Globalization of business Lecture Notes

Introduction Cross-Cultural management studies the behaviour of people in organization around the world and trains people to work in organizations with employee and client populations. It describes organizational behaviour within countries and cultures; Compares organizational behaviour across cultures and countries: and perhaps, most importantly, seeks to understand and improve the interaction of co-workers, clients, suppliers, and alliance partners from different countries and cultures. Cross-cultural management thus expands the scope of domestic management to encompass the international and multicultural spheres.

Definition Origins of globalization began a long time ago with emergence of international trading corporation, e.g.. British East India Company and Dutch East India Company Definitions of Globalizations: “Transfer the business and workforce of the organizations to all over the world , in terms of strategies, operations managements, marketing, as well as human and material resources and services.” “Globalization is a term that refers to the establishment of worldwide operations and the development of standardized products and marketing.”

Globalization encompasses: Internatinalization(Trade & Investment) Liberalization(Freeing Markets) Universalization(cultural interchange)… or… Westernization ( Western cultural dominance) Globalization as “Deterritorialization”

Integration of Economies due to intensification of information communication technologies and removal of trade barriers among countries. Globalization is the process of increasing interdependence among countries and citizens. Economic globalization is the process of increasing economic interdependence among countries and their citizens.

Forces Driving Globalization Increasing competitive clout resulting from regional trading blocs Declining tariffs, which encourage trading across borders and open up new markets. The information and communication technology explosion, which makes the coordination of far-flung operations easier and also increases the commonality of consumer tastes.

Declining trade and Investment barriers Less protectionism( tariffs, subsidies ,regulations, or quotas), because of WTO. Less Capital restrictions. Political changes such as Revolutions, new governments, wars Change of Political system in countries due to the disintegration of the socialist bloc. Trade and Investment policies. Compatible technical standards e.g. ISO 9000 Common marketing regulations

Cost Globalization Drivers Economies of Scale: expensive to set up production but they could service any market such as steel and microprocessors Steep Experience Curves: knowledge and technology intensive sectors: aircraft Favorable Logistics: transportation costs important as we decide where to produce New Product Development Costs: are rising due to short life of their products that require higher return on their investment (airlines, telecommunications, chips, pharmaceuticals)

Competitive Drivers Competing with imports and other global rivals have placed increasing pressures on both domestic and international companies to be competitive in national and international markets.

Challenges for Globalization To create a global organization where it does not already exist, requires a transformational process into new work culture mode of thinking and functioning ” A great challenge is that the people cannot accept the new work concept. The anti-globalization groups argued the following issues: The greed and anti-consumerism of multinational corporations.

Concerns about Human rights, labor rights, environmental impacts. Fear that Globalization is homogenizing the world and destroying the rich cultural diversity. Informational and communication technology can be an agent for this challenges!

Much of global business could not be accomplished without ICT ICT also can reduce the risk of the challenges due to following arguments: ICT revolution enhanced the knowledge and understanding between both individuals and their organization; ICT help organizations to monitor the behavior of government officials across borders to protect employees human rights;

New ICT applications reduce the employees repeated work and enhance the productivity and working efficiency; ICT had changed the work environment into one more flexible and mobile; The ICT hardware and software provide tools and means for peoples everywhere to meet electronically and control their affairs in homeland.

Motive for companies to go abroad Proactive Motives [firm-initiated strategic change] Reactive Motives [firms response and adoption to changes imposed by outside environment] Profit Advantage Unique products Technological Advantage Managerial commitment Tax benefit Economies of Scale Competitive Pressures Overproduction Declining domestic sales Excess Capacity Saturated Domestic markets Proximity to customers and ports

Others A desire for continued growth. Preferable suppliers( quality, cost) Labor market (supply, quality, cost) Government involvement /restrictions Reducing distance to customers (cost) Increased foreign competition in home country Reduce general business risk by diversifying into other countries.

Discussion Questions Taking Tanzanian Companies case, what challenges managers face in managing their firms in a globalized world? What can be done to overcome these challenges? What is the position of Tanzanian Firms on Globalization? Beneficiaries or losers? Why?