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Session 2

Dr. Triyono Arief Wahyudi

Globalization & International Environment
International Entrepreneurship

Strategic Planning
LONG RUN PROFITABILITY AND GROWTH

EVOLVING MARKET OPPORUNITIES
RESOURCES & OBJECTIVES

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Strategic Management Scope
External Business Environment Senior Managers:
Leadership and Entrepreneurship People

Resources

Strategic Planning, Strategy and Policies:
Formulation, Implementation and Evaluation Dr. Triyono Arief Wahyudi - Strategic 1/21/2012
Management

Business Processes

To Achieve Company Objectives

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Current Competitive Landscape
• A Risky Business World
• Investments required to compete on a global scale are enormous or massive.
• Consequences of failure are strict

• Important Elements of Success
• Developing strategy • Implementing strategy
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Competitive Landscape
Global economy Rapid technological change
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Strategic management among global and innovative combatants

Competitive Landscape: Hypercompetition
Hypercompetition
A condition of rapidly escalating competition based on
• • Price-quality positioning Competition to create new know-how and establish first-mover advantage Competition to protect or attack established product or geographic markets
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Hypercompetition

Dr. Triyono Arief Wahyudi - Strategic 1/21/2012 Management

Global Economy
• Global Economy
• Goods, people, skills, and ideas move freely across geographic borders • Movement is relatively free-for-all by artificial constraints
• Expansion into global arena complicates a firm’s competitive environment
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Global Economy (cont’d)
Globalization
◦ Increased economic interdependence among countries as reflected in the flow of goods and services, financial capital, and knowledge across country borders
◦ Increased range of opportunities for companies competing in the 21st-century competitive landscape
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Country Competitiveness Rankings (Population over 20 Million)
Country
United States Australia Canada Malaysia Germany Taiwan United Kingdom France Spain Thailand Japan China Brazil China Korea

2002
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15

2003
2 3 2 6 4 7 5 9 8 10 11 12 0 0 10

Country
Colombia Italy South Africa India India Brazil Philippines Romania Mexico Turkey Russia Poland Indonesia Argentina Venezuela

2002
16 17 18 19 20 21 22 23 24 25 26 27 28 29 30

2003
20 14 16 0 17 15 18 0 19 23 21 22 25 26 24
Table 1.1

SOURCE: From World Competitiveness Yearbook 2003, IMD, Switzerland. http://www.imd.ch.wcy.esummary, April. Reprinted by permission.

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International Environment

The External Environment

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General Environment
• Dimensions in the broader society that influence an industry and the firms within it:
• Demographic • Economic

• Political/legal
• Sociocultural • Technological • Global
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TABLE

The General Environment: Segments and Elements

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Industry Environment
• The set of factors directly influencing a firm and its competitive actions and competitive responses
• Threat of new entrants

• Power of suppliers
• Power of buyers • Threat of product substitutes • Intensity of rivalry among competitors
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Competitor Environment
• Gathering and interpreting information about all of the companies that the firm competes against. • Understanding the firm’s competitor environment complements the insights provided by studying the general and industry environments.
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Analysis of the External Environments
• General environment
• Focused on the future

• Industry environment
• Focused on factors and conditions influencing a firm’s profitability within an industry

• Competitor environment
• Focused on predicting the dynamics of competitors’ actions, responses and intentions
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Opportunities and Threats
• Opportunity
• A condition in the general environment that, if exploited, helps a company achieve strategic competitiveness.

• Threat
• A condition in the general environment that may hinder a company’s efforts to achieve strategic competitiveness.
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Technology and Technological Changes
 Rate of change of technology and speed at which new technologies become available
◦ Continuous innovation—how rapidly and consistently new, information-intensive technologies replace older ones ◦ The development of troublemaking technologies that destroy the value of existing technology and create new markets
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Technological Change
 The Information Age
◦ The ability to effectively and efficiently access and use information has become an important source of competitive advantage
◦ Technology includes personal computers, cellular phones, artificial intelligence, virtual reality, massive databases, electronic networks, internet trade
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Technological Changes
 Increasing Knowledge Intensity
◦ Strategic flexibility: set of capabilities used to respond to various demands and opportunities in dynamic and uncertain competitive environments
◦ Organizational slack: the resources that allow the firm flexibility to respond to environmental changes ◦ Capacity to learn
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Entrepreneurship: AsiaOceania
• Asia-Oceania performs poorly in seeking new market expansion, introducing new products, or using new technologies. • New entrepreneurial businesses in the region are driven more by high growth in market opportunities for existing services, and less by the introduction of new services or innovative products

Transition Economies
Asia APEC – The Asian Pacific Economic Cooperation China Three types of entrepreneurial ventures have emerged:
• Township and village enterprises (TVE’s) • Sino-foreign joint ventures and wholly foreignowned subsidiaries • Collective of privately owned joint ventures

Entrepreneurship: European Union
• Entrepreneurial activity is directly linked to cultural support • Generous employment protection and unemployment benefits reflect the low entrepreneurial • EU has identified a need to enhance positive attitudes about entrepreneurship to further encourage entrepreneurial activity • Need to deregulate and liberalize markets and to commercialize research

Globalization

Globalization Defined
Globalization: the ongoing social, economic, and political process that deepens and broadens the relationships and inter-dependencies amongst nations—their people, their firms, their organizations, and their governments
• • International business facilitates globalization process Four Dimension of Globalization Index are: Economic, Technological, Personal Contact, and Political

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International Business Defined
International business: all commercial transactions between parties in two or more countries • Private firms are profit-oriented. • Government organizations may or may not be profit-oriented. • The international business environment is more complex and diverse than the domestic business environment.

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Globalization and its challenges
Globalization – the removal of barriers to free trade and the closer integration of national economies – can be a force for good that has the potential to enrich everyone in the world, particularly the poor, but the way it has been managed (especially the international trade agreements) needs to be rethought. Joseph Stiglitz Globalization has been ―misgoverned‖. John K. Galbraith

Globalization
Globalization mean is that the whole process is potentially beneficial for development, as it saves resources, otherwise used for low efficient micro-management, but this process needs management by consciously prepared bodies – governments, international organizations, and above all, globalization needs a rules-based system, in which the interests of all – industrialized and poor nations alike – need to be taken into account and managed in a system that provides international public goods.

Globalization
• The Bretton Woods institutions are called to play a role in this international regime for the provision of public goods. • A key role here belongs to the WTO and its binding rules, which need to take into account the interests of all, including the poorest developing countries. • Stiglitz argues, the problem is that the rich industrialized countries have imposed their interests and this is why the international trade agreements have to be rethought.

Globalization
• What about e-trade. The same issue - the need for good management of international e-commerce - applies. • The WTO has had informal discussions about e-commerce, but there is no real work on binding WTO rules is envisaged in this area. • ICTs come as part of other binding agreements – services, and now there are negotiations on trade facilitation, which may include obligations to publish all trade procedures on the Internet, build Single electronic Windows for filing trade information, etc. • In this sense, the WSIS, managed by other UN agencies has made attempts to establish some basic rules, including governance of the Internet and creation of a Solidarity Fund for ICT development in the developing countries. •

THE FACE OF GLOBALIZATION
• Countries differ greatly in their globalization levels. ranks the 20 most global countries according to their overall globalization level as well as according to the four components that make up the Globalization Index developed by A. T. Kearney, a consultancy, and Foreign Policy magazine: economic integration, personal contact, technological connectivity, and political engagement.

THE FACE OF GLOBALIZATION
Economic integration scores are based on a country’s trade and foreign investment.
Technological connectivity scores are composed of the number of Internet users, hosts, and secure servers in a given nation.

Personal contact scores are based on travel and tourism, international telephone traffic, and crossborder remittances.
Political engagement scores are a combination of membership in international organizations, contributions of staff and money to UN peacekeeping missions, the number of international treaties ratified, and government-to-government transfers.

Factors in International Business Operations

Figure shows the organization of materials in the text. 33

The Forces Driving Globalization
1. Increased in and expansion of technology 2. Liberalization of cross-border trade and resource movements 3. Development of services that support international business 4. Growing consumer pressures 5. Increased global competition 6. Changing political situations 7. Expanded cross-national cooperation
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Criticisms of Globalization
• Threats to national sovereignty/ independence • Economic growth and environmental stress • Growing income inequality and personal stress

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Why International Business Differs from Domestic Business
• • • • • Political and legal practices Cultural factors Economic forces Geographic influences Competitive factors

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International Business As A Discipline for Managers
• Integrative discipline borrowing from Domestic and International Law, Political Science, Anthropology, Sociology, Psychology, Economics, Geography and Business • Managers must have an International Mindset to succeed in global markets
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Global Governance
• Politics/Peace- United Nations • Trade- World Trade Organization (WTO) • Money/Finance- International Monetary Fund (IMF) • Development- World Bank • Overall- G8 Nations (USA, Canada, UK, France, Germany, Italy, Japan, and Russia) • Other international organizations and bodies

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Why go International?
• Resource-rich countries (raw materials) • Labor-rich countries (e.g. Mexico, Japan, India, Russia, etc.) • Market-rich countries (e.g. China)

Reasons to Internationalize
Proactive Reasons
• Increased Profit • Unique Goods or Services • Technological Advantage • Exclusive Market Information • Owner-Manager Desire • Tax Benefits • Economies of Scale

Reactive Reasons
• Competitive Pressures • Declining Domestic Demand • Overcapacity • Proximity to Customers • Counterattack Foreign Competition

Researching the Foreign Market
• • • • • • • Government Regulations Political Climate Infrastructure Distribution Channels Competition Market Size Local Customs and Culture

International Threats and Risks
• • • • • • • Ignorance and uncertainty Lack of experience Lack of information Restrictions Political risks Economic risks Financial risks

Key Questions and Resources
 Why is the company interested in going international?  What does the foreign-market assessment reveal about the nature and functioning of the markets under investigation?  What specific market strategy is needed to tap the potential of this market?

International Entrepreneurship
• Venture capital and entrepreneurs fund less than 0.1% of the world’s entrepreneurs • High-level VC funding accelerates the commercialization of new products and services and gives the US dominance is world markets. • Ninety-one percent of VC invested in the US finances high technology companies, in contrast to only 29 percent in other nations

Entrepreneurship: Latin America
• Volatile economic conditions yield modest growth and income • Government policies are not supportive and do not promote entrepreneurship activity • Intellectual property rights protection is inadequate • Regulatory constraints, labor costs, and legal regulations place a high burden on entrepreneurs • Access to technologies and international markets is difficult • There is a strong need for improved management skills and better consulting services

Dr. Triyono Arief Wahyudi

International Entrepreneurship Entrepreneurship by Country

The needs to do entrepreneurial activities

Example 1: Qualcomm in China

Example 1: Qualcomm in China
Timetable • 1997-2000: China and Qualcomm go back and forth in discussions on licensing Qualcomm’s technology • December 2000: MOU with China's Ministry of Information Industry for CDMA

• January 2002: China Unicom first CDMA Deployment
• September 2002: Appointment of Three Senior Executives • December 2002: QUALCOMM and China Unicom Sign Agreement to Form Joint Venture • April 2003: China Unicom Nationwide Launch of CDMA2000

Example 2: Microsoft in Europe
Microsoft Research Cambridge • Established July 1997, now at ~75 researchers European Science Initiative • Established July 2004 • ‘new kinds’ of science and computing…‘ambient intelligence’ where sensors, wireless networks and interactive, embedded computing are invisibly and seamlessly woven into people’s everyday life

Example 3: Microsoft in China
Asia Center for Interaction Design • Established November 2003 • Rapid Prototyping: developing and advancing the art of software prototyping • Information Visualization and Management: user interface design, prototyping, and usability testing • Lifestyle Gaming