INTERNATIONAL MANAGEMENT

Transcription

1 INTERNATIONAL MANAGEMENT Ir. Sihombing/IP 13 Pensyarah Pelawat Fakulti Kejuruteraan Pembuatan Universiti Teknologi Malaysia Melaka

2 THE GLOBAL ENVIRONMENT In the past, managers have viewed the global sector as closed. Each country or market was assumed to be isolated from others. Firms did not consider global competition, exports. Today s s environment is very different. Managers need to view it as an open market. Organizations buy and sell around the world. Managers need to learn to compete globally.

3 Global Strategies and the Multinational Corporation OUTLINE Implications of International Competition for Industry Analysis Analyzing Competitive Advantage within an International Context Applying the Framework (1) International location l of production (2) Foreign market entry strategies Multinational Strategies: Globalization versus National Differentiation Strategy and Organization of the Multinational Corporation

4 The Internationalization Process HIGH International Trade LO W International Industries --aerospace --military hardware --diamond mining --agriculture Domestic Industries --railroads --laundries/dry cleaning --hairdressing --milk Global Industries --automobiles --oil --semiconductors --consumer electronics Multinational/ Multidomestic Industries --investment banking --hotels --consulting LOW Foreign Direct Investment HIGH

5 Implications of Internationalization for Industry Analysis INDUSTRY STRUCTURE Lower entry barriers around national markets Increased industry rivalry --- lower seller concentration --- greater diversity of competitors Increased buyer power: wider choice for dealers & consumers COMPETITION Increased intensity of competition PROFITABILITY Other things remaining equal, internationalization tends to reduce an industry s margins & rate of return on capital

6 Competitive Advantage within an an International Context: The Basic Framework FIRM RESOURCES & CAPABILITIES -- Financial resources -- Physical resources -- Technology -- Reputation -- Functional capabilities -- General management capabilities COMPETITIVE ADVANTAGE THE INDUSTRY ENVIRONMENT Key Success Factors THE NATIONAL ENVIRONMENT -- National resources and capabilities (raw materials; national culture; human resources; transportation, communication, legal infrastructure -- Domestic market conditions -- Government policies -- Exchange rates -- Related and supporting industries

7 National Influences on Competitiveness: The Theory of Comparative Advantage A country has a relative efficiency cy advantage in those products that make intensive use of resources that are relatively abundant within the country. E.g. Philippines relatively more efficient in the production of footwear, apparel, and assembled electronic products than in the production of chemicals and automobiles. U.S. is relatively more efficient in the production of semiconductors and pharmaceuticals than shoes or shirts. When exchange rates are well-behaved, comparative advantage becomes competitive advantage.

8 TARIFF BARRIERS A tariff is a barriers to trade. Tariffs are taxes levied upon imports. These seek to protect jobs in the home country. Other countries usually retaliate. Free trade: in a free trade agreement, each country seeks to specialize in things they make most efficiently. If India is more efficient in making textiles, and the USA in making computer software, then each country should focus on these.

9 DISTANCE & CULTURE BARIERS The second leading cause of trade barriers. Distance closed the markets as far as some managers were concerned. Communications could be difficult. Languages and cultures were different. During the last 50 years, communications and transportation technology has dramatically improved. Jet aircraft, fiber optics, satellites have provided fast, secure communications and transportation. These have also reduced cultural differences.

10 Effects on Managers Declining barriers have opened great opportunities for managers. Managers can not only sell goods and services but also buy resources and components globally. Managers now face a more dynamic and exciting job due to global competition.

11 FREE TRADE NAFTA: North American Free Trade Agreement. Abolishes most tariffs on goods traded between Mexico, Canada and the U.S. Allows unrestricted cross-border flows of resources. Many U.S. firms have now invested in Mexico. This is a manufacturing opportunity. Wage costs are lower in Mexico. Can serve Mexico with a plant in Mexico and reduce freight. Managers face new opportunities and threats.

12 GLOBAL TASK ENVIRONMENT Suppliers Competitors Forces yielding Opportunities and threats Distributors Customers

13 Suppliers & Distributors Managers buy products from global suppliers or make items abroad and supply themselves. Key is to keep quality high and costs low. Global outsourcing: firms buy inputs from throughout the world. GM might build engines in Mexico, transmissions in Korea, and seats in the U.S. Finished goods become global products. Distributors: each country often has a unique system of distribution. Managers must identify all the issues.

14 Customers & Competitors Formerly distinct national markets are merging into a huge global market. True for both consumer and business goods. Creates large opportunities. Still, managers often must customize products to fit the culture. McDonald's sells a local soft drink in Brazil. Global competitors present new threats. Increases competition abroad as well as at home.

15 Forces in the Global General Environment Political & Legal Systems Sociocultural System Forces yielding Opportunities and threats Economic system

16 Political-Legal Forces Results from diverse and changing nature of each countries political system. Representative democracies: such as the U.S., Britain, Canada. Citizens elect leaders who make decisions for electorate. Usually has a number of safeguards such as freedom of expression, a fair court system, regular elections, and limited terms for officials. Well defined legal system and economic freedom.

17 Political-Legal Forces Totalitarian regimes: a single political party or person monopolize power in a country. Typically do not recognize or permit opposition. Most safeguards found in a democracy do not exist. Examples include Iran, Iraq, and China. These are difficult to do business with given the lack of economic freedom. Further, human rights issues also cause managers to avoid dealing with these countries.

18 Economic Systems Free market economy: production of goods and services is in private ownership. Production is dictated by supply and demand. Command economy: decisions on what to produce, how much, done by the government. Most command economies are moving away from the command economy. Mixed economy: certain economic sectors controlled by private business, others are government controlled. Many mixed countries are moving toward a free enterprise system.

19 Recent Trends Current shift away from totalitarian dictators toward democratic regimes. Very dramatic example seen in the collapse of the former Soviet Republic. Also very pronounced in Latin America and Africa. With this shift, has come a strong movement toward free market systems. This provides great opportunities to business managers on a global level. Many businesses are investing millions in former totalitarian countries to seize these opportunities.

20 Changing Political and Economic Forces Democratic Political Freedom Russia 1995 Hungary 1985 Britain 1985 Britain 1995 Hungary 1995 Totalitarian Russia 1985 China 1985 China 1995 Command Mixed Market Economic Freedom

21 The Best Business Climate GROWING MARKET Determinants of growth potential: Purchasing Power : a comparison of the relative cost of a standard set of goods and services in different countries. Degree of Global Competition: : number and quality of companies that already compete

22 The Best Business Climate CHOOSING AN OFFICE/MANUFACTURING SITE Effective, cost-efficient office site or manufacturing location : Qualitative factors : Workforce Quality Company Strategy Quantitative factors: kind of facility, tariff, and non-tariff barriers, exchange rates, and transportation and labor.

23 The Best Business Climate MINIMIZING POLITICAL RISK Type of political risk : Political uncertainty: : the risk of major changes in political regimes that can result from war, revolution, death of political leaders, social unrest, or other influential events. Policy uncertainty: the risk associated with changes in laws and government policies that directly affect the way foreign companies conduct business

24 The Best Business Climate MINIMIZING POLITICAL RISK (add) Strategies to minimize or adapt to political risk: Avoidance: strategy when political risks associated with a country or region are too great. Control: active strategy to prevent or educe political risks by lobbying foreign governments or international trade agencies to change laws, regulations, or trade barriers that hurt their business in that country. Cooperation: makes use of joint ventures and collaborative contracts

25 Sociocultural Forces 1. National culture: includes the values, norms, knowledge, beliefs, and other practices that unite a country. 2. Values: abstract ideas about what a society believes to be good, desirable and beautiful. Provides attitudes for democracy, truth, appropriate roles for men, and women. Usually not static but very slow to change.

26 Sociocultural Forces 3. Norms: social rules prescribing behavior in a given situation. Folkways: routine social conventions including dress codes and manners. Mores: Norms that are central to functioning of society. much more significant that folkways. More examples include theft, adultery, and are often enacted into law. Norms vary from country to country.

27 Hofstede s Model of National Culture Individualism Low Power Distance Achievement Oriented Low Uncertainty Avoidance Short Term Orientation Collectivism High Power Distance Nurturing Oriented High Uncertainty Avoidance Long Term Orientation

28 1. Individualism v. Collectivism Individualism: world view that values individual freedom and self-expression. expression. Usually has a strong belief in personal rights and need to be judged by achievements. Collectivism: world view that values the group over the individual. Widespread in Communism. Prevalent in Japan as well. Managers must understand how their workers relate to this issue.

29 2. Power Distance A society s s acceptance of differences in the well being of citizens due to differences in heritage, and physical and intellectual capabilities. In high power distance societies, the gap between rich and poor gets very wide. In low power distance societies, any gap between rich and poor is reduced by taxation and welfare programs. Most western cultures (U.S., Germany, United Kingdom) have relatively low power distance and high individualism. Many economically poor countries such as Panama, Malaysia have high power distance and low individualism.

30 3. Achievement vs Nurture Achievement oriented societies value assertiveness, performance, success. The society is results-oriented. Nurturing-oriented value quality of life, personal relationships, service. The U. S. and Japan are achievement- oriented while Sweden, Denmark are more nurturing-oriented.

31 4. Uncertainty Avoidance Societies and people differ on their willingness to take on risk. Low uncertainty avoidance (U.S., Hong Kong), value diversity, and tolerate differences. Tolerate a wide range of opinions and beliefs. High uncertainty avoidance (Japan and France) are more rigid and do not tolerate people acting differently. High conformity to norms is expected.

32 5. Long Term Outlook Long-term outlook is based on values of saving, and persistence. Taiwan and Hong Kong are cultures that are long -term in outlook. Short-term term outlook seeks the maintenance of personal stability or happiness right now. France and the U. S. are examples of this approach.

33 International Expansion Importing and Exporting: : the least complex method of expansion. Exporting: firm makes products and sells abroad. Importing: firm sells products made abroad. Licensing: : firm allows foreign organization to make and distribute goods for a fee. Helps the home firm since it does not have to set up a complete production and distribution network. Franchising: company sells a foreign organization the rights to use brand name and know-how in return for payment and profit percentage.

34 International Options Strategic Alliances: managers pool resources with a foreign firm and both organizations share the rewards and risks. Allows firm to maintain control which is a problem with exporting, licensing, and franchising. Wholly-owned owned foreign subsidiary: firm invests in production operations in a foreign country. Many Japanese auto firms have done this in the U.S. This is very expensive but can yield high returns.

35 International Expansion Importing Exporting Licensing Franchising Joint Ventures Strat.. Alliances Whollyowned For. Subsidiary Low Level of Foreign involvement and investment needed by a global organization High

36 Organization Structure and Management Systems OUTLINE Evolution of the corporation Principles of organizational design The role of hierarchy: bureaucratic control vs. modular integration Alternative structural forms Management systems

37 Evolution of the Modern Corporation The business environment Strategic changes Organizational consequences Early 19th century Late 19th century Local markets Firms specialized & Small firms. Transport slow focused on local Simple manage- Limited mechanization markets ment structures Introduction of Geographical and Functional structrailroads, telegraph vertical expansion ures. Line/staff industrialization separation. Accounting systems Early 20th century Excess capacity in Product & Development of distribution. Growth multinational multidivisional of financial institut- diversification corporation ions & world trade

38 General Motors Organization Structure, 1921 Board of Directors President Executive Committee Financial Staff GM Acceptance Corporation Legal Department General Advisory Staff Chevrolet Division Sheridan Division Canadia n Division Oldsmobile Division Buick Division Cadillac Division GM Export Company GM Truck Division Samson Tractor Division Oakland Division Source: A.P. Sloan, My Years with General Motors, Orbit Publishing, 1972, p. 57. Intercompany Parts Division Scripps Booth Corp.

39 The Basic Tasks of Organization Achieving high levels of productivity requires SPECIALIZATION Specialization by individuals necessitates COORDINATION For coordination to be effective requires COOPERATION But goals of employees == goals of owners THE AGENCY PROBLEM THE ORGANIZATIONAL CHALLENGE: to design structure & systems that: Permit specialization Facilitate coordination by grouping individuals & link groups with systems of communication, decision making, & control Create incentives to align individual & firm goals

40 Hierarchy Economizes on on Coordination (a) Self Organizing Team: 10 interactions (b) Hierarchy: 4 interactions

41 Hierarchy of of Loosely-Coupled Modules Allows Flexible Adaptation Tightly-coupled, integrated system: Change in any part of the system requires system-wide adaptation Loose-coupled, modular hierarchy: partiallyautonomous modules linked by standardized interfaces permits decentralized adaptation and innovation

42 Weber s s Principles of Bureaucracy Rational-legal authority Specialization of labor Hierarchical structure Coordination and control through rules and standard operating procedures Standardization employment practices Separation of jobs and people Formalization of administrative acts, decisions and rules

43 Mechanistic and Organic Forms FEATURE MECHANISTIC ORGANIC Task definition Rigid & highly specialized Flexible; less specialized Coordination & control Communication Commitment & loyalty Environmental context Rules & directives imposed from the top Mainly vertical To immediate superior Stable with low tech- nological uncertainty Mutual adjustment.l Cultural control Horizontal & vertical To the organization & its goals & values Dynamic, ambiguous, technologically uncertain

44 Designing the Hierarchy: The Basis for Defining Organizational Units and their Relationships Units may be defined on the basis of Common Tasks, Products, Geographical Proximity, or Process/Function Critical issue: Intensity of Coordination Employees with the greatest interdependence should be grouped into same organizational unit. Additional criteria: Economies of Scale, Economies of Utilization, Learning, Standardization of Control Systems

45 General Motors Organization Structure, 1997 Board of Directors President s Council Corporate Functions North American Operations Delphi Automotiv e Systems GM Acceptance Corporation International Operations Hughes Electronics GM Europe Midsize & Luxury Car Group Small Car Group GM Power Train Group Vehicle Sales, & Marketing Group Development & Technical Cooperation Group Asian & Pacific Operations Latin American, African, & Middle East Operation

46 Corporate Executive Office Chairman & CEO Service Divisions Corporate Staff Finance Business R&D Human Legal Development Resources GE Aircraft Engines GE Transportation GE Industrial Systems GE Plastics GE Appliances GE Supply GE Power Systems GE Medical Systems GE Lighting GE Specialty Materials NBC GE Capital 26 businesses organized into 5 segments: Consumer Mid-market Specialized Specialty Equipment Services Financing Financing Insurance Management General Electric s Organization Structure, 2002

47 Overview of the innovation process

48 The interaction between development activities and design environment

49 The popular view of science

50 Conceptual framework of innovation

51 Linear models of innovation

52 Simultaneous Coupling Model

53 Interactive Model of Innovation

54 Innovation as a Management Process

55 THANK YOU