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Management ch 04 managing in a global environment

Chapter 4

Managing in a Global Environment


Importance of International Business

If you are not thinking
international,
you are not thinking business
management

2

Copyright © 2005 by South-Western, a division of Thomson Learning. All rights reserved.


Global Environment and
International Managers

Chapter 4

Topics



Difficulties Operating in Borderless World



Challenges


Economic



Legal-political



Socio-cultural



Multinational Corporations



Foreign Markets - Entrance
Managers’ Challenge: Wal-Mart Managers

3

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A Borderless World

4




Business is becoming a unified, global field



Companies that think globally have a competitive
edge



Domestic markets are saturated for many companies



Consumers can no longer tell from which country
they are buying

Copyright © 2005 by South-Western, a division of Thomson Learning. All rights reserved.


Four Stages of Globalization
Domestic stage:
market potential is limited to the home country
production and marketing facilities located at home
International 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 country
offers the best opportunities and lowest cost
ownership, control, and top management tend to be dispersed

5

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4 Stages of Globalization
1. Domestic

2. International

3. Multinational

Strategic Orientation

Domestically
Oriented

Export- Oriented
multi-domestic

Multinational

Global

Stage of Development

Initial foreign
involvement

Competitive
positioning

Explosion of
international
operations

Global

Cultural Sensitivity

Of little
importance

Very important

Somewhat
important

Critically
important

“Many good
ways”

“The least-cost
way”

“Many good
ways”

Manager Assumptions “One best
way”

SOURCE: Based on Nancy J. Adler, International Dimensions of Organizational Behavior, 4 th ed. (Cincinnati, Ohio: South-Western, 2002), 89.

6

4. Global

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Global (stateless) Corporations


Number is increasing



Awareness of national borders decreasing



Rising managers expected to know a 2nd or 3rd
language



Corporate Example – Nestle (Swiss)




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CEO Peter Brabeck–Letmathe (Austrian)
Half of general managers (non-Swiss)
Strong faith in regional managers who are native to the
region

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The International
Business Environment

8



International management is management of
business operations conducted in more than one
country



Fundamental tasks do not change



Basic management functions


are the same - domestic or international



Greater difficulties and risks when performing on an international
scale

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International Environment Factors

Economic
•Economic
development
•Infrastructure
•Resource and
product markets
•Per capita
Income
•Exchange rates
•Economic
conditions

Legal-Political
•Political risk
•Government
takeovers

Organization

•Tariffs, quotas, taxes
•Terrorism, political
instability
•Laws, regulations

Sociocultural
•Socio values, beliefs
•Language
•Religion (objects, taboos, holidays)
•Kinship patterns
•Formal education, literary
•Time orientation

9

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Economic Environment Factors

10



Economic development



Infrastructure



Resource and product markets



Exchange rates



Inflation



Interest rates



Economic growth

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Economic Development

11



Countries categorized as “developing” or “developed”



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

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Infrastructure
A country’s physical facilities that support economic
activities




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Airports, highways, and railroads
Energy-producing facilities
Communication facilities

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Resource and Product Markets
When operating in another country...


Managers must evaluate market demand



To develop plants, resource markets must be available – raw
materials and labor

Corporate Example – McDonald

13

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Exchange Rates






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Rate at which one country’s
currency is exchanged for
another country’s
Has become a major concern for
companies doing business
internationally
Changes in the exchange rate
can have major implications for
profitability of international
operations

Copyright © 2005 by South-Western, a division of Thomson Learning. All rights reserved.


The Legal-Political Environment


15

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

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Political Instability



Events such as riots, revolutions, or government
upheavals that affect the operations of an
international company

16

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Laws and Regulations

17



Government laws and regulations differ from country
to country



Make doing business a true challenge for
international firms



Internet has increased impact of foreign laws on U.S.
companies – expands potential for doing business
on global basis

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Sociocultural Environment


Culture – shared knowledge, beliefs, values,
common modes of behavior, and ways of thinking
among members of a society






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Intangible
Pervasive
Difficult for outsider to learn

Managers need to understand difference in social
values to comprehend local cultures and deal with
them effectively

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Hofstede’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
Ethical Dilemma: The Problem in Asia

19

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Four Dimensions of National Value

20

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GLOBE Value Dimensions
Global Leadership and Organizational Behavior Effectiveness project

More comprehensive view of cultural
similarities and differences





Assertiveness
Future orientation
Uncertainty avoidance
Gender differentiation







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Power distance
Societal collectivism
Individual collectivism
Performance orientation
Humane orientation

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International Cultural Influences


Other Cultural Characteristics






22

Language
Religion
Attitudes
Social Organization
Education



Linguistic pluralism – several languages exist



Ethnocentrism – regard own culture superior

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International Trade Agreements


Most visible changes in legal-political
factors grow out of international trade
agreements:





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GATT
WTO
EU
NAFTA

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International Trade Alliances









24

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, 147 member countries abide by the rules
Primary tools WTO uses on tariff concessions,
countries agree to limit level of tariffs on imports
from other WTO members
Most favored nation clause

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WTO

25



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



Has legal authority to arbitrate disputes on
400 trade issues



Partly responsible for backlash against global
trade

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