Principle and Practice of Management MGT

1. International
Management
Chapter Six
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2. 6-2
Learning Objectives
LO1 Discuss what integration of the global economy means for
individual companies and their managers
LO2 Describe how the world economy is becoming more
integrated than ever before
LO3 Define the strategies organizations use to compete in the
global marketplace
LO4 Compare the various entry modes organizations use to
enter overseas markets
LO5 Explain how companies can approach the task of staffing
overseas operations
LO6 Summarize the skills and knowledge managers need to
manage globally.
LO7 Identify ways in which cultural differences across
countries influence management

3. 6-3
Implications of a Flat World
1. Expansion of international trade
2. Foreign direct investment (FDI) is playing an
ever-increasing role in the global economy
3. Imports are penetrating deeper into the
world’s largest economies
4. Companies are finding their home markets
under attack from foreign competitors

4. 6-4
Implications of a Flat World
Opportunities are greater
Environment is more complex and
competitive

5. 6-5
The Role of Outsourcing
Outsourcing
 Contracting with an
outside provider to
produce one or more
of an organization’s
goods or services.
Offshoring
 Moving work to
other countries.

6. 6-6
Factors to Consider for Offshoring
What is the competitive advantage of the
products they offer?
Is the business in its early stages?
Can production savings be achieved locally?
Can the entire supply chain be improved?

7. 6-7
The Global Environment
The global economy
is dominated by
countries in three
regions: North
America, Western
Europe, and Asia
Other developing
countries and regions
represent important
areas for economic
growth

8. 6-8
Key Issues of the Global
Environment
Table 6.1

9. 6-9
European Unification
Europe is
integrating
economically to
form the biggest
market in the world
Certain structural
issues within Europe
need to be
corrected for the EU
to function
effectively.

10. 6-10
Other Pacts
North American Free Trade Agreement
(NAFTA)
 An economic pact that combined the economies
of the United States, Canada, and Mexico into
one of the world’s largest trading blocs
Asia-Pacific Economic Cooperation Pact
(APEC)
 A loose economic affiliation of Southeast Asian
Far Eastern nations. The most prominent
members are China, Japan, and Korea

11. 6-11
Organizational Models
Figure 6.5

12. 6-12
Choosing a Global Strategy
International model
 composed of a company’s overseas subsidiaries
and characterized by greater control by the
parent company over the research function and
local product and marketing strategies than in
the multinational model.
Multinational model
 consists of the subsidiaries in each country in
which a company does business and provides a
great deal of discretion to those subsidiaries to
respond to local conditions

13. 6-13
Choosing a Global Strategy
Global model
 consists of a company’s overseas subsidiaries and
characterized by centralized decision making and
tight control by the parent company over most
aspects of worldwide
operations

14. 6-14
Choosing a Global Strategy
Transnational model
 characterized by centralizing certain functions in
locations that best achieve cost economies
 basing other functions in the company’s national
subsidiaries to facilitate greater local
responsiveness
 fostering communication among subsidiaries to
permit transfer of technological expertise and
skills.

15. 6-15
Comparison of Entry Modes
Table 6.2

16. 6-16
Exporting
Advantages of exporting:
Provides scale economies by avoiding the
costs of manufacturing in other countries
Consistent with a pure global strategy

17. 6-17
Licensing
International licensing
 an arrangement by which a licensee in another
country buys the rights to manufacture a
company’s product in its own country for a
negotiated fee (typically, royalty payments on the
number of units sold)

18. 6-18
Franchising
Franchising
 the company sells limited rights to use its brand
name to franchisees in return for a lump-sum
payment and a share of the franchisee’s profits.

19. 6-19
Joint Ventures
Joint ventures benefit a company through:
 the local partner’s knowledge of the host
country’s competitive conditions, culture,
language, political systems, and business
systems
the sharing of development costs and/or risks
with the local partner.

20. 6-20
Managing across Borders
 Expatriates
 Parent-company nationals who
are sent to work at a foreign
subsidiary
 Host-country nationals
 Natives of the country where an
overseas subsidiary is located
 Third-country nationals
 Natives of a country other than
the home country or the host
country of an overseas
subsidiary.

21. 6-21
Stressors and Coping Responses in the
Developmental Stages of Expatriate Executives
Table 6.3

22. 6-22
Skills of the Global Manager
15% of all employee transfers are to
international locations
Failure rate ranges from 20%-70%
Failure rate
 the number of expatriate managers of an
overseas operation who come home early
 communication is key to reducing the failure rate

23. 6-23
Identifying International Executives
Table 6.4

24. 6-24
How to Prevent Failed
Global Assignments
Table 6.5

25. 6-25
Understanding Cultural Issues
Ethnocentrism
 The tendency to
judge others by the
standards of one’s
group or culture,
which are seen as
superior
Culture shock
 The disorientation
and stress associated
with being in a
foreign environment.

26. 6-26
Understanding Cultural Issues
Power distance
 the extent to which a
society accepts the
fact that power in
organizations is
distributed unequally
Individualism/
collectivism
 the extent to which
people act on their
own or as a part of a
group.

27. 6-27
Understanding Cultural Issues
Uncertainty
avoidance
 the extent to which
people in a society
feel threatened by
uncertain and
ambiguous
situations.
Masculinity/
femininity
 the extent to which a
society values
quantity of life over
quality of life

28. 6-28
Positions of 40 Countries on the Power
Distance and Individualism Scales
Figure 6.6

29. 6-29
Understanding Cultural Issues
Inpatriate
 A foreign national
brought in to work
at the parent
company.

30. 6-30
Understanding Cultural Issues
International workers may have different
preconceptions about the nature and length of
meetings, and managers should make sure
foreign nationals are comfortable with the local
approach.
Workers from other countries can work long hours
but, in countries with strong labor organizations,
often get many more weeks of vacation.
Europeans in particular may balk at working on
weekends.