Chapter 3

Managing in a Global

Environment

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A Borderless World

Organizations and managers are not isolated from international forces:– Trade barriers have fallen– Communication is faster, cheaper– Consumer tastes converge

The difficulties and risks of a borderless world are matched by benefits and opportunities

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Four Stages of Globalization

*Today the # of global & stateless corporations is increasing and the awareness of national border is decreasing

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International Market Strategies

• Exporting – transferring products for sale to foreign countries

• Outsourcing – also called off shoring, work activities are done in countries with cheap labor

• Franchising – licensing that provides a complete package of materials and services

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Strategies for Entering International Markets

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China Inc.

Many companies are going to China and India, business is booming

More and more products are manufactured in these countries

China can manufacture at a much lower cost

India is growing in software design, services and engineering

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The International Business Environment

• Planning, organizing, leading and controlling in multiple countries can be challenging

– It took McDonalds a year to figure that Hindus in India do not eat beef

– In Africa, the baby food includes pictures to aid illiterate consumers

• Managers must be aware to operate in the highly competitive global environment

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Key Factors in International Environment

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The Economic Environment

Resource and Product MarketsCompanies must evaluate the market demand for

their products

Exchange RatesVolatility in exchange rates can have major

implications on profit

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World Economic Forum Global Competitiveness

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The Legal-Political Environment

Political risk is defined as the risk of lost assets, earning power, or managerial control.

Managers must be concerned with the political instability of global markets.

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The Sociocultural Environment

The values and behaviors that govern U.S. business do not always translate

• Social Values

• Communication Differences

• Other Cultural Characteristics

– Language, religion, social organization, education and attitudes

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Hofstede’s Value Dimensions

1. Power Distance

2. Uncertainty Avoidance

3. Individualism and Collectivism

4. Masculinity and Femininity

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GLOBE Project Value Dimensions Assertiveness Future orientation Uncertainty avoidance Gender differentiation Power distance Social collectivism Individual collectivism Performance orientation Humane orientation

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Country Ranking on Selected GLOBE Value Dimensions

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High-Context and Low-Context Cultures

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International Trade Alliances• General Agreement on Tariff and Trade (GATT)

– 23 nations in 1947, a set of rules for fair trade• World Trade Organization (WTO)

– Maturation of GATT into permanent global institute• European Union

– 1957 Alliance to improve economic and social conditions among members; evolved to 27-nation European Union

• North American Free Trade Agreement (NAFTA)– Merged the United States, Canada and Mexico into

trading bloc

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European Union

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The Globalization Backlash• 68% of Americans say other countries benefit the

most from free trade

• The United States primary concern is the loss of jobs

• Business leaders insist that economic benefits flow back to the U.S. economy

– Lower prices

– Expanded markets

– Increased profits and funds for innovation

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Developing Cultural Intelligence

• Managers will be most successful in foreign assignments if they are culturally flexible & able to adapt easily to new situations and ways of doing things

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Developing Cultural Intelligence

• Cultural intelligence – ability to use reasoning and observation skills– Culturally flexible

– Adapt to new situations

• Managers must study the language and learn

Cognitive, emotional and physical intelligence

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Developing Cultural Intelligence

• Cognitive– Person’s observational & learning skills & the

ability to pick up on clues to understanding

• Emotional– Concerns one’s self-confidence & self-motivation

• Physical– Person’s ability to shift his or her speech

patterns, expressions & body language

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Managing Cross-Culturally• Human resources seek managers who will thrive

internationally

• Global skills will be a key consideration

• Self-analysis must take place about family situationsCan you initiate social contacts in a foreign culture?

Can you adjust well to different environments and changes in personal comfort?

Can you manage your future reentry in the job market?

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An Asian Vies of Cultural Differences