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CRKC 5003Global Business Systems and CultureUnit 2 Professor David Duffill
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| Unit | Content |
| One | The Evolving Global Context to Business |
| Two | International Business Systems |
| Three | Legal and political foundations of international managementInternational ethics and social responsibility |
| Four | Interacting effectively in an international environment |
| Five | Motivating and leading across cultures |
| Six | The implications of international business practices in different sectors |
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Unit 2: Tasks
Watch the second lecture and read Chapter 8 of Sweeney and McFarlin and Chapter 8 of International Business (A)
“Skim” chapters 5 and 6 of “Macroeconomics: Theory Through Applications” (B)
Read “The World as an Imperfect Globe”
Start to collect data and information on the country selected for your interim analysis; “skim” selectively “World Regional Geography: People, Places and Globalization” (C) and Witt et al., 2017
Participate in the Forum discussion
(A):
(B):
(C):
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The overall scope of the module is to address Global Business Systems and Culture.
Business systems are considered to encompass the institutions both at the firm and societal levels:
They consider how firms operate within countries and the extent to which they may be constrained by elements such as governmental system, financing sources, education, employment features, etc.
Overview
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Background
There are many reasons that drive companies to internationalise
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International business theory
Before 1970 the academic focus was largely on national competitiveness as evidenced by trade statistics
Leading scholars at that time included Hymer (“for firms to own and control foreign value-adding activities they must possess some kind of innovatory, cost, financial or marketing advantages which is sufficient to outweigh the disadvantages they face in competing with indigenous firms in the country of production”) and Dunning’s ‘eclectic paradigm’ explaining the conditions required for internationalisation (the firm should possess some owner-specific advantage, there should be location-specific advantages, and the firm should decide to internalise the use of this advantage)
In the 1970s the focus moved to foreign direct investment (FDI) by multi-national enterprises (MNEs)
Scholars included Porter (Diamond Model) and Rugman (Double Diamond model)
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Patterns of internationalisation
Source: Grant and Jordan (2015), Foundations of Strategy
Trade tends to be focused on specific industries
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Patterns of internationalisation
a Excluding automotive products and office and telecom equipment
Source: World Trade Organisation
Rather old data, but it demonstrates that most industries show little change in their significance.
Why the relative growth in Office and Telecom, and the decline in Mining?
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Patterns of internationalisation
Source: World Trade Organisation
Trade tends to be focused on specific industries
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Trade and wealth are closely linked
There seems to be a correlation between export trade and wealth (GDP)
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International trade growth
In the 70 years since 1950, the world has grown significantly:
Population has increased by 3 times
Individual wealth (GDP per capita) by 4.8 times.
How much has world trade grown?
3 times ?
5 times ?
30 times?
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International trade growth
The answer is even higher – 41 times!
Note: Trade is calculated as average of exports and imports, and excludes significant re-exports or imports for re-exports
Source: World Trade Organization
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Factors driving growth in trade
The growth has been driven by multiple factors:
Liberalisation of trade by more countries
Lower cost of airfreight
Lower cost of shipping and faster turnarounds
Adoption of lean manufacturing (just-in-time)
Offshoring labour-intensive manufacturing
………
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Will Covid cause a rethink?
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Currently some managers expect the globalisation of supply chains to decrease in significance, but most believe it will become increasingly important
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Value Chain Analysis
As a tool, some might see Michael Porter’s Value Chain model as outdated, but in many ways it has become more important than ever
Areas such as corporate management, legal, finance, HR, etc which although important have little overall impact on the firm’s success
Managers must identify the primary activities which are critical to the competitive advantage of the firm
The focus should then be on improving performance in the primary activities; performance in non-core areas must be good, but could be outsourced to more efficient providers
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Value Chain Analysis
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Entry Modes
There is a variety of ways on which a company could enter an international market
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Selecting a location combines an understanding of the benefits of specific sites, with insights of their relative advantages or limitations within the firm
Site selection
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Business Systems
An analysis of national business systems considers the impact on how firms operate within countries and the extent to which they may be constrained
Institutional Features Affecting Firm Capacities and Capabilities in Business Systems
Note: Continued on next page
Source: Rana and Morgan, 2018
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Business Systems (continued)
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Business Systems
When reviewing a country as a potential location for a company’s globalisation activities, it is therefore important to understand the country’s institutional features, as demonstrated in the previous exhibit as well as in the following pages.
Sources for developing such insights include the following:
statista and Business Source Complete (both available through the university’s library) publish country reports, as does The World Factbook – CIA
Organisations such as OECD, JuriGlobe, The Lancet (population), UN, World Bank, etc.
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Types of Business Systems
Business Systems and Their Impact on Firms
Source: Rana and Morgan, 2018
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Types of Business Systems (continued)
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Types of Business Systems (continued)
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Types of Business Systems (continued)
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Types of Business Systems
Possible additional sources of data are indicated in this exhibit from Witt et al., 2017:
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Clusters of Business Systems
This exhibit from Witt et al., 2017 shows how countries with similar business systems (based on the “Dimensions” identified in the preceding page) can be clustered together:
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Clusters of Business Systems
The clustering is based on the “Pairwise institutional distances” (Gower dissimilarity matrix) of two countries (higher = less similar); for example, Canada is very close to New Zealand in its business systems, but far away to Pakistan.
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CAGE
The CAGE (Cultural, Administrative, Geographic, Economic) distance framework is a tool designed to help companies when developing cross-border strategies.
Take a look at a short lecture from its creator, Professor Ghemawat, at
You can also find some statistical data that might help with the country analysis in your midterm assignment at
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Background to the Assessment
The assessment will require you to consider a fictional company from a country in either Tier 1 or 2 (see below) that is planning to establish a business relationship with a country in a “lower ranked” country.
The midterm assessment will require you to write a profile of the target country and its business systems, while the
final will need you to develop an under-standing of the cultures of both countries and the potential issues that could result from any differences.
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