International Management and Globalization

Globalization
Understanding

Environment

a Countrys

International Managing Managing

Market-Entry Strategies

International Operations Across Cultures

The flow of good and services, capital, and knowledge across country borders

Three Stages of Globalization

According to Thomas Friedman

Internationalization of countries Companies moving into international markets Individuals collaborating (and competing) on a global basis

Companies move to areas of cost efficient possibilities i.e.

China and India

Technology has provided opportunities to the unseen Allows companies to expand in foreign markets Improves a countrys economic development

Negative factors: Foreign competition can harm local companies

Institutional Environment

The countrys rules, policies, and enforcement processes that influence individuals and organizations behaviors that operate within the country boundaries.

Economic Development

Affects living standards and citizens health and welfare

Developed Economies

Bigger, more effective capital markets. (weakest in developing economies)

Political-Legal Institution
Political risks, regulations, and laws and their enforcement Major influence on a countrys economy China example Rules established by law are intended to make the management of public firms more transparent Intellectual property laws to encourage foreign involvement

Physical Infrastructure
Facilitates business communications and flow of goods from their source to consumers Roads and highways, number of telephone lines per capita, airports Good physical infrastructure=lower costs for firms

A learned set of assumptions, values, and beliefs that members of a group have accepted and that affect human behavior.
We program our minds Individuality
Power Distance: the extent to which people accept power and authority differences among people Uncertainty Avoidance: when cultures differ in the extent to which they need things to be clear or ambiguous high: clear norms- Japan low: few rules, love ambiguity- US

 Exporting
Licensing Strategic Alliances Acquisitions Wholly Owned Subsidiaries

 Manufacturing products in a firms home country and shipping them to a foreign market Advantages
Low risk Low capital requirements

Disadvantages

Firm must establish a means of marketing and distributing its goods Small returns due to transportation and sharing costs Sensitive to fluctuations in exchange rates

 Arrangements establishing how to allow a local firm in the new market to manufacture and distribute its product Advantages
Low costs Little risk Entry into growing markets

Disadvantage

Unlikely to produce major returns Firm has little control over the product and its brand

 A cooperative arrangement between two firms in which they agree to share resources to accomplish a mutually desirable goal Advantages
Shared costs and risks Access to additional resources Maintain and increase global competitiveness Access to better and cheaper performance

Disadvantages
High risk

 Acquisitions of local firms made by foreign firms to enter a new international market Advantages
Fast way to enter a foreign market Largest new market entry of any of these methods

Disadvantages
Controversial with local publics or governments Challenge of integrating two different corporate cultures High costs

 A direct investment to establish a business in a foreign market in which the local firm owns and controls 100 percent of the business Advantages
Maximum control over operations High returns

Disadvantages
Complex and difficult to launch High risk

Advantages: Home office controls strategy Standardized product=enhanced profits Shared resources=efficient allocation (better money management) Disadvantages No flexibility for subsidiaries to make decisions and changes Subsidiaries vulnerable to competition Complex product/service is hard to adapt with different cultures

Advantages: Flexibility for subsidiaries to adapt strategy Ability to react quickly to change

Disadvantages:
Home office cant evaluate performance of subsidiary managers More expensive (cannot achieve economy of scale)

Advantages:
Decentralized authority Flexibility and adaptivity Shared resources Managed costs and efficient allocation

What are the benefits of a multicultural team?

BENEFITS
Greater outreach Various backgrounds More ideas Increased creativity and productivity

BEWARE
a lack of cultural intelligence can create tension and do more harm than good to ones business

Virtual Teams
Most work will happen outside of meetings and video chats Gain the teams trust
Lead by example Be consistent Do trust building activities Know about other cultures

Cultural intelligence - become knowledgeable

of other cultures and the appropriateness of actions under specific contexts
High vs Low context Cultures

High-context cultures

Low-context cultures

are much more aware of their surroundings and have a heightened perception of what is and is not appropriate at any given moment
Japanese, Chinese, Korean and Arab

tend not to let contextual variables determine appropriate behaviors as strictly, but there are certainly still times when something would be considered inappropriate

American, German, Swiss and English

More cultures = more ways of thinking and more resources to utilize Need for control

Jagdish Sheth believes, Increased global interaction will not stir up a clash of cultures, but will lead to a more culturally integrated world. We should make use of our different ways of thinking to accomplish our goals for the wellbeing of the global economy

What is Globalization?
Harnessing success through understanding of the world.

Argggh!

International Management and Globalization