01s introduction v2
DESCRIPTION
fashion garments textile ppt style ramp apparel clothing meetingsTRANSCRIPT
Lecture 1 Introduction
This Course Background Current Dominant Factors Break Globalization and Employment
International Ops / International Business
Course Subject
Strategy, MarketingFinance
Operations
International Transactions, Forcustomers input resources service and production locationsknowledgefunding
Business
International Transactions
Trade Foreign Direct Investment (and
other investment) Technology Transfer Supply Chain Relationships Facilitating Infrastructure
Course ObjectivesGain a conceptual framework to:
• integrate and adapt superior operating practices and technologies from across the world for high performance operations.
• design global supply chains and manage risks of cross border business relationships
• establish world class manufacturing, service and R&D in developing countries
• assess globalization political and societal issues
• apply international business concepts to real business situations
Critical skills for successful careers in Large global companies
In the developed and developing worldSmall companies that buy, sell, and learn globallyNew venturesGovernment and Academia
Course Structure
• General principles
• Examples from specific countries
• Examples from specific firms and industries
• Strategic and Political Implications
Cross Cutting Ideas
Transplantation vs Transformation National mindset vs Global Brains Market vs Resource Drivers Deals and Partnerships Knowledge Diffusion Diverse Supply Chain Structures
Toyota in India Example
Course RequirementsReadings – Library On-Line Reserves and Case Packs
• Participate in discussion boards in advance
Essay
• Analyze an article or do more depth on one of the readings. 5-10 pages
Project
• Strong preference: Work to solve a real problem with a company you or a team-mate have some access to
GradingParticipation = 30% (discussion board and
in-class contributions )Essay = 30%Project = 40%
Instructor Introductions
Richard Alben Susan Sanderson
Student Contributions
Fill out a survey on your International Business experience
Course Limitations
US viewpoint
Leaves out important areas of the world
Only cover a few industries in any depth
Your challenge: Use your experience and research to cover the gaps.
History of International Business
Trade from ancient times until the late 1800’s
From the late 1800’s to before WWII Dominance of the US (to 1970) Globalization: Japan, the Asian Tigers, the
EU and China
History of International Business
Trade from ancient times until the late 1800’s
From the late 1800’s to before WWII Dominance of the US (to 1970) Globalization: Japan, the Asian Tigers, the
EU and China
Growth of TradeGrowth of Trade
WTO and IMF and World Bank dataIntra-EU trade in 2000 was 1.4T in 2000Services was 20%, Merchandise was 80% in 20002004 data from a different series
Year World GDP
(2000$ trillions)
World Trade
(2000$ trillions)
Trade as a % of GDP
1950 5.4 0.09 1.6
1960 8.6 0.17 2.0
1970 14.3 0.39 2.7
1980 20.8 2.54 12.2
1990 28.5 4.30 15.1
2000 36.3 7.88 21.7
2004 37.3 10.06 27.0
Growth of Foreign Direct InvestmentGrowth of Foreign Direct Investment
UNCTAD data
FDI Inflows ($Bil)
0
200
400
600
800
1,000
1,200
1,400
1970
1972
1974
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
World Developed countries Developing countries
Globalization of Business Practices
Linked to globalization of companies
National companies with overseas operations
Multinational companies Global companies
With “global brains”But with national base
World businesses(?)
Diverse national cultures
Global company culture
Home country culture
Why Does Geography Matter? Resource availability varies with
geographic locationMineral resources (oil, coal, gold, iron ore)Growing conditions (weather, soil)etc
Ability to serve customers varies with distance
Transportation/communication costsHair cutsGovernment incentives/disincentivesetc
Market Seeking vs Resource Seeking International Operations
Examples Implications
Dominate Factors Today
World Class Operations Reductions of Trade and Investment
Barriers Globally Connected Supply Chains
Operations Foundations of Globalization
Changes at the level of operations drove much of globalizationInternational transaction costs driven downProduction technology needs to compete with “best-in-world”
Innovations in Information and Communication and Transportation drive down transaction costsPort Automation, Inter-modal shipping technologyInternetGlobal Supply chainsInformation enabled services
Innovations in Production technology and Management Total quality management and its relativesAdaptation for specific products and company culturesHigh performance and technology emerge in the developing world
Trade and Investment Barriers
TariffsIn past, were a major source of revenue to
governments
A major impediment to trade Non-tariff issues Trade agreements - WTO
Tariffs Past
Major source of revenue to governmentsRaised prices of imported good by 20% - 100%+
Present for US$20B/yr to US government on $1T in imports (2000)
Average of 2% of import value (wholesale)
“Most Favored Nation,” “Normal Trade Relation” rates: Consumer electronics - 3.9%, Machine tools - 7% Some agricultural goods and Clothing - ~25%
Countries with Trade agreements Many rates are 0%
Less developed worldHigh tariffs remain
Protection Revenue
Other Barriers Quotas (Tariff Rate Quota)
Textile (Multi-fiber agreement) example Trigger Prices Local Content Requirements Off-sets Technical standards, health and safety
Can be used as screen for protectionism National security
Weapons and Dual Use Technologies
Local business ownership requirements
International Agreements on Bribery US Foreign Corrupt Practices Act (FPCA)
– No payments by US companies to foreign officials for the purpose of obtaining business (1977)
Can’t avoid it by using subsidiaries or intermediaries Can get hit with treble damages from companies that lose
business because of our bribe
– Exceptions Facilitating payments Where provably legal in the foreign country
Changed the game for US companies Extended to most firms from other developed
countries (1998)– OECD Convention (ratified by 33 countries)– US FPCA extended to apply to almost any firm doing
business in the US
A Global Supply Chain
Fiber supplier in Australia
Textile Maker in Italy
Zipper Maker in China
Apparel Maker in Mauritius
Apparel Designer and Marketer in US
Carriers and Intermediaries
Carriers and Intermediaries
Retailer in US
Question: How best to command a supply chain?• Arms length transaction at every stage?• Global coordination – vertical integration?
Use of Intermediaries• Laura Ashley – Federal Express Case: Logistics Outsourcing• Next time - Li and Fung Case: Supply Chain Outsourcing
Material flowInformation flow
Implies transport system details omitted
Trade in Goods and Labor
Trade in Beavers and Knives
Europe1 beaver = 3 knives
North American Wilderness3 beavers = 1 knife
Start
Finish
Knife-Beaver Trade issuesKnife-Beaver Trade issues
Transaction costs Distribution of Benefits Dynamics
exchange ratio equilibrationcost pressures on facilitating factorstechnology and market changes
“Trade” in Labor
US1 labor hour = $22
China1 labor hour = $0.60
Start
Finish
$
$$$$$
$
Unemployed worker
Unemployed worker
$$$$
Labor Trade issuesLabor Trade issues
Restriction on movement of people Differences in productivity declining
Requires Knowledge transfer Increasing disparity between “footloose” and “rooted” jobs
Equilibration of wages between countriesIncreasing income disparity within countries
Pain, but economic benefit to developed country GDP“Creative Destruction,” Like Productivity
Mainline opinion: major net positive effect for developing country
Median Salaries ($K/year) In IT – India vs. US*
*India results from PayScale 2005
0102030405060708090
100
pro
gra
mm
er
Sr.
So
fwa
re
En
gin
ee
r
IT P
roje
ct
Ma
na
ge
r
USIndia
• India IT wages up 14.5% vs 3% in US 2004
Professional Wages
Business Week - Dec. 2005
Measure of Income Disparity
% Households
% G
NI
of
low
est
x% o
f h
ou
seh
old
s
0 100
100
0
Gini Coefficients: a = 0, b~0.4, c~0.6
a
bc
Increasing Income Disparity in the US
From “Income Inequality in the United States”By Steven C. Deller*
URL: http://www.aae.wisc.edu/www/pub/cenews/ce308figures.pdf
Global R&D Resources I: Total Science and Engineering Doctorates in Selected Asian Economies
0
1000
2000
3000
4000
5000
6000
7000
8000
1975
1977
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
ChinaIndiaJapanSouth KoreaTaiwan
NSF Science Indicators – 2004 appendix table 2-39
Global R&D Resources II: Total Science and Engineering Doctorates including US and Germany
0
2000
4000
6000
8000
10000
12000
14000
16000
18000
20000
1975
1977
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
ChinaIndiaJapanSouth KoreaTaiwanUSGermany
NSF Science Indicators – 2004 appendix table 2-39 and 2-37
Next Class
Global Supply ChainsReadings: “Modular production networks: a
new American model of industrial organization,” by Timothy Sturgeon
Guest speaker: Tim Sturgeon
Case: Li and Fung
Guidance for Case DiscussionLi and Fung
Two major themes How Li and Fung developed into a world class player in providing
supply chain services Technology advance requires that the company adapt. But how to
adapt new information technologies in a way that provides value in both cost and enhanced service is an issue
Some discussion points What were the historic strengths that enabled Li and Fung’s
business to grow? What was the value they delivered? What keeps an intermediary like Li and Fung from being squeezed
between suppliers and retailers? How is Li and Fung trying to adapt to advancing information
technology? What advice would you give William Fung?
Assignment Prepare notes to hand in