fundamental of management. lecture 3

Lecture 3Managing in a Global Environment

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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

A Borderless World

Copyright ©2012 by South-Western, a division of Cengage Learning. All rights reserved.

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4.1 Ranking of Six Countries on the Global Index


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4.2 Four Stages of Globalization


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• Exporting – transferring products for sale to foreign countries

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

• Licensing – enabling a company to produce and market a product in another country

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

• Direct Investing – high level of involvement, company manages and controls assets

– Joint venture and other types of partnerships are common

International Market Strategies


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4.3 Strategies for Entering the International Arena


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China manufacturers many products for U.S. companies

China is also a growing consumer market

Regulations and government policies make doing business in China a challenge

India is a service giant, growing in software design and engineering

Brazil is a country that is gaining the attention of American managers

China Inc.


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• Planning, organizing, leading, and controlling in multiple countries can be challenging– It took McDonalds a year to figure out that Hindus in

India do not eat beef

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

• Managers must be mindful in the global marketplace

The International Business Environment


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4.4 Key Factors in International Environment


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• Economic Development - Countries are categorized as either developed or developing based on per capita income

– Government Policies

– Market Size

– Financial Markets

– Infrastructure

• Resource and Product Markets

– Companies must evaluate market demand

The current economic crisis has highlighted how interconnected economies are around the world

The Economic Environment


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4.5 World Economic Forum Global Competitiveness


The United States moved from #1 to #2!

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4.6 How Countries are Bearing

the Economic Crisis


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• 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

The Legal-Political Environment


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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→ Attitudes

The Sociocultural Environment


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Power Distance

Uncertainty Avoidance

Individualism and Collectivism

Masculinity and Felinity

Hofstede’s Value Dimensions


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• Assertiveness• Future orientation• Uncertainty avoidance• Gender differentiation• Power distance

GLOBE Project Value Dimensions


• Social collectivism• Individual collectivism• Performance

orientation• Humane orientation

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4.7 Country Ranking on Four GLOBE Value Dimensions


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4.8 Country Ranking on Selected GLOBE Value Dimensions


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4.9 High-Context and Low-Context Cultures


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• 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

Developing Cultural Intelligence


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• 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

International Trade Alliances


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4.10 European Union


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Trading alliance of ten countries

World’s third largest free-trade area

1.9 billion people and $45 trillion in trade

Remove all tariffs between China and ASEAN countries by 2015

China-ASEAN Free Trade Area


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• The size and volume of international business is LARGE– Companies have revenue = GDP of small country– Move assets from country to country– 25% or more of its profit comes from outside parent

country• MNC is managed as an integrated whole• Controlled by one management authority• MNC managers must have a global perspective

The Impact of Multinational Corporations (MNC)


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• 68% of Americans say other countries benefit the most from free trade– 53% believe free trade has hurt U.S.

• The United States’ primary concern is the loss of jobs– $136 billion in wages will shift from the U.S.

• Business leaders insist that economic benefits flow back to the U.S. economy– Lower prices and expanded markets– Increased profits and funds for innovation

• But American shoppers say they would pay higher prices to keep down foreign competition

The Globalization Backlash


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An approach for multinationals to do good

Corporations can alleviate problems and make large profits by selling to the world’s poor

There are more than 4 billion people at the lowest level of the economic pyramid

Many companies are adopting BOP strategies

Serving the Bottom of the Pyramid (BOP)
