1. Managing the Global Environment
Free Powerpoint Templates

2. The Changing Global Environment
Global Organization operates and competes in more than one country
The challenges of Global Competition
Establishing operations in a foreign country
Obtaining material from foreign suppliers
Managing in a foreign culture
The Global environment is open meaning companies are free to buy and sell goods and services in various countries

3. Declining Barriers to Trade
Tariff- A tax that government imposes on imported or occasionally exported goods. This is intended to protect domestic industry and jobs from foreign competition. Other countries retaliate with their own tariffs.

4. Declining Barriers to Trade
Free Trade Doctrine- the idea that if each country specializes in the goods that it can produce most efficiently, the remaining product produced will be used to export in exchange for products that the country lacks.
GATT- General Agreement of Tariffs and Trades. 117 countries reduced tariffs from % to 3% between

5. Declining Barriers of Distance and Culture
Distance- Markets were closed due to slowness of communications over long distances
Culture- Language barriers and lack of understanding in cultural practices made business difficult overseas
Improvement in transportation (FedEx) and the internet reduced barriers

6. North American Free Trade Agreement (NAFTA)
Abolishes 99% of tariffs on goods traded between Mexico, Canada and the U.S.
Increased investment by U.S. firms in Mexican manufacturing facilities due to lower wage costs in Mexico
Increased the market size for business
Increased competition for U.S. companies

7. Global Task Environment
Suppliers- problem in developing a network of global suppliers to keep costs down and quality up
Global Outsourcing- manufacturing overseas to keep costs down.
Distributors- Each country has different custom and legal restraints

8. Global Task Environment
Customers- create large opportunities for new customers. Products must be customized to fit different cultures
Competitors- Increased competition abroad and strong local markets. Entry of foreign competitors into home markets
Read Li & Fung Supply Chain Mgt. page

9. Global General Environment
Political Forces
Representative Democracy- representatives elected by citizens to make decisions on their behalf. (Freedom of expression, court system and regular elections)
Totalitarian Regimes- a single party holds all political power and does not permit opposition. Human rights issues and lack of court system make it difficult to due business in these countries

10. Global General Environment
Economic Forces
Free market economy- private business controls production of goods and services
Command economy- government controls all factors of production and sets prices
Mixed economy- Certain businesses controlled by private business, others are government controlled. (socialism)
Read Global Car Manufacturing on page 198

11. Global General Environment
Sociocultural forces-
National culture- set of values and beliefs that unite citizens of a country
Values- ideas about what a society believes to be good (roles of men, women, government)
Norms- unwritten rules and code of conduct on how people should act.
Folkways-routine social conventions (dress and manners.
Mores- behavioral norms (theft, adultery)

12. Hofstede’s Model of National Culture
A model of national culture developed into five dimensions for comparing different countries. (Review figure 6.5 on page 201
Individualism-values individual freedom and self-expression judged by achievements vs. social background.
Collectivism- Values subordination of the individual to the goals of the group. Japan and communist countries support this value

13. Hofstede’s Model
Power Distance- Society’s acceptance of differences in the well being of citizens
High power distance- gap between rich and poor becomes very wide
Low power distance- gap is reduced by taxation and welfare programs (U.S. Germany)

14. Hofstede’s Model
Achievement- Countries value assertiveness and success and are results oriented (U.S. Japan)
Nurturing- value quality of live, personal relationships, and service (Sweden and Denmark)

15. Hofstede’s Model
Uncertainty Avoidance-Societies differ in their tolerance for uncertainty and risk
Low uncertainty- value diversity and wide range of opinions and beliefs (U.S.)
High uncertainty- expect high conformity in their citizens beliefs and behavior (Japan, France)

16. Hofstede’s Model
Long Term Outlook- how countries view economy and quality of life issues
Long Term outlook- value saving and persistence (Asian cultures)
Short term outlook- seek to maintain stability and happiness in the present (U.S.)
Research Hofstede’s model for 6 select countries from and report results vs. that of the U.S.

17. Global Management
Management practices that are effective in one culture often will not work as well in another culture
Culture shock- the feeling of surprise and disorientation people feel when they do not understand the values that guide a particular culture
Extatriate Managers- manager who go abroad to work for a global organization

18. Four ways of expanding Internationally
Importing and Exporting- The least risky and least complex of global operations
Exporting- making products at home and selling them abroad
Importing- selling products at home that are made abroad.
Research the U.S. trade gap between exports and imports at

19. Four ways of expanding Internationally
Licensing-allowing a foreign organization to take charge of manufacturing and distributing a product in its country in return for a fee. The Licensor reduces cost of investing in fixed assets but risks exposing its technological know-how
Franchising-selling the rights to use a brand name and use of technology in return for a lump sum payment and % of profit. Cost of expanding is reduced but risk of reputation if not done correctly.

20. Four ways of expanding Internationally
Strategic Alliances- companies poor or share their resources with a foreign company both sharing the rewards and risks of the new venture. U.S. company maintain controls of operation
Joint venture- a strategic alliance among two companies that agree to jointly establish and share the ownership of a new business.

21. Four ways of expanding Internationally
Wholly-Owned foreign subsidiary- production operations are established in a foreign country independent of any local direct involvement
Required a high level of investment
Higher degree of control of operations
Potential for high return on investment
Protects the firm’s technology and know how

22. Impediments to an Open Global Environment
Administrative barriers (non-tariff) policies and regulations to impede or block foreign competitors entry into local market
Self-Imposed Ethical Impediments
Respect for worker rights
Respect for the environment
Read American Rice invades Japan and saving the amazon Jungle on page 208

23. Global Project
Research Apple computer’s global strategy for entry into China and India
Each team of 10 students will research the task and general environment issues facing Apple computer as it prepares to enter both China and India.
You will report back to the Board of Directors for Apple as to what issues to consder as they enter each market