International Management.
Global Change & international turmoil has made it even more important for the world to
understand the importance of international and global management.
Usher of instant international news, dynamic multiplayer gaming and real-time social
communication are all results of globalization. BPO (Business Process Outsourcing is
also an output of international globalization management). Company ownerships such
as IBM, Ben & Jerry, Anheuser-Busch are also interlinked through international
communication.
The economy right now exists in global scale where everything from resources,markets
to competition is worldwide in scope. The influence of globalization is uncountable right
now. Economic integration is at peak. Panjak Ghemawat’s concept of World 3.0, where
nations balance cooperation in global economy with national identities and interests
seems true. Economic gains through international integration is as important as
anything. Any product has a total international travel and a big story before it comes to
the final consumer (even after recycling) and such was the example of Pietra Rivoli’s
TSHIRT.
RM Kanter also described globalization as one of the most inflential and powerful
events in history.
Honda’s cultural integration in Ohio with Allen Kinzer as the first manager is also a very
important story of globalization in terms of human reserouces. 4200 workers PRODUCE
440000 vehicles per year.
Haier’s story in South Carolina (CEO- Zhang Ruimin) who had a tough time capturing
America’s refrigerator market and his specific organizational style showed perseverance
and finally succeeded.
Global Management shows various complexities and there can be numerous examples
of it-
Procter & Gamble- 180 countries
McDonalds- Outside America SALES (Moscow,Tokyo,Budapest and Rio)
Toyota- 14 North American Plants with 35000 workers.
Global Managers with strong global perspective make this possible.
International Management. 1
REASON OF GOING GLOBAL
As per John Chambers, the chairman & CEO of Cisco systems, the need for getting the
best possible infrastructure,workforce and support from the government is the most
important thing regardless of national boundaries for a truly global brand to succeed.
NIKE’S Swoosh is one of the most recognised international brands despite it not having
any domestic manufacuting infrastructure and is mostly based on international-sourcing
(100+ factories in China) whereas NB takes a totally different approach with 25%
production in it’s original US but it also leverages sales from outside of US.
BENEFITS
Profits with expanded operations
New Customers after crossing national boundaries
More materials,products and services
Labor- Lower Cost,Talented workers
Larger pool of financial resources and capital
Lower Risk of spreading assets across multiple companies
Hand in Hand Economic development along with the local economy also exists where
examples of Green-Mountain Coffee,Peet’s & Starbucks can come on the page which
help local farmers (Rwanda) grow and also improve their production methods.
THE PROCESS
The most common market-entry strategies for a company to go global are-
Global Sourcing,Exporting/Importing & Licensing & Franchising
DIRECT INVESTMENT STRATEGIES
Strategic Alliances, Joint Venture, Wholly owned subsidaries
GLOBAL SOURCING
Purchasing Materials, Manufacturing components,Locating Business Services
This basically means the best possible international division of labour at low cost which
flows in a complex system in order to provide the most efficient output
Examples
International Management. 2
Boeing
Final Assembly- 787 Dreamliners in America
Center Fuselage- Italy
Landing Gear- France
Flight Deck Interiors- Japan
Service Sector Examples
Call Centers in Phillipines, R&D in Brazil/Russia, X-Ray Analysis in India.
Global Sourcing is being extensively used in the manufacturing of several global
products from toys to electronics.
CHINA- The factory of the world which is a major outsourcing destination for most of the
businesses. Apples Manufacturing- Hon Hai Precision Industry Taiwan (Trade Name-
Foxconn) (350000 workers) and they also assemble for HP,Sony etc.
But it also has cons because of which companies are RESHORING, which can be
1. Complex Global Supply Chains
2. Moral Blow which results in financial damage
3. Sketchy and untrustworthy foreign contracts/deals
4. Rising Labor Rates
5. Higher Transportation Costs
6. Cheaper Energy in home regions
7. Stable Wage Rates in home regions
8. Better Quality Control
9. Good Public Relations through common culture and domestic operations
A BCG Report concluded that over half of US Companies are either reshoring or
are planning to do so in the future
EXPORTING & IMPORTING
Exporting- Selling locally made products in foreign markets.
Importing- Buying Foreign-made products and selling them in domestic markets
International Management. 3
Exports create local jobs due to which government support ushers and expansion
results.
The Growth of Richards Industries due to it’s CEO’s Bruce Boxerman’s exporting
decisions to expand from Cincinnati after visiting a trade fair resulted positively in the
favour of globalisation due to which his company is now the parent of six product lines
and has over 200 sales representatives internationally (this happened due to him
spotting an international opportunity of selling precision valves)
LICENSING & FRANCHISING
Licensing agreements also play a very important role in G in which foreign firms pay a
feww for rights to make or sell another company’s products in a specificed region.
Access to
Unique Manufacturing Tech
Special Patent & Licenses
Trademarks
E.g.- NB Licensed a chinese supplier ro produce and distribute it’s shoes around Asia
but an issue arose where even after NB revoked the license to supplier continued to
produce it which resulted in court calls in litigation terms.
Franchising is another form in which a foreign firm buys rights to use another’s name
and operating methods in the home country. E.g. McDonald’s, Wendy’s and Subway sell
facility designs, equipment, product ingredients, recipes and managment systems to
foreign investors while retaining certain brand,product and operating controls, the main
issue that arises is to create the locally popular taste according to the specific cuisine in
which the firm is being franchised to prove successful.
JOINT VENTURES & STRATEGIC ALLIANCES
FDI involves setting up or buying all parts of a business in another country, insourcing is
used for job creation through FDI,
US FDI Value- 125 Billion $
Jobs- Around 5.9 Million
International Management. 4
A Common way to start is with joint ventures where foreign and local partners agree to
pool resources, share risks and get in for a joint operation, it sometimes starts when a
foreign partner buys partial ownership in a local firm or as an entirely new firm.
A GLOBAL STRATEGIC ALLIANCE is when foreign and domestic firms work together
for mutual benefit and partners in alliance to generate more market penetration and
profits through cooperation. A foreign alliance can bring new opportunites,access to tech
and skills whereas the local alliance can bring new markets, access to expert locals and
business context.
Potential Business Risks also exist where goals do not match like for example when the
FA seeks profit and cost-effectiveness but the LA seeks employment and new tech.
Loss of Business ideas & IP is also a potential and such was the story when China’s
General Motor’s Local Joint Venture allegedly copied the model of one of their cars
called Chery and went on to become a successful international brand called Chery
International.
FOREIGN SUBSIDARIES.
International Management. 5
