《国际商务(International Business)英文全套完整课件》由会员分享，可在线阅读，更多相关《国际商务(International Business)英文全套完整课件（270页珍藏版）》请在金锄头文库上搜索。
1、International BusinessSession 1 - GlobalizationTwo perspectives of studying international business Firstly, the comparison of the business environments of different countries and regionsSecondly, the study of multinationalsSession One - Globalization Introduction -Global companies are common at pres
2、ent An outstanding example the line of retailerGlobal companies use different strategiesAhold of Holland , “going globe with a local face”Wal-mart of US, “global retail brand”Session One - GlobalizationWhat is GlobalizationIt refers to the shift toward a more integrated and interdependent world econ
3、omy.With globalization, the previously remote world has turned into “the global village” Session One - GlobalizationGlobalization has two main components- Globalization of Market- Globalization of Production Sometimes, Globalization of Trade is also frequently mentioned as a third componentsSession
4、One - GlobalizationGlobalization of Market- It is referred to the merging of historically distinct and separate national market into one huge global market.- Standard products helped creating the global market. Especially those giants Citicorp, McDonalds, Coca-cola,etc.- The most global markets are
5、those industrial products and materials, but not consumer goods, due to different tastes and preferences.Session One - GlobalizationNational market vs International marketSince many companies competing in the international market, to talk about the national market as “the American market”, or “the G
6、erman market” is meaningless.Coca-cola vs Pepsi, Ford vs Toyota, Boeing vs AirbusSession One - GlobalizationThe Globalization of Production - It refers to the sourcing of goods and services from locations around world to take the advantage of national differences in cost and quality of factors of pr
7、oduction - probably, in China for labor; in Canada for forest resources; in Saudi Arabia for oil resources; and in the America for capital and/or technologySession One - GlobalizationAdvantages of the Globalization of production - reducing the overall cost- improving the quality or functionality of
8、the product one of the best examples Boeing Boeing 777 - 132,500 major components, 545 suppliers around the world (including China)Session One - GlobalizationOutcomes of the Globalization of Production results in the creation of products that are global in nature called “global product”makes the cou
9、ntry origin of production ambiguous Example cotton cultivated in Russia; spun in India; Woven in China; Dyed in German; Tailored in Mexico; and finally sewed in BrazilSession One - GlobalizationDrivers of GlobalizationFirstly: Declining Trade & Investment BarriersTariff is mainly to protect its dome
10、stic industry from foreign competitors.This “beggar thy neighbor” retaliatory policy was common during the 1930s the Great Depression period.Session One - GlobalizationSituations changed since the 1940s. GATT established in 1947, and eight rounds of negotiations were held, resulting only 3.9% averag
11、e tariff rate for most of the developed countries.GSP was adopted since 1971(which was reached agreement on the Second Session of the UNCTAD)Session One - GlobalizationTo The first regional economic integration was established in Europe EEC, based on Roman Convention, signed between six countries in
12、 1957, and came into force in 1958.Session One - GlobalizationA dramatic increase in bilateral investment treaties were also signed.The average FDI yearly increased from about $25 billion in 1975 to a record of $1.3 trillion in 2000.In 2000, China received nearly $50 billion foreign investment, bein
13、g the biggest recipient of FDI.By 2000, 60,000 parents companies had 820, 000 affiliates in foreign market.Session One - GlobalizationSecondly, The role of Technological ChangeTo Microprocessor & Telecommunications, such as satellite , optical fiber, wireless technology, greatly reduced the cost of
14、global communication .The Internet and World Wide Web- formed a backbone of Tomorrows global economic, made it possible for small business firms to access to the world market. In 2000, Web-based transaction reached $657 billion , mainly in the form of B2B(e-commerce), rather than the B2C(e-business)
15、.Session One - Globalizationtransportation technology- increased the speed- reduced the costAll made it possible for managers to take care of worldwide factories in the same time.The use of containers has been one of the most significant revolution.Session One - GlobalizationThe Changing Demographic
16、s of the Global EconomyThe changing world output and world trade pictures- China, South Korea,etc., increasing rapidly as being regarded as potential economic colossus.- The World Bank has estimated that by 2020 the Chinese economy could be larger than that of the U.S., if current trends continue. -
17、 for tomorrows business opportunities.Session One - Globalizationthe Changing Foreign Direct Investment Picture- FDI beginning in 1970s- European & Japanese firms began to shift labor-intensive production to developing counties.- also, as a mean of hedging against unfavorable currency movements and
18、possible imposition of trade barriers (called Tariff Factory)Session One - Globalization the Changing Natures of Multinationals- Non U.S. multinationals and Mini-multinationals appeared- Although the Worlds largest 100 multinationals are dominated by developed countries, many multinationals from dev
19、eloping countries are also shown on the list, including Hutchison Whampoa of H.K.Session One - Globalization the Changing of World OrderBetween 1989 and 1991, remarkable democratic revolution swept in the Communist World.Market Economy has been a dominant mechanism since than.Session One - Globaliza
20、tionThe globalization debate- brings with it risk of its own- even from a purely economic perspective, globalization is not all good.Session One - GlobalizationGlobalization, Jobs and Income- Huge wage differences - Statistics shown that since 1980 lowest 10% Americans have seen a drop of wage by 20
21、%, while the top 10%, increased by 10%.- Most people argued this is because of the importing cheap products from developing countries.Session One - GlobalizationSolution to the wage differences A solution to the problem of the declining of the incomes is to be found not in limiting free trade and gl
22、obalization, but to increase the investment in education and to reduce the supply of unskilled workers.Session One - GlobalizationGlobalization, Labor policies and the Environment- the second source of concern of globalization is the inadequate protection of labor forces and the environment.- Howeve
23、r, supporters of free trade and the globalization pointed out that tougher environment regulations & stricter labor standards go hand in hand with economic progress.Session One - GlobalizationGlobalization, and National Sovereignty- another concern from the critics of globalization is todays increas
24、ingly interdependent global economy shifts economic power away from national governments towards supranational organizations, such as the UN and WTO.- supporters argued that these bodies are aimed at serving the collective interests of the members and the relevant decisions are made by the members.S
25、ession One - GlobalizationGlobalization and Worlds Poor- The gap between the rich and the poor nations has gotten wider along with the progress of globalization.- Supporters also argued that many poorest countries have witnessed great transformation, especially in the Southeast Asia.- Poorer conditi
26、ons have varied from country to country, such as war, totalitarian government, etc., none of these related to the globalization.Session One - GlobalizationSUMUPManaging in the Global MarketSession One - GlobalizationManaging international business is different from managing in a purely domestic mark
27、et:countries are different. Language/law/culturethe range problems of international business are wider. Long distance shipment/ different modes of enteringhas limitations imposed on by government intervention. Investment area/percentageinvolving monetary issuesSession 2 National difference in Politi
28、cal EconomyPEST FrameworkPoliticalEconomicSocialTechnologicalSession Two National difference in Political EconomyPurpose of this Session:To develop an awareness of and appreciation for the significance of country differences in political systems, economic systems, legal systems and national culture
29、(which will be dealt with in the following session)To describe how these systems are evolving and to draw out the implications of these changes for the practice of international business.Session Two National difference in Political EconomyPolitical Systems- The economic and legal systems of a countr
30、y are shaped by its political system- by political system we mean the system of government in a nationSession Two National difference in Political EconomyTwo related dimensions of assessing the political system:collectivism as opposed to individualismdemocratic as opposed to totalitarianSession Two
31、National difference in Political EconomyCollectivism and IndividualismCollectivism refers to a political system that stress the primacy of collective goals over individual goalsnormally regarded as “the good for society” or to “the common good”Advocacy of collectivism can be traced to the ancient Gr
32、eek philosopher Plato(427-347BC)as the basis for socialists Session Two National difference in Political EconomySocialismKarl Marx(1818-1883) was the founder of Socialism. He argued that the few benefit at the expense of the many in a capitalist society where individual freedoms are not restrictedAl
33、though the capitalists accumulate considerable wealth, Marx argued that the capitalists expropriate for their own use the value created by workers, while paying for the workers only subsistence wages in return.Session Two National difference in Political EconomyIn the early 20th century, the sociali
34、st ideology split into two camps:the Communist, socialism can be achieved only through violent revolution and totalitarian dictatorship - more influential in Asiathe social democrats, to achieve socialism by democratic means more influential in West nationsSession Two National difference in Politica
35、l EconomyIndividualismBased on the philosophy that an individual should have freedom in his or her economic and political pursuitscan be traced to another ancient Greek philosopher Aristotle (384-322BC), Platos discipleThe philosophy was refined by many British philosophers including David Hume, Ada
36、m Smith, John Stuart Mill, and it was explicitly expressed in the Declaration of IndependenceSession Two National difference in Political EconomyThe ground rules of individualism- individual economic and political freedomSession Two National difference in Political EconomyDemocracy and TotalitarianD
37、emocracy government is formed by elected representativesTotalitarian government is formed in which one person or party exercises absolute controlSession Two National difference in Political EconomyGrey Areasusually democracy and individualism go hand in hand, so as the collectivism and totalitarian.
38、however, it is possible to have a totalitarian state with some degree of individualismSession Two National difference in Political EconomyDifferent forms of Totalitarianismcommunist totalitariantheocratic totalitariantribal totalitarianright-wing totalitarianSession Two National difference in Politi
39、cal EconomyEconomic SystemThere is a connection between political ideology and economic systemsFree market economic systems are more likely to be found in countries where individual goals are given primacy over collective goals.Session Two National difference in Political EconomyFour broad types of
40、economic systemsMarket EconomyCommand Economy (planned economy)Mixed Economy State-directed Economy - it differs from a mixed economy in that the state does not routinely take private enterprises into public ownership. It directs private investments through “industrial policy”Session Two National di
41、fference in Political EconomyIntellectual Foundation for State-Directed EconomyInfant Industry TheoryIn some industries, economies of scale are so large that the prevailing domestic industry can only be developed through industrial policy to overcome the disadvantages.Session Two National difference
42、 in Political EconomyNew Trade Theory In some industries, foreign competitors established advantages only because its early entry of the industry (so- called first-mover advantage), so the industrial policy can establish a leading position in an emerging industry or to offset the advantages of forei
43、gn competitors.Session Two National difference in Political EconomyLegal SystemsIt refers to the rules, or laws, that regulates behaviors along with the process by which the laws are enforced and through which redress for grievances is obtained.The legal system is influenced by the prevailing politi
44、cal systems.Session Two National difference in Political EconomyImportant areas of law relating to international businessproperty rightsintellectual propertyproduct safety and product liabilitycontract lawSession Two National difference in Political EconomyStates in transitionThe political economy o
45、f many countries has changed radically since the late 1980s.First, a wave of democratic revolution swept the world.Second, there has been a strong move away from centrally planned and mixed economies toward a more free market economic model.Session Two National difference in Political EconomyImplica
46、tions for businessFirst, the political, economic, and legal environment of a country clearly influences the attractiveness of that country as a market/or investment site.The benefit, cost, and risks associated with of doing business in a country are a function of that countrys relevant systems.Sessi
47、on Two National difference in Political EconomySecond, the political, economic, and legal systems of a country can raise important ethical issues that have implications for the practice of international business.There are three important issues of much debate:- violating human rights- suing differen
48、t product standards/ child labor- corruption (Do the Romans do?) Session 3 Differences in CulturesWhat is culture?Geert Hofstede, an expert on cross-cultural differences and management, defined culture as “the collective programming of the mind which distinguishes the members of one human group from
49、 another.”Session Three Differences in CulturesTo make it simple: Culture is the collection of values, beliefs, behaviors, customs, and attitudes that distinguish a society. Among which values and norms are the key elements of a culture.Session Three Differences in CulturesValues and NormsThe term S
50、ociety is used to refer to a group of people who share a common set of values and norms.By VALUES we mean abstract ideas about what a group believes to be good, right, and desirable. Put differently, values are shared assumptions about how things ought to be.Session Three Differences in CulturesValu
51、es form the bedrock of a culture. They may include a societys attitudes towards such concepts as individual freedom, democracy, truth, justice, loyalty, social obligation, love, sex, marriage,etc. Session Three Differences in CulturesBy NORMS we mean the social rules and guidelines that prescribe ap
52、propriate behaviors in particular situations.Norms are the social rules that govern peoples actions toward one another.Session Three Differences in CulturesTwo categories of NormsFolkways, routine conventions of everyday life, such as dress code in different situations; eating with correct utensils.
53、People who violate folkways may be thought of as eccentric, but not to be considered evil or bad.Session Three Differences in CulturesMores, as the central to the functioning of a society and to its social life.- Mores including such factors as indictment against theft, incest- People who violate mo
54、res can bring serious retribution. In many societies, certain mores have been enacted into law.Session Three Differences in CulturesCultures, Society and the Nation-stateThere is not a strict one-to-one correspondence between a society and a nation-state;Sometimes, one nation-state can have several
55、cultures. Canada, U.S.A.Similarly, one culture may embrace many nations, such as the Islamic Society.The Determinants of Culture Norms andValuesReligionSocialStructureLanguagesEducationsPoliticalPhilosophyEconomic PhilosophySession Three Differences in CulturesSocial Structure refers to a societys b
56、asic social organization.Two dimensions are among the most important aspects when explaining the basic unit of an organization.One is the degree to which the basic unit of an organization is the individual, as opposed to the group; Another is the degree to which a society is stratified into classes
57、or castes.Session Three Differences in CulturesPros and Cons for the individual vs. groupObviously, In many West societies, the individual is the basic building block of social organization. While the example of the other extreme is the Japanese culture.Pros mobility, entrepreneurialCons lack of roy
58、altySession Three Differences in CulturesSocial Stratification- All societies are stratified on a hierarchical basis into social categories. These strata are usually formed based on family background, occupation, income, etc.- We use the term Society Mobility to refer the extent to which individuals
59、 can move out of the strata into which they are born.Session Three Differences in CulturesBusiness Implications for social stratificationIn the U.S. people are easily accepted for his or her own economic achievement. While in the U.K., the person may still not be accepted by others of that class due
60、 to accent or background.Adverse result may occur in more rigid mobility societies. - lack of cooperation ,resulting high management costSession Three Differences in CulturesReligious and Ethical SystemsReligion a system of shared beliefs and rituals that are concerned with the realm of the sacred.E
61、thical systems a set of moral principles, or values, that are used to guide and shape behavior.Most of the worlds ethical systems are the product of religions.Session Three Differences in CulturesDifferent Forms of RegionsRoman Catholic (18.8) Southern Europe and Latin AmericaEastern Orthodox (3.1%)
62、 Greece & RussiaProtestant (10.1%) Further split of ChristianityIslam (17.7%) Middle East & Far EastHinduism (13.3%) Indian SubcontinentBuddhism (5.7%) Central, Southeast AsiaSession Three Differences in CulturesConfucianismfounded in the 15th century B.C.spread over mainly in China, Korea and Japan
63、NOTE: Confucianism is not a religion, it is built around comprehensive ethical code that sets down guidelines for relationships with others.The need for high moral and ethical conduct and loyalty to others are the central. Session Three Differences in CulturesEconomic Implications of CultureCross cu
64、lture literacyReligion is paramount in all areas of life in Islam society. Muslim rituals requires 5 times a day.Session Three Differences in CulturesEconomic Implications of CultureCulture & Competitive AdvantagesIslam principle prohibits or receipts of interests (deemed as usury) . So how bank wor
65、ks ?Japanese success group affiliation/ loyalty/ reciprocal obligations/ honesty/ educationSession Three Differences in CulturesEconomic Implications of CultureCulture and Business EthicsHindu emphases the importance of individuals spiritual achievements, instead of material achievements (it perceiv
66、e the pursuit of material well-being as making the attainment of nirvana more difficult.How about Confucianism?Session Three Differences in CulturesLanguageSame language, same business culture?Lingua FrancaTranslationSession Three Differences in CulturesCommunication- Non-verbal communication- gift
67、giving and hospitalitySession Three Differences in CulturesCultural Shock CycleNoveltyStruggling to CommunicateFrustration, Confusion & DepressionAdaptationCulture and the Workplace the study made by Geert Hofestede how culture related to values in the workplace:Power distanceIndividualism vs. colle
68、ctivismUncertainty avoidanceMasculinity vs. femininityFifth dimension expanded “Confucian dynamism” (sometimes called long-term orientation)Sum Up: The main characteristics of Chinese Business CultureChinese tend to be modest, not try to be abrupt toward an issue which exists different views. Theref
69、ore, when a Chinese smiles and nod his or her head when you are talking, only means he or she is listening, may not necessarily agree with you.Chinese expected to establish good relationship before doing real good business, good relationship, or “Guanxi” is the basis for business. In many places, th
70、e Chinese host will invite you to the dinner or lunch before any business talks. A person with good relationship means the person is worthy of trust. “Even no business concluded, friendship is extended ” is popular among Chinese businesspeople.Chinese tend to discuss the broad principles first befor
71、e move to more details of the contract. (for instance, the tenure of the Joint Venture, the percentage of the investment for both of the parties)Chinese are polite and tend to be puncture on the meeting (which means respect to the others), the only exception is for the girl in a date, which is expec
72、ted by the boy. (If you are going to be respected by others, you should respect other people first.)When you are asking a Chinese to make an concession, youd better to prepare for the correspondent concession in a deal. “reciprocal”, “mutually benefit”, “win-win games” are the wordings will never be
73、 over emphasized, even in the governmental level of negotiation.Session Three Differences in CulturesCase StudyJohn HigginsP.78Session 4: Ethics in International BusinessEthics is the study of morality and standards of conduct. - MNCs should be responsible to their employees. - MNCs should be respon
74、sible to the communities.Ethics is important in the study of international management, because ethical behavior in one country sometimes is viewed as unethical behavior in other countries.Ethical Issues in International BusinessEmployment Practice- same working condition? (many private and foreign i
75、nvestment companies forced the workers to work 6 days a week)- same pay? (in some of the foreign companies, the expiates receives more than 10 times income compared to the Chinese colleagues although they have the same working responsibilities )Ethical Issues in International BusinessHuman Right- In
76、vestment in South Africa before 1994 during the days of white rule and apartheid. (How about increasing investment in China)- Human right is a sensitive issue, particularly in China, United States release every year the report of human right conditions on different countries (more than 190), but nev
77、er disclose its own conditions. As response, China release US Human Right Report since 1999. Family planning system is one of the issues (the right of giving birth and the obligation of population control)- Giving bribes to the Iraq officials between 1997 and 2003 under the oil for food program, man
78、y famous multinationals involved, such as DaimlerChrysler, Siemens, Volvo, Weir Group, etc.- “Head tax” toward some 81,000 Chinese immigrants a century ago to help build the Canadian Pacific Railway, though the Canadian government apologized in 2006 in an atonement ceremony.Ethical Issues in Interna
79、tional BusinessEnvironment Protection- should the developed country to move the polluted industries into the developing country? (toxic gas leakage in Bolpal, India of an American company investment by Unicarbide, causing more than 2000 death and 200,000 affected in 1984. )- In order to avoid the “t
80、ragedy of the commons”, the developed countries should take more responsibilities, since they are more responsible for the pollution in their economic development and the transferring those industries into the developing countries.Ethical Issues in International BusinessCorruption- It is a problem i
81、n almost every society in history and it continues to be one today.- The Iraq case under the oil for food program.- Indonesia case: much of the $43billion rescuer package from the IMF went into the coffer of Suharto and his relatives in 1997. - Lockheeds case - $12.5 million payments to Japanese age
82、nts and government officials to secure a large order from Nippon Air in 1970s.- US Foreign Corrupt Practice Act, 1977- OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions , went to force in 1999.- In China, every one knows “guanxi”. There is a phra
83、se “business is business; friend is friend”, and “there is no real friend in business”Ethical Issues in International BusinessMoral Obligations- Social responsibilities of the multinationals “Noblesse Oblige”Ethical Dilemmas - What is the right way?The Roots of Unethical BehaviorEthicalBehaviorPerso
84、nalEthicsDecisionMakingProcessesOrganizationCultureLeadershipUnrealisticPerformanceExpectationsPersonal Ethics the generally accepted principles of right or wrong governing the conduct of individuals, it came from our parents, schools, religion and the media.Decision-making process businesspeople so
85、metimes do not realize they are behaving unethically.Organization Culture the values and norms shared among employees of an organization, some organization is build on values that emphasized greed and deception.Unrealistic Performance Expectations which forces the expatriate manager to attain the go
86、al only by cutting corners or acting in a an ethical manner.Leadership leadership help to establish the culture of an organization, and they set the example that others follow.Philosophical Approaches to EthicsStraw Man inappropriate guidelines for ethical decision making- The Friedman Doctrine: the
87、 only social responsibility of business is to increase profit, so long as the company stays within the rules of law.- Cultural Relativism: ethics are nothing more than a reflection of a culture and that firms should simply adopt the ethics of the cultures in which they operate.( When in Rome do as t
88、he Romans do.)- Righteous Moralism: the belief that a home-country standards of ethics are the appropriate ones for companies to follow in foreign countries.- Nave Immoralism: the belief that if a manager of a multinational sees that firms from other nations are not following ethical norms in a host
89、 nation, that manager should not either.Philosophical Approaches to EthicsUtilitarian and Kantian Ethics- Utilitarian Approaches to Ethics: the moral worth of actions or practices is determined by their consequences.- Kantian Ethics: the belief that people should be treated as ends and never as mean
90、s to the ends of others. People are not instrument, like machines. People have dignity and need to respected as such.Philosophical Approaches to EthicsRights Theories - a twentieth century ethical approach based on the belief that human beings have fundamental rights and privileges that transcend na
91、tional boundaries and cultures.Justice Theories- Ethical approaches that focus on the attainment of a just distribution of economic goods and services.Business Implications Hiring and PromotionOrganization Culture and LeadershipDecision-making ProcessesEthics OfficersMoral CourageCorporate Social Re
92、sponsibilityCorporate social responsibility (CSR) - The actions of a firm to benefit society beyond the requirements of the law and the direct interests of the firm.Nongovernmental organizations (NGOs) - Private, non-for-profit organizations that seeks to serve societys interests by focusing on soci
93、al, political, and economic issues such as poverty, social justice, education, health, and the environmentResponse to Social ObligationsUN Global CompactHuman Rights Principle 1: Support and respect the protection of international human rights within their sphere of influence. Principle 2: Make sure
94、 their own corporations are not complicit in human rights abuses.Labor Principle 3:Freedom of association and the effective recognition of the right to collective bargaining. Principle 4: The elimination of all forms of forced and compulsory labor. Principle 5: The effective abolition of child labor
95、. Principle 6: The elimination of discrimination with respect to employment and corruption.Response to Social ObligationsUN Global Compact continued Environment Principle 7: Support a precautionary approach to environmental challenges. Principle 8: Undertake initiatives to promote greater environmen
96、tal responsibilities. Principle 9: Encourage the development and diffusion of environmentally friendly technologies.Anti-corruption Principle 10: Business should work against all forms of corruption, including extortion and bribery.Session 5 International Trade Theory and ConceptsTwo goals of this s
97、ession:to review a number of theories that explain why it is beneficial for a country to engage in international trade.to explain the pattern of international trade that we observe in the world economy.Mercantilism It is the first international trade theory, emerged in the mid-16th century in Englan
98、d.Main representative is Thomas Men, his principle is reflected in his book Englands Wealth from International Trade regarded as the Bible of Mercantilism.Mercantilismthe assertion was that gold & silver were the mainstays of national wealth & essential to vigorous commerceunder the gold standard sy
99、stem, gold & silver were the currency of trade between countriesthe main tenet of Mercantilism was to maintain trade surplusimplication of Mercantilism no virtue in a large volume of trade per se, rather to maximize exports by subsidies, and minimize imports by tariffs and non-tariff barriers.Mercan
100、tilismAn inherent inconsistency in the Mercantilismpointed out by the classical economist David Hume Specie flow mechanismMercantilism as a bankrupt theory that has no place in the modern world?Absolute AdvantageAdam Smith (1723-1790) attacked the Mercantilism assumption that trade is a zero-sum gam
101、e (therefore is the game of beggar thy neighbor), instead , trade is a positive-sum game.In his 1776 landmark book An Inquiry into the Nature and the Causes of the Wealth of the Nations (briefly, the Wealth of Nations),absolute advantage theory was put forwardAbsolute AdvantageBefore Specialization
102、Wheat CottonLabor Used(day)Output(unit)Labor Used(day)Output(unit) U.K. 100 50 100 20 U.S.A. 150 50 50 20 Total 250 100 150 40Absolute AdvantageAfter SpecializationWheatCottonLabor used(day)Output(unit)Labor used(day)Output(unit)U.K. 200 100(50) (50)U.S.A. (50) 200 80(30)Total 200 100 200 80Comparat
103、ive AdvantageSuppose, one country has an absolute advantage in the production of all goods, specialization still exists ?David Ricardo (1772 1823) put forward the theory of the Comparative Advantage in his 1817 book Principles of Political EconomyComparative AdvantageExplanation Wine (days/unit) Cot
104、ton (days/unit) U.K. 90 80 Portugal 100 120Comparative AdvantageDomestic exchange rate:In Portugal 1 cotton = 1.2 wine, whileIn U.K. 1 cotton = 0.89 wineTherefore, in U.K. cotton is cheaper than in Portugal, it means U.K. has comparative advantage over the production of cotton, and Portugal has the
105、advantage on wineComparative AdvantageThe basic messages of the theory of comparative advantage are as follows:potential world production is greater with unrestricted free tradetrade is a positive-sum game in which all countries that participate realize economic gainsthe theory is so powerful that i
106、t remains a major intellectual weapon for free tradeComparative AdvantageAssumptions of the theory of comparative advantage:- no transportation costs- no differences in the prices of labor, and no exchange rates involved- resources easily flow from the production of one good to another in a country-
107、 constant returns to scales (PPF is a straight line)Comparative Advantage- free trade will not change the efficiency of the use of its resources- trade has no effect on income distribution within a countryComparative Advantage- Modern AnalysisHeckscher-Ohlin TheoryRicardos theory emphasize that the
108、comparative advantage arises from differences in productivityTwo Swedish economists Eli Heckscher (in 1919) and Bertil Ohlin (in 1933) argued from national factor endowmentsBy factor endowments they meant the extent to which a country is endowed with such resources as land, labor, capital,etc.Hecksc
109、her-Ohlin TheoryNote:Factor endowments are of relative sense, not absolute. The abundant supply of one resources may be offset by its domestic demandA country will be competitive in the world market for those products with extensive use of its abundant resources.The Product Life-Cycle TheoryRaymond
110、Vernon proposed PLC theory in the mid-1960sStages in the product life cycleNew product stage technology intensiveMaturing product stage capital intensiveStandardized product stage labor intensiveThe Product Life-Cycle TheoryImplications of PLC theory- a dynamic analysis- factor intensity is a relati
111、ve concept, it changes with the extension of the life cycle of the product- factor intensity may be different in various countries, due to the substitution of the factorsThe New Trade Theoryemerged in the 1970sPaul R. Krugman argued that economies of scale (increasing returns to specialization) exis
112、t in certain industries.As a country produces more of the good, due to the realization of economies of scale, productivity will increase and unit cost will fall.The New Trade TheoryLearning effects also exits in the industry, which means cost saving from learning by doing.This first-mover advantage
113、(by early entrants)in an industry may get a lock on the world market that discourages subsequent entry.The theory generates the basis for government intervention and strategic trade policyThe New Trade TheoryNew trade theory complies with the theory of comparative advantage, by efficient use of reso
114、urces due to economies of scale and learning effect.National Competitive AdvantageIt explains why a nation achieves international success in a particular industry.by Michael Porter of Harvard Business SchoolPorter pointed out that four attributes of a nation shape the environment in which local firm
115、s compete and these attributes promote or impede the creation of competitive advantage.Two additional variables can influence the national diamond: Chance and GovernmentPorters Diamond - National Competitive AdvantageFirm Strategy,Structure, andRivalryRelated and Supporting IndustriesFactorEndowment
116、DemandConditionNational Competitive AdvantageFactor Endowment - Basic Factors and Advanced Factors - Basic Factors can create initial advantages and reinforced or extended by advanced factorsDemand Condition - Firms are typically most sensitive to the needs of their closest customers. - Home demand
117、can create pressure for innovation and qualityNational Competitive AdvantageRelated and Supporting Industries - successful industries within a country tend to be grouped into clusters of related industriesFirm Strategy, Structure and Rivalry - different nations have different management ideologies -
118、 vigorous domestic rivalry can create pressure to improve efficiencyNational Competitive AdvantageBusiness implication of trade theoryLocation Implication Different countries have particular advantages in different productive activitiesFirst-mover Implication It is important for a firm to enter a ma
119、rket in an early stage, especially when the global market can profitably support only a limited number of firms, say aerospace industryNational Competitive AdvantagePolicy ImplicationFree trade is generally in the best interests of a countryIt may not be in the best interest of an individual firmNat
120、ional Competitive AdvantageCase Study:The Rise of Indian Software Industryp167Session 6 The Political Economy of International TradeWe have reviewed many free trade theories, which including both - static economic gains, and - dynamic economic gainsHowever, governments still intervene in internation
121、al trade, WHY? - we explore first the policy instruments the governments use to intervene international tradeInstruments of Trade PolicyTariff a tax levied on importsFour categories Specific Tariff - Ad Valorem Tariff - Alternative Tariff - Compound TariffThe principle objective of tariff - to prote
122、ct domestic producers - to raise revenue for government - to adjust domestic production and consumption Instruments of Trade PolicyEconomic effect of tarifftariffs are pro-producer and anti-consumertariffs reduce the overall efficiency of the world economy due to the inefficient utilization of resou
123、rces Instruments of Trade PolicyInstruments of Trade PolicyNote:a/e: producer gainsb: production lossc: government gain (tariff revenue)d: consumer lossj: effect of improvement of terms of tradeNational gains/loss = j (b+d)Instruments of Trade PolicySubsidiesProduction subsidies - to help firms to c
124、ompete against foreign importersExport subsidies to help firms to gain export marketInstruments of Trade PolicyPros & Cons SubsidiesPros - help firms to achieve dominant position (first-mover advantage)Cons - to protect inefficiency - to increase the tax burdens for the consumersInstruments of Trade
125、 PolicyImport Quotas and Voluntary Export RestrictionsImport Quotas restrictions on the quantity and value of some goods by issuing licensesVoluntary Export Restriction (VER) quotas imposed by exporting country, typically at the request of the importing countryGood Example Sugar and Textile industri
126、es of the U.S.A.Instruments of Trade PolicyEffect of Quotas and VERincreasing consumers expenditurearising corruption by seeking for quota rentQuota rent the extra profit when supply is artificially limitedVER is a referred to as a typical example of gray areaInstruments of Trade PolicyLocal Content
127、 Requirementsa requirement that some specific fraction of a good be produced domesticallydeveloping countries use it to shift the production from simply assembling to manufacturing with local partsdeveloped countries use it to protect local jobs and against foreign competitionInstruments of Trade Po
128、licyAdministrative Policybureaucratic rules designed to make it difficulty for imports to enter a countryusually, it is carried out by complicated customs formalities examples: tulip bulb & Federal Express in JapanInstruments of Trade PolicyAntidumpingSelling goods in a foreign market at - below the
129、 costs of production, or - below the “fare” market value (or normal value)losses incurred from predatory dumping can be covered by - Government subsidies - profit from home market to subsidize - raising prices and earn substantial profits after driving out competitors out of the marketInstruments of
130、 Trade PolicyAntidumping a critical issue facing China500 cases launched since 1979 Sep. 2002 to China by 33 countries and regionsworld record of high anti-dumping rate by Mexico for China shoes 1004%WTO rules market economySo, China? third substitution country is often usedGovernment InterventionTw
131、o reasons for government interventionpolitically concerned with protection the interest of certain groupsEconomically concerned with boosting the overall wealth of a nationGovernment InterventionPolitical Arguments for InterventionProtecting Jobs & IndustriesNational SecurityRetaliationProtection Co
132、nsumersFurthering Foreign Policy ObjectivesProtecting Human RightsGovernment InterventionEconomic Arguments for InterventionInfant Industry Argument- a legitimate reason for protection - firstly put forward by Alexander Hamilton in 1792, and extended by German economist Friedrich List Government Int
133、erventionEconomic Arguments for Intervention (cont.)Strategic Trade Policy- to help domestic firms to gain first-mover advantage (as Boeing in the 1950s and 1960s)- to help domestic firms to overcome the barriers to the entry created by foreign firms with first-mover advantage (as Airbus in the mid-
134、1970s) Boeing vs. AirbusProductionNon-productionProductionNon-productionBoeing vs. AirbusProductionNon-ProductionProductionNon-ProductionImplications for BusinessTrade Barriers and Firm Strategy - direct investment in the Host country - move production base to other countries with no specific trade
135、barriersPolicy Implications - business firms are major players on the international trade scene, they can influence on government trade policySession 7 Regional Economic IntegrationLevels of Regional Economic IntegrationTheoretically, from the least to the most integrated levels:Levels of Regional E
136、conomic IntegrationPreferential Trade ArrangementCustoms UnionFree Trade AreaCommon MarketEconomic UnionPolitical UnionPreferential Trade ArrangementFeatures:Remove barriers partly or fully, within one or more areas between member countries.Free Trade AreaFeatures: Removing all barriers of goods and
137、 services; each country is allowed to determine its own trade policies.Examples:the most enduring one: EFTA(1960), between Norway, Iceland, Liechtenstein, and Switzerlandthe most influential one: NAFTA (1994), between U.S.A., Canada and MexicoCustoms UnionFeatures: adopts a common external trade pol
138、icyTypical example:Andean Pact (Bolivia, Colombia, Ecuador and Peru)EU began as a customs Union and has moved well beyond this stage.Common MarketFeatures: allows factors of production to move freely (needs significant degree of harmony and cooperation on fiscal, monetary and employment policies)Typ
139、ical example:MERCOSUR, between Argentina, Brazil, Paraguay and Uruguay, 1991Economic UnionFeatures: requires a common currency, harmonization of tax rates, and a common monetary and fiscal policy.Typical example: EU, 1993The Economic Case for IntegrationEconomies of scale production more efficiently
140、, due to specializationDynamic gains from trade due to the free flow of factors of productionAs we see there still exist government intervention in international trade, regional economic integration is an attempt to remove barriers within few member countries.The Political Case for IntegrationEnhanc
141、ing the political weight in the worldReducing violent conflict between nationsImpediments to IntegrationIt has its costs, involves some painful adjustmentsIt concerns over national sovereignty member countries have to give up some degree of their control over some key policy issuesThe Case Against R
142、egional Economic Integration Trade CreationTrade Diversion Trade Creation Trade Diversion ? WTO rules ensure that free trade agreement does not result in trade diversion. How about Non-tariff barriers? Implications for BusinessOpportunities - Market access - lower costs of doing businessThreats - fi
143、rms within the blocs facing more competition - firms outside the blocs facing long-term improvements of the firms within the blocs - difficult to enter into the trading blocs - influence the corporate strategies, such as mergers/acquisitionsCase StudyDeutsche Banks Pan-European Banking Strategy p.28
144、8Session 8 The Global Monetary Systemand financial risk managementThe international monetary system refers to the institutional arrangements that countries adopt to govern exchange rate.Purpose of this session: - explain how international monetary system works, - put out its implications for interna
145、tional business. - how to manage financial risks Foreign Exchange Rate MechanismFloating exchange ratePegged exchange rateDirty float exchange rateFixed exchange rateExchange rate system in ChinaWorlds Monetary System EvolutionThe Gold Standard - pegging currencies to gold and guaranteeing convertib
146、ility.- the exchange rate is determined based on the weight and the purity (finesse) of the gold.The gold standard existed from the 1870s to World War I in 1914.By the start of World War II in 1939, the gold standard was dead.The adjustment mechanism is simple and attractive, some people believe tha
147、t the world now should return to the gold standard.The Bretton Woods SystemEstablished in 1944 at Bretton Woods, New Hampshire, to design a new international monetary system.Established two multinational institutions: IMF and the World Bank.Established the principle/commitment not to devaluate curre
148、ncies. Any devaluation up to 10% should be approved by IMF.The Bretton Woods Agreement:- a system of fixed exchange ratesU.S. Dollar remained convertible to gold ( $35 per ounce, or 1$ = 0.888671 g pure gold)Other currencies pegged to the U.S. Dollar within 1%. The Role of IMFDiscipline - maintainin
149、g fixed exchange rate - curtailing price inflationFlexibility - lending facilities to reduce balance-of-payment deficits - adjusting parities to allow for the devaluation of a countrys currency by more than 10%, if approved by IMF.The Role of the World Bank- lending money to members, mainly on publi
150、c-sector projects financing.IBRD Scheme, borrowers pay a market rate of interest ( cost of funds plus margins)IDA Scheme, to borrowers in the poorest countries, with 1% annual interest rate, and up to 50 years.The Collapse of the Fixed Exchange Rate SystemCollapsed in March 1973Reasons: - U.S. gover
151、nment excessive expenditure by increasing money supply, caused inflation, in the mean time, stimulated the domestic economy, import increased (trade deficit, deteriorated the balance of payment)- growing speculation In August 1971, U.S. dollar devaluated by 8 recent with fluctuations enlarged to 2.5
152、%Achilles heel: speculative attack would devastated the systemTriffin dilemma: - Bretton Woods system could work only as long as the inflation rate remained low and the U.S. did not run a balance-of-payments deficit.- Even if the above criteria were met, the U.S. reserves and gold supply can hardly
153、meet the development of the World economy.The Jamaica Agreement- the floating exchange rate regime since Jan. 1976The main elements of the agreement:Floating rates were declared acceptableGold was abandoned as a reserve assetIncreasing the annual quotas easy access to IMF fundFixed versus Floating E
154、xchange RateThe case for Floating Exchange RateMonetary Policy AutonomyTrade Balance Adjustment Fixed versus Floating Exchange RateThe case for Fixed Exchange RateMonetary DisciplineSpeculationUncertaintyTrade Balance AdjustmentExchange Rate Regimes in Practice- IMF members exchange rate policies in
155、 2000Free Float 27%Managed Float 15%Adjustable Peg 6%Fixed Peg Arrangement 24%Currency Board Arrangement 4%No Separate Tender 20%Other 4%Evaluating the IMFs Policy Prescription- Asian Crisis- IMFs Policy EvaluationInappropriate PoliciesMoral HazardLack of AccountabilityObservationsImplications for B
156、usinessCurrency ManagementBusiness StrategyCorporate-Government RelationsInvestment decisionCapital budgetingProject and parent cash flowAdjusting for political and economic risksRisks and capital budgetingGlobal money management- the efficiency objectiveMinimizing cash balancesReducing transaction
157、costGlobal money management- the tax objectiveDividend remittancesRoyalty payments and feesTransfer pricesFronting loansManaging Foreign Exchange Risk Types of foreign exchange exposureTransaction exposureassociated with a contractual payment of foreign currency.Economic exposure firms long-term cas
158、h flows will be affected, by unexpected future exchange rate changes.Translation exposure arises from the legal requirement that all firms consolidate their financial statements (balance sheets and income statements) of all worldwide operations annually.Transaction Exposure ManagementNatural hedging
159、 - arranging to have foreign currency cash flows coming in and out at roughly the same times and same amounts.Contractual hedging using financial contracts to hedge the transactional exposure. - currency forward contract, the most commonly used, it allows a firm to be assured a fixed rate of the exc
160、hange between the desired two currencies at the precise future date, with the exact amount of the exposure. - currency futures contract - currency options contractEconomic Exposure ManagementDiversification of operation it would allow the firm to be desensitized to the impacts of any one pair of exc
161、hange rate changes. (global expansion)Diversification of financing it serves to hedge economic exposure much in the same way as it did with transaction exposures. A firm with debt denominated in many different currencies is sensitive to many different interest rates, a firm with diversified debt wil
162、l not be subject to the full impact of rapid rising of the interest rates or inflation rates. Translation Exposure ManagementInterest rate swap allows a firm to use its good credit standing to borrow capital at lower fixed rates and exchange its interest payment with a slightly lower credit-rated bo
163、rrower who has debt service payments at floating rates. Each borrower ends up making net interest payments at rates below those it could have achieved on its own.Currency swap is the equivalent of the interest rate swap, only the currency of denomination of the debt is different.Other ways of reduci
164、ng foreign exchange riskSelecting hard currency in the export businessPayment by both of the two currencies, with one of the currency as the calculation in the contractUsing lead or lag in the payment BSI (Borrow Spot - Investment) LSI (Lead Spot - Investment )Global Capital MarketAttractions of the
165、 global capital market - The borrower s perspective: lower cost of capital - The investors perspective: portfolio diversificaitonGrowth of the global capital market - information technology - deregulation The Eurocurrency MarketGenesis and growth of the marketAttractions of the Eurocurrency marketDr
166、awbacks of the Eurocurrency market Case StudyCaterpillar Inc.P.368Session 9Entry Strategy and Business OperationsThe Session is concerned with the topics:The decision of which foreign markets to enter, when to enter them, and on what scale;The choice of entry mode, and The role of strategic alliance
167、s The basic organizational structuresBasic Entry DecisionWhich Foreign Market?Based on the potential long-run profit, and - size of the market, the present wealth, future wealth of consumersBenefit, costs, risks associated with- PEST framework. - especially the economic and political factorsConclusi
168、on which market to enterMost favorable in politically stable developed and developing countries that have free market systems, where there is not a dramatic upsurge in either inflation rates or private-sector debt.Lest favorable in politically unstable developing nations with a mixed or command econ
169、omy or that nations with speculative financial bubbles have led to excess borrowings.Timing of EntryEarly entrants Advantages:- capture demand and create brand name- build sales volume and ride down the experience curve ahead of rivals- create switching cost Disadvantage:- pioneering cost (mistakes
170、that may make)Example of Amway Scale of Entry and Strategic CommitmentsLarge scale the involvement of significant resourcesLarge scale are also associated with the value of the resulting strategic commitments, which has long term impact and difficult to reverse.Advantages large scale- easy to attrac
171、t customers/distributors- made difficult for competitors to enterDisadvantages large scale- few resources to invest in other places- limits the firms strategic flexibility, higher riskEntry ModeSix different modes:ExportingTurnkey projectLicensingFranchisingEstablishing joint venturesSetting up a ne
172、w wholly subsidiaryExportingAdvantages:- lower costs- riding down the experience curve- location economies of scaleDisadvantages:- if cost of production abroad much lower- high transportation cost - tariff barriers- delegating its marketing (foreign agent may handle competitors products in the same
173、time)Turkey ProjectsAdvantages:- particular useful where FDI is limited by host government regulations- less risky than a conventional FDIdisadvantages:- no long-term interest- inadvertently create a competitor- selling its competitive advantages (technology) to potential and/or actual competitorsLi
174、censingadvantages:- bearing no development cost and risks - suitable for firms who lacking the capital- suitable to those unfamiliar and politically volatile foreign market- suitable for engaging the foreign market but is restricted by the local governmentdisadvantages:- no direct control over manag
175、ement- need the firm to coordinate the fierce competitions over the World- lost control on the technologyFranchisingSimilar to licensing, it differs in that franchiser not only sells intangible prosperity, but also insists that the franchisee agree to abide by strict rules as to how it does business
176、Advantages:- similar to licensingDisadvantages:- quality controlJoint Ventureadvantages:- benefit from local partners knowledge- share the cost and risk with the partner- in many countries, JV is the only entry mode possibledisadvantages:- the risk of giving control of the high-tech to its partner -
177、 no tight control over the venture- conflicts and battles for control due to different goals and objectives of investing partiesWholly Owned Subsidiariesadvantages:- reducing the risk of losing control over high-tech- tight control, easy to reach its global strategy- helpful in realizing location an
178、d experience curve economiesdisadvantages:- the most costly mode- the most risky modeGreen-field Venture or Acquisition?AcquisitionPros- quick to execute- to preempt their competitors- less riskyCons- overpay for the assets of the acquired firms- cultural clash between the acquiring and acquired fir
179、ms- time of the integrating of the operations often longer than excepted- inadequate pre-acquisition screeningGreenfield VenturesPros-greater ability to build the kind of subsidiary company that it wantsCons- more risky- slower to establish- the possibility of being preempted by more aggressive glob
180、al competitors, who enter via acquisitions and build a big market presence Strategic AlliancesStrategic Alliances cooperative agreements between potential or actual competitorsAdvantages:Facilitate entry into a foreign marketShare the fixed costs (and associated risks) of developing new productsBrin
181、g together complementary skill and assets that neither company could easily develop on its own.Help the firm establish technological standards for the industryStrategic AllianceDisadvantages:It gives competitors a low-cost route to new technology and marketSelecting PartnerA good ally has three char
182、acteristics:A partner can help the firm to achieve its strategic goals ( market access, market share or profit?)A partner shares a common vision A good partner is unlikely try to opportunistically exploit the alliance for its own ends fair play Alliance StructureProbability of Opportunism byAlliance
183、 partnerReduced byWalling off Critical TechnologyEstablishing contractuall SafeguardsAgreeing to Swap Valuable Skills and TechnologiesSeeking Credible CommitmentsManaging the AllianceBuilding TrustLearning from partnersBasic Organizational StructurePressure for global integrationAircraft CamerasCons
184、umerElectronicsComputers AutoSynthetic fibersTelecommunications AerospaceCementSteelClothingPackaged goodsPressure for local responsivenessHighLowLowHighGlobalTrans-nationalInter-nationalMulti-domestic Initial Division Structure export deptChief Executive OfficerProductionMarketingFinanceHumanResour
185、cesV.P.InternationalOperationsFranceJapanEgyptAustraliaArgentinaHome-officedepartmentOverseassubsidiariesUse of Subsidiaries during the Early Stage of InternationalizationAn International Division StructureCEOProductionMarketingFinanceHumanResourcesDomesticDivision:PaintDomesticDivision:ToolsDomesti
186、cDivision:HardwareDomesticDivision:FurnitureInternationalDivision:AustraliaJapanItalyOfficeOperationMarketingGovernmentRelationsHome-officedepartmentOperatingdivisionsA structural arrangement that handles all international operations out of a divisioncreated for this purpose.Global Structural Arrang
187、ementCEOProductionMarketingFinanceHumanResourcesProductDivision CProductDivision BProductDivision AProductDivision DProductDivision EEuropeAfricaSouthAmericaAustraliaFar EastMarketingFinanceHumanResourcesProductionGreat BritainFranceGermanyA structural arrangement in which domestic divisions are giv
188、en worldwide responsibility for product groupsA global Area Division StructureCEOProductionMarketingFinanceHumanResourcesNorthAmericaEuropeSouthAmericaAsiaAfricaGreat BritainFranceGermanyA structure under which global operations are organized on a geographicrather than a product basisA Global Functi
189、onal StructureCEOProductionMarketingFinanceDomesticProductionProduct AProduct BProduct CProduct DForeignProductionProduct AProduct BProduct CProduct DDomesticProductionProduct AProduct BProduct CProduct DForeignProductionProduct AProduct BProduct CProduct DA structure organizes worldwide operations
190、based primarily on function and secondarily on products A Multinational Matrix StructureCEOProductionMarketingFinanceHumanResourcesIndustrial GoodsNorth AmericaEuropeManager,Industrial goodsNorth AmericaManager,Industrial goodsEuropeA structure combines product, area and functional arrangement into
191、a MNCSession 10:The Strategy of International BusinessSome basic principles of strategy:Strategy: The actions that managers take to attain company goals.Profitability: The rate of return concept.Profit Growth: The percentage increase in net profits over timeDeterminants of Enterprises ValueEnterpris
192、esValuationProfitabilityProfit GrowthReduce CostAdd Values and Raise PricesSelling More in Existing MarketsEnter New MarketValue CreationValue Creation: performing activities that increase that value of goods or services to consumers.The more value customers place on a firms product, the higher the
193、price the firm can charge for those products.Consumer surplus: what the consumers willing to pay minus what the consumer actually paid.Customers reservation price: individuals has different assessment of the value of the product, so the firm need to adopt the differentiation strategy.Two basic strat
194、egies for creating value and attaining a competitive advantage in an industry: low cost and differentiation.Porters Five Generic Competitive StrategiesLow cost providersDifferentiantionBest - cost providersFocused strategy based on low-costFocused strategy based on differentiationValue CreationV-PP-
195、CCV-CV= Value of Product an average customerP = Price per Unit C= Cost pf productionper unit V-P= Consumer surplus P-C= Profit per unit soldV-C= Value created per unitVPCStrategic Choices in the International Hotel Industry- An ExampleIncreased Valuation/ Differentiation (V)Four SeasonsStarwoodEffic
196、iency FrontierMarriottStrategic choices inthis area not viableIn international hotel industryHigh CostLow Cost (C)Operations: The firm as a valueOperations: the various value creation activities a firm undertakes.A firm must manage the activities, such as production, marketing, sales, material manag
197、ement, R&D, HRM, information system, and the firm infrastructure, effectively an in manner that is consistent with its strategy.Primary Activities: are divided into four functions: research and development, production, marketing and sales, and customer service.Supporting Activities: provide the inpu
198、ts that allow the primary activities to occur, including: managing inventory, tracking sales, pricing products, selling products, dealing with customer service inquires, etc.The Value ChainCompany InfrastructureInformation System Logistics Human ResourcesR&D Production MarketingandSales Consumer Ser
199、vicesPrimary ActivitiesOrganization: the implementation of strategyOrganization Architecture: refers to the totality of a firms organization, including formal organizational structure, control systems and incentives, organizational culture, processes and people.Organizational Structure the formal di
200、vision of the organization into subunits such as product divisions, national operations, and functions; the location of decision-making responsibilities within that structure (centralized or decentralized) the establishment of integrating mechanisms to coordinate the activities of subunits, includin
201、g cross-functional teams and or panregional committee.Organization ArchitecturePeopleStructureCultureProcessesIncentives and ControlsStrategic Fit: fit for each other, attaining superior performanceOperativeStrategyOrganizationArchitectureStrategyMarketConditionSupportsSupportsFitsSupportsGlobal Exp
202、ansion, Profitability, and Profit GrowthExpanding the market: leveraging products and competenciesLocation Economies: the economies that arise form performing a value-creation activity in the optimal location for that activity at a cost advantage to the firm.Experience Effects: systematic reduction
203、in production costs that have been observed to occur over the life of a product.Leveraging Subsidiary SkillsCost Pressure and Pressure for Local ResponsivenessPressure for Cost Reductions Producing standard products Realizing economies of scale Outsourcing certain functionsPressure for Local Respons
204、iveness differences in customer tastes and preferences differences in infrastructure and traditional practices differences in distribution channels host governmental demandsPressure for Cost Reduction and Local ResponsivenessFirm AFirm CFirm BFirm DLowHighPressure for Local ResponsivenessHighLowPres
205、sure for Cost ReductionChoosing a StrategyGlobal Standardization Strategy : pursuing a low-cost strategy on a global scale and increasing profitability and profit growth by reaping the cost reductions that come from economies of scale, learning effects, and location economies.Localization Strategy:
206、increasing profitability by customizing the firms goods and services so that they provide a good match to tastes and preferences in different national markets.Transnational Strategy: attempting to simultaneously achieve low costs through location economies, economies of scale, and learning effects w
207、hile also differentiating product offerings across geographic markets to account for local differences and fostering multidirectional flows of skills between different subsidiaries in the firms global network of operations.International Strategy: when a firm takes product first produced for its dome
208、stic market and sells them internationally with only minimal local customization. Four Basic Strategies LowHighPressure for Local ResponsivenessHighLowPressure for Cost ReductionGlobal StandardizationStrategyTransnationalStrategyInternational StrategyLocalizationStrategySession 11Global Marketing &
209、R&DThe Globalization of Markets and Brands debate the emergence of global markets for standardized consumer productsThe persistence of cultural and economic differences between nations acts as a major brake on any trend toward global consumer tastes and preferencesMarket SegmentationMarket segmentat
210、ion refers to identifying distinct groups of consumers whose purchasing behavior differs from others in important ways.Market can be segmented based on - geography - demography - social-cultural factors - psychological factorsMarket SegmentationTwo main issues for managers in an international busine
211、ss consider marke segmentation.The goal of market segmentation is to optimize the fit between the purchasing behavior of consumers in a given segment and the marketing mix, thereby maximzing sales to that segment.Product AttributesA product can be viewed as a bundle of attributes. Factors that influ
212、ence the product attributes:Cultural DifferencesEconomic developmentProduct and Technical StandardsDistribution StrategyBy distribution strategy it means the choice of delivering the product to the consumersFour Main Differences between countries - Retail Concentration - Channel Length - Channel Exc
213、lusivity - Channel QualityChoosing a Distribution Strategy - the optimal strategy is determined by the relative costs and benefits of each alternativeCommunication StrategyAvailable channels of communication channels - direct selling / sales promotion / direct marketing and advertisingBarriers to In
214、ternational Communication - Cultural Barriers - Source and Country of Origin Effects - Noise LevelsPush verse Pull StrategiesProduct Type and Consumer sophisticationChannel LengthMedia AvailabilityThe Push-Pull Mix Push Strategy for industrial products and/or complex new products;when distribution c
215、hannels are short;when few print or electronic media are available Pull Strategy for consumer goods;when distribution channels are long;when sufficient print and electronic media are available to carry the marketing message Global AdvertisingPros and cons for standardized advising For Standardized A
216、dvertising - significant economic advantages - creative talent is scare - many brand names are globalAgainst Standardized Advertising - cultural differences - advertising regulations may block implementation Dealing with Country DifferencesPricing StrategyPrice DiscriminationIt refers to the cases t
217、hat consumers in different countries are charged different prices for the same productTwo conditions necessary for profitable price discrimination - the firm must be able to keep its national markets separate - different price elasticities of demand in different countriesThe determinants of Demand E
218、lasticityIncome level - price elasticity tends to be greater in countries with low income levelsCompetitive conditions - the more competitors there are, the greater consumers bargaining power will be and the more likely consumers will be to buy from the firm that charges the lowest priceStrategic Pr
219、icingPredatory Pricing - a competitive weapon to drive weaker competitors out of a national marketMultipoint Pricing Strategy - when two or more international businesses compete against each other in two or more national marketsExperience Curve Pricing - aggressive pricingRegulatory Influences on Pr
220、ices - Antidumping Regulations / Competition PolicyConfiguring the Market MixA firm might vary aspects of its marketing mix from country to country to take account local differences in culture, economic conditions, competitive conditions, product and technical standards, distribution systems, govern
221、ment regulationsFinancial services/ McDonalds global standardization still need to be aware of the customization of the marketingHowever, there are often significant opportunities for standardization along one or more elements of the marketing mixNew-Product DevelopmentThe Location of R&D - More mon
222、ey is spent on basic and applied research and development - Underlying demand is strong - Consumers are affluent - Competition is intenseIntegrating R&D, Marketing, and Production, ensuring - product development projects are driven by customer needs - new products are designed for ease of manufactur
223、e - development costs are kept in check - time to market is minimized Cross-Functional TeamsA development team is to be composed of representatives from R&D, marketing, and productionThe team should be led by a “heavyweight” project managerThe team should be composed of at least one member from each
224、 key functionThe team should be physically co-located to facilitate communicationThe team should have a clear plan and clear goalThe team needs to develop its own processes for communication and conflict resolutionImplications for International BusinessThe firm should build close links between its R
225、&D centers and its various country operationIntegrating R&D, marketing, and production may require R&D centers that are linked by formal and informal integrating mechanisms with marketing operations in each country in their regions and with the various manufacturing facilitiesEstablishing a global n
226、etwork of R&D center Case StudyNike The Ugly American?P.600Session 12Global Human Resource ManagementObjectivesDescribe strategic recruitmentExamine the recruitment processDiscuss the major internal and external sources of human resourcesIdentify the major recruitment methodsWhat is Human Resource M
227、anagement ?Managing people within the employer-employee relationshipIt involves the productive use of people in achieving the organizationss strategic business objectives and the satisfaction of individual employee needsWhat is Human Resources Management ? (Cont)HRM is either a part of the problem o
228、r part of the solution in gaining the productive contribution of people.The HR manager, as with any other functional manager in marketing, production or finance, is responsible for performance.The HR position exists to help achieve the strategic business objectives of the companyWhos involved in HRM
229、 ?Every manager is involved with human resource decisions.It is important the HRM function is carried out with full cooperation between line managers and the HR staff.The International Human Resource Management ProcessRecruitment and SelectionPerformance AppraisalHRMs Strategic ContextCompensation a
230、nd BenefitsContribution to Organizational EffectivesLabor RelationsTraining and Development The Strategic Role of International HRM International Strategy MultidomesticInternationalGlobalTransnationalStructure and ControlCentralization of operating decisionsHorizontal differentiationNeed for coordin
231、ationIntegrating mechanismsPerformance ambiguityNeed for cultural controlsStaffing PolicyStaffing policy is concerned with the selection of employees for particular jobsTypes of staffing policyThe Ethnocentric ApproachThe Polycentric ApproachThe Geocentric ApproachThe Ethnocentric ApproachA policy w
232、hich all key management positions are filled by parent-country nationals (PCN). ( “Dutch Mafia”)Reasons - host country lacks qualified individuals- best way to maintain a unified corporate culture- creating value by transferring core competencies to a foreign operationdrawbacks- limiting advancement
233、 opportunities for host-country nationals (HCN)- leading to “cultural myopia”The Polycentric ApproachA policy which requires HCNs to be recruited to manage subsidiaries, while PCNs occupy key positions at corporate headquarters.Reasons- less likely to suffer from cultural myopia- less expensive to i
234、mplement, reducing the costs of value creationdrawbacks- HCNs have limited opportunities to experience outside their own country- the isolation and lead to a lack of integration between corporate headquarter and foreign subsidiaries (a quasi-autonomous operation)The Geocentric ApproachA policy that
235、seeks best people for key jobs throughout the organization, regardless of nationality (TCNs)Reasons- make the best use of its human resources- build cadre of of international executives who feel at home working in a number of cultures- reduce culture myopia and enhance local responsivenessDrawbacks
236、regulations / training cost / high pay issueExpatriate ManagersReasons for high expatriate failure rates for U.S. multinationals:Inability of spouse to adjustManagers inability to adjustOther family problemsManagers personal or emotional maturityInability to cope with larger overseas responsibilitie
237、sReasons for high expatriate failure rate for the Japanese multinationals:Inability to cope withy larger overseas responsibilitiesDifficulties with new environmentPersonal or emotional problemsLack of technical competenceInability of spouse to adjustExpatriates Selection Self-orientationOthers-orien
238、tationPerceptual abilityCultural toughnessTraining and Management Development- Training for Expatriate Managers Cultural TrainingLanguage TrainingPractical Training- Repatriation of Expatriates- Management Development and Strategy- Training and Management Development several postings/cross-cultural
239、sensitivety and experience/attend management education programs at regular intervals Performance Appraisal and CompensationPerformance AppraisalPerformance Appraisal ProblemsGuidelines for Performance AppraisalsCompensationNational Differences in CompensationExpatriate Pay- Base Salary / Foreign Ser
240、vice Premium / Allowances / Taxation / BenefitsInternational Labor RelationsThe concerns for Organized LaborThe Strategy of Organized LaborApproaches to Labor RelationsCase StudyGlobal Human Resource Management at Coca-ColaP.628Session 13: Foreign Direct InvestmentIntroduction:Forms of foreign inves
241、tment - Foreign Direct Investment (FDI) - Foreign Indirect Investment (Portfolio)Forms of FDI - Greenfield investment - M&ATrends of FDIThe average yearly outflow of FDI increased from $25 billion in 1975 to $1.2 trillion in 2000.By 2004, the global stock of FDI exceeded $9 trillion.70,000 parents c
242、ompanies had 690,000 affiliates and employed more than 50 million people, accounting for about 1/10 of the global GDP.Although the developed countries still account for the largest inflows, FDI into developing countries has increased, with 17.5% of the worlds total in 1985 to 40% in 2000.The positiv
243、e effect of FDI inflows in ChinaFDI amounted for about 15% of Chinas GDP in 2004.FDI accounted for 10% or so of annualized gross fixed capital formation between 1998 and 2004.(The summary of total amount of capital invested in factories, stores, office buildings and the like)FDI enterprises employed
244、 24 million people, accounting for 10% of the overall urban labor force by 2004.450 out of the worlds top 500 enterprises invested in China.FDI contributed 57.1% of export and 58.52% of import in 2007, respectively.China has been the largest recipient of FDI among the developing countries for nearly
245、 17 consecutive years.FDI outflows of ChinaThere are more than 30,000 companies engaged in the outward direct investment.These investments covers more than 170 countries and regions.The accumulative amount of outward investment reached 100 billion USD.Theories of FDI Three perspectives:Why invest?Pa
246、tterns of the investment.Eclectic paradigm (the combination) Why Foreign Direct Investment? Other alternatives for firms to explore the profits of foreign marker.ExportingLicensing Although FDI is more risky and expensive, exporting and licensing exist limitations: export - high cost of transportati
247、on, trade barriers; licensing giving away valuable technological know-how to a potential foreign competitor; licensing does not give tight control on manufacturingmarketing, etc; firms capabilities of management and so on are not transferred, so the licensee is not able to do as efficiently as the f
248、irm could do, therefore, reduce the profit.FDI is preferred When the firm has valuable know-how that cannot be adequately protected by a licensing contract.When the firm needs tight control over a foreign entity to maximize its market share and earnings in that country;When a firms skills and know-h
249、ow are not amenable to licensing.Patterns of FDIStrategic Behavior - looking at the relationship between FDI and rivalry in oligopolistic in industries, by F.T. Knickerbocker - he argued that imitative behavior can take many forms (prices, capacity, etc.) in an oligopoly - can be extended to embrace
250、 the concept of multipoint competition, which arises when two or more enterprises encounter each other in different regional market, national market, or industry.Patterns of FDIThe Product Life Cycle- put forward by Raymond Vernon,- he argued that the firms that pioneer a product in their home marke
251、ts undertake FDI to produce products for consumption in foreign; and then subsequently shift production to developing countries when product standardization and market saturation give rise to price competition and cost pressure. The Eclectic Paradigm - put forward by the British economist John Dunni
252、ng.- he argued that location-specific advantages are also of considerable importance in explaining both the rationale for and the direction of foreign direct investment. Political Ideology and FDIThe Radical View - view the FDI as the tool of exploiting , dominating the economy, and deteriorating th
253、e environment of the host country.The Free Market View - the practice of the theories of Smith and Ricardo, however, there is no single country adopt the free market view in its pure form, in the name of “reducing competition”, and “contrary to national security interest”, and so on. Pragmatic Natio
254、nalism - view the FDI has both benefits and costsBenefits and Costs of FDI Host Country BenefitsResources transfer effectsEmployment effectsBalance-of-payment effectsEffect on competition and economic growth Host Country CostsAdverse effects on competition (monopoly)Adverse effects on the balance of
255、 payment (earnings remitting back, high ratio of debt)National sovereignty and autonomyBenefits and Costs of FDI Home Country BenefitsEffects on balance of payments: earnings, capital equipments, intermediate goods, and the like.Employment effects : increasing the capital goods manufacturingReverse
256、resource-transfer effect: management skills, product and process technologies. Home Country CostsEffects on balance of payments: outflows of capital, production shift to a low cost country, substitution of direct export.Employment effects: substitution of home production How high are TransportationCost and tariffIs Know-howAmenable to Licensing?Is tight control over Foreign operationRequired?Can know-how be protected by Licensing contract?Then licenseExportFDIFDIFDILowNoYesNoHighYesNoYesThe comparison of export, licensing, and foreign direct investment
