Bài giảng Principles of Management - Chapter 3 Globalization and The Manager

chapter 3Globalization and The ManagerMcGraw-Hill/IrwinPrinciples of Management © 2008 The McGraw-Hill Companies, Inc., All Rights Reserved.Learning ObjectivesExplain what globalization is.Describe the processes driving globalization.Identify the implications of globalization for business enterprises.Discuss different constraints limiting the pace of globalization.Outline the benefits of going global for a business firm.Discuss some of the challenges of managing in a global enterprise.Globalization The process whereby national economies and business systems are becoming deeply interlinked with each other.Accelerated Pace of GlobalizationThree main reasons:The spread of market-based economic systemsThe decline of barriers to international trade and foreign direct investmentFalling costs of communication and transportationMarket EconomyMost businesses are privately ownedPrices are set by the interaction of supply and demandGovernment regulation is limited to ensuring that competition between individual enterprises is free and fair and that the system does not produce outcomes judged to be unacceptableSocialist EconomyMost businesses are owned by the statePrivate producers were excluded from certain industrial and commercial activitiesPrices were set by the stateState planners decided what was produced where, in what quantity, and by whomAntithetical to globalizationPrivatization in KosovoAuthorities have put another 23 firms for sale in KosovoHundreds of other government-owned companies have already been sold which were considered inefficient and dilapidatedIn 2006, the province’s economy grew 5% for the first time driven by the private sectorHowever, the unemployment is still at 50%Source: The Associated Press, December 28, 2006Falling Barriers to Trade and InvestmentTariffs – A tax on importsQuotas – A limit on the number of items of a good that can be imported from a foreign nationRegional trade agreements – agreements to remove barriers to trade between nations within a geographic regionCommunication & Transportation CostsSatelliteOptical fiberWireless technologiesInternetFalling Communication CostsIn 1983, a three minute telephone call from the USA to India would cost $13.50 on AT&T (before the breakup) going through the operatorToday, using the Internet, one can make the same call for free (no need for operator)The traditional telephone landline or cellular phone would cost few pennies per minute (no need for operator).Implications of GlobalizationA massive surge in the volume of international trade and foreign direct investmentsForeign Direct Investment (FDI) has increased even more dramaticallyFor individual enterprises and their managers:Globalization of production is well under wayGlobalization of markets is starting to occurAdvances in technology are facilitating these trendsGlobalization of ProductionCapitalLaborLandEnergyFactors of ProductionGlobalization of MarketsMerging of historically distinct and separate national markets into one huge marketplaceAs firms follow each other around the world, they bringProductsOperating strategiesMarketing strategiesBand namesGreater uniformity replaces diversityTechnology InnovationsAllow managers to create and then manage a globally dispersed production systemFurther facilitating the globalization of productionFacilitated in globalization of marketsIT SpendingSource: Business Week, October 27, 2005Constraints to GlobalizationLimit the ability of managers to move production activities to places where they can be performed at the lowest cost.Also, limit the managers’ ability to treat the entire world as a single homogeneous marketplaceConstraints to GlobalizationProtectionist CountertrendsNational Differences in Consumer BehaviorNational Differences in Business SystemsDifferences in Social CultureGlobal Packaging?In 2003 McDonald’s announced that all 300,000 of its restaurants in over 100 countries will soon adopt the same brand packaging for its menu items. Two years later, the company backpedaled and announce localizationComputer manufacturer HP uses as many as eight languages on its packagingProcter & Gamble adjusts its branding strategy across bordersSource: Business Week Online, January 23, 2006Reasons for ExpansionExpand the market Realize scale economiesRealize location economiesBenefit from global learningRealizing Location Economies in India According to the Federation of Indian Chambers of Commerce and Industry of India’s (FICCI) annual foreign direct investment (FDI) survey:70 % of the foreign companies are earning profits from their Indian operations84% said to be planning to expand their business in India90% considered the information technology (IT) and business process outsourcing (BPO) services to be one of the most lucrative sectors for investmentsSource: The Hindu, August 16, 2005Decisions When Going Global Whether to treat the world as a single market or customize the firm’s products to reflect differences across nationsThe best mode for entering a foreign marketWhere to locate different business activitiesHow best to manage subsidiariesQuestion If an organization wants to be global, it must treat the world as a single market and utilize global standardization strategy. Do you agree? Explain.Management Challenges to GlobalizationGlobal Standardization or Local CustomizationManaging People in the Multinational FirmLocating ActivitiesEntry ModeGlobal Standardization or Local Customization Global standardization strategy – treating the world market as a single entity, selling the same basic product around the worldLocal customization strategy – varying some aspect of product offerings or marketing messages to take country or regional differences into accountQuestion When McDonald’s sells wine on its menu in France and Soy Burgers or Lamb Burgers in India, it is adopting which of these strategies?LicensingFranchisingGlobal standardizationLocal customizationEntry ModeExportingLicensingFranchisingJoint ventureWholly owned subsidiaryFranchising xWholly owned subsidiaryLicensing xJoint ventureExporting xLocating ActivitiesManagers have to break the operations of the firm into discrete steps or activitiesEach activity has to be located in the best place given a consideration of factors such as country differences in:Labor costs and infrastructureTransportation costsTariff barriersCurrency exchange ratesStrategic orientationManaging PeopleGeocentric StaffingEthnocentric StaffingPolycentric Staffing