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Managing in aGlobal
Environment
Chapter 3
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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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Four Stages of Globalization (contd.)
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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Four Stages of Globalization (contd.)
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.
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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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3-10
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.
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Sociocultural Environment
Includes shared: knowledge beliefs values common modes of behavior common ways of thinking
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Dimensions ofSocial Value Systems
Power distance. Uncertainty avoidance. Individualism & collectivism. Masculinity/femininity. Long term versus short term orientation.
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GLOBE Project Value Dimensions Assertiveness Future orientation Uncertainty avoidance Gender differentiation Power distance
Societal collectivism Individual collectivism Performance
orientation Humane orientation
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Additional Cultural Influences for International Organizations’ Consideration
Language Religion Attitudes Social organization Education
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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.
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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.
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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
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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
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