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INTERNATIONAL STRATEGYCase description
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13,20,27 januari 10:00 – 11:00 Q&A sessions
Lecture 1 :
CH1 Globalization
Definition globalization :
> A process
> ‘global interconnectedness’
> Interdependent
> ‘a spatial extension of human activities across cultures, economies and political systems’
> New concept but old phenomenon
Globalization waves:
Examples : spread of religions (400-1000), European colonialization of the Americas (1500-1700),
creation of the British and French empires (19th century), Colonization of asia and Africa
Created the 19th century world of development and underdeveloped countries
>continuation with the revolutions in communication and transport
Business side : trade, capital, technology (knowledge)
General side : people, culture, environment
>the transition of china into an economic superpower
The globalization of markets
= refers to merging of historically distinct and separate national markets into one huge global market
>failing barriers to cross-border trade and investment
>global tastes
>competitors may not change among nations
Apple vs. Samsung
>benefits small and large companies
>significant differences between national markets
>products that serve universal needs are global : oil
‘Allot of the global products are not for the consumers because there are still allot of cultural
differences’
The globalization of production
= sourcing goods to take advantage of differences in cost and quality of factors of production
Factors of production include labor, energy, land, capital
Early outsourcing was confined to manufacturing
>modern communication technology has advanced outsourcing today for service activities, boeing
Negative sides of outsourcing low surveillance on the outsourced activities
Mistaken global assumptions
- Not everyone speaks English
- They are eager to adopt our way of doing things
, - Our corporate culture is the same everywhere
- Travel, reduction of trade blocks, and the global media are creating a single global culture
The emergence of global institutions
Impediments (belemmeringen) prevent optimal dispersion (spreading) of activities
>formal and informal barriers to trade
>barriers to foreign direct investment
>transportation costs
>political and economic risk
>challenge of coordination globally dispersed supply chain
Institutions needed to help to manage, regulate, and ‘police’ the global market place
Like : GATT, MTO, IMF, the World Bank, The United Nations, G20, ISO etc.
Drivers of globalization
International trade = when a firm exports goods or services to consumers in a another country
Foreign Direct investment (FDI) = when a firm invests resources in business activities outside its
home-country
Role of technological change
The lowering of trade barriers made globalization of markets and production a theoretical possibility.
Technological change has made it a tangible reality
Communication
>development of the ‘microprocessor’ – single most important innovation since ww2
> Moore’s law predicts that the power of microprocessor technology doubles and its cost of
production falls in half every 18 months
The internet
>more than half of the world’s population uses the internet
>global e commerce sales over 2.5 trillion
>the internet acts as an equalizer
Transportation technology - commercial jets, ‘super-freighters (supervrachtschepen)’, and
‘containerization’ have all shrunk the globe
Implications for the globalization production - Locating production in geographically separate
locations has become more economical
Implications for the globalization of markets - Cultural distance has been reduced and has brought
some convergence of consumer tastes and preferences
Implication example : Suez canal blockage
Changing demographics of the economy
The changing world output and world trade picture
>As barriers to the free flow of goods and services fell, non U.S. firms
increasingly invested across national borders
Desire to disperse production activities to optimal locations and to
build a direct presence in major foreign markets
The changing foreign direct investment picture
This reflects the faster economic growth of several other economies, particularly China
>China and BRIC countries ( Brazil, Russia, India, China and South Africa) growing more rapidly
,The changing nature of the multinational enterprise
>Multinational enterprise (MNE) = any business that has productive activities in two or more
countries
>the percentage of the top 2000 global firms are becoming more non U.S. companies
National share of the largest 2000 multinational enterprises in 2019
The rise of mini-multinationals
>Growth in the number of medium- and small-sized businesses
Because … Internet is lowering barriers that smaller firms faced in international trade
The changing world order
(Former) communist countries present export and investment opportunities
>signs of growing unrest commitment to market-based economic systems cannot be assumed
>risk of doing business in these countries are high
China is moving to industrial superpower
In Latin America debt and inflation are down, more private investors, expanding companies
Global economy of the twenty-first century
>barriers to the free flow of goods, services, and capital have been coming down
>strengthened by the widespread adoption of liberal economic policies by countries that had opposed
them
>globalization is not inevitable (onvermijdbaar)
Countries may pull back
Risks are high
The globalization debate
Anti-globalization protest protestors believe globalization causes detrimental effects on living
standards, wage rates, and the environment
Theory and evidence suggest these fears may be exaggerated
Globalization, jobs and income
Negative : falling trade barriers allow firms to move manufacturing activities to countries where wage
rates are much lower
Positive : benefits outweigh the costs
Globalization, labor policies, and the environment
Critics argue : labor and environmental regulations increase manufacturing costs, lack of regulation
can lead to abuse, firms move production to nations that do not have regulations.
Supporters argue : tougher environmental regulations and stricter labor standards go hand in hand with
economic progress, free trade leads to less labor exploitation and less pollution
, Globalization and national sovereignty
Critics argue : shift of power away from national governments toward supranational organizations
(WTO, EU, UN).
Supporters argue : the power of supranational organizations is limited to what nation-states
collectively agree to grant, these organizations exist to serve the collective interest of member states
World poverty
Critics : Gap grows between the richer and the poorer people
Supporters : To solve this Lower trade barriers
Learning objectives :
- Understand what is meant by the term globalization
- Recognize the main drivers of globalization
- Describe the changing nature of global economy
Managing international business differs from managing purely domestic business
- Countries are different
- Range of problems is wider and problems more complex
- Must find ways to work within limits imposed by government
Lecture 2 : An international perspective on corporate strategy
CH13 the strategy of international business
CH14 the organization of international business
Strategy and the firm
Basic principles of strategy
Strategy = refers to actions that managers take to attain the goals of the firm
Goal : maximize the value of the firm for owners and shareholders
Profitability = the rate of return a firm makes on its invested capital (ROI)
>Divide net profit by total invested capital
Profit growth = measures percentage increase in net profits over time
Profitability can be executed by lowering the costs or raise the prices
Michael Porter
>a firm should be explicit about its choice of strategic emphasis with regard to value creation
(differentiation) and low costs
A firm should configure its internal operations to support that strategic emphasis
1. Pick a position on the efficiency frontier that is viable in the sense that there is enough
demand to support that choice
2. Configure its internal operations, such as manufacturing, marketing, logistics, information
systems, human resources, and so on, so that they support that position
3. Make sure that the firm has the right organization structure in place to execute its strategy
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