Chapter 5

International Management

Planning Ahead — Chapter 5 Study Questions

1. What are the management challenges of globalization?

2. What are global businesses and what do they do?3. What is culture and how does it impact global

management?4. How can we benefit from global management

learning?

Chapter 5 Learning Dashboard

1. Management and Globalization1. Global management2. Why companies go global3. How companies go global4. Global business environments

2. Global Businesses1. Types of global businesses2. Pros and cons of global businesses3. Ethics challenges for global businesses4. Global business environments

Chapter 5 Learning Dashboard

3. Culture and Global Diversity1. Cultural intelligence2. Silent languages of culture3. Tight and loose cultures4. Values and national cultures

4. Global Management Learning1. Are management theories universal?2. Global learning goals

Management and Globalization

• Key concepts in the challenges of globalization:

– Global economy: global economy can be seen as the economy of global society and national economies

– Globalization: process of international integration arising from the interchange of world views, products, ideas, and other aspects of culture

– Global management: management of a global company with different views, products and cultures.

– World 3.0: global prosperity and how to achieve it

– Global manager: has the capability to manage amid the complexity of business that is conducted across divergent cultures and time zones

5

Management and Globalization

• International businesses– Conducting for-profit transactions of goods and

services across national boundaries

• Reasons why businesses go global:(PSLRCC)

• Market entry strategies – involve the sale of goods or services to foreign

markets but do not require expensive investments

Management and Globalization

• Types of market entry strategies: (GLIFE)– Global sourcing– Exporting– Importing– Licensing agreement– Franchising

• Types of direct investment strategies: (JSF)– Joint venture– Strategic alliance – Foreign subsidiary

Common forms of global business—from market entry to direct investment strategies

Management and Globalization

Management and Globalization?

Insourcing refers to local job creation that results from foreign direct investment

Management and Globalization

Types of insourcing:

Insourcing refers to local job creation that results from foreign direct investment

Management and Globalization

Management and Globalization

Management and Globalization

Legal and political systems– Differing laws and practices regarding• Business ownership• Foreign currency exchange• Protection of intellectual property rights

– Counterfeit merchandise

– Political risk• Potential loss in value of a foreign investment due to

instability and political changes in the host country

– Political risk analysis• Forecast political disruptions that threaten the value of a

foreign investment

Management and Globalization

• Trade Agreements and Trade Barriers–World Trade Organization • Most favored nation status• Tariffs• Nontariff barriers• Protectionism

Management and Globalization

Regional Economic Alliances– NAFTA – North American Free Trade Agreement– EU – European Union– APEC – Asia Pacific Economic Cooperation– ASEAN – Association of Southeast Asian Nations– SADC – Southern Africa Development Community

Global Businesses

• Types of global businesses:– Global Corporation• MNE (multinational enterprise) or MNC (multinational

corporation) with extensive business operations in more than one foreign country

– Transnational corporation• A global corporation that operates worldwide on a

borderless basis

Global Businesses

• Mutual benefits for host country and global corporation or MNC:

– Shared growth opportunities– Shared income opportunities– Shared learning opportunities– Shared development opportunities

Global Businesses

• Host country complaints about MNCs:(LIEDHD)

– Excessive profits– Domination of local economy– Interference with local government– Hiring the best local talent– Limited technology transfer– Disrespect for local customs

Global Businesses

• MNC complaints about host countries:

Profit limitations– Overpriced resources– Exploitative rules– Foreign exchange restrictions– Failure to uphold contracts

Global Businesses

Global Businesses

• Ethical issues for Global Businesses:– Corruption – illegal practices that further one’s

business interests– Foreign Corrupt Practices Act – makes it illegal for

U.S. firms and their representatives to engage in corrupt practices overseas• Bribes to foreign officials• Excessive commissions• Non monetary gifts

Global Businesses

• Child labor and Sweatshops:– Child labor – full time employment of children for

work otherwise done by adults– Sweatshops – employ workers at very low wages for

long hours in poor working conditions

Culture and Global Diversity

Culture and Global Diversity

Stages in adjusting to a new culture:

Culture and Global Diversity

Silent languages ofculture

Culture and Global Diversity

Context– Low context cultures - emphasize communication

via spoken or written words• United States• Canada• Germany

Culture and Global Diversity

Context– High context cultures – rely on nonverbal and

situational cues as well as on spoken or written words• Thailand• Malaysia

Space– Proxemics – study of how people use space to

communicate• In the U.S. people value “personal space”• Many Latin and Asian cultures expect much less personal

space

Culture and Global Diversity

Time– Monochronic cultures – people tend to do one

thing at a time• United States, Canada, Germany

– Polychronic cultures – time is used to accomplish many different things at once• Egypt, Saudi Arabia, Mexico

Culture and Global Diversity

Tight and Loose Cultures– Cultural tightness-looseness• Strength of norms that govern social behavior• Tolerance for any deviance from norms• Tight = Japan, Korea• Loose = Brazil, Hungary