po b lecture 7 global business models v2 students
DESCRIPTION
POB lecture 7TRANSCRIPT
Principles of Business
Global Business Models – Part 1
2
Overview
• Overview of the key trends of globalisation; considering different FDI routes to market
• What are the factors and costs involved that drive global business
• Describe the cultural factors that affect global business (using Hofestede’s Cultural Framework)
• Critically evaluate different legal systems and the implications on global business models
• Consider the role of trade barriers and uncompetitive business practises across the world
• Detail the different forms of international business activity
3
Learning Outcomes
• Explain the role of global business and effects of culture and legal systems
• Critically evaluate why nations and companies trade and describe how international trade is measured
• Discuss the nature of conflicts in global business, including free trade and government interventions
• Define the major forms of business activities internationally
Global Competitiveness
View video: http://www.youtube.com/watch?v=-2547RlpEIM
Top Trading Countries
Source: World Economic Forum, 2013
Global Trade: Overview
Source: World Economic Forum, 2013
Global Inflows/Outflows
Source: World Economic Forum, 2013
Regional Trade
Source: Daniels et al,, 2013
Regional Trade
Source: World Economic Forum, 2013
Global Business Model to Market
Source: Daniels et al, 2013
Forms of International Business Activity
ImportingPurchasing goods or services from another country
and bringing them into one’s own
country
ExportingSelling and
shipping goods or services to
another country
LicensingAgreement to
produce and market another company’s
product in exchange for a royalty or fee
Foreign Direct InvestmentInvestment of
money by foreign companies in
domestic business enterprises
Multinational Corporations
Companies with operations in
more than one country
Global Organisation Structures
Source: Daniels, 2013
Geographic & Division Structure
Source: unc.edu
Matrix Structure at Unilever
Source: Emeraldinsight.com
• Problem areas that can hinder managers’ cultural awareness…– Subconscious reactions to circumstances– The assumption that all societal subgroups are similar
• Managers that educate themselves about other cultures have a greater chance of succeeding abroad
Culture and Global Business
• The nation is a useful definition of society because similarity among people is a cause and an effect of national boundaries– laws apply primarily along national lines– language and values are shared within borders– rites and symbols are shared along national lines
Hofstede’s Cultural Dimensions
• Geert Hofstede• Dutch management
researcher
• Gathered data from 100,000 IBM employees
• Wanted to determine values on which cultures vary
• Surveyed workers from 50 countries and 3 regions
• Concluded that there are five dimensions used to differentiate and rate cultures
Geert Hofstede
Source: www.geerthofstede.com
Hofstede’s Cultural Dimensions
• How people define themselves and their relationship to others
• Individualist• Believe individual is most
important• Stress independence over
dependence
• Collectivist• Views, needs and goals of
group most important• Obligation to the group is the
norm• Self is defined in relation to
others
Individualism/Collectivism Uncertainty Avoidance
• People within a culture are made nervous by situations which they percieve as unstructured, unclear and unpredictable
• High Uncertainty Avoidance• Avoid ambiguity• Strict code of behavior• Belief in absolute truths
• Low Uncertainty Avoidance• Accept ambiguity and lack
of structure• More inclined to take risks• Rules are rejected or
ignored
Hofstede’s Cultural Dimensions
• Extent to which people view inequality as normal
• High Power Distance• Power is scarce resource• Natural and inevitable• Centralisation of power
• Low Power Distance• Minimal power differences• Power can be achieved
through work• Superiority not rigid
Power Distance Masculinity-Femininity
• Relationship between gender and sex-appropriate behaviour
• Masculinity• Distinct roles• Men are assertive,
ambitious and competitive• Women are supportive and
nurturing
• Femininity • Fewer rigid gender roles• Men and women are more
equal• Interpersonal relationships
Hofstede’s Cultural Dimensions
• Long-term orientation• Savings• Do anything to achieve a
goal• “Eye on the prize”
• Short-term orientation• Immediate gratification• “Make money, spend
money”• Less willing to sacrifice
Long-term/Short-terms
Managing Cultural Differences
• Do managers have to alter their customary practices to succeed in countries with different cultures?
• Must consider– Host society acceptance– Degree of cultural
differences• cultural distance
– Ability to adjust• culture shock and
reverse culture shock– Company and
management orientation
• Three company and management orientations– Polycentrism
• business units abroad should act like local companies
– Ethnocentrism• home culture is
superior to local culture• overlook national
differences– Geocentrism
• integrate home and host practices
The Legal Environment
• The legal system is the mechanism for creating, interpreting, and enforcing the laws in a specified jurisdiction
Source: Daniels et al, 2013
Trends in Legal Systems
• What is the basis of rule in a country?
– The rule of man• legal rights derive from the individual who
commands the power to impose them • associated with a totalitarian system
– The rule of law• systematic and objective laws applied by
public officials who are held accountable for their administration
• associated with a democratic system
Trends in Legal Systems
The Worldwide Practice of the Rule of Law
Source: Daniels et al, 2013
Flow of Goods and Services Globally
Source: Daniels et al, 2013
Economic Rationales for Government Intervention
• Why governments intervene in trade– Economic rationales
• Fighting unemployment• Protecting infant industries• Promoting industrialization• Improving comparative position
– Non-economic rationales• Maintaining essential industries• Promoting acceptable practices abroad• Maintaining or extending spheres of influence• Preserving national culture
Tariff and Non-Tariff Barriers
• Tariffs are also known as duties– refer to a government
levied tax on goods shipped internationally
• Tariffs may be levied – on goods entering,
leaving, or passing through a country
– for protection or revenue– on a per unit basis or a
value basis• export tariffs• transit tariffs• import tariffs
• Subsidies – direct assistance to
companies to make them more competitive
• agricultural subsidies • overcoming market
imperfections• valuation problems
• Aid and loans– tied – untied
• Customs valuation• Other direct-price
influences – special fees and
requirements
Nontariff Barriers: Quantity Controls
• Quotas– limit the quantity of a
product that can be imported or exported in a given time frame
• Voluntary export restraint (VER)
• Embargoes
• “Buy local” legislation• Standards and labels• Specific permission
requirements– import or export
license • Administrative delays• Reciprocal requirements
– Countertrade or offsets
• Restrictions on services
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Essential work for next week
• Please consult the OLE for details of:– Essential readings*– Seminar/workshop preparation work*– Recommended further readings– Any additional learning
* Essential readings and preparation work must always be completed in time for the next session
End of presentation
© Pearson College 2013