I. CRITICAL THINKING AND DISCUSSION QUESTIONS Question 1. The choice of strategy for a multinational firm must depend on a comparison of the benefits of that strategy (in terms of value creation) with the costs of implementing it (as defined by organizational architecture necessary for implementation. On this basis, it may be logical for some firms to pursue a localization strategy, and still others a transnational strategy”. Is this statement correct? Question 2. Discuss this statement. An understanding of the causes and consequences of performance ambiguity is central to the issue of organizational design in multinational firms. Question 3. Describe the organizational architecture that a transnational firm might adopt to reduce the cost of control. Why did Unilever’s decentralized structure make sense in the 1950s1970s? Why did this structure start to create problems for the company in the 1980s?
International Business I CRITICAL THINKING AND DISCUSSION QUESTIONS Question The choice of strategy for a multinational firm must depend on a comparison of the benefits of that strategy (in terms of value creation) with the costs of implementing it (as defined by organizational architecture necessary for implementation On this basis, it may be logical for some firms to pursue a localization strategy, and still others a transnational strategy” Is this statement correct? Yes, that statement is correct As different business operating in different industries faces different pressures Some businesses face high cost pressures without facing high local responsiveness and vice versa, some have to deal with both Therefore, when a firm considers its strategy, it must take into account the correlation between the benefits and the value it generates over the cost of adopting the strategy Why? Because if that strategy only helps the firm creating a certain amount of value while the cost to apply that strategy is ten times bigger, we can not consider that that strategy is suitable for the company It is also impossible to use localization strategy for an industry where price are the main weapon and the product has a high standardization over the world because it definitely just increase the cost Each strategy has its pros and cons and only responds to certain pressures For example, applying transnational strategy means a very high application cost and lots of ambiguity They must also ensure that the profit and value that the firm will receive must be higher than the cost Therefore, the choice of strategy must fit the needs of each firm, for every firm has different problems and goals Question Discuss this statement "An understanding of the causes and consequences of performance ambiguity is central to the issue of organizational design in multinational firms." Statement can be interpreted as making the point that organizational design has to consider the performance ambiguities that will ultimately be created as result of the design Different organizational designs can remove performance ambiguities, shift them to a different level in the hierarchy, or create new performance ambiguities It makes sense to analyze the cause of performance ambiguities as a part of the organizational design process It also makes sense to analyze the opportunities for performance ambiguity that a new design might present Chapter 14: The organization of international business International Business It is important for management to be able to cope with the challenges of performance ambiguity, which as Charles Hill explains “exists when the causes of a subunit’s poor performance are not clear” One of the main causes for performance ambiguity is unsatisfactory presentation on some level of the company Companies often learn from their mistakes; however, it is critical to understand the reasons for the poor performance and to address them accordingly Multinational corporations have independent units and sometimes resolving performance ambiguity issue could be quite difficult David Kill and Frances Shin suggest that “it is crucial that the same integrated pattern recognition paradigm be utilized to map performance to input features (i.e possible causes) to promote organizational learning” Thus when crafting a new organizational design, not only mast the causes of existing performance ambiguities be addressed, bur the likely consequences in the form of new performance ambiguities must also be considered Thus, how an international company is organized (the architecture) may be the main reason why company does or does not perform Question Describe the organizational architecture that a transnational firm might adopt to reduce the cost of control One of the core issues is that businesses must control their operating costs This is a decisive factor, not only impact on whether or not to cut costs but also play a decisive role in the success or failure of the enterprise Understanding costs, factors affecting the cost, enterprises can control the cost, thereby saving costs, spending will be more effective and ultimately increase the operating profit of enterprises in accordance with that also increased Therefore, cost management is a top concern for managers, because the profits are more or less directly affected by the costs A firm can reduce its costs of control by implementing these control systems when and where they are needed Personal controls are generally used in small firms, but the principles translate Directly overseeing subordinates’ actions will give managers a better understanding of the individual’s and overall performance Cultural controls exist when employees believe in the norms and value systems of that firm Having bureaucratic controls set in place will give managers a guideline of parameters to stay within, whether that is their subunits’ budget or how much capital they are able to spend in a given time period Output controls align with bureaucratic Chapter 14: The organization of international business International Business controls Output controls set goals for subunits to achieve and are expressed in profitability, productivity, growth, market share, and quality The goals set for subunits fall within the rules and procedures of how the firm acts A transnational firm should adopt more bureaucratic and output controls in order to reduce these costs The ultimate goal is to achieve cultural control, but that cannot happen without a strong and welcoming working environment Question What is the most appropriate organizational architecture for a firm that is competing in an industry where a global strategy is most appropriate? When a global strategy is appropriate, a company believes that its market is the world, and that it seeks economies of scale through the development and manufacture of a standardized product An appropriate organizational architecture would be moderate decentralization with worldwide product divisions A worldwide product division structure tends to be adopted by firms that are reasonably diversified and, accordingly, originally had domestic structures based on product divisions As with the domestic product divisional structure, each division is a self-contained, largely autonomous entity with full responsibility for its own value creation activities The headquarters retains responsibility for the overall strategic development and financial control of the firm There needs to be a lot of coordination, many integrating mechanisms, and a strong culture Examples of companies pursuing global strategies are Intel, Motorola, and Texas Instruments The benefit of the global strategy are economical economies of scale: production of large quantities of goods in a short time, increase your income per employee: by creating quality products and creating trust for consumers and minimize costs due to specified standards Question If a firm is changing its strategy from an international to a transnational strategy, what are the most important challenges it is likely to face in implementing this change? How can the firm overcome these changes? The most important challenges are likely to be related to control, as the firm moves from at least a partial reliance on output measures and bureaucratic methods to one that will require many formal and informal controls and integration mechanisms Significant performance ambiguities may occur with transnational strategies A way to address these challenges is with a very strong culture and many integrating Chapter 14: The organization of international business International Business mechanisms Examples of companies addressing the complex challenges of a transnational strategy are Ford, GM, Caterpillar, and ABB Coordination is highest in transnational firms, too Trying to integrate the right mechanisms can muddy the waters for a firm transitioning strategies Cooperation and coordination are essential for creating a successful strategy Coordination can be hindered due to managers having different tasks Marketing managers concern themselves with promotion, market share, pricing, etc, whereas production managers worry themselves with production issues like capacity utilization, cost control and quality control Communication between managers can be inhibited due to the fact that marketing managers and production managers “do not speak the same language” Different managers have different goals when working with an unstandardized product Lack of respect can also become an issue between managers, which is an unnecessary challenge that can arise These challenges can be overcome Liaison can be created Each person in each subunit can be assigned responsibility for coordinating with another subunit on a regular basis People will establish a permanent relationship Integrating this all the way up the hierarchy of power can reduce the lack of respect between others If interaction is high, it may take longer to reach liaison, but firms can counter it by implementing a matrix structure In a matrix structure, all roles are viewed as integrated roles Firms can keep a close eye on local responsiveness and the pursuit of location and experience curve economies Question Reread the Management Focus on Walmart's international division and answer the following questions: a Why did the centralization of decisions at the headquarters on Walmart's international division create problems for the company's different national operations? Has Walmart's response been appropriate? The headquarter first thought that centralization will help them get into other countries cause the methods and ways they used were already proved in domestic market The centralization wasn’t that bad when they started because there were not many things to care about However, by the international division gets bigger, they had to deal with bunch of things from lot of different countries When Wal-Mart began its international Chapter 14: The organization of international business International Business expansion, it set up an international division to handle all foreign operations However, over time, this approach proved to be challenging Managers in foreign countries had to get permission from Bentonville before they could make any changes in strategy or operations Not only did this approach slow decision-making, also meant that decisions were being made by managers who were removed from the local situation Wal-Mart began to change this approach when it acquired Britain’s ASDA supermarket chain Today, the company has given greater responsibility to local managers particularly in merchandising and operations Wal-Mart’s main business strategy is EDLP-Every Day Low Priced which is the key-point of their success To accomplish this strategy, they mainly focused on efficiency of distribution structure All those strategies core values are Timed and Responsed Shorten the time for everything includes distribution, storing, etc directly affected lower the price of goods which could be best response to customer need In other words, Wal-Mart has been successful since they always managed their time and response to customer Those points were same for Wal-Mart international division strategy Their international division was like these days at the early stage The international division was centralized so the branches needed to get approval for every action and decision from headquarter in USA However, this centralization process made whole process slow and it harmed the core value of Wal-Mart Also, they realized that the system can’t be same in other countries It needed to be changed and modified in order to fully get into each local market place By the late 1990ds they started to change their policy for international division They gave more responsibility to each division so that they don’t have to wait for approval and response from headquarter By this change, each international divisions could meet their local market’s need more rapidly and effectively b Do you think that having an international division is the best structure for managing Wal-mart's foreign operations? What problems might arise with this structure? What other structure might work? Most students will probably suggest that while the international division may have been a good strategy at the beginning of Wal-Mart’s expansion into foreign markets, as foreign revenues have grown, approach no longer works Many students will probably suggest that Wal-Mart consider moving towards a transnational Chapter 14: The organization of international business International Business approach where it could respond to local markets and at the same time, respond to the pressure to minimize costs That it can negotiate on a global basis with key suppliers and can simultaneously introduce new merchandise into its stores around the world For example, the division has developed a knowledge management system whereby stores in one country, let's say Argentina, can quickly communicate pictures of items, sales data, and ideas on how to market and promote products to stores in another country, such as Japan The division is also starting to move personnel between stores in different countries as a way of facilitating the flow of best practices across national borders Finally, the division is at the cutting edge of moving Walmart away from its U.S.-centric mentality and showing the organization that ideas implemented in foreign operations might also be used to improve the efficiency and effectiveness of Wal-mart's operations at home Question Reread the Management Focus on the rise and fall of the matrix structure at Dow Chemical, then answer the following questions: a Why did Dow first adopt a matrix structure? What were the problems with this structure? Do you think these problems are typical of matrix structures? Dow Chemical initially adopted the matrix structure because it would allow the company to be responsive to both local market needs and corporate objectives However, when it was first adopted, the structure did not work well The dual chain of control led to turf battles and a lack of accountability, however, Dow felt that by making the structure more flexible it could still work The company had moved into the pharmaceuticals business where local responsiveness was important as was the need to be conscious of costs Many students will probably agree that the dual chain of command associated with the matrix structure makes it challenging, however at least according to Dow, there are ways to make it work In fact, Dow credits the structure for much of its success prior to the mid-1990s b What drove the shift away from the matrix structure in the late 1990s? Does Dow's structure now make sense given the nature of its businesses and the competitive environment it competes in? In the mid-1990s, Dow divested itself of its pharmaceuticals activities, and changed its structure to reflect its new strategy The company shifted to global business divisions as a way to reduce costs and streamline decision-making Dow felt Chapter 14: The organization of international business International Business that given its new focus on bulk chemicals, the new structure would work better The change was also driven by realization that the matrix structure was just too complex and costly to manage in the intense competitive environment of the 1990s, particularly given the company's renewed focus on its commodity chemicals where competitive advantage often went to the low-cost producer Question Reread the Management Focus on Lincoln Electric, then answer the following questions: a To what extent are the organization culture and incentive systems of Lincoln Electric aligned with the firm’s strategy? Lincoln had a strong respect for the ability of the individual and believe that, correct motivated, ordinary people could achieve extraordinary performance Lincoln Electric stresses that individuals should be rewarded for their individual efforts, and that everyone who works for the company should be treated equally Accordingly, employee pay depends on individual output, everyone eats in the same cafeteria, parks in the same lot, and so on Because employees can boost their pay significantly by working harder and being innovative, the company as a whole becomes more productive Lincoln competes in a business that is very competitive, where cost minimization is a key source of competitive advantage Lincoln's culture and incentive systems both encourage employees to strive for high levels of productivity, which translates into the low costs that arc critical for its success These aspects of Lincoln's organizational architecture are aligned with the low-cost strategy of the company b How was the culture at Lincoln Electric created and nurtured over time? Lincoln Electric has a long tradition of equality and fairness Lincoln has a strong respect for the ability of the individual and believe that, correctly motivated, ordinary people could achieve extraordinary performance He emphasized that Lincoln should be a meritocracy where people were rewarded for their individual effort Strongly egalitarian, Lincoln removed barriers to communication between workers and managers, practice an open-door policy Since 1934, employees have been assessed both objectively and subjectively Objective criteria include the level and quality of an individual’s output- production workers receive no base salary but are paid according to the number of pieces they produce, while subjective criteria Chapter 14: The organization of international business International Business include attitudes and dependability- workers have responsibility for the quality of their output and must repair any defects spotted by quality inspectors before the pieces are included in the piecework calculation Workers actually have the ability to double their base pay- Lincoln’s factory workers have been able to earn a pay that often exceeds the average manufacturing wage in the area by more than 50 percent and receive a bonus on top of this that in good years could double the base pay Even so, because productivity is so high, Lincoln Electric is the low cost leader in the industry c Why did the culture and incentive systems work well in the United States? Why did it not take in other country? In the United States, a country that encourages individualism, Lincoln Electric’s emphasis on individual performance has been very successful However, in other countries, this approach has met with some resistance In some countries, Lincoln Electric’ pay-per-output approach was considered exploitative In Germany, it was actually illegal! In addition, in some countries the incentive of more money for more output was not valued In countries where Lincoln Electric expanded through acquisition, unionized employees opposed the compensation approach Chapter 14: The organization of international business International Business II Question CLOSING CASE Why did Unilever’s decentralized structure make sense in the 1950s-1970s? Why did this structure start to create problems for the company in the 1980s? Unilever’s decentralized structure made sense in the 1950s-1970s because at those times, many markets were still segmented from each other by high barriers to cross-border trade, and given that national differences in business practices often required considerable localization Therefore, decentralized one allowed each subsidiary the opportunity to cater to local needs So, product offerings and marketing strategy was matched to local tastes and preferences, and distribution strategies were linked to the prevailing retail system in each market Furthermore, there was almost no competition in the markets Unilever was targeting, they mostly maintained the largest market share and there was probably not so much international influence from other multinationals But as time changes, this structure no longer worked well like in the 1950s – 1970s when the competitive environment changed to one where there was high pressure for cost reductions At the late of 1980s and the mid-1990s, as the collapse of USSR and the Socialist bloc in the West as well as the rise of some “Asian Tigers” like China, South Korea,… countries began to accelerate the process of opening up the self - economy as well as integrate into a big global economy Some Unilever’s rivals kept up the trends and had more success It means their competitor focus on releasing global products, they have few subsidiaries and their subsidiaries did produce few products So its competitor – Nestle and Procter & Gamble – could reduce cost and they had global brand while Unilever was behind them Unilever’s decentralized structure pushed to adapt the trend but lots of duplication, particularly in manufacturing; a lack of scale economies And a high-cost structure – those accompanied with decentralized structure when step into global integration – has swept away all the efforts And those’re why that structure didn’t fit anymore Question What was Unilever trying to when it introduced a new structure based on business groups in the mid-1990s? Why you think this structure failed to cure Unilever’s ills? Chapter 14: The organization of international business International Business was a great quarter, and investors initially responded positively in after-hours trading Overall, Microsoft's stock is well positioned for attractive returns going forward which appeal more and more investor WALT DISNEY Global strategy The Walt Disney Company has a generic strategy for competitive advantage that capitalizes on the uniqueness of products offered in the entertainment, mass media, and amusement park industries Disney’s generic competitive strategy is based on making its products different from those of competitors On the other hand, the corporation’s intensive strategies for growth are focused on developing new products that suit global market trends The company grows through innovation and creativity, which enable the business to compete against large firms For example, the company competes against Viacom Inc., Time Warner Inc., Sony Corporation, CBS Corporation, and Comcast Corporation, which owns Universal Pictures The Walt Disney Company’s generic strategy and intensive growth strategies address such competitive landscape Through corresponding strategic objectives and competitive advantages, the entertainment conglomerate manages challenges in its industry environment High utilization of fixed assets Walt Disney Productions renowned itself as a leader in the United States animation industry Walt Disney has invested heavily in fixed assets by establishing its own film studios, theatres, amusement parks, and other facilities Well recognized and cherished brand name Walt Disney has strong brand name in the industry and is very experienced It is best known for the brand name of its film studio; "the Walt Disney Motion movies group" Currently it is one of the best-known studios in Hollywood Product innovation capabilities Walt Disney responds to their customers' taste and preferences by a very creative method It begins from brainstorming meeting well-known as "Blue Sk\/'_ It has also established several facilities which mainly focus customer needs Chapter 14: The organization of international business 39 International Business Breadth of product line product selection Walt Disney is the most diversified corporation in the industry It is diversified into travel, television, live-action, theatre, publishing, radio and film production etc and has enormous range of products in each category Creative organization culture and labor force: Walt Disney has very flexible culture and its employees have sovereignty to think ahead of boundaries and arise with new innovative ideas They have sturdy motivation and teamwork Disney is mainly famous for being a film producer, admired showman, and an innovator in theme park design and animation and teamwork Disney is mainly famous for being a film producer, admired showman, and an innovator in theme park design and animation Technological Know-how Throughout its existence Walt Disney has been updating its technology Open Source Software has an extraordinary significance for Walt Disney Animation Studios (WDAS) The Studio has a vast narration of technological innovation, choices from pioneering the employ of digital system for making hand-drawn animation and to mounting 3D painting and interpretation techniques in Deep image Throughout the years, the Studio has sustained to innovate in all characteristic of creating animated workings As the circumstance of the industry has altered, permitting Open Source Software to turn into a common groundwork for many technologies Disney wants to contribute reverse to the society due to which it has established this platform Organizational culture for excellent entertainment An advantage of Disney’s organizational culture is its focus on optimism and innovation, which contribute to excellent business performance Also, the company benefits from the cultural advantage of family-oriented focus This characteristic strengthens the Disney brand’s popularity For example, family orientation enables the company’s global reach in the entertainment market, and the corresponding brand popularity Moreover, Disney’s corporate culture promotes a community mindset that supports rapport and morale among employees The company’s culture also motivates the workforce to ensure high-quality output, which translates to high quality products Through these advantages, the company’s management motivates workers to maintain behaviors for strategic success Chapter 14: The organization of international business 40 International Business Stay true to your company’s mission and values Walt Disney was famous for saying, “I hope that we never lose sight of one thing — that it was all started by a mouse.” Decades later, Mickey Mouse is still the crown jewel of the Disney franchise, representing all the good will and imagination Disney represents He’s also a constant reminder that the company has strong roots and it embraces American values Differentiate your offer Every facet of Disney’s operation is unique Employees are called “associates,” visitors are called “guests,” creative designers are called “Imagineers.” And that’s just the beginning The experience of being at a Disney theme park or staying at a Disney resort is all about creating a dream vacation — one where the attention to detail and personal service is just as memorable as the attractions themselves SOUTHWEST AIRLINE Southwest Airlines Strategy Southwest has pursued a low-cost, low-price, no-frills, strategy from day one It made air travel affordable to the mass American population Southwest advance ticket purchase requirements are more lenient than rivals and the company offers deep discounts for some seats purchased through its website The company offers ‘Business Select’ fares for economy minded business travelers This fare offers early boarding privileges to passengers along with extra Rapid Rewards (Anthony, 2011) Despite many of its rivals charging extra for add on services, like checking bags, in-flight snacks, buying a ticket in person from airport, fees for changing reservations, etc., Southwest insists upon an all-inclusive lowest fare Its concept of price elasticity that is, the erosion of profit margins through offering lowest fares in more than compensated by increases sales volumes is proven to be true for most of its markets Southwest’s point to point route system also minimizes connections, delays and total trip time Its emphasis on non-stop flights between pair of cities allows 75 % of its passengers to fly non-stop to their destination Chapter 14: The organization of international business 41 International Business Innovation Southwest applied a lot of changes in a traditional airline’s business model which helped it serve the niche target customers and at the same time earn significant profits These changes include: Reducing the number of cabin crew’s members to only three Using only one type of aircraft Flying point-to-point and only 25 minutes turn-around after landing Cheaper prices No in-flight meals Having only one seating class choice Effective on-land service and generous cancellation policies People management By creating a culture that’s fun and inclusive, with core values that remind all employees to enjoy their work and not take themselves too seriously, Southwest motivates employees to take pride in what they do, which often translates to going the extra mile for customers Southwest also seeks out employees with proactive attitudes, making every team member feel responsible for the success of their colleagues, according to Forbes This team-based environment pushes employees to always their best work — including getting planes from the gate into the air at record speed — which drives customer satisfaction and loyalty That isn't to say Southwest doesn't directly look out for their customers When employees are taught to "live the Southwest way," the airline encourages them to "put others first" and "demonstrate proactive customer service." In other words — the airline might put employees first, but they want employees to put customers first Use of corporate asset Since its inception Southwest Airlines has almost exclusively operated Boeing 737 aircraft (except for a brief period when it leased and flew some Boeing 727-200 aircraft) Southwest is the world's largest operator of the Boeing 737, and was the launch customer of the 737-300, 737-500, 737-700, and 737 MAX Southwest Airlines is also poised to be the launch customer for the 737 MAX Chapter 14: The organization of international business 42 International Business Southwest added the Boeing 737-700 to its fleet on December 17, 1997 Southwest added the Boeing 737-800 to its fleet on April 11, 2012 The aircraft has 175 seats, 32 more than the former largest 737s in Southwest's fleet After completing the purchase of AirTran Airways, Southwest Airlines acquired AirTran's existing fleet of Boeing 717 aircraft However, Southwest elected not to integrate them into its fleet and currently leases them to Delta Air Lines On December 13, 2011, Southwest placed a firm order for 150 Boeing 737 MAX aircraft, becoming the launch customer for the type (although the first delivery of the 737 MAX was to Malindo Air) By using only one type of aircraft, it save a ton of money for SouthWest by reducing the maintenance, pilot training cost That helps a lot for the low price strategy of SouthWest Social responsibility Southwest Airlines® is pleased to share that the 2016 One Report won two bestof-category awards for Best Corporate Social Responsibility Report and Corporate Social Responsibility Report: Best Front Cover Additionally, Southwest earned the ASPC Colonial Awards for Excellence in the categories of Corporate Social Responsibility Report: Best Letter to Stakeholders and Corporate Social Responsibility Report: Best Interactive Online Experience Through its innovative reporting approach, the Southwest Airlines One Report shares the many ways Southwest brings to life its Purpose of connecting People to what's important in their lives through friendly, reliable, and low-cost air travel The Report focuses on the Company's pledge to being a leader in global citizenship and its holistic approach to the triple bottom line of Performance, People, and Planet Quality of management The company strategy does not focus on managing the quality and the good customer service, but start of managing the employees’ satisfaction This radical change of approach has given good results from its inception to the present time; So much so, that even within the fusions that the company has suffered, the main idea has been always to think first about the employees This positioning defines a solid corporate culture through its history Chapter 14: The organization of international business 43 International Business Financial soundness Southwest is committed to returning value to its Shareholders Since 2010, Southwest has returned more than $9.4 billion to Shareholders through share repurchases and dividends, through September 30, 2018 As of September 30, 2018, Southwest has returned more than $1.8 billion to Shareholders through the repurchase of $1.5 billion in common stock and the payment of $332 million in dividends in 2018 Long-term investment value One of the major keys to Southwest's success, helping its stock price triple between 2012 and 2015, stems from another good management decision Since 1999, Southwest has extensively used hedging in the futures markets to minimize its fuel costs This one aggressive investment practice has saved Southwest more than $5 billion in the past 15 years Quality of products / services On every flight, Southwest offers Customers the first two pieces of checked luggage (weight and size limitations apply) and all ticket changes without additional fees Southwest's all Boeing fleet consistently offers leather seating and the comfort of full-size cabins, many of which are equipped with satellite-based WiFi connectivity and a new, sustainable cabin interior With 40 consecutive years of profitability, the People of Southwest operate more than 3,200 flights a day and serve communities around 89 airports in Southwest's network of domestic destinations Global competitiveness Although the airline is now the third-busiest U.S carrier, Southwest Airlines still has the power to force its rivals to lower their fares, according to a new study from the Darden School of Business at the University of Virginia The average fares for all carriers dropped at least 15% in 56 of those markets after Southwest Airlines entered and 74 markets had average fares that dropped at least 10%, the study found Only 12 had fare increases after Southwest Airlines stepped in The study found that Southwest Airlines had the biggest effect on fares even when low jet fuel costs and the entry of other low-cost airlines were considered And the drop in fares has helped boost demand on those routes by an average of 28% Chapter 14: The organization of international business 44 International Business FEDEX Ability to attract and retain talented people FedEx is constantly on the look-out for talented people who share the basic qualities of honesty, enthusiasm, creativity and respect for co-workers and customers As a global company, FedEx embodies a culture that respects diversity and strives to develop all its employees to their fullest potential Management understands that FedEx will only continue to be successful with fully dedicated employees This is core to our philosophy of People-Service-Profit Consistently ranked among the world's most admired and trusted employers, FedEx inspires its more than 425,000 team members to remain focused on safety, the highest ethical and professional standards and the needs of their customers and communities Working in FedEx, workers will have the opportunity to demonstrate leadership in an operationally excellent environment, with the required support and resources to help them to succeed; help fellow employees realize their full potential; and have the opportunity to innovate and contribute ideas to enhance the company’s business growth Quality of management Quality has always been a hallmark of FedEx, and they’re never satisfied As customer needs and expectations evolve, they must continually improve to make customers’ lives easier and simplify the FedEx experience They achieve this through Quality Driven Management Created by FedEx in 2008, QDM is an outgrowth of our decades of quality leadership and experience Through QDM, they’re pioneering innovations in quality thinking and driving our quality to new heights for their customers QDM draws on the best concepts and practices from many quality philosophies — including Six Sigma, Lean, Total Quality Management, Design Thinking and Agile — to create an optimal approach for a service business like them QDM is a unique and integral part of their FedEx culture From the executive suite to the frontline, FedEx team members both learn and teach QDM, and are actively encouraged to seek new ways to improve and innovate Chapter 14: The organization of international business 45 International Business To monitor their progress, QDM includes an enterprise wide system of metrics called the FedEx Service Quality Index that keeps them focused on the things that matter most to customers In 1990, FedEx became the first service company to win the Malcolm Baldrige National Quality Award In 1994, they became the first transportation company to receive worldwide ISO 9001 certification This tradition continues with QDM, as they drive our quality performance levels even higher Social responsibility to the communication and the environment Connecting the world responsibly and resourcefully AS ONE OF THE WORLD’S MOST ADMIRED BRANDS, they have a responsibility to be a role model in the communities where they live and work That means reaching beyond the services they provide to be a caring corporate citizen and a thoughtful steward of the environment Social responsibility isn’t only important to them — their customers want to make the world a better place by working with like-minded companies They estimate that the FY15 revenue from customers who requested information on corporate citizenship was ore than $6.2 billion Invovativeness FedEx was built on a new combination of existing ideas that turned them into the original logistics disruptor When they began operations in 1973, their innovative hub-and-spoke system was uniquely developed to deliver overnight express packages to any and all points on their network by a certain time FedEx originated the first real-time, package tracking because they knew that information about the package was as important as the package itself In this click-driven world, new becomes old very fast Traditional solutions won’t work in new circumstances, but recombining existing ideas often can Their purpose as a company is to connect people with possibilities, and they know technology helps them that in a big way Quality of product or services FedEx Express invented express transportation and remains the industry’s global leader, providing rapid, reliable, time-definite delivery to more than 220 countries and territories, connecting markets that comprise more than 99 percent of the world’s Chapter 14: The organization of international business 46 International Business gross domestic product Unmatched air route authorities and transportation infrastructure, combined with leading-edge information technologies, make FedEx Express the world’s largest express transportation company, providing fast and reliable delivery of approximately million shipments and 29 million pounds of freight each business day Wise use of corporate asset In 1984, Federal Express acquired Gelco Express, a Minneapolis-based express delivery company and service to 84 countries In order to develop its overseas markets, Federal Express has acquired shipping companies in the United Kingdom, the Netherlands and the United Arab Emirates In 1985, the company began expanding its services to Europe by opening a hub at Brussels Airport It is an unforgettable year for FedEx, with the acquisition of TNT Express, the world's second-largest express carrier, for 4.4 billion euros ($ 4.8 billion) This move has contributed to a significant increase in FedEx's market share in the European market, where FedEx holds only 5% of market share, much lower than 19% of DHL's market share, and about 12% of TNT Express and 16% of United Parcel Service (UPS) Financial soundness Current Ratio (MRQ) of FexEd is 1.32- which is in the sound position FedEx’s debt-to-equity ratio of about 0.89 is certainly a conservative ratio and gives it lots of breathing room As for the company’s profitability, it has obtained a healthy return on the equity it has on it balance sheet, generating a net profit of 4.14% on its sales and making for a return on equity of about 14.17 percent Long-term investment value Over the same time frame, FedEx has increased revenues by 11% to $47.5B as of May 2015, EBITDA by ~33%, and dividends by over 50% More importantly, the company's management effectiveness ratios, such as ROA and ROCE, also increased: from 6.1% to 8.3% and from 9.7% to 13.6%, respectively On the other hand, the company's return on equity has decreased from low teens to high-single digits over the past five fiscal years Chapter 14: The organization of international business 47 International Business Effectiveness in doing business globally Their powerhouse global network provides reliable, time-sensitive and competitively superior integrated express transportation services to more than 220 countries and territories and to every address in the U.S In addition to a full portfolio of intercontinental air express services, FedEx Express domestic shipping services have now expanded to over 35 countries Delivering online orders of handcrafted goods from all over the world to your community, and from your community to the world Connecting people with goods, services, ideas and technologies creates opportunities Opportunities that build jobs, generate prosperity and lift communities to higher standards of living Exercise Globalization can present many challenges and opportunities for companies, cultures, and countries In fact, the globalEDGE website features a blog that includes current discussions on globalization Locate the globalEDGE Blog and find a recent blog post that provides insights concerning the challenges and opportunities of globalization facing firms from an emerging or developing economy Prepare a description of the issue and provide an examination of these challenges and opportunities on regional and global firm operations for firms from your chosen economy Challenges of International Business International company structure If your aim is to be competitive globally, you must have a team in place that’s up for the challenge One fundamental consideration is the structure of your organization and the location of your teams Foreign laws and regulation Along with getting your company structure in place, gaining a comprehensive understanding of the local laws and regulations governing your target markets is key From tax implications through to trading laws, navigating legal requirements is a central function for any successful international business Eligibility to trade is a significant consideration, as are potential tariffs and the legal costs associated with entering new markets International accounting Chapter 14: The organization of international business 48 International Business Of the main legal areas to consider when it comes to doing international business, tax compliance is perhaps the most crucial Accounting can present a challenge to multinational businesses who may be liable for corporation tax abroad Different tax systems, rates, and compliance requirements can make the accounting function of a multinational organization significantly challenging Cost calculation and global pricing strategy Setting the price for your products and services can present challenges when doing business overseas and should be another major consideration of your strategy You must consider costs to remain competitive, while still ensuring profit Researching the prices of direct, local-market competitors can give you a benchmark, however, it remains essential to ensure the math still works in your favor Universal payment methods The proliferation of international e-commerce websites has made selling goods overseas easier and more affordable for businesses and consumers However, payment methods that are commonly accepted in your home market might be unavailable abroad Determining acceptable payment methods and ensuring secure processing must be a central consideration for businesses who seeks to trade internationally Communication difficulties and cultural differences Good communication is at the heart of effective international business strategy However, communicating across cultures can be a very real challenge At Hult, developing cross-cultural competency and communication skills are a core focus inside and outside of the classroom Political risk An obvious risk for international business is political uncertainty and instability Countries and emerging markets that may offer considerable opportunities for expanding global businesses may also pose challenges, which more established markets not Before considering expansion into a new or unknown market, a risk assessment of the economic and political landscape is critical Supply chain complexity and risks of labor exploitation When it comes to sourcing products and services from overseas, managing suppliers and supply chains can also be a tricky process Unfortunately, the length and Chapter 14: The organization of international business 49 International Business complexity of supply chains increases the chance of working with suppliers who have unethical — and even illegal — business practices Of growing concern is the risk in international business of forced labor and worker exploitation Opportunity Expanding market Enterprises would approach new customers, who has rich and diverse demand They are potential target customer that help companies can improve new product to meet their demands This promotes and supports firms to create better product Removing border barriers Taxes have long been one of the major barriers for businesses, which want to import or export goods Spending so much money on taxes that businesses pay to trade Opportunities in the international market have made these import and export taxes significantly reduced, which makes it easier for global firms to access local customers Increasing cooperation opportunities A company that wants to develop sustainably in an international market with many strong businesses needs cooperation Collaborate with potential partners to work together stronger, offset each other's weaknesses, and expand distribution channels Approaching new technology Integration into the international economic market means that businesses will have chance to access to new and innovative technology They can study and choose the suitable technology to improve the quality and efficiency of their products, while improving labor productivity Getting more experiences International marketing has many advantages to promote and apply on many aspects such as marketing export goods, marketing services, marketing investment Enterprises will accumulate much experience in organizing corporate management, market research and strategic planning, especially experience in developing international marketing mix Xiaomi Inc Case Challenges of Xiaomi: Chapter 14: The organization of international business 50 International Business : matrix and flat Xiaomi organizational structure can be classified as matrix Specifically, Xiaomi organizational structure is decentralized, where different business units are managed independently Although the large size of the business involves presence in 70 countries with more than 18,000 employees, the company has fewer management classes than other similar-sized businesses Foreign laws and regulations In November 2017, the Indian Government implemented Demonetisation Policy which affected the online smartphones sales One of the sectors reeling from the impact of demonetisation is that of feature phones and affordable smartphones, Since most of these purchases are made using cash payments even now, the initial impact was as high as 90% Pricing strategy of Xiaomi Inc To maintain their market share companies were forced to sell their high-end products at reduce price since Xiaomi was selling a similar product at a lower price than what they were selling Distribution When Xiaomi entered the Indian market, they chose online sale channel, with online channel, a new entrant can hope to reach the consumers in top cities pretty fast And, Xiaomi used the online channel to quickly reach out to consumers ready to try their products Xiaomi had an established brand name so it helped but still creating physical channel would have taken many years to reach the scale they have managed in a short time Political factors: In August 2014, just after launch when Xiaomi was accused of sharing user data, like Phone no., IMEI no., Text messages, contacts etc to a server in Beijing, without notice of users, it became an issue for the company Which when investigated came out to be a month old report of even before when Xiaomi started selling smartphones in India It could have had a political impact on its business Opportunity of international business Chapter 14: The organization of international business 51 International Business Rising Brand Awareness – Xiaomi’s brand awareness is rising and more and more people are getting to know about the brand thereby resulting in higher sales across the globe E-commerce advantage – The Flash sale model is a very popular model which has worked wonders for Xiaomi In this model, the product is made available only in limited quantities and sold at a very low price This model made the consumers crazy and each Xiaomi looked like a price which was hard earned Specifications of the smartphones produced – Xiaomi smartphones are technologically advanced as well and they give higher tech specs at lower price Xiaomi phones are especially renowned for their camera which is said to be very high resolution and gives excellent photos Research and Development – Xiaomi invests heavily in R&D and it is a market followerbut its major R&D expenses are towards cost advantage and not differentiation advantage Chapter 14: The organization of international business 52 International Business THE END Chapter 14: The organization of international business 53 ... amusement parks, and other facilities Well recognized and cherished brand name Walt Disney has strong brand name in the industry and is very experienced It is best known for the brand name of its... its R&D activities Well Recognized and Cherished Brand Name Apple is the king of brand names around the globe and is placed at number one in the US Apple and Google a substitute for the international... Hathaway and JPMorgan Chase & Co to disrupt health care, and fields like search, travel and entertainment are on notice as well Its culture, powerful platform and resultant insights, and long-term