Global Business Operations and Management - Essay Example

Lecture Globalization – a word that has revolutionized the world in the most tremendous fashion. Globalization can be defined as the integration ofthe economies and culture of various countries of the world. In this economic era it is the phenomenon of globalization that has contracted this world to the extent where economy of every country is utterly dependent on that of the others. Multinational organization can be regarded as the most important factor when considering advent of globalization. An example of such an organization would be IBM. The giants MNCs of the world have converged the markets by developing a similar taste for the customers across the globe and responding to it aptly. In addition, global production, global service and global HRM have also accelerated the process of globalization. Barlett and Ghoshal developed a framework based on the Global Integration and Local responsiveness which can assist in identifying the strategic position of any MNC in the business. Industrial and IT products (for example Apple i-phone) are usually adhered towards global integration and convergence and they tend to market a standardized product. An example of local responsive MNC would be FMCG or any other service industry which strives to adapt to the local demography and culture. MNCs are criticized to certain extent as well. It is generally considered that the multinationals only motive is profits and they disregard environment and national sovereignty. MNCs are also blamed for exploiting cheap labor especially in the Asian countries. Lecture 2 The foremost goal of Multinational corporations is to increase net worth of the company in such a way that is beneficial for both the management of the organization and the society as a whole. In doing so, the management must incorporate such strategy which increases the profitability and the profit growth over period. Cost reduction is the way through which the profitability of the company can be increased. Multinational usually prefers to operate in countries where labor and other factors of productions are cheap. In addition, profitability of the company can also be increased through increasing the selling price. As far as profit growth is considered, Market penetration strategy and product development strategy are the tools for that. By going international, the companies achieve economies of scale which significantly reduces per unit cost of production by spreading fixed cost over large volume. Multination also invests heavily in technology which increases the learning curve and also reduces the production cost. Apart from the cost reduction strategies, multinationals enhances their revenue from the core competence which can be defined as the specific skill that the firm possess which cannot be matched by any other company. Global presence and market expansion also assists multinationals in enhancing their revenue. When it comes to competing in the international market, multinationals considers factors such as structure, culture, operational strategy. Multinational performs competitive dynamic analysis through industry considerations and resource based considerations. Industry based considerations evaluates factors such as industry price leader, product homogeneity and entry barriers whereas resource based considerations pertains to the core skills and abilities that is possessed by the organization by itself. Companies also consider the prevailing domestic and international competition in the industry it is operating. When competing in international market, the multinational must give regards to both global integration and local responsiveness. Wal-mart has not been successful in Japan because it disregarded the local need of fresh products irrespective of the price. Whereas Costco has been quite successful in Japan by offering both quality and affordable price to the customers. Lecture 3 There are several ways through which an organization can enter into an international market which primarily are exporting, turnkey project, licensing, franchising and foreign direct investment (FDI). Exporting is usually performed by multinationals in the initial phase of their existence. The managerial decision when it comes to exporting the right product includes factors such as sales volume, core technology to protect, tariff and government control. The primary issue when it comes to exporting pertains to payments from the customers. Letter of credit (LC) is a payment arrangement, between overseas buyer and domestic seller and between their banks, which ensures that timely payment is made by the buyer and accordingly delivery is made by the seller according to the terms of the contract. The advantages of exporting are that it avoids cost and helps achieve experience curve and location economies. However, exporting requires high transportation and transaction cost and trade barriers. Another form of entering into international market is through turnkey projects in which contractor agrees to handle most of the details of the project for foreign client. The advantages of turnkey project it can overcome FDI restrictions and is less risky. The example is process technology industries such as power supply. Licensing, another mean of entrance, gives the licensee the freedom to produce and market the products or services in exchange for a fee. Licensing reduces development cost and risk of opening a foreign market but it limits the firm’s control over production and marketing strategy. In a franchising agreement, franchisor provides a proven business model and brand name to franchisee (an individual or corporate investor) in return for franchising fee. Franchising significantly reduces cost and risk of entering into a foreign market but its disadvantages are challenging in quality control and protecting brand equity. Through FDI the companies can establish overseas production facilities or joint ventures and take all the managerial decisions. Lecture 4 Foreign direct investment (FDI) is usually conducted by the companies when it has sufficient market knowledge and wants to produce or market a product in the foreign country entirely on its own. When a company undertakes FDI, it becomes an MNC. The advantages of FDI can be described using the OLI framework which stands for Ownership advantage, Location advantages and internalization advantages. Ownership advantages are the firm specific advantage which comes from factor such as brand name. This gives rise to increase in profitability and growth. Location advantages define the types of motivation to invest in a certain location based on factors such as resources, market, and efficiency and strategic aspect. On the other hand, internalization focuses on reducing transaction cost. All of these factors determine where and why the company should indulge in FDI. In selecting a potential country for investment, the companies usually screen a country according to their motives (lower cost incentives, unexplored markets) and after consulting informants take the final decision. These decisions are further broken down into short-term goal and long-term goal. After taking the final decision, the company should put focus towards aspects such which bank to choose (home, local or global) depending on factors such as financing needs and finance charges and whether to build a factory or rent one. In addition, criteria for land, property and confidentiality of the trip are also crucial. Development trajectory of a foreign subsidiary defines the affect that the foreign subsidiary has brought upon the host country in the form of capital, employment and technology. Lecture 6 Companies, especially multinationals, use the tool of branding in order to give their product and service a distinct and distinguished presence in the market. Unilever, Toyota, P&G and Coco-Cola are among the few biggest brands across the globe. When considering global branding, the companies usually make tradeoffs between being globally integrated and being locally responsiveness. An example of standardization of marketing would be Siemens international which has maintained consistent image all across the globe. In the value chain of any organization, marketing practices is the one that requires high level of local responsiveness. Marketing tactics of any organization needs to respond to the Political, Social, Economical and Technological aspects of a country. Social and cultural aspects create barriers to international marketing communication. In addition, the legal condition also plays a very important part in international marketing. In some countries the laws related to branding is poorly implemented which are not sufficient to protect them against other fake brands. Economic plays a significant part in selecting the most apt distribution channel for the product and services of the company. Strengthened political condition also assists the organizations in delivering their marketing message accurately. When considering the venture of promoting Distinto in London, consumes perception needs to be altered through brand awareness and brand image. In addition, consumer behavior is required to be noticed through provoking first trial developing loyalty. Market performance is measured in the terms of increase in sales or profits. Lecture 7 Research and development are considered quite critical for a firm’s success as in today’s world competition is often based on technological innovation and market leadership. Multinationals can be placed on the exploration and exploitation scales according to their operational strategies. Companies such as Google and Microsoft are inclined towards exploration whereas giant such as Coco Cola are using the existing technology and exploiting the current market potential. Global R&D can be divided into radical, incremental, fundamental and adaptive. Global production can be defined as when a company establishes manufacturing sites across the globe. There could be several motivations behind global production which could be cost driven, quality technological driven, market driven or client driven. In addition, when developing global production, the companies usually considers whether the operations would be centralized or de-centralized. Level of fixed cost, industry and value to weight ratio are few factors that requires consideration. A case study of Spanish retail clothing group Zara is presented which explains the integration of value chain activities. When considering the potential problems of Zara’s production model, factors such as high labor cost and fluctuation of Euro are considered. While evaluating the distribution tactics of the brand, role of technology, logistics efficiency and management of inventory is considered. Potential problems with the of Zara’s marketing model is the standardization of marketing, advertising and location of stores. Currently the problems faced by the today’s MNCs pertain to designs, production, logistics, integration of value chain and effective global coordination. Read More