4. World Trade Organization 1997: Trade ministers from countries representing 92% of world trade agreed to eliminate tariffs on software, computer chips, telecommunication equipment, and computers.
5. Regional Trade Agreements Regional Trade Agreements—agreements among nations to reduce tariffs and develop similar technical and economic standards. European Union, NATFA
6. Sell Anywhere, Locate Anywhere World trade growth: average of 6.5% per year between 1990 and 2000. Nearly half of the over $5 trillion in world trade is among the European union, the U.S., and Japan—the TRIAD.
9. Sell Anywhere, Locate Anywhere Foreign Direct Investment (FDI) occurs when a multinational company from one country has an ownership position located in another country. FDI increased by more that 36% between 1996 and 2000. Post 9/11 has seen a decline in FDI. Nevertheless, it remains a significant factor.
11. Foreign Direct Investment Developed countries get the bulk of FDI (69%) while developing countries get around 30%. Least developed countries get minimal FDI. Implications for managers—significant opportunities around the world. Multinational managers should look at risk rating of countries.
13. The Internet and Information Technology Electronic Communication — E-mail, World Wide Web, etc. Allows multinationals to communicate with company locations throughout the world. Multinationals can also monitor worldwide operations. Information technology is spurring a borderless financial market.
14. The Rise of Global Products and Global Customers The needs of customers for many products and services are growing more similar, e.g., McDonald’s, Boeing, Toyota. Global customers search the world for their supplies without regard for national boundaries.
15. Privatization Sale of government-owned businesses to private investors, usually through stock or direct sale to other companies. Two types of privatization contribute to the global economy — the developed world and the developing world.
16. Privatization—Types The Developed Countries Use privatization to make formerly government-controlled enterprises more competitive in the global economy. The Developing Countries Use privatization to jump-start their economies or to speed the transition from a communist to a capitalist system.
17. New Competitors Free market reforms are creating a potential group of new competitors. Korean, Russian, Taiwanese, and Mexican companies are all emerging. Chinese companies are also on the move.
19. New Competitors are Emerging Global trade has two important effects in developing new competitors: When developing countries are used as low-wage platforms for high-tech assembly, multinationals facilitate the transfer of technology. Aggressive multinationals are also expanding beyond their own borders.
20. The Rise of Global Standards Companies can make one or only a few versions of product for the world market. This is cheaper than making different versions for different countries. Drive to develop common standards to save money.
21. Global Standards Consistency in quality also an important requirement of doing business in many countries. International organization for standardization (ISO) in Geneva, Switzerland Developed a set of technical standards (ISO 9001:2000 series).
24. Multinational Management: A Strategic Approach Considers how managers formulate and implement strategies to compete successfully in the global economy. Strategies are the maneuvers or activities used to increase and sustain organizational performance. Multinational strategies must include maneuvers that deal with operating in more than one country and culture.
25. Internationalization Internationalization is the process by which Firms increase their awareness of the influence of international activities on their future Establish and conduct transactions with firms from other countries.
26. BRIC Offshoring
27. 5 reasons global sourcing programs To focus on core competencies To reduce and/or variablize costs To gain expertise that is not currently in house To increase quality, efficiency, and speed of delivery To be able to scale operations effectively Source: ITESA
30. Moving Forward Friedman’s view of a “flat world” “Flatteners” or developments that helped create this flat world Summarize these flatteners into his notion of a “triple convergence”
32. Flat World Playing field has been flattened traditional advantages accruing to one country or a large multinational are being challenged Coefficient of globalization Completion for global knowledge work Intellectual work, intellectual capital, can be delivered, distributed, produced, and put back together again . . . with relative freedom in the way we do work
34. Significance of Flat World Level playing field Traditional, comparative advantages held by those with access to information and/or technology can now be challenged Individuals from non-traditional backgrounds can now engage in economic activity, at times in ways not seen before
36. Flatteners: first three are platforms contributing to collaboration 11/9: the fall of the Berlin Wall opening Windows Fall of the “Wall” between East and West Berlin Political systems that were once closed opened up Windows 8/9: Netscape goes public Emergence of an internet browser Work flow software: Development of software which when installed in different computers and in different places allows them to work with each other
37. 11/9 as a platform for collaboration 11/9: the fall of the Berlin Wall which separated East and West Berlin and Germany The fall of the “wall” resulted in the eventual collapse of countries that were part of the Council for Mutual Economic Assistance or COMECON, sometimes referred to as the “Eastern bloc”, or the Soviet empire Included in this “bloc” were countries like the Czech Republic, Bulgaria, Romania, East Germany, Poland, etc.
38. Friedman’s claim this event tipped balance of power across the world towards more democratic, free-market oriented governments
39. 11/9 as a platform for collaboration (Continued) Centrally planned countries “opened up” In 1991, India abolished trade controls China accelerated reforms (although some of china’s economic reforms started in the 70s) Global exchange of digital information now possible as political restrictions eased up Huge personal empowerment
40. 8/9 as a platform for collaboration 8/9: Netscape goes public The initial browser was Mosaic which was designed to allow researchers/scientists in remote locations to access each other’s work Mosaic was transformed into the first browser to be made available to the public (for free) Coupled with introduction of Windows 95, including GUI capability, these made accessing the internet much easier Early access to the internet were text based
41. 8/9 as a platform for collaboration (Continued) Browsers as gateway to Internet From internal systems to systems of systems Dot com bubble allowed massive investments in the internet highway; by the time the bubble burst, an initial physical infrastructure – fiber optic cables, switches, etc. – was in place From resistance to email and cell phones (early 90s) to emergence of terms like B2B and B2C.
42. Work-flow software as a platform for collaboration Work flow software: software that allows computers and in different places to communicate and work with each other using different modes, e.g. audio, video, etc. Example: Wild Brain produces cartoons in SF Recording sessions Design and direction Writers Animation All in different locations using Virtual Private Network (VPN)
43. Work-flow software as a platform for collaboration (Continued) Example 2: Pay Pal Emergence of protocols and standards to facilitate communication among systems
44. Flat World and NIN Berlin Wall Windows Netscape Browser Workflow Flat World NIN
53. Flatteners: the next seven are new forms of collaboration Uploading Outsourcing Offshoring Supply-chaining In-sourcing In-forming Steroids
54. Flattener 4: Uploading Power or capability of individuals to send up, out, and around their own products and ideas Apache – a web server that allow web browsers (in different computers) to interact with different web servers. Web servers allow a user to use his or her home or office to host a web site.
55. Flattener 4: Uploading (Continued) Open source communities “community rules” Examples: Linux operating system - offers a family of operating systems; can be adapted to run on the smallest desk top computer, laptop, palm pilot, etc. Firefox (Mozilla) Blogging, Wikis, etc.
56. Flattener 5: Outsourcing India as an example of how outsourcing began Educational infrastructure in India 7 Indian Institute of Technology 6 Institute of Management As a result, Indian nationals would go to the US or developed countries to find work Dot-com boom created “physical highway” to allow for India to get “connected” Reform of telecommunications system in India
57. Flattener 5: Outsourcing (Continued) US companies start looking for opportunities to utilize labor pool in India Late in the 1990s, the Y2K issue emerged Indian “expats” return to India after “dot.com bubble” burst Friedman sees the massive amount of programming to prevent a “Y2K” disaster and return of expats catalysts India’s emergence as an outsourcing destination
58. Flattener 6: Offshoring Offshoring: move a strategic process or portion of a company’s value chain to a foreign location Distinction Outsourcing: have another company do a specific, but limited function, e.g. accounting Offshoring: move production or an important process offshore
59. Flattener 6: Offshoring (Continued) China as an example of the emergence of offshoring 1977: Deng Xiaoping starts economic reforms in China Mid 1980s: applies for membership in WTO Finally accepted into WTO mid 1990s Watershed moment in the sense that as a member of WTO, China has to play by international rules
60. Flattener 6: Offshoring (Continued) Example: ASIMCO From efforts to find “new china” managers to manage their business to investing in the US US operation takes care of finishing, also allows company to keep abreast with technology Film: China Brands Friedman does mention possible limits to growth in China, including need for further reforms
61. Work-types companies avoid offshoring Relationship-oriented work Process where repeatable process map cannot be created Roles with complex industry structure and/or long product learning curves Success criteria are not well defined or measurable Strategic aspect to the business High levels of sensitive intellectual property are shared across wide groups of people
62. Work-types companies push offshoring High transaction volume High repeatability Low domain knowledge needed Low mission criticality Few touch points Low complexity Low training efforts Non-strategic Well defined process and metrics Easily transmitted over electronic wires Outcomes can be easily managed
63.
64. India Advantages Low cost Native English Early market entrance Governmental software export strategy since 1972 Early adoption to quality standards Strong educational programs Government incentives Technology park development Tax advantages and tax breaks Low import duties
65. India Disadvantages Geo-political risk with Pakistan Electrical Power issues 24 hour travel Time zone Costly Turnover Salaries rising 20% annually for skilled workers Mid-manager staffing difficulties Cultural differences
66. Brazil Advantages Low cost Time Zone and Proximity Early adoption to quality standards Strong educational programs Multilingual Support (Spanish and Portuguese support) Government incentives Technology park development (but need more) Tax advantages and tax breaks
67. Brazil Disadvantages Corruption Lack of Qualified People Delays Infrastructure IP Problems English Brain Drain Higher cost than India and China Poor infrastructure especially off coast High sunk cost Costly turnover
68. China Advantages Scale Labor Speed Low cost Strong educational programs and joint university programs Government incentives Technology park development Tax advantages and tax breaks
69. China Disadvantages Focus on Asia English Cultural differences and inward thinking Uncertain governmental actions Communist effect on property laws Communist bureaucracy Intellectual property theft is rampant Data Privacy Poor infrastructure especially off coast Manufacturing focus Poor customer service Need for local representation/local partner Indian offshore companies are having problems with offloading their own work to China
70. Flattener 7: Supply Chaining Wal-Mart as an example of a company that pursues supply chain management aggressively Coefficient of Globalization Learning to sell new products: sushi
71. Flattener 8: Insourcing World Synchronized: Supply Manager Trust through systemes Toshiba Repairs Shoes.com UPS
72. Flattener 9: In-forming In-forming: capability to build your own supply chain . . . of information, knowledge, entertainment
73. Flattener 10: Steroids Computing capability has increased in terms of computational, storage, and input/output capacity Instant messaging and file sharing VOIP Video conferencing Computer graphics Wireless communication
74. Flat World and NIN Uploading Outsourcing Offshoring Supply-chaining In-sourcing In-forming Steroids Flat World NIN
75. Flat World and NIN Uploading Outsourcing Offshoring Supply-chaining In-sourcing In-forming Steroids Flat World NIN
