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Analysing Global Industries  

This chapter discusses the concepts and tools used to analyse global industry. It acknowledges that a specified set of products and geographical boundaries are needed to achieve a satisfactory market. It explains how a more highly concentrated market is correlated to the concentrated power in the hands of a few firms to manipulate prices, the quantity and quality of goods and services, and the terms and conditions of the sale. The chapter also looks at the Porter Five Forces model as a means to analyse industries. It highlights that firms sometimes make strenuous efforts to avoid price competition through the establishment of cartels and systems of price leadership. Moreover, the chapter cites the significance of product differentiation as a major element of competitive strategy and entry barriers in other industries. It adds how complementary products are included as the sixth force of the Porter model.

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Assessing Country Attractiveness  

This chapter focuses on the process of assessing the attractiveness of countries. It starts with an explanation of how firms tend to follow the process of internationalization through exporting and the establishment of overseas subsidiaries. The chapter lists the reasons for foreign indirect investment (FDI) such as market access, lower production cost, and access to resources. It recognizes China as the leader in scouring raw materials in the world. The chapter explains how firms screen other countries for export and import via their attractiveness of new markets and production locations. It mentions numerous commercial organizations specializing in country and marketing analysis.

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Conclusions  

Peter J. Buckley and Peter Enderwick

This chapter considers theories of the firm and strategic behaviour in relation to the contemporary global factory. Drawing on developments in internalization thinking, the chapter examines the competitive advantages of the global factory and the challenges it faces in relation to coordination, innovation, and adaptation. The chapter draw on a range of frameworks to discuss these challenges and stresses the importance of economic principles when considering under-researched aspects of the global factory.

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Corporate Social Responsibility  

Hinrich Voss

This chapter introduces theories of corporate social responsibility (CSR) and discusses the relationships of multinational enterprises (MNEs) with the natural environment and human rights. It looks at key concepts that relate to the identification and evaluation of stakeholders and the proactive approaches that MNEs have adopted to address environmental and ethical concerns. It also uses case studies to develop an understanding of how the core company aims to ensure that the businesses with which it is working adhere to laws and ethical norms. The chapter presents the activities of MNEs within the global norms framework, alongside the social and environmental targets that international organizations pursue with the support of MNEs. It highlights the links between CSR and the formal and informal institutional environment and assesses the social and environmental impact of the global factory.

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Corporate Social Responsibility  

This chapter looks at the firms’ economic, social, and environmental obligations which come under the term ‘corporate social responsibility’ (CSR). It highlights the idea that firms’ alleged only obligation is to maximize profit in line with CSR. The chapter explains how the international business environment is also battling cultural imperialism alongside different economic and legal contexts. It highlights concerns about child labour and corruption. Then, the chapter looks at the standard company guide provided by Global Compact. It includes a discussion on the UN’s efforts to alleviate poverty called Millennium Development Goals and Sustainable Development Goals.

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Cross-cultural Management Strategies  

Hanna Gajewska-De Mattos, Virpi Outila, and Peter Enderwick

This chapter considers the growth of multiculturalism and whether there is any evidence for cultural convergence, which is growing cross-cultural homogeneity, or divergence, which is increasing heterogeneity. It introduces the concept of cultural clusters and explains how these offer a valuable tool for international managers as conflict will increasingly be the result of ethnic and religious divisions. It also builds on the positive perspectives of cultural diversity and examines ways in which cultural differences can be harnessed to create a competitive advantage. The chapter mentions the change in how diversity is perceived, which requires mindsets that are much more global and outward-focused and underpin the successful operation of a global factory system. It assesses the key implications of multiculturalism for the global factory.

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The Ecological Environment  

This chapter focuses on ecological impacts on businesses. It highlights the need for concerted action on a global level, which can then be translated into national and local environmental action. The chapter points out that firms have large roles to play in the environment as they convert resources into products. It notes a growing interest in being sustainable and discusses the global impact of climate change. The chapter looks at the Rio Declaration and Agenda 21 to show how they have established a comprehensive set of principles that the UN Global Compact translated into prescriptions for responsible business behaviour. The chapter notes that businesses have to balance the risk of incurring costs for environmental compliance and the risk of doing nothing in relation to climate change. It suggests that if businesses do not redouble their efforts to reduce their ecological impact, there will be calls for tougher environmental regulation.

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The Economic Dimension  

Yingqi Wei, Adam R. Cross, and Robert Read

This chapter examines the economic dimension of the external environment in which global factories operate. It extends the discussion on why governments involve themselves in economic affairs and the varying ideologies that underpin the form and extent of this involvement. It also details the various types of national economic system that can be found in countries and explores how the economic policy of governments has the potential to influence the performance and profitability of the international operations of global factory networks. The chapter considers a variety of economic indicators and factors that global factory managers can use to evaluate the attractiveness of foreign locations, emphasizing the relationship between indicators and factors and the opportunities, costs, and risks they present to the activities of the global factory. It looks at exchange rates and various types of exchange rate policy pursued by governments.

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The Financial Framework  

This chapter looks at the impact of the financial environment on businesses. It highlights that the financial environment plays a significant role through the provision of money and credit; the operation of system payment; and monetary phenomena like inflation, interest rates, or exchange rates. The chapter references financial markets and large institutions in London, New York, and Tokyo to emphasize their importance in the effective functioning of businesses and economies. It acknowledges the difficulties of accessing finance for international businesses. The chapter considers the businesses industry’s size, diversification, and internationalization, which continue to pose great challenges to regulatory authorities. The chapter notes the argument that the improvements in regulation seem inadequate. It also states that the international finance system’s stability should not be taken for granted.

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Financial Management Strategies  

Chris Jones, Yama Temouri, and Robert Read

This chapter explains how a global factory operates within a multi-currency environment and that managers need to understand the implications of exchange rate exposure and currency risk. It discusses the nature of and key players in the foreign exchange market and explores theories of foreign exchange rate determination and forecasting. It also examines the implications for global factory operations and techniques for currency risk hedging. The chapter considers financial management techniques available to the global factory manager and concludes with a discussion of transfer pricing and the use of tax havens within the global factory.

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Foreign Operations Modes  

Peter Enderwick

This chapter examines ways of entering and operating in overseas markets and considers the wide range of factors that are both internal and external to the firm in order to determine operating modes. It discusses the variety of operating modes that multinational enterprises (MNEs) may adopt, classifying these as trade-related, investment-related, and resource-transfer modes. It also talks about the dynamic aspects of operating mode choice, examining entry timing, mode switching, and divestment and the implications for mode choice within the global factory. The chapter explores the multifaceted nature and complexity of foreign entry and operating modes and the principal factors that influence mode choice. It notes key influences on the choice of foreign operating mode within global factory systems.

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Formulating the Strategic Response  

Peter Enderwick, Hinrich Voss, and Michael McDermott

This chapter examines the strategy formulation process, elaborating that strategy is a disputed concept and process and is more than simply planning, the pursuit of goals, or operational excellence. It talks about various schools of strategy thought that offer different perspectives and considers industry approaches, market exploitation, and strategy as problem-solving. It also highlights some of the key tools of strategic analysis, including SWOT, PESTLE, industry, and market analysis. The chapter analyses international strategy formulation and multi-domestic, global, and transnational approaches. It investigates strategy formulation within both small and medium-sized enterprises (SMEs) and service MNEs and strategy formulation within the global factory, noting how this differs in terms of competitive advantages, coordination, and the reconciliation of strategic trade-offs.

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The Global Business Environment  

This chapter explores the global external business environment. It notes that the factors in this environment are highly interdependent but can be analysed using the PESTLE model. The elements of the PESTLE model are political, economic and financial, socio-cultural, technological, legal, and ecological. The model regards the business environment as increasingly complex, dynamic, uncertain, and hostile. The chapter notes that firms need to scan the environment in order to identify opportunities for new markets, cost reductions, and sources of supply. Moreover, the chapter shows how firms need to avoid threats posed by competitors, economic and financial volatility, political instability, new technology, and natural disasters. The chapter explains how organizations assess the impact of external issues by looking into their effect on the industry structure and the organization’s stakeholders.

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The Global Economy  

This chapter looks at international patterns of wealth, international trade, and exchange rates. It identifies the USA as the richest economy while noting that China has the bigger purchasing power parity (PPP). The chapter explains what it means to make a GDP comparison between countries. It explains that the UNDP also looks at other indicators such as income inequality, life expectancy, literacy rates, and school enrolments to determine a country’s degree of development. The chapter states that economic growth is the key to raising living standards. It looks at the growth of international trade, which is predicted to reach 34% by 2030. The chapter points out that fluctuations in exchange rates could have a major impact on businesses. It considers the accusation that some countries manipulate the exchange rates of their respective currencies to make their goods more competitive in the global market.

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Global Innovation Management  

Mario Kafouros

This chapter examines one of the key drivers of firm growth and global competitiveness: innovation. It explains that innovation differs significantly across firms and can take different forms and types, elaborating on how innovation can help firms to build significant competitive advantages in the global economy. It talks about the globalization of research and development (R&D) which represents a major challenge, such as increasing knowledge leakage which leads to imitation, although it provides the opportunity to access diverse technologies from multiple countries. The chapter analyses how the global factory helps explain the trade-offs that specific R&D location choices may cause in terms of value creation and value capture and may assist firms to locate their R&D units across countries in an optimal way. It explains how open innovation can help firms to gain a competitive advantage in the global economy.

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Globalization  

This chapter focuses on globalization. It begins by considering the three main indicators of globalization: international trade in goods and services, transfer of money between countries, and the movement of people across borders. The chapter points out that culture has been influenced by globalization via mass media. It identifies competition, reduction in regulatory barriers, and technology as drivers of globalization. Moreover, the chapter discusses barriers to globalization such as government policies, protection of intellectual property rights, culture, corruption, geography, and border and immigration controls. It argues that globalization simultaneously presents opportunities and threats to business and notes that globalization affects cultural, social, and economic dimensions as well.

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Human Resources Management Strategies  

Fiona Moore and Peter Enderwick

This chapter looks at the key resource within any business: people, discussing the management of people in an international business, which involves significant challenges. The chapter examines the additional options in staffing and selection that internationalization brings. It also refers to human resources management (HRM) in an international context, which requires a commitment to effective systems for training, performance appraisal, and compensation, particularly in view of how diversity and equity objectives are addressed. The chapter cites challenges in labour relations practices when conducted internationally and through outsourced arrangements. It deals with the characteristic of the global factory, which considers the management of expatriates and their repatriation as a unique aspect of international HRM.

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Implementing the Strategic Response  

Peter Enderwick, Hinrich Voss, and Michael McDermott

This chapter examines strategy implementation, which is the third step in the process of strategic analysis, choice, and implementation. It discusses the role of organizational structure and how it supports strategy in contributing to communication, knowledge sharing, and the creation of shared values. It also considers the major organizational forms adopted by international businesses: functional, product, geographical, and matrix structures. The chapter highlights the balance between centralization and decentralization which is critical to organizational design and examines how effective organizational design can be supported by other coordinating mechanisms, including selection, training, and the creation of a shared corporate culture. It looks at the strategy implementation issues that are unique to the global factory and the management of externalization, coordination, and knowledge transfer.

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The Institutional Dimension  

Hinrich Voss and Christos Antoniou

This chapter helps develop an understanding of what institutions are and how they affect a global factory at local, regional, and international levels. It analyses economic and organizational institutional theories, which introduces the formal and informal mechanisms by which institutions exert influence over businesses, the laws and regulations with which firms have to comply, and the traditions and cultures they have to respect and address. It also talks about how institutions can have a positive impact by enabling and supporting international business through trade promotion and investment agreements. The chapter refers to institutions that support and inhibit international business in relation to the global factory. It describes varied supranational institutions that shape national laws and influence the global factory and situates the behaviour of the global factory in various institutional contexts.

Book

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Edited by Peter J. Buckley, Peter Enderwick, and Hinrich Voss

International Business is made up of three parts. The first part looks at context and rationale and includes an introduction, theories of the international firm, international business in context, and international trade theory. Part Two looks at the external environment. It covers a number of dimensions: institutional, political, social, and economic. The third part is about managing the global factory. This includes an examination of foreign operations modes, corporate social responsibility, marketing strategies, global innovation management, financial management strategies, human resources management strategies, cross-cultural management strategies, and the strategic response.