International Management 2024
Summary International Management
Thema 1. International Management
What is international management
International management is the process of planning, organizing, directing, and controlling the organization, which
individuals (managers) use to achieve an organization’s goals when the organization is involved in cross-border
activities or functions outside its nation-state.
More specifically, it’s about:
• Navigating the complexities of operating across multiple countries,
• Integrating global perspectives into business strategies, and
• Effectively managing a diverse and geographically dispersed organization
Not every company needs international management. That depends on its cross-border activities. Examples of cross-
border activities include international suppliers, employees in other countries and foreign direct investment (FDI).
For example, Colruyt is mainly a Belgian company, but has foreign suppliers. They thus need international
management.
Multinational companies definitely need international management.
Definition : A multinational corporation (MNC) is a company that operates in its home country, as well as in other
countries around the world. It maintains a central office located in one country, which coordinates the
management of all of its other offices, such as administrative branches or factories.
Why to internationalize
Reasons for internationalization:
• Market Expansion: access to new customers or growing markets
• Access to cheaper resources: labour, materials
• Access to better resources: human capital, technologies
• Gaining competitive advantage
• Managing regulatory environment
• Risk diversification
Market expansion
When it comes to market expansion, we typically categorize companies:
1) Traditional companies : start domestically and gradually expand internationally
2) “Born Global” companies : A "born global" company, or international new venture, is “a business
organization that, from inception, seeks to derive significant competitive advantage from the use of
resources and the sale of outputs in multiple countries.
In other words, unlike traditional firms, who start domestically and gradually expand internationally, born
global companies internationalize rapidly, often within a few years of their founding.
Difference in resources
The cost of labour is a major driver for companies to internationalize. Why :
1) Labour is a major cost for most companies (typically 20-70% of gross sales)
2) There is huge variation in labour cost across the globe. (Example: South America vs Europe)
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Managing regulations and risks
The main things for a company to take into account when its moves abroad to do business is:
1) Dealing with construction permits
2) Getting electricity
3) Registering property
4) Getting credit
5) ….
When taking these factors into account, New Zealand, Singapore and Hong Kong appear to be the best places for
doing business. Albania, Mongolia and Kirgizstan are the worst (most insecure) places.
Drivers and Barriers to internationalization
a) Facilitators of internationalization
• Decreasing barriers to cross-border trade and investment
• Converging of consumer tastes
• Decrease of transportation and communication costs
• …
But!
• Significant differences still exist among national markets
• Processes counteracting the globalization
b) Why do companies struggle abroad
• Expanding into international markets is challenging for companies’ “foreigness”.
• They are often unfamiliar with the local business environment and cultural differences, not as credible as
and have fewer resources than local competitors.
• Foreign companies face costs that they do not have in the home market.
c) The CAGE Distance Framework
CAGE stands for : Cultural, Administrative, Geographic, Economic.
The concept is used for companies when expanding abroad. A company will want the difference in the host
country to be as small as possible regarding their home country. This will translate is a certain “distance” in
the CAGE.
The “CAGE framework” can be used in various applications, such as Strategic Market Selection, Entry Mode
Decisions, Adaptation Strategies, Risk Management and Competitive Advantage.
Here are some ways how the “distance” can be decreased:
• Introduction of direct flights – innovation, information exchange;
• Introduction/increased used of online communication tools – collaboration, investments;
• Acquisition of foreign companies – spread of corporate culture and
• technologies;
• Appointment of local managers – improved communication with local team,
• increased trust;
• Creation of alliances with local companies – better understanding of local
• business culture;
• Adaptation of business model to local conditions.
Exercise : How a US-based company considering expansion to the Belgian market should use the CAGE
framework. Check slides & make yourself.
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Thema 2. Globalization and Deglobalisation
Official definition of globalization: Globalization is the shift toward a more integrated and interdependent
world economy.
Economic definition of globalization: Globalization refers to the growing economic interdependence of
countries worldwide through the increasing volume and variety of cross-border transactions in goods and
services and of international capital flows, and also through the more rapid and widespread diffusion of
technology.
Globalisation results in:
Globalization of markets : merging of separate national markets into a single global marketplace.
(results: access to world markets and global competition)
Globalization of production : sourcing goods and services from locations around the globe to take
advantage of national differences in the cost and quality of factors of production. (goals : lower costs,
improve quality, build reputation)
Drivers of globalization
a) Declining trade and investment barriers
• Tariffs
• Quotas
• Import licenses
• Standards
• Regulations
Institutions for global trade:
• GATT – WTO
• IMF and the World Bank
• UN
• G20
• Regional agreements and unions
b) Technological change
• Improvement in communication technologies
• Improvement in transportation technology
o Jet aircraft
o Superfreighters
o Containerization
c) Convergence of consumer tastes
Consumer tastes have become more aligned due to:
• Global media and advertising
• Travel and migration
• Internet and e-commerce
• Global brands
• Income growth
Role of globalization
Economic effects of globalization are:
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• Increased trade and investment
• Economic growth, job creation
• Growth of economic interconnectedness and interdependence among countries
• Technology transfer
• Economic vulnerability
• Negative environmental impact
How globalized the world really is
The globalization debate
a) Globalisation, jobs and income
Arguments:
(+) benefits outweight the costs
(+) countries specialization in what they do best benefits all
(-) destroys jobs in wealthy countries due to production offshoring
(-) the gap between rich and poor nations rises
Evidence:
(+) average real income increased for all
(+) decline of wages for unskilled workers can attributed to technological change
(-) decline in real wages of unskilled workers
(-) rise in inequality
Explanatory graphs:
b) Globalisation, labour practices and environment
Arguments:
(+) globalisation improves labour and environmental practices
(-) MNE’s “close eyes” on abusive labour practices
(-) MNE’s pollute abroad
(-) Expensive standards hurt countries’ competitiveness
Evidence:
(+) richer countries have stricter labour laws
(-) Carbon emissions have a positive relationship with income
Explanatory graphs:
c) Globalisation and national soverenity
Arguments:
(+) Supranational organisations ensure compliance with international trade rules and standards
(-) national governments lose economic power
d) Discussion: “The rise and fall of the world most successful joint venture” (US-China trade war)
What triggered the trade war
China has long been a low-cost producer of products designed by companies in the West. But with its
growth of its ambition, China became a competitor to the US economic and geopolitical landscape.
The US accused China of unfair trade practices, which resulted in a US trade deficit. So for the
protection of American industries, the US increased import tariffs on goods from China and imposed
other restrictions on trade.
What are the benefits and disadvantages for the US
o Benefits:
o Negatives:
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