6-1

Global ForcesOutcomes of changes in international relationships Economic integration of countries through free

trade agreements GATT and WTO, NAFTA, EU

Declining barriers of distance and culture Technological developments allow secure and quick

communications

6-2

Free Trade Agreements GATT and World Trade Organization

GATT signed by 23 countries in 1947 Included “most favored nation” which calls for member

countries to grant other member countries their most favorable treatment with respect to imports and exports

Evolved into World Trade Organization (1995) Monitors international trade to promote global free trade Expanded to include trade in services and intellectual

property

6-3

Free Trade Agreements

North American Free Trade Agreement (NAFTA) 1994 Abolishes 99% of tariffs on goods traded between

Mexico, Canada and U.S. Unrestricted flows of resources across borders U.S. firms have increasingly invested in Mexican

manufacturing facilities because of low wages.

6-4

The Role of National CultureGeert Hofstede developed five dimensions to compare the

values an norms of different countries

6-5

Hofstede’s Model of National Culture Individualism vs Collectivism

Individualism values the idea that people should be judged by their individual achievements People in individualistic cultures have loose ties to

others focusing mainly on looking after themselves and immediate family

Collectivism values subordination of individual goals to group goals People in collectivistic cultures have strong ties to the

groups in which they belong.

6-6

Hofstede’s Model of National Culture Uncertainty Avoidance

Measures the extent to which people in the culture are comfortable with ambiguous situations and tolerant of risk

Cultures with low uncertainty avoidance value diversity and tolerate wide range of opinions and beliefs

Cultures with high uncertainty avoidance attempt to limit ambiguity through laws and norms of behavior – more rigid and expect high conformity

6-7

Hofstede’s Model of National Culture Power Distance

The degree to which societies accept unequal power among their citizens – includes unequal wealth, status, social differences Cultures in which inequalities are allowed to grow and

persist over time are have high power distance. Cultures of low power distance place checks on the

growth of unequal power through taxation and welfare programs

Central to this principle is the extent to which the followers or lower-powered members accept the unequal power

6-8

Hofstede’s Model of National Culture Achievement vs. Nurturing

Cultures with achievement orientations value assertiveness, competition and are results-oriented

Cultures with nurturing orientations value quality of life, caring for others and the environment and service

Women’s values along this dimension did not differ very much across cultures (women are similar across cultures), primary differences in values on this dimension are among men.

6-9

Hofstede’s Model of National Culture Long-Term vs. Short Term Orientation

Cultures with long-term orientations value saving and persistence in achieving goals

Cultures with short-term orientations value living in present and maintaining personal happiness