1. Managing in a Global Environment
Chapter 4
Managing in a Global Environment

2. 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
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3. 4.1 Ranking of Six Countries on the Global Index
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4. 4.2 Four Stages of Globalization
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5. International Market Strategies
Exporting – transferring products for sale to foreign countries
Outsourcing – also called off shoring, work activities are done in countries with cheap labor
Licensing – enabling a company to produce and market a product in another country
Franchising is licensing that provides a complete package of materials and services
Direct Investing – high level of involvement, company manages and controls assets
Joint venture and other types of partnerships are common
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6. 4.3 Strategies for Entering the International Arena
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7. China Inc. China manufacturers many products for U.S. companies
China is also a growing consumer market
Regulations and government policies make doing business in China a challenge
India is a service giant, growing in software design and engineering
Brazil is a country that is gaining the attention of American managers
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8. 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 marketplace
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9. 4.4 Key Factors in International Environment
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10. The Economic Environment
Economic Development - Countries are categorized as either developed or developing based on per capita income
Government Policies
Market Size
Financial Markets
Infrastructure
Resource and Product Markets
Companies must evaluate market demand
The current economic crisis has highlighted how interconnected economies are around the world
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11. 4.5 World Economic Forum Global Competitiveness
The United States moved from #1 to #2!
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12. 4.6 How Countries are Bearing the Economic Crisis
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13. The Legal-Political Environment
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
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14. The Sociocultural Environment
The values and behaviors that govern U.S. business do not always translate
Social Values
Communication Differences
Other Cultural Characteristics
Language
Religion
Social organization
Education
Attitudes
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15. Hofstede’s Value Dimensions
Power Distance
Uncertainty Avoidance
Individualism and Collectivism
Masculinity and Felinity
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16. GLOBE Project Value Dimensions
Assertiveness
Future orientation
Uncertainty avoidance
Gender differentiation
Power distance
Social collectivism
Individual collectivism
Performance orientation
Humane orientation
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17. 4.7 Country Ranking on Four GLOBE Value Dimensions
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18. 4.8 Country Ranking on Selected GLOBE Value Dimensions
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19. 4.9 High-Context and Low-Context Cultures
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20. Developing Cultural Intelligence
Cultural intelligence – ability to use reasoning and observation skills
Culturally flexible
Adapt to new situations
Managers must study the language and learn
Cognitive, emotional, and physical intelligence
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21. 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
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22. 4.10 European Union
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23. 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
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24. 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
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25. The Globalization Backlash
68% of Americans say other countries benefit the most from free trade
53% believe free trade has hurt U.S.
The United States’ primary concern is the loss of jobs
$136 billion in wages will shift from the U.S.
Business leaders insist that economic benefits flow back to the U.S. economy
Lower prices and expanded markets
Increased profits and funds for innovation
But American shoppers say they would pay higher prices to keep down foreign competition
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26. 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
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