MANAGING IN A GLOBAL ENVIRONMENT (Chapter 3) Session 4

What is Your Global Perspective? Ethnocentric Attitude Belief that home country (where the firm originated) has the best work approaches and practices (Parochialism) Polycentric Attitude View that employees/managers in host country (the foreign country in which the company is operating) know the best approaches and practices Geocentric Attitude A world-oriented view that focuses on using the best approaches and people from all around the globe The type of approach successful managers will need in today’s global environment

Global Trade: Regional Trading Alliances Global competition previously considered country against country. Now it is shaped by regional trading agreements The European Union (EU) Unified economic and trade entity between 28 countries Economic and monetary union (Euro) North American Free Trade Agreement (NAFTA) United States, Canada, and Mexico together created the largest trade block Eliminated barriers to free trade (tariffs, import licensing requirements, and customs user fees)

Global Trade: Regional Trading Alliances Association of Southeast Asian Nations (ASEAN) Trading alliance of 10 Southeast Asian nations The main problem right now is creating a trade block of all 16 nations. ASEAN’s biggest problem is that individual members haven’t been willing to sacrifice for the common good. African Union 53 African nations came together to build a prosperous Africa

Global Trade: Global Trading Mechanisms Global trade among nations doesn’t just happen on its own. As trade issues arise, global trade systems ensure that trade continues efficiently and effectively. There are 4 major global mechanisms World Trade Organization The International Monetary Fund, The World Bank Group The Organization for Economic Cooperation and Development

Different Types of International Organization 1. Multinational Corporation (MNC) A firm that maintains operations in multiple countries. Multi-domestic: A firm that maintains operations in several countries and decentralizes management and other decisions to operating country. This is a Polycentric Approach. (Switzerland based Nestle) 2. Global A firm that centralizes its management and other decisions in the home country. This approach to globalization reflects the ethnocentric attitude. Starwood Hotels

Different Types of International Organization 3. Transnational or Borderless Organization A firm that eliminates artificial geographic barriers Reflects a geocentric attitude Ford Motor Company is pursuing what it calls the One Ford concept as it integrates its operations around the world A company’s national origin or the national origin of its employees is no longer a good measure of where it does business.

How Organizations go Global Global Sourcing - purchasing materials or labor from around the world wherever it is cheapest. Exporting - making products domestically and selling them abroad. Importing - acquiring products made abroad and selling them domestically. Licensing - an organization gives another organization the right to make or sell its products using its technology or product specifications. Ex: Dell products Franchising - an organization gives another organization the right to use its name and operating methods.

How Organizations go Global Strategic Alliance - a partnership between an organization and one or more foreign company partner(s) in which both share resources and knowledge in developing new products or building production facilities. Ex: Starbucks and Barnes & Noble Joint Venture - a specific type of strategic alliance in which the partners agree to form a separate, independent organization for some business purpose. Ex: Hulu Foreign Subsidiary - directly investing in a foreign country by setting up a separate and independent production facility or office. (Find out one by yourself)

How Organizations go Global

The Economic Environment A global manager must be aware of economic issues when doing business in other countries. It is important to understand a country’s economic system. Free Market Economy - an economic system in which resources are primarily owned and controlled by the private sector. Planned Economy - an economic system in which economic decisions are planned by a central government. No economy is purely free market or planned. USA and UK are toward the free market end of the spectrum but do have governmental intervention and controls. The economies of Vietnam and North Korea are more planned but recently have been moving toward more free market. organizational culture is descriptive. It’s concerned with how members perceive the culture and describe it, not with whether they like it. Finally, even though individuals may have different backgrounds or work at different organizational levels, they tend to describe the organization’s culture in similar terms. That’s the shared aspect of culture.

The Cultural Environment National Culture - the values and attitudes shared by individuals from a specific country that shape their behavior and beliefs about what is important. Which is more important to a manager—national culture or organizational culture? Is an IBM facility in Germany more likely to reflect German culture or IBM’s corporate culture? Research indicates that national culture has a greater effect on employees than does their organization’s culture. Hence it is important for managers to study the cultural environment. organizational culture is descriptive. It’s concerned with how members perceive the culture and describe it, not with whether they like it. Finally, even though individuals may have different backgrounds or work at different organizational levels, they tend to describe the organization’s culture in similar terms. That’s the shared aspect of culture.

Hofstede’s Five Dimensions of National Culture organizational culture is descriptive. It’s concerned with how members perceive the culture and describe it, not with whether they like it. Finally, even though individuals may have different backgrounds or work at different organizational levels, they tend to describe the organization’s culture in similar terms. That’s the shared aspect of culture.

Hofstede’s Five Dimensions of National Culture organizational culture is descriptive. It’s concerned with how members perceive the culture and describe it, not with whether they like it. Finally, even though individuals may have different backgrounds or work at different organizational levels, they tend to describe the organization’s culture in similar terms. That’s the shared aspect of culture.

Contemporary Issues 1. The Challenge of Openness 2. Global Mind-Set Increased threat of terrorism Economic interdependence of trading Acknowledging cultural, political, and economic differences 2. Global Mind-Set attributes that allow a leader to be effective in cross-cultural environments organizational culture is descriptive. It’s concerned with how members perceive the culture and describe it, not with whether they like it. Finally, even though individuals may have different backgrounds or work at different organizational levels, they tend to describe the organization’s culture in similar terms. That’s the shared aspect of culture.