Managing in a Global Environment Chapter 3 Managing in a Global Environment

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

3.1 - Ranking of Six Countries on the Globalization Index

Global Mindset Ability of managers to appreciate and influence individuals, groups, organizations, and systems that represent: Different social, cultural, political, institutional, intellectual, and psychological characteristics Develop by engaging with people from different cultures

The Impact of Multinational Corporations (MNC) 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

The Impact of Multinational Corporations (MNC) Controlled by one management authority MNC managers must have a global perspective Ethnocentric companies – place emphasis on their home countries Polycentric companies – oriented toward the markets of individual foreign host countries Geocentric companies – world oriented and favor no specific country

The Globalization Backlash 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

The Globalization Backlash 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

Serving the Bottom of the Pyramid (BOP) 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

3.2 - Strategies for Entering the International Arena

Getting Started Internationally Exporting – transferring products for sale to foreign countries Outsourcing – also called offshoring, work activities are done in countries with cheap labor

Getting Started Internationally 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

The International Business Environment Planning, organizing, leading, and controlling in multiple countries can be challenging It took McDonald’s a year to figure out that Hindus in India do not eat beef In Africa, the labels on bottles include pictures to aid illiterate consumers Managers must be mindful in the global marketplace

3.3 - Key Factors in International Environment

The Economic Environment Economic development – Countries are categorized as either developed or developing based on per capita income Government policies Market size Financial markets Infrastructure

3.4 - Country Competitiveness Comparison 2011-2012

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

3.5 - How Countries are Bearing the Economic Crisis

The Legal-Political Environment Political risk is defined as the risk of lost assets, earning power, or managerial control Political instability includes riots, revolutions, civil disorders, and frequent changes in government

The Sociocultural Environment The values and behaviors that govern U.S. business do not always translate Social values Communication differences

Hofstede’s Value Dimensions Power distance Uncertainty avoidance Individualism and collectivism Masculinity and femininity

3.6 - Rank Orderings of Ten Countries Along Four Dimensions of National Value Systems

GLOBE Project Value Dimensions Assertiveness Future orientation Gender differentiation Performance orientation Humane orientation

3.7 - Examples of Country Rankings on Selected GLOBE Value Dimensions

3.8 - High-Context and Low-Context Cultures

Changing International Landscape China Inc. China manufactures many products for U.S. companies China is also a growing consumer market Regulations and government policies make doing business in China a challenge

Changing International Landscape India is a service giant, growing in software design and engineering Brazil is a country that is gaining the attention of American managers

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

International Trade Alliances 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 a single market

3.9 - The Nations of the European Union