MANAGEMENT RICHARD L. DAFT

Managing in a Global Environment Managing in a Global Environment CHAPTER 4

Learning Outcomes Describe the emerging borderless world and some issues of particular concern for today’s managers. Describe market entry strategies that business use to develop foreign markets. Define international management and explain how it differs from the management of domestic business operations. Indicate how dissimilarities in the economic, sociocultural, and legal-political environments throughout the world can affect business operations. Describe how regional trading alliances are reshaping the international business environment. Describe the characteristics of a multinational corporation. Explain cultural intelligence and why it is necessary for managers working in foreign countries. Copyright ©2010 by South-Western, a division of Cengage Learning.  All rights reserved.

Are You Ready To Work Internationally? Cross-cultural skills are extremely important Every manager needs to think globally The future of business and society is being shaped by global relationships A global mind-set is becoming a prerequisite for managers Copyright ©2010 by South-Western, a division of Cengage Learning.  All rights reserved.

A Borderless World Isolation from international forces is no longer possible Trade barriers are falling Communication is faster and cheaper Consumer tastes are converging Virtual connections enable close, rapid coordination among people working in different parts of the world Copyright ©2010 by South-Western, a division of Cengage Learning.  All rights reserved.

Four Stages of Globalization Copyright ©2010 by South-Western, a division of Cengage Learning.  All rights reserved.

Strategies for Entering International Markets Exporting – transfers products for sale in foreign countries Global Outsourcing – transferring the labor of specific tasks to low cost countries Licensing – allowing an operation in another country to produce and sale company products Franchising – providing a foreign organization with package of materials and services Direct Investing - a production facility in another country Copyright ©2010 by South-Western, a division of Cengage Learning.  All rights reserved.

Getting Started Internationally Copyright ©2010 by South-Western, a division of Cengage Learning.  All rights reserved.

China Inc. Opportunities in China are booming Companies are engaging in all strategies The most common practice is outsourcing Multinationals are manufacturing a large variety of products in China China is attractive for low-cost manufacturing India is attractive in software design, services and engineering An author has named the phenomenon Chindia Copyright ©2010 by South-Western, a division of Cengage Learning.  All rights reserved.

Key Factors in The International Environment Copyright ©2010 by South-Western, a division of Cengage Learning.  All rights reserved.

The Economic Environment Economic development differs around the world Countries can be categorized as developed or less-developed Companies must be able to access the resources needed to produce their products Volatility in exchange rates can impact a businesses bottom-line Copyright ©2010 by South-Western, a division of Cengage Learning.  All rights reserved.

World Economic Forum Global Competitiveness Copyright ©2010 by South-Western, a division of Cengage Learning.  All rights reserved.

The Legal-Political Environment Government supervision Political instability Laws and regulations Copyright ©2010 by South-Western, a division of Cengage Learning.  All rights reserved.

The Sociocultural Environment Shared knowledge Beliefs Values Modes of behavior Values and behaviors from the US do not translate around the world Copyright ©2010 by South-Western, a division of Cengage Learning.  All rights reserved.

Country Ranking and National Value Systems Copyright ©2010 by South-Western, a division of Cengage Learning.  All rights reserved.

Hofstede’s Value Dimensions National value systems that influence organizational and employee working relationships Power Distance Uncertainty Avoidance Individualism and Collectivism Masculinity/ Femininity Copyright ©2010 by South-Western, a division of Cengage Learning.  All rights reserved.

GLOBE Project Value Dimensions Global Leadership and Organizational Behavior Effectiveness (GLOBE) Assertiveness Future Orientation Uncertainty Avoidance Gender Differentiation Power Distance Societal Collectivism Individual Collectivism Performance Orientation Humane Orientation Extension of Hofstede’s assessment Copyright ©2010 by South-Western, a division of Cengage Learning.  All rights reserved.

Country Rankings and GLOBE Rankings Copyright ©2010 by South-Western, a division of Cengage Learning.  All rights reserved.

Communication Differences Some cultures pay more attention to the social context of communication Social Setting Nonverbal Behavior Social Status High-context cultures are sensitive to social exchanges Low-context cultures use communication to exchange facts and information Copyright ©2010 by South-Western, a division of Cengage Learning.  All rights reserved.

High-Context and Low-Context Cultures Copyright ©2010 by South-Western, a division of Cengage Learning.  All rights reserved.

Other Cultural Characteristics Language Religion Social Organization Education Attitudes Copyright ©2010 by South-Western, a division of Cengage Learning.  All rights reserved.

International Trade Alliances General Agreement on Tariffs and Trade (GATT) Signed in 1947 by 23 nations Nondiscrimination, clear procedures, negotiations and disputes regarding trade World Trade Organization (WTO) Permanent global organization from GATT As of July 2007: 151 Countries European Union Begun in 1957 to improve economic and social conditions in European Economic Community Evolved into the 27-nation European Union Goal is to develop single market system North America Free Trade Agreement (NAFTA) United States, Canada, and Mexico Trading bloc to spur growth and investment Copyright ©2010 by South-Western, a division of Cengage Learning.  All rights reserved.

The Nations of the European Union Copyright ©2010 by South-Western, a division of Cengage Learning.  All rights reserved.

The Globalization Backlash As the world becomes more global, a backlash is growing 68% of American say other countries benefit more from trade One of the key concerns is job loss Many argue that globalization benefits the economy Copyright ©2010 by South-Western, a division of Cengage Learning.  All rights reserved.

Multinational Corporations More than 25% of its total sales revenue come from outside the home country In 2007, 42% of the global sales of US multinationals come from their foreign affiliates An MNC is managed as an integrated business system MNCs are controlled by a single management authority MNC managers have a global perspective Copyright ©2010 by South-Western, a division of Cengage Learning.  All rights reserved.

Managing In A Global Environment Developing Cultural Intelligence Cultural flexibility and ability to adapt Cognitive, emotional and physical Managing Cross-Culturally Expatriates can be successful by focusing on: Human Resources Leading Decision Making Motivating Copyright ©2010 by South-Western, a division of Cengage Learning.  All rights reserved.