3 managing in a global diverse environment
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CHAPTER 3:MANAGING IN A GLOBAL DIVERSE
ENVIRONMENT
CH 3© 2015 SAGE Publications
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Global Business in the Global Village• Global business: buying and selling of goods amongst
different countries• Global village: companies conducting business
worldwide without boundaries
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Different Types of Global Business• Domestic Business: Conducts business in only one
country• International Business: Based primarily in one country
but transacts business in other countries• Multinational Corporations (MNC): Has ownership of
operations in two or more countries
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Foreign and Transnational Companies • Foreign subsidiaries or affiliates: company owned and
controlled by another company making up a combined company called the holding or parent company
• Transnational Company type: eliminates artificial geographical barriers and does not have a single national headquarter
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Foreign Trade• Foreign Trade is conducting business with other countries• Foreign trade generally, but not always, benefits a
company• Dumping is when a company sells a product in another country
at a loss with the intention of driving out the competition
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Trade Barriers• Embargo: Total ban on the importing of a product from
one or more countries• Quotas: Sets a limit on the number or volume of a
product that can be imported or exported during a set period of time
• Subsidies: Include government grants, loans and a tax breaks given to domestic companies
• Tariff (Tax Method): Direct tax on imports to make foreign products more expensive
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World Trade Organization (WTO)• Allows organizations and governments to work together
to develop free trade among countries
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Trade Agreements• There are six major trade agreements around the globe:
• North American Free Trade Agreement (NAFTA)• Dominican Republic-Central American Free Trade Agreement
(CAFTA-DR) • Union of South American Nations (UNASUR)• European Union (EU)• Association of Southeast Asian Nations (ASEAN)• Asia-Pacific Economic Cooperation (APEC)
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Exchange Rates• Exchange Rates: the value of one country’s currency
when accepted by/convereted to another country• Balance of Trade: The difference between the value of the
products and services a country exports and imports.
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The Balance of Trade• Trade deficit: a country importing more than it exports • Trade surplus: a country exporting more than it imports
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Becoming a Business Global• Global Sourcing: Hiring others outside the firm to
perform work worldwide• Importing and Exporting: Commerce that moves goods
or services into or out of a country• Licensing and Franchising: Licensor allows the licensee
to make its products, serves or intellectual property for a fee
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Becoming a Business Global• Contracting: A foreign company making a product or
providing a service for domestic one• Contract manufacturing vs. Management Contracting• Strategic Alliances and Joint Ventures Strategic • Alliance is an agreement to share resources that does not
necessarily involve creating a new company.• Joint venture is created when two or more firms share
ownership of a new company • Direct Investment: The building or buying operating
facilities in a foreign country
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Business Practices of Global Companies• Global Management Team- Top level managers who are
foreign nationals • Global Strategy- One strategy for the entire company not
one per subsidiary
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Business Practices of Global Companies• Global Operations and Products- Standardized operations
and products worldwide to attain economies of scale• Global Technology and R&D- Technology research and
development centralized in one country, rather than duplicated at each subsidiary
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Business Practices of Global Companies• Global Financing- Search world markets to get the best
rates and terms when borrowing money for the long term; short term financing is largely arranged in individual countries using local financial institutions
• Global Marketing- Global products and marketing are adapted for local markets and are often developed by local agencies
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Workplace Diversity• Diversity: the variety of people with different group
identities within the same workplace • Diversity has a major impact on employees’ work
related values and attitudes and can affect the way an organization is managed
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Workplace Diversity• Age• Gender• Race and Ethnicity• Disability• Other
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Hofstede National Culture Diversity• Power Distance • Individualism vs. Collectivism• Assertiveness vs. Nurturing• Uncertainty Avoidance vs. Acceptance• Long term vs. Short term Orientation
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Power Distance• High Power Distance Cultures
• Employees expect and accept that management will make all decisions with little input from them
• China, Philippines, & most Arab countries• Low Power Distance Cultures
• Employees expect to be consulted on decisions of management and want to participate
• Israel, United States, & most European countries
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Individualism vs. Collectivism• Individualism
• Individualist cultures believe the individual should be self-sufficient with loyalty to themselves first and the group and company second
• United States & Netherlands• Collectivism
• Places society, the group & the company first• Indonesia & China
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Assertiveness vs. Nurturing• Assertiveness
• Assertive cultures are more aggressive and competitive with focus on achievement and material possessions
• Indonesia & China• Nurturing
• Nurturing cultures emphasize the importance of relationships, modesty, caring and quality of life
• Netherlands & France
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Uncertainty Avoidance vs. Acceptance• Uncertainty Avoidance
• Uncertainty avoidance cultures like structure, security, and are less likely to take risk
• Japan & Germany• Uncertainty Acceptance
• Uncertainty acceptance cultures are more comfortable dealing with the unknown, changes and take more risk
• Hong Kong
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Long Term vs. Short Term Orientation• Long Term Orientation
• Long term cultures look to the future and value thrift• China & Hong Kong
• Short Term Orientation• Short term cultures focus on the past and present, and value
immediate gratification • United States & Germany
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GLOBE’s Expanded Dimensions• Global Leadership and Organizational Behavior
Effectiveness (GLOBE) Initiative- Expanded Hofstede's 5 dimensions into 9• Assertiveness• Future Orientation• Gender differences• Uncertainty Avoidance• Power Distance• Social Collectivism• In-Group Collectivism• Performance Orientation • Humane Orientation
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Dimensions Low Moderate High
Assertiveness:People are tough, confrontational, and competitive
SwitzerlandNew Zealand
IrelandPhilippines
Spain United States
Future Orientation:People plan, delaying to invest in the future
RussiaArgentina
SloveniaIndiaUnited States
NetherlandsCanada
Gender differences:People have great gender role differences
Sweden DenmarkUnited States
BrazilItaly
Egypt China
Uncertainty Avoidance:People are uncomfortable with the unknown/ambiguity
BoliviaHungary
MexicoUnited States
Austria Germany
Power distance:People accept power inequality differences
NetherlandsUnited States
France Thailand
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Dimensions Low Moderate High
Societal Collectivism:Teamwork is encouraged( vs. individualism)
Greece Germany
Hong KongUnited States
Japan Singapore
In-Group Collectivism:People take pride in membership (family, team, organization)
DenmarkNew Zealand
IsraelJapanUnited States
China Morocco
Performance Orientation:People strive for improvement and excellence
RussiaVenezuela
EnglandSweden
TaiwanUnited States
Humane Orientation:People are fair, caring and kind to others
SingaporeSpain
United StatesHong Kong
IndonesiaIceland