizationDifferences in country costs

E.g., labor costs

Competitive pressuresCompetitors from different countries

E.g., GM’s activity in China is linked to increase in competitors in US.

Competitors globalizedHave the ability to leverage their reach

Too many competitors at homeE.g. Honda’s push into the US

Access to knowledgeE.g. Japanese biotechnology investments in US

GovernmentFavorable trade policies

E.g., recent reform in India of the FDI lawsCompatible technical standards

E.g., EU unity on standards for elevatorsCommon marketing regulations

E.g., use of certain media, ability to make claims. Host government concerns

E.g., number of expatriates; local content

In threes, 10 minutesFor 2 of the 4 global drivers, identify 2

industries (e.g., automotive, toothpaste, pet care products, high end medical equipment, toys, pharmaceuticals, etc.). One industry should be highly affected by this driver and the other should not be affected much at all. Be sure that you can explain your reasoning for your conclusions.

Regional Trading BlocksRegional Trading Blocks

The dominance of the United States is already over.

What is emerging is a world economy of blocs represented by: NAFTA, EU, and ASEAN.

Much of today’s world trade takes place within these three regional free-trade blocs:

Western Europe, Asia, and the Americas

Much of today’s world trade are grouped around three dominant currencies:

euro, yen, and the dollar

The dominance of the United States is already over.

What is emerging is a world economy of blocs represented by: NAFTA, EU, and ASEAN.

Much of today’s world trade takes place within these three regional free-trade blocs:

Western Europe, Asia, and the Americas

Much of today’s world trade are grouped around three dominant currencies:

euro, yen, and the dollar


The European Union EU

The European Union EU

A unified market over 400 million people living in 27 nations

EU poses two challenges for global managers:

1. “Fortress” Europe2. Dealing with multiple cultures within

this unified market

A unified market over 400 million people living in 27 nations

EU poses two challenges for global managers:

1. “Fortress” Europe2. Dealing with multiple cultures within

this unified market


AsiaAsia

China India ASEAN South Asia Association of Regional

Cooperation (SAARC) Japan Asian Tigers:

Hong Kong Singapore South Korea Taiwan

China India ASEAN South Asia Association of Regional

Cooperation (SAARC) Japan Asian Tigers:

Hong Kong Singapore South Korea Taiwan


The AmericasThe Americas

North American Free Trade Agreement (NAFTA)

Central America Free Trade Agreement (CAFTA)

MERCOSUR

North American Free Trade Agreement (NAFTA)

Central America Free Trade Agreement (CAFTA)

MERCOSUR


Other Regions in the WorldOther Regions in the World

The Russian Federation Middle East The African Union—AU South Africa Less developed countries—LDCs

Low Gross National Product (GNP)Low Gross Domestic Product (GDP)Large, relatively unskilled workforceHigh international debt

The Russian Federation Middle East The African Union—AU South Africa Less developed countries—LDCs

Low Gross National Product (GNP)Low Gross Domestic Product (GDP)Large, relatively unskilled workforceHigh international debt


The Global Manager’s RoleThe Global Manager’s Role


http://www.ted.com/talks/lang/eng/parag_khanna_maps_the_future_of_countries.html

What is International Management?

1-29

The process of developing strategies, designing and operating systems, and

working with people around the world to ensure sustained

competitive advantage

Copyright ©2011 Pearson Education, Inc. publishing as Prentice Hall

International News Article (10 minutes)“China Aims to Rein in Car Sales”

Switch and work with someone you haven’t worked with in class yet.

In pairs, decide what the article illustrates about the international management topics in Chapter 1. Be specific about how the article illustrates a topic.

Describe what you learned from analyzing the article. This could be specific information, and/or an insight into doing business internationally that you did not have before.

What discussion question would you create from reading this article that could provoke an fruitful, interesting class discussion?

Political RiskPolitical Risk

Examples:Examples:

1-31

Any governmental action or politically motivated event that could adversely affect the

long-run profitability or value of a firm

Venezuela took control of cement plants and offices belonging to

Mexico, after failing to reach an agreement in nationalization talks.

Bolivian president’s move to nationalize the

national gas industry followed that in

Venezuela.


The Political Risk Cont.The Political Risk Cont.

Typical Political RisksTypical Political Risks Political Risk Assessment

1-32

Expropriation and confiscation

NationalizationTerrorismMacro-political risk event Micro-political risk eventDiscriminatory treatmentBarriers to repatriation of

funds Interference in managerial

decision makingDishonesty by government

officials

Expropriation and confiscation

NationalizationTerrorismMacro-political risk event Micro-political risk eventDiscriminatory treatmentBarriers to repatriation of

funds Interference in managerial

decision makingDishonesty by government

officials

Helps companies manage exposure to risk and minimize financial loss

Two forms:Consultation with

expertsDevelopment of

internal staff capabilities

Helps companies manage exposure to risk and minimize financial loss

Two forms:Consultation with

expertsDevelopment of

internal staff capabilities


For Week 3Read the international News article

assigned today and - Chapter 2, and Case 3: Nokia (pages 82-88).

Turn in your team member list and emails next time. Be sure to have your top three country choices from the list in the syllabus.

Be sure to be on time as we will be going to the library for the first 45 minutes.

Documents

International Management Mgmt 446 Fall, 2011 Sully Taylor