Themes And Resources For Teaching International Business Tamer CavusgilPresentation Transcript
Themes and Resources for Teaching International Business S. Tamer Cavusgil University Distinguished Faculty John W. Byington Endowed Chair in Global Marketing Michigan State University 7th Biennial International Business Institute for Community College Faculty East Lansing, Michigan, May 2007
Globalization and its implications
Key Trends in Global Business
Implications for Management
Teaching tips and classroom exercises
Themes for Teaching IB Offshoring Culture Globalization Technology Diverse Participants Smaller Firms in IB Emerging Markets Strategy International Entrepreneurship Collaborative Ventures Service Sector Industry
What is Globalization?
At the macro level…
Greater integration and interdependency of national economies
Freer movement of goods, services, capital, and knowledge
Prevalence of regional trading blocs
Emergence of monetary unions
Convergence of customer lifestyles, requirements, etc.
What is Globalization?
For business enterprises…
Foreign market entry and expansion
Selective externalization of value chain
Collaborative ventures with foreign partners
Integration of operations on a global scale
Building global capabilities and a global organization
The Many Dimensions of Globalization
Companies – The business enterprise
Products and brands
Regulations, laws, standards
Cultural values, mindsets, consumer behavior
Phases of Globalization 1 st Phase: 1830, peaking around 1880 Aided by railroads, ocean transport, rise of manufacturing and trading companies 2 nd Phase: 1900, peaking around 1920s Fueled by electricity and steel 3 rd Phase: 1948, peaking around 1970 GATT, end of WW II, Marshall Plan… 4 th Phase: 1980, peaking around 1997 Tech. advances, Internet, Emerging Markets…
Global economic realignment
Geography made redundant by technological connectivity
Consolidation of industries on a worldwide scale
Strains on natural resources and the environment
Remarkable growth and potential of Emerging Markets…
Emerging Market Dynamics
Source of customers, suppliers, ideas, and human capital.
One billion new consumers will enter the global markets in the next decade!
Household income will reach threshold level of $5,000 in EMs.
Consumer spending will increase from $4 trillion to more than $9 trillion by 2015, nearly matching Western Europe.
Attractions and Challenges of EMs
Dynamic, rapidly transforming
Low competitive intensity
Dominated by family conglomerates
Bureaucracy, redtape, lack of transparency
Legal, institutional vacuum
Safeguarding intellectual property
The Aspiring Consumer in EMs
Middle class coming into its own
Engaged in technological leapfrogging
Exposed to Western brands
Eager to consume material things
Highly brand conscious
20,400 55 26 5 South Korea 8,300 45 28 14 Thailand 8,200 45 32 10 Turkey 10,000 41 42 13 Mexico 8,400 35 65 22 Brazil 11,100 47 67 12 Russia 3,600 48 105 20 Indonesia 3,300 49 534 8 India 6,800 45 587 1 China GDP per capita ( PPP, US $ ) % of Income held by middle class Middle-class population (millions) Rank in MSU-CIBER’s EMPI Country
Why GDP Per Capita is a Poor Indicator of Market Potential for EMs?
Need to adjust for Purchasing Power Parity
Informal economy is often as large as the formal economy in developing countries
The “mean” is a poor indicator since income distribution is typically bi-modal in EMs
Household income several times larger than per capita income because of multiple wage earners
Developing country statistics may be unreliable
Typical exporter is more interested in a large enough “market niche” than huge potential
Implications for Management
Building interconnectedness: ‘global orchestration’ of value-chain activities
Search for maximum flexibility in manufacturing, sourcing and other value- adding activities
Relentless search for productivity gains and operational efficiency
Recognizing, cultivating, and measuring key global strategic assets of the organization
Gaining and sharpening partnering capabilities…
Research & Development Product Design Manufacturing Marketing Distribution Sales & Service Stage in Value Chain Strategic alliances Licensing/cross licensing Design contracting Global procurement Contract manufacturing Equity joint ventures (FDI) Agency agreements Licensing Exporting to distributors/ agents Franchising Exporting to end-users Business format franchising Agency/representative relationships Types of Collaboration Company Examples Telecoms, computers, drugs, aircraft, satellite communication systems… Dow, Pharmacia-Upjohn Software, autos, fashion goods, shoes, furniture… Automotive Gerber (Novartis) IKEA, Guardian Industries Kmart, Manpower, Banks, Courier Services, Amway
2. Companies-The Business Enterprise
Diagnostic tools from MSU CIBER: CORE, Distributor, Partner, Freight forwarder
Business Week’s Global 1000; Fortune’s Global 500
Fortune Global Most Admired Companies
Financial Times World’s Most Respected Companies
UNCTAD World’s Largest Transnational Corporations
National or Multi-local Companies Global or Transnational Companies Nestle, Unilever, Asea Brown Boveri, Sony, Coca-Cola
Strong national identity
National endowments: talent pool, skills, capabilities
Unique corporate governance/ownership patterns
National regulations on employment
National patterns of investment in R & D
Planning and resource allocation
Dependence on global markets
Worldwide manufacturing capability
Globally integrated strategy
Centralized structure and decision-making
Uniform operational policies and routines
Global organization and culture
3. Products and Brands
Business Week – Interbrand ’s Global Brands Scoreboard: World’s Top 100 Global Brands
2003 Global Brands Scoreboard
4. Economic Assets
Flows of capital (investment, debt, portfolio investment, etc.), technology, know-how, human resources, etc.
Delphion (patents), U.S. Patent Office
5. Business Risk
Economist’s Big Mac Index
The concept of Purchasing Power Parity , the notion that a dollar should buy the same bundle of goods in all countries, is explained. Comparing actual exchange rates with PPP indicates whether a currency is under- or overvalued.
MSU-CIBER’s Market Potential Indicators for Emerging Markets
Four Types of Risks Commercial Risk Types of Risks in International Business Country (Political and Legal) Risk Cross-Cultural Risk Weak Partner Operational Problems Timing of entry Competitive intensity Poor execution of strategy Currency exposure Asset valuation Foreign taxation Inflationary and transfer pricing Global sourcing Social/political unrest and instability Economic mismanagement; inflation Distribution of income; size of middle class Government intervention, bureaucracy, red tape Market access; barriers; profit repatriation Legal safeguards for intellectual property right Cultural distance Negotiation patterns Decision-making styles Ethical practices Currency/Financial Risk
Hoover’s Industry Snapshots
U.S. Commercial Service
Market and Country Research
International Marketing Insight (IMI) Reports
Multilateral Development Bank (MDB)
Industry Sector Analysis Reports
Best Market Reports
Global Agriculture Information Network (GAIN) AgWorld Attaché reports
Country Commercial Guides
Aircraft (Civil) Computers Credit Cards Automobiles Soft Drinks Specialty Chemicals Pharmaceuticals (Ethical) Toothpaste Electric Insulation Commercial Banking Pharmaceuticals (OTC) Book Publishing Low High Strength of Competitive Globalization Drivers
7. Countries, Markets
IMD World Competitiveness Scoreboard
World Economic Forum Global Competitiveness Report
A.T. Kearney/Foreign Policy Globalization Index
Heritage Foundation and WSJ Index of Economic Freedom
Blah The World Competitiveness Scoreboard 2005 Source: IMD World Competitiveness Yearbook 2004
Economic freedom explains from 54 to 74 percent of the variation in income among countries.
A 10% increase in economic freedom in a country can produce an increase in GNP per capita of 7.4% to 13.6%.
CONCLUSION: The message is clear: enhancing economic freedom can lead to significant improvements in living standards. Economic Freedom and Wealth
8. Regulations, Laws, Standards Harmonization is a slow process when it comes to these… 8. Regulations, Laws, Standards
Ilan Alon and Nancy Cannon, “Internet-Based Experiential Learning in International Marketing: The Case of Globalview.org,” Online Information Review , Vol. 24, No. 5 (2000), 349-356.
R. F. Scherer, S. T. Beaton, M.F. Ainina and J. F. Meyer (eds.), A Field Guide to Internationalizing Business Education , Second Edition, 2003, Lakeshore Communications: Euclid, Ohio.
Case collections from business schools at Western Ontario, IMD, Harvard, Virginia, etc.
Internationalizing Business Education: Toward Meeting the Challenge, (Cavusgil), East Lansing, Michigan, MSU Press, 1993.
Internationalizing Business Education: Toward Meeting the Challenge , (Cavusgil), East Lansing, Michigan, MSU Press, 1993.
“ Expanding Horizons with E-Learning” in A Field Guide to Internationalizing Business Education , R. F. Scherer, S. T. Beaton, M.F. Ainina and J. F. Meyer (eds.), Second Edition, 2003, 183-194, Cavusgil, I. Kiyak and T. Kiyak.
Study Abroad Programs in Business Schools, Issues and Recommendations by Leading Educators, East Lansing, MI, MSU Press, 2002.
Publications on Internationalizing Business Education