Management_005 Managing in a Global Environtment

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55Managing in a

Global EnvironmentManaging in a

Global Environment

6-2 2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin

Learning ObjectivesLearning Objectives

zExplain why the ability to perceive, interpret, and respond appropriately to the organizational environment is crucial for managerial successz Identify the main forces in a global

organizations task and general environments, and describe the challenges that each force presents to managers

McGraw-Hill/Irwin 2006 The McGraw-Hill Companies, Inc. All rights reserved.


Learning ObjectivesLearning Objectives

zExplain why the global environment is becoming more open and competitive and why barriers to the global transfer of goods and services are falling, increasing the opportunities, complexities, challenges, and threats that managers face


Global OrganizationsGlobal Organizations

zOrganizations that operate and compete not only domestically, but also globally

zUncertain and unpredictable


Organizational EnvironmentOrganizational Environment

zSet of forces and conditions outside the organizations boundaries that have the potential to affect the way the organization operateszOpportunities and threats


Task EnvironmentTask Environment

zSet of forces and conditions that originate with suppliers, distributors, customers, and competitorszAffect an organizations ability to obtain

inputs and dispose of its outputszMost immediate and direct effect on

managers


Forces in the Organizational Environment

Forces in the Organizational Environment

Figure 6.1


The Task EnvironmentThe Task Environment

Suppliers Individuals and organizations that provide an

organization with the input resources that it needs to produce goods and servicesz Raw materials, component parts, labor (employees)

Relationships with suppliers can be difficult due to materials shortages, unions, and lack of substitutes.z Suppliers that are the sole source of a critical item are in a

strong bargaining position to raise their prices. Managers can reduce these supplier effects by

increasing the number of suppliers of an input.


Global OutsourcingGlobal Outsourcing

Purchase of inputs from foreign suppliers or the production of inputs abroad to lower production costs and improve product quality and design



Distributors Organizations that help other organizations

sell their goods or services to customersz Powerful distributors can limit access to markets

through its control of customers in those markets.

zManagers can counter the effects of distributors by seeking alternative distribution channels.



Customers Individuals and groups that buy goods and

services that an organization producesz Identifying an organizations main customers

and producing the goods and services they want is crucial to organizational and managerial success.



Competitors Organizations that produce goods and services

that are similar to a particular organizations goods and services

Potential Competitorsz Organizations that presently are not in the task

environment but could enter if they so chose

Strong competitive rivalry results in price competition, and falling prices reduce access to resources and lower profits.



Rivalry between competitors is potentially the most threatening force that managers deal with

Vs.Vs.



Barriers to Entry Factors that make it difficult and costly for

the organization to enter a particular task environment or industry


Barriers to EntryBarriers to Entry

zEconomies of scale Cost advantages associated with large

operationszBrand loyalty

zCustomers preference for the products of organizations currently existing in the task environment.

zGovernment regulations that impede entry


Barriers to Entry and CompetitionBarriers to Entry and Competition

Figure 6.2


General EnvironmentGeneral Environment

Economic

Technological Socio-cultural

Demographic Political and Legal

Forces


The General EnvironmentThe General Environment

Economic Forces Interest rates, inflation, unemployment,

economic growth, and other factors that affect the general health and well-being of a nation or the regional economy of an organization

Managers usually cannot impact or control these.

Forces have profound impact on the firm.



Technological Forces Outcomes of changes in the technology

that managers use to design, produce, or distribute goods and serviceszResults in new opportunities or threats to

managerszOften makes products obsolete very

quickly.zCan change how managers manage.



Sociocultural Forces Pressures emanating from the social structure of a

country or society or from the national culturez Social structure: the arrangement of relationships between

individuals and groups in societyz National culture: the set of values that a society considers

important and the norms of behavior that are approved or sanctioned in that society.

Cultures and their associated social structures, values, and norms differ widely throughout the world.



Demographic Forces Outcomes of change in, or changing attitudes

toward, the characteristics of a population, such as age, gender, ethnic origin, race, sexual orientation, and social classz During the past two decades, women have entered the

workforce in increasing numbers and most industrial countries populations are aging.

z This will change the opportunities for firms competing in these areas as demands for child care and health care are forecast to increase dramatically.


The General Environment The General Environment

Political and Legal Forces Outcomes of changes in laws and

regulations, such as the deregulation of industries, the privatization of organizations, and increased emphasis on environmental protectionz Increases in laws and regulations increase the

costs of resources and limit the uses of resources that managers are responsible for acquiring and using effectively and efficiently.


The General Environment The General Environment

Global Forces Outcomes of changes in international

relationships; changes in nations economic, political, and legal systems; and changes in technology, such as falling trade barriers, the growth of representative democracies, and reliable and instantaneous communication

Important opportunities and threats to managers:z The economic integration of countries through free-trade

agreements (GATT, NAFTA, EU) that decrease the barriers to trade.


The Global EnvironmentThe Global Environment

Figure 6.3


Declining Barriers to Trade and Investment

Declining Barriers to Trade and Investment

Tariff A tax that government imposes on imported

or, occasionally, exported goods.z Intended to protect domestic industry and jobs

from foreign competitionzOther countries usually retaliate their own tariffs,

actions that eventually reduce the overall amount of trade and impedes economic growth.


GATT and the Rise of Free TradeGATT and the Rise of Free Trade

Free-Trade Doctrine The idea that if each country specializes in

the production of the goods and services that it can produce most efficiently, this will make the best use of global resourcesz If India is more efficient in making textiles, and

the United States is more efficient in making computer software, then each country should focus on their respective strengths and trade for the others goods.


Declining Barriers of Distance and Culture

Declining Barriers of Distance and Culture

zDistance Markets were essentially closed because of the

slowness of communications over long distances.zCulture Language barriers and cultural practices made

managing overseas businesses difficultzChanges in Distance and Communication Improvement in transportation technology and fast,

secure communications have greatly reduced the barriers of physical and cultural distances.


Effects of Free Trade on ManagersEffects of Free Trade on Managers

Declining Trade Barriers Opened enormous opportunities for

managers to expand the market for their goods and services.

Allowed managers to now both buy and sell goods and services globally.

Increased intensity of global competition such that managers now have a more dynamic and exciting job of managing.


Effects of Free Trade on Managers Effects of Free Trade on Managers

North American Free Trade Agreement (NAFTA) Abolishes 99% of tariffs on goods traded between

Mexico, Canada and the United Statesz Unrestricted cross-border flows of resourcesz Increased investment by U.S. firms in Mexican

manufacturing facilities due lower wage costs in Mexico

Opportunities and Threatsz The opportunity to serve more marketsz Increased competition from NAFTA competitors


The Role of National CultureThe Role of National Culture

Values Ideas about what a society believes to be

good, desirable and beautiful.z Provides conceptual support for democracy,

truth, appropriate roles for men, and women.zUsually not static but

very slow to change.


The Role of National CultureThe Role of National Culture

Norms Unwritten rules and codes of conduct that

prescribe how people should act in particular situations.z Folkwaysroutine social conventions of daily life (e.g.,

dress codes and social manners)z Moresbehavioral norms that are considered central to

functioning of society and much more significant than folkways (e.g., theft and adultery), and they are often enacted into law.

Norms vary from country to country.


Hofstedes Model of National CultureHofstedes Model of National Culture

Figure 6.4


Hofstedes Model of National Culture


z Individualism A worldview that values individual freedom and

self-expression and holds a strong belief in personal rights and the need for persons to be judged by their achievements rather their social background.

zCollectivism A worldview that values subordination of the

individual to the goals of the group. Widespread under communism and prevalent in

Japan as well.




Power Distance A societys acceptance of differences in the

well being of citizens due to differences in heritage, and physical and intellectual capabilities (individualism).z In high power distance societies, the gap between

rich and poor becomes very wide (e.g., Panama and Malaysia).

z In the low power distance societies of western cultures (e.g., United States and Germany), the gap between rich and poor is reduced by taxation and welfare programs.




Achievement versus Nurturing Orientation Achievement-oriented societies value

assertiveness, performance, and success and are results-oriented.

Nurturing-oriented cultures value quality of life, personal relationships, and service.

The United States and Japan are achievement-oriented; Sweden and Denmark are more nurturing-oriented.




Uncertainty Avoidance Societies and people differ in their tolerance for

uncertainty and risk. Low uncertainty avoidance cultures (e.g., U.S. and

Hong Kong) value diversity and tolerate a wide range of opinions and beliefs.

High uncertainty avoidance societies (e.g., Japan and France) are more rigid and expect high conformity in their citizens beliefs and norms of behavior.




Long Term Outlook Cultures (e.g., Taiwan and Hong Kong)

with a long-term in outlook are based on the values of saving, and persistence.

Short-term outlook societies (e.g., France and the United States) seek the maintenance of personal stability or happiness in the present.


National Culture and Global Management

National Culture and Global Management

zManagement practices that are effective in one culture often will not work as well in another culturezManagers must be sensitive to the

value systems and norms of an individuals country and behave accordingly


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Managing in a Global EnvironmentLearning ObjectivesLearning ObjectivesGlobal OrganizationsOrganizational EnvironmentTask EnvironmentForces in the Organizational EnvironmentThe Task EnvironmentGlobal OutsourcingThe Task EnvironmentThe Task EnvironmentThe Task EnvironmentThe Task EnvironmentThe Task EnvironmentBarriers to EntryBarriers to Entry and CompetitionGeneral EnvironmentThe General EnvironmentThe General EnvironmentThe General EnvironmentThe General EnvironmentThe General EnvironmentThe General EnvironmentThe Global EnvironmentDeclining Barriers to Trade and InvestmentGATT and the Rise of Free TradeDeclining Barriers of Distance and CultureEffects of Free Trade on ManagersEffects of Free Trade on ManagersThe Role of National CultureThe Role of National CultureHofstedes Model of National CultureHofstedes Model of National CultureHofstedes Model of National CultureHofstedes Model of National CultureHofstedes Model of National CultureHofstedes Model of National CultureNational Culture and Global ManagementMovie Example: Antitrust

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Management_005 Managing in a Global Environtment