Transcript Business 3 - Glendale Community College

International
Business
Lecture 1:
The business enterprise
in the international
environment:
introduction
International Business: Challenges in a Changing World
Aims of the lecture
To identify key characteristics of international
business
To appreciate the role of entrepreneurship
To gain an understanding of the nature of the
company, along with roles within the company
To identify the main business functions of the
organization in the international context
To highlight the role of co-operative arrangements in
international business
To gain an overview of key players in the international
business environment
International Business: Challenges in a Changing World
Figure 1.1:
Comparison of the local, national and international business
International Business: Challenges in a Changing World
Seeking the
Customers Products Customers
Size
Local
business
National International
business
business
Small
local firm
Countrywide
organization with
local and regional
units
Organization
based in a home
country with
foreign and
regional links
Local
customers
Diverse
customers within
the national
environment
Domestic and
foreign
customers
Sourced
through local
suppliers
More
Sourcing of
complex products products across
and distribution national borders
Personal relations
for operations
and for reaching
the customers
Use of national
media to reach
the customers
Global media to
manage international activities
and reach
customers
International Business: Challenges in a Changing World
Figure 1.2:
Dimensions of the international environment
International Business: Challenges in a Changing World
Entrepreneurship
• Successful entrepreneurship involves identifying opportunities,
pursuing new ideas and securing financial support.
• It includes start-up businesses, as well as the re-focusing of
existing enterprises.
• Levels of entrepreneurial activity differ from country to
country, and are influenced by culture.
• Governments can encourage (or discourage) entrepreneurs.
• The born-global company takes an international approach
from the outset.
International Business: Challenges in a Changing World
Small-to-medium size enterprise
(SME)
• An SME is usually defined as an organization employing fewer
than 249 employees.
• SMEs provide the bulk of jobs in most countries.
• The franchise provides a means for an SME to benefit from
the brand and support of an established MNE.
• Franchising is often used by MNEs as a means of international
expansion.
International Business: Challenges in a Changing World
Figure 1.3:
Early Stage entrepreneurial activity 2006
International Business: Challenges in a Changing World
Figure 1.4:
The global
entrepreneur
International Business: Challenges in a Changing World
Strategic Crossroads 1.1: McDonald’s (page 11)
What reasons lie behind the comparative success of McDonald’s
franchise outlets over the company-owned ones?
In the franchise outlets, the franchisee invests more of his or her own
resources and has a more entrepreneurial approach to the business.
Managers of the company-owned outlets, by contrast, have less sense of
ownership and a lower level of entrepreneurial drive. This question can be
broadened into a discussion of an entrepreneurial approach generally, which
can bring in country differences in entrepreneurial environments.
How does the development license fit in with McDonald’s overall
revitalization program?
The nature of the new developmental licenses should be highlighted at the
start. They provide that the underperforming outlets should be sold to local
entrepreneurs, who would invest their own capital to a greater extent than
under McDonald’s usual arrangements. The new owners would be imbued
with a greater entrepreneurial approach, but would still benefit from the
strong brand and supply chain arrangements. Whether these new owners
deliver improved financial performance depends on their competitiveness in
their local markets. McDonald’s executives are stressing the importance of
the revitalization program to win new customers. They look to the new
owners to deliver these improvements, reflecting the success of the
revitalization program in the US.
International Business: Challenges in a Changing World
Dynamics of the company
• Forming a company offers advantages of separate
legal identity to the owners.
• Companies are registered in particular countries,
in accordance with their national laws.
• Private companies are often family owned.
• In contrast, public companies …
– Have numerous shareholders and tradable shares
– Have a chief executive officer (CEO) and directors
who are accountable to the shareholders
– Are increasingly international in their ownership
profiles
International Business: Challenges in a Changing World
Figure 1.5: Roles within the public company
International Business: Challenges in a Changing World
Figure 1.6:
Changing ownership of UK equities
International Business: Challenges in a Changing World
The multinational enterprise
(MNE)
• Pursues opportunities and co-ordinates
businesses across national borders.
• As it grows in size, it evolves a more complex
organizational structure, often based on parent
company and subsidiaries.
• MNEs differ in the degree of centralized control or
local autonomy in various locations.
International Business: Challenges in a Changing World
Figure 1.7:
MNE multi-tiered ownership structure
International Business: Challenges in a Changing World
International business functions
• International operations
• Accounting and finance for international business
• International marketing
• International HRM
• Research and development (R&D)
◊ These functions may be centralized or
decentralized, depending on the organization’s
overall culture and strategy.
International Business: Challenges in a Changing World
Figure 1.8:
Business
functions in the
international
context
International Business: Challenges in a Changing World
Corporate governance
• Corporate governance concerns the company’s decisionmaking structures and processes.
• ‘Shareholder’ model predominates in the US and UK:
– It has a single-tier board and focuses on maximizing
shareholder value.
• ‘Stakeholder’ model is prevalent in the 2-tier boards in
Europe and Japan:
– It takes a wider perspective, encompassing employees in
particular.
• Wider stakeholder interests are now recognized in most
companies, as corporate social responsibility (CSR)
impacts on governance.
International Business: Challenges in a Changing World
Figure 1.9:
Executive managers and company stakeholders
International Business: Challenges in a Changing World
Alliances, networks and joint
ventures
• All are co-operative arrangements which contribute to
international strategy.
• Alliances (often called strategic alliances) offer opportunities
for pooling resources and skills in differing environments.
• Networks may be intra-firm or inter-firm; both organizations
and individual staff can benefit. They can be important for
SMEs in their strategic expansion.
• Joint ventures offer international opportunities through the
formation of a new enterprise, benefiting from the strengths
of both founding partners.
International Business: Challenges in a Changing World
Figure 1.10:
Alliances, networks
and joint ventures
International Business: Challenges in a Changing World
Key players in the
international environment
• National governments, which play both direct and indirect
roles.
• Regional institutions, such as the European Union (EU).
• International governmental organizations, such as the
World Trade Organisation (WTO).
• Voluntary organizations, such as trade unions, nongovernmental organizations (NGOs).
• Stakeholders in the MNE.
International Business: Challenges in a Changing World
Figure 1.11: MNE interactions
International Business: Challenges in a Changing World
Figure 1.12:
The European
Union and
eurozone
International Business: Challenges in a Changing World
Conclusions
• Businesses change in their organization and strategy as they
become more international.
• As more countries become integrated into global business,
MNEs face challenges in adapting to diverse cultural
environments.
• Firms’ interactions with business partners, governments,
international organizations and groups in society grow as their
operations develop in different locations.
• Managing stakeholder interests, including shareholders,
customers and communities, is a key challenge for today’s
international managers.
International Business: Challenges in a Changing World