PowerPoint Presentations Chapter 04

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Managing OrganizationsPrinciples and Guidelines
Thomas N. Duening, PhDArizona State University
John M. Ivancevich, DBA University of Houston
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Part OneIntroduction to Management
Chapter FourManaging Globally
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4-1 Introduction

• International competitors are a major presence
• Many reasons to go global
• Increasing opportunities
• Declining local markets
• Economies of scale
• Cost advantages
• Need to adjust to
• Varying consumer preferences
• Different employee work styles
• Political climate
• Unfamiliar culture
• A new strategy is to be created based on a new
  set of assumptions

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4-2 The Multinational Enterprise

• A firm doing business in two or more countries
• Has sales offices and manufacturing facilities in
  numerous countries
• MNEs view their scope of operation as global in
  nature
• Foreign companies have entered the United States
  and many American firms are owned by foreign
  multinationals

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4-2a The MNE Decision

• Decision to become an MNE is a major one which
  essentially comprises of three primary decisions
• The international market to be served
• The products / services to be marketed
• The mode of entry into the market
• Export
• Foreign Activities
• Direct Investment

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4-2a The International Market to Be Served

• Market size in the prospective country
• Countrys consumer wealth (per capita income)
• Ease of doing business
• Geographical location
• Language commonality
• Political climate
• Cultural climate
• Availability of human resources

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4-2a The Products or Services to Be Marketed

• Market size in the prospective country
• Countrys consumer wealth (per capita income)
• Introduce successful products in the domestic
  market
• Example Kelloggs, Coca-Cola, McDonalds
• Phased Internationalization approach
• Introduce products based on market-research
  reports
• Example Ferreros Tic Tac breath mints, IDVs
  Baileys Irish Cream liqueur

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4-2a The Mode of Entry into Global Markets

• Three basic strategies
• Export
• Foreign activities
• Direct investment

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4-3 The Global Environment

• Culture
• Economics
• Politics

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4-3a Culture

• Cultures are learned
• Cultures vary
• Cultures influence behavior

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4-3b Economics

• The economic influences of a country
  substantially affects MNE performance.
• Countries are classified as developed country
  DC or less-developed country LDC.
• LDCs comprise most of the world's population,
  only about 25 percent of the world's
  international business activity occurs in these
  countries.
• There is a changing attitude by both host
  government and MNEs.
• Improved relations have given rise to a doubling
  of direct investment.

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4-3c Politics

• Government attitudes towards imports and direct
  investment
• Efficiency of the government
• Stability of the government
• Business ethics
• Prevalence of terrorism

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4-4 Management Functions Applied Globally

• Planning
• Organizing
• Leading
• Controlling

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4-4a The Planning Function
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4-4b The Organizing Function

• Complexity of organization
• Authority and decision making
• Evaluation, rewards and punishments
• Communication, information flow
• Staffing, recruitment and development

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4-4c The Leading Function

• Varies in effectiveness from nation to nation
• Decision on local leader or an expatriate leader
• Advantages and disadvantages needs to be
  carefully studied before deciding on either of
  the options
• Expatriate leader would be suited where there is
  a shortage of managerial skills to oversee the
  operation
• Cost of hiring such a leader would be high and
  sometimes might make a wrong hiring decision

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4-4d The Controlling Function

• Standards
• Information
• Action

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4-5 Global Economic Integration

• North American Free Trade Agreement (NAFTA)
• Formation of NAFTA has contributed to increased
  intra-regional trade in North America
• European Union (EU)
• Economic integration through trade in Western
  Europe is much more advanced

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4-5a The World Trade Organization

• WTO sets out the principal obligations to be met
  by governments in implementing domestic trade
  policies and regulations
• Two rules forming the cornerstone of WTO
• Most Favored Nation (MFN)
• National treatment

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4-5b Regional Trade Agreements
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4-5c Implications for the United States

• A major question concerns the extent to which the
  US will participate in the formation and
  development of RTAs.
• Companies within an RTA are becoming almost like
  a domestic competitors.
• U.S. must rethink their strategies for the
  domestic market, since they do not want
  competition from new companies outside the U.S.