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MANAGEMENT S. Robbins and M.Coulter
Chapter 4 - Managing in a GlobalEnvironment
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L E A R N I N G O U T L I N EFollow this Learning Outline as you read and study this chapter.
What Your Global Perspective? Define parochialism.
Contrast ethnocentric, polycentric, and geocentric attitudestowards global business.
Explain why its important for managers to be sensitive toglobal differences
Understanding the Global Environment
Describe the current status of the European Union.
Discuss the North American Free Trade Agreement and otherregional trade alliances in Latin America.
Tell about the Association of Southeast Asian Nations.
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L E A R N I N G O U T L I N E (contd)Follow this Learning Outline as you read and study this chapter.
Understanding the Global Environment
Explain the interdependence that globalization involves.
Discuss the role of the WTO.
Doing Business Globally
Contrast multinational, multidomestic, global,transnational, and born global organizations.
Describe the different ways organizations can gointernational.
Define global sourcing, exporting, importing, licensing,and franchising.
Describe global strategic alliances, joint ventures, andforeign subsidiaries.
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L E A R N I N G O U T L I N E (contd)Follow this Learning Outline as you read and study this chapter.
Managing in a Global Environment (contd)
Explain how the global legal-political and economicenvironments affect managers.
Discuss Hofstedes five dimensions for assessing
cultures. Explain the nine GLOBE dimensions for assessing
cultures.
Discuss the challenges of doing business globally intodays world.
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The Global Marketplace
Several forces have combined to spark and sustainglobalization:
1. Governments and businesses are aware of the benefits of globalization
to businesses and shareholders.
2. New technologies make international travel, communication and
commerce much faster and cheaper.
3. Competitive pressures sometimes force a firm to expand into foreignmarkets to keep up with competitors.
4. Treaties and trade agreements also play a major role. In large part,
these agreements facilitate and foster the growth of trading activity
Globalization - Process by which the world economy
is becoming a single interdependent system
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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 a narrow view of the world
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Whats Your Global Perspective?
Parochialism Is viewing the world solely through its own eyes and
perspectives.
Is not recognizing that others have different ways of
living and working.
Is a significant obstacle for managers working in a
global business world.
Is falling into the trap of ignoring others values and
customs and rigidly applying an attitude of ours isbetter 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 home
country.
Polycentric Attitude
The view that the managers in the hostcountry know
the best work approaches and practices for running
their business.
Geocentric AttitudeA world-orientedview that focuses on using the best
approaches and people from around the globe.
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Exhibit 41 Key Information About Three Global Attitudes
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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
Economic and monetary union (Euro)
North American Free Trade Agreement (NAFTA) Eliminated barriers to free trade (tariffs, import licensing requirements, and
customs user fees)
United States, Canada, and Mexico
Caribbean Single Market & Economy (CSME)
The CARICOM Single Market is an arrangement which allows CARICOMgoods, services, people and capital to move throughout the CaribbeanCommunity without tariffs and without restrictions to achieve a single, largeeconomic space, and to provide for a common economic and trade policy. The CSME is comprised of 13 member states. They are Antigua and Barbuda,
Barbados, Belize, Dominica, Grenada, Guyana, Jamaica, Monsterrat, St. Kittsand Nevis, St. Lucia, St. Vincent and the Grenadines, Suriname and Trinidadand Tobago with a combined population of approximately 6 million people
A huge component of globalization is global trade
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Regional Trading Agreements (contd)
U.S.-Central America Free Trade Agreement(CAFTA)
Free Trade Area of the Americas
Association of Southeast Asian Nations(ASEAN)
Trading alliance of 10 Southeast Asian nations
African Union
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The World Trade Organization (WTO)
Evolved from the General Agreement on Tariffsand Trade (GATT) in 1995.
Functions as the only global organization
dealing with the rules of trade among nations.
Has 149 member nations and 32 observergovernments.
Monitors and promotes world trade.
Heavily promotes fair trade practices and seeksto settle disputes
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Different Types of InternationalOrganizations
Multinational Corporation (MNC)
Maintains operations in multiple countries. Two types:
1. The global company - typically centralizes its management andother decisions in the home country and manages them from ahome base.
2. The multi-domestic company decentralizes its management andother decisions to the local host country.
Transnational Corporation - TNC or Borderless
OrganizationA global org. that eliminates structural divisions that impose
artificial geographic barriers and is organized along businesslines that reflect a geocentric attitude.
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How Organizations Go Global
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Stage 1 - The most basic form is global sourcing or outsourcing
companies purchase materials or labour from around the worldwherever they are least expensive
Stage 2 - The company may decide instead to go international byexporting or importing: Exporting is the making of products domestically and selling abroad
Importing is the acquisition of products made abroad and selling themlocally
Each successive stage beyond this requires companies to becomemore international by committing more investment and risk: Licensing - giving other organizations the right to make or sell its
products using its technology or product specification Franchising - giving other organizations the right to use your brand
name and operating methods
Forms of Globalization
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Stage 3 - Companies may decide to make more
of a direct investment in international markets:
Strategic Alliances - Partnerships between and
organization and a foreign company in which both
share resources and knowledge in developing new
products and cooperating with promotional efforts
Joint Venture - A specific type of strategic alliance in
which the partners agree to form a separate,
independent organization for some business purpose
Foreign Subsidiary - Directly investing in a foreigncountry by setting up a separate and independent
production facility or office.
Forms of Globalization Contd
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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
Political stability impacts levels of unrest, movement of fundsetc.
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 3 kinds1. Market economy
An economy in which resources are primarily owned andcontrolled by the private sector.
2. Command or Planned economyAn economy in which all economic decisions are planned by
a central government.
3. Mixed economy the co-existence of features ofboth market and planned economies
Monetary and Financial FactorsCurrency exchange rates
Inflation rates
Diverse tax policies
An economic system is determined by how the resources/factors ofproduction are allocated in a county
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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
beliefs about what is important.
May have more influence on an organization than theorganization culture.
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Hofstedes Framework for Assessing Cultures
Individualismversus
Collectivism
PowerDistance
UncertaintyAvoidance
Quantity versusQuality of Life/Achievement
versusNurturing
Long-Termversus
Short-TermOrientation
Culture
One of the most popular frameworks used to help managers better
understand the differences among national cultures
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Exhibit 45 Hofstedes Five Dimensions ofNational Culture
(1)Individualistic people look after their own and family interestsCollectivistic people expect group to look after and protect them
Individualistic Collectivistic
United States, Canada Japan Mexico, Thailand
Australia
(2) High power distanceAccepts wide differences in power, greatdeal of respect for those in authority
Low power distancePlays down inequalities: employees are not
afraid to approach nor are in awe of theboss
High power distance Low power distance
Mexico, Singapore, Italy, Japan United States, Sweden
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Exhibit 45 Hofstedes Five Dimensions ofNational Culture
(3) High uncertainty avoidanceThreatened with ambiguity andexperience high levels ofanxiety
Low uncertainty avoidance Comfortable with risks; tolerant ofdifferent behavior and
opinions
High uncertainty avoidance Low uncertainty avoidance
Italy, Mexico, France United Kingdom Canada, United States,
Singapore
(4) AchievementValues such as assertiveness, acquiring money and goods,
and competition prevailNurturingValues such as relationships and concern for others prevail
Achievement Nurturing
United States, Japan, Canada, Greece France, SwedenMexico
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Exhibit 45 Hofstedes Five Dimensions ofNational Culture
(5)Long-term orientationPeople look to the future and value thriftand persistence
Short-term orientation People value tradition and the past
Short-term thinking Long-term thinking
Germany, Australia, China, Taiwan, Japan
United States, Canada
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Assessing Cultures AnotherPerspective
The Global Leadership and Organizational BehaviourEffectiveness (GLOBE) Framework 9 dimensions onwhich to assess national cultures: 1. Assertiveness
2. Future Orientation
3. Gender Differentiation
4. Uncertainty Avoidance
5. Power Distance
6. Individualism/Collectivsm 7. In-group Collectivsm
8. Performance Orientation
9. Humane Orientation
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Global Management in Todays World
Challenges
Openness associated with globalization
Significant cultural differences (e.g., Americanization)
Adjusting leadership styles and management
approaches
Risks
Loss of investments in unstable countries
Increased terrorism
Economic interdependence
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The Concerns of the Manager of the MNC
Political stability
Currency stability
Competition Nationalism
Protection of patents and trademarks
Host government relations
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Terms to Know parochialism
ethnocentric attitude
polycentric attitude
geocentric attitude
European Union (EU)
Euro
North American Free Trade
Agreement (NAFTA) Association of Southeast Asian
Nations (ASEAN)
World Trade Organization(WTO)
multinational corporations(MNCs)
multidomestic corporation
global company
transnational or borderlessorganization
born globals
exporting
importing
licensing
franchising
strategic alliances
joint venture
foreign subsidiary market economy
command economy
national culture
GLOBE