BA 351 Managing Organizations

1. BA 351Managing Organizations Managing in a Global Environment

2. Clicker Buttons Directional buttons: navigate menu options Menu: press and hold to power on/off Clear:erase an entry Send or “enter” button to submit a selection Change Session ID: >> Menu >> Right directional button >> Send >> ”Yes” button >> Enter ID & Send Find Net / No Net: Need to change the session ID number Denied: Need to change the user ID number

3. True or False China and India are the worlds fastest growing economies?

4. The Changing Pattern of International Business Changing world output and world trade picture The U.S. no longer dominates the world economy Large U.S. multinationals no longer dominate international business The centrally planned communist economies that made up roughly half the world suddenly become accessible to Western businesses The global economy has become more knowledge-intensive

5. The Changing Pattern of International Business (continued) Lowered trade barriers General Agreement on Tariffs and Trade (GATT) World Trade Organization (WTO) Integrated Economic Markets The European Union (EU) The North American Free Trade Act (NAFTA) Central American-Dominican Republic Free Trade Agreement (CAFTA) The Association of Southeast Asian Nations (ASEAN) The Asia Pacific Economic Cooperation (APEC)

6. The Changing Pattern of International Business (continued) Global consumer preferences Tastes and preferences are converging Presence of mass media, exposure to goods from various countries, and standardized products Globalized production Cost efficiency

7. Example of Globalized Production Of the $20,000 sticker price of a General Motors Automobile LeMans: $6,000 goes to South Korea, where the car was assembled $3,000 goes to Japan for sophisticated high-tech parts (engines, transaxles, electronics) $800 goes to Taiwan, Singapore, and Japan for small parts $500 goes to Great Britain for advertising and marketing services $1,000 goes to Ireland for data processing $7,600 goes to GM and its external professional firms in the United States

8. The Changing Pattern of International Business (continued) Technological innovations Advances in communications, information processing, and transportation technology Fiber optics, wireless technology, the Internet and World Wide Web, and satellite technology Management across cultures Adaptation to business strategies, structures, operational policies, and human resource programs

9. Major Factors Affecting International Business General business environment Legal system Common law Civil law Muslim law Economic environment Cultural environment Culture shock

10. Dimensions of Culture Power Distance Individualism Uncertainty Avoidance Masculinity / Femininity Long-term/ Short-term Orientation

11. Video Cirque de Soleil Answer these Qs: How has the “global shift” contributed to the success of Cirque de Soleil? Why was this critical in the company’s beginning? What about now? How does management across cultures affect Cirque de Soleil?

12. To succeed, Cirque makes special accommodations for cultural differences among its workers. ___________ can occur when a person is exposed to a new culture with different norms, customs, and expectations and has difficulty adjusting. • Culture Shock • Individualism • Uncertainty Avoidance • Power Distance

13. Entry Strategy and Strategic Alliances Four key decisions of a firm contemplating foreign expansion: Which countries to enter When to enter Scale of involvement How to enter

14. Choosing Foreign Countries The appeal of a particular country is likely to be greater when: The size of the domestic market is large The present wealth of consumers in that market is high and projected to grow in the future The needed resources are readily available The firm’s product offerings are suitable to a particular market A positive business environment exists

15. When to Enter Foreign Countries and Scale of Involvement When to Enter First-mover advantages Pioneering costs Scale of Involvement Lowest if the firm simply decides to export its products to the foreign location Highest if the firm decides to have a wholly owned subsidiary in the foreign country

16. Modes of Entry Exporting Turnkey Project Licensing Franchising Joint Venture Wholly Owned Subsidiary Strategic Alliance

17. Modes of Entry Exporting – entering new markets by sending products to other countries, still maintaining production facilities within the domestic borders Turnkey projects – specialized type of exporting, where the firm handles the startup of the company and a local client is then handed the key Licensing – entering new markets by transferring the rights to produce and sell products overseas to a foreign firm

18. Modes of Entry Franchising – entering new markets in which the franchise pays a fee for using the brand name and agrees to follow the standards and rules Joint venture – means of entering new markets where two or more independent firms agree to establish a separate firm Strategic alliance – cooperative arrangements between competitors or potential competitors from different countries Wholly owned subsidiary – entering new markets in which a firm fully owns its subsidiary in foreign countries

19. I wouldn’t suggest this mode of Entry

20. Various Modes of Entry Choices Mode of Entry Advantages Disadvantages Exporting Economies of scale Lower foreign expenses No low cost sales High transportation costs Potential tariffs Turnkey Project Access to closed markets Competition from local client Loss of competitive advantage Licensing Quick expansion Lower expenses and risks Lower political risk Loss of competitive advantage Limited ability to use profits in one country to increase competition in another country Franchising Quick expansion Lower development costs and risks Lower political risk Loss of competitive advantage Potential quality control problems Limited ability to use profits in one country to increase competition in another country

21. Various Modes of Entry Choices(continued) Mode of Entry Advantages Disadvantages Joint Venture Knowledge of local markets Lower development costs and risk Access to closed markets Potential for conflict of interest Loss of competitive advantage Strategic Alliance Access to closed markets Pooled resources increase partner’s capabilities Complementary skills & assets Loss of competitive advantage Potential overestimation of partner’s capabilities Wholly Owned Subsidiary Maximum control over proprietary knowledge/ technology Greater strategic flexibility Efficiencies of global production system Large capital outlay Lack of local knowledge Increased risk

22. Examples of Strategic Alliances General Electric – Snecma of France Toshiba – IBM Mitsui – General Electric GM – Daewoo Texas Instrument – Compel Communications Canon – Hewlett-Packard Mitsubishi – Caterpillar

23. Take a look at China Brands

24. Why International Assignments End in Failure Career blockage – the feeling that working abroad has gotten their career sidetracked, while people back home are climbing the corporate ladder Culture shock – the inability to adjust to a different cultural environment Lack of pre-departure cross-cultural training – little if any is offered to expatriates before going to a different country.

25. Why International Assignments End in Failure Overemphasis on technical qualifications – the expatriate may lack cultural adaptability, even though they have the technical skills Getting rid of a troublesome employee – provides the ability to solve interpersonal conflict, but at a huge expense to the company Family problems – inability or unwillingness of the expatriate’s family to adapt to life in another country

26. Key HR Management Factors for Global Firms Selection Selection criterion should include cultural sensitivity Training Length of assignment determines depth of training Cross-cultural training is critical to success Career Development International assignments should be part of career advancement plan Compensation and Benefits Incentives and quality-of-life concerns

27. Ethics and Social Responsibility Sweatshops

28. Yes or No • Do you think U.S. companies have the moral responsibility to offer a so-called living wage and to fight exploitative practices in foreign countries, even if doing so means putting the company at a competitive disadvantage?

29. Yes or No • Do you think most consumers care about potential abuses of overseas contractors? Would most consumers be willing to pay slightly higher prices to improve the standard of living of foreign workers?

30. Yes or No • Some believe that a company might actually increase business by convincing customers that it is socially responsible and that it values human dignity more than making an extra buck. Do you agree?

31. Flowchart For Problem Resolution Is It Working? NO YES Don’t Mess With It! Did You Mess With It? YES YOU IDIOT! NO Anyone Else Knows? Will it Blow Up In Your Hands? You’re SCREWED! YES YES Can You Blame Someone Else? NO NO NO Hide It Look The Other Way Yes NO PROBLEM!