1. PowerPoint Presentation by Charlie Cook The Environment of Managing Gary Dessler Principles and Practices for Tomorrow’s Leaders Copyright © 2004 Prentice Hall, Inc. All rights reserved. Managing in a Global Environment Managing in a Global Environment 17 C H A P T E R

2. Copyright © 2004 Prentice Hall. All rights reserved.17–2 Chapter Objectives After studying this chapter and the case exercises at the end, you should be able to: 1.List the sociocultural and legal/political errors managers make when expanding abroad. 2.Tell a manager why a company is (or is not) a suitable candidate for expanding into a specific country, based on the cultural, and geographic distance between that country and the company’s home country. 3.List the reasons why you would (or would not) be a good global manager.

3. Copyright © 2004 Prentice Hall. All rights reserved.17–3 Chapter Objectives (cont’d) 4.Specify the basic global strategy a manager should pursue, and why. 5.Specify the type of basic global organization structure a manager should use, and why. 6.Tell a manager what he or she did wrong in leading and motivating employees abroad.

4. Copyright © 2004 Prentice Hall. All rights reserved.17–4 Ways of Doing Business Abroad Exporting  Selling abroad, either directly to target customers or indirectly by retaining foreign sales agents and distributors. Licensing  An arrangement whereby a firm (the licensor) grants a foreign firm the right to use intangible property. Franchising  The granting of a right by a parent company to another firm to do business in a prescribed manner.

5. Copyright © 2004 Prentice Hall. All rights reserved.17–5 Ways of Doing Business Abroad (cont’d) Foreign Direct Investment  Operations in one country controlled by entities in a foreign country. Strategic Alliance  An agreement between potential or actual competitors to achieve common objectives. Joint Venture  The participation of two or more companies in an enterprise such that each party contributes assets, owns the entity to some degree, and shares risk.

6. Copyright © 2004 Prentice Hall. All rights reserved.17–6 Ways of Doing Business Abroad (cont’d) Wholly Owned Subsidiary  A firm that is owned 100% by a foreign firm.

7. Copyright © 2004 Prentice Hall. All rights reserved.17–7 The Language of International Business International Trade  The export or import of goods or services to consumers in another country. International Business  Any firm that engages in international trade or investment; also refers to business activities that involve the movement of resources, goods, services, and skills across national boundaries. International Management  The performance of the management process across national boundaries.

8. Copyright © 2004 Prentice Hall. All rights reserved.17–8 The Language of International Business Multinational Corporation (MNC)  A company that operates manufacturing and marketing facilities in two or more countries: managers of the parent firm, whose owners are mostly in the firm’s home country, coordinate the MNC’s operation.

9. Copyright © 2004 Prentice Hall. All rights reserved.17–9 The Economic Environment Economic Systems  Market economies  Supply and demand determine what is produced, in what quantities, and at what prices.  Command economies  Yearly targets on five-year plans with specific production goals are set by the government which also sets prices for each sector of the economy.  Mixed economies  Some sectors are left to private ownership and free market mechanisms, while others are largely owned and managed by the government.

10. Copyright © 2004 Prentice Hall. All rights reserved.17–10 The Economic Environment (cont’d) Economic Development  A measure of the how extensively the industrial infrastructure is developed for a given country. Gross Domestic Product (GDP)  The market value of all goods and services that have been bought for final use during a period of time, and, therefore, is the basic measure of a nation’s economic activity.

11. Copyright © 2004 Prentice Hall. All rights reserved.17–11 The Economic Environment (cont’d) Exchange Rate  The rate at which one country’s currency can be exchanged for another country’s currency. Trade Barrier  A governmental influence that is usually aimed at reducing the competitiveness of imported products or services. Tariff  A government tax on imports. Quota  A legal restriction on the import of particular goods.

12. Copyright © 2004 Prentice Hall. All rights reserved.17–12 The Economic Environment (cont’d) Exchange Rate  The rate at which one country’s currency can be exchanged for another country’s currency. Trade Barrier  A governmental influence that is aimed at reducing the competitiveness of imported products or services.  Tariff: A government tax on imports.  Quota:A legal restriction on the import of particular goods.  Subsidy: A direct payment a country makes to support a domestic producer.

13. Copyright © 2004 Prentice Hall. All rights reserved.17–13 Economic Integration and Free Trade Free Trade  All trade barriers among participating countries are removed, so there is an unrestricted exchange of goods among these countries. Economic Integration  The result of two or more nations minimizing trade restrictions to obtain the advantages of free trade. Free Trade Area  A type of economic integration in which all barriers to trade among members are removed.

14. Copyright © 2004 Prentice Hall. All rights reserved.17–14 Economic Integration Customs Union  A situation in which trade barriers among members are removed and a common trade policy exists with respect to nonmembers. Common Market  A system in which no barriers to trade exist among member countries, and a common external trade policy is in force that governs trade with nonmembers  Factors of production, such as labor, capital, and technology, move freely among members.

15. Copyright © 2004 Prentice Hall. All rights reserved.17–15 Levels of Economic Integration FIGURE 17–1

16. Copyright © 2004 Prentice Hall. All rights reserved.17–16 European Union (EU) Organizational Structure FIGURE 17–2 Source: From “Survey of Europe,” The Economics, October 23, 1999, p. 0. @ 00 The Economist Newspaper Group, Inc. Reprinted with permission. Further reproduction prohibited. www.economist.com.

17. Copyright © 2004 Prentice Hall. All rights reserved.17–17 Legal and Political Environment Common Law  A legal system where tradition and precedent—not written statutes—govern legal decisions. Other Code Law  A legal system that uses a comprehensive set of written statutes. International Law A body of law is embodied in treaties and other types of agreements among nations.

18. Copyright © 2004 Prentice Hall. All rights reserved.17–18 The Technological Environment Technology transfer  The transfer, often to another country, of systematic knowledge for the manufacturing of a product, for the application of a process, or for the rendering of a service; it does not extend to the mere sales or lease of goods.  Successful technology requires:  A needed and suitable technology.  Favorable social and economic conditions.  The willingness and ability of the receiving party to use and adapt the technology

19. Copyright © 2004 Prentice Hall. All rights reserved.17–19 FIGURE 17–3 Determinants of Global Distance Source: Adapted from Pankaj Ghemawat, “Distance Still Matters,” Harvard Business Review, September, 2001, p. 140.

20. Copyright © 2004 Prentice Hall. All rights reserved.17–20 FIGURE 17–4 Industry Sensitivity to Distance Source: Pankaj Ghemawat, “Distance Still Matters,” Harvard Business Review, September 2001, pp. 142–43.

21. Copyright © 2004 Prentice Hall. All rights reserved.17–21 International Expansion Factors before expanding abroad:  Cultural distance (languages and religions)  Administrative distance (absence of shared monetary or political associations)  Geographic distance (physical remoteness)  Economic distance (differences in consumer incomes).

22. Copyright © 2004 Prentice Hall. All rights reserved.17–22

23. Copyright © 2004 Prentice Hall. All rights reserved.17–23 Managing Globally Ethnocentric  A management philosophy that leads to the creation of home-market-oriented firms. Polycentric  A management philosophy oriented toward pursuing a limited number of individual foreign markets. Regiocentric (also Geocentric)  A management philosophy oriented toward larger areas, including the global marketplace.

24. Copyright © 2004 Prentice Hall. All rights reserved.17–24 FIGURE 17–5 Environmental Influences and Global Strategy Source: Adapted from Figures 2 and 5 and discussion in Sumantra Ghoshal and Nitin Nohria, Reprinted from John Daniels and Lee Radebaugh, International Business (Upper Saddle River, NJ: Prentice Hall, 2001), p. 529. “Horses for Courses: Organizational Forms for Multinational Corporations,” Sloan Management Review, Winter 1993, pp. 23–36.

25. Copyright © 2004 Prentice Hall. All rights reserved.17–25 FIGURE 17–6 International Organizations

26. Copyright © 2004 Prentice Hall. All rights reserved.17–26 Values  Basic beliefs about what is important and unimportant, and what one should and should not do.  Hofstede’s measures of global values:  Power distance (acceptance of inequality)  Individualism versus collectivism  Masculinity versus femininity (assertiveness versus caring)  Uncertainty avoidance (desire for certainty and stability)

27. Copyright © 2004 Prentice Hall. All rights reserved.17–27 FIGURE 17–7 Country Clusters Based on Power Distance Source: Source: Adapted from G. Hofstede, Culture’s Consequences (Beverly Hills, CA: Sage Publications, 1984).

28. Copyright © 2004 Prentice Hall. All rights reserved.17–28

29. Copyright © 2004 Prentice Hall. All rights reserved.17–29