1. MANAGEMENT Chapter Five: Navigating the Global Environment
TWELFTH EDITION
MANAGEMENT
Ricky W. Griffin
Part Two: Understanding the Environmental Context of Management
Chapter Five: Navigating the Global Environment
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2. Learning Outcomes
Describe the nature of international business, including its meaning, recent trends, management of globalization, and competition in a global market.
Discuss the structure of the global economy and describe the GATT and the WTO.
Identify and discuss the environmental challenges inherent in international management.
Describe the basic issues involved in competing in a global economy, including organization size and the management challenges in a global economy.
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3. The Nature of International Business
You
Clothes made in Taiwan
Car made in Japan
Phone made in China
Coffee grown in Africa
Failure to take a global perspective is one of the biggest mistakes a manager can make.
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4. Levels of International Business Activity
Figure 5.1
Levels of International Business Activity
The text identifies four general levels of international activity differentiating organizations.
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5. The Meaning of International Business
A domestic business
acquires all of its resources and sells all of its products or services within a single country.
An international business
is based in a single country but acquires meaningful resources and/or revenues from other countries.
A multinational business
uses a worldwide marketplace to buy materials, borrow money, manufacture, and sell its products.
A global business
transcends national boundaries and is not committed to a single home country.
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6. Trends in International Business
After WW II, the U.S. dominated global markets.
Rebuilt countries were poised for growth while U.S. companies became complacent.
Increased population and affluence meant consumers wanted new/better products.
Foreign products began flooding the U.S. market and companies had to compete.
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7. Managing the Process of Globalization
Involves making the product in the firm’s domestic marketplace and selling it in another country.
Exporting
Means that a good, service, or capital is brought into the home country from abroad.
Importing
Importing and/or exporting is usually the first type of international business in which a firm gets involved.
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8. Managing the Process of Globalization
Licensing
An arrangement whereby one company allows another to use its brand name, trademark, technology, patent, copyright, or other assets in exchange for a royalty based on sales.
Strategic alliance
Occurs when two or more firms jointly cooperate for mutual gain.
A joint venture is a special type of strategic alliance in which partners share ownership in a new enterprise.
Direct investment
Occurs when a firm headquartered in one country builds or purchases operating facilities or subsidiaries in a foreign country.
Maquiladoras are light-assembly plants built in northern Mexico, close to the U.S. border.
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9. Table 5.1
Advantages and Disadvantages of Different Approaches to Internationalization
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10. Competing in a Global Market
The functions are the same, whatever a firm’s level of international involvement.
Complexity increases for international firms.
The key question is whether to focus on globalization or regionalism.
Most MNC’s use both global and local resources and activities.
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11. Structure of the Global Economy
Mature market economies and systems
A market economy is based on the private ownership of business that allows market factors such as supply and demand to determine business strategy.
Clusters of countries that engage in high levels of trade with one another is known as market systems.
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12. Figure 5.2 The Global Economy
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13. Mature Market Economies and Systems
An agreement made by the U.S., Canada, and Mexico to promote trade with one another.
North American Free Trade Agreement (NAFTA)
The first and most important international market system.
European Union (EU)
A market system located in Southeast Asia.
Pacific Asia
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14. Structure of the Global Economy
High-potential/high-growth economies
Underdeveloped and immature economies.
Characterized by weak industry, weak currency, and relatively poor consumers.
China, India, Brazil, Russia, Vietnam and South Africa.
Currently experiencing strong development and growth.
Barriers to international trade:
consumers’ lack of wealth and poor infrastructure.
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15. Structure of the Global Economy
Other economies
The Middle East defies classification.
These countries hold tremendous wealth yet are politically unstable and exhibit vast cultural differences.
Countries involved in political or ethnic violence are poor business risks.
Cuba offers a unique opportunity as it is only now emerging into the outside world.
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16. Role of the GATT and the WTO
The General Agreement on Tariffs and Trade is a trade agreement to promote international trade by reducing barriers and making it easier for all nations to compete in international markets.
(WTO)
The World Trade Organization began in 1995 and replaced the GATT, absorbing its mission. Requires members to open their markets to international trade and follow WTO rules.
The WTO has three goals: to promote fair trade policies, to reduce trade barriers, and to resolve trade disputes.
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17. Environmental Challenges of International Management
Figure 5.3
Environmental Challenges of International Management
Managers functioning in a global context must be aware of several environmental challenges.
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18. Environmental Challenges of International Management
Three aspects of the economic environment
Economic system
Most countries are moving toward a market economy.
Natural resources
These vary by country.
Access to and use of natural resources.
Infrastructure
The schools, hospitals, power plants, railroads, highways, ports, airfields, and distribution systems make up infrastructure.
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19. Environmental Challenges of International Management
The political/legal environment
Government stability
includes the ability to stay in power or as the permanence of policies toward business.
If nationalized, a company is taken over by the government.
Incentives for multinational trade
include tax cuts, low interest rates, or other subsidies.
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20. Environmental Challenges of International Management
The political/legal environment
Controls on international trade
A tariff is a tax collected on goods shipped across national boundaries.
A quota is a limit on the number or value of goods that can be traded.
An export restraint agreement between governments sets voluntary limits on goods exported or imported from each other.
“Buy national” legislation gives preference to domestic producers.
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21. Environmental Challenges of International Management
The political/legal environment
An economic community is a set of countries that agree to markedly reduce or eliminate trade barriers among member nations.
A formalized market system.
The European Union (EU).
NAFTA.
The Latin American Integration Association.
The Caribbean Common Market.
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22. Environmental Challenges of International Management
The cultural environment
Values, symbols, beliefs, and language differ from one country to another.
Barbie dolls do not sell well in Muslim countries.
Different cultures value time differently.
Language can pose a barrier.
Both spoken works and nonverbal aspects of language can pose problems for managers.
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23. Individual Differences Across Cultures
Figure 5.4
Individual Differences Across Cultures
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24. Individual Differences Across Cultures
Figure 5.4
Individual Differences Across Cultures
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25. Individual Differences Across Cultures
Figure 5.4
Individual Differences Across Cultures
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26. Competing in a Global Economy
Globalization and organization size
Multinational corporations (MNCs)
adopt a global perspective and compete in the global marketplace.
Medium-size organizations
remain primarily domestic but may buy/sell products made abroad and may face foreign competition in their own domestic market.
Small organizations
participate as local suppliers to MCCs, and some perform simple importing/exporting.
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27. Competing in a Global Economy
Management challenges
Planning and decision making
Managers need a broad understanding of the environment and competition in order to plan.
Organizing
Degree of control allowed local managers influences difficulties of organizing.
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28. Competing in a Global Economy
Management challenges
Leading
Managers must understand how cultural factors affect individuals, motivation, the role of leadership, communication, interpersonal and group processes.
Controlling
Basic issues revolve around operations management, productivity, quality, technology, and information systems.
© 2017 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

29. Competing in a Global Economy
Management challenges
Leading
Managers must understand how cultural factors affect individuals, motivation, the role of leadership, communication, interpersonal and group processes.
Controlling
Basic issues revolve around operations management, productivity, quality, technology, and information systems.
© 2017 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

30. Summary
Chapter five described the nature of international business and discussed the structure of the global market.
The chapter introduced and discussed the basic environmental challenges with a deeper focus on global competition.
The chapter concluded by looking at the four management functions within a global economy.
© 2017 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.