Managing in a Global Environment Chapter 4 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 Copyright ©2012 by South-Western, a division of Cengage Learning. All rights reserved.

International Market Strategies Exporting Outsourcing Licensing Direct Investing Copyright ©2012 by South-Western, a division of Cengage Learning. All rights reserved.

International Management Management of business operations conducted in more than one country. Copyright ©2012 by South-Western, a division of Cengage Learning. All rights reserved.

The International Business Environment 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 market place. When they are comparing one country with another, the economic,legal-political and socio cultural sectors present greatest difficulties. Copyright ©2012 by South-Western, a division of Cengage Learning. All rights reserved.

4.4 Key Factors in International Environment Copyright ©2012 by South-Western, a division of Cengage Learning. All rights reserved.

The Economic Environment Economic Development - Countries are categorized as either developed or developing based on per capita income Developed countries Developing countries Resource and Product Markets When operating in another country, managers must evaluate market demand for their products and services ECONOMIC INTERDEPENDANCE- The current economic crisis has highlighted how interconnected economies are around the world Copyright ©2012 by South-Western, a division of Cengage Learning. All rights reserved.

The Legal-Political Environment Business must deal with unfamiliar political systems when they go international. Issues faced: 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. Political instability includes riots ,revolutions, civil disorders and frequent changes in government. Copyright ©2012 by South-Western, a division of Cengage Learning. All rights reserved.

The Sociocultural Environment One way managers can get a handle on local cultures is to understand differences in social values. Social Values Communication Differences Other Cultural Characteristics Language Religion Social organization Education Attitudes Copyright ©2012 by South-Western, a division of Cengage Learning. All rights reserved.

Hofstede’s Value Dimensions Power Distance Uncertainty Avoidance Individualism and Collectivism Masculinity and Felinity Copyright ©2012 by South-Western, a division of Cengage Learning. All rights reserved.

Developing Cultural Intelligence Managers working internationally need cultural intelligence. Cultural intelligence – ability to use reasoning and observation skills to interpret unfamiliar situations and devise appropriate behavioral response Culturally flexible Adapt to new situations Managers must study the language and learn Cultural Intelligence includes three components. Cognitive, emotional, and physical intelligence Copyright ©2012 by South-Western, a division of Cengage Learning. All rights reserved.

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

China-ASEAN Free Trade Area 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 Copyright ©2012 by South-Western, a division of Cengage Learning. All rights reserved.

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 Controlled by one management authority MNC managers must have a global perspective Copyright ©2012 by South-Western, a division of Cengage Learning. All rights reserved.

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