© 2006 by South-Western, a division of Thomson Learning. All rights reserved. 3-1 Managing in a...

© 2006 by South-Western, a division of Thomson Learning. All rights reserved. 3-1

Managing in aGlobal

Environment

Chapter 3

© 2006 by South-Western, a division of Thomson Learning. All rights reserved.

3-2

Learning Objectives1. Describe the emerging borderless world.2. Define international management and explain how it differs

from the management of domestic business operations.3. Indicate how dissimilarities in the economic, sociocultural,

and legal-political environments throughout the world can affect business operations.

4. Describe market entry strategies that businesses use to develop foreign markets.

5. Describe the characteristics of a multinational corporation.6. Explain the challenges of managing in a global

environment.


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Four Stages of Globalization

Domestic stage market potential is limited to the home country. production and marketing facilities located at

home..


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Four Stages of Globalization (contd.)

International stage exports increase. company usually adopts a multi-domestic

approach.


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Multinational stage marketing and production facilities located in

many countries. more than 1/3 of its sales outside the home

country.


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Global (or stateless) stage making sales and acquiring resources in

whatever country offers the best deal. ownership, control, and top management tend

to be dispersed.


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Why the Need for a Global Strategy

Business is becoming a unified global field. For many, domestic markets are saturated.


3-8

Principles of International Business Relations

1. Always show respect and listen, don’t be in a hurry.2. Try to gain an appreciation for the differences

between Hofsede’s “masculine” and “feminine” cultures.

3. Do not feel your way is the best way.4. Emphasize points of agreement.5. Discern the perceived definitions of words.6. Save face as well as giving face.7. Don’t embarrass anyone in front of others.8. Know or take someone who knows the culture.


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Principles of International Business Relations (contd.)

9. Understand that leadership may mean different things to different countries.

10. Don’t lose your temper.11. Avoid clique-building.12. Always show respect.13. Leave the American task oriented, fast paced style at home.14. Eliminate stereotypes.15. Be sensitive to the difference between low context culture

and high context cultures.16. Learn to tolerate a high degree of unpredictability.


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Organization

Sociocultural

•Social values, beliefs

•Language

•Religion (objects, taboos, holidays)

•Kinship patterns

•Formal education, literacy

•Time orientation

Legal-Political

•Political risk

•Laws, restrictions

•Government takeovers

•Tariffs, quotas, taxes

•Terrorism, political instability

Economic

•Economic development

•Resource & product markets

•Per capita income

•Infrastructure

•Exchange rates

•Economic conditions

Ex. 3.2 Key Factors in the International Environment


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The Economic EnvironmentIncludes such factors as: economic development. Infrastructure. resource and product markets. exchange rates. inflation, interest rates, and economic growth.


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Legal-Political Environment Political Risk risk of loss of assets, earning power, or managerial

control. Political Instability includes government takeovers, civil disorders. Laws and Regulations laws and regulations differ from country to country.


3-13

Sociocultural Environment

Includes shared: knowledge beliefs values common modes of behavior common ways of thinking


3-14

Dimensions ofSocial Value Systems

Power distance. Uncertainty avoidance. Individualism & collectivism. Masculinity/femininity. Long term versus short term orientation.


3-15

GLOBE Project Value Dimensions Assertiveness Future orientation Uncertainty avoidance Gender differentiation Power distance

Societal collectivism Individual collectivism Performance

orientation Humane orientation


3-16

Additional Cultural Influences for International Organizations’ Consideration

Language Religion Attitudes Social organization Education


3-17

GATT

General Agreement on Tariffs and Trade (GATT) Signed by 23 nations in 1947 as a set or rules. Ensured nondiscrimination, clear procedures, negotiation of

disputes, and participation of lesser developed countries in international trade.

Primary tools GATT successor, WTO. tariff concessions, countries agree to limit level of tariffs on imports

from other members. most favored nation clause.

Overall goal: closer relationships among member nations. help operate the global marketplace more efficiently.


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European Union

European Union (EU) Formed in 1957 to improve economic and social

conditions. Has 25-nation alliance. EU’s monetary revolution, introduction of the Euro. Euro is the single European currency that replaced

12 national currencies.


3-19

North AmericanFree Trade Agreement

North American Free Trade Agreement (NAFTA)

went into effect on January 1, 1994. merged the United States, Canada, and Mexico

with more that 421 million consumers. breaks down tariffs and trade restrictions on

most agriculture and manufactured products.


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Market Entry Strategies

… represent alternative ways to sell products and services in foreign markets.

… represent alternative ways to sell products and services in foreign markets.


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Outsourcing

… to seek cheaper sources of supply offshore.… to seek cheaper sources of supply offshore.


3-22

Ex. 3.6 Strategies for EnteringInternational Markets

Greenfield Venture

Acquisition

Joint Venture

Franchising

Licensing

Exporting

High

High

Low

Low

Ow

ners

hip

of F

orei

gn O

per

atio

ns

Cost to Enter Foreign Operations


3-23

Managing Cross Culturally

Managers must be sensitive to cultural subtleties in: leadership decision making motivation control must be culturally flexible and easily adapt to new

situations cannot be ethnocentric Culture Shock may lead to frustration and anxiety

© 2006 by South-Western, a division of Thomson Learning. All rights reserved. 3-1 Managing in a...

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