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©2004 by Nelson, a division of Thomson Canada Limited 1 Chapter 8 Global Management

8- Global Management

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Page 1: 8- Global Management

©2004 by Nelson, a division of Thomson Canada Limited 1

Chapter 8

Global Management

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©2004 by Nelson, a division of Thomson Canada Limited 2

What Would You Do?

Wal-Mart’s International Strategy dominant retailer in Canada and USA major global competitor is Carrefour which countries should Wal-Mart enter? what impact will free-trade agreements

have?

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What Is Global business?After reading these next two sections, you should be able to:

1. describe the impact of global business on Canada2. discuss the trade rules and agreements that govern global trade

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Impact of Global Business Foreign direct investment Global competition Multinational corporations

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Regional Distribution of Inward Direct Foreign Investment

Region Percent

United States 72European Union 19Asia-Pacific 5Latin America 2All Other 2

Adapted from Exhibit 8.1

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Regional Distribution of Outward Direct Foreign Investment

Region Percent

United States 52European Union 19Latin America 19Asia-Pacific 6All Other 5

Adapted from Exhibit 8.2

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Multinational CorporationMultinational Corporation

corporation that owns businesses in two or more countries

Country of Manufacture country where product is made and

assembledCountry of Origin

Home country where headquarters is located

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Trade Rules and Agreements

Trade barriers

Trade agreements

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Trade Barriers Tariff Nontariff

quotas voluntary export restraints government standards government subsidies Customs valuation/classification

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Trade AgreementsGeneral Agreement on Tariffs and Trade (GATT)Regional Trading Zones

Maastricht Treaty of Europe NAFTA FTAA ASEAN and APEC

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GATT Worldwide trade agreement Designed to reduce and eliminate

tariffs and subsidies Protect intellectual property

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Maastricht Treaty of Europe Now 15 member countries Created the European Union Facilitate trade among members The currency is the “Euro”

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North America Free Trade Agreement (NAFTA) Canada, United

States, & Mexico Liberalizes trade

among these nations

Eliminates tariffs and barriers

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Free Trade Area of the Americas Proposed agreement Unite 36 countries in North and

South America Negotiations to finish by 2005

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Association of South-East Nations (ASEAN) and Asia-Pacific Economic Cooperation (APEC)

ASEAN Indonesia, Thailand, Philippines,

Malaysia, Singapore, & BruneiAPEC Canada, United States, Japan, South

Korea, Australia, New Zealand, China, Taiwan, Hong Kong, & ASEAN members

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Learning Objectives:How to Go GlobalWhile there is no magical formula to answer these questions, after reading these next two sections, you should be able to:

3. explain why companies choose to standardize or adapt their business procedures4. explain the different ways that companies

can organize to do business globally

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Consistency or Adaptation?Consistency A multinational corporation runs its

offices, plants, and facilities in different countries under the same rules, policies, and procedures

Adaptation Multinational corporations modify

standard operating procedures to adapt to local differences

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Forms for Global Business Exporting Cooperative contracts Strategic alliances Wholly owned affiliates Global new ventures

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Learning Objectives:Where to Go GlobalAfter reading these next three sections, you should be able to:

5. explain how to find a favorable business climate6. discuss the importance of identifying and adapting to cultural differences7. explain how to successfully prepare workers for international assignments

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Finding the Best Business Climate Positioning for growing markets Choosing an office/manufacturing

location Minimizing political risk

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Positioning for Growing Markets Purchasing power

comparison of the relative cost of a standard set of goods and services in different countries

more means greater growth potential Degree of global competition

the number and quality of companies that already compete in foreign markets

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Choosing an Office/Manufacturing Location Qualitative factors

Work force quality Company strategy

Quantitative factors Costs and barriers

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World’s Best Cities for BusinessUnited States1. New York City2. San Francisco3. Chicago4. Washington,

D.C.5. San Jose

Adapted from Exhibit 8.4

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World’s Best Cities for BusinessEurope1. London2. Frankfurt3. Helsinki4. Amsterdam5. Dublin

Adapted from Exhibit 8.4

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Minimizing Political Risk Political uncertainty

Risk of major changes in political regimes Policy uncertainty

Risk associated with changes in laws and government policies directed at businesses

Strategies avoidance control cooperation

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Becoming Aware of Cultural Differences National culture

power distance individualism masculinity/femininity uncertainty avoidance short-term/long-term

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Cultural Dimensions

Exhibit 8.5

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Preparing for an International Assignment

Language and cross-cultural training

Consideration of spouse, family, and dual-career issues

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What Really WorksCross-Cultural Training

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What Really Works

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What Really Happened? Wal-Mart entered Brazil, Britain,

and Germany Carrefour has been a strong

competitor Increasing focus on local

adaptation, but maintaining some global consistency