Kinicki/Williams, Management: A Practical Introduction 3e ©2008, McGraw-Hill/Irwin Management A Practical Introduction Third Edition Angelo Kinicki & Brian

Kinicki/Williams, Management: A Practical Introduction 3e ©2008, McGraw-Hill/Irwin

Management A Practical Introduction

Third Edition

Angelo Kinicki & Brian K. Williams

Kinicki/Williams, Management: A Practical Introduction 3e ©2008, McGraw-Hill/Irwin2

Chapter 4: Global Management

Managing Across BordersGlobalizationYou & International ManagementWhy & How Companies Expand InternationallyEconomic & Political-Legal DifferencesRegional Economic CooperationCultural Differences


4.1 Globalization: The Collapse Of Time & Distance



WHAT IS GLOBALIZATION?

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

Today, we are witnessing a shrinking of time and space as air travel and the electronic media have made it easier for people around the world to communicate with each otherWe call this the global village


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

The Global Economy

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


4.1 Globalization: The Collapse Of

Time & Distance

IS GLOBALIZATION A GOOD THING?

Growth in jobs and income in one country means growth in jobs and income in other countries—a win-win situationHowever, global interdependency can be negative when negative events in one country generate negative events in other countriesOutsourcing jobs also brings negative effects to the country that loses the jobs



The Global Economy: Positive and Negative Effects

Negative Effects

Can have some insecurity

Economic crises in some countries can soon affect other countries

Positive Effects

U.S. exports, international trade, and U.S. workers are connected

Growth of jobs and income in other countries will mean growth of jobs and income for the U.S.



Two types of firms are emerging in the world economy: mergers of huge companies into even bigger companies, and small, fast-moving start-up companies Companies in many industries are merging with other companies to be bigger, cross-border enterprises Almost any firm can operate globally todayThanks to the Internet and World Wide Web, small companies can get started more easily, and small companies can maneuver faster


Globalization: The Collapse Of Time & Distance

WHY SHOULD YOU LEARN ABOUT INTERNATIONAL MANAGEMENT?



WHY SHOULD YOU LEARN ABOUT INTERNATIONAL MANAGEMENT?

International managers oversee the conduct of operations in, or with, organizations in foreign countries



International Management

Multinational Corporation: is a business firm with operations in several countries.

Multinational Organization: is a not-for-profit organization with operations in several countries.



You need to learn about international management because you may find yourself in any of the following situations:

dealing with customers or partners from different cultures buying components, raw materials, or services from foreign suppliersworking for a superior from a foreign country working in a foreign subsidiary or for a foreign firm located in another country


4.2 You & International Management

There are three primary attitudes among international managers:managers who believe that their native country, culture, language, and behavior are superior to all others are ethnocentric managers managers who believe native managers in foreign offices best understand native personnel and practices, and so the home office should leave them alone are polycentric managers Geocentric managers accept that there are differences and similarities between home and foreign personnel and practices, and that they should use whatever techniques are most effective


E4-10


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:



CLASSROOM PERFORMANCE SYSTEM

A manager that believes his way is best is a ______ manager.

A) geocentric

B) polycentric

C) transcentric

D) ethnocentric




A manager that believes his way is best is a ______ manager.

A) geocentric

B) polycentric

C) transcentric

D) ethnocentric


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Why Companies Expand Internationally


4.3 Why & How Companies

Expand Internationally

WHY DO COMPANIES EXPAND INTERNATIONALLY?

Firms expand internationally to take advantage of:1. Availability of supplies - some companies have to go to foreign countries to get their supplies2. New markets - when domestic demand declines, companies need to find new markets3. Lower labor costs - manufacturing is cheaper where wages are lower4. Access to finance capital - foreign financing, either private or through a government, can entice companies to go international5. Avoidance of tariffs & import quotas - companies might establish a foreign subsidiary to avoid tariffs or quotas


E4-9


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



Practical Action: What You Can Do to Prepare for Overseas Assignments

Persuade your boss that you can handle overseas duty and that the organization will benefit

Study up on your host country

Become skilled in the language

Become skilled in the culture



Practical Action: What You Can Do to Prepare for Overseas Assignments (Cont.)

65Problem solving

97Basic computer

158Technical

88Management

511Administrative

714Interpersonal skills

2731Foreign language

For Women (percentage)

For Men (percentage)

Skills Most Lacking for Managers Overseas


E4-13

Panel 4.1


How Companies Expand Internationally

Global Outsourcing

Importing, exporting, &

countertrading

Licensing &

franchising

Joint ventures

Wholly owned

subsidiaries

Highest risk & invest-ment

Lowest risk & investment


4.3 Why & How Companies

Expand Internationally

HOW DO COMPANIES EXPAND INTERNATIONALLY?

There are five ways to expand internationally:1. Global outsourcing - many companies engage in global outsourcing (using suppliers outside the country to provide goods and services) – sometimes called contract manufacturing2. Importing, exporting, & countertrading - a company that buys goods outside the country and resells them domestically is importing, while a company that produces goods domestically and sells them outside the country is exporting, and countertrading occurs when a firm barters for goods


4.3 Why & How Companies Expand Internationally

3. Licensing & franchising - licensing (when a company allows a foreign company to pay a fee to make or distribute the first company’s product or service) and franchising (when a company allows a foreign company to pay a fee and a share of the profits in exchange for using the first company’s brand name and a package of materials and services) are very similar4. Joint ventures - when firms join forces to share the risks and rewards of starting a new enterprise together in a foreign country, they form a joint venture or strategic alliance 5. Wholly-owned subsidiaries - a foreign subsidiary that is totally owned and controlled by an organization is a wholly owned subsidiary


4.4 Economic & Political-Legal Differences

HOW CAN MANAGERS ADJUST TO ECONOMIC DIFFERENCES IN OTHER COUNTRIES?

Managers need to consider economic systems, economic development, infrastructure and resources, and currency exchange rates in foreign markets

There are three types of economic systems: free market, command, and mixed



1. In a free market economy (capitalism) like the U.S., the production of goods and services is controlled by private enterprise and the interaction of the forces of supply and demand2. In a command economy (communism) like North Korea, the government owns most businesses and regulates the amount, types, and prices of goods 3. In a mixed economy (socialism) like many European countries, most of the important industries are owned by the government, but others are controlled by private enterprise




In which type of economy is the production of goods and services controlled by private enterprise?

A) command

B) centrally planned

C) free

D) mixed




In which type of economy is the production of goods and services controlled by private enterprise?

A) command

B) centrally planned

C) free

D) mixed



There are two levels of economic development: Countries with high levels of economic development and generally high average incomes are developed countriesDeveloping or less developed countries include countries with low economic development and low average incomes



A country’s infrastructure consists of the physical facilities that form the basis for its level of economic development Thanks to cell phone service, many countries with poor communication infrastructure have been able to participate in the world economy The rate at which one country’s currency can be exchanged for another country’s currency is the exchange rateA change of just a few percentage points can have major implications for a company




Which of the following is not an example of a developed country?

A) New ZealandB) JapanC) FranceD) Brazil




Which of the following is not an example of a developed country?

A) New ZealandB) JapanC) FranceD) Brazil



HOW CAN MANAGERS ADJUST TO POLITICAL-LEGAL DIFFERENCES IN OTHER COUNTRIES?

Managers need to be aware of governmental systems and the potential for political risk Democratic governments rely on free elections and representative assembliesTotalitarian governments are ruled by a dictator, a single political party, or a special-membership group



The risk that political changes will cause loss of a company’s assets or impair its foreign operations is called political riskFirms need to plan for instability and expropriation (government seizure of a foreign country’s assets) Companies need to be aware of laws that could affect how they do business in other countries like the U.S. Foreign Corrupt Practices Act which makes it illegal for employees of U.S. companies to bribe political decision makers in foreign nations


4.5 The World Of Free Trade: Regional Economic Cooperation

WHAT IS FREE TRADE AND REGIONAL ECONOMIC COOPERATION?

Free trade means that goods and services move among nations without political or economic obstruction When governments use regulations such as tariffs, import quotas, and embargoes to limit the import of goods and services, they are being protectionistGovernments use barriers to protect domestic industries from foreign competition


4.5 The World Of Free Trade:

Regional Economic Cooperation

There are three main types of trade barriers: 1. Trade barriers in the form of a customs duty, or tax, levied mainly on imports are called tariffs

2. Trade barriers that limit the numbers of a product that can be imported are import quotas

3. Embargoes are complete bans on the import or export of certain products

Groups of nations within a geographic region that have agreed to remove trade barriers with one another are called trading blocs or economic communities




There are four major trading blocs:

1. The North American Free Trade Agreement or NAFTA was formed in 1994 between the U.S., Canada, and MexicoNAFTA’s goal is to eliminate 99 percent of tariffs on goods trade between members

2. The European Union was originally formed in 1957 and now includes 25 European countriesThe EU is the world’s largest free market




3. The group of 21 Pacific Rim countries whose purpose is to improve economic and political ties is called the Asia-Pacific Economic Cooperation or APECAPEC, founded in 1989, is working toward the elimination of trade barriers4. Mercosur is the largest trade bloc in Latin America and has four core members—Argentina, Brazil, Paraguay, and Uruguay, and two associate members, Chile and BoliviaMERCOSUR has reduced tariffs by 75 percent




Three organizations facilitate international trade:1. The World Trade Organization (WTO) is designed to monitor and enforce trade agreements The WTO, which superseded GATT in 1995, has 146 members and covers trade in goods and services2. The World Bank was established in 1944 to help rebuild EuropeToday, it provides low-interest loans to developing nations for improving transportation, education, health, and telecommunications 3. The International Monetary Fund (IMF) is designed to assist in smoothing the flow of money between nationsThe IMF was instrumental in bailing out nations affected by the Southeast Asian financial crisis




Which trading bloc includes 21 Pacific Rim countries whose goal is to improve economic and political ties?

A) the EU

B) APEC

C) NAFTA

D) MERCOSUR




Which trading bloc includes 21 Pacific Rim countries whose goal is to improve economic and political ties?

A) the EU

B) APEC

C) NAFTA

D) MERCOSUR


4.6 The Importance Of Understanding

Cultural Differences

WHY SHOULD MANAGERS UNDERSTAND CULTURAL DIFFERENCES BETWEEN COUNTRIES?

Culture is the shared set of beliefs, values, knowledge, and patterns of behavior common to a group of peopleMisunderstandings and miscommunications in international business often occur because of cultural misunderstandingsIn low-context cultures like Germany and the U.S., shared meanings are primarily derived from written and spoken words In high-context cultures like Japan and China, people rely heavily on situational cues for meaning when communicating with others




Geert Hofstede identified four dimensions along which national cultures vary

1. individualism/collectivism describes how loosely or tightly people are socially bonded (high)

2. power distance refers to how much people accept inequality in power (low)

3. uncertainty avoidance describes how strongly people desire uncertainty (low)

4. masculinity/femininity refers to how much people embrace stereotypical male or female traits (moderately high)




Which of the following is not one of Hofstede’s four dimensions?

A) gender differentiationB) individualism/collectivismC) power distance

D) uncertainty avoidance




Which of the following is not one of Hofstede’s four dimensions?

A) gender differentiationB) individualism/collectivismC) power distance

D) uncertainty avoidance



Cultural Differences The GLOBE project is an ongoing cross-cultural investigation of nine cultural dimensions involved in leadership and organizational processes1. institutional collectivism - how much should leaders encourage and reward loyalty to the social unit2. in-group collectivism - how much pride and loyalty should people have for their family or organization3. power distance - how much unequal distribution of power should there be in society and organizations 4. uncertainty avoidance - how much should people rely on social norms and rules to avoid uncertainty




5. gender differentiation - how much should society maximize gender role differences6. assertiveness - how confrontational and dominant should individuals be in social relationships7. future orientation - how much should people delay gratifications by planning and saving for the future8. performance orientation - how much should individuals be rewarded for improvement and excellence9. humane orientation - how much should society encourage and reward people for being kind, fair, friendly, and generous



Cultural Differences Managers need to bridge cross-cultural gaps by understanding basic cultural across four areas 1. Language - more than 3,000 different languages are spoken in the worldManagers can either speak their own language, use a translator, or learn the local language 2. Interpersonal space - how close people should be when communicating varies by cultureSome cultures like the people of Latin America prefer a smaller interpersonal space, whereas others, like the people of Northern Europe prefer to be further apart




3. Time orientation - time orientation varies by cultureAmericans practice monochromatic time (a preference for doing one thing at a time)Arab cultures follow polychromatic time (preference for doing more than one thing at a time)

4. Religion - Christianity has the largest following with 2.1 billion adherents, Islam is next with 1.3 billion followers, then Hinduism, Buddhism, and Judaism Organizations need to consider the impact of religious differences on employee groups

Documents

Kinicki/Williams, Management: A Practical Introduction 3e ©2008, McGraw-Hill/Irwin Management A Practical Introduction Third Edition Angelo Kinicki & Brian