8e Daft Chapter 04

8/8/2019 8e Daft Chapter 04

http://slidepdf.com/reader/full/8e-daft-chapter-04 1/32

Managing in a Global EnvironmentManaging in a Global Environment

CHAPTER 4CHAPTER 4



Copyright © 2008 by South-Western, a division of Thomson Learning. All rights reserved.2

Learning ObjectivesLearning Objectives

Describe the emerging borderless world andsome issues of particular concern for today¶smanagers.

Describe market entry strategies thatbusinesses use to develop foreign markets.

Define international management and explainhow it differs from the management of domesticbusiness operations.

Indicate how dissimilarities in the economic,sociocultural, and legal-political environmentsthroughout the world can affect businessoperations.




Learning Objectives (contd.)Learning Objectives (contd.)

Describe how regional trading alliances are

reshaping the international business

environment.

Describe the characteristics of a multinational

corporation.

Explain cultural intelligence and why it is

necessary for managers working in foreign

countries.




Importance of International BusinessImportance of International Business

If you are not thinking

international,

you are not thinking

business management




A Borderless WorldA Borderless World

Business is becoming a unified, global

field

Companies that think globally have acompetitive edge

Domestic markets are saturated for

many companies

Consumers can no longer tell from which

country they are buying




4 Stages of Globalization4 Stages of Globalization

Exhibit 4.1




Four Stages of GlobalizationFour Stages of Globalization

Domestic stage:

market potential is limited to the home country

production and marketing facilities located at home

Inter national stage:

exports increase

company usually adopts a multi-domestic approach

Multinational stage:

marketing and production facilities located in many countries

more than 1/3 of its sales outside the home country

Global (or stateless) stage:

making sales and acquiring resources in whatever countryoffers the best opportunities and lowest cost ownership, control,and top management tend to be dispersed




Global (stateless) CorporationsGlobal (stateless) Corporations

Number is increasing

Awareness of national borders

decreasing

Corporate Examples

± Fred Hassan ± Pakistan-born CEO of

Schering Plough ± Mexico-born Fernando Aguirre, CEO of

Chiquita Brands




Strategies for Entering International MarketsStrategies for Entering International Markets

Exhibit 4.2




Getting Started InternationallyGetting Started Internationally

Market Entry Strategy

± An organizational strategy for entering a

foreign market Global Outsourcing (offshoring)

± Engaging in the international division of labor

so as to obtain the cheapest sources of labor

and supplies regardless of country. Alsocalled global sourcing .




International Environment FactorsInternational Environment Factors

Organization

EconomicEconomic

development

Infrastructure

Resource andproduct markets

Per capita

Income

Exchange rates

Economicconditions

Legal-PoliticalPolitical risk

Governmenttakeovers

Tariffs, quotas, taxes

Terrorism, politicalinstability

Laws, regulations

SocioculturalSocio values, beliefs

Language

Religion (objects, taboos, holidays)

Kinship patterns

Formal education, literary

Time orientation

Exhibit 4.3




Economic growth

Economic development

Infrastructure

Resource and product markets

Exchange rates

Inflation

Interest rates

Economic Environment FactorsEconomic Environment Factors




Economic DevelopmentEconomic Development

Countries categorized as ³developing´ or

³developed´

Criterion used to classify is per capita income

Developing countries have low per capita incomes

LDCs located in Asia, Africa, and South America

Developed are North America, Europe, & Japan

Driving global growth in Asia, Eastern Europe, &Latin America




InfrastructureInfrastructure

A country¶s physical facilities that support

economic activities

Airports, highways, and railroads

Energy-producing facilities

Communication facilities




Resource and Product MarketsResource and Product Markets

When operating in another country...

± Managers must evaluate market demand

± To develop plants, resource markets mustbe available ± raw materials and labor

Corporate Example ± McDonald




Exchange RatesExchange Rates

Rate at which one country¶scurrency is exchanged for another country¶s

Has become a major concern for companies doing businessinternationally

Changes in the exchange rate

can have major implications for profitability of internationaloperations




The Legal-Political EnvironmentThe Legal-Political Environment

Political Risk± due to events or actions

by host governments

Loss of assets

Loss of earning power

Loss of managerial control

Government takeovers Acts of violence




Political InstabilityPolitical Instability

Events such as riots, revolutions, or

government upheavals that affect theoperations of an international company




Laws and RegulationsLaws and Regulations

Government laws and regulations differ

from country to country

Make doing business a true challengefor international firms

Internet has increased impact of foreign

laws on U.S. companies ± expandspotential for doing business on global

basis




Sociocultural EnvironmentSociocultural Environment

Culture ± shared knowledge, beliefs,values, common modes of behavior, andways of thinking among members of a

society ± Intangible

± Pervasive

± Difficult for outsider to learn

Managers need to understand differencein social values to comprehend localcultures and deal with them effectively




Hofstede¶s Value DimensionsHofstede¶s Value Dimensions

Research = national value systems influence

organizational and employee working relationships

± Power distance (high = accept inequality)

± Uncertainty avoidance (uncomfortable with

uncertainty) ± Individualism and collectivism (Individualism take care

of themselves)

± Masculinity/femininity (preference for

achievement/assertiveness; femininity for

relationship) ± Long-term/short-term orientation = 5th dimension




Four Dimensions of National ValueFour Dimensions of National Value

Exhibit 4.4




GLOBE Value DimensionsGLOBE Value Dimensions

± Assertiveness

± Future orientation

± Uncertainty

avoidance

± Gender

differentiation

± Power distance

± Societal collectivism

± Individual collectivism

± Performanceorientation

± Humane orientation

Global Leadership and Organizational Behavior Effectiveness project

More comprehensive view of cultural

similarities and differences




International Cultural InfluencesInternational Cultural Influences

Other Cultural Characteristics ± Language

± Religion

± Attitudes ± Social Organization

± Education

Linguistic pluralism ± several languages exist

Ethnocentrism ± regard own culture superior




International Trade AgreementsInternational Trade Agreements

Most visible changes in legal-

political factors grow out of

international trade agreements:

± GATT

± WTO

± EU

± N AFT A




International Trade AlliancesInternational Trade Alliances

General Agreement on Tariffs and Trade (GATT)

Signed by 23 nations in 1947 as a set of rules

Ensured nondiscrimination, clear procedures,

negotiation of disputes, and participation of lesser developed countries in international trade

Today, 149 member countries abide by the rules

Primary tools WTO uses on tariff concessions,countries agree to limit level of tariffs on importsfrom other WTO members

Most favored nation clause




WTOWTO

Goal, is to guide and sometimes

urge the nations of the world

toward free trade and open

markets Encompasses GATT and all of

its agreements

Partly responsible for backlashagainst global trade




European UnionEuropean Union

Formed in 1957 to improve economic andsocial conditions

Has grown to 25-nation alliance

Initiative Europe ¶92 called for creation of openmarkets for Europe¶s 340 million consumers

Biggest expansion in 2004 ± 10 new membersfrom southern and eastern Europe

Observers feared EU would become a tradebarrier

EU¶s monetary revolution, introduction of theEuro




North American Free Trade Agreement North American Free Trade Agreement

Went into effect on January 1, 1994

Merged the United States, Canada, and Mexico with

more that 421 million consumers

Breaks down tariffs and trade restrictions on most

agriculture and manufactured products

August 12, 1992 agreements in number of key areas

include: agriculture, autos, transport, & intellectual

property

January, 2004 -10th anniversary = success and failure




Other Trade AlliancesOther Trade Alliances

The Association of Southeast Asian Nations

(ASEAN)

Mercosur (Argentina, Brazil, Bolivia, Chile,

Paraguay, Uruguay)

The Central American Free Trade Agreement

(CAFT A)

Free Trade Area of the Americas (FT AA)




Multinational Corporations (MNC)Multinational Corporations (MNC)

Receives >25% total sales revenues from

operations outside parent company¶s home

country

± Managed as integrated worldwide business system

± Controlled by single management authority

± Top managers exercise global perspective




Managing in a Global EnvironmentManaging in a Global Environment

Managers must be sensitive to cultural

subtleties

Personal challenges ± culture shock

Managing cross-culturally

± Leading

± Decision making

± Motivating

± Controlling

Managers must be culturally flexible and

easily adapt to new situations

Documents

8e Daft Chapter 04