Chapter%201%20The%20World%20Business%20Challenge

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Chapter 1The World Business Challenge
John S. Hill
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Figure1-1 Chapter Outline
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The World Business Challenge

• The Diverse International Marketplace
• The Changing International Marketplace

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The Diverse International Marketplace

• Political diversity Autocracies-democracies
• Economic diversity 100 per capita to 40,000
• Regional diversityNorth America 5-6 world
  population, 30 GDP Asia 60 world population ¼
  world GDP
• Cultural/Linguistic diversity 10,000 cultural
  groups and 200 nations
• Diversities in Country Size and Populations
• Developmental diversities

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The Changing World Marketplace

• Political change nations seek political
  stability but elections, governmental and
  leadership changes problematic
• Economic change economic growth, inflation,
  unemployment problems governmental economic
  mismanagement currency fluctuations
• Cultural change e.g. religious or ethnic
  conflict creates uncertainties for political and
  economic climates
• Financial changes conduct transactions in a
  world marketplace with over 180 currencies

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Responding to the International Business
Challenge How Executives Cope with Global
Diversity and Change

• From Cultural Ignorance to Cultural
  Understanding
• Analytic Tools The Multi-Disciplinary Nature of
  International Business

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From Cultural Ignorance to Cultural Understanding

• Cultural ignorance when individuals have no
  knowledge of cultural differences
• Cultural awareness when people know there are
  cultural differences and are looking for them
• Cultural knowledge know appropriate behaviors
  but not why they occur
• Cultural understanding when businesspeople not
  only know what behaviors are appropriate but also
  understand why those behaviors are occurring

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Analytic Tools The Multi-Disciplinary Nature of
International Business

• Political science the study of politicians,
  political institutions and their effects on
  business and society
• Anthropology study of the evolution of mankind
  in its various environments traditional to
  modern
• Economic Development changes in institutions
  and values as countries progress economically
• Sociology the study of group behaviors in
  societysocial class, gender behaviors

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Analytic Tools The Multi-Disciplinary Nature of
International Business

• Religion the primary determinant of behaviors
  and lifestyles in non-Christian countries e.g.
  Islam, Buddhism, Hinduism, Confucianism, Taoism
• Geography a known quantity in firms national
  markets, unknown in foreign marketsclimate,
  topography, resources and their effects
• History a key tool in understanding a countrys
  current political, economic and cultural
  circumstances

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Globalization Historic Background

• Globalization Definition and Components
• The Exploration Era to 1500
• 1500-1900The Colonial Era
• 1900-today The Era of the Modern International
  Corporation

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Globalization Historic Background

• Globalization Definition
• The globalization movement is the trend towards
  increasing interdependencies among world markets,
  and the diffusion of new ideas, technologies,
  products, services and lifestyles through
  international markets

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Globalization Historic Background

• Globalization Components
• Modernization the upgrading of technologies and
  living standards that occur as ideas, products,
  and services diffuse through world markets
• Westernization the emulation of lifestyles and
  behaviors of Western societies, most notably
  those of North America and Western Europe

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Globalization Historic Background

• The Exploration Era to 1500
• Civilization of Latin America (Incas, Mayans,
  Aztecs), Asia (India China), Western Europe
  (Romans) and Egypt (pharaohs and pyramids)
• Sixth century B.C. Silk Road from Middle East to
  China
• Roman Empire established trade routes and common
  currency
• 12th 13th centuries Major navigational
  advances for sail ships
• 15th century Major period of exploration to
  Americas, Africa and Asia

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Globalization Historic Background

• 1500-1900The Colonial Era
• The development of mega languages early on
  Latin Chinese later, English European
  languages
• Advances in arms and military capabilities
• Writing and printing technologies
• Transportation innovations the steam engine
• The industrial revolution machines
  electricity
• Communications Advances telephone/telegraph
• Retail establishments access to
  products/services

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Globalization Historic Background

• 1900-today The Era of the Modern International
  Corporation
• 1900-1945 Company Internationalization
• Companies began to replace countries as the
  major catalysts of economic and cultural change
  Aided by air travel, automobiles, radio and
  television
• 1945-1980 Era of Increasing International
  Competition
• Corporations began to reassert themselves in
  international markets European and Japanese
  companies challenge US corporations in
  international markets

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The Globalization Era Since 1980

• The Major Catalysts of Post 1980 Globalization
• Globalization and the Developing World
• Reasons for Developmental Differences The
  Diffusion Process in International Business
• Diffusion Effects on Strategy Formulation and
  Implementation

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The Major Catalysts of Post 1980 Globalization

• International Trade GATT and WTO. Trade
  increases to about 8 trillion in 2002
• Trade Blocs Trade blocs to facilitate
  commercial interactions among members EU, NAFTA
• Foreign Direct Investments (FDI) International
  companies make investments in factories, plant
  and machinery in non-domestic markets. 10 fold
  increase over 1980-2002 to over 7 trillion
• Global Movements towards Capitalism Demise of
  communism in the 1980s and 1990s
• Technology and Global Media The advent of
  satellite, computer and Internet technology

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Globalization and the Developing World

• Up to 1985, the Triad nations of North America,
  Western Europe, and Japan were dominant in world
  commerce
• As developing markets opened up to trade and
  investments, so new ideas and technologies began
  to contribute to economic and cultural change
• The diffusion of technologies and consequent
  modernization processes have barely impacted many
  emerging markets

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Reasons for Developmental Differences The
Diffusion Process in International Business

• The International Diffusion Process
• Figure 1-4 Diffusion Across Markets
• 
  1 2 3
• 
  
• 
  Time
• Figure 1-5 Diffusion Within Markets
  
• 
  a b c
  
• 
  

Global market diffusion
1 Advancing countries 2 Industrializing
countries 3 Less advanced countries
National market diffusion
a Urban centers b Semi-urban centers c
Rural-areas
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Reasons for Developmental Differences The
Diffusion Process in International Business

• The Diffusion Process in National Markets
  Determined by
• Country Openness to External Influences
• Education and Literacy levels low levels retard
  diffusion rates high levels facilitate diffusion
• The Importance of National Infrastructures poor
  roads, rails, energy grids slow down diffusion
  rates
• Effects of National Ethnic and Linguistic
  Compositions multi-ethnic/lingual societies slow
  down diffusion rates
• How disruptive innovations are on national
  lifestyles

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Diffusion Effects on Strategy Formulation and
Implementation

• The Arguments for Standardized Strategies
• While companies make some adaptations (voltage
  changes for electronic goods right/left hand
  drives and minor stylistic changes for autos
  labeling changes for consumer products),
  essentially products and services are similar
  from market to market
• Take advantage of customer demand homogenized
  through trade, commercial contacts, international
  media
• Often the industrialized nations and advanced
  sectors of LDCs
• The Arguments for Localized Strategies
• This involves taking full account of national
  cultures, values and behaviors
• Necessary in countries with strong national
  cultures and nations relatively untouched by the
  forces of globalization. Companies must adapt to
  be successful
• Most companies need to adapt to greater or lesser
  degrees

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World Business Topics and the Organization of
this Text

• Chapter 1 introduces key world business
  concepts, globalization, its history, background
  and general effects
• Chapter 2 examines the forces contributing to
  the globalization movement the United Nations,
  private sector contributions, trade blocs and
  privatization programs
• Chapter 3 looks at globalization effects how
  technology transfers affect nations and the
  transitions from traditional to modern societies
• Chapter 4 tackles regional development issues
• Chapter 5 shows how individual markets are
  analyzed
• Chapter 6 looks at how firms analyze industries
  and competitors on a worldwide scale

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International Business Topics and the
Organization of this Text

• Chapter 7 brings industry and company analyses
  into the corporate planning process
• Chapter 8 describes companies globalization
  processes
• Chapter 9 looks at the creation of global and
  multi-market strategies global brands,
  competitive and financial strategies
• Chapter 10 shows how firms choose to enter and
  service individual markets
• Chapter 11 examines how companies manage
  multi-market supply chains
• Chapter 12 looks at how cultural differences are
  managed
• Chapter 13 discusses the management of local
  stakeholders and supply chains

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Key Points

• World business is the performing of commercial
  activities to promote the sale of goods and
  services across national boundaries
• The world business challenge is to use tools
  from political science, anthropology, economic
  development, sociology, religious studies,
  geography and history to understand the diversity
  and change inherent in world markets
• The globalization movement is the trend towards
  increasing interdependencies among world markets
  and the diffusion of new ideas, technologies,
  products, services, and lifestyles through
  international markets

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Key Points

• Modern corporations date from the 19th century,
  but grew dramatically in the post-1945 era, with
  US, European, and Japanese companies taking the
  lead
• The diffusion process of new technologies and
  products starts with developed countries and
  moves over time into developing markets within
  national markets, diffusion starts with urban
  markets and moves into semi-urban and then into
  rural areas
• The diffusion process affects strategy
  formulation and implementation, with standardized
  strategies more likely in developed markets and
  adaptation strategies more likely in rural and
  developing markets

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Thank You