The document discusses several factors that have contributed to the flattening of the world and increased globalization, according to Thomas Friedman. These include the fall of the Berlin Wall, the rise of the internet and web browsers, and the emergence of workflow software, which created online platforms for increased collaboration globally. Subsequent factors discussed are uploading, outsourcing, offshoring, supply-chaining, insourcing, and informing, which represent new forms of global collaboration enabled by technological advances. The document also discusses implications for international business and theories of internationalization.

2. RtB

3. Internaionalization

4. Creative Commons License

5. Quantum Integration

7. International BusinessStephan Langdon, MBA, M.ED

8. The Globalizing Economy

9. Leading Exporting and Importing Countries

10. Leading Exporting and Importing Countries, continued

11. Top 25 Companies by Foreign Asset Ownership

12. Foreign Direct InvestmentDeveloped 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.

13. The Internet and Information TechnologyElectronic 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.

14. The Rise of Global Products and Global CustomersThe 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.

15. PrivatizationSale 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.

16. Privatization—TypesThe 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.

17. New CompetitorsFree 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.

18. Top 25 Emerging Market Companies

19. New Competitors are EmergingGlobal 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.

20. The Rise of Global StandardsCompanies 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.

21. Global StandardsConsistency 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).

22. InternationalizationInternationalization is the process by which Firms increase their awareness of the influence of international activities on their futureEstablish and conduct transactions with firms from other countries.

23. 5 reasons global sourcing programsTo focus on core competenciesTo reduce and/or variablize costs To gain expertise that is not currently in houseTo increase quality, efficiency, and speed of deliveryTo be able to scale operations effectivelySource: ITESA

24. Reznor Case

25. Flat World and NINBerlin WallWindowsNetscape BrowserWorkflowFlat WorldNIN

26. Flat World and NINBerlin WallWindowsNetscape BrowserWorkflowGlobal Market

27. Websites

28. Facebook.com

29. Access

30. Musician Work

31. Danial Lanois

32. Pay PalFlat WorldNIN

33. Flat World and NINUploadingOutsourcingOffshoringSupply-chainingIn-sourcingIn-formingSteroidsFlat WorldNIN

34. Flat World and NINUploadingOutsourcingOffshoringSupply-chainingIn-sourcingIn-formingSteroidsFlat WorldNIN

35. The world is flat . . . (Friedman)Three converging developments

36. A global, Web-enabled playing field that allows multiple forms of collaboration

37. Gradual adaptation of organizations through horizontal collaboration in the value creation process extends this platform to different countries

38. 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 economyExample of how triple convergence worksA global, Web-enabled playing field that allows multiple forms of collaboration is in placeA 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”

39. New “Arrivals”Population dataPopulation dataWe are only seeing the tip of the iceberg.Not everyone has access yetMicrosoft: in China, 1 in a million can mean a total of 1,300,000Bangalore: “we are hungry for success”Its dominated by, but not all IndiaMap of IT businesses

40. Why do Firms Internationalize?opportunities for growthmarket diversificationhigaher margins and profitsGain new ideas about products, services, and business methodsBetter serve key customers that have relocated abroadBe closer to supply sources, benefit from global sourcing advantages, or gain flexibility in the sourcing of products

41. 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

42. STEPPolitical SocialEconomic Technological

43. Dimensions of InternalizationInternationalization has both inward-looking and outward-looking dimensions. The outward-looking perspective incorporates an awareness of the nature of competition in foreign markets

44. 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.

45. Dimensions of Internalization (cont.)Similar to the Sequential Approach theory of internationalization:As firms build confidence, experience and success:Partially OwnedWholly Owned(3) Acquisition Existing Business(1) Capital ParticipationNew Business(2) Joint Venture(4) Greenfield

46. Dimensions of Internalization (cont.)Not all firms do or can follow the sequential process of internationalization:Dependent upon industrial and environmental conditionsNeed to coordinate operations in many countries and many value chain activities

47. Dimensions of Internalization (cont.)Internationalization affects firms in equally important ways from an inward perspective.

48. The related modes of activity include:

49. Importing/sourcing.

50. Acting as licensee from a foreign company.

51. Establishing joint ventures (JVs) inside the home country with foreign companies.

52. Managing as the wholly owned subsidiary of a foreign firmDimensions of Internalization (cont.)Many firms have an appreciation of the global environment but do not seek out international opportunities in countries that differ greatly

53. Questions to explore:

54. What products/services can be “global”?

55. How can a firm know if it has a globally competitive product?

56. How can the firm successfully take a product global? Internationalization Theory

57. Types of InternationalisationUpstream internationalisation Downstream internationalisation importoutsourcingmarket entryoutwardinternationalisationinwardinternationalisation

58. Implications for Your Project Upstream Internationalisation (Supply chain management)Location of key suppliersRelationship with key suppliersChanges in number and frequency of changesSupply strategies , e.g. vertical integrationDownstream Internationalisation (Export management)Goals, relationships, strategies, organisational development

59. Degrees of InternationalisationDegree of commitment/level of involvement (structure)Degree of change within the firm (process)

60. International Product Life CycleBasic AssumptionsThe relative weight of changes in factors of production at various stages of a product’s life cycleChanges in a product’s degree of market attractivenessImplications for InternationalisationExtension of the life cycle of productsReduction in unit costs of productionOther useful conceptsProduct vs. Market lagClient-followers vs. Market searchers

62. The Network Approach to InternationalisationFirms within an industrial market are inter-dependentThey share resourcesTheir relationships are both stable and changingThey are mutually vulnerableMarkets are networks of relationships

63. Some Characteristics of a NetworkIntensityPower sharingReciprocityCohesion, throughDomain consensusPositive evaluationWork co-ordination

64. 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 factorsLeontief paradox

65. Industrial Clusters A concentration of suppliers and supporting firms from the same industry located within the same geographic areaExamples 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, IndiaIndustrial clusters can serve as an export platform for individual nations

66. National Industrial PolicyProactive 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 incentivesMonetary and fiscal policiesRigorous educational systemsInvestment in national infrastructureStrong legal and regulatory systems

67. National Industrial Policy:Ireland as an ExampleBeginning 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 consolidationPartnership with the industry and unionsEmphasis on high-value adding industries such as pharma, biotechnology, and ITMembership in the European Union; subsidies and investment received from the EUInvestment in education

68. FDI Based Explanations: Dunning’s Eclectic ParadigmThree 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 advantageLocation-specific advantages – advantages associated with the country in which the MNE is invested, including natural resources, skilled or low cost labor, and inexpensive capitalInternalization advantages – control derived from internalizing foreign-based manufacturing, distribution, or other value chain activities

69. The background - UppsalaThe firm is assumed to strive for growth and long term profitThe firm is assumed to avoid uncertainty and keep risk taking at a low levelThe 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 environmentDynamic model (present state important for future changes and subsequent states)

70. State AspectsMarket knowledgeInformation stored and retrievable in minds of individuals, computer memories or in written formObjective or experiential – latter most crusialMarket commitmentAmount and specificity of resources committed to a market (experiential knowledge may be one type)

71. Change AspectsCommitment decisionsResponse to perceived probalems/opportunitiesHigh perceived uncertainty leads to low commitmentIncreased (experiential) makret knowledge leads to lower preceived market uncertaintySmall steps unless very large resourcesCurrent business activitiesPrime source of market experience

72. Johanson & Vahlne – 1990 (1)Stages model is one possible manifestation of the State and change aspects modelInternationally experienced firms may allocate resources on the basis of real market conditions rather than in response to the unknownValidity of model mainly in early stages (low experiential knowledge and high uncertainty)World more internationalized and homogeneousPsychic distance smaller and market knowledge less country specific

73. Johanson &a Vahlne – 1990 (2)Service firms may internationalize in a different mannerInternationalization processes should be related to processes in the environment (market, network, industry, technology, etc.)Behavioral model could be supplemented by economic modelsStrategic thinking should supplement emergent development, chance, and necessity

74. The stage model

76. Two

77. Moving ForwardFriedman’s view of a “flat world”“Flatteners” or developments that helped create this flat worldSummarize these flatteners into his notion of a “triple convergence”

78. Flat World

79. Flat WorldPlaying field has been flattened traditional advantages accruing to one country or a large multinational are being challengedCoefficient of globalizationCompletion for global knowledge workIntellectual work, intellectual capital, can be delivered, distributed, produced, and put back together again . . . with relative freedom in the way we do work

80. What is the significance of all this?

81. Significance of Flat WorldLevel playing fieldTraditional, comparative advantages held by those with access to information and/or technology can now be challengedIndividuals from non-traditional backgrounds can now engage in economic activity, at times in ways not seen before

82. Flattenersfirst three are platforms contributing to collaboration

83. Flatteners: first three are platforms contributing to collaboration11/9: the fall of the Berlin Wall opening WindowsFall of the “Wall” between East and West BerlinPolitical systems that were once closed opened upWindows8/9: Netscape goes publicEmergence of an internet browserWork flow software: Development of software which when installed in different computers and in different places allows them to work with each other

84. 11/9 as a platform for collaboration11/9: the fall of the Berlin Wall which separated East and West Berlin and GermanyThe 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 empireIncluded in this “bloc” were countries like the Czech Republic, Bulgaria, Romania, East Germany, Poland, etc.

85. Friedman’s claimthis event tipped balance of power across the world towards more democratic, free-market oriented governments

86. 11/9 as a platform for collaboration (Continued)Centrally planned countries “opened up”In 1991, India abolished trade controlsChina accelerated reforms (although some of china’s economic reforms started in the 70s)Global exchange of digital information now possible as political restrictions eased upHuge personal empowerment

87. 8/9 as a platform for collaboration8/9: Netscape goes publicThe initial browser was Mosaic which was designed to allow researchers/scientists in remote locations to access each other’s workMosaic 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 easierEarly access to the internet were text based

88. 8/9 as a platform for collaboration (Continued)Browsers as gateway to Internet From internal systems to systems of systemsDot 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 placeFrom resistance to email and cell phones (early 90s) to emergence of terms like B2B and B2C.

89. Work-flow software as a platform for collaborationWork 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 SFRecording sessionsDesign and directionWritersAnimationAll in different locations using Virtual Private Network (VPN)

90. Work-flow software as a platform for collaboration (Continued)Example 2: Pay PalEmergence of protocols and standards to facilitate communication among systems

91. Flatteners: the next seven are new forms of collaboration

92. Flatteners: the next seven are new forms of collaborationUploadingOutsourcingOffshoringSupply-chainingIn-sourcingIn-formingSteroids

93. Flattener 4: UploadingPower or capability of individuals to send up, out, and around their own products and ideasApache – 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.

94. 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.

95. Flattener 5: Outsourcing India as an example of how outsourcing beganEducational infrastructure in India7 Indian Institute of Technology 6 Institute of ManagementAs a result, Indian nationals would go to the US or developed countries to find workDot-com boom created “physical highway” to allow for India to get “connected”Reform of telecommunications system in India

96. Flattener 5: Outsourcing (Continued)US companies start looking for opportunities to utilize labor pool in IndiaLate in the 1990s, the Y2K issue emergedIndian “expats” return to India after “dot.com bubble” burstFriedman sees the massive amount of programming to prevent a “Y2K” disaster and return of expats catalysts India’s emergence as an outsourcing destination

97. Flattener 6: OffshoringOffshoring: move a strategic process or portion of a company’s value chain to a foreign locationDistinction Outsourcing: have another company do a specific, but limited function, e.g. accountingOffshoring: move production or an important process offshore

98. Flattener 6: Offshoring (Continued)China as an example of the emergence of offshoring1977: Deng Xiaoping starts economic reforms in ChinaMid 1980s: applies for membership in WTOFinally accepted into WTO mid 1990sWatershed moment in the sense that as a member of WTO, China has to play by international rules

99. Flattener 6: Offshoring (Continued)Example: ASIMCOFrom 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 technologyFilm: China BrandsFriedman does mention possible limits to growth in China, including need for further reforms

100. Work-types companies avoid offshoringRelationship-oriented work Process where repeatable process map cannot be createdRoles with complex industry structure and/or long product learning curvesSuccess criteria are not well defined or measurableStrategic aspect to the businessHigh levels of sensitive intellectual property are shared across wide groups of people

101. Work-types companies push offshoringHigh transaction volumeHigh repeatabilityLow domain knowledge neededLow mission criticalityFew touch pointsLow complexityLow training effortsNon-strategicWell defined process and metricsEasily transmitted over electronic wiresOutcomes can be easily managed

103. India AdvantagesLow costNative EnglishEarly market entranceGovernmental software export strategy since 1972 Early adoption to quality standardsStrong educational programsGovernment incentives Technology park developmentTax advantages and tax breaksLow import duties

104. India DisadvantagesGeo-political risk with PakistanElectrical Power issues 24 hour travelTime zoneCostly Turnover Salaries rising 20% annually for skilled workersMid-manager staffing difficultiesCultural differences

105. Brazil AdvantagesLow costTime Zone and ProximityEarly adoption to quality standardsStrong educational programsMultilingual Support (Spanish and Portuguese support)Government incentives Technology park development (but need more)Tax advantages and tax breaks

106. Brazil DisadvantagesCorruptionLack of Qualified PeopleDelaysInfrastructureIP ProblemsEnglishBrain DrainHigher cost than India and ChinaPoor infrastructure especially off coastHigh sunk costCostly turnover

107. China AdvantagesScaleLaborSpeedLow costStrong educational programs and joint university programsGovernment incentives Technology park developmentTax advantages and tax breaks

108. China DisadvantagesFocus on AsiaEnglish Cultural differences and inward thinking Uncertain governmental actionsCommunist effect on property laws Communist bureaucracy Intellectual property theft is rampantData PrivacyPoor infrastructure especially off coastManufacturing focus Poor customer service Need for local representation/local partner Indian offshore companies are having problems with offloading their own work to China

109. Flattener 7: Supply ChainingWal-Mart as an example of a company that pursues supply chain management aggressivelyCoefficient of GlobalizationLearning to sell new products: sushi

110. Flattener 8: InsourcingWorld Synchronized: Supply ManagerTrust through systemesToshiba RepairsShoes.comUPS

111. Flattener 9: In-formingIn-forming: capability to build your own supply chain . . . of information, knowledge, entertainment

112. Flattener 10: SteroidsComputing capability has increased in terms of computational, storage, and input/output capacityInstant messaging and file sharingVOIPVideo conferencingComputer graphicsWireless communication