Principals of Management - MBA Week4

8/13/2019 Principals of Management - MBA Week4

1/29

MBA503: Lecture 4

Managing in a GlobalEnvironment

Dr Sardana Islam KhanAssistant Professor


2/29

Learning Objectives

After this lecture and readings, students shouldbe able to:

Part A

discuss the challenges of managing in a global context

differentiate between domestic business operations and international explain differences in economic, socio-cultural and legal political

environments affect the management of worldwide business operations

identify and describe various market entry strategies used by businesses todevelop foreign markets

describe the characteristics of a multinational company describe the meaning of the term globalisation

Part B

Preparing for Assessment 2Do Not Miss This Information!


3/29

Globalisation and stages

Globalisation is about investment and financial marketsoperating worldwide

1. Domestic stagemarket limited and all productionand marketing at home

2. International stage - organisation adopts multi-domestic approachinternational division

3. Multinational stagemarketing and production inseveral countriesmore than one third of salesoutside home country

4. Global stageorganisations operate in country/iesthat offer best opportunities and sales


4/29


5/29


6/29

The impact of national culture

Culture can be found at many different levels ofanalysis:

Individuals ideas and beliefs

Organisational culture

National culture National culture can be analysed where:

There is a high level of similarity within country; and

Countries are dissimilar from each other

Seminal work on conceptualisation of national cultures(in management context) by Professor Geert Hofstede

GeertHofstede


7/29

Cultural Differences

When Nike learned thatthis stylized Air logoresembled Allah in

Arabic script, itapologised and pulledthe shoes from

distribution.


8/29

Hofstedes research

Hypothesised that cultural differences betweenorganisations was reflected by national differences:

National values systems (i.e.: cultures) would influenceorganisational and employee working relationships

Surveyed > 116,000 employees of one company(IBM) in 40 countries

Big problem with study: only studied one organisation(IBM)therefore not representative of otherorganisations


9/29


10/29


11/29

Cultural Dimensions - the GLOBE

Project

Power Distance Uncertainty Avoidance

Societal Collectivism

In-group Collectivism

Gender Egalitarianism

Assertiveness

Future Orientation

Performance Orientation Humane Orientation

McGraw-Hill

2004 The McGraw-Hill Companies, Inc. All rights


12/29

Implications

Interpersonal Language

Punctuality

Interpersonal space

Tempo of dealings Leadership style

Motivation.

Organisational Structure

Decision-making

Leadership

Adaptation of products HRM policies

Entry mode choice

Location of value-creating

activities Organisational culture.


13/29

Evolving into a global organisation

Several ways that existing organisations canpenetrate into markets in other countries:

Market entry strategies

Direct investment strategies

The correct choice depends on a myriad offactors including:

Nature of the environment in the new market

Assessment of risk Capabilities of parent organisation


14/29

International Expansion

Two possible ways of expanding:1. Market entry strategies:

Outsourcing

Exporting

Licencing Franchising

2. Direct investment strategies:

Joint ventures

Mergers or acquisitions Wholly owned affiliates or subsidiaries (including

greenfield ventures)


15/29

Market Entry Strategies

Involves the sale of goods and services toforeign markets, but does not require expensivecapital investments

Options include:

Global sourcing / outsourcing Exporting

Importing

Licence agreements

Franchise agreements


16/29

Global Outsourcing

Concerned with the international division of labour

Contract out some or all of the manufacture of a good/ provision of service to alternate labour markets

Advantage:

Access to cheap labour and supplies regardless of country

Disadvantage:

Quality control

Managing resource flows

Ethical considerations (consider again next week)


17/29

Exporting/Importing

Most businesses start their international operationswith exporting: Make product domestically

Ship overseas

Require access to distribution channels in new market

Advantages: Very little risk

Instant foreign market knowledge

No major resource commitment

Disadvantages: Limited control

Product and company image may be damaged


18/29

Licensing

An agreement that allows the licensee to usean industrial property in exchange for paymentto the other party (licensor) Typically manufacturing based

Way of selling intellectual property (know-how) Advantages:

Profitable

Gain access to markets

Disadvantages: Build future competitor


19/29


20/29

Direct Investment Strategies

Require major capital commitments but creates

right of ownership and control in the foreignmarket

Options include: Joint venture

Mergers and acquisitions

Wholly owned affiliates (including greenfieldventures)

Evolution of the trans-national corporation (TNC)and the multi-national corporation (MNC)


21/29

Joint Ventures

An agreement in which 2 or more partners own anoverseas business: usually in the home country of one of the partners

Advantages:

Efficient Gain access to market and skills of local partner

Access to dual competitive advantages

Disadvantages:

Difficult to find right partner Can involve substantial capital investment


22/29

Merger: Combination and pooling of equals, with newly created firm

often taking on a new name

Acquisition: One firm, the acquirer, purchases and absorbs operations of

another, the acquired

Merger-acquisition strategy: Much-used strategic option

Especially suited for situations where alliances do not provid

a firm with needed capabilities or cost-reducing opportunities Ownership allows for tightly integrated operations, creating

more control and autonomy than alliances

Merger and Acquisition Strategies


23/29

Mergers and Acquisitions

Advantages: To create a more cost-efficient operation

To expand a firms geographic coverage, extend a firmsbusiness into new product categories or international marke

To gain quick access to new technologies or competitive

capabilities

Disadvantages:

Resistance from rank-and-file employees

Hard-to-resolve conflicts in management styles and corporat

cultures Tough problems of integration

Reduce competition [ACCC in Australia to monitor]


24/29

Examples of mergers

AOL and Time Warner ($350 billion) Vodafone and Mannesmann ($190 billion)

Exxon and Mobil Oil ($86 billion)

Travelers and Citicorp ($76 billion)

Bank of America and NationsBank ($60 billion) Daimler Benz and Chrysler ($40 billion)

BHP and Billiton ($28 billion)

Hewlett Packard and Compaq ($25 billion)


25/29

Wholly owned affiliates

An overseas operation that is totally owned

and controlled (100%) by the firm (multi-national corporation, MNC)

Advantages: Can be very profitable, if successful

Full control Disadvantages:

Requires high level of capital investment

Period of acclimatisation to new environment (newgeneral and specific environment to understand)

Possible resentment from host country if MNC isperceived as driving out local enterprise


26/29

Which mode of entry?


27/29


28/29

Summary

The business environment (both local andglobal) provides the context for businessactivity and managerial action

The environment provides opportunities and

constraints for organisations Next week, we will consider another aspect of

the environmentthe extent to which being agood corporate citizen can limit or shape

managerial action


29/29

Next week

Week 5:

The ethical organisation

Principals of Management - MBA Week4

Documents

Transcript of Principals of Management - MBA Week4