Ckr chs 1 & 2 overview cavusgil

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  • In the early 1990’s the Department of Defense launched a tri service combat aircraft recapitalization program called the Joint Strike Fighter (JSF), now designated the F-35.. The intent of the program was to leverage recent major National investments in technology, introduce true service interoperability and achieve economies of Commonality and Scale as legacy combat aircraft fleets were replaced. The ongoing National Security strategy to require coalition based operations had also surfaced significant capability gaps between US and allied air forces equipment. Component Commanders were impacted by these shortfalls and a decision was made to allow participation by selected allied Nations in the development and procurement of the JSF. The United Kingdom enjoyed a unique role in the start up of JSF as they had been part of a cooperative development program with the US Marine Corps called Advanced Short Takeoff and Vertical Landing, a program originally envisioned to replace the aging AV-8 Harrier fleet. The requirement for ASTOVL was one of the several earlier replacement programs included in the Operational Requirement for JSF. Seven additional countries were allowed to participate as Partners in the JSF Program.   These countries joined the program following contract award in October of 2001. These relationships were codified in formal bi-lateral Government to Government agreements for the initial stage Additional strategic considerations: In addition to developing the ability to form future allied coalitions, there is a second strategically important aspect of the JSF F-35 program as an extension of US Foreign Policy in strategically important geographic regions. These are dominated by the Far East (Japan< Singapore and the Republic of Korea) and the Middle East (Israel). While these countries are not “Partners” and do not tend to participate in US Coalitions, they represent an extension of US Foreign policy in their regions. These countries will be allowed to participate in the project through the traditional Foreign Military Sales (FMS) processes.
  • Ckr chs 1 & 2 overview cavusgil

    1. 1. Globalization & International Business: Fundamental Concepts Chs. 1 & 2 from Cavusgil, Knight, Riesenberger, 3rd Ed, Pearson Education
    2. 2. Agenda1. What are the key concepts in international trade and investment?2. How does international business differ from domestic business? Key risks in IB?3. Who participates in international business?4. Why do firms internationalize? What is ‘globalization penalty’? Copyright © 2014 Pearson Education Inc.
    3. 3. Facets of IBCopyright © 2014 Pearson Education Inc.
    4. 4. Key Concepts in International Business• International business: Performance of trade and investment activities by firms across national borders.• Globalization of markets: Ongoing economic integration and growing interdependency of countries worldwide. Copyright © 2014 Pearson Education Inc.
    5. 5. Phases of Globalization Globalization is Not a New Phenomenon!• 1st Phase: 1830, peaking around 1880; Aided by railroads, ocean transport; resulting in the rise of manufacturing and trading companies• 2nd Phase: 1900, peaking late 1920s; Fueled by electricity and steel; early MNEs• 3rd Phase: 1948, peaking around 1970; GATT, end of WW II, Marshall Plan; gradual reduction of barriers to trade• 4th Phase: 1980, peaking around 1997; Fueled by Internet and other technologies: rapid liberalization in Emerging Markets• Next phase?
    6. 6. Key Concepts (cont’d)• International trade: Exchange of products and services across national borders; typically through exporting and importing.• Exporting: Sale of products or services to customers located abroad from a base in the home country or a third country. Boeing and Airbus export billions in commercial aircraft every year.• Importing or Global Sourcing: Procurement of products or services from suppliers located abroad for consumption in the home country or a third country. Toyota imports many parts from China when it manufactures © 2014 Pearson Education Inc. Copyright cars in Japan.
    7. 7. Key Concepts (cont’d)Foreign Direct Investment (FDI): Transfer of assets to another country or the acquisition of assets in that country. Amounts to equity investment.International portfolio investment: Passive owner- ship of foreign securities such as stocks and bonds in order to generate financial returns. Copyright © 2014 Pearson Education Inc.
    8. 8. Acquisition of Do You Recognize These Brands? - 1 SomeAmerican Companies Date of Brand Acquirer Country of Origin Acquisition New York Stock Euronext acquisition Netherlands 2007Exchange Euronext ICE Deutsche Börse Germany 2011 (failed) Godiva Yildiz Holding Turkey 2008 (Ulker) Anheuser-Busch (Budweiser) In-Bev Brazil 2008 Burger King Holdings 3G Capital Brazil 2010 Sara Lee JBS SA Brazil pending
    9. 9. Acquisition of Some Do You Recognize These Brands? - 2American Companies Country of Date of Brand Acquirer Origin Acquisition Purina Nestle Switzerland 2001 7-Eleven Ito-Yokado Japan 2005 Gerber Nestle Switzerland 1996 Car & Driver French Hachette France Filipacchi Médias, S.A. Alka_Seltzer Bayer Schering Pharma Germany 1979 ThinkPad Lenovo China 2005
    10. 10. Globalization of Markets• Unprecedented growth of international trade. In 1960, global trade was $100 billion per year. Today, world exports amount to some $14 trillion annually!• Trade between nations, accompanied by substantial flows of capital, technology, and knowledge.• Development of sophisticated global financial systems and mechanisms that facilitate the cross-border flow of products, money, technology, and knowledge.• Greater collaboration among nations through multilateral regulatory agencies such as the World Trade Organization (WTO; www.wto.org) and the International Monetary Fund (IMF; www.imf.org). Copyright © 2014 Pearson Education Inc.
    11. 11. World Trade Is Growing Faster than GDP Copyright © 2014 Pearson Education Inc.
    12. 12. FDI Inflows into World Regions (in Billions of U.S. Dollars per Year) Copyright © 2014 Pearson Education Inc.
    13. 13. International vs. Domestic BusinessInternational Business:Cross-border Cross national Cross-cultural Multiple currencies …Pose new risks, in addition to commercial risk: Country/Political risk Cross-cultural risk (incl. ethical risks) Currency risk Copyright © 2014 Pearson Education Inc.
    14. 14. The Four Risks of International Business Copyright © 2014 Pearson Education Inc.
    15. 15. Examples of Country RiskGoogle received over 1,000 requests fromgovernments to remove objectionable material• Complied with ~ 54% “Google’s Censorship Juggle,” WSJ, June 18, 2012
    16. 16. Source: Daalen, R. V., Mock, V. and Morris, B. (2013) “UPS quits takeover in Europe” The Wall Street Journal: Deals & Deal Market,January 14.
    17. 17. • Instability – Ex: Mexico – Firms limiting investments in Mexico due to drug-related violence – Electrolux chose to build appliance factory ($190 million) in Memphis, TN. rather than Mexico – Whirlpool chose to build factory in Cleveland, TN. Rather than Mexico “Companies Shun Violent Mexico,” WSJ, Dec. 17, 2010
    18. 18. Commercial Risk • Less than optimal formulation and/or implementation of strategies, tactics or procedures, e.g. partnering selections, market entry timing, pricing, product features, and promotional themes • Ex: Danone (France) & Hangzhou Wahaha Group Co. China  In 2007, Danone’s JV with a local Chinese partner (Wahaha) failed after the Chinese firm set up a mirror business in which it sold, on the side, the products that the JV was marketing • Failures in int’l markets are far more costly than domestic business blunders“Danone Pulls Out of Disputed China Venture,” WSJ, Oct. 1, 2009
    19. 19. If IB was Risk-Free … Wal-Mart’s SEC problems -- bribes to obtain permits in Mexico Foxconn’s challenges with labor, riots, and government in China UPS offers $ 7 b. to acquire TNT in Europe but runs into antitrust barriers Home Depot and Best Buy abandon their plans in China Says Ms.Tomé: “…the Chinese culture is very different from Western culture. Their way of doing business and their way of interacting with others is different … the Chinese are used to “haggling” when they go shopping. And that’s not part of Home Depot’s business model.” Copyright © 2014 Pearson Education Inc.
    20. 20. Why Go International? Seek opportunities for growth (IBM expects to earn 30% of its revenues from EMs by 2015; at Unilever EMs already make up 56% of business. Aditya Birla Group operates in 40 countries, earns more than ½ of its revenues from outside India) Earn higher margins and profits Exploit brand equity on a global scale Better serve customers abroad Monitor & learn from competition abroad Gain from new business partners Be closer to supply sources, gain flexibility in the sourcing of products
    21. 21. Three Strategic Benefits Accruing to Firms from Global Operations Efficiency (configure optimal supply chains) Flexibility (better cope with diversity and volatility of countries – diversify risks) Learning (benefit from ideas, know-how, partners, etc.; more MNEs have initiated R&D centers abroad; vast reserves of skills & knowledge, experience embedded in a global workforce is a real asset!) (See CKR Ch 12)
    22. 22. Is There Such a Thing as ‘Globalization Penalty’?  Global companies scored lower than locally focused ones on: ‘executing on the ground;’ and building relationships with governments and business partners (McKinsey 2012)  Where Firms struggle:  No single organizational model is best for all companies  Difficult to adapt products & services to local needs, given fairly standardized business models of MNEs  Four tensions: Managing strategy, people, costs, and risks on a global scale  Transferring lessons learned in one market to another  Deploying & developing talent in EMs  Global footprint magnifies complexity! Diversity of markets, customers, and channels…
    23. 23. Risk Mitigation Rises to the Top of MNE Agenda Geographically diverse business portfolio works as a hedge against the volatility of local growth, country risk, and currency risk. But… Pursuing so many markets (including high-risk EMs) takes global companies into unchartered waters … Calling for new risk-management infrastructure and skills … Which, if they generate excessively risk-aversive processes, will slow down decision making and cause the firm to miss out on fast-developing opportunities!
    24. 24. F-35 Lightning IILM Aero’s F-35 Joint Strike Force
    25. 25. Who Participates in International Business?• Multinational enterprise (MNE)• Small and Medium-Sized Enterprise (SME)• Born global firms• State agencies & state-owned companies• Not-for-Profit organizations; NGOs• Logistics & shipping firms• Service providers (banks, ad agencies, research firms, law firms, payment facilitators)• Investment firms; sovereign wealth funds
    26. 26. Geographic Locations of the500 Largest Multinational Enterprises Copyright © 2014 Pearson Education Inc.
    27. 27. 2011 2012 ChangeChina 61 73 +12 EM Firms in Fortune Global 500 (2012)BRICs 83 96 +13All EMs 114 125 +11 Russia: 7 Hungary: 1 S. Korea: 13 Poland: 1 Turkey: 1 China: 73 Mexico: 3 Taiwan: 6 India: 8 Thailand: 1 Colombia: 1 Venezuela: 1 Malaysia: 1 Brazil: 8
    28. 28. Examples of Born Global Companies• Groupon – 2010: Groupon expanded from one country to 35 countries – Groupon has more than 40 million users in 300 global markets “What’s Next for Groupon?,” Advertising Age, Dec. 13, 2010
    29. 29. Examples of Born Global Companies - 2 • Groupon – 40% JV with Gao Peng in China – Recently closed more than 10 offices in China, laid off hundreds of employees“Groupon Stumbles in China, Closes Some Offices,” WSJ, August 24, 2011

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