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Fundamental of Management. Lecture 3

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Fundamental of Management.

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Fundamental of Management. Lecture 3

  1. 1. Lecture 3 Managing in a Global Environment
  2. 2. A Borderless World Organizations and managers are not isolated from international forces: – Trade barriers have fallen – Communication is faster, cheaper – Consumer tastes converge The difficulties and risks of a borderless world are matched by benefits and opportunities Copyright ©2012 by South-Western, a division of Cengage Learning. All rights reserved. 2
  3. 3. 4.1 Ranking of Six Countries on the Global Index Copyright ©2012 by South-Western, a division of Cengage Learning. All rights reserved. 3
  4. 4. 4.2 Four Stages of Globalization Copyright ©2012 by South-Western, a division of Cengage Learning. All rights reserved. 4
  5. 5. International Market Strategies • Exporting – transferring products for sale to foreign countries • Outsourcing – also called off shoring, work activities are done in countries with cheap labor • Licensing – enabling a company to produce and market a product in another country – Franchising is licensing that provides a complete package of materials and services • Direct Investing – high level of involvement, company manages and controls assets – Joint venture and other types of partnerships are common Copyright ©2012 by South-Western, a division of Cengage Learning. All rights reserved. 5
  6. 6. 4.3 Strategies for Entering the International Arena Copyright ©2012 by South-Western, a division of Cengage Learning. All rights reserved. 6
  7. 7. China Inc.  China manufacturers many products for U.S. companies  China is also a growing consumer market  Regulations and government policies make doing business in China a challenge  India is a service giant, growing in software design and engineering  Brazil is a country that is gaining the attention of American managers Copyright ©2012 by South-Western, a division of Cengage Learning. All rights reserved. 7
  8. 8. The International Business Environment • Planning, organizing, leading, and controlling in multiple countries can be challenging – It took McDonalds a year to figure out that Hindus in India do not eat beef – In Africa, the baby food includes pictures to aid illiterate consumers • Managers must be mindful in the global marketplace Copyright ©2012 by South-Western, a division of Cengage Learning. All rights reserved. 8
  9. 9. 4.4 Key Factors in International Environment Copyright ©2012 by South-Western, a division of Cengage Learning. All rights reserved. 9
  10. 10. The Economic Environment • Economic Development - Countries are categorized as either developed or developing based on per capita income – Government Policies – Market Size – Financial Markets – Infrastructure • Resource and Product Markets – Companies must evaluate market demand The current economic crisis has highlighted how interconnected economies are around the world Copyright ©2012 by South-Western, a division of Cengage Learning. All rights reserved. 10
  11. 11. 4.5 World Economic Forum Global Competitiveness The United States moved from #1 to #2! Copyright ©2012 by South-Western, a division of Cengage Learning. All rights reserved. 11
  12. 12. 4.6 How Countries are Bearing the Economic Crisis Copyright ©2012 by South-Western, a division of Cengage Learning. All rights reserved. 12
  13. 13. The Legal-Political Environment • Political risk is defined as the risk of lost assets, earning power, or managerial control • Managers must be concerned with the political instability of global markets Copyright ©2012 by South-Western, a division of Cengage Learning. All rights reserved. 13
  14. 14. The Sociocultural Environment The values and behaviors that govern U.S. business do not always translate – Social Values – Communication Differences – Other Cultural Characteristics → Language → Religion → Social organization → Education → Attitudes Copyright ©2012 by South-Western, a division of Cengage Learning. All rights reserved. 14
  15. 15. Hofstede’s Value Dimensions  Power Distance  Uncertainty Avoidance  Individualism and Collectivism  Masculinity and Felinity Copyright ©2012 by South-Western, a division of Cengage Learning. All rights reserved. 15
  16. 16. GLOBE Project Value Dimensions • Assertiveness • Future orientation • Uncertainty avoidance • Gender differentiation • Power distance • Social collectivism • Individual collectivism • Performance orientation • Humane orientation Copyright ©2012 by South-Western, a division of Cengage Learning. All rights reserved. 16
  17. 17. 4.7 Country Ranking on Four GLOBE Value Dimensions Copyright ©2012 by South-Western, a division of Cengage Learning. All rights reserved. 17
  18. 18. 4.8 Country Ranking on Selected GLOBE Value Dimensions Copyright ©2012 by South-Western, a division of Cengage Learning. All rights reserved. 18
  19. 19. 4.9 High-Context and Low-Context Cultures Copyright ©2012 by South-Western, a division of Cengage Learning. All rights reserved. 19
  20. 20. Developing Cultural Intelligence • Cultural intelligence – ability to use reasoning and observation skills – Culturally flexible – Adapt to new situations • Managers must study the language and learn • Cognitive, emotional, and physical intelligence Copyright ©2012 by South-Western, a division of Cengage Learning. All rights reserved. 20
  21. 21. International Trade Alliances • General Agreement on Tariff and Trade (GATT) – 23 nations in 1947, a set of rules for fair trade • World Trade Organization (WTO) – Maturation of GATT into permanent global institute • European Union – 1957 Alliance to improve economic and social conditions among members; evolved to 27-nation European Union • North American Free Trade Agreement (NAFTA) – Merged the United States, Canada, and Mexico into trading bloc Copyright ©2012 by South-Western, a division of Cengage Learning. All rights reserved. 21
  22. 22. 4.10 European Union Copyright ©2012 by South-Western, a division of Cengage Learning. All rights reserved. 22
  23. 23. China-ASEAN Free Trade Area  Trading alliance of ten countries  World’s third largest free-trade area  1.9 billion people and $45 trillion in trade  Remove all tariffs between China and ASEAN countries by 2015 Copyright ©2012 by South-Western, a division of Cengage Learning. All rights reserved. 23
  24. 24. The Impact of Multinational Corporations (MNC) • The size and volume of international business is LARGE – Companies have revenue = GDP of small country – Move assets from country to country – 25% or more of its profit comes from outside parent country • MNC is managed as an integrated whole • Controlled by one management authority • MNC managers must have a global perspective Copyright ©2012 by South-Western, a division of Cengage Learning. All rights reserved. 24
  25. 25. The Globalization Backlash • 68% of Americans say other countries benefit the most from free trade – 53% believe free trade has hurt U.S. • The United States’ primary concern is the loss of jobs – $136 billion in wages will shift from the U.S. • Business leaders insist that economic benefits flow back to the U.S. economy – Lower prices and expanded markets – Increased profits and funds for innovation • But American shoppers say they would pay higher prices to keep down foreign competition Copyright ©2012 by South-Western, a division of Cengage Learning. All rights reserved. 25
  26. 26. Serving the Bottom of the Pyramid (BOP)  An approach for multinationals to do good  Corporations can alleviate problems and make large profits by selling to the world’s poor  There are more than 4 billion people at the lowest level of the economic pyramid  Many companies are adopting BOP strategies Copyright ©2012 by South-Western, a division of Cengage Learning. All rights reserved. 26

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