D270 Midterm

Key Aspects of Political Systems

- System of government in a nation - Who governs and holds the power? (Norms and rules that govern political activities; role of institutions, organizations, interest groups, citizens) - Level of individual rights and freedoms - How are disputes and conflicts resolved? Political systems can be assessed according to two dimensions: 1. Degree to which they emphasize collectivism as opposed to individualism 2. Degree to which they are democratic or totalitarian

Why does Globalization matter to future managers (and to you?)

- a larger market for sales beyond home borders (helps you better compete and tap into more resources) - to tap a wider availability of resources (materials, labor, technology, financing, etc.) - to understand and respond to competition (at home and abroad) - expanded career opportunities (by choice or under fire) overall, there is a positive response among countries to globalization

national culture is...

- acquired, learned (not inherited) - gradual (shaped slowly over time and not readily apparent) - shared (insiders develop a similar way of seeing the world) - hard to change (old habits die hard) - ethnocentric (insiders are at the center of the map) - relative (not right nor wrong - just different) - same process across groups (but with different norms and meanings)

the trickiness of studying culture

- attitudes, values, beliefs are not directly visible - people belong to several cultural groups (nationality, ethnicity, religion, gender, work organization, profession, age cohort, income level, etc.) - not everyone in one country shares the same attitudes, values, beliefs - subcultures are present within nations - some people have internalized more than one culture (bi-cultural, multi-cultural) - cultural similarity may link groups from different nations to a greater degree than groups from the same nation

How did we get here? (chapter 3 intro slide)

- Globalization has provided more possibilities than ever to produce and sell outside of a firm's home country - There are around 200 countries with a dizzying variety of histories, demographics, cultures, economic conditions, geographic, advantages, challenges, etc. - We talked about culture and the factors that shape it: political and legal systems are the PRODUCT of culture and in turn, SHAPE culture - The political and legal system is the set of institutions, frameworks, and rules governing a nation (Sovereignty) - Firms are subject to the power of governments and must abide by the rules of the Political and Legal System (e.g., The Floating Subsidiary Dilemma, Sovereignty at Bay, etc.)

Why Study the Political Environment?

- Managers evaluate these to determine the benefits, costs, risks, profitability, and sustainability of operations in a country before expansion - These lead to decisions on how best to acquire resources, types of investment, modes of entry, degree of adaptation, strategies to manage threats, etc. - After entry managers monitor and forecast the dimensions and dynamism of the P.E. of the country - Key issue: Level of stability or instability

Political and Legal System Final Principles to Remember

- Political and legal systems vary among countries - These differences impact how firms capture opportunities and deflect threats - Firms can't directly apply principles and practices they've developed at home to the foreign environments - Have to "Play the cards you are dealt!": individual companies can seldom change the political and legal systems of a country; international managers are "strangers in strange lands" and must be prepared to adapt abroad

The Managerial Focus of the Political and Legal Environment: Operational and Strategic Concerns

- Starting a business - Entering and enforcing contracts - Local worker relations: hiring and firing, health and safety standards, workweek - Closing down the business - Country of Origin and Local Content - Marketplace behavior (e.g., rules of operation and competition practices) - Product safety - Legal jurisdiction - Intellectual property rights and protection

Tips for Smooth Cross Cultural Interactions

- consult GlobeSmart for country profile and specific information - proceed slowly and check step by step: familiar behaviors may have different meanings; instead of "business as usual," expect "business as unusual" - become conscious of local patterns: think recipes, maps, stage; most people behave rationally, just have to discover their rationale - learn about the country: history, culture, economy etc.; understand their significance in the world; titles and surnames may be different - local language is important: learning basic phrases and attempts show respect; watch idioms, slang, technical jargon - use local partners: role of function/expertise - great news: with work and experience, one can become the lesson of a "stranger"

More information on modes

- firms have a range of alternatives from Exporting to Foreign Direct Investment (FDI) - selection of modes depends on a number of factors and trade-offs which might range from firm strategy to restrictions by host country governments - exporting tends to be the least complex, costly, risky, and FDI (with 100% ownership) tends to be the most complex, costly, and risky - firms might use different modes abroad depending on the host country situation, government policies, and other contextual factors

how did we get here with globalization and international business? (chapter 2 intro slide)

- globalization is about greater interdependence - interdependence creates opportunities for firms and managers - engaging in IB creates various levels of involvement abroad (exporting toward FDI) - IB is much more complex then domestic business, due to the environmental perspective - since business gets done through people, we need to understand how the cultural environments abroad shape people's behaviors

cultural behaviors in business to consider

- role of the individual in society - relationship preferences - risk-taking and information processing - communication style - effective leadership style - motivation - decision-making - negotiating style

GlobeSmart Things to Watch For

- the country profile plots are national averages (individuals will differ) - country profile plots are best used as a starting point to help you explore an individual's styles - some countries are very diverse and some information may not apply everywhere - will take time to explore all the features and information - known to contain minor errors and some outdated information

why perform a country analysis?

- to decide the most suitable countries in which to expand - to choose an order of expansion over time - to identify which products of services would be most suitable - to decide on the most effective entry modes in a particular country - to identify opportunities and risks of operating in a particular country

Key Points of Legal Systems

-Managers cannot expect home country legal system to apply abroad -How the court system works and role of judges will differ greatly -Any type of business agreement will be fraught with risk -Legal system will definitely impact firm-government and firm-firm negotiations -On legal issues, managers should work hard to rely on good, reputable local service providers Legal systems will typically not transfer like financial knowledge. Find local providers to help

two approaches to the cultural environment

textbook: - cultural awareness - the nation as a point of reference - how cultures change - language and religion - behaviors affecting business - dealing with culture - two relevant cases to read lecture: - how culture applies to our class - how culture works - several video examples - the ethnocentric tendency - the cultural dimensions - tips for managing culture

Tom Stroud Work Experience

1. A.T. Kearney: 4.5 years, focused on operations consulting, cost reduction (demand management, strategic sourcing), large scale program management 2. the Cambridge Group: 5.5 years, focused on developing grwoth strategies based on a foundation of consumer insights for CPG and Financial Services companies (qualitative work, quantitative work/statistical modeling, client relationship management, team management/mentoring) Nielsen: 2 years, focused on introducing and developing consultative practices and skills into the organization (led Nielsen's marketing analytics practices' efforts at SC Johnson, led Nielsen's Advanced Analytics consulting group) Marketing Management Analytics (MMA): 1 year; launched, developed, and led the firm's Chicago office, providing marketing mix and pricing analytics to guide clients' spending and efforts in the marketplace EY-Parthenon (another consulting group that is now the strategy line for EY): joined in April 2014; strategy practice (growth strategy and innovation, with an emphasis on CPG and Manufacturing companies); focused on delivering strategies to address clients' most pressing growth challenges

The Importance of Global Business

1. Business today is international - not covering international is only half of what you need to know to be successful 2. make better business decisions 3. b-school rankings require international coverage 4. better understanding of diversity 5. to be a well-rounded business person 6. because hiring firms expect Kelley students to be prepared - you never know when you may be called to go abroad

Top 5 Global Trends to Watch in 2022-2023

1. Conflicts over independence and border sovereignty: Russia-Ukraine, China-Taiwan, India-Pakistan, Russia-Former Soviet Republics 2. Post-Covid recovery-inflation and recessions: vaccination rates, new variants, travel, supply chain issues, etc. 3. Patching up the new world disorder: back to a rules-based world order, back to multilaterialism? 4. More U.S.-China tensions: trade wars will not disappear, other countries taking sides 5. Companies on the front lines of geopolitics: examples are Huawei, TikTok, Facebook, Apple, Boeing, Pfizer, etc.; issues seem to be over privacy, intellectual property, climate change, social justice, pharma

the stages of globalization

1. Globalization 1.0 - The Silk Road (200 BC-1700s): Birth of the Han Dynasty and trade between East and West in spices, silk, gunpowder, paper, etc. 2. Globalization 2.0 - Rise of European Colonial Empires to end WWII (1500-1945): England, France, Portugal, Spain, Russia, Ottoman, Netherlands, etc. exploration and colonization of new lands; advances in transportation led to exploration and colonization of new lands with lots of exploitation; name of the game was to amass wealth by discovering new lands and finding raw materials; new empires rose 3. Globalization 3.0 - World Wars recovery and modern Multinational Enterprise (MNE) expansion (1950-1990's): golden age of G-7; Foreign Direct Investment (FDI) expansion; export-led development; spread of Democracy; etc.; golden age of globalization of recovery and period of expansion and cooperation after two devastating wars had detrimental effects on globalization with deglobalization with countries at war and tariffs going up 4. globalization 4.0: anti-globalization movement and modern deglobalization (1999-present): rise of financial crises, income inequality, terrorism, fraying of Democracy, shifts towards Totalitarianism, New Nationalism, Global Pandemics, etc.; negative attitudes and anti-globalization movements came about at this time with some countries feeling like globalization did not help them as much as other countries even though globalization has become a buzz word, it polarizes people who are upset about globalization - BUT the fact is that this process has been around for a long time

Bottom line of D270

1. IB can change very quickly 2. the environmental framework is very useful, now and later in your career 3. understanding IB is more important than ever: the current and future impact of covid-19, anti-globalization forces, technological advances, political realignments and tensions, Trade Wars and Economic Conflicts 4. talented individuals are needed more than ever

The Negative Side of Globalization

1. Threats to National Sovereignty: "all politics is local" (Tip O'Neill, U.S. House Speaker); small countries feel threatened and overly dependent); Cultural Homogeneity threatens uniqueness 2. Environmental Stress: depletion of planet's limited resources, pollution and contamination, emission of greenhouse gases and climate change 3. growing income inequality and stress: greater division between rich and poor, threat of job loss leads to personal stress negatives tend to be highlighted more, although you should be attentive to both sides and realize that you can't have all the benefits and there are tradeoffs like giving up control and independence

D270 General Approach

1. Through coverage of traditional IB topics 2. to provide real world knowledge 3. focus on managerial implications 4. to make students more competitive domestically and internationally 4. "what in the world is going on?" highly relevant to the work world

Types of Market Penetration

1. direct exports 2. exporting via local distributor 3. licensing or franchising 4. sales operation 5. transportation and distribution 6. strategic alliance (may or may not involve equity) 7. foreign direct investment (ownership and control) (joint venture, acquisition, greenfield)

why does Tom Stroud feel this material covered in class is important - "why do I have to take this class?"

1. hard skills may get you the job, but it's the soft skills that will help you be good at it. soft skills are what makes you successful with the hard skills 2. key among those soft skills is the ability to navigate an increasingly global environment (e.g., you moved to an international assignment and you have to interact people on teams from completely different cultures) 3. one day your awesome job might send you on a multi-year international assignment - by yourself. companies tend to use international assignments as a transition to develop leaders as it is considered less risky to run the less important business

Tom Stroud's shared travel experiences

1. in 2001, he was asked to moved to Korea for a year-and-a-half to support the development of all the IT systems and infrastructure for the FIFA World Cup. Lessons learned: age is very important in some cultures (vs. meritocracy (best idea wins), but in Asia, even if the boss is wrong, the boss is older than you and is right); positional authority is important; "okay" doesn't mean the same thing everywhere; you can survive without knowing the language; try it.. you might like it 2. in 2011, he was charged with developing a multinational product positioning strategy for Unilever's Personal Wash category. Lessons Learned: each market requires a customized approach (despite having the same message, you have to take a customized approach); do your cultural pre-work, plan for different messaging, anticipate different rates of change 3. in 2013, he took on a job to lead a mixed on-shore/off-shore team to develop market effectiveness measurement methodologies and execute client projects. Lessons Learned: positional authority and hierarchy are important in India, face time can be really important, getting to know your team as people first is an essential step, American approaches to management aren't universal, remember the Platinum Rule

The Forces Behind Current Extent of Globalization

1. increase in application of technology: improvements in transportation and communication networks 2. liberalization of cross-border trade and resource movements 3. development of services that support international business activities: transportation, banking, packages, etc. 4. growth of consumer pressures: consumer demand for foreign products and on MNC behaviors. This one is MOST IMPORTANT because the consumer is so focused and demanding on products and benefits and have a wealth of information to find the best in the world 5. increased global competition 6. changing political situations and government policies - tend to use trade to strengthen relationships 7. expansion of cross-national cooperation: WTO, IMF, NAFTA, EU, treaties and agreements

why do domestic firms go international?

1. to expand sales (growth and efficiency) (e.g., General Motors (USA), Volkswagen (Germany), Michelin (France), Nestle (Switzerland), Sony (Japan) 2. to acquire resources (not everything can be found at home) (e.g., labor, products, components, services; foreign capital; technologies; information/knowledge) 3. minimize risk ("business is like a game with no 4th quarter) (e.g., business cycle differences amongst countries, diversify suppliers across countries, counter competitors' moves and advantages) company's face situations when the market is saturated and want to continue to lower margins

Advantages and disadvantages of totalitarianism

Advantages: - can permit fast and efficient national policy formation because there is no need to debate decisions - enlightened and benevolent leaders can make good decisions in the national interest Disadvantages: - the needs of individuals and private enterprise are subordinate to those of the state - leaders can make poor decisions and may be corrupted by power

Advantages and disadvantages of democracy

Advantages: - people prefer to have choice over personal and economic decisions - people prefer freedom over control of their behavior Disadvantages: - difficult for individuals and groups to achieve national agreement - national policy can be slow and cumbersome to implement

The State of Globalization in 2021 Based on Harvard Business Review (HBR) article by Steven A. Altman and Phillip Bastian Addresses same question if we are in state of globalization/deglobalization

Approach and data for this study: - used the 2020 Edition of DHL Global Connectedness Index - released in Dec 2020 - study updated in Nov 2021 - index measures globalization on more than 3.5 millions data points across 4 dimensions: trade flows (merchandise trade), capital flows (FDI), information flows (music and movement of entertainment), and people flows (travel, etc.) -looks at trade depth (how much trade) and trade breadth (how many countries you are trading with) Context of this study: -Covid-19 swept across the world in 2020 -Most recent downturn was after 2008-2009 global financial crisis: worse setback in international trade and capital flows in decades -2018 Tariff Wars threatened to disrupt trade with China and to restructure US-China supply chains -Covid-19 raised doubts about the future of globalization, creating 3 possible options: (1) continued "slowbalization" in effect since 2008-2009, (2) deglobalization over short, medium, and long term; (3) short interruption with pre-covid level resumption by 2022 Findings (from graph) - outcome overall seems to be positive in the future: 1. trade flows: massive decline before recovering 2. capital flows: massive decline but globalization picking back up 3. information: actually increased because people were on the internet 4. people: travel has been severely disrupted conclusions: 1. Covid-19 has not halted most types of international flows nor turned the tide toward deglobalization: trade has rebounded strongly, capital flows are recovering, digital information flows did not decrease have actually surged upward, only people flows show unprecedented collapse but are slowly recovering 2. us-china trade was disrupted somewhat due to 2018 Tariff Wars but trade spiked during pandemic and us firms continued to invest in china (Walmart, Tesla, Disney, Starbucks, etc.) 3. Public opinion (US and abroad) is shifting toward international cooperation, support for globalization, and toward immigration 4. covid-19 has not knocked down globalization enough to cause a company retreat toward home country or home region 5. corporate globalization will continue to matter for competitiveness especially after people travel resumes, after 2022 and beyond final word: benefits of globalization are still there that makes it hard for countries to turn down those continued benefits

Measuring Political Freedom (Freedom House)

Each country is assigned two numerical ratings - from 1 to 7 - for political rights and civil liberties, with 1 representing the most free and 7 the least free

Country Case Study Comparisons Ease of Doing Business

Australia wins on the ease of business with New Zealand being good too lowest performer is India depending on what you are trying to do, there may be a place where one thing is better ranked than another

Key Global Issues Eroding Political Freedom Now

Authoritarian Reach: authoritarian leaders worldwide are exerting their influence beyond their borders in an attempt to silence critics and subvert democracy Democracy during Pandemic: the coronavirus presents a range of new challenges to democracy and human rights Election Integrity: free an fair elections are a foundational component of political freedom Equality and Human Rights: democracy depends on the guarantee of equal rights under law and freedom from discrimination for all individuals in a society Freedom of Assembly: the right to assemble peacefully is a fundamental prerequisite for any open and self-governing society Technology and Democracy: rapidly advancing information and communication technologies have had a profound impact on democracy around the world

Tom Stroud Education

B.S., Information Systems Indiana University Kelley School of Business M.B.A., Finance, Marketing, Management & Strategy, Analytic Consulting, Kellogg School of Management

Basic characteristics of a Democracy

Citizen rule: citizens have the power to decide who will be the decision makers that run the government Majority Rule and Minority Rights: majority decides on elections and issues, but the rights of the minority have to be protected in the process Individual Rights: democracies protect the rights and freedom of individual people Free and Fair Elections: adult citizens are granted the right to participate in regular elections Citizen Participation: citizens have the right to vote also a responsibility to participate Cooperation and Compromise: people have to work together and be willing to compromise to make the system work for everyone Freedom of Speech, Religion, Assembly: these are related to several individual rights above Independent court system and Rule of Law: people are treated equally, with liberty, justice, and with general support allowing individuality

Legal Environment System Types

Common Law (England, U.S.): starts with past cases (precedent) and some codes to determine outcomes of current disputes. May allow for modifications of the law to current reality Civil Law (very common in like 150 countries): starts with systematic codification of laws. Judges find and apply established laws to current disputes (strictly). Not easily modified Theocratic Law: based on the inspirations and instructions of religious teachings Customary Law: based on norms and accepted behavior that gain legitimacy through long-term practice Mixed System: applies when a country uses 2 or more system types cumulatively or interactively

how do we measure globalization?

Degree of Trade Openness between countries: 1. 25% of global production sold outside country of origin (7% in 1950) 2. restrictions on imports have been decreasing since WWII (tariffs have been decreasing) 3. foreign ownership of assets has been increasing since WWII 4. world trade (exports and imports) has grown more rapidly than world production (GDP) since WWII 5. DHL Global Connectedness Index and similar sources (Flows of: goods, capital, information, people) - many sources use creative techniques to measure interconnectedness many ways to measure but often merchandise is used

Modes of International Operations - the How

Exports/Imports -> Merchandise -> visible/tangible goods Exports/Imports -> Services (Tourism and transportation, service performance (turkey operations, management contracts), asset use (licensing agreements, franchising). dividends and interest from foreign investments are also service exports and imports because they represent the use of assets. Investments -> Foreign direct investment -> ownership + controlling interest (solo/wholly owned, joint venture, mixed venture) Investments -> Portfolio investment -> financial interest/non-controlling (stocks, bonds, loans, debit notes, bills) NOTE: turnkey operations does NOT involve ownership and is a service

What will determine the future Global Ideology?

Democracy: - Failure of Totalitarian Regimes to deliver economic progress - Improved communication eroding Totalitarian regimes' control - spread - Freedom yielding economic dividends and progress Totalitarianism: - one party systems yielding economic dividends and progress - failed experiments toward democracy or failures in current systems - recent Global Economic Crises exposing weakness in Democracies if they see successful economies, they'll go. But if they think it is shit, they will go away

Democracy vs. Totalitarianism

Democracy: - Government is by the people, exercised either directly or through elected representatives (representative democracy) - Elected representatives are held accountable through safeguards: representative, multiparty, parliamentary, social Totalitarianism: - One person/party exercises absolute control over all spheres of human life (competing political parties are banned): authoritarian, fascist, secularist, dictatorship, theocratic, tribal

Class activity: Which should investors choose: Totalitarian or Democratic? What type of political system is better for international business managers and their companies What characteristics of any political system would international managers prefer?

Democratic: 1. open markets 2. more competition 3. representation (diverse perspectives, harmony) 4. political stability 5. creativity because of open market system and competition Totalitarian 1. less change -> stability (if government has a lot of power and control, if it gets bad however, it can slip into greed and domination) 2. enforcement/Rule of Man: copyright does exist but MAY NOT be enforced 3. faster decision making 4. laws can favor government and business 5. investment opportunities/relationship to government from a managerial point of view, BOTH have advantages and disadvantages Managers look at business characteristics that favor them, which can be in ANY system

Key Factors of Interest in D270 Diagram

Diagram components: 1. right blue box = the firm 2. objectives = WHY countries go international 3. in order to achieve these objectives, the firm crafts a strategy in order to pursue objectives successfully 4. left green box = firm interacts with the operating environment that has institutional, physical, and competitive factors 5. modes are HOW the company does business (merchandise, service, make investments) 6. functions of the firm are the basic functional areas in order to implement strategy to pursue a particular mode 7. overlying alternatives: companies are constantly deciding which countries to expand in Physical/institutional factors: 1. Geographic factors 2. Demographic factors 3. Political policies 4. Legal policies 5. Behavioral factors 6. Economic forces 7. Globalization and IB 8. Cultural factors 9. Globalization and society 10. Government involvement Competitive factors: 1. competitive product strategy 2. company resources and experience 3. competitors in each market

Culture as Capital when Selling abroad

Domestic Approach: Rock-Bottom Price + Bell-Ringer Product = Sale Cross National Approach: Reasonable Price + Reasonable Product + Customer's Trust = Sale

Is Globalization in Retreat Now?

Factors now: 1. immigration and terrorism concerns 2. Brexit Vote and the fraying of the E.U. 3. Trans-Pacific Partnership (TPP) US exit 4. US-China Tit-for-Tat Trade War 5. Trade agreements under attack (NAFTA) 6. Covid-19 Global Pandemic 7. Uneven global levels of vaccination 8. Travel and supply chain disruptions

Legal System

the mechanism for creating, interpreting, and enforcing the laws of a particular jurisdiction Legal systems usually have three components: 1. constitutional law to guarantee open and just political order 2. criminal law to protect the social order 3. civil and commercial law to ensure fairness and efficiency of business transactions

Current Political Systems Around the World

Full Democracy: - mature political culture promotes political freedoms and civil liberties - Government discharges responsibilities transparently - An effective system of checks and balances regulates politics - The judiciary is independent, its decisions are impartially enforced, and the rule of law predominates - Media are independent, vigilant, and diverse Flawed Democracy (U.S.): - The State respects basic civil liberties - Free and fair elections regularly occur but experience fraud or media restrictions - Governance problems and low political participation make for a weak poltiical culture - Leadership and policy change occur frequently Hybrid Regime (Bangladesh): - Electoral irregularities undermine freedom and justice - The state limits opposition parties and candidates - Judicial bias favoring the "man" undermines the rule of law - Political culture, public administration, and political participation struggles - Corruption is extensive, civil society fades, and media are regulated Authoritarian Regime: - Political pluralism is absent or repressed by the state - Democratic institutions may exist but the state uses them to legitimatize single-party rule - Elections, if they do occur, are neither free nor fair - The state systematically disregards civil liberties - There is no independent judiciary and the rule of man predominates - Media are typcially state-owned or controlled by groups connected to the state - Censorship suppresses criticism of the state - Propaganda promotes the state ideology

Globalization and firms

the ongoing search for competitiveness and survivability while dealing with government policy barriers and negative societal views much negative sentiment towards companies because they make parts in different parts of the world, and when people are focused on jobs transfers, this can make them angry

Switzerland

High level of citizen participation

why is Tom Stroud here?

I'm here today because I've already been where you are (he took this class)... 1. I took this class and also felt like it was a waste of time 2. I lacked "real world" experience" 3. I was ambitious and sought a great career

Deglobalization

the process of diminishing interdependence and integration between national states a period when world trade and investment declines in contrast to periods of Globalization

GlobeSmart Cultural Dimensions

Independent vs. interdependent 1. Independent: take more initiative individually; quick decision making style; openly express opinions; focus on personal achievements; reward/recognize individuals 2. interdependent: collaborate with others; focus on group goals and decision-making; express opinions cautiously; reward/recognize the group; appreciate protocol egalitarianism vs. status 1. egalitarianism: self-directed; flexibility in roles; OK to challenge opinion of superiors; treat everyone equally; downplay protocol and formality 2. status: do not challenge superiors; more formal dealing with junior staff; status and position matters/respected; behavior based on status risk vs. certainty 1. risk: demonstrate quick results; flexibility and initiative valued; speed valued over thoroughness 2. certainty: spend time on background research; processes and systems valued; thoroughness valued over speed direct vs. indirect 1. direct: say what you mean and mean what you say; more direct and to the point; openly confront difficulties; OK to disagree and give feedback 2. indirect: take care how something is said; avoid discussing difficulties; personal dignity/face saving matters; not OK to disagree publicly; don't hurt any feelings task vs. relationship 1. task: move quickly to business; stick to schedule on goals and objectives; relationships with colleagues and customers develop quickly; focus on achievements; OK to disagree and to criticize directly 2. relationship: trust-building comes first; relationships with colleagues and customers happen slowly over time; people more important than agendas; NOT OK to disagree and to criticize directly

Individual and Collectivism

Individualism: - Champions the primacy and rights of individuals over the group - Individual freedom, self-expression, and personal independence are supreme - Every person can make decisions free of too many rules and regulations - Central tenet is that individual economic and political freedoms (Free Market Capitalism) as the way for the society to advance Collectivism: - Advocates the primacy of the rights of the group over the individual - Individual rights are sacrificed for the good of the majority-interdependency - Regulations are needed for social justice, income equality, workplace harmony, etc. - In the modern world, Collectivism is expressed through socialism or communism as the way for the society to advance

Individualism relevant issues

Mask wearing and gun rights When gun control laws were being addressed, the idea of individualism came in when more people started trying to buy more guns. When there is a constitutional right and people feel entitled, it is very hard to change

Political Freedom in the World 2022

the share of the world's population living in Free environments has fallen as authoritarian practices proliferate We have been moving toward totalitarianism and away from democracy, as can be seen by more countries declining in terms of freedom than countries gaining freedom

Ownership and Production location (offshoring vs. outsourcing vs. reshoring)

Offshoring = owned, abroad. the company MAINTAINS ownership through FDI (e.g., Apple-owned operation that is in another country) Outsourcing = not owned, domestic or abroad. giving another company the work, but there is NO OWNERSHIP Reshoring = firm bringing back operations back to the home country outsourcing and offshoring are often used interchangeably in the business media but actually mean different things

U.S. Political Freedom Over Time

Over the past 10 years, the United States' aggregate Freedom in the World score has declined by 11 points, placing it amongst the 25 countries that have suffered the largest declines in this period

Political Environment

P.E. represents the General Framework, the Rules of Business, and the specific Legal System of the country Key Issues: Who holds authority, how is power transferred, what are the specific policies and how are they set, what are the consequences for wrong-doers, is there Rule of Law or Rule of Man, etc.

Typical Measures of Global Risk and Instability

Political Risk Perils: 1. Exchange transfer 2. Sovereign non-payment 3. Political interference (attacks on court system and legislative process) 4. Supply chain disruption 5. Legal and regulatory 6. Political violence Terrorism and Political Violence Risk Perils: 1. Terrorism and sabotage 2. Strikes, riots, civil commotion, and malicious damage 3. Insurrection, revolution, rebellion, mutiny, coupe d'etat, civil war and war Health Risks: 1. Health pandemics like Spanish flu, Swine Flu, AIDS, SARS, Ebola, Coronavirus, etc. affecting immigration, travel, production, distribution, etc. Bold = relevant

Is Globalization a good thing? (in-class assignment)

Positive 1. access to resources 2. transparency, communication 3. lower costs/prices 4. variety of goods and services 5. cultural understanding Negative 1. income inequality 2. dependence on other countries - seen as dangerous or risky if the country cuts off the service 3. environmental sustainability 4. brain drain (hard working people search for better economic opportunities and leave countries, draining the brain from the country) 5. job transfer/loss

The Positive Side of Globalization

Poverty reduction Middle class: having enough money to cover basic needs like food, clothing, shelter, and still having enough left cover for luxuries like fancy food, a TV, and motorbike, home improvement, and education Globalization has lifted millions out of poverty and into the middle class since WWII by 2020, half of the world's population be middle class (3.7 billion - before the Industrial Revolution there was no middle class, just royalty and peasants) an additional 190 million (2.5%) will make up the mega-rich

Key Common Law-Civil Law Differences

Right to Act: 1. Common Law - one has a right to act unless otherwise restricted by the law 2. Civil Law - what action is permissible is predefined under strict code of legal behavior Changes over Time: 1. Common Law - continually unfolding series of rulings based on recent precedent-Law and human behavior travel in parallel 2. Civil Law - seldom changing, law is increasingly distant from currently accepted behavior Role of Lawyers: 1. Common Law - start with case in question and find the legislation which fits best 2. Civil Law: find the past legislation addressing the case situation in question Role of Judges: 1. Common Law - their scholarly work and legal opinions over time can give them much power, discretion, and notoriety 2. Civil Law - discretionary authority and power is limited by extensive legal codes Time to Resolution: 1. Common Law - slower, can be slow due to the creative work of lawyers, power of judges, and rights to appeal 2. Civil Law - FASTER, since every conceivable human act has been spelled out, the work of lawyers and judges if straightforward People can get confused by common law (used in U.S.) vs. civil law

Rule of Man vs. Rule of law

Rule of Man: the ruler and the rule are synonymous, whether the ruler is an individual or a single party. The ruling party is not usually subject to checks or balances to their power Rule of Law: governmental authority is legitimately exercised in accordance with written and publicly disclosed laws that have been appropriately adopted and enforced in an established procedure

Apple "1984"

Shows the west's view of totalitarianism that is largely negative

how many countries has Tom Stroud been to

Since his time at Kelley, he has worked in 16 countries or regions and has traveled to 40 more for leisure

Tom Stroud Background

Spans both operations and growth strategy management consulting, as well as marketing analytics

Tom Stroud's advice

Start mastering the skills that you'll learn in this class now and make the most of the experiences that Kelley offers you 1. take advantage of the international learning opportunities that Kelley provides 2. meet the people around you; the school is incredibly diverse 3. be open-minded; focus on eliminating egocentricity whenever possible 4. take the time to get to know the faculty; they are here for you

World Bank Ease of Doing Business

The World Bank ranks 190 countries on their respective ease of doing business - the higher the score, the more favorable the business environment Index averages the country's percentile on ten dimensions: (1) starting a business, (2) dealing with construction permits, (3) getting electricity, (4) registering property, (5) getting credit, (6) protection minority investors, (7) paying taxes, (8) trading across borders, (9) enforcing contracts, (1) resolving insolvency diagram shows best and worst performers

Political Ideologies in the Next Decade

one represented by U.S., one by China Washington Consensus: - Champion of Democracy: political competition is a right - Political and Economic Freedom should guide the System - Rule of law, Property Rights, and Human Rights are Sacred - Trade Policy can be used to advance Political and Human Rights Beijing Consensus: - Champion of One Party System: approved officials protect the people and have their consent - Authoritarian Capitalism should guide the system (capitalism with Chinese characteristics) - Benevolent Persuasion vs. Iron Fist to enforce action - Economic Development and Trade are used to growth and harmonious society - Separate from Politics - Do not judge other systems or be judged

So what type of Political & Legal Environment do International Managers prefer? Totalitarian or Democratic?

They prefer places where there is -overall freedom to set company strategy -transparency in "rules of the game" -freedom from corruption -stability and predictability -ability to voice interests and concerns -Rule of Law: effective enforceability mechanism

why is culture relevant? (for an expat)

rationale: - exposure to cultures - future work - help with local technical gaps - specific business expansion process - deliver headquarters resources - gain corporate understanding of the local environment

Tom Stroud Bio-Sketch

Tom Stroud Bio E-mail: [email protected] Tom Stroud has been a management consultant for more than 20 years, with specialties in customer-driven growth strategy, new product development, and performance improvement. Tom is currently a Senior Director with EY-Parthenon's Strategy practice in the firm's Chicago office, where he advises clients across industries on growth strategies, consumer insights, and innovation. Prior to joining EY, Tom built and managed the Chicago office for MMA, a marketing analytics firm focused on pricing and marketing mix optimization. Tom has also held consulting positions several other firms. He spent 7 years with The Cambridge Group, a boutique brand strategy firm in Chicago, focused on developing growth strategies built on a foundation of proprietary consumer insights for clients, primarily in the consumer packaged goods space. Prior to Cambridge, Tom spent 4 years with Kearney, where he focused on operational improvements, cost reduction, and large-scale program management. During his consulting career, Tom has amassed significant international business experience. He lived in Korea and Japan for nearly two years while overseeing the development of all IT for the 2002 FIFA World Cup. He has also managed a team of 21 in Bangalore. Across various consulting engagements, he has conducted business in nearly 20 countries. Tom is an alumnus of the Kelley School of Business, earning his bachelor's degree (honors, high distinction) in Computer Information Systems in 1999. He also earned an MBA from the Kellogg School of Management at Northwestern University in 2005, with majors in Management & Strategy, Finance, Marketing, and Analytical Consulting. Tom lives in Chicago with his wife, Emily, and their dog, Oliver. Outside of work, he's an instrument-rated private pilot. He also enjoys cooking, traveling, photography, home automation.

Platinum Rule

Treat others the way they want to be treated (BETTER) VERSUS the golden rule that is to do unto others as you'd have them do unto you (good)

The Political Spectrum

shows the range of ideological views/beliefs.

Entry mode approaches and foreign direct investment decision tree

With more control, you have higher returns but higher risk

Globalization

a process of broadening of interdependent relationships among people who are divided into national borders Broad definition: transfer of people, goods, ideas, religions, political and legal systems, diseases, etc. across national borders Business definition: reduction of barriers on movement of goods, services, capital, technology, people across national borders. business setting is more orientated towards the movement of trade with the easiest form of business transactions to track being merchandise globalization means MANY things and be measures many ways state of interconnectedness, the exchange of people, capital, ideas, religions, etc. the OPPOSITE is complete isolation and independence - anything that is NOT fully independent involves globalization

successful global leadership skills

adaptability - someone who can handle more complexity and uncertainty than domestic managers are typically accustomed to, who relate well with diverse groups of people, who listens more than talks, who craves adventure over the status quo, and who accepts that there is more than one way to skin a business problem. As one executive put it, good global leaders like getting up in the morning and saying, "I have no idea what's going to happen today." ~ Hal Lancaster respect - someone who can move in and out of social, cultural, and mixed gender encounters with relative ease; one who is able to handle diversities of many sorts and to be flexible in the face of rapid social changes - in short, a psychologically secured person who believes in the common unity of humankind ~ Thomas Fitzgerald

International Business

any commercial transactions between two or more countries when a company does business in more than one country - starting as a global company is rare e.g., Coca-Cola and Microsoft sell in over 200 countries

Evolution of Global Poverty, 1990-2030

by 2015, you had huge reduction in poverty

The Floating Subsidiary Dilemma

constantly going back and forth between what the home countries demand and the host country with the same subsidiary. There can be disagreements that can arise to complications

quick background of D270

dean dan smith forms select committee to review UG curriculum, around 2009 KSB committee envisioned Global Foundations Core in 2010 Garcia and other faculty asked for input at early stages KSB full faculty approval in Dec. 2011 G-Core consists of: D270 (global business environments), G202 (business, government, and society), X271 (global business analysis) or X272 (global business immersion) MUST pass D270 with C or better to be able to enroll in X271/X272 and I-Core

Professor P. Roberto Garcia information

director, center for international business education and research. family roots are in latin america - moved to USA since 1950s. travel back often for business and pleasure degrees: BA, psychology and spanish; MBA and ph.D. international business teaching: all international, all levels. undergraduates, 4 mba courses, kelley direct, and exec. ed. Germans at IU, Thailand, Germany Croatia, China. Have taught online since 2000. Served as a resource for Global Foundations Core Curriculum recent work trips: mexico, belgium, england, chile, italy, germany, thailand, brazil, japan, india, croatia, turkey, peru, canda, china, u.a.e. (dubai), australia, poland, denmark consulting/teaching/research: ford, GM, VW, nissan, chrysler, alcoa, U.S. Dept. of Justice, Philips, Kimball electronics, ingersoll rand, manitowoc, cummins, eli lilly, etc.

common business situations across cultures (HSBC business dinner)

example where the guy ate too fast and was considered being rude in China - similar business behaviors may have different meanings - cultural differences may make competent managers appear incompetent - old habits die hard, well worn behaviors are hard to change - the nature and importance of the tsk might make adaptation difficult

the environmental and international environmental perspective

functions are in the center because they represent the managers making decisions on how to respond to these different factors in the environment when a firm ventures outside its home country, you still have the same environment but they build off each other and merge

Country Case Study Comparisons Political Freedom vs. Economic Success

have to consider GDP Per Capita and freedom score Seems to be correlation with high political freedom and economic success (with GDP per Capita), but some exceptions like China being largely not free and having highest GDP

Testing your awareness of globalization

how many countries are there in the world? 193 or 195 because of issues like "One China Principle" - some IB aspects do not have a clear answer, especially when there are difficulties with disagreements in borders which firms are American? not as many as you think. globalization advances more quickly than our ability to process information

commonly researched cultural dimensions

individualism vs. collectivism 1. individualism: independence, individuals are major unit, success attributed to own ability, personal goals over group goals, values autonomy and independence, confrontation is OK 2. collectivism: interdependence; groups are major unit; success attributed to help of group; achievement for benefit of group; values interdependence; harmony is expected low power distance vs. high power distance 1. low power distance = equality: status difference played down; less formal dress, speaking; etiquette; hard work vs. pomp and ceremony 2. high power distance = hierarchy: upper status carries respect; formal in language, dress, etiquette; social rank order is important and observed; deference shown by age, gender, rank task vs. relationship 1. task = report talk: move quickly to business; relationships develop quickly; focus on achievements; time is money 2. relationship = rapport task: relationship-building comes first; relationships happen slowly; people more important than agendas direct vs. indirect 1. direct = low context: message carried by words; directness in communication; conflicts depersonalized; straight talk 2. indirect = high context: message carried nonverbally also; less direct communication; conflicts personalized; diplomacy masculinity vs. femininity 1. masculinity = tough societies: gender inequality at work; highly competitive; task-oriented; bigger is better; live to work 2. femininity = tender societies: relative gender equality; highly cooperative; relationship oriented; smaller is beautiful; work to live low uncertainty avoidance vs. high uncertainty avoidance 1. low uncertainty avoidance = risk tasking: willingness to live day-by-day; more risk taking; willingness to change employer; initiative valued 2. high uncertainty avoidance = low risk: greater anxiety about future; less risk taking; more loyalty to employer; initiative discouraged and feared

modes of international business

merchandise exports and imports; service exports and imports; investments objectives: 1. sales expansion 2. resource acquisition 3. risk reduction

key perspective on global leadership

no better tool set exists for approaching an unfamiliar location than keen eyes, open ears, a flexible mind, and a willing heart... as a step into a new culture, learning ideally takes place through a gradual process of observation, imitation, comparison with one's own culture, and finally choosing to do things our way, their way, or some new hybrid solution that we create together ~ Ernest Gundling

culture

norms based on: attitudes, values, and beliefs definition 1: the learned norms, based on the values, attitudes, and beliefs of a group of people definition 2: the collective programming of the mind of a group of people created by factors like: social structure, religion, language, education, economic philosophy, political philosophy

ethnocentric tendency

tendency to evaluate other groups according to the values and standards of one own's ethnic group "we don't see things as they are, we see them as we are."

Are we in a state of Deglobalization?

very important question because for us as consumers are the benefits laid out going to be reduced timeline that states we are entering a period of globalization (takes economic data dating back in the 1870 and we're now in a period that's similar to something that happened about a hundred years ago): -1870-1914: industrialization and integration (globalization) -1914-45: interwar era (deglobalization) -1945-80: postwar rebound (globalization) -1980-2008: liberalization (globalization) -2008-2017: 'slowbalization' (deglobalization) -2020-2021: 'deglobalization' Factors that affected interwar period: 1. WWI and WWII 2. Russian Revolution 3. Spanish Flu Pandemic 4. Great Depression (1929) 5. Severe protectionism Factors affecting now: 1. 2008 Financial crisis (recession) 2. Nationalism Trends of 2014 3. BREXIT (2016) 4. US Exit from TPP (2017) 5. U.S. Tariff Wars of 2018 6. U.S.-China Rivalry (aggressive trade war with China - two largest economies - that impacted many consumers and compnaies) 7. Decoupling of Supply Chains 8. Covid-19 (30+% decline in world GDP) 9. Severe protectionism (again) 10. maybe also add the Russian-Ukraine war 11. COVID-19 - argument is that world came to a phase of slowglobalization, then once COVID hit then BOOM economic crises can spread quickly when things are interconnected

21 days in China: Luke Helgeson and Culture Shock

video of luke going to china and dealing with difficulties as he goes through culture shock 1. luke is from a small town and has not travelled extensively 2. different attitudes, values, beliefs, norms abroad can affect anyone 3. time differences, home pressures, and nature of work can pile up 4. even an experienced traveler may have to help out a co-worker or team member like luke

Argentine Surrealism "Presidents"

video of many presidents together at once - shows how world is being more global

International vs. Domestic business differences

while they can seem like the same, there are MANY differences that affect the way business is done International: all commercial transactions take place in two or more countries, doing business across national borders. you need to reexamine the way business is done when you cross national borders differences to consider 1. physical and societal factors (geographic influences, political policies, legal policies, behavioral factors, economic forces) 2. competitive factors 3. managers must track domestic and foreign environments decision making in IB is more COMPLEX 1. complexity increases with level of internal control desired, level of involvement/mode of operation, number of countries of expansion, differences among countries of expansion a useful analogy offered by an auto industry exec: "think of the difference ebtween checkers and chess" some industries are more like 3-D chess