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Globalization refers to the shift toward a more integrated and interdependent world economyGlobalization refers to the shift toward a more integrated and interdependent world economyGlobalization refers to the shift toward a more integrated and interdependent world economy

Globalization

Ha Noi, Foreign Trade University

Chapter 1

International Business

< International Business >

Investment

Trade

Profit

Go … Global

Globalization refers to the shift toward a more integrated and interdependent world economy

(Charles W Hill)

Globalization 3.0 (from 2000 to the present)

(From Thomas Friedman in The World is Flat)

- Same basic products worldwide

- “German market” or the “American market”,

only the global market

…refers to the merging of historically distinct and separate national markets into one huge global marketplace

Globalization of

Production

…refers to the sourcing of goods and services from locations around the globe to take advantage of national differences in the cost and quality of

factors of production like land, labor, and capital

- Companies compete more effectively by

lowering their overall cost structure or

improving the quality or functionality of their product offering

Drivers of Globalization

-The decline in barriers  free flow of goods, services, and capital (GATT, WTO)

- The technological changes (productions, telecom, transportation )

Debate

• Agree or Disagree?

• 8 opinions

• 3 mins/each

- Greater economic growth

- Higher consumer income, and more jobs

… Anti

- Firms collapse, job losses

- Wealth - Poverty gap

- Child, women labor

INTERNATIONAL BUSINESS

FTU – Foreign Trade University

In real estate, the mantra is 'location, location, location.‗For global brand managers, it might be 'localise, localise, localise.‗

There is a balance on the spectrum between ―local‖ and ―global‖ that represents the ―sweet spot‖…[and makes for] ―the race to the middle

— A manager-

The world got flat…[creating] a global, Web-enabled playing field that allows for…collaboration on research and work in real time, without regard to geography, distance or, in the near future, even language

-A journalist-

How global are we?

Semi-Globalization

“There are three ways to add value in a world where differences still matter: 3A strategies

ADAPTATION ,

AGGREGATION and

ARBITRAGE ”

Pankaj Ghemawat

Because…

National Differences in…

Chapter 2

International business (IB)

Political System

= System of Government in a

Nation

The political economy of a nation refers to how the political, economic, and legal systems of a country are interdependent

(Hills.C.W)

Collectivism

Plato (427-347 BC) Greek philosopher

- stresses the primacy of collective goals

over individual goals

- advocate the state ownership of the basic means

of production, distribution, and exchange

- benefit society as a whole, rather than individual

capitalists

- Communism and social democrats

Karl Marx (1818-1883)

Socialism

DEM

OCR

ACY

- Pure democracy is based on the belief that citizens should be directly involved in decision making

- Most modern democratic states practice representative democracy where citizens periodically elect individuals to represent them

an individual should have freedom in his own economic and political pursuits

- “ individual diversity and private ownership are desirable”

- democratic political systems  free market economies

Aristotle

(384-322 BC)

Individualism

Totalitarianism

Totalitarianism is a form of government in which one person or political party exercises absolute control over all spheres of human life and prohibits opposing political parties

Communist totalitarianism – the

communist party monopolizes power Theocratic totalitarianism -

monopolized by religious principles

Tribal totalitarianism Right-wing totalitarianism

“the rules that regulate behavior along with the processes by which the laws are enforced”

There are three types of legal systems

- Common law - based on tradition, precedent, and custom (UK,USA)

- Civil law - based on detailed set of laws organized into codes (80 countries)

- Theocratic law - based on religious teachings

Legal System?

(*) International Law - Bilateral and

Multilateral treaties)

Question:

Search and give more detail about the Islamic law (especially

applying to the international business)

-Property rights: legal rights over use to which a resource is put and income derived

-Intellectual Property Rights (IP): patents, copyrights, trademarks: major bone of

contention especially in info-based economies

-Product safety and liability: standards protecting consumers

- Enforcement of national and

international laws

Question:

Look for a multinational which troubled which the international legal issues

- Summarize the case

- Give your recommendations

Corruption Perceptions Index 2011

- Local business groups

Culture Environment

National Differences

FTU – Foreign Trade University

Perceptions of each other

Telling the truth

Queuing

Transportation

Child

Senior’s daily life

Noise level inside a restaurant

Connections and Contacts

Punctuality

Boss

and many others…

EAST - WEST CULTURAL DIFFERENCES

“Culture is more often a source of conflict than of synergy Cultural differences are a nuisance at best and often a disaster”

Prof Geert Hosftede

3,000 languages and as many as 10,000 dialects worldwide

LANGUAGE

Language can be a competitive weapon

Language serves at the window to the culture of a society

Verbal or non-verbal is a very important skill for Business people

4 Main religious: Christianity, Islam, Hinduism, Buddhism

“Master Kong”: 551 – 478 BC

Confucianism is not a religion, but influences behavior and shapes culture in many parts of Asia

Activity 1

Give some examples of cultural differences in the interpretation

of body language What is the role of such nonverbal

communication in business relationships?

WORKING IN CROSS CULTURAL WORKPLACE

Power distance

“The extent to which the less

powerful members of institutions and organizations within a country expect and accept that power is distributed unequally”

High power distance

• Minimize the inequalities among people

• Interdependence between less and

more powerful people

• Flat hierarchy pyramid

• Power decentralization

• Narrow salary range

• Subordinated expect to be consulted

• The ideal boss is a resourceful democrat

• Privileges and status are disapproved

• Inequalities among people are both expected and desired

• Less powerful people should be depended on the more powerful

• Slope hierarchy pyramid

• Power centralization

• Wide salary range

• Subordinated expect to be told what to

India France Italy Japan Spain Argentina

US Germany

UK Denmark Israel Austria

Example

• A company from Austria (low power distance) is considering entering the

Vietnam (high power distance) market

Communication tips for the Austrian manager:

1) Give clear and explicit directions to those working with him

2) Deadlines should be highlighted and stressed

3) Do not expect subordinates to take initiative

4) Be more authoritarian in his management style

5) Show respect and deference to those higher up the ladder

Uncertainty avoidance –

“The extent to which members of a

society feel threaten by uncertain

or unknown situations”

• Uncertainty: normal feature of life and

each day is accepted as it comes

• Low stress – subjective feeling of

well-being

• Aggression and emotions must not be

shown

• Comfortable in ambiguous situations

and with unfamiliar risk

• There should not be more rules than

Australia Canada

US

UK India Denmark Singapore

Example

 A company from France (high uncertainty avoidance) is considering investing in

Denmark (low uncertainty avoidance)

Communication tips for the French manager:

1) Try to be more flexible or open in his approach to new ideas than he may be used to

2) Be prepared to push through agreed plans quickly as they would be expected to be

realized as soon as possible

3) Allow employees the autonomy and space to execute their tasks on their own; only

guidelines and resources will be expected of him

• Relationship employer- employee is

perceived in moral terms, like a family

• Hiring and promotion decisions take

employees’ ingroup into account

• Management is management of

groups

• Relationship prevails over task

• Individuals learn to think in terms of

“I”

• Diplomas increase economic worth and/or self- respect

• Relationship employer-employee is a contract based on mutual advantage

• Hiring and promotion are supposed

to be based on skills and rules only

• Management is management of individuals

• Task prevails over relationship

Low individualism

Communication tips for the UK manager:

1) Note that individuals have a strong sense of responsibility for their family

2) Remember that praise should be directed to a team rather than individuals

3) Understand that rewards depend upon seniority and experience

4) Be aware that the decision making process will be rather slow, as many members

across the hierarchy need to be consulted

Masculinity

“The tendency within a society to emphasize traditional gender roles”

• Sympathy for the weak

• In family, both fathers and mothers

deal with facts and feelings

• Stress on equality, solidarity , and

quality of work life

• Managers use intuition and strive

for consensus

• Resolution of conflicts by

compromise and negotiation

• Dominant values: material success and progress

• Money and things are important

• Sympathy for the strong

• In family, fathers deal with facts and mothers with feelings

• Stress on equity, competition among colleagues and performance

• Managers are expected to be decisive and assertive

• Resolution of conflicts by fighting them out

Low masculinity

High

Low

Japan Mexico Germany

UK

US Arabia France Korea Portugal Denmark Sweden

Example

 A company from Denmark ( low masculinity) is considering investing in Mexico

Communication tips for the Danish manager :

1) Be aware that people will discuss business anytime, even at social gatherings

2) Avoid asking personal questions in business situations

3) Take into account that people are not interested in developing closer friendships 4) Communicate directly, unemotionally and concisely

5) In order to assess others use professional identity, not family or contacts

Long- term orientation

“A basic orientation towards time that values patience”

Long-term orientation

• Respect for traditions

• Little money available for

investment

• Quick results expected

• Respect for social and status

obligations regardless of cost

• Concern with possessing the Truth

• Adaptation of traditions to a modern context

• Funds available for investment

• Perseverance towards slow results

• Respect for social and status obligations within limits

• Concern with respecting the demands of Virtue

Short- term orientation

Activity 2

Assumed that your corporation intend to open your business in America and Japan, from your own research about their culture, point out the culture differences and specialties Give some

recommendations for your boss?

International Business Strategies

What is Strategy ?

• Origin?

• Definition?

? • How to compete? • What are the goals?

• How to achieve these goals?

Goals of business strategies?

Enterprise Valuation

Profitability Profit growth

Add Value and Raise

Prices Reduce Costs

See More in Existing

Markets

Enter New Market

How is Value created?

Low-cost Strategy?

Low-cost Strategy?

Differentiation Strategy?

Chuỗi bán lẻ Nordstrom

Differentiation Strategy

When Differentiation is the only choice?

Porter Airlines

Differentiation Strategy

Strategic Positioning?

Low-cost hay Differentiation ???

How cn firms increase profits through

Expand their market

Realize location economies

Realize greater cost economies from experience effects

Realize economies of scale and earn a greater return

Competitive pressures exist in the global

marketplace?

Cost reductions

Locally responsive

Pressures for cost reductions

- Exist of global market

✓Born of global market

✓Customer preference homogeneity

- Benefits of product

standardization

✓ Reducing costs through location

economies, economies of scale and

experience effects

Pressures for local responsiveness

• Differences in consumer tastes

and preferences

• Differences in traditional

practices and infrastructure

• Host government demands

• Differences in distribution

channels

Case study: Walmart

- Biggest retailer in the world

- Walmart expanding internationally

✓ Modes of entry

✓ Walmart in China

✓ Walmart in Brazil

Intenational Business Strategies

Global Standardization

Strategy

Transnational

Strategy

International Strategy

Localization

(Multi-domestic) Strategy

Pressures for Local Responsiveness

International Strategy

When to apply? Low cost-reduction pressures and low local-responsive pressures

Characteristics:

- Centralizing product development activities in the Headquater

- Running production and marketing in international brands under strict

control of the Headquarter

Global Standardization Strategy

When to apply? Strong pressure for

cost-reduction and low pressures for

local responsiveness

Characteristics:

✓ Offering an universally product to

the whole world market

✓ Focusing on reducing costs through

location economies and economies

of scale.

Localization (Multi-domestic) Strategy

When to apply? Low cost-reduction pressure and strong pressure for local responsive

Characteristics: Customizing products/services, business strategies

(including production, product R&D, and marketing) based on particular market conditions

Transnational Strategy

When to apply? Both pressures are intense

Đặc điểm: Developing different commpetencies and skills at foreign branches; simultaneously understanding and realizing the differences of each market systematically; then linking and sharing these knowledge in the whole system.

Pros & Cons of the 4 IB strategies

effects and economies of scale (ES)

• Cost effectiveness

• Lack of local responsiveness

markets

• Lack of local responsiveness

• Unable to exploit EC and ES

Click to add text

Sample industries in the grid

How does strategy evolve ?

Localization

(Multi-domestics) Strategy

Local responsiveness pressure

Study the development history of Coca-Coala and identify international business strategies which they already implemented.

13-2

Where decision-making power is concentrated

How the firm divides into sub-units

Potential for conflicts and coordination problems between domestic and foreign operations

2

3

4

– 

– 

Structure

INTERNATIONAL

BUSINESS Modes of entry

WHEN SHOULD A FIRM ENTER A FOREIGN MARKET?

“Once attractive markets are identified, the

firm must consider the timing of entry”

1.  Early Entry – when the firm enters a

foreign market before other foreign

firms

2   Late entry – when the firm enters the

market after firms have already

established themselves in the market

FIRST MOVER

Pros

•  The ability to pre-empt rivals by

establishing a strong brand name

•  The ability to build up sales volume,

experience curve

•  The ability to tie customers into

products or services and making it

difficult for later entrants to win

business

PROS & CONS

Cons

•  Pioneering costs - arise when the

foreign business is so different from the home market

•  The expense to learn the rules of new business game

•  The costs of business failure, mistakes

•  The costs of promoting and educating customers