Managing in the Global Environment

Chapter 6

Managing in the Global Environment

MGMT 321 - Chapter 6

Global Management Global Organizations

– Operate and compete globally– Uncertain and unpredictable

Global Environment– Forces and conditions in

the world outside the organization’s boundaries


Forces in the Organizational Environment


Task Environment Set of forces and conditions that

originate with suppliers, distributors, customers, and competitors

Affect an organization’s ability to obtain inputs and dispose of its outputs

Most immediate and direct effect on managers


SuppliersIndividuals and organizations that provide

an organization with input resources Relationships can be difficult due to

materials shortages, unions, and lack of substitutes

Managers can reduce supplier effects by increasing the number of suppliers

Low-cost products made abroad can be an opportunity for U.S. companies

Global Outsourcing


The Task Environment Distributors

– Organizations that help other organizations sell their goods or services to customers

Customers– Individuals and groups that buy goods and

services that an organization produces Competitors

– Current– Potential


Competitors Rivalry between competitors is

potentially the most threatening force– Price competition– Falling prices – Reduces access to resources – Lowers profits

Vs. Vs.

http://www.outback.com/index.asp

http://www.mortons.com/website/index.html


Barriers to Entry and Competition

Figure 6.2


General Environment Economic Technological Demographic Socio-cultural Political and Legal


Economic Forces Interest rates, inflation, unemployment,

economic growth, and other factors affecting the general financial health

Successful managers: – Realize the effects of economic forces – Pay close attention to what is occurring in

the national and regional economies


Technological Forces Outcomes of changes in the technology

that managers use to design, produce, or distribute goods and services

Results in new opportunities or threats Often makes products obsolete very

quickly Changes are altering the very nature of

work itself, including the manager’s job


Socio-cultural Forces Pressures emanating from the social

structure of a country or society or from the national culture

Societies differ substantially in the values and norms they emphasize

Effective managers are sensitive to differences between societies and adjust their behaviors accordingly


Demographic Forces Aging populations in most industrialized

nations Organizations need to

find ways to motivate and utilize older workers


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 protection• Increasingly nations are joining together into

political unions that allow for the free exchange of resources and capital


Process of Globalization Globalization

– Specific and general forces that work together to connect economic, political, and social systems

– Nations and peoples become increasingly interdependent

Forms of capital that flow between countries:– Human capital– Financial capital– Resource capital– Political capital


Declining Barriers to Trade and Investment Tariff

– A tax that government imposes on imported or, occasionally, exported goods

– Intended to protect domestic industry and jobs from foreign competition

Free-Trade Doctrine– Each country should specialize in the

production of the goods and services that it can produce most efficiently


Declining Barriers of Distance and Culture Distance

– Markets were essentially closed because of the slowness of communications

Culture– Language barriers and cultural practices

Changes in distance and communication– Improvements in transportation technology

and fast, secure communications


Effects of Free Trade NAFTA

– Abolishes 99% of tariffs on goods traded between Mexico, Canada and the United States

– Increased investment by U.S. firms in Mexican manufacturing facilities

CAFTA– Same as NAFTA between United States and all

countries in Central America– Approved by Dominican Republic, El Salvador,

Guatemala, Nicaragua, and Honduras


The Role of National Culture Values

– Ideas about what a society believes to be good, desirable and beautiful

– Provide the basic underpinnings for notions of freedom, democracy, honesty, loyalty, etc.

Norms– Unwritten rules and codes of conduct that

prescribe how people should act Mores

– Behavioral norms that are considered central to functioning of society


Hofstede’s Model of National Culture

Figure 6.4

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Managing in the Global Environment