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Managing in a Global Environment

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

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