global strategy hw

MGT 272 GLOBAL STRATEGY &

MANAGEMENT Session 1

Professor Haibo LIU

About Zoom

• Switch on your camera (facilitate discussion and keep you focused)

• Display name: first name, last name

• Please note that Zoom automatically logs your attendance (duration you are online). Please make sure your display name is consistent with your registered name (otherwise I cannot tell it is you).

• How: • Click on the “Participants” button at the top of the Zoom window • Next, hover your mouse over your name in the “Participants” list on the right side of the

Zoom window • Click on “Rename”

2

Ice breaker

• Your name

• Where are you from?

• What do you do when you feel stressed/irritated/upset?

3

Syllabus

• When I upload the worksheet on Canvas, do you get a notice?

4

WHAT IS GLOBALIZATION

The “Early” Globalization

• In 1492, a Spanish-based maritime expedition led by Christopher Columbus encountered the Americas, a continent which was previously unknown in Europe and Asia

• The Columbian Exchange was the widespread transfer of plants, animals, culture, human populations, technology, and ideas in the 15th and 16th centuries

What is Globalization?

What is Globalization?

• “Globalization refers to growing economic interdependence among countries as reflected in increasing cross-border flows of three types of entities: goods and services, capital, and know- how.” oMultiple level of aggregation: world, country, industry,

company, business unit

http://data.worldbank.org/indicator/NE.EXP.GNFS.ZS

What is Globalization?

• At the country level, globalization refers to the extent of the interlinkages between that country’s economy and the rest of the world.

• At the industry level, globalization refers to the degree to which a company’s competitive position in one country is interdependent with its competitive position in another country. oHigher interdependence  more leverage of competencies

across locations winner takes all

• At the company level, how can we measure how global a firm is?

How to measure globalization? Corporate Globality

What Is a Global Company?

• Globalization of market presence: the extent to which the company targets customers in all major world markets for its industry

• Globalization of supply chain: the extent to which the company accesses the most optimal locations for various activities in its supply chain

• Globalization of capital base: the extent to which the company taps into the most optimal sources of capital worldwide

• Globalization of corporate mindset: the extent to which the corporation reflects an understanding of diversity across cultures and markets and can integrate across this diversity

What Is a Global Company?

• Globality is a omultidimensional phenomenon ocontinuous variable along a spectrum from low to high

What Is Driving Globalization?

What Is Driving Globalization?

• Free-market ideology  barriers to trade is declining rapidly

• Technological advances  reduced communication cost

• The size of the market in developing economies are beginning to catch up with the advanced economies  increased demand

• Economic liberalization offers access to a much larger market but also results in increased competition.

What Is Driving Globalization? • Free-market ideology  barriers to trade is declining rapidly

What Is Driving Globalization?

• Technological advances  reduced communication and transportation cost

Where We Are Now

• People around the world live longer than ever before

• In emerging markets, billions of people have moved out of extreme poverty

• In the developed world, people enjoy cheaper products, better medicines, education, mobility, etc.

What Is Challenging Globalization?

What Is Challenging Globalization?

• Growing dissatisfaction with entrenched economic and social inequality

• The Richest 1% Now Own More Than 50% of the World’s Wealth

What Is Challenging Globalization?

• Unequal distribution of wealth: o Return to labor o Return to knowledge o Return to capital

• 70% of the US workforce has experienced no real wage increase in the past four decades

https://www.bcg.com/publications/2016/strategy-globalization-saving-globalization-technology-from-themselves

What Is Challenging Globalization?

• Today’s economic inequality is a result of how governments have chosen to manage (or rather chosen not to manage) globalization, technology, multinational corporations

• Wealth creation does not automatically result in a fair distribution of rewards

https://www.bcg.com/publications/2016/strategy-globalization-saving-globalization-technology-from-themselves

What’s Next?

• Trade wars?

• Economic warfare is undermining economic integration and overall wealth creation (eg. Economic sanctions, trade wars)

• Multilateral alliances are becoming regional rather than global o Multiple “core-periphery” relationships

28

Regional Comprehensive Economic Partnership (RCEP)

Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP)

What’s Next?

• Trade wars?

• Economic warfare is undermining economic integration and overall wealth creation (eg. Economic sanctions, trade wars)

• Multilateral alliances are becoming regional rather than global o Multiple “core-periphery” relationships

• Role of the governments and policymakers (outside the scope of this course)

• What are the implications for companies?

30

Implications for Companies

• A further increase in the intensity of global competition and uncertainties oThe economic map of the world will change more radically oThe regional composition of the world’s largest corporations

will be radically different oThe ongoing technology revolution will make real-time

coordination of globally dispersed operations routine oPolitical uncertainty could become the major business risk

(compromising firms’ ability access markets and talent, and to invest and create wealth)

Takeaway for a company, and what we are going to learn 1. Ensure that their company leads the industry in identifying

market opportunities worldwide and establishing the necessary presence in key markets.

2. Work relentlessly to convert global presence into global competitive advantage.

3. Take full account of the rapid growth of emerging markets.

4. Cultivate a global mindset.

Does Every Company Need a Global Mindset?

Does Every Company Need a Global Mindset?

• There are companies in industries where the most efficient size of an operating unit is very small relative to the global size of the industry, or multidomestic industry o Eg. Nursing homes, hospitals, radio stations, cleaning services

• But there are at least two benefits:

• Makes the organization much more proactive in benchmarking and learning from their counterparts

• Makes the organization much alert to the entry of foreign competitors o Eg. The U.S. beer industry was controlled by two domestic companies: Anheuser-Busch

(50%) and Miller Brewing (20%) in 2002. o South African Breweries acquired Miller Brewing o The acquisition created the world's second-largest brewer