Unit Title: International Business (Case Study) Unit Code: … · 2008-10-09 · • Seeing that in international business the firm is a value chain that can ... Porter’s generic

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Unit Title: International Business (Case Study) Unit Code: CSBP Level: Advanced Diploma in Business Management Learning Outcome: 1. Understand the key challenges facing international business and global

operators. (PART A) Indicative Content: To understand the nature of the issues and challenges facing organisations as a new world order is being created. • Recognise the fundamental shift taking place in the world economy. • Know the data concerning growth of world trade and the subsequent

increase in GDP per capita in modern times. • Demonstrate the inexorable move from a world of nation states to that

which Kenichi Ohmae refers to as a ‘borderless world’. • Understand that insulation within the confines of national boundaries is

counter productive, as are barriers to trade. • Distance, time zones, government regulations, etc. are increasingly

irrelevant. • Today’s world is one of an independent regional and global economic

system. • Candidates will be capable of debating the issues and challenges facing

business. • They will know about the opportunities created for business to extend their

reach, expand their revenues, drive down costs and accelerate profitability. • Candidates will be capable of explaining the advantages and benefits

conferred by the telecommunication revolution sweeping the business and consumer worlds.

• They will appreciate the changes in logistics, distribution and supply chain brought about through new IT developments.

• Understand the accelerated flows of foreign direct investment (FDI). • Comprehend the dislocation between production and consumption ending

the dependence on national coherence. • Follow the trends in the growth of economic and politic regions; EU,

NAFTA, ASEAN, MERCOSUR, ECOWAS, etc. • Plot the changing balance of world trade with the growth of China, India to

be followed by Brazil and others. Examiner’s Tips: The subject is very much in the news. All lecturers and candidates should read a good quality daily newspaper and leading political and business journals, all of which regularly carry articles relating to this lecture. Candidates should be encouraged to bring relevant articles to the classroom as a basis for debate and discussion.

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Unit Title: International Business (Case Study) Unit Code: CSBP Level: Advanced Diploma in Business Management Learning Outcome: 1. Understand the key challenges facing international business and global

operators. (PART B)

Indicative Content: 1.1 To understand what is meant by globalisation and its implications for

regions, countries, markets and customers. • Candidates will understand what is meant by globalisation and its

implications for regions, countries, markets and customers. • They will be capable of defining globalisation and see that it has two

main components, the globalisation of markets (customers) and the globalisation of production.

• They will describe and give examples of the globalisation of customer markets, Levi, Apple’s Ipod, McDonalds, Amex and a host of other examples. We have become global customers.

• They will realise that it may be no longer necessary to talk about the French market, the German market, the US market (depending on the level of globalisation achieved in the individual market).

• They will recognise that the means of production can take place virtually anywhere and that supply chains are increasingly global with companies assembling components from ‘best of breed’ suppliers. Production is increasingly global, channelled to deliver ‘best possible value’ to all markets served by the organisation.

• Candidates will be expected to be capable of debating the pros and cons of globalisation, i.e. prosperity and impoverishment, and present reasoned arguments.

1.2 To recognise the key drivers of globalisation and international trade together with the prevailing counter culture, i.e. IT developments (Internet, mobile phones), globalisation, multinationals, transnationals, urbanisation, global consumers. • Candidates will establish the two key drivers as liberalisation of trade

and investment together with the contribution of technological change. They will critically evaluate the role played by both.

• The role of WTO, World Bank, IMF and other facilitating organisations must be understood.

• The contribution of multinationals and transitional organisations. • The growing role of nation states and regions in developing and

challenging the pace of change. • The revolution in IT and its capabilities in terms of eliminating

distance, standardising business systems, creating a global audience for companies and consumers.

• Candidates must be capable of explaining the impact of microprocessors, telecommunications, transportation technology and the Internet on creating a seismic shift in production and consumption.

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Examiner’s Tips: As in lecture 1 candidates are expected to read widely and familiarise themselves with the current developments. They should create informal study groups to try and think what are the implications in terms of their own futures as international business managers.

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Unit Title: International Business (Case Study) Unit Code: CSBP Level: Advanced Diploma in Business Management Learning Outcome: 2. To develop a strategic business plan for an organisation. (PART A) Indicative Content: 2.1 Understand and explain the role of strategy in an international context.

• The role of strategy; defining that which is necessary to achieve the corporate objective(s) – to most business organisations the principal goal is to be highly profitable.

• Recognising that profitability comes from adding value and by lowering costs, i.e. differentiation or low cost strategy (or both).

• Seeing that in international business the firm is a value chain that can be leveraged to achieve either strategy. The value chain is a core teaching activity and must be understood and applied.

2.2 Understand the issues of strategic choice.

• To fully appreciate the five key strategic decisions: o Export strategy where production and marketing remain in the

domestic market. o International strategy, creating value by transferring skills and

production to overseas markets. o Multidomestic strategy, maximising local responsiveness. o Global strategy, utilising the experience curve effect and location

economies. o Transnational strategy, the aim of globalisation combining high

cost reduction pressures and high pressure for local responsiveness.

2.3 Be capable of reflection and identification of strategic outcomes based

on analysis, utilising the relevant academic and business models. • To understand the academic and business models used in the

development of strategy; Porter’s generic and five forces models, SBUs and the value chain.

• Candidates will need to analyse the case study examination data, applying the relevant models, and be capable of making recommendations supported by evidence with justification.

Examiner’s Tips: As in lecture 1 candidates are expected to read widely and familiarise themselves with the ABE website and read through the examiner’s interpretation of previous case studies. In the examination, candidates are nearly always asked to critically evaluate strategic performance and make some recommendations. So make sure that candidates are armed with the tools before the examination case study is published.

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Unit Title: International Business (Case Study) Unit Code: CSBP Level: Advanced Diploma in Business Management Learning Outcome: 2. To develop a strategic business plan for an organisation. (PART B) Indicative Content: 2.4 Formulate recommendations embracing domestic as well as

international strategies. • In a world of hyper competition successful international business

expansion is increasingly based on having a strong domestic base, a stronghold that provides the bulwark and the resources to attack a new market, e.g. Japanese expansion into the US market.

• The basis for the stronghold position should be chosen from: cost and quality, timing and knowledge, innovation, financial resources (examples should be developed for each).

2.5 Examine the contribution of academic thinking in determining the

direction of international development from portfolio analysis and entry strategies to mergers and acquisitions. • To understand the contribution of academic and business models and

their application to the creation and development of the business plan: Porter, Ansoff, BCG, GE Matrix and Shell directional. Additionally in the international context Harrell and Keifer (1993) Business Portfolio is particularly relevant.

• The models will form the basis of identifying and selecting the overseas market(s) to enter.

• Candidates must be capable of applying the chosen model(s) in analysing the case study.

• Candidates will be capable of identifying market opportunities at different stages of development, i.e. emerging through to post industrial.

• They will recognise the different stages of development which require different entry strategies.

• They will be familiar with the lead market concept. • They will know and be familiar with the full range of entry strategies

available; simple exporting through indirect and direct exporting leading on to overseas production and the establishment of overseas subsidiaries.

• Of particular importance is knowledge of joint ventures, strategic alliances, mergers and acquisitions.

• Additionally the increasing role played by technology in driving international business must be understood, i.e. the Internet, telecommunications and e-commerce across the supply chain.

• Candidates must be capable of justifying their market entry decisions.

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Examiner’s Tips: This lecture is of crucial importance and the examiner will seek evidence that candidates can use academic models in the development of strategy. Also selecting the appropriate entry choice is a critical business decision as it ties the company to a specific range of activities. Also test candidate’s knowledge and capabilities by creating scenarios, e.g. a washing machine company wishing to enter market x.

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Unit Title: International Business (Case Study) Unit Code: CSBP Level: Advanced Diploma in Business Management Learning Outcome: 3. Implementation of a strategic business plan. (PART A) Indicative Content: 3.1 Identify and explain the role and contribution of management in

international development (as distinct from the domestic arena). • Candidates will appreciate the capstone of the international expansion

in a business’s strategic plan. • They will understand that effective implementation requires reflection

on the best organisational set up and that organisational management issues are central to achieving implementation.

• Candidates will be capable of deciding which management structure is appropriate to the given situation.

• They will understand that the starting point should be a discussion between the merits and pitfalls of top down versus bottom up planning theory.

• They will recognise that competitive environment, rate of environmental change, impact of regionalisation and above all the nature of customers will all affect management judgement and operational structures.

• Candidates will know the four basic options: international division, product bases structure, geographic structure, matrix structure, and be fully aware of the strengths and weaknesses of each.

• Candidates must also be aware of the latest thinking that challenges the above four options: flexibility, responsiveness, global networking and the impact made by the IT revolution.

• They must be capable of selecting an appropriate management structure and defending their choices.

3.2 Explain the links between strategy and structure in international business development. • Candidates will be capable of showing how management structures

relate to the view of the firm as a value chain (ref. 2.1). • They need to understand that management structures need to build

around the value chain (and not the other way round). • They should understand that profiting from global expansion results

from: transferring core components (products, R&D, marketing, HR, logistics, etc.)

• They should also understand the significance of location economies, e.g. China, experience curve economies, local responsiveness, government influences, consumer preferences and the importance of creating a global web nowadays in establishing management structures.

• They should know the implications and be capable of making judgements that underpin recommendations.

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Examiner’s Tips: The case study frequently covers management structure and as such the examiner expects candidates to analyse and comment on it in regard to its impact on strategic performance. The ABE website relating to past papers will contain analysis and suggested solutions.

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Unit Title: International Business (Case Study) Unit Code: CSBP Level: Advanced Diploma in Business Management Learning Outcome: 3. Implementation of a strategic business plan. (PART B) Indicative Content: 3.3 Describe the strategic options and explain their importance in

implementing international operations, from exporting through to strategic alliances. • Strategic options depend on the degree of coordination required

between the operational subunits and how they relate to the value chain (ref. 3.2 and 2.1).

• Ability to implement control mechanisms is a major task of a firm’s leadership. Candidates should comment on the types of control systems: personal, bureaucratic, output and cultural control.

• They should relate control systems to performance ambiguities and reflect on the implications for control.

• Referring to 3.5, candidates will recognise that the choice of market entry strategy affects control systems and that each entry method will require a unique management system to implement it.

• The scale of entry brings with it a specific strategic commitment that has a long-term impact and can be difficult to reverse. The more deeply strategic the entry mode the greater the strategic involvement.

• Of particular importance today is the subject of strategic alliances driven by issues of globalisation (ref. 1.1 and 1.2).

• Candidates must appreciate the strategic issues, benefits and risks surrounding the creation of strategic alliances, partner choice and implementation.

3.4 Examine the issues surrounding international and global human resource management. • Candidates will have studied the four strategic options, international

multidomestic, global and transnational (ref. 2.2), but will need to reflect that each structure requires appropriate human resources without which it is simply a drawing on a page.

• Staffing policy underpins effective implementation. The four basic approaches are: ethnocentric, polycentric, regioncentric, geocentric. The advantages and disadvantages must be fully understood.

• Issues dealing with expatriate managers, training and development of ‘local’ managers, performance appraisal, and corporate acculturation are all important HR issues.

• International labour relations also play a significant part in effective implementation of the plan . Whilst it is not expected that candidates be ‘expert’ in the field they do need to be aware of concerns surrounding differing employment laws and cultures.

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3.5 Explain the role of financial management in international business, i.e. investment decisions, political and economic risk, transactional taxation and transfer policy. • Candidates are expected to be capable of analysing financial data

incorporated in the case study examination using knowledge acquired in other subjects studied at ABE, e.g. Corporate Finance.

• They will appreciate that different countries have their own accounting standards and therefore comparability of financial data may not be straightforward.

• They will appreciate the issues of foreign currency exchange and currency translation across boundaries.

• They will understand that FDI (foreign direct investment) decisions incur substantial risks and have implications in terms of capital budgeting and cash flows.

• They will recognise that political and economic risks rank topmost in many global CEOs mindset (we live in an unstable world).

• They will understand the issues of transfer pricing and the efficiencies attained by moving money across borders together with the corresponding difficulties.

Examiner’s Tips: Get candidates to cross-reference their knowledge from studying HR and any finance modules. Candidates could work in groups analysing the financial data in the case study with the strong supporting the weaker in the group.

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Unit Title: International Business (Case Study) Unit Code: CSBP Level: Advanced Diploma in Business Management Learning Outcome: 4. Be capable of evaluating and recommending organisational structures

outside the domestic situation. (PART A) Indicative Content: 4.1 Explain how cultural values play a major role in shaping customs and

practice in the organisation. • Candidates will recognise that international business is different

because countries are different and that success in a variety of countries requires cross-cultural literacy.

• They will also know that a relationship exists between cultures and the costs of doing business in a country.

• Initially candidates will revisit the organisational structures identified in 3.1 and 3.2.

• Then build on the definition(s) of culture ending with ‘the way we do things around here’ (Lewis). The work of Hofetede is also of real significance.

• Culture is underpinned by a set of values and norms that should be explained together with the relationship between culture, society and nation state.

• Terpstra and Sarathy’s model of the determinants of culture will be understood and counter pinned by examples, i.e. the components of culture being: social structures, religion, political philosophy, education and language (Hill).

4.2 Describe the body of knowledge on cultural diversity and explain its effect on organisational practices and customs. • Building on the knowledge of what is culture, candidates must be

capable of reflection on its impact in management. • Distributor and employee relationships plus, of course, customers. • Candidates will recognise cultural adaptation but also reflect on which

cultural components can be constant across borders and regions (business systems), e.g. the danger of ethnocentrism (ref. 3.4).

4.3 Identify and describe the various methods and approaches to international organisational structures and make recommendations relevant to the needs of the organisation and the environment. • This has been largely covered already (ref. 3.4) but candidates need

to be capable of demonstrating an understanding of the organisational structures and be capable of applying them to the situation in the case study.

Examiner’s Tips: Get candidates working on scenarios/case studies of which there are many in international text books, e.g. Disney goes to Paris (Hill). Examine previous ABE case studies on international business.

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Unit Title: International Business (Case Study) Unit Code: CSBP Level: Advanced Diploma in Business Management Learning Outcome: 4. Be capable of evaluating and recommending organisational structures

outside the domestic situation. (PART B)

Indicative Content: 4.4 Describe and explain the linkage between the corporate headquarters

and the regional and local subsidiaries. • First candidates need to revisit the organisational structures (ref. 3.1

and 3.2). • They need to appreciate the role played by corporate HQ in

establishing corporate objectives and strategies plus the development of the corporate business plan over the longer period.

• Candidates then need to make the linkages with ref. 3.4 in order to decide which of the four strategic options to follow (international – transnational).

• They then need to develop the appropriate staffing policy (ref. 3.4, ethno through to geocentric).

• The next stage is to recognise the cultural imperatives (ref. 4.1). • Having revisited the previous points candidates must understand that

the relationship between corporate HQ and the local unit is critical in creating the correct balance between freedoms of execution versus corporate control. Candidates will appreciate each solution has benefits and pitfalls.

• They should appreciate the need for coordination between the local units and within the overall strategy of the firm where coordination is lowest within an international strategy and greatest in a transnational one.

• They will need to know the impediments to coordination and understand that formal and informal mechanisms need to be established.

• Finally they should appreciate the need to develop an organisational culture that reflects the structure and the strategy and that this is difficult to achieve.

Examiner’s Tips: This lecture is in part a revision session covering key strategic decisions taken in building structures and strategy. Time can be taken to ensure that candidates fully understand units 3 and 4 so that they can make appropriate recommendations in the case study examination.

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Unit Title: International Business (Case Study) Unit Code: CSBP Level: Advanced Diploma in Business Management Learning Outcome:

5. Be capable of evaluating a vision, providing leadership for the organisation. (PART A )

Indicative Content: 5.1 Explain the issues underpinning motivational change and the creation of

readiness for this change. • Candidates will need to revisit the opening lecture dealing with an

understanding of the issues and challenges of the new world order being created.

• Change is not an option in today’s world, it is an imperative. • Leading change beginning with a vision and its communication is

increasingly important for developing international business. • Candidates will be able to recognise that a vision describes and

underpins the core values and purpose guiding the firm as well as creating an envisioned future towards which change is directed.

• They will understand that core values include a few basic principles or beliefs (three or four) that best represent what the organisation stands for, e.g. customer service (Nordstrom), wholesomeness and imagination (Disney).

• A core purpose is ‘the reason for being’, e.g. changing the way people work and play (Apple).

• They will appreciate that creating an envisioned future involves BHAGs (big hairy audacious goals), e.g. bold and valued outcomes.

• An envisaged future also involves painting a picture of what the organisation should look like.

• Implementing change involves the following: political support, identification of key stakeholders and influencing them.

5.2 Evaluate the strategic role of leadership in developing international expansion, particularly the creation of a vision and the communication of this to a diverse audience. • In today’s fast changing and increasingly international world change is

an important business dynamic but it must be led (ref. 1.1 and 1.2). • Candidates should appreciate that business leaders need a dual

strategy – to run their business efficiently yet at the same time change it.

• They need to have a firmer grip on IT which is now providing new ways to integrate supply and manufacturing distribution.

• They need to recognise that traditional boundaries between industries/product categories are disappearing fast, e.g. mobile phones are now cameras, computers, etc.

• Candidates of HR in the ABE syllabus will understand that the process of leadership involves: the development of newer, often flatter, matrix forms of organisation, a growing number of strategic alliances (ref. 2.5), also people’s changing expectations and values.

Examiner’s Tips: Candidates should refer to their study notes on the HR module.

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Unit Title: International Business (Case Study) Unit Code: CSBP Level: Advanced Diploma in Business Management Learning Outcome: 5. Be capable of evaluating a vision, providing leadership for the

organisation. (PART B )

Indicative Content: Explain the role played by planning in the shaping of the future direction for the organisation. • The importance of embracing and leading change was discussed in the

previous lecture (ref. 5.1 and 5.2). • Candidates have to learn that change requires planning – it has to be led

otherwise the result is chaos. • Candidates should be aware of the basic theories of change: Lewin’s

change model of unfreezing, moving and unfreezing; the action research model and its contemporary adaptations (HR candidates should be familiar with these).

• Candidates need to recognise the different types of planned change depending on the magnitude of the change and the degree of organisational involvement.

• In the international context change is even more complex as it crosses cultural boundaries (ref. 4.1, the work of Hofstede, Terpstra and Sarathy and Hill’s components of culture).

• Change comes in many forms and has to be managed with care and sensitivity, it is rarely successful when imposed in an ethnocentric manner. It has to be believed in and embraced.

• To reflect on the significance of team building as a change agent internationally and its contribution to sustaining momentum.

• Business is increasingly moving away from sole decision making to team building, group process approaches. This is not only true across business functions but is very much a component of international business development.

• Teams are created within a single business function to develop regional/ global solutions, e.g. global brand positioning, global systems and processing. A good example is that many global IT businesses have a regional structure, e.g. EMEA – Europe, Middle East and Africa.

• Candidates need to reflect that teams require leadership and management and that team managers need to have cultural awareness and they need to be trained to develop skills in the international context.

Examiner’s Tips: In making strategic recommendations candidates may well be asked to envisage the future for the company featured in the case study and the need for it to have a vision and to restructure. Planning for this may be part of an examination question.

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Unit Title: International Business (Case Study) Unit Code: CSBP Level: Advanced Diploma in Business Management Learning Outcome: 6. Evaluate the regulatory, ethical and social responsibilities of the

international firm. (PART A) Indicative Content: 6.1 Being aware that with the pull of globalisation comes the recognition that

companies operate within different political systems from collectivism, individualism and democracy to authoritarianism. • Candidates will know that globalisation does not mean a uniform

marketplace. • Every country has its individual political system that shapes the

economic and legal framework with which the global firm must comply.

• Political systems require sensitive relationships and management to be effective. Broadly speaking political systems can be assessed as having an emphasis towards collectivism versus individualism. Secondly they can be considered on a continuum ranging from democratic to totalitarian. Of course there are many grey areas. Managers need to recognise and understand which dimension(s) predominate and act accordingly in terms of foreign investment and degree of involvement.

6.2 Explain how countries are at different stages of economic development and that business solutions will reflect this. • Just as political systems differ among countries, many are at different

stages of economic development ranging from command economies at one extreme through to market driven ones. In lecture 1 candidates will appreciate the diversity of economic development and recognise that in international business ‘one size does fit all’, e.g. the structural difficulties within the European Union and even greater differences between countries in other regions of the globe. Business solutions must be adjusted and tailored to meet specific needs and circumstances.

6.3 Explain the growing role and significance of ethical responsibility. • This is of growing importance in domestic and international markets.

Candidates must appreciate that international management will understand the following: o Accept responsibility for the consequence of decision making. o Recognise the limits of competence, culture and experience in

providing products and services. o Serve the short- and long-term welfare of all stakeholders. o Avoid conflicts of interest and be clear in terms of setting goals.

Examiner’s Tips: Every quality newspaper has articles almost daily covering these topics. Prepare a file, ask candidates to contribute to a debate on any of these issues. You will be sure they will have opinions. Read some of the texts in the field of ethics, e.g. No Logo by Naomi Klein.

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Unit Title: International Business (Case Study) Unit Code: CSBP Level: Advanced Diploma in Business Management Learning Outcome: 6. Evaluate the regulatory, ethical and social responsibilities of the

international firm. (PART B) Indicative Content: 6.4 Examine the growing importance of corporate social responsibility (CSR)

and the impact of consumer movements so that the organisation strikes the appropriate balance in its international development. • CSR is part of having an ethical responsibility and this lecture can be

considered a continuum of the previous one. • CSR involving taking a view that the firm has to create a new

corporate culture and foster employee loyalty if it to be considered a global corporation.

• Stakeholders from governments down to individual customers regard corporations in terms of trust values, attitude to the environment, human rights and dignity, transparency and accountability and governance. Firms not complying positively will find themselves discriminated against.

• Candidates will be able to form judgements and carry them into the decision making process during the case study examination.

6.5 Describe the legal systems in terms of protection of employment, property rights and intellectual capital together with product safety and product liability. • This is a sub-set of CSR. Global communications driven by IT mean

information travels spontaneously around the world. An indiscretion or a decision taking place in country A can be global news at the push of a button.

• Organisations are now accountable to an international stakeholder’s base or all their actions across the range of business functions.

Examiner’s Tips: Companies are increasingly transparent and public in their business activities. Check some corporate website, e.g. McDonalds, Microsoft, Wal-Mart – three organisations that have received negative publicity in recent times. Consider these responses. Again read the quality press and see how the emergence of consumer movements, such as Greenpeace, is shaping popular opinion. FINAL COMMENT: This series of lectures (12) is meant as guidance to tutors in leading up to candidates taking the case study examination. The examination will consist of three compulsory questions. The answers will inevitably require candidates to apply the learning material from the lectures and will involve candidates combining learning outcomes and particularly indicative content from a number of lecture topics to satisfy the examiner. As such, tutors should cross-reference their teaching material.