Chapter 8 Internationalization and Globalization

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Chapter 8Internationalization and Globalization
2
Chapter Outline

• Introduction Internationalization and
  Globalization
• Drivers of Corporate Internationalization and
  Globalization Why Firms Go Abroad
• Preparing the Company for Internationalization
  and Globalization
• Effects of Globalization
• Financing International and Global Operations

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Internationalization and Globalization

• Internationalization Defined
• Internationalization firms extend products and
  services in overseas markets, usually from their
  home country. Internationalization is the first
  stage in the globalization process

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Internationalization and Globalization

• Globalization Defined
• Globalization the process by which businesses
  create value by leveraging their resources and
  capabilities across borders, and includes the
  coordination of cross-border manufacturing and
  marketing strategies

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Internationalization and Globalization

• Measuring Internationalization and Globalization
• Objective measures United Nations Conference on
  Trade and Development (UNCTAD) has developed an
  index to show international corporate involvement
  called Transnationality Index.

6
Internationalization and Globalization

• Measuring Internationalization and Globalization
• Objective measures United Nations Conference on
  Trade and Development (UNCTAD) has developed an
  index to show international corporate involvement
  called Transnationality Index. It is based on
• Foreign assets to total assets.

7
Internationalization and Globalization

• Measuring Internationalization and Globalization
• Objective measures United Nations Conference on
  Trade and Development (UNCTAD) has developed an
  index to show international corporate involvement
  called Transnationality Index. It is based on
• Foreign assets to total assets.
• Foreign sales to total sales

8
Internationalization and Globalization

• Measuring Internationalization and Globalization
• Objective measures United Nations Conference on
  Trade and Development (UNCTAD) has developed an
  index to show international corporate involvement
  called Transnationality Index. It is based on
• Foreign assets to total assets.
• Foreign sales to total sales
• Foreign employment to total employment

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Internationalization and Globalization

• Measuring Internationalization and Globalization
• Objective measures
• Corporate measures
• Governance and responsibility who are
  controlling to corporation

10
Internationalization and Globalization

• Measuring Internationalization and Globalization
• Objective measures
• Corporate measures
• Governance and responsibility who are
  controlling to corporation
• Strategy and planning of global corporations
  that
• Produce standardize products could be ventrally
  planed,
• must meet local needs should be decentralized

11
Internationalization and Globalization

• Measuring Internationalization and Globalization
• Objective measures
• Corporate measures
• Governance and responsibility who are
  controlling to corporation
• Strategy and planning of global corporations
  that
• Produce standardize products could be ventrally
  planed,
• must meet local needs should be decentralized
• Market orientation also depends on the
  orientation of the countries where the company is
  active. If they are similar, a unified marketing
  strategy will be use. Otherwise, each country
  requires its own strategy.

12
Internationalization and Globalization

• Measuring Internationalization and Globalization
• Objective measures
• Corporate measures
• Governance and responsibility who are
  controlling to corporation
• Strategy and planning of global corporations
  that
• Produce standardize products could be ventrally
  planed,
• must meet local needs should be decentralized
• Market orientation also depends on the
  orientation of the countries where the company is
  active. If they are similar, a unified marketing
  strategy will be use. Otherwise, each country
  requires its own strategy.
• Manufacturing operations and technology.
  Customers, country conditions, and competition
  determine where resources should be allocated.
  Whether economies of scale could be exploited
  whether low cost factors could be utilized

13
Internationalization and Globalization

• Measuring Internationalization and Globalization
• Objective measures
• Corporate measures
• Governance and responsibility who are
  controlling to corporation
• Strategy and planning of global corporations
  that
• Produce standardize products could be ventrally
  planed,
• must meet local needs should be decentralized
• Market orientation also depends on the
  orientation of the countries where the company is
  active. If they are similar, a unified marketing
  strategy will be use. Otherwise, each country
  requires its own strategy.
• Manufacturing operations and technology.
  Customers, country conditions, and competition
  determine where resources should be allocated.
  Whether economies of scale could be exploited
  whether low cost factors could be utilized
• R D intensive industries must balance their
  activities across borders when possible and
  advantageous and safe. RD are usually
  centralized due to secrecy as well as need for
  specific knowledge and resources.

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Internationalization and Globalization

• Measuring Internationalization and Globalization
• Objective measures
• Corporate measures
• Governance and responsibility who are
  controlling to corporation
• Strategy and planning of global corporations
  that
• Produce standardize products could be ventrally
  planed,
• must meet local needs should be decentralized
• Market orientation also depends on the
  orientation of the countries where the company is
  active. If they are similar, a unified marketing
  strategy will be use. Otherwise, each country
  requires its own strategy.
• Manufacturing operations and technology.
  Customers, country conditions, and competition
  determine where resources should be allocated.
  Whether economies of scale could be exploited
  whether low cost factors could be utilized
• R D intensive industries must balance their
  activities across borders when possible and
  advantageous and safe. RD are usually
  centralized due to secrecy as well as need for
  specific knowledge and resources.
• Organization and human resource management the
  challenge has been to train and retain managers
  with local market knowledge as well as with
  global understanding.

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Advantages of Internationalization and
Globalization

• Extension and expansion of market

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Advantages of Internationalization and
Globalization

• Extension and expansion of market
• Exploitation of resources overseas

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Advantages of Internationalization and
Globalization

• Extension and expansion of market
• Exploitation of resources overseas
• Taking advantage of economies of scale

18
Advantages of Internationalization and
Globalization

• Extension and expansion of market
• Exploitation of resources overseas
• Taking advantage of economies of scale
• Acquiring economies of scope building and using
  foreign market expertise in against their rivals

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Disadvantages of Internationalization and
Globalization

• Divert resources from dometic to international
  markets

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Disadvantages of Internationalization and
Globalization

• Divert resources from dometic to international
  markets
• Going overseas is a permanent learning process.
  You need to constantly adapt to new and changing
  environment

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Internationalization, Globalization, and industry
strategy

• High
• Pressures
• for global
• integration
• Low
• Low Pressures for local responsiveness High

Global Integration Strategy
Global/Local (cross border branding and supply
chain)   Internationalization Strategy
Multinational Strategy (Export
/Import) (localized marketing with supply
chain)



 
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Drivers of Corporate Internationalization and
Globalization

• Market Drivers
• Cost Drivers
• Competitive Drivers
• Government Drivers
• Globalization and Information Technologies

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Drivers of Corporate Internationalization and
Globalization

• Market Drivers
• Common customer needs products and technology
  is transferred with its cultural baggage to other
  countries with similar needs. Some products such
  as Coca-Cola, McDonalds, KFC, etc. have been
  palatable to many cultures

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Drivers of Corporate Internationalization and
Globalization

• Market Drivers
• Common customer needs Coca-Cola, McDonalds
• Global channels global channels have emerged
  with free trade as free trade enabled companies
  to distribute goods and provide services
  internationally. Carrefour, Toys R Us, Wal-Mart
  have developed global channels to distribute
  products.

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Drivers of Corporate Internationalization and
Globalization

• Market Drivers
• Common customer needs Coca-Cola, McDonalds
• Global channels Carrefour, Toys R Us, Wal-Mart
• Marketing Transfers and Global Branding IBM,
  Toyota, Bic, Kodak have become household names
  throughout the world

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Drivers of Corporate Internationalization and
Globalization

• Market Drivers
• Common customer needs Coca-Cola, McDonalds
• Global channels Carrefour, Toys R Us, Wal-Mart
• Marketing Transfers and Global Branding IBM,
  Toyota, Bic, Kodak
• Lead Countries Made in xxxx. Countries have
  developed a name for some products, e.g., Japan
  for consumer electronics, Switzerland for
  watches, USA for computer software, etc.

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Drivers of Corporate Internationalization and
Globalization

• Cost Drivers
• Economies of scale expensive to set up
  production but they could service any market such
  as steel and microprocessors

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Drivers of Corporate Internationalization and
Globalization

• Cost Drivers
• Economies of scale steel and microprocessors
• Steep Experience Curves knowledge and
  technology intensive sectors aircraft

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Drivers of Corporate Internationalization and
Globalization

• Cost Drivers
• Economies of scale steel and microprocessors
• Steep Experience Curves knowledge and
  technology intensive sectors aircraft
• Low Cost Production low cost labor (textiles)

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Drivers of Corporate Internationalization and
Globalization

• Cost Drivers
• Economies of scale steel and microprocessors
• Steep Experience Curves knowledge and
  technology intensive sectors aircraft
• Low Cost Production textiles
• Favorable Logistics transportation costs
  important as we decide where to produce lumber,
  non-specialty chemicals

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Drivers of Corporate Internationalization and
Globalization

• Cost Drivers
• Economies of scale steel and microprocessors
• Steep Experience Curves knowledge and
  technology intensive sectors aircraft
• Low Cost Production textiles
• Favorable Logistics transportation costs
  important) lumber, chemicals
• New Product Development Costs are rising due to
  short life of their products that require higher
  return on their investment (airlines,
  telecommunications, chips, pharmaceuticals )

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Drivers of Corporate Internationalization and
Globalization

• Competitive Drivers
• Competing with imports and other global rivals
  have placed increasing pressures on both domestic
  and international companies to be competitive in
  national and international markets.

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Drivers of Corporate Internationalization and
Globalization

• Government Drivers
• United Nations, and its agencies like the IMF,
  World Bank and WTO free trade, privatization
  (but can retard also)

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Drivers of Corporate Internationalization and
Globalization
Globalization and Information Technologies Globalization and Information Technologies Globalization and Information Technologies
Inter-firm linkages International new product development has become more quicker Customer responsiveness has been reduced from 125 days to about 10 days due to supply chain
Inter-organizational systems (IOS) connecting insurance, banks, customs, immigrations to minimize duplication Internet-based E-commerce Extranet allowing outside parties limited access to the companys information system
Intranet Groupware technology allowing email, screen sharing, and other forms of global communications have allowed around the clock work on projects Organizational Memory System that allows access to past information and strategies and therefore enhances the ability of the decision-makers to do a better job
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Preparing the Company for Internationalization
Globalization

• Focusing the Organization Corporate Competencies
• Focusing the Organization Supply Chain
  Restructuring
• Developing Leadership and Management Capabilities
• Globalizing the Corporate Culture

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Preparing the Company for Globalization

• Focusing the Organization
• Corporate Competencies
• those activities that have proven international
  potential
• hard decisions must be made on activities that
  do not add value to the globalization move

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World Business Analysis Opinion What do you
think?100 year old essentially family-run
Italian firm is an automobile producer (all
types, from basic to luxuryhalf the companys
sales). It also produces trucks, agricultural
tractors, construction equipment, trains, and is
in chemicals, publishing and insurance. It needs
to internationalize and globalize its operations.
What should its first steps be?

• -

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Preparing the Company for Globalization

• Focusing the Organization
• Supply Chain Restructuring
• De-layer corporate hierarchies for quicker
  decisions
• Rethink manufacturing systems to close
  unproductive plants and consolidate production
• Reevaluate supplier relationships to focus on a
  few, well-positioned providers
• Reassess distributor capabilities for the global
  arena

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Preparing the Company for Globalization

• Developing Competent Leadership and Management
  Capabilities
• Global Leadership Characteristics
• Unbridled Inquisitiveness the desire to learn
  and the ability to enjoy the constant stimulation
  and challenges
• Personal characteristics The ability to connect
  socially and emotionally with wide varieties of
  individuals
• Duality senior managements ability to balance
  global and local considerations in making
• Savvy Management leaders have instinctive
  recognitions of strategic tradeoffs

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Preparing the Company for Globalization

• Developing Leadership and Management Capabilities
• Developing Global Leaders
• International travel to see and learn other
  cultures
• Global team experiences to see and learn the
  decision making process and social interaction at
  the local level with
• Cross-cultural training
• Overseas assignments

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Preparing the Company for Globalization
Globalizing the Corporate Culture What is Corporate Culture Globalizing the Corporate Culture What is Corporate Culture Globalizing the Corporate Culture What is Corporate Culture
Authority structures Degree of organizational formality Information flows
Tolerance for maverick behaviors Competitive or cooperative culture Decision-making apparatus
Organizational focus Organizational structure Gender orientations
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Preparing the Company for Globalization

• Globalizing the Corporate Culture
• Deciding on Corporate Cultures in Foreign
  Markets no right or wrong answers
• Global Standardization of Corporate Cultures is
  the trend but caution is always required

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Preparing the Company for Globalization

• Globalizing the Corporate Culture
• Adapting Corporate Cultures to National Culture
  Influences depends on
• Societal competitiveness the amount of
  competition within societiespolitical, economic,
  social class systems
• Shareholder-Stakeholder Orientations the
  specific objectives or audiences corporate
  cultures oriented toward spread of capitalism
  vs. local needs
• National culture influences on corporate cultures
  

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World Business Analysis Opinion What do you
think?8-2 How would you globalize a corporate
culture?

• -

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Preparing the Company for Globalization

• National Culture Influences on Corporate Cultures
  
• Power Distance the extent to which strong social
  class distinctions are maintained at societal and
  corporate levels
• Individualism/Collectivism the degree to which
  individual or group actions are the bases for
  getting issues resolved
• Masculine and Feminine Societies the tolerance
  levels for aggressive behaviors and their gender
  orientations
• Uncertainty Avoidance the extent to which
  societal behaviors are risk-oriented or
  risk-averse
• Long Versus Short Term Orientations East-West
  contrasts

46
World Business Analysis Opinion What do you
think?8-3 A large US multinational operating in
Malaysia noticed that US expatriates and local
managers were not on the same cultural page. In
particular (i) Malaysian managers took fewer
initiatives in front of their bosses (ii) they
often said yes when they meant no (iii) they
were upset when a lower status US engineer openly
disagreed with his boss in a meeting (iv)
Malaysian managers copied everyone in their
e-mails. Why do you think?

• -

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Effects of Globalization

• Industry Structure Effects
• Organizational Structure Effects
• Corporate Culture Effects
• Relationships Among Strategies, Structures and
  Corporate Cultures

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Effects of Globalization

• Industry Structure Effects
• At the national level, domestic firms must attain
  critical mass size to deal with foreign
  competitors
• At the regional level, firms need to attain
  regional market coverage and scale economies to
  compete against other global producers
• At the worldwide level, industry structures have
  been affected by a series of mega-mergers
  between large international companies

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Effects of Globalization

• Organizational Structure Effects
• International department
• Worldwide functional structure
• Worldwide product structure
• Geographic structures

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International Division Structure
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Worldwide Functional Structure
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Worldwide Product Structure
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Geographic Structure
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Effects of Globalization

• Corporate Culture Adjustments
• Ethnocentric corporate cultures emphasize
  home-market orientations in strategic decision
  making and attitudes made in advantages,
  alcohol, fashion, food
• Polycentric operations involve complete host
  country orientations competitive advantage based
  on responsiveness
• Regiocentric cultures blend national subsidiaries
  within regions into cohesive strategy-making
  units regional brands, supply chains
• Geocentric corporate cultures are totally
  globally-oriented no regard for individual
  national cultures

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Effects of Globalization

• Relationships Among Strategies, Structures, and
  Corporate Cultures
• Causes of Change marketplace change and new
  strategy new structure (M A, JVs) leadership
  changes
• Relationships among international strategies,
  structures, and corporate cultures ethnocentric
  and exporting polycentric and consumer goods
  regional, global productsregiocentric/geocentric

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Financing International and Global Operations

• Equity Options Using Outside Financing
  availability of national stock exchanges appear
  local
• Equity Options Using Internal Financing
  cross-holdings of shares among subsidiaries good
  control protection from takeovers
• Debt Options Using External Financing local
  financial institutions must be sound low
  interest rates
• Debt Options and Internal Financing borrowing
  from HQ/subsidiaries can adjust interest rates
  according to subsidiary/market needs

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Key Points

• Defining internationalization
• Defining globalization
• Measuring them?
• Globalization drivers
• Preparing for globalization
• Globalizing corporate cultures
• Effects of globalization on industries,
  organizations, corporate cultures
• Financing foreign operations

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Key Points

• Internationalization occurs as firms extend
  products and services into foreign markets.
• As companies globalize, they must balance
  pressures to globally integrate their operations
  with pressures to localize output.
• Globalization can be measured objectively through
  foreign percentages of assets, sales, and
  employment.

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Key Points

• Globalization drivers can be based on market,
  cost, competitor, or government factors.
• Companies prepare for globalization by assessing
  corporate competencies, supply chains, leadership
  capabilities, and corporate cultures.

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Key Points

• Globalizing corporate cultures involves defining
  and critically examining organizational
  relationships, communication patterns, and
  employee behaviors.
• Effects of globalization must be assessed for
  industry structure, organizational structure, and
  corporate culture
• International firms have a number of options in
  financing their internationalization and
  globalization efforts.