Financial Analyst Meeting 2004

1/4/2012

Topics

Principles of Management
MBA & BBA Lecture 4 (Managing Global Environment)
By: Farhan Mir

Introduction History and Evolution of Management Organizational & Environmental Constraints

Managing Global Environment

Global Perspective Need for going Global Understanding Global Environment Doing Business Globally Managing in Global Environment
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Trends in International Business

Why do companies expand internationally?
Expand sales (Extending Markets) Cutting costs Offering new products Global Opportunities (WTO allowing International companies more opportunities in Pakistani market & Vice Versa) But once they enter into the global markets they also face global issues (Constraints of Farhan Mir the global environment)
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Trends in International Business

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Source: www.wal-mart.com

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Trends in International Business

Wal-Mart USA
1489 Stores 1397 Supercenters 532 Sams Clubs 56 Neighborhood Markets

Trends in International Business

China: www.wal-martchina.com Germany: www.walmartgermany.de Mexico: www.walmartmexico.com.mx Korea: www.walmartkorea.com United Kingdom: www.asda.com

Wal-Mart International 11 Argentina 23 Brazil 214 Canada 92 Germany 613 Mexico (1st intl store in
1991)

3474 Total Stores 1,000,000 + associates

52 Puerto Rico 265 Great Britain 31 China 15 Korea 1317 Total International Farhan Mir 300,000 + associates2007 IMS 2007

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Financial Analyst Meeting 2004

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Trends in International Business

Wal-Marts next market?

Perspective towards Globalization

Parochialism- narrow view of the world
where you dont recognize differences between people

Ethnocentric- best work approaches are

that of the home country (where the business initiated)

Polycentric- managers in the host countries know the best work practices for running their business Geocentric- world-oriented view that
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focuses on using the best approaches and people from the globe

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Degree of Internationalization
Domestic business
All products and services within one country Almost extinct Mostly small businesses

Degree of Internationalization
Multinational business
Worldwide marketplace for inputs and outputs Retain primary headquarters in one country

Global business
No overriding commitment to any single country Government and legal restrictions make this category somewhat hypothetical
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International business
Operate primarily in one country Some resources or revenues from other countries
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Degree of Internationalization
These are the largest export markets for this Finnish company in 1957. Any idea what company this is?

Degree of Internationalization
Today, you might recognize this company as a major provider of telecommunications, information technology, and electronics.

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Degree of Internationalization
The company is Nokia, and here are some of the countries it operates in today. Europe, Africa & Middle East
Austria Belgium Bulgaria Czech Republic Denmark Estonia Finland France Germany Greece Hungary Ireland Italy Latvia Source: Nokia.com Lithuania Luxembourg Maghreb Netherlands Norway Poland Portugal Romania Russia Slovakia Spain Sweden Switzerland Turkey UK

Degree of Internationalization (Some Examples)

Nestl comes close to global business
http://www.nestle.com/Html/Id/index.asp Operations in over 100 countries

Asia-Pacific
Australia China Hong Kong India Japan Korea Philippines Singapore Taiwan

Americas
USA Brazil Canada

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The Structure of the Global Market

Market Systems (Economic Integration)
European Union NAFTA AFTA ASEAN OPEC Hundreds of others

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European Union (EU)

Established in February 1992 as a treaty uniting 12 countries
Over 374 million people Since other 7 countries also in negotiation process so the overall population increases Before becoming part of EU all these countries had there own set of policies, tax structures and protected industries Now a single market and a common currency (Euro) No traveling barriers No investment and employment barriers Why EU? Idea was to build alliance against the strong US and Japanese Economies German automobiles now sold in EU Nokia selling major telecommunication services throughout EU
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European Union (EU)

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Source: Robbins, 2002

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Financial Analyst Meeting 2004

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Types of Global Organizations

Multinational Corporation (MNCs)
Maintains significant operations in multiple countries but manages them from a base in the home country Sony

Transnational Corporation (TNC)

Maintains significant operations in multiple countries but decentralizes management to the local country Nestle

Borderless Organization
Approaches global business from a geocentric approach and omits almost all barriers IBM (developed itself into 13 divisions)
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The Process of Internationalization

Exporting
Making products at home and selling them overseas Most of the Sialkot Industry is based on this model SAGA is one of the giant organization & CA is another one

The Process of Internationalization

Strategic Alliances
Doing business with partner organization overseas by sharing resources and developing new products and services

Importing
Selling products home that are made overseas Youll find products of most of the international manufacturers in Pakistan even those organizations are not themselves present in the country Most of the Australia is dominated by Chinese products imported for use

Joint Venture
A partnership in which the partner organization form a separate new organization by merging together

Licensing & Franchising

Manufacturing organizations allowing others to use their brand name, technology or product specification Based on annual fee on sales Service organization allowing others to sue their brand name, technology or product specification Farhan Mir
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Foreign Subsidiary
Establishing and independent unit or facility in another country

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The Process of Internationalization

Stage I
Passive Response

Stage II
Initial Overt Entry

Stage III
Established International Operations

Challenges for the Global Manager

Political Environment Economic Environment
Resource allocation processes Property ownership Natural resources Infrastructure Government stability International trade incentives International trade controls Economic communities

Foreign Subsidiary Joint Ventures Strategic Alliances Licensing/ Franchising

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Exporting to foreign countries Hiring foreign representation or contracting with foreign manufacturers

Cultural Environment
Values, Symbols, Beliefs, Language

Importing from foreign countries

International Management Functions

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Challenges for the Global Manager

Cultural Environment
Often taken for granted Not necessarily a problem, but can be disastrous Language Values, symbols, beliefs

Challenges for the Global Manager

Examples of cultural bloopers
GMs Chevy Nova didnt sell well in South America because no va means it wont go in Spanish In Taiwan, the translation of the Pepsi slogan Come alive with the Pepsi generation came out as Pepsi will bring your ancestors back from the dead. Gerber changed its baby food packaging in Africa after it learned the largely illiterate population was accustomed to seeing a picture on the label of what was in the can CocaCoca-Cola had to alter the taste of its soft drink in China when the Chinese described it as tasting like medicine. The name coca-cola also had to be re-worked because it cocaretranslated as bite the wax tadpole.
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Challenges for the Global ManagerManager- Global Distances

Hofstedes Framework for Assessing National Cultures

Individualism versus Collectivism Power Distance Uncertainty Avoidance Quantity versus Quality of Life Long-term versus Short-term Orientation

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Examples of Hofstedes Cultural Dimensions

Careers in International ManagementManagement- If you have got a International Assignment

Success Factors
CrossCross-cultural sensitivity Business knowledge Courage Motivates others Personal integrity Diagnostic skills Commitment to success Takes personal and business risks Changes with feedback Enjoys challenge Takes advantage of opportunities Open to criticism Seeks feedback Maintains flexibility
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