Chapter 2: Environmental Chapter 2: Environmental Constraints on ManagersConstraints on Managers

Understanding the Global Understanding the Global EnvironmentEnvironment

Business Management 12Business Management 12

Understanding the Global Understanding the Global EnvironmentEnvironment

The global environment presents The global environment presents both opportunities and challenges for both opportunities and challenges for managers.managers.

With the marketplace now global and With the marketplace now global and national borders becoming national borders becoming increasingly irrelevant, the potential increasingly irrelevant, the potential for organizations to grow is for organizations to grow is expanding dramatically.expanding dramatically.

Understanding the Global Understanding the Global EnvironmentEnvironment

Managers working within the global Managers working within the global environment must deal with:environment must deal with:

Cultural differencesCultural differences Economic differencesEconomic differences Political differencesPolitical differences New competition from around the New competition from around the

globe that can appear at any timeglobe that can appear at any time

Global TradeGlobal Trade

An important part of the global An important part of the global environment is global trade.environment is global trade.

Global trade has been around for Global trade has been around for centuries, and is shaped by several centuries, and is shaped by several regional trading alliances and agreements regional trading alliances and agreements that are negotiated through the World that are negotiated through the World Trade OrganizationTrade Organization

Examples: European Union (EU)Examples: European Union (EU) North America Free Trade North America Free Trade Agreement (NAFTA) Agreement (NAFTA)

The Legal-Political EnvironmentThe Legal-Political Environment

Canadian managers are used to stable Canadian managers are used to stable legal and political systems, this however is legal and political systems, this however is not the case in some countries of the not the case in some countries of the worldworld

Managers in such countries face Managers in such countries face uncertainty and are not always to uncertainty and are not always to accurately predict outcomes due to such accurately predict outcomes due to such circumstancescircumstances

Example: Google in ChinaExample: Google in China See clip: See clip:

http://abcnews.go.com/Technology/video/ghttp://abcnews.go.com/Technology/video/google-shuts-down-china-site-10177013oogle-shuts-down-china-site-10177013

The Economic EnvironmentThe Economic Environment

The global manager must be aware of the The global manager must be aware of the economic system under which a country economic system under which a country operates when conducting business operates when conducting business globallyglobally

A A market economymarket economy is one in which is one in which resources are primarily owned and resources are primarily owned and controlled by the private sector (Ex. controlled by the private sector (Ex. Canada)Canada)

A A planned economyplanned economy is one in which all is one in which all economic decisions are planned by a economic decisions are planned by a central governmentcentral government

The Cultural EnvironmentThe Cultural Environment

National culture has a greater effect National culture has a greater effect on employees than does their on employees than does their organization’s culture…what is organization’s culture…what is national culture?national culture?

National cultureNational culture are the values and are the values and attitudes shared by individuals from attitudes shared by individuals from a specific country that shape their a specific country that shape their behaviour and beliefs about what is behaviour and beliefs about what is important.important.

HOFSTEDE’S CULTURAL HOFSTEDE’S CULTURAL DIMENSIONSDIMENSIONS

Studied 116,000 IBM employees in 40 Studied 116,000 IBM employees in 40 different countriesdifferent countries

He was able to classify their values and He was able to classify their values and attitudes into four distinct categoriesattitudes into four distinct categories

His research proved useful to managers in His research proved useful to managers in determining Canada’s placement (Scale: determining Canada’s placement (Scale: High to low)High to low)

Good managers must recognize the Good managers must recognize the differences in order to be successful. differences in order to be successful.

Individualism Vs. CollectivismIndividualism Vs. Collectivism

IndividualismIndividualism – Look after their own – Look after their own

interests and those of the immediate interests and those of the immediate family (Example: US, Canada)family (Example: US, Canada)

CollectivismCollectivism - People prefer to act - People prefer to act as members of a group and expect to as members of a group and expect to be looked after and protected. be looked after and protected. (Example: Mexico, Thailand)(Example: Mexico, Thailand)

Power DistancePower Distance

Power DistancePower Distance – A society that – A society that accepts that power is unequal accepts that power is unequal within an organization or institution. within an organization or institution. Employees have a high regard and Employees have a high regard and respect for those in positions of respect for those in positions of authority.authority.

Uncertainty AvoidanceUncertainty Avoidance

Uncertainty AvoidanceUncertainty Avoidance – This refers – This refers to the degree to which people to the degree to which people tolerate risk and prefer structured tolerate risk and prefer structured over unstructured situations. People over unstructured situations. People in a society with high uncertainty in a society with high uncertainty avoidance tend to be stressed, avoidance tend to be stressed, nervous and aggressive.nervous and aggressive.

Achievement Vs. NurturingAchievement Vs. Nurturing

AchievementAchievement is the degree to which is the degree to which values such as assertiveness, making values such as assertiveness, making money and buying material goods money and buying material goods and competition is seen as important and competition is seen as important (Example: US, Japan)(Example: US, Japan)

NurturingNurturing emphasizes relationships emphasizes relationships and concern for others. (Example: and concern for others. (Example: France, Sweden)France, Sweden)

Long Term and Short Term Long Term and Short Term OrientationOrientation

This attribute looks at a country’s This attribute looks at a country’s orientation toward work and life.orientation toward work and life.

Long term OrientationLong term Orientation – People look to – People look to the future and value thrift and persistence; the future and value thrift and persistence; leisure time unimportant. (Example: China, leisure time unimportant. (Example: China, Japan)Japan)

Short term OrientationShort term Orientation – People value – People value the past and present and emphasizes the past and present and emphasizes respect for tradition and fulfilling social respect for tradition and fulfilling social obligations; leisure time important obligations; leisure time important (Example: Canada, US, Australia)(Example: Canada, US, Australia)

Canada has Individualism (IDV) as the highest ranking (80) Hofstede Dimension, and is indicative of a society with a more individualistic attitude and relatively loose bonds with others.

Canadian's lowest ranking Dimension is Long Term Orientation at 23, this low LTO ranking is indicative of societies' belief in meeting its obligations and tends to reflect an appreciation for cultural traditions.