overview of international business functions
TRANSCRIPT
Overview Of International Business Functions
Arvind V. PhatakCarnell Professor of Management and
International Business;Ex. Director, IGMS/CIBER
Drivers of Globalization
Effects of Globalization
Globalization’sChallenges to Business
Firms
Impacts on Curriculum
Presentation Format
Major Skills and Characteristics of New Employees
(On a 5-point scale)Knowledge of Other Cultures: 4.2
Cross-Cultural Communications skills: 4.2
Experience in IB: 4.2
College Degree: 4.2
Experience in related functional area: 4.1
Fluency in Foreign Language: 4.1
General knowledge of other countries: 4.0
Globalization
• The international Monetary Fund defines it as “the
growing economic interdependence of countries
worldwide through the increasing volume and variety of
cross-border transactions in goods and services and of
international capital flows, and also through the more rapid
and widespread diffusion of technology
Drivers Of Globalization
Death Of Distance
• Countries inter-connected by rapid flows of knowledge and information
• E-mail and chat rooms
• Vide Conferencing
• Cell phones
• Satellite Transmission
• BBC, CNN, Star, Al Jazeera
Death Of Time
• London – New York
• 1930: Steam ships, 10 days• 1950s: Propeller Aircraft 200-300 mph, 2 days• 1960s: Jet Aircraft 500-700mph, 8 hours• 1990s: Supersonic Jets, 3 hours• Distance measured in time to get there
The Push Towards Free Trade
• International Trade measured by volumes of imports and exports
• International trade growing at a sky rocketing pace
• Increasing economic interdependence among countries
The Push Towards Free Trade
• World exports of goods $ 2 Trillion in 1991, $ 6 Trillion in 2001
• World economy growth – 3 %
• World trade growth – 6 %
• Significant increase in cross border investments in portfolio and Foreign Direct Investment
Creation of a Global Labor Force• Jobs come to where people are
• Indian Software industry serves the needs of Europe and American markets
• China dictating price of consumer goods
• Fast approaching global wage rate for skilled and unskilled workers
• Global workforce determines global prices of goods and services
• People > Jobs
• Jobs > People
Porous Borders Between countries
• Lowering of barriers to immigration
• Increase in transfer of wealth, knowledge and technology among countries
• Economic linkages between adopted and mother countries
– Indian and Chinese Diaspora has its footprints in every country in world
Porous Borders Between countries
• Pre-1964: Immigration restrictions against Asia Pacific triangle
• Post 1964: Non-European Immigration world wide
• Ease of visa restrictions: H1B
Globalization of Financial Markets
• What happens in US impacts rest of the world
• Interest rates, stock markets, currency values are all interconnected
• A country’s ability to compete is often dictated by events in distant parts of the world
Global Thrust for a Market Economy
• Centralized planning replaced by free markets and economic liberalization
• Deregulation of airline, financial services and telecommunications in developed and developing countries
• Welcome mat for foreign companies in consumer products
• Opportunities in infrastructure projects
Global Thrust for a Market Economy
• The fall of the Soviet Union has given a boost to free enterprise and market based economies.
Current trends in International economy
• Privatization
– Huge public sector debts
– Poor performance of SOEs
– Raise revenue for state
– Attract foreign investment and technology
Deregulation and Privatization of Commerce and Industry Globally
• Money is flowing across national boundaries
• Number of international airlines has grown
• Number of passenger miles flown has shot up
• The tourism and hospitality industry has flourished
Rapidly Falling Freight costsThree notable economic trends:
• World economy has become far less transport-intensive
• “Containerization” and “intermodal transportation” has led to steep drops in the cost of cargo handling
• Deregulation of the airlines and telecommunications has brought about huge drop in the data transfer and air transport
Effects Of Globalization
Movement Toward Free Trade and Trade Blocs
Types of Trade BlocsFree Trade Area: member countries eliminate trade
barriers among themselves, but retain right to impose barriers on non-members.
Customs Union: member countries remove barriers among themselves and have common barriers on non-member countries
Common market: A customs Union that allows free movement of factors of production
Economic Union: A common market where economic policies are also harmonized
European Union
ASEAN
Mercosur
Trade Blocs and Global Free Trade
Trade Bloc 1990 1995 1996 1997 1998 1999NAFTA 226273 394472 437804 496423 521649 581162
EU 981260 1259699 437804 496423 1226988 1376314
ASEAN 28648 81911 86923 88770 71669 81929
MERCOSuR 4127 14199 17075 20772 20352 15313
Evolution & Growth of Global Companies
• Principally companies from Europe, United States, Japan and South Korea
•
• Global Companies and their global network of subsidiaries are connecting countries and companies world-wide.
Table 1-2
Challenges Faced By Businesses in Global
Environment
Environmental Challenges
Political Ideologies
Economic Systems
Technological Sophistication
Legal Challenges
Cultural Distance
Impacts on Business Functions
Marketing: advertisements, packaging
Finance: pricing, balance sheet effects
Production: reward systems, technology
Leadership: styles
Communications: methods and modes
.
The Importance Of Understanding Culture
and Cultural Differences
Iceberg
Major Business languages Globally
• English
• Chinese
• Spanish
• Hindi
• Bengali
• Japanese
• Portuguese
• Russian
Top Languages
35%
14%13%
12%
8%7% 6% 5% Chinese, Mandarin
Hindi
English
Spanish
Bengali
Portuguese
Russian
J apanese
World Religions and Business• Christianity
• Judaism – Holidays, Sabbath, dietary prohibitions
• Islam – banking, holidays
• Buddhism
• Hinduism – dietary prohibitionsTop Religions
34%
22%
15%
14%6% 4% 3%2%
Christian
Islam
Hinduism
Secular/Nonreligious
Buddhism
Chinese Traditionalreligionprimal-indigenous
African Traditional &Diasporic
Corruption rankingsCorruption Rankings
The Americas USA
The Americas Venezuela
Western Europe Finland
Western Europe Greece
Eastern Europe Slovenia
Eastern Europe Ukraine
West Asia Israel
West Asia Kazakhastan
South Asia Sri Lanka
South Asia India
South Asia Pakistan
East Asia Singapore
East Asia China
East Asia Vietnam
Africa Bostwana
Africa Nigeria
0 2 4 6 8 10 12
USA
Venezuela
Finland
Greece
Slovenia
Ukraine
Israel
Kazakhastan
Sri Lanka
India
Pakistan
Singapore
China
Vietnam
Bostwana
Nigeria
The
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Corruption Index
Series1
Cost Of Corruption
Value Orientations In Society
Universalism---------------Particularism
Affect Neutrality---------------Affect
Specificity---------------Diffusion
Achieved Status---------------Ascribed Status
Self Interest---------------Collectivity
Private and Public Self
PrivateSelf
PublicSelf
Private and Public Self
Private and Public Self
Private and public Self
Cultural differences
• Gestures and body language
• Marketing
• Colors– Prussian blue for singer
– Red and Gold are tops in China
– White in India and Japan = Death
The Language of Time
AmericanCulture
Time is Money!
There is a limited amount of time available to each person.
Language of Time
EasternEasternCultureCulture
Time does not begin at birth nor end at death.Time is an inexhaustible resource.
Office Location
Language of SpaceLanguage of Space
Boss is in the Penthouse
Boss is in the Center
Language of Things
Language of Agreements
The end point of the negotiation
CONTRACTU.S. VIEWU.S. VIEW
Language of Agreements
This is the beginning of the
negotiations
CONTRACT
EASTERN VIEWEASTERN VIEW
Language of Friendship
Eastern CulturesEastern Cultures
You take care of a friend’s family!
Friendship is alifetime thing!
Few -- but verygood friends!
Key IB Success Factors
• Technical Ability• Managerial Skills• Cultural Empathy• Adaptability and Flexibility• Diplomatic Skills• Language Aptitude• Personal Motives• Emotional Stability and Maturity• Adaptability of Family
The IB Curricular Tripod
Language Area
Business
BusinessLeadership
Questions