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Managing in a Global Environment
Chapter4
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Global Environment and
International Managers
Difficulties Operating in Borderless World
Challenges Economic
Legal-political
Socio-cultural Multinational Corporations
Foreign Markets - Entrance
Chapter 4
Topics
Managers Challenge: Wal-Mart Managers
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A Borderless World
Business is becoming a unified, global field
Companies that think globally have acompetitive edge
Domestic markets are saturated for many
companies
Consumers can no longer tell from which
country they are buying
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4 Stages of Globalization
1. Domestic 2. International 3. Multinational 4. Global
Strategic Orientation
Stage of Development
Cultural Sensitivity
Manager Assumptions
Domestically
Oriented
Export- Oriented
multi-domestic
Multinational Global
GlobalInitial foreign
involvement
Competitive
positioning
Explosion of
international
operations
Of little
importance
One best
way
Very important
Many good
ways
Somewhat
important
The least-cost
way
Critically
important
Many good
ways
SOURCE: Based on Nancy J. Adler, International Dimensions of Organizational Behavior, 4 th ed. (Cincinnati, Ohio: South-Western, 2002), 8-
9.
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The International
Business Environment
International management is management
of business operations conducted in morethan one country
Fundamental tasks do not change
Basic management functions are the same - domestic or international
Greater difficulties and risks when performing on
an international scale
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Economic Environment Factors
Economic development
Infrastructure Resource and product markets
Exchange rates
Inflation
Interest rates
Economic growth
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Infrastructure
A countrys physical facilities that support
economic activities
Airports, highways, and railroads
Energy-producing facilities
Communication facilities
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Exchange Rates
Rate at which one countryscurrency is exchanged for
another countrys Has become a major concern for
companies doing businessinternationally
Changes in the exchange ratecan have major implications forprofitability of internationaloperations
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The Legal-Political Environment
Political Riskdue to events or actions by host
governments Loss of assets
Loss of earning power
Loss of managerial control
Government takeovers
Acts of violence
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Political Instability
Events such as riots, revolutions, or
government upheavals that affect the
operations of an international company
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Laws and Regulations
Government laws and regulations differ from
country to country Make doing business a true challenge for
international firms
Internet has increased impact of foreign lawson U.S. companies expands potential for
doing business on global basis
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Sociocultural Environment
Culture shared knowledge, beliefs, values,common modes of behavior, and ways of thinking
among members of a society Intangible
Pervasive
Difficult for outsider to learn
Managers need to understand difference in socialvalues to comprehend local cultures and deal withthem effectively
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Hofstedes Value Dimensions
Research = national value systems influence
organizational and employee working relationships
Power distance (high = accept inequality)
Uncertainty avoidance (uncomfortable with uncertainty)
Individualism and collectivism (Individualism take careof themselves)
Masculinity/femininity (preference forachievement/assertiveness; femininity for relationship)
Long-term/short-term orientation = 5th dimension
Ethical Dilemma: The Problem in Asia
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Four Dimensions of National Value
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GLOBE Value Dimensions
Assertiveness
Future orientation
Uncertainty avoidance
Gender differentiation
Power distance
Societal collectivism
Individual collectivism
Performance orientation
Humane orientation
Global Leadership and Organizational Behavior Effectiveness project
More comprehensive view of cultural
similarities and differences
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International Trade Agreements
Most visible changes in legal-political
factors grow out of international trade
agreements: GATT
WTO
EU
NAFTA
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International Trade Alliances
General Agreement on Tariffs and Trade (GATT)
Signed by 23 nations in 1947 as a set of rules Ensured nondiscrimination, clear procedures,
negotiation of disputes, and participation of lesserdeveloped countries in international trade
Today, 147 member countries abide by the rules
Primary tools WTO uses on tariff concessions,countries agree to limit level of tariffs on importsfrom other WTO members
Most favored nation clause
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European Union
Formed in 1957 to improve economic and socialconditions
Has grown to 25-nation alliance
Initiative Europe 92 called for creation of open marketsfor Europes 340 million consumers
Biggest expansion in 2004 10 new members from
southern and eastern Europe
Observers feared EU would become a trade barrier
EUs monetary revolution, introduction of the Euro
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Nations of The EU
*
* *
*
*
*
*
*
**
*Joined in2004
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Multinational Corporations (MNC)
Receives >25% total sales revenues from
operations outside parent companys home
country
Managed as integrated worldwide business system
Controlled by single management authority
Top managers exercise global perspective
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Managing in a Global Environment
Managers must be sensitive to cultural subtleties
Personal challenges culture shock Managing Cross-culturally
Leading
Decision making
Motivating
Controlling
Managers must be culturally flexible and easily
adapt to new situations
Experiential Exercise: Rate your Global
Management Potential