Schermerhorn - Chapter 31 Core Concepts of Management Schermerhorn Prepared by Cheryl Wyrick...

Schermerhorn - Chapter 3 1

Core Concepts of ManagementSchermerhorn

Prepared by

Cheryl Wyrick

California State Polytechnic University Pomona

John Wiley & Sons, Inc


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Chapter 3Globalization and International Management

Planning Ahead– What are the processes of globalization?

– What is the environment of international business?

– How does culture create global diversity?

– How do management practices transfer across cultures?


Processes of Globalization

The New Europe– European Union (EU)

• grouping of European countries who agreed to support mutual economic growth

• 11 of these countries have agreed to adopt the Euro (common currency)



The Americas– North American Free Trade

Agreement (NAFTA)• Agreement for free flow of

goods and services between the U.S., Canada and Mexico

– Free Trade of the Americas (FTAA) is a possibility

– Other agreements• MERCOSUR• Andrean Pact• CARICOM



Maquiladoras– foreign manufacturing plants allowed to operate

in Mexico• allowed special privileges in exchange for hiring

Mexican labor– import materials, components and equipment with duty

paid on “value added”



Maquiladoras– advantages

• increased employment and prosperity

– disadvantages• social costs in border towns

• exploitation of less expensive Mexican labor



Asia and the Pacific Rim– Asia and Pacific Rim economies are expected

to be larger than those of the EU– China is the world’s largest single-country

marketplace– Japanese companies account for many Fortune

500 companies



Africa– beckons international

business

– increased attention to stable countries


Environment of International Business

Forms of International Business– Global Sourcing

• manufacturing and/or purchasing components worldwide and assembling them into a final product



Forms of International Business – Exporting

• selling locally made products in foreign markets

– Importing• buying foreign made products and selling

them in domestic markets



Forms of International Business – Licensing Agreement

• pay a fee to acquire the rights to sell another company’s products

• franchising is form of licensing


Environment of International Business Forms of International Business

– Direct Investment Strategies• joint ventures

• strategic alliances

• wholly owned subsidiary


Multinational Corporations

Multinational Corporation (MNC)– business with extensive international operations

in more than one country



Advantages of MNCs– larger tax bases– increased employment opportunities– technology transfers– introduction of new industries– development of local resources



Disadvantages of MNCs– extract excessive profits– dominate local economy– do not respect local customs and laws– fail to help domestic firms develop– do not transfer most advanced technology


Pros and Cons of Global Operations

Ethical Issues in Multinational Operations– Foreign Corrupt Practices Act– Sweatshops– Environmental protection


Culture and Global Diversity

Culture– shared set of beliefs, values and patterns of

behavior common to a group of people



Ethnocentrism– tendency to view one’s own culture

as superior to others



Silent Language– Culture shock

• discomfort a person feels in an unfamiliar culture



Spoken Language– Low-context

• explicit spoken and written word

• examples: US, Germany

– High-context• words convey only part of the message

• examples: Middle East, Asia



Use of Space (Proxemics)– interpersonal distance used in communication

• Latin Americans tend to be close

• Americans value more space



Time Orientation– Monochronic

• time is allotted do one thing at a time

– Polychronic• time is allotted to do many things at once



Religion– may influence business practices– source of ethical and moral teaching



Role of Contracts– some cultures view as final and binding– others view as a starting point– some expect contracts to be written– others accept “word” as binding



Values and National Cultures (Hofstede)– Power distance– Uncertainty avoidance– Individualism-collectivism– Masculinity-femininity– Short-term - long-term orientation



Understanding Cultural Differences– Relationships with People

• universalism vs. particularism

• individualism vs. collectivism

• neutral vs. affective

• specific vs.diffuse

• achievement vs. prescription



Understanding Cultural Differences– Attitudes toward time

• sequential

• synchronic



Understanding Cultural Differences– Attitudes toward environment

• inner-directed

• outer-directed


Management Across Cultures

Comparative Management– how management systematically differs from

one country and/or culture to the next• global manager

– someone comfortable with cultural diversity

– quick to find opportunity in unfamiliar settings



Are Management Theories Universal?– U.S. management

theories may be ethnocentric

• emphasis on participation and individual performance are not applicable to other cultures



Are Management Theories Universal?– Japanese management practices

• lifetime employment

• job rotation and broad career experience

• shared information

• collective decision-making

• quality emphasis

– These practices are not easy to translate



Global Organizational Learning– cultural awareness facilitates more informed

transfers of management practices

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