Overview Of International

Business Functions
Arvind V. Phatak
Carnell Professor of Management and
International Business;
Ex. Director, IGMS/CIBER
Presentation Format

Drivers of Globalization

Effects of Globalization

Globalization’s
Challenges to Business
Firms

Impacts on Curriculum
Major Skills and Characteristics of New Employees
(On a 5-point scale)
Knowledge of Other Cultures: 4.2

Cross-Cultural Communications skills: 4.2

Experience in IB: 4.2

College Degree: 4.2

Experience in related functional area: 4.1

Fluency in Foreign Language: 4.1

General knowledge of other countries: 4.0

 Globalization

• The international Monetary Fund defines it as “the

growing economic interdependence of countries
worldwide through the increasing volume and variety of
cross-border transactions in goods and services and of
international capital flows, and also through the more rapid
and widespread diffusion of technology
Drivers Of Globalization
 Death Of Distance

• Countries inter-connected by rapid flows of knowledge

and information
• E-mail and chat rooms
• Vide Conferencing
• Cell phones
• Satellite Transmission
• BBC, CNN, Star, Al Jazeera
 Death Of Time

• London – New York

• 1930: Steam ships, 10 days

• 1950s: Propeller Aircraft 200-300 mph, 2 days
• 1960s: Jet Aircraft 500-700mph, 8 hours
• 1990s: Supersonic Jets, 3 hours
• Distance measured in time to get there
 The Push Towards Free Trade

• International Trade measured by volumes of imports and

exports

• International trade growing at a sky rocketing pace

• Increasing economic interdependence among countries

 The Push Towards Free Trade

• World exports of goods $ 2 Trillion in 1991, $ 6 Trillion in

2001

• World economy growth – 3 %

• World trade growth – 6 %

• Significant increase in cross border investments in

portfolio and Foreign Direct Investment
 Creation of a Global Labor Force
• Jobs come to where people are
• Indian Software industry serves the needs of Europe and
American markets
• China dictating price of consumer goods
• Fast approaching global wage rate for skilled and unskilled
workers
• Global workforce determines global prices of goods and
services
• People > Jobs
• Jobs > People
 Porous Borders Between
countries
• Lowering of barriers to immigration

• Increase in transfer of wealth, knowledge and technology

among countries

• Economic linkages between adopted and mother countries

– Indian and Chinese Diaspora has its footprints in every
country in world
 Porous Borders Between
countries
• Pre-1964: Immigration restrictions against Asia Pacific
triangle

• Post 1964: Non-European Immigration world wide

• Ease of visa restrictions: H1B

 Globalization of Financial
Markets
• What happens in US impacts rest of the world

• Interest rates, stock markets, currency values are all

interconnected

• A country’s ability to compete is often dictated by events

in distant parts of the world
 Global Thrust for a Market
Economy
• Centralized planning replaced by free markets and
economic liberalization

• Deregulation of airline, financial services and

telecommunications in developed and developing countries

• Welcome mat for foreign companies in consumer products

• Opportunities in infrastructure projects

 Global Thrust for a Market
Economy
• The fall of the Soviet Union has given a boost to free
enterprise and market based economies.
 Current trends in International
economy
• Privatization
– Huge public sector debts

– Poor performance of SOEs

– Raise revenue for state

– Attract foreign investment and technology

Deregulation and Privatization of
Commerce and Industry Globally
• Money is flowing across national boundaries

• Number of international airlines has grown

• Number of passenger miles flown has shot up

• The tourism and hospitality industry has flourished

 Rapidly Falling Freight costs
Three notable economic trends:
• World economy has become far less transport-intensive

• “Containerization” and “intermodal transportation” has led

to steep drops in the cost of cargo handling

• Deregulation of the airlines and telecommunications has

brought about huge drop in the data transfer and air
transport
Effects Of Globalization
 Movement Toward Free Trade
and Trade Blocs
Types of Trade Blocs
Free Trade Area: member countries eliminate trade
barriers among themselves, but retain right to impose
barriers on non-members.
Customs Union: member countries remove barriers
among themselves and have common barriers on non-
member countries
Common market: A customs Union that allows free
movement of factors of production
Economic Union: A common market where economic
policies are also harmonized
European Union
ASEAN
Mercosur
Trade Blocs and Global Free Trade

Trade Bloc 1990 1995 1996 1997 1998 1999

NAFTA 226273 394472 437804 496423 521649 581162
EU 981260 1259699 437804 496423 1226988 1376314
ASEAN 28648 81911 86923 88770 71669 81929
MERCOSuR 4127 14199 17075 20772 20352 15313
 Evolution & Growth of Global
Companies
• Principally companies from Europe, United States, Japan
and South Korea
•
• Global Companies and their global network of subsidiaries
are connecting countries and companies world-wide.
Table 1-2
Challenges Faced By
Businesses in Global
Environment
 Environmental Challenges
Political Ideologies

Economic Systems

Technological Sophistication

Legal Challenges

Cultural Distance
 Impacts on Business Functions

Marketing: advertisements, packaging

Finance: pricing, balance sheet effects

Production: reward systems, technology

Leadership: styles

Communications: methods and modes

.
 The Importance Of
Understanding Culture
and Cultural Differences
Iceberg
 Major Business languages
Globally
• English Top Languages
• Chinese
• Spanish 7% 6% 5%
C hinese, Mandarin
8% Hindi
• Hindi
English
• Bengali 12% Spanish
• Japanese 35% Bengali
• Portuguese Portuguese
13% Russian
• Russian 14%
J apanese
 World Religions and Business
• Christianity
• Judaism – Holidays, Sabbath, dietary prohibitions
• Islam – banking, holidays
• Buddhism
• Hinduism – dietary prohibitions
Top Religions C hristia n

Islam

6% 4% 3%
2% Hinduism
14%
Secula r/ No nreligious

Buddhism
34% C hinese Traditio na l
15%
religio n
prima l-indigeno us
22%
Africa n Tra ditiona l &
Dia spo ric
 Corruption rankings
Corruption Rankings

Nigeria Africa Nigeria

Africa

Bostwana Africa Bostwana

Vietnam East Asia Vietnam

East Asia

China East Asia China

Singapore East Asia Singapore

Pakistan South Asia Pakistan

South Asia

India South Asia India

Region 7 Nationa

Sri Lanka South Asia Sri Lanka

Series1
Kazakhastan West Asia Kazakhastan
West
Asia

Israel West Asia Israel

Ukraine Eastern Europe Ukraine

Americas Europe Europe
Western Eastern

Slovenia Eastern Europe Slovenia

Greece Western Europe Greece

Finland Western Europe Finland

Venezuela The Americas Venezuela

The

USA The Americas USA

0 2 4 6 8 10 12
Corruption Index
Cost Of Corruption
Value Orientations In Society
Universalism---------------Particularism

Affect Neutrality---------------Affect

Specificity---------------Diffusion

Achieved Status---------------Ascribed Status

Self Interest---------------Collectivity
 Private and Public Self

Public Private
Self Self
Private and Public Self
Private and Public Self
Private and public Self
 Cultural differences
• Gestures and body language
• Marketing
• Colors
– Prussian blue for singer
– Red and Gold are tops in China
– White in India and Japan = Death
 The Language of Time
American
Culture

Time is Money!
There is a limited amount of
time available to each
person.
 Language of Time

Eastern
Culture

Time does not begin at

birth nor end at death.
Time is an inexhaustible resource.
Language of Space
Office Location

Boss is in the
Penthouse

Boss is in the
Center
Language of Things
 Language of Agreements
U.S. VIEW
TR A CT
CON
The end point of the
negotiation
 Language of Agreements
EASTERN VIEW CON
T RAC
T
This is the
beginning of the
negotiations
Language of Friendship

You take care of Friendship is a

a friend’s family! lifetime thing!

Few -- but very

good friends!

Eastern Cultures
 Key IB Success Factors

• Technical Ability
• Managerial Skills
• Cultural Empathy
• Adaptability and Flexibility
• Diplomatic Skills
• Language Aptitude
• Personal Motives
• Emotional Stability and Maturity
• Adaptability of Family
The IB Curricular Tripod

Language Area

Business
Leadership

Business
Questions