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International Business<br />Stephan Langdon, MBA, M.ED<br />
The Globalizing Economy<br />
Boarderless World<br />End of nation state<br />
World Trade Organization<br />1997: Trade ministers from countries representing 92% of world trade agreed to eliminate tar...
Regional Trade Agreements<br />Regional Trade Agreements—agreements among nations to reduce tariffs and develop similar te...
Sell Anywhere, Locate Anywhere<br />World trade growth: average of 6.5% per year between 1990 and 2000.<br />Nearly half o...
Leading Exporting and Importing Countries<br />
Leading Exporting and Importing Countries, continued<br />
Sell Anywhere, Locate Anywhere<br />Foreign Direct Investment (FDI)  occurs when a multinational company from one country ...
Top 25 Companies by Foreign Asset Ownership<br />
Foreign Direct Investment<br />Developed countries get the bulk of FDI (69%) while developing countries get around 30%.<br...
Risk Ratings of Selected Countries<br />
The Internet and Information Technology<br />Electronic Communication — E-mail, World Wide Web, etc. <br />Allows multinat...
The Rise of Global Products and Global Customers<br />The needs of customers for many products and services are growing mo...
Privatization<br />Sale of government-owned businesses to private investors, <br />usually through stock or direct sale to...
Privatization—Types<br />The Developed Countries <br />Use privatization to make formerly government-controlled enterprise...
New Competitors<br />Free market reforms are creating a potential group of new competitors.<br />Korean, Russian, Taiwanes...
Top 25 Emerging Market Companies<br />
New Competitors are Emerging<br />Global trade has two important effects in developing new competitors:<br />When developi...
The Rise of Global Standards<br />Companies can make one or only a few versions of product for the world market.<br />This...
Global Standards<br />Consistency in quality also an important requirement of doing business in many countries.<br />Inter...
Next Generation of Multinational Managers: Characteristics<br />
Next Generation of Multinational Managers: Characteristics<br />
Multinational Management: A Strategic Approach<br />Considers how managers formulate and implement strategies to compete s...
Internationalization<br />Internationalization is the process by which <br />Firms increase their awareness of the influen...
     BRIC<br />Offshoring<br />
5 reasons global sourcing programs<br />To focus on core competencies<br />To reduce and/or variablize costs <br />To gain...
Reznor Case<br />
Two<br />
Moving Forward<br />Friedman’s view of a “flat world”<br />“Flatteners” or developments that helped create this flat world...
Flat World<br />
Flat World<br />Playing field has been flattened <br />traditional advantages accruing to one country or a large multinati...
What is the significance of all this?<br />
Significance of Flat World<br />Level playing field<br />Traditional, comparative advantages held by those with access to ...
Flattenersfirst three are platforms    contributing to collaboration<br />
Flatteners: first three are platforms contributing to collaboration<br />11/9: the fall of the Berlin Wall opening Windows...
11/9 as a platform for collaboration<br />11/9: the fall of the Berlin Wall which separated East and West Berlin and Germa...
Friedman’s claim<br />this event tipped balance of power across the world towards more democratic, free-market oriented go...
11/9 as a platform for collaboration (Continued)<br />Centrally planned countries “opened up”<br />In 1991, India abolishe...
8/9 as a platform for collaboration<br />8/9: Netscape goes public<br />The initial browser was Mosaic which was designed ...
8/9 as a platform for collaboration (Continued)<br />Browsers as gateway to Internet <br />From internal systems to system...
Work-flow software as a platform for collaboration<br />Work flow software: software that allows computers and in differen...
Work-flow software as a platform for collaboration (Continued)<br />Example 2: Pay Pal<br />Emergence of protocols and sta...
Flat World and NIN<br />Berlin Wall<br />Windows<br />Netscape Browser<br />Workflow<br />Flat World<br />NIN<br />
Flat World and NIN<br />Berlin Wall<br />Windows<br />Netscape Browser<br />Workflow<br /><ul><li>Global Market
Websites
Facebook.com
Access
Musician Work
Danial Lanois
Pay Pal</li></ul>Flat World<br />NIN<br />
Flatteners: the next seven are new forms of collaboration<br />
Flatteners: the next seven are new forms of collaboration<br />Uploading<br />Outsourcing<br />Offshoring<br />Supply-chai...
Flattener 4: Uploading<br />Power or capability of individuals to send up, out, and around their own products and ideas<br...
Flattener 4: Uploading (Continued)<br />Open source communities<br />“community rules”<br />Examples:<br />Linux operating...
Flattener 5: Outsourcing <br />India as an example of how outsourcing began<br />Educational infrastructure in India<br />...
Flattener 5: Outsourcing (Continued)<br />US companies start looking for opportunities to utilize labor pool in India<br /...
Flattener 6: Offshoring<br />Offshoring: move a strategic process or portion of a company’s value chain to a foreign locat...
Flattener 6: Offshoring (Continued)<br />China as an example of the emergence of offshoring<br />1977: Deng Xiaoping start...
Flattener 6: Offshoring (Continued)<br />Example: ASIMCO<br />From efforts to find “new china” managers to manage their bu...
Work-types companies avoid offshoring<br />Relationship-oriented work <br />Process where repeatable process map cannot be...
Work-types companies push offshoring<br />High transaction volume<br />High repeatability<br />Low domain knowledge needed...
India Advantages<br />Low cost<br />Native English<br />Early market entrance<br />Governmental software export strategy s...
India Disadvantages<br />Geo-political risk with Pakistan<br />Electrical Power issues <br />24 hour travel<br />Time zone...
Brazil Advantages<br />Low cost<br />Time Zone and Proximity<br />Early adoption to quality standards<br />Strong educatio...
Brazil Disadvantages<br />Corruption<br />Lack of Qualified People<br />Delays<br />Infrastructure<br />IP Problems<br />E...
China Advantages<br />Scale<br />Labor<br />Speed<br />Low cost<br />Strong educational programs and joint university prog...
China Disadvantages<br />Focus on Asia<br />English  <br />Cultural differences and inward thinking <br />Uncertain govern...
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CESA IB.2011.02

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CESA IB.2011.02

  1. 1. International Business<br />Stephan Langdon, MBA, M.ED<br />
  2. 2. The Globalizing Economy<br />
  3. 3. Boarderless World<br />End of nation state<br />
  4. 4. World Trade Organization<br />1997: Trade ministers from countries representing 92% of world trade agreed to eliminate tariffs on software, computer chips, telecommunication equipment, and computers.<br />
  5. 5. Regional Trade Agreements<br />Regional Trade Agreements—agreements among nations to reduce tariffs and develop similar technical and economic standards.<br />European Union, NATFA<br />
  6. 6. Sell Anywhere, Locate Anywhere<br />World trade growth: average of 6.5% per year between 1990 and 2000.<br />Nearly half of the over $5 trillion in world trade is among the European union, the U.S., and Japan—the TRIAD.<br />
  7. 7. Leading Exporting and Importing Countries<br />
  8. 8. Leading Exporting and Importing Countries, continued<br />
  9. 9. Sell Anywhere, Locate Anywhere<br />Foreign Direct Investment (FDI) occurs when a multinational company from one country has an ownership position located in another country.<br />FDI increased by more that 36% between 1996 and 2000.<br />Post 9/11 has seen a decline in FDI.<br />Nevertheless, it remains a significant factor.<br />
  10. 10. Top 25 Companies by Foreign Asset Ownership<br />
  11. 11. Foreign Direct Investment<br />Developed countries get the bulk of FDI (69%) while developing countries get around 30%.<br />Least developed countries get minimal FDI.<br />Implications for managers—significant opportunities around the world.<br />Multinational managers should look at risk rating of countries.<br />
  12. 12. Risk Ratings of Selected Countries<br />
  13. 13. The Internet and Information Technology<br />Electronic Communication — E-mail, World Wide Web, etc. <br />Allows multinationals to communicate with company locations throughout the world.<br />Multinationals can also monitor worldwide operations. <br />Information technology is spurring a borderless financial market.<br />
  14. 14. The Rise of Global Products and Global Customers<br />The needs of customers for many products and services are growing more similar,<br /> e.g., McDonald’s, Boeing, Toyota.<br />Global customers search the world for their supplies without regard for national boundaries.<br />
  15. 15. Privatization<br />Sale of government-owned businesses to private investors, <br />usually through stock or direct sale to other companies.<br />Two types of privatization contribute to the global economy — the developed world and the developing world.<br />
  16. 16. Privatization—Types<br />The Developed Countries <br />Use privatization to make formerly government-controlled enterprises more competitive in the global economy.<br />The Developing Countries <br />Use privatization to jump-start their economies or to speed the transition from a communist to a capitalist system.<br />
  17. 17. New Competitors<br />Free market reforms are creating a potential group of new competitors.<br />Korean, Russian, Taiwanese, and Mexican companies are all emerging. <br />Chinese companies are also on the move.<br />
  18. 18. Top 25 Emerging Market Companies<br />
  19. 19. New Competitors are Emerging<br />Global trade has two important effects in developing new competitors:<br />When developing countries are used as low-wage platforms for high-tech assembly, multinationals facilitate the transfer of technology.<br />Aggressive multinationals are also expanding beyond their own borders.<br />
  20. 20. The Rise of Global Standards<br />Companies can make one or only a few versions of product for the world market.<br />This is cheaper than making different versions for different countries.<br />Drive to develop common standards to save money.<br />
  21. 21. Global Standards<br />Consistency in quality also an important requirement of doing business in many countries.<br />International organization for standardization (ISO) in Geneva, Switzerland <br />Developed a set of technical standards (ISO 9001:2000 series).<br />
  22. 22. Next Generation of Multinational Managers: Characteristics<br />
  23. 23. Next Generation of Multinational Managers: Characteristics<br />
  24. 24. Multinational Management: A Strategic Approach<br />Considers how managers formulate and implement strategies to compete successfully in the global economy.<br />Strategies are the maneuvers or activities used to increase and sustain organizational performance.<br />Multinational strategies must include maneuvers that deal with operating in more than one country and culture.<br />
  25. 25. Internationalization<br />Internationalization is the process by which <br />Firms increase their awareness of the influence of international activities on their future<br />Establish and conduct transactions with firms from other countries.<br />
  26. 26. BRIC<br />Offshoring<br />
  27. 27. 5 reasons global sourcing programs<br />To focus on core competencies<br />To reduce and/or variablize costs <br />To gain expertise that is not currently in house<br />To increase quality, efficiency, and speed of delivery<br />To be able to scale operations effectively<br />Source: ITESA<br />
  28. 28. Reznor Case<br />
  29. 29. Two<br />
  30. 30. Moving Forward<br />Friedman’s view of a “flat world”<br />“Flatteners” or developments that helped create this flat world<br />Summarize these flatteners into his notion of a “triple convergence”<br />
  31. 31. Flat World<br />
  32. 32. Flat World<br />Playing field has been flattened <br />traditional advantages accruing to one country or a large multinational are being challenged<br />Coefficient of globalization<br />Completion for global knowledge work<br />Intellectual work, intellectual capital, can be delivered, distributed, produced, and put back together again . . . with relative freedom in the way we do work<br />
  33. 33. What is the significance of all this?<br />
  34. 34. Significance of Flat World<br />Level playing field<br />Traditional, comparative advantages held by those with access to information and/or technology can now be challenged<br />Individuals from non-traditional backgrounds can now engage in economic activity, at times in ways not seen before <br />
  35. 35. Flattenersfirst three are platforms contributing to collaboration<br />
  36. 36. Flatteners: first three are platforms contributing to collaboration<br />11/9: the fall of the Berlin Wall opening Windows<br />Fall of the “Wall” between East and West Berlin<br />Political systems that were once closed opened up<br />Windows<br />8/9: Netscape goes public<br />Emergence of an internet browser<br />Work flow software: <br />Development of software which when installed in different computers and in different places allows them to work with each other<br />
  37. 37. 11/9 as a platform for collaboration<br />11/9: the fall of the Berlin Wall which separated East and West Berlin and Germany<br />The fall of the “wall” resulted in the eventual collapse of countries that were part of the Council for Mutual Economic Assistance or COMECON, <br />sometimes referred to as the “Eastern bloc”, or the Soviet empire<br />Included in this “bloc” were countries like the Czech Republic, Bulgaria, Romania, East Germany, Poland, etc.<br />
  38. 38. Friedman’s claim<br />this event tipped balance of power across the world towards more democratic, free-market oriented governments<br />
  39. 39. 11/9 as a platform for collaboration (Continued)<br />Centrally planned countries “opened up”<br />In 1991, India abolished trade controls<br />China accelerated reforms (although some of china’s economic reforms started in the 70s)<br />Global exchange of digital information now possible as political restrictions eased up<br />Huge personal empowerment<br />
  40. 40. 8/9 as a platform for collaboration<br />8/9: Netscape goes public<br />The initial browser was Mosaic which was designed to allow researchers/scientists in remote locations to access each other’s work<br />Mosaic was transformed into the first browser to be made available to the public (for free)<br />Coupled with introduction of Windows 95, including GUI capability, these made accessing the internet much easier<br />Early access to the internet were text based<br />
  41. 41. 8/9 as a platform for collaboration (Continued)<br />Browsers as gateway to Internet <br />From internal systems to systems of systems<br />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<br />From resistance to email and cell phones (early 90s) to emergence of terms like B2B and B2C.<br />
  42. 42. Work-flow software as a platform for collaboration<br />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.<br />Example: Wild Brain produces cartoons in SF<br />Recording sessions<br />Design and direction<br />Writers<br />Animation<br />All in different locations using Virtual Private Network (VPN)<br />
  43. 43. Work-flow software as a platform for collaboration (Continued)<br />Example 2: Pay Pal<br />Emergence of protocols and standards to facilitate communication among systems<br />
  44. 44. Flat World and NIN<br />Berlin Wall<br />Windows<br />Netscape Browser<br />Workflow<br />Flat World<br />NIN<br />
  45. 45. Flat World and NIN<br />Berlin Wall<br />Windows<br />Netscape Browser<br />Workflow<br /><ul><li>Global Market
  46. 46. Websites
  47. 47. Facebook.com
  48. 48. Access
  49. 49. Musician Work
  50. 50. Danial Lanois
  51. 51. Pay Pal</li></ul>Flat World<br />NIN<br />
  52. 52. Flatteners: the next seven are new forms of collaboration<br />
  53. 53. Flatteners: the next seven are new forms of collaboration<br />Uploading<br />Outsourcing<br />Offshoring<br />Supply-chaining<br />In-sourcing<br />In-forming<br />Steroids<br />
  54. 54. Flattener 4: Uploading<br />Power or capability of individuals to send up, out, and around their own products and ideas<br />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.<br />
  55. 55. Flattener 4: Uploading (Continued)<br />Open source communities<br />“community rules”<br />Examples:<br />Linux operating system - offers a family of operating systems; can be adapted to run on the smallest desk top computer, laptop, palm pilot, etc.<br />Firefox (Mozilla)<br />Blogging, Wikis, etc.<br />
  56. 56. Flattener 5: Outsourcing <br />India as an example of how outsourcing began<br />Educational infrastructure in India<br />7 Indian Institute of Technology <br />6 Institute of Management<br />As a result, Indian nationals would go to the US or developed countries to find work<br />Dot-com boom created “physical highway” to allow for India to get “connected”<br />Reform of telecommunications system in India<br />
  57. 57. Flattener 5: Outsourcing (Continued)<br />US companies start looking for opportunities to utilize labor pool in India<br />Late in the 1990s, the Y2K issue emerged<br />Indian “expats” return to India after “dot.com bubble” burst<br />Friedman sees the massive amount of programming to prevent a “Y2K” disaster and return of expats catalysts India’s emergence as an outsourcing destination<br />
  58. 58. Flattener 6: Offshoring<br />Offshoring: move a strategic process or portion of a company’s value chain to a foreign location<br />Distinction <br />Outsourcing: have another company do a specific, but limited function, e.g. accounting<br />Offshoring: move production or an important process offshore<br />
  59. 59. Flattener 6: Offshoring (Continued)<br />China as an example of the emergence of offshoring<br />1977: Deng Xiaoping starts economic reforms in China<br />Mid 1980s: applies for membership in WTO<br />Finally accepted into WTO mid 1990s<br />Watershed moment in the sense that as a member of WTO, China has to play by international rules<br />
  60. 60. Flattener 6: Offshoring (Continued)<br />Example: ASIMCO<br />From efforts to find “new china” managers to manage their business to investing in the US <br />US operation takes care of finishing, also allows company to keep abreast with technology<br />Film: China Brands<br />Friedman does mention possible limits to growth in China, including need for further reforms<br />
  61. 61. Work-types companies avoid offshoring<br />Relationship-oriented work <br />Process where repeatable process map cannot be created<br />Roles with complex industry structure and/or long product learning curves<br />Success criteria are not well defined or measurable<br />Strategic aspect to the business<br />High levels of sensitive intellectual property are shared across wide groups of people<br />
  62. 62. Work-types companies push offshoring<br />High transaction volume<br />High repeatability<br />Low domain knowledge needed<br />Low mission criticality<br />Few touch points<br />Low complexity<br />Low training efforts<br />Non-strategic<br />Well defined process and metrics<br />Easily transmitted over electronic wires<br />Outcomes can be easily managed<br />
  63. 63.
  64. 64. India Advantages<br />Low cost<br />Native English<br />Early market entrance<br />Governmental software export strategy since 1972 <br />Early adoption to quality standards<br />Strong educational programs<br />Government incentives <br />Technology park development<br />Tax advantages and tax breaks<br />Low import duties<br />
  65. 65. India Disadvantages<br />Geo-political risk with Pakistan<br />Electrical Power issues <br />24 hour travel<br />Time zone<br />Costly Turnover <br />Salaries rising 20% annually for skilled workers<br />Mid-manager staffing difficulties<br />Cultural differences<br />
  66. 66. Brazil Advantages<br />Low cost<br />Time Zone and Proximity<br />Early adoption to quality standards<br />Strong educational programs<br />Multilingual Support (Spanish and Portuguese support)<br />Government incentives <br />Technology park development (but need more)<br />Tax advantages and tax breaks<br />
  67. 67. Brazil Disadvantages<br />Corruption<br />Lack of Qualified People<br />Delays<br />Infrastructure<br />IP Problems<br />English<br />Brain Drain<br />Higher cost than India and China<br />Poor infrastructure especially off coast<br />High sunk cost<br />Costly turnover <br />
  68. 68. China Advantages<br />Scale<br />Labor<br />Speed<br />Low cost<br />Strong educational programs and joint university programs<br />Government incentives <br />Technology park development<br />Tax advantages and tax breaks<br />
  69. 69. China Disadvantages<br />Focus on Asia<br />English <br />Cultural differences and inward thinking <br />Uncertain governmental actions<br />Communist effect on property laws <br />Communist bureaucracy <br />Intellectual property theft is rampant<br />Data Privacy<br />Poor infrastructure especially off coast<br />Manufacturing focus <br />Poor customer service <br />Need for local representation/local partner <br />Indian offshore companies are having problems with offloading their own work to China<br />
  70. 70. Flattener 7: Supply Chaining<br />Wal-Mart as an example of a company that pursues supply chain management aggressively<br />Coefficient of Globalization<br />Learning to sell new products: sushi<br />
  71. 71. Flattener 8: Insourcing<br />World Synchronized: Supply Manager<br />Trust through systemes<br />Toshiba Repairs<br />Shoes.com<br />UPS<br />
  72. 72. Flattener 9: In-forming<br />In-forming: capability to build your own supply chain . . . of information, knowledge, entertainment<br />
  73. 73. Flattener 10: Steroids<br />Computing capability has increased in terms of computational, storage, and input/output capacity<br />Instant messaging and file sharing<br />VOIP<br />Video conferencing<br />Computer graphics<br />Wireless communication<br />
  74. 74. Flat World and NIN<br />Uploading<br />Outsourcing<br />Offshoring<br />Supply-chaining<br />In-sourcing<br />In-forming<br />Steroids<br />Flat World<br />NIN<br />
  75. 75. Flat World and NIN<br />Uploading<br />Outsourcing<br />Offshoring<br />Supply-chaining<br />In-sourcing<br />In-forming<br />Steroids<br />Flat World<br />NIN<br />

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