Yet, globalisation has not led to convergence. Considerable diversity between nations and regions continues to shape the business environment globally. For the international manager, an understanding of global forces, as well as more local/regional differences is crucial to strategy formulation in a rapidly changing environment. Learning Outcomes On completion of the module participants will be able to: Knowledge: 1. Critically review and apply concepts, terminology & theoretical models associated with international business policies and strategies. 2.
Demonstrate understanding of the political, socio-cultural, economic and technological factors that have been found to influence variations in international organisational business structures and management styles 3. Critically assess the relationship between national and organisational cultures 4. Relate conceptual theory of ‘internationalisation’, innovation and competitive advantage to different industries and locations Skills: 1. Demonstrate in a (small group), ability to apply relevant behavioural concepts to real-world scenarios/organisations, and participate in/lead discussion on related dilemmas or issues. . As an individual apply relevant theoretical concepts to real-world business (environment) dilemmas or issues, producing a diagnosis and suggesting possible outcomes. CONTENTS SYNOPSIS: This module examines aspects of the key concept of strategic management within an international business context. It begins by introducing and understanding of corporate strategy as it relates trans- national corporations as players in an increasing global environment. The impact of Foreign Direct Investment (FDI) and actions of global players as they seek to identify competitive advantage is considered.
As the role cultural differences play in determining the success/failure of a company within the global context activity, the applied research results of Hofstede are explored. Growth of the global marketplace has been accompanied by national and international regulations governing the openness of trade. Thus trade agreements, e. g. under the banner of WTO, are examined as well as the issues which link this to the “hyperglobalisation” thesis. A distinction is made between those companies operating in market, state and transitional economies.
The impact of the growth of technology in general and communication technology in particular are explored. The role played by the international financial environment in influencing international business is also reviewed. AMPLIFIED CONTENT Introduction: Concepts of Business Organisation; Strategy; Marketing Orientation; Corporate Governance Globalisation and FDI: Globalisation-different perspectives; Internationalisation v. Globalisation; Dunning’s OLI paradigm and applications to impact on MNE and FDI activity. Porter’s Competitive advantage model (see also below) Culture: Definitions.
Importance of Impact of Cultural Differences on Business; Research by G. Hofstede/ F. Trompenaars’ dimensions of National Culture. Application, importance of understanding concept of Guanxi, for international partners to Chinese businesses. Political Environment: National International forces + also to linked to International ‘Political’ Institutions –WTO, G20, BRIC, Trade Blocs e. g. EU, ASEAN, APEC, NAFTA etc. Social Environment: Demography: Consequences of Ageing Populations for Business and Society in industrialised societies; versus growing populations in developing countries.
Re-location of employment in globalised world. E. g. Call Centre customer convenience across time zones, or pressurised workforce? World Trade and the International Competitive Environment: Key trade theories, e. g. Comparative Advantage, Limitations of Vernon’s Model. First Mover Advantage, Porter’s Competitive Advantage. Role of WTO and its principles; related controversial issues. E. g. Prospects for closure of Doha round. Evolving regional groupings, EU, ASEAN, APEC The Technology Environment
Introduction to importance of R& D; use/role of Patents; technology transfer; impact of e-technologies Internet/e-commerce International Financial Environment Foreign exchange principles; impact of globalisation of financial markets. Comparison of ‘financial’ shocks Asian financial crisis 1997-8; the Credit Crunch 2008–2010; ‘sub-prime’ market to Lehman Bros. AIG. Partial re-nationalisation of Commercial Banks, trading internationally from US & GB. TEACHING & LEARNING METHODS Teaching & learning will take place through a series of core lectures and programmed learning activities undertaken in seminar workshops.
Students will have a learning opportunity to participate as team members by presenting findings from case studies through short presentations with interactive questions and answers and class discussion to broaden the teaching and learning experience. This will provide formative feedback in advance broadly related summative assessment. Directed reading will be specified; with students being actively encouraged to pursue a variety of other learning resources; journal articles, internet sources as well the recommended core text. Lecture: One hour x 10 Seminar /workshop: Two hours X 10
Directed Study: 70 hours Research: 50 hours TOTAL: 150 hours ASSESSMENT METHODS Formative Group/syndicate discussions, virtual learning, class debates and small group presentations will act as the formative assessment throughout the module. Formative feedback will regularly be given through plenary discussion of class activities. Summative Assessment: The module is assessed by an individual written assignment the end of the module worth 100% of the overall grade Students are required to attain at least 40% in order to pass the module.
CORE READING: Morrison J. (2009), International Business: Challenges in a Changing World, Palgrave MacMillan. [An excellent comprehensive and challenging text with links to Marketing, HR Finance, and Operations Management. ] used selectively – key relevant themes as per Lecture/Seminar coverage OR Morrison, J. (2006), The International Business Environment, (2nd edition). Palgrave MacMillan. Supporting Reading Hamilton, L. & Webster, P. (2009) The International Business Environment, Oxford University Press, Oxford. (mostly aimed at Undergraduates but good knowledge base for PG courses)
The World in 2010, The Economist, London, 2009 More general texts cover the wider area of International Business for example: Hill, Charles W. L. , (2009) International Business: Competing in the Global Market, 7th ed. , Mc Graw Hill, New York Daniels, J, Radebaugh, L. & Sullivan, D, (2009) International Business, (12th ed. ), Pearson Wall S. , Minocha S. , and Rees B. (2010) International Business, 3rd ed. ,FT Prentice Hall And for a more specialist area: Brummer A. ,(2009), The Crunch: How Greed and Incompetence Sparked the Credit Crisis, RH Business Books, London.
Internet Sources: The Core Text indicates Webalert boxes, and other internet sources to consult in relation to each topic. Some sources will be suggested/ hyperlinked in lecture notes, and considered in seminars. The library has access to Online sources for which you will need to register for an Athens password. Both the Economist www. economist. com and the Financial Times www. ft. com can be accessed this way. Programmes using this Module as a Core: MBA, MA International Management, MBS. Module Leader: Bob Woodfield, Pod 203, E-mail: bob. [email protected] ac. uk Fax 0191 515 2308
Teaching Team: James Riddle, E-mail: jim. [email protected] ac. uk Ms. A. Nwankwo E-mail: TBA OUTLINE OF THE SEMINAR/WORKSHOP SESSIONS WEEK 1 Lecture 1: Introduction – International Business Environment (IBE) Please note: Slides of all lectures are made available on SUNSPACE Seminar 1 – Introduction to the Module; the guide explained, including teaching, learning and assessment, and how seminar workshops will be organised. Contextual DVD + discussion questions Reading: Morrison, J (2006) International Business Environment, Ch1. or Morrison (2009) International Business, Ch. 1 WEEK 2
Lecture 2: Globalisation and Methods of Internationalizing Operations Seminar 2 – Review Understanding of lecture 1; Remaining answers from DVD; Results of student research – see also case below Reading: Morrison, J (2006) International Business Environment, Ch1. or Morrison (2009) International Business, Ch. Parts of Ch. 1 Case Study: Group Presentation: Look at Procter & Gamble’s website, in relation to above reading. What can you find about the way they have restructured in recent years? What have been the objectives in doing so? What corporate governance structure has P& G adopted to deliver their brands to different countries?
WEEK 3 Lecture 3: Foreign Direct Investment: key theories; trends patterns. Impact of MNE’s & globalisation on society Seminars 2 & 3 themes: Globalization and Foreign Direct Investment (FDI) Internationalisation, its motives and theoretical approaches are introduced, with focus on transnational corporations (TNCs). Dunning’s OLI paradigm is outlined. Introductory example of impact of Globalization in other areas – culture; society; technology; financial markets. Seminar 3 Reading: Morrison, J (2006) International Business Environment, Ch5. Or Morrison (2009) parts of Ch 2.
Group Case Study1: PepsiCo’s path to internationalization. Morrison (2009)p. 20. Group Case study 2: Nokia keeps competitors at bay Morrison (2009) pp. 50- 51 WEEK 4 Lecture 4: The Economic Environment How do we compare national economies; what are the policy measures open to governments? The role of government, and the extent of its involvement in business activities, clearly influences international business in a country. Macro-economic indicators enable corporations to assess the international market attractiveness of doing business with a particular country. How do companies try to fit into different economic systems?
Seminar 4: Foreign Direct Investment: key theories; trends patterns. Impact of MNE’s & globalisation on society Reading: Morrison, J (2006) International Business Environment, Ch5. Or Morrison (2009) parts of Ch 2. Group Case Study 1: ‘Made in India’ comes of age. Country Focus Morrison (2009) pp 61-63 Group Case Study 2: IBM and LENOVO: A tale of globalization Morrison (2009) p. 73 –74 WEEK 5 Lecture 5 The Cultural Environment It is widely accepted that the more individualistic cultures of Northern European countries were at the forefront of industrialization and capitalist development.
What is the role of differing national cultures and identities in economic development? How have companies had to adapt in order to be successful in areas of the world with different cultural outlooks? Seminar 5: Economic Environment Reading: Morrison, J (2006) International Business Environment, Ch3 and 4. or Morrison (2009) Ch 3. Group Case Study: Wal-Mart’s great leap forward Morrison (2009) pp. 113 – 115. Group Debate: Assess the Macroeconomic policy options open to Governments’ attempting to recover from the recession. Week 6 Lecture 6: The Political Environment as a Risk Factor for Business Investment Seminar 6
The Cultural Environment: its impact on economic development and business operations Reading: Morrison, J (2006) Ch 6 or Morrison, J. (2009) parts of Chapter 4 . Group Case Study 1: 4. 2 DIY goes Global, Morrison J. (2009)pp 152 – 153. Case Study 2: Testing Times for Citigroup in S. Korea, Morrison J. (2009) p. 140. WEEK 7 Lecture 7 International Political Institutional Environment:WTO, Trade Blocs Regional trade agreements, including customs unions, common market and deepening economic and political integration from Europe (EU), the Americas (Nafta) and Asia (ASEAN) and (APEC), and Africa will be considered.
The growing importance of the World Trade Organization (WTO),will be reviewed along with the role of multilateral trade agreements generally. Reading: Morrison, J (2006), Ch3 & 4. Group case study:Call Centre Jobs Migrate to India(see notes below) WEEK 8 Lecture 8 World Trade and International Competition Seminar 8 International Trade and Regional Integration Patterns of global trade are considered and key theories and policies are outlined, including the theory of comparative advantage and newer trade theories such as Porter’s theory of competitive advantage.
The emphasis is the application of these within the context of trading framework of International Political Institutions WEEK 9 Lecture 9 The Technological Environment An applied approach to modern concepts of technology innovation will be taken. The use of patents globally will be introduced, with a discussion of the issues from the point of view of industrialised and developing economies. Methods of technology transfer will be considered. Seminar 9 – The Technological Environment WEEK 10 Lecture 10 International Financial Environment See lecture notes & related DVD BBC2 series “The Love of Money” or “The City Uncovered”
Questions relating to above DVD + Seminar time will be devoted to providing advice and further discuss on end assessment choices in preparation for submission. International Business Environment PGBM04 Summative Assessment Guidelines Assessment for this module takes the form of an individual assignment. This will provide some guidelines about what to expect and what is expected from you. Further information will be provided in seminars and on Sunspace for this module. FORMAT The assignment will be a paper consisting of eight discussion type questions.
You are required to choose ONE and write an essay style answer of about 3000 words. WHAT THE ASSESSMENT WILL BE BASED ON You are expected to use a variety of source in your answer. These may include textbooks, journal articles,internet sources and newspaper articles (for example) the Financial Times. You will be expected to carry out research on each chosen question, gathering and selecting relevant information for inclusion in your answer. It is important that each answer puts forward your individual analysis on the issues raised using your sources as evidence and examples.
The answers you write will indicate the development of your thoughts and critical evaluation of the topics, which have taken place throughout the semester. As part of the induction and/or later you will be briefed by the Subject Librarian for Business on how to register with the Library Information Services, in order to access resources and acquiring an ATHENS password. Virtual Learning available via Sunspace – has help on the use of Harvard Referencing, and other study skills advice is available on the Module website. In addition a list of useful links at the end of this guide is included.
Details of the Assignment Issue date: Week beginning 6th December 2010 Details of the Submission date: Wednesday 19th January 2011, by 2pm Prospect Building Further question specific advice information will be given on Assessment via Sunspace and in Lectures/Seminars. A set of sample questions is provided for general guidance. Seminar/Workshop Programme Please note the seminar programme is a crucial element in supporting your learning and understanding by providing the opportunity to apply, discuss and present key issues. Normally you will be allocated to a group for your presentations.
You are expected to work within a group/team and organize your presentation accordingly. Each group will be given approximately 20 minutes to present their case. A group will be allocated a leader to ensure better organization and smooth presentation. You are not given a mark, but presentations are a key part of the formative assessment process. It is a prerequisite for the submission of the assignment. ALL STUDENTS ARE STRONGLY ADVISED TO PREPARE FOR PRESENTATIONS/SEMINARS BY READING THE RELEVANT CHAPTERS OF KEY TEXTS BEFORE EACH SEMINAR SESSION Seminar Week 1 View BBC 2 – The Love of Money: Part 3 Back from the Brink. BBC Revealing how close the world came to the brink of economic ruin Autumn 2008. Key players, incl. ex-UK PM Gordon Brown & US Secretary Tim Geithner, reveal the ups & downs of then as they fought behind the scenes. Few people realise how close society came to a truly catastrophic breakdown. • Consider questions:- • Who is the Governor of the Bank of England? • Briefly what role does he/his senior team) perform in relation to UK Government economic policy? • What were the key reasons for the financial crisis “the credit crunch? ” Why was its impact felt around the world? • What part did events at Lehman Brothers play? What does the acronym BRIC stand for when listing powerful emerging world economies. Name the President of 2 of these countries? • Which post is held by Geir Haarde? What was the financial situation in his country in Autumn 2008? • Which job was held by French politician Christine Legarde? [What was her role? Whose response was she co-ordinating? ] • How where Sir Fred Goodwin’s company involved? • On Wed 8th October 2008 how much UK taxpayer’s money was committed to “The Historic Re-Capitalisation Bank Rescue Plan”? Which 2 banks in particular were the major beneficiaries? • (Near the end of the programme) who said”…. f we had not had a British announcement we would be in a very much worse place today. ” What organisation does he work for? • Who says at the end of the programme …”this is one in a long series of financial crises. People who think the world has changed have not read history? ” Student’s opinions/discussion. Week 2 Finish off week 1 questions; review understanding of Lecture 1 For Seminar 2 ALL students to briefly consider their own countries/ companies experiences. • What where key causes of “The S. E Asian financial crisis 1997”; “the Dot. Com boom”. What do they have in common?
Case Study: Procter and Gamble Week 3. Case 1: Nokia & Case 2: Pepsico Week 4 CASE: IBM & LENOVO: A Tale of Globalization IBM stunned the world in 2004 by announcing that it had sold its personal computer (PC) business to Lenovo, a Chinese company, at the time little known outside China. The takeover even attracted the attention of the US Congress, whose Committee on Foreign Investment in the US was needed to clear the deal, as a takeover by a Chinese company in the technology sector could raise questions of national security. For both companies, the takeover represented a dramatic change of strategy.
IBM’s reputation was built on its hardware expertise, and it was now selling off its entire PC business. Lenovo was an entrepreneurial Chinese PC producer, which had built up a market share of 30% in China, but had little presence elsewhere. It paid $1. 75 billion for IBM’s PC business, making this the largest ever overseas acquisition by a Chinese company. Overnight, Lenovo became a global company. IBM, as its name, International Business Machines, reflects, has traditionally viewed its core business as hardware, but changes in direction over the years have led it more into software and services provision.
Its mainframe computer business, which had been successful in the 1970s and 80s, waned in the 90s, as PCs surged in popularity. In the 1980s, the company built up a PC business, but one with little of its own technology: it used processors from Intel, software from Microsoft and outsourced manufacturing. In this very competitive market, it was failing to make profits, as Dell and Hewlett-Packard steamed ahead. The logical move was to sell the PC business, in order to concentrate on higher value activities, mainly for business customers.
Its hardware division has focused on the top-end server market, adding features and adapting technology from its mainframe computers. The resurgence of its mainframe computers, newly engineered and designed to run Linux open-source software, is also proving successful. In services, IBM aims to capture swathes of the outsourcing sector, offering all types of BPO, including logistics support, call centres, human resources and more. This sector, however, has become crowded, as smaller flexible companies with lower costs, such as Wipro from India, compete for work.
IBM’s management now see the company’s strategy as moving towards large BPO projects, its ‘business process transformation services’. The company will need to change its culture from a product and software orientation to one of service provision, which will require greater flexibility and more of a solutions approach than its traditional hardware business. Reflecting its new outsourcing orientation, the company has reorganized and shed 13,000 jobs, mainly in Europe, moving departments to lower cost locations: human resources to Hungary and payroll functions to Romania.
IBM has retained strong ties with its former PC business, through an equity stake and licensing agreements for its patents and designs. It owns 19% of Lenovo’s shares, and it allowed Lenovo to use the IBM brand name on its products for five years. One of IBM’s greatest successes had been the ThinkPad notebook computer, with its iconic black casing, which continues to be sold by the new owners under the Lenovo brand. Lenovo is increasing the range of products offered under the ThinkPad brand, to cater for small and medium-sized businesses. For Lenovo, the IBM brand was a step towards building its own global brand.
It can point to Samsung in South Korea, an Asian company which has gained a reputation for innovative products backed by a strong brand. However, Lenovo dropped the IBM brand name two years ahead of schedule due to customers’ acceptance and recognition of the Lenovo and Think trademark. Lenovo’s strength has been in producing computers for the Chinese market. Founded only in 1984, the company’s success can be mainly attributed to its entrepreneurial founder and now chairman, Yang Yuanqing, who, as part of the deal, had to step down as CEO, to make way for the new CEO, who was the former head of IBM’s PC division.
The new head of human resources has also come over from IBM. Lenovo has ambitions to challenge Dell and Hewlett-Packard, particularly on price and products designed for emerging markets. It can put to good use its experience in designing low-cost machines for the Chinese market. Its expertise in procuring low cost components will give it an advantage, especially important as procurement costs account for 70–80% of total revenues in this sector. It can use its new economies of scale to further lower procurement costs. It also aims to target small business users in developed economies, which had never been a priority for IBM.
Can Lenovo’s performance match its global ambitions? In the first two years after the takeover, it introduced its own branded products outside China, and increased its revenues fourfold. It now has significant sales outside China. However, the huge organizational and logistical changes have taken their toll, net profits in 2005 falling to just $22 million, a fifth of the previous year’s. Doubts revolve mainly around the fact that a relatively young company with no experience outside its domestic market has acquired a global company three times its size.
There are the cultural differences between the acquired business, a rather bureaucratic division of a large American MNE, and the new entrepreneurial Chinese owners, whose management team before the takeover had an average age of 28. The chief financial officer says: ‘It’s not a difference between Chinese and Americans, but really between an entrepreneur company and a well-established multinational company’ (Dickie, 30 September 2005). For Lenovo, complexities of supply chains, products and technology have been difficult to manage, especially as the new headquarters in New York and the Chinese workforce are 12 time zones apart.
For other Chinese companies eyeing international expansion, the success of Lenovo would be an example to follow. Lenovo’s failure would send a strong signal that, despite energy and ambition, they might not yet have the management skills to take on leading MNEs in established markets. By 2007, the company had made progress towards restructuring the business, and felt confident to launch new products aimed at the global consumer PC market, taking on rivals Dell, Hewlett-Packard and Acer (of Taiwan). New IdeaPad notebooks will be launched in the US, France, China, India, Russia and other markets.
Dickie (2005) ‘Lenovo targets small business’, FT www. lenovo. com www. ibm. com/investor Read the case study & web check the sites above. • What changes in strategy have taken place at IBM, both before and after the sale of the PC business? • What aspects of globalization are highlighted in the case study? • Consider the acquisition of IBM’s PC business by Lenovo in terms of owner-specific advantages. • Briefly comment on Lenovo’s prospects in competition with established rivals Seminar 5 Case1
Wal-Mart’s great leap forward Wal–Mart is the world’s largest retailer, but this American retailing giant is finding life at the top hard at home, and even harder abroad. In 1962, Sam Walton, Wal-Mart’s founder, devised a business model which seemed to guarantee continued growth; employ lowly paid staff to sell low-cost, mass- market products predominantly aimed at America’s low-income groups. By the end of the 1990s the model was starting to look tarnished, as the consumers became more diverse and demanding and employee relations started to deteriorate.
The supermarket sector, once the domain of national chains has now gone global. In the UK, Tesco forges ahead both at home and abroad, its sales growing faster abroad than at home. Wal–Mart by contrast has concentrated on the US, but with sales growth at home slowing, it started to look abroad. Wal-Mart has looked to changes in strategy and organization to boost sales at home, as well as compete in global markets. Currently the US accounts for 80% of its profits, but it hopes to increase global profits from the current 20 % to 30%.
Initially a food retailer only, non-food ranges, such as clothing and appliances, were added in 1988. Its worldwide sourcing, benefiting from economies of scale, has brought in low-cost textiles and appliances, particularly from China. Wal-Mart executives have been concerned that higher profit is needed in the US to offset higher costs. Wal-Mart is the largest private employer in the US, employing 1. 4 million people. Working for such a large organization, low wage workers might expect to be unionized. However the company refuses to recognize the grocery worker’s trade union.
Since the late 1990s, Wal-Mart has sought to expand internationally. Its purchase of ASDA in the UK in 1999 has been its most successful acquisition. It also entered the difficult supermarket environment in Germany, where the ‘hard’ discounters, such as Aldi and Lidl have grown to 40% of the market. While Wal- Mart’s global logistics should have guaranteed economies of scale to enable it to compete, the 85 stores struggled to make profits, losing out to the established discounters. It also encountered problems with Germany’s strong trade unions. Wal-Mart sold these shops to the Metro chain in 2006.
Wal-Mart has now moved on to China, where it competes against a number of other Western hypermarket players such as Tesco and Carrefour. Here, Wal-Mart is trying to establish its business model, and to appeal to increasing numbers of wage-earning consumers. It is also hoping to offer them its own credit card. The bank backing the scheme is substantially owned by state entities and non tradable shares as is common in China. In a further move, Wal–Mart, known for its anti-union stance in the US, has allowed trade unions to set up branches in its Chinese outlets, and has allowed the Chinese Communist Party to set up a branch in one.
While this may sound unusual, given its past practices, the partnership between the Chinese Communist Party and Wal –Mart has a logic; the company seeks profits in the world’s largest and fastest growing market, while China’s leaders wish to keep an eye on this powerful investor. This latest chapter in Wal-Mart’s localization strategy promises to be interesting; from the point of view of its chances of success in China, and in the reaction of Wal-Mart’s shareholders. [adapted from Morrison, J. (2009) International Business, Palgrave p. 113-115] Questions: 1.
The experience of Wal-Mart’s international expansion to date has been one of mixed fortunes. Consider its recent experience for a country of your choice. 2. What are its prospects for success in China? (Limit this to knowledge of its involvement in your local area). 3. Is Wal-Mart’s business philosophy typical of 21st century expansion in its sector? What are the positive and negative aspects of it business model? Week 5: Case 2: Class Debate Whole group to search out from informed financial/economics sources, from perspective of own country’s Macroeconomic policy.
Case for continuing government Fiscal Stimulus; Case against. Managing ‘down’ the size of a country’s Budget deficit. From a International perspective look for example at last G20 meeting, Canada end of June 2010. Suggested background articles from an INTERNATIONAL CONTEXT: “U, V or W for recovery. ” Economist 392, no. 8645 (August 22, 2009): 10-11. Business Source Elite, EBSCOhost Or 2 views from compilation of articles Financial Times FT Online from Library: The Austerity Debate Deficit Cutting v. Fiscal Stimulus Monday July 19th – 23rd July 2010
Seminar Week 6: Review and discuss Hofstede/Trompenaars analysis Do you agree with their analysis? If their conclusions are correct how may it affect the way companies work together. Case study 1: Group presenting Morrison (2009) Case 4. 2 pp152- 153 DIY goes Global. • What aspects of the cultural environment in China are relevant to the DIY sector? • How successful has B& Q been in adapting to the tastes and needs of local consumers in China? • What is the nature of the competitive environment in the sector B & Q have entered? www. kingfisher. co. uk; B & Q’S Chinese website is www. nq. com. cn. What can we tell about the cultural differences (as non Chinese speakers)? Home Depot’s website is www. homedepot. com What challenges await Home Depot in its Chinese market entry Compare B & Q and Home Depot in terms of their approaches to internationalization. Case 2: Testing Times for Citigroup in S. Korea • What difficulties has Citigroup faced in building market share in S. Korea? • What issues within the 2 organisations have held up the integration process. • In your view what mistakes has Citigroup made in integrating the 2 organizations? What recommendations would you give to Citigroup for any future acquisition in Asia? www. citigroup. com WEEK 7 Call Centre Jobs Migrate to India Call centres were once heralded as the providers of much-needed jobs in areas where the decline in manufacturing industry had left economic stagnation and high unemployment. Areas such as the northeast of England and Wales attracted call centres, largely in banking and financial services, where the need was for efficiency in handling large number of fairly routine queries from customers.
An element of their attraction for business was the low-cost environment which they offered, and for employees, job and training opportunities. However, the reality turned out to be less rosy than expectations had suggested, and the quest for cost savings had led to a migration of some of these jobs to low-cost locations, particularly in India. Call centre work acquired a reputation as a ‘repetitive’ and without prospects of career development in the UK, which has been slow to shift. Low pay, poor working conditions and limited career prospects have led to high staff turnover and employees seeing this type of work as casual or temporary.
A number of high-profile companies, including HSBC, Aviva (Insurance) and BT, have shifted call centre jobs to India. HSBC, the world’s second largest bank, cut 4000 UK jobs in 2003, relocating the work to India, Malaysia and China, in one of the largest transfers of British jobs to overseas locations. Its chief executive said: ‘as one of the world’s largest financial services companies, HSBC has a responsibility to all its stakeholders to remain efficient and competitive’ (Croft, 17 October 2003). A succinct illustration of the widely held conviction that call centre migration is a seamless process is found in the words of the HSBC CEO, who lauded the virtues of the Indian workers, at the moment when his company embarked upon its first wave of offshoring” [Taylor & Bain (2005)] For HSBC’s UK employees, the company’s advertising slogan, ‘the world’s local bank’, had a particularly hollow sound. Announcing the shift of two call centres to India, BT’s management highlighted the dilemma.
On the one hand, the need to seek the low-cost locations, but also sensitivity to the employment implications for current UK employees (Singh, 10 March 2003). BT had outsourced jobs to service companies in the UK, reflecting a trend of ‘outsourcing’ which has developed in the industry. Under an outsourcing contract, a specialist call centre company agrees to provide call centre services for an organization such as BT. In the UK, (NORTH EAST REGION especially) Garland Call Centres was one of these companies. In May 2010 it went into administration “unable to support trading after the termination of key contracts”.
Nick Reed, director and joint administrator at PricewaterhouseCoopers LLP, said: “Garlands Call Centres has experienced very challenging trading conditions and more recently received notice from a number of key clients of their intention to move their customer service work to other centres, many in low wage countries including Asia and Africa. ” As recently as 2007/2008 , turnover was ? 50m, and company employee number had grown to around 3,000. By 2009 it had lost much of its work for its large broadband and mobile operator clients. By 2010, it said it was left with contracted work for only 1,500 employees.
Customers phoning a helpline with a query regarding a gas provider, mobile phone provider or bank will probably have no idea they are speaking to a Garland employee rather than directly to the provider. For Garland, the attraction of Hartlepool was a pool of potential workers, many with a university education, with the added advantage that, because of high regional unemployment, they are willing to work for as little as ? 13,000–? 15,000 a year. A third of Garland’s employees have university degrees. By comparison, call centre jobs in India are mostly held by graduates, but the starting salary of the Indian graduate is ? 000+per year. Here, specialist call centre companies are growing rapidly, fuelled by large numbers of graduates who speak English. These are considered desirable jobs, with relatively good conditions by local standards, but rates of staff retention are low, with annual turnover running at 40 – 50 per cent. Indian workers have found it difficult to adjust to the night shifts which are required of them, to deal with customers in time zones the other side of the globe. Then there are the pressures of the job, combined with the language and cultural adjustment needed to deal with customers in the US and Europe.
They, like counterparts elsewhere, are unlikely to see their careers in call centres. According to Taylor and Bain (2005) it can be concluded that migration of call centre work will not be seamless. ”The cost reduction logic drives companies to offshore voice services, but they are then confronted with a series of problems deriving from the customer oriented logic. ” “Even allowing for the simplified, standardized nature of the bulk of Indian call-handling, it appears the cultural and linguistic differences are not readily overcome.
Consequently the call centre with its distinctive labour process may in the long run be offshored less readily than other non-customer facing, back office activities The future of call centre workers, wherever they are, will depend largely on the extent to which automated technology is able to take over many routine tasks, through voice recognition, email and the internet. Deskilling leading to automation is a familiar occupational pattern which has affected manufacturing industries and is likely to be repeated in the call centre industry. [adapted and updated from Morrison (2006) p229-230; Taylor P. nd Bain P (2005) “India calling to the far away towns: the call centre labour processes and globalization”, Work Employment and Society, Vol. 19 No. 2, pp. 261-282. BBC News May 2010 http://news. bbc. co. uk/go/pr/fr/-/1/hi/england/tees/8687770. stm] Case Questions 1. In what ways can it be said that globalization is affecting the call centre industry? 2. HSBC’s chief executive referred to the interests of stake holders – what did he mean? 3. Successful call centres exist in Sunderland and elsewhere in the NE of England (given you experience of a relevant company visit), why are they still viable? i. e. What do Taylor & Bain mean in the last paragraph above? ] Seminar Week 8: WTO website. View and discuss from WTO website A choice from: Videos such as: Prospects for 2010 (March 2010 with WTO Chief Economist) 2min 32s; WTO at Fifteen (7m 39s); To the Heart of the WTO, viewed through the viewpoint of interests of 2 countries (Brazil and Norway) (22m 27s) Routes of Trade (9m) very introductory [At the most advanced which presumes at lot of reading and understanding: WTO FORUM Debate – Regional Trade Agreements & Multilateral Trade Bhagwati & Hufbauer, 2007 (13m3s)]
Plus Case: Piecemeal Liberalization of World Trade in Textiles and Clothing. Seminar Week 9 Case Study Technology: Does R & D expenditure deliver better company performance and competitive advantage? Review evidence of part of Morrison (2009) Ch 12. Access: ¦ UK Dept of Trade and Industry now known as UK Department of Business Innovation and Skills www. innovation. gov. uk/rd_scoreboard/ What is measured by the R& D scoreboard? How is this measured? What about relative performance of research intensive companies? What can we deduce by way of international comparisons?
Consider also the evidence by consultants Booz Allen: http://www. boozallen. com/publications/article/981406 (Oct 2005) Seminar Week 10 Seminar devoted to advice and guidance on assessment choices in preparation for submission of end assignments. Useful links: • University Policy on Plagiarism https://docushare. sunderland. ac. uk/docushare/dsweb/Get/Document-2994/AQH-F6-12+Policy+Statement+on+Plagiarism. pdf • University Policy on Extenuating Circumstances https://docushare. sunderland. ac. uk/docushare/dsweb/Get/Document-2995/AQH-F6-13+Procedures+for+Extenuating+Circumstances. pdf Link to the University’s Academic Regulations https://docushare. sunderland. ac. uk/docushare/dsweb/View/Collection-2780 • University Policies on Complaints, Appeals and Student Discipline https://docushare. sunderland. ac. uk/docushare/dsweb/View/Collection-2784 Generic Assessment Criteria – Postgraduate – related to the assessment criteria of the module} | |Grade |Relevance | | |76-85% |The work examined is outstanding and demonstrates comprehensive knowledge, understanding and skills appropriate to the Level of the qualification.
There is also excellent evidence showing that all the | | | |learning outcomes and responsibilities appropriate to that level are fully satisfied. At this level it is expected that the work will be outstanding in the majority of the categories cited above or by | | | |demonstrating particularly compelling evaluation and elegance of argument, interpretation or discourse. | | | |The work examined is excellent and is evidence of comprehensive knowledge, understanding and skills appropriate to the Level of the qualification.
There is also excellent evidence showing that all the | | |70 – 75% |learning outcomes and responsibilities appropriate to that level are satisfied At this level it is expected that the work will be excellent in the majority of the categories cited above or by | | | |demonstrating particularly compelling evaluation and elegance of argument, interpretation or discourse. | | |Directly relevant to the requirements of the assessment | | |60 – 69% | | | |30 – 34% |The work examined provides insufficient evidence of the knowledge, understanding and skills appropriate to the Level of the qualification.
The evidence provided shows that some of the learning outcomes| | | |and responsibilities appropriate to that Level are satisfied. The work will be weak in some of the indicators. | | |15-29% |The work examined is unacceptable and provides little evidence of the knowledge, understanding and skills appropriate to the Level of the qualification. The evidence shows that few of the learning | | | |outcomes and responsibilities appropriate to that Level are satisfied.
The work will be weak in several of the indicators. | | |0-14% |The work examined is unacceptable and provides almost no evidence of the knowledge, understanding and skills appropriate to the Level of the qualification. The evidence fails to show that any of the | | | |learning outcomes and responsibilities appropriate to that Level are satisfied. The work will be weak in the majority or all of the indicators. | ———————– Reading: Morrison, J. 2006): Chapter 10 or Morrison, J. (2009) part of Chapter 6. Case Study for ALL: WTO debate:“The current WTO principles and agreed framework of trade policies have a positive influence on multilateral free trade. ” Group case: Piecemeal Liberalization of World Trade in Textiles and Clothing. Case study 6. 2. (Morrison 2009) pp. 233 -235. Reading: Morrison, J (2006), Ch 11 or Morrison (2009) parts of Chapter 12. Group Case Study: Access the Innovation references below