IB Exam 4

functional structure

Management of international operations is organized by functional activity Is associated more with global or transnational strategy Vice Presidents have global oversight VP R&D VP Manufacturing VP Procurement VP Marketing Global product development Global branding Modified uniform pricing Tracking of parallel imports Global theme advertising management of the firm's international operations is organized by functional activities, such as production and marketing. For example, oil companies tend to organize their worldwide operations along two major functional lines—production and marketing of petroleum products. Some cruise ship lines engage in both shipbuilding and cruise marketing, two distinctive functions that require separate departments. The advantages of functional division are a small central staff, which provides strong centralized control and coordination, and a united, focused global strategy with a high degree of functional expertise. However, the functional approach may falter if headquarters lacks expertise in coordinating manufacturing, marketing, and other functions in diverse geographic locations. In addition, when the firm deals with numerous product lines, coordination can become unwieldy.

product structure

Management of international operations is organized by major product line Each product group is responsible for marketing, sales, planning, and (in some cases) production and research and development Other functions such as legal, accounting, and finance can be included in the product group or performed by corporate staff Common for companies operating in several distinct industries Appropriate when perceived differences involved with marketing the various product lines are greater than perceived differences in geographic markets Knowledge of specific geographic areas can be limited and sensitivity to local market conditions can be diminished Facilitates the development of global products and global product roll-outs Is associated more with global or transnational strategy under this arrangement, the firm organizes its international operations by major product line. Each product division is responsible for producing and marketing a specific group of products worldwide. For example, product categories for Motorola's international operations include mobile phones and network solutions. Apple's product categories include the iPad, iPod, iPhone, and personal computers. Each international product division operates as a stand-alone profit center with substantial autonomy. The goal is to achieve a high degree of worldwide coordination within each product category. Increased coordination facilitates economies of scale and sharing of technology and product knowledge among the firm's operations worldwide. Thus, the product division structure is highly centralized and typically associated with global strategy. The advantage of the product division structure is that all support functions, such as R&D, marketing, and manufacturing, are focused on the product. At the same time, products are easier to tailor for individual markets to meet specific buyer needs. The product division structure may also lead to duplication of corporate support functions for each product division and a tendency for managers to focus their efforts on subsidiaries with the greatest potential for quick returns.

organizational process

Managerial routines, behaviors, and mechanisms that allow the firm to function as intended Typical processes include mechanisms for collecting information, ensuring quality control in manufacturing, and maintaining effective payment systems the managerial routines, behaviors, and mechanisms that allow the firm to function as intended. Typical processes include mechanisms for collecting strategic information, ensuring quality control in manufacturing, and maintaining efficient payment systems for international sales. General Electric has gained substantial competitive advantage by emphasizing and refining the countless processes that comprise its value chains. For instance, GE digitizes all key documents and uses intranets and the Internet to automate many activities and reduce operating costs. Managers attempt to achieve global coordination and integration not just by subscribing to a particular organizational design, but also by implementing common processes or globalizing mechanisms. These common processes provide substantial interconnectedness within the MNE network and allow for meaningful cross-fertilization and knowledge. Globalizing mechanisms include global teams and global information systems.

strategies to cope with gray markets

Managers can pursue at least four strategies to cope with gray market imports. 1. Aggressively cut prices in countries and regions targeted by gray market brokers. 2. Hinder the flow of products into markets where gray market brokers procure the product. For instance, in dealing with the pharmaceutical gray market between Canada and the United States, the U.S. firm Pfizer could reduce shipment of its cholesterol drug Lipitor to Canada to levels just sufficient for local use by Canadians. 3. Design products with exclusive features that strongly appeal to customers. Adding distinctive features unique to each market reduces the likelihood that products will be channeled elsewhere. 4. Publicize the limitations of gray market channels. Trademark owners publicize the disadvantages of buying gray market goods to potential buyers. In the United States, consumers who fill their prescriptions via online pharmacies from Canada have been warned the products may be counterfeit. Indeed, this is a legitimate concern, since counterfeit drugs do make their way into pharmacies in Canada and the United States

manufacturer concerns over gray markets

Manufacturers of branded products are concerned about gray market activity because it can lead to: 1. A tarnished brand image when customers realize the product is available at a lower price through alternative channels, particularly less-prestigious outlets. 2. Strained manufacturer-distributor relations that can arise when parallel imports result in lost sales to authorized distributors. 3. Disruptions in company planning that occur in regional sales forecasting, pricing strategies, merchandising plans, and general marketing efforts. Risk of tarnished image when customers realize the product is available at a lower price through alternative channels. Strained relations between manufacturers and authorized distributors as distributors lose sales. Disrupted company activities, including: Sales forecasting Pricing strategies Marketing

result of the Lindsey case

May 9 2011: the defendants were found guilty dec 7 2011: a federal judge throws out the Lindsey conviction due to prosecutorial misconduct

benefits of product adaptation

May be necessary to meet different government regulations Able to use products in different climates and infrastructures Better product performance in different use conditions Decreased costs due to feature elimination Increased sales due to better meeting industry norms or cultural preferences

CSR & sustaininability

Meeting humanity's needs without harming future generations. The sustainable firm pursues three types of interests: Economic interests refer to the firm's economic impact on the localities where it does business, such as regarding job creation, wages, and public works. Social interests refer to how the firm performs relative to social justice, such as avoiding the use of child labor and sweatshops, as well as providing employee benefits. Environmental interests refer to the extent of the firm's impact and harm to the natural environment.

apadtation

Modifying elements of the marketing program to accommodate specific customer requirements in individual foreign markets.

koreans in mexico

Most of the 20th Century Asian immigration to Mexico was highly restricted 1990s Koreans became the exception, resulting in both legal and illegal immigration 1997 economic crash in Korea resulted in more Koreans moving to Mexico 1997 economic crash in Argentina and Brazil created an "exodus" of rhizomatic Koreans to Mexico 2000 officially but 15,000 really Most chose to live in Korean enclaves, especially in Tepito - Mexico City's smugglers' market

mandatory product adaptation

Necessary for product to be sold in a local market Government regulations Physical realities

discretionary product adaptation

Not necessary but may be beneficial

infrastructure & use

People may actually use the products differently in a market - P&G had to adapt Cheer detergent because Japanese consumers washed their clothes in cold tap water, used leftover bath water, and liked to add fabric softeners

climate

Physical realities of markets affect product decisions A sugar coating keeps chocolate from melting

standardization examples

Popular consumer products like Sony's PlayStation, Rolex watches, and Louis Vuitton handbags are largely standardized around the world. Representing a tendency toward global integration, standardization is more likely to be pursued in global industries such as aircraft manufacturing, pharmaceuticals, and credit cards. Airbus, Pfizer, and MasterCard use a standardized marketing strategy with great success. Their offerings are largely uniform across many markets worldwide. A standardized marketing approach is most appropriate when: ■ Similar market segments exist across countries. ■ Customers seek similar features in the product or service. ■ Products have universal specifications. ■ Business customers have converging expectations or needs regarding specifications, quality, performance, and other product attributes. The viability of standardization varies across industries and product categories. Commodities, industrial equipment, and technology products lend themselves to a high degree of standardization. Popular consumer electronics like Sony's PlayStation, Apple's iPod, and Canon digital cameras, as well as well-known fashion accessories like Rolex watches and Louis Vuitton handbags, are largely standardized around the world. Automotive parts, building materials, dinnerware, and basic food ingredients are other products that require little or no adaptation.

transfer price

Price paid by importing or buying unit of a firm to the exporting unit of the same firm

corporate social responsibility

(CSR) Any corporate activity designed to benefit society as a whole or in part that may or may not directly benefit the corporation itself Manner of operating a business that meets or exceeds the ethical, legal, commercial, and public expectations of customers, shareholders, employees, and communitites

improved planning and control

(advantage of standardized marketing) Fewer offerings simplify quality control and reduce the number of replacement parts. Global marketing is easier to manage than having to develop numerous campaigns.

cost reduction

(advantage of standardized marketing) Standardization reduces costs through economies of scale in design, sourcing, manufacturing, and marketing. Offering a similar marketing program globally is more efficient than adapting products and marketing for each of the numerous individual markets.

ability to portray a consistent image and build global brands

(advantage of standardized marketing) Standardized marketing increases customer interest and reduces customer confusion.

pyramid of ethical behavior

(bottom -> up) first level: complying with laws and regulations second: ethical behavior top: corporate social responsiblity

export department

-A unit within the firm charged with managing the firm's export operations Most closely associated with home replication strategy•The firm's resource commitment is small. Export activities are unified under one department, providing efficiencies in selling, distribution, and shipping. For manufacturing firms, exporting is usually the first foreign market entry strategy. It rarely requires much organizational structure until export sales reach a critical point. Initially, the firm will channel exports through an outside intermediary, such as a foreign distributor. When export sales reach a substantial proportion of total sales, the firm will usually establish a separate export department charged with managing export operations. The approach is most closely associated with home replication strategy.

advantages of standardized marketing

-cost reduction -improved planning and control -ability to portray a consistent image and build global brands

three strategic objectives

-efficiency -flexibility -learning

countries paying the least amount of bribes

1. Netherlands 1. Switzerland 3. Belgium 4. Germany 4. Japan 6. Australia 6. Canada 8. Singapore 8. UK 10. USA

least corrupt countries

1. New Zealand 2. Denmark 3. Finland 4. Sweden 5. Singapore 6. Norway 14. Germany 16. UK 22. Chile 24. USA

transparency international

1. corruption perceptions index 2. bribe payers index 3. Global Corruption Barometer (what they read) - ASK THEM FOR MAJOR FINDINGS Other Good Resources on the Transparency International Web Site Country Surveys CORIS - Corruption Online Research & Information System http://www.corisweb.org

differences between domestic and international HRM

1. new HR responsibilities 2. greater involvement in employees' personal lives 3. The need for an international perspective in compensation policy. 4. The mix of expatriates versus locals. 5. Greater risk exposure 6. External influences of the government and national culture.

lawsuits

1998 Northern Brands (R.J. Reynolds) pleads guilty to smuggling in U.S.A. Canada sues Reynolds for $1 Billion Latin America & EU join in Colombian states sue Philip Morris for Selling cigarettes to known smugglers and offering them marketing assistance Generating false or misleading invoices Arranging for payment in virtually untraceable ways EU sues for Policing costs Health care cost increases Lost tax revenues saved by the revenue rule! The EU Agreement Philip Morris International pays $1.25 billion BAT pays $200 million

percentage of workers who belong to labor unions

2003, 2013 The Exhibit illustrates the percentage of workers in each country that have formal union memberships. Note the recent gradual decline of union membership in many advanced economies. It has fallen to less than 15 percent of workers in France and the United States and less than 25 percent in Australia, Germany, Japan, and Mexico. However, union membership is relatively high in Belgium, Denmark, and Finland, where more than 50 percent of workers, mostly government employees, are unionized.

countries paying the most bribes

23. United Arab Emirates 25. Indonesia 26. Mexico 27. China 28. Russia

3M's matrix

3M was proud of its matrix organization A survey of subsidiary managers revealed that the matrix structure drove them crazy!

most corrupt countries

69. Italy 73. Tunisia 73. Brazil 75. China 95. India 112. Egypt 120. Iran 143. Russia 172. Venezuela 175. Iraq 182. Somalia

transnational strategy

A coordinated approach to internationalization in which the firm strives to be more responsive to local needs while retaining sufficient central control of operations to ensure efficiency and learning. The firm seeks to combine the major advantages of multidomestic and global strategies, while minimizing their disadvantages. It's a flexible approach: standardize where feasible; adapt where appropriate. It is associated with a geocentric mindset Good ideas can come from headquarters and subsidiaries Good ideas are shared Power is more evenly distributed throughout MNE One example of transnational strategy is Lenovo (www.lenovo.com), the Chinese producer of personal computers and laptops. Lenovo went global when it bought the PC arm of IBM, gaining a global sales force and strong global brands, such as the Thinkpad line. The firm rotates its headquarters between China and the United States; its official language is English. Planning and design are done in the United States, while manufacturing is done in China (for Asian markets), Mexico (for the Americas), and Poland (for Europe). Lenovo concentrates production in these low-cost countries to generate the greatest cost efficiencies and economies of scale. Lenovo's basic computers are the same, but the keyboards and internal software are adapted for each market to accommodate differences in language. The firm's retailing Web sites look identical worldwide but are adapted for language. Marketing operations, centralized to Bangalore, India, include global campaigns designed to sell computers in more than sixty countries with ads that can air in multiple regions. In short, Lenovo strikes a balance between pursuing global strategy and adapting its offerings and approaches, as needed, to suit individual markets. Given the difficulty of balancing central control and local responsiveness, most MNEs find it difficult to implement transnational strategy. In the long run, almost all need to include some elements of localized decision making, because each country has idiosyncratic characteristics.

strategy

A planned set of actions that managers take to make best use of the firm's resources and core competences to gain a competitive advantage -When developing strategies, managers examine the firm's strengths and weaknesses, and the opportunities and challenges facing the firm. -They then decide which customers to target, what product lines to offer, how best to contend with competitors, and how generally to configure and coordinate the firm's activities around the world.

Department of justice and FBI

Added dedicated agents Targets bribe-prone industries Energy Medical devices Provides for forensic training to other countries

international division

All international activities are centralized within one division in the firm, separate from domestic units•Associated with increased focus on international business•Concentrates international expertise with greater coordination and management of international operations Over time, as the firm undertakes more advanced activities abroad, management will typically create an international division structure, making a separate unit within the firm dedicated to managing its international operations. The decision to create a separate division is usually accompanied by a significant shift in resource allocation and an increased focus on international business. Typically, a vice president of international operations is appointed, who reports directly to the corporate CEO. Division managers oversee the development and maintenance of relationships with foreign suppliers, distributors, and other value-chain partners. Over time, the division typically undertakes more advanced internationalization options, such as licensing and small-scale foreign direct investment. In the early stages, the structure is most closely associated with home replication strategy. However, with time, management may advance toward multidomestic or global strategies. The international division structure offers several advantages. It centralizes management and coordination of international operations. It is staffed with international experts who focus on developing new business opportunities abroad and offering assistance and training for foreign operations. Its creation signals that management is committed to international operations. However, initially, this structure can lead to a domestic versus international power struggle over, for example, control of financial and human resources. There is likely to be little sharing of knowledge between the foreign units and domestic operations or among the foreign units themselves. R&D and future-oriented planning activities tend to remain separate and may be domestically focused. Products continue to be developed for the domestic market with international needs considered only after domestic needs have been addressed. Given these problems, many companies eventually evolve out of the international division structure.

matrix organizational structure

Allows for two or more dimensions of theoretically equal importance, e.g. = product & geography Requires change in management structure from traditional authority to an influence system based on technical competence, interpersonal sensitivity, and leadership Complexity can cause duplication of authority, confusion of responsibility and power struggles but who's the boss? The global matrix structure is closely associated with transnational strategy. Managerial responsibility for each product is shared by each product unit and the particular geographic areas of the firm. Thus, firms develop a dual reporting system in which, for example, an employee in a foreign subsidiary reports to two managers—the local subsidiary general manager and the corporate product division manager. Often the country manager is superior in authority with responsibility for appraisal. Global matrix structure recognizes the importance of flexible and responsive country-level operations and shows firms how to link those operations to optimize operational efficiency and competitive effectiveness. The manager working in this structure shares decision making with other managers, wherever they may be, to achieve best practice for the firm's operations worldwide. Unilever, the $57 billion European producer of food, beverage, household, and personal care products, successfully applied the global matrix structure. Originally a merger between British and Dutch firms, Unilever (www.unilever.com) long pursued a multidomestic approach to international business. In the 1990s, for example, in order to manufacture ice cream, it regularly sourced more than thirty different types of vanilla. Its Rexona deodorant had thirty different packages and forty-eight distinctive formulations. Advertising and branding were handled locally and often amateurishly. Competitors with more centralized operations were able to respond faster to changing consumer tastes. They were better at coordinating their international units and had captured efficiencies by striking supplier contracts for many countries simultaneously. Despite a sales volume similar to P&G's, Unilever had twice as many employees. The decentralized structure of its international organization had produced needless duplication and countless obstacles to a more efficient global approach.

US travel act

Although rarely invoked, this act allows US citizens and firms to be prosecuted for committing acts overseas that are forbidden under US law. A firm was threatened with prosecution for bribing someone in a private-sector firm abroad. The firm was headquartered in California, and there is a California law forbidding this.

1998

Amendments to original law allows prosecution of any company listed on a US stock exchange and its common law, Indictments against non-USA citizens increase

expatriates

An employee who goes to work abroad for an extended period, usually years Employees in any of the three categories assigned to work and reside in a foreign country for an extended period, usually a year or longer, are called expatriates (sometimes shortened to "expat"). A U.S. firm might employ a German manager in its subsidiary in France or transfer a Japanese executive to its U.S. headquarters.3 Both these managers are expatriates. While expatriates comprise only a small percentage of the workforce in most MNEs, they perform many critical functions.

Procter & Gamble in Argentina

Argentina accuses Procter & Gamble of tax fraud and suspends its operations in the country Operating in country since 1991 Runs three manufacturing plants and two distribution centers in the country Argentina alleges that P&G inflated transfer prices for $138 million of products from Brazil (such as razors) but billed through a Swiss subsidiary in order to pay lower taxes in Argentina get profits out of country

BAT archives revealved

BAT supported smuggling in Cameroon BAT prepared a contingency plan for Venezuela If it lost Belmont brand to Phillip Morris, BAT would maintain brand name via contraband BAT considered supporting smuggling of cigarettes from wholly-own subsidiary in Brazil to Argentina where they had a joint venture

bribe payers index

Based on cross-national surveys of 55-60 chief executives of foreign and national companies covering a wide array of business sectors, principles in commercial law practices, partners of leading accountancies, and head of banking at big banks Leading export countries are included to see who is paying bribes abroad Peter Eigen, chairman of TI has said on the TI web site: "Politicians and public officials from the world's leading industrial countries are ignoring the ROT in their own backyards and the criminal bribe-paying activities of MN firms headquartered in their countries while increasingly focused on the high level of corruption in developing countries!"

corruption perceptions index

Based on cross-national surveys of business people, general public, and country analysts Variable sizes of surveys distort the index Survey is based on perceptions not empirical data (does not account for the number of prosecutions, number of course cases, or a measure of the quality of judicial system and enforcement) Shows only receiving, end-demand side of corruption; it does not measure the supply side

strategic CSR

CSR aligned with core competencies and linked to specific business objectives.

benefits of CSR

Can help differentiate the firm and enhance its brands. Helps cut costs, as when the firm takes steps to minimize packaging, recycle, economize on energy usage, and reduce waste in operations. Can help the firm avoid increased taxation, regulation or other legal actions by local government authorities. CSR that enhance brand equity by promoting goodwill toward the organization Good for Recruiting

How the Grinch Stole Christmas

Can the Grinch Steal Christmas Abroad? First motion picture designed as a global product The movie was both designed and produced with adaptation in mind But does this reduce art to the lowest common denominator?

modifies uniform pricing strategy

Carefully monitoring price levels in each country and avoiding large gray-trade-enticing gaps

do, don't say?

Chinese government is sensitive to inflation and rising prices It fined Unilever over $300,000 when media reported the company's speculation about raising its prices Law forbids this However, no company has been fined for actually raising prices

distribution systems china vs. usa

Chinese wholesalers Capture 80% of Revenues from Distribution of Consumer Products, While Retailers Realize Only 20% In the US, Numbers Are Reversed!

players in the China to Mexico counterfeit smuggling business

Chinese? Mexicans? Chinese in Mexico? Chinese Counterfeit Exports and the Role of the Diaspora Chinese

third country nationals

Citizens of countries other than the home or host country. Most work in management and are hired because they possess special knowledge or skills. A Canadian MNE may employ Italian citizens in its subsidiary in Italy (HCNs), send Canadian citizens to work in the Asia-Pacific region on assignment (PCNs), or assign Swiss employees to its subsidiary in Turkey (TCNs).

parent country nationals

Citizens of the country where the MNE is headquartered. Also called home-country nationals.

host country nationals

Citizens of the country where the subsidiary or affiliate is located. HCNs make up the largest proportion of employees that the firm hires abroad. They usually work in manufacturing, assembly, basic service activities, clerical work, and other non-managerial functions.

promotion standardization advantages

Companies can gain economies of scope and take advantage of production cost savings when advertisements and other promotions are standardized across markets. By focusing on a standardized promotion campaign, the company is able to spend more time, attention, and money on the campaign rather than these resources being fractured among several different national and even sub-national campaigns. Consumers now are exposed to a company's promotions beyond their national boundaries, via travel, viewing global media, or the Internet. International organizational buyers are exposed to a company's promotions beyond their immediate location through employee travel and information passed to them from the company's other foreign locations. A standard promotion campaign helps build a strong brand image and avoids the confusion that can occur when individuals are exposed to different promotions in different countries. Production cost savings Able to spend more time, attention & $ on campaign itself Strong branding image But promotion may be the most culture-bound of the elements of the marketing mix

ethnocentric and intrustive?

Compliance training annoys everyone. It really annoys non-Americans

global citizens

Consumers who rely on global brands to indicate products of quality and innovation Concerned that transnational firms respect workers rights and the environment Segment is 55% of consumers in study Fewer global citizens in the U.K. and U.S. Proportionately more global citizens in Brazil, China, and Indonesia

after-sales service

Costco delighted consumers by making them feel truly comfortable returning products in Taiwan

cultural impact on distribution

Could DealDey become the Amazon.com of Nigeria? Traffic is snarled. Drivers are ambushed and robbed. Many houses lack house numbers. A lack of trust requires offline payments. Most sales in Nigeria are still in cash Most Brazilian women prefer to buy cosmetics from women who sell door-to-door This is great for U.S. Avon and Brazilian Natura But it poses a challenge to MNE L'Oreal

credibility of advertising

Countries view the value of advertising in different ways U.S. = eager to criticize advertising (especially that aimed at children) Asia = advertisements provide good product information, respects consumers' intelligence Former Soviet Union = most skeptical

leading causes of expatriate failure

Culture shock Family complications

standardized marketing is appropriate when

Customers seek similar features in the product or service. Products have universal specifications. Business customers have converging expectations or needs regarding specifications, quality, performance, and other product attributes. Similar market segments exist across countries.

Ford global product example

Design team included Europeans, Asians, and Americans Customers around the world wanted safety, technology, fuel efficiency, and style Built on one platform for all markets Reduced the time to market by 25-50% Goal: 80% of Ford's cars will be on global platforms

bounties to whistleblowers

Dodd-Frank Act allows whistleblowers to receive 10-30% of monetary sanctions if fine is at least $1 million Law encourages whistleblowers to report problems first to their firms Some people excluded from receiving awards.

P&G CSR in Egypt

Donations Cash & in-kind donations Victims of the 1992 earthquake Mentally challenged children Cancer patients Orphans Others Sustainable Development Building 50 one-room classrooms in the rural areas Building clinics in underserved areas Young Innovators Program Pampers Child and Baby Development Program

standardization

Efforts to make marketing program elements uniform so as to target entire regions of countries, or even the global marketplace.

External influences of the government and national culture.

Employees must be hired, evaluated, and compensated in ways consistent with country and regional customs and regulations. Laws govern work hours, the firm's ability to dismiss or lay off employees, and severance compensation. In many European countries, labor unions are active in managing the firm. In France, Germany, and Spain, employees may work no more than a set number of hours per week, sometimes as few as 35.

management checklist

Establish the right corporate culture Support it from the top Perform a corruption and bribery risk assessment Evaluate third-party relationships Improve internal controls Avoid Avon's mistakes! Develop clear and practical policies and procedures Establish a violation reporting system Provide ongoing training

US Foreign Corrupt Practices Act

FCPA, 1977 Forbids U.S. citizens to bribe foreign government employees or politicians - or to give money to agents that is subsequently used to bribe Expediting payments paid to civil servants to do their jobs are allowed Citizens must report bribery in their organization. Records must be transparent and well kept. Failure to comply can result in fines and jail time!

fines

Fines are often much higher for covering up a bribe than for the bribery itself!

international advertising

Firms conduct advertising via media, which includes direct mail, radio, television, cinema, billboards, transit, print media, and the Internet. Transit refers to ads placed in buses, trains, and subways; they are particularly useful in large cities. Print media are newspapers, magazines, and trade journals. Managers assess the availability and viability of media by examining the amount and types of advertising spending already occurring in each market. In 2012, advertising expenditures on major media surpassed approximately $170 billion in North America, $100 billion in Western Europe and $125 billion in the Asia-Pacific region. Total spending on advertising worldwide reached almost $500 billion. Five western firms—Yum Brands, Pernod Ricard, Avon Products, Colgate-Palmolive, and P&G—spend more than 10 percent of their ad budgets in just one country, China.

international transfer pricing

Firms may deviate from market prices to maximize profits or minimize risk and uncertainty Accumulate more profits in a low-tax country Repatriate profits from a country with limits on profit repatriation Reduce tariff duties by quoting low transfer prices to high-tariff country But governments increasingly scrutinize the transfer pricing policies of MNEs BRICS want to set rules favorable to themselves

global integration

Firms that emphasize global integration: ◦Make and sell standardized products and services to capitalize on converging customer needs and tastes◦Compete on a regional or worldwide basis ◦Minimize operating costs by centralizing value chain activities and emphasizing scale economies◦Compete in more global industries Seek cost reduction through scale economiesCapitalize on converging consumer trends and universal needs Provide uniform service to global consumersConduct global sourcingMonitor and respond to global competitorsTake advantage of media with cross-national reach. the coordination of the firm's value-chain activities across multiple countries to achieve worldwide efficiency, synergy, and cross-fertilization in order to take advantage of similarities between countries. Firms that emphasize global integration make and sell products and services that are relatively standardized—that is, uniform or with minimal adaptation—to capitalize on converging customer needs and tastes worldwide. Such firms compete on a regional or worldwide basis. They seek to minimize operating costs by centralizing value-chain activities and emphasizing economies of scale.

local responsiveness

Firms that emphasize local responsiveness: ◦Leverage national endowments such as local talent◦Cater to local customer needs◦Accommodate differences in distribution channels◦Respond to local competition◦Adjust to cultural differences◦Meet host government requirements and regulations

The mix of expatriates versus locals.

Foreign subsidiaries are frequently staffed from the home country, the host country, and/or third countries. The mix of staff depends on several factors, including the international experience of the firm, cost of living in the foreign location, and availability of qualified local staff.

structure add-ons

Geographic organizations can be globally tweaked with global mandates & teams, especially in an MNE wants to harness some advantages of a transnational strategy

core competency alignments

GlaxoSmithKline (Pharmaceuticals) Devotes substantial R&D to poor-country ailments such as malaria and tuberculosis Was first to offer AIDS medication at cost Danimal in South Africa Nutritious for poor children Provided employment in black townships

corporate sustainability snapshot

Global Compact Annual Implementation Survey, 2012 1712 companies responded

geographic structure vs. function/product structure

Globalization argues for shift to function/product structures Tough decision—culture still matters

legal redress

Governments take different stands on gray markets but most support gray markets One exception: USA prohibits gray market of pharmaceuticals

gray markets

Gray markets can cause problems for manufacturers because they Hurt relationships with authorized dealers Undermine ability to charge different prices in different markets in order to maximize global profits

meeting with the justice department

Hewlett-Packard Ford Motor Company Whirlpool General Motors Sony Westinghouse General Electric

4 strategies emerging from the integration responsiveness framework

Home replication strategy Multidomestic strategy Global strategy Transnational strategy

structure follows strategy

How much decision-making should the firm retain at headquarters and how much it should delegate to foreign subsidiaries and affiliates. It is the choice between centralization and decentralization.

UN global compact

Human Rights Labor Standards Environment Anti-Corruption

greater involvement in employees personal lives

Human resource professionals help expatriates and their families with housing arrangements, health care, children's schooling, safety, and security, as well as proper compensation given higher living costs in some foreign locations.

new hr responsibilities

IHRM managers encounter numerous factors not necessarily present at home, including foreign taxation issues for expatriates, international relocation and orientation, administrative services for expatriates, host government relations, language translation services, and repatriation (returning the expatriate to his or her home country).

corporate culture

If an international firm can establish a strong corporate culture across its subsidiaries, then managers from its various units share a single vision and values Consequently, less formal controls may be necessary Corporate culture tends to reflect national culture of the MNE's home country And this can conflict at times with the culture of the many subsidiaries

standardization and adaptation

In addition to guiding targeting and positioning, global marketing strategy also articulates the degree to which the firm's marketing program should vary between different foreign markets. With adaptation, the firm modifies one or more elements of its international marketing program to accommodate specific customer requirements in a particular market. Standardization makes the marketing program elements uniform, with a view to targeting entire regions, or even the global marketplace, with the same product or service. We identified the key elements of the marketing program (sometimes called the marketing mix) affected by the standardization/ adaptation decision. These are: global branding and product development, international pricing, international marketing communications, and international distribution. In the international context, marketing strategy tackles the complexity of having both global and local competitors, as well as cross-national differences in culture, language, living standards, economic conditions, regulations, and quality of business infrastructure. A key challenge is to resolve the trade-offs between standardization and adaptation. When they enter international markets, managers undertake a broad corporate strategy in which they attempt to strike the ideal balance between global integration and local responsiveness. Global integration seeks cross-national synergy in the firm's value-chain activities in order to take maximum advantage of similarities between countries, while local responsiveness aims to meet the specific needs of buyers in individual countries. How the firm resolves the balance between global integration and local responsiveness also affects how it makes standardization and adaptation decisions in its marketing program elements.

local responsiveness

In contrast to global integration, many companies seek to respond to specific conditions in individual countries accordingly, this refers to managing the firm's value-chain activities and addressing diverse opportunities and risks on a country-by-country basis. It emphasizes meeting the specific needs of customers in individual markets. Meeting the specific needs of buyers in individual countries Local responsiveness requires the firm to adapt to customer needs and the competitive environment. Local managers are free to adjust offerings, marketing, and practices to suit conditions in individual markets. Leverage national endowments such as local talent Cater to local customer needs Accommodate differences in distribution channels Respond to local competition Adjust to cultural differences Meet host government requirements and regulations

global industry

In such industries, customer needs vary little from country to country. Firms sell relatively standardized offerings across entire regions or throughout the world. Example: American Standard sells similar bathroom fixtures worldwide In other types of industries, such as aerospace, automobiles, metals, computers, chemicals, and industrial equipment, firms generally approach international business by catering to the needs and tastes of customers on a regional or global scale. For example, Dupont sells essentially the same chemicals around the world. Subaru markets very similar cars in most of the countries where it does business. Industries such as this, in which competition takes place on a regional or worldwide basis, are known as global industries. Most global industries are characterized by a handful of major players that compete head-on in multiple markets. Kodak must contend with the same rivals—Japan's Fuji and Europe's Agfa-Gevaert—around the world. In the earth-moving equipment industry, Caterpillar and Komatsu compete head-on in all major world markets. The industry usually has only a handful of the same competitors that compete regionally or worldwide Firms that specialize in such industries as aerospace, cars, computers, chemicals, and industrial equipment, typically cater to customers on a regional or global scale

multidomestic industry

In such industries, the firm must adapt its offerings to suit the language, culture, laws, income level, and other specific characteristics of each country. An industry in which competition takes place on a country-by-country basis. Each country tends to have a unique set of competitors Companies that specialize in particular industries, such as processed food, beverages, consumer products, fashion, retailing, and publishing, have long approached international business by catering to the specific needs and tastes of each of the countries where they do business. For example, the British publisher Bloomsbury translates each volume of its Harry Potter series into the local language in every country where the book is sold. Coca- Cola varies the formula of its beverages to suit differing conditions abroad. Industries such as this, in which the firm must adapt its offerings to suit the culture, laws, income level, and other specific characteristics of each country, are known as multidomestic industries. In such industries, each country tends to have a unique set of competitors. Accordingly, a multidomestic industry is one in which competition takes place on a country-by-country basis.

distribution systems

In true developing countries, distribution channels are long, fractured (often single family-owned businesses dominate a geographic area), and are inefficient. Marketers must prepare to play "channel educators," often getting more involved in teaching intermediaries how to do their job than they would in more developed contexts. This can cost time and money! Plus, many companies might not have the in-house expertise and competence to adequately train and supervise foreign-market intermediaries. Examples of channel education include offering training programs, preparing manuals and pamphlets describing the products and services, helping middlemen develop their facilities, enhancing their inventory procedures and management skills, facilitating more efficient and effective shipment, and improving their shelving procedures, etc. It can also involve establishing tracking and cost-accounting systems.

revisiting expediting payments

It's still okay to pay to expedite your products through customs. But not if it gives you a competitive advantage. UPS is forbidden to pay expediting payments to customs officials. And it is not okay to pay to reclassify product category to pay lower tariff.

cultural adaptation example

Kraft reinvents the iconic Oreo to win China they're ugly add rectangles

labor unions

Labor regulations vary substantially, with minimum regulations in Africa and India to very detailed regulations in Northern Europe. Union membership has declined in most countries but remains high in several European countries. Strikes can disrupt international operations Labor regulations vary substantially, from minimal rules in Africa and the Indian subcontinent to highly detailed laws and regulations in countries such as Germany and Sweden. In many countries, younger workers are less interested in joining unions, and labor laws have become less union-friendly than in the past. The trend toward outsourcing manufacturing and business processes to foreign suppliers also contributes to declining membership. Germany, a nation with a strong tradition of unionized labor, has seen a net outflow of FDI in recent years as German firms have established manufacturing facilities in Eastern Europe and SE Asia. Each world region has a distinctive approach to labor influenced by its history, tradition, and other local factors. In the United States, unionization is concentrated in such industries as automobiles and steel and among public-sector employees such as police and teachers. Union membership in the United States peaked in the 1950s, and the unionized labor force in various traditional industries has fallen in recent years. Globalization, capital mobility, and mass immigration from Mexico have substantially affected the power of organized labor, leading to continued workforce restructuring. Nevertheless, U.S. labor unions remain an important political force. Their activities center on collective bargaining over wages, benefits, and workplace conditions and on representing members if management attempts to violate contract provisions. Labor activism and dispute resolution through unions have grown significantly in China in recent years. Given close ties between Chinese labor and government, Western managers usually deal extensively with China's national and local governments in managing labor relations. Walmart had to officially recognize unions in China—something it does not normally do. China also has a developing independent labor movement. In recent years, workers have staged thousands of strikes and protests there to demand better wages and working conditions.

causes of gray markets

Large difference in pricing of same product between two countries, often the result of company strategy. Exchange rate movement can enlarge differences. Product unavailable in a national market Example: IKEA in South Africa

distribution systems in developing economies

Long, inefficient distribution systems A product may pass through many wholesalers before reaching the final retailer

potential benefits of product standardization

Lower manufacturing costs Lower input costs (due to centralized purchasing) Cost savings due to elimination of product adaptation efforts Fast global roll-outs are possible Product available for global customers Enhance consumer perceptions of global brand

remember

MNEs don't think, create, strategize or implement anything. It is the people within them that do these things. People are at the heart of all global success

international distributions

MNEs must often adapt to different channels, infrastructure environments, regulations and cultures across the world

geographic area structure

Management and control are decentralized to individual geographic regions, whose managers are responsible for operations within their region Results in greater responsiveness to customer needs and wants in each market, providing a good balance between global integration and local adaptation However, managers' orientation is more regional than global, which affects development and management of products. Global economies of scale may suffer. Associated with multidomestic strategy and a polycentric worldview an organizational arrangement in which management and control are highly decentralized to the level of individual geographic regions, where local managers are responsible for operations within their own regions. Firms that organize their operations geographically tend to market products that are relatively standardized across entire regions or groupings of countries. The structure is decentralized because headquarters management delegates operations for each locality to the respective regional managers. The structure is typically associated with multidomestic strategy. Firms that use the geographic area approach are often in mature industries with narrow product lines, such as the pharmaceutical, food, automotive, cosmetics, and beverage industries. For example, Nestlé organizes itself into a South America division, a North America division, an Asia division, and so forth. Nestlé treats all geographic locations, including the domestic market, as equals. All areas work in unison toward a common global strategic vision. Assets, including capital, are distributed to ensure optimal return on corporate goals, not area goals. Geographic area units usually manufacture and market locally appropriate goods within their own areas. The main advantage of the geographic area structure is the ability to strike a balance between global integration and local adaptation on a regional basis. The area managers have the authority to modify products and strategy. Improved communications and coordination between subsidiaries are possible within each region but often are lacking with other area units and corporate headquarters. Geographic area managers typically lack a global orientation when it comes to such issues as developing and managing products.

The need for an international perspective in compensation policy

Management must account for all its PCNs, HCNs, and TCNs who may be nationals of numerous countries. In an emerging market like Vietnam, compensation may need to include allowances for housing, education, and other facilities not readily available there. Establishing a fair and comparable compensation scale, regardless of nationality, is a frequent challenge in large MNEs. For instance, an Australian national posted to Brazil can be subject to income taxation by both governments. Thus, tax equalization—ensuring there is no tax disincentive associated with an international assignment—is a complicating aspect.

the birth of smuggling

Product demand can't be satisfied by government controlled supply Or prices of smuggled products may be attractively lower Taxes aren't paid on illegal imports But other expenses add up High unemployment in urban areas can supply many vendors for smuggled goods Smugglers may be viewed as Robin Hoods

chocolate bar in india

Put chocolate in small package Move production out of Mumbai to cheaper location Improve supply chain Support cocoa production in India to avoid buying imported cocoa keep it cheap! Ikea is cool

international price escalation

Refers to the problem of end-user prices reaching high levels in the export market. It is caused by multilayered distribution channels, intermediary margins, tariffs, and other added costs associated with the foreign market. May result in an excessively high retail price in the target market, creating a competitive disadvantage for the exporter.

uniform pricing strategy

Requires a company to charge the same price everywhere when that price is translated into a base currency Difficult to achieve because of different taxes, trade margins, customs duties, and currency fluctuations

global strategy

Responding to globalization, headquarters seeks substantial control over all country operations in order to minimize redundancy and achieve maximum efficiency, learning, and integration worldwide. Global strategy asks "why not make the same thing, the same way, everywhere?" Products, marketing, and company practices are relatively standardized. R&D, manufacturing, marketing and other activities tend to be concentrated at headquarters, where they can be centrally coordinated and controlled. This is often associated with a return to an ethnocentric mindset In the extreme, global strategy asks, "Why not make the same thing, the same way, everywhere?" Thus, global strategy emphasizes central coordination and control of international operations. Headquarters managers are often largely responsible for the firm's operations worldwide. Activities such as R&D and manufacturing are centralized at headquarters, and management tends to view the world as one large marketplace. An example of global strategy is Whirlpool Corporation (www.whirlpool.com), the home appliance firm. Once a disjointed collection of autonomous national subsidiaries, the firm now manages its global activities from company headquarters. Its integrated value chains mean Whirlpool's most advanced expertise in appliance technology, production, and distribution are continuously shared among all the firm's business units worldwide. Its engineers continuously seek the most cost-effective ways to produce leading-edge products based on common parts and components. Whirlpool R&D personnel from Asia, Europe, and the Americas work in global teams to develop appliances based on standardized platforms, with little cross-national variation. For example, the firm developed the "World Washer," a single washing machine that can be sold anywhere. In a typical Whirlpool refrigerator, the compressor, casing, and door are identical wherever the product is sold. Only basic controls and position of the freezer cabinet are varied, to suit differing national preferences. The company intranet allows R&D teams to access ideas and specs on how to create inputs that can be integrated into Whirlpool products, wherever they are made. Parts and components are sourced from a limited number of top suppliers worldwide, who operate globally to deliver to as many of Whirlpool's factories as possible. Whirlpool does much of its manufacturing in China, Mexico, and other emerging markets to keep costs low. In total, it makes its appliances in just twelve countries and sells them in 170. Marketing activities are standardized and focus on making Whirlpool a globally recognized brand. By emphasizing global strategy, Whirlpool optimizes its value chains and enjoys superior performance around the world. Advantages. It provides a substantial ability to respond to worldwide opportunities. It increases opportunities for cross-national learning and cross-fertilization of the firm's knowledge among all its subsidiaries. It creates economies of scale, which result in lower operational costs. Global strategy can also improve the quality of products and processes, primarily by simplifying manufacturing and other processes. High-quality products give rise to global brand recognition, increased consumer preference, and efficient international marketing programs. Many factors make it easier to pursue global strategy, including converging buyer characteristics worldwide, growing acceptance of global brands, increased diffusion of uniform technology (especially in industrial markets), the spread of international joint ventures, and integrating effects of globalization and advanced communications technologies. However, it is challenging for management to closely coordinate the activities of widely dispersed international operations. The firm must maintain ongoing communications between headquarters and its subsidiaries, as well as between the subsidiaries. When carried to an extreme, global strategy results in a loss of responsiveness and flexibility in local markets

repatriation

Return of the expatriate to the home country. Requires advance preparation. Unless managed well, returning expatriate may encounter problems, such as career disruptions and'reverse culture shock'.

global integrators framework

Seek cost reduction through scale economies Capitalize on converging consumer trends and universal needs Provide uniform service to global consumers Conduct global sourcing Monitor and respond to global competitors Take advantage of media with cross-national reach

price standardization advantages

Simple planning and budgeting Develop global brand image Serve global business customers (MNEs) with one price Meet local consumer price expectations created by Travel Global media Internet Prevent gray trade There are advantages to offering the same price around the world. Homogeneous pricing allows for simple planning and budgeting, thereby saving time and money. It enhances a global brand image. As one of the 4 Ps of marketing, price communicates aspects about the brand's personality and its positioning. Offering the same price point around the globe engenders a similar brand image and positioning throughout the world. As people and information travel around the world quickly, comparison shopping is now easier to do. It can create consumer dissonance when he/she travels to a foreign country to find that the product that they purchase at home is cheaper or more expensive abroad. Consumers are exposed to differential price points in foreign markets through global media and the internet. Increasingly MNCs want to supply not only a subsidiary but an entire global organization in a similar way with similar goods. They typically prefer to pay the same price for goods in each of their locations, so they pressure suppliers to offer them the same price in Bangkok as they do in New York. As we will discuss later, offering the same (or similar) pricing around the globe helps decrease the possibility of gray trading, which can erode a company's profits and its relationship with contracted intermediaries in foreign markets.

the evolution of smuggling

Smuggling can become extensive Smuggling can become retail savvy Smuggling becomes more "organized crime" On-going and centralized Violent

beware

Some global accounts demand too much service for too low prices. Global marketers must sometimes "fire" these bad customers.

tariffs & taxes

Sony Playstation 4 Brazil Price = $1800 (vs about $400 in USA) Transfer price = 21.5% Retailer and distributor = 22% Tariff & other taxes = 63.0%

global teams

Teams consisting of members from different parts of the world Often are cross-functional Commonly used to create regional solutions Pricing corridors to reduce gray trade in a region Pan-regional advertising

The Lindsey Case

The Bribing of Individuals Fight Back Executives at Lindsey Manufacturing were indicted for paying an agent to pass on bribes to an official in a Mexican public utility company. $297,500 Ferrari $1.8 million yacht $170,000 for credit card bills Facing 30 years in jail, the Lindsey executives decide to take it to the jury. First FCPA trial in 34 years!

BMW vs. parallel markets

The demand for BMW's in Thailand exceeds the supply from Germany BMW Thailand stopped providing warranty and services to non-authorized BMW and Mini cars BMW Thailand says the action is necessary as the fuel quality and emission standards vary from country to country The independent premium car importers say BMW wants to reduce competition

multidomestic strategy

The firm develops subsidiaries or affiliates in each of its foreign markets and appoints local managers to operate independently and be locally responsive. Products and services are adapted to suit the needs and wants of buyers in each country. Because headquarters acknowledges differences between national markets, subsidiaries are allowed to vary products and practices by country. Country managers are often nationals of the host country and generally don't share knowledge and experience with managers in other countries. This is associated with a polycentric mindset. Power shifts to the subsidiaries. The food and beverage giant Nestlé (www.nestle.com) applies a multidomestic strategy. In each of its country subsidiaries, the firm employs highly autonomous nationals who adapt corporate strategic guidelines to meet specific local needs and conditions. Because of this approach, Nestlé is often perceived as a local firm in each of its markets. For example, the firm varies the taste of its Nescafé brand instant coffees. In Spain, the coffee has an intense, full-bodied flavor. In Northern Europe, it is mild and aromatic. Depending on the country, Nestlé sells its products through various channels, including supermarkets, small shops, market stalls, vending machines, mobile vendors, and even door-to-door. In Nigeria, it built a network of small warehouses and ships goods via pickup trucks. In China, the firm created a system of simple distribution links among villages that facilitate direct delivery by local vendors, often by bicycle. Nestlé also adapts its marketing. In patriotic Russia, advertising emphasizes Russian history and literature. In Africa, the firm hired local singers to visit villages and offer a mix of entertainment and product demonstrations. Nestlé also charges lower prices for its products in markets such as Brazil and China to suit lower local buying power. Advantages. If the foreign subsidiary includes a factory, locally produced products can be better adapted to the local market. There is minimal pressure on headquarters staff because local operations are managed by individual managers in each country. Firms with limited international experience find multidomestic strategy an easy option, as they can delegate many tasks to their country managers (or to foreign distributors, franchisees, or licensees, where they are used). Disadvantages. Each foreign subsidiary manager tends to develop a local strategic plan, organizational culture, and business processes that can differ substantially from those of headquarters. Subsidiaries have little incentive to share their knowledge and experience with managers in the firm's other country markets. This may lead to reduced economies of scale. Limited information sharing also reduces the possibility of developing a knowledge-based competitive advantage. While multidomestic strategy is more responsive to individual markets, it may lead to inefficient manufacturing, redundant operations, a proliferation of over-adapted products, and higher operating costs.

learning

The firm must create the ability to obtain learning from operating in international environments and exploit this learning on a worldwide basis. The diversity of the international environment presents the internationalizing firm with unique learning opportunities. By operating in various countries, the MNE can acquire new technical and managerial know-how, new product ideas, improved R&D capabilities, partnering skills, and survival capabilities in unfamiliar environments. The firm's partners or subsidiaries capture and disseminate this learning throughout their corporate network. Although Procter & Gamble (www.pg.com) is based in the United States, the firm's research center in Belgium developed a special water-softening technology to deal with Europe's hard water. P&G's subsidiary in Japan formulated a detergent that works well in cold water to adapt to Japanese customers' preference for cold-water clothes washing. P&G incorporated these inventions into its knowledge base and applied the knowledge to the development of products for other markets around the world. International business success is determined in the end by the degree to which the firm achieves all three skills—efficiency, flexibility, and learning. But it is often difficult to excel in all three simultaneously. One firm may be highly efficient, while another excels at flexibility and a third at learning. Many Japanese firms achieved international success by developing highly efficient and centralized manufacturing systems. In Europe, numerous firms succeeded internationally by being locally responsive, despite sometimes failing to achieve substantial efficiency or technological leadership. Many MNEs from the United States have struggled to adapt their activities to the cultural and political diversity of national environments and instead have proven adept at achieving efficiency via economies of scale. During the global financial crisis that began in 2008, efficiency and flexibility became particularly important to the success of multinational firms.

international human resource management

The planning, selection, training, employment, and evaluation of employees for international operations. How a firm recruits, trains, and places skilled personnel in its worldwide value chains sets it apart from competition.

expatriate assignment failure

The premature return of an expatriate due to an inability to perform well abroad. Costly to the firm (lost productivity and relocation costs) and to expatriates themselves (family stress and career disruption).

organizational structure

The reporting relationships inside the firm, "the boxes and lines" that specify the linkages among people, functions, and processes, allowing the firm to carry out its operations.

people

The right people in the right place are key to implementing a successful global strategy

new product development processes

The shift from local to global development requires consideration of unique or special conditions for major markets at the very beginning of product development.

timing of new product introduction

Traditionally, new products were launched 1st in home market 2nd in major triad markets 3rd in emerging markets Today average time lag between domestic and foreign introduction has diminished substantially due to Increasing R&D costs Quicker-moving competition

organized crime

Transnational criminal organizations are now major players in international business They are active in Smuggling Counterfeiting Smuggling counterfeits Other crimes

infrastructure challenges

Trucks average 186 miles per day on India's rural roads verses 500 miles in the USA India only has cold storage facilities for 11 percent of the country's transported produce India loses one-third of its produce to spoilage!

is the checklist ethnocentric

USA companies rarely accept negative feedback about their ethics guidelines. No geocentrism here! Does violation reporting work in collectivist setting?

global account management

Under globalization, MNEs seek uniform and consistent prices, quality, and customer service from suppliers. Global account management means serving a key global (business) customer in a consistent and standardized manner, regardless of where in the world it operates. In a gradually globalizing world, foreign customers increasingly seek uniform and consistent prices, quality, and customer service. Global account management (GAM) means serving a key global customer in a consistent and standardized manner, regardless of where in the world it operates. Walmart is a key global account for Procter & Gamble, purchasing a substantial amount of P&G products. Walmart expects consistent service, including uniform prices for the same P&G product regardless of where in the world it is delivered. Key accounts such as Migros, Zellers, and Walmart typically purchase from a collection of preferred suppliers that meet their specifications. Suppliers target these key customers by shifting resources from national, regional, and function-based operations to GAM, whose programs feature dedicated cross-functional teams, specialized coordination activities for specific accounts, and formalized structures and processes. Private IT-based portals facilitate the implementation of such systems. Each global customer is assigned a global account manager, or team, who provides the customer with coordinated marketing support and service across various countries.

codetermination

Unions are a factor in reducing the occurrence of sweatshops and other poor working conditions in China. The government has launched several initiatives to better protect workers' rights, including new legislation. A campaign by the All-China Federation of Trade Unions (ACFTU), the world's largest labor federation with over 150 million members, is seeking to unionize workers at all foreign firms operating in China. The ACFTU functions largely to bridge labor demands and the interests of the Chinese government. Unions in Europe often represent not only factory workers but white-collar workers such as physicians, engineers, and teachers. They hold much political power and may be allied with a particular political party, usually the Labor Party. A unique feature in Europe, especially in Germany and the Scandinavian countries, is labor union participation in determining wage rates, bonuses, profit sharing, holiday leaves, dismissals, and plant expansions and closings. In 2006, the European Union passed new legislation that requires even small enterprises to inform and consult employees about a range of business, employment, and work organization issues. In Sweden, labor plays a significant role in shop-floor decisions and participates in such issues as product quality standards and how to organize the factory for greater efficiency and safety. In Sweden and Germany, labor participation in management may be mandated, and workers often sit on corporate boards, a practice known as codetermination. By contrast, in Britain, South Korea, and the United States, relations between management and labor unions are often adversarial.

Wal-Mart

Wal-Mart shook up retail in Mexico but failed in South Korea Wal-Mart can't buy directly from farmers Farmers must sell to designated wholesellers Government imposed system of middlemen can increase farm to store costs sixfold

distribution system in developed economies

Well-developed, shorter, efficient distribution systems

managing the expatriate experience

What happens when things go awry for the employee working may occur because an employee is unable to perform well or because his or her family has difficulty adjusting. Such failure is costly to company productivity and goals and adds to the costs of relocating. Failure can also affect expatriates themselves, leading to diminished careers or problems in their family lives. As many as one-third of foreign assignments end prematurely due to expatriate assignment failure. The rate is particularly high among employees assigned to countries with substantial culture and language differences.

parallel imports

When cross-market prices are large, individual buyers or independent entrepreneurs buy products in low-price countries for re-export into high-price countries. This creates... gray markets

Greater risk exposure

When employee productivity falls below acceptable levels, when workers go on strike, or when key managers quit the firm, the consequences are often more pronounced in international business. Exposure to political risk and terrorism are major concerns for IHRM professionals and may require greater compensation and security arrangements for employees and their families.

beyond the us fcpa

Will an OECD anti-bribery pact level the playing field? Europe joins fight against MNE bribery Britain's new anti-bribery legislation Expediting payments outlawed Jurisdiction encompasses all firm with operations in UK

think global

act local

managers develop international strategies to

allocate scarce resources and configure value-adding activities on a worldwide scale participate in major markets implement valuable partnerships abroad engage in competitive moves in response to foreign rivals

Koreans

are mentioned in 351 articles relating to smuggling in Mexico! 2003 US government report identifies Koreans in Mexico City as being one of the major distributors of counterfeits from Asia 2010 Mexican Attorney General's Office stated 30% of Tepito warehouses were owned by Asians, especially Koreans

coke & pepsi in mexico

bad news A one-peso tax for every liter of sweetened soft drinks added 10% to price Sales declined 12% overall and 17% among low-income consumers

national differences

but _______________ still dictate many adaptations due to different national environments

Three key dimensions of brand evaluation

consumer evaluation of global brands (global brands study) 1. Quality signal 2. Global myth 3. Social responsibility

Four Consumer Segments

consumer evaluation of global brands study 1. global citizens 2. global dreamers 3. antiglobals 4. global agnostics

learning

develop the firm's products, technologies, capabilities, and skills by internalizing knowledge gained from international ventures

Starbucks

expensive in China !

global mandates

expressed assignment to carry out a task on a global scale Global account management Global brand management

control systems

function via Performance standards What's your market share? Behavioral standards Don't bribe!

CEO export department

general administration R&D and manufacturing IT & logistics marketing export department

centralized approach

gives headquarters considerable authority and control over the firm's activities worldwide.

bribery

giving something of value to an individual in a position of trust to influence judgment or behavior

help

how can smuggling help a multinational firm?

hurt

how can smuggling hurt a multinational firm?

three employees categories in the MNE

i) host country nationals (HCNs) ii) parent country nationals (PCNs) iii) third-country nationals (TCNs)

foreign market pricing

is determined by: Cost factors such as production and channel transportation costs Market factors such as competition and the price a target market is willing and able to pay Regulatory factors such as tariffs, other taxes, price controls Internal factors such as corporate strategy to build or to "milk" a market And even cultural factors

efficiency

lower the cost of the firm's operations and activities on a global scale

types of product adaptation

mandatory and discretionary

decentralized approach

means substantial autonomy and decision-making authority are delegated to the firm's subsidiaries around the world. In every company, management tends to devise a structure consistent with its vision and strategies. Thus, MNEs that emphasize global integration tend to have a centralized structure. Those that emphasize local responsiveness generally are decentralized.

elements of MNE organization

organizational structure, people, culture, organizational processes all -> ability to develop and implement international strategy

india

pampers in _____ P&G is sending thousands of marketers to hospitals & door to door to explain the benefits of disposable diapers Is this sustainability

government regulations

price controls Instituted by the government and regulatory agencies Two types: Across-the-board Industry-specific Today, they're often related to food

four P's of marketing

product price promotion place (Distribution)

international pricing

product pricing standardization <-> product pricing adaptation ??

culture shock

shock—confusion and anxiety experienced by a person who lives in a foreign culture for an extended period. It can affect the expatriate or family members and results from an inability to cope with the differences experienced in a foreign environment. Inadequate language and cross-cultural skills tend to exacerbate culture shock, as the expatriate is unable to function effectively in the foreign environment or fails to communicate well with locals. Most expatriates and their families who experience culture shock overcome it, usually within a few months. But a few give up and return home early. Especially a factor for those assigned to culturally dissimilar countries, such as China or Yemen. Can be reduced via advance preparation, training, language skills, deep interest in the new country.

chinese counterfeits

smuggling & transnational crime Chinese counterfeits soar The Chinese government tolerates this Transnational crime comes to play an increasingly large role in this industry chinese counterfeits go global!

culture

special japanese pricing Strong association between price and quality BMW 545i lists for $56,000 in USA and $84,000 in Japan chinese haggling team Websites put consumers in touch to visit retailers together and ask for quantity discounts

international strategy

strategy carried out in two or more countries

flexibility

the agility to manage diverse country-specific risks and opportunities by tapping resources in individual countries and exploiting local opportunities

international promotion

the constant tug-of-war between standardization and adaptation. promotion standardization <-> promotion adaptation ?

international metker's challenge

the constant tug-of-war between standardization and adaptation. This is a central theme of this course. product standardization <-> product adaptation

global integration

the coordination of the firm's value-chain activities across multiple countries to achieve worldwide efficiency, synergy, and cross-fertilization in order to take advantage of similarities between countries. Firms that emphasize global integration make and sell products and services that are relatively standardized—that is, uniform or with minimal adaptation—to capitalize on converging customer needs and tastes worldwide. Such firms compete on a regional or worldwide basis. They seek to minimize operating costs by centralizing value-chain activities and emphasizing economies of scale.

home replication strategy

the firm views international business as separate from, and secondary to, its domestic business. Expanding abroad is viewed as an opportunity to generate additional sales for domestic product lines. Thus, the firm designs products with domestic customers in mind and pursues international business in order to extend product life cycles and replicate home-market success. Such a firm expects little useful knowledge to flow from its foreign operations. Firms that make and sell commodities (such as raw materials and basic parts) sometimes use the home replication strategy because such products often do not require a sophisticated internationalization approach. The strategy can also succeed when the firm targets only markets that are similar to the home market. Home replication strategy is typically employed by the smaller firm with products it wants to sell abroad to generate additional sales. It contracts with an intermediary in each of several foreign markets to import and distribute the product and generally does not adapt it for foreign customers. Because management knows little about international business and has limited human and financial resources, the firm relies heavily on its foreign intermediaries. A key consequence is that it maintains little control over how its products are marketed abroad. Replicating abroad what the firm normally does at home provides few competitive advantages in foreign markets. Consequently, for most internationalizing firms, home replication is usually an initial, temporary approach rather than a long-term strategy. This is associated with an ethnocentric mindset Management holds little interest in foreign markets and expects little knowledge to flow from foreign operations. All or most power is located at headquarters in the home country

chinese transnational crime connection

the korean diaspora The nature of Chinese transnational crime The nature of the Korean Diaspora

IRHM managers

the ultimate challenge is to ensure the right person is in the right position at the right location with the right pay scale. In some countries it is easier to get work visas for employees with specific specialized skills. For example, the financial services and information technology sectors in southern India have experienced a shortage of mid- and senior-level managerial talent. Consequently, managers from as far away as Eastern Europe are being posted to India to take advantage of compensation packages that are now competitive by advanced economy standards.

global segments

transnational consumer segment based on age, social class, lifestyle Not as easy to identify as you might think Teenagers are not the same worldwide

settling global prices

uniform pricing strategy & modified uniform pricing strategy

suspicious

what happens to smuggling with trade liberalization? smuggling and the Cigarette Industry The embarrassing incident at the Hague

small scale retailers

who dominates emerging markets MNCs show renewed interest in small retailers, especially in emerging markets They Represent 60% of total in-store sales in Latin America There is limited space in store They often sell single-use products; e.g., a single razor blade Procter & Gamble estimates 20 million such stores worldwide—often located in someone's home Only 2.5 million carry P&G products

Mexico

who has the world's fourth largest counterfeit market