Chapter Four

Global Management: Managing Across

Borders

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Globalization

Globalization trend of the world economy toward becoming a more interdependent system.

The Global EconomyGlobal Economy refers to the increasing tendency of economies of theworld to interact with one another as one market instead of many national markets.

Megamergers & Minifirms WorldwideMegamergersThe trend in the 1990’s was that mid-sized firms would cross-border: merge with other big companies

MinifirmsThe Internet and the World Wide Web allow small firms to:

Get Started More EasilyManeuver Faster

International ManagementMultinational corporation: is a business firm with operations in several countries.Multinational organization: is a nonprofit organization with operations in several countries.

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You and International Management

You may deal with foreign customers or partners

You may deal with foreign suppliers

You may work for a foreign firm in the United States

You may work for an American firm outside the United States

Why Companies Expand Internationally

1) Availability of supplies

2) New markets

3) Lower labor costs

4) Access to finance capital

5) Avoidance of tariffs & import quotas

Principle Economic Systems

1) Free Market Economy: the production of goods and services are controlled by private enterprise and the interaction of forces of supply and demand, rather than by the government.

2) Command Economy: or central-planning economy the government owns most businesses and regulates the amounts, types, and prices of goods and services.

3) Mixed Economy: most of the important industries are owned by the government, but others are controlled by private enterprise.

Privatization state-owned businesses were sold off to private enterprise

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The Successful International Manager:

Ethnocentric: believe that they are culturally superior.

Polycentric: feels native management in native country is best.

Geocentric: accepts diversity.

Is: Is Not:

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How Companies Expand Internationally

Global Outsourcing

Importing, exporting, &

countertrading

Licensing &

franchising

Joint ventures

Wholly owned

subsidiaries

Highest risk & invest-ment

Lowest risk & investment

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Infrastructure & Resources

Infrastructure: consists of the physical facilities that form the basis for its level of economic development.

Exchange Rate: is the rate at which one country’s currency can be exchanged for another country’s currency.

Government Systems

Democratic: rely on free elections and representative assemblies.

Totalitarian ruled by a dictator, a single political party, or a special-membership group.

Political Legal Differences

Instability: Seen in:

Riots Civil disorders Revolutions or changes in

government

Expropriation: is a government’s seizure of a foreign companies assets.

Political Legal Differences (Cont.)

Foreign Corrupt Practices Act of 1977: which makes it illegal for employees of the U.S. companies to bribe political decision makers in foreign nations.

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Barriers to International Trade

Trade Protectionism: the use of government regulations to limit the import of goods and services Protectionism Devices:

Tariffs Import quotas Embargoes

Organizations Promoting Free TradeThe World Trade Organization (WTO)

The World Bank The International Monetary Fund (IMF)

Major Trading Blocs

• Trading Bloc: also known as an economic

• community, is a group of nations within a

• geographical region that have agreed to remove

• trade barriers with each other

• NAFTA—North American Free Trade Agreement

• EU—European Union

• ASEAN—Association of Southeast Asian Nations

• Mercosur

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National Culture

National Culture: shared set of beliefs, values, knowledge, and patterns of behavior common to a group of people.

Four Basic Cultural Areas1. Language2. Nonverbal Communication3. Time orientation4. Religion

McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.

Different Norms

Thailand:

Public displays of temper or affection are

frowned on.

Japan:

Business cards are exchanged before

bowing or handshaking.

Malaysia:

Touching someone casually, especially on the top of the head, is considered impolite.

Indonesia:

Handshaking and head noddings are

customary greetings.

The Philippines:

Handshaking and a pat on the back are common greetings.

South Korea:

Men bow slightly and shake hands

sometimes with two hands. Women refrain from shaking hands.

China:

Hugging or taking someone’s arm is

considered inappropriate.