Management, by Williams South-Western College Publishing Copyright © 2003 Chapter 8 Global Management.

Management, by WilliamsSouth-Western College PublishingCopyright © 2003

Chapter 8Chapter 8

Global Management

2


What Would What Would YouYou Do? Do? Wal-Mart’s International StrategyWal-Mart’s International Strategy

Dominant retailer in U.S. Major global competitor is Carrefour Which countries should Wal-Mart enter? What impact will free trade agreements have? Global consistency vs. local adaptation

3


After discussing this section, you should be able to:

Learning ObjectivesLearning ObjectivesWhat Is Global Business?What Is Global Business?

1. describe the impact of global business on the U.S.

2. discuss the trade rules and agreements that govern global trade.

4


Impact of Global BusinessImpact of Global Business

“Foreigners” Buying up American Companies

American Companies are not Competitive in the World Market

Americans Buying American Products

5


Foreign Investment in the U.S.Foreign Investment in the U.S.

United KingdomGerman

NetherlandsCanadaFranceJapan

LuxemborgSwitzerland

IrelandBermuda

Dollars (Millions)

10,000 20,000 30,000 40,000 50,0000

1994-19991994-1999

Adapted from Exhibit 8.1

6


U.S. Direct Foreign Investment AbroadU.S. Direct Foreign Investment AbroadUnited Kingdom

CanadaNetherlands

GermanyJapan

BermudaFrance

SwitzerlandBrazil

AustraliaMexico

Panama

Dollars (Millions)40,000 80,000 120,000 160,0000

1994-19991994-1999


7


Global High-Technology Market ShareGlobal High-Technology Market Share

United StatesUnited States31%31%

CanadaCanada1%1%

JapanJapan22%22%

GermanyGermany7%7%

FranceFrance3%3%

United KingdomUnited Kingdom5%5%

ItalyItaly1%1%

ChinaChina6%6%

South KoreaSouth Korea4%4%

TaiwanTaiwan2%2%

SingaporeSingapore2%2%

All Other CountriesAll Other Countries22%22%

Average Global High Technology Market Share, 1993-1997Average Global High Technology Market Share, 1993-1997


8


Buying AmericanBuying American

Americans say they want to “Buy American”

Country of manufacture where the product is made

Country of origin company’s home country

9


Trade Rules and AgreementsTrade Rules and Agreements

Trade Barriers

Trade Agreements

Consumers, Trade Barriers and Trade Agreements

10


Trade BarriersTrade Barriers

Tariff Nontariff barriers

Quotas Voluntary export restraints Government import standards Government subsidies Customs valuation/classification

11


Trade AgreementsTrade Agreements

General Agreement on Tariffs & Trade (GATT)

Regional Trading Zones Maastricht Treaty of Europe NAFTA FTAA ASEAN & APEC

12


World Trade OrganizationWorld Trade Organization

Location: Location: Geneva, SwitzerlandGeneva, SwitzerlandEstablished: Established: 1 January 19951 January 1995Created by: Created by: Uruguay Round Uruguay Round negotiations (1988-1994)negotiations (1988-1994)Membership:Membership: 142 countries (as of 142 countries (as of 26 July 2001)26 July 2001)Budget: 127 million Swiss francs Budget: 127 million Swiss francs for 2000for 2000Secretariat staff: 500Secretariat staff: 500Head: Mike Moore (director-Head: Mike Moore (director-generalgeneral

Functions:Functions: Administering WTO trade Administering WTO trade

agreementsagreements Forum for trade Forum for trade

negotiationsnegotiations Handling trade disputesHandling trade disputes Monitoring national trade Monitoring national trade

policiespolicies Technical assistance and Technical assistance and

training for developing training for developing countriescountries

Cooperation with other Cooperation with other international organizationsinternational organizations

13


GATTGATT

Worldwide trade agreement Designed to reduce and eliminate tariffs

and subsidies Protect intellectual property

14


Maastricht Treaty of EuropeMaastricht Treaty of Europe

Originally, 12 (now 15) European countries

13 other countries have applied Transform these different countries into

the European Union Open up trade among member nations Create the “Euro” currency

15


North American Free Trade North American Free Trade Agreement - NAFTAAgreement - NAFTA

Canada, United States, & Mexico Liberalizes trade among these three

nations Eliminate tariffs and barriers

16


Free Trade Area of the AmericasFree Trade Area of the Americas

Proposed agreement Unite 34 countries in North & South America

Reduce trade barriers to zero Standardize financial markets Process for handling trade disputes

17


Association of South East NationsAssociation of South East NationsAsia-Pacific Economic CooperationAsia-Pacific Economic Cooperation

ASEAN Indonesia, Thailand, Philippines,

Malaysia, Singapore, & Brunei APEC

U.S., Canada, Japan, South Korea, Australia, New Zealand, China, Hong Kong, & ASEAN members

18


Consumers, Trade Barriers, & Trade Consumers, Trade Barriers, & Trade AgreementsAgreements American annual income less than many

countries Cost of living, however, is also less here Open trade gives American consumers

many choices

19



Learning ObjectivesLearning ObjectivesHow to Go Global?How to Go Global?

3. explain why companies choose to standardize or adapt their business procedures.

4. explain the different ways that companies can organize to do business globally.

20


Consistency or Adaptation?Consistency or Adaptation?

Globalconsistency

Localadaptation

21


Forms for Global BusinessForms for Global Business

ExportingCooperative Contract

•licensing•franchise

Strategic Alliances- Joint Ventures

Wholly OwnedAffiliates

Global NewVentures

22


Been There, Done ThatBeen There, Done That

13,000 restaurants in the U.S. 15,000 restaurants in 119 other countries How can McDonald’s maintain its

projected growth rate? What are the limiting factors? What must McDonald’s do to keep the

character of its company aligned with its international presence?

23



Learning ObjectivesLearning ObjectivesWhere to Go Global?Where to Go Global?

5. explain how to find a favorable business climate.

6. discuss the importance of identifying and adapting to cultural differences.

7. explain how to successfully prepare workers for international assignments.

24


Finding the Best Business ClimateFinding the Best Business Climate

Growing Markets

Choosing an Office/Manufacturing Location

Minimizing PoliticalRisk

25


Growing MarketsGrowing Markets

Purchasing Power comparison of a standard set of goods

and services in different countries more means greater growth potential

Degree of Global Competition the number & quality of companies

already in the market more means less growth potential

26


Consumption of Coca-ColaConsumption of Coca-ColaP

er C

apit

a C

onsu

mp

tion

of

Coc

a-C

ola

Per

Cap

ita

Con

sum

pti

on o

f C

oca-

Col

a

Purchasing Power (per capita real GDP)Purchasing Power (per capita real GDP)

00 1000010000 2000020000 3000030000 400004000000

200200

300300

400400

500500

100100

.

...

.

.

.

.

.

..

..

..

.

ChinaChina

ColumbiaColumbiaPhillipinesPhillipines

BrazilBrazil

MexicoMexico

ChileChile

ArgentinaArgentina

KoreaKoreaItalyItaly

Great Great BritainBritain

SpainSpainAustraliaAustralia

GermanyGermanyJapanJapan

FranceFrance

United United StatesStates


27


Choosing an Office/Manufacturing Choosing an Office/Manufacturing LocationLocation Quantity factors

work force quality company strategy

Quality factors costs and barriers

28


Quality of Netherlands Workforce Quality of Netherlands Workforce for Call Center Jobsfor Call Center Jobs

Adapte from Exhibit 8.7

0 20 40 60 80 100 120 140

Ireland

UK

France

Germany

Belgium

Netherlands

Two Languages Three Languages More than Three Languages

29


United States1. New York City2. San Francisco3. Chicago4. Wash. D.C. area5. San Jose

Latin America1. Buenos Aires2. San Juan3. Mexico City4. Sao Paulo5. Santiago

Europe1. London2. Frankfurt3. Helsinki4. Amsterdam5. Dublin

Asia Pacific1. Hong Kong2. Sydney3. Singapore4. Auckland5. Tokyo

World’s Best Cities for BusinessWorld’s Best Cities for Business


30


Minimizing Political RisksMinimizing Political Risks

Political uncertainty risk of major changes in political regimes

Policy uncertainty risk associated with changes in laws and

government policies directed at businesses

Strategies avoidance control avoidance

31


Political Risk: 10 Riskiest CountriesPolitical Risk: 10 Riskiest CountriesInternational Country Risk International Country Risk GuideGuide

Ten Riskiest CountriesTen Riskiest Countries1.1. Sierra LeoneSierra Leone2.2. YugoslaviaYugoslavia3.3. SomaliaSomalia4.4. Guinea-BissauGuinea-Bissau5.5. ZimbabweZimbabwe6.6. Congo, Dem. RepublicCongo, Dem. Republic7.7. IraqIraq8.8. MoldovaMoldova9.9. Korea, D.P.R.Korea, D.P.R.10.10. LiberiaLiberia

Coplin-O’Leary Risk Coplin-O’Leary Risk RatingsRatings

Ten Riskiest CountriesTen Riskiest Countries1.1. EcuadorEcuador2.2. IraqIraq3.3. CubaCuba4.4. RussiaRussia5.5. MyanmarMyanmar6.6. SudanSudan7.7. VietnamVietnam8.8. CameroonCameroon9.9. PakistanPakistan10.10. NigeriaNigeria

32


Political Risk: 10 Least Risky CountriesPolitical Risk: 10 Least Risky CountriesInternational Country Risk International Country Risk GuideGuide

Ten Least Risky CountriesTen Least Risky Countries1.1. SingaporeSingapore2.2. NorwayNorway2.2. SwitzerlandSwitzerland4.4. LuxembourgLuxembourg5.5. NetherlandsNetherlands6.6. FinlandFinland7.7. BruneiBrunei8.8. DenmarkDenmark9.9. CanadaCanada10.10. SwedenSweden

Coplin-O’Leary Risk Coplin-O’Leary Risk RatingsRatings

Ten Least Risky CountriesTen Least Risky Countries1.1. SwitzerlandSwitzerland2.2. BulgariaBulgaria3.3. SingaporeSingapore4.4. BelgiumBelgium5.5. IrelandIreland6.6. FinlandFinland7.7. AustriaAustria8.8. CanadaCanada9.9. NetherlandsNetherlands10.10. United KingdomUnited Kingdom

33


Becoming Aware of Cultural Becoming Aware of Cultural Differences - Geert HofstedeDifferences - Geert Hofstede

Power distance Individualism Short-term/Long-term orientation Masculinity v. femininity Uncertainty avoidance

34


Hofstede’s Five Cultural DimensionsHofstede’s Five Cultural Dimensions

USAGermany

JapanFrance

NetherlandsHong Kong

IndonesiaWest Africa

RussiaChina

400400

350350

300300

250250

200200

150150

100100

5050

00Ho

fste

de

’s C

ult

ura

l Dim

ens

ion

sPower DistancePower Distance IndividualismIndividualism MasculinityMasculinity Uncertainty AvoidanceUncertainty Avoidance Long-Term OrientationLong-Term Orientation


35


Preparing for an International Preparing for an International AssignmentAssignment

Language andCross-Cultural

Training

Spouse, Family,and

Dual-CareerIssues

36


What Really Works?What Really Works?

Cross-Cultural Training

Psychological Well-Being & Self-Development

10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Fostering Relationships with Native Citizens

10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Probability of success 79%


37


What Really Works? (What Really Works? (Cont’d.)Cont’d.)

Accurate Cultural Perceptions

10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Rapid Adjustment to Foreign Cultures & Countries

10% 20% 30% 40% 50% 60% 70% 80% 90% 100%Probability of success 74%


38


What Really Works? (What Really Works? (Cont’d.)Cont’d.)

On-the-Job Performance

10% 20% 30% 40% 50% 60% 70% 80% 90% 100%


39


What What ReallyReally Happened? Happened? Wal-Mart’s International StrategyWal-Mart’s International Strategy

Currently Carrefour (its major global competitor) has been able to match or better Wal-Mart’s prices

Wal-Mart is increasing local adaptation to meet customer needs, but maintaining some global consistency to take advantage of purchasing power

Management, by Williams South-Western College Publishing Copyright © 2003 Chapter 8 Global Management.

Documents