Managing in a Global Environment

1
Chapter 3

• Managing in a Global Environment

2
The International Business Environment

• Greater difficulties and risks when performing
  management functions - due to differences in
  culture, language, economies, laws, political
  stability, etc.

3
Stages of Globalization

• 1. Domestic Stage All production and marketing
  facilities at home.
• 2. International Stage International Division
  is typically part of the structure, but is not
  dominant.
• 3. Multinational Stage Marketing and production
  in many countries and 1/4 of sales from outside
  home country.
• 4. Global Stage Making sales and acquiring
  resources in whatever country offers the best
  deal.
• Ownership, control, and top management tend
  to be dispersed.

4
Multinational/Global Corporations

• The revenue of GM is comparable to the gross
  domestic product (GDP) of Finland
• Revenue of General Electric is equal to the GDP
  of Israel
• Revenue of Toyota is similar to the GDP of Hong
  Kong.

5
Multinational/Global Corporations

• are criticized for
• Excessive profits
• Lack of technology transfer
• Lack of respect for local culture
• Interference with governments

• complain about host countries
• Profit limitations
• Overpriced resources
• Foreign exchange restrictions
• Failure to meet contract obligations

6
Getting Started Internationally

• Global Outsourcing (e.g., Nike)
• Exporting (e.g., L.L. Bean)
• Licensing (e.g., Lowenbrau)
• Franchising (e.g., McDonalds)

• Direct Investing
• Joint Venture (e.g., NUMMI)
• Wholly Owned Foreign Affiliates
• Acquisition
• (e.g.,BP purchasing AMOCO)
• Greenfield Venture
• (e.g., Toyota in Kentucky)

7
Hofstedes Dimensions of Culture (National Social
Values)

• Power Distance
• Uncertainty Avoidance
• Individualism/Collectivism
• Masculinity/Femininity
• Time Orientation

8
Power Distance

• High power distance means people accept
  inequality in power among institutions,
  organizations, and people
• Uncertainty Avoidance
• High uncertainty avoidance means that members of
  a society feel uncomfortable with uncertainty and
  ambiguity

9
Individualism Collectivism

• Individualism reflects a value for a loosely knit
  social framework in which individuals are
  expected to take care of themselves
• Collectivism is a preference for a tightly knit
  social framework in which individuals look after
  one another

10
Masculinity/Femininity (Toughness/Tenderness)(Ach
ievement/Nurturing)

• Masculine cultures stress the importance of
  achievement, heroism, assertiveness, and material
  success
• Feminine cultures value relationships, modesty,
  caring for the weak, and quality of life

11
Time Orientation

• Short-Term Orientation means that people expect
  fairly rapid feedback from decisions, expect
  quick profits, frequent job evaluations and
  promotions, etc.

12
Other Cultural Characteristics

• Language
• Religion
• Space
• Time Orientation (monochronic vs. polychronic)

13
Managing Cross-Culturally

• Must be culturally flexible and easily adapt to
  new situations and ways of doing things
• Cannot be ethnocentric
• Culture Shock frustration and anxiety from
  different culture
• Motivating -
• Must fit the incentives with the culture
• Controlling-
• Often are unable to fire unproductive employees
  and must find creative ways of dealing with them.

14
Characteristics of U.S. Managers as viewed by
other Nations

• Negative
• Work less hard than Asians
• Short-term orientation
• Judge persons worth by their wealth
• Loyal to unit, not firm
• Not well-rounded educationally
• Parochial

• Positive
• Informal, frank, trustworthy
• Innovative, open-minded, pragmatic
• Entrepreneurial, profit-oriented
• Eager to get things done
• Work harder than Europeans

15
GATTGeneral Agreement on Tariffs and Trade

• GATT has changed to WTO (World Trade Org.) (148
  members as of August 2005)
• For settling international trade disputes
• Most Favored Nation (MFN) members grant each
  other most favorable trade treatment (reduced
  tariffs, etc.)
• MFN status now called Normal Trade Relations
  (NTR)

16
European Union (EU)

• Formed in 1958 to improve economic and social
  conditions among its members
• 25 nation alliance is an open market for Europe's
  400 million consumers.
• Moving toward one economy and one currency (Euro)

17
EU Reforms and Deregulation

• Auto sales
• Telecommunications
• Social policy
• Monetary union

• Banking
• Insurance
• Health
• Safety standards
• Airlines

18
Advantages of the EU

• Increased competition and economies of scale will
  enable companies to grow large and efficient
• Will become more competitive in the United States
  and other world markets.

19
North American Free Trade Agreement (NAFTA) 1994

• Canada, Mexico, and U.S.
• Alliance including approximately 400 million
  consumers
• Expected to spur growth and investment, increase
  exports, and expand jobs in all three nations

20
Opposition to NAFTA

• Many opposed the agreement due to fear of job
  losses to Mexico
• Others fear weakened pollution standards and
  toxic dumping.

21
Some NAFTA Effects

• Cifra in a joint venture with Wal-Mart to operate
  Wal-Marts and Sams Clubs in 20 Mexican cities
• Cinemark Theaters building movie multiplexes in
  several large Mexican cities
• Mexican investors buy Del Monte foods

22
Alliances-Promise or Pitfall?

• Will there emerge multiple competitive trading
  blocs?
• Will just three powerful trading blocs dominate
  Americas, Europe, Pacific Rim (APEC -
  Asian-Pacific Economic Forum)?
• Will the expansion of global corporations weaken
  the trading blocs?

23
Recommended International Business Conduct

• Always show respect and listen, dont be in a
  hurry.
• Try to gain an appreciation for the differences
  between Hofsedes masculine and feminine
  cultures.
• Do not feel your way is the best way.
• Emphasize points of agreement.
• Discern the perceived definitions of words.
• Save face as well as giving face.
• Dont embarrass anyone in front of others
• Know or take someone who knows the culture.
• Understand that leadership may mean different
  things to different countries.
• Dont lose your temper.
• Avoid clique-building.
• Always show respect.
• Leave the American task-oriented, fast-paced
  style at home
• Eliminate stereotypes.
• Be sensitive to the difference between low
  context culture and high context cultures
• Learn to tolerate a high degree of
  unpredictability.