introduction lectures module 2 outside usa strategic

Skill Development at it’s Best

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Strategic ManagementMBA & BBA

Introduction

Lectures Module 2

Outside USA Strategic ManagementCourse Lecturer: Farhan Mir


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Nature of Global Business - What is a Global Company?

• It is a business that operates all over the world and;

• Treats the world as one country.

• Locates in low wage countries.

• Purchases raw materials from cheapest country.

• Borrows from cheapest country.

• Moves managers around.


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Globalization – Introduction

https://www.youtube.com/watch?v=JJ0nFD19eT8

https://www.youtube.com/watch?v=JJ0nFD19eT8


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Examples

• Coca-Cola

• Toyota

• McDonalds

• Nike………………


Copyright 2020@MIRSSource: World Features Syndicate. 3-5

Photo Credit: Dennis Yang

LO 3-3

• Sweet Potato

• Honeydew Melon

• Green Apple

• Kiwi Fruit

• Mango

• Pineapple

• Strawberry

• Corn Crumb Soft Rice Cake

TIME to MAKE the DONUTS…Dunkin’ Donuts Flavors in Taiwan


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2-6

Nature of Global Business - We are Living in an Integrated World

• In the early 20th century economic integration was at 10%; today it is 50%

• Ford Fiesta – Ford’s first global car


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2-7

Nature of Global Business - Global Economy

The new realities, continued:• The world economy, not individual countries, is the

dominating factor

• Greece and Spain debt crisis and the EU

• 75-year struggle between capitalism and socialism has almost ended– Fall of USSR (key holdouts: Cuba, North Korea, Venezuela)

• E-Commerce diminishes the importance of national barriers and forces companies to re-evaluate business models (1 billion Internet users world wide)


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2-8

Nature of Global Business - Global Economy

• For US-based companies, 75% of sales potential is outside the US.– About 90% of Coca-Cola’s operating income is

generated outside the US.

• For Japanese companies, 85% of potential is outside Japan.

• For German and EU companies, 94% of potential is outside Germany.


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2-10

Nature of Global Business - The Triad

• U.S., Western Europe, and Japan

• Represents 75% of world income

• Expanded Triad includes all of North America and the Pacific Rim and most of Eastern Europe

• Global companies should be equally strong in each part


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Nature of Global Business - Big Emerging Markets

• China

• India

• Indonesia

• South Korea

• Brazil

• Mexico

• Argentina

• South Africa

• Poland

• Turkey ██ Emerging markets██ Developed markets

http://upload.wikimedia.org/wikipedia/en/e/ed/Developed_and_Emerging_markets.png


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Nature of Global Business - BRIC• BRIC or BRICs are terms used to refer to the

combination of Brazil, Russia, India, and China.

• The economies of the BRICs are rapidly developing and by the year 2050 will eclipse most of the current richest countries of the world.

http://en.wikipedia.org/wiki/Brazil

http://en.wikipedia.org/wiki/Russia

http://en.wikipedia.org/wiki/India

http://en.wikipedia.org/wiki/People%27s_Republic_of_China

http://upload.wikimedia.org/wikipedia/commons/b/b1/World-BRICs.png


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2-13

Nature of Global Business - Rapidly Developing Economies

• The term "rapidly developing economies" is now being used to denote emerging markets such as

– The United Arab Emirates,

– Chile and

– Malaysia

• That are undergoing rapid growth.

http://en.wikipedia.org/wiki/United_Arab_Emirates

http://en.wikipedia.org/wiki/Chile

http://en.wikipedia.org/wiki/Malaysia


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14

Nature of Global Business – Level of Internationalization

Lowest Level of International Activity Highest

DOMESTIC

BUSINESS

INTERNATIONAL

BUSINESS

MULTINATIONAL

BUSINESS

GLOBAL

BUSINESS


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Nature of Global Business - MNCs

• Major force driving the expansion of global markets

• Complex business entities that are heavily effected by social, economic, cultural and political factors

• Where, Why and How to globalize are key questions for any MNC


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Least Amount of commitment, control, risk and profit potential Most

Licensing Exporting FranchisingContract

Manufacturing

International

joint ventures

and strategic

alliances

Foreign

direct

investment

LO 3-3

Nature of Doing Global Business


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Reasons for the development of Global Co.’s

Increase Sales: Higher profits.(home market saturated)

Mass Production:Enables Economies of Scale (more produced = lower cost per unit).

Developments in ICT: Communication is faster & easier.

Deregulation: World Trade Organisationmaking trade easier.


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Advantages and Disadvantages of Global Business

Advantages

• Increased Sales

• Expansion in products/Services

• Increased Consumer base

• Economies of Scale

• Technology Diffusion

• Skillful Labor

Disadvantages

• Complexity of Operations

• Political, Social and Cultural Differences

• Risk of Failure

• Increased Uncertainties


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20


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Starbucks Failing in Australia

https://youtu.be/_FGUkxn5kZQ

https://youtu.be/_FGUkxn5kZQ


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Why Companies Fail Globally


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Dominos Success in India

https://youtu.be/EK6_QNZa4S4

https://youtu.be/EK6_QNZa4S4


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Coping the Global Challenge

• International Competition

• Many countries are still Protectionist

• Technology and Abrupt changes make it different to analyze competitive landscape

• Monitoring global competition is becoming a serious challenge for all


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Meeting the Challenge

• The Globalization Imperative:

– Belief that one worldwide approach to doing business is key to efficiency and effectiveness.

– Many factors facilitate the need to develop unique strategies for different cultures


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Coping the Global Challenge

• However the standardised marketing mix may have to be adjusted to meet local tastes, cultures & legislation.

• Eg. RHD cars in Ireland & UK………

LHD rest of world.


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Many factors facilitate the need to develop unique strategies for different cultures:

• The Globalization Imperative:– Diversity of worldwide industry standards– Continual demand by local customers for

differentiated products– Importance of being insider as in case of customer

who prefers to “buy local”– Difficulty of managing global organizations– Need to allow subsidiaries to use own abilities and

talents unconstrained by headquarters


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Tax Rates and Tax Inversions


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US Business Culture Vs Foreign Business Culture

• Acknowledging the fact that US business culture may have similarities yet many differences from business cultures in rest of the world

• Past failures by US firms in multiple countriescalls for reassessing this important aspect of strategic management at international level


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Differences Across Cultures In criteria used to evaluate personnel

Netherlands France Germany Britain

Reality

Analysis

Helicopter

Leadership

Imagination

Imagination

Analysis

Leadership

Helicopter

Reality

Leadership

Analysis

Reality

Imagination

Helicopter

Helicopter

Imagination

Reality

Analysis

Leadership

In the norms and rules regulating◦ Incentive plans, pay equity, and severance◦ Holiday and maternity leave

Other HR functions◦ In labor relations and role of labor unions◦ In job design and employee training programs


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As companies trade worldwide, they must be aware of different cultural and business practices (e.g. etiquette, business customs,

rules for personal interactions)


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BUSINESS in the

GLOBAL MARKET

3-32

LO 3-1

• Over 90% of companies

doing business globally

believe it is important

for employees to have

international

experience.

• U.S. organizations (like

UPS, MLB, the NFL and

the NBA) are also

expanding abroad.

http://www.international.ups.com/

http://mlb.mlb.com/mlb/international/

http://www.nfl.com/international

http://www.nba.com/global/


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Business Culture Across Countries

• Mexico

• Japan

• China

• India


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Cultural Differences in SelectedCountries and Regions

Doing Business in China1. The Chinese place values and principles above money and expediency.

2. Business meetings typically start with pleasantries such as tea and general conversation about the guest’s trip to the country, local accommodations, and family.

3. The Chinese host will give the appropriate indication for when a meeting is to begin and when the meeting is over.

4. Once the Chinese decide who and what is best, they tend to stick with these decisions. Although slow in formulating a plan of action, once

they get started, they make fairly good progress.


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• Doing business in India

1. It is important to be on time for meetings.

2. Personal questions should not be asked unless the other individual is a friend or close associate.

3. Titles are important, so people who are doctors or professors should be addressed accordingly.

4. Public displays of affection are considered to beinappropriate, so one should refrain from backslapping

or touching others.


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• Doing business in Arab countries1. It is important never to display feelings of superiority, because

this makes the other party feel inferior. Let one’s action speak for itself and not brag or put on a show of self-importance.

2. One should not take credit for joint efforts. A great deal of what is accomplished is a result of group work, and to indicate that one accomplished something alone is a mistake.

3. Much of what gets done is a result of going through administrative channels in the country. It often is difficult to sidestep a lot of this red tape, and efforts to do so can be regarded as disrespect for legal and governmental institutions.


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Business Abroad

• For product’s success in another country, companies must research the country’s languages, customs, and tastes.

https://www.youtube.com/watch?v=8qECCCaPdw0

https://www.youtube.com/watch?v=8qECCCaPdw0

http://www.travelchannel.com/video/mcfeasting-in-south-africa

http://www.travelchannel.com/video/dunkin-seoul


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Business Climate Across Countries

• Africa

• China

• Brazil

• Indonesia

• India

• Japan

• Mexico

• Vietnam


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Business Etiquette• Business etiquette: conduct that is

considered socially acceptable in business; differs from country to country

• Example: • In the USA receiving a gift from a potential

business partner could be seen as a bribe. But in Japan it is customary to give gifts, and there are many rituals involved.

• In India, before doing business it is customary to have tea.

• In Mexico, throwing documents on a table during a meeting is considered an insult

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