1

Global Dimensions of Management

Key Global Events• Collapse of the Soviet Union• Opening of China• Improved Access

(Telecommunications)• Steady Growth in MNC’s• The European Community• NAFTA - GATT

2

International Management

The conduct of business and other operations in foreign countries. • Working overseas in the foreign operation of a domestic firm.

• Working overseas for a foreign firm.

• Working as a domestic employee of a foreign firm operating in your country.

3

Why Organizations Go International

•Profits•New Markets•Raw Materials•Financial Capital•Lower Labor Costs

4

The Global Economy

Based on the worldwide interdependence of resource supplies, product markets, and business competition.

The European Union

The Americas

Asia and the Pacific RimRussia

NAFTA

GATT

Asia-Pacific Economic Forum

AfricaMaquiladoras

China

WTO

5

International Business

•The conduct of for-profit transactions of goods and services across national boundaries.

6

International Business

Strategies• Market Entry

– Global Sourcing

– Exporting– Importing– Licensing – Franchising

• Direct Investment

– Joint Ventures– Wholly Owned

Subs

7

Multinational Corporations

•A business firm with extensive international operations in more than one foreign country

MNO’s are organizations like the Red Cross, whose nonprofit missions and operations span the globe.

8

Types of MNCs

• Transnational CorporationsStrive to operate on a borderless basis and without being identified with one national home.

• EthnocentricStrict headquarters control over foreign operations, expects to operate the same way it does at home.

9

Types of MNCs• Polycentric

Gives it foreign operations more operating freedom, respects market differences among countries, and treats each country as a separate competitive domain.

• Geocentric Like Traditional it seeks total integration of global operations by operating without "home country" prejudices, making major decisions for global perspective, and employing senior executives from many different countries.

10

Environmental Challenges in the Global Economy

• Economic Differences– Centralized vs Free Market Economies– Transition to Privatization– Trade Alliances and Policies

• Legal Political Differences– Democratic vs Totlaitarian Systems– Diverse Legal Codes

11

Environmental Challenges in the Global Economy

• Educational Differences– Different School Systems– Literacy Levels– Availability of Skilled Labor

• Socio-Cultural Differences– Different Cultures– Culture Shock– Ethnocentrism

12

Host Country Complaints of MNC’s

• Extract excessive profits.• Dominate the local economy.• Interfere with the local government.• Fail to help domestic firms develop.• Hire the best local personnel.• Fail to transfer advanced

technologies.• Fail to respect local customs, laws,

and needs.

13

MNC’s Complaints

•Profit limitations.

•Overpriced resources.

•Exploitative rules.

•Foreign exchange restrictions.

•Failure to meet contract obligations .

14

Popular Dimensions Of

Culture•Language•Use of Space•Time Orientation

Monochronic vs Polychronic

•Religion•Use Of Contracts

15

Hofstede's Dimensions Of

Culture•Power Distance

The degree to which a society accepts the unequal distribution of power in organizations.

•Uncertainty AvoidanceThe degree to which a society tolerates risk and situational uncertainties.

16

Hofstede's Dimensions Of

Culture•Individualism - Collectivism

The degree to which a society emphasizes individual self-interest, or the collective values of groups.

•Masculinity - FemininityThe degree to which a society emphasizes assertiveness and material concerns, or relationships with others and concerns for feelings.

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Hofstede's Dimensions Of

Culture•Time Orientation

The degree to which a society emphasizes short term considerations versus greater concern for the future.

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High LowPower Distance

Philippines AustriaUS

Uncertainty AvoidanceGreece SingaporeUS

IndividualismUSA VenezuelaJapan

MasculinityJapan SwedenUS

Time Orientation

USA Japan

19

Apply the Management Functions Across

Cultures•Comparative Management

The study of how management practices systematically differ from one country and/or culture to the next.

•Political-Risk AnalysisInvolves forecasting the probability of various events that can threaten the security of a foreign investment.

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Comparative Management Practices

•We can look to Hofstede's Model to understand how strong cultural influences can impact the compatibility of management theories when applied across international borders.

21

Comparative Management Practices

•Notwithstanding the stories proclaiming the success of the Japanese management system.… we should hesitate to accept any practice, no matter how well it appears to work somewhere else, as a universal prescription to action.