Business 187: Global Dimensions of Business

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Business 187 Global Dimensions of Business

• Professor Mary Yoko Brannen

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Why do companies engage in international business?
Traditional Market Seeking (Sales
Expansion) Resource Seeking
Diversification Minimize Competive
Risk New' Knowledge/ Innovation
Options for Strategic Moves/ Countermoves

Materials Cheap Labor Capital
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Why International Business is Growing

• Liberal government policies on trade
• Rapid improvement of technology
• Transportation is quicker while costs are lower
• Communication enables control from afar
• New institutions to support trade Examples
• Global banking ?Federal Express
• Consumer demand
• Companies learning from each other

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Modes of International Business

• Most common Importing and exporting of
  merchandise
• Service exports and imports
• Tourism and transportation
• Construction
• Management contracts (e.g., hotels)
• Use of assets Licensing, franchising
• Direct and portfolio investment

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Two kinds of international INVESTMENT

• Direct investment
• gives the foreigner control of a business
• The foreigner purchases a company or part of it
  directly
• Portfolio investment
• The foreigner purchases securities (stocks,
  bonds) that have been issued on the open market

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The multinational enterprise

• A multinational enterprise is a business that
  takes a global approach to markets and production
• General Motors
• Yahoo
• Mirabilis (Israeli firm pioneered real-time
  Internet chat)
• Some firms do international business but are not
  multinational enterprises
• Driscoll Strawberries

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Many Variations of the Multinational Company
Globe as playing field 
STRATEGY
ORGANIZATION
PEOPLE
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Basic approaches to strategy in the
multinational enterprise.

• Two approaches
• The globally integrated company
• Dell
• Ford
• The multidomestic company or locally responsive
  company
• Frito-Lay
• General Motors
• The two approaches can be mixed

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Globally integrated or multidomestic (locally
responsive)?

• Global standardization has advantages
• Reduced costs in development and manufacturing
• Economies of scale since fixed costs are spread
  over more units of production

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Locally Responsive

• Advantages of responding to national preferences
• Design, marketing, operations can better match
  specific national preferences
• Multinational enterprises have to choose
• Can choose on an issue-by-issue basis

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Trends favor globally integrated strategy

• Competition requires lower costs
• Increased technological change favors a globally
  integrated product line
• More communication reduces international
  differences
• But international differences are still enormous

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Evolution of Strategy in the Internationalization
Process

• Passive to active expansion
• External to internal handling of operations
• Deepening mode of commitment
• Geographical diversification
• Leapfrogging of Expansion
• Few to many foreign locations
• Similar to dissimilar environments

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The Usual Pattern of Internationalization
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Three Parts to this Course

• Macro Environment
• Global Competitive Environment
• Human and Cultural Environment
• Political and Legal Environment
• Economic and Financial Environment
• Mezzo Environment
• Strategy
• Global strategic theories
• Firm Strategies
• Micro Environment
• Functional Areas
• Marketing, Operations Management, Organizational
• Behavior, Human Resource Management

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International Business Influences and
Operations
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Prerequisites for International SuccessorHow
does a firm overcome its"Liability of
Foreignness"?

• Motivation
• Strategy
• Organization
• People

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National competitiveness

• Is it bad for the average citizen of a country
  when a local firm contracts abroad?
• We dont know
• Today each country must think about its
  competitiveness
• It may be separate from competitiveness of the
  firms based there

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Ethics What do you think?

• International business raises many ethical issues
• Many without simple answers
• Normativism There are universal standards of
  behavior all in business (and all cultures)
  should follow
• Relativism Ethical principles must vary from
  group to group

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Think carefully before you declare yourself a
relativist

• International business behavior can have
  radically good or bad effects
• Korea going from poor to rich nation
• Toxic pollutants for U.S. market being dumped in
  China

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Try to develop clear principles if you think you
are a normativist

• Sometimes your principles will be challenged
  suddenly
• You need to know what you believe and try to find
  a way to strive for integrity while paying
  attention to the bottom-line

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Exciting times

• Both bad and good things are happening
• Bad pollution, layoffs, dishonest executives
• Good growth, new opportunities, people emerging
  from poverty
• One goal for this section of Bus 187 is to
  provide tools that help you create more of the
  good and get rid of some of the bad