international management - phatak - ch.1 slides

8/10/2019 International Management - Phatak - Ch.1 slides

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McGraw-Hill/Irwin International Management 2005 The McGraw-Hill Companies, Inc., All Rights Reserved.

International Management

Phatak, Bhagat, and Kashlak


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Chapter Objectives

Define the concepts of international business and internationalmanagement.Examine the transnationality of countries and companiesDistinguish among the various types of international mindsetsobserved in international firms.Discuss the stages of development of an international company.Define and understand the strategic, marketing and economicmotives of firms seeking to expand internationally.

Explain the strategic objectives and sources of competitiveadvantage for an international firm.


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Chapter Topics

The International Management SettingWhat is International BusinessWhat is International ManagementInternational Companies and International MindsetsThe Evolution of an International EnterpriseWhy Firms Seek to Engage in International Business

Strategic Objectives and Sources of CompetitiveAdvantageThe Environment of International Management


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Fig. 1-1: Managing in the InternationalEnvironment

Section I: The Macro-Environment(Economics, Politics, Infrastructure Laws, Culture)

Section II: Firm-Level Initiatives(Strategy, Structure, Implementation, Control)

Section III: Manager Responses( Communication, Motivation, Leadership,

Negotiations, Responsibility


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Domain of International Management

Why, when, and how does a business firm (as anorganization) decide to go international including theexpansion and reduction of such internalization?

Why, when, and how is its organizational behavior a broad term covering mission, objectives, strategies,structures, staff, and processes [particularly, decision-making] internal, and external transactions and relations,

performance, impact, etc. altered byinternationalization.


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An International Company

is an enterprise that has operations in two or more countries. If it hasoperations in several countries then it may have a network of wholly or

partially (jointly with one or more foreign partners) owned producingand marketing foreign affiliates or subsidiaries. The foreign affiliatesmay be linked with the parent company and with each other by ties ofcommon ownership and by a common global strategy to which eachaffiliate is responsive and committed. The parent company may controlthe foreign affiliates via resources that it allocates to each affiliate capital, technology, trademarks, patents, and manpower and throughthe right to approve each affiliates long - and short-range plans and

budgets.


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Table 1-1: Largest International Companies(Selected)

GlobalRank

Company 2002 Revenues ($millions)

1234

5

Wal-Mart StoresExxon MobilGeneral MotorsBP

Ford Motor

219,812.0191,581.0177,260.0174,218.0

162,412.0


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Table 1-3: Labor Productivity of Foreign Affiliates andDomestic Firms in Manufacturing in Selected Economies

Country ForeignAffiliates

DomesticFirms

Ratio Foreign:Domestic

U.S.A 103818 71006 1.46

U.K. 79402 51885 1.53 Netherlands 105793 69477 1.52

Ireland 268272 24571 10.9

China 7199 2633 2.73

France 75970 101732 0.75

Sweden 68845 77417 0.89


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International Mindsets

Specific pressures will affect competition inindustries and firms that cross national

boundaries causing1) a global orientation that relies on coordination

of worldwide activities to maximize thecollective organization, and

2) a multidomestic orientation that responds toindividual country opportunities andconstraints.


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International Mindsets(contd.)

Increasingly, there are pressures forinternational companies to be both globallyefficient and locally responsive. These

pressures derive from environmental changessuch as new technologies, unanticipatedcompetition, and the convergence of industry

boundaries. In such situations, firms exhibit atransnational mindset to simultaneously gainefficiency and local market benefits.


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Foreign Market Entry Modes

ExportingCountertradeContract manufacturingLicensingFranchisingTurnkey projects

Non-equity strategic alliancesEquity-based ventures such as wholly-ownedsubsidiaries and equity joint ventures


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Evolutionary Stages

Stage 1 : Foreign InquiryStage 2 : Export ManagerStage 3 : Export Department and Direct Sales

Stage 4 : Sales Branches and SubsidiariesStage 5 : Assembly AbroadStage 6 : Production AbroadStage 7 : Integration of Foreign Affiliates


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Fig. 1-2: Motives to Go International

The Historically Indigenous Firm

Cost-ReductionMotives

StrategicMotives

Market-SeekingMotives


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Ex. 1-2: Global Strategy: An OrganizingFramework

StrategicObjectives

NationalDifferences

Scale Economies Scope Economies

Achieving efficiencyin current operations

Benefiting fromdifferences in factorcosts wages and cost

of capital.

Expanding andexploiting potentialscale economies in

each activity.

Sharing investmentsand costs across

products, markets, and

businesses.Managing risks Managing different

kinds of risks arisingfrom market or policy-induced changes incomparative advantage

of different countries.

Balancing scale withstrategic andoperational flexibility.

Portfoliodiversification of risksand creation of optionsand side-bets.

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Ex. 1-2(contd.)

StrategicObjectives

NationalDifferences

Scale Economies Scope Economies

Innovation, learning,and adapting.

Learning from societaldifferences in

organizational andmanagerial processesand systems.

Benefiting fromexperience cost

reduction andinnovation.

Sharing learning acrossorganizational

components indifferent products,markets, or businesses.

Sources of Competitive Advantage

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Fig. 1-3: The International Environment

Economic:Tr ade Agr eements

Trading Bl ocsGNP/Wages

Inflation

Legal:I ntern ational L aw

H ost Countr y L awsH ome Laws

I ntern ational Piracy

Infrastructure:Communications

I ntern etTransportation

Technology

Cultural:CustomsValues

LanguageReligion

Political:Governments

I deologyStability

Civil Stri fe

TheInternational

Company

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1-20Fig. 1-4: Fundamentals of International Management: A Model of InternationalManagement

International

EnvironmentalAnalysis

Economic Envir onment& I nfrastructure

(Chapter 2)

PoliticalEnvironment(Chapter 3)

CulturalEnvironment(Chapter 5)

InternationalStrategicInitiatives

Strategies for Intl Competition

(Chapter 6)

F oreign M odesOf Entry

(Chapter 7)

Intl JVs and Alliances

(Chapter 8)

Organizing Intl Operations (Chapter 9)

Controlling Intl Operations (Chapter 10)

Intl Human Resource Mgmt (Chapter 12)

Work M otivation (Chapter 13)

Leadershi p (Chapter 14)

Commun icati ons (Chapter 15)

Ethi cs and Social Responsibil ity(Chapter 17)

LegalEnvironment(Chapter 4)

Management/Implementationof International Initiatives

M anagin g Technologyand K nowledge(Chapter 11)

Negotiations andDecision-M aking (Chapter 16)

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Key Terms and Concepts

Foreign Direct Investment (FDI)Definition of International BusinessDefinition of International ManagementDefinition of International CompanyTransnationality IndexInternational Mindsets

Global orientationMultidomestic orientationTransnational orientation

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Key Terms and Concepts(contd.)

Evolution of an International EnterpriseEvolution of Service FirmsMotives for International Expansion

Market seekingCost reductionStrategic

Global Strategy

international management - phatak - ch.1 slides

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