An Introduction to Global and Transnational Business Chapter 1

Objectives Define key terms in study of international business Describe changes in international business in late 20th and early 21st century Explain the causes, nature & problems of globalisation Discuss key issues in global and transnational business management Discuss ‘big controversies’ in strategic management in relation to global business Explain the management processes involved in successful global and transnational business management

The trend towards globalisation World business is not simply becoming more international – it is becoming global Internationalization: the trend for increasing trade across national boundaries and conduct of business activities in more than one country Globalization: the trend towards global markets, production, competition and growing interdependence between national economies

Key terms in global business (1) International business operation in more than one country trading across their national boundaries Multinational business conducting international business operating in several countries decentralisation of strategy and management decision-making to overseas subsidiaries little co-ordination of activities and subsidiaries across national boundaries strategies largely determined by local conditions

Key terms in global business (2) conduct of business activities across the world single global strategy - highly co-ordinated & integrated centralised decision- making Transnational business varying degrees of co-ordination & integration strategy and operations both global and locally differentiated depending upon business conditions centralised and decentralised decision-making

Globalisation - definitions Global economy - national economies are increasingly inter-related Global markets global customer wants global products and services Globally connected markets Global industries global location of activities global co-ordination of activities global competition

Globalisation - definitions Global enterprises global strategies global products global activities Not all global enterprises operate in global markets or industries e.g.. IKEA Most seemingly global markets and industries have a mix of global and local characteristics

Causes of globalization Manufacturing technology mass production Transportation technology movement of people, materials & finished products quickly & cheaply Information & communications technology globalisation of markets & global co-ordination of activities Trade liberalisation GATT & WTO reduce tariff & other trade barriers between countries Rising incomes vastly increased demand for products and services worldwide

Global issues These issues are discussed in detail in the book Blessing or curse? increased living standards vs. exploitation increased choice vs. cultural convergence Business strategy integrated vs. differentiated business strategy concentrated vs. dispersed activities

Transnational strategy combines global configuration and co-ordination of business activities with local responsiveness global core competence - access to global markets extensive participation in major world markets differentiated structure and organisation Total global strategy (Yip, 1992) - is “more or less global in its different elements."

Issues in Transnational strategy and management Transnational strategy - organisational learning, knowledge & competence building Cultural factors Market servicing - entry strategies Transnational Leadership and Management HR management Financial management Technology management Production and logistics Marketing management Mergers and alliances

Approaches to strategy The prescriptive approach (also called the deliberate or planned approach) The emergent (or learning) approach The competitive positioning approach - ‘outside-in’ (Porter) The resource and core competence approach - ‘inside-out’ (Prahalad & Hamel)

Assumptions underlying transnational strategy Strategy is inevitably planned & emergent Competitive advantage results from: internal competences & from changing conditions in the business environment competitive & collaborative behaviour knowledge and organisational learning ‘learning’ organisations Analysis must distinguish between global industries & markets

Developing transnational strategy Global mission and objectives Analysis of global resources, competences and value adding activities Analysis of the global business environment Developing transnational knowledge, competences and strategies Implementing strategy and managing transnational operations Continuous organisational learning