Globalization

Lecture 1 GLOBALIZATION International Business BUSI 2490

Objectives Define International Business q Define “Globalization” q

q Examine “Globalization” § Areas; Drivers; Reasons

International Business q 

Definition:

ANY COMMERCIAL TRANSACTION THAT CROSSES THE BORDERS OF TWO (OR MORE) COUNTRIES

International Business cont ’ d qObjects? § Goods – Consumer & Industrial goods

§ Services – Large variety §“Invisibles” – Intellectual property (licensing, franchising), Management Services, Tourism, Transportation § Financing – Lending & Borrowing

International Business – cont ’ d

q Differences from “domestic” business ? §Legal-political, economic, socialcultural, technological §Complexity, Size

International Business

– cont ’ d

q It involves us all! HOW?  Imports are the source of things we use (toys, education, infrastructure)  Foreign markets (i.e., exports) are essential for our economic wellbeing  Companies we work for have significant international business activities  We determine government

International Business

BASIC ACTIVITIES –



q Export

q Import

q“International Trade” - for use or resale qOriginating in North Africa – Middle East 2000 B.C. 

qInternational Investments (originating during colonialism)

qFDI – controlling assets, property or companies in a “host” country qPortfolio investments – purchasing financial assets (not for “control”)

BASIC ACTIVITIES

–

cont ’ d

 

qGlobal Financial Services Industry

qBanking, Securities, Insurance, Credit cards, etc.



qSpecial, modern activities

qLicensing – intellectual property for royalty qFranchising – know-how, logos, brand names, etc. for royalty qManagement contracts – operating facilities for a fee qOutsourcing – performing a business function for a fee



Facts of Small Biz Exporting Most exporters have fewer than 50 employees

Comprehensive help is available

Export financing is available

Most products do not need an export license

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Chapter 1 - 9

Definition of Globalization 

qGlobalization is an ever increasing relationship and interdependency between entities of various countries, encompassing:

qBusinesses, qAll types of organizations qGovernments qPeople



in many areas of human development:

qEconomic including financial qSocial and cultural qPolitical and legal qTechnological and operational

Areas of Globalization

e g r a l o t q d s n e i a l p s p n a o i q Globalization of Markets t It a z i n a s g E r o M q S q Globalization of Production q q Globalization of Consumers q q Globalization of Financing q

q 

Areas of Globalization – cont ’ d q

qGlobalization of Markets qConsumer goods qe.g., credit cards, burgers qnot prevalent, still maintaining “national” characteristics

qIndustrial goods qmost global markets qraw materials; aircraft; computer software & hardware; financial instruments q

Areas of Globalization – cont ’ d q

qGlobalization of Production qseeking competitive advantage qCost & Quality qfor factors of production qLabour , Energy, Land, Capital, Expertise

Areas of Globalization – cont ’ d 

qGlobalization of Consumers qcommunication technology provides organizations consumers from any place on earth qtastes, habits, preferences of consumers have become more and more similar qtechnology has created a well informed “global”

Drivers of Globalization qGlobal Institutions qDeclining (or removal of) Trade and Investment Barriers qTechnological Change qOther q  

Drivers of Globalization

qGlobal Institutions qGATT – to reduce trade barriers qWTO – to police the world trade system qIMF – to maintain order in the international monetary system qThe World Bank – to promote economic

Drivers of Globalization qDeclining/removal of Trade and Investment Barriers through qmultilateral agreements on the free flow of goods, services & capital qregional & bilateral agreements on crossborder trade and resource movement

Drivers of Globalization

qTechnological Change qTransportation qCommunications qInformation processing

Drivers of Globalization qOther qPolitical changes qEmergence of “miniMultinationals” qThe effects of expanding FDI qDevelopment of services dedicated to the global business qEver increasing competition

Are “ Globalization ” and “ International Business ” one and the same phenomenon? 

qInternational Business and Globalization influence and facilitate each others’ evolution ut o b a s i s s e n i s u b l a n ” o n i t o i a t n a r z i e l a Int n o i t a n r “inte er t a e r g t u o b a & s i s n n o o i i t t a za n i l g a n b o o l m G a ) ” e n c o n i t e a d n iz l e a p n e o d i r t e a n int e d “ ( s ie m o n o c e 

Reasons for Globalization qTo decrease cost, improve quality and increase productivity e.g., by avoiding costly and risky transportation systems and using less costly inputs qTo obtain new markets and reduce marketing costs (Bombardier) qTo acquire inputs, resources and expertise (Mittal) qTo access information qTo leverage core competencies (banks) qTo minimize risks (level income streams, complement business cycles from market to market) qTo become more competitive – including by

The Debate on Globalization Globalization Costs Jobs & Lowers Wages

Ø

Ønew jobs in host country = lost jobs in home country

v Globalization Creates Jobs and Boosts Wages vefficiencies create savings, new investments & wealth

q v 

Jobs and Wages Supporters

Opponents ê

Eliminates jobs in developed nations ê

ê

Lowers wages in developed nations

é

é

é

ê ê

Exploits workers in developing nations

Increases wealth and efficiency everywhere Generates labor market flexibility in developed countries é

é

Advances economies of developing nations

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The Debate on Globalization Ø

Globalization Has a Negative Impact on Labour and Environmental Regulations

Øfirms move to countries with low labour and environmental standards

v Globalization brings positive influences to Labour & Environmental regulations

vthere is evidence contradicting the critics’ claims regarding labour standards, including new labour legislation adopted by many emerging markets vgovernments of emerging nations

Labor, Environment, & Markets Opponents – Globalization lowers

Supporters + Investment raises

labor standards

labor standards

– Weakens protection of

+ Open economies most

the environment

– Exploits workers in poor nations

environment friendly

+ Companies concerned for future markets

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The Debate on Globalization Globalization is a threat to Democracy and National Sovereignty ØSupranational institutions with appointed officials dictate the actions of sovereign nations v Globalization has helped the worldwide spread of democracy vmore democracies than ever vsometimes, the loss of “sovereignty” (e.g., in Ø

National Sovereignty Opponents

Su p p or t e r s

Supranational institutions reduce autonomy of national, regional, and local governments

Globalization has benefited societies by helping to spread democracy worldwide

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The Debate on Globalization ØGlobalization has a negative impact on culture ØCultural diversity is destroyed and small local business is wiped out vGlobalization protects the deep moral and cultural norms, allows countries to export their cultural goods and to trade for goods that

Impact on Culture Opponents • Destroys cultural diversity • Homogenizes our world • Bankrupts local small businesses

Supporters • Specialize and trade to obtain other goods • Import cultural goods from other nations

• Protects deeper moral and cultural norms Copyright © 2010 Pearson Education, Inc. publishing as International Prentice Hall Business 5e Chapter 1 - 29

The Debate on Globalization 

Globalization leads to a high costs for economic growth and income inequality



vGlobalization - a major reason for the unprecedented economic growth worldwide vhigh costs - temporary; investments = huge benefits vexpanding middle-classes and high standard of living vincome inequality is influenced more by technology and politics than globalization vcountries open to trade and investment grow faster

Income Inequality In com e In e q u a lit y debate

1

2

Inequality within nations Poor people in developing nations benefit most from an open economy

Inequality between nations Nations open to world trade and investment grow faster than rich nations

3

Global inequality Inequality has fallen, but experts disagree on the extent of the decline

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Recap of Objectives Define International Business q Define “Globalization” q

q Examine “Globalization” §Areas, Drivers & Reasons

LECTURE 2 CROSS-CULTURAL

BUSINESS

International Business BUSI 2490

Objectives 

q Examine some definitions of “culture” q Identify components of culture q Discuss two frameworks for classifying culture q Evaluate implications of cultural differences for international business management

What Is Culture?

Set of values, beliefs, rules, and institutions held by a specific group of people

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More definitions q

CULTURE (Diana Kendall, et al, Sociology in our times, 3ce) qthe knowledge, language, values, customs and material objects that are passed from person to person and from one generation to the next in a human group of society; qin other words: ideas, behaviour AND material possessions common to a

More definitions q

qCULTURE = Tradition (collective programming of the mind) – making the members of one group distinct from others. qCulture is a society’s (or a group’s) system of shared and learned values and norms; as a whole, these VALUES and NORMS are the society’s (or the group’s)

design for living

q qValues: abstract ideas about the good, the right, the desirable qNorms: social rules and guidelines; determine appropriate behaviour in specific situations

Components of Culture Aesthetics Physical environme nts

Education

Values & attitudes

Cultu re

Personal communic ation

Manners & customs

Social structure Religion

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Aesthetics Music Painting Dance Drama Architecture

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Values and Attitudes Values Values

Attitudes Attitudes

The ideas, beliefs, and customs to which people are emotionally attached • Freedom • Responsibility • Honesty

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Positive or negative evaluations, feelings, and tendencies people hold toward objects or concepts • Time • Work • Cultural change

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Manners and Customs Manners

Customs

Appropriate behavior, speech, and dressing in general

Traditional ways or behavior in specific circumstances

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Physical and Material Culture

N: O E C N E INFLU n& o i t c u d o r p Agri-food on i t p m ing u s v i l n & co n o i t truc s n o c e s u Ho s condition tion a t r o p s n a r T

These influence a culture’s development and pace of change Topography Physical features characterizing the surface of a geographic region Climate Weather conditions of a geographic region Material Culture Technology used to manufacture goods and provide services © Prentice Hall, 2008

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Social Structure Social structure

Culture’s groups, institutions, social positions, and resource distribution

Social stratification

Process of ranking people into social layers

Social mobility

Ease of moving up or down a culture's "social ladder" © Prentice Hall, 2008

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Slide 3-3

Social Structure and Culture TWO MAIN CRITERIA TO COMPARE CULTURES • whether the unit of social organization is the individual or the group • the degree to which a society is stratified into classes or castes 

McGraw-Hill Ryerson

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Slide 3-4

Business implications of Individual vs. Group Societal Characteristics • Individual – Managerial mobility between companies – Economic dynamism, innovation – Good general skills – Teamwork difficult,

• Group

– Loyalty and commitment to company – In-depth knowledge of company – Specialist skills – Easy to build teams, collaboration – Emotional identification with group or company non– collaborative  e.g., Japanese – Exposure to companies McGraw-Hill Ryerson © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved. different ways

Slide 3-4

Social Stratification Family Background, Occupation, Income Social Mobility • Caste system 

– Position determined by family – Change not usually possible

• Class system – Position at birth can be changed by luck or achievements McGraw-Hill Ryerson

Significance • Class consciousness 

– Relationships are based on class backgrounds – Mutual antagonism even hostility – Raises cost of doing business

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More on Social Class i.a.w. the relation to 

Means of Production Marx): 

(Karl

“ M u ltid im e n sio n a l“ a p p ro a ch to so cia l stra tifica tio n ( Max Weber

)

qW E A LT H qP O W E R qP R E S T IG E

qCAPITALISTS - own & control

E x a m p le o f cla sse s :

the means of production; achieve wealth through capital

U p p e r ( upper -upper , lower u p p e r) M id d le (upper-middle, lower

qWORKING CLASS (PROLETARIAT) – own and sell

middle)

Working class Working poor Underclass

World Religions Christianity Islam Hinduism Buddhism Confucianism Judaism Shinto

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Origin Origin of of Human Human Values Values

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Slide 3-5

Religion, Ethics, and Culture • Religion = system of shared beliefs about the sacred • Ethical systems = moral principles or values that shape & guide behaviour; often, products of religion • Economic characteristics of major religious groups: – Christianity - Protestant work ethic – Islam – similar principles with those in Judaism and Christianity – Hinduism - anti-materialistic, socially stratified – Buddhism - anti-materialistic, social equality – Confucianism - hierarchy, loyalty, honesty – Shinto – loyalty, respect, enjoyment of life All have significant sub-sets with distinct and © 2006 The McGraw-Hill Companies,beliefs Inc., All Rights Reserved.

 McGraw-Hill Ryerson

Education Cultures pass on traditions, customs, and values through schooling, parenting, group memberships, etc. Education level

Well-educated attract high-paying jobs, while poorly educated attract low-paying manufacturing jobs

Brain drain

Departure of highly educated people from one profession, geographic region, or nation to another

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Layers of Culture qLayers qValues, Rituals, Heroes, Symbols => Practices qLevels of layers* qNational level – the nation as a whole qRegional level – ethnic, linguistic, religious differences within a nation qGender level – female vs. male qGeneration level – parents & children, parents & grandparents qSocial class level – differences in occupation, educational * Source: www.tamu.edu/classes/cosc/choudhury/culture.html

Cultural Literacy

Detailed knowledge of a culture that enables a person to function effectively within it Ethnocentrism Belief that one’s own ethnic group or culture is superior to that of others

X

√

Polycentrism Adapt to the “local” culture

Geocentric Approach

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Classifying Cultures

Kluckhohn-Strodtbeck Framework Relation to nature WHO CONTROLS WHOM

Material or spiritual

Time orientation FOCUS ON PAST, PRESENT, FUTURE?

Responsibility to others

Trust and control CAN PEOPLE BE TRUSTED?

View of personal space WORK/LIVE IN PRIVATE OR PUBLIC?

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Hofstede Framework Individualism Individualism vs. vs. collectivism collectivism

Power Power distance distance Accepting Acceptingsocial social inequality inequality Achievement Achievement vs. vs. nurturing nurturing

Uncertainty Uncertainty avoidance avoidance Copyright © 2010 Pearson Education, Inc. publishing International as Prentice Business Hall 5e

Long-term Long-term orientation orientation Chapter 2 - 55

Power Distance & Individualism vs. Collectivism

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Power Distance & Uncertainty Avoidance

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Looking forward q

q Please Read: CHAPTERS 3 and 4 qHOMEWORK!

q Presentation assignments! q Keep up with MESP requirements for Term Projects 