The document discusses several factors that have contributed to the creation of a "flat world" and the globalizing economy, including: 1) The fall of the Berlin Wall in 1989 opened formerly closed political systems and increased global exchange of digital information. 2) The emergence of the Netscape browser in 1995 and Windows 95 made accessing the internet much easier, facilitating global communication and collaboration. 3) Work-flow software allowed computers in different locations to communicate and collaborate through sharing of audio, video and other files. 4) Outsourcing of jobs to countries like India was enabled by India's educational system producing skilled workers, reforms to telecommunications, and the Y2K issue which increased work sent to India

1. International BusinessStephan Langdon, MBA, M.ED

2. The Globalizing Economy

3. Boarderless WorldEnd of nation state

4. World Trade Organization1997: Trade ministers from countries representing 92% of world trade agreed to eliminate tariffs on software, computer chips, telecommunication equipment, and computers.

5. Regional Trade AgreementsRegional Trade Agreements—agreements among nations to reduce tariffs and develop similar technical and economic standards.European Union, NATFA

6. Sell Anywhere, Locate AnywhereWorld trade growth: average of 6.5% per year between 1990 and 2000.Nearly half of the over $5 trillion in world trade is among the European union, the U.S., and Japan—the TRIAD.

7. Leading Exporting and Importing Countries

8. Leading Exporting and Importing Countries, continued

9. Sell Anywhere, Locate AnywhereForeign Direct Investment (FDI) occurs when a multinational company from one country has an ownership position located in another country.FDI increased by more that 36% between 1996 and 2000.Post 9/11 has seen a decline in FDI.Nevertheless, it remains a significant factor.

10. Top 25 Companies by Foreign Asset Ownership

11. 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.

12. Risk Ratings of Selected 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. Next Generation of Multinational Managers: Characteristics

23. Next Generation of Multinational Managers: Characteristics

24. Multinational Management: A Strategic ApproachConsiders how managers formulate and implement strategies to compete successfully in the global economy.Strategies are the maneuvers or activities used to increase and sustain organizational performance.Multinational strategies must include maneuvers that deal with operating in more than one country and culture.

25. 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.

26. BRICOffshoring

27. 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

28. Reznor Case

29. Two

30. 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”

31. Flat World

32. 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

33. What is the significance of all this?

34. 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

35. Flattenersfirst three are platforms contributing to collaboration

36. 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

37. 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.

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

39. 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

40. 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

41. 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.

42. 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)

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

44. Flat World and NINBerlin WallWindowsNetscape BrowserWorkflowFlat WorldNIN

45. Flat World and NINBerlin WallWindowsNetscape BrowserWorkflowGlobal Market

46. Websites

47. Facebook.com

48. Access

49. Musician Work

50. Danial Lanois

51. Pay PalFlat WorldNIN

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

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

54. 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.

55. 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.

56. 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

57. 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

58. 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

59. 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

60. 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

61. 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

62. 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

64. 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

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

66. 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

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

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

69. 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