Transcript Διαφάνεια 1

COURSE: GLOBAL BUSINESS MANAGEMENT
MGT610
DR. DIMITRIS STAVROULAKIS
PROFESSOR OF HUMAN RESOURCE MANAGEMENT
DEPT OF ACCOUNTING
TEI OF PIRAEUS
Unit 2: Globalization of business
Training Material: Textbook (3-15 & 39-48).
World largest companies in 2009
(http://money.cnn.com/magazines/fortune/global500
/2009/
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1- Wal-Mart Stores
2- Exxon Mobil
3- Royal Dutch Shell
4- BP
5- Toyota Motor
6- Chevron
7- ING Group
8- Total
9- General Motors
10-ConocoPhillips
Nationalities of World’s
Largest Companies (2008).
1. U.S. - 153
2. Japan - 64
3. France - 39
4. Germany - 37
5. Britain - 34
6. China - 29
7. South Korea -15
8. Canada - 14
8. Switzerland - 14
10. Netherlands - 13
11. Spain - 11
12. Italy - 10
13. Australia - 8
14. India - 7
15. Sweden - 6
15. Taiwan - 6
17. Mexico - 5
Source: Forbes
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GREECE
DATA
GREECE
o Number of days to establish a foreign
business: 22
o Number of procedures: 18
RANKING
o Global Competitive Index: 83/139
o Ease of doing business: 100/183
o Ease of starting a business: 135/183
o Protecting investors: 155/183
o Getting electricity: 77/183
o Getting credit: 78/183
o Registering property: 150/183
o Trading across borders: 84/183
o Enforcing contracts: 90/183
o Construction permits: 41/183
o Resolving insolvency: 57/183
Ease of doing business (ranking)
Drivers for globalization of business
 Economic development & technical innovations
 Facilitation of cross-border trade & capital
transfer
 Development of services that support
international business (transports,
communications)
 Consumer demands
 Intensified competition of companies at the
international level
Drivers for globalization of business (cont)
 Lower or no tariffs within commercial zones (EU,
NAFTA, ASEAN)
 Intercultural understanding through common
language (e.g. Spain-Mexico-Argentina, PortugalBrazil)
 Shortening product cycles
Factors deterring business from going global
 Strong local culture & traditions
 Local religions
 Political instability
 Trade barriers
 National trade union mentality &
practices
Positive side of MNCs
 Promote economic growth
 Provide lower-priced, higher-quality
goods to consumers
 Bring funds & capital
 Transfer technology, including
organizational, management and
marketing skills
 Pay higher wages (increase productivity)
 Introduce competition to domestic firms
 Offer job openings
Negative Side of MNCs
 Poor citizens of host countries
 A permissive attitude on the part of the host may generate
exploitation of workers & destruction of the environment
 Foreign superpowers may destroy local business
 i.e. soft drinks, Coke and Pepsi versus small local
manufacturers
 There are concerns among small shopkeepers when Wal-Mart
comes to town
 In many European cities under 100,000 local authorities
forbid the installation of big commercial centers
 Market power
 After local firms are driven out, MNCs can exert market
pressure and increase prices
 MNCs can easily create oligopolies and barriers to entry
 When confronted with new regulations or trade union activity
they can easily move away (or threaten to). Greece: Pirelli,
Goodyear, Triumph, Levis, Palco-Schiesser etc.
Negative Side of MNCs (cont):
=Balance of payments
-Initially positive, then negative (import of raw materials &
resources, repatriation of profits)
=Tax avoidance
=Involvement in local politics
-Stiglitz provides examples of U.S. government pressuring
governments (Indonesia) to provide privileges to MNCs
-Puppet governments formed through the power of
multinationals (bananaland) - e.g. United Fruit in Guatemala &
Chile
-Greece under pressure to purchase armament
-World Bank pressuring Pakistani government to buy high
priced power from MNC
=MNC established with privilege (preference to state supplies,
cheaper energy & resources than local competitors)
What should go right and what can go wrong in MNC-host
country relationships
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MNC Stakeholders
Go International or Stay Domestic?
Critical Questions.
 Availability of international demand for company’s products?
 Can products be modified to suit foreign market?
 Is foreign market business climate receptive to imports?
 Does the company have necessary skills, knowledge, capacity,
financial, and other resources to do business abroad?
 Do benefits outweigh costs ?
 Theoretical benefits of global expansion may prove
extremely difficulty to reap in practice.
 Going global is not necessarily good for business.
 Not going global is not necessarily bad for business
Internationalization motives
INTERNAL
EXTERNAL
PROACTIVE/
AGGRESSIVE
(PUSH
FACTORS)
 PROFIT AND GROWTH
GOALS
 MANAGERIAL EXCELLENCE
 MARKETING ADVANTAGE
 ECONOMIES OF SCALE
 UNIQUE PRODUCT /
TECHNOLOGY
 KNOW-HOW & COMPETENCE
 FOREING MARKET
OPPORTUNITIES /
MARKET INFORMATION
 ACCESS TO R&D, KNOWLEDGE
CLUSTERS
REACTIVE/
DEFENSIVE
(PULL
FACTORS)
 RISK REDUCTION THROUGH
DIVERSIFICATION
 EXTEND SALES OF
SEASONAL PRODUCTS
 EXCESS CAPACITY/
OVERPRODUCTION
 UNEXPECTED FOREIGN
ORDERS
 DOMESTIC MARKET:
SMALL AND SATURATED
 COMPETITIVE PRESSURES
 EXISTING RELATIONSHIP WITH
INTERNATIONAL CUSTOMERS
(E.G. SUBCONTRACTORS OF APPLE)
Motives for International Expansion
 Market Share
 Domestic market may lack the size to support
efficient scale manufacturing facilities
 Return upon Investment
 Large investment projects require expansion to
global markets to compensate costs
 Weak patent protection in many countries
renders rapid overseas expansion necessary in
order to preempt imitators
Exploitation of company capabilities
 Knowledge + R&D
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Motives for International Expansion (cont)
 Economies of Scale
 Expanding size or scope of markets helps to
achieve economies of scale in manufacturing,
marketing & distribution
 Costs are spread over a larger sales base
 Profit per unit is increased
 Location Advantages
 Low-cost markets aid in developing competitive
advantage
 Easier access is achieved with regard to:
• Raw materials • Key customers
• Lower cost labor • Energy
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Definitions of MNCs
 OECD: “An enterprise that engages in foreign direct investments
(FDIs) and owns or controls value-adding activities in more than
one country”
 United Nations (1973): An enterprise “which controls assets,
factories, mines, sales offices, and the like in two or more
countries”.
 United Nations (1984): An enterprise:
 comprising entities in two or more countries, regardless of the
legal form and fields of activity in these entities
 which operates under a system of decision making permitting
coherent policies and a common strategy through one or more
decision-making centers
 in which the entities are so linked, by ownership or otherwise,
that one or more of them may be able to exercise a significant
influence over the activities of the other, in particular to share
knowledge, resources, and responsibilities.
Definitions of MNC * (cont)
 Bartlett & Ghoshal: Two preconditions:
1. Substantial FDI
2. Active, coordinated management
 “What really differentiates MNC from ordinary
business, is that it creates an internal organization to
carry out key cross-border tasks and transactions
internally rather than depending on trade through
the external markets” (p. 10)*.
 According to Bartlett & Ghoshal, most companies
involved in activities abroad should not be
considered MNCs, since they are not managing their
subsidiaries actively or in a coordinative manner.
Definitions of MNC * (cont)
 Any internationally active company must fulfill
3 important strategic goals:
 GLOBAL EFFICIENCY in existing activities
 INTERNATIONAL FLEXIBILITY and LOCAL
RESPONSIVENESS (appropriate management
of risks and opportunities) THINK GLOBAL,
ACT LOCAL
 WORLD-WIDE LEARNING through its
exposure to local contexts