Chapter 4 - Managong in a Global Environment

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2007 Prentice Hall, Inc. All rights reserved. 41

MANAGEMENT S. Robbins and M.Coulter

Chapter 4 - Managing in a GlobalEnvironment


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L E A R N I N G O U T L I N EFollow this Learning Outline as you read and study this chapter.

What Your Global Perspective? Define parochialism.

Contrast ethnocentric, polycentric, and geocentric attitudestowards global business.

Explain why its important for managers to be sensitive toglobal differences

Understanding the Global Environment

Describe the current status of the European Union.

Discuss the North American Free Trade Agreement and otherregional trade alliances in Latin America.

Tell about the Association of Southeast Asian Nations.


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L E A R N I N G O U T L I N E (contd)Follow this Learning Outline as you read and study this chapter.

Understanding the Global Environment

Explain the interdependence that globalization involves.

Discuss the role of the WTO.

Doing Business Globally

Contrast multinational, multidomestic, global,transnational, and born global organizations.

Describe the different ways organizations can gointernational.

Define global sourcing, exporting, importing, licensing,and franchising.

Describe global strategic alliances, joint ventures, andforeign subsidiaries.


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L E A R N I N G O U T L I N E (contd)Follow this Learning Outline as you read and study this chapter.

Managing in a Global Environment (contd)

Explain how the global legal-political and economicenvironments affect managers.

Discuss Hofstedes five dimensions for assessing

cultures. Explain the nine GLOBE dimensions for assessing

cultures.

Discuss the challenges of doing business globally intodays world.


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The Global Marketplace

Several forces have combined to spark and sustainglobalization:

1. Governments and businesses are aware of the benefits of globalization

to businesses and shareholders.

2. New technologies make international travel, communication and

commerce much faster and cheaper.

3. Competitive pressures sometimes force a firm to expand into foreignmarkets to keep up with competitors.

4. Treaties and trade agreements also play a major role. In large part,

these agreements facilitate and foster the growth of trading activity

Globalization - Process by which the world economy

is becoming a single interdependent system


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The Global Marketplace

Opportunities and Challenges

Coping with the sudden appearance of new

competitors

Acknowledging cultural, political, and economicdifferences

Dealing with increased uncertainty, fear, and anxiety

Adapting to changes in the global environment

Avoiding parochialism a narrow view of the world


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Whats Your Global Perspective?

Parochialism Is viewing the world solely through its own eyes and

perspectives.

Is not recognizing that others have different ways of

living and working.

Is a significant obstacle for managers working in a

global business world.

Is falling into the trap of ignoring others values and

customs and rigidly applying an attitude of ours isbetter than theirs to foreign cultures.


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Adopting a Global Perspective

Ethnocentric Attitude

The parochialistic belief that the best work

approaches and practices are those of the home

country.

Polycentric Attitude

The view that the managers in the hostcountry know

the best work approaches and practices for running

their business.

Geocentric AttitudeA world-orientedview that focuses on using the best

approaches and people from around the globe.


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Exhibit 41 Key Information About Three Global Attitudes


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Regional Trading Agreements

The European Union (EU) A unified economic and trade entity

Belgium, Denmark, France, Greece, Ireland, Italy, Luxembourg, the Netherlands,Portugal, Spain, the United Kingdom, Germany, Austria, Finland, and Sweden

Economic and monetary union (Euro)

North American Free Trade Agreement (NAFTA) Eliminated barriers to free trade (tariffs, import licensing requirements, and

customs user fees)

United States, Canada, and Mexico

Caribbean Single Market & Economy (CSME)

The CARICOM Single Market is an arrangement which allows CARICOMgoods, services, people and capital to move throughout the CaribbeanCommunity without tariffs and without restrictions to achieve a single, largeeconomic space, and to provide for a common economic and trade policy. The CSME is comprised of 13 member states. They are Antigua and Barbuda,

Barbados, Belize, Dominica, Grenada, Guyana, Jamaica, Monsterrat, St. Kittsand Nevis, St. Lucia, St. Vincent and the Grenadines, Suriname and Trinidadand Tobago with a combined population of approximately 6 million people

A huge component of globalization is global trade


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Regional Trading Agreements (contd)

U.S.-Central America Free Trade Agreement(CAFTA)

Free Trade Area of the Americas

Association of Southeast Asian Nations(ASEAN)

Trading alliance of 10 Southeast Asian nations

African Union


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The World Trade Organization (WTO)

Evolved from the General Agreement on Tariffsand Trade (GATT) in 1995.

Functions as the only global organization

dealing with the rules of trade among nations.

Has 149 member nations and 32 observergovernments.

Monitors and promotes world trade.

Heavily promotes fair trade practices and seeksto settle disputes


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Different Types of InternationalOrganizations

Multinational Corporation (MNC)

Maintains operations in multiple countries. Two types:

1. The global company - typically centralizes its management andother decisions in the home country and manages them from ahome base.

2. The multi-domestic company decentralizes its management andother decisions to the local host country.

Transnational Corporation - TNC or Borderless

OrganizationA global org. that eliminates structural divisions that impose

artificial geographic barriers and is organized along businesslines that reflect a geocentric attitude.


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How Organizations Go Global


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Stage 1 - The most basic form is global sourcing or outsourcing

companies purchase materials or labour from around the worldwherever they are least expensive

Stage 2 - The company may decide instead to go international byexporting or importing: Exporting is the making of products domestically and selling abroad

Importing is the acquisition of products made abroad and selling themlocally

Each successive stage beyond this requires companies to becomemore international by committing more investment and risk: Licensing - giving other organizations the right to make or sell its

products using its technology or product specification Franchising - giving other organizations the right to use your brand

name and operating methods

Forms of Globalization


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Stage 3 - Companies may decide to make more

of a direct investment in international markets:

Strategic Alliances - Partnerships between and

organization and a foreign company in which both

share resources and knowledge in developing new

products and cooperating with promotional efforts

Joint Venture - A specific type of strategic alliance in

which the partners agree to form a separate,

independent organization for some business purpose

Foreign Subsidiary - Directly investing in a foreigncountry by setting up a separate and independent

production facility or office.

Forms of Globalization Contd


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Managing in A Global Environment

The Legal Environment

Stability or instability of legal and political systems

Legal procedures are established and followed

Fair and honest elections held on a regular basis

Political stability impacts levels of unrest, movement of fundsetc.

Differences in the laws of various nations

Effects on business activities

Effects on delivery of products and services


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The Economic Environment

Economic Systems 3 kinds1. Market economy

An economy in which resources are primarily owned andcontrolled by the private sector.

2. Command or Planned economyAn economy in which all economic decisions are planned by

a central government.

3. Mixed economy the co-existence of features ofboth market and planned economies

Monetary and Financial FactorsCurrency exchange rates

Inflation rates

Diverse tax policies

An economic system is determined by how the resources/factors ofproduction are allocated in a county


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The Cultural Environment

National Culture

Is the values and attitudes shared by individuals from

a specific country that shape their behavior and their

beliefs about what is important.

May have more influence on an organization than theorganization culture.


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Hofstedes Framework for Assessing Cultures

Individualismversus

Collectivism

PowerDistance

UncertaintyAvoidance

Quantity versusQuality of Life/Achievement

versusNurturing

Long-Termversus

Short-TermOrientation

Culture

One of the most popular frameworks used to help managers better

understand the differences among national cultures


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Exhibit 45 Hofstedes Five Dimensions ofNational Culture

(1)Individualistic people look after their own and family interestsCollectivistic people expect group to look after and protect them

Individualistic Collectivistic

United States, Canada Japan Mexico, Thailand

Australia

(2) High power distanceAccepts wide differences in power, greatdeal of respect for those in authority

Low power distancePlays down inequalities: employees are not

afraid to approach nor are in awe of theboss

High power distance Low power distance

Mexico, Singapore, Italy, Japan United States, Sweden


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(3) High uncertainty avoidanceThreatened with ambiguity andexperience high levels ofanxiety

Low uncertainty avoidance Comfortable with risks; tolerant ofdifferent behavior and

opinions

High uncertainty avoidance Low uncertainty avoidance

Italy, Mexico, France United Kingdom Canada, United States,

Singapore

(4) AchievementValues such as assertiveness, acquiring money and goods,

and competition prevailNurturingValues such as relationships and concern for others prevail

Achievement Nurturing

United States, Japan, Canada, Greece France, SwedenMexico


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(5)Long-term orientationPeople look to the future and value thriftand 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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Assessing Cultures AnotherPerspective

The Global Leadership and Organizational BehaviourEffectiveness (GLOBE) Framework 9 dimensions onwhich to assess national cultures: 1. Assertiveness

2. Future Orientation

3. Gender Differentiation

4. Uncertainty Avoidance

5. Power Distance

6. Individualism/Collectivsm 7. In-group Collectivsm

8. Performance Orientation

9. Humane Orientation


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Global Management in Todays World

Challenges

Openness associated with globalization

Significant cultural differences (e.g., Americanization)

Adjusting leadership styles and management

approaches

Risks

Loss of investments in unstable countries

Increased terrorism

Economic interdependence


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The Concerns of the Manager of the MNC

Political stability

Currency stability

Competition Nationalism

Protection of patents and trademarks

Host government relations


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Terms to Know parochialism

ethnocentric attitude

polycentric attitude

geocentric attitude

European Union (EU)

Euro

North American Free Trade

Agreement (NAFTA) Association of Southeast Asian

Nations (ASEAN)

World Trade Organization(WTO)

multinational corporations(MNCs)

multidomestic corporation

global company

transnational or borderlessorganization

born globals

exporting

importing

licensing

franchising

strategic alliances

joint venture

foreign subsidiary market economy

command economy

national culture

GLOBE

Chapter 4 - Managong in a Global Environment

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