CLASS NOTES

Ten thoughts from the future EcoCom, Dec 17, 2013

- From social everything to being smart socially Competition for attention
- Information security
- Who needs shops anyway
- Redistributing the industrial revolution- small scale manufacturing (3D and soon 4D
printing) Production closer to markets & mass customization
- Rising labour costs in developing markets, high unemployment in developed markets,
global access to online talent and knowledge, advances in robotics Reshoring of
production to developed markets WILL INCREASE

Ten thoughts for the future
- Hubonomics : the new face of globalization
Hubs will specialize to support the needs of growing regional trade, emerging vity
states, online communities of choice, and the next gen of flexible workers and
entrepreneurs
- Sci-fi is here: making the impossible possible
Control of mind and artificial intelligence, shape-shifting materials and self-
organizing nanobots, cyborgs and enhanced humans, space exploration, and high-
speed, intelligent transportation.
- Growing pains: Transforming markets and generations.
- Panic versus denial: The resource gap grows, the global risks rise but who i listening ?
- Fighting unemployability & unemployerability- Polarization towards higher and lower
skill levels is squeezing mid-level jobs, education systems are not preparing students for
the jobs of the future.
- Organizational unemployerability not being able to attract and retain desired talent
as new generations demand exciting and meaningful work.
- Bipolar world: consistency to ambiguity

Culture and Global Diversity

- Silent languages of culture :

Context
A) Low-context cultures : emphasize communication via spoken or written
words
B) High-context cultures : rely on nonverbal and situational cues as well as
on spoken or written words in communication body language, physical
setting, past relationships.

Time
A) Monochronic cultures people tend to do one thing at a time
B) Polychronic cultures time is used to accomplish many different things at
once.

Space
Proxemics is how people use space to communicate.

Values and national cultures (Hofstede):
- Power distance
- Uncertainty avoidance
- Individualism-collectivism
- Masculinity-feminity
- Time orientation

*Project GLOBE (Global Leadership and Organizational Behaviour Effectiveness) :
Researches the leadership , organizational practices, and diversity among world cultures.
- Power distance
- Uncertainty avoidance
- Gender egalitarianism
- Future orientation
- Institutional collectivism
- In group collectivism
- Assertiveness
- Performance orientation
- Humane orientation

Facilitators of leadership success :
- Acting trustworthy, just, honest
- Showing foresight, planning
- Being positive, dynamic, motivating
- Inspiring confidence
- Being informed and communicative
- Being a coordinator and team builder

Inhibitors of leadership success:
- Being a loner
- Acting uncooperative
- Being irritable
- Acting autocratic

Deals of the day Mergers and acquisitions, Reuters Dec. 2013
Examples of globalization
- AT&T Inc said it would sell its wireline operations in Connecticut to Frontier
Communications for $2 billion.
- The owner of Colombian airline Avianca is considering taking over Italian airline Alitalia
or Polish state-owned LOT to boost his presence in Europe.
- Canadas Saputo Inc for Australias Warrnambool Cheese and Butter Factory Holdings
Co to knock out its rivals.
- Spanish drugs company Almirall SA is buying U.S. group Aqua Pharmaceuticals.
- British Tesco is buying 50% stake in TATAs Trent Hypermarket in India.

Global economy :
- Resource supplies, product markets, and business competition are worldwide, rather
than local.

Globalization :
- The process of growing interdependence of these components in the global economy.

World 3.0 :
- Nations cooperate in the global economy while respecting one anothers national
characters and special interests

Global management:
- Management in organisations with business interests in more than one country.

Global manager:
- informed about international developments
- transnational in outlook
- competent in working with multicultural people
- Aware of regional developments in a changing world.

Global businesses: conduct for-profit transactions of goods and services across national
boundaries.

Reasons why businesses go global:
- Profits
- Customers
- Suppliers
- Capital
- Labour
Management and Globalization

Common forms of global business from market entry to direct investment strategies.

Global sourcing: the process of purchasing materials or services around the world for local
use

Exporting: selling locally made products in foreign markets

Importing: buying foreign-made products and selling them domestically.

Licensing agreement: one firm pays fee for rights to make or sell another companys
products

Franchising: a fee is paid for rights to use another firms name and operating methods.

Foreign Direct Investment: building, buying all or buying part ownership of a business in
another country

Insourcing: job creation through foreign direct investment

Example :

- Shell broke into the Italian petrochemical industry: supplying the fluids which
Montecatini, strong in research and management, needed and could not obtain in the
difficult Italian capital market.

- General Electric took advantages of Machines Bulls lack of working capital to supply
this need and, with Bulls first-class marketing set-up, formed a viable joint venture.

- The biggest contract cleaning organization Danish Der Danske Rengring Service
manufacturing a range of cleaning equipment under the name of Darenas and owns
another Danish company manufacturing industrial chemical cleaning products. Joint
ventures with Electroluc to cover both contract cleaning and the manufacturing and
supply of machines and other cleaning products.

Global strategic Alliances : a partnership in which foreign and domestic firms share
resources and knowledge for mutual gains.

Ex: Starbucks- Barnes & noles, HP Disney, Avon KORRES in Latin America, etc.

Types of direct investment strategies:
- Joint ventures: operates in a foreign country through co-ownership
- (and more on powerpoint for week 3)


Criteria for choosing a joint venture partner :
- Familiarity with your firms major business.
- Strong local workforce
- Future expansion possibilities
- Values its customers
- Strong local market for partners own products
- Good profit potential
- Sound financial standing

Complication in the global business environment:
- Politic risk: the potential loss in vaslue of a foreign investment due to instability and
changes in host country (example: terrorism, civil wars, military disruption)
- Local legal systems: complex and unfamiliar laws can create problems new laws and
economic policies, patents, trademarks.
- World Trade Organization resolves trade and tariff disputes among countries
- Protectionism can complicate global trading relationships.
Regional Economic Alliances:
- NAFTA North American Free Trade Agreement
- EU European Union
- SADC Southern Africa Development Community
- APEC Asia Pacific Economic Cooperation
- ASEAC Association of Southeast Asian Nations

Types of global business:

- Global corporation
MNC (Multinational Corporation) with extensive business soperations in more than
one foreign country

Examples: Walmart, Toyota, BMW, Sony

- Transnational corporation
MNC (multinational corporation) operates worldwide on a borderless basis without
being identified with one national home

Examples: Nestle, Hugo Boss

Ethical issues for multinational corporations :

- Corruption illegal practices that further ones business interests
- Sweatshops employing workers at low wages for long hours and in poor working
conditions
- Child labour full-time employment of children for work otherwise done by adults
- Sustainable development meeting current needs without compromising future
needs.