Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 20004-1The GlobalEnvironment4
Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 20004-2The Global EnvironmentIn the past, managers have viewed theglo...
Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 20004-3Tariff BarriersA tariff is a barriers to trade. Tariffs are t...
Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 20004-4Distance & Culture BarriersThe second leading cause of trade b...
Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 20004-5Effects on ManagersDeclining barriers have opened greatopportu...
Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 20004-6Free TradeNAFTA: North American Free TradeAgreement. Abolishes...
Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 20004-7Global Task EnvironmentSuppliersSuppliersDistributorsDistributo...
Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 20004-8Suppliers & DistributorsManagers buy products from globalsuppl...
Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 20004-9Customers & CompetitorsFormerly distinct national markets arem...
Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 20004-10Forces in the Global General EnvironmentPolitical &Legal Syste...
Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 20004-11Political-Legal ForcesResults from diverse and changing natur...
Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 20004-12Totalitarian regimes: a single political partyor person monop...
Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 20004-13Economic SystemsFree market economy: production of goodsand s...
Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 20004-14Recent TrendsCurrent shift away from totalitariandictators to...
Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 20004-15Changing Political andEconomic ForcesRussia1985Russia1995Democ...
Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 20004-16Sociocultural ForcesNational culture: includes the values,nor...
Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 20004-17Norms: social rules prescribing behavior ina given situation....
Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 20004-18Hofstede’s Model of National CultureIndividualismLow PowerDist...
Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 20004-19Individualism v. CollectivismIndividualism: world view that v...
Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 20004-20Power DistanceA society’s acceptance of differences in thewel...
Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 20004-21Achievement vs NurtureAchievement oriented societies valueass...
Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 20004-22Uncertainty AvoidanceSocieties and people differ on their will...
Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 20004-23Long Term OutlookLong-term outlook is based on values ofsavin...
Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 20004-24International ExpansionImporting and Exporting: the least com...
Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 20004-25International OptionsStrategic Alliances: managers pool resou...
Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 20004-26International ExpansionImportingExportingLicensingLicensingFra...
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Management Chpt04

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Management Chpt04

  1. 1. Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 20004-1The GlobalEnvironment4
  2. 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. 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. 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. 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. 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. 7. Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 20004-7Global Task EnvironmentSuppliersSuppliersDistributorsDistributorsCustomersCompetitorsCompetitorsForces yieldingForces yieldingOpportunitiesOpportunitiesand threatsand threatsFigure 4.2
  8. 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. 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. 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. 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. 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. 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. 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. 15. Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 20004-15Changing Political andEconomic ForcesRussia1985Russia1995DemocraticPoliticalFreedomTotalitarianChina1985China1995Command MarketMixedEconomic FreedomBritain1985Britain1995Hungary1985Hungary1995Figure 4.4
  16. 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. 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. 18. Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 20004-18Hofstede’s Model of National CultureIndividualismLow PowerDistanceAchievementOrientedLow UncertaintyAvoidanceShort TermOrientationCollectivismHigh PowerDistanceNurturingOrientedHigh UncertaintyAvoidanceLong TermOrientationFigure4.5
  19. 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. 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. 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. 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. 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. 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. 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. 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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