© Farhan Mir 2007 IMS Management Thoughts & Practices MBA & BBA Lecture 4 (Managing Global Environment) By: Farhan Mir

© Farhan Mir© Farhan Mir

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Management Management Thoughts & PracticesThoughts & Practices

MBA & BBAMBA & BBALecture 4Lecture 4(Managing Global (Managing Global Environment)Environment)

By: Farhan MirBy: Farhan Mir


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TopicsTopicsIntroductionHistory and Evolution of ManagementOrganizational & Environmental Constraints

Managing Global Environment

Global PerspectiveGlobal Perspective

Need for going GlobalNeed for going Global

Understanding Global Understanding Global EnvironmentEnvironment

Doing Business GloballyDoing Business Globally

Managing in Global EnvironmentManaging in Global Environment


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Trends in International Trends in International BusinessBusinessWhy do companies expand

internationally?Expand sales (Extending Markets)Expand sales (Extending Markets)

Cutting costsCutting costs

Offering new productsOffering new products

Global OpportunitiesGlobal Opportunities(WTO allowing International companies more opportunities in Pakistani market & Vice Versa)

But once they enter into the global But once they enter into the global markets they also face global issues markets they also face global issues (Constraints of the global (Constraints of the global environment)environment)


20200707 IMSIMSSource: www.wal-mart.com

Trends in International Trends in International BusinessBusiness


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Wal-Mart USA1489 Stores1489 Stores1397 Supercenters1397 Supercenters532 Sam’s Clubs532 Sam’s Clubs56 Neighborhood 56 Neighborhood MarketsMarkets

3474 Total Stores3474 Total Stores1,000,000 + associates1,000,000 + associates

Wal-Mart International11 Argentina23 Brazil214 Canada92 Germany613 Mexico (1st int’l store in 1991)

52 Puerto Rico265 Great Britain31 China15 Korea

1317 Total International300,000 + associates


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China: www.wal-martchina.com

Germany: www.walmartgermany.de

Mexico: www.walmartmexico.com.mx

Korea: www.walmartkorea.com

United Kingdom: www.asda.com


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Wal-Mart’s next market?


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Perspective towards Perspective towards GlobalizationGlobalization

Parochialism- narrow view of the world where you don’t recognize differences between people

Ethnocentric- best work approaches are that of the home country (where the business initiated)

Polycentric- managers in the host countries know the best work practices for running their business

Geocentric- world-oriented view that focuses on using the best approaches and people from the globe


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Degree of Degree of InternationalizationInternationalization

Domestic businessAll products and services within one All products and services within one countrycountry

Almost extinctAlmost extinct

Mostly small businessesMostly small businesses

International businessOperate primarily in one countryOperate primarily in one country

Some resources or revenues from Some resources or revenues from other countriesother countries


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Multinational businessWorldwide marketplace for inputs and Worldwide marketplace for inputs and outputsoutputs

Retain primary “headquarters” in one Retain primary “headquarters” in one countrycountry

Global businessNo overriding commitment to any No overriding commitment to any single countrysingle country

Government and legal restrictions Government and legal restrictions make this category somewhat make this category somewhat “hypothetical” “hypothetical”


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Degree of Degree of InternationalizationInternationalizationThese are the largest export markets for this Finnish

company in 1957. Any idea what company this is?


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Degree of Degree of InternationalizationInternationalizationToday, you might recognize this company as a major providerof telecommunications, information technology, and electronics.


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AustriaBelgiumBulgariaCzech RepublicDenmarkEstoniaFinlandFranceGermanyGreeceHungaryIrelandItalyLatvia

AustraliaChinaHong KongIndiaJapanKoreaPhilippinesSingaporeTaiwan

USABrazilCanada

LithuaniaLuxembourgMaghrebNetherlandsNorwayPolandPortugalRomaniaRussiaSlovakiaSpainSwedenSwitzerlandTurkeyUK

AmericasAsia-PacificEurope, Africa& Middle East

Source: Nokia.com

The company is Nokia, and here are some of the countries it operates in today.


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Degree of Degree of Internationalization Internationalization (Some Examples)(Some Examples)

Nestlé comes close to “global” business

http://www.nestle.com/Html/Id/http://www.nestle.com/Html/Id/index.aspindex.asp

Operations in over 100 countriesOperations in over 100 countries


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The Structure of the The Structure of the Global MarketGlobal Market

Market Systems (Economic Integration)

European UnionEuropean Union

NAFTANAFTA

AFTAAFTA

ASEANASEAN

OPECOPEC

Hundreds of othersHundreds of others


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European Union (EU)European Union (EU)Established in February 1992 as a treaty uniting 12 countries

Over 374 million peopleOver 374 million people

Since other 7 countries also in negotiation Since other 7 countries also in negotiation process so the overall population increasesprocess so the overall population increases

Before becoming part of EU all these countries Before becoming part of EU all these countries had there own set of policies, tax structures and had there own set of policies, tax structures and protected industriesprotected industries

Now a single market and a common currency Now a single market and a common currency (Euro)(Euro)

No traveling barriers

No investment and employment barriers

Why EU?Why EU?

Idea was to build alliance against the strong US and Japanese Economies

German automobiles now sold in EU

Nokia selling major telecommunication services throughout EU


20200707 IMSIMSSource: Robbins, 2002

European Union (EU)


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Types of Global Types of Global OrganizationsOrganizationsMultinational Corporation (MNCs)

Maintains significant operations in multiple Maintains significant operations in multiple countries but manages them from a base in countries but manages them from a base in the home countrythe home country

Sony

Transnational Corporation (TNC)Maintains significant operations in multiple Maintains significant operations in multiple countries but decentralizes management to countries but decentralizes management to the local countrythe local country

Nestle

Borderless OrganizationApproaches global business from a Approaches global business from a geocentric approach and omits almost all geocentric approach and omits almost all barriersbarriers

IBM (developed itself into 13 divisions)


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The Process of The Process of InternationalizationInternationalizationExporting

Making products at home and selling them Making products at home and selling them overseas overseas

Most of the Sialkot Industry is based on this model SAGA is one of the giant organization & CA is another one

ImportingSelling products home that are made overseasSelling products home that are made overseas

You’ll find products of most of the international manufacturers in Pakistan even those organizations are not themselves present in the countryMost of the Australia is dominated by Chinese products imported for use

Licensing & FranchisingManufacturing organizations allowing others to use Manufacturing organizations allowing others to use their brand name, technology or product their brand name, technology or product specificationspecification

Based on annual fee on salesService organization allowing others to sue their Service organization allowing others to sue their brand name, technology or product specificationbrand name, technology or product specification


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The Process of The Process of InternationalizationInternationalizationStrategic Alliances

Doing business with partner organization Doing business with partner organization overseas by sharing resources and overseas by sharing resources and developing new products and servicesdeveloping new products and services

Joint VentureA partnership in which the partner A partnership in which the partner organization form a separate new organization form a separate new organization by merging togetherorganization by merging together

Foreign SubsidiaryEstablishing and independent unit or Establishing and independent unit or facility in another countryfacility in another country


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Stage IPassive Response

Stage IIInitial Overt Entry

Stage IIIEstablished International

Operations

Exportingto foreigncountries

Importingfrom foreign

countries

Hiring foreignrepresentation orcontracting with

foreign manufacturers Licensing/Franchising

ForeignSubsidiary

JointVentures

StrategicAlliances

The Process of The Process of InternationalizationInternationalization


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Political EnvironmentPolitical EnvironmentGovernment stabilityInternational trade incentivesInternational trade controlsEconomic communities

Economic EnvironmentEconomic EnvironmentResource allocation processesProperty ownershipNatural resourcesInfrastructure

International Management International Management FunctionsFunctions

Cultural EnvironmentCultural EnvironmentValues, Symbols, Beliefs, Language

Cultural EnvironmentCultural EnvironmentValues, Symbols, Beliefs, Language

Challenges for the Challenges for the Global ManagerGlobal Manager


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Challenges for the Global Challenges for the Global ManagerManager

Cultural EnvironmentOften taken for grantedOften taken for granted

Not necessarily a problem, but can be Not necessarily a problem, but can be disastrousdisastrous

LanguageValues, symbols, beliefs


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Challenges for the Global Challenges for the Global ManagerManagerExamples of cultural “bloopers”

GM’s Chevy Nova didn’t sell well in South America GM’s Chevy Nova didn’t sell well in South America because “no va” means “it won’t go” in Spanishbecause “no va” means “it won’t go” in Spanish

In Taiwan, the translation of the Pepsi slogan In Taiwan, the translation of the Pepsi slogan “Come alive with the Pepsi generation” came out as “Come alive with the Pepsi generation” came out as “Pepsi will bring your ancestors back from the “Pepsi will bring your ancestors back from the dead.”dead.”

Gerber changed its baby food packaging in Africa Gerber changed its baby food packaging in Africa after it learned the largely illiterate population was after it learned the largely illiterate population was accustomed to seeing a picture on the label of what accustomed to seeing a picture on the label of what was in the canwas in the can

Coca-Cola had to alter the taste of its soft drink in Coca-Cola had to alter the taste of its soft drink in China when the Chinese described it as “tasting like China when the Chinese described it as “tasting like medicine.” The name “coca-cola” also had to be medicine.” The name “coca-cola” also had to be re-worked because it translated as “bite the wax re-worked because it translated as “bite the wax tadpole”.tadpole”.


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Challenges for the Global Challenges for the Global Manager- Global Manager- Global DistancesDistances


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Hofstede’s Framework for Hofstede’s Framework for Assessing National Assessing National CulturesCultures

Individualism versus Collectivism

Power Distance

Uncertainty Avoidance

Quantity versus Quality of Life

Long-term versus Short-term Orientation


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Examples of Hofstede’s Examples of Hofstede’s Cultural DimensionsCultural Dimensions


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Careers in International Careers in International Management- If you have got Management- If you have got a International Assignmenta International Assignment

Success FactorsCross-cultural Cross-cultural sensitivitysensitivity

Business Business knowledgeknowledge

CourageCourage

Motivates othersMotivates others

Personal integrityPersonal integrity

Diagnostic skills Diagnostic skills

Commitment to Commitment to success success

Takes personal Takes personal and business and business risks risks

Changes with Changes with feedbackfeedback

Enjoys challengeEnjoys challenge

Takes advantage Takes advantage of opportunitiesof opportunities

Open to criticismOpen to criticism

Seeks feedbackSeeks feedback

Maintains Maintains flexibilityflexibility

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© Farhan Mir 2007 IMS Management Thoughts & Practices MBA & BBA Lecture 4 (Managing Global Environment) By: Farhan Mir