Changes within a Global Environment

Mammed Bagher School of Management The Business School Edinburgh Napier University EH14 1DJ m.bagher@napier.ac.uk

The Field of International Business International Business is all business transactions, private and governmental that involve two or more countries. Private companies undertake such transactions for profit; governments may or may not do the same in their transactions.
Daniels, J. D. & Radebaugh, L. H: (2001)

Globalisation

Globalisation impacts on governments, state agencies and regional supra-national bodies such as the EU Farnham, D: (2005)

What is Globalisation all about?

Some definitions:
Referring to the world economy and the world markets. www.scottish-enterprise.com/sedotcom_home/help/help-glossary.htm The growing interdependence of countries world-wide through the increasing volume and variety of cross-border transactions in goods and services, and also through the more rapid and widespread diffusion of technology. Not just an economic phenomenon, but frequently described as such. www.mft.govt.nz/support/tplu/tradematters/glossary.html Is a more advanced form of internationalisation that implies a degree of functional integration between internationally dispersed economic activities. wps.prenhall.com/wps/media/objects/213/218150/glossary.html

What is Globalisation all about?

Some definitions:
An industry or corporation acting on a global scale with manufacturing bases in several countries. Eg Apple, Nike and McDonalds. www.bridgemary.hants.sch.uk/folders/gcse_revision_guide/glossary/page_1.htm Generally defined as the network of connections of organisations and peoples across national, geographic and cultural borders and boundaries. These global networks are creating a shrinking world where local differences and national boundaries are being subsumed into global identities. ... www.stile.coventry.ac.uk/cbs/staff/beech/BOTM/Glossary.htm Globalization (or globalisation) is a term used to describe the changes in societies and the world economy that are the result of dramatically increased trade and cultural exchange. In specifically economic contexts, it is often understood to refer almost exclusively to the effects of trade, particularly

trade liberalization or free trade, however see below. ...

en.wikipedia.org/wiki/Globalisation Index of globalisation
http://www.kof.ch/globalization/

Global Business & Emerging Markets

Emerging markets will be not only a source of significant revenue growth for companies but also a source of talent, true innovation and ground-breaking approaches to business, which they will leverage on a global scale
Emmanuelle Roman, (Ernst & Young)

Post 2012 Emerging Markets

Estimates show that 70% of world growth over the next few years will come from emerging markets, with China and India accounting for 40% of that growth.
Source: http://www.ey.com/GL/en/Issues/Business-environments

Rank Order (1-10) - GDP (purchasing power parity)

Rank 1 2 3 Country United States China Japan GDP (purchasing power parity) $ 14.660,000,000,000 $ 10,909,000,000,000 $ 4,310,000,000,000 Date of Information 2011 2011 2011

4
5 6

India
Germany Russia

$ 4,060,000,000,000
$ 2,940,000,000,000 $ 2,223,000,000,000

2011
2011 2011

7
8 9 10

United Kingdom
Brazil France Italy

$ 2,173,000,000,000
$ 2,172,000,000,000 $ 2,145,000,000,000 $ 1,774,000,000,000

2011
2011 2011 2011

Source: http://www.indexmundi.com/g/r.aspx?t=10&v=65

Why Enter Foreign Markets?

Proactive Drivers (active globalisation) Market saturation Resources Profit margin Access Image Economies of scale Competitive advantage Tax/interest advantage Subsidies Cost of resources Merger and acquisition opportunities Reactive Drivers (passive globalisation) Competitive pressure Business partners Capital markets Trade barriers Legal constraints Coincidence

International Business Model

In International business, an International manager can apply any of the following to a concept or technique employed in domestic operations Transfer it intact (concept of adaptation) Adapt it to local conditions (concept of adaptation) Not use it overseas Pre-requisites include Management of complexity Knowledge of markets Awareness of cultures

Worlds Biggest Companies

1. 2. 3. 4. 5. 6. 7. 8. 9. 10. Wal-Mart Stores Royal Dutch Shell Exxon Mobil BP Sinopec Group China National Petroleum State Grid Toyota Motor Japan Post Holdings Chevron
Source: http://money.cnn.com/magazines/fortune/global500/2011

Top 10 Global Brands

1 Coca Cola 2 IBM 3 Microsoft 4 Google 5 General Electric 6 McDonalds 7 Intel 8 Apple 9 Disney 10Hewlett-Packard
Source: http://www.huffingtonpost.com/2012/01/18/the-top-global-brands

The Experience of Globalisation

Not everything is global. In fact, most employment is local or regional. Yet the strategically crucial activities and economic factors are networked around a globalised system of inputs and outputs, which conditions the fate of all economics and most jobs. Castells: (2001)

Free Market

is a capitalist instrument that rewards the risks and penalties of individual ownership and the judgement Seldon, A: (1990)

Means of carrying out International Operations

External Influences Operations Objectives

Physical & Societal Factors

Strategy MEANS
Modes *Importing & exporting Functions *Marketing *Production *Accounting *Finance *Human resources Overlaying Tactical Alternatives *Choice of countries *Organisation & control mechanism *Degree of integration among countries operations

Competitive Environment

*Tourism & transportation *Licensing & franchising *Turnkey operations *Management contracts *Direct & portfolio investment

Types of Market economy (Farnham: 2005) & Strategic International Management

System Market Regulation Accountability Labour market AngloSaxon Central European Russian free contract share-holder de-regulated Value system individualist

social

public law power

stakeholder

regulated

social cohesion mutual-aid

anarchic

managersworkers networks

local

Japanese

managed

trust

internal

collectivist

Chinese

interpersonal

trust

families

parochial

paternalist

Drivers of Globalisation
Globalisation is not a single event but rather an overlapping of four trends: Developments in worldwide communications and the Internet The instantaneous nature and enormous turnover of global financial markets The collapse of communism and the emergence of capitalism as the dominant social and economic order The growing equality between women and men though this varies markedly across the world. Giddens & Hutton: (2001)

Management Concerns
P/E ratios, financial reports and performance Share prices and company assets Balance sheets and corporate health Organisation charts and organisational relationships Company attitude surveys and staff morale Performance indicators and competitiveness Quality statistics and product acceptability Standardisation, routines, rules, procedures

Globalisation continuity with the past or a new paradigm? Continuity international trade and business is not new but has been taking place for centuries. at the other extreme are the gee-whiz types, who are so impressed with all the changes happening today, especially to do with technology, that they see a world breaking quite radically with its past.
Giddens & Hutton: (2001)

Globalisation do managers have a choice?

Is globalisation such a powerful external force that managers and individuals generally have no choice over their future? Or since our globalised futures are not yet written, and since viable choice remain within globalization, we should reject the simplistic intellectually conservative, and imperative-driven ideas of the gurus.
Collins: (2001)

The Next Generation of Globalised Managers

A global mindset The ability to work with diverse people A long-range perspective The ability to manage change and transition The ability to create systems for a learning and changing organisation The talent to motivate employees to achieve excellence Accomplished negotiating skills A willingness to seek and succeed in overseas assignments An understanding of national cultures

Implications for Managing in a Global Environment

Distinguishing the Real from the Representational http://www.usc.edu/schools/annenberg/asc/projects/comm544/li brary/images/336.html http://images.google.co.uk/images?q=world+map&hl=en&btnG= Search+Images Resisting technological overkill Embracing change Organisational flexibility Organicism rather than Mechanism Designed redundancy Iterative spiralling advance Awareness of Butterfly Effects