1. Management, by Williams South-Western College Publishing Copyright © 2003 Chapter 8 Global Management

2. Management, by Williams South-Western College Publishing Copyright © 2003 2 What Would You Do? Wal-Mart’s International Strategy 4Dominant retailer in U.S. 4Major global competitor is Carrefour 4Which countries should Wal-Mart enter? 4What impact will free trade agreements have? 4Global consistency vs. local adaptation

3. Management, by Williams South-Western College Publishing Copyright © 2003 3 After discussing this section, you should be able to: Learning Objectives What Is Global Business? 1.describe the impact of global business on the U.S. 2.discuss the trade rules and agreements that govern global trade.

4. Management, by Williams South-Western College Publishing Copyright © 2003 4 Impact of Global Business “Foreigners” Buying up American Companies American Companies are not Competitive in the World Market Americans Buying American Products

5. Management, by Williams South-Western College Publishing Copyright © 2003 5 Foreign Investment in the U.S. United Kingdom German Netherlands Canada France Japan Luxemborg Switzerland Ireland Bermuda Dollars (Millions) 10,00020,00030,00040,00050,0000 1994-1999 Adapted from Exhibit 8.1

6. Management, by Williams South-Western College Publishing Copyright © 2003 6 U.S. Direct Foreign Investment Abroad United Kingdom Canada Netherlands Germany Japan Bermuda France Switzerland Brazil Australia Mexico Panama Dollars (Millions) 40,00080,000120,000160,0000 1994-1999 Adapted from Exhibit 8.2

7. Management, by Williams South-Western College Publishing Copyright © 2003 7 Global High-Technology Market Share United States 31% Canada1% Japan22% Germany7% France3% United Kingdom 5% Italy1% China6% South Korea 4% Taiwan2%Singapore2% All Other Countries 22% Average Global High Technology Market Share, 1993-1997 Adapted from Exhibit 8.3

8. Management, by Williams South-Western College Publishing Copyright © 2003 8 Buying American 4Americans say they want to “Buy American” 4Country of manufacture Twhere the product is made 4Country of origin Tcompany’s home country

9. Management, by Williams South-Western College Publishing Copyright © 2003 9 Trade Rules and Agreements Trade Barriers Trade Agreements Consumers, Trade Barriers and Trade Agreements

10. Management, by Williams South-Western College Publishing Copyright © 2003 10 Trade Barriers 4Tariff 4Nontariff barriers TQuotas TVoluntary export restraints TGovernment import standards TGovernment subsidies TCustoms valuation/classification

11. Management, by Williams South-Western College Publishing Copyright © 2003 11 Trade Agreements 4General Agreement on Tariffs & Trade (GATT) 4Regional Trading Zones TMaastricht Treaty of Europe TNAFTA TFTAA TASEAN & APEC

12. Management, by Williams South-Western College Publishing Copyright © 2003 12 World Trade Organization Location: Geneva, Switzerland Established: 1 January 1995 Created by: Uruguay Round negotiations (1988-1994) Membership:142 countries (as of 26 July 2001) Budget: 127 million Swiss francs for 2000 Secretariat staff: 500 Head: Mike Moore (director- general Functions: 4Administering WTO trade agreements 4Forum for trade negotiations 4Handling trade disputes 4Monitoring national trade policies 4Technical assistance and training for developing countries 4Cooperation with other international organizations

13. Management, by Williams South-Western College Publishing Copyright © 2003 13 GATT 4Worldwide trade agreement 4Designed to reduce and eliminate tariffs and subsidies 4Protect intellectual property

14. Management, by Williams South-Western College Publishing Copyright © 2003 14 Maastricht Treaty of Europe 4Originally, 12 (now 15) European countries 413 other countries have applied 4Transform these different countries into the European Union 4Open up trade among member nations 4Create the “Euro” currency

15. Management, by Williams South-Western College Publishing Copyright © 2003 15 North American Free Trade Agreement - NAFTA 4Canada, United States, & Mexico 4Liberalizes trade among these three nations 4Eliminate tariffs and barriers

16. Management, by Williams South-Western College Publishing Copyright © 2003 16 Free Trade Area of the Americas 4Proposed agreement 4Unite 34 countries in North & South America TReduce trade barriers to zero TStandardize financial markets TProcess for handling trade disputes

17. Management, by Williams South-Western College Publishing Copyright © 2003 17 Association of South East Nations Asia-Pacific Economic Cooperation 4ASEAN TIndonesia, Thailand, Philippines, Malaysia, Singapore, & Brunei 4APEC TU.S., Canada, Japan, South Korea, Australia, New Zealand, China, Hong Kong, & ASEAN members

18. Management, by Williams South-Western College Publishing Copyright © 2003 18 Consumers, Trade Barriers, & Trade Agreements 4American annual income less than many countries 4Cost of living, however, is also less here 4Open trade gives American consumers many choices

19. Management, by Williams South-Western College Publishing Copyright © 2003 19 After discussing this section, you should be able to: Learning Objectives How to Go Global? 3.explain why companies choose to standardize or adapt their business procedures. 4.explain the different ways that companies can organize to do business globally.

20. Management, by Williams South-Western College Publishing Copyright © 2003 20 Consistency or Adaptation? Global consistency Local adaptation

21. Management, by Williams South-Western College Publishing Copyright © 2003 21 Forms for Global Business Exporting Cooperative Contract licensing franchise Strategic Alliances - Joint Ventures Wholly Owned Affiliates Global New Ventures

22. Management, by Williams South-Western College Publishing Copyright © 2003 22 Been There, Done That 413,000 restaurants in the U.S. 415,000 restaurants in 119 other countries 4How can McDonald’s maintain its projected growth rate? 4What are the limiting factors? 4What must McDonald’s do to keep the character of its company aligned with its international presence?

23. Management, by Williams South-Western College Publishing Copyright © 2003 23 After discussing this section, you should be able to: Learning Objectives Where to Go Global? 5.explain how to find a favorable business climate. 6.discuss the importance of identifying and adapting to cultural differences. 7.explain how to successfully prepare workers for international assignments.

24. Management, by Williams South-Western College Publishing Copyright © 2003 24 Finding the Best Business Climate Growing Markets Choosing an Office/ Manufacturing Location Minimizing Political Risk

25. Management, by Williams South-Western College Publishing Copyright © 2003 25 Growing Markets 4Purchasing Power Tcomparison of a standard set of goods and services in different countries Tmore means greater growth potential 4Degree of Global Competition Tthe number & quality of companies already in the market Tmore means less growth potential

26. Management, by Williams South-Western College Publishing Copyright © 2003 26 Consumption of Coca-Cola Per Capita Consumption of Coca-Cola Purchasing Power (per capita real GDP) 010000200003000040000 0 200 300 400 500 100................ China Columbia Phillipines Brazil Mexico Chile Argentina Korea Italy Great Britain Spain Australia Germany Japan France United States Adapted from Exhibit 8.6

27. Management, by Williams South-Western College Publishing Copyright © 2003 27 Choosing an Office/Manufacturing Location 4Quantity factors Twork force quality Tcompany strategy 4Quality factors Tcosts and barriers

28. Management, by Williams South-Western College Publishing Copyright © 2003 28 Quality of Netherlands Workforce for Call Center Jobs Adapte from Exhibit 8.7 020406080100120140 Ireland UK France Germany Belgium Netherlands Two LanguagesThree LanguagesMore than Three Languages

29. Management, by Williams South-Western College Publishing Copyright © 2003 29 United States 1. New York City 2. San Francisco 3. Chicago 4. Wash. D.C. area 5. San Jose Latin America 1. Buenos Aires 2. San Juan 3. Mexico City 4. Sao Paulo 5. Santiago Europe 1. London 2. Frankfurt 3. Helsinki 4. Amsterdam 5. Dublin Asia Pacific 1. Hong Kong 2. Sydney 3. Singapore 4. Auckland 5. Tokyo World’s Best Cities for Business Adapted from Exhibit 8.8

30. Management, by Williams South-Western College Publishing Copyright © 2003 30 Minimizing Political Risks 4Political uncertainty Trisk of major changes in political regimes 4Policy uncertainty Trisk associated with changes in laws and government policies directed at businesses 4Strategies Tavoidance Tcontrol Tavoidance

31. Management, by Williams South-Western College Publishing Copyright © 2003 31 Political Risk: 10 Riskiest Countries International Country Risk Guide Ten Riskiest Countries 1.Sierra Leone 2.Yugoslavia 3.Somalia 4.Guinea-Bissau 5.Zimbabwe 6.Congo, Dem. Republic 7.Iraq 8.Moldova 9.Korea, D.P.R. 10.Liberia Coplin-O’Leary Risk Ratings Ten Riskiest Countries 1.Ecuador 2.Iraq 3.Cuba 4.Russia 5.Myanmar 6.Sudan 7.Vietnam 8.Cameroon 9.Pakistan 10.Nigeria

32. Management, by Williams South-Western College Publishing Copyright © 2003 32 Political Risk: 10 Least Risky Countries International Country Risk Guide Ten Least Risky Countries 1.Singapore 2.Norway 2.Switzerland 4.Luxembourg 5.Netherlands 6.Finland 7.Brunei 8.Denmark 9.Canada 10.Sweden Coplin-O’Leary Risk Ratings Ten Least Risky Countries 1.Switzerland 2.Bulgaria 3.Singapore 4.Belgium 5.Ireland 6.Finland 7.Austria 8.Canada 9.Netherlands 10.United Kingdom

33. Management, by Williams South-Western College Publishing Copyright © 2003 33 Becoming Aware of Cultural Differences - Geert Hofstede 4Power distance 4Individualism 4Short-term/Long-term orientation 4Masculinity v. femininity 4Uncertainty avoidance

34. Management, by Williams South-Western College Publishing Copyright © 2003 34 Hofstede’s Five Cultural Dimensions USA Germany Japan France Netherlands Hong Kong Indonesia West Africa Russia China 400 350 300 250 200 150 100 50 0 Hofstede’s Cultural Dimensions Power Distance IndividualismMasculinity Uncertainty Avoidance Long-Term Orientation Adapted from Exhibit 8.10

35. Management, by Williams South-Western College Publishing Copyright © 2003 35 Preparing for an International Assignment Language and Cross-Cultural Training Spouse, Family, and Dual-Career Issues

36. Management, by Williams South-Western College Publishing Copyright © 2003 36 What Really Works? Cross-Cultural Training Psychological Well-Being & Self-Development 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Fostering Relationships with Native Citizens 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Probability of success 79% Probability of success74%

37. Management, by Williams South-Western College Publishing Copyright © 2003 37 What Really Works? (Cont’d.) Accurate Cultural Perceptions 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Rapid Adjustment to Foreign Cultures & Countries 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Probability of success 74% Probability of success 74%

38. Management, by Williams South-Western College Publishing Copyright © 2003 38 What Really Works? (Cont’d.) On-the-Job Performance 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Probability of success 71%

39. Management, by Williams South-Western College Publishing Copyright © 2003 39 What Really Happened? Wal-Mart’s International Strategy 4Currently Carrefour (its major global competitor) has been able to match or better Wal-Mart’s prices 4Wal-Mart is increasing local adaptation to meet customer needs, but maintaining some global consistency to take advantage of purchasing power