Management in International Business
#1 What Is International
Business?
Dr Robert Dygas - East Asian Economic Studies Department, 2022/23
dr Robert Dygas
1
Literature
• Ch. W. L. Hill, International Business, Competing in the global marketplace, 13th edition, McGraw Hill,
New York 2021
• T. Cavusgil, G. Knight, J. Riesenberger, International Business. The New Realities, 2nd ed. Pearson, Boston
MA., 2012 (or 1st ed. 2008);
• M. A. Hitt, R. D. Ireland, R. E. Hoskisson, Strategic Management: Competitiveness and Globalization:
Concepts and Cases, South-Western Cengage Learning, Mason 2011;
• J. J. Wild, L. W. Wild, International Business. The Challenges of Globalization, Prentice Hall, New York 2012.
• Cavusgil S.T, Ghauri P.N., Akcal A.A., Doing business in emerging markets, SAGE, London 2013.
• Khanna T., Krishna G. Palepu, Winning in Emerging Markets: A Roadmap for Strategy and Execution.
Harvard Business Press (Boston, MA), 2010.
dr Robert Dygas
2
Final mark composition
• Multiple/single choice examination 100%
dr Robert Dygas
3
Main topics
1.
2.
3.
4.
5.
Why you should study International business?
Key concepts in international business
How international business differs from domestic business?
Who participates in International business?
Why Do Firms Internationalize?
dr Robert Dygas
4
Why Study Management in International
Business? (Motivation)
• To understand the perspectives of the global economy, the national economy, the firm, and you as
a future manager
• To gain the foundational business concepts and cross-cultural skills needed to succeed in global
activities
• To help you with your professional career
• What jobs can I do with an international business degree?
•
•
•
•
•
•
•
•
business adviser.
business analyst.
corporate investment banker.
human resources officer.
management consultant.
marketing executive.
procurement manager.
product manager.
https://youtu.be/RdX4Q4K_72w
https://youtu.be/1bumPyvzCyo
• Sucess Factors: working abroad, networking
dr Robert Dygas
5
International Business – an overview
International business refers to the performance of trade and investment
activities by firms across national borders. Because it emphasizes crossing
national boundaries, we also refer to international business as crossborder business.
Dr Robert Dygas, Department of East Asian Economic Studies, October 2022
Globalization
• globalization Trend away from distinct national economic units and
toward one huge global market.
• globalization of markets Moving away from an economic system in
which national markets are distinct entities, isolated by trade barriers
and barriers of distance, time, and culture, and toward a system in
which national markets are merging into one global market.
• globalization of production Trend by individual firms to disperse parts
of their productive processes to different locations around the globe
to take advantage of differences in cost and quality of factors of
production.
dr Robert Dygas
7
Globalisation trend
Global trade,
measured by the
ratio of world
exports to world
GDP, is a reasonable
proxy for economic
integration.
Trade openness
index is the sum of
export and import
divided by the world
GDP
https://cepr.org/
dr Robert Dygas
8
Global Institutions
• United Nations
• IMF
• WTO
• WHO
• World Bank
dr Robert Dygas
9
Globalization of markets
• The globalization of markets is evident in several related trends
• Unprecedented growth of international trade. In 1960, cross-border trade was
modest—about $100 billion per year. Today, it accounts for a substantial
proportion of the world economy, with world exports amounting to some $14
trillion annually— that is, $14,000,000,000,000!
• Trade between nations, accompanied by substantial flows of capital, technology,
and knowledge.
• Development of highly sophisticated global financial systems and mechanisms
that facilitate the cross-border flow of products, money, technology, and
knowledge.
• Greater collaboration among nations through multilateral regulatory agencies
such as the World Trade Organization (WTO; www.wto.org) and the International
Monetary Fund (IMF; www.imf.org), UN (www.un.org)
dr Robert Dygas
10
Deglobalization in COVID-19
“Global recession and slowbalisation seem like certain things, now, with
the way the pandemic has exposed the vulnerability of national and
global supply chains.”
Dr Tuomo Kuosa, Content Director, Futures Platform
• In terms of global trade, the world could be divided into three
competing economic blocks, for instance, those led by the US, EU,
China and India.
dr Robert Dygas
11
Situation today 2022
• Decoupling
• Global slowdown/slowbalisation
• Stagflation
• Military tensions
• Protectionism
• Q: Is business still International?
dr Robert Dygas
12
What Are the Key Concepts in International
Business?
• International trade
Exchange of products and services across national borders, typically through exporting and importing.
Exporting
Sale of products or services to customers located abroad, from a base in the home country or a third country
• Importing or global sourcing
Procurement of products or services from suppliers located abroad for consumption in the home country or
a third country.
International investment
The transfer of assets to another country or the acquisition of assets in that country.
• International portfolio investment
Passive ownership of foreign securities such as stocks and bonds for the purpose of generating financial
returns.
• Foreign direct investment (FDI) An internationalization strategy in which the firm establishes a physical
presence abroad through acquisition of productive assets such as capital, technology, labor, land, plant, and
equipment
dr Robert Dygas
13
How Does International Business Differ
from Domestic Business?
Firms that engage in international business operate in countries
characterized by distinctive economic, cultural, and political
conditions.
Globalization is not without risks
dr Robert Dygas
14
Who Participates in International Business?
• MNEs
• MSMEs
• Governments
• NGOs
60 000 MNCs controls 500 000 subsidiaries world wide
dr Robert Dygas
15
Why Do Firms Internationalize?
•
•
•
•
•
•
•
•
Seek opportunities for growth through market diversification
Earn higher margins and profits
Gain new ideas about products, services, and business methods
Better serve key customers that have relocated abroad and be closer to
supply sources, benefit from global sourcing advantages, or gain flexibility
in product sourcing.
Gain access to lower-cost or better-value factors of production
Develop economies of scale in sourcing, production, marketing, and R&D
Confront international competitors more effectively or thwart the growth
of competition in the home market
Invest in a potentially rewarding relationship with a foreign partner
dr Robert Dygas
16
Evolution and Change in TC Organizational
Structures
Domestic structure
plus export
department
*
* Domestic structure
plus foreign
subsidiary
Typical ways to
structure
international
activities
* Global functional
structure
*International
division
* Global product
structure
* Matrix structure
8-17
Organizing TC for Globalization
Differentiation
Integration
• Focusing on and specializing in
specific markets
• Coordinating those same
markets
dr Robert Dygas
18
Globalization and TC’s strategy
• A firm’s structural choices always involve two opposing forces: the
need for differentiation (focusing on and specializing in specific
markets) and the need for integration (coordinating those same
markets).
• The way a firm is organized along the differentiation-integration
continuum determines how well strategies, along the localizationglobalization continuum, are implemented. A globalization strategy
treats the world as one market by using a standardized approach to
products and markets.
dr Robert Dygas
19
Global integration vs local responsiveness
• Businesses that are highly globally integrated have the objective to
reduce costs as much as possible by creating economies of scale
through a more standardized product offering worldwide.
• Business that are highly locally responsive have as extra objective to
adapt products and services to specific local needs.
• It seems that these strategic options are mutually exclusive, but there
are companies trying to be both globally integrated and locally
responsive.
dr Robert Dygas
20
Bartlett & Ghoshal Matrix (1989)
• Bartlett and Ghoshal clustered
businesses based on two
criteria: global integration and
local responsiveness. Together
these two factors generate four
types of strategies that
internationally operating
businesses can pursue:
Multidomestic, Global,
Transnational and International
strategies.
dr Robert Dygas
21
Typologies of TCs based on Bartlett and Ghoshal
Matrix
dr Robert Dygas
22
Examples
• Multidomestic: Low Integration and High Responsiveness (Nestle)
• Nestlé uses a unique marketing and sales approach for each of the markets in which it
operates. Furthermore, it adapts its products to local tastes by offering different products in
different markets.
• Global: High Integration and Low Responsiveness (Pfizer)
• Pfizer offera a standarized product worldwide and have the goal to maximize efficiencies in
order to recude costs as much as possible. Global companies are highly centralized and
subsidiaries are often very dependent on the HQ.
• Transnational: High Integration and High Responsiveness (Unilever)
• The transnational company has characteristics of both the global and multidomestic firm. Its
aim is to maximize local responsiveness but also to gain benefits from global integration
• International: Low Integration and Low Responsiveness (Chateau Margaux)
• An international company therefore has little need for local adaption and global integration.
The majority of the value chain activities will be maintained at the headquarter. This strategy
is also often referred to as an exporting strategy.
dr Robert Dygas
23
Infosys India
• Infosys Technologies was started by 7 people 30+ years ago in Pune
with HQ in Bangalore (initial capital: 250 USD)
• Infosys today: 276 000 employees, annual reve
16.3 B USD
dr Robert Dygas
24
Next Generation
Global Sales
Global account management Operating Model
Structure overview
Roles / Responsibilities
Regional GA Directors (GAD)
CEO
Global Services
President
UK
President
EUROPE
Country
Manager
President
AMEA
GAD/
Vertical
Lead
Sales
Director
GAMs
LAMs
President
Americas
Also
responsible
for 1 vertical
President
of Strategy
President
GBFM
Global Account Manager (GAM)
• Based in region, dual-reporting – operational reporting to HoS,
Regional VP, GAD or President; functional reporting to GAD.
• GAMs responsible for leading relationship with GAs in region &
globally w/ regional counterparts
VP of
Global
Sales
Global Account
Mgmt+ Saes
Enablement team
VP of Global Sales
Strategic Deals
team
LAMs
Functional reporting
Operational reporting
• Based in region, dual-reporting – functional reporting to VP Global
Sales, operational reporting to regional President
• GADs have dual role – responsible for: global accounts within region,
driving vertical propositions globally
• Have P&L responsibility for regional HQ accounts
GAD = Global Account Director
GAM = Global Account Manager
LAM = Local Account Manager
• Reports into President of Strategy
• Jointly responsible for performance of top ~230 key global accounts
with GADs in region
• Responsible for driving account plans, bid preparation, training,
targeting, operations & supporting global sales teams
• Global Acct Planning and Ops teams at centre to support planning,
bid process, P&L mgmt, resource allocation, etc.
• Maintains shadow P&L for all global accounts
Global Value Chains
Global value chains (GVCs) are ‘organizational systems’
• that operate across multiple nations;
• that are integrated
• whose global integration is complex
• whose technology base, or ‘engine’, is Information & Communication Technologies
• that drive firm-level competitive advantage through integrating global and local
competitive and comparative advantages (firm specific & location specific advantages)
• that build & defend longer term competitive advantage through complex and hard to
imitate firm-level assets / capabilities
• that evolve through stages of development, or may be ‘born global’
• that incorporate ‘traditional’ or ‘conventional’ activities and functions but also involve
‘whole system’ activities from sourcing to customer support and embody materials,
information, financial and people flows and assets
dr Robert Dygas
26
Fragmentation of production: the example of the
Boeing 787 Dreamliner
Wing box: Mitsubishi Heavy Industries (Japan)
Wing ice protection: GKN Aerospace (UK)
Centre fuselage: Alenia Aeronautica (Italy)
Escape slides: Air Cruisers (USA)
Rear fuselage:
Boeing South Carolina (USA)
Vertical Stabiliser: Boeing
Commercial Airplanes (USA)
Forward fuselage:
Kawasaki Heavy Industries (Japan)
Spirit Aerosystems (USA)
Lavatories:
Jamco (Japan)
Doors & windows:
Zodiac Aerospace (USA)
PPG Aerospace (USA)
Raked wing tips: Korean Airlines
Aerospace division (Korea)
Flight deck seats:
Ipeco (UK)
Flight deck controls:
Esterline (USA),
Moog (USA)
Horizontal Stabiliser:
Alenia Aeronautica (Italy)
Centre wing box:
Fuji Heavy Industries (Japan)
Aux. power unit: Hamilton
Sundstrand (USA)
Passenger doors:
Latécoère Aéroservices (France)
Cargo doors: Saab (Sweden)
Source: www.newairplane.com
Prepreg composites:
Toray (Japan)
Landing gear: Messier-Dowti (France)
Electric brakes: Messier-Bugatti (France)
Tires: Bridgestone Tires (Japan)
Engines: GE Engines (USA),
Rolls Royce (UK)
Engine nacelles: Goodrich (USA)
Tools/Software: Dassault Systemes (France)
Navigation: Honeywell (USA)
Pilot control system: Rockwell Colins (USA)
Wiring: Safran (France)
Final assembly: Boeing
Commercial Airplanes (USA)
Q&A
• Would you like to work for a global company? Why?
• Suppose that after graduation you get a job with a company, a small
firm that does business only in its domestic market. You have just
completed coursework in international business, are aware of various
business opportunities abroad, and believe that the company should
internationalize. Why your company should pursue international
business?. Please give your reasoning.
dr Robert Dygas
28