MANAGING IN A GLOBAL ENVIRONMENT

Prepared By : ZAREEN SHAIKH, SZABIST LarkanaSession-4

Class-BBA-2

The International Business The International Business EnvironmentEnvironment

Greater difficulties and risks when Greater difficulties and risks when performing management functions - due performing management functions - due to differences in culture, language, to differences in culture, language, economies, laws, political stability, etc.economies, laws, political stability, etc.

Stages of GlobalizationStages of Globalization1.1. Domestic StageDomestic Stage = All production and marketing facilities at = All production and marketing facilities at

home.home.

2. 2. International StageInternational Stage = International Division is typically part of = International Division is typically part of the structure, but is not dominant.the structure, but is not dominant.

3. 3. Multinational StageMultinational Stage = Marketing and production in many = Marketing and production in many countries and 1/3 of sales from outside home country.countries and 1/3 of sales from outside home country.

4. 4. Global StageGlobal Stage =Making sales and acquiring(to get something) =Making sales and acquiring(to get something) resources in whatever country offers the best deal.resources in whatever country offers the best deal.

Ownership, control, and top management tend to be Ownership, control, and top management tend to be dispersed.dispersed.

INTERNATIONAL BUSINESS MANAGEMENT

ENVIRONMENTAL ENVIRONMENTAL FORCESFORCES

1. Economic environment2. Legal/ Political environmental4. Socio-cultural environment5. Technological environment

Economic environment

Economic Development (Developed & Less Developed Countries)

Infrastructure Resource & Product Markets Exchange rates

Legal/ Political environment

Political Risk and Instability Laws and Regulations

GATTWTOEUNAFTATRADE ALLIANCES

Socio-cultural environment

Hofstede’s Dimensions of Culture Hofstede’s Dimensions of Culture (National Social Values)(National Social Values)

Power DistancePower Distance Uncertainty AvoidanceUncertainty Avoidance Individualism/CollectivismIndividualism/Collectivism Masculinity/FemininityMasculinity/Femininity Time OrientationTime Orientation

Power DistancePower DistanceHigh power distance High power distance means people accept means people accept

inequality in power among institutions, inequality in power among institutions, organizations, and peopleorganizations, and people

Uncertainty AvoidanceUncertainty AvoidanceHigh uncertainty High uncertainty avoidance means that avoidance means that members of a society feel uncomfortable members of a society feel uncomfortable

with uncertainty and ambiguitywith uncertainty and ambiguity

IndividualismIndividualism IndividualismIndividualism reflects a value for a reflects a value for a loosely knit social framework in which loosely knit social framework in which

individuals are expected to take care of individuals are expected to take care of themselvesthemselves

CollectivismCollectivism CollectivismCollectivism is a preference for a tightly is a preference for a tightly

knit social framework in which knit social framework in which individuals look after one anotherindividuals look after one another

Masculinity/Femininity Masculinity/Femininity (Toughness/Tenderness)(Toughness/Tenderness)(Achievement/Nurturing)(Achievement/Nurturing)

MasculineMasculine cultures stress the cultures stress the importance of achievement, heroism, importance of achievement, heroism, assertiveness, and material successassertiveness, and material success

FeminineFeminine cultures value relationships, cultures value relationships, modesty, caring for the weak, and modesty, caring for the weak, and quality of lifequality of life

Time OrientationTime Orientation

Short-Term Orientation Short-Term Orientation means a greater means a greater concern with the past and present and a concern with the past and present and a high value on meeting social obligations.high value on meeting social obligations.

Long-Term OrientationLong-Term Orientation means a greater means a greater concern for the future and high value on concern for the future and high value on the saving and determination.the saving and determination.

Technological EnvironmentTechnological EnvironmentChanging at “lightning speed” Internet and telecommunications

Increasing bandwidth/high-speed accessReduced costs of entry/ leapfrogging

E-businessCustomization (“the long end of the tail”)E-retailing and financial services

Movement of money across borders “E-cash” – a currency without a country

Outsourcing and offshoringInformation as a commodityThe 24-hour office – increased productivity/lower cost

How Organizations Go GlobalThree Stages of Globalization

Stage I Exporting products for sale overseas and importing products from

overseas to sell in the home country.

Stage II Committing to directly sell home-country products in overseas

markets or contracting for products to be manufactured overseas and sold in the home country.

Stage III Licensing manufacturing and franchising services to foreign firms

to use the brand name, technology, or product specifications developed by the firm.

How Organizations Go Global

Other Forms of GlobalizationStrategic Alliances

Partnerships between an organization and a foreign company in which both share resources and knowledge in developing new products or building new production facilities.

Joint VentureA specific type of strategic alliance in which the

partners agree to form a separate, independent organization for some business purpose.

Class Debate: The Pros and Cons of Globalization

THE PROS AND CONS THE PROS AND CONS OF GLOBALIZATIONOF GLOBALIZATION

1. Where do you stand?2. Key themes to consider

a. Impact on Laborb. Impact on Equalityc. Impact on Governmentd. Impact on the Environmente. Impact on Culture and Community

Impact on LaborImpact on Labor

Positive effects Increased job opportunities

Upgraded education system

Increased training

Negative effects Job displacement

Loss of industries or economic

groups

Lowered labor standards

Downward wage pressure

Decreased union power

Diminished social contract

Impact on EqualityImpact on EqualityPositive effects

Increased income / reduced poverty

Increased wages for education or

technically skilled

Improved economic conditions

Rich become richer

Greater access to goods

Lower cost of goods

Increased food supply (in some

countries)

Negative effects Greater disparity between haves

and have-nots within and across

countries

Some downward pressure on

wages for the poorly educated or

unskilled

Worsened economic conditions in

marginalized countries

Poor become poorer

Impact on GovernmentImpact on GovernmentPositive effects

Increased economic

development

Expanded infrastructure

Transfer of modern

management techniques

Greater interdependence

among business

partners

Negative effects MNC power increased

MNCs externalize cost to countries

Competition results in too many

concessions

MNCs influence local policies

Companies incorporate in low tax

countries

Pressure to reduce social benefits

Impact on the EnvironmentImpact on the EnvironmentPositive effects

More efficient use of

resources

Increased demand for and

transfer of more efficient

technologies

Increased incomes lead to

greater concern for

environmental protection

Negative effects Increased consumption

Advertising creates artificial

needs

Greater use of fossil fuels

(increased travel)

Increased surplus and scarcity

More factories require more

infrastructure

Impact on Culture/CommunityImpact on Culture/Community

Positive effects Increased cultural exposure

and understanding

Closer cross-border ties

Negative effects More mobility disrupts social life,

particularly in remote or rural

communities

Disintegration of local

communities

Cultural homogenization and

monoculture / reduced cultural

diversity

Globalization: Pros and ConsGlobalization: Pros and ConsGlobalization as “moral conflict” Impacts of Globalization

Increases economic interdependenceCreates winners and losers

Implications of the debateFor academics

Need for more objective research Need to question assumptions and be open to alternatives

For companies Be aware of multiple stakeholder interests Follow the guidelines of the UN Global Compact

ConclusionConclusion Implications for Managers

Lifelong learningthe “most valuable asset is the ability to learn how to learn” (Thomas

Friedman, The World is Flat)

Responsivenessbe alert for changes and quick to respond

Adaptabilityknowing how to work with othersbeing comfortable with uncertainty and ambiguity

Both a local and global perspectivesee the big picture (global economy/whole organization)understand the details of operating at the local level

ANY QUESTION