Themes and Resources for Teaching International Business S. Tamer Cavusgil University Distinguished Faculty John W. Byington Endowed Chair in Global Marketing Michigan State University 7th Biennial International Business Institute for Community College Faculty East Lansing, Michigan, May 2007
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Themes And Resources For Teaching International Business Tamer Cavusgil
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Themes and Resources for Teaching International
Business
S. Tamer CavusgilUniversity Distinguished Faculty
John W. Byington Endowed Chair in Global Marketing
Michigan State University 7th Biennial International Business Institute for
Community College FacultyEast Lansing, Michigan, May 2007
The Agenda
• Globalization and its implications• Key Trends in Global Business• Implications for Management• Learning resources• Teaching tips and classroom exercises• Course design• Helpful publications
Themes for Teaching IB
Offshoring
Culture
Globalization
Technology
Diverse Participants
Smaller Firms in IB
EmergingMarkets
Strategy
International Entrepreneurship
Collaborative Ventures
ServiceSector
Industry
What is Globalization?
At the macro level…
•Greater integration and interdependency of national economies
•Freer movement of goods, services, capital, and knowledge
•Prevalence of regional trading blocs
•Emergence of monetary unions
•Convergence of customer lifestyles, requirements, etc.
What is Globalization?
For business enterprises…
•Foreign market entry and expansion
•Selective externalization of value chain
•Collaborative ventures with foreign partners
• Integration of operations on a global scale
•Building global capabilities and a global organization
The Many Dimensions of Globalization
1. Value-adding activities2. Companies – The business enterprise3. Products and brands4. Economic assets5. Business risks6. Industries7. Countries, markets8. Regulations, laws, standards9. Cultural values, mindsets, consumer
behavior10.Business practices
Phases of Globalization1st Phase: 1830, peaking around 1880
Aided by railroads, ocean transport, rise of manufacturing and trading companies
2nd Phase: 1900, peaking around 1920s
Fueled by electricity and steel
3rd Phase: 1948, peaking around 1970
GATT, end of WW II, Marshall Plan…
4th Phase: 1980, peaking around 1997
Tech. advances, Internet, Emerging Markets…
Globalization Trends
1. Global economic realignment2. Geography made redundant by
technological connectivity3. Consolidation of industries on a
worldwide scale4. Strains on natural resources and
the environment5. Remarkable growth and potential
of Emerging Markets…
Emerging Market Dynamics
• Source of customers, suppliers, ideas, and human capital.
• One billion new consumers will enter the global markets in the next decade!
• Household income will reach threshold level of $5,000 in EMs.
• Consumer spending will increase from $4 trillion to more than $9 trillion by 2015, nearly matching Western Europe.
Attractions and Challenges of EMs
• Dynamic, rapidly transforming• Low competitive intensity• Dominated by family conglomerates• Political instability• Bureaucracy, redtape, lack of
transparency• Legal, institutional vacuum• Safeguarding intellectual property• Cultural distance…
The Aspiring Consumer in EMs
• Young demographics• Rapidly urbanizing• Middle class coming into its own• Engaged in technological leapfrogging• Exposed to Western brands• Rising expectations• Eager to consume material things • Highly brand conscious
CountryRank in MSU-
CIBER’s EMPI
Middle-class
population (millions)
% of Income held by
middle class
GDP per capita
( PPP, US $ )
China 1 587 45 6,800
India 8 534 49 3,300
Indonesia 20 105 48 3,600
Russia 12 67 47 11,100
Brazil 22 65 35 8,400
Mexico 13 42 41 10,000
Turkey 10 32 45 8,200
Thailand 14 28 45 8,300
South Korea
5 26 55 20,400
Why GDP Per Capita is a Poor Indicator
of Market Potential for EMs?1. Need to adjust for Purchasing Power Parity 2. Informal economy is often as large as the
formal economy in developing countries3. The “mean” is a poor indicator since income
distribution is typically bi-modal in EMs4. Household income several times larger than
per capita income because of multiple wage earners
5. Developing country statistics may be unreliable
6. Typical exporter is more interested in a large enough “market niche” than huge potential
Implications for Management
1. Building interconnectedness: ‘global orchestration’ of value-chain activities
2. Exploiting knowledge3. Search for maximum flexibility in
manufacturing, sourcing and other value-adding activities
4. Relentless search for productivity gains and operational efficiency
5. Recognizing, cultivating, and measuring key global strategic assets of the organization
6. Gaining and sharpening partnering capabilities…
Research & Development
Product Design
Manufacturing
Marketing
Distribution
Sales & Service
Stage in Value Chain
Strategic alliancesLicensing/cross licensing
Design contracting
Global procurementContract manufacturingEquity joint ventures (FDI)Agency agreementsLicensing
Exporting to distributors/ agentsFranchising
Exporting to end-usersBusiness format franchising
Agency/representative relationships
Types of Collaboration Company Examples
Telecoms, computers, drugs,aircraft, satellite communication systems… Dow, Pharmacia-Upjohn
Software, autos,fashion goods, shoes,furniture…
Automotive
Gerber (Novartis)
IKEA, Guardian Industries
Kmart, Manpower, Banks,Courier Services, Amway
2. Companies-The Business Enterprise
Diagnostic tools from MSU CIBER: CORE, Distributor, Partner, Freight forwarder
Business Week’s Global 1000; Fortune’s Global 500
Fortune Global Most Admired Companies
Financial Times World’s Most Respected Companies
UNCTAD World’s Largest Transnational Corporations
National orMulti-localCompanies
Global orTransnationalCompanies
Nestle, Unilever,Asea Brown Boveri, Sony, Coca-Cola
• Strong national identity
• National endowments: talent pool, skills, capabilities
• Unique corporate governance/ownership patterns
• National regulations on employment
• National patterns of investment in R & D
• Planning and resource allocation
• Dependence on global markets
• Worldwide manufacturing capability
• Standardized products
• Globally integrated strategy
• Centralized structure and decision-making
• Uniform operational policies and routines
• Global organization and culture
3. Products and Brands
Business Week – Interbrand’s Global Brands Scoreboard: World’s Top 100 Global Brands
2003 Global Brands Scoreboard
4. Economic Assets
Flows of capital (investment, debt, portfolio investment, etc.), technology, know-how, human resources, etc.
Delphion (patents), U.S. Patent Office
5. Business Risk
Economist’s Big Mac Index
The concept of Purchasing Power Parity, the notion that a dollar should buy the same bundle of goods in all countries, is explained. Comparing actual exchange rates with PPP indicates whether a currency is under- or overvalued.
MSU-CIBER’s Market Potential Indicators for Emerging Markets
Four Types of Risks
Commercial Risk
Types of Risksin International
Business
Country (Political and Legal) Risk
Cross-Cultural Risk
Weak Partner Operational Problems Timing of entry Competitive intensity Poor execution of strategy
Currency exposure Asset valuation Foreign taxation Inflationary and transfer
pricing Global sourcing
Social/political unrest and instability Economic mismanagement; inflation Distribution of income; size of middle class Government intervention, bureaucracy, red tape Market access; barriers; profit repatriation Legal safeguards for intellectual property right
Cultural distance Negotiation patterns Decision-making styles Ethical practices
Currency/Financial Risk
6. Industries
Stat-USA (NTDB)
Hoover’s Industry Snapshots
U.S. Commercial Service
Market and Country Research
•International Marketing Insight (IMI) Reports
•Multilateral Development Bank (MDB)
•Industry Sector Analysis Reports
•Best Market Reports
•Global Agriculture Information Network (GAIN) AgWorld Attaché reports
•Country Commercial Guides
Aircraft (Civil)Computers
Credit CardsAutomobiles
Soft Drinks
Specialty Chemicals
Pharmaceuticals (Ethical)
Toothpaste
Electric InsulationCommercial Banking
Pharmaceuticals (OTC)
Book Publishing
Low HighStrength of Competitive
Globalization Drivers
7. Countries, Markets
IMD World Competitiveness Scoreboard
World Economic Forum Global Competitiveness Report
A.T. Kearney/Foreign Policy Globalization Index
Heritage Foundation and WSJ Index of Economic Freedom
Blah
The World Competitiveness Scoreboard 2005
Source: IMD World Competitiveness Yearbook 2004
• Economic freedom explains from 54 to 74 percent of the variation in income among countries.
• A 10% increase in economic freedom in a country can produce an increase in GNP per capita of 7.4% to 13.6%.
CONCLUSION:
The message is clear: enhancing economic freedom
can lead to significant improvements in living
standards.
Economic Freedom and Wealth
8. Regulations, Laws, Standards
Harmonization is a slow process when it comes to these…
...and one good news; even in America there is corruption...
Laxman, Times of India, July 23, 2002
The 2003 Corruption Perceptions Index for Major Emerging Markets
Country rank Country
CPI 2003 score
Surveys used
Standard deviation
High-low range
5 Singapore 9.4 12 0.1 9.2 - 9.5
14 Hong Kong 8 11 1.1 5.6 - 9.3
20 Chile 7.4 12 0.9 5.6 - 8.8
21 Israel 7 10 1.2 4.7 - 8.1
37 Malaysia 5.2 13 1.1 3.6 - 8.0
40 Hungary 4.8 13 0.6 4.0 - 5.6
48 South Africa 4.4 12 0.6 3.6 - 5.5
50 South Korea 4.3 12 1 2.0 - 5.6
54 Czech Republic 3.9 12 0.9 2.6 - 5.6
Colombia 3.7 11 0.5 2.7 - 4.4
Peru 3.7 9 0.6 2.7 - 4.9
Mexico 3.6 12 0.6 2.4 - 4.9
Poland 3.6 14 1.1 2.4 - 5.6
66 China 3.4 13 1 2.0 - 5.5
Egypt 3.3 9 1.3 1.8 - 5.3
Egypt 3.3 9 1.3 1.8 - 5.3
Thailand 3.3 13 0.9 1.4 - 4.4
77 Turkey 3.1 14 0.9 1.8 - 5.4
83 India 2.8 14 0.4 2.1 - 3.6
86 Russia 2.7 16 0.8 1.4 - 4.9
92 Argentina 2.5 12 0.5 1.6 - 3.2
92 Philippines 2.5 12 0.5 1.6 - 3.6
100 Venezuela 2.4 12 0.5 1.4 - 3.1
122 Indonesia 1.9 13 0.5 0.7 - 2.9
70
64
59
A
Economist Intelligence Unit e-readiness rankings, 2003
2003 e-readiness ranking (of 60)
2002 ranking Country 2003 e-readiness
score (of 10) 2002 score
1 4 (tie) Sweden 8.67 8.32
2 7 Denmark 8.45 8.29
3 (tie) 2 Netherlands 8.43 8.40
3 (tie) 1 US 8.43 8.41
3 (tie) 3 UK 8.43 8.38
6 10 Finland 8.38 8.18
7 11 (tie) Norway 8.28 8.17
8 4 (tie) Switzerland 8.26 8.32
9 6 Australia 8.25 8.30
10 (tie) 9 Canada 8.20 8.23
10 (tie) 14 Hong Kong 8.20 8.13
Is Globalization a Good Thing?The Critics
• Benefits of globalization are not evenly distributed
• Globalization causes dislocation of jobs
• Wages for unskilled labor are declining
• Manufacturing moves offshore to avoid workplace safety and health regulations
• MNCs fail to protect the environment
• Power shifts to multinational corporations and supranational organizations; nations loose sovereignty
• Concentration of power by multinational corporations leads to monopoly
• International financial markets are inherently unstable
• Globalization results in loss of national cultural values and identity
Is Globalization a Good Thing?The Critics (cont.)
•Cultural empathy / Open-mindedness•Tolerance for ambiguity•Perceptiveness•Premium on personal relationships. •Flexibility/Adaptability/Self reliance •A good sense of humor•Warmth in human relationships•Curiosity
Skills for Global Manager
Learning Resources • The World is Flat: A Brief History of the
Twenty-First Century by Thomas L. Friedman, New York: Farrar, Straus and Giroux, 2005.
• The Next Global Stage: Challenges and Opportunities in Our Borderless World by Kenichi Ohmae, Pearson Education, Inc./ Wharton School Publishing, 2005.
• Tectonic Shift: The Geoeconomic Realignment of Globalizing Markets by Jagdish N Sheth and Rajendra Sisodia, New Delhi: Response Books
• The Culture Code: An Ingenious Way to Understand Why People around the World Live and Buy As They Do by Clotaire Rapaille, Broadway Books, 2006.
Learning Resources 2 – One Billion Customers: Lessons from the
Frontlines of Doing Business in China by James McGregor, A Wall Street Journal Book published by Free Press, 2005.
– The Asian Mystique: Dragon Ladies, Geisha Girls, and our Fantasies of the Exotic Orient by Sheridan Prasso, Public Affairs, 2005.
– China Shakes the World: The Rise of a Hungry Nation by James Hynge, forthcoming.
– Doing Business in Emerging Markets, S.T. Cavusgil, P. Ghauri & M. Agarwal, Thousand Oaks, CA: Sage Publications, Inc., 2002.
Knowledge Portals•
• IB course modules at globalEDGE: globaledge.msu.edu/academy/courses.asp
• Diagnostic Tools available from MSU CIBER:globaledge.msu.edu/DiagTools/
• CIBER Web: ciberweb.msu.edu/• CKR Educators Consortium and Portal• Academy of International Business:
CIBERs • Globalization Seminars sponsored by several CIBERs
and held at the University of Memphis: www.people.memphis.edu/~wangctr/Pages/Globalization_Seminars.htm
• Indiana University CIBER’s Pedagogy for International Business Workshop: www.kelley.iu.edu/ciber/eventitem.cfm?ID=102
• MSU CIBER’s International Business Institute for Community College Faculty, offered every other year at MSU: ciberweb.msu.edu/activitydetail.asp?ViewID=1&SectionRecordID=552
• Other CIBER programs: ciberweb.msu.edu/facultydev/
• Market entry, expansion, segmentation
• Standardization /adaptation
• Global brand success
• Joint ventures/alliances/partnerships
• Product liability laws; retail regulations
• Global supply chain management
• Emerging Markets; Family Conglomerates
• Offshoring
Themes for General Business
• Comparative advantage; gains from trade
• Drivers of globalization
• Purchasing Power Parity
• Global Competitiveness Index
• Index of Economic Freedom
• Culture and IB
• International entrepreneurship
• Attitudes toward work and leisure
• Unionization; collective bargaining
Globalization Themes for Economics
• The Iceberg Principle of Culture
• Cultural stereotypes, idioms, metaphors
• Cultural Dimensions (High Context; Collectivism, Power distance, Uncertainty avoidance, Masculinity)
• Language as the expression of culture
• Self Reference Criterion
• Critical incidence analysis
• Negotiation patterns
Themes for Culture
• Exchange rates and trade
• Currency risk; Euro in the E.U.
• Harmonized accounting practices
• Transfer pricing; Taxation of foreign income
• Foreign Corrupt Practices Act
• Operating in: High-inflation countries; Free Trade Areas
• Listing in foreign stock markets
Themes for Accounting
• Internet and Information Technology as a driver of globalization
• eBusiness /On-line strategies
• Virtual interconnectedness in the multinational corporation
• Globalization of IT sector; India’s advantage in this area
• Globalization of related industries such as office furniture industry (Steelcase, Herman Miller, etc.)
Themes for Information Systems / Technology
Helpful Publications on Pedagogy
• Robert Boice, Advice for New Faculty Members: Nihil Nimus, 2000, Allyn and Bacon: Needham Heights, MA.
• Ilan Alon and Nancy Cannon, “Internet-Based Experiential Learning in International Marketing: The Case of Globalview.org,” Online Information Review, Vol. 24, No. 5 (2000), 349-356.
• R. F. Scherer, S. T. Beaton, M.F. Ainina and J. F. Meyer (eds.), A Field Guide to Internationalizing Business Education, Second Edition, 2003, Lakeshore Communications: Euclid, Ohio.
• Case collections from business schools at Western Ontario, IMD, Harvard, Virginia, etc.
• Internationalizing Business Education: Toward Meeting the Challenge, (Cavusgil), East Lansing, Michigan, MSU Press, 1993.
• Internationalizing Business Education: Toward Meeting the Challenge, (Cavusgil), East Lansing, Michigan, MSU Press, 1993.
• “Expanding Horizons with E-Learning” in A Field Guide to Internationalizing Business Education, R. F. Scherer, S. T. Beaton, M.F. Ainina and J. F. Meyer (eds.), Second Edition, 2003, 183-194, Cavusgil, I. Kiyak and T. Kiyak.
• Study Abroad Programs in Business Schools, Issues and Recommendations by Leading Educators, East Lansing, MI, MSU Press, 2002.
Publications on Internationalizing Business Education