International Management
Concept
1
Understanding the Concept
International
Business
International
Management
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•
•
•
•
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Includes all commercial transactions- private and governmentalbetween two or more countries
Transactions include sales, investment, and transportation
Private companies do such transactions for profit
- Daniels, Radebaugh and Sullivan
Practice of managing business operations in more than one
country
Familiarity with the language, culture, economic, political
environment and business practices of the countries in which
multinational firms trade and invest
Have problem solving skills to formulate effective
management strategies and policies
2
Value Add Process (Activities & Resources): Scope of IB
Transformational
Resources
- Technology
- Know- How (Innovativeness)
- Capital
- Organizational Skills
- Information
Input Resources
Transformational Activities
Output
- Transfer of resources
(Goods, Funds, People)
- Services (Accounting,
Financial, Legal, Consulting)
- Relationship of MNE with the
host countries
- Business Operation
- MNE has to grapple
with;
• Profitability aspect
• Accommodate interest of
host and parent country
3
Case Study: IKEA
IKEA Profile
•
Household furniture and fixtures
Production Path
Put on Display in Stores
Across USA
Shipping To
USA
Produces Furniture Parts & Assemble
Sweden
Designed
Denmark
Purchase & Dried
Norway
4
Understanding the Concept
MNE
Multi National
Enterprise
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•
•
•
•
Derives a “substantial” portion of revenues from foreign operations
Operates subsidiaries that share a common strategic vision
Places expatriates at senior management posts
Known as ‘Multi National Corporation’
Example: Intel employees around 140,000 employees in different
countries across the globe/ Ernst & Young (Global Accounting and
Professional Firm) employees around 120,000 people in more than
100 countries
EME
Early
Multinational
Enterprise
• Are very start up, decides to go international, enjoy the benefits
and rise up to the challenges of international operations
• High technology enterprise
• Example: VKB (low cost virtual interface solutions in
communication, computing and entertainment), founded in 2000.
Grew its business in USA, Europe, Middle East and Asia by
identifying strategic financial and operational partners.
SMIE
Small & Mid
sized
Enterprise
• Engaged in international business
• No facilities that are owned overseas
5
Global Focus: SME (Small Medium Enterprise): Diesel Company
Diesel’s Profile
Diesel’s
Management
• Founded in Italy in the year 1978
• Started as an SME and grew into achieving annual sales of more
than US$1 billion, 85% of which comes form abroad
• Producing fashion wear jeans, attracting youth of today
• Competing with Donna Karan & Tommy Hilfiger
• Sees the world as a borderless macro- culture
• Youth designers who travel the globe for inspiration and weave
their impressions into their collections.
Production
Strategy
• Focuses on design & marketing
• Leaving production of jeans to sub- contractors
• Expanded its distribution to over 80 countries through department
stores & retailers
• 200 owned stores from Paris to Miami to Tokyo
Advertising
Strategy
• Controversial advertising: Sumo wrestlers kissing, a row of
chimpanzees giving a fascist salute, “145 cigarettes a day will give
you that sexy voice and win new friends”
• High internet presence
• 1500 new designs every 6 months
6
List of Top 10 Global Fortune 500- Year 2014
S.No.
Company Name
Profits
$ Millions
Country
1
Wal- Mart Stores
16,022
US
2
Royal Dutch Shell
16,371
UK/ Netherlands
3
Sinopec Group
8,932
China
4
China National Petroleum
18,504
China
5
Exxon Mobil
32,580
US
6
BP
23,451
UK
7
State Grid
7,982
China
8
Volkswagen
12,071
German
9
Toyota Motor
187,198
Japan
10
Glencore
Switzerland
7
Drivers of International Business
Expand Market Share
Company’s Sales/ Total Sales of the
Industry
Position Strategically
Discover Opportunities
Improve Economic Gains
8
Phenomena of Globalization
Globalization
Globalization:
A Synonym
for one of the
Phenomena
• Increasing of worldwide integration of market for goods, services
and capital
Concurrent with the
• Increased role of MNCs in the world economy
And, an increased intervention into domestic & regional policies by
• International institutions such as the IMF, the WTO, the World
Bank and the United Nations.
• The pursuit of classical ‘Free Market’ policies in the world economy
• The growing dominance of western and American forms of
political, economic and cultural life
• The proliferation of new information technologies (the “Internet
Revolution”)
• The notion that the world community is facing the creation of one
single unified community in which major sources of conflict have
vanished (“Global Integration”)
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Globalization
Cylinders liners
(Germany)
Water level sensor
(Germany)
Instrumental cluster
(Germany)
Alternator
(France)
Sales
(France)
Transmission
chains (USA)
Fuel lines
(USA)
Windshield windows
(United Kingdom)
Door panels
(USA)
Tires
(Japan)
10
Drivers of Globalization
Cost (Increase of International Capital
transfers and investment, low wages,
transport cost)
Environment (Reduction of
Market (integration of world
barriers to trade, privatization of state
owned businesses, technology
advancement,)
financial markets, new business
opportunities, existence of different
brands, convergence of worldwide
consumer expectations & prefereces)
Competition (increased
competition, strategic international
partners, quality & value of goods &
services, customer satisfaction, lower
prices, )
11
Processes to Understand Globalization
- Speeding up of flows of goods, capital, people, ideas across the globe
- Increased communication, transportation & technology
- Quickening of actions. Example: Email system
- Intensification of links, mode of interaction and flows that inter connect the world
- Much more information is shared in less time than ever before
- Example: 1940s, for news radio was the only source. Now, any time one can login to their
phones and get updated on any news across the globe at any time.
- Stretching out of social, cultural, political and economic practices across the globe
- Practices & decisions made in one part of the world may have consequences on any other
part of the world. Example: N. Korea began testing nuclear weapons, had a huge political
and social impact on the rest of the world
- Interdependency of local & global landscape. Example: Consumption of sugar, can have a
significant impact on the people of Brazil as it produces the sugar we consume.
- We are getting away from ‘Euro- centrism’ Values, goods and culture are inter mixed,
shared across the globe. Example: Many of the medicines used in the USA come from
natural treatments & resources found in other countries.
- People now customize their own ideas, values and lifestyles.
12
Globalization and Business
Global Markets
Business
Ecosystem
Global
Management
Skills
Global Supply
Chain
Implications
Global
Resources
Global
Production
• Origin of headquarter locations become unknown & irrelevant:
Example: Procter & Gamble Corporation is based in Cincinnati,
Ohio, CNN’s office is in Atlanta, Georgia along with headquarters of
Coca Cola Co.
• Diffusion of new services: Example: Proliferation of HSBC (Hong
Kong and Shanghai Banking Corporation) with connectivity to
branches around N. America and the world. This proliferation
means that if one takes a loan from HSBC bank from Boston Area,
the Dollars are actually originated from deposits made in England
and Singapore.
• Producer/ Provider of Goods & Services: Facilities involved may be
based anywhere in the world & the location may be selected
based on least cost and best quality.
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Globalization and Business… cont…
Implications
R&D
• Investment Funds Manager Or Corporate Executive: Globalization
means that capital required for investment & operations may be
raised in a number of stock markets that compete for their
businesses. It allows corporations to acquire ownership in overseas
markets
• Cost of Labor:
- Flow of worker is heavily controlled
- The world price of capital may be set in USA and for Oil set in
Saudi Arabia, but there is no such ting as a world price for labor.
• Supply Chain Activities: The term used to describe the network of
suppliers dispersed across continents is a ‘global supply chain’.
• Value Chain Activities: A value chain is the whole series of
activities that create and build value at every step. The total value
delivered by the company is the sum total of the value built up all
throughout the company.
Proc
urem
ent
Man
ufact
uring
Mark
eting
Distri
butio
n
After
Sales
Servi
ce &
Supp
ort
14
Globalization and Business… cont…
R&D
E- Bay, the
internet
merchandis
e & reseller,
executes its
developme
nt work in
Israel,
California
and India
Proc
urem
ent
AlcatelLucent, the
French
telecommu
nication
equipment
maker is
outsourcing
its IT
globally
Man
ufact
uring
Whirlpool
Corp, the
goods
manufactur
er has
plants in
USA,
Mexico and
China
Mark
eting
HSBC the
global
financial
giant,
operates
braches in
most urban
centers to
be close to
the
customers,
including
London,
New York.
Paris and
Hong Kong
Distri
butio
n
Florsheim,
the maker
of footwear
is using an
internation
al network
of
corporate
owned and
franchised
stores to
reach its
customers
in Australia,
USA,
Canada etc.
After
Sales
Servi
ce &
Supp
ort
Schneider
Electric ,
European
based MNC
specializes
in energy
manageme
nt with its
operations
and after
sales
services in
more than
100
countries
15
http://www.rediff.com/news/column/how-brics-bank-can-affect-world-economics-and-politics/20140718.htm
Landscape of Global Economy
Asian Financial
Crisis of 1997
Emergence of
BRICS
Recession of
2008
http://rt.com/op-edge/174344-ten-outcomes-brics-summit/
• Crisis started in Thailand with the financial collapse of the Thai Baht
• Govt. of Thailand was forced to float the Baht due to lack of foreign
currency to support its fixed exchange rates
• Financial crisis spread to East Asia, devalued stock markets and rise
in private debt
• Indonesia, South Korea and Thailand were the countries most
affected . Hong Kong, Malaysia, Laos and Philippines were also
impacted by the crisis.
• IMF stepped in to initiate a $40 billion to stabilize the economies.
• Association of Brazil, Russia, India, China and South Africa (joined in
2010)
• 40% of the world’s population, combined GDP of 21% of global
volume, 20% of global trade, 11% of accumulated investment
• Creation of BRICS bank with an authorized capital of $100 billion. It
will be open for other countries to join
• WB & IMF created after II World War, shaped the global political
economy for many decades
• Worst global recession since II World War- IMF
• US mortgage-backed securities, as they offered higher yields than
U.S. government bonds
• Investment and commercial banks in the United States and Europe
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suffered huge losses and even faced bankruptcy
Landscape of Global Economy
Recession of
2008
http://www.indianmba.com/Faculty_Column/FC1269/fc1269.html
• Stimulus Package 2009: $787 Billion stimulus package was approved
by USA govt.
• Package was designed to quickly jump-start economic growth, and
save between 900,000 to 2.3 million jobs
• As of October 30, 2009, it saved 640,329 jobs
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Globalization and Society
No
Geographical
Boundaries
Social
Interconnected
ness
Speed of
Activity
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•
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Advances in telecommunication
Dependence on digital computer
Video conferencing
Execution of commercial transaction over internet
• Socially inter connected
• No existing political & geographical boundaries
• Example: UN makes reports based on facts & figures collected
globally which then affect events in a particular community,
country or region
• Fast paced work
• Easy movements of human resources, information, capital goods
and services
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