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Sistem Jaringan Bisnis International Teori Network FDI Doing Business Case Study MNC

Business Network


Brooke, M.Z. and Remmers H.L. (1977) di dalam Bridget C Kenny (2009)

The Body of Knowledge on International Business Studies


Holmlund & Kock, (1998, p. 48) di dalam Bridget C Kenny (2009)

"Globalisation requires new relationships both across companies and in companies. To compete effectively in the global economy, companies must strengthen their internal unity as well as become more adept at external learning“ - (Kanter, 1994)

a network involves “sets of two or more connected exchange relationships”

- Axelsson and Easton (1992)

Mitchell (1969) defined networks as “a specific type of relations linking a defined set of

persons, objects and events”


Nooteboom (1999) defined a network as a pattern of more or less lasting linkages between firms or divisions within firms (departments, subsidiaries).

Vertical – constituting flows of products (goods or services) from

suppliers to users, in intra-firm value chains or inter-firm value systems (Porter 1985);

Horizontal - where similar, competing products (substitutes in

consumption) are pooled to share a common resource of production or distribution, in a scale strategy;

Diagonal – or diversified, where dissimilar products, which may be

complimentary in research, marketing, or distribution, are pooled to share a common resource.

Three types of linkages:

Vertical Integration/

Supply Chain ?


Theories of Network Development Processes Bridget C Kenny (2009)


Main approaches to firm-level internationalisation

Wach, (2012 di dalam Wach dan Wehrmann (2014)


Zucchella & Sciabini (2007) di dalam Wach & Wehrmann (2014)


The Network Model of Internationalization

The network model of internationalisation (Johanson and Mattsson, 1988)

allows for the influence of external actors or organisations on the internationalisation of

the firm. Comprising two dimensions, the degree of internationalisation of the firm and the degree of internationalisation of the market, the network model enlarges on the process model by allowing for multilateral influences on the international decision making of the firm.

Richard D Hadley and Heather I M Wilson

The Early Starter firm possesses a low degree of internationalisation, with its network sharing this characteristic

The Late Starter has a low degree of internationalisation, but is positioned in a highly internationalised market.

Although the Lonely International firm resides in an internationally inexperienced network, its greater degree of commitment to the internationalisation process, as reflected by its relatively high degree of internationalisation

The International among Others firm as enjoying a high degree of internationalisation.


Internationalization process and the role of business networks and learning in it (Meyer, Skak 2002) di dalam Marge Seppo (2007), The Role of Business Networks in The

Internationalization …


Internationalization of the focal firm by establishing new business network or through existing network (Marge Seppo, 2007)

Pengukuran Variabel?

Foreign Sales as Percentage of Total Sales

Foreign Employees as Percentage of Total Employees

The number of countries in which the firm operates.

Foreign Owners as Percentage of Total Ownership

The number of listings in foreign stock exchanges


Ease of Doing Business Index


DOING BUSINESS 2012 INDONESIA

Source: www.doingbusiness.org

© 2012 The World Bank


DOING BUSINESS 2012

Source: www.doingbusiness.org

© 2012 The World Bank


Best practices in Indonesia compared internationally


Starting a business

Where is it easy to start a business?


Time and cost to start a business in Indonesia—fastest in Gorontalo and Palangka Raya; cheapest in Pontianak


It is easier to start a business now in all 14 cities benchmarked since 2010


Regionally, big cuts in the time and procedures to start a business since 2010


The company registry is the information exchange hub for business and government

John R. Wille, Karim O. Belayachi, Numa de Magalhaes, Frederic Meunier`(2011) di dalam A COPUBLICATION OF THE WORLD BANK AND THE INTERNATIONAL FINANCE CORPORATION


What are the time, cost and number of procedures to comply with formalities to build a warehouse?

Dealing with construction permits

Procedures, time and cost to deal with construction permits


What are the time, cost and number of procedures required to transfer property between 2 local companies?

Where is it easy to register property—and where not?

Registering property


Foreign Direct Investment World Investment Report

United Nations Conference on Trade and Development


Global FDI inflows Top 20 host economies, 2009 and 2010 (Billions of dollars)


Global FDI outflows, Top 20 Home Economies, 2009 and 2010 (Billions of dollars)

2012?


Top host economies for FDI in 2011–2013


Case Study


Harrigan’s Generic Vertical Integration Strategies (1985)

Vertical Integration/

Supply Chain ?


Convergence Media Value Chain

Sumber: Wirtz (2001) di dalam Fiona Röder (2007)


Organizational Structure and International Revenue

Sumber: Fiona Röder (2007)


Model of International Managerial Competitiveness

Customers' Views of Australian Management: Asian-Pacific Viewpoints, Curtin University


Cultural Grouping and Management Style


Hofstede’s Cultural Value Scores for 30 Selected Cultures

National Cultural Differences and Multinational Business. Pankaj Ghemawat and Sebastian Reiche

National Cultural Differences and Multinational Business


East European Business Networks

East European Business Networks: A Review of Dependencies and Strategies and Their Influence on Company Success. Emanuela Todeva, Research Papers in International Business

The dependency of firms on government decision

The dependency of firms on inter-firm, inter- and intra-industry linkages

Professional and political networks

Intra-firm dependencies

The accumulation of resources

Uncertainty of resources

Strategic behaviour

The adjustment behaviour of firms during the transition is pre-determined by the macro-economic conditions, the position that each firm occupies in a particular industry, and its control over the value chain.

7 Dependencies


Business Networks Based on Transformed Dependencies


New Established Business Networks


Chinese Business Network in Southeast Asian Markets

Facing The Chinese Business Network In Southeast Asian Markets – Overcoming The Duality Between Nordic And Chinese Business Networks. Hans Jansson and Joachim Ramström

The Nordic and Chinese business network models contrasted


The New Global Challengers The Boston Consulting Group (2006)


The RDE 100 Emerging Global Challengers


Multinational Corporation


Company A We are multinational firm. We distributed our product in about 100 countries. We manufacture in over 17 countries and do research and development in three countries. We look at all new investment project – both domestic or overseas – using exactly the same criteria.

What ‘s Senior Executive Speak?

Company B We are multinational firm. Only 1% of the personnel in our affiliate companies are non-nationals. Most of these are US executives on temporary assignments. In all major market, the affiliate’s managing director is of the local nationality.

Company C We are multinational firm. Our product division executives have worldwide profit responsibility. As our organizational chart shows, the United States is just one region on a par with Europe, Latin America, Africa, etc. in each product division.

Company D (non-american) We are multinational firm. We have at least 18 nationalities represented at our headquarters. Most senior executive speak at least two languages. About 30% of our staff at headquarters are foreigners.

Dikutip dari Howard V. Perlmutter (2001) The Tortuous Evolution of The Multinational Corporation, Columbia Journal of World Business


An enterprise operating in several countries but managed from one (home) country

www.businessdictionary.com

MNC?

MNC is a parent company that :

1. Engages in foreign production through its affiliates located in several countries,

2. Exercises direct control over the policies of its affiliates,

3. Implements business strategies in production, marketing, finance and staffing

that transcend national boundaries (geocentric). Franklin Root (1994)

A corporation that has its facilities and other assets in

at least one country other than its home country www.investopedia.com


Three Stages of Evolution

1. Export stage

• initial inquiries => firms rely on export agents • expansion of export sales • further expansion þ foreign sales branch or assembly

operations (to save transport cost)

2. Foreign Production Stage

DFI versus Licensing ?

Licensing is usually first experience (because it is easy)

e.g.: Kentucky Fried Chicken in the U.K. it does not require any capital expenditure;

it is not risky; payment = a fixed % of sales

the mother firm cannot exercise any managerial control over the licensee (it is independent)

The licensee may transfer industrial secrets to another independent firm, thereby creating a rival.

Direct Investment requires the decision of top management because it is a critical step.

it is risky (lack of information); plants are established in several countries; licensing is switched from independent producers to its subsidiaries; export continues


3. Multinational Stage

The company becomes a multinational enterprise when it begins to plan, organize and coordinate production, marketing, R&D, financing, and

staffing. For each of these operations, the firm must find the best location.

Rule of Thumb

A company whose foreign sales are 25% or more of total sales. This ratio is high

for small countries, but low for large countries, e.g. Nestle (98%: Dutch), Phillips

(94%: Swiss).

Examples: Manufacturing MNCs

24 of top fifty firms are located in the U.S.

9 in Japan

6 in Germany.

Petroleum companies: 6/10 located in the U.S.

Food/Restaurant Chains. 10/10 in the U.S.

US Multinational Corporations Exxon, GM, Ford, etc.


Organization Design Ethnocentric Polycentric Geocentric

Complexity of organization

Complex in home country, simple in subsidiaries

Varied and independent Increasingly complex and interdependent

Authority; decision making

High in headquarters Relatively low in headquarters

Aim for a collaborative approach between headquarters and subsidiaries

Evaluation and control

Home standards applied for persons and performance

Determined locally Find standards which are universal and local

Reward and punishments; incentives

High in headquarters, low in subsidiaries

Wide variation; can be high or low reward for subsidiaries performance

International and local executives rewarded for reaching local and worldwide objectives

Communication; Information flow

High volume to subsidiaries orders, commands, advice

Little to and from headquarters, little between subsidiaries

Both ways and between subsidiaries. Heads of subsidiaries part of management team

Identification Nationality of owner Nationality of host country Truly international company but identifying with national interest

Perpetuation (recruiting, staffing, development)

Recruit and develop people of home country for key positions everywhere in the world

Develop people of local nationality for key positions in their own country

Develop best men everywhere in the world for key positions everywhere in the world

Three Types of Headquarters Orientation Toward Subsidiaries in an International Enterprise

Dikutip dari Howard V. Perlmutter (2001) The Tortuous Evolution of The Multinational Corporation, Columbia Journal of World Business


Forces Toward Geocentrism Obstacles Toward Geocentrism

Environmental Intra-Organizational Environmental Intra-Organizational

1. Technological and managerial know-how increasing in availability in different countries

1. Desire to use human vs material resources optimally

1. Economic nationalism in host and home countries

1. Management inexperience in overseas market

2. International customers 2. Observed lowering of morale in affiliates of etnocentric company

2. Political nationalism in host and home countries

2. Nation-centered reward and punishment structure

3. Local customers demand for best product at fair price

3. Evidence of waste and duplication in polycentrism

3. Military secrecy associated with research in home country

3. Mutual distrust between home country people and foreign executives

4. Host country desire to increase balance of payment

4. Increasing awareness and respect for good men of other than home nationality

4. Distrust of big international firms by host country political leaders

4. Resistance to letting foreigners into the power structure

5. Growing world markets 5. Risk diversification in having a worldwide production & distribution system

5. Lack of international monetary system

5. Anticipated costs and risks of geocentrism

6. Global competition among international firms for scarce human and material resources

6. Need for recruitment of good men on a worldwide basis

6. Growing differences between the rich and poor countries

6. Nationalistic tendencies in staff

7. Major advances in integration of international transport& telecommunication

7. Need for a worldwide information system

7. Host country belief that home country get disproportionate benefits of international firms profits

7. Increasing in mobility of staff

8. Regional supranational economic & political communities

8. Worldwide appeal of product 8. Home country political leaders’ attempts to control firm’s policy

8. Linguistic problems and different cultural backgrounds

9. Senior management’s long term commitment to geocentrism as related to survival and growth

9. Centralization tendencies in headquarters

International Executives View of Forces and Obstacles Toward Geocentrism

Sumber: Howard V. Perlmutter (2001)


What reasons lie behind the comparative success of McDonald’s franchise outlets over the company-owned ones?

In the franchise outlets, the franchisee invests more of his or her own resources and has a more entrepreneurial approach to the business. Managers of the company-owned outlets, by contrast, have less sense of ownership and a lower level of entrepreneurial drive. This question can be broadened into a discussion of an entrepreneurial approach generally, which can bring in country differences in entrepreneurial environments.

Studi Kasus MNC (1)

Sumber: Janet Morrison (2009). International Business: Challenges in a Changing World. Lecturer Manual


Studi Kasus MNC (2)


What were the causes of the crisis at Ericsson?

Two causes are mentioned in direct connection with the crisis: • Heavy investment in 3G licences left the large telecoms

companies financially weakened, causing them to cut back in capital investment.

• Chinese manufacturers, with their lower costs and ability to undercut Ericsson on price, gained market share.

Another cause which emerges is Ericsson’s reliance on equipment manufacturing for revenues, which left it vulnerable to Chinese competitors.


Studi Kasus MNC (3)


How has PepsiCo’s diversification strategy proved to be advantageous in comparison to the strategy of Coca-Cola?

PepsiCo has been able to add new businesses and products by its strategy of diversification, allowing it to respond to changing consumer needs with a wide portfolio of products. In particular, it has added bottled water, snack foods (through the acquisition of Frito-Lay and Quaker Oats), juices (through the acquisition of Tropicana), and the sports drink Gatorade (as part of the Quaker Oats portfolio). These products reduce its dependence on traditional carbonated drinks. They also diversify the range of products for health-conscious consumers. By comparison, Coke has remained more dependent on its flagship carbonated drink, Coke. Although it has expanded into more markets internationally than PepsiCo, it has been slow to diversify into healthier products.


Studi Kasus MNC (4)


What problems which have beset VW in global car markets?

VW is a mass-market car producer, and has found its competitiveness slipping away in key markets, largely because of high costs in Germany, where it is based. It has traditionally been reluctant to use low-cost locations for components, unlike rival global carmakers. High wages and job protection in Germany have been priorities for the powerful trade union, IG Metall, which is influential on VW’s supervisory board. In the US, VW’s sales slumped for several reasons: the weakness of the US dollar, the lack of appealing new models and the unwillingness of the company to use local suppliers of components for its Mexican factory. In China, where VW was a market leader, competitive pressures have gathered strength, from both other western entrants and Chinese companies.


Studi Kasus MNC (5)


What problems have Japanese companies had to overcome in order to regain competitiveness in global markets? • The jobs-for-life guarantee – Japan’s large companies have prided themselves on their

employment system which guaranteed a job for life to permanent, full-time employees. This was an important element in Japanese corporate culture, giving employees a strong sense of identity with the company, along with high levels of loyalty. Following decades of rapid economic development, Japan went into a period of economic downturn in the 1990s, and in the same decade, Japan’s companies came under competitive pressures from other East Asian economies which were catching up in terms of economic development. Although Japanese companies needed to restructure and abandon the jobs-for-life policy, they were reluctant to take drastic steps to slim down workforces.

• Core technology and innovation capacities – Japan’s large companies were famous for their innovations, but in embarking on joint ventures with companies in the rising economies of East Asia, lost control of some of their key innovations. Rethinking their innovation strategies, involving decisions on what to keep in-house and where to seek cooperative strategies, was part of the strategy to regain competitiveness.


Globalization and Business Network

http://cambridgeforecast.files.wordpress.com/2008/06/globalcorp.gif


Sumber: Globalization and The Rendezvous Of Civilizations, Cambridge Forecast Group


Globalization is the ongoing process that deepens

and broadens the relationships and interdependence among countries. International Business is a

mechanism to bring about globalization

International Business Environments and Operations, 13/e, Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall

International business consists of all

commercial transactions—including sales, investments, and transportation—that take place

between two or more countries


KOF Index of Globalization

World Indonesia


KOF Index of Globalization


A. Economic Globalization [36%] i) Actual Flows (50%) Trade (percent of GDP) (21%) Foreign Direct Investment, stocks (percent of GDP) (28%) Portfolio Investment (percent of GDP) (24%) Income Payments to Foreign Nationals (percent of GDP) (27%)

ii) Restrictions (50%) Hidden Import Barriers (24%) Mean Tariff Rate (27%) Taxes on International Trade (percent of current revenue) (26%) Capital Account Restrictions (23%)

2012 KOF Index of Globalization Indices and Variables Weights



B. Social Globalization [37%] i) Data on Personal Contact (34%) Telephone Traffic (25%) Transfers (percent of GDP) (4%) International Tourism (26%) Foreign Population (percent of total population) (21%) International letters (per capita) (25%) ii) Data on Information Flows (35%) Internet Users (per 1000 people) (33%) Television (per 1000 people) (36%) Trade in Newspapers (percent of GDP) (32%) iii) Data on Cultural Proximity (31%) Number of McDonald's Restaurants (per capita) (44%) Number of Ikea (per capita) (45%) Trade in books (percent of GDP) (11%)



C. Political Globalization [26%] Embassies in Country (25%) Membership in International Organizations (28%) Participation in U.N. Security Council Missions (22%) International Treaties (25%)


2012 KOF Index of Globalization


2012 KOF Index of Globalization

Globalization Index: 87 dari 208

Indonesia

Economic Globalization: 76

Social Globalization: 146

Political Globalization: 39


What’s Wrong with Globalization

•Threats to national sovereignty

•Economic growth and environmental stress

•Growing income inequality and personal stress

•Offshoring – the transferring of production abroad – is controversial in terms of who benefits when costs are reduced and whether the process

exchanges good jobs for bad ones. International Business Environments and Operations, 13/e,

Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall

http://www.absolutewealth.com/wp-content/uploads/2012/03/globalization.gif


Export-import trade

Foreign direct investment

Licensing

Franchising

Management contracts

International Business, 7e. Czinkota, Ronkainen, and Moffett

Types of International Business


Global Network Strategy © Professor Daniel F. Spulber

http://assets.cambridge.org/97805218/80817/cover/9780521880817.jpg


Create network of customers, suppliers,

partners

Use network to achieve global size and reach

Use network to provide local customization

Network relationships generate competitive

advantage

Global Network Strategy

© Professor Daniel F. Spulber


• Communications: Wired and mobile telephone systems

• Internet

• Transportation: Railroads, Airlines, Shipping, Intermodal

systems

• Energy: Oil and natural gas pipelines, Electric power

transmission and distribution

• Logistics: Postal systems, Wholesale and retail distribution


Physical networks:

Business networks:

Manufacturing, services, distribution, technology,

social networks (trust and information sharing)


The Global Factory

• Hong Kong manufacturers own or

contract with more than 40,000

factories in South China employing

four million workers

• To take advantage of specialized

sources in different countries - best

quality

• To take advantage of cost variations

across countries - least cost sources

• To take advantage of location -

minimize transport-costs, transaction

costs, and tariffs



The Global Store Examples: Dairy Farm, Shell, Zara

Growth: access to additional customers

Develop global brands

Coordination economies from centralized regional warehouses and production facilities

Provide access to sourcing network – Enhances value of supplier contacts by expansion of distribution

Lower transaction costs for suppliers who deal with fewer distributors

Lower risk from pooling demand fluctuations



Partner Networks

• Achieve global scale

• Members focus on their region

• Reduce competition by avoiding duplication of facilities and operations

• Avoid government restrictions on ownership and market dominance

• Technology standard setting

• Complements in production

• Complements in demand (game players and games)



• Provide 60% of all transatlantic services

• "Alliance that Revolves Around You"

• ONEWORLD members: Iberia, Cathay Pacific, Quantas, Finnair, Aer Lingus, Lan Airlines (Chile)

• The airlines cooperate on scheduling and ticketing, frequent flyer programs, airport clubs, baggage handling, customer service

• Competitive response to the STAR ALLIANCE from United, Lufthansa, SAS, Air Canada and Thai Airways (210,000 Employees, flights to 578 cities in 106 countries)

• 600 destinations in 135 countries around the world, operating over 8000 flights daily, 230 million passengers/year

British Airways / American Airlines


Partner Networks


Franchise Networks Advantages

• Rapid international growth

• Local ownership

• Local management

• Lower capital outlays

Disadvantages • Search cost of finding franchise

owners overseas

• Costs of monitoring performance

across borders

• Transaction costs of forming franchise

contracts in other country remains © Professor Daniel F. Spulber


Matchmaker Brings buyers and sellers together across

international borders

Market maker Creates and operates markets that cross

international borders

Agent Provide representation in other countries

Global Intermediary Strategy


D:/


Matchmaker • Bridge international differences in goods and services,

business practices, law and regulations, currencies,

languages, time zones

• Provide value-added activities

• Representative agents in sales, distribution, purchasing,

financing, contracting, and supply chain managers

• Match offers to buyer and seller needs: product features,

location, time.

• Avoids costs of search for buyers and sellers

• Reduces buyer and seller risks from dealing with few

trading partners, © Professor Daniel F. Spulber


• Language: Seller speaks Chinese, buyer speaks Spanish, intermediary speaks both

• Currency: Seller wants pesos, buyer has dollars, intermediary changes dollars to pesos

• Distance: Seller is in Thailand, buyer is in Brazil, intermediary arranges transportation

• Trust: Buyer and seller both trust the intermediary without having dealt directly with each other

• Time: Seller is in Japan, buyer is in Mexico, intermediary operates in both time zones

• Knowledge: Seller in Germany knows production technology, buyer in US knows preferences of US customers, intermediary combines knowledge of supply and demand across borders

• Culture: Seller and buyer are in different countries, intermediary adapts products, services, contract terms and negotiation to diverse social customs

Matchmaker



Mitsui



Market Maker

Cemex

Mittal

Cargill

BP Amoco

eBay

The global market maker aggregates demand across countries and aggregates supply

across countries



• Wholesales 280,000 computer hardware and software

products – think of number of prices!

• Sources in US and many other countries from 1,700

manufacturers

• Serves 175,000 resellers in more than 100 countries

• Serves through operations and affiliates in 35 countries

• Establishes prices, coordinates sales and purchases, clears

the market, allocates products

Ingram Micro

The leading international wholesaler of

technology products and services



•Creates and operates international markets

•Chooses prices, conveys information

•Adjusts sourcing and serving to clear markets – avoids

efficiency losses from market imbalances

•Provides immediacy: ready to buy and sell

•Allocates goods and services across countries

•Gathers and aggregates information about customers and

suppliers on an international level, inventories, orders, and

production

•Applies IT to international coordination

•Earns returns from international risk pooling

Market maker



Agents • Export Marketing Company (EMC) represents sellers,

can be broker or dealer, bears risks, arranges resale,

transportation, credit

• Export Trading Company (ETC) represents buyers,

handles imports, usually takes title to goods

• Act as international agent: provide expertise in negotiation,

market knowledge

• Provide trust to buyers and sellers

• Allows principal to delegate authority for distant

transactions

• Provides market expertise, often to smaller firms



Ethics in International Business

Prof. Robert Chapman Wood, San Jose State University, www.cob.sjsu.edu/wood_r/

http://forum.belmont.edu/business/category/business-ethics/


Business ethics are principles of right or

wrong governing the conduct of business people

The text says, “the accepted principles of right and wrong”

But there are many differences of opinion among highly ethical businesspeople

Prof. Robert Chapman Wood, San Jose State University,

www.cob.sjsu.edu/wood_r/



The world has many different ethical systems

mostly derived from different religions

Different systems can lead to different opinions about what is ethical



Ethical Issues in International Business

Many ethical issues and dilemmas are rooted in differences in political systems, law, economic

development, and culture

Some key ethical issues in international business …

Employment Practices When work conditions in a host nation are clearly inferior

to those in a multinational’s home nation,

what standards should be applied?

How much divergence is acceptable?



Human Rights Basic rights are not respected in many nations

‘What is the responsibility of a foreign firm in a country where human rights are trampled?’

Environmental Pollution Environmental regulations (or enforcement) in host

nations may be inferior to those at home Multinationals can produce more pollution than at home

The tragedy of the commons occurs - The water in Mekong River

- freedom of speech

- freedom of association

- freedom of assembly

- freedom from political repression



Corruption International businesses can, and have, gained economic advantages by making payments

to government officials US passed the Foreign Corrupt Practices Act

Organization for Economic Cooperation and Development (OECD) adopted the Convention on Combating Bribery of Foreign Public Officials in International Business Transactions

Social responsibility Multinational firms have power, wealth from control over

resources and ability to move production Moral philosophers argue that with power comes the

responsibility to give something back to the societies that enable them to prosper

Advocates argue that businesses need to recognize their noblesse oblige (benevolent behavior that is the responsibility of successful people and

enterprises)

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