International Business

Globalisation and Business Globalisation has been described,as ‘the

concrete structuration of the world as a whole’: that is, a growing awareness at a global level that ‘the world’ is a continuously constructed environment.

However most of the thoughts on globalisation is associated with a convergence in politics, economics and cultures.

Skeptics suggest there is no real globalisation. Observable elements such as international trade has been there ever since and it is inappropriate to term them as globalisation

Another group suggests that globalisation is a relatively new phenomenon and we are experiencing it now.

Hyperglobalists suggest that the world is now integrated, borderless and nation state isn’t relevant anymore.

Globalisation Contd.

Internal Environment◦ Recruitment◦ Motivation◦ Training ◦ Skills required◦ Structure◦ Outsourcing

External Environment◦ Competition ◦ Changes in consumer taste

Impact of globalisation to businesses

Benefits◦ Low production cost◦ Efficient production◦ Enables to focus more on the other key areas of

the business (e.g. –branding for Nike, Marketing for VS)

Drawbacks◦ Difficulties in controlling quality◦ Motivating staff◦ Legal issues◦ Vision of the organisation is not communicated◦ Limited learning ◦ Sustainability of the model

Outsourcing

Expanded commodification ◦ this results from increased consumerism,

expansion of finance capital and the emergence of information and communications capital

Reorganization ◦ owing to the creation of offshore arrangements

which increase profit, corporate networks are also developed which extend across borders, company mergers and acquisitions are commonplace and a small number of competitors dominate the market, creating oligopolies.

Effects of globalisation on contemporary capitalism

International Company◦ Has HQ in one country and trades overseas

Multinational Company◦ Has a home base and has bases in other parts of

the world and hence trades from multiple locations

Transnational Company ◦ TNC’s are MNC’s which are trying to disassociate

itself from a home base but who are not yet successful in doing so

Global Company◦ This is an organisation that has no national

identity

Business forms in a globalised environment

Knowledge◦ MNC’s operate with the idea of deriving

knowledge from various parts of the world Competition

◦ MNC’s enter to variety of markets in order to be competitive not only from cheap production cost but also from quality of manufacturing

Markets◦ The developing nations actually offer a market for

products themselves now, rather than only providing the opportunity for manufacturing.

Changes in the purpose for the emergence of MNC’s

Development of IT Governance

◦ No international police to manage corporate governance

Nation State◦ Reduction in the power of nation states which

according to many is a result of the increase in power of MNC’s

Mitigating risks in a single market Emergence of virtual economy

Structure◦ Structure for MNC’s should suit its size mostly

Strategy ◦ Strategy should suit all the markets it has a

presence in.

Internal Environment of MNC’s

Staff◦ Ethnocentric approach

This is where the approaches used in the home country is used elsewhere as well

◦ Polycentric approach This is where each subsidiary develops its own

HRM practices◦ Regiocentric approach

This is similar to the polycentric approach but the differences lie at the regional level as opposed to local countries

◦ Geocentric or Global approach This is where HRM is practiced at a global level.

HRM practices are therefore generally consistent across subsidiaries.

More frequent decision making More delegation Need for a clear structure and lines of

communication and control

Factors that need to be considered for decision making in MNC’s

MNC’s are affected by the following external factors◦ Political◦ Economical◦ Technological◦ Cultural

External Environmental Influences for MNC’s

Many have commented on a global convergence of management and organizational practices

As a result some have attempted to replicated certain management practices in more than one country.

According to a study conducted by Lowe et al Japanese production systems have been implemented successfully in Mexico compared to Britain.

Tranferability of Practices

Therefore it cannot therefore be assumed that a best practice or the practices of the home country can be seen as more efficient and then transplanted to operations overseas, because conditions would have to be similar

Green Field Investment Acquisition Licensing Franchising

Market Entry Strategies for MNC’s

Flatter organisation structure which facilitates swift communication

Easier to communicate the vision and the leadership of the organisation

Adaptability is fast for market changes and hence can be more responsive

Staff alienation becomes limited and hence motivation is easy

Limited conflicts on the organisation culture

Advantages of Small Business Organisation

Limited management capabilities Limited financial resources Creating a learning culture will be difficult Organizational Development (OD) aspects

solely depends on the attitude of the top management

Disadvantages of Small Business Organisations