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Summary of International management at the KU Leuven
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In depth summary of the course "international management", which is an open book exam.
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INTERNATIONAL MANAGEMENT :Second Class
Topics covered:
- Globalization and international management
- Universal theory versus context specificity
- Equifinality (different ways to reach the same outcome), single peak and multi peak systems.
- Contingency approach
- Backlash against globalization
We had an increase of 20/30 years of globalization, our generation : we can order and have
our package delivered with a notification that will say on which day it will be delivered -> we
are used to that
Equifinality : various ways to get the same outcome -> difficult bc international management
presumes that context matters, and that there is no such thing as an universal way to
manage a firm
Increasing connectedness
- Globalization not new at all
- Wave 1: driven by reduction of transportation costs
o Waves combine 2 things: an invention and a reduction of transportation costs
o Critical at the time : firms did not buy parts or components of products, but final products
were shipped from part A to B
o 1870-1920
o Electricity and oil
o Reduction of transportation costs
- Wave 2 :
o Wave here : fragmenting the production process in such a way that the production process
can be done in the country where it is produced the cheapest
o This was made possible by technology
o Since 1991, some say with Thatcher and Reagan
o Especially since 2001 when China became member WTO
o Liberal economic regime in the 1880s
o Technology and ICT revolution
o Reduction of transport costs and lower costs of managing at distance
Shipping :
Size and impact of 2nd wave : key factor -> low shipping costs
Containers :
- Standard 20ft container Rotterdam-Shanghai less than 1000 euros
- Largest ships 400 meters
- Fit 23,000 containers
- Wall from Leuven to Lille
Marginal costs of transportation : minimal, the world was relying on a system were
factories were interdependent
Fukushima : Toyota US was in trouble bc Toyota Japan was in trouble bc of what
happened in Fukushima
One country is the input, and the other output -> digital technology who manage
this = fantastic; but this works in a perfect digital world
, One of the things that we are experiencing now: this perfectly predictable
world that we tried to build these 30 years, never existed
Very often one firm has a supplier, but that firm has a supplier too -> first tier,
two tier ,… suppliers
Firms know there first tier supplier but now two tier, so problem : how are you
exposed to this risk?
Many firms are looking at how they are exposed to those risks : major change
compared to the past!
Key role for multinational firms
- Market seeking: worldwide consumers
- Efficiency seeking: optimizing value chains
- Natural resource seeking: oil and minerals
- Technology seeking: acquiring knowledge and expertise
Firms are now realizing that they might need buffers instead of producing just in
time with perfectly manageable technologies ; they might need a second supplier
(other country for example) ; this is more expensive -> this will make management
and production more expensive => one of the reason inflation that we’re
experiencing is structural, no moving away
Multinational firms : operating across borders, different context with different risk
portfolio and profiles
Optimizing value chains
containers of past example :
Example:
Production: 90% in China, Korea, Japan
Ownership: Greece (18%), Japan (11%), China (11%), Singapore (6%), Hong Kong (5%)
Registration:
1 Panama, Marshall island, Liberia
Shipbreaking: Pakistan, India, Bangladesh
Fine slicing of value chains based on efficiency
Disconnecting place from ownership
, Firm: optimization of supply and value chains
Why using a lot of countries? Because these activities can be done in the cheapest
way there
NGO’s in the west are criticized because shipbreaking done by people in critical
conditions, is this good?
China as factory of the world
- Since 2001 member of WTO => crucial bc meant that firms in china could
compete with European/American… firms all around the world under the
same regulations
- Share in worldwide exports
- More Chinese MNCs (Huawei, AliBaba)
Chinese Fortune500
2003: 10
2020: 124
trade :
15
10
5
0
1970
1980
1990
2000
2010
2018
Foxconn Technology group
1988: First factory in Shenzhen in China
150 employees
2020: 30 industrial parks in China
1.2 million employees
350 Iphones per minute (!)
Designed in California, Assembled in China
, International management deals with
1. Management of firms in a multinational context – study of the MNC
2. Comparison of management practices in firms across countries => firms in
china, india, Netherlands,… even if they are in the same industry they are
not organized and managed in the same way
Some scholars add non-US studies/studies of firms outside the US. E.g. a study of Belgian
firms in Belgium. This is NOT IM
US bias: Myopic view of the world and use of the US as the global standard – (cf. role of
hegemon in Witt’s JIBS article)
Historical perspective : after WW2 -> multinational becoming very active, Europe
this was facilitated by Marshall fund (mechanism for Us firms to internationalize) ;
1980s => factories, idea to liberalize economy
When they saw more international firms coming to US, people were thinking “Oh
we have to do the same” => same management practices as the US => Idea was:
US is so powerful and economy so big and us multinational firms are omnipresent
Idea was have a look at how the US firms are doing if you want to internationalize
yours (idea of Michael Witt’s view of the hegemon)
Theorizing on firms and context
- Universal laws
- Context specific unique circumstances
- This is the core of the paper by Beugelsdijk 2022 that is on the reading list.
2 ways to theorize it : 1 universal theory on how firms behave and it applies to all
countries all over the world in the exact same way
Universalistic theory
- management and organization are subject to the same universal “laws”
everywhere in the world.
- The key assumption that UT relies on is the fundamental characteristics of
human behavior all over the world.
- If there are cross country differences, these are only temporarily.
- UT assumes one “best” and most efficient model. Countries that do not have
that yet, will do so over time
2 ways to theorize it : 1 universal theory on how firms behave and it applies to
all countries all over the world in the exact same way; if there are cross
countries differences only temporarily! (because firms not copying haven’t
understood it yet, so it will come=> either they have to adopt and adapt
otherwise it goes bust)
In LR : management system all over the world in the same way implemented (
1990s and 2000s ideas) -> world will become similar, globalization will make
us similar
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