Using Internet-Based Resources in Teaching IB

S. Tamer CavusgilUniversity Distinguished Faculty

John W. Byington Endowed Chair in Global MarketingMichigan State University

July 2008

Examples of Web Resources• globalEDGE

– Market potential Index for Emerging Markets http://globaledge.msu.edu/resourceDesk/mpi

– Diagnostic Tools (CORE, Partner, Distributor, GLOBE) http://globaledge.msu.edu/diagTools

• ATKearney – FDI Confidence Index http://

www.atkearney.com/main.taf?p=5,3,1,140,2 – Global Services Location Index http://

www.atkearney.com/main.taf?p=5,3,1,160&utm_source=pr&utm_medium=atk

– Global Retail Development Index http://www.atkearney.com/main.taf?p=5,3,1,141

Other Portals• World Bank’s Ease of Doing Business Index

http://www.doingbusiness.org/ • Interbrand / Business Week Best Global Brands

Study– http://www.interbrand.com/best_brands_2007.asp – http://www.businessweek.com/magazine/toc/06_32/

B399606globalbrands.htm • CKR Educators Consortium Portal; Repository

of IB teaching tools and resources for the virtual community of Pearson’s Cavusgil, Knight, Riesenberger IB text (2008) users.– http://www.prenhall.com/cavusgil – http://www.pearsonhighered.com/educator/academic/

product/0,3110,0131738607,00.html – http://dev.prenhall.com/divisions/bp/app/fred/Catalog/

0131738607

Emerging Market Potential Indicators Index (EMPI)

Diagnostic Tools: CORE, Distributor, Partner, freight Forwarder, Global Company

ATKearney Resources

• FDI Confidence Indexhttp://www.atkearney.com/main.taf?p=5,3,1,140,2

•Global Services Location Attractiveness Index http://www.atkearney.com/main.taf?

p=5,3,1,160&utm_source=pr&utm_medium=atk •Global Retail Development

Indexhttp://www.atkearney.com/main.taf?p=5,3,1,141

•World Bank’s Ease of Doing Business portal, Benchmarking Business Regulations

• http://www.doingbusiness.org/

The World’s Bank’s Ease of Doing Business

... in China, Hong Kong and the U.S.A.

Doing Business (overall) 93 5 3Starting a Business 128 5 3Dealing with Licenses 153 64 22Employing Workers 78 16 1Registering Property 21 60 10Getting Credit 101 2 7Protecting Investors 83 3 5Paying Taxes 168 5 62Trading Across Borders 38 1 11Enforcing Contracts 63 10 6Closing a Business 75 14 16

Assessing the Country Regulatory Environment

Learning Objectives:• Understand those factors that enhance business activity and those that constrain

it • Formulate quantitative measurement of business regulations in a country • Relate the degree of business regulations to such factors as pace of economic

development, GDP per capita, and others• Develop public policy implications for improving the commercial climate in a

country

Prepared by the World Bank, the Doing Business database provides objective measures of business regulations and their enforcement. The Doing Business indicators are calculated and reported for 155 economies. They indicate the regulatory costs of business and can be used to analyze specific regulations that enhance or constrain investment, productivity and growth.

Please review the overall rankings by visiting:

http://www.doingbusiness.org/EconomyRankings/

Assignment:1. What are your initial impressions of the country rankings in the Doing Business study?

What is unique to the top 10 countries where ease of doing business (EDB) is ideal, and what is unique to those countries to where EDB is highly unfavorable?

2. Please review of the methodology used by the World Bank in capturing the EDB rankings. To what extent is this a sound approach? What are the limitations of this methodology? From your knowledge of country regulatory environments, do the ten overall indicators of EDB capture all of the key determinants?

3. Consider the 25 emerging countries identified by http://globaledge.msu.edu/ . Also consider an industry of your choice. How would you go about refining the EDB rankings to fit the particular needs of your chosen industry and the emerging country environment? Develop a weighting scheme for customizing the World Bank’s EDB rankings. Explain the rationale for your choice of weights that you have chosen for each of the ten indicators. Interpret and comment on your customized EDB rankings by country.

4. You have been asked to make a presentation before your senior management on your choice of three most attractive countries for your company to enter over the next year. Justify the choice of your recommended countries based on considerations other than EDB. Will your recommendation differ based on your entry mode (e.g., direct investment versus exporting)?

5. Based upon your analysis, formulate six public policy recommendations for improving the regulatory environment of in a country of your choice.

Extra Credit Question: Conduct a regression analysis where you employ EDB figures as the predictor to predict GDP per capita, growth rate of GDP per capita, and the country’s rate of participation in international trade. Carry out this analysis for three countries of your choice.

•Top 100 Global Brands from Interbrand Consultancy and Business Week: http://www.interbrand.com/best_brands_2007.asp

• http://www.businessweek.com/magazine/toc/06_32/B399606globalbrands.htm

What Makes Brands Globally Recognizable?

Learning objectives:1.Understand the common elements of

successful global brands. 2.Learn about Interbrand methodology for

arriving at global brand rankings.3.Understand unique features of the brands

that rank especially high ranked brands.4.Understand companies how can go about

pursuing global brand leadership.5.Understand the limitations of global

branding.

Assignment1. Visit the Interbrand site at

http://www.interbrand.com/best_brands_2007.asp and Business Week portal at http://bwnt.businessweek.com/brand/2005/ .

2. Provide your initial impressions of the rankings. What patterns can you identify about the rankings? For example, do you find a dominance of a certain country’s brands in the list?

3. What are the common elements of highly recognized brands?4. Analyze and critique the Interbrand methodology. What are its

merits? What are its limitations?5. A common element of successful global brands is that these

tend be highly standardized offerings. Why does standardization works especially well for some brands?

6. From a country perspective, can you identify any limitations that may be associated with global brands?

7. How should managers go about establishing global brands? What were especially useful strategies of recent additions such as Zara, Google, LG, Bulgari, Novartis and UPS?

Illustrations of Collaborative Ventures

We made a distinction between conventional, equity-based joint ventures and non-equity, strategic alliances. Another distinctive feature of a collaborative venture is its geographic focus—whether the venture’s geographic reach is primarily local (in single national market) or regional/global (encompassing multiple markets or worldwide). Using these two features it is possible to develop a classification scheme such as the following grid. Using this scheme, identify at least six examples of ventures for each of the four types. General business literature will be useful for this purpose. Familiarize yourself with these ventures and be prepared to comment on their long-term prospects. If they are still active, what are the prospects? If they disbanded or failed, why?

Geographic Reach

Type of Venture Local (Single Country)

Regional/Global

Equity JVs

(ownership based)

Non-equity

ventures (project based)

Readings: “Make Your Dealers Your Partners,” Harvard Business Review,

March-April 1996.“Selecting Foreign Distributors: An Expert Systems Approach,”

Industrial Marketing Management, 1995, (on VIBA).

NUMMI (50/50 JV of Toyota & GM)

Autolatina (Ford & Volkswagen in

Brazil)

Whirlpool (49%) and Vitro (51%) JV

in Mexico

Ciba-Geigy and Corning (50/50

Medical diagnostics)

Northwest & KLM

GM & Fanuc Robotics (50/50)

Ford and Jaguar

Fuji and Xerox copiers

Dow Corning (last 20 years; silicones)

R & D, Licensing and marketing agreements

among pharmaceuticals

Coca Cola and its bottlers in individual

markets

GE and Toshiba (research and

information exchange)

IKEA and furniture suppliers

Code sharing agreements among

airlines

Global supplier relationships

Kodak and Panasonic

Whirlpool and Emerson Electric

(motors)

Non-EquityAlliances(Project Based;

Contractual)

Equity JVs(Ownership

Based)

Type ofCollaboration

Local(Single Market)

Regional/Global

(INSTRUCTOR SOLUTION)Geographic Scope of Collaboration

•Complex management structure•Afford greater control over future directions•Knowledge transfer may be easier•Common goals drive the JV•Difficult to terminate •Legal involvement and costs

•Coordination/Knowledge transfer a challenge•Higher Currency exposure •Product adaptation/ customization necessary•Political Risk

• Simple management structure; able to adjust• Easy to enact; take advantage of respective strengths; quick response to changing technology/markets• Easier to terminate• In absence of equity-binding, trust and relationships must bind; open communication channels• Conflicts may be more difficult to resolve effectively•Division of costs/benefits may strain the relationship•Transfer of knowledge may not be as easy

Contrasting International Collaborative Ventures

Local(Single Market)

Global(Regional or Worldwide)

EquityJoint Ventures

(Ownership Based)

Non-EquityCollaborative Ventures

(Alliances)(Project Based)

CKR: International Business: Strategy, Management and the

New Realities• http://www.pearsonhighered.com/educator/

academic/product/0,3110,0131738607,00.html

• http://dev.prenhall.com/divisions/bp/app/fred/Catalog/0131738607

• http://www.prenhall.com/cavusgil

Management Skill Buildersin Cavusgil, Knight and

Riesenberger International Business: Strategy,

Management and the New RealitiesISBN # 0-13-173860-7

Pearson 2008

Illustrations of Product and Promotion Adaptation

Using the chart that follows, attempt to develop five alternative strategies for internationalization. Varying decisions on product and promotion/positioning result in five distinct strategy options. First develop some examples of products or industries where each strategy would be appropriate. Next, elaborate on special advantages as well as drawbacks of each strategy. Finally, the following checklist is offered as a way of considering reasons for why management would engage in product adaptation. The list provides a comprehensive guide for thinking about product adaptation and, in the process, add value to company’s offering.

Product

Strategy

Positioning and

Promotion Strategy

Examples Comments

(Pro and Con)

Same Same

(Straight Extension/Shot in the Dark)

Same Modified

(Don’t Tinker with a Good Product Idea)

Modified Same

(Product Localization/Adaptation)

Modified Modified

(Dual Adaptation)

New New

(Global Product Development)

Product Strategy

Communications Strategy Examples Comments

STRAIGHT EXTENSION

Uniform

Uniform Credit card, pocket calculators, breakfast cereal, mineral water, wine, pasta, cookies, soft drinks (Pepsi, Coke), alcohol, cigarettes, watches, cosmetics, Hollywood movies, hotel chains. Unsuccessful cases: Campbell soup in England, Brazil, Philip Morris in Canada, Pillsbury Doughboy

Simplicity; low-cost; efficiency; exploit a good idea that worked well at home (Avis: We try harder); consistent image; ease of planning and administration. Unresponsive to varying customer needs and preferences.

COMMUNICATION ADAPTATION

Same

Modified Garden power equipment; bicycles, motors scooters, outboard motors. Use of local celebrities in commercials. Targeting college students by New York Times. Positioning bowling as “white collar” recreation in China.

Low-cost implementation. Tailor-made positioning. Broadening appeal of product to new customer segments. Inconsistent image. Makes coordination of marketing activities more difficult

PRODUCT LOCALIZATION

Modified

Same Detergents, soap (to function in cold water); Gasoline (to meet weather conditions); Ag chemicals (to meet different soil conditions); Household appliances (scaled down to meet use environments) refrigerator, freezer, etc.; Also for voltage differences; metric, etc.; Clothing (Levis cuts); Food, candy (McDonalds, KFC, Campbell soup); Right-hand drive cars. IKEA adapts products for U.S. customers.

Higher design, manufacturing and sourcing costs. More precise catering to needs. Consistent image. Avoid market entry barriers. Gain competitive edge.

DUAL ADAPTATION

Different

Different Greeting cards (space for sender to write own message also wrapped in cellophane for handling). Coffee. Preferences differ among countries. Little Ceasar, Hard Rock Café, etc., not only change their menu and services, but also target a different clientele. Brunswick creates entertainment centers that include more than bowling.

Allow creativity and redesign. Greater customer satisfaction. Attract new customer segments. Avoid market entry barriers. Higher design, manufacturing costs. Coordination across markets becomes a challenge.

GLOBAL PRODUCT DEVELOPMENT

New

New Benetton in S.E. Asia: shorter arms & legs, and did not use politically-charged European advertising, but simpler themes; Coca Cola developed a dietary supplement for developing countries which is protein-fortified beverage; Manual washing machines; Bare-bones model trucks for developing countries; Ford Mondeo, Nissan Primera, P&G’s Vizir. Pepsi launches a new fruit juice drink “Heaven and Earth” in China when it discovers that Chinese prefer fruit juices.

High risk. Potentially limited market. High cost. Capitalize on opportunity availed by local market.

(INSTRUCTOR SOLUTION)ADAPTATION vs. STANDARDIZATION IN INTERNATIONAL MARKETS

STRATEGIC OPTIONS

Critical Incident Analysis in Cross-Cultural Management

Assignment

Most of us have experienced a situation where, in a cross-cultural setting, we found the behavior of a foreign national hard to explain. We perceived this behavior to be odd, unusual, or perhaps improper. As a result, we may have felt anger, frustration, or at least felt uncomfortable and awkward. It is likely that this state of affairs interfered with our ability to interact effectively with the foreign national, and maybe even led to a breakdown in communication.

That we tend to view other cultures through our own is a well-accepted human trait. We accept our own culture and its ways as the norm—everything else may seem strange to us. Our acceptance of our own culture also tends to condition how we react to different behavior, systems, or values. This sub-conscious reference to our own way of doing things is known as Self-Reference Criterion. Understanding this phenomenon is an effective first step in avoiding cultural bias — avoid ethnocentric reactions.

Critical Incident Analysis encourages a more objective reaction to cultural differences by helping us develop empathy for other points of view. It may be attempted in a number of steps as follows:

1. First, identify the situations where you need to be culturally aware to interact effectively with your business partners from another culture. These may include socializing, building trust, negotiations, arrival to meetings, legal agreements, formality, and so on.

2. When confronted with a “different” behavior, discipline yourself not to make value judgments. Instead define the situation or problem in terms of the foreign culture traits, habits, and norms. Simply make observations and gather objective information. This way, you will be isolating the self-reference criterion influence in the problem.

3. Learn to make a variety of interpretations of the foreign national’s behavior, to weight the probabilities of each, to select the most likely interpretation, and then formulate your own response. By doing so, you will have reacted to the situation without the self-reference criterion, and hopefully produced the optimum response.

4. Learn from this process, and improve continually. Remember also that cross-cultural empathy—and success in international business—can be greatly enhanced by acquiring factual knowledge about your partners. This includes political and economic background of the country, the human profile (social norms, values, behavior, traditions, etc.), history as well as current national affairs, and their perceptions of other cultures.

Assignment: Using the approach suggested by the Critical Incident Analysis, define a situation that you or someone else has experienced that led to a cross-cultural misunderstanding. Explain what actually happened, and how a more culturally-sensitive response may have been possible if Critical Incident Analysis were used.