1. PowerPoint Presentation by Charlie Cook The University of West Alabama chapter 2 Part I: The Global Management Environment 5e Copyright © 2011 Cengage Learning. All rights reserved. The Global Environment: Culture, Ethics, Social Responsibility, and Sustainability

2. Copyright © 2011 Cengage Learning. All rights reserved.2–2 Learning Outcomes 1. 1.Explain the five internal environmental factors. 2. 2.List and explain the need for the two primary principles of total quality management (TQM). 3. 3.Describe the three levels of organizational culture and their relationship to each other. 4. 4.Describe how the nine external environmental factors— customers, competition, suppliers, labor force, shareholders, society, technology, the economy, and governments—can affect the internal business environment. 5. 5.Contrast the classification of businesses in the global village. 6. 6.List the six activities that make a business a global one, in order from lowest to highest cost and risk. After studying this chapter, you should be able to:

3. Copyright © 2011 Cengage Learning. All rights reserved.2–3 Learning Outcomes (cont’d) 7. 7.Compare the three levels of moral development. 8. 8.Explain the stakeholders’ approach to ethics. 9. 9.Define the key terms listed at the end of this chapter. After studying this chapter, you should be able to:

4. Copyright © 2011 Cengage Learning. All rights reserved.2–4 IDEAS ON MANAGEMENT at Amazon.com 1. 1.Who is Amazon.com’s top manager, and what is its mission, major resource, systems process, and structure? 2. 2.What type of culture does Amazon.com have? 3. 3.How does the external environment affect Amazon.com? 4. 4.How is Amazon.com classified in the global village, and how did it go global? 5. 5.Is Amazon.com ethical, and does it have a code of ethics? 6. 6.What types of things does Amazon.com do to be socially responsible? 7. 7.What types of things does Amazon.com do for environmental sustainability?

5. Copyright © 2011 Cengage Learning. All rights reserved.2–5 The Internal Environment Management and CultureManagement and Culture  Organizational culture  The values, beliefs, and assumptions about appropriate behavior that members of an organization share. MissionMission  A organization’s purpose or reason for being  Top management’s responsibility to develop a mission with clear measurable objectives.  States the unique advantage the firm offers to customers that differentiates it from its competitors.  Is relevant to all stakeholders’ interests.

6. Copyright © 2011 Cengage Learning. All rights reserved.2–6 Exhibit 2–1 ●Internal Environmental Means and Ends

7. Copyright © 2011 Cengage Learning. All rights reserved.2–7 The Internal Environment (cont’d) ResourcesResources  Human resources  Physical resources  Financial resources  Informational resources Systems ProcessSystems Process  The method used to transform inputs into outputs  Process components 1.Inputs 2.Transformation 3.Outputs 4.Feedback

8. Copyright © 2011 Cengage Learning. All rights reserved.2–8 Exhibit 2–2 ●The Systems Process

9. Copyright © 2011 Cengage Learning. All rights reserved.2–9 The Internal Environment (cont’d) QualityQuality  Comparing a product’s actual functioning to requirements to determine value. Customer ValueCustomer Value  The perceived benefits of a product, used by customers to determine whether or not to buy a product. Total Quality Management (TQM)Total Quality Management (TQM)  Focusing the organization on the customer to continually improve product value.

10. Copyright © 2011 Cengage Learning. All rights reserved.2–10 The Internal Environment (cont’d) StructureStructure  The way in which resources are grouped to effectively achieve the organization’s mission.  Organizations structure resources to transform inputs into outputs.  All of an organization’s resources must be structured effectively to achieve its mission.

11. Copyright © 2011 Cengage Learning. All rights reserved.2–11 Exhibit 2–3 ●Components of the Internal Environment

12. Copyright © 2011 Cengage Learning. All rights reserved.2–12

13. Copyright © 2011 Cengage Learning. All rights reserved.2–13 Join the Discussion Ethics & Social Responsibility Downsizing and Part-Time WorkersDownsizing and Part-Time Workers 1. Is downsizing ethical and socially responsible? 2. Is using part-time employees rather than full-time ones ethical and socially responsible? 3. Would you be willing to pay higher prices at stores, such as Wal-Mart, so that more full-time workers could replace part-time workers?

14. Copyright © 2011 Cengage Learning. All rights reserved.2–14 Organizational Culture Learning the Organization’s CultureLearning the Organization’s Culture  Heroes  Stories  Slogans  Symbols  Ceremonies Three Levels of CultureThree Levels of Culture  Level 1—Behavior (the visible level)  Level 2—Values and Beliefs (the invisible level)  Level 3—Assumptions are so deeply ingrained that they are considered unquestionably true.

15. Copyright © 2011 Cengage Learning. All rights reserved.2–15 Exhibit 2–4 ●Three Levels of Organizational Culture Direction of effect

16. The Relationship between Strong and Weak and Healthy and Unhealthy Cultures Copyright © 2011 Cengage Learning. All rights reserved.1–16 Strong Weak UnhealthyHealthy Everyone works together with similar behavior and values and beliefs that help the organization succeed at meeting its mission. People work together, but the behavior is based on poor values and beliefs that hurt the organization. People don’t behave the same, lack shared values and beliefs, and don’t stick together, but most work toward meeting the mission. People don’t behave the same, lack shared values and beliefs, don’t stick together, and their behaviors hurt the success of the organization

17. Copyright © 2011 Cengage Learning. All rights reserved.2–17 Organizational Culture (cont’d) Strong CulturesStrong Cultures  Have employees who subconsciously know the shared assumptions; consciously know the values and beliefs; agree with the shared assumptions, values, and beliefs, and behave as expected.  Advantage: benefit from easier communication and cooperation; unity of direction; and consensus is easier to reach  Disadvantage: threat of becoming stagnant Weak CulturesWeak Cultures  Have employees who do not behave as expected and do not agree with the shared values.

18. Copyright © 2011 Cengage Learning. All rights reserved.2–18 Organizational Culture (cont’d) Healthy CulturesHealthy Cultures  Have positive values that are implemented that contribute to success.  Have quality embedded in or supported by the firm’s culture. Unhealthy CulturesUnhealthy Cultures  Have unhealthy factors that are negative and hinder success, and can lead to failure.  Don’t support high quality and success.

19. Copyright © 2011 Cengage Learning. All rights reserved.2–19

20. Copyright © 2011 Cengage Learning. All rights reserved.2–20 Organizational Culture (cont’d) Managing, Changing, and Merging CulturesManaging, Changing, and Merging Cultures  Symbolic Leaders  Articulate a vision for the organization and reinforce the culture through slogans, symbols, and ceremonies.  Facilitate cultural change and/or mergers. Learning OrganizationsLearning Organizations  Have cultures that value sharing knowledge to adapt to the changing environment and continuously improve.  Strong leadership, team-based structure, employee empowerment, open information, a participative strategy, and a strong adaptive culture

21. Copyright © 2011 Cengage Learning. All rights reserved.2–21 The External Environment: Task Factors CustomersCustomers  Their needs decide what products businesses offer. CompetitionCompetition  Competitors’ business practices often have to be duplicated to maintain customer value. SuppliersSuppliers  Poor quality suppliers mean poor quality products. Labor Force/UnionsLabor Force/Unions  Quality labor is needed to produce quality products. ShareholdersShareholders  The board of directors monitors management and provides direction for the organization.

22. Copyright © 2011 Cengage Learning. All rights reserved.2–22 The External Environment: General Factors SocietySociety  Businesses are pressured by societal forces to behave in an acceptable manner. TechnologyTechnology  Firms must stay current on technology to stay competitive and provide customer value. The EconomyThe Economy  Economic activity has both short and long-term effects on an organization’s ability to provide customer value. GovernmentsGovernments  Policies, rules, and regulations affect what, how much, and how business is conducted.

23. Copyright © 2011 Cengage Learning. All rights reserved.2–23

24. Copyright © 2011 Cengage Learning. All rights reserved.2–24 Join the Discussion Ethics & Social Responsibility Auto Fuel EfficiencyAuto Fuel Efficiency 1. Are the automakers being ethical and socially responsible by taking advantage of loopholes in the law to classify one-half of their vehicles as light trucks? 2. Should society be concerned about fuel efficiency? Should people use fuel efficiency as a major criterion when buying a car? 3. Should the government be involved in setting fuel efficiency standards? If yes, should it change the current standards? How?

25. Copyright © 2011 Cengage Learning. All rights reserved.2–25 The External Environment (cont’d) Chaos and Interactive ManagementChaos and Interactive Management  Reactive managers  Make changes only when forced to by external factors.  Responsive managers  Try to adapt to the environment by predicting and preparing for change before it occurs.  Interactive managers  Design a desirable future and invent ways of bringing it about by trying to prevent, not prepare, for threats and to create, not exploit, opportunities.

26. Copyright © 2011 Cengage Learning. All rights reserved.2–26 Exhibit 2–5 ●The Organizational Environment

27. Copyright © 2011 Cengage Learning. All rights reserved.2–27 The Global Environment The Global VillageThe Global Village  Globalization is the number-one challenge of business leaders in the 21st century.  Companies are conducting business worldwide without boundaries as the world becomes smaller through technology. Ethnocentrism and “Made in America”Ethnocentrism and “Made in America”  Regarding one’s own ethnic group or culture as superior to others (e.g., “Buy American”).

28. Copyright © 2011 Cengage Learning. All rights reserved.2–28 Join the Discussion Ethics & Social Responsibility Buy AmericanBuy American 1.Is it ethical and socially responsible to ask people to buy American? 2.Is it ethical and socially responsible to buy foreign products?

29. Copyright © 2011 Cengage Learning. All rights reserved.2–29 Foreign Trade Balance of Trade World Trade Organization (WTO) Trade Agreements Protectionism Currency Exchange Rates

30. Copyright © 2011 Cengage Learning. All rights reserved.2–30 Exhibit 2–6 ●Exchange Rates Suppose you are selling a product in China for 8,000 yuan. With an exchange rate of 8 yuan to 1 dollar, you get $1,000 [8,000 (yuan selling price) divided by 8 (8 yuan = $1)] for each product you sell. Suppose that this price and exchange rate give you a 25 percent profit margin. Now let’s see what happens with the extreme fluctuations in exchange rates that sometimes occur: If the exchange rate becomes 6 yuan to 1 dollar, the yuan is strong (and the dollar is weak). When you exchange the yuan for dollars, you get $1,333.33 [8,000 (yuan selling price) divided by 6 (6 yuan = $1)] for each product you sell. Now let’s make the dollar strong (and the yuan weak). If the exchange rate goes to 10 yuan to the dollar, you get $800 [8,000 (yuan selling price) divided by 10 (10 yuan = $1)]. You can either change your yuan selling price to maintain your 25 percent profit margin or make more or less based on the exchange rate. Now think about the complexity of FedEx doing business in over 100 currencies.

31. Copyright © 2011 Cengage Learning. All rights reserved.2–31 Global Trading Agreements World Trade OrganizationWorld Trade Organization  Establishes and enforces world trade laws. Trade AlliancesTrade Alliances  European Union (EU)  Created a single market without national barriers to travel, employment, investment, and trade.  Euro (€): single currency for the EU.  North American Free Trade Agreement (NAFTA)  United States, Canada, and Mexico  Association of Southeast Asian Nations (ASEAN)  Asia-Pacific Economic Cooperation (APEC)

32. Copyright © 2011 Cengage Learning. All rights reserved.2–32 Exhibit 2–7 ●Trading Blocs

33. Copyright © 2011 Cengage Learning. All rights reserved.2–33 Classifying Businesses in the Global Village Domestic BusinessDomestic Business  Conducts business only in its home country. International BusinessInternational Business  Is based primarily in one country but transacts business in other countries. Multinational Corporation (MNC) or Global BusinessMultinational Corporation (MNC) or Global Business  Has significant operations in more than one country.

34. Copyright © 2011 Cengage Learning. All rights reserved.2–34 Taking a Business Global Global SourcingGlobal Sourcing  The use of worldwide resources (outsourcing). ImportingImporting  A domestic firm buys products from foreign firms and sells them in its home market. ExportingExporting  A domestic firm sells its locally-made products to foreign buyers in overseas markets.

35. Copyright © 2011 Cengage Learning. All rights reserved.2–35 Exhibit 2–8 ●Taking a Business Global

36. Copyright © 2011 Cengage Learning. All rights reserved.2–36 Taking a Business Global (cont’d) LicensingLicensing  One company allows another company to use its assets (intellectual property) for a fee.  Brand name, trademark, technology, patent, and copyright  Franchising  For a fee and a percentage of the revenues, a franchiser provides the franchisee with a combination of trademark, equipment, materials, training, managerial guidelines, consulting advice, and cooperative advertising.

37. Copyright © 2011 Cengage Learning. All rights reserved.2–37 Taking a Business Global (cont’d) ContractingContracting  A company has a foreign firm manufacture the goods that it sells as its own. Joint VentureJoint Venture  An enterprise that is created when firms agree to share in its ownership. Direct Investment Direct Investment  Investment that occurs when a company builds or purchases operating facilities (subsidiaries) in a foreign country.

38. Copyright © 2011 Cengage Learning. All rights reserved.2–38

39. Copyright © 2011 Cengage Learning. All rights reserved.2–39 Exhibit 2–9 ●Practices of Global Companies

40. Copyright © 2011 Cengage Learning. All rights reserved.2–40

41. Copyright © 2011 Cengage Learning. All rights reserved.2–41 Join the Discussion Ethics & Social Responsibility File SharingFile Sharing 1. Is it ethical and socially responsible for people to download music, movies, or software for free, which prevents recording, film, or software companies and artists from getting any royalties? 2. Is it ethical and socially responsible for LimeWire and others to give people the means to download music, movies, or software for free?

42. Copyright © 2011 Cengage Learning. All rights reserved.2–42 Join the Discussion Ethics & Social Responsibility BribesBribes 1. Is it ethical and socially responsible to pay bribes? 2. Should the manager have paid the bribe to get the phone installed?

43. Copyright © 2011 Cengage Learning. All rights reserved.2–43 Diversity To be successful in the global village, you need to be sensitive to other cultures.To be successful in the global village, you need to be sensitive to other cultures. GLOBEGLOBE  Global Leadership and Organizational Behavior Effectiveness (GLOBE) is an ongoing cross-cultural investigation of leadership and national culture.

44. Copyright © 2011 Cengage Learning. All rights reserved.2–44

45. Copyright © 2011 Cengage Learning. All rights reserved.2–45 Exhibit 2–10 ●Global Leadership and Organizational Behavior Effectiveness (GLOBE) Dimensions

46. Copyright © 2011 Cengage Learning. All rights reserved.2–46 Business Ethics EthicsEthics  The standards of right and wrong that influence behavior.  Right behavior is considered ethical, and wrong behavior is considered unethical.  Government laws and regulations are designed to govern business behavior.  Ethics, however, go beyond legal requirements.  Ethical concepts are culturally-bound.  What is considered ethical in one country may be unethical in another.

47. Copyright © 2011 Cengage Learning. All rights reserved.2–47 Business Ethics (cont’d) Does Ethical Behavior Pay?Does Ethical Behavior Pay?  Research shows a positive relationship between ethical behavior and leadership effectiveness.  Having strong ethics means having integrity, and people trust others they believe have integrity.  Unethical behavior creates a negative image of big business.  Mahatma Gandhi called business without morality a sin.

48. Copyright © 2011 Cengage Learning. All rights reserved.2–48 Factors Affecting Ethical Behavior The Situation Personality Traits and Attitudes Moral Development Ethical Behavior

49. Copyright © 2011 Cengage Learning. All rights reserved.2–49 Levels of Moral Development PreconventionalPreconventional  Self-interest motivates behavior. ConventionalConventional  Behavior is motivated by the desire to live up to others’ expectations. PostconventionalPostconventional  Behavior is motivated by universal principles of right and wrong, regardless of the expectations of leaders or one’s group.

50. Copyright © 2011 Cengage Learning. All rights reserved.2–50 Exhibit 2–11 ●Levels of Moral Development Level

51. Copyright © 2011 Cengage Learning. All rights reserved.2–51 How People Justify Unethical Behavior Moral JustificationMoral Justification  The process of reinterpreting immoral behavior in terms of a higher purpose.  Displacement of responsibility  Diffusion of responsibility  Advantageous comparison  Disregard or distortion of consequences  Attribution of blame  Euphemistic labeling

52. Copyright © 2011 Cengage Learning. All rights reserved.2–52 Simple Guides to Ethical Behavior Golden RuleGolden Rule  “Do unto others as you want them to do unto you.” Four-Way TestFour-Way Test 1. Is it the truth? 2. Is it fair to all concerned? 3. Will it build goodwill and better friendship? 4. Will it be beneficial to all concerned? Stakeholders’ Approach to EthicsStakeholders’ Approach to Ethics  Creating a win-win situation for all stakeholders so that everyone benefits from the decision.

53. Copyright © 2011 Cengage Learning. All rights reserved.2–53 Managing Ethics Codes of EthicsCodes of Ethics  State importance of conducting business in an ethical manner; provide guidelines for ethical behavior. Top Management Support and ExampleTop Management Support and Example  Develop codes of ethics  Ensure that employees are instructed on what is and what is not considered ethical behavior  Enforce ethical behavior Enforcing Ethical BehaviorEnforcing Ethical Behavior  Do not fail to punish unethical behavior.  Whistle-blowers should not suffer negative consequences.

54. Social Responsibility Social Responsibility to StakeholdersSocial Responsibility to Stakeholders  The conscious effort to try to create a win-win situation for all external stakeholders, as well as internal stakeholders. Does It Pay to Be Socially Responsible?Does It Pay to Be Socially Responsible?  Social responsibility doesn’t guarantee or improve profits, but scandals hurt corporate reputations. Social AuditSocial Audit  A measure of how well a firm’s social behavior helps it achieve its social objectives. Copyright © 2011 Cengage Learning. All rights reserved.2–54

55. Copyright © 2011 Cengage Learning. All rights reserved.2–55 Join the Discussion Ethics & Social Responsibility TV Sex, Profanity, and ViolenceTV Sex, Profanity, and Violence 1. How do TV and movies influence societal values? (Consider that many children watch as many as five hours of TV per day.) 2. Do TV shows and movies that include sex and violence reflect current religious and societal values? 3. Is it ethical and socially responsible to air TV shows with sexual content, profanity, and violence during hours when children are watching? 4. Is it ethical and socially responsible to portray women as sex objects? 5. Should the FCC regulate television, and if yes, how far should it go? Should it make networks tone down the sex and violence, or take shows off the air?

56. Sustainability SustainabilitySustainability  Meeting the needs of the present world without compromising the ability of the future generations to meet their own needs. Sustainability Practices in “Green” CompaniesSustainability Practices in “Green” Companies  Conserving inputs and energy resources to create long-term environmentally sustainable products. Organizations for Sustainable DevelopmentOrganizations for Sustainable Development  World Business Council for Sustainable Development  International Institute for Sustainable Development Copyright © 2011 Cengage Learning. All rights reserved.1–56

57. Copyright © 2011 Cengage Learning. All rights reserved.2–57 KEY TERMS customer valuecustomer value direct investmentdirect investment ethicsethics ethnocentrismethnocentrism external environmentexternal environment global sourcingglobal sourcing global villageglobal village internal environmentinternal environment international businessinternational business joint venturejoint venture learning organizationlearning organization levels of culturelevels of culture missionmission multinational corporation (MNC)multinational corporation (MNC) organizational cultureorganizational culture qualityquality social responsibilitysocial responsibility stakeholdersstakeholders stakeholders’ approach to ethicsstakeholders’ approach to ethics symbolic leaderssymbolic leaders systems processsystems process total quality management (TQM)total quality management (TQM)