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Business Strategy in the Global Economy (MN30409)Bruno OliveiraB.Oliveira@bath.ac.ukSession 4 Globalization and the Determinants of Global Competitiveness

1Group WorkGeneral DescriptionRequires research about global trends

ObjectiveDevelop the skills to understand global trends and their relation to global strategy .

Submission DateSubmitted electronically (through Moodle) until 23.55 GMT, on the 30th of April 2014.

This date was selected with the purpose of allowing you to have your work and the feedback I will provide fresh in your mind for the exam. This will allow you to better understand and remember the key concepts and theories within the course.

2Group WorkChoose ONE of the following companies

Dropbox, Microsoft, Netflix, Pinterest, Tesla Motors or Uber .

3Group WorkSubmission Requirements

You have to submit 2 Files: a WORD FILE (.doc or .docx) AND a PDF file

The word limit for this assignment is 2500 words excluding references. NO 10% buffer 2500 words absolute limit. NO Appendices are accepted!

If you use tables with text, they cannot be added as an image. They have to have readable text and its content counts towards the word limit. There are no exceptions!

PlagiarismZero tolerance. Every document will be automatically analysed through powerful software.

4Group Work Structure & Content4 Key Sections Need to be Included:

Brief reflection on the companys current global strategy Briefly analyse the companys current global strategyFree to use the approach you find more relevant. Using the 4 dimensions of global strategy is just one possibility.

Identification of key global trends (e.g. economic, political, social, technological, etc)

Be creative and think outside the boxYou have to follow a logical approach and explain clearly how you arrived at your list of trends Support some of the research with references

5Group Work Structure & ContentReflections of the opportunities and threats that might emerge due to the trends identified

Make relevant connections between the trends identified and the company.What are the opportunities created and what about the challenges?Think from different angles to allow a deep understanding of the different effects a trend might have Summary of key opportunities and threats you identified (5-10).

Recommendations on how the company should deal with the emerging trends

Recommend how the company can take advantage of opportunities and at the same time protect against threats. Minimum of 3 recommendations, which should be supported with convincing arguments. More than 7 recommendations would normally be seen as too much.

6Assessment CriteriaReport Overall Structure and Logic

The report shows a clear structure and all the different pieces fit together. There is a good flow and a good relationship between the ideas conveyed in the different sections. For example, the arguments used to identify key trends are then followed up to discuss the opportunities and threats generated.

The process followed throughout your report (e.g. identify trends, opportunities/threats, etc) is clearly explained.

Clarity of writing

7Assessment CriteriaUnderstanding of key concepts/theories & ability to apply them in a practical situation

The key concepts/theories/frameworks/models approached in the course are used throughout the project.

You are able to choose the concepts that best fit your analysis and it is clearly explained why they are used in your project.

You are able to clearly apply the concepts and theories to the practical case you are analysing. In doing so, you show a clear understanding of how those concepts and theories apply in practice.

Use of correct terminology

8Assessment CriteriaArgumentation and Quality of Discussion

Depth of coverage of key issues - You have addressed the key issues outlined in the section Group Work Structure and Content.

The discussion undertaken demonstrates extensive research and deep reflection of the key issues identified.

Ability to consider issues from different angles and to discuss how a different perspective can have different implications.

Ability to use relevant references or practical examples to support critical statements and key issues.

The decisions you take are supported with strong and clear arguments. For example, the choice of key trends, key opportunities, final recommendations need to be well argued.

9Assessment CriteriaAbility to draw well-reasoned and well-supported reccomendations

You are able to synthesise your work in a logical way and your final recommendations are well aligned with the argument you built throughout the project.

You are able to explain clearly why you chose to focus on certain opportunities/threats instead of others.

You show a good ability to reflect on how your recommendations impact on the future decisions and strategy of the company.

Originality and novel thinkingAbility to come up with novel interpretations and suggestions, showing deep reflection of the subject under consideration.

10Example of Feedback Form Used 11

11Example of Final Feedback Highest Mark12This is an outstanding piece of work. Congratulations!

The work is very well structured and written. The arguments are very solid and robust, showing you did an extensive research about the company and the global environment. Furthermore, you were able to synthesise all the information and focus on the key points and recommendations. The trends and suggestions you made were very interesting, logically argued and showed careful thought and consideration. The use of figures helped to convey your ideas in a compelling way and showed a good level of novel thinking and originality. Very well done!

In terms of areas for improvement, the first section could have been better structured and organised. The last section could have reflected a bit more on the implications of your recommendations for Amazons future.

I felt inspired reading your work, which is not an easy achievement! Congratulations again.

12Example of Final Feedback Lowest Mark13This is a reasonable piece of work. You did some effort to integrate some lecture contents within your report but unfortunately the work has several shortcomings that were mentioned throughout.The structure of the work could have been improved and the writing could have been clearer and more convincing. Your approach was too general and vague and did not identify specific issues. Furthermore your recommendations seemed too narrow and too similar. Overall, the quality of discussion lacked depth and there were little references to support your analysis and arguments. The work would also have been improved if you were able to analyse the key issues from different angles. This would allow you to be more original in the presentation of your ideas.

13Update Course StructureKey Sessions for Group Work Sessions 1 to 7S1 (3rd Feb): Introduction Business Strategy in the Global EconomyS2 (10th Feb): Global Strategy(3h Session)S3 (17th Feb): Institutional/cultural considerations (3h Session)S4 (24th Feb): Globalisation & Determinants of Global Competitiveness + Assessment InfoS5 (3rd Mar): Integrating internal and external resources Open Innovation & Open StrategyS6 (10th Mar): International Expansion I Entry ModesS7 (17th Mar): International Expansion II Global M&As S8 (24th Mar): No Session Watch Video & Work on Group ProjectS9 (14th Apr): No Session (Replaced by 3h sessions on S2 & S3)S10 (21th Apr): Guest Speaker: Claire Affleck (Vodafone Global Enterprise)S11 (28th Apr): Revision and Exam Preparation

14Office Hours and AvailabilityOffice HoursNormally on Tuesdays between 2-4pm (before class). Also available after class (from 18.05). Please book in advance.Available by email at b.oliveira@bath.ac.ukImportant info below regarding availability24th Feb to 20th March Good availability to meet in person and generally able to respond quick to emails.22nd March to 5th April Abroad on conference and Easter break. Not possible to meet in person. Available for emails but might take a bit longer than usual to respond while abroad.6th to 19th April Research activities abroad. Better availability to respond to emails. If really necessary might set up a skype call. 20th April until end of semester Good availability to meet in person and generally able to respond quickly to emails.

S2 (10th Feb): Global Strategy(3h Session)S3 (17th Feb): Institutional/cultural considerations (3h Session)S4 (24th Feb): Globalisation & Determinants of Global Competitiveness + Assessment InfoS5 (3rd Mar): Integrating internal and external resources Open Innovation & Open StrategyS6 (10th Mar): International Expansion I Entry ModesS7 (17th Mar): International Expansion II Global M&As S8 (24th Mar): No Session Watch Video & Work on Group ProjectS9 (14th Apr): No Session (Replaced by 3h sessions on S2 & S3)S10 (21th Apr): Guest Speaker: Claire Affleck (Vodafone Global Enterprise)S11 (28th Apr): Revision and Exam Preparation

15Learning Outcomes for Today

1. Understand what is globalisation and be capable of discussing the arguments in favour and against it3. Comprehend why being knowledgeable about globalization is important for managers involved in global strategy.4. Understand the key business benefits of globalisation 5. Grasp the key business challenges associated with globalisation2. Be able to understand the point of view of different stakeholders on globalisation17Discussion Baidu: The Google of China

Example Cultural/Institutional Impact on Business17Example Cultural/Institutional Impact on Business18http://www.bloomberg.com/video/the-baidu-billionaire-inside-the-google-of-china-uweP_4bfT6KFyNkvCFq5Hw.html18Example Cultural/Institutional Impact on Business19https://www.youtube.com/watch?v=PQIZpi0mKnM19 - Managing joint ventures

- Negotiating internationally

- Managing relationships with suppliers/customers

- Dealing with host country governments

- Motivating the local work force Impact of Cultural Differences on Business Situations

20GlobalisationGlobalization: The process by which people, products, information, and money can move freely across borders.

Globalizing: The phenomenon of the transition of industries whose competitive structure changes progressively from multinational to global.

21Emergence of GlobalisationDecline in barriers to the free flow of goods, services and capital. Agreements between countries within the World Trade Organization (WTO) to lower the tariffs charged on the trade of goods, services and capital.Decline in barriers toward Foreign Direct Investment (FDI) allowing foreign firms to invest and own resources.

22Emergence of GlobalisationMajor Technological Changes. Major advances in communication, information processing and transportation technology. For example, between 1930 and 1990 the price of 3-minute phone call between New York and London fell from $244.65 to $3.32. Today, using VOIP, it can be 0!

23Global Trends Business Communications

Telepresence and the Future of Business?https://www.youtube.com/watch?v=18zD3_wkWqM25Globalization Debate Summit

2627Arguments Pro GlobalisationCreates overall wealth for all nations because specialization increases trade.Reduces inflation because of cost efficienciesBenefits customers because of price reduction owing to cost efficienciesBetter allocation of natural, financial and human resourcesReduces corruption because of free market trade

2728Arguments Against GlobalisationImposes massive strain on labour force both in developed countries (job destruction) and developing countries (e.g. child labour)Standardises customer tastes and reduce diversityInduces concentration of power in a few global corporationsIntroduce a jungle leading to the domination of the strongest multinational Harms the environment because of unrestrained exploitation of natural resources such as forestsReduces capacity for nations to protect their national interests, cultures and values

28Example An Argument Against Globalisation29https://www.youtube.com/watch?v=uWSxzjyMNpU29Globalisation at the Firm Level30

30Why do Firms GlobalizeMARKETSTo capture new marketsRESOURCESNatural resourcesOffshoring/OffsourcingKnowledgeSecurity of supplyCOMPETITIVENESSEconomies of scaleCostsNetworksRisk-spreadingCustomer ValueCVPROFITInternal CostsCSupplies (S)CostsVolume (V) Get Access to resources and procurement(S) Increase Size benefit from Economies of Scale (C) Increase Size (V): Capture market opportunities Get access to low cost labor and infrastructure (C) Get access to knowledge (CV and C) Serve global customers (CV) Reduce risks through geographical diversificationPrice3132Business Benefits of GlobalisationCOST BENEFITS:

Economies of Scale (e.g product/standardization)

Increased bargaining power over suppliers

Ability to organize global business system that locates activities in the most advantageous places

TIMING BENEFITS

Coordinated Approach to product launching in early stage of product lifecycle. Optimal volume obtained quicker.

Ability to work around the clock. Example: Many software companies, including IBM and Microsoft, now use Indian engineers to perform test functions on software designed in the United States.

The time difference allows Indian engineers to run debugging tests on software written in the United States when U.S. engineers sleep, transmitting the corrected code back to the United States over secure Internet connections so it is ready for U.S. engineers to work on the following day

3233Example Apple Launched the iPad in several countries simultaneously

3334Business Benefits of GlobalisationLEARNING BENEFITS:

Coordinated transfer of information, best practice and people across subsidiaries

For example, Unilever Thailand found an innovative way to produce and market ice-creams this was transferred to all other Asian locations.

ARBITRAGE BENEFITS

Use resources in one country for the benefit of other countries.

Can allow company to play the global chess game engage in price war in one country to weaken important competitor in its dominant market. Example: Goodyear vs Michelin

Tax & Legal Arbitrage. Example: In Europe, Ebay has their tax jurisdiction in Luxembourg; Apple has a complex network of subsidiaries across to world to save money in taxes (see link below).

New York Times May 2013 - Apple's Web of Tax Shelters Saved It Billions34DesignProductionMarketingServiceDesignProductionMarketingServiceDesignProductionMarketingServiceDesignProductionMarketingServiceOTIS UKOTIS GERMANYOTIS FRANCEOTIS ITALYCompete against UK and multinational competitors

for the UK marketCompete against German and multinational competitors

for the German marketCompete against French and multinational competitors

for the French marketCompete against Italian and multinational competitors

for the Italian MarketA CLASSIC EXAMPLE: OTIS MULTINATIONAL CONFIGURATIONFor many people globalisation means to expand the companys presence abroad, for others it means standardising a product and selling it to the world, for other its a managerial approach where decision-making is centralised at corporate headquarters.The concept is relatively new, before than the 1970s almost nobody talked about globalisation, before common terms were only multinationals, international or transnational. YETinternational and multinational companies have been around for ages:Examples are the EAST INDIA COMPANY (17th century) and companies such as Unilever, Nestle or P&G that were operating all over the world already at the end of the 19th century.

35DesignMarketingServiceProduction DesignMarketingServiceProductionDesignProductionMarketingProductionMarketingServiceProductionOTIS UKOTIS GERMANYOTIS FRANCEOTIS ITALYOTIS EUROPEA CLASSIC EXAMPLE: OTIS MULTINATIONAL CONFIGURATION There are still country subsidiaries, which take care of installation, maintenance, public relations and personnel, but otherwise product development and manufacturing is coordinated globally by product lines36

HISTORICAL EVOLUTION OF GLOBALISATIONFor many people globalisation means to expand the companys presence abroad, for others it means standardising a product and selling it to the world, for other its a managerial approach where decision-making is centralised at corporate headquarters.The concept is relatively new, before than the 1970s almost nobody talked about globalisation, before common terms were only multinationals, international or transnational. YETinternational and multinational companies have been around for ages:Examples are the EAST INDIA COMPANY (17th century) and companies such as Unilever, Nestle or P&G that were operating all over the world already at the end of the 19th century.

3738Business Challenges of Globalisation

3839Business Challenges of GlobalisationCULTURAL FACTORS

Need to adapt to local customs and traditions: Product standardization is not effective in this case and it is more complex to manage the global activities.

For example, tastes in food, social interactions in sales negotiations, attitude toward hygiene, cosmetics or gifts still vary considerable between cultures.

Commercial Factors: distribution, customization, responsiveness

Distribution networks and practices may differ significantly from country to country. Ways of managing the network, motivating dealers and distributors can vary. Example: Pharmaceutical industry- Marketing and distribution of medicine vary for different countries (e.g. Doctors selling directly, free distribution, drug stores, etc.)

Responsiveness to customer demand and need to offer customised products/services are a challenge because they prevent standardization; For example, banking services to customers and small businesses require local presence and customization to market conditions3940Business Challenges of GlobalisationTECHINCAL FACTORS

Differences in technical standards. Different standards on electrical, civil, chemical or mechanical engineering prevent economies of scale.

Need to adapt to local customs and traditions: Product standardization is not effective in this case and it is more complex to manage the global activities.

LEGAL FACTORS: Regulation and national security issues

Regulatory constrains imposed by governments. Regulation on the free flow of people (work permits), cash, goods, data (censorship).Governments can even nationalise foreign companies and take control of key industries (e.g. oil)

Imposition of localization constrains. For example, some countries only allow foreign direct investment if the company develop value added in the country (e.g. manufacturing) or if enters in a partnership with local companies (e.g. joint ventures).40Summary of the SessionGlobalisation means a greater integration between countries and it has been fuelled by declining barriers to trade and major technological advancements.

However, globalisation is a controversial topic that attracts heated debates. There are a number of pro and against globalisation arguments. The globalisation progress is not linear and is subject to come backs it seems like the swing of a pendulum.

At the level of the firm, there are 4 key benefits: cost benefits, timing benefits, learning benefits and arbitrage benefits .

Companies also face globalisation challenges that managers need to consider when developing global strategy: cultural differences, commercial factors (e.g. differences in network and distribution systems), differences in technical standards, differences in regulation and national security issues. systems