MANGMT 3000 1st Edition Lecture 6 Outline of Last Lecture I Goals II Plans III MBO Outline of Current Lecture I Globalization Current Lecture Globalization Trend of the world economy toward becoming a more interdependent system Global village the shrinking of time and space as air travel and the electronic media have made it much easier for the people of the globe to communicate with one another E commerce buying and selling of products and services through computer networks U S retail e commerce sales were estimated at 48 2 billion in the third quarter of 2011 Global economy increasing tendency of the economies of the world to interact with one another as one market instead of many national markets Positive effects more markets for American exports Negative effects vast surplus funds form global investments flowed into US that were invested badly in subprime mortgages Minifirms operating worldwide Small companies can get started more easily Small companies can maneuver faster Megafirms large cross borders Industries ill suited for small medium size oil telecommunications These notes represent a detailed interpretation of the professor s lecture GradeBuddy is best used as a supplement to your own notes not as a substitute Why learn about international management Multinational corporation business firm with operations in several countries Multinational organization nonprofit org with operations in several countries You may deal with foreign customers or partners You may deal with foreign employees or suppliers You may work for a foreign firm in the US You may work for an American firm outside the US or a foreign one Ethnocentric managers believer that their native country culture language and behavior are superior to all others Parochialism narrow view in which people see things solely through their own perspective Polycentric manager take the view that native managers in the foreign offices best understand native personnel and practices and so the home office should leave them alone Geocentric managers accept that there are differences and similarities between home and foreign personnel and practices and that they should use whatever techniques are most effective Being an effective road warrior Lesson 1 Frequent travel may be needed because personal encounters are essential Lesson 2 Travel may be global but understanding must be local Lesson 3 Frequent travel requires frequent adjustments Why companies expand internationally 1 2 3 4 5 Availability of supplies raw materials resources intellectual capital etc New markets great demand enter before competition Lower labor costs ex Maquiladoras Access to finance capital Avoidance of tariffs and important quotas Challenges culture language laws customs time zones geographic distance currency product configurations Global outsourcing using suppliers outside the US to provide labor goods or services Importing company buys goods outside the country and resells them domestically Exporting company produces goods domestically and sells them outside the country Countertrading bartering goods for goods Licensing firm allows a foreign company to pay it a fee to make or distribute the firm s product or service Franchising firm allows a foreign company to pay it a fee and a share of the profit in return for using the firm s brand name and a package of materials and services Joint ventures formed with a foreign company to share the risks and rewards of starting a new enterprise together in a foreign company Also known as strategic alliance Wholly owned subsidiary foreign subsidiary that is totally owned and controlled by an organization Greenfield venture foreign subsidiary that the owning organization has built from scratch Tariffs customs duty or tax levied mainly on imports Import quotas limits on the numbers of a product that can be exported Embargoes complete ban on the import or export of certain products Dumping foreign company exports products at lower price than home country World Trade Organization designed to monitor and enforce trade agreements Agreements are based on the General Agreement on Tariffs and trade Consists of 153 countries World Bank purpose is to provide low interest loans to developing nations for improving transportation education health and telecommunications International Money Fund designed to assist in something the flow of money between nations Trading bloc group of nations within a geographic region that have agreed to remove trade barriers with one another Also known as an economic community 2 worldviews Global integration directive mass production push keep control Local responsiveness supportive customize pull relinquish control Advantages disadvantages of global expansion Exporting Low cost test waters Face tariffs cost of logistics not always cheapest option Licensing franchising Low cost risk Loss of trade secrets or service quality control Subsidiary Protect trade secrets keep management control High cost risk Joint venture Share cost risk leverage local know how Loss of trade secrets loss of management control