Managing in the

Global Environment

Chapter Four

Copyright © 2011 by the McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin

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Learning Objectives

LO1 Explain why the ability to perceive, interpret, and respond appropriately to the organizational environment is crucial for managerial success

LO2 Differentiate between the global task and global general environments

LO3 Identify the main forces in a global task and general environments, and describe the challenges that each force presents to managers

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Learning Objectives

LO4 Explain why the global environment is becoming more open and competitive and identify the forces behind the process of globalization that increase the opportunities, complexities, challenges, and threats that managers face

LO5 Discuss why national cultures differ and why it is important that managers be sensitive to the effects of falling trade barriers and regional trade associations on the political and social systems of nations around the world

What is the Global Environment?

• Global Organizations – Organizations that

operate and compete in more than one country

• Global Environment – Set of global forces and

conditions that operate beyond an organization’s boundaries

– Affects a manager’s ability to acquire and utilize resources

– Uncertain and unpredictable

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Any examples??

Forces in the Global Environment

Figure 4.14-5

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What is the Global Environment?

• Task Environment – Set of forces and conditions that originate with:

Suppliers, Distributors, Customers & Competitors– Affects an organization’s ability to obtain inputs

and dispose of its outputs– Influences managers on a daily basis

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What is the Global Environment?

• General Environment – The wide-ranging global forces that affect an

organization and its task environment– Economic, Technological, Socio-cultural,

Demographic, Political and Legal forces

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1-The Task Environment/Suppliers

• Suppliers– Individuals and organizations that provide an

organization with the input resources that it needs to produce goods and services

– Provide raw materials, component parts, labor (employees) = inputs!

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1-The Task Environment/Suppliers

• Relationships with suppliers can be difficult– Material shortages, unions, lack of substitutes

• Suppliers that are the only source of a critical item are in a strong position to raise prices

• Managers can reduce these supplier effects by increasing the number of suppliers per input

• Is this always possible or practical?

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Global Outsourcing

• Global Outsourcing – Purchase of inputs from foreign suppliers or the

production of inputs abroad to lower production costs and improve product quality or design

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2-The Task Environment/Distributors

• Distributors– Organizations that help other organizations

sell their goods or services to customers• Powerful distributors can limit access to

markets through its control of customers in those markets.

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3-The Task Environment/Customers

• Customers– Individuals and groups that buy the

goods and services that an organization produces

– Identifying an organization’s maincustomers and producing the goodsand services they want is crucialto organizational and managerial success

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4-The Task Environment/Competitors

• Competitors– Organizations that produce goods

and services that are similar to a particular organization’s goods and services

– Strong competitive rivalry results in: -Price competition & lower prices -BUT falling prices reduce access to resources and lower profits

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The Task Environment-Barriers to Entry

• Barriers to Entry– Factors that make it difficult and costly for the

organization to enter a particular task environment or industry

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The Task Environment-Barriers to Entry

• Economies of scale– Cost advantages associated with large

operations• Brand loyalty

– Customers’ preference for the products of organizations currently existing in the task environment

• Government regulations– Government policies that may limit

imports of goods

Barriers to Entry and Competition

Figure 4.24-16

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1-General Environment/Economics

• Economic Forces– Interest rates– Inflation– Unemployment– Economic growth– Other factors that affect the general health and

well-being of a nation or the regional economy of an organization

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2-General Environment/Technology

• Technological Forces– Outcomes of changes in the technology that

managers use to design, produce, or distribute goods and services

• Products may become obsolete (Other People’s Money)• Better/faster/more efficient products and services

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3-General Environment/Sociocultural

• Sociocultural Forces– Pressures emanating from the social structure of a

country or society or from the national culture

3-General Environment/Sociocultural

• Social structure– Arrangement of

relationships between individuals and groups in society

• National culture– Set of values that a

society considers important and the norms of behavior that are approved or sanctioned in that society.

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4-General Environment/Demographics

• Demographic Forces– Outcomes of change in, or changing attitudes

toward, the characteristics of a population, such as age, gender, ethnic origin, race, sexual orientation, and social class

• Most industrialized nations are experiencing the aging of their populations

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5-General Environment/Political-Legal

• Political and Legal Forces– Outcomes of changes in laws and regulations include:

• Deregulation of industries• Privatization of organizations• Increased emphasis on environmental protection• Free exchange of resources and capital

The Global Environment-EU

Figure 4.34-23

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The Process of Globalization

• Globalization – Set of specific and general forces that work

together to integrate and connect economic, political, and social systems across countries, cultures, or geographical regions, resulting in:

– Nations become increasingly interdependent• Changes in Globalization result from Capital

– Human/People- Financial/Money-Resources/Raw Materials and Political/Power

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Effects of Free Trade on Managers

• Declining Trade Barriers– Opened enormous opportunities for managers to

expand the market for their goods and services– Allowed managers to now both buy and sell goods

and services globally• Tariff

– Tax imposed on imported goods

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The Role of National Culture

• Values– Ideas about what is good, desirable and beautiful

• Provides conceptual support for democracy, truth, appropriate roles for men, and women

• Usually not static but very slow to change

• Norms– Unwritten informal codes of conduct

Norms

• Folkways– Routine social

conventions of everyday life

• Mores – Norms that are

considered to be central to functioning of society and to social life

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Hofstede’s Model of National Culture

Figure 4.44-28

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Hofstede’s Model of National Culture

• Individualism– A worldview that values individual

freedom and self-expression andadherence to the principle thatpeople should be judged by individual achievements ratherthan by their social background

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Hofstede’s Model of National Culture

• Collectivism– A worldview that values subordination of the

individual to the goals of the group and adherence to the principle that people should be judged by their contribution to the group

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Hofstede’s Model of National Culture

• Power Distance– The degree to which societies accept the idea that

inequalities in the power and well-being of their citizens are due to differences in individuals’ physical and intellectual capabilities and heritage

– Low power distance = more equality/opportunity– High power distance = economical poor countries– US/UK = low power distance/high individualism– S.A. = high power distance/low individualism

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National Culture and Global Management

• Management practices that are effective in one culture might be troublesome in another

• Managers must be sensitive to the value systems and norms of an individual’s country and behave accordingly

• Examples include: – Wages– Holidays– Teamwork

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Discussion Question?

What technology has had the biggest impact on business in the last 50 years? Think about…..

New technology has made the world smaller Technology has changed how a manager manages Money spent on IT department now vs. 50 years ago Can you imagine not being “connected” in some way? Could you go without IM or email for a week? What happens to businesses when networks go down?

A. Internet B. Cell Phones C. Computers D. Email