Management 11e John Schermerhorn Chapter 5: Global Management and Cultural Diversity

Planning Ahead — Chapter 5 study questions 1.What are the management challenges of globalization? 2.What are global businesses and what do they do? 3.What is culture and how does it impact global management? 4.How can we benefit from global management learning?

Study Question 1: What are the management challenges of globalization?  Key concepts in the challenges of globalization:  Global economy  Globalization  Global management  Global manager Management 11e/ Chapter 53

Study Question 1: What are the management challenges of globalization?  Global economy  Resource supplies, product markets, and business competition are worldwide, rather than local  Globalization  The process of growing interdependence of these components in the global economy  Global management  Management in organizations with business interests in more than one country  Global manager  Aware of international developments and the effect on societies and economies  Competent in working with people from different cultures Management 11e/ Chapter 54

Study Question 1: What are the management challenges of globalization?  Global businesses  Conduct for-profit transactions of goods and services across national boundaries  Reasons why businesses go global: Management 11e/ Chapter 55 ProfitsCustomersSuppliersCapitalLaborRisk

Study Question 1: What are the management challenges of globalization?  Market entry strategies  involve the sale of goods or services to foreign markets but do not require expensive investments  Types of market entry strategies:  Global sourcing  Exporting  Importing  Licensing agreement  Franchising Management 11e/ Chapter 56

Figure 5.1 Common forms of global business—from market entry to direct investment strategies Management 11e/ Chapter 57

Study Question 1: What are the management challenges of globalization? the process of purchasing materials or services around the world for local use Global sourcing selling locally made products in foreign markets Exporting buying foreign-made products and selling them domestically Importing one firm pays fee for rights to make or sell another company’s products Licensing agreement a fee is paid for rights to use another firm’s name and operating methods Franchising Management 11e/ Chapter 58

Study Question 1: What are the international business challenges of globalization?  Direct investment strategies require major capital commitments but create rights of ownership and control over foreign operations Management 11e/ Chapter 59

Study Question 1: What are the international business challenges of globalization?  Types of direct investment strategies: Management 11e/ Chapter 510 Joint ventures operates in a foreign country through co- ownership by foreign and local partners Strategic alliances a partnership in which foreign and domestic firms share resources and knowledge for mutual gains Foreign subsidiaries local operation completely owned by a foreign firm

Study Question 1: What are the international business challenges of globalization? Familiarity with your firm’s major business Strong local workforce Future expansion possibilities Values its customers Strong local market for partner’s own products Good profit potential Sound financial standing Criteria for choosing a joint venture partner: Management 11e/ Chapter 511

Study Question 1: What are the international business challenges of globalization? Global business environments Legal and political systemsTrade agreements and trade barriersRegional economic alliances Management 11e/ Chapter 512

Study Question 1: What are the international business challenges of globalization?  Legal and political systems  Differing laws and practices regarding  Business ownership  Foreign currency exchange  Protection of intellectual property rights  Counterfeit merchandise  Legal and political systems  Political risk  Potential loss in value of a foreign investment due to instability and political changes in the host country  Political risk analysis  Forecast political disruptions that threaten the value of a foreign investment Management 11e/ Chapter 513

Study Question 1: What are the international business challenges of globalization?  Trade Agreements and Trade Barrriers  World Trade Organization  Most favored nation status  Tariffs  Nontariff barriers  Protectionism  Regional Economic Alliances  NAFTA – North American Free Trade Agreement  EU – European Union  APEC – Asia Pacific Economic Cooperation  ASEAN – Association of Southeast Asian Nations  SADC – Southern Africa Development Community Management 11e/ Chapter 514

Study Question 2: What are global businesses and what do they do?  Types of global businesses:  Global corporation  MNC (multinational corporation) with extensive business operations in more than one foreign country  Transnational corporation  MNC (multinational corporation) operates worldwide on a borderless basis  Mutual benefits for host country and global corporation or MNC:  Shared growth opportunities  Shared income opportunities  Shared learning opportunities  Shared development opportunities Management 11e/ Chapter 515

Figure 5.2 What should go right and what can go wrong in MNC- host country relationships Management 11e/ Chapter 516

Study Question 2: What are global businesses and what do they do?  Host country complaints about MNCs:  Excessive profits  Domination of local economy  Interference with local government  Hiring the best local talent  Limited technology transfer  Disrespect for local customs  MNC complaints about host countries:  Profit limitations  Overpriced resources  Exploitative rules  Foreign exchange restrictions  Failure to uphold contracts Management 11e/ Chapter 517

Study Question 2: What are global businesses and what do they do? Corruption – illegal practices that further one’s business interests Sweatshops — employing workers at low wages for long hours and in poor working conditions Child labor — full-time employment of children for work otherwise done by adults Sustainable development — meeting current needs without compromising future needs Ethical issues for Global Businesses: Management 11e/ Chapter 518

Study Question 2: What are global businesses and what do they do?  Ethical issues for Global Businesses:  Corruption – illegal practices that further one’s business interests  Foreign Corrupt Practices Act – makes it illegal for U.S. firms and their representatives to engage in corrupt practices overseas  Bribes to foreign officials  Excessive commissions  Non monetary gifts  Child labor and Sweatshops:  Child labor – full time employment of children for work otherwise done by adults  Sweatshops – employ workers at very low wages for long hours in poor working conditions Management 11e/ Chapter 519

Study Question 3: What is culture and how does it impact global management? The shared set of beliefs, values, and patterns of behavior common to a group of people Culture Confusion and discomfort a person experiences in an unfamiliar culture Culture shock The ability to adapt and adjust to new cultures Cultural intelligence Tendency to consider one’s own culture as superior to others Ethnocentrism Management 11e/ Chapter 520

Study Question 3: What is culture and how does it impact global management?  Stages in adjusting to a new culture: Management 11e/ Chapter 521 ConfusionSmall victoriesThe honeymoonIrritation and angerReality

Study Question 3: What is culture and how does it impact global management? Context Low context High context Time Monochronic Polychronic Space Proxemics Management 11e/ Chapter 522 Silent languages of culture

Study Question 3: What is culture and how does it impact global management?  Context  Low context cultures - emphasize communication via spoken or written words  United States  Canada  Germany  Context  High context cultures – rely on nonverbal and situational cues as well as on spoken or written words  Thailand  Malaysia Management 11e/ Chapter 523

Study Question 3: What is culture and how does it impact global management?  Time  Monochronic cultures – people tend to do one thing at a time  United States, Canada, Germany  Polychronic cultures – time is used to accomplish many different things at once  Egypt, Saudi Arabia, Mexico  Space  Proxemics – study of how people use space to communicate  In the U.S. people value “personal space”  Many Latin and Asian cultures expect much less personal space Management 11e/ Chapter 524

Power distance Uncertainty avoidance Individualism- collectivism Masculinity- femininity Time orientation Study Question 3: What is culture and how does it impact global management?  Values and national cultures (Hofstede): Management 11e/ Chapter 525

Figure 5.3 How countries compare on Hofstede’s dimension of national culture Management 11e/ Chapter 526

Study Question 4: How can we benefit from global management learning?  Project GLOBE (Global Leadership and Organizational Behavior Effectiveness)  Researches the leadership, organizational practices, and diversity among world cultures  Power distance  Uncertainty avoidance  Gender egalitarianism  Future orientation  Project GLOBE’s nine dimensions continued  Institutional collectivism  In-group collectivism  Assertiveness  Performance orientation  Humane orientation Management 11e/ Chapter 527

Study Question 4: How can we benefit from global management learning?  Project GLOBE’s research on leadership practices across cultures  Facilitators of leadership success  Acting trustworthy, just, honest  Showing foresight, planning  Being positive, dynamic, motivating  Inspiring confidence  Being informed and communicative  Being a coordinator and team builder  Project GLOBE’s research on leadership practices across cultures  Inhibitors of leadership success  Being a loner  Acting uncooperative  Being irritable  Acting autocratic Management 11e/ Chapter 528

Figure 5.4 Nine cultural dimensions used by Project GLOBE researchers Management 11e/ Chapter 529

Study Question 4: How can we benefit from global management learning?  Comparative management  How management systematically differs among countries and/or cultures  Global managers  Need to successfully apply management functions across international boundaries  Global management learning:  Companies can and should learn from each other  GLOBE dimensions  Power distance  Uncertainty avoidance  Future orientation  Be alert, open, inquiring, but always cautious Management 11e/ Chapter 530

Management 11e/ Chapter 5 Case  Harley-Davidson: Style and strategy have global reach