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Managers and Cultural Differences

Management Functions and Organization

The Changing Process of Management

Chapter 10MANAGEMENT PRINCIPLES

IN ACTION

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Virtual CorporationsHere Today and Gone Tomorrow

The virtual corporation offers some promising approaches to the toughfacts of life in the global marketplace. Most companies can’t react fastenough to take advantage of changing opportunities. By the time managersof giant companies get the necessary people and other resources ready,those opportunities have vanished. The managers of smaller companiesoften lack the influence and resources to respond to opportunities that arehere today and gone tomorrow.

Managers who want to form virtual corporations must first identify whattheir company does best. Then they must form ties with other companiesthat represent “the best of the best.” These fast-reacting, sharply focused,world-class competitors have the muscle and cutting-edge technology topounce on short-term opportunities.

The U.S. film industry already functions in this way. Virtual corporationshave replaced the old Hollywood studio system. Various industry talentstemporarily link up for specific film projects before going their separateways. Perhaps it’s no small coincidence that the U.S. film industry hasbeen very successful in the global marketplace. It is one of the biggestexport successes for the country. Maybe Hollywood managers could teachother managers worldwide a lesson or two!

Think Critically1. Why do virtual corporations exist?2. What characteristic describes each component of a virtual corporation?3. Go to the web site of MGM Motion Pictures, Paramount Motion

Pictures, or Sony Pictures Entertainment to learn about the structureand management of the film company.

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� Explain the character-istics of successfulmanagers and howmanagement stylesvary.

� Understand theeffects of cultural differences on a glob-al workforce.

MANAGERS AND CULTURAL DIFFERENCES10-1

GOALS

MANAGERS IN ORGANIZATIONS

Managers are people in charge of organizations and their resources. Theyare men and women who assume responsibility for the administration

of an organization. Managers work with and oversee employees to meetorganizational goals in an ever-changing environment. They try to use theavailable resources for maximum gain, just as you try to use your time andmoney to derive the most desirable benefits.

Whether you realize it or not, you already have some managerial experi-ence. You are in charge of and responsible for yourself. You are responsiblefor other people and things. You are also responsible for your textbooks,school supplies, and assigned homework. You may even be responsible forcleaning your own room or for maintaining your own car. Consequently,managing is not a totally foreign concept to you.

❙ CHARACTERISTICS OF MANAGERSSuccessful managers possess a wide variety of conceptual, technical, andinterpersonal abilities. Supporting these abilities are certain skills and person-al characteristics. One characteristic of managerial ability is leadership.Leadership is the ability to get others to follow. Another characteristic is theability to communicate effectively. Managers must have strong writing,reading, listening, speaking, and presenting skills to be successful.

The ability to plan and organize is important. Managers must be able to useresources to achieve goals. They must be able to gather, analyze, and acquireinformation to solve problems. The ability to make decisions is also important.

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Chapter 10 MANAGEMENT PRINCIPLES IN ACTION

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Managers must be able to take rea-soned positions based on relevantinformation and to live with theconsequences of the decisions.

Managers must be able to judgewhen they should be in charge andwhen they should delegate and allowothers to be in charge. The ability tobe objective is also useful. Managersneed to know their strengths andweaknesses, as well as the strengthsand weaknesses of others. Managers must be willing to lead others in new,untried directions and must be able to adapt to change. You might alreadypossess a number of these important skills that influence managerial success.

❙ STYLES OF MANAGERSOne way to examine managers is to look at how they use power or authority.There are three distinct types of management styles. These styles are auto-cratic, participative, and free-rein. These three styles can be placed along acontinuum that represents managerial power or authority, as Figure 10-1shows. Autocratic managers maximize their personal power or authority tocontrol others. Free-rein managers minimize their personal power or authori-ty to control others. Participative managers balance their personal power orauthority to control others against the power people assume for themselves.

Autocratic Management Style Managers who centralize power andtell employees what to do are autocratic managers. They are authoritarianand rule with a heavy hand. The autocrat takes full authority and assumesfull responsibility. If an autocratic manager uses power negatively, then theemployees feel uninformed, insecure, and afraid. If an autocratic manageruses power positively, then rewards are distributed to those who comply.Sometimes the term “benevolent autocrat” is used to refer to an autocraticmanager who uses power positively.

Most people do not work well under autocratic managers, especially nega-tive ones. Autocratic management is considered an old-fashioned style ofmanagement and could be replaced by a more participative managementstyle.

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Figure 10-1 Autocratic, participative, and free-rein managers use power orauthority differently.

Maximize

Power or Authority to Control Others

AutocraticManagers

Free-ReinManagers

ParticipativeManagers

Minimize

USE OF POWER OR AUTHORITY BY MANAGERS

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Participative Management Style Managers who decentralize powerand share it with employees are participative managers. The manager andemployees work together to achieve goals. Participative managers keepemployees informed and encourage them to share ideas and suggestions. Theparticipative manager uses group forces rather than power or authority tokeep the unit operating effectively. For most managerial situations, the par-ticipative style is recommended.

Free-Rein Management Style Managers who avoid the use of powerare free-rein managers. They let employees establish their own goals andmonitor their own progress. Employees learn on their own and supply theirown motivation. Managers exist primarily as contact persons for outsiders.Since free-rein management can lead to chaos in many situations, expertsrecommend that managers use it in circumstances where employees are self-disciplined and self-motivated and can make wise choices for themselves.


How do the styles of managers vary along a continuum?

SHARING CONFIDENTIALINFORMATION

Geir Alver works for a Norwegianmultinational corporation as a seniormanager. His sister Gerd Griegworks for a competing company in asimilar position. Since they work forrival organizations, they have mutu-ally agreed never to discuss corpo-rate business with each other. Thetwo siblings enjoy a close personalrelationship and see each otherevery two or three weeks.

Yesterday when Geir and his fam-ily were visiting Gerd and her family,their visit was interrupted by a long-distance telephone call from theNew York headquarters of Gerd’semployer. Although Gerd took thecall in another room and closed thedoor behind her, the animated con-versation spilled into the hallway andthe nearby room where the otherswere finishing their desserts andbeverages. As Geir walked down thehall to the kitchen with a stack ofdishes a few minutes later, he over-

heard Gerd confirming privilegedstrategic information that would bevery useful to his organization.Having that information could givehis organization a competitiveadvantage over its American rival.Best of all, because his sister wasnot aware that he had overheard theinformation, she would never realizethat she had inadvertently been thesource of the leaked information. Ifhe relayed the strategic informationto top-level managers, Geir was cer-tain that he would be rewarded witheither money or a promotion—ormaybe even both.

Think Critically1. Since Geir and Gerd did not dis-

cuss the privileged informationfrom the New York headquarters,did either of them engage inunethical behavior?

2. If you were Geir, what would youdo with information you over-heard from a rival corporation?Explain.

WORK ASA GROUP

Discuss how widespreadbeliefs, values, andassumptions within the culture of the United Statesinfluence the actions ofmanagers in this country.


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INFLUENCES OF CULTURAL DIFFERENCES

Managers must remember that people’s behaviors are shaped by their culturalbackgrounds. Every culture and subculture has norms or standards for its

members. However, certain members of cultural groups will deviate from thosenorms. People from different cultural backgrounds may not be alike eventhough they may appear to be similar on the surface. They may actually havevery different beliefs, values, and assumptions. Consequently, managers must bevery careful when managing people. Managers must be very sensitive to andrespectful of cultural differences. They also must be aware that certain culturallybased patterns of behavior exist and need to be considered.

Participation in Making Decisions For example, some cultural groupswant subordinates to be actively involved in decision making. This is generallytrue for natives of the United States. In contrast, natives of Venezuela may pre-fer little or no role in decision making. They typically prefer to have managerstell them what to do.

Hiring Preferences Different cultural groups value different selectioncriteria for hiring employees. For example, natives of the United States tend tovalue job-related qualifications. Natives of Greece tend to value family member-ship or friendship above all other qualifications.

Permanence of Employment Attitudes about the permanence ofemployment vary among members of different culturalgroups. Natives of the United States generally acceptless employment security than natives of Japan. U.S.workers are frequently laid off during economic downturns and receive minimal company compensa-tion. They also freely look for new opportunities withnew companies. The Japanese are less mobile and until recently, expected lifetime employment from acompany.

Labor-Management Relationships U.S.laborers tend to have confrontational attitudes towardsmanagers. They believe that confrontation brings aboutequitable work and rewarding relationships. Bycontrast, in Sweden many workers help todetermine their work and rewarding relation-ships by serving on managerial boards. Ingeneral, U.S. managers are shaped by a cul-ture and subcultures that value personal free-dom, independence, and self-respect.Employees from other cultural groups—espe-cially European and Asian—tend to viewthese values as selfish and insensitive. Suchopposing cultural perspectives can lead toconflicts between managers and employees inthe culturally diverse business world unlessthose differences are sensitively addressed.


For a firsthand account of some of the issues facing cross-cultural workers, access the Indonesian Expatriate web sitethrough intlbizxtra.swlearning.com. Click on the link forChapter 10. Read the article entitled “Business AcrossCultures” by George Whitfield. How can a multinational company avoid misunderstandings about what is acceptablebehavior on the job? How could you, as a cross-culturalworker, avoid making an embarrassing mistake?

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While it is useful for managers to be aware of prevailing cultural prefer-ences, they must realize that not all individuals fit their cultural molds.Consequently, managers must temper their understandings about culturalpreferences. They must also consider the values, beliefs, and assumptions ofthe individuals involved. Managers who fail to consider individual differ-ences and cultural norms will be less successful in the culturally diverse glob-al business environment.


How do cultural differences affect managers of a global workforce?

THE MANAGERS WHO REFUSEDTO MAKE DECISIONS

As the new plant manager, CynthiaHopkins, a U.S. citizen, was shockedduring her first encounters with herlocal Panamanian managers.Guillermo, Maria, and Diego refusedto participate in decision making,politely deferring to Cynthia’s judg-ments instead. When Cynthia finallymade decisions on her own for themanagers, she noticed that theymade good-faith efforts to implementthose decisions. Cynthia was puzzledby their reactions involving decisionmaking. Was there something wrongwith her managerial style? Did thePanamanian managers resent beingsupervised by a foreigner?

When Cynthia mentioned heruncooperative decision makers toanother Panamanian plant manager,she was surprised by the explanationshe received. Most Panamanians,like many Latin Americans, comefrom cultural backgrounds that placelittle value on acting independently oras a consultant. A superior whoseeks employees’ opinions orencourages employees’ decisionmaking causes the employees to

question the superior’s decision-making abilities. When faced with the culturally unacceptable task ofmaking decisions that they believedthe plant manager should make, thePanamanian managers did not coop-erate. To them, their participation indecision making undermined the roleof the new plant manager.

Cynthia learned her lesson quickly.She tried to manage in a more cultur-ally sensitive way. Rather than relyingon participative U.S.-style manage-ment, she started making the deci-sions for her Panamanian supervi-sors. The employees were quite comfortable being told what to do.They carefully carried out Cynthia’sdecisions, and soon their workingrelationships with Cynthia became“muy simpático”—very congenial.

Think Critically1. Why was Cynthia Hopkins

unaware of Panamanian perspec-tives about the roles of man-agers?

2. Why did Guillermo, Maria, andDiego fail to make managerialdecisions on their own?

3. What managerial style didCynthia use that was effectivewith the Panamanian managers?

4. How could you find out moreabout Panamanian attitudestoward managerial styles?

GLOBAL BUSINESSGLOBAL BUSINESS


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REVIEW GLOBAL BUSINESS TERMSREVIEW GLOBAL BUSINESS TERMSDefine each of the following terms.

1. managers 3. participative managers

2. autocratic managers 4. free-rein managers

REVIEW GLOBAL BUSINESS CONCEPTSREVIEW GLOBAL BUSINESS CONCEPTS5. What personal characteristic distinguishes among autocratic, participative,

and free-rein managers?

6. What are four culturally influenced dimensions of behavior to which man-agers should be sensitive?

SOLSOLVE GLOBAL BUSINESS PROBLEMSVE GLOBAL BUSINESS PROBLEMS“I have been managing the Bristol office of a global corporation for seven years.The office has an international workforce drawn from 18 countries on four conti-nents. Every employee is highly competent in his or her specialty. Consequently,I have learned that I can rely on their judgments to a significant degree. I spendmuch of my time conferring with employees. Most decisions can be worked outby sharing our viewpoints, discussing the merits of those viewpoints, and select-ing the best mutually agreeable viewpoints for implementation. It has been yearssince I have had to dictate the solutions to my employees.”

7. Using a detailed map of the United Kingdom as a guide, describe the loca-tion of Bristol, the city in which the British manager works.

8. What is the British manager’s prevailing management style?

9. What facts from the narrative support your conclusion about the manage-ment style?

THINK CRITICALLTHINK CRITICALLYY10. Why do managers often use a combination of autocratic, participative, and

free-rein management styles?

11. How can managers increase their sensitivity to cultural differences?

MAKE CONNECTIONSMAKE CONNECTIONS12. TECHNOLOGY How can technology help a manager monitor the work of

subordinates?

13. COMMUNICATIONS Why is effective business communication consid-ered to be the lifeblood of management?

14. HISTORY Why was autocratic management the dominant managerialstyle in the United States until well into the twentieth century?

15. CULTURAL STUDIES Use the Internet to find online cultural resourcesfor international managers.




� Describe the basiccomponents of theprocess of managing.

� Differentiate betweenorganizational struc-tures based on func-tion, product, andgeography.

MANAGEMENT FUNCTIONS AND ORGANIZATION

10-2GOALS

PROCESS OF MANAGING

The process of managing includes the following major components.

● Planning and decision making● Organizing, staffing, and communicating● Motivating and leading● ControllingThese components are illustrated in Figure 10-2. The exact mix of these

components varies depending on the type of managerial job and the peopleand other resources involved. However, sooner or later managers will beinvolved with all four broad managerial components.

❙ PLANNING AND DECISION MAKINGPlanning and decision making are important components of managing.Planning relates to setting goals or objectives to be attained. Planning is sim-ilar to deciding where you want to go. You have to know your destinationbefore you can get there.

Once you decide the goal, you can explore different options or routes thatlead to the goal. At various points along the way, you have choices to make.You should weigh the advantages and disadvantages of each alternative andselect the best alternative overall. In other words, you should make thought-ful decisions.

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❙ ORGANIZING, STAFFING, AND COMMUNICATINGOrganizing, staffing, and communicating are also important components ofmanaging. Organizing involves structuring business operations in logical andmeaningful ways. Sometimes organizing relates to how business activities orfunctions are put together. Sometimes organizing involves assembling thenecessary resources in a manner that facilitates the accomplishment of goals.

Staffing is the process of acquiring employees with the necessary knowl-edge, skills, and attitudes to fill the various positions in the organization.Communicating is interacting with people through verbal and nonverbalmeans. Communicating is a vital managerial task. An organization cannotfunction cohesively and reach its goals unless all employees give, receive, andshare information in a timely and effective manner.

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THE MANAGERIAL PROCESS IN ACTION

Figure 10-2 The managerialprocess includes planning and deci-sion making; organizing, staffing,and communicating; motivating andleading; and controlling.

Planning and Decision Making

Controlling Organizing, Staffing,and Communicating

Motivating and Leading

10-2 MANAGEMENT FUNCTIONS AND ORGANIZATION



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❙ MOTIVATING AND LEADINGMotivating is creating the desire to achieve. Managers realize that motivationcomes from internal and external sources. Internal motivation comes fromwithin the employee. The desire to perform work more efficiently is anexample of internal motivation. External motivation comes from outside theemployee. A salary increase is an example of external motivation.

Leading is getting employees to voluntarily pursue the goals of the organi-zation. Managers who are effective leaders create a desire within employeesto want to achieve what the organization sets out to achieve.

❙ CONTROLLINGControlling is regulating the operations of a business. It involves taking bothpreventive and corrective actions to keep business activities on track.Controlling helps to ensure that business operations are both efficient andproductive. Activities such as verifying, adjusting, and testing seek to maxi-mize output while minimizing input. For example, businesses have theaccounting records audited by outsiders periodically as a preventive measure.This verifies the accuracy and truthfulness of the financial records. Some pre-ventive actions that businesses may offer include substance abuse programsfor afflicted employees. This helps troubled individuals return to productivestatus as workers and prevents the company from having to hire and trainnew employees.

What are the four major components of managing?


A lthough BizPlanIt markets its online businessplanning services through its web site, it also

provides a variety of free services. One particularly use-ful free service for managers is the detailed informationabout creating a virtual business plan.

The BizPlanIt web site has a link to Virtual BizPlan,which provides practical guidance for managers as theydevelop business plans. It identifies the different sectionsand what kinds of topics to address in each. It also iden-tifies common errors to avoid when developing businessplan sections. By following the guidance that is provided,even managers with limited experience can create sound

business plans that will help their organizations prosperin the competitive world of global business.

Think Critically1. Why is it good business strategy for the managers

of BizPlanIt to include free information about busi-ness plans at the web site that promotes its services?

2. After viewing the Virtual BizPlan link would you feelcomfortable writing a business plan? Why or whynot?

Virtual Business Plans


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STRUCTURES OF ORGANIZATIONS

Businesses use various organizational structures to reach their goals. Anorganizational chart is a drawing that shows the structure of an organi-

zation. Line and staff are two types of positions. Line positions are manageri-al. Individuals with line positions have authority and responsibility over peo-ple and resources. Staff positions are nonmanagerial. Individuals with staffpositions assist or advise those in line positions.

An organization can be either tall or flat. A tall organization is one thathas many levels of management. One manager generally supervises a smallnumber of employees. This results in more levels of managers. A flat organi-zation is one that has few levels of management. Organizations are increas-ingly becoming flatter with fewer levels of management.

Businesses are commonly organized in one of three ways: by function, byproduct, or by geography.

❙ ORGANIZATION BY FUNCTIONWhen a business is organized by function, the departments are determinedby what people do. For example, in a sportswear manufacturing company,the function of the manufacturing department is to produce sportswear, thefunction of the sales department is to sell sportswear, and the function of theaccounting department is to keep accurate financial records. Other function-al groups might be linked together and given relevant departmental names,too. Figure 10-3 shows part of the organizational chart of a business organ-ized by function.

Figure 10-3 A simplified organizational chart for a business organized by function might look something like this.

ORGANIZATION BY FUNCTION

SalesManager

ManufacturingManager

ProductDevelopment

Manager

Vice Presidentfor

Production

President

Vice Presidentfor

Customer Service

BusinessAffairs

Manager

ORGANIZATION BY FUNCTION

WORK ASA GROUP

Identify the ways employ-ees communicate within anorganization.



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Aviation PartsDivision

VicePresident

MicrocomputerDivision

ConsumerSmall Appliance

Division

President

❙ ORGANIZATION BY PRODUCTAnother way to organize a business is by product. When a business organizesitself in this way, related products are grouped together to form departments.This type of organization is helpful when the product lines are very different.For example, a large manufacturing company that makes airplane parts andsmall consumer appliances may form two divisions. One division could befor the airplane parts, and it might be called the aviation parts division.Another division could be for the small consumer appliances, and it mightbe called the consumer small appliance division. Figure 10-4 shows part ofthe organizational chart of a business organized by product.

Figure 10-4 This is a good example of a simplified organizational chart for abusiness organized by product.

ORGANIZATION BY PRODUCT

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❙ ORGANIZATION BY GEOGRAPHYStill another way to organize a business is by geography. When a businesschooses this option, it organizes itself on some geographic basis. The geo-graphic basis might be by city, county, state, region, country, or continent.Companies that operate beyond the borders of one country often use geo-graphic organization, as do some domestic companies. For example, a globalcorporation may have North American, South American, European, African,and Asian divisions. Each division would specialize in business operations inits designated territory. Figure 10-5 shows part of the organizational chart ofa business organized by geography.


ORGANIZATION BY GEOGRAPHY

North AmericanOperations

Manager

Vice Presidentof

Northern Division

South AmericanOperations

Manager

EuropeanOperations

Manager

AfricanOperations

Manager

ChiefExecutive

Officer

Vice Presidentof

Southern Division

ORGANIZATION BY GEOGRAPHY

What are three common business organizational structures?

Figure 10-5 This is agood example of asimplified organiza-tional chart for a busi-ness organized bygeography.

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REVIEW GLOBAL BUSINESS TERMSREVIEW GLOBAL BUSINESS TERMSDefine the following term.

1. organizational chart

REVIEW GLOBAL BUSINESS CONCEPTSREVIEW GLOBAL BUSINESS CONCEPTS2. How do good managers decide how to achieve goals?

3. What is the difference between a line position and a staff position?

4. What is a tall organization?

SOLSOLVE GLOBAL BUSINESS PROBLEMSVE GLOBAL BUSINESS PROBLEMSChemVision Corporation is a research company that develops chemicals,processes, and medicines for various industries. Clients come to ChemVisionwith a problem to be solved, and ChemVision assembles a team to work on theproblem. The company’s central management personnel administer the humanrelations, sales, and accounting functions. Each team is headed by a researchscientist. Scientists are recruited to a team based on their reputation, experi-ence, and expertise; and the best-known is usually appointed to head the team.The scientists are personally motivated to make new discoveries to enhancetheir professional reputations. As a result, however, they each have their ownagendas and jealously guard progress in their research. How well is ChemVisionsucceeding in the following processes of managing?

5. Planning

6. Staffing

7. Communicating

8. Motivating

9. Controlling

THINK CRITICALLTHINK CRITICALLYY10. What factors motivate you as a student? What factors would motivate you

to perform well as an employee?

11. Why is no single organizational structure ideal for all businesses?

MAKE CONNECTIONSMAKE CONNECTIONS12. TECHNOLOGY Use available software to create an organizational chart

for a small business of your choice.

13. COMMUNICATIONS Describe a real or fictional situation in which poor communications could prevent an organization from achieving itsgoals.

14. TECHNOLOGY Use the Internet to find the organizational structure foran international business.

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� Discuss factors thataffect the levels ofmanagement in anorganization.

� Describe the fourstages through whicha business passes toreach global status.

� Explain the differ-ences between man-agement today andthe way it is expectedto be in the future.

THE CHANGINGPROCESS OF

MANAGEMENT10-3GOALS

LEVELS OF MANAGEMENT

A ll businesses have managers in charge of operations. The number ofmanagers a business needs, the lines of authority that are established,

and the delegation of responsibility all depend on the size of the businessand the complexity of its operations.

❙ SPAN OF CONTROLThe span of control is the number of employees a manager supervises. Forexample, a sole proprietorship is a business that has one owner-manager andmay have limited operations. The owner-manager oversees and supervises allemployees and business activities.

When the volume of business, the complexity of business, or the numberof employees grows, one person may no longer be able to manage the busi-ness. If a sole proprietor sells half of the business to a partner, then that part-ner could manage some of the operations. This would reduce the span ofcontrol of the original sole proprietor.

As a business continues to expand, more managers are needed. Front-linemanagers are needed to oversee the day-to-day operations in specific depart-ments. The front-line managers may report to a middle manager. Middlemanagers oversee the work and departments of a number of front-line

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managers. A number of middle managers may report to a senior manager.Senior managers oversee the work and departments of a number of middlemanagers. In a large business, senior managers report to the chief executiveofficer. The chief executive officer (CEO) is the highest manager within acompany. Figure 10-6 shows the span of control of various levels of man-agers within a large organization.

❙ LINES OF AUTHORITYRegardless of the organizational structure and the number of levels of management, a business must establish clear lines of authority. Lines ofauthority indicate who is responsible to whom and for what. The need forhaving clear lines of authority grows as the business expands. When a busi-ness starts, there may be one owner-manager who is clearly in charge. Theowner-manager has the authority or right to make all decisions. As the busi-ness expands and other managers are added, lines of authority must be clear-ly established. Otherwise, chaos results. Managers need to be aware of thespecific area for which they are responsible. They also need to have a clearunderstanding of their relationship to other managers.

❙ DELEGATION OF AUTHORITY AND RESPONSIBILITYOne important decision that managers must make relates to how muchauthority and responsibility they delegate or transfer to others. If managersretain too much authority and responsibility, they become autocratic. Thismay cause some employees to be rebellious because they feel powerless. Ifmanagers retain too little authority and responsibility, chaos develops.Employees who are not self-directed will have too much independence andmore authority and responsibility than they can handle.


President

Dept. CSupervisor

Dept. BSupervisor

Dept. ASupervisor

CustomerServiceManager

SalesManager

PromotionsManager

MarketingInformation

Manager

Vice Presidentof

Distribution

Vice Presidentof

Production

Vice Presidentof

Marketing

Vice Presidentof HumanResources

Vice Presidentof

Finance

S N O CON O

ChiefExecutiveOfficer

SeniorManagers

MiddleManagers

Front-LineManagers

SPAN OF CONTROL

Figure 10-6 In this example, thepresident has a span of controlof five, the vice president of mar-keting has a span of control offour, and the sales manager hasa span of control of three.


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In most circumstances, managers try to balance the authority and respon-sibility between them and their employees. Participative managers shareauthority and responsibility with employees. They give employees somedegree of freedom to determine and achieve goals with a correspondingdegree of accountability for achieving those goals.

The amount of authority and responsibility that is delegated to employeesor to organizational units is a reflection of the degree of centralizationwithin an organization. If the authority and responsibility are tightly held bythe managers and organizational units, then a centralized style of manage-ment results throughout the organization. If the authority and responsibilityare widely distributed among many employees and organizational units, thena decentralized style of management results. Centralization of authority andresponsibility tends to make organizations more autocratic. Decentralizationof power and responsibility tends to make organizations more participative.Global organizations must decide how much authority and responsibility togrant to each of their organizational units and managers.

EVOLUTION OF ORGANIZATIONS AND MANAGEMENT

As a business evolves from a domestic company into a global corporation,unique challenges are encountered. The managerial process must be adaptedto meet the particular challenges at each stage. Managing becomes morecomplex and demanding as the business evolves into a global organization.The evolutionary process and related managerial dimensions of a companycan be viewed as a series of stages.

❙ STAGE 1 DOMESTIC COMPANYThe first stage on the way to becoming a global corporation is being adomestic company. A domestic company is one that operates completelywithin the country of origin. Such a company uses domestic sources to cre-ate and sell its products and services. In other words, it acquires materialsand sells goods and services in the country of origin. A domestic companyhas no business dealings with anyone except residents of the country.Consequently, a domestic company is the easiest type to manage. The basicmanagerial process in the country of origin can be used to resolve most ofthe challenges of a domestic business.

❙ STAGE 2 EXPORTING COMPANY As a domestic company grows and becomes successful, it often begins toexport, or sell abroad. A company that sells in other countries is known as anexporting company. An exporting company typically relies on its domesticcompetitive advantages as it expands abroad. Often the managers of an

How are the levels of management related to the span of control, the lines ofauthority, and the delegation of authority and responsibility?

10-3 THE CHANGING PROCESS OF MANAGEMENT

WORK ASA GROUP

Discuss reasons why cen-tralization of authoritytends to make organiza-tions more autocratic whiledecentralization of authori-ty tends to make organiza-tions more participative.


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exporting company know little about the markets abroad. Consequently, anexporting company frequently uses independent agents or distributors whounderstand the markets abroad. This arrangement simplifies the manage-ment of the business. Most of the export-related problems are handled bythe independent agents or distributors. This lets managers focus their pri-mary attention on domestic operations. This stage allows the company totake advantage of foreign markets while not having to accept full respon-sibility for operating abroad.

❙ STAGE 3 INTERNATIONAL CORPORATIONAn international corporation, also known as a multinational corporation,creates and markets goods and services in both its country of origin and inother countries. The parent or founding company provides the internationalcorporation with an organizational structureand operational strategy.

The local, national, or regional sub-sidiaries, or companies, of an internationalorganization are usually responsible for deci-sion making and customer service. Theymake decisions involving production, mar-keting strategy, sales and service, and thelike. Often various subsidiaries of interna-tional corporations operate quite independ-ently. An international corporation is like agroup of interrelated companies operating inmany countries.

The managerial skills needed in an inter-national corporation vary widely. Those who


DOBRISKI ENTERPRISES

Paulina Dobriski, an immigrant fromPoland, founded a small business inthe United States that manufacturesPolish-style foods. Five years agothe products were sold only in theChicago metropolitan area. Mrs.Dobriski and her family worked dili-gently at the business, and it hasgrown every year. Now DobriskiEnterprises exports food products tothree countries. Within ten years,Dobriski Enterprises hopes to manu-facture and sell food products on fivecontinents. Mrs. Dobriski’s childrencan then manage the subsidiaries

abroad. Within 20 years, Mrs.Dobriski and her family hope to dom-inate the production and sales ofPolish-style food products throughworldwide operations Then PaulinaDobriski will have reached her entre-preneurial goal, which is to own andmanage her own global corporation.

Think Critically1. Why did Dobriski Enterprises

begin selling its products in theChicago metropolitan area?

2. If things go as planned, howmany years will it take DobriskiEnterprises to become a multina-tional corporation?

3. What will have to happen ifDobriski Enterprises changesfrom a multinational corporationto a global corporation?

GLOBAL BUSINESSGLOBAL BUSINESS



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manage from the parent company need broad manage-rial skills that cross countries. Managers at the local,national, and regional levels need more specialized skillsadapted to their specific assignments.

❙ STAGE 4 GLOBAL CORPORATIONA global corporation is an outgrowth of an internation-al corporation. A global corporation operates so thatcountry boundaries are not an obstacle to operations. Itsearches for the most efficient combinations of goodsand services on a worldwide basis. It markets thosegoods and services with little or no regard for nationalboundaries. A global corporation is like a domesticcompany except that it buys and sells worldwide ratherthan within the country of origin.

Those who manage in global corporations some-times need broad managerial skills, since they operate on a worldwide basis. Many decisions require local-, national-, and regional-specific knowledge along withspecialized managerial skills.

MANAGING NOW AND IN THE FUTURE

A s business globalization increases, the role of the manager will change.The vision of the manager will shift from the domestic to the global

marketplace. While today’s managers predict the future based upon the past,tomorrow’s managers will need insight into the future.

Managers of the future will not be content to be visionary; they will striveto facilitate the visionary development of others. Managers will shift fromfunctioning alone to functioning as part of a team. While the managers oftoday enjoy the trust of boards and shareholders, the managers of tomorrowwill need the trust of owners, customers, employees, suppliers, and govern-mental officials. Managers increasingly will meet the needs of the diversegroups to whom they are responsible. Rather than being monolingual andmonocultural, as is often the case today, tomorrow’s managers will be multi-lingual and multicultural. They will function like natives outside of theirown cultures.

Successful global managers must develop and use global strategic skills. Theymust skillfully manage transition and change in a culturally diverse world.They must function effectively as team members while coping with changingorganizational structures. Global managers will need outstanding communica-tion skills—listening, speaking, reading, and writing skills. They must be ableto acquire and transfer knowledge throughout the organization. Successfulglobal managers must quickly adapt to the changing environment. What isyour potential to be a manager in the ever changing global marketplace?

What are the stages through which a business passes to attain global status?




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GEOGRAPHY:VATICAN CITY—HEADQUARTERS OF A WORLDWIDE CHURCHThe world’s smallest state, the State of Vatican City (Città del Vaticano), is the headquarters for one of the world’s largest multinational organizations,the Roman Catholic Church. This independent state is completely surrounded

by Rome, Italy. It consists of the Church of St. Peter(also known as the Vatican Basilica), the VaticanApostolic Palace (with its world-famous museums andlibrary), various administrative and ecclesiastical build-ings, apartments, and the Vatican Gardens. About 109acres (44 hectares) in size, the State of Vatican Cityhas a population of nearly 1,000 persons who performspecial services for the Holy See (the realm, seat ofpower, authority, and jurisdiction of the pope).

The State of Vatican City has its own symbols ofnationhood—constitution, coinage, postal system, seal,and flag. It also has its own radio station and dailynewspaper. It exchanges diplomatic representativeswith other countries, but they have accreditation to andfrom the Holy See of the Church, not the State ofVatican City.

Legislative, executive, and judicial power are vestedin the pope within Vatican City, but actual internaladministration is handled by a governor and other officials. Public order is maintained by a small force ofgendarmes (or police-soldiers), assisted, when neces-sary, by the Swiss Guards, the pope’s personal regi-ment of soldiers. Primary judicial power is given to alocal tribunal.

Think Critically1. In what ways is Vatican City like and unlike most

other states?2. In what ways is Vatican City like a multinational

corporation?

How will management tomorrow be different from management today?



279

REVIEW GLOBAL BUSINESS TERMSREVIEW GLOBAL BUSINESS TERMSDefine each of the following terms.

1. span of control 5. chief executive officer (CEO)

2. front-line manager 6. lines of authority

3. middle manager 7. degree of centralization

4. senior manager

REVIEW GLOBAL BUSINESS CONCEPTSREVIEW GLOBAL BUSINESS CONCEPTS8. Why is the line of authority important regardless of the span of control?

9. What is degree of centralization, and how does it affect managerial styles?

10. What are the four stages through which a business passes on the way toachieving global status?

11. What is a visionary manager?

SOLSOLVE GLOBAL BUSINESS PROBLEMSVE GLOBAL BUSINESS PROBLEMSSoltech, Inc., is a company that introduced a software package that managesthe human resources function for large companies. The software is based on theU.S. tax structure and uses the English language. It can generate and managejob descriptions, performance appraisals, interns, and salary and benefit admin-istration.

12. What stage is Soltech in now?

13. What stage is Soltech in if it tailors versions of the software for Germanyand Japan and opens manufacturing facilities in those countries?

14. What stage is Soltech in if it expands into other kinds of software, with ver-sions in numerous languages, and sells to all countries?

THINK CRITICALLTHINK CRITICALLYY15. What would a company do if its span of control at some level became too

large to manage?

16. Why do organizations competing in the global marketplace tend to have alimited number of levels of management?

MAKING CONNECTIONSMAKING CONNECTIONS17. CULTURAL STUDIES Choose a product with which you are familiar.

Describe how the manufacturer could evolve from a Stage 1 company to aStage 4 company.

18. COMMUNICATIONS Why does having a larger span of control increasethe need for better communication within an organization?




280

Chapter 10 ASSESSMENTCHAPTER SUMMARCHAPTER SUMMARYY

10-1 MANAGERS AND CULTURAL DIFFERENCESManagers, who are the people in charge of organizations and theirresources, have characteristics and styles that vary.

Managers must be sensitive to and respect the cultural differences withintheir businesses.

10-2 MANAGEMENT FUNCTIONS AND ORGANIZATIONManagers engage in planning and decision making; organizing, staffing,and communicating; motivating and leading; and controlling.

Organizations can be structured by function, product, or geography.

10-3 THE CHANGING PROCESS OF MANAGEMENTThe levels of management are influenced by the span of control, lines ofauthority, and delegation of authority and responsibility.

The evolution of a business through the domestic company, exporting com-pany, international corporation, and global corporation stages affects itsmanagement.

As globalization continues, the roles of managers will change.C

B

A

B

A

B

A

Read the case at the beginning of this chapter, and answer the followingquestions.

1. Why do you think the term virtual corporation was coined to describetemporary “best-of-everything” businesses?

2. Why do you think that the U.S. film industry has been quick to create virtual corporations.

3. What can managers of other businesses learn from the managers of virtual corporations?

4. Choose a recent U.S. film. Through Internet or library research or directcommunication with the production and/or distribution company, investi-gate how the needed talents were brought together for the project.Determine whether or not the film project was the product of a virtual corporation.



281

REVIEW GLOBAL BUSINESS TERMSREVIEW GLOBAL BUSINESS TERMSMatch the terms listed with the definitions.

1. Managers who decentralize power andshare it with employees.

2. People in charge of organizations and theirresources.

3. Managers who oversee the work anddepartments of a number of front-line man-agers.

4. Amount of authority and responsibility thatis delegated to employees or to organiza-tional units.

5. Managers who oversee the day-to-dayoperations in specific departments.

6. The highest manager within a company.

7. Managers who centralize power and tellemployees what to do.

8. A drawing that shows the structure of anorganization.

9. The number of employees a managersupervises.

10. Managers who oversee the work anddepartments of a number of middlemanagers.

11. Managers who avoid the use of power.

12. Indicates who is responsible to whomand for what.

MAKE GLOBAL BUSINESSMAKE GLOBAL BUSINESSDECISIONSDECISIONS13. Why is a participative manager likely to

use autocratic and free-rein manage-ment on occasion?

14. Devise an analogy between a compo-nent of the management process andsomething that is familiar to you.

15. Draw an organizational chart thatdepicts the department of your school.What is the span of control for thehead of the department?

16. What may the managers of a domesticcompany not know when their compa-ny decides to become an exportingcompany?

a. autocratic managers

b. chief executive officer(CEO)

c. degree of centraliza-tion

d. free-rein managers

e. front-line managers

f. lines of authority

g. managers

h. middle managers

i. organizational chart

j. participative managers

k. senior managers

l. span of control

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Chapter 10 ASSESSMENT17. Managers in the global environment must become leaders as learners.

What does the expression “leaders as learners” mean, and why is it neces-sary to be a leader as learner in the global marketplace?

GLOBAL CONNECTIONSGLOBAL CONNECTIONS18. TECHNOLOGY Describe how using scheduling software could contribute

to the controlling process and success of an organization.

19. TECHNOLOGY As a manager, how can technology help you keep trackof business operations abroad?

20. CULTURAL STUDIES How does the culture of the United States fosterparticipative management?

21. COMMUNICATIONS How would a memorandum from an autocraticmanager to employees about extended breaks differ from one from a free-rein manager?

22. GEOGRAPHY In what region(s) of Europe are most of the countriesfound that favor family and friendship rather than qualifications when hiringmanagers?

23. CAREER PLANNING How would you go about locating a book thataddresses careers in management?



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IDENTIFYING MANAGEMENT SKILLS AND ORGANIZATIONAL STRUCTURE

Develop a management plan based on the company and country you havebeen using in this continuing project, or create a new idea for a business inthe same or a different coun-try. Make use of previouslycollected information, and doadditional research. Thisphase of your business planshould include the followingcomponents.

1. What skills will managersneed to adapt to thesocial and cultural envi-ronment of this country?

2. Describe the managementstyle (autocratic, participa-tory, or free-reign) mostappropriate for this organi-zation.

3. Explain which type oforganizational structure(function, product, orgeography) would be mostappropriate.

4. Which of the organiza-tion’s activities will be cen-tralized and which will bedecentralized?

5. What other managementand organizational deci-sions will need to beadapted for internationalbusiness operations?

Prepare a written summary orpresent a short oral report(two or three minutes) of yourfindings.

THE GLOBAL

ENTREPRENEURENTREPRENEURCREATING AN INTERNATIONAL BUSINESS PLAN



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