COURSE: GLOBAL BUSINESS MANAGEMENT MGT610 DR. DIMITRIS STAVROULAKIS

1. COURSE: GLOBAL BUSINESS MANAGEMENT MGT610 DR. DIMITRIS STAVROULAKIS PROFESSOR OF HUMAN RESOURCE MANAGEMENT DEPT OF ACCOUNTING TEI OF PIRAEUS

2. Unit 2: Globalization of businessTraining Material: Textbook (3-15 & 39-48).

3. World largest companies in 2009 (http://money.cnn.com/magazines/fortune/global500/2009/ • 1- Wal-Mart Stores • 2- Exxon Mobil • 3- Royal Dutch Shell • 4- BP • 5- Toyota Motor • 6- Chevron • 7- ING Group • 8- Total • 9- General Motors • 10-ConocoPhillips

4. 1. U.S. - 153 2. Japan - 64 3. France - 39 4. Germany - 37 5. Britain - 34 6. China - 29 7. South Korea -15 8. Canada - 14 8. Switzerland - 14 10. Netherlands - 13 11. Spain - 11 12. Italy - 10 13. Australia - 8 14. India - 7 15. Sweden - 6 15. Taiwan - 6 17. Mexico - 5 Source: Forbes Nationalities of World’s Largest Companies (2008). .

8. GREECE

9. GREECE DATA Ease of doing business (ranking) • Number of days to establish a foreign business: 22 • Number of procedures: 18 RANKING • Global Competitive Index: 83/139 • Ease of doing business: 100/183 • Ease of starting a business: 135/183 • Protecting investors: 155/183 • Getting electricity: 77/183 • Getting credit: 78/183 • Registering property: 150/183 • Trading across borders: 84/183 • Enforcing contracts: 90/183 • Construction permits: 41/183 • Resolving insolvency: 57/183

10. Drivers for globalization of business • Economic development & technical innovations • Facilitation of cross-border trade & capital transfer • Development of services that support international business (transports, communications) • Consumer demands • Intensified competition of companies at the international level

11. Drivers for globalization of business (cont) • Lower or no tariffs within commercial zones (EU, NAFTA, ASEAN) • Intercultural understanding through common language (e.g. Spain-Mexico-Argentina, Portugal-Brazil) • Shortening product cycles

12. Factors deterring business from going global • Strong local culture & traditions • Local religions • Political instability • Trade barriers • National trade union mentality & practices

13. Positive side of MNCs • Promote economic growth • Provide lower-priced, higher-quality goods to consumers • Bring funds & capital • Transfer technology, including organizational, management and marketing skills • Pay higher wages (increase productivity) • Introduce competition to domestic firms • Offer job openings

14. Negative Side of MNCs • Poor citizens of host countries • A permissive attitude on the part of the host may generate exploitation of workers & destruction of the environment • Foreign superpowers may destroy local business • i.e. soft drinks, Coke and Pepsi versus small local manufacturers • There are concerns among small shopkeepers when Wal-Mart comes to town • In many European cities under 100,000 local authorities forbid the installation of big commercial centers • Market power • After local firms are driven out, MNCs can exert market pressure and increase prices • MNCs can easily create oligopolies and barriers to entry • When confronted with new regulations or trade union activity they can easily move away (or threaten to). Greece: Pirelli, Goodyear, Triumph, Levis, Palco-Schiesser etc.

15. Negative Side of MNCs (cont): =Balance of payments -Initially positive, then negative (import of raw materials & resources, repatriation of profits) =Tax avoidance =Involvement in local politics -Stiglitz provides examples of U.S. government pressuring governments (Indonesia) to provide privileges to MNCs -Puppet governments formed through the power of multinationals (bananaland) - e.g. United Fruit in Guatemala & Chile -Greece under pressure to purchase armament -World Bank pressuring Pakistani government to buy high priced power from MNC =MNC established with privilege (preference to state supplies, cheaper energy & resources than local competitors)

16. What should go right and what can go wrong in MNC-host country relationships

17. MNC Stakeholders

18. Go International or Stay Domestic? Critical Questions. • Availability of international demand for company’s products? • Can products be modified to suit foreign market? • Is foreign market business climate receptive to imports? • Does the company have necessary skills, knowledge, capacity, financial, and other resources to do business abroad? • Do benefits outweigh costs ? • Theoretical benefits of global expansion may prove extremely difficulty to reap in practice. • Going global is not necessarily good for business. • Not going global is not necessarily bad for business

19. Internationalization motives

20. Motives for International Expansion • Market Share • Domestic market may lack the size to support efficient scale manufacturing facilities • Return upon Investment • Large investment projects require expansion to global markets to compensate costs • Weak patent protection in many countries renders rapid overseas expansion necessary in order to preempt imitators Exploitation of company capabilities • Knowledge + R&D

21. Motives for International Expansion (cont) • Economies of Scale • Expanding size or scope of markets helps to achieve economies of scale in manufacturing, marketing & distribution • Costs are spread over a larger sales base • Profit per unit is increased • Location Advantages • Low-cost markets aid in developing competitive advantage • Easier access is achieved with regard to: • Raw materials • Lower cost labor • Key customers • Energy

25. Definitions of MNCs • OECD: “An enterprise that engages in foreign direct investments (FDIs) and owns or controls value-adding activities in more than one country” • United Nations (1973): An enterprise “which controls assets, factories, mines, sales offices, and the like in two or more countries”. • United Nations (1984): An enterprise: • comprising entities in two or more countries, regardless of the legal form and fields of activity in these entities • which operates under a system of decision making permitting coherent policies and a common strategy through one or more decision-making centers • in which the entities are so linked, by ownership or otherwise, that one or more of them may be able to exercise a significant influence over the activities of the other, in particular to share knowledge, resources, and responsibilities.

26. Definitions of MNC * (cont) • Bartlett & Ghoshal: Two preconditions: • Substantial FDI • Active, coordinated management • “What really differentiates MNC from ordinary business, is that it creates an internal organization to carry out key cross-border tasks and transactions internally rather than depending on trade through the external markets” (p. 10)*. • According to Bartlett & Ghoshal, most companies involved in activities abroad should not be considered MNCs, since they are not managing their subsidiaries actively or in a coordinative manner.

27. Definitions of MNC * (cont) • Any internationally active company must fulfill 3 important strategic goals: • GLOBAL EFFICIENCY in existing activities • INTERNATIONAL FLEXIBILITY and LOCAL RESPONSIVENESS (appropriate management of risks and opportunities) THINK GLOBAL, ACT LOCAL • WORLD-WIDE LEARNING through its exposure to local contexts