Ch no. 4 Managing in Global Environment

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Managing in aManaging in a
GlobalGlobal
EnvironmentEnvironment
ChapterChapter
44
Management
Stephen P. Robbins Mary Coulter
tenth edition

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Learning OutcomesLearning Outcomes
Follow this Learning Outline as you read and studyFollow this Learning Outline as you read and study
this chapter.this chapter.
4.1 What’s Your Global perspective?
• Define parochialism.Define parochialism.
• Contrast ethnocentric, polycentric, and geocentricContrast ethnocentric, polycentric, and geocentric
attitudes towards global business.attitudes towards global business.
4.2 Understanding The global Environment
• Describe the current status of the EU, NAFTA,Describe the current status of the EU, NAFTA,
ASEAN and other Regional Trade Allowances.ASEAN and other Regional Trade Allowances.
• Discuss the role of the WTO.Discuss the role of the WTO.

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Learning OutcomesLearning Outcomes
4.3 Doing Business Globally
• Contrast multinational, multidomestic, global,Contrast multinational, multidomestic, global,
transnational, and born global organizations.transnational, and born global organizations.
• Describe the different ways organizations can goDescribe the different ways organizations can go
international.international.
4.4 Managing In A Global Environment.
• Explain how the global legal-political and economicExplain how the global legal-political and economic
environments affect managers.environments affect managers.
• Discuss Hofstede’s five dimensions for assessingDiscuss Hofstede’s five dimensions for assessing
cultures.cultures.
• Describe the challenges of doing business globally inDescribe the challenges of doing business globally in
today’s world.today’s world.

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Learning OutcomesLearning Outcomes
4.4 Managing In A Global Environment.
• Explain how the global legal-political and economicExplain how the global legal-political and economic
environments affect managers.environments affect managers.
• Discuss Hofstede’s five dimensions for assessingDiscuss Hofstede’s five dimensions for assessing
cultures.cultures.
• Describe the challenges of doing business globally inDescribe the challenges of doing business globally in
today’s world.today’s world.

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The Global MarketplaceThe Global Marketplace
• Opportunities and ChallengesOpportunities and Challenges
 Coping with the sudden appearance of newCoping with the sudden appearance of new
competitorscompetitors
 Acknowledging cultural, political, and economicAcknowledging cultural, political, and economic
differencesdifferences
 Dealing with increased uncertainty, fear, and anxietyDealing with increased uncertainty, fear, and anxiety
 Adapting to changes in the global environmentAdapting to changes in the global environment
 Avoiding parochialismAvoiding parochialism

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What’s Your GlobalWhat’s Your Global
Perspective?Perspective?
• ParochialismParochialism
 Is viewing the world solely through one’s own eyesIs viewing the world solely through one’s own eyes
and perspectives.and perspectives.
 Is not recognizing that others have different ways ofIs not recognizing that others have different ways of
living and working.living and working.
 Is a significant obstacle for managers working in aIs a significant obstacle for managers working in a
global business world.global business world.
 Is falling into the trap of ignoring others’ values andIs falling into the trap of ignoring others’ values and
customs and rigidly applying an attitude of “ours iscustoms and rigidly applying an attitude of “ours is
better than theirs” to foreign cultures.better than theirs” to foreign cultures.

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Adopting a Global PerspectiveAdopting a Global Perspective
• Ethnocentric AttitudeEthnocentric Attitude
 The parochialistic belief that the best workThe parochialistic belief that the best work
approaches and practices are those of theapproaches and practices are those of the homehome
country.country.
• Polycentric AttitudePolycentric Attitude
 The view that the managers in theThe view that the managers in the hosthost country knowcountry know
the best work approaches and practices for runningthe best work approaches and practices for running
their business.their business.
• Geocentric AttitudeGeocentric Attitude
 AA world-orientedworld-oriented view that focuses on using the bestview that focuses on using the best
approaches and people from around the globe.approaches and people from around the globe.

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Regional Trading AgreementsRegional Trading Agreements
• The European Union (EU)The European Union (EU)
 A unified economic and trade entityA unified economic and trade entity
 Belgium, Denmark, France, Greece, Ireland, Italy,Belgium, Denmark, France, Greece, Ireland, Italy,
Luxembourg, the Netherlands, Portugal, Spain, the UnitedLuxembourg, the Netherlands, Portugal, Spain, the United
Kingdom, Germany, Austria, Finland, and SwedenKingdom, Germany, Austria, Finland, and Sweden
• North American Free Trade Agreement (NAFTA)North American Free Trade Agreement (NAFTA)
 Eliminated barriers to free trade (tariffs, importEliminated barriers to free trade (tariffs, import
licensing requirements, and customs user fees)licensing requirements, and customs user fees)
 United States, Canada, and MexicoUnited States, Canada, and Mexico

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Exhibit 4–1Exhibit 4–1 European UnionEuropean Union

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Regional Trading AgreementsRegional Trading Agreements
• U.S.-Central America Free Trade Agreement (CAFTA)U.S.-Central America Free Trade Agreement (CAFTA)
• Free Trade Area of the AmericasFree Trade Area of the Americas
• Southern Cone Common Market (Mercosur)Southern Cone Common Market (Mercosur)
• Association of Southeast Asian Nations (ASEAN)Association of Southeast Asian Nations (ASEAN)
 Trading alliance of 10 Southeast Asian nationsTrading alliance of 10 Southeast Asian nations
• African UnionAfrican Union
• South Asian Association for Regional CooperationSouth Asian Association for Regional Cooperation
(SARRC)(SARRC)

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Exhibit 4–2Exhibit 4–2 ASEAN MembersASEAN Members
Source: Based on J. McClenahen and T. Clark,
“ASEAN at Work,” IW. May 19, 1997, p. 42.

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The World Trade OrganizationThe World Trade Organization
(WTO)(WTO)
• Evolved from the General Agreement on TariffsEvolved from the General Agreement on Tariffs
and Trade (GATT) in 1995.and Trade (GATT) in 1995.
• Functions as the only global organizationFunctions as the only global organization
dealing with the rules of trade among nations.dealing with the rules of trade among nations.
• Has 149 member nations and 32 observerHas 149 member nations and 32 observer
governments.governments.
• Monitors and promotes world trade.Monitors and promotes world trade.

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Different Types of InternationalDifferent Types of International
OrganizationsOrganizations
• Multinational Corporation (MNC)Multinational Corporation (MNC)
 Maintains operations in multiple countries.Maintains operations in multiple countries.
• Multidomestic CorporationMultidomestic Corporation
 Is an MNC that decentralizes management and otherIs an MNC that decentralizes management and other
decisions to the local country.decisions to the local country.
• Global CompanyGlobal Company
 Is an MNC that centralizes its management and otherIs an MNC that centralizes its management and other
decisions in the home country.decisions in the home country.

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Different Types of InternationalDifferent Types of International
Organizations (cont’d)Organizations (cont’d)
• Transnational Corporation (BorderlessTransnational Corporation (Borderless
Organization)Organization)
 Is an MNC that has eliminated structural divisions thatIs an MNC that has eliminated structural divisions that
impose artificial geographic barriers and is organizedimpose artificial geographic barriers and is organized
along business lines that reflect a geocentric attitude.along business lines that reflect a geocentric attitude.

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Exhibit 4–3Exhibit 4–3 How Organizations Go GlobalHow Organizations Go Global

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Other Forms of GlobalizationOther Forms of Globalization
• Strategic AlliancesStrategic Alliances
 Partnerships between and organization and a foreignPartnerships between and organization and a foreign
company in which both share resources andcompany in which both share resources and
knowledge in developing new products or buildingknowledge in developing new products or building
new production facilities.new production facilities.
• Joint VentureJoint Venture
 A specific type of strategic alliance in which theA specific type of strategic alliance in which the
partners agree to form a separate, independentpartners agree to form a separate, independent
organization for some business purpose.organization for some business purpose.
• Foreign SubsidiaryForeign Subsidiary
 Directly investing in a foreign country by setting up aDirectly investing in a foreign country by setting up a
separate and independent production facility or office.separate and independent production facility or office.

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Managing in A GlobalManaging in A Global
EnvironmentEnvironment
• The Legal EnvironmentThe Legal Environment
 Stability or instability of legal and political systemsStability or instability of legal and political systems
 Legal procedures are established and followedLegal procedures are established and followed
 Fair and honest elections held on a regular basisFair and honest elections held on a regular basis
 Differences in the laws of various nationsDifferences in the laws of various nations
 Effects on business activitiesEffects on business activities
 Effects on delivery of products and servicesEffects on delivery of products and services

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The Economic EnvironmentThe Economic Environment
• Economic SystemsEconomic Systems
 Free market economyFree market economy
 An economy in which resources are primarily owned andAn economy in which resources are primarily owned and
controlled by the private sector.controlled by the private sector.
 Planned economyPlanned economy
 An economy in which all economic decisions are planned byAn economy in which all economic decisions are planned by
a central government.a central government.
• Monetary and Financial FactorsMonetary and Financial Factors
 Currency exchange ratesCurrency exchange rates
 Inflation ratesInflation rates
 Diverse tax policiesDiverse tax policies

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The Cultural EnvironmentThe Cultural Environment
• National CultureNational Culture
 Is the values and attitudes shared by individuals fromIs the values and attitudes shared by individuals from
a specific country that shape their behavior and theira specific country that shape their behavior and their
beliefs about what is important.beliefs about what is important.
 May have more influence on an organization than theMay have more influence on an organization than the
organization culture.organization culture.

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Exhibit 4–4Exhibit 4–4 What Are Americans LikeWhat Are Americans Like
Americans are very informal.
Americans are direct.
Americans are competitive.
Americans are achievers.
Americans are independent and individualistic.
Americans are questioners.
Americans dislike silence.
Americans value punctuality.
Americans value cleanliness.
Sources: Based on M. Ernest (ed.), Predeparture Orientation Handbook: For Foreign Students and Scholars Planning to Study in the
United States (Washington, DC: U.S. Information Agency, Bureau of Cultural Affairs, 1984), pp. 103–05; A. Bennett, “American Culture Is
Often a Puzzle for Foreign Managers in the U.S.,” Wall Street Journal, February 12, 1986, p. 29; “Don’t Think Our Way’s the Only Way,”
The Pryor Report, February 1988, p. 9; and B.J. Wattenberg, “The Attitudes behind American Exceptionalism,” U.S. News & World
Report, August 7, 1989, p. 25.

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Hofstede’s Framework forHofstede’s Framework for
Assessing CulturesAssessing Cultures
Individualism
versus
Collectivism
Individualism
versus
Collectivism
Power
Distance
Power
Distance
Uncertainty
Avoidance
Uncertainty
Avoidance
Achievement
versus
Nurturing
Achievement
versus
Nurturing
Long-Term
versus
Short-Term
Orientation
Long-Term
versus
Short-Term
Orientation
CultureCulture

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Exhibit 4–5 Hofstede’s Five Dimensions of
National Culture
(1) Individualistic — people look after their own and family interests
Collectivistic — people expect group to look after and protect them
Individualistic Collectivistic
United States, Canada Japan Mexico, Thailand
Australia
(2) High power distance—Accepts wide differences in power, great
deal of respect for those in authority
Low power distance—Plays down inequalities: employees are not
afraid to approach nor are in awe of the
boss
High power distance Low power distance
Mexico, Singapore, Italy, Japan United States, Sweden

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Exhibit 4–5 Hofstede’s Five Dimensions of
National Culture
(3) High uncertainty avoidance—Threatened with ambiguity and
experience high levels of
anxiety
Low uncertainty avoidance— Comfortable with risks; tolerant of
different behavior and
opinions
High uncertainty avoidance Low uncertainty avoidance
Italy, Mexico, France United Kingdom Canada, United States,
Singapore
(4) Achievement—Values such as assertiveness, acquiring money and goods,
and competition prevail
Nurturing—Values such as relationships and concern for others prevail
Achievement Nurturing
United States, Japan, Canada, Greece France, Sweden
Mexico

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Exhibit 4–5 Hofstede’s Five Dimensions of
National Culture
(5) Long-term orientation—People look to the future and value thrift
and persistence
Short-term orientation — People value tradition and the past
Short-term thinking Long-term thinking
Germany, Australia, China, Taiwan, Japan
United States, Canada

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Exhibit 4–6Exhibit 4–6 GLOBE HighlightsGLOBE Highlights
Source: M. Javidan and R. J. House, “Cultural Acumen for the Global Manager: Lessons from Project GLOBE,” Organizational Dynamics,
Spring 2001, pp. 289–305. Copyright © 2001. Reprinted with permission from Elsevier.

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Global Management in Today’sGlobal Management in Today’s
WorldWorld
• ChallengesChallenges
 Openness associated with globalizationOpenness associated with globalization
 Significant cultural differences (e.g., Americanization)Significant cultural differences (e.g., Americanization)
 Adjusting leadership styles and managementAdjusting leadership styles and management
approachesapproaches
• RisksRisks
 Loss of investments in unstable countriesLoss of investments in unstable countries
 Increased terrorismIncreased terrorism
 Economic interdependenceEconomic interdependence

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Terms to KnowTerms to Know
• parochialismparochialism
• ethnocentric attitudeethnocentric attitude
• polycentric attitudepolycentric attitude
• geocentric attitudegeocentric attitude
• European Union (EU)European Union (EU)
• EuroEuro
• North American Free TradeNorth American Free Trade
Agreement (NAFTA)Agreement (NAFTA)
• Association of Southeast AsianAssociation of Southeast Asian
Nations (ASEAN)Nations (ASEAN)
• World Trade OrganizationWorld Trade Organization
(WTO)(WTO)
• multinational corporationsmultinational corporations
(MNCs)(MNCs)
• multidomestic corporationmultidomestic corporation
• global companyglobal company
• transnational or borderlesstransnational or borderless
organizationorganization
• born globalsborn globals
• global sourcingglobal sourcing
• exportingexporting
• importingimporting
• licensinglicensing
• franchisingfranchising
• strategic alliancesstrategic alliances
• joint venturejoint venture
• foreign subsidiaryforeign subsidiary
• market economymarket economy
• command economycommand economy
• national culturenational culture
• GLOBEGLOBE
• wikiswikis
• blogsblogs

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