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2011.02.cesa ib 02

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    2011.02.cesa ib 02 2011.02.cesa ib 02 Presentation Transcript

    • RtB
    • Internaionalization
    • Creative Commons License
    • Quantum Integration
    • International Business
      Stephan Langdon, MBA, M.ED
    • The Globalizing Economy
    • Leading Exporting and Importing Countries
    • Leading Exporting and Importing Countries, continued
    • Top 25 Companies by Foreign Asset Ownership
    • Foreign Direct Investment
      Developed countries get the bulk of FDI (69%) while developing countries get around 30%.
      Least developed countries get minimal FDI.
      Implications for managers—significant opportunities around the world.
      Multinational managers should look at risk rating of countries.
    • The Internet and Information Technology
      Electronic Communication — E-mail, World Wide Web, etc.
      Allows multinationals to communicate with company locations throughout the world.
      Multinationals can also monitor worldwide operations.
      Information technology is spurring a borderless financial market.
    • The Rise of Global Products and Global Customers
      The needs of customers for many products and services are growing more similar,
      e.g., McDonald’s, Boeing, Toyota.
      Global customers search the world for their supplies without regard for national boundaries.
    • Privatization
      Sale of government-owned businesses to private investors,
      usually through stock or direct sale to other companies.
      Two types of privatization contribute to the global economy — the developed world and the developing world.
    • Privatization—Types
      The Developed Countries
      Use privatization to make formerly government-controlled enterprises more competitive in the global economy.
      The Developing Countries
      Use privatization to jump-start their economies or to speed the transition from a communist to a capitalist system.
    • New Competitors
      Free market reforms are creating a potential group of new competitors.
      Korean, Russian, Taiwanese, and Mexican companies are all emerging.
      Chinese companies are also on the move.
    • Top 25 Emerging Market Companies
    • New Competitors are Emerging
      Global trade has two important effects in developing new competitors:
      When developing countries are used as low-wage platforms for high-tech assembly, multinationals facilitate the transfer of technology.
      Aggressive multinationals are also expanding beyond their own borders.
    • The Rise of Global Standards
      Companies can make one or only a few versions of product for the world market.
      This is cheaper than making different versions for different countries.
      Drive to develop common standards to save money.
    • Global Standards
      Consistency in quality also an important requirement of doing business in many countries.
      International organization for standardization (ISO) in Geneva, Switzerland
      Developed a set of technical standards (ISO 9001:2000 series).
    • Internationalization
      Internationalization is the process by which
      Firms increase their awareness of the influence of international activities on their future
      Establish and conduct transactions with firms from other countries.
    • 5 reasons global sourcing programs
      To focus on core competencies
      To reduce and/or variablize costs
      To gain expertise that is not currently in house
      To increase quality, efficiency, and speed of delivery
      To be able to scale operations effectively
      Source: ITESA
    • Reznor Case
    • Flat World and NIN
      Berlin Wall
      Windows
      Netscape Browser
      Workflow
      Flat World
      NIN
    • Flat World and NIN
      Berlin Wall
      Windows
      Netscape Browser
      Workflow
      • Global Market
      • Websites
      • Facebook.com
      • Access
      • Musician Work
      • Danial Lanois
      • Pay Pal
      Flat World
      NIN
    • Flat World and NIN
      Uploading
      Outsourcing
      Offshoring
      Supply-chaining
      In-sourcing
      In-forming
      Steroids
      Flat World
      NIN
    • Flat World and NIN
      Uploading
      Outsourcing
      Offshoring
      Supply-chaining
      In-sourcing
      In-forming
      Steroids
      Flat World
      NIN
    • The world is flat . . . (Friedman)
      • Three converging developments
      • A global, Web-enabled playing field that allows multiple forms of collaboration
      • Gradual adaptation of organizations through horizontal collaboration in the value creation process extends this platform to different countries
      • 3 billion people join the party - opening of economies like China, India, Russia, and in Eastern Europe, Latin America, and Central Asia to the world economy
    • Example of how triple convergence works
      A global, Web-enabled playing field that allows multiple forms of collaboration is in place
      A company installs an effective supply chain that allows it to source products from a country, e.g. India, Bangladesh, China, Ireland, etc.
      A factory worker in China is able to benefit from global trade because his or her country has allowed information and products to flow “freely”
    • New “Arrivals”
      Population data
      Population data
      We are only seeing the tip of the iceberg.
      Not everyone has access yet
      Microsoft: in China, 1 in a million can mean a total of 1,300,000
      Bangalore: “we are hungry for success”
      Its dominated by, but not all India
      Map of IT businesses
    • Why do Firms Internationalize?
      opportunities for growth
      market diversification
      higaher margins and profits
      Gain new ideas about products, services, and business methods
      Better serve key customers that have relocated abroad
      Be closer to supply sources, benefit from global sourcing advantages, or gain flexibility in the sourcing of products
    • Why do Firms Internationalize?
      Gain access to lower-cost or better-value factors of production
      Develop economies of scale in sourcing, production, marketing, and R&D
      Confront international competitors more effectively or thwart the growth of competition in the home market
      Invest in a potentially rewarding relationship with a foreign partner
    • STEP
      Political
      Social
      Economic
      Technological
    • Dimensions of Internalization
      Internationalization has both inward-looking and outward-looking dimensions.
      The outward-looking perspective incorporates an awareness of the nature of competition in foreign markets
    • Dimensions of Internalization (cont.)
      Includes the following modes of activities:
      Exporting.
      Acting as licensor to a foreign company.
      Establishing joint ventures outside the home country with foreign companies.
      Establishing or acquiring wholly owned businesses outside the home country.
    • Dimensions of Internalization (cont.)
      Similar to the Sequential Approach theory of internationalization:
      As firms build confidence, experience and success:
      Partially Owned
      Wholly Owned
      (3) Acquisition
      Existing Business
      (1) Capital Participation
      New Business
      (2) Joint Venture
      (4) Greenfield
    • Dimensions of Internalization (cont.)
      Not all firms do or can follow the sequential process of internationalization:
      Dependent upon industrial and environmental conditions
      Need to coordinate operations in many countries and many value chain activities
    • Dimensions of Internalization (cont.)
      • Internationalization affects firms in equally important ways from an inward perspective.
      • The related modes of activity include:
      • Importing/sourcing.
      • Acting as licensee from a foreign company.
      • Establishing joint ventures (JVs) inside the home country with foreign companies.
      • Managing as the wholly owned subsidiary of a foreign firm
    • Dimensions of Internalization (cont.)
      • Many firms have an appreciation of the global environment but do not seek out international opportunities in countries that differ greatly
      • Questions to explore:
      • What products/services can be “global”?
      • How can a firm know if it has a globally competitive product?
      • How can the firm successfully take a product global?
    • Internationalization Theory
    • Types of Internationalisation
      Upstream internationalisation
      Downstream internationalisation
      importoutsourcing
      market entry
      outwardinternationalisation
      inwardinternationalisation
    • Implications for Your Project
      Upstream Internationalisation (Supply chain management)
      Location of key suppliers
      Relationship with key suppliers
      Changes in number and frequency of changes
      Supply strategies , e.g. vertical integration
      Downstream Internationalisation (Export management)
      Goals, relationships, strategies, organisational development
    • Degrees of Internationalisation
      Degree of commitment/level of involvement (structure)
      Degree of change within the firm (process)
    • International Product Life Cycle
      Basic Assumptions
      The relative weight of changes in factors of production at various stages of a product’s life cycle
      Changes in a product’s degree of market attractiveness
      Implications for Internationalisation
      Extension of the life cycle of products
      Reduction in unit costs of production
      Other useful concepts
      Product vs. Market lag
      Client-followers vs. Market searchers
    • The Network Approach to Internationalisation
      Firms within an industrial market are inter-dependent
      They share resources
      Their relationships are both stable and changing
      They are mutually vulnerable
      Markets are networks of relationships
    • Some Characteristics of a Network
      Intensity
      Power sharing
      Reciprocity
      Cohesion, through
      Domain consensus
      Positive evaluation
      Work co-ordination
    • FACTOR ENDOWMENTS (HECKSCHER – OHLIN) 
      Introduces concept of ‘factors of production’.
      A country will have a comparative advantage in producing goods which make intensive use of factors of production which it has in abundance
      A country exportsproducts which use intensively its relatively abundant factors and imports products which use intensively its relatively scarce factors
      Leontief paradox
    • Industrial Clusters
      A concentration of suppliers and supporting firms from the same industry located within the same geographic area
      Examples include: the Silicon Valley, fashion cluster in northern Italy, pharma cluster in Switzerland, footwear industry in Pusan, South Korea, and the IT industry in Bangalore, India
      Industrial clusters can serve as an export platform for individual nations
    • National Industrial Policy
      Proactive economic development plan implemented by the public sector to nurture or support promising industry sectors with potential for regional or global dominance. Public sector initiatives can include:
      Tax incentives
      Monetary and fiscal policies
      Rigorous educational systems
      Investment in national infrastructure
      Strong legal and regulatory systems
    • National Industrial Policy:Ireland as an Example
      Beginning in the 1980s, the Irish government implemented a series of pro-business policies to build strong economic sectors. The “Irish Miracle” resulted from:
      Fiscal, monetary, and tax consolidation
      Partnership with the industry and unions
      Emphasis on high-value adding industries such as pharma, biotechnology, and IT
      Membership in the European Union; subsidies and investment received from the EU
      Investment in education
    • FDI Based Explanations: Dunning’s Eclectic Paradigm
      Three conditions determine whether or not a company will internalize via FDI:
      Ownership-specific advantages – knowledge, skills, capabilities, relationships, or physical assets that form the basis for the firm’s competitive advantage
      Location-specific advantages – advantages associated with the country in which the MNE is invested, including natural resources, skilled or low cost labor, and inexpensive capital
      Internalization advantages – control derived from internalizing foreign-based manufacturing, distribution, or other value chain activities
    • The background - Uppsala
      The firm is assumed to strive for growth and long term profit
      The firm is assumed to avoid uncertainty and keep risk taking at a low level
      The behavioral theory of the firm
      bounded rationality – perfect decisons are infeasable
      limited search
      satisficing behavior - meet criteria for adequacy, rather than to identify an optimal solution
      conflicting goals,
      Incremental adjustments to changing conditions of the firm and its environment
      Dynamic model (present state important for future changes and subsequent states)
    • State Aspects
      Market knowledge
      Information stored and retrievable in minds of individuals, computer memories or in written form
      Objective or experiential – latter most crusial
      Market commitment
      Amount and specificity of resources committed to a market
      (experiential knowledge may be one type)
    • Change Aspects
      Commitment decisions
      Response to perceived probalems/opportunities
      High perceived uncertainty leads to low commitment
      Increased (experiential) makret knowledge leads to lower preceived market uncertainty
      Small steps unless very large resources
      Current business activities
      Prime source of market experience
    • Johanson & Vahlne – 1990 (1)
      Stages model is one possible manifestation of the State and change aspects model
      Internationally experienced firms may allocate resources on the basis of real market conditions rather than in response to the unknown
      Validity of model mainly in early stages (low experiential knowledge and high uncertainty)
      World more internationalized and homogeneous
      Psychic distance smaller and market knowledge less country specific
    • Johanson &a Vahlne – 1990 (2)
      Service firms may internationalize in a different manner
      Internationalization processes should be related to processes in the environment (market, network, industry, technology, etc.)
      Behavioral model could be supplemented by economic models
      Strategic thinking should supplement emergent development, chance, and necessity
    • The stage model
    • Two
    • Moving Forward
      Friedman’s view of a “flat world”
      “Flatteners” or developments that helped create this flat world
      Summarize these flatteners into his notion of a “triple convergence”
    • Flat World
    • Flat World
      Playing field has been flattened
      traditional advantages accruing to one country or a large multinational are being challenged
      Coefficient of globalization
      Completion for global knowledge work
      Intellectual work, intellectual capital, can be delivered, distributed, produced, and put back together again . . . with relative freedom in the way we do work
    • What is the significance of all this?
    • Significance of Flat World
      Level playing field
      Traditional, comparative advantages held by those with access to information and/or technology can now be challenged
      Individuals from non-traditional backgrounds can now engage in economic activity, at times in ways not seen before
    • Flattenersfirst three are platforms contributing to collaboration
    • Flatteners: first three are platforms contributing to collaboration
      11/9: the fall of the Berlin Wall opening Windows
      Fall of the “Wall” between East and West Berlin
      Political systems that were once closed opened up
      Windows
      8/9: Netscape goes public
      Emergence of an internet browser
      Work flow software:
      Development of software which when installed in different computers and in different places allows them to work with each other
    • 11/9 as a platform for collaboration
      11/9: the fall of the Berlin Wall which separated East and West Berlin and Germany
      The fall of the “wall” resulted in the eventual collapse of countries that were part of the Council for Mutual Economic Assistance or COMECON,
      sometimes referred to as the “Eastern bloc”, or the Soviet empire
      Included in this “bloc” were countries like the Czech Republic, Bulgaria, Romania, East Germany, Poland, etc.
    • Friedman’s claim
      this event tipped balance of power across the world towards more democratic, free-market oriented governments
    • 11/9 as a platform for collaboration (Continued)
      Centrally planned countries “opened up”
      In 1991, India abolished trade controls
      China accelerated reforms (although some of china’s economic reforms started in the 70s)
      Global exchange of digital information now possible as political restrictions eased up
      Huge personal empowerment
    • 8/9 as a platform for collaboration
      8/9: Netscape goes public
      The initial browser was Mosaic which was designed to allow researchers/scientists in remote locations to access each other’s work
      Mosaic was transformed into the first browser to be made available to the public (for free)
      Coupled with introduction of Windows 95, including GUI capability, these made accessing the internet much easier
      Early access to the internet were text based
    • 8/9 as a platform for collaboration (Continued)
      Browsers as gateway to Internet
      From internal systems to systems of systems
      Dot com bubble allowed massive investments in the internet highway; by the time the bubble burst, an initial physical infrastructure – fiber optic cables, switches, etc. – was in place
      From resistance to email and cell phones (early 90s) to emergence of terms like B2B and B2C.
    • Work-flow software as a platform for collaboration
      Work flow software: software that allows computers and in different places to communicate and work with each other using different modes, e.g. audio, video, etc.
      Example: Wild Brain produces cartoons in SF
      Recording sessions
      Design and direction
      Writers
      Animation
      All in different locations using Virtual Private Network (VPN)
    • Work-flow software as a platform for collaboration (Continued)
      Example 2: Pay Pal
      Emergence of protocols and standards to facilitate communication among systems
    • Flatteners: the next seven are new forms of collaboration
    • Flatteners: the next seven are new forms of collaboration
      Uploading
      Outsourcing
      Offshoring
      Supply-chaining
      In-sourcing
      In-forming
      Steroids
    • Flattener 4: Uploading
      Power or capability of individuals to send up, out, and around their own products and ideas
      Apache – a web server that allow web browsers (in different computers) to interact with different web servers. Web servers allow a user to use his or her home or office to host a web site.
    • Flattener 4: Uploading (Continued)
      Open source communities
      “community rules”
      Examples:
      Linux operating system - offers a family of operating systems; can be adapted to run on the smallest desk top computer, laptop, palm pilot, etc.
      Firefox (Mozilla)
      Blogging, Wikis, etc.
    • Flattener 5: Outsourcing
      India as an example of how outsourcing began
      Educational infrastructure in India
      7 Indian Institute of Technology
      6 Institute of Management
      As a result, Indian nationals would go to the US or developed countries to find work
      Dot-com boom created “physical highway” to allow for India to get “connected”
      Reform of telecommunications system in India
    • Flattener 5: Outsourcing (Continued)
      US companies start looking for opportunities to utilize labor pool in India
      Late in the 1990s, the Y2K issue emerged
      Indian “expats” return to India after “dot.com bubble” burst
      Friedman sees the massive amount of programming to prevent a “Y2K” disaster and return of expats catalysts India’s emergence as an outsourcing destination
    • Flattener 6: Offshoring
      Offshoring: move a strategic process or portion of a company’s value chain to a foreign location
      Distinction
      Outsourcing: have another company do a specific, but limited function, e.g. accounting
      Offshoring: move production or an important process offshore
    • Flattener 6: Offshoring (Continued)
      China as an example of the emergence of offshoring
      1977: Deng Xiaoping starts economic reforms in China
      Mid 1980s: applies for membership in WTO
      Finally accepted into WTO mid 1990s
      Watershed moment in the sense that as a member of WTO, China has to play by international rules
    • Flattener 6: Offshoring (Continued)
      Example: ASIMCO
      From efforts to find “new china” managers to manage their business to investing in the US
      US operation takes care of finishing, also allows company to keep abreast with technology
      Film: China Brands
      Friedman does mention possible limits to growth in China, including need for further reforms
    • Work-types companies avoid offshoring
      Relationship-oriented work
      Process where repeatable process map cannot be created
      Roles with complex industry structure and/or long product learning curves
      Success criteria are not well defined or measurable
      Strategic aspect to the business
      High levels of sensitive intellectual property are shared across wide groups of people
    • Work-types companies push offshoring
      High transaction volume
      High repeatability
      Low domain knowledge needed
      Low mission criticality
      Few touch points
      Low complexity
      Low training efforts
      Non-strategic
      Well defined process and metrics
      Easily transmitted over electronic wires
      Outcomes can be easily managed
    • India Advantages
      Low cost
      Native English
      Early market entrance
      Governmental software export strategy since 1972
      Early adoption to quality standards
      Strong educational programs
      Government incentives
      Technology park development
      Tax advantages and tax breaks
      Low import duties
    • India Disadvantages
      Geo-political risk with Pakistan
      Electrical Power issues
      24 hour travel
      Time zone
      Costly Turnover
      Salaries rising 20% annually for skilled workers
      Mid-manager staffing difficulties
      Cultural differences
    • Brazil Advantages
      Low cost
      Time Zone and Proximity
      Early adoption to quality standards
      Strong educational programs
      Multilingual Support (Spanish and Portuguese support)
      Government incentives
      Technology park development (but need more)
      Tax advantages and tax breaks
    • Brazil Disadvantages
      Corruption
      Lack of Qualified People
      Delays
      Infrastructure
      IP Problems
      English
      Brain Drain
      Higher cost than India and China
      Poor infrastructure especially off coast
      High sunk cost
      Costly turnover
    • China Advantages
      Scale
      Labor
      Speed
      Low cost
      Strong educational programs and joint university programs
      Government incentives
      Technology park development
      Tax advantages and tax breaks
    • China Disadvantages
      Focus on Asia
      English
      Cultural differences and inward thinking
      Uncertain governmental actions
      Communist effect on property laws
      Communist bureaucracy
      Intellectual property theft is rampant
      Data Privacy
      Poor infrastructure especially off coast
      Manufacturing focus
      Poor customer service
      Need for local representation/local partner
      Indian offshore companies are having problems with offloading their own work to China
    • Flattener 7: Supply Chaining
      Wal-Mart as an example of a company that pursues supply chain management aggressively
      Coefficient of Globalization
      Learning to sell new products: sushi
    • Flattener 8: Insourcing
      World Synchronized: Supply Manager
      Trust through systemes
      Toshiba Repairs
      Shoes.com
      UPS
    • Flattener 9: In-forming
      In-forming: capability to build your own supply chain . . . of information, knowledge, entertainment
    • Flattener 10: Steroids
      Computing capability has increased in terms of computational, storage, and input/output capacity
      Instant messaging and file sharing
      VOIP
      Video conferencing
      Computer graphics
      Wireless communication