Alternative Models of the MNC Centralised Hub Decentralised Federation Integrated Network most key assets and resources centralised most key assets and resources decentralised tight control through centralised decision-making, product flows from centre Out loose control, financial flows: capital out, dividends back foreign subsidiaries are treated as delivery pipelines to their market foreign subsidiaries are treated as independent national businesses large flows of components, products, resources, people and Information among interdependent units distributed, specialised resources and capabilities complex coordination processes and cooperation in a shared decision making Source: Adapted from Bartlett/Beamish 2014, p. 281, p. 285. The MNC as an Intra- and Inter-Organisational Network HQ = Headquarters WOS = Wholly-ownedSubsidiary = Intra-organisational Network WOS B (Country B) WOS C (Country C) WOS D (Country D) WOS E (Country E) WOS F (Country F) WOS A (Country A) Company H (Distributor for Country H) Company J (System Supplier from Country J) Company G (Country G) Joint Venture K (Marketing/Sales for Country K) Joint Venture L (Manufacturing in Country L) Partial Ownership Company L (Country L) Partial Ownership Company K (Country K) Partial Ownership Company C (Country C) Contract Mfg. Company M (Country M) HQ Source: Adapted from Schmid/Kutschker 2003, p. 165. Figure 1.1 Figure 1.2 1 The Structure of the MNC as a Differentiated Network Company Headquarters (Horizontal) Linkages between Subsidiaries Differentiated Headquarters- Subsidiary Relationships Subsidiary 2 Subsidiary 3Subsidiary 4 Subsidiary 1 Source: Adapted from Nohria/Ghoshal 1997, p. 14. Geographic Spread and Functional Diversity of BP’s Worldwide Operations (as of Dec. 31, 2013; without Operations of Rosneft) Downstream: RefineryUpstream: Production of liquids (oil) or gas Upstream: Exploration Downstream: Production of petrochemicals Source: BP 2014a, pp. 4-5. Figure 1.3 Figure 1.4 2 Value Chain of BP MidstreamUpstream Downstream Developing & Extracting developmentof fieldsand production activitiestobring thehydrocarbons tothesurface Transporting & Trading movementof hydrocarbons usingpipelines, trucksandtrains andcapturing value via trading Manufacturing refining, process- ingand blending ofhydrocarbons tomakefuels, lubricantsand petrochemicals Marketing & Sales sellingfuelfor transportation(e.g via gas stations), energy, lubricants andpetrochemi- calsasinputfor otherproducts Finding (Exploration) acquisitionof explorationrights; searchforhydro- carbonsbeneath theearth's surface Source: Adapted from BP 2014a, pp. 2-3. The Integration/Responsiveness-Framework Forces for Local Responsiveness low high high low Forcesfor Global Integration Global Organisation Transnational Organisation Multinational Organisation International Organisation Source: Adapted from Bartlett/Ghoshal 1989, p. 438. Figure 1.5 Figure 2.1 3 Selected Characteristics of the Four MNC Types International Global Multinational Transnational Role of Subsidiary sale of HQ products implementation of HQ strategies identification and exploitation of local opportunities differentiated contribution to the worldwide competitive advantages of the MNC Network Model centralised hub centralised hub decentralised federation integrated network Vertical Product Flows high, sequential high, sequential low bidirectional Inter-subsidiary Product Flows low low low high Centralisation of Decisions high high low medium (decentralised centralisation) Management Transfers, Visits, Joint Working Teams low high low high Centres of Excellence low low low high Product Modification low low high high Local Production low low high medium Dependency strong dependence strong dependence in- dependence inter- dependence Source: Summarised and adapted from Macharzina 1993, p. 83, p. 102; Har- zing 2000, p. 113; Bartlett/Beamish 2014, pp. 198-201. Table 2.1 4 Three Levels of the I/R-Framework ForcesforLocalResponsiveness Forcesfor Global Integration low high low high External Environment National Adaptation Integration in MNC low high low high Strategy of Subsidiary LocalResponsiveness Global Integration low high low high StrategicOrientation of MNC inter- national multi- national trans- national global Source: Morschett 2007, p. 396. AAA-Framework with Profiles of Two Companies AggregationAdaptation Arbitrage GE Healthcare Philips Medical Systems Source: Adapted from Ghemawat 2007, p. 66. Figure 2.2 Figure 2.3 5 Selected Characteristics of the Three Dimensions of International Strategy Adaptation Aggregation Arbitrage Competitive Advantage Why should we globalize at all? to achieve local relevance through national focus while exploiting some economies of scale to achieve scale and scope economies through international standardization to achieve absolute economies through international specialization Configuration Where should we locate operations overseas? mainly in foreign countries that are similar to the home base, to limit the effects of cultural, administrative, geographic, and economic distance in a more diverse set of countries, to exploit some elements of distance Coordination How should we connect international operations? by country, with emphasis on achieving local presence within borders by business, region, or customers, with emphasis on horizontal relation- ships for cross-border economies of scale by function, with emphasis on vertical relationships, even acrossorganizational boundaries Controls What types of extremes should we watch for? excessive variety or complexity excessive standardization, with emphasis on scale narrowing spreads Source: Ghemawat 2007, p. 61. Level of Globalisation by Retail Sector in 2012 Retail Revenue from Foreign Operations Average Countries Single-Country Operators Top 250 24.3% 10.0 36.8% Fashion Goods 29.8% 22.2 23.8% Hardlines& Leisure Goods 26.6% 13.1 26.9% Fast-moving Consumer Goods 23.3% 5.1 44.5% Diversified 22.6% 10.3 36.8% Source: Deloitte 2014, p. 24. Table 2.2 Table 2.3 6 Forces for Global Integration and Local Responsiveness in Different Retail Sectors Forces for Local Responsiveness low high high low Forces for Global Integration  Consumer Electronics  Appliances  Fashion  Food  Media (Music, DVDs)  Cosmetics  Drug Stores  Telecommunication  Furniture  Home Improvement  Books Retailers and Their Strategic Orientation Hollister 7-Eleven REWE Group Alnatura Brand globally standardised globally standardised locally integrated locally integrated Marketing Strategy globally standardised between global standardisation and local integration locally integrated - Store Layout globally standardised between global standardisation and local integration locally integrated globally standardised Assortment globally standardised between global standardisation and local integration locally integrated between global standardisation and local integration Distribution Globally standardised locally integrated globally standardised with local Integration between global standardisation and local integration Figure 2.4 Table 2.4 7 Role Typology by Bartlett/Ghoshal Strategic Importance of Local Environment low high high low Competenceof LocalOrganisation Contributor Strategic Leader Black HoleImplementer Source: Adapted from Bartlett/Ghoshal 1986, p. 90. Role Typology by White/Poynter Market Scope Product Scope limited unconstrained global local Product Specialist Strategic Independent Miniature Replica Adopter Adapter Innovator Market Scope ValueAddedScope low high global local Rationalised Manufacturer Strategic Independent Product Specialist Miniature Replica Adopter Adapter Innovator Marketing Satellite Source: Adapted from White/Poynter 1984, p. 60. Figure 3.1 Figure 3.2 8 Role Typology by Gupta/Govindarajan Inflow of Knowledge from the Rest of the Corporation to the Local Subsidiary Outflowof Knowledge fromtheLocalSubsidiary to theRest of theCorporation low high high low Global Innovator (Knowledge Provider) Integrated Player (Knowledge Networker) Implementor (Knowledge User) Local Innovator (Knowledge Independent) (The terminology of Randøy/Li (1998) is displayed in brackets.) Source: Gupta/Govindarajan 1991. Role Typology by Andersson/Forsgren InternalPurchases low high high low InternalSales Forward Vertical Mutually Integrated Backward VerticalExternal Source: Andersson/Forsgren 1994, p. 15. Figure 3.3 Figure 3.4 9 The Top-10 Retailers in the World by Retail Revenues 2012 (in billion USD) 469.2 101.3 99.1 98.8 96.8 87.2 85.8 74.8 73.0 72.0 0 100 200 300 400 500 Walmart Tesco Cosco Wholesale Carrefour Kroger Schwarz Group Metro The Home Depot Aldi Target Source: Deloitte 2014. Figure 3.5 10 Internationalisation of Walmart Entry Year Country Retail Units (May 2014) Form of Entry 1991 Mexico 2,207 50:50 joint venture with local retailer Cifra; acquisition of majority stake in 1997; extension to 60% in 2000 1994 Canada 390 acquisition of 122 stores of local retailer Woolco 1995 Brazil 556 acquisition of 118 stores of local retailer Bompreco 1995 Argentina 105 opening own stores 1996 China 402 joint venture; opening of own stores; 2006 major acquisition 108 stores from foreign retailer Trust-Mart (tripling Walmart's size); 2012 acquisition of a majority stake in online supermarket Yihoadian 1997 Germany 0 acquisition of 21 stores of local retailer Wertkauf; followed by acquisition of 74 stores of Intermarchéin 1999; market exit in 2006 (by selling its then 85 stores to Metro) in 2006 1998 South Korea 0 acquisition of 4 stores (and 6 undeveloped sites); market exit in 2006 (by selling its then 16 stores to Shinsegae). 1999 UK 577 acquisition of local retail company ASDA with 229 stores 2002 Japan 439 acquisitionof a 6.1% stake in local retail company Seiyu with 370 stores; acquisition of majority interest in 2005; turning Seiyu in a wholly-owned subsidiary in 2008 2005 Central America 668 acquisition of 33.3% of Central American Retail Holding Company with 363 stores in Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua, increased to 51% in 2006 2009 Chile 386 acquisition of local retail company D&S with 224 stores 2009 India 20 joint venture with local company Bharti Enterprises, complete take-over in 2014 2011 Africa 578 acquisition of majority stake in Massmart Holdings with 288 stores in 14 African countries (focus on South Africa) Source: Gathered from diverse sources; Walmart 2014a; Walmart 2014b, p. 61. Table 3.1 11 Alternative Motives for Internationalisation Market Seeking (Natural) Resource Seeking Efficiency Seeking Strategic Asset (or Capability) Seeking Follow- the- Leader Hourly Labour Cost in Industry in Selected European Countries 2013 (in EUR) 53.3 45.1 36.8 36.5 33.8 28.0 22.5 10.2 9.2 8.0 7.6 4.7 3.4 0 10 20 30 40 50 60 Norway Sweden France Germany Austria Italy United Kingdom Czech Republic Slovakia Hungary Poland Romania Bulgaria Source: Eurostat 2014. Figure 4.1 Figure 4.2 12 Ranking of the Most Innovative Countries Country Rank Innovation and Sophistication Score Country Rank Innovation and Sophistication Score Switzerland 1 5.72 Denmark 11 5.14 Finland 2 5.65 Austria 12 5.14 Japan 3 5.62 Singapore 13 5.14 Germany 4 5.59 Qatar 14 5.08 Sweden 5 5.46 Belgium 15 5.07 United States 6 5.43 Norway 16 5.07 Netherlands 7 5.36 Luxembourg 17 4.84 Israel 8 5.23 France 18 4.84 Taiwan 9 5.22 Hong Kong 19 4.83 United Kingdom 10 5.15 Korea, Rep. 20 4.82 Source: World Economic Forum 2013, p. 16. SAP Revenue Categories in 2013 Revenue categories % + Cloud subscriptionsandsupport 4 + Software 27 + Support 52 Software andsoftware-relatedservicesrevenue 83 + Consulting 13 + Other services 4 Professional serviceandotherservicesrevenue 17 Total revenue 100 one-time revenue recurringrevenue Source: SAP 2014, p. 1. Table 4.1 Table 4.2 13 Software Company Ranking in 2012 Rank Company Country Sales(in billionUSD) Profits (in billionUSD) Assets(in billionUSD) Market Value (in billionUSD) 1 Microsoft United States 83.3 22.8 153.5 343.8 2 Oracle United States 37.9 11.1 86.6 185 3 SAP Germany 22.3 4.4 37.3 97.1 4 Vmware United States 5.2 1 12.3 48.2 5 Symantec United States 6.8 0.9 13.3 14 6 CA United States 4.6 1 11.8 14.1 7 Fiserv United States 4.8 0.7 9.7 14.6 8 HCL Technologies India 4.7 0.7 4.2 16.6 9 Intuit United States 4.2 0.7 4.7 22.4 10 Amadeus IT Holdings Spain 4.1 0.7 7.5 18.9 Source: PWC 2013. SAP’s Product Portfolio Source: SAP 2012, p. 9. Table 4.3 Figure 4.3 14 SAP’s Internationalisation Strategy Internationalisation Localisation Translation technical enablement of a system to operate globally  multilanguagesupport  code pages/unicodes  time zones  multiple currencies  calendars business solutions are not viable without localisationof content  local best business practices  legal requirements and statutory reporting speak the languageof the locals Source: SAP 2012, p. 10. SAP’s R&D Activities Con-Innovation LabsDevelopment Centre SAP Research Locations Sybase Research and Development Locations Source: SAP 2012. Table 4.4 Figure 4.4 15 SAP Brand Architecture mySAP Business Suite mySAP CRM mySAP SRM mySAP PLM mySAP SCM SAP Global FDI Flows by Region (in billion USD) Region FDI inflows FDI outflows 2010 2011 2012 2010 2011 2012 World Developed economies Developing economies Africa Asia East and South-East Asia South Asia West Asia Latin America and the Caribbean Oceania Transition economies 1409 696 637 44 401 313 29 59 190 3 75 1652 820 735 48 436 343 44 49 249 2 96 1351 561 703 50 407 326 34 47 244 2 87 1505 1030 413 9 284 254 16 13 119 1 62 1678 1183 422 5 311 271 13 26 105 1 73 1391 909 426 14 308 275 9 24 103 1 55 Structurally weak,vulnerable and small economies Least developed economies Landlocked developing countries Small island developing States 45 19 27 4.7 56 21 34 5.6 60 26 35 6.2 12 3.0 9.3 0.3 10 3.0 5.5 1.8 10 5.0 3.1 1.8 Memorandum: percentage share in world FDI flows Developed economies Developing economies Africa Asia East and South-East Asia South Asia West Asia Latin America and the Caribbean Oceania Transition economies 49.4 45.2 3.1 28.4 22.2 2.0 4.2 13.5 0.2 5.3 49.7 44.5 2.9 26.4 20.8 2.7 3.0 15.1 0.1 5.8 41.5 52.0 3.7 30.1 24.1 2.5 3.5 18.1 0.2 6.5 68.4 27.5 0.6 18.9 16.9 1.1 0.9 7.9 0.0 4.1 70.5 25.2 0.3 18.5 16.2 0.8 1.6 6.3 0.1 4.3 65,4 30.6 1.0 22.2 19.8 0.7 1.7 7.4 0.0 4.0 Structurally weak,vulnerable and small economies Least developed economies Landlocked developing countries Small island developing States 3.2 1.3 1.9 0.3 3.4 1.3 2.1 0.3 4.4 1.9 2.6 0.5 0.8 0.2 0.6 0.0 0.6 0.2 0.3 0.1 0.7 0.4 0.2 0.1 Source: UNCTAD 2013. Figure 4.5 Table 5.1 16 The Fortune Global 500 by Location 2 1 12 54 120 21 22 12 31 109 477 477 476 415 271 1980 1990 2000 2010 2025 (projected) Developed Regions Emerging Markets, excl. China Greater China 5% 5% 5% 17% 46% Emerging Markets Total Share Source: McKinsey Global Institute 2013. Characteristics of Emerging Country MNCs and Traditional MNCs Feature Emerging Market MNCs Traditional MNCs Speed of Internationalization accelerated gradual Competitive Advantages weak: upgrading of resources required strong: required resources available in-house Political Capabilities strong: firms are used to unstable political environments weak: firms are used to stable political environments In Search of Markets dual path: simultaneous entry into developed and developing countries single path: from less to more distant countries Expansion Path In Search of Lower Costs into less developed countries as home country development raises production costs into less developed countries In Search of Strategic Assets into more developed countries into similar developed countries Preferred Entry Mode external growth: alliances, joint ventures, acquisitions internal growth: wholly owned subsidiaries Organizational Adaptability high, because of their recent and relatively limited international presence, which enables them to adapt technologies to small-scale markets, excel at projects execution and adopt new technology quickly low, because of their ingrained structure and cultures Source: Guillén/García-Canal 2011, p. 17. Figure 5.1 Table 5.2 17 Development of Emerging Country Multinationals Comparative and competitive advantage = Increased: • technological capabilities • value added in manufacturing • export competitiveness China? Clothing, autos, electronics, software? Indian software industry WIPRO, InfoSs, TCS, etc. S. Korea, Taiwan, Singapore, H-K Clothing → Steel → Autos + Electronics Japan: Clothing Steel Autos Electronics ? 1940s 1950s 1960s 1970s 1980s 1990s 2000s Source: Rugman/Collinson 2012, p. 654. Value Creation Strategies of Emerging Country Multinationals Transferability between Markets high low Availabilityfor the Firm high I (Exploiters) II (Defenders) Resource FirmExample Resource Firm Example  know-how (marketing, brand & distribution Astrid y Gastón, Concha y Toro, Bimbo, Pollo Campero  market share  market knowledge AméricaMóvil, Cemex  customer-driven Tenaris  innovative capability Tenaris  competitor-driven AméricaMóvil, Cemex, Politec  know-how (production) Petrobas  market-driven Petrobas IV (Others) III (Resource Developers) low EMNCs use anotherform of access to resources lacked (e.g., imports) Resource Firm example  leading technology/knowledge Bimbo, Politec, Natura  financial resources Cemex  know-how (marketing: brand & distribution Bimbo  natural resources Vale, Petrobas Source: Losada Otalora/Casanova 2012, p. 9. Table 5.3 Figure 5.2 18 Firm-Specific Advantages of Emerging Country Multinationals Globalising… Assets Capabilities Connections Reputation Innovation and Technology patents, licenses, IPR. specialised tools, hardware, software, etc. low-end (maintenance) to high-end (blue-sky R&D) expertise strategic alliances, buyer and supplier links. R&D networks/global capability inputs credibility, trust, track record, recognition Marketing and Brands own valued brands, logos, trademarks, awards, etc. brand management protection, development of expertise formal co-branding, supplier or buyer, distribution, and retailing affiliations reputation for quality, price, innovation, etc., market positioning, brand recognition, market presence Source: Rugman/Collinson 2012, p. 656. Characteristics of the LLL-Framework Criterion LLL-Framework ResourceUtilisation resources accessed through linkage with external firms GeographicScope locations tapped as part of international network Make or Buy? bias towards operations created through external linkage Learning learning achieved through repetition of linkage and leverage ProcessofInternationalisation proceeds incrementally through linkage Organisation global integration sought as latecomer advantage Driving Paradigm capturing of latecomer advantage Time Frame cumulative development process Source: Adapted from Mathews 2006, p. 21. Table 5.4 Table 5.5 19 Ownership Structure and Business Sectors within the Tata Group Companies of theTata Group Public Trusts Free Float Sir Dorabji Tata and Allied Trusts Sir Ratan Tata Trust JN Tata Endow- ment Private Investors (3%) Institutional Investors (18%) Holding Tata Sons Tata Industries 13% 66% 21% 98 Companies/7 CusinessSectors Materials Engineering Products andServices Information Technology andCommunication 31.9 17.0 9.9 Energy Chemicals Services Consumer Products 4.3 2.8 2.1 2.1 (Sector-Wise Revenues in billionUSD) Source: Schuster/Holtbrügge 2011. Figure 5.3 20 Transaction Cost Reasoning for Different Modes of Internationalisation Transaction Costs Specificity (Uncertainty, Frequency) Export Cooperation Wholly-owned Subsidiary S1 S2 Source: Adapted from Welch/Benito/Petersen 2007, p. 26. The OLI Decision Process for Foreign Operation Modes Ownership Advantages? No International Activities Location Advantages in Host Country? yes Internalisation Advantages? Contractual Arrangements, e.g. Licensing FDI Decision Type Decision Internationalisation Decision Location Decision Internalisation Decision Produceat Home, thenExport yes yes no no no Source: Adapted from Sudarsanam 2003, p. 201; Welch/Benito/Petersen 2007, p. 31. Figure 6.1 Figure 6.2 21 The Information Processing Approach Information- Processing Requirements Information- Processing Capacities Effectiveness as Function of the Fit External Context • e.g. Uncertainty • e.g. Relationship with Partners • e.g. MNC Size MNC Strategy • e.g. Degree of Internationalisation • e.g. Strategic Objectives • e.g. Diversification Features of Organisational Design • e.g. Organisation Structure • e.g. Formalisation/ Standardisation • e.g. Informal Coordination Mechanisms Source: Adapted from Egelhoff 1991, p. 345; Wolf/Egelhoff 2001, p. 122. Categories of Market Barriers Non-Tariff Barriers Autonomous Private Sector Tariffs Quantitative Restrictions Regulations, Policies, Procedures Buy Local Campaigns Local Buying Non- Governmental Institutions Legislative Body/Executive Forces Non-Tariff Barriers Autonomous Private Sector Tariffs Quantitative Restrictions Regulations, Policies, Procedures Buy Local Campaigns Local Buying Non- Governmental Institutions Legislative Body/Executive Forces Increase in World Trade between 1980 and 2013 (in billion USD) Year World Europe Asia 1980 2,034 897 324 2013 18,784 6,636 6,285 Source: WTO World Trade Report 2014. Figure 7.1 Figure 6.3 Table 7.1 22 India’s Steps to Open the Market Year Event January 1997 India allows foreign direct investments (FDI) in cash & carry (wholesale) with 100% ownership. 2001 India liberalises the insurance sector. Investment through FDI can be a maximum of 26%. May 2001 The Indian Government opens the defence industry to the private sector. It permits 100% equity with a maximum of 26% FDI component. March 2002 The Cabinet of India allows 100% FDI in the advertising and film industry, up from the present limit of 74%. June 2002 The Indian Government first allows 26% FDI in news and current affairs in print media. February 2006 The Indian Government opens up the retail sector by permitting FDI up to 51% in single-brand retail trading companies. March 2011 Up to 100% FDI are permitted in certain agricultural activities (inter alia floriculture, horticulture, apiculture, cultivation of vegetables andmushrooms under controlled conditions, animal husbandry, pisciculture, aquaculture, tea production). November 2011 India allows up to 51% FDI in multi-brand retail trading and 100% FDI in single-brand retail trading subject to 33% purchases from domestic sources. September 2012 The Indian Government permits foreign airlines to make up to 49% FDI in scheduled and non-scheduled air transport services. July 2013 The Indian Government rescinds the limit of 74% on foreign ownership in mobile services operations and allows these companies to be wholly owned by foreign investors. August 2013 The Indian Government approved 100% FDI in the telecom sector. January 2014 The Reserve Bank of India relaxes FDI regulations to facilitate great FDI inflows into the country. Source: Financial Express 2002; People’s World 2002; The Hindu 2011; Ce- dar Consulting 2012; The Economic Times 2012; The Metropolitan Corporate Counsel 2012; CIO 2013; Indian Defence Review 2013; The Economic Times 2013; India TV News 2014; The Economic Times 2014. Table 7.2 23 Different Levels of Economic Integration Economic Union Monetary Union Political Union Free Trade Area Common Market Customs Union DegreeofEconomicIntegration high low Characteristics of a Common Market Common Market Free Movement of Goods and Services Free Movement of Factors of Production Free Movement of Goods Free Movement of Services Free Movement of Capital Free Movement of Persons Figure 7.2 Figure 7.3 24 Shares of Intra-EU Trade for the EU Member States (EU-27) 2013 (in %) State Quote State Quote Austria 69 Latvia 66 Belgium 70 Lithuania 57 Bulgaria 60 Luxembourg 81 Cyprus 58 Malta 42 Czech Republic 81 Netherlands 76 Denmark 63 Poland 75 Estonia 71 Portugal 70 Finland 55 Romania 69 France 59 Slovakia 83 Germany 57 Slovenia 69 Greece 46 Spain 63 Hungary 76 Sweden 58 Ireland 59 United Kingdom 44 Italy 53 Source: EUROSTAT 2014. Consolidated Financial Statements of Mazda Motor Corporation and Consolidated Subsidiaries 2009 2010 2011 2012 2013 Net Sales (in billionYen) 2,535.9 2,163.9 2,325.6 2,033.0 2,205.2 Net Sales- Domestic (in billionYen) 620.3 575.0 541.5 560.2 588.0 Net Sales– North America (in billionYen) 697.6 574.6 631.3 575.6 651.2 Net Sales- Europe (in billionYen) 653.4 477.3 427.4 347.3 347.9 Net Sales–Other areas (in billionYen) 564.6 537.0 725.5 549.9 618.1 Global SalesVolume (thousandofunits) 1,261 1,193 1,273 1,247 1,235 NumberofEmployees 39,852 38,987 38,117 37,617 37,745 Source: Mazda 2014. Table 7.3 Table 7.4 25 Top 10 World Motor Vehicle Producing Countries 2008-2013 (in thousand of units) Top 10 (2013) 2008 2009 2010 2011 2012 2013 China 9,299 13,791 18,265 18,419 19,272 22,117 UnitedStates 8,694 5,731 7,763 8,662 10,329 11,046 Japan 11,576 7,934 9,629 8,399 9,943 9,630 Germany 6,046 5,210 5,906 6,311 5,649 5,718 South Korea 3,827 3,513 4,272 4,657 4,562 4,521 India 2,332 2,642 3,557 3,927 4,145 3,881 Brazil 3,216 3,182 3,382 3,408 3,343 3,740 Mexico 2,168 1,561 2,342 2,681 3,002 3,052 Thailand 1,394 999 1,645 1,458 2,429 2,533 Canada 2,082 1,490 2,068 2,135 2,464 2,380 Source: OICA 2014. Top 10 Manufacturers in Mexico Based on Units Sold in 2013 Rank Manufacturer SoldUnits 1. Nissan 263,477 2. General Motors 201,604 3. Volkswagen 156,313 4. Ford 85,721 5. Chrysler 78,974 6. Toyota 60,740 7. Honda 58,381 8. Mazda 33,348 9. Seat 21,189 10. Renault 21,187 Source: Autoblog 2014. Table 7.5 Table 7.6 26 Selection of Projects of Automobile Manufacturers in Mexico in 2014 Manufacturer Project Audi 1.3 billion USD: new productionplant for Q5 model Chrysler 164million USD: expansion for Tigersharkengines Daimler 19 million USD: bus-assembly plant expansion General Motors 349 million USD: new transmission plant Honda 7 million USD: CR-V vehiclesplant expansion Mazda 770 million USD: new production plant Mercedes-Benz 20 million USD: new assembly line expansion Nissan 14 million USD: diesel engines Volkswagen 118 million USD: newengine configuration Source: Mexiconow 2014. Selected Free Trade Agreements of Mexico Agreement Member States Duty-free Trade in the Automotive Sector Local Content Requirement North American Free Trade Agreement (NAFTA) Mexico, USA, Canada since 01.01.2004 62.5% Middle East Free Trade Area (MEFTA) Mexico, European Union since 01.01.2007 50% Mercosur/ACE-55 Mexico, Argentina,Brazil since01.01.2007/ 19.03.2012 60% Argentina and Brazil, 35% Mexico Economic Partnership Agreement (AAE, by its initials in Spanish) Mexico, Japan since 01.04.2011 65% Source: AHK Mexiko 2012, p. 25. Table 7.7 Table 7.8 27 Global Competitiveness Index Ranking 2013-2014 Country/ Economy Rank Score Country/ Economy Rank Score Switzerland 1 5.67 Austria 16 5.15 Singapore 2 5.61 Belgium 17 5.13 Finland 3 5.54 New Zealand 18 5.11 Germany 4 5.51 U. Arab Emirates 19 5.11 United States 5 5.48 Saudi Arabia 20 5.10 Sweden 6 5.48 Australia 21 5.09 Hong Kong SAR 7 5.47 Luxembourg 22 5.09 Netherlands 8 5.42 France 23 5.05 Japan 9 5.40 Malaysia 24 5.03 United Kingdom 10 5.37 Korea, Rep. 25 5.01 Norway 11 5.33 Brunei 26 4.95 Taiwan 12 5.29 Israel 27 4.94 Qatar 13 5.24 Ireland 28 4.92 Canada 14 5.20 China 29 4.84 Denmark 15 5.18 Puerto Rico 30 4.67 Source: World Economic Forum 2013, p. 15. Determinants of National Competitive Advantage: Porter’s Diamond Model Chance Factor Conditions Related and Supporting Industries Firm Strategy, Structureand Rivalry Demand Conditions Government • localcontextthatencourages appropriateforms ofinvestmentand sustainedupgrading • vigorouscompetitionamonglocally basedrivals • sophisticated and demanding local customer(s) • unusual local demand in specialisedsegments that can be served globally • customer needs that anticipate those elsewhere • presence of capable, locally based suppliers • presence of competitive related industries • factor(input) quantity andcost - naturalresources - human resources - capitalresources - physicalinfrastructure - administrative infrastructure - informationinfrastructure - scientificandtechnological infrastructure • factorquality • factorspecialisation Source: Porter 1990a, p. 127. Table 8.1 Figure 8.1 28 The Generalised Double Diamond Factor Conditions Relatedand Supporting Industries Firm Strategy, Structureand Rivalry Demand Conditions International Diamond Domestic Diamond Source: Adapted from Moon/Rugman/Verbeke 1998, p. 138. Actors in Regional Clusters Legal and Regulatory Environment Social Capital Research Institutions/ Technology/ R&D Transportation and Communication Infrastructure Financial Institutions Research Community CompaniesGovernment Institutions for Collaboration Qualified Customers Product Markets Specific Suppliers Production Factors Source: Adapted from Sölvell/Lindqvist/Ketels 2003, p. 18; Andersson et al. 2004, p. 31. Figure 8.2 Figure 8.3 29 Cluster Lifecycle Time Size/Attractiveness/ Productivity oftheCluster Emergence Growth Maturity Decline/ Transformation Pioneers/ Spin-offs Specialised Suppliers, Services Companies, Specialised Personnel Emergenceof Related Institutions Attractionof RelatedFirmsand Specialised WorkForce Personal Relationships, Informal Information-/ KnowledgeTransfer Inflexibility Formal and Informal Relationships Transformation by Adaption/ Innovation Source: Adapted from Schramm-Klein 2005, p. 542; Menzel/Fornahl 2010, p. 218. GFCI 15 Industry Sector Sub-Indices Top 10 Rank Investment Management Banking Government& Regulatory Insurance Professional Services 1 New York (-) New York (-) London (-) New York (+2) London (-) 2 London (-) Hong Kong (-) New York (-) London (-1) New York (-) 3 Hong Kong (+1) London (-) Hong Kong (-) Singapore(-) Hong Kong (-) 4 Singapore(-1) Singapore(-) Zurich(-) Hong Kong (-2) Singapore(-) 5 Tokyo (-) Seoul (-) Singapore(+1) Seoul (+23) Zurich(-) 6 Boston (-) Zurich(+2) Geneva (-1) Zurich(-1) Tokyo (+3) 7 Zurich(-) Tokyo (-1) Tokyo (-) Chicago (+4) Geneva (-1) 8 Toronto (-) Shanghai (+5) Seoul (+6) Boston (-2) Chicago (+6) 9 Geneva (+1) San Francisco (+1) Frankfurt (-1) Geneva (-1) Toronto (+1) 10 Chicago (+1) Geneva (-1) Toronto (-) Tokyo (+5) Washington DC (+20) (The range from previous years is displayed in brackets.) Source: Z/YEN LTD. 2014, p. 31. Figure 8.4 Table 8.2 30 Financial and Related Professional Services: Employment in London at End 2013 Rank Sector Employment Change frompreviousyear 1 Accounting & Management Consultancy 215,500 1.4% 2 Banking 147,100 2.4% 3 Auxiliary & Other 126,400 2.1% 4 Legal Services 106,000 2.8% 5 Insurance 70,700 0.5% 6 Fund Management 23,100 3.6% Source: TheCityUK 2014. London Financial Cluster in Porter’s Diamond Model Chance Factor Conditions Related and Supporting Industries Structure of Firms and Rivalry Demand Conditions Government + open to foreign companies and FDI +/- financial services is a highly mobile and global industry - increasing commodisationand low-cost competition made possible by technological advancements and spread of advanced IT infrastucture + demanding and sophisticated global customers + demanding and sophisticated local customers - relatively small local demand + pushes domestic firms to think internationally and compete globally + relatively easy to serve other geographies, including accessing hundreds of million of potential new customers in emerging markets + large number and variety of high- caliber local service providers, e.g. telecommunications, IT, law, consulting, accounting, tax, audit, mediation, business hospitality, commercial and residential real estate, logistics, financial media +/- transportation: Heathrow as an international transportation hub; public transportation overcrowded + highly competent regulator + fair and predictable legal environment +/- low and decreasing barriers to the flow of capital + opportunity to continue to benefit from emerging markets - further attraction of low-cost competitors + English has become the leading language of international discourse + London as a global melting pot for international cultures + well-situated geographically to the USA and continental Europe + work day overlaps with US market’s and Asian market’s open hours + development and attraction of an enormous pool of skilled labour + accomodatingrules for migration and temporary foreign workers + high quality of life for professionals (strong arts and culture, low crime rate) +/- education: strong universities and business schools; average public schools - high cost of living (real estate, local services) - high costs of labour and commercial real estate Source: Adapted from Porter 1990a, p. 127. Table 8.3 Figure 8.5 31 Levels of Culture Artefacts Espoused Values Basic Assumptions Visible Structuresand Processes (SometimesHard toDecipher) Strategies, Philosophies (EspousedJustifications) Unconscious, Taken-for-granted Beliefs, Perceptions, Thoughts, andFeelings (Ultimate Source ofValues andAction) Language, Technology, Art, Stratification and Status, Systems, Family Ideals and Goals, Means (How to Get There, e.g. Heroic Paths, Sins, Virtues) “Man“ and Nature Time, Space, Rules of Interaction Source: Adapted from Schein 1992, pp. 15-20. Figure 9.1 32 Layers of Culture Global Culture National Culture Organisational Culture Group Culture Individual Cultural Selfrepresentation Source: Adapted from Erez/Gati 2004, p. 288. Environmental Influences on International Management Functions Country-Specific Influences Economic System Political System Technological Level Important Historical Events Customs and Traditions of the Country Religion Dialects and Languages Education Work Authority Money Change Time Risk Family Equality Attitudes Toward International Management Functions Organising and Controlling Managing Technological Change Motivating Communicating Decision Making Negotiating Ethical and Social Responsibility Influences Influences Cultural Orientation and Value Patterns Source: Adapted from Phatak/Bhagat/Kashlak 2009, p. 115. Figure 9.2 Figure 9.3 33 Examples of Cross-Cultural Business Contexts Face to Face Company to Company Company to Customer Meetings Communication Negotiation Contracts Alliances JVs M&As Marketing (New) Product Development • Language • Knowledge/ Expertise • Behaviour • Rituals • Organisation • Hierarchy and Decision Making • Labor Relations • Attitudes Toward Work • Consumer Preferences • Quality of Demand Source: Rugman/Collinson 2012, p. 136. Figure 9.4 34 Comparative Characteristics of High Context and Low Context Cultures Characteristic Low Context/Individualistic (e.g. Western Europe, US) High Context/Collectivistic (e.g. Japan, China, Saudi Arabia) Communication and Language  explicit, direct  implicit, indirect Sense of Self and Space  informal handshakes  formal hugs, bows and handshakes Dress and Appearance  dress for individual success, wide variety  indication of position in society, religious rule Food and Eating Habits  eating is a necessity, fast food  eating is social event Time Consciousness  linear, exact, promptness is valued, time = money  elastic, relative, time spent on enjoyment, time=relationships Family and Friends  nuclear family, self-oriented, value youth  extended family, other oriented, loyalty and responsibility, respect for old age Values and Norms  independence, confrontation of conflict  group conformity, harmony Beliefs and Attitudes  egalitarian, challenge authority, individuals control destiny, gender equity  hierarchical, respect for authority, individuals accept destiny, gender roles Mental Process and Learning  linear, logical sequential, problem solving  lateral, holistic, simultaneous, accepting life's difficulties Business/Work Habits  deal oriented (“quickly getting down to business”), rewards based in achievement, work has value  relationship oriented (“first you make a friend, then you make a deal”), rewards based on seniority, work is a necessity Source: Hollensen 2014, p. 248. Hofstede’s Culture Dimensions in Selected Countries Country Power Distance Individualism Masculinity Uncertainty Avoidance Long-Term Orientation France 68 71 43 86 - Germany 35 67 66 65 31 Hong Kong 68 25 57 29 96 India 77 48 56 40 61 Japan 54 46 95 92 80 Malaysia 104 26 50 36 - Netherlands 38 80 14 53 44 Singapore 74 20 48 8 48 South Korea 60 18 39 85 75 Sweden 31 71 5 29 33 Switzerland 34 68 70 58 - United Kingdom 35 89 66 35 25 United States 40 91 62 46 29 Source: Hofstede 1991, pp. 312-313. Table 9.1 Table 9.2 35 Latin Europe Cluster’s Societal Culture Scores 1 2 3 4 5 6 7 Uncertainty Avoidance Future Orientation Power Distance Institutional Collectivism Humane OrientationPerformance Orientation Family Orientation Gender Egalitarianism Assertiveness as is should be Source: Jesuino 2002, p. 85. Organisation Types Reflecting Cultural Predispositions Imperialist Interventionist Interactive Independent Organisation ethnocentric ethnocentric geocentric polycentric Structure steep hierarchy flat hierarchy network federation Strategy dictated centrally decided jointly specified locally specified Decision Making centralised distributed shared devolved Source: Rugman/Collinson 2012, p. 151. Figure 9.4 Table 9.3 36 Development of GDP from 2005 to 2012 (in billion USD) 0 200 400 600 800 1.000 1.200 1.400 1.600 1.800 2005 2006 2007 2008 2009 2010 2011 2012 1,800 1,600 1,400 1,200 1,000 800 600 400 200 0 Source: The World Bank 2014, p. 4. Parameter-Values for the Culture-Dimensions of Russia 0 2 4 6 Collectivism I Collectivism II Gender Egalitarianism Assertiveness Power DistancePerformance Orientation Future Orientation Uncertainty Avoidance Humane Orientation as is should be Source: House/Javidan 2004. Figure 9.5 Figure 9.6 37 The Most Relevant Sets of Coordination Mechanisms Formal Mechanisms Informal Mechanisms organisational structure: departmentalisation or grouping of organisational units lateral or cross-departmental relations: direct managerial contact, temporary or permanent teams, task forces, committees, integrators, and integrative departments centralisation: centralisation or decentralisation of decision making through the hierarchy of formal authority informal communication: personal contacts among managers, management trips, meetings, conferences, transfer of managers, etc. formalisation and standardisation: written policies, rules, job descriptions, and standard procedures, through instruments such as manuals, charts, etc. normative integration: building an organisational culture of known and shares strategic objectives and values by training, transfer of managers, career path management, reward systems, etc. planning: strategic planning, budgeting, functional plans, scheduling, etc. Source: Adapted from Martinez/Jarillo 1989, p. 491. Effectiveness of Different Coordination Mechanisms Strategic and Organisational Clarity Strategic and Organisational Ambiguity high low high low Structure SystemsCulture People Effectiveness Structure Systems Culture People Source: Hamel/Prahalad 1983, p. 349. Table 10.1 Figure 10.1 38 Shared Values at McKinsey & Co. Put the client’s interest ahead of our own This means we deliver more value than expected. It doesn’t mean doing whatever the client asks. Behave as professionals Uphold absolute integrity. Show respect to local custom and culture, as long as we don’t compromise our integrity. Keep our client information confidential We don’t reveal sensitive information. We don’t promote our own good work. We focus on making our clients successful. Tell the truth as we see it We stay independent and able to disagree, regardless of the popularity of our views or their effect on our fees. We have the courage to invent and champion unconventional solutions to problems. We do this to help build internal support, get to real issues, and reach practical recommendations. Deliver the best of our firm to every client as cost effectively as we can We expect our people tospend clients’ and our firm’s resources as if their own resources were at stake Source: McKinsey 2014. Guiding Principles at McKinsey & Company We operate as one firm. We maintain consistently high standards for service and people so that we can always bring the best team of minds from around the world—with the broadest range of industry and functional experience—to bear on every engagement. We come to better answers in teams than as individuals. So we do not compete against each other. Instead, we share a structured problem-solving approach, where all opinions and options are considered, researched, and analysed carefully before recommendations are made. We give each other tireless support. We are fiercely dedicated to developing and coaching one another and our clients. Ours is a firm of leaders who want the freedom to do what they think is right. Source: McKinsey 2014. Table 10.2 Table 10.3 39 Global Functional Structure at STIHL AG Chairman of the Board Production & Materials Handling Finance, Controlling, Information Systems & Services Human Resources & Legal Marketing & Sales Development Source: STIHL 2014. Strengths and Weaknesses of a Global Functional Structure Strengths Weaknesses  intensive knowledge transfer concerning the function  focus on key functions  functional expertise  centralisation/standardisation  helps to “unify” the corporation  one line of responsibility  avoidance of double work  knowledge transfer concerning other fields rather low (specific requirements of certain product groups, regions, customer groups often neglected)  potentially low motivation due to centralisation  slow reaction to changes in certain countries due to standardisation and formalisation  high requirements for information processing by top management  potentially lack of market orientation  difficult for subsidiaries with whole value-added chains Source: Adapted from Zentes/Swoboda/Morschett 2004, p. 765. Global Product Structure at Liebherr Chairman of the Board Earthmoving Mining Mobile cranes Maritime cranes Domestic appliances Machine tools and automotion systems Aerospace and transpor- tation systems Tower cranes and concrete technology Compo- nents Source: Liebherr 2014. Figure 11.1 Table 11.1 Figure 11.2 40 Strengths and Weaknesses of a Global Product Structure Strengths Weaknesses  intensive knowledge transfer concerning the product/product groups  focus on differences between products  expertise for specific products  usually high market orientation of product divisions  coordination in companies with heterogeneous products facilitated  holistic view of the value chain  promotion of entrepreneurial behaviour  economies of scale easily exploited  flexible response to changes in product requirements  duplication of functions  knowledge transfer concerning other fields (e.g. functions, regions) rather low  coordination and cooperation between different product divisions more complicated  risk of divisional egoism  difficult for foreign subsidiaries with more than one product line  lack of economies of scope Source: Adapted from Zentes/Swoboda/Morschett 2004, p. 767. Global Area Structure at Mondelez International Chairman and Chief Executive Officer Executive Vice President Latin America Executive Vice President North America Executive Vice President Europe Executive Vice President Asia Pacific and EEMEA* *Eastern Europe, Middle East, Africa Source: Mondelez International 2014. Table 11.2 Figure 11.3 41 Strengths and Weaknesses of a Global Area Structure Strengths Weaknesses  intensive knowledge transfer concerning the region  focus on differences between regions  regional expertise  communication and coordination advantages: personal communication as coordination instrument easy to use, due to geographic proximity  holistic view on business in the region  uniform company image in the region  flexible response to changes in local environment (local responsiveness easy)  duplication of functions  duplication of resources  coordination and knowledge transfer across regions might be difficult and slow  risk of regional egoism  risk of overemphasis on regional differences  risk of low cost efficiency and low economies of scale due to local adaptation  diffusion of technology might be slowed down  “not invented here” syndrome  problems in technologically dynamic environments Source: Adapted from Zentes/Swoboda/Morschett 2004, p. 770. Global Matrix Structure at Procter & Gamble Global Baby, Feminine andFamily Care North America Western Europe Central/ Eastern Europe Middle East/Africa Latin America Asia Corporate Function(CF) Global Business Service (GBS) Global Beauty GobalFabricand Home Care Global Healthand Grooming Source: Procter & Gamble 2014. Table 11.3 Figure 11.4 42 Strengths and Weaknesses of a Global Matrix Structure Strengths Weaknesses  provides access to advantages of the other organisational structures  combination of two or more areas of expertise  good knowledge transfer throughout the organisation  simultaneous consideration of product, region and/or function  better allocation of resources due to forced consideration of multiple aspects simultaneously  good opportunity to decentralise the decision process  complex and costly  high requirements for information and communication  high requirements for cooperative behaviour  potential ambiguity of orders  decisions may take longer, often extensive meeting culture  risk of power struggles  appropriate for firms with many products and unstable environments Source: Adapted from Zentes/Swoboda/Morschett 2004, p. 783; Griffin/ Pustay 2013, pp. 401-402. Hybrid Global Structure at Coca-Cola CEO North America Group Latin America Group Europe Group Eurasia/ Africa Group Pacific Group Coca-Cola Americas Bottling Investments Group Coca-Cola International Source: Coca-Cola 2014. Table 11.4 Figure 11.5 43 The Stages Model of Stopford and Wells Product Diversification Abroad Foreign Sales as Percentage of Total Sales Global Product Structure Alternative Development Paths Global Area Structure Global Matrix Interna- tional Division Source: Adapted from Stopford/Wells 1972, p. 65. Development of Total Number of Employees (in thousands) 61 71 79 91 93 89 90 94 101 2005 2006 2007 2008 2009 2010 2011 2012 2013 Source: Microsoft 2013a. Figure 11.6 Figure 11.7 44 Development of Revenue (in billion USD) 39.8 44.3 51.1 60.4 58.4 62.5 69.9 73.7 77.9 2005 2006 2007 2008 2009 2010 2011 2012 2013 Source: Microsoft 2013a. Microsoft’s Organisational Structure as of 2006 Platformsand Services Division CEO Entertainment and Devices Division Microsoft Business Division Corporate AffairsGroups Human Resources, Finance, Operations, IT, Legal Affairs, Accounting  R&D  Sales  Customer Service  R&D  Sales  Customer Service  R&D  Sales  Customer Service Source: Adapted from Microsoft 2006. Figure 11.8 Figure 11.9 45 List of Major Microsoft Corporation Acquisitions Year Company 1987 Forethought (computer software) 1997 Hotmail (web-based email service) 2000 Visio (drawing software) 2002 Navision (software programming) 2007 aQuantitave(digital marketing) 2008 Fast Search & Transfer (data search technologies) 2011 Skype (telecommunications) 2012 Yammer (social networking) 2013 Nokia mobile phones unit 2014 Parature(customer service software) Source: Microsoft 2014. Microsoft’s Organisational Structure as of 2013 CEO Devices and Studios Applications andServices Cloud and Enterprises Microsoft Dynamics Operating Systems Finance HR Marketing Business Development & Evangelism COO Legal and Corporate Affairs Advanced Strategy and Research Engineering Groups Centralised Groups Source: Adapted from Microsoft 2013b. Table 11.5 Figure 11.10 46 Generic Corporate Cultures Speed of Feedback from the Market slow fast high low Degree of Risk Associated With the Company‘s Activities Bet-Your-Company Culture Tough-Guy, Macho Culture Work Hard/Play Hard Culture Process Culture Source: Adapted from Deal/Kennedy 1982, pp. 107-108. Apple’s Brand Values Brand Values Characteristics Innovative frequent hardware and software updates Customer Support highlytrained and skilledretail staff; on-site abilityfor the customer to get their hands on the product HighQuality Products high buildquality; lowerror count in both hardware and software, therefore a lowamount of customer complaints Great Design high attention to detail; an overall consistentbrand image, reflected by design, form and function Easy to Use no previous background knowledge required Source: Adapted from Apple 2014. Figure 12.1 Table 12.1 47 Apple´s Departments Executive Profiles Tim Cook CEO Angela Ahrendts Retail andOnline Stores Eddy Cue Internet Software Craig Federighi Software Engineering Jonathan Ive Design Peter Oppenheimer Financial Officer Dan Riccio Hardware Engineering Philip W. Schiller Marketing Bruce Sewell General Counsel Jeff Williams Operations Source: Adapted from Apple 2014. Events in the Evolution and Development of CSR TimelineofKey CSR Events 1900 2000 1840s: Victorian Philanthropy (Quakers, Cadbury, Barclays) in the UK 1929: Wall Street Crash 1930s: Great Depression 1984: Bhopal Disaster 1989: Exxon Valez 1990s: Nike Sweatshops 2007: Housing Crisis 2008: Lehman Bankruptcy 1886: Santa Clara County v. Southern Pacific Railroad 1960s-1980s: Environmentalism 1962: Publication of Rachel Carson‘s SilentSpring 1990: Launch of Internet byTim Berners- Lee 2001: Enron Bankruptcy 2002: SOX1750-1850: Industrial Revolution 1911: Standard Oil 2011: Occupy Wall St. 1982: Tylenol Recall 1995: Brent Spar Ken Sara-wiwa 1759: Publication ofAdam Smith‘sTheoryof Moral Sentiments 1919: Dodge v. Ford Motor Company 1790s: First Consumer Boycottof Slave- harvestedSugar 1800 1991: Kyoto Protocol 2010: BP‘s Oil Spill in Gulf of Mexico Source: Adapted from Chandler/Werther 2014, p. 15. Figure 12.2 Figure 13.1 48 Measures to Capture the Triple Bottom Line Economic Environmental Social sales, profits, ROI pollutants emitted health and safety record taxes paid carbon footprint community impacts monetary flows recycling and reuse human rights, privacy jobs created water and energy use product responsibility supplier relations product impacts employee relations Source: Adapted from Savitz/Weber 2014, p. 5. Table 13.1 49 Corporate Social Responsibility Pyramid Economic (“Being Profitable“) Legal (“Bbeyingthe Law“) Ethical (“Being Ethical“) Philan- trophic (“Being a Good Citizen“) Be Profitable Obey the Law Be Ethical Be a Good Corporate Citizen Required Required Expected Desired Source: Carroll 1991. MNC Stakeholders MNC Home Country Owners Customers Employees Unions Suppliers Distributors Strategic Allies Community Economy Government Host Country Economy Employees Community Host Government Consumers Strategic Allies Suppliers DistributorsSociety in General Global Environment and Ecology Sustainable Resources Population´s Standard of Living Source: Adapted from Deresky 2014, p. 62. Figure 13.2 Figure 13.3 50 The CSR Management Model Organising Identity Organising Transactivity Organising the Business Proposition Organising Systems Organising Accountability Business Context Societal Context Source: Jonker/De Witte 2006, p. 5. Development of DJSI World and MSCI World -50% -40% -30% -20% -10% 0% 10% 20% 30% 40% 50% 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 DJSI World MSCI All Countries Source: Robecosam 2014. Figure 13.4 Figure 13.5 51 Newsweek Green Ranking: World’s Greenest Companies Rank Company Name Industry Group Energy Productivity Carbon Productivity Water productivity Waste Productivity Reputation Newsweek Green Score 1 Vivendi Telecommunication Services 73.3% 67.8% 97.6% 82.9% 87.7% 85.3% 2 Allergan Pharmaceuticals, Biotechnilogy 72.2% 85.2% 61.1% 82.0% 100.0% 85.1% 3 Adobe Systems Software & Services 82.7% 87.1% 99.2% 91.9% 51.4% 84.4% 4 Kering Consumer Durables & Apparel 67.7% 70.2% 81.5% 82.2% 90.1% 83.6% 5 NTT DOCOMO Telecommunication Services 81.7% 57.7% 90.5% 90.6% 100.0% 83.1% 6 Ecolab Materials 73.2% 80.1% 84.3% 59.6% 90.1% 82.6% 7 Atlas Copco Capital Goods 78.0% 89.4% 81.9% 87.4% 58.7% 77.2% 8 BiogenIdee Pharmaceuticals, Biotechnilogy 69.2% 82.7% 84.5% 97.0% 53.4% 75.7% 9 Compass Group Consumer Service 74.3% 69.3% 91.3% 83.9% 87.4% 75.3% 10 Schneider Electric Capital Goods 73.0% 71.9% 79.5% 68.0% 57.0% 75.3% 11 Centrica Utilities 57.4% 82.2% 58.5% 82.6% 65.6% 75.2% 12 Kone Capital Goods 73.6% 63.9% 69.5% 59.4% 72.2% 74.4% 13 Hyundai Mobis Automobiles & Components 85.7% 94.9% 72.2% 53.6% 81.7% 72.3% 14 Skandinaviska Enskilda Banken Banks 66.6% 92.3% 66.6% 53.3% 51.7% 72.1% 15 Christian Dior Consumer Durables & Apparel 58.5% 67.6% 36.3% 50.5% 100.0% 71.9% 16 Bayerische MotorenWerke Automobiles & Components 75.0% 87.5% 83.6% 82.2% 11.0% 71.4% 17 Adidas Consumer Durables & Apparel 81.8% 90.0% 84.3% 81.7% 3.6% 71.4% 18 Cardinal Health Health Care Equipment & Services 75.5% 70.1% 81.9% 64.6% 61.0% 71.0% 19 ItauUnibanco Holding Banks 59.6% 90.6% 49.4% 56.9% 62.1% 70.9% 20 Baker Hughes Energy 75.4% 74.9% 60.8% 14.1% 85.3% 70.8% Source: Newsweek 2014. Table 13.2 52 Selected Coop Store Brands Coop Naturaplan Organically produced food bearing the Bio Suisse bud label, including regional organic specialties. Uncompromisingly organic, uncompromisingly tasty. Coop Naturafarm Swiss meat and eggs from animals and poultry reared subject to very rigorous animal husbandry standards, with stalls designed to meet animals’ needs and feed that is free of genetically modified plants. Coop Oecoplan Environmentally friendly products for home and garden, flowers and plants with Bio Suisse bud logo, timber products with the FSC label, products made from recycled materials, energy-efficient appliances and ecological services. Coop Naturaline Textiles made from organically grown cotton and produced according to socially and environmentlyresponsible methods, and plant-based cosmetic products. Pro Montagna Products produced and processed in the Swiss mountain areas – with a donation tot he Coop Aid for Mountain Regions scheme. Slow Food Traditional, sustainably manufactured specialitiesfor rediscovering the pleasure of real food. Source: Coop 2013a. Figure 13.6 53 Milestones in the Cooperation between Coop and Remei 1993 1995 1997 2005 2006 2008 2012 2013 2014 Introduction of Naturaline ecologically and socially responsible textiles Naturaline made from 100% organic cotton Launch of the bioRe Foundation by Coop and Remei Opening of the first BioRe training centre in India Mobile hospital and opening of the first village school in India First carbonate dioxide neutral T- shirt collection Complete assortment carbonate dioxide neutral Implementa tion of the Traceability -Tool New design and first collection by Melanie Wagner Net Sales of Naturaline Textiles (in billion CHF) 4 10 15 22 25 24 25 26 25 31 37 44 51 54 55 54 53 53 51 0 10 20 30 40 50 60 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Source: Coop 2013b. Figure 13.7 Figure 13.8 54 Classification of Selected Foreign Operation Modes Value-Added Dominantly in Home Country Value-Added Dominantly in Host Country Without FDI in Host Country (Contractual) (Direct or Indirect) Export Joint Ventures Wholly-owned Subsidiaries e.g. Licensing, Franchising, Contract Manufacturing WithFDI in Host Country (Equity) Foreign Operation Modes Greenfield Investment Acquisition (Brownfield Investment) Cooperation Hierarchy Value-Added Dominantly in Third Country Source: Adapted and expanded from Zentes 1993, p. 67. Characteristics of Selected Foreign Operation Modes lowmedium-lowmediumhighFlexibility medium medium medium Equity Cooperation highlowlow/medium/highControl highlowlowResource Commitment lowhighlowKnowledge Dissemination Risk Wholly-owned Subsidiary Contractual CooperationExport lowmedium-lowmediumhighFlexibility medium medium medium Equity Cooperation highlowlow/medium/highControl highlowlowResource Commitment lowhighlowKnowledge Dissemination Risk Wholly-owned Subsidiary Contractual CooperationExport Source: Adapted from Driscoll/Paliwoda 1997, p. 60. Figure 14.1 Table 14.1 55 The Creation of AB InBev 1987 2000 2004 2008 Source: AB InBev 2014. AB InBev’s Global Presence Country with Presence of AB InBev Source: AB InBev 2014. Figure 14.2 Figure 14.3 56 Characteristics of AB InBev’s Focus Markets 3.5% 25.6% 6.8% 12.6% 5.3% 3.4% .13.7% 20.8% 58.0% 13.4% 68.5% 47.6% 0% 20% 40% 60% 80% Mexico China Brazil United States Market Share of AB InBev in Country Country Share of Global Beer Industry EBIT Country Share of Global Beer Industry Volume Source: AB InBev 2014. Global Merchandise Exports from 1980 to 2013 (in billion USD) 2,0343,449 3,449 6,459 10,508 12,130 14,023 16,160 12,554 15,283 18,319 18,401 18,784 0 2 4 6 8 10 12 14 16 18 20 1980 1990 1995 2000 2005 2006 2007 2008 2009 2010 2011 2012 2013 Export Volume (in billion USD) Source: WTO World Trade Report 2014. Figure 14.4 Figure 15.1 57 Leading Export Countries (Merchandise Trade): Share of World Trade 2013 (in %) 2.8 2.9 2.9 3.0 3.1 3.6 3.8 7.7 8.4 11.7 0% 2% 4% 6% 8% 10% 12% Russia Hongkong United Kingdom South Korea France Netherlands Japan Germany USA China Export Share Source: WTO World Trade Report 2014. Growth of World Trade and World Production (in %) -12 -10 -8 -6 -4 -2 0 2 4 6 8 10 12 14 16 World Trade World Production Source: WTO World Trade Report 2013. Figure 15.2 Figure 15.3 58 Advantages and Disadvantages of Export Modes Export Mode Advantages Disadvantages IndirectExporting ♦ limited commitmentandinvestment required ♦ minimal risk (market, political) ♦ little ornoinvolvementorexport experienceneeded ♦ suitableforfirmswith limited resources ♦ goodway to test-marketproducts, developgoodwill, andallowclientsto becomefamiliarwith firm‘stradename ♦ no control over marketing mix elements other than the product ♦ an additional domestic member in the distribution chain may add costs ♦ lack of contact with the market ♦ lower profit margin due to commissions and other payment to intermediaries ♦ limited contact/feedback from end users ♦ limited/no opportunity to learn international business know-how and develop marketing contacts ♦ difficulties in taking over the business after the relationship has ended. Direct exporting - Domestic-Based Sales Representatives - Agents/Distributors - Resident Sales Representatives/Foreign Sales Branches/Foreign Sales Subsidiaries ♦ bettercontrolof salesactivities comparedtoindependent intermediaries ♦ accesstomarketexperience ♦ shorterdistributionchain(comparedto indirectexporting) ♦ acquisationof marketknowledge ♦ morecontrolovermarketingmix (especiallywith agents) ♦ localservice supportavailable ♦ fullcontrolof operation ♦ directacquisationof market knowledge ♦ high travel expenses ♦ little control over market price and lack of distribution control (especially with distributors) ♦ some investment in sales organisation required (contact with distributors or agents) ♦ cultural differences, providing communication problems ♦ initial capital investment required (subsidiary) ♦ less flexibility (subsidiary) ♦ high risk (market, political) ♦ taxation problems Source: Adapted from Hollensen 2014, p. 362, p. 398; Seyoum 2014, p. 94. Table 15.1 59 Forms of Countertrade Doesthetransactioninvolve reciprocalcommitments? (otherthancash payments) Yes No Countertrade Straight Sales (cash orcredit) Doesthetransactioninvolve theuseof money? Yes No Counterpurchase, buyback, oroffset Barter-type Is thetransactiona reciprocalcommitment limited topurchaseof goods? Doesthetransaction extendoverlongtime periodsandinvolve a basketofgoods? Yes No Yes No Buybackand counterpurchase Are thegoodstaken back bytheexporter andtheresultantoutput oftheequipmentsold? Yes No Buyback Counterpurchase Doesthe transaction involve debt? Yes No Swaps Offset Clearing arrangements Are third parties involved? Yes No Switch Trading Simple Barter Clearing Arrangements Source: Seyoum 2014, p. 263. Figure 15.4 60 Incoterms 2010: Division of Costs, Licences, Formalities and Risks Term Transport Transport Insurance Clearance Taxes Export license Import license Transfer of risk EXW (Ex-Works) buyer buyer(although not obligated to insure) buyer buyer buyer buyer when goods are placed at the disposal of the buyer FCA (Free Carrier) buyer buyer (although not obligated to insure buyer buyer seller buyer upon seller’s delivery to the carrier at the named place FAS (Free Alongside Ship) buyer buyer(although not obligated to insure buyer buyer seller buyer when goods are placed alongside the ship FOB (Free on Board) buyer buyer buyer buyer seller buyer when goods are placed on board the vessel at the port of departure CFR (Cost and Freight) seller buyer(although not obligated to insure buyer buyer seller buyer when goods are placed on board the vessel at the port of departure CIF (Cost, Insurance and Freight) seller seller buyer buyer seller buyer when goods are placed on board the vessel at the port of departure CPT (Carriage Paid To) seller buyer buyer buyer seller buyer upon seller’s delivery to the main carrier at the place of departure CIP (Carriage and Insurance Paid To) seller seller buyer buyer seller buyer upon seller’s delivery to the main carrier at the place of departure DAT (Delivered At Terminal) seller seller buyer buyer seller buyer when the goods are unloaded from the arriving vehicle (not cleared) and are at the buyer’s disposal at the agreed place of destination DAP (Delivered At Place) seller seller (although not obligated to insure) buyer buyer seller buyer when the goods are placed at the buyer’s disposal at the agreed destination (not unloaded and not cleared) DDP (Delivered Duty Paid) seller seller (although not obligated to insure) seller seller seller seller when goods cleared and duty paid (not unloaded) are placed at the buyer’s disposal at the agreed destination Source: ICC Germany 2013. Selected Data of Herrenknecht (2008 to 2013) 2008 2009 2010 2011 2012 2013 Sales (in million EUR) 926 866 935 1,017 1,147 1,051 Order inflow (in million EUR) 939 908 916 1,143 1,051 1,082 Number of staff* 3,831 3,960 4,154 5,635 5,079 4,777 *including trainees and temporary workers Source: Herrenknecht 2014. Table 15.2 Table 15.3 61 Milestones in Herrenknecht’s History (1975 to 2013) Engineer office, Lahr Office and assemblyplant, Schwanau Acquiring Maschinen-und Stahlbau GmbH, Dresden Conversion ofGmbH in AG 35 years of Herrenknecht Market leaderin mechanised tunneling technology First placein brand rankingamong German mid-sized companies A secondtime, first placein brand rankingamong German mid-sized companies Salespass the 1 billionEUR mark World´slargest tunneldrilling machine First subsidiary abroad, Sunderland Foundationof Herrenknecht GmbH 1975 1977 1980 1984 1991 1998 2002 2010 2011 2012 2013 Source: Herrenknecht 2014. Core Markets and Brands ExplorationMiningTunnelling Herrenknecht Tunneling Systems Herrenknecht Tunneling Systems Herrenknecht Vertical Additional Equipment Additional Equipment Additional Equipment Additional Services Global Tunneling Experts ♦ H+E Logistik ♦ Maschinen- und Stahlbau Dresden ♦ TechniMétal Systèms ♦ VMT ♦ Herren- knecht Formwork ♦ Euroform ♦ Schäfer Urbach Core Markets Core Brands Group Brands Herrenknecht (AG) ♦ Schäfer Urbach ♦ Bohrtech Vertical ♦ H+E Logistik ♦ Maschinen- und Stahlbau Dresden ♦ TechniMétal Systèms ♦ VMT ♦ Euroform Source: Herrenknecht 2014. Figure 15.5 Figure 15.6 62 Worldwide Operations (2014) Region Country Numberof distribution locations Numberof service locations Numberof production locations Region Country Numberof distribution locations Numberof service locations Numberof production locations Africa& Middle East Egypt 1 Europe Italy 3 2 1 Qatar 1 1 Netherlands 2 2 Saudi Arabia 1 1 Portugal 1 South Africa 1 Romania 1 United Arab Emirates 2 2 1 Russia 2 2 Asia China 2 7 4 Spain 1 1 India 1 1 1 Sweden 1 Indonesia 2 Switzerland 3 2 1 Malaysia 1 Turkey 1 Singapore 1 1 Ukraine 1 1 South Korea 1 United Kingdom 1 1 Thailand 1 1 Northern America Canada 1 Australia& Oceania Australia 2 1 United States 1 1 1 Central America Mexico 2 1 South America Argentina 2 1 Panama 1 1 Brazil 1 1 Europe Azerbaijan 1 Chile 1 1 Bulgaria 1 Colombia 1 1 France 2 1 1 Peru 1 Germany 9 8 8 Venezuela 1 1 Source: Herrenknecht 2014. Selective Production Expansion 1997 2010 20121977 2005 2007 Germany (8 plants) USA (1 plant) China (4 plants) Switzerland (1 plant) India (1 plant) UAE (1 plant) France (1 plant) Brazil in process of planning Source: Adapted from Herrenknecht 2014. Table 15.4 Figure 15.7 63 Transaction Modes Market Cooperation Hierarchy/ Integration Internalisation Externalisation Most Important Reasons for Outsourcing 23% 24% 26% 33% 42% 0 10 20 30 40 50 Access to Specific Knowledge, Expertise and Tools Reduction in Headcount Objectives Improved Focus on Core Objectives Efficiency Improvements Improvement in Cost Level or Reduction Source: Ernst & Young 2013, p.15. Figure 16.1 Figure 16.2 64 Most Important Risks for Outsourcing 29% 29% 35% 43% 51% 0% 10% 20% 30% 40% 50% 60% Loss of Confidentiality Loss of Knowledge Impact on Quality Loss of Control Dependency on External Service Provider Source: Ernst & Young 2013, p. 15. Strategic Relevance/Competence-Matrix Develop Use Outsource Transfer high Strength of Competence Strategic Relevance low high low Source: Adapted from Krüger/Homp 1997, p. 105. Figure 16.3 Figure 16.4 65 A.T. Kearney’s Strategic Outsourcing Framework Contest Co-Source Insource Outsource high Commonality Market Maturity low high low Source: Martin 2010, p. 165. Supplier Pyramid Third Tier Subcomponent Suppliers Second Tier Component Suppliers First Tier System Suppliers Assembly Plant Figure 16.5 Figure 16.6 66 Transactional Modes and Configuration Domestic Units Foreign Affiliates Domestic Suppliers Foreign Suppliers Home Country (Onshore) Foreign Countries (Offshore/Nearshore) Location Decision (Configuration) Corporate Boundary Decision (Transactional Mode) Insourcing Outsourcing Source: Adapted from Abramovsky/Griffith 2006, p. 595. Location of Outsourced Business Processes and Services by Country 77% 86% 87% 80% 76% 65% 74% 59% 10% 11% 9% 10% 11% 21% 18% 26% 14% 3% 5% 10% 13% 14% 8% 16% 0% 20% 40% 60% 80% 100% United Kingdom Spain Sweden Norway Netherlands Germany Finland Denmark Onshore Nearshore Offshore Source: Ernst & Young 2013, p. 13. Figure 16.7 Figure 16.8 67 Outsourcing of IT Services per Industry 35% 13% 10% 31% 42% 65% 87% 90% 69% 58% 0% 20% 40% 60% 80% 100% Telecommunication Oil and Gas IT Consumer Products Automotive Outsourced Inhouse Source: Ernst & Young 2013, p. 12. Milestones in Company History (from 1974 to 2012) Foundation by Terry Gou Ranked First Largest Private Manufacturing Enterprise in Taiwan Ranked 60th among Fortune Global 500 Ranked 30th among Fortune Global 500 Ranked Largest Exporter in China Ranked Best Management Company in Taiwan Listed on the Taiwan Stock Exchange Corporation Ranked Best Investor Relation Company in Taiwan Once Again Ranked Best Investor Relation Company in Taiwan 1974 1991 1999 2001 2002 2003 2006/2007 2011 2012 The Company´s Manufacturing Services Manufacturing Services CEM (ContractElectronic Manufacturing) EMS (Electronic Manu- facturingServices) ODM (Original Design Manufacturing) CMMS (Components, Module, Move and Service) Figure 16.9 Figure 16.10 Figure 16.11 68 Major Customers and Devices Produced by Foxconn Customer Manufacturing Product Amazon Kindle Apple iPad, iPod, iPhone, Mac mini, Macbook pro Cisco Video and Telecommunication Equipment Dell Laptops Hewlett-Packard Personal Computer, Laptops, Printer Intel Mainboards Microsoft X-Box, X-Box 360 Nintendo DS, Wii Nokia Components ofMobile Phones Blackberry Smartphones Sony Playstation Huawei Smartphones Acer Smartphones Revenue by Geographic Area Based on the Location of Customers (in 2012) 30.0% 28.8% 9.0% 8.8% 0.3% 17.4% USA Ireland China Singapore Japan Taiwan Others Source: Foxconn 2014. Table 16.1 Figure 16.12 69 Markets for IT Goods and Services 2014 (in billion USD) 877.2 211.4 124.5 100.2 95.6 USA Japan China Great Britain Germany Source: SCMP 2014. Operating Units (in 2013) Pan America Europe Asia Upcoming Mega-Sites Pan America: Toronto/Fullerton/Santa Clara/Houston/Forth Worth/Austin/Indy/Seattle/ Vicksburg/San Diego/Florida/Raleigh/ Harrisburg/Manaus/ Sao Paulo/Chihuahua/ Juarez/Guadalajara Europe: Lahti/Komarom/ Copenhagen/ Helsinki/Ulm/ Renfrew/ Pardubice/Czech Asia: Shenzhen/Shanghai/Beijing/ Taiyuan/Kunshan/Hangzhou/ Chungshan/Tucheng/Hsinchu/ Peneng/Korea/Yokohama/ Singapore/Chennai/Sydney Upcoming Mega-Sites: China: Langfang/Huaian/Shenyang/Yingkou/Qinhuangda Vietnam: Hanoi Mexico: Reynosa Brazil: Itu USA: Pennsylvania Source: Foxconn 2014. Figure 16.13 Figure 16.14 70 Strategic Advantages of Alliances Partner A Partner B Strengths/Weaknesses Strengths/Weaknesses Joint Competitive Advantage International Y-Alliances and X-Alliance: Examples A: Upstreamspecialist B: Downstream specialist A+B (e.g. a joint venture) Y - Alliance A+B (e.g. a jointventutre) A B ProductionR&D Marketing Sales and services ProductionR&D Marketing Sales and services ProductionR&D Marketing Sales and services R&D Production Marketing Sales and services R&D Production Marketing Sales and services Note. A isthe manufacturer, B isthe partnerandC isthe customer X - Alliance Border C C Source: Adapted from Hollensen 2014, p. 370. Figure 17.1 Figure 17.2 Types of Licence Agreements Licences Process Licences Product Licences Distribution Licences Brand Licences Advantages and Disadvantages of Licensing Advantages Disadvantages  Increases income on products already developed as a result of expensive research.  Permits entry into markets that are otherwise closed on account of high rates of duty, import quotas and so on.  A viable option where manufacture is near the customer‘s base.  Requires little capital investment and should provide a higher rate of return on capital employed.  There may be valuable spin-offs if the licensor can sell other products or components to the licensee. If these parts are for products being manufactured locally or machinery, there may also be some tariff concessions on their import.  The licensor is not exposed to the danger of nationalization or expropriation of assets.  Because of the limited capital requirements, new products can be exploited rapidly, on a worldwide basis, before competition develops.  The licensor can take immediate advantage of the licensee‘s local marketing and distribution organization and of existing customer contacts.  Protects patents, especially in countries that give weak protection for products not produced locally.  Local manufacture may also be an advantage in securing government contracts.  The licensee may prove less competent than expected at marketing or other management activities. Costs may even grow faster than income.  The licensee, even if it reaches an agreed minimum turnover, may not fully exploit the market, leaving it open to the entry of competitors, so that the licensor loses control of the marketing operation.  Danger of the licensee running short of funds, especially if considerable plant expansion is involved or an injection of capital is required to sustain the project. This danger can be turned to advantage if the licensor has funds available by a general expansion of the business through a partnership.  Licence fees are normally a small percentage of turnover, about 5 per cent, and will often compare unfavourably with what might be obtained from a company’s own manufacturing operation.  Lack of control over licensee operations.  Quality control of the product is difficult - and the product will often be sold under the licensor’s brand name.  Negotiations with the licensee, and sometimes with local government, are costly.  Governments often impose conditions on transferral of royalties or on component supply. Source: Hollensen 2014, p. 390. Table 17.1 Figure 17.3 72 Types of International Franchise Agreements Franchisor Franchisee Franchisee Franchisee Franchisee Franchisee Franchisee Direct Foreign Franchising Franchise Contract Franchise Contract Franchisor Franchisee Franchisee Franchisee Master Franchisee Franchisee Franchisee Franchisee Master- Franchising Master Franchise Contract Franchise Contract Franchise Contract Home Market Foreign Market Franchisor Franchisee Franchisee Franchisee EquityJoint Venture/ WhollyOwned Subsi- diary Franchisee Franchisee Franchisee Indirect Foreign Franchising byEquityJoint Ventures/Wholly Owned Subsidiaries Articlesof Association Franchise ContractFranchise Contract Franchisor Franchisee Franchisee Franchisee Franchisee Franchisee Franchisee Direct Foreign Franchising Franchise Contract Franchise Contract Franchisor Franchisee Franchisee Franchisee Master Franchisee Franchisee Franchisee Franchisee Master- Franchising Master Franchise Contract Franchise Contract Franchise Contract Home Market Foreign Market Franchisor Franchisee Franchisee Franchisee EquityJoint Venture/ WhollyOwned Subsi- diary Franchisee Franchisee Franchisee Indirect Foreign Franchising byEquityJoint Ventures/Wholly Owned Subsidiaries Articlesof Association Franchise ContractFranchise Contract Source: Adapted from Zentes/Swoboda/Schramm-Klein 2013, p. 250. Figure 17.4 73 Structure of a Management Contract System in the Airport Industry Civil Aviation Ministry Egyptian Holding Company for Airports and Air Navigation Cairo Airport Company Cairo International Airport Fraport AG Germany Ownership 100% Management Ownership 100% Source: Fraport AG 2014. Advantages and Disadvantages of Equity Joint Ventures Advantages Disadvantages  accesstoexpertiseandcontactsin localmarkets  typically, international partnercontributesfinancial resources, technologicalknow-howorproducts, the localpartnerprovideslocalskillsandknowledge  reducedmarketandpoliticalrisk  sharedknowledgeandresources, sharedriskof failures  overcomeshostgovernmentrestrictions  may avoid localtariffsornon-tariffbarriers  possiblybetterrelationswith localgovernments throughhaving a localpartner(meetshostcountry pressureforlocalparticipation)  objectivesofrespectivepartnersmay be imcompatible, resultingin conflicts  contributiontojointventurecanbecome disproportionate  lossofcontrolover foreignoperations  partnersmay becomelockedintolong-term incvetmentsfromwhich it isdifficulttowithdraw  transferpricingproblemsas goodspass between partners  importanceofventuretoeachpartnermay change over time  lossofflexibilityandconfidentiality  problemsof managementstructuresanddual parent staffingofequityjointventures Source: Adapted from Hollensen 2014, p. 391. Table 17.2 Figure 17.5 74 Organisational Modes of Alliances Strategic Alliances Centralised Hub Decentralised Federation Integrated Network Model Source: Adapted from Bartlett/Ghoshal/Beamish 2008, pp. 338, 342. Fits in Cooperative Agreements FitsPartner A Partner B Cultural FitStrategic Fit Process-Related Fit Aims/Strategies Capacities/Capabilities Negotiating Positions Values/Standards Management Style Organisational Structures IT Systems Accounting/ Controlling Figure 17.6 Figure 17.7 75 Group Sales by Geographic Region (in billion EUR) 8.3 8.3 4.7 Europe ALMA Zone (Asia-Pacific, Latin-America, Africa, Middle East) North America (including CIS Zone) Source: Adapted from Danone 2014. Global FDI Inflows (in billion USD) 0 500.000 1.000.000 1.500.000 2.000.000 2.500.000 3.000.000 3.500.000 4.000.000 Developing economies Transition economies Developed economies World 4,000,000 3,500,000 3,000,000 500,000 1,000,000 1,500,000 2,000,000 2,500,000 Source: UNCTAD 2014. Figure 17.8 Figure 18.1 76 Advantages and Disadvantages of Wholly-owned Subsidiaries  investment requirements and barriers  high risks especially in insecure countries  build up of considerably resources  cost intensive acquisitions and time consuming start up  decision for investment much less reversible than other transaction forms  disadvantages in terms of flexibility because of capital commitment but advantages through decision superiority  direct and independent presence  independent marketing activities  pushing of own strategies, easy alignment of own structures  uniformity of market appearance  influence- and supervision options  bundling and deployment of company know- how (supervision of inflow and outflow)  increasing market power towards buyers, suppliers and competitors  frequent settlement sponsorships by host countries DisadvantagesAdvantages  investment requirements and barriers  high risks especially in insecure countries  build up of considerably resources  cost intensive acquisitions and time consuming start up  decision for investment much less reversible than other transaction forms  disadvantages in terms of flexibility because of capital commitment but advantages through decision superiority  direct and independent presence  independent marketing activities  pushing of own strategies, easy alignment of own structures  uniformity of market appearance  influence- and supervision options  bundling and deployment of company know- how (supervision of inflow and outflow)  increasing market power towards buyers, suppliers and competitors  frequent settlement sponsorships by host countries DisadvantagesAdvantages Source: Adapted from Kutschker/Schmid 2011, pp. 908-909. Types of M&A Strategies Acquisitions that are conducted with the purpose of post-acquisition asset stripping. Raider Acquisition The management of the takeover target has a positive attitude towards the takeover. Friendly Takeover The takeover target is unwilling to be acquired or the target’s management has no prior knowledge of the offer. Unfriendly/Hostile Takeover Specific type of a hostile takeover in which the acquiring company attempts to convince the existing shareholders to use their proxy votes to install a new management that is open for the takeover. Proxy Contest Public, open offer by an acquirer to all shareholders. The bidder contacts the shareholders directly, inviting them to sell their shares to the offer price. Tender Offer Companies of equal size come together. Often, one of the merging companies is considered the “primus inter pares” once the merger has taken place. Merger of Equals Acquisition of a company with cash that is raised with a preponderance of debt raised by the acquirer. Several different types of LBO exist, depending on the acquiring party, for example investor buyout, management buyout, or employee buyout can be distinguished. Leveraged Buyout (LBO) The objective of the acquisition is to integrate the takeover target into the network of the MNC, e.g. to realise synergies, economies of scale, etc. Builder Acquisition MethodStrategy Acquisitions that are conducted with the purpose of post-acquisition asset stripping. Raider Acquisition The management of the takeover target has a positive attitude towards the takeover. Friendly Takeover The takeover target is unwilling to be acquired or the target’s management has no prior knowledge of the offer. Unfriendly/Hostile Takeover Specific type of a hostile takeover in which the acquiring company attempts to convince the existing shareholders to use their proxy votes to install a new management that is open for the takeover. Proxy Contest Public, open offer by an acquirer to all shareholders. The bidder contacts the shareholders directly, inviting them to sell their shares to the offer price. Tender Offer Companies of equal size come together. Often, one of the merging companies is considered the “primus inter pares” once the merger has taken place. Merger of Equals Acquisition of a company with cash that is raised with a preponderance of debt raised by the acquirer. Several different types of LBO exist, depending on the acquiring party, for example investor buyout, management buyout, or employee buyout can be distinguished. Leveraged Buyout (LBO) The objective of the acquisition is to integrate the takeover target into the network of the MNC, e.g. to realise synergies, economies of scale, etc. Builder Acquisition MethodStrategy Table 18.1 Table 18.2 77 Cross-border M&As by Region of Purchaser and Seller in 2012 Value of cross-border M&As by region/economy of seller, 2012 (in million of USD) Value of cross-border M&As by region/economy of purchaser, 2012 (in million of USD) United States 66,113 United States 79,885 United Kingdom 35,852 Canada 39,474 Canada 29,325 China 37,111 Australia 23,087 Japan 35,666 Netherlands 17,051 Switzerland 16,254 Brazil 16,359 Germany 15,453 Ireland 12,096 Chile 9,764 France 11,985 Malaysia 9,292 China 9,995 Hong Kong/China 8,016 Switzerland 8,635 Russian Federation 7,807 Source: UNCTAD 2013. Barriers to Cross-border M&As Structural Barriers Statutory  strong powers for supervisory boards to block mergers; unions and workers’ councils have say on takeovers and strong redundancy rights  issue of bearer shares, double voting or non-voting shares; absence of one share, one vote (OSOV) principle  discriminatory tax laws against foreign acquirers, e.g. withholding taxes on dividends Regulatory  antitrust regulation, foreign investment review, rules of stock exchange and professional self-regulatory bodies  absence of statutory or voluntary bodies to regulate takeovers Infrastructure  absence of M&A services, e.g. legal, accounting, investment banking services Technical Barriers Management  two-tier boards which cannot be removed or changed quickly  families dominate shareholding  powers to issue shares with differential voting rights or to friendly persons  powers to limit maximum voting rights; powers to override shareholders in company’s interest Information Barriers Accounting  accounting statements not available, quality of information poor  low compliance with international generally accepted accounting principles; accounting practice biased to avoid tax liability, or conservative, hence accounting statements opaque Shareholders  due to issue of bearer shares, shareholding structure not known Regulation  regulatory procedures not known or unpredictable Culture and Tradition Attitude  “to sell is to admit failure” syndrome; dislike of hostile bids; dislike of institutional constraints on dividends or short-term profits  unwillingness to disclose information Value system  high premium on trust and confidence in negotiations rather than formal contracts Source: Adapted from Sudarsanam 2010, p. 231. Table 18.3 Table 18.4 78 Advantages and Disadvantages of Cross-border M&As  massive risk  huge capital availability as requirement  best case scenario: financial markets as balancing instrument  in reality: limited range of alternatives for SME  high information and search costs  adequate target company as basic requirement  negotiation problem (Information asymmetries)  necessity of coordination and integration of heterogeneous structures, systems, cultures  adaptation of market appearance required  provisos/resistances of local management  possibly brain drain  provisos/resistances of host country government (foreign infiltration)  growing management complexity  access to customers, distribution channels, materials, HR  rapid market development  time savings/synergy effects  if applicable fast market entry in numerous geographic regions  positive cash-flow  scale effects  gain of know-how  complementary effects  gain of market position/image  fastest mode of diversification  no increasing competition intensity in host  country  little danger of overcapacity DisadvantagesAdvantages  massive risk  huge capital availability as requirement  best case scenario: financial markets as balancing instrument  in reality: limited range of alternatives for SME  high information and search costs  adequate target company as basic requirement  negotiation problem (Information asymmetries)  necessity of coordination and integration of heterogeneous structures, systems, cultures  adaptation of market appearance required  provisos/resistances of local management  possibly brain drain  provisos/resistances of host country government (foreign infiltration)  growing management complexity  access to customers, distribution channels, materials, HR  rapid market development  time savings/synergy effects  if applicable fast market entry in numerous geographic regions  positive cash-flow  scale effects  gain of know-how  complementary effects  gain of market position/image  fastest mode of diversification  no increasing competition intensity in host  country  little danger of overcapacity DisadvantagesAdvantages Source: Adapted from Zentes/Swoboda/Morschett 2004, p. 658. Causes of Failure and Success in Cross-border M&As  detailed post-acquisition integration plans  speed of implementation  clarity of acquisition purpose  good cultural fit  high degree of target management cooperation  knowledge of target and its industry  target management attitudes  cultural differences  no post-acquisition integration planning  lack of knowledge of industry or target  poor management of target  no prior acquisition experience Cause of SuccessCause of Failure  detailed post-acquisition integration plans  speed of implementation  clarity of acquisition purpose  good cultural fit  high degree of target management cooperation  knowledge of target and its industry  target management attitudes  cultural differences  no post-acquisition integration planning  lack of knowledge of industry or target  poor management of target  no prior acquisition experience Cause of SuccessCause of Failure Source: Adapted from Sudarsanam 2010, p. 726. Table 18.5 Table 18.6 79 ThyssenKrupp Group Structure ThyssenKrupp Steel Europe Steel America StainlessGlobal Materials Services Elevator Technoylogy Plant Technology Components Technology Marine Systems ThyssenKrupp Business Services ThyssenKrupp IT Services Plant Division Mechanical Division Source: ThyssenKrupp AG 2010. Business Opportunities for ThyssenKrupp Leading Engineering Expertise in Material Mechanical Plant More Consumer and Capital Goods More Infrastructure andBuildings More Resource and Energy Consumption Reductin in CO2 Emissions, Renewable Energies Efficient Infrastructure, Method, Processes EfficientResource andEnergy Utilization, Alternative Energies Demographic Change Urbanisation Globalisation Climate Change Finite Resources Political Framework Conditions Driver Demand („More“) Business Opportunities Demand („Better“) Constraints Source: ThyssenKrupp AG 2013, p. 31. Figure 18.2 Figure 18.3 80 Example of a Scoring Model for the Selection of a Production Location Location Characteristic Importance of Criterion in Percent (wi) Evaluation of Country (ei) (from 1 - very bad to 10 -excellent) Combined Score (wi x ei) Attractiveness of Local Market 20% 8 1.6 Logistics Costs 5% 4 0.2 Wage Level 15% 2 0.3 Availability of Skilled Labour 15% 9 1.35 Innovativeness of Country 10% 8 0.8 Availability of Suppliers 20% 8 1.6 Stability of Local Currency 5% 9 0.45 Political Risk 10% 4 0.4 SUM (Overall Score) 100% - 6.7 Basic Types of Production Configurations International Splitting of Production Process no yes De- centralization Concentration Production Steps Sales Host Country A Host Country B Host Country C Home Country Host Country A Host Country B Host Country C Home Country Parallel Production World Market Factory Cross-Border Production II Cross-Border Production I Number of Production Locations Source: Grünig/Morschett 2012, p. 301. Table 19.1 Figure 19.1 81 Types of Foreign Production Plants Lead ContributorSource Offshore Outpost Server high low access to low cost production input factors Strategic Reason for Establishing the Plant ExtentofTechnical Activitiesat the Site use of local technological resources proximity to market Source: Ferdows 1989, p. 8; 1997, p. 77. Figure 19.2 82 Alternative Modes for Producing and Sourcing from Abroad Border Company Contract Manufacturer BuyingAgent Company Independent Manufacturer Export FirmCompany Independent Manufacturer Manufacturer‘s Sales Subs.Company Independent Manufacturer Company Independent Suppliers Company Production Joint Venture Company Wholly-Owned Production Subsidiary Alliance/Partnership Company Independent Manufacturer ProcurementOffice Company Independent Manufacturer Import FirmCompany Independent Manufacturer Sourcing froma Trading Company TakingUp OwnProductionAbroad Sourcing froma ForeignContractManufacturer Sourcing froman Independent ForeignManufacturer Source: Grünig/Morschett 2012, p. 188. Figure 19.3 83 Deliveries (Sales) of Audi – Development and Geographical Distribution 770 779 829 905 964 1,003 950 1,092 1,303 1,455 1,575 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Development of Delivered Cars (in thousands) Germany 250 Rest of Europe 423China 492 USA 158 Other 253 Geographic Distribution 2013 (in thousands) Source: Audi 2014a and several annual reports. Audi Production Sites around the World Kaluga, Russia Martorell, Spain Brussels, Belgium Neckarsulm, Germany Ingolstadt, Germany Bratislava, Slovakia Györ, Hungary Aurangabad, India Jakarta, Indonesia Foshan, China Changchun, China San José Chiapa, Mexico (from 2016) Curibata, Brazil (from 2015) Source: Adapted from Audi 2014b, p. 145. Figure 19.4 Figure 19.5 84 Grouping of Industrial Sectors According to R&D Intensity Industry Category R&D Intensity Examples of Industries High R&D Intensity >5% pharmaceuticals and biotechnology; health care equipment and services; technology hardware and equipment; software and computer services; aerospace and defence Medium-high R&D Intensity 2-5% electronics and electrical equipment; automobiles and parts; industrial engineering and machinery; chemicals; personal goods; household goods; general industrials; support services Medium-low R&D Intensity 1-2% food products; beverages; travel and leisure; media; oil equipment; electricity; fixed line telecommunications Low R&D Intensity <1% oil and gas; industrial metals; construction and materials; food and drug retailers; transportation; mining; tobacco; multi-utilities Source: European Commission 2013a, p. 27. Ethnocentric Centralised R&D Behavioural Orientation  ethnocentric inward orientation  think tank as national treasure in home country  protection of core technology againstcompetitors  homogeneous R&D culture Configuration  centralR&D in home country  centraland tight coordination and control of R&D programme Central R&D Strengths  high efficiency  low R&D costs (scale effects)  shortcycle times  protected core technologies Weaknesses  lack of sensitivity for local markets  dangeror missing externaltechnology  not-invented-here syndrome  tendencytowards rigid organisation Source: Boutellier/Gassmann/Zedtwitz 2008, p. 80. Table 20.1 Figure 20.1 85 Geocentric Centralised R&D Behavioural Orientation  geocentric externalorientation  closecooperation with other sites  unrestricted information flow  change agents enable internationalisation Configuration  centralR&D in home country  closecontactwith international sites  international secondments and recruiting Central R&D Strengths  efficiencydue to centralisation  high sensitivity for local markets and technology trends  cost-efficient R&D internationalisation Weaknesses  dangerto neglectsystematicinternationalisation  local contentrestrictions and local market specifications insufficiently considered International Manufacturing Technology Parks LocalLogistics Global Sourcing Strategic Alliances Cooperation/Lead Users Source: Boutellier/Gassmann/Zedtwitz 2008, p. 82. Polycentric Decentralised R&D Behavioural Orientation  polycentric orientation  customisation beforestandardisation  local effectiveness before global efficiency  arm‘s length principle Configuration  decentralised R&D  dominance of product-related R&D  little coordination betweenR&D units Strengths  strong sensitivity for local markets  adaptation to local environment  usage of local resources Weaknesses  inefficiency and parallel development  no technological focus  problems with critical mass R&D1 R&D2 R&D3 R&D4 Central R&D Source: Boutellier/Gassmann/Zedtwitz 2008, p. 84 Figure 20.2 Figure 20.3 86 R&D Hub Model Behavioural Orientation  decentralised R&D tightly controlled bycentre  R&D centre has technology lead  global coordination of R&D direction and budget Configuration  ethno- orgeocentric orientation  node structure with clear dominance of centre  cooperation of units centrally controlled Strengths  high efficiencydue to central coordination of R&D  avoidance of redundant R&D  exploitation of all available strengths  realisation of synergies Weaknesses  high costs of coordination and time  danger of oppressing creativityand flexibilitythrough central directives R&D1 R&D2 R&D3 R&D4 Central R&D Source: Boutellier/Gassmann/Zedtwitz 2008, p. 86. Integrated R&D Network Behavioural Orientation  geocentric orientation, lead-country concept  partnership among all competence centres  unrestricted flow of information Configuration  highly internationalised R&D  global responsibility of competence centres for technologies or products  multi-dimensional coordination and information Strengths  coupling of specialisation and synergy effects  global before local efficiency  organisational learning across many locations  exploitation and refining of local strengths Weaknesses  high coordination costs  complexity of institutional rules and decision processes R&D1 R&D2 R&D3 R&D4 Source: Boutellier/Gassmann/Zedtwitz 2008, p. 88. Figure 20.4 Figure 20.5 87 Growth Platforms and Economic Importance Growth Platform Function Sales in billion EUR (in 2013) Emerging Markets Offersa broad product portfolio adapted to local needs of emerging markets. 10.96 Diabetes Offers patients integrated and personalised solutions (treatments, services and technologies) to simplify the management of diabetes. 6.57 Vaccines Deals with the task of human immunization and prevention of epidemics around the world. 3.7 Consumer Healthcare Includes for example pain killers and treatments for coughs and colds. 3.0 New Genzyme Therapeutic solutions for rare diseases provided and developed by Genzyme, a subsidiary of Sanofi. 2.1 Animal Health Launches innovative products for pets and production animals and is executed by Merial, the animal health subsidiary of Sanofi. 2.0 Innovative Products Includes products launched since 2009, and do not belong to other growth platforms with a focus on the development of biologic medicines. 0.7 Source: Sanofi 2014. Sanofi’s Geographically Focused Research Hubs United States Hub Asian Hub German Hub French Hub Source: Sanofi 2014. Figure 20.6 Table 20.2 88 Types and Characteristics of Sanofi’s Collaborations Research Institutes Hospitals Biotechs Others Scientific Focus Commercial Focus Collaborative Focus Source: Adapted from Sanofi 2014. Classification of Marketing Strategies International Marketing Strategy HQ Border Undifferentiated use of the same marketing mix in all countries (1,2,…,n). Product 1,2,…,n Price 1,2,…,n Place 1,2,…,n Promotion 1,2,…,n All Countries Multinational Marketing Strategy HQ Border Product 1 Price 1 Place 1 Promotion 1 Country 1 Product 2 Price 2 Place 2 Promotion 2 Product n Price n Place n Promotion n Country 2 Country n Each country/market has its own marketing mix. Global Marketing Strategy HQ Border Undifferentiated use of global marketing mix in all countries (1,2,…,n). Product 1,2,…,n Price 1,2,…,n Place 1,2,…,n Promotion 1,2,…,n All countries Transnational Marketing Strategy HQ Border Product 1 Price 1 Place 1 Promotion 1 Country 1 Product 2 Price 2 Place 2 Promotion 2 Product n Price n Place n Promotion n Country 2 Country n Development of Guidelines for Marketing Strategy („Pattern Standardisation“) Patterns are transferred to each country/market with only as much adaption as necessary. Development of Global Marketing Strategy Source: Adapted from Hollensen 2014, p. 474. Figure 21.1 Figure 20.7 89 Selected Factors Favouring Standardisation vs. Differentiation Factors Favouring Standardisation Factors Favouring Differentiation  economies of scale, e.g. in R&D, production and marketing (experience curve effects)  global competition  convergence of tastes and consumer needs (consumer preferences are homogeneous)  centralised management of international operations (possible to transfer experience across borders)  a standardised concept is used by competitors  high degree of transferability of competitive advantages from market to market  easier communication, planning and control (e.g. through Internet and mobile technology)  stock cost reduction  local environment-induced adaptation, e.g. government and regulatory influences, legal issues, differences in technical standards (no experience curve effects)  local competition  variation in consumer needs (consumer needs are heterogeneous, e.g. because of cultural differences)  fragmented and decentralised management with independent country subsidiaries  an adapted concept is used by competitors  low degree of transferability of competitive advantages from market to market Source: Adapted from Hollensen 2014, p. 477. Table 21.1 90 Factors Influencing International Pricing Strategy Company and Product-specific Factors Market Factors Environmental Factors  corporate and marketing objectives  firm and product positioning  degree of international product standardisation or adaptation  product range, cross subsidisation, life cycle, substitutes, product differentiation and unique selling proposition  cost structures, manufacturing, experience effects, economies of scale  marketing, product development  available resources  inventory  shipping cost  consumers’ perceptions, expectations and ability to pay  need for product and promotional adaptation, market servicing, extra packaging requirements  market structure, distribution channels, discounting pressures  market growth, demand elasticities  need for credit  competition objectives, strategies and strength  government influences and constraints  tax, tariffs  currency fluctuations  business cycle stage, level of inflation  use of non-money payment and leasing Source: Adapted from Doole/Lowe 2012, pp. 358-359. Table 21.2 91 Taxonomy of International Pricing Practices Source: Adapted from Solberg/Stöttinger/Yaprak 2006, p. 31. Figure 21.2 92 Communication Tools in International Marketing Advertising Public Relations Sales Promotion Direct Marketing Personal Selling  newspapers  magazines  journals  directories  television  radio  cinema  outdoor  Internet  annual reports  house magazines  press relations  events  lobbying  sponsorships  rebates and price discounts  catalogues and brochures  samples, coupons, gifts  competitions  direct mail  database marketing  Internet marketing  mobile marketing (SMS, MMS)  social media marketing  viral marketing  location-based marketing  advertising games  sales presentations  sales force management  trade fairs  exhibitions Source: Adapted from Zentes/Swoboda/Schramm-Klein 2013, p. 389. Table 21.3 93 General Standardisation Level for Different Elements of the Marketing Mix Pricing Pricing Distribution Distribution Promotion Promotion Advertising Media Advertising Media Advertising Content Advertising Content Product Product Brand Name Brand Name Differentiation Standardisation Service Service Source: Adapted from Zentes/Swoboda/Schramm-Klein 2013, p. 449. The Vision of Nestlé Operational Efficiency Consumer Engagement Whenever, Wherever, However Innovation and Renovation Nutrition, Healthand Wellness Emerging Marketsand Populary Positioned Products Out-of-Home Consumption Premiumisation Unmatched Productand Brand Portfolio Unmatched Research and Development Capability Unmatched Geographic Presence People, Culture, Values and Attitude „Our objectiveis tobethe leaderin Nutrition Healthand Wellness, andtheindustry referenceforfinancial performance, trustedby all stakeholders.“ Operational Pillars Growth Drivers Competitive Advantages Compliance Sustainability CreatingShared Value Nestlé Culture, Values andPrinciples Nestlé Figure 21.3 Figure 21.4 94 The Nestlé Brand Tree Around 8,300 Local Brands Responsibilityoflocal markets Examples:  Savory  Sahne-Nuss  McKay  Buxton 140 Regional Strategic Brands Responsibilityofstrategic businessunitandregional management  Herta  Findus  Alpo  Vittel  Stouffer‘s  Arrowhead  Calistoga  DeerPark  IceMountain  Ozarka  Zephyrhills Around 55 Worldwide Strategic Brands Responsibilityofgeneralmanagement at strategicbusinessunitlevel  Haoji  Totole  La Vie  Erikli  Levissima  Minéré  Theodora  Kit Kat  Polo  Cerelac  Baci  MightyDog  Smarties  After Eight  Coffee-Mate 10 Worldwide Corporate Brands  Nestle  Maggi  Perrier  L‘Oreal  Buitoni  Carnatio Source: Adapted from Zentes/Swoboda/Schramm-Klein 2013, p. 450. Examples of Various KitKat Flavours Source: Alimenta 2014. Figure 21.5 Figure 21.6 95 Nespresso Magazine Source: Nespresso 2014. Dimensions of International Human Resource Management Employee Group Dimension Leadership Labour Relations Performance Appraisal & Compensation Training & Development Recruitment & Selection Host-Country Nationals Third-Country Nationals Home-Country Nationals Activity Dimension Regional Dimension Home Country Host Country Other Countries Source: Adapted from Morgan 1986, p. 44. Figure 21.7 Figure 22.1 96 Phases in Cultural Adjustment positive negative 1 Euphoria/ Honey- moon 2 Culture Shock/ Disillusionment 3 Acculturation time Emotions Repatriation 4 Stability/ Biculturalism Source: Adapted from Hofstede 2001, p. 259; Griffin/Pustay 2013, p. 547. Selected Products and Services of Google Google Search YouTube Google Maps Gmail Google News Google Places Google Chrome Google Scholar Google AdWords Google Calendar Google Translate Google Code Google+ Google Wallet Google Insights for Search Google Groups Google Glass Google Docs Google Play (Store) Google Nexus Google Chromecast Source: Google 2014. Figure 22.2 Table 22.1 97 Europe’s Most Attractive Employers in 2014 Rank Business Ranking Engineering Ranking 1 Google Siemens 2 L'OréalGroup IBM 3 PwC (PriceWaterhouseCoopers) BMW Group 4 EY (Ernst & Young) Google 5 Microsoft Microsoft 6 McKinsey & Company Nestlé 7 Unilever General Electric 8 KPMG Bosch 9 Procter & Gamble Daimler Mercedes-Benz 10 The Boston Consulting Group EADS (Airbus) Source: Universum 2014. Decision and Information Requirements at Different Levels in an MNC  targets from division management  operative data from internal accounting  only immediate info on external environment  supportive data from division or HQ  development of country-specific strategies  coordination of operational issues in subsidiary Subsidiary Management  targets from HQ  long-term, mid-term, rather speculative data  specific product and/or region related coordination and evaluation data  quantitative monetary info on division results  basic targets for subsidiaries  mid-term planning  resource allocation to subsidiaries  coordination of subsidiaries (incl. selecting and appraising subsidiary management) Division Management  opportunities/threats and strengths/ weaknesses info on coporate level  info across divisions (and performance)  long-term developments (highly aggregated)  basic long-term strategic decisions for company  resource allocation to divisions  coordination of divisions (incl. selecting and appraising division management) External Internal Corporate ManagementStrategic Ope- rational Infor- mation Information Requirements DecisionsDecision Type  targets from division management  operative data from internal accounting  only immediate info on external environment  supportive data from division or HQ  development of country-specific strategies  coordination of operational issues in subsidiary Subsidiary Management  targets from HQ  long-term, mid-term, rather speculative data  specific product and/or region related coordination and evaluation data  quantitative monetary info on division results  basic targets for subsidiaries  mid-term planning  resource allocation to subsidiaries  coordination of subsidiaries (incl. selecting and appraising subsidiary management) Division Management  opportunities/threats and strengths/ weaknesses info on coporate level  info across divisions (and performance)  long-term developments (highly aggregated)  basic long-term strategic decisions for company  resource allocation to divisions  coordination of divisions (incl. selecting and appraising division management) External Internal Corporate ManagementStrategic Ope- rational Infor- mation Information Requirements DecisionsDecision Type Source: Adapted from Zentes/Swoboda/Morschett 2004, p. 806. Table 22.2 Table 23.1 98 The Balanced Scorecard Financial Perspective  objectives  measures Financial Perspective  objectives  measures Customer Perspective  objectives  measures Customer Perspective  objectives  measures Learning & Growth Perspective  objectives  measures Learning & Growth Perspective  objectives  measures Internal Processes Perspective  objectives  measures Internal Processes Perspective  objectives  measures Vision and Strategy Source: Kaplan/Norton 1996, p. 9; Gowthorpe 2011, p. 425. Implementing the Balanced Scorecard in Multi-Level Organisations Corporate Level Division Level Subsidiary Level Subsequent Levels e.g. functions, teams, … F C I L&G Corporation F C I L&G Corporation F C I L&G Asia/Pacific F C I L&G Americas F C I L&G Europe F C I L&G France F C I L&G France F C I L&G Slovakia F C I L&G Slovakia Source: Adapted from Rieg/Gleich 2002, p. 697; Zentes/Swoboda/Morschett 2004, p. 830. Figure 23.1 Figure 23.2 99 Business Units and Selected Brands Laundryand Home Care Adhesive Technologies Beauty Care Somat Pril Persil Vernel Spee Perwoll Fa Aok Theramed syoss got2b Schwarzkopf Loctite Pattex Technomelt Pritt Metylan Sista Source: Henkel 2014. Selected Performance and Financial Key Figures for the Henkel Business Units (2013) Laundry& Home Care Beauty Care Adhesive Technologies Sales (in million EUR) 4,580 3,510 8,117 EBIT (in million EUR) 682 474 1,271 AdjustedReturn on Sales (EBIT) 15.6% 15.0% 16.9% Capital Employed (in million EUR) 2,321 2,007 6,752 WeightedAverage Cost of Capital (WACC) 7.5% 7.5% 10.5% Return on Capital Employed (ROCE) 29.4% 23.6% 18.8% EconomicValue Added (EVA; in million EUR) 507 323 562 Source: Henkel 2014. Figure 23.3 Table 23.2 100 Economic Value Added of the Business Unit Adhesive Technologies in 2013 (in million EUR) EconomicValue Added 562 Capital Employed 6,752 EBIT 1,271 WACC 10.5%= - x Source: Adapted from Henkel 2014, p. 109. Calculation of Return on Capital Employed of the Laundry and Home Care Business Unit Return on Capital Employed 29.4% Capital Employed 2,321 millionEUR EBIT 682 million EUR = Source: Adapted from Henkel 2014, p. 109. Figure 23.4 Figure 23.5 101 http://www.springer.com/978-3-658-07883-6