WEEK 1: INTRODUCTION
International business: Performance of trade and investment activities by firms across national borders.
International trade: Exchange of products and services across national borders; typically through exporting and importing.
What makes International Business Practices so different?
- Must operate in multiple environments - Additional political demands and risks - Global (greater) competition
- Increased complexity (distance, time, cultural barriers)
WEEK 3: MOTIVATION AND LEADERSHIP ACROSS CULTURES TURNOVER AROUND THE WORLD
High cost of turnover → millennial turnover costs the US economy $30.5 billion annually - Main idea: Millennials are turning-over careers more than any other generations - # of MNEs rise – more global integration, thus, turn-over easier
o Employee retention – trends are changing to be lower (losing employees) o Also note – knowledge loss/leakage
- Key question: How do we keep employees motivated to stay?
MULTINATIONAL ENTERPRISES (MNE’S)
Characteristics - ONE: Substantial (FDI) direct investment in foreign countries (not just trading relationships)
- TWO: Active coordinated management of these offshore assets - THREE: Strategic and organizational integration of operations located
abroad
Global Influence - Largest MNEs are as large as/more influential than mid-sized countries - Even in the midst of the 2010 recession, the number of MNEs
exceeded 65,000
- Note: Importance of developing economies is rising
MOTIVATION
Definition: The psychological process through which unsatisfied wants or needs lead to drives that are aimed at goals or incentives.
Unsatisfied need → Drive toward goal to satisfy need → Attainment of goal (need satisfaction) Intrinsic → Fulfillment through carrying out activity & helping others (E.g. Interest, appreciate) Extrinsic → Competition, compensation, incentive plans (E.g. Payment or promotion)
Traditional Motivations to Internationalise
- Resource seeking: Supplies, factor cost differences, natural resources - Market seeking: Fill capacity, exploit economies of scale and scope Emerging Motivations to International
- Competitive positioning: Cross-subsidize markets, secure profit (E.g. Goldman Sachs)
- Global scanning: Access emerging trends, new technologies, best skills worldwide (E.g. Lenovo) o Most recent motivation
Motivation for FDI International Capital
Theories FDI driven by return equalization, portfolio diversification Location Theories FDI driven by countries’ comparative advantage
Product Cycle Theory FDI driven by firms’ management of the global product life cycle Oligopolistic Behaviour
Theories FDI driven by firms’ search for, or defence of, competitive advantage Internalization Theory FDI driven by organizations’ internal transaction efficiency (Hierarchy vs.
Markets)
Eclectic Theory (OLI ) FDI driven by many shifting forces (Ownership, Location, and Internalization)
Prerequisites to internationalise:
- Must offer location-specific advantages
- Company must have ownership-specific advantage or strategic competencies
MOTIVATION THEORIES
Content Theories Select Process Theories
Maslow’s Hierarchy of Needs (Image via Google)
Note: Country Differences
- Hierarchy different for Eastern cultures (value sense of belonging more, at very bottom of hierarchy) than Western countries do – Social needs
- Western hierarchy is more flat à value things quite equally (vs. Eastern more triangular) - E.g. Chinese business economy during Chairman
Mao – preferred praise to physical motivation (more related to spiritual than material items) Two Factor Theory
- Motivators: Job-content factors that ensure job satisfaction (recognition, responsibility,
advancement) – present = satisfaction
Equity Theory
- Motivation effected by perception of how fairly they are being treated
o Equitable treatment = higher job performance o Supported in Western
cultures Goal-Setting Theory
- How individuals set and respond to goals
- Aras: Goal difficulty, specificity, timely feedback etc.
- American employee
participation in setting goals à motivational
Expectancy Theory
- Effort à Performance à Reward (employee values reward)
- High performance à high rewards = high satisfaction - Cultural impact (less valued in
societies where people believe
- Hygiene factors: Job-context variables that can lead to dissatisfaction (salary, working conditions) – absent = dissatisfaction
- Hygiene à more important for IB and expats etc.
things are beyond their control.
E.g. India)
Job Design: Job’s content, the methods that are used on the job, and the way the job relates to other jobs in the organization → must match cultural motivators
- E.g. ‘Death by overwork’ in Japan
Leadership: Process of influencing people to direct their efforts toward the achievement of some particular goal or goals
Theory XYZ explains the type of leadership.
Theory X
Managers - Workers are lazy, lack ambition. Use of coercion and control necessary.
- Primary need of employees: job security Authoritarian
Leadership - Work-centred behaviour designed to ensure task accomplishment - One-way communication from manager to subordinate
Theory Y Managers
- Employees exercise self-direction and self-control (if committed to goals) - Rewards important
- Capacity to exercise imagination, ingenuity and creativity Paternalistic
Leadership - Use of work-centred behaviour coupled with a protective employee- centred concern
Theory Z
Managers - Motivated by sense of commitment to ‘greater whole’
- Employees seek responsibility and opportunities - Broad goals of organisation important, loyalty Participative
Leadership - Use of both work or task-centred and people-centred approaches to leading subordinates
Examples
- Carlos Ghosn – Nissan prior CEO
- Nissan as a Japanese brand – represented by foreigner – issues due to cultural mismatch, shameful approach from Japanese people, offended Japanese government
o Japan: often for life, US: short-term, layoffs common o Japan: Slow promotions, US: quick
o Japan: Group decision making, US: individual manager decisions o Japan: Manager considers personal life of employee, US: work life only - Case Study: Chinese Leadership styles
o Haier leadership: Ruimin Zhang
o Highly personalised leadership – took customer complaints (E.g. Rinsing morning harvest from rural customers – designed potato washing machine)
§ Very individualised
o Customer driven in terms of product (vs. Japan – customer feeling driven)
§ Germany – technical driven
o Yuhui Su à ‘cheating’ – negative example of leadership styles
WEEK 4: EXPANDING ABROAD AND ENTRY MODE
1. Determine organisation’s mission and long-term objectives
2. Implement a plan of action (strategic planning – helps deal with political risk, competition, currency instability)
o Although, does not always result in higher profitability
o Argument 2: Appropriability à knowledge created when starting an industry may be a public good. If establishing property rights not feasible à high tariffs as ‘second-best’
policy
TRADE LIBERALIZATION
- Mid-1980s, many governments had lost faith in import substitution and began to liberalize trade.
- Mixed results, but, many developing countries have achieved extraordinary growth while becoming more, not less, open to trade.
o E.g. India
- Counter-argument: trade liberalization has contributed to income inequality.
- Case Study: East Asian promotion of exports
o Policy reforms were followed by a large increase in openness, as measured by their share of exports in GDP.
o However – Mexico and Brazil also sharply liberalized trade, and did not have the same results
o Thus – correlated with rapid economic growth, but maybe not the cause (in the case of East Asia)
Trade and Low-Wage Labour
- Some have opposed free trade because of the fact that workers in low- and middle-income countries earn lower wages and have worse working conditions than workers in high-income countries.
- But workers in low- and middle-income countries are predicted to have lower wages due to lower productivity, yet still have higher wages compared to their situation without trade.
- Fair trade movement/consumption is a valid approach to combat the potential abuse of workers in low-income countries.
WEEK 7: ORGANISATIONAL STRUCTURE IN MNES
- Align structure with organizational strategy
- 2 elements to consider: Vertical differentiation (control and decision-making power) and Horizontal differentiation (company structure divided along product, area or functions)
FUNCTIONAL STRUCTURE
An organizational structure composed of all the departments that an organization requires to produce its goods or services (E.g. Below CEO à Finance, Merchandising, Sales and Customer Experience, HR, Marketing, etc.)
DIVISIONAL STRUCTURES
An organizational structure composed of separate business units within which are the functions that work together to produce a specific product for a specific customer.
Product
Structure - Each product line or business is handled by a self-contained division - Functional managers – specialise in one product area
- E.g. Washing Machine Division, with separate functions
- Removes need for direct supervision of division by corporate managers - Improves use of resources
Global Product
Structure - Each product division takes responsibility for deciding where to manufacture & how to market in foreign countries
- E.g. Product Division, followed by Foreign subsidiaries by region Geographic
Structure
- Geographic divisions
- Northern Region, Western Region etc.
o Ventures scope (Narrow.. ie. Single functions, limited term. vs. Wide... i.e. Multi industry, large scale, forever)
o Each parents duties
o Managerial role of each partner
o Control/Structure (Shared or split decision making?)
4. Doing the Deal (Paperwork, legal considerations, agree on endgame) 5. Making the Venture Work
o Top management attention needed, manage cultural differences, be flexible (alliance management)
True Alliance à Continuing input, even distribution of risk/rewards, flexible, clearly specified objectives Pseudo Alliance à One-time, uneven distribution risk/rewards, strict rulebook, ambiguous objectives
KNOWLEDGE
Knowledge Based View (KBV)
Knowledge is the most important resource. It is difficult to imitate and can therefore provide a competitive advantage.
Knowledge Facts, information, and skills acquired through experience or education Knowledge
Management The structure, processes, and the system that actively develop, leverage and transfer knowledge.
1. Knowledge creation
2. Knowledge storage and retrieval 3. Knowledge transfer
4. Knowledge application
Knowledge Transfer Knowledge transfer in organizations is the process through which one unit (e.g., group, department, or division) is affected by the experience of another
Explicit knowledge (“Know-what”) à Formal language. E.g. Work processes, organized tasks, routine, on the job learning, logical thinking, rewards tied to business goals.
- People to Documents: Electronic document system that codifies/stores knowledge - CODIFICATION (E.g. EY) – data focused
Tacit Knowledge (“Know-how”) à practical, action-oriented knowledge, resembles institution. E.g.
Spontaneous and improvised, openness and trust, mentoring, brainstorming, creative, networking, open and friendly.
- PERSONALIZATION (E.g. McKinsey/Bain and Company) – focus on dialogue, networks of people, transfer people between offices
Problems in Knowledge Management
Knowledge acquisition à failure to share and integrate
Knowledge retention à employee turnover and knowledge leakage
Knowledge outflow à “How does it help me?” and “knowledge is power” mentality Knowledge transmission à Inappropriate channels
Knowledge inflow à “Not invented here” syndrome
WEEK 10: INTERNALIZATION ENTREPRENEURSHIP AND SMES
‘Outliers’ in international business – why does this happen?
- International entrepreneurial firms, small business enterprises (SMEs), International new ventures and born-global
o An organization that from inception (or close to inception), seeks to derive significant competitive advantage from the use of resources and sales in multiple countries
