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Management Chpt04
Management Chpt04
Management Chpt04
Management Chpt04
Management Chpt04
Management Chpt04
Management Chpt04
Management Chpt04
Management Chpt04
Management Chpt04
Management Chpt04
Management Chpt04
Management Chpt04
Management Chpt04
Management Chpt04
Management Chpt04
Management Chpt04
Management Chpt04
Management Chpt04
Management Chpt04
Management Chpt04
Management Chpt04
Management Chpt04
Management Chpt04
Management Chpt04
Management Chpt04
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Management Chpt04

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  • 1. Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 20004-1The GlobalEnvironment4
  • 2. Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 20004-2The Global EnvironmentIn the past, managers have viewed theglobal sector as closed. Each country or market was assumed to be isolatedfrom others. Firms did not consider global competition, exports.Today’s environment is very different. Managers need to view it as an open market. Organizations buy and sell around the world. Managers need to learn to compete globally.
  • 3. Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 20004-3Tariff BarriersA tariff is a barriers to trade. Tariffs are taxes levied upon imports. These seek to protect jobs in the homecountry. Other countries usually retaliate.Free trade: in a free tradeagreement, each country seeksto specialize in things theymake most efficiently. If India is more efficient in makingtextiles, and the USA in makingcomputer software, then each countryshould focus on these.
  • 4. Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 20004-4Distance & Culture BarriersThe second leading cause of trade barriers. Distance closed the markets as far as some managerswere concerned. Communications could be difficult. Languages and cultures were different.During the last 50 years, communicationsand transportation technology hasdramatically improved. Jet aircraft, fiber optics, satellites have provided fast,secure communications and transportation. These have also reduced cultural differences.
  • 5. Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 20004-5Effects on ManagersDeclining barriers have opened greatopportunities for managers. Managers can not only sell goods and services but alsobuy resources and components globally.Managers now face a more dynamic andexciting job due to global competition.
  • 6. Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 20004-6Free TradeNAFTA: North American Free TradeAgreement. Abolishes most tariffs on goods traded betweenMexico, Canada and the U.S. Allows unrestricted cross-border flows of resources. Many U.S. firms have now invested in Mexico.This is a manufacturing opportunity. Wage costs are lower in Mexico. Can serve Mexico with a plant in Mexico and reducefreight.Managers face new opportunities andthreats.
  • 7. Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 20004-7Global Task EnvironmentSuppliersSuppliersDistributorsDistributorsCustomersCompetitorsCompetitorsForces yieldingForces yieldingOpportunitiesOpportunitiesand threatsand threatsFigure 4.2
  • 8. Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 20004-8Suppliers & DistributorsManagers buy products from globalsuppliers or make items abroad and supplythemselves. Key is to keep quality high and costs low.Global outsourcing: firms buy inputs fromthroughout the world. GM might build engines in Mexico, transmissions inKorea, and seats in the U.S. Finished goods become global products.Distributors: each country often has a uniquesystem of distribution. Managers must identify all the issues.
  • 9. Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 20004-9Customers & CompetitorsFormerly distinct national markets aremerging into a huge global market. True for both consumer and business goods. Creates large opportunities.Still, managers often must customizeproducts to fit the culture. McDonalds sells a local soft drink in Brazil.Global competitors present new threats. Increases competition abroad as well as at home.
  • 10. Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 20004-10Forces in the Global General EnvironmentPolitical &Legal SystemsEconomicsystemSocioculturalSystemForces yieldingForces yieldingOpportunitiesOpportunitiesand threatsand threatsFigure 4.3
  • 11. Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 20004-11Political-Legal ForcesResults from diverse and changing natureof each countries’ political system.Representative democracies: such as theU.S., Britain, Canada. Citizens elect leaders who make decisions forelectorate. Usually has a number of safeguards such as freedomof expression, a fair court system, regular elections,and limited terms for officials. Well defined legal system and economic freedom.
  • 12. Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 20004-12Totalitarian regimes: a single political partyor person monopolize power in a country. Typically do not recognize or permit opposition. Most safeguards found in a democracy do not exist. Examples include Iran, Iraq, and China.These are difficult to do business with giventhe lack of economic freedom.Further, human rights issues also causemanagers to avoid dealing with thesecountries.
  • 13. Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 20004-13Economic SystemsFree market economy: production of goodsand services is in private ownership. Production is dictated by supply and demand.Command economy: decisions on what toproduce, how much, done by the government. Most command economies are moving away from thecommand economy.Mixed economy: certain economic sectorscontrolled by private business, others aregovernment controlled. Many mixed countries are moving toward a freeenterprise system.
  • 14. Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 20004-14Recent TrendsCurrent shift away from totalitariandictators toward democratic regimes. Very dramatic example seen in the collapse of the formerSoviet Republic. Also very pronounced in Latin America and Africa.With this shift, has come a strong movementtoward free market systems. This provides great opportunities to business managerson a global level. Many businesses are investing millions in formertotalitarian countries to seize these opportunities.
  • 15. Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 20004-15Changing Political andEconomic ForcesRussia1985Russia1995DemocraticPoliticalFreedomTotalitarianChina1985China1995Command MarketMixedEconomic FreedomBritain1985Britain1995Hungary1985Hungary1995Figure 4.4
  • 16. Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 20004-16Sociocultural ForcesNational culture: includes the values,norms, knowledge, beliefs, and otherpractices that unite a country.Values: abstract ideas about what asociety believes to be good, desirable andbeautiful. Provides attitudes for democracy, truth, appropriateroles for men, and women. Usually not static but very slow to change.
  • 17. Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 20004-17Norms: social rules prescribing behavior ina given situation. Folkways: routine social conventions including dresscodes and manners. Mores: Norms that are central to functioning ofsociety. much more significant that folkways. More examples include theft, adultery, and are oftenenacted into law.Norms vary from country to country.
  • 18. Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 20004-18Hofstede’s Model of National CultureIndividualismLow PowerDistanceAchievementOrientedLow UncertaintyAvoidanceShort TermOrientationCollectivismHigh PowerDistanceNurturingOrientedHigh UncertaintyAvoidanceLong TermOrientationFigure4.5
  • 19. Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 20004-19Individualism v. CollectivismIndividualism: world view that valuesindividual freedom and self-expression. Usually has a strong belief in personal rights and need tobe judged by achievements.Collectivism: world view that values thegroup over the individual. Widespread in Communism. Prevalent in Japan as well.Managers must understand how theirworkers relate to this issue.
  • 20. Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 20004-20Power DistanceA society’s acceptance of differences in thewell being of citizens due to differences inheritage, and physical and intellectualcapabilities. In high power distance societies, the gap between richand poor gets very wide. In low power distance societies, any gap between richand poor is reduced by taxation and welfare programs.Most western cultures (U.S., Germany, UnitedKingdom) have relatively low power distance and highindividualism.Many economically poor countries such as Panama,Malaysia have high power distance and lowindividualism.
  • 21. Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 20004-21Achievement vs NurtureAchievement oriented societies valueassertiveness, performance, success. The society is results-oriented.Nurturing-oriented value quality of life,personal relationships, service.The U. S. and Japan are achievement-oriented while Sweden, Denmark are morenurturing-oriented.
  • 22. Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 20004-22Uncertainty AvoidanceSocieties and people differ on their willingnessto take on risk.Low uncertainty avoidance (U.S., HongKong), value diversity, and toleratedifferences. Tolerate a wide range of opinions and beliefs.High uncertainty avoidance (Japan andFrance) are more rigid and do not toleratepeople acting differently. High conformity to norms is expected.
  • 23. Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 20004-23Long Term OutlookLong-term outlook is based on values ofsaving, and persistence. Taiwan and Hong Kong are cultures that are long -termin outlook.Short-term outlook seeks the maintenance ofpersonal stability or happiness right now. France and the U. S. are examples of this approach.
  • 24. Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 20004-24International ExpansionImporting and Exporting: the least complexmethod of expansion. Exporting: firm makes products and sells abroad. Importing: firm sells products made abroad.Licensing: firm allows foreign organization tomake and distribute goods for a fee. Helps the home firm since it does not have to set up acomplete production and distribution network.Franchising: company sells a foreignorganization the rights to use brand name andknow-how in return for payment and profitpercentage.
  • 25. Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 20004-25International OptionsStrategic Alliances: managers pool resourceswith a foreign firm and both organizationsshare the rewards and risks. Allows firm to maintain control which is a problem withexporting, licensing, and franchising.Wholly-owned foreign subsidiary: firm investsin production operations in a foreign country. Many Japanese auto firms have done this in the U.S. This is very expensive but can yield high returns.
  • 26. Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 20004-26International ExpansionImportingExportingLicensingLicensingFranchisingFranchisingJoint VenturesJoint VenturesStrat. AlliancesStrat. AlliancesWholly-owned For.SubsidiaryLow HighLevel of Foreign involvement and investmentneeded by a global organizationFigure 4.6

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