A sample of such indicators is provided below for each IBGA. Alignment occurs in this textbook according to the IBGA chapter matrix below. While each chapter by way of its subject matter, learning objectives, suggested learning tasks and stimulus material potentially provides a vehicle for developing all IBGAs, the alignment matrix recognises that certain subject matter lends itself to the development of specific IBGAs. The matrix also acknowledges that two of the IBGAS are so generic that they can be assigned to all chapters. Recognise and value the moral dimensions of international business decisions and actions.
Choose language, media and formats suitable for the message and the audience. Boeing was vertically integrated and manufactured many of the major components that went into the planes. The largest parts produced by outside suppliers were the jet engines, where two of the three suppliers were American companies. The lone foreign engine manufacturer was the British company Rolls-Royce. Fast-forward to the modern era, and things look very different. In the case of its latest aircraft, the super-efficient Dreamliner, 50 outside suppliers spread around the world account for 65 per cent of the value of the aircraft.
Italian firm Alenia Aeronautica makes the centre fuselage and horizontal stabiliser. Kawasaki of Japan makes part of the forward fuselage and the fixed trailing edge of the wing. German firm Diehl Luftfahrt Elektronik supplies the main cabin lighting. Japanese company Jamco makes parts for the lavatories, flight decks interiors and galleys. Mitsubishi Heavy Industries of Japan makes the wings.
KAA of Korea makes the wing tips. And so on. Why the change? The trend started in when Mitsubishi of Japan was given contracts to produce inboard wing flaps for the The Japanese reciprocated by placing big orders for Boeing jets. A second rationale was to disperse component part production to those suppliers who are the best in the world at their particular activity.
A third reason for the extensive outsourcing on the was that Boeing wanted to unburden itself of some of the risks and costs associated with developing production facilities for the By outsourcing, it pushed some of those risks and costs off onto suppliers, who had to undertake major investments in capacity to ramp up to produce for the So what did Boeing retain for itself? Engineering design, marketing and sales, and final assembly at its Everett plant north of Seattle, all activities where Boeing maintains it is the best in the world.
Of major component parts, Boeing made only the tail fin and wing-to-body fairing which attaches the wings to the fuselage of the plane. Everything else was outsourced. As the moved through development in the s, however, it became clear that Boeing had pushed the outsourcing paradigm too far. Coordinating a globally dispersed production system this extensive turned out to be very challenging. As a consequence, the date for delivery of the first jet was pushed back more than four years, and Boeing had to take millions of dollars in penalties for late deliveries.
The problems at one supplier, Vought Aircraft in North Carolina, were so severe that Boeing ultimately agreed to acquire the company and bring its production in-house. Vought was co-owned by Alenia of Italy and made parts of the main fuselage. For its next jet, a new version of its popular, wide-bodied jet, the X, which will use the same carbon-fibre technology as the , Boeing will bring wing production back in-house.
Mitsubishi and Kawasaki of Japan produce much of the wing structure for the , and for the original version of the This seems to have given Boeing an opening to bring wing production back in-house. Epstein and J. Scott and T. We are moving away from a world in which national economies were relatively self-contained entities, isolated from each other by barriers to cross-border trade and investment; by distance, time zones and language; and by national differences in government regulation, culture and business systems.
We are moving towards a world where barriers to cross-border trade and investment are declining; perceived distance is shrinking due to advances in transportation and telecommunications technology; material culture is starting to look similar; and national economies are merging into an interdependent, integrated global economic system. The process by which this is occurring is commonly referred to as globalisation, and international business is the main facilitator of this process.
In , independent suppliers produced only 5 per cent of the value of a Boeing commercial jet.
With the advent of the Dreamliner, this figure reached 65 per cent, and many of those suppliers were scattered around the globe. Boeing also believed that it made sense to outsource production of component parts to independent suppliers if they were the best in the world at performing that particular activity, no matter where they were located. As the case makes clear, however, there are risks involved in embracing globalisation to the extent that Boeing did. Coordinating a globally dispersed supply chain turned out to be a logistical nightmare, and was partly responsible for delaying the launch of the by more than four years, which cost Boeing dearly.
The Boeing example illustrates, therefore, that managers need to carefully think through their strategy for competing in the global marketplace of the 21st century, balancing the benefits of embracing globalisation against the associated risks. This is a theme that we shall return to repeatedly throughout this text.
More generally, globalisation now has an impact upon almost everything we do. In this interdependent global economy, an Australian is driving home from work in a Ford utility—the brand of a US multinational, designed in Japan and manufactured in Thailand by a joint venture of Ford and Mazda, using a Mazda design. On the way to work, the Australian driver fills the car with fuel at a BP service station owned by a British multinational company. The fuel could have been made from oil pumped out of a well off the coast of Africa by a French oil company that transported it to refineries in Singapore in a ship owned by a Greek shipping line.
While driving home, the Australian rings her stockbroker on a hands-free mobile phone, a product of the Finnish company Nokia, that was assembled in China using chip sets produced in Taiwan to a design of Indian engineers working at the Nokia Research Centre in Japan. She tells her stockbroker to purchase shares in CSL, an Australian bio-pharmaceutical company transformed from a government-owned enterprise to a privately owned global company, now with 14 employees operating in 30 countries. On the way home, a news announcer on the car radio informs the driver that anti-globalisation protests at a meeting of the World Economic Forum in Davos, Switzerland, have turned violent.
One protester has been killed. The announcer then turns to the next item, a story about how interest rates in the United States have been increased by the US Federal Reserve, which overnight sparked a decline in the value of the Australian dollar on the foreign exchange markets. The driver muses that now might be the time to replace her old ute with a new imported one if the dollar looks likely to continue to depreciate in value.
This is the world in which we live. It is a world where the volume of goods, services and investments crossing national borders has expanded faster than world output consistently for more than half a century. The most widely used unit of measurement is the US dollar. The US dollar is used extensively as a medium of exchange, a foreign currency reserve and a unit of account in international transactions. It is a world requiring more effective collaboration and action at a global level among national governments on issues such as climate change, terrorism, flu pandemics and financial crises.
The pursuit of such policy recommendations, however, would prevent developing countries adopting policies that would create jobs through tariff protection and industrialisation, guarantee public services through government ownership, protect farmers and food security through subsidies, and relax intellectual property laws to promote the production and import of life-saving generic drugs. The Cambridge University economist Ha-Joon Chang argues that historically the developed countries themselves did not develop by relying on the free market policies that they are now advocating.
Chang points out that the developed economies such as the United States and the United Kingdom used tariff protection and subsidies to develop their domestic industries and promote economic development. In the case of the more recent economic miracles in Japan and South Korea, their respective governments also protected their key industries with tariffs before exposing them to foreign competition.
One might be forgiven for observing that the motive for now arguing for freer trade and freer foreign investment may have more to do with locking in the advantages that the industrially developed countries presently enjoy than with helping poorer countries to develop. In this world, products are made from inputs that come from all over the world. As the internet penetrates more regions of the world and information flows become mostly instantaneous and almost costless, global integration is becoming more individualised, rather than being just institution to institution or B2B.
It is also a world in which vigorous and vocal groups protest against globalisation, which they blame for a list of ills, from job losses and unemployment in developed nations, and poverty in developing economies, to environmental degradation, climate change and the Americanisation of popular culture. There is no clearer evidence that we live in one economic world than the advent and fallout of the —09 Global Financial Crisis GFC or the stock market volatility caused by events in Greece and China.
As globalisation unfolds, it transforms industries and creates anxiety among those who believed their jobs were once protected from foreign competition. Historically, while many workers in manufacturing industries worried about the impact that foreign competition might have on their jobs, workers in service industries felt more secure. Now, this, too, is changing. Advances in information and communications technology, lower transportation costs and the rise of skilled workers in emerging and developing countries mean that many services no longer need to be performed where they are delivered.
Offshoring is an increasing trend. Offshoring is a particular form of outsourcing.
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Outsourcing means that tasks that were previously performed in-house are now purchased from another firm. Offshoring means that a task previously performed in one country is now being undertaken abroad. The offshoring trend can be seen in many service industries such as data entry, customer service calls, software development and the preparation of legal briefs and tax returns.
For example, Indian accountants, trained in the tax rules and processes of other countries, perform work for foreign accounting firms. As the best-selling author Thomas Friedman has argued, the world is becoming flat. We explore how changes in regulations governing international trade and investment, when coupled with changes in political and economic systems and technology, have dramatically altered the competitive playing field confronting many businesses. We discuss the resulting opportunities and threats, and review the different strategies that managers can pursue to exploit the opportunities and counter the threats.
The Opening Case identified the choices that Boeing management has made over time as it engaged with globalisation; for example, choices over what product it should produce where in the global economy to sustain international competitiveness. We consider whether globalisation benefits or harms national economies, and we look at what economic theory has to say about the outsourcing or offshoring of manufacturing and service jobs to places such as India and China, and at the benefits and costs of outsourcing—not just to entire economies but also to business firms and their employees.
First, though, we need to get a better overview of the nature and process of globalisation, and that is the function of the current chapter. However, the global influence of US companies has remained strong. While strategically repositioning its global product range and withdrawing manufacturing from Australia, Ford continues engagement in Australia with new multimillion-dollar investments in advanced research and development, focused on technological innovation in the design and development of new vehicles for both Australasian and international markets.
This research and development focus now provides new employment opportunities for highly skilled automotive research graduates from Australian universities. These and many other such US companies have demonstrated effective integration of international business strategy with distributed global supply chain resources and strong connectedness between corporate business agenda and government policy.
Identifying regional market needs and capacity, accessing advanced skills, expertise and resources, and a targeted alignment with government policy, can collectively leverage an effective globalisation strategy in a constantly changing global economic environment. VWK6snZ—Uk; dfat. As used in this book, the term globalisation refers to the shift towards a more integrated and interdependent world economy.
Globalisation in general has several facets ranging over political, cultural, economic and ecological issues; but in the business world the focus is on the globalisation of markets and of production. Falling barriers to cross-border trade have made it easier to sell internationally. In fact, the most global of markets currently are not the markets for consumer products, where national differences in tastes and preferences and other factors are still often important enough to act as a brake on globalisation, but markets for industrial goods and materials that serve a universal need.
These include the markets for commodities such as iron ore, oil and wheat; for industrial products such as microprocessors, computer memory chips and software; for commercial jet aircraft; and for financial assets such as foreign currency, US Treasury bills, Eurobonds and futures. The firms in these industries, both consumer and industrial, are more than just beneficiaries of the globalisation of markets: they are also facilitators of it. By offering the same basic product worldwide, they enjoy cost-advantages but they also help to create a global market.
If a firm moves into a nation not currently served by its rivals, many of those rivals are sure to follow to prevent their competitor from gaining an advantage. They bring many of the assets that served them well in these markets, including their products, operating strategies, marketing strategies and brand names. This creates some homogeneity across markets. Thus, greater uniformity replaces diversity. A company does not have to be the size of the multinational giants whose brands are mentioned above to facilitate and benefit from the globalisation of markets.
For some time, small Australian firms have been enjoying success in the global economy. Forty-four per cent of all goods exporters are small firms; that is, less than 20 employees. Its headquarters is located in Ballarat, Victoria. One company-developed innovation is a process for treating ore underground which means that only the most valuable portion is brought to the surface. As a result of this technology, mining operating costs can be cut by 25 per cent. After 10 years, its workforce grew to 75, doubling in two years. In the area of the processing of gold alone, it now employs globally a staff of 30 technicians and professionals.
It exports to 30 countries and has opened regional offices in South Africa, Canada and Chile where mining and mineral processing are major industries. In the United States, 34 per cent of total US exports are initiated by small to medium-sized companies less than employees. Ninety-eight per cent of all US exporters are small to medium-sized companies. As we shall see in later chapters, significant differences still exist among national markets along many relevant dimensions including consumer tastes and preferences, distribution channels, culturally embedded value systems, political systems, economic development and legal regulations.
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These differences frequently require companies to customise marketing strategies, product features and operating practices to best match conditions in a particular country. For example, motor vehicle companies will design and promote different car models in different nations, depending on a range of factors such as local fuel costs, design standards, income levels, road conditions, environmental concerns and cultural values.
Average incomes in India are low, but as the economy is rapidly growing and standards of living rise, the local demand for an affordable car is expected to rise substantially. The globalisation of production Globalisation of production refers to the sourcing of goods and services from locations around the globe to take advantage of national differences in the cost and quality of factors of production such as labour, technology, land and capital. By doing this, companies hope to lower their overall cost structure or improve the quality or functionality of their product offering, thereby allowing them to compete more effectively.
As we saw in the Opening Case, aircraft manufacturer Boeing has employed such a strategy. A global web of suppliers yields a better final product, which enhances the chances of Boeing winning a greater share of total orders for aircraft than its global rival Airbus Industrie.
Boeing also outsources some production to foreign countries to increase the chance that it will win significant orders from airlines based in that country. The Japanese airline ANA was the first customer for the when the plane entered service in late ANA has ordered 66 planes to date.
By , however, Apple had largely turned to foreign manufacturing. The shift to offshore manufacturing reached its peak with the iconic iPhone, which Apple first introduced in All iPhones contain hundreds of parts, an estimated 90 per cent of which are manufactured abroad. Advanced semiconductors come from Germany and Taiwan, memory from Korea and Japan, display panels and circuitry from Korea and Taiwan, chip sets from Europe, and rare metals from Africa and Asia.
Apple still employs some 43 people in the United States, and it has kept important activities at home, including product design, software engineering and marketing. But an additional people are involved in the engineering, building and final assembly of its products outside the United States, and most of them work at subcontractors like Foxconn.
When explaining its decision to assemble the iPhone in China, Apple cites a number of factors. Extensive quotes from poetry, prose and drama underpin the narrative. Convert currency. Add to Basket. Book Description Routledge, Condition: New. More information about this seller Contact this seller. Ronald Carter ; John McRae. Publisher: Routledge , This specific ISBN edition is currently not available.
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