Bec doms ppt on international strategy and management

1. International Strategy and Management

6. Globalization

8. Average Tariff Rates (Manufactured Products as % of Value) 1913 1950 1990 2000 France 21 18 5.9 3.9 Germany 20 26 5.9 3.9 Italy 18 25 5.9 3.9 Japan 30 5.3 3.9 Holland 5 11 5.9 3.9 Sweden 20 9 4.4 3.9 Britain 23 5.9 3.9 U.S. 44 14 4.8 3.9

9. Growth – World Trade & Output 0 500 1000 1500 2000 2500 1950 1960 1970 1980 1990 2000 Trade Output (GDP)

10. National Composition of MNCs 1000 2000 3000 4000 5000 6000 7000 8000 Rest of World Latin America W.Europe Asia Pacific North America 1973 1990 1997 2000 U.S.A. 48.5% 31.5% 32.4% 26% Japan 3.5 12 15.7 17 U.K. 18.8 6.8 6.6 8 France 7.3 10.4 9.8 13 Germany 8.1 .9 12.7 12

14. The Impact of Globalization Jobs and income Firms move jobs to low cost countries Countries specialize in efficiently produced goods and import those they can not efficiently produce Increases income in less developed countries May lead to income inequality

15. The Impact of Globalization Labor policies and the environment Firms move to countries with weak laws Economic progress leads to stronger laws By creating wealth and incentives for technology improvements, world will be better Tie strong laws to international agreements

18. Global Ethics

19. Guiding Principles Three Guiding Principles Respect for core human values, which determine the absolute moral threshold for all business activities. Respect for local traditions. The belief that context matters when deciding what is right and what is wrong. “ Values in Tension: Ethics Away From Home” Donaldson – HBR Reprint 96502

20. Global Ethical Perspective Treat corporate values and formal standards as absolutes. Design and implement conditions of engagement for suppliers and customers. Allow foreign business units to help formulate ethical standards and interpret ethical issues. In host countries, support efforts to decrease institutional corruption. Exercise moral imagination.

21. Global Ethics Incentives to be ethical Avoid legal penalties, bad PR, employee satisfaction Ethics and corruption Foreign Corrupt Practices Act 1977 Example Ethics and human right China & Tibet Alien Tort Statute 1789 – Unocal in Myanmar

22. Ethics and Corruption After graduating, your first assignment lands you in Asia as the local director of a U.S. pharmaceutical firm. It was a small operation, but you have big plans. You hope to segment your customers, empower your workers, implement just-in-time production, and use the balanced scorecard to keep score. You figure to double your business in the first year. But right now, you’re thinking it might have been a better idea to take that consulting offer instead. The first million-dollar shipment of your company’s new HIV-fighting drug has just been removed from the refrigerated C-130 cargo plane. It sits on the steaming tarmac, not 30 feet away, practically melting in the midday heat. Another twenty minutes, and it’s ruined. Unfortunately, you can’t seem to clear it through customs. There is some question as to the approval process that a new product has to go through to enter the country. You’re not sure you can wait. The friendly local customs official cruising around the airport looks from you to the metal container, trying to decide which of you is sweating more profusely. Leaning against the counter, he reviews your bills of lading and other customs documents. “Your papers look to be in order, but I am just not sure about the proper approval process,” he says. You despair. Re-opening the approval process will take time you don’t have. What should you do?!? Fortunately, you remember the $1000 traveler’s check in your back pocket that’s supposed to pay for your apartment deposit. You walk over to the official, grab the manifest, stuff the check into the stack of papers, and hand it back to him. A smile spreads across his face. He decides that his insecurity about the approval process has lessened. “You are so thoughtful to understand. I look forward to conducting further business with you. Your cargo is cleared through customs.”

23. Global Ethics - Case Hitting the Wall: Nike and International Labor Practices – HBS 9-700-047 Managing a multinational firm involves managing and exploiting differences among countries. In the case of workplace standards and environmental protection, managers have to understand the underlying tradeoffs and balance exploitation of differences with global ethics.

24. Culture

26. What are “American Values?” Achievement and success Individualism Freedom Progress Democracy Equality

28. Theory and empirical foundation is used in a general way to look at differences between cultures. 5 dimensions Power distance Individualism vs. collectivism Uncertainty avoidance Masculinity vs. femininity ST vs. LT orientation But Don’t assume everyone in a country has the same norms and values Hofstede’s Work-Related Values U.S. China

29. Determinants of Culture Education Economic Philosophy Political Philosophy Religion Language Social Structure Culture: Norms and Value Systems

30. Religion Distribution 4% 5% 20% 18% 43% 10% Christian (1.2 Billion) Islam (1 Billion) Hindu (500 Million) Buddhist (250 Million) Confucian (150 Million) Other/ Nonreligious

32. Language Allows people to communicate Structures the way the world is perceived Directs attention to certain features of the world rather than others Helps define culture Creates separatist tendencies? Canada, Belgium, Spain, Cyprus Non-verbal (93% of communication) Eyebrows, fingers/thumbs, hand gestures, feet, personal space, body gestures (ok, thumbs up)

33. Education Formal education supplements family role in teaching values and norms Focus on facts of social and political nature of society Obligations of citizenship For int’l business, it is a determinant of national competitive advantage (post-war Japan) Medium to learn language, conceptual, and math skills Value of personal achievement and competition

34. Democracy and Totalitarianism Democracy Government by the people, exercised either directly or through elected representatives. Totalitarianism Government in which one person or political party exercises absolute control over all spheres of human life and opposing political parties are prohibited . Political Philosophy (System)

36. Social Structure Individuals vs. Groups Shared sense of identification Degree to which group is viewed as the primary means of social organization Cooperation – MIT Study Social Stratification Social strata Social mobility Class system

38. Culture - Case Euro Disney: The First 100 Days” – HBS 9-693-013 Planning process The role of culture Differences in culture vs. attitude about culture Adapting versus adopting – what is core?

39. Foreign Exchange

40. Foreign Exchange & Strategy “ Note on Operating Exposure to Exchange-Rate Changes” Luehrman – HBS 9-288-018 Example: Losses at JAL Airlines (Hill) Case: Japan’s Automakers Face Endaka – HBS 9-796-030 Impact on business model - What they sell, how they sell, where they manufacture, manufacturing process Japanese response vs. U.S. response

41. Foreign Exchange Markets

45. Measuring FOREX Market Activity: Average Electronic Conversations Per Hour Greenwich Mean Time FOREX Market Geography Tokyo opens Asia closing 10 AM In Tokyo Afternoon in America London closing 6 pm In NY Americas open Europe opening Lunch In Tokyo

63. Global Foreign Exchange Market Turnover (daily averages in April, billions of US dollars) Source: Bank for International Settlements , “Central Bank Survey of Foreign Exchange and Derivatives Market Activity in April 2001,” October 2001, www.bis.org . Next survey planned for April 2004. FOREX Market Size

65. Geographic Distribution of Foreign Exchange Market Turnover (daily averages in April, billions of US dollars) Source: Bank for International Settlements, “Central Bank Survey of Foreign Exchange and Derivatives Market Activity in April 2001,” October 2001, www.bis.org . Next survey planned for April 2004. FOREX Market Size

66. Currency Distribution of Global Foreign Exchange Market Turnover (percentage shares of average daily turnover in April) Source: Bank for International Settlements , “Central Bank Survey of Foreign Exchange and Derivatives Market Activity in April 2001,” October 2001, www.bis.org . Next survey planned for April 2004. FOREX Market Size

81. Managing Global Expansion

83. Entry Modes Franchising Exporting Licensing Joint Ventures Wholly Owned Subsidiaries

85. Improving Export Performance Export specialists who act as the export management department or international department for client firms Bundesregierung.de Miti.go.jp Exim.gov Ita.doc.gov Top management commitment Start small Enter to learn, add to grow Build relationships Hire locals Information from government sources Export Management Companies Export strategies

93. Selecting an Entry Mode Technological Know-How Management Know-How Wholly owned subsidiary unless 1. Venture is structured to reduce risk of loss of technology 2. Technology advantage transitory Then licensing or joint venture OK Franchising, subsidiaries (wholly owned or joint venture) Pressure for Cost Reduction Combination of exporting and wholly owned subsidiary Entry Mode Basis for Competition

94. Which Foreign Markets? Market potential Market size (e.g., China vs. Taiwan) Demand Costs: Customer acquisition, infrastructure Distance: Cultural, administrative, geographic, economic (Comparisons – Wal-Mart in Mexico) Learning potential Sophisticated/demanding customers? Pace of technology?

96. Wal-Mart de Mexico Sam’s Club, Mexico City, 1991 Per capita income $2,000 Monterrey 1993 (Laredo) Distribution problems (no NAFTA yet) Ice skates, riding mowers, leaf blowers, fishing 1994 (post NAFTA) Labels on 80,000 products December: Peso crisis, 40% depreciation By mid-1997, 373 of 1000 non-US stores Distribution center Local sourcing (Sony Wega $1600,$600); scale Joint venture w/ Cifra (WalMex)

99. International Manufacturing Strategy

101. Location Strategy Technological Factors Flexible manufacturing technology Available Not Available Minimum efficient scale High Low Fixed costs High Low Product Factors Serves universal needs Yes No Value-to-weight ratio High Low Country Factors Differences in factor costs Substantial Few Substantial Few Trade barriers Few Many Differences in political economy Differences in culture Substantial Few Concentrated Decentralized Favored Manufactured Strategy

102. The Acer Group’s China Manufacturing Decision – HBS 99M009 Decentralized structure Role of core competencies Key considerations Costs, market presence, infrastructure, materials management, expats (safety, desire), labor laws, time frame, environment PEST framework - environment Manufacturing Location - Case

103. International Marketing Strategy (Global Branding)

106. International Human Resource Management