International Business

28 August 2019

Toshiya Ozaki
Rikkyo University
 Index
1. Before we start
• Who is teaching?
• What do we study?
• Why do we study?
• How do we study?

2. Introduction to IB
• Globalization of Business
• Firms and IB

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BEFORE WE START

3
 Who is teaching?

Toshiya Ozaki, PhD

College of Business, Rikkyo University 4
 Objectives
1. Develop knowledge of global business and management
2. Understand the significance of national differences for
customer values, markets and organizations
3. Analyze issues and challenges of globalization of firms &
develop strategic plans for them
4. Understand the importance of social responsibility and
managerial ethics unique to global business
5. Identify the key competencies needed to be an effective
manager for global business
6. Demonstrate critical thinking when presented with
managerial problems
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 What do we study?
• What is IB?
– Is IB different from Int’l Econ, Int’l Trade, Int’l Mgt?
– Need to understand more than just business….
• Why important?
– Opportunities – Markets, Suppliers (Sourcing), Capitals
(Financing), Partners, Facilitators, Technologies, People
– Challenges – Rivals, Formal & Informal National
Differences, Managing People & Organizations across
Different Countries and Cultures
• Important for whom?
– National Government & National Economy, Cities and
Regional Governments, Industries, Firms, Employees,
Citizens and Public
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 How do we study?
– Lecture
• Based on the assigned reading materials
• Covering beyond the reading materials
– Case study
• Opportunity to apply the lecture content to the real
world cases, discuss topics and issues with your
friends, learn from each other, present your
understanding, and strengthen it
– Examination
• Opportunity to wrap up & demonstrate understanding

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 How do we study?
– Resources
• Reading materials available online
• Additional resources over the Internet including:
– Reading Assignments (8) and (9)
– https://aib.msu.edu/resources/globaledge.asp
– Grading
• Participation 10%, Case Presentation: 20%
• Midterm Exam 35%, Final Exam 35%

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 Textbook:
1. Peter Zámborský, International Business
and Global Strategy (Bookboon.com, 2016).
http://bookboon.com/en/international-business-and-global-strategy-ebook

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 Specific Subjects:
2. Pankaj Ghemawat and Thomas M. Hout, Differences in Business
Ownership and Governance around the World (2011).
3. Pankaj Ghemawat, The Globalization of Firms (2011).
4. ____, The Globalization of Markets (2011).
5. Pankaj Ghemawat and Sebastian Reiche, National Cultural Differences and
Multinationals Business (2011).
6. PWC, The World in 2050 – Summary Report (February 2017).
7. Swiss National Centre of Competence in Research, Theory of Comparative
Advantage: Some Examples.
8. United Nations Conference on Trade and Development (UNCTAD),
Investment Trends Monitor, Issue 28 (January 2018).
9. World Trade Organization (WTO), Trade Statistics And Outlook: Trade
Recovery Expected in 2017 and 2018 amid Policy Uncertainty, Press
Release 793 (12 April 2017).

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 Cases:
10. Amit Rangnekar, McDonald's India Entry Strategy (May
2014).
11. Anju Mathew, Grete Rød, Jaime Villalobos, David Yates,
Digital Divide Data, MIT Sloan Management Case, 09-095
(September 15, 2009).
12. Rebecca Henderson, Richard M. Locke, Christopher Lyddy,
Cate Reavis, Nike Considered: Getting Traction on
Sustainability, MIT Sloan Management Case, 08-077
(January 21, 2009).
13. Sameer Sabir, Tania Aidrus, Sarah Bird, Pakistan: A Story of
Technology, Entrepreneurs and Global Networks, MIT Sloan
Management Case, 10-082 (February 17, 2010).

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 News Articles:
14. Daniel Gross, “Don’t Believe the Globaloney,” Strategy and
Business (June 7, 2016).

15. Daniel Gross, “You May Be Part of a Global Supply Chain,”

Strategy and Business (February 14, 2017).

16. Kenichi Ohmae, “Where Will Japanese Companies Go in a

Post-Brexit World?” Strategy and Business (November 16,
2016).

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 Schedule v.2 National
Characteristics

28 Aug Intro to IB #6 9 Sep Nat’l Difference #1: 6 - 8

- Globalization #1: 1/2/5 - Political/Legal #2
- Firms & IB (#10) - Economic #16
30 Aug Trade & FDI #1: 3/4 11 Sep Cultural Diff #5
#4 Case: McDonald #10
4 Sep Trade Theory #7 13 Sep Global Strategy #1: 11 – 14
Case: DDD #11 - Foundation
6 Sep Money 16 Sep Global Strategy #4
- Foreign Exch #1: 9/10 - Perspectives #1: 15 – 17
- Global Fin Case: Nike #12
Institutions Tbc Final Exam
9 Sep Mid-term
Strategy as
Firm Response
Framework for
Globalization 13
 Ideas behind Schedule
Framework for
Globalization

National
Characteristics

Strategy as
Firm Response

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GLOBALIZATION OF
BUSINESS
15
Globalization
(PWC)

16
Globalization (PWC)
• GDP at PPP??

• Moving up 12 places
– What does it mean?
– How significant?
– Who benefits?
– Why happens?
– Why in Vietnam?
– Sustainable?

17
 Globalization? (Ghemawat)
– End of the national borders?
– Liberalization, westernization,
homogenization, economic growth and
decline, equality and inequality
– Reality?
• Semi-globalized world
• Trade of products and services
• FDI (Foreign Direct Investment)
• People
• Information and Technology
18
 GDP at PPP??
• GDP:
– Nominal GDP, Real GDP, GDP at PPP
• GDP Per Capita:
– Nominal GDP Per Capita, GDP Per Capita at
PPP
• GDP growth rate
– Nominal GDP Growth Rate, Real GDP
Growth Rate, GDP Growth Rate at PPP

19
 How do we measure
a National Economy?
• Short-term: measuring the value of national
economic activity
– Gross National Product (GNP) (in USD, VND, JPY)
• aggregate market value of final products produced
by citizens of a country (both on and offshore)
– ex: Vingroup predecessor (Technokom) in Ukraine

– Gross Domestic Product (GDP) (in USD, VND, JPY)

• aggregate market value of final products produced
within a national border (both by citizens &
foreigners)
– ex: Honda Viet Nam
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 How do we measure
a National Economy?
• Short-term (more): measuring the value of
economic activity per person
– GNP (or GDP) per capita (in USD, VND, JPY)
• Nominal / Real / PPP (purchasing power parity)

• Long-term: measuring the change in the

value of economic activitiy
– Annual Average Growth (in %) in GDP (or GDP)

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 Why Important?
• Size of output market ⇒ Short-term Business
Opportunity
– Population
– Spending Power (Purchasing Power) Per Person
– Total Spending Power of a National Economy

• Growth Potentials of output market ⇒ Long-term

Business Opportunity
– Growth of National Economy
– Development of Economic Capacity (esp. Technology)
– Demographic Change
– Discovery of Natural Resources
– Stability by Political, Economic and Legal Systems
– More… 24
 Why Vietnam Grows Fast?
Will It Grow Forever??
– Old understanding: Self-sustained Growth
• Industrialize All: Develop home-grown companies
• Mercantilism: Export More, Import Less
• Less Trade: Depend Less on Foreign Firms

– New understanding: Globalization

• Industrialize Strategically: Develop select-few
industries, grow them as global players
• Global Value Chain: Export More, Import More,
Integrate Them
• More Trade, More Investment (FDI): Interdependence
25
 Underlying Factors of
New Understanding
– New understanding of “market” and “innovation”
at a national level
• Government – public policy on market, hard (road, port,
telecom, etc.) and soft (education, etc.) infrastructure
• Firms – specialization, investment in people and
technologies

– Framework for Freer Trade and Finance

– Technological Innovation
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 Long-term perspective

Growth & Development

Efficient Division of Labor

under Competitive Market

Innovation (Improvement) in
Production (creation of value)
Under Competitive Market

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 Long-term perspective

Growth & Development

Division of Labor Efficient & Competitive

& Innovation Market
Economic System
+ New ProductsInfrastructure + Market Economy
+ New Processes(education, Legal System
+ New Organizations
utility, etc) + Property Rights
+ New Mgt Practices + Transparent Rules
+ New Strategies + Enforcement

Informal Political System

New Technologies 28
System
 Long-term perspective

Growth & Development

Innovation Unstable & Inefficient Market

Economic System
- Weak Market Economy
+ New Products
Infrastructure
+ New Processes
(education, Legal System
+ New Organizations
utility, etc) - Weak Property Rights
+ New Mgt Practices - Weak Rules
+ New Strategies - Weak Enforcement

Informal Political System

New Technologies - Unstable/Weak 29
System
- Less Predictable
 New Development
• Specialization at Global Level
– Firms competing globally for competitive
specialization

• Development of Global Value Chain

– Focal firm
– Distribution channel intermediary
– Facilitator

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Dell’s Global Value Chain

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 Trading Partners
Volume (size) & Pattern (X/M)

32
 Trading Partners
Volume (size) & Pattern (X/M)

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FIRMS AND
INTERNATIONAL BUSINESS
34
1. Why going abroad?

35
 As an individual traveler…
– Architecture
– Culture
– Friend
– Food
– History
– Nature
– Scenery
– Wow experiences…

36
 As a firm…
– Access to Output market
• to serve new customers

– Access to Input market

• to manufacture at a lower cost

– Everything In-between
• to manage the organization globally (multinational
management), such as taking advantage of the
economy of scale, lower tax rate, advanced skills
and technologies, etc. 37
Firm’s Global Value Chain

38
 Value Chain of the Firm (Porter, 1980)
and Markets

Headquarters
（Plans & Control, Personnel, Legal, PR, etc）

After-
Sales &
Sourcing Manufacturing market
Mktg Services

R&D
Input market Output market
(parts & components, Product (products & services)
people, capital, etc.) Planning 39
In-between (Managing Org)
Case Study: Apple’s i-Phone

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Selling a US smartphone around the world
= accessing to foreign “output market”

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http://hypervocal.com/culture/2012/15-coolest-apple-stores-from-around-the-world/
 Factors behind firm answers:
Value Chain of the Firm

Headquarters
（Plans & Control, Personnel, Legal, PR, etc）

After-
Sales &
Sourcing Manufacturing market
Mktg Services

R&D
Input market Output market
(parts & components, Product (products & services)
people, capital, etc.) Planning 42
In-between (Mgt Org)
Producing a US smartphone in China
= accessing to foreign “input market”

43
http://content.time.com/time/covers/asia/0,16641,20120702,00.html
 Factors behind firm answers:
Value Chain of the Firm

Headquarters
（Plans & Control, Personnel, Legal, PR, etc）

After-
Sales &
Sourcing Manufacturing market
Mktg Services

R&D
Input market Output market
(parts & components, Product (products & services)
people, capital, etc.) Planning 44
In-between (Mgt Org)
 Apple’s mysterious global headquarters
(amid horses and cows)
everything in-between (aka multinational mgt)

45
http://fortune.com/2013/11/01/on-site-at-apples-famous-irish-headquarters/
 Factors behind firm answers:
Value Chain of the Firm

Headquarters
（Plans & Control, Personnel, Legal, PR, etc）

After-
Sales &
Sourcing Manufacturing market
Mktg Services

R&D
Input market Output market
(parts & components, Product (products & services)
people, capital, etc.) Planning 46
In-between (multinational management)
Who “can” go abroad?

47
 As an individual traveler…
– Architecture
– Culture
– Friend Motivation
Interests
– Food
– History
– Nature Resources
Capabilities
– Scenery
– Wow experiences…
Travel &
Enjoy!

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 As a firm…
Motivation
– Access to Output market Interests

• to serve new customers

Resources
Capabilities
– Access to Input market
• to manufacture at a lower cost Compete &
Succeed
Globally!

– Everything In-between
• to manage the organization globally (multinational
management), such as taking advantage of the
economy of scale, lower tax rate, advanced skills
and technologies, etc. 49
– Motivations and Interests
• Opportunities in Input markets, Output markets,
Everything in-between (Opportunities in
Multinational Management, including Global
integration)
• Country-specific advantage
– Resources and Capabilities to Compete and
Succeed Globally (Competitive Strategy)
• Firm-specific advantage including
– Products, Capital, People, Technologies
– Ability to Manage Liability of foreignness
– Ability to Manage Local responsiveness 50
• Resources and Capabilities for IB (to
compete and succeed globally)
– Good (Competitive) Product = Value
• Cheaper than rivals
• Better than rivals
– Enough Capital
– Competent Staffs
• Liability of Foreignness (LOF)
• Local Responsiveness (LR)

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 Examples of LOF:
Cultural Differences

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 Example of LR:
Localizing Products

53
 Liability of Foreignness?
Local Responsiveness?
• Output markets
– Availability, Price and Competition
– Preference (including Quality)
– Marketing (including Outbound Supply Chain)
• Input markets
– Availability, Price and Competition
– Preference (including Quality)
– Access (including Inbound Supply Chain)
• In-between
– Availability, Price (Wage), Competition
– Firm Culture
– Labor Relations and Labor Practices
• Any other characteristics of national differences??54
Two-step preparations for developing
competitive strategy
– Understanding “frameworks” linking
• Input markets
• Output markets
– Understanding “national characteristics”
shaping
• Input markets
• Output markets
– Integrating the two understandings for
• Strategies for input and output markets
• Strategies for everything in-between (i.e.,
multinational management) 55
Organizational Learning Process for
Capability Development
– Phased approach
• Small Scale Export of
Products (output market)
using Facilitators
• Overcoming Liability of
Foreignness, Understanding
Local Responsiveness
– Experimental FDI for
Marketing & Distribution
– Active FDI for Marketing &
Distribution
– Full-line Value Chain

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 Schedule v.2 National
Characteristics

28 Aug Intro to IB #6 9 Sep Nat’l Difference #1: 6 - 8

- Globalization #1: 1/2/5 - Political/Legal #2
- Firms & IB (#10) - Economic #16
30 Aug Trade & FDI #1: 3/4 11 Sep Cultural Diff #5
#4 Case: McDonald #10
4 Sep Trade Theory #7 13 Sep Global Strategy #1: 11 – 14
Case: DDD #11 - Foundation
6 Sep Money 16 Sep Global Strategy #4
- Foreign Exch #1: 9/10 - Perspectives #1: 15 – 17
- Global Fin Case: Nike #12
Institutions Tbc Final Exam
9 Sep Mid-term
Strategy as
Firm Response
Framework for
Globalization 57
 Next sessions
• Framework for Globalization
– 30 Aug: Trade and FDI (#1 from 3 to 4; #4)

– 4 Sep: Trade Theory (#7 and 11)

Case Study (#4)

– 6 Sep: Money (Foreign Exchange and Global

Financial Institutions) (#1 from 9 to 10)

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 Case Study Assignments
• Schedule
– 4 Sept: DDD
– 11 Sept : McDonald’s
– 16 Sept : Nike
• Format:
– Group presentation
– Each Case has 4 Questions
– 4 Page PPT (one page per one questions)
– Random Selection
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 4 Sept: DDD
1. What is the business model of DDD? What
value does it offer to customers? What value
chain does it have?
2. Which aspects of the case involve trading?
Does it follow the pattern of trade?
3. Which aspects of the case involve FDI?
Does it follow the pattern of FDI?
4. What has made DDD successful? What are
its constraints? Which strategies should DDD
pursue for the next step?
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 See you on Aug 30!

30 Aug Trade & FDI #1: 3/4

#4

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