principles of management gtu mba globalization and management

7/31/2019 Principles of management GTU MBA Globalization and Management

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Globalization and Management


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The Global Marketplace

Opportunities and Challenges Coping with the sudden appearance of new competitors

Acknowledging cultural, political and economicdifferences

Dealing with increased uncertainty, fear and anxiety Adapting to changes in the global environment

Avoiding parochialism


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Whats Your Global Perspective?

Parochialism

Is viewing the world solely through ones own eyes and

perspectives.

Is not recognizing that others have different ways of livingand working.

Is a significant obstacle for managers working in a globalbusiness world.

Is falling into the trap of ignoring others values andcustoms and rigidly applying an attitude of ours is better

than theirs to foreign cultures.


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Adopting a Global Perspective

Ethnocentric Attitude The parochialistic belief that the best work approaches

and practices are those of the homecountry.

Polycentric Attitude

The view that the managers in the hostcountry know thebest work approaches and practices for running theirbusiness.

Geocentric Attitude

A world-orientedview that focuses on using the bestapproaches and people from around the globe.


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Regional Trading Agreements

The European Union (EU) A unified economic and trade entity

Belgium, Denmark, France, Greece, Ireland, Italy, Luxembourg,the Netherlands, Portugal, Spain, the United Kingdom,Germany, Austria, Finland and Sweden

North American Free Trade Agreement (NAFTA)

Eliminated barriers to free trade (tariffs, import licensingrequirements and customs user fees)

United States, Canada and Mexico


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European Union


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Regional Trading Agreements

U.S.-Central America Free Trade Agreement (CAFTA)

Free Trade Area of the Americas

Southern Cone Common Market (Mercosur)

Association of Southeast Asian Nations (ASEAN)

Trading alliance of 10 Southeast Asian nations

African Union

South Asian Association for Regional Cooperation

(SARRC)


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ASEAN Members


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The World Trade Organization (WTO)

Evolved from the General Agreement on Tariffs andTrade (GATT) in 1995.

Functions as the only global organization dealingwith the rules of trade among nations.

Has 149 member nations and 32 observergovernments.

Monitors and promotes world trade.


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Different Types of International

Organizations

Multinational Corporation (MNC)

Maintains operations in multiple countries.

Multidomestic Corporation Is an MNC that decentralizes management and other

decisions to the local country.

Global Company

Is an MNC that centralizes its management and otherdecisions in the home country.


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Different Types of International

Organizations (cont.)

Transnational Corporation (BorderlessOrganization)

Is an MNC that has eliminated structural divisions thatimpose artificial geographic barriers and is organizedalong business lines that reflect a geocentric attitude.


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How do firms decide to enter the

global market

Risk Which markets to enter

How many places to cater

Others factors- entry cost, population, income

Barriers to entry Communication cost


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Risks associated in globalization

Changing government policies Cultural differences

Threat of local competition

Currency exchange problems

Adverse economic growth Transportation, communication systems

Political risk

Appropriateness & Availability of technology


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How Organizations Go Global


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Other Forms of Globalization

Strategic Alliances Partnerships between organization and a foreign

company in which both share resources and knowledge indeveloping new products or building new productionfacilities.

Joint Venture A specific type of strategic alliance in which the partners

agree to form a separate, independent organization forsome business purpose.

Foreign Subsidiary Directly investing in a foreign country by setting up a

separate and independent production facility or office.


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Managing in A Global Environment

The Legal Environment

Stability or instability of legal and political systems

Legal procedures are established and followed

Fair and honest elections held on a regular basis

Differences in the laws of various nations

Effects on business activities

Effects on delivery of products and services


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The Economic Environment

Economic Systems Free market economy

An economy in which resources are primarily owned andcontrolled by the private sector.

Planned economy

An economy in which all economic decisions are planned by acentral government.

Monetary and Financial Factors

Currency exchange rates

Inflation rates

Diverse tax policies


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The Cultural Environment

National Culture Is the values and attitudes shared by individuals from a

specific country that shape their behavior and their beliefsabout what is important.

May have more influence on an organization than theorganization culture.


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What Are Indians Like?

Indians are informal. They do not say thank you, please,etc. as much as people say from other countries. They donot think that it is important to make an appointment beforegoing to a friends place. If two people are talking to eachother, a third will not think twice before joining theconversation. They will not be shy of asking a stranger

about his or her personal information. Indians are indirect. Indians will find ways of saying

unpleasant things so that they do not sound rude.

Indians are both collectivistic and individualistic. Indians will

depend on others to get their work done and will also helpothers in their needs. They do not believe that peoplecontrol their own destiny and at the same time would notmind to be on their own to achieve their goals.

.


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Indians view time as stretchable. Indians are not very upsetif a meeting does not start on time. Time is defined by how

long it takes to get something done

Indians have mostly external locus of control. A typicalIndian will not blame oneself for all their failures. It is very

common for them to say that this was because of theirdestiny.

Indians value relationships. Indians will go to great extent tobuild relationships and their view for relationships is long

term. Family is a very important source of relationships forthe Indians.


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Indians are paternalistic. The head of the family is reveredand respected. A leader or a boss is looked upon as the

caretaker and father figure. A caring boss can get a lot ofwork done from the Indian subordinates. Whenever you goout to meet a family or for a formal business meeting, it is

common to first greet the eldest or the senior-most personin the setting.

Indians value keeping of word. Once trust is establishedand a word is given, Indians will try hard to honor it. Theymight be late or a little slow to honor their word but will

eventually come back to you and will keep their promise.


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Hofstedes Framework for Assessing Cultures

Culture

Individualismversus

Collectivism

PowerDistance

UncertaintyAvoidance

Achievementversus

Nurturing

Long-Term

versusShort-TermOrientation


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GLOBE Highlights


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The Role of Multinational Enterprises (MNE)

Ways to own foreign assets

Foreign portfolio investments:

Purchase shares in the company that owns assets.

Such investments give those companies share in profits, but noright to participate in management.

Direct investment: buying and management of foreignassets.

It is through a multinational enterprise, a large corporation withoperations and divisions spread over several countries but

controlled by a central headquarter. Three factors to be considered by management before

investment decisions.


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The Role of Multinational Enterprises (MNE)

Economies of different nations: Infrastructure: transportation, schools, communication

systems, hospitals, power plants and sanitary facilities.

Political risks:

Possibility of political changes. Appropriateness of technology to different cultures.

Production technology in one country may not work inanother.

Some governments may not encourage technologicalchanges.


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Impact of MNEs on Host Countries

Not necessarily welcome participants in nationaleconomies around the world

Viewed with suspicion

Some potential benefits

Transfer of capital, technology and entrepreneurship tothe host country.

Improved host countrys balance of payments.

Creation of local jobs and career opportunities

Improved competition in local economy Greater availability of products for local consumers.


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Impact of MNEs on Host Countries

Some potential costs:

MNE may use local financing thereby absorbing capitalthat may have financed indigenous companies.

Few well advertised, standardized products may drivelocal produced products from the market, therebyreducing consumer choice.


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Impact of MNEs on Home Countries

Less debatable due to absence of highly chargedemotional issues as political interference, culturaldisruption and economic dependence.

Drawbacks:

Outflow of foreign investments with reduced income fromexports may weaken the national balance of payments.

Loss of technological advantage especially with jointventures.

Loss of domestic jobs.


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The Future of Global Management

The various trends in the external environment mayinfluence the practice of managerial functions ofplanning, organizing, staffing, leading and controlling.

The external environment may be categorized astechnological, economic, political and legal, and social,

ethical and ecological.

We live in a knowledge society in which informationtechnology impacts on most aspects of our lives.

In todays world, technology is being produced and

distributed to the public faster then ever before.


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Global Management

Trends/ changes in the global environment

1. Technological:

a) Widespread use of IT

b) Emergence of knowledge society

c) Easy access to information at low costd) Widespread and global e-commerce

2. Economic:

a) EU reduced internal regional barriers by adding Bulgaria

and Romania in 2007, but created external ones


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Global Management

b) U.S. labour unions stance shifts from free trade to

protectionism to protect jobs

c) Borderless society

3. Political/Legal:

a) Expansion of EU via admittance of new members, mainlyfrom Eastern Europe

b) Increased protectionism because of declinedemployment in manufacturing and services (due to e.g.outsourcing to India)


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Global Management

4. Social/Ethical/Ecological:

a) Emergence of knowledge workers

b) People healthier and live longer

c) Shifts in demographics: low birth rates and increased life

expectancies result in graying population in developedcountries

d) Global Greening concerns.


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Effects of Technological Changes on Planning: Setting

objectives, strategic planning, decision making

IT aids scenario planning

Wealth of information helps decision making (butpossible information overload)

Consumer access to product and service information

allows comparisons with implications for marketingstrategies, thus focus on consumer needs and servicesrequired.

Cross-national alliances, joint ventures and mergers

facilitated, thus global strategies required.

Effects of Technological Changes on Organi ing:


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Effects of Technological Changes on Organizing:

organization structure, authority relationships,

decentralization

New organizational forms have come up. Eg.Outsourcing, virtual firms.

Outsourcing requires disintegration of organizationstructure and restructuring

Knowledge work promotes non-hierarchical structures

Knowledge workers may become shareholders.

From organization structures based on products andservices to alliances based on strategic considerations.

Manufactures join to form purchasing cooperatives

Suppliers run and controlled by manufacturers, whodirect and advise.


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Effects of Technological Changes on Staffing

Specialized technical knowledge needed Greater mobility of knowledge workers in changing jobs

Information enhances knowledge workers upward

mobility

Outsourcing of human resource management tospecialist firms at home or abroad

Continual training and retraining required to keep abreastof new technologies

Development of new measurements for evaluating andrewarding knowledge workers


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Effects of Technological Changes on Leading:

Motivation, leadership, communication, teamwork

Information technology gives power to knowledgeworkers and consumers.

Knowledge workers demand higher-order needssatisfaction (recognition, self-actualization, responsibility

and participation) Electronic communication technology aids teamwork

Lower communication costs.


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Effects of Technological Changes on Controlling:

Control techniques, Productivity

Ease of control It facilitates detection and correction of deviation

Productivity measurements at low costs

Internet facilitates world-wide selling

Use of internet more for outside scanning not only forinternal operations.


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Effects of Economical Changes on:

Planning: Setting objectives, strategic planning, decisionmaking

Global strategies formulated

Scanning for opportunities and threats globally, not only athome

Increased global competition

Borderless society has it own threats and opportunities

Organizing: organization structure, authority relationships,decentralization

Emergence of transnational companies

Forming of cross-national alliances and mergers requires

restructuring


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Effects of Economic Changes on:

Staffing:

Possible growth of labour unions in various countries

Multicultural work force

Need for culturally sensitive personnel with

understanding of international macroeconomics Leading: Motivation, leadership, communication,

teamwork

Need for political leadership to balance interests of

countries within regional blocs Ways to integrate developed with developing countries

required

Greater affluence requires new ways to motivate workers


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Effects of Economic Changes on:

Controlling: Control techniques, Productivity

Controls for transnational companies needed (eg. Taxpolicy)

Potential for higher productivity


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Effects of Political/Legal changes on:

Planning: Setting objectives, strategic planning, decisionmaking

More powerful EU can become a threat to USA

Strategies needed to coping with barriers created byRegional Alliances.

Organizing: organization structure, authority relationships,

decentralization

Need for establishing structures that resolve conflictbetween countries within power blocs and for developingpolicies to compete in regional blocs


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Effects of Political/Legal changes on:

Staffing:

Political-legal implications posed by multicultural workforce

Post September 11, USA makes it more difficult to obtainwork visas thus hampering staffing of critical positions

With increased protectionism, staffing in outsourcingcompanies can be on a decline

Leading:

Potential communication barriers arising from use ofdifferent languages

Effects of Social/Ethical/Ecological


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changes on:

Planning:

Opportunity for targeting products at the youth in developingcountries

More marketing focus on older population in the developedcountries

Strategies must consider ecological impact of products andservices (eg. Recycling)

Organizing:

Great potential for upward mobility in society andorganizations, partly because of impact of knowledge society.



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Changes on:

Staffing:

Knowledge workers, as key human resources, require goodformal education

Need to integrate immigrants into work force

Greater role of women at workplace

Leading:

Top management has to balance interests of variousstakeholders (national and international)

More women in leadership positions

Top managers more engaged in ecological policies



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Changes on:

Controlling:

Growing awareness of environmental controls(measurement of performance against key environmentaldrivers)


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Liberalization in the 1990s

It was in the 1990s that the first initiation towardsglobalization and economic liberalization was undertakenby Dr Manmohan Singh, who was the Finance Minister ofIndia under the Congress government headed by P.V.Narasimha Rao.

This is perhaps the milestone in the economic growth ofIndia and it aimed towards welcoming globalization.


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Gains from Globalization

The gains from globalization can be analyzed in thecontext of the three types of channels:

1. Trade in Goods and Services

2. Movement of Capital

3. Financial Flows


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1. Trade in Goods and Services:

According to the standard theory, international tradeleads to allocation of resources that is consistent withcomparative advantage.

This results in specialization which enhancesproductivity.

It is accepted that international trade, in general, isbeneficial and that restrictive trade practices impedegrowth

However , emerging economies will reap the benefits

of international trade only if they reach the full potential

of their resource availability


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Movement of Capital:

Capital mobility enables the total savings of the world tobe distributed among countries which have the highest

investment potential. Under these circumstances, one countrys growth is not

constrained by its own domestic savings.

The inflow of foreign capital has played a significant role

in the development in the recent period of the East Asiancountries.


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Financial Flows:

The rapid development of the capital market has been oneof the important features of the current process of

globalization However, the volatility in the foreign exchange market and

the ease with which funds can be withdrawn from countrieshave created often times panic situations.

When one country faces a crisis, it affects others Herd instinct is not uncommon in financial markets

When an economy becomes more open to capital andfinancial flows, there is even greater compulsion to ensure

that factors relating to macro-economic stability are not


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Concerns and Fears

The first major concern is that globalization leads to a moreunfair distribution of income among countries and withincountries.

The second fear is that globalization leads to loss ofnational autonomy and that countries are finding itincreasingly difficult to follow independent domesticpolicies.

In a highly integrated world economy, it is true that one

country cannot pursue policies which are not in consonancewith the worldwide trends.

Another fear associated with globalization is insecurity andvolatility. When countries are inter-related strongly, a smallspark can start a large fire.


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Actions by India

India has many strengths, which several developingcountries lack. In that sense, India is different and is in astronger position to gain from international trade andinvestment.

Indias rise to the top of the IT industry in the world is a

reflection of the abundance of skilled manpower in our

country.

India can attract greater foreign investment, if we canaccelerate our growth with stability. Stability, in thiscontext, means reasonable balance on the fiscal and

external accounts.


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Impacts on India

Globalization and liberalization has also made a positiveimpact on various important economic segments.

Today, the service sectors, industrial sectors and the

agriculture sector have really grown to a great extent. With the increase in the supply level, the rate of

employment is also increasing considerably.

One of the main aspects of globalization is foreign

investment. India today has emerged as one of the perfect markets

for foreign investors due to its vast market base.

More and more foreign companies are investing in the

Indian market to get more returns.


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Managing in Global Environment

The Role of Cultural Intelligence

It is often seen that most of the expatriates fail orare not able to perform upto the mark.

One of the reasons given for the failure is lack ofcultural intelligence.

Cultural intelligence refers to an individuals

capability to function effectively across cultures

this can include national, ethnic, organizational aswell as other types of culture.


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It consists of cognition (thinking, learning, and

strategizing); motivation (efficacy and confidence,persistence, value congruence and affect for the newculture); and behavior (social mimicry and behavioralrepertoire).

Cultural shock refers to frustration and anxiety that resultsfrom being constantly subjected to strange and unfamiliarcues about what to do and how to do it.


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Adaptation of Other Management Activities

Managers will have to be customized as per the hostcountry environment.

Expatriates or international managers will have to beextra sensitive or trained to fit their style to the host

country styles for effective management.

principles of management gtu mba globalization and management

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