CHAPTER 1 - GLOBALIZATION

Saturday, October 10, 2020 8:25 AM

DEFINITION OF INTERNATIONAL BUSINESS

All business transactions that cross national borders
○ Business transactions: Trade, Investment, Production
Example: Samsung buys VinSmart stock; Samsung builds a factory in Vietnam
○ National borders: Geo, Culture, Race
Example: Vietnamese sells pho to a Korean tourist. Can it be called IB?
YES because there is a cross of national borders on culture and race.

WHY FIRMS ENGAGE IN INTERNATIONAL BUSINESS

• Increase revenue and sales:
○ When the domestic market saturates, firms need to expand its market to increase Rev and
Sales
• Lengthen product life cycle:
○ PLC: Introduction > Growth > Mature > Decline
○ A product (Nokia 1280) can enter Decline phase in country A (Vietnam) but still at earlier
phase in country B (Africa)
• Diversify production input
○ Diversify labor source: Zara has multiple factories in countries with cheap labor
○ Diversify input source to optimize the advantage of different source (cheap labor, cheap
material, high-quality labor, etc.)
• Reduce independence on certain markets
○ Never put all your eggs in one basket - If one market fails, other market can make up for
that failure.

DIFFERENCE BETWEEN IB FIRMS ORIGINATE FROM THE DIFFERENCE IN THEIR IB

STRATEGIES
• International firms:
○ Firms doing IB but mostly engage in international trade --> Import/Export only
• Global firms:
○ Operational activities in many countries (outsource NOT subsidiaries)
○ Example: Apple hires factories in China, hires MKT agency in US, etc.
• Multinational enterprises (MNEs):
○ Operation on a global scale with subsidiaries, branches, agencies belonged to them
○ Example: Viettel can be consider an MNE - subsidiaries in Laos, Algeria, etc.
• Transnational corporation (TNCs):
○ Mixed between Global firms and MNEs

DEFINITION OF GLOBALIZATION
Include: Interdependence - Integration - Interconnection
• Interdependence:
○ Countries no longer totally independence (grow their own food, produce and use their own
product)
○ But countries are rather interdependent on different aspects. They can survive without
each other, but also are influenced directly and indirectly (butterfly effect).
○ Example:

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  Bac Ninh labor force and employment relies a lot on Samsung
 Many countries rely on China - the global factory
 COVID 19 hurts everyone, causes economic downturn to all countries and all
industries: No tourists --> Hotels has to cut down employees
• Integration:
○ Countries integrate with each other to take advantage in trade, social welfare, politics, etc.
○ Example: WTO, GATS, ASEAN, NAFTA
• Interconnection:
○ Countries are connected with each other
○ Example: The spread of trends

STAGES OF GLOBALIZATION
Each stage of globalization is normally triggered by a technological revolution

• Globalization 1.0 (1492 - 1800)

○ The world map started to complete with Colombo finding out America
○ The start of international trade & cultural and religious exchanges
• Globalization 2.0 (1800 - 2000)
○ Characterized by the flourish of MNEs (in 20th century)
○ These MNEs had enormous influences on countries
• Globalization 3.0
○ This era is based on "The world is flat" by Thomas Fredman
○ Triggered by the development of technology and the Internet
○ People all over the world are interdependent on each other
• Globalization 4.0
○ Development of AI and TOT

CHARACTERISTICS OF GLOBALIZATION
1. GLOBALIZATION OF MARKETS
• Definition:
○ The merging of historically distinct and separate national markets into one huge global
marketplace
• Drivers that triggered the globalization of markets:
○ Falling trade barriers makes it easier to sell internationally
 In the past: tariff, NTB => Difficult to penetrate into a new market
 Today: International trade agreements, integration groups => trade barriers are
cut down
○ Converging taste and preferences of consumers worldwide (getting more and more similar)
○ Same basic products worldwide
 No "German market" or "American market", only the global market - but only
for certain kinds of products like food, groceries, etc.

2. GLOBALIZATION OF PRODUCTION
• Definition:
○ The sourcing of goods and services from worldwide
=> Take advantage of national differences in cost and quality of factors of production
• Companies compete more effectively by:
○ Lowering the overall cost structure
○ Improve quality/functionality of their product offering
○ Example:

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  US fashion brands choose to manufacture their garments and clothes in Vietnam,
where labor cost is much cheaper; but their design jobs are still undertaken in France,
Italy, which are considered the capital of fashion.
 Many financial companies place their headquarter in UK or Switzerland - where the
finance is their strength.

EAT LOCAL, SPEND GLOBAL LÀ GÌ?

Eat local: Due to the differences in tastes and preferences
Spend global: Using phones, TVs, clothes, etc. manufactured outside the border

THINK GLOBAL, ACT LOCAL LÀ GÌ?

The strategy implemented by some multinational companies according to which:
○ Global viewpoint is adopted in terms of formulating company vision, long-term aims and
objectives and devising effective strategy in order to achieve these aims and objectives
○ Adaptations are made in each market according to the culture and specifications of any
specific market

From <https://research-methodology.net/think-globally-act-locally-a-critical-analysis/>

DRIVERS OF GLOBALIZATION
• The decline in barriers
○ Free flow of goods, services and capital (GATT, WTO)
• The technological changes (productions, telecom, transportation)
○ Transportation depended on wind or human power in the past. It took a lot more time to
dispatch between two countries that share no border.
○ Today we can eat fresh food from the US within 1 day shipping because we have:
 Bigger ships delivering more goods
 The invention of containers increase the capacity of ships
 The invention of warehouse to keep food fresh for a long time
○ Carriage >> Steamline >> Propeller plane >> Passenger plane >> Container

DIFFERENT PERSPECTIVES ON GLOBALIZATION

HYPERGLOBALIST PERSPECTIVES:
1. Globality is the end state of globalization
• A fundamental shift in the global competitive landscape
• ‘Competing with everyone, from everywhere, for everything.' Business flows in every
direction
• Power is shifting from the US, Europe and Japan to China, India and other rapidly
developing economies

2. The beginning of 21st Century will be remembered for a whole new age
of globalization — a ‘flattening’ of the world
• The explosion of advanced technologies now means that suddenly knowledge-pools and
resources have connected all over the planet, levelling the playing field as never before
• Each of us is potentially an equal — and competitor — of the other
• The world is wired so Indian accountants or software engineers can share an idea, team
their skills or compete head-on for work with their US and European counterparts
• Professionals everywhere, from China to Australia to Costa Rica, can work from home as if
they were in offices next door

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 • Globalization v.1.0, 2.0 and 3.0

SCEPTIC PERSPECTIVE
1. Some critics say the global economy is highly uneven and ‘spiky’ (e.g. Richard Florida)
○ Innovation clusters (number of patents, resulting from a critical mass of
entrepreneurs, scientist, financiers) focus mainly in North America, Europe, East
Asian countries only.
○ Other regions are relatively flat or even sunken.
=> Inequality

2. Some argue that regions are the real competitive units (e.g. Rugman)
Regionalization not Globalization because of TRIAD DOMINANCE
○ Largest 500 MNEs are not spread world-wide but clustered around the major regions
(the ‘triad’)
 85% of cars produced in North America are sold there; over 90% of cars
produced in the EU are sold there; over 93% of cars sold in Japan are made
there
○ World’s 500 largest companies:
 72% of all sales are within their home region (e.g. Wal-Mart 94%; General
Motors 81%; Kingfisher 98%; Vodafone 93%; Mitsubishi 93%)
○ Only 9 truly global MNEs, other are actually focusing on their region regarding their
sales.
3. And is any of this really ‘new’? (e.g. Hirst & Thompson)

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CHAPTER 2 - POLITICAL AND LEGAL
ENVIRONMENT
Saturday, October 10, 2020 10:40 AM

• In real estate, the mantra is "location, location, location".

For global brand managers, it might be "localize, localize, localize".
--> You have to customize your products.
• When doing business, we need to consider both global and local aspect.
• Semi-globalization: Globalization is happening, but national differences still exist.
• Analyze the political economyof a country --> Analyze the political, economic and legal
system.

POLITICAL SYSTEM
• Is the system of govt. in a nation
• 2 dimensions to consider:
○ Collectivism or Individualism
○ Totalitarian or Democratic
• There is a relativity between these 2 dimensions:
○ Collectivism often goes with Totalitarian, Individualism often goes with Democratic
○ But hardly any countries are pure collectivism or individualism, pure totalitarian or
democratic.
○ Most are the mixture of both.

1. COLLECTIVISM
• Collectivism
○ Stresses the primacy of collective goal over individual goals.
○ Emphasize that individual may have to sacrifice for the collective goal of the majority.
○ Traced back to Plato
• Socialism is a modern adaptation of collectivism
○ Advocate the state ownership of basic means of production, distribution and exchange
○ Benefit society as a whole rather than individual capitalists
○ Communism (socialism can only be achieved through revolution) & social democrats
(socialism can be achieved through democratic means)
○ Karl Marx

2. INDIVIDUALISM
• An individual should have freedom in his own economic and political pursuits
• Individual diversity and private ownership are desirable
• Democratic political systems => Free market economies
• Traced back to Aristotle
• The growth of free market ideas: Adam Smith "Invisible Hand"
• 2 dimensions: Freedom + Private ownership

3. DEMOCRACY
• Government directly voted by nation citizens.
• Pure democracy is based on the belief that citizens should be directly involved in decision
making.
• Most modem democratic states practice representative democracy where citizens
periodically elect individuals to represent them

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 4. TOTALITARIANISM
• A form of govt. in which one person or political party exercises absolute control over all
spheres of human life and prohibits opposing political parties.
• Including:
○ Communist totalitarianism
 Communist party monopolizes power
○ Theocratic totalitarianism
 Monopolized by a party, group or people that governs according to religious
principles
○ Tribal totalitarianism
 A political party that represents the interests of a particular tribe land (and not
always the majority of the tribe) monopolizes power
○ Right-wing totalitarianism
 Freedom in economy but monopolized political power
 Permit some individual economic freedome but restrict individual
political freedom
 Over-hostility to social list/communist ideas
 Govt. are backed by the military or may be made up of military officers
 Example: The fascism regime in WW2

WHEN ANALYZING POLITICAL SYSTEM OF A COUNTRY, CONSIDER:

• The political system based on 2 dimensions:
○ Collectivism or Individualism
○ Totalitarian or Democratic
• The party situation and its impacts
• The political stability status
• Transparency: Corruption index
• Political risk

LEGAL SYSTEM
• Definition
○ The rules that regulate behavior along with the processes by which the laws are
enforced and through which redress for grievances is obtained
• Roles
○ Regulate business practices
○ Define the manner in which business transaction are to be executed
○ Set down the rights and regulations for those involved in business transaction
○ Affect the business environment attractiveness to foreign investors
• The legal system is influenced by:
○ Political system
○ Historical traditions
• The legal system is provided by the country rulers and reflects the regulator's
political ideology
○ A totalitarian country with collectivism orientation will be likely to enact laws that restric
operations of private sectors.
○ A democratic country with individualism emphasis has a tendency to support and
promote private enterprises and the right of customers.
• Types of legal systems
○ Common law

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 ○ Civil law
○ Theocratic law

1. COMMON LAW
• Based on tradition, precedent and custom
○ Tradition - Legal history
○ Precedents - Similar cases that happened before
○ Custom - Laws will base on specific situations and vary accordingly
• Applied in UK and its former colonies, including the US
• Flexibility: Greater level of flexibility => Greater power to interpret the law of the judges

2. CIVIL LAW
• Based on detailed set of laws organized into codes (80 countries)
• Applied in Germany, France, Japan, Russia, etc
• Flexibility: Less controversial than Common Law because of less flexibility and less power to
interpret

3. THEOCRATIC LAW
• Based on religious teachings
• Islamic law is the most widely practiced theocratic legal system
○ Is a moral law rather than a commercial law, govern all aspects of life
○ Foundation:
 The Quran Holy Book of Islam
 The Sunnah
 Decisions and sayings of prophet Muhammad
 Writings of Islamic scholars how have derived rules by analogy from the principles
established in the Quran and Sunnah
○ Cannot change/amend over time
• Applied with Common/Civil law because theocratic law cannot be applied in some situations,
especially commercial ones
• Example: Muslim banks are not allowed to give loan and receive interests in exchange.

INTERNATIONAL LEGAL ISSUES

• Contract:
○ Contract is a document that specifies the conditions under which an exchange is to
occur and details the rights & obligations of the parties involved
○ Contract enforcement is governed by the contract law:
 Defines the condition in which the exchange of goods and services happens
 Defines responsibilities of each party
 Defines in different dispute situations which laws will be applied
○ When contract disputes arise in intl. trade, international laws (Multilateral / Bilateral
treaties) will be aplied.
• Property rights
○ Legal rights over use to which a resource is put and income derived
• Intellectual Property Rights (IP)
○ Patents, copyrights, trademarks: major bone of contention especially in info-based
economies
• Product safety and liability
○ Product safety law set a certain safety standards protecting consumers
○ Product liability involves holding a firm and its officers responsible when a product

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 causes injury, death or damage
• Enforcement of national and international laws

POLITICAL RISKS
1. POLITICAL RISKS
• Discontinuities
• Uncertainty: ruling party changes, etc.
• Political forces
○ Example: A green company lobby the ruling party to act against unhealthy food
=> Causing obstacle to fast-food investors
• Business impacts
○ Macro
○ Micro
• Administration procedures: Time to proceed paperwork

2. SOURCES OF POLITICAL RISKS

• Xenophobia
• Social unrest/disorder
• Internal rebellion: Thailand
• Armed conflicts between nations
• Local business groups

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CHAPTER 3 - ECONOMIC ENVIRONMENT
Saturday, October 10, 2020 10:47 AM

ECONOMIC ENVIRONMENT
Definition: The totality of economic factors, such as employment, income, inflation, interest rates,
productivity of a nation

TYPES OF ECONOMIC SYSTEM

1. Traditional economy:
• Family or community based economy (tribes).
• System relies on custom or ritual
• Decisions made by the elders
• Eg: Aborigines, Amazon tribes - where the community is a self-distinct community that produce
and consume what they produce

2. Market Economy:
• A free-market (capitalistic) economy built upon the private ownership and control of the factors
of production.
• System relies on consumption choices (Demand — supply principle)
• Against monopolies
• Eg: USA, Japan - where people privately own their property, they can use the property based on
their willingness and the market will exercise based on its invisible hand

3. Command Economy:
• A centrally-planned economy built upon government ownership and control of the factors of
production.
• System relies on Government decision
• Often go with collectivism and totalitarianism govt.
• Less developed than Market Economy
• Eg: Cuba, North Korea - whre the govt. control the supply side independently of the market
demand

4. Mixed Economy:
• An economy in which economic decisions are largely market-driven and ownership is
largely private, but significant government intervention is still evident.
• Eg: Most modern economies, such as the govt. monopoly of electricity in VN

STAGES OF ECONOMIC DEVELOPMENT

1. Preindustrial countries
• Incomes < USD 400
• Limited industrialization
• Low literacy rates
• High birth rates
• Heavy reliance on foreign aid
• Political instability.

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 2. Less developed countries (LDCs)
• Income between USD 401 and USD 1,635
• Early stages of industrialization
• Growing domestic market.

3. Developing countries
• Income (USD 1,636 - USD 5,500)
• Decrease in percentage of agricultural workers
• Industrialization
• Rising wages
• High literacy rates.

4. Industrialized countries
• Income (US$ 5,501 - US$ 10,000)
• Post industrialization
• High standard of living

5. Advanced countries (OECDs)

• Income> USD 10,000
• Post industrialization
• knowledge based - less machine based

GDP & GNI

• GDP: is the total value of all goods and services produced w i thi n a nati on’s bor der s .
• GNI: measures the income generated by both total domestic production and the international
production activities of national companies.
• Per capita income: GNI/GDP divided by the number of people living in a country.

ECONOMIC FREEDOM
• The key ingredients of economic freedom are:
○ personal choice
○ voluntary exchange coordinated by markets;
○ freedom to enter and compete in markets; and
○ protection of persons and their property from aggression by others.
• Economic system is largely influenced by legal and political system of a country
○ Democratic + individualism => Higher economic freedom
○ Totalitarianism + collectivism => Lower economic freedom (the economy is interferred or
governed by the State, no free and fair competition, etc.)
• State of play:
○ US: Demand and supply only
○ China: Economic decisions of firm are influenced by the govt. and local authority
○ Vietnam: The economic recession in 2010 caused higher govt. interference in some econmic
activities => Lower level of economic freedom

PURCHASING POWER PARITY

• Is the number of units of a country's currency required to buy the same amounts of goods and
services in the domestic market that one unit of income would buy in the other country

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 • Reflect the power of people using their money

Big Mac Index — Big Mac theory

If a Big Mac costs €3.38 in countries that use the euro and $3.73 in the US
=> PPP rate is 3.38/3.73 = 0.91.
○ If the actual exchange rate for the euro is lower than the implied PPP rate
=> The value of the euro might go up until it reaches the implied PPP rate
○ If the actual exchange rate is higher
=> The euro will go down until it hits the implied PPP rate

HUMAN DEVELOPMENT INDEX

• Developed by Pakistan economist Mahbub UI Haq (1990)
• Measures the average achievements in a country on three dimensions
○ Longevity: life expectancy at birth
○ Knowledge: adult literacy rate
○ Standard of living: GNI per capita
• State of play
○ Vietnam (HDL - 2010) = 0.590 (113/187) => 0.593 (2011)128/187
○ International medium HDI = 0.630, East and Asia Pacific = 0.671
○ Thailand = 0.682 (103/187)
○ Philippines = 0.644 (112/187)
○ Pakistan = 145/187
○ India = 134/187

GREEN ISSUES OF DEVELOPMENT

• Growing concern for the ecological welfare of the world spurs calls for green measures of GNP.
• Pollution, climate change.
• Recycling
• Green products.
• Corporate social responsibility

GROSS NATIONAL HAPINESS INDEX (GNH)

• Developed in an attempt to dedine an indicaor that measures quality of life or social progress in a
more holistic and psychological terms than GDP
• Coined in 1972 by Bhutan's fourth Dragon former king Jigme Singye Wangchuck who has opened
Bhutan to the age of modernization
• VN: 96 (2010)

IMPLICATION FOR MANAGERS

• Inflation/deflation: price index and cost of living.
• Unemployment: civilian labor force, labor regulations
• Debt: internal and external debt
• Income distribution/inequality: globally, within the country, GlNl index, urban vs. rural
• Poverty, Labor costs, Productivity
• Balance of Payments

ECONOMIC RISKS
• High inflation

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 • Protectionism
• Unstable exchange rate
• Trade deficit
• The euro (€) zone breaks up
• The global economic recession
• Public debt spirals out of control

By your own opinion, argue this following statement:

“…the wide variation and the different of economic development level is one of some
significant reasons for the current struggles of EUROzone.”

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CHAPTER 4 - CULTURAL ENVIRONMENT
Saturday, October 10, 2020 12:02 PM

“Culture is more often a source of conflict than of synergy. Cultural differences are a nuisance at
best and often a disaster."

DEFINITION OF CULTURE
A system of value, norms and beliefs that are being shared among groups of people

ELEMENTS OF CULTURE
• Religion
• Language
• Aesthetic: viewpoint over what is beautiful or not
• Political - economic philosophies: e.g. buying habit and behavior
• Education: viewpoint over what is focused - theory/practice/talents
• Social structure: social classes and castes

RELIGION
There are four main religions in the world:
1. Christianity
• The world's most widely practiced (20% world population)
• Grew out of Judaism (đạo Do Thái)
• A monotheistic religion
• 11th century: 2 major Christian organization
○ The Roman Catholic Church: > 1/2 Christians (Giáo hội Công Giáo)
○ The Orthodox Church: less influencing (Chính thống Giáo)
• 16th century: Protestanism (đạo Tin lành)

2. Islam
• World's 2nd largest religion
• Dates back to AD610 with Prophet Muhammad
• Roots: Judaism + Christianity
• Monotheistic religion
• Requires unconditional acceptance of the uniqueness, power, authority of God and the
understanding hat the objective of life is to fulfill the dictates of His will in the hope of admission
to the paradise

3. Hinduism
• ±750M adherents, mostly in India
• World's oldest major religion
• Belief in reincarnation (luân hồi) and karma

4. Buddhism
• ±350M adherents
• "Suffering originateds from people's desire for pleasure"
• Doesn't support caste system (hệ thống đẳng cấp) and extreme ascetic behavior (khổ hạnh thái
quá)
• Stress the afterlife and spiritual achievement rather involvement in this world

NOTE: CONFUCIANISM is not a religion, but influences and shapes the culture in many part of Asia.

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 LANGUAGE
• There are 3,000 language and as many as 10,000 dialects worldwide
• Language can be a competitive weapon
• Verbal or non-verbal language is a very important skill for business people
• Example:
○ Thumb-up can mean OK, alright - or can either have offensive meanings
○ For Japanese people:
 Bending body upward is a greeting sign
 Showing business card should be responded by asking about some details to show
that you're paying attention. If you put it away, it shows offensive behavior.

HOFSTEDE'S FIVE DIMENSIONS OF CULTURAL DIFFERENCES (FINAL

MCQ)

1. POWER DISTANCE
• Definition:
○ The extent to which the less powerful members of institutions and organizations within a
country expect and accept that power is distributed unequally
• State of play:
○ The power distance in Asia is higher than that in Europe
• Comparision between low and high power distance:

LOW POWER DISTANCE HIGH POWER DISTANCE

○ Minimize the inequalities among people ○ Inequalities among people are expected & desired
○ Interdependence between less and more ○ Less powerful people should be depended on
powerful people the more powerful

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 ○ Flat hierarchy pyramid ○ Slope hierarchy pyramid
○ Power decentralization ○ Power centralization
○ Narrow salary range ○ Wide salary range
○ Subordinated expect to be consulted ○ Subordinated expect to be told what to do
○ The ideal boss is a resourceful ○ The ideal boss is a benevolent autocrat/good father
democrat ○ Privileges and status are both expected
○ Privileges and status are disapproved and popular

• Orientation towards authority:

• Example:
○ A company from Austria (low power distance) is considering entering the Vietnam (high
power distance) market.
○ Communication tips for the Austrian managers:
 Give clear and explicit directions to those working with him
 Deadlines should be highlighted and stressed
 Do not expect subordinates to take initiative
 Be more authoritarian in his management style
 Show respect and deference to those higher up the ladder

2. UNCERTAINTY AVOIDANCE
• Definition:
○ The extent to which members of a society feel threaten by uncertain or unknown situations
• Comparision between weak and strong uncertainty avoidance
WEAK UNCERTAINTY AVOIDANCE STRONG UNCERTAINTY AVOIDANCE
○ Uncertainty = Normal feature of life and each ○ Uncertainty = A continuous threat that must
day is accepted as it comes be fought
○ Low stress–subjective feeling of well-being ○ High stress–subjective feeling of anxiety
○ Aggression and emotions must not be shown ○ Aggression and emotions may be shown at
○ Comfortable in ambiguous situations and proper times
with unfamiliar risk ○ Fear of ambiguous situations and of unfamiliar
○ There should not be more rules than necessary risk
○ Precision and punctuality have to be learned ○ Emotional need for rules, even if they never work
○ Precision and punctuality come naturally

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 ○ Tolerance to innovation ○ Resistance to innovation
○ Motivation by ○ Motivation by security
achievement

• Desires for stability:

• Example
○ A company from France (high uncertainty avoidance) is considering investing in Denmark
(low uncertainty avoidance)
○ Communication tips for the French manager:
 Try to be more flexible or open in his approach to new ideas than he may be used to
 Be prepared to push through agreed plans quickly as they would be expected to be
realized as soon as possible
 Allow employees the autonomy and space to execute their tasks on their own; only
guidelines and resources will be expected of him

3. INDIVIDUALISM AND COLLECTIVISM

• Definition of individualism
○ The tendency of people to look after themselves and their immediate family and neglect the
needs of society
• Comparision between low and high individualism
LOW INDIVIDUALISM HIGH INDIVIDUALISM
○ Individuals learn to think in terms of“we” ○ Individuals learn to think in terms of“I”
○ Diplomas provide entry to higher ○ Diplomas increase economic worth and/or
status groups self- respect
○ Relationship employer-employee is ○ Relationship employer-employee is a
perceived in moral terms, like a family contract based on mutual advantage
○ Hiring and promotion decisions take ○ Hiring and promotion are supposed to be based
employees’ ingroup into account on skills and rules only
○ Management is management of groups ○ Management is management of individuals
○ Relationship prevails over task ○ Task prevails over relationship

• Individualism

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• Example:
○ A company from UK (high individualism) is considering investing in Mexico (low
individualism)
○ Communication tips for the UK manager:
 Note that individuals have a strong sense of responsibility for their family
 Remember that praise should be directed to a team rather than individuals
 Understand that rewards depend upon seniority and experience
 Be aware that the decision making process will be rather slow, as many
members across the hierarchy need to be consulted

4. MASCULINITY OR FEMINITY
• Definition of masculinity
○ The tendency within a society to emphasize traditional gender roles
• Comparison between low masculinity (feminity) and high masculinity
LOW MASCULINITY HIGH MASCULINITY
○ Dominant values: caring for others and preservation ○ Dominant values: material success and progress
○ People and warm relationships are important ○ Money and things are important
○ Sympathy for the weak ○ Sympathy for the strong
○ In family, both fathers and mothers deal with ○ In family, fathers deal with facts and mothers
facts and feelings with feelings
○ Stress on equality, solidarity, and quality of work life ○ Stress on equity, competition among
○ Managers use intuition and strive for consensus colleagues and performance
○ Resolution of conflicts by compromise ○ Managers are expected to be decisive and
and negotiation assertive
○ Resolution of conflicts by fighting them out
• Masculinity

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• Example
○ A company from Denmark (low masculinity) is considering investing in Mexico (high
masculinity)
○ Communication tips for the Danish manager:
 Be aware that people will discuss business anytime, even at social gatherings
 Avoid asking personal questions in business situations
 Take into account that people are not interested in developing closer friendships
 Communicate directly, unemotionally and concisely
 In order to assess others use professional identity, not family or contacts

4. LONG-TERM ORIENTATION
• Definition:
○ A basic orientation towards time that values patience
• Comparison between short-term and long-term orientation:
SHORT-TERM ORIENTATION LONG-TERM ORIENTATION
○ Respect for traditions ○ Adaptation of traditions to a modern context
○ Little money available for investment ○ Funds available for investment
○ Quick results expected ○ Perseverance towards slow results
○ Respect for social and status obligations ○ Respect for social and status obligations
regardless of cost within limits
○ Concern with possessing the Truth ○ Concern with respecting the demands of Virtue

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CHAPTER 5 - INTERNATIONAL BUSINESS
STRATEGIES
Saturday, October 10, 2020 5:40 PM

DEFINITION OF INTERNATIONAL BUSINESS STRATEGIES

The overal strategies for firms when following international business activities

STRATEGY
• Origin: In business theory in 1960s
• Definition: A broad formular that answers 3 questions (M. Porter)
○ How to compete?
○ What are the goals? (Goals should be set in accordance with the SMART model)
○ How to achieve these goals? (Plan should be established)
• Example: I want to lose 5kgs
○ Set the goal: Lose 5kgs after 3 months
○ How to compete: Skip meals
○ How to achieve: A plan of calories I consume every day

BUSINESS STRATEGIES

GOALS OF BUSINESS STRATEGIES

VALUE
1. What is value
• Each product we buy has certain value, which is the amount of money you're willing to
pay for.
• For example, I'm addicted to mobile phone, this item is valuable to mea and based on my
condition, I'm willing to pay up to 25M for mobile phone. But if you're not very interested in
mobile phone, you might be willing to pay only no more than 15M for mobile phone.
=> The value of product is different for different people.

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 2. How is value created?

TYPES OF BUSINESS STRATEGIES

1. LOW COST STRATEGY
• Companies try to have the lowest cost compared to other competitors in the industry with
features which are accepted by customers
• Companies will try to reduce costs of inputs or increase the efficiency in management.
• Example: Walmart, Dell, Vietjet Air - products for normal people with good prices

2. DIFFERENTIATION STRATEGY
• Competing on the basis of having unique characteristics for their products or services
that are widely valued by customers
• Companies do not care much about costs and invest in R&D and marketing to attract
customers
• Example:
○ Nordstrom retail: appears luxurious to customers and provides good customer service
=> Able to charge higher price
○ Rolex: Image of a successful man
○ Toyota: Reliable - Durable
○ Starbuck: 30 quality - 70 atmosphere

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STRATEGIC POSITIONING: Low Cost or Differentiation?

Efficiency curve:
• The efficiency curve represents the effiency level of strategies applied, and is curved
because of the diminishing return principle:
○ The higher the cost, the lower the differentiation
○ The higher the differenciation, the lower the cost
• Not all points on the efficiency curve are attractive:
○ At the highest point of differentiation, the cost is too high that there would be no
customers
○ At the lowest point of cost, the company would have to sell at lost in order to remain
in the market
• Companies cannot totally follow a pure low-cost strategy or a pure differentiation strategy

Case when differentiation is the only choice: WHEN LEVEL OF

COMPETITION IS HIGH
Porter Airlines (2006)
○ Positioned as a middle-class provider but the low-price flight segment has already
been saturated
○ But normally, the airport is far from the city centre, which takes hours to get to the
airport

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 ○ So Porter Airlines shifted to differentiation by owning and locating their own airports
near the city centre so that passengers can get here in about 5 minutes
○ This stategy has been successfully applied

INTERNATIONAL BUSINESS STRATEGIES

HOW CAN FIRM INCREASE PROFITS THROUGH INTERNATIONAL

EXPANSION?
• Expanding their market: Demand is higher -> sell all around the world
• Realize the location economies and exploit resources at their best prices and effiency
○ R&D in America, designing in France
○ Manufacturing in VN, China
• Realize greater cost economies from experience effects (sell a certain amounts, then
gradually find ways to perform better and eventually reduce costs)
• Realize economies of scale and earn greater returns, utilize fixed costs, etc.
- Ability to spread fixed costs over a large volume
- A firm may not be able to attain an efficient scale of production unless it serves global
markets
- Global sales increase the size the entreprise, so its bargaining power with suppliers
increases, which may allow it to attain economies of scale in purchasing, bargaining down
the cost of inputs and boosting profitability.
 Firm core competencies: Skills within the firm that competiors cannot easily match or imitate
(can exist in any value creation activity). Core competencies allow firms to reduce the costs ò
value creation and to create perceived value so that premium pricing is possible.
VD: P&G: the products and marketing strategies

COMPETITIVE PRESSURE IN GLOBAL MARKETPLACE

COST REDUCTION vs. LOCAL RESPONSIVENESS

1. PRESSURE FOR COST REDUCTION:

This is due to:
• In theory: P = C + profit
 About competitors:
- The emergence of competitors from regions/ with comparative cost advantages
- Trade liberalization -> facing more and more competitors from many other countries
 About customers:
- There is a trend towards consuming globally standardized goods
- Tends to be price-sensitive
• Globalization led to the emergence of global maket
○ A global marketplace was formed when the world transformed towards a more
interdependent - integrated - interconnected orientation
○ Customer preference homogeneity: Customer preference is getting more and more
converging (similar)
• Benefits of product standardization
○ Reducing costs through: location economies; economies of scale and learning effects
• Applicable industries:
- Industries with high price competion pressure: aviation, transportation
- Industries that can produce industrial products on a large scale: electronics,
telecommunications,… or industries that supply common productsL washing powder, oil,
rice…
-

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 NOTE: Every firm face the pressure for cost reduction.

2. PRESSURE FOR LOCAL RESPONSIVENESS

• Definition: Pressure forces businesses to ffocus all efforts on adjusting products
This is the pressure to meet the demand for:
• Differences in:
○ Consumer tastes and preferences: VD McDonald’s in India
○ Traditional practices and infrastructure
 Buy electronic goods from Japan and bring back to Vietnam for usage
=> Need an adapter because Japanese use 110V electricity, Vietnamese use
220V electricity
 Japanese drive on the left side of the road, Vietnamese drive on the right
=> The steering wheel of the car is on the opposite side
○ Distribution channel
 German buy at the supermarket => Investors must target at the supermarkets
 Spanish buy at the local store => Investors must target at the local stores
• Host government demands
 Foreign investors want to penetrate into Vietnam must take the form of
joint ventures
CASE STUDY: WALMART

• Walmart is the biggest retailer in the world

• Advantage: Low storage cost, inventory, efficient logistics

• The international expansion of Walmart

○ Walmart in US are located in regional area, remote area to lower location
cost. This is possible because American go to supermarket periodically.

○ Walmart when penetrating

China
 Difference in customer habit: Asian go to supermarket every day
 Host government demand: Joint-venture
 Walmart adaptation:
 Pack everything in small quantity
 80% imported from the US - 20% sourced locally
=> remain the international characteristics to local customers
 Issue member cards
 Satelite stores near the local residence

○ Walmart when penetrating Brazil

 Entered late when Brazil has already have big and famous supermarkets
 Competitors had good relationship with customers but the
customer service is low
 If Walmart used price competition => Competitors would lower their
price to, but remain superior due to their incumbent relationship with the
customers
 Walmart adaptation: Provide big to large range of product with
good customer service

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 INTERNATIONAL BUSINESS STRATEGY
• When analyze the strategy of a company:
○ Because IB strategies change over time, so:
 In what period of time they apply this strategy?
 In which market they apply this strategy?
• How to analyse the IB strategy of a company:
○ Analyze the characteristics of the strategy
○ Assess whether the strategy is appropriate based on the characteristics of the market
○ Suggest recommendation from the characteristics of the market

1. International Strategy
• When to apply:
○ Low cost reduction pressure
○ Low local responsive pressures.
• Characteristics:
○ Centralizing product development activities in the Headquarter
○ Running production and marketing in international brands under strict control of the
Headquarter
○ Create value through core competencies
○ Easiest strategies: Keep everything the same, just export internationally
 This is the simpliest form of IB strategy.
 Applied when firm first goes global or is in the initial stage of development.
 Almost their core activities are kept in their home countries and they only
export their producst or services to the international market.
 The product/service sold in the international market can be modified a little bit or
marketing in a different way in order to meet the tastes and preferences of local
consumer (color, size, etc.)
 But the overall characteristics remain unchanged
• When cannot apply:
○ After a period of time, when the technology is not the core competency any more and
competitors emerge
 Pressure for cost reduction and local responsiveness increase
 International strategy cannot be applied anymore
• Example: Coca Cola applied international strategy when they first went global
• Pros: transfer core competencies to foreign market
• Cons:
○ Lack of local responsiveness
○ Unable to exploit the EC (experience curve) and ES (economies of scale)

2. Global Standardization Strategy

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  Sản xuất 1 sản phẩm giống nhau cho tất cả thị trường, chủ yếu cạnh tranh về giá
 Will allocate their value chain and supply chain in the most efficient way
 Micro chips, hàng điện tử, automobile, telecommunication equipment

 When to apply:
○ Strong pressure for cost reduction
○ Low pressure for local responsive
 Characteristics:
○ Offer an universal product to the whole world market
○ Focus on reducing costs through exploiting experience effects, location economies
and economies of scale
 Example: Apple
○ Coi taste của tất cả mọi người giống nhau, market as a whole globally, không có thị trường riêng
của từng nước mà chi có 1 thị trường trên toàn thế giới
○ R&D ở Mỹ, outsource các hoạt động khác bên ngoài Mỹ - Linh kiện bán dẫn và màn hình từ Hàn
Quốc, chip từ Nhật Bản, lắp ráp tại Trung Quốc và xuất khẩu đi khắp thế giới
 Pros:
○ Exploit the experience curve (EC) effect and economies of scale (ES)
○ Cost effectiveness
 Cons: Lack of local responsiveness

3. Localization (Multi-domestic) strategy

 Đặc điểm địa phương khác nhau

 Thay đổi sản phẩm để phù hợp với thị hiếu của địa phương
 Thị hiếu và sở thích là điều quan tâm chủ yếu
 Giá cả không quá ảnh hưởng
 Almost all food retailing adapt this strategy

 When to apply:
○ Low pressure for cost-reduction
○ Strong pressure for local responisve
 Characteristics:
○ Customize products/services, business strategies (include production, product R&D,
marketing) based on particular market conditions to match the local taste
○ Headquarter only builds the general stategy.
○ Subsidiary in each market has a lot of power in deciding what they will do with their
market => Increase cost
 Example: McDonald’s
○ Giám đốc vùng có quyền trong việc quyết định bán sản phẩm gì
○ Từng địa phương có quá nhiều khác biệt: McDonald's Ấn Độ không bán BigMac vì người
Ấn Độ không ăn thịt bò, nhưng lại cho ra nhiều dòng burger gà, burger chay
 Pros:
○ Customize products and services along with real demands for market
○ Minimize risks arising from differences between countries
○ Flexibility in handling issues
○ Exploiting the capabilities of branches
 Cons:
○ Lack of cost reduction pressure =>
○ HIGH COST: due to cumbersome multinational management apparatus -> increased cost
○ Unsustainable trategy due to emergence of competitors with better cost structures

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4. Transnational Strategy (chiến lược xuyên quốc gia)

 The ultimate form of IB strategy

 Most complicated but also most promising strategy
 Often applied with pharmaceuticals

• When to apply:
○ Strong pressure for cost reduction
○ Strong pressure for local responsive
• Characteristics:
A combination of global standardization strategy and multi-domestic strategy
=> All characteristics:
○ Lower cost
○ Develop different competencies and skills at foreign branches
○ Understand and realize the differences of each market systematically
○ Link and share these knowledge in the whole system (Ability to learn and transfer all their
knowledge to their branches)
• Example: P&G
• Pros:
○ Exploit the EC and ES
○ Cost effectiveness
○ Customize products and service along with real demands of market
○ Develop global learning system
• Cons: Require good-structuring organization

*Globalization forces => Cost reduction pressure

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HOW DOES IB STRATEGIES EVOLVE?

*As competitors emerge, international and localization strategies become less viable.

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CHAPTER 8 - ORGANIZATION STRUCTURE
Sunday, October 11, 2020 10:32 PM

VERTICAL DIFFERENTIATION
Where the decision making power is concentrated or not

1. CENTRALIZED DECISION-MAKING
• Characteristics
○ Centralized decision made by on or several top managers at the head quarter
○ Consistent decision passed through the whole organization's body, organization's objective
○ Lower managers do not have right to change decisions of upper level
○ Tight control in all decisional actions
○ Avoid duplication of activities and decisions
• Where to apply: GLOBAL STANDARDIZATION STRATEGY
○ There is one identical product
○ The company's value chain spreads to various places in the world
 To avoid conflict in decisions and ensure decisions are made by competent managers
 Eg: Vietcombank, Vietinbank,

2. DECENTRALIZED DECISION-MAKING
• Characteristics
○ Decisions may be made at all level of organization
 There will be a lot of layers in the organization so each people at each level will be
given certain power to make decisions, depending on the importance of the decision
○ Relief the burden for the headquarter for making decisions
○ Motivate individuals and personal innovation
 If you do what you're told, you'll have NO motivation to be innovative, creative
and active
○ Greater flexibility
 The top manager can have one way to deal with the problem
 But you're given certain level of making decisions, which is the tendency for you to
be more flexible
 It takes a lot of time and is not suitable for urgent situations
○ Decisions suitable with the real situation of the market
 For example, a university has a centralized decision-making
 If there is any problem with the class, the teach has to ask the Principal for guidance
 The Principal might not know exactly what's going on so his decision may not be the
best decision for the class
• Where to apply: LOCALIZATION (MULTI-DOMESTIC) STRATEGY
• Drawback: Conflict with the overall strategy of the company
 Eg: Uniqlo having a lot of stores. They decided to launch a new series of T-shirt. But this week in
Hanoi is too cold -> regional manager make decision to when to launch the product.

HORIZONTAL DIFFERENTIATION
How the firm divides into sub-units

AT HOME COUNTRY
1. FUNCTIONAL STRUCTURE

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 *Advantage: Specialization + Best outcome
* Divides by functions such as marketing, finance, production and human resources.
* Best for companies with a narrow product range and a global standardization strategy.

2. PRODUCT DIVISIONAL STRUCTURE

• Rationale: Each product line is different. We cannot apply the same strategy for each product
• Disadvantage: Costly, less cooperation/interaction among departments in different product lines
3. CUSTOMER-BASED DIVISION
 Structured around specific customer segments
 Ideal for businesses serving distinct customer groups
4. GEOGRAPHICAL DIVISION STRUCTURE
 Divides operations by regions or countries
 Support localization
WHEN GO GLOBAL, WHAT SHOULD THEY DO?
1. INTERNATIONAL DIVISION

• They often group all of their international activities into an international division

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 ○ Firms with a functional structure at home would replicate the functional structure in the
foreign market
○ Firms with a divisional structure at home would replicate the divisional structure in the
foreign market
• Potential for conflicts and coordination problems between domestic and foreign operation
(International division deals with IB activities, not interfering with domestic activities)
• This is the easiest way for firm which first goes global
2. WORLDWIDE PRODUCT DIVISIONAL STRUCTURE
Adopted by firms that already have domestic product divisions

• Transfer core competencies among subsidiaries

• Help realize location economies, experience effect and economies of scales
• Effective where local responsive is LOW
• Not good for high local pressure responsive
 Each division take care of both domestic and foreign activities
 Best fit with GLOBAL STANDARDIZATION + INTERNATIONAL STRATEGY (product doesn't change much)

3. WORLDWIDE AREA STRUCTURE

Favored by firms with low degree of diversification and a domestic structure based on function

• Divide the world into autonomous geographic areas

• Decentralize operational authority
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 • Effective where the local responsiveness IS HIGH
• Best fit with LOCALIZATION STRATEGY
• Can result in a fragmentation of the organization
• Different product line for each region => Manager in each region has a lot of decision-making
Power
4. GLOBAL MATRIX STRUCTURE
An attempt to minimize the limitation of the worldwide area structure and the worldwide product
divisional structure

• Allow for differentiation along two dimensions: Product division + Geographic area
• Have dual decision-making: Product division and Geographic area have equal responsibility for
operating decisions
• Can be bureaucratic and slow
• Can result in conflict between areas + product divisions
• Can result in finger-pointing between divisions when something goes wrong

INTEGRATING MECHANISM:
1. FORMAL INTEGRATING MECHANISM

• Simpliest formal integrating mechanism is direct contact between sub-unit managers (nhân viên
phòng A nói chuyện trực tiếp với nhân viên phòng B)
• Second simpliest is liaisons: Công việc khi phát sinh vấn đề yêu cầu nhân viên 2 bộ phận khác nhau
phải làm việc với nhau thì nhân viên phòng A sang phòng B làm việc với vai trò đại diện và sẽ giải
quyết mọi vấn đề cần sự hỗ trợ của phòng A cho phòng B
• Temporary or permanent teams composed of individuals from each sub-unit is the next level of
formal integration
• The matrix structure allows for all roles to be integrating roles (temporary only)
- Clearly defined structure
- Hierarchy of Authority
- Rules and Procedures
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 2. INFORMAL MECHANISM

A knowledge network is a network for transmitting information within an organization that is

based no on formal organisation structure but on informal contacts between managers within an
enterprise and on distributed information systems
3. STRUCTURAL INTEGRATING MECHANISM
STRATEGY - STRUCTURE

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MODES OF ENTRY

Entering a foreign market: Once attractive markets are identified, the firm must consider the
timing of entry.
- Export: the process of producing goods or services in one country and selling
them to customers in another.
- Wholly owned subsidiaries
- Joint Venture
- Turnkey Project
- Franchising
- Licensing
Fair Trade: a person comes to the farmers to buy the products then sell to another for higher
prices.

1. Export
- Choose exporting:
+ avoid the costs of establishing local manufacturing operations
+ helps the firm achieve experience curve and location economies
- Not choose exporting:
+ high transportation costs and tariffs can make it uneconomical
+ agents in a foreign country may not act in exporter’s best interest
- Type of exporting:
+ Indirect exporting (EMC: export management companies)
+ Cooperative Exporting (piggyback)
+ Direct exporting
2. Wholly Owned Subsidiary
3. Joint Venture
4. Turnkey Project
 Common for:
- Large scale infrastructure: roads, bridges, airports
- Energy and utilities
- Manufacturing facilities
 Advantages:
- Minimal risk
- Quick Entry Strategy
- Government and Large Business contracts
 Disadvantages:
- Lack of long term market presence
- Knowledge transfer: for the foreign business

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