managing in a global environment. importance of international business if you are not thinking...
TRANSCRIPT
Managing in a Global Environment
Importance of International Business
If you are not thinking international,
you are not thinking business management
Global Environment and International Managers
Difficulties Operating in Borderless World
Challenges Economic Legal-political Socio-cultural
Multinational Corporations Foreign Markets - Entrance
A Borderless World
Business is becoming a unified, global field
Companies that think globally have a competitive edge
Domestic markets are saturated for many companies
Consumers can no longer tell from which country they are buying
Four Stages of Globalization
Domestic stage:market potential is limited to the home countryproduction and marketing facilities located at home
International stage:exports increasecompany usually adopts a multi-domestic approach
Multinational stage:marketing and production facilities located in many countriesmore than 1/3 of its sales outside the home country
Global (or stateless) stage:making sales and acquiring resources in whatever country offers the best opportunities and lowest cost ownership, control, and top management tend to be dispersed
4 Stages of Globalization1. 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.
Global (stateless) Corporations
Number is increasing Awareness of national borders decreasing Rising managers expected to know a 2nd or
3rd language Corporate Example – Nestle (Swiss)
CEO Peter Brabeck–Letmathe (Austrian) Half of general managers (non-Swiss) Strong faith in regional managers who are native
to the region
The InternationalBusiness Environment
International management is management of business operations conducted in more than 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
International Environment Factors
Organization
Economic•Economic development•Infrastructure•Resource and product markets•Per capita Income•Exchange rates•Economic conditions
Legal-Political
•Political risk
•Government takeovers
•Tariffs, quotas, taxes
•Terrorism, political instability
•Laws, regulations
Sociocultural•Socio values, beliefs•Language•Religion (objects, taboos, holidays)•Kinship patterns•Formal education, literary•Time orientation
Economic Environment Factors
Economic development
Infrastructure
Resource and product markets
Exchange rates
Inflation
Interest rates
Economic growth
Economic Development
● Countries categorized as “developing” or “developed”
● Criterion used to classify is per capita income
● Developing countries have low per capita incomes
● LDCs located in Asia, Africa, and South America
● Developed are North America, Europe, & Japan
● Driving global growth in Asia, Eastern Europe, & Latin America
Infrastructure
A country’s physical facilities that support economic activities
Airports, highways, and railroads Energy-producing facilities Communication facilities
Resource and Product Markets
When operating in another country... Managers must evaluate market
demand To develop plants, resource markets
must be available – raw materials and labor
Corporate Example – McDonald
Exchange Rates Rate at which one country’s
currency is exchanged for another country’s
Has become a major concern for companies doing business internationally
Changes in the exchange rate can have major implications for profitability of international operations
The Legal-Political Environment
Political Risk– due to events or actions by host governments ● Loss of assets● Loss of earning power● Loss of managerial control● Government takeovers● Acts of violence
Political Instability
Events such as riots, revolutions, or
government upheavals that affect the
operations of an international
company
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 laws on U.S. companies – expands potential for doing business on global basis
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 social values to comprehend local cultures and deal with them effectively
Hofstede’s 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
care of themselves) Masculinity/femininity (preference for
achievement/assertiveness; femininity for relationship)
Long-term/short-term orientation = 5th dimension
Four Dimensions of National Value
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
International Cultural Influences
Other Cultural Characteristics Language Religion Attitudes Social Organization Education
Linguistic pluralism – several languages exist Ethnocentrism – regard own culture superior
International Trade Agreements Most visible changes in legal-
political factors grow out of international trade agreements: GATT WTO EU NAFTA
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 lesser developed 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 imports from other WTO members
Most favored nation clause
WTO
Goal, is to guide and sometimes urge the nations of the world toward free trade and open markets
Encompasses GATT and all of its agreements
Has legal authority to arbitrate disputes on 400 trade issues
Partly responsible for backlash against global trade
European Union
Formed in 1957 to improve economic and social conditions
Has grown to 25-nation alliance Initiative Europe ’92 called for creation of open
markets for Europe’s 340 million consumers Biggest expansion in 2004 – 10 new members
from southern and eastern Europe Observers feared EU would become a trade barrier EU’s monetary revolution, introduction of the Euro
Nations of The EU
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*Joined in 2004
North American Free Trade Agreement
● Went into effect on January 1, 1994● Merged the United States, Canada, and Mexico with
more that 421 million consumers● Breaks down tariffs and trade restrictions on most
agriculture and manufactured products● August 12, 1992 agreements in number of key areas
include: agriculture, autos, transport, & intellectual property
● January, 2004 -10th anniversary = success and failure
Strategies for EnteringInternational Markets
Exporting
High
HighLow Low
Ow
ne
rsh
ip o
f F
ore
ign
Op
erat
ion
s
Cost to Enter Foreign Operations
Licensing
Franchising
Joint Venture
Acquisition
GreenfieldVenture
Multinational Corporations (MNC)
Receives >25% total sales revenues from operations outside parent company’s home country Managed as integrated worldwide business
system
Controlled by single management authority
Top managers exercise global perspective
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
Are you ready for a Global Role? If you're looking for a job with a more international view or you're
considering taking an overseas assignment, be sure you have these three components of a global mind-set:
Intellectual capital. This is your capacity to understand how business works on a global level and includes a strong grasp on how the industry operates worldwide, as well as the ability to piece together multiple scenarios.
Psychological capital. To be a global leader you need to have a passion for diversity, a thirst for adventure, and the self-confidence to succeed in a culture completely different than your own.
3. Social capital. You need to be able to build productive relationships with people from other parts of the world. To do this, you'll need intercultural empathy and strong diplomacy skills.