Chapter 6 presentation 129655770306773750

Chapter Six

Managing in the Global Environment

McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved.

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Global Organizations

Global Organizations ≈Organizations that operate and compete not

only domestically, but also globally≈Uncertain and

unpredictable

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What Is the Global Environment?

Global Environment ≈Set of forces and conditions in the world

outside the organization’s boundaries that affect the way it operates and shape its behavior

≈Changes over time≈Presents managers with opportunities and

threats

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Task Environment

Task Environment ≈Set of forces and conditions that originate with

suppliers, distributors, customers, and competitors

≈Affects an organization’s ability to obtain inputs and dispose of its outputs

≈Most immediate and direct effect on managers

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Forces in the Global Environment

Figure 6.1

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The Task Environment

Suppliers≈Individuals and organizations that provide an

organization with the input resources that it needs to produce goods and services Raw materials, component parts, labor (employees)

≈Relationships with suppliers can be difficult due to materials shortages, unions, and lack of substitutes. Suppliers that are the sole source of a critical item are in a

strong bargaining position to raise their prices. Managers can reduce these supplier effects by increasing the

number of suppliers of an input.

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Global Outsourcing

Global Outsourcing ≈Organizations purchase inputs from other

companies or produce inputs themselves throughout the world to lower production costs and improve the quality or design of their products

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The Task Environment

Distributors≈Organizations that help other organizations

sell their goods or services to customers Powerful distributors can limit access to markets

through its control of customers in those markets. Managers can counter the effects of distributors by

seeking alternative distribution channels.

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The Task Environment

Customers≈Individuals and groups that buy goods and

services that an organization produces Identifying an organization’s main customers and

producing the goods and services they want is crucial to organizational and managerial success.

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The Task Environment

Competitors≈Organizations that produce goods and

services that are similar to a particular organization’s goods and services Rivalry between competitors is potentially the most

threatening force that managers deal with

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The Task Environment

Barriers to Entry≈Factors that make it difficult and costly for the

organization to enter a particular task environment or industry

≈Economies of scale, brand loyalty, government regulations

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Barriers to Entry and Competition

Figure 6.2

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The General Environment

Economic Forces≈factors that affect the general health and well-

being of a country or world region≈Interest rates, inflation, unemployment,

economic growth

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The General Environment

Technology≈Combination of tools, machines, computers,

skills, information, and knowledge that managers use in the design, production, and distribution of goods and services

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The General Environment

Technological Forces≈Outcomes of changes in the technology that

managers use to design, produce, or distribute goods and services

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The General Environment

Sociocultural Forces≈Pressures emanating from the social structure

of a country or society or from the national culture Social structure: the arrangement of relationships

between individuals and groups in society National culture: the set of values that a society

considers important and the norms of behavior that are approved or sanctioned in that society.

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The General Environment

Demographic Forces≈Outcomes of change in, or changing attitudes

toward, the characteristics of a population, such as age, gender, ethnic origin, race, sexual orientation, and social class

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The General Environment

Political and Legal Forces≈Outcomes of changes in laws and regulations, ≈deregulation of industries, the privatization of

organizations, and increased emphasis on environmental protection Increasingly nations are joining together into

political unions that allow for the free exchange of resources and capital

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The Global Environment

Figure 6.3

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Process of Globalization

Globalization≈Set of specific and general forces that work together to integrate and

connect economic, political, and social systems across countries, cultures, or geographical regions

≈Result is that nations and peoples become increasingly interdependent

Managers now recognize that companies exist and compete in a truly global market

Managers constantly confront the challenges of global competition≈Establishing operations in a country abroad≈Obtaining inputs from suppliers abroad≈Challenges of managing in a different national culture

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Process of Globalization

Four principal forms of capital that flow between countries are:≈Human capital≈Financial capital≈Resource capital≈Political capital

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Declining Barriers to Trade and Investment

Tariff≈A tax that government imposes on imported

or, occasionally, exported goods.≈Intended to protect domestic industry and jobs

from foreign competition

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GATT and the Rise of Free Trade

Free-Trade Doctrine≈The idea that if each country specializes in the

production of the goods and services that it can produce most efficiently, this will make the best use of global resources and will result in lower prices

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Declining Barriers of Distance and Culture

Distance≈Markets were essentially closed because of the

slowness of communications over long distances.

Culture≈Language barriers and cultural practices made

managing overseas businesses difficult

Changes in Distance and Communication≈Improvement in transportation technology and fast,

secure communications have greatly reduced the barriers of physical and cultural distances.

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Effects of Free Trade on Managers

Declining Trade Barriers≈Opened enormous opportunities for managers

to expand the market for their goods and services.

≈Allowed managers to now both buy and sell goods and services globally.

≈Increased intensity of global competition such that managers now have a more dynamic and exciting job of managing.

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The Role of National Culture

Values≈Ideas about what a society believes to be good,

desirable and beautiful.≈Provide the basic underpinnings for notions of

individual freedom, democracy, truth, justice, honesty, loyalty, love, sex, marriage, etc.

Norms≈Unwritten rules and codes of conduct that prescribe

how people should act in particular situations.

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Hofstede’s Model of National Culture

Figure 6.4

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Hofstede’s Model of National Culture

Individualism≈A worldview that values individual freedom and self-

expression and adherence to the principle that people should be judged by their individual achievements rather their social background.

Collectivism≈A worldview that values subordination of the individual

to the goals of the group and adherence to the principle that people should be judged by their contribution to the group

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Hofstede’s Model of National Culture

Power Distance≈Degree to which societies accept the idea that

inequalities in the power and well-being of their citizens are due to differences in individuals’ physical and intellectual capabilities and heritage

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Hofstede’s Model of National Culture

Achievement versus Nurturing Orientation≈Achievement-oriented societies value

assertiveness, performance, and success and are results-oriented.

≈Nurturing-oriented cultures value quality of life, personal relationships, and service.

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Hofstede’s Model of National Culture

Uncertainty Avoidance≈Societies and people differ in their tolerance

for uncertainty and risk.≈Low uncertainty avoidance cultures (e.g., U.S.

and Hong Kong) value diversity and tolerate a wide range of opinions and beliefs.

≈High uncertainty avoidance societies (e.g., Japan and France) are more rigid and expect high conformity in their citizens’ beliefs and norms of behavior.

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Hofstede’s Model of National Culture

Long-term vs. Short-term Orientation≈Cultures with a long-term orientation rest on

values such as thrift and persistence in achieving goals

≈Cultures with a short-term orientation are concerned with maintaining personal stability or happiness and living for the present