MANGMT 3000 1st Edition Lecture 6Outline of Last LectureI. GoalsII. PlansIII. MBOOutline of Current LectureI. GlobalizationCurrent LectureGlobalization- Trend of the world economy toward becoming a more interdependent systemGlobal 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 anotherE-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 2011Global economy- increasing tendency of the economies of the world to interact with one another as one market instead of many national marketsPositive effects- more markets for American exportsNegative effects- vast surplus funds form global investments flowed into US that were invested badly in subprime mortgagesMinifirms operating worldwide:-Small companies can get started more easily-Small companies can maneuver fasterMegafirms (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 oneEthnocentric managers- believer that their native country, culture, language and behavior, are superior to all othersParochialism- narrow view in which people see things solely through their own perspectivePolycentric 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 aloneGeocentric 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 essentialLesson 2: Travel may be global, but understanding must be localLesson 3: Frequent travel requires frequent adjustments Why companies expand internationally:1. Availability of supplies (raw materials, resources, intellectual capital, etc.)2. New markets (great demand, enter before competition)3. Lower labor costs (ex. Maquiladoras)4. Access to finance capital5. Avoidance of tariffs and important quotasChallenges- culture, language, laws, customs, time zones, geographic distance, currency, product configurationsGlobal outsourcing- using suppliers outside the US to provide labor, goods, or servicesImporting- company buys goods outside the country and resells them domesticallyExporting- company produces goods domestically and sells them outside the countryCountertrading- bartering goods for goodsLicensing- firm allows a foreign company to pay it a fee to make or distribute the firm’s product or serviceFranchising- 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 servicesJoint 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 allianceWholly-owned subsidiary- foreign subsidiary that is totally owned and controlled by an organizationGreenfield venture- foreign subsidiary that the owning organization has built from scratch Tariffs- customs duty, or tax, levied mainly on importsImport quotas- limits on the numbers of a product that can be exportedEmbargoes- complete ban on the import or export of certain productsDumping- foreign company exports products at lower price than home countryWorld Trade Organization- designed to monitor and enforce trade agreements-Agreements are based on the General Agreement on Tariffs and trade-Consists of 153 countriesWorld Bank- purpose is to provide low-interest loans to developing nations for improving transportation, education, health, and telecommunicationsInternational Money Fund- designed to assist in something the flow of money between nationsTrading bloc- group of nations within a geographic region that have agreed to remove trade barriers with one another-Also known as an economic community2 worldviews:-Global integration directive, mass production, push, keep control-Local responsiveness supportive, customize, pull, relinquish control Advantages/disadvantages of global expansionExporting:Low cost, “test waters”-Face tariffs, cost of logistics, not always cheapest optionLicensing/franchising:-Low cost/risk-Loss of trade secrets or service quality controlSubsidiary:-Protect trade secrets, keep management control-High cost/riskJoint venture:-Share cost/risk, leverage local know how-Loss of trade secrets, loss of management