Managing in a Global Environment


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Managing in a Global Environment

  1. 1. Managing in a Global Environment CHAPTER 4 0
  2. 2. Learning Objectives <ul><li>Describe the emerging borderless world and some issues of particular concern for today’s managers. </li></ul><ul><li>Describe market entry strategies that businesses use to develop foreign markets. </li></ul><ul><li>Define international management and explain how it differs from the management of domestic business operations. </li></ul><ul><li>Indicate how dissimilarities in the economic, sociocultural, and legal-political environments throughout the world can affect business operations. </li></ul>0
  3. 3. Learning Objectives (contd.) <ul><li>Describe how regional trading alliances are reshaping the international business environment. </li></ul><ul><li>Describe the characteristics of a multinational corporation. </li></ul><ul><li>Explain cultural intelligence and why it is necessary for managers working in foreign countries. </li></ul>0
  4. 4. Importance of International Business <ul><li>If you are not thinking international, </li></ul><ul><li>you are not thinking business management </li></ul>0
  5. 5. A Borderless World <ul><li>Business is becoming a unified, global field </li></ul><ul><li>Companies that think globally have a competitive edge </li></ul><ul><li>Domestic markets are saturated for many companies </li></ul><ul><li>Consumers can no longer tell from which country they are buying </li></ul>0
  6. 6. 4 Stages of Globalization Exhibit 4.1 0
  7. 7. Four Stages of Globalization <ul><li>Domestic stage: </li></ul><ul><li>market potential is limited to the home country </li></ul><ul><li>production and marketing facilities located at home </li></ul><ul><li>International stage: </li></ul><ul><li>exports increase </li></ul><ul><li>company usually adopts a multi-domestic approach </li></ul><ul><li>Multinational stage: </li></ul><ul><li>marketing and production facilities located in many countries </li></ul><ul><li>more than 1/3 of its sales outside the home country </li></ul><ul><li>Global (or stateless) stage: </li></ul><ul><li>making sales and acquiring resources in whatever country offers the best opportunities and lowest cost ownership, control, and top management tend to be dispersed </li></ul>0
  8. 8. Global (stateless) Corporations <ul><li>Number is increasing </li></ul><ul><li>Awareness of national borders decreasing </li></ul><ul><li>Corporate Examples </li></ul><ul><ul><li>Fred Hassan – Pakistan-born CEO of Schering Plough </li></ul></ul><ul><ul><li>Mexico-born Fernando Aguirre, CEO of Chiquita Brands </li></ul></ul>0
  9. 9. Strategies for Entering International Markets Exhibit 4.2 0
  10. 10. Getting Started Internationally <ul><li>Market Entry Strategy </li></ul><ul><ul><li>An organizational strategy for entering a foreign market </li></ul></ul><ul><li>Global Outsourcing (offshoring) </li></ul><ul><ul><li>Engaging in the international division of labor so as to obtain the cheapest sources of labor and supplies regardless of country. Also called global sourcing . </li></ul></ul>0
  11. 11. International Environment Factors Organization <ul><li>Economic </li></ul><ul><li>Economic development </li></ul><ul><li>Infrastructure </li></ul><ul><li>Resource and product markets </li></ul><ul><li>Per capita Income </li></ul><ul><li>Exchange rates </li></ul><ul><li>Economic conditions </li></ul><ul><li>Legal-Politica l </li></ul><ul><li>Political risk </li></ul><ul><li>Government takeovers </li></ul><ul><li>Tariffs, quotas, taxes </li></ul><ul><li>Terrorism, political instability </li></ul><ul><li>Laws, regulations </li></ul><ul><li>Sociocultural </li></ul><ul><li>Socio values, beliefs </li></ul><ul><li>Language </li></ul><ul><li>Religion (objects, taboos, holidays) </li></ul><ul><li>Kinship patterns </li></ul><ul><li>Formal education, literary </li></ul><ul><li>Time orientation </li></ul>Exhibit 4.3 0
  12. 12. Economic Environment Factors Economic growth Economic development Infrastructure Resource and product markets Exchange rates Inflation Interest rates 0
  13. 13. Economic Development <ul><li>Countries categorized as “developing” or “developed” </li></ul><ul><li>Criterion used to classify is per capita income </li></ul><ul><li>Developing countries have low per capita incomes </li></ul><ul><li>LDCs located in Asia, Africa, and South America </li></ul><ul><li>Developed are North America, Europe, & Japan </li></ul><ul><li>Driving global growth in Asia, Eastern Europe, & Latin America </li></ul>0
  14. 14. Infrastructure <ul><li>A country’s physical facilities that support economic activities </li></ul><ul><li>Airports, highways, and railroads </li></ul><ul><li>Energy-producing facilities </li></ul><ul><li>Communication facilities </li></ul>0
  15. 15. Resource and Product Markets <ul><li>When operating in another country... </li></ul><ul><ul><li>Managers must evaluate market demand </li></ul></ul><ul><ul><li>To develop plants, resource markets must be available – raw materials and labor </li></ul></ul><ul><li>Corporate Example – McDonald </li></ul>0
  16. 16. Exchange Rates <ul><li>Rate at which one country’s currency is exchanged for another country’s </li></ul><ul><li>Has become a major concern for companies doing business internationally </li></ul><ul><li>Changes in the exchange rate can have major implications for profitability of international operations </li></ul>0
  17. 17. The Legal-Political Environment <ul><li>Political Risk– due to events or actions by host governments </li></ul><ul><ul><li>Loss of assets </li></ul></ul><ul><ul><li>Loss of earning power </li></ul></ul><ul><ul><li>Loss of managerial control </li></ul></ul><ul><ul><li>Government takeovers </li></ul></ul><ul><ul><li>Acts of violence </li></ul></ul>0
  18. 18. Political Instability <ul><li>Events such as riots, revolutions, or government upheavals that affect the operations of an international company </li></ul>0
  19. 19. Laws and Regulations <ul><li>Government laws and regulations differ from country to country </li></ul><ul><li>Make doing business a true challenge for international firms </li></ul><ul><li>Internet has increased impact of foreign laws on U.S. companies – expands potential for doing business on global basis </li></ul>0
  20. 20. Sociocultural Environment <ul><li>Culture – shared knowledge, beliefs, values, common modes of behavior, and ways of thinking among members of a society </li></ul><ul><ul><li>Intangible </li></ul></ul><ul><ul><li>Pervasive </li></ul></ul><ul><ul><li>Difficult for outsider to learn </li></ul></ul><ul><li>Managers need to understand difference in social values to comprehend local cultures and deal with them effectively </li></ul>0
  21. 21. Hofstede’s Value Dimensions <ul><li>Research = national value systems influence organizational and employee working relationships </li></ul><ul><ul><li>Power distance (high = accept inequality) </li></ul></ul><ul><ul><li>Uncertainty avoidance (uncomfortable with uncertainty) </li></ul></ul><ul><ul><li>Individualism and collectivism (Individualism take care of themselves) </li></ul></ul><ul><ul><li>Masculinity/femininity (preference for achievement/assertiveness; femininity for relationship) </li></ul></ul><ul><ul><li>Long-term/short-term orientation = 5 th dimension </li></ul></ul>0
  22. 22. Four Dimensions of National Value Exhibit 4.4 0
  23. 23. GLOBE Value Dimensions <ul><ul><li>Assertiveness </li></ul></ul><ul><ul><li>Future orientation </li></ul></ul><ul><ul><li>Uncertainty avoidance </li></ul></ul><ul><ul><li>Gender differentiation </li></ul></ul><ul><ul><li>Power distance </li></ul></ul><ul><ul><li>Societal collectivism </li></ul></ul><ul><ul><li>Individual collectivism </li></ul></ul><ul><ul><li>Performance orientation </li></ul></ul><ul><ul><li>Humane orientation </li></ul></ul>Global Leadership and Organizational Behavior Effectiveness project More comprehensive view of cultural similarities and differences 0
  24. 24. International Cultural Influences <ul><li>Other Cultural Characteristics </li></ul><ul><ul><li>Language </li></ul></ul><ul><ul><li>Religion </li></ul></ul><ul><ul><li>Attitudes </li></ul></ul><ul><ul><li>Social Organization </li></ul></ul><ul><ul><li>Education </li></ul></ul><ul><li>Linguistic pluralism – several languages exist </li></ul><ul><li>Ethnocentrism – regard own culture superior </li></ul>0
  25. 25. International Trade Agreements <ul><li>Most visible changes in legal-political factors grow out of international trade agreements: </li></ul><ul><ul><li>GATT </li></ul></ul><ul><ul><li>WTO </li></ul></ul><ul><ul><li>EU </li></ul></ul><ul><ul><li>NAFTA </li></ul></ul>0
  26. 26. International Trade Alliances <ul><li>General Agreement on Tariffs and Trade (GATT) </li></ul><ul><li>Signed by 23 nations in 1947 as a set of rules </li></ul><ul><li>Ensured nondiscrimination, clear procedures, negotiation of disputes, and participation of lesser developed countries in international trade </li></ul><ul><li>Today, 149 member countries abide by the rules </li></ul><ul><li>Primary tools WTO uses on tariff concessions, countries agree to limit level of tariffs on imports from other WTO members </li></ul><ul><li>Most favored nation clause </li></ul>0
  27. 27. WTO <ul><li>Goal, is to guide and sometimes urge the nations of the world toward free trade and open markets </li></ul><ul><li>Encompasses GATT and all of its agreements </li></ul><ul><li>Partly responsible for backlash against global trade </li></ul>0
  28. 28. European Union <ul><li>Formed in 1957 to improve economic and social conditions </li></ul><ul><li>Has grown to 25-nation alliance </li></ul><ul><li>Initiative Europe ’92 called for creation of open markets for Europe’s 340 million consumers </li></ul><ul><li>Biggest expansion in 2004 – 10 new members from southern and eastern Europe </li></ul><ul><li>Observers feared EU would become a trade barrier </li></ul><ul><li>EU’s monetary revolution, introduction of the Euro </li></ul>0
  29. 29. North American Free Trade Agreement <ul><li>Went into effect on January 1, 1994 </li></ul><ul><li>Merged the United States, Canada, and Mexico with more that 421 million consumers </li></ul><ul><li>Breaks down tariffs and trade restrictions on most agriculture and manufactured products </li></ul><ul><li>August 12, 1992 agreements in number of key areas include: agriculture, autos, transport, & intellectual property </li></ul><ul><li>January, 2004 -10 th anniversary = success and failure </li></ul>0
  30. 30. Other Trade Alliances <ul><li>The Association of Southeast Asian Nations (ASEAN) </li></ul><ul><li>Mercosur (Argentina, Brazil, Bolivia, Chile, Paraguay, Uruguay) </li></ul><ul><li>The Central American Free Trade Agreement (CAFTA) </li></ul><ul><li>Free Trade Area of the Americas (FTAA) </li></ul>0
  31. 31. Multinational Corporations (MNC) <ul><li>Receives >25% total sales revenues from operations outside parent company’s home country </li></ul><ul><ul><li>Managed as integrated worldwide business system </li></ul></ul><ul><ul><li>Controlled by single management authority </li></ul></ul><ul><ul><li>Top managers exercise global perspective </li></ul></ul>0
  32. 32. Managing in a Global Environment <ul><li>Managers must be sensitive to cultural subtleties </li></ul><ul><li>Personal challenges – culture shock </li></ul><ul><li>Managing cross-culturally </li></ul><ul><ul><li>Leading </li></ul></ul><ul><ul><li>Decision making </li></ul></ul><ul><ul><li>Motivating </li></ul></ul><ul><ul><li>Controlling </li></ul></ul><ul><li>Managers must be culturally flexible and easily adapt to new situations </li></ul>0