Managing In A Global Environment P O M

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L E A R N I N G O U T L I N E L E A R N I N G O U T L I N E Follow this Learning Outline as you read and study this chapter.Follow this Learning Outline as you read and study this chapter.

What’s Your Global Perspective?What’s Your Global Perspective?• Define parochialism.Define parochialism.• Contrast ethnocentric, polycentric, and geocentric Contrast ethnocentric, polycentric, and geocentric

attitudes towards global business.attitudes towards global business.• Explain why it’s important for managers to be sensitive to Explain why it’s important for managers to be sensitive to

global differencesglobal differences

Understanding the Global EnvironmentUnderstanding the Global Environment• Describe the current status of the European Union.Describe the current status of the European Union.• Discuss the North American Free Trade Agreement and Discuss the North American Free Trade Agreement and

other regional trade alliances in Latin America.other regional trade alliances in Latin America.• Tell about the Association of Southeast Asian Nations.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 (cont’d) L E A R N I N G O U T L I N E (cont’d) Follow this Learning Outline as you read and study this chapter.Follow this Learning Outline as you read and study this chapter.

Understanding the Global EnvironmentUnderstanding the Global Environment• Explain the interdependence that globalization involves.Explain the interdependence that globalization involves.• Discuss the role of the WTO.Discuss the role of the WTO.

Doing Business GloballyDoing Business Globally• Contrast multinational, multidomestic, global, Contrast multinational, multidomestic, global,

transnational, and born global organizations.transnational, and born global organizations.• Describe the different ways organizations can go Describe the different ways organizations can go

international.international.• Define global sourcing, exporting, importing, licensing, Define global sourcing, exporting, importing, licensing,

and franchising.and franchising.• Describe global strategic alliances, joint ventures, and Describe global strategic alliances, joint ventures, and

foreign subsidiaries.foreign subsidiaries.

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L E A R N I N G O U T L I N E (cont’d) L E A R N I N G O U T L I N E (cont’d) Follow this Learning Outline as you read and study this chapter.Follow this Learning Outline as you read and study this chapter.

Managing in a Global Environment (cont’d)Managing in a Global Environment (cont’d)• Explain how the global legal-political and economic Explain how the global legal-political and economic

environments affect managers.environments affect managers.• Discuss Hofstede’s five dimensions for assessing Discuss Hofstede’s five dimensions for assessing

cultures.cultures.• Explain the nine GLOBE dimensions for assessing Explain the nine GLOBE dimensions for assessing

cultures.cultures.• Discuss the challenges of doing business globally in Discuss the challenges of doing business globally in

today’s world.today’s world.

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The Global MarketplaceThe Global Marketplace• Opportunities and ChallengesOpportunities and Challenges

Coping with the sudden appearance of new Coping with the sudden appearance of new competitorscompetitors

Acknowledging cultural, political, and economic Acknowledging cultural, political, and economic differencesdifferences

Dealing with increased uncertainty, fear, and anxietyDealing with increased uncertainty, fear, and anxiety Adapting to changes in the global environmentAdapting to changes in the global environment Avoiding parochialismAvoiding parochialism

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What’s Your Global Perspective?What’s Your Global Perspective?• ParochialismParochialism

Is viewing the world solely through its own eyes and Is viewing the world solely through its own eyes and perspectives.perspectives.

Is not recognizing that others have different ways of Is not recognizing that others have different ways of living and working.living and working.

Is a significant obstacle for managers working in a Is a significant obstacle for managers working in a global business world.global business world.

Is falling into the trap of ignoring others’ values and Is falling into the trap of ignoring others’ values and customs and rigidly applying an attitude of “ours is customs and rigidly applying an attitude of “ours is better than theirs” to foreign cultures.better than theirs” to foreign cultures.

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Exhibit 4–1Exhibit 4–1 Key Information About Three Global AttitudesKey Information About Three Global Attitudes

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Adopting a Global PerspectiveAdopting a Global Perspective• Ethnocentric AttitudeEthnocentric Attitude

The parochialistic belief that the best work The parochialistic belief that the best work approaches and practices are those of the approaches and practices are those of the homehome country.country.

• Polycentric AttitudePolycentric Attitude The view that the managers in the The view that the managers in the hosthost country know country know

the best work approaches and practices for running the best work approaches and practices for running their business.their business.

• Geocentric AttitudeGeocentric Attitude A A world-orientedworld-oriented view that focuses on using the best view that focuses on using the best

approaches and people from around the globe.approaches and people from around the globe.

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Regional Trading AgreementsRegional Trading Agreements• The European Union (EU)The European Union (EU)

A unified economic and trade entity A unified economic and trade entity Belgium, Denmark, France, Greece, Ireland, Italy, Belgium, Denmark, France, Greece, Ireland, Italy,

Luxembourg, the Netherlands, Portugal, Spain, the United Luxembourg, the Netherlands, Portugal, Spain, the United Kingdom, Germany, Austria, Finland, and SwedenKingdom, Germany, Austria, Finland, and Sweden

Economic and monetary union (Euro)Economic and monetary union (Euro)

• North American Free Trade Agreement (NAFTA)North American Free Trade Agreement (NAFTA) Eliminated barriers to free trade (tariffs, import Eliminated barriers to free trade (tariffs, import

licensing requirements, and customs user fees)licensing requirements, and customs user fees) United States, Canada, and MexicoUnited States, Canada, and Mexico

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Exhibit 4–3Exhibit 4–3 European Union CountriesEuropean Union Countries

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Regional Trading Agreements (cont’d)Regional Trading Agreements (cont’d)• U.S.-Central America Free Trade Agreement U.S.-Central America Free Trade Agreement

(CAFTA)(CAFTA)• Free Trade Area of the AmericasFree Trade Area of the Americas• Southern Cone Common Market (Mercosur)Southern Cone Common Market (Mercosur)• Association of Southeast Asian Nations Association of Southeast Asian Nations

(ASEAN)(ASEAN) Trading alliance of 10 Southeast Asian nationsTrading alliance of 10 Southeast Asian nations

• African UnionAfrican Union• South Asian Association for Regional South Asian Association for Regional

Cooperation (SARRC)Cooperation (SARRC)

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Exhibit 4–4Exhibit 4–4 ASEAN MembersASEAN Members

Source: Based on J. McClenahen and T. Clark, “ASEAN at Work,” IW. May 19, 1997, p. 42.

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The World Trade Organization (WTO)The World Trade Organization (WTO)• Evolved from the General Agreement on Tariffs Evolved from the General Agreement on Tariffs

and Trade (GATT) in 1995.and Trade (GATT) in 1995.

• Functions as the only global organization Functions as the only global organization dealing with the rules of trade among nations.dealing with the rules of trade among nations.

• Has 149 member nations and 32 observer Has 149 member nations and 32 observer governments.governments.

• Monitors and promotes world trade.Monitors and promotes world trade.

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Different Types of International Different Types of International OrganizationsOrganizations• Multinational Corporation (MNC)Multinational Corporation (MNC)

Maintains operations in multiple countries.Maintains operations in multiple countries.

• Multidomestic CorporationMultidomestic Corporation Is an MNC that decentralizes management and other Is an MNC that decentralizes management and other

decisions to the local country.decisions to the local country.

• Global CompanyGlobal Company Is an MNC that centralizes its management and other Is an MNC that centralizes its management and other

decisions in the home country.decisions in the home country.

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Different Types of International Different Types of International Organizations (cont’d)Organizations (cont’d)• Transnational Corporation (Borderless Transnational Corporation (Borderless

Organization)Organization) Is an MNC that has eliminated structural divisions that Is an MNC that has eliminated structural divisions that

impose artificial geographic barriers and is organized impose artificial geographic barriers and is organized along business lines that reflect a geocentric attitude.along business lines that reflect a geocentric attitude.

• Born Globals/International New Ventures (INVs)Born Globals/International New Ventures (INVs) Commit resources upfront (material, people, Commit resources upfront (material, people,

financing) to doing business in more than one financing) to doing business in more than one country.country.

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Exhibit 4–5Exhibit 4–5 How Organizations Go GlobalHow Organizations Go Global

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Other Forms of GlobalizationOther Forms of Globalization• Strategic AlliancesStrategic Alliances

Partnerships between and organization and a foreign Partnerships between and organization and a foreign company in which both share resources and company in which both share resources and knowledge in developing new products or building knowledge in developing new products or building new production facilities.new production facilities.

• Joint VentureJoint Venture A specific type of strategic alliance in which the A specific type of strategic alliance in which the

partners agree to form a separate, independent partners agree to form a separate, independent organization for some business purpose.organization for some business purpose.

• Foreign SubsidiaryForeign Subsidiary Directly investing in a foreign country by setting up a Directly investing in a foreign country by setting up a

separate and independent production facility or office. separate and independent production facility or office.

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Managing in A Global EnvironmentManaging in A Global Environment• The Legal EnvironmentThe Legal Environment

Stability or instability of legal and political systemsStability or instability of legal and political systems Legal procedures are established and followedLegal procedures are established and followed Fair and honest elections held on a regular basisFair and honest elections held on a regular basis

Differences in the laws of various nationsDifferences in the laws of various nations Effects on business activitiesEffects on business activities Effects on delivery of products and servicesEffects on delivery of products and services

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The Economic EnvironmentThe Economic Environment• Economic SystemsEconomic Systems

Market economyMarket economy An economy in which resources are primarily owned and An economy in which resources are primarily owned and

controlled by the private sector.controlled by the private sector. Command economyCommand economy

An economy in which all economic decisions are planned by An economy in which all economic decisions are planned by a central government.a central government.

• Monetary and Financial FactorsMonetary and Financial Factors Currency exchange ratesCurrency exchange rates Inflation ratesInflation rates Diverse tax policiesDiverse tax policies

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The Cultural EnvironmentThe Cultural Environment• National CultureNational Culture

Is the values and attitudes shared by individuals from Is the values and attitudes shared by individuals from a specific country that shape their behavior and their a specific country that shape their behavior and their beliefs about what is important.beliefs about what is important.

May have more influence on an organization than the May have more influence on an organization than the organization culture.organization culture.

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Exhibit 4–6Exhibit 4–6 What Are Americans LikeWhat Are Americans Like

Americans are very informal.Americans are direct.Americans are competitive.Americans are achievers.Americans are independent and individualistic.Americans are questioners.Americans dislike silence.Americans value punctuality.Americans value cleanliness.

Sources: Based on M. Ernest (ed.), Predeparture Orientation Handbook: For Foreign Students and Scholars Planning to Study in the United States (Washington, DC: U.S. Information Agency, Bureau of Cultural Affairs, 1984), pp. 103–05; A. Bennett, “American Culture Is Often a Puzzle for Foreign Managers in the U.S.,” Wall Street Journal, February 12, 1986, p. 29; “Don’t Think Our Way’s the Only Way,” The Pryor Report, February 1988, p. 9; and B.J. Wattenberg, “The Attitudes behind American Exceptionalism,” U.S. News & World Report, August 7, 1989, p. 25.

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Hofstede’s Framework for Assessing CulturesHofstede’s Framework for Assessing Cultures

Individualismversus

Collectivism

PowerDistance

UncertaintyAvoidance

Achievement versus

Nurturing

Long-Termversus

Short-Term Orientation Culture

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Exhibit 4–7Exhibit 4–7 Examples of Hofstede’s Cultural DimensionsExamples of Hofstede’s Cultural Dimensions

Source: Based on G. Hofstede, “Motivation, Leadership, and Organization: Do American Theories Apply Abroad?” Organizational Dynamics, Summer 1980, pp. 42–63.

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Exhibit 4–8Exhibit 4–8 GLOBE HighlightsGLOBE Highlights

Source: M. Javidan and R. J. House, “Cultural Acumen for the Global Manager: Lessons from Project GLOBE,” Organizational Dynamics, Spring 2001, pp. 289–305. Copyright © 2001. Reprinted with permission from Elsevier.

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Global Management in Today’s WorldGlobal Management in Today’s World• ChallengesChallenges

Openness associated with globalizationOpenness associated with globalization Significant cultural differences (e.g., Americanization)Significant cultural differences (e.g., Americanization) Adjusting leadership styles and management Adjusting leadership styles and management

approachesapproaches• RisksRisks

Loss of investments in unstable countriesLoss of investments in unstable countries Increased terrorismIncreased terrorism Economic interdependence Economic interdependence

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Terms to KnowTerms to Know• parochialismparochialism• ethnocentric attitudeethnocentric attitude• polycentric attitudepolycentric attitude• geocentric attitudegeocentric attitude• European Union (EU)European Union (EU)• EuroEuro• North American Free Trade North American Free Trade

Agreement (NAFTA)Agreement (NAFTA)• Association of Southeast Asian Association of Southeast Asian

Nations (ASEAN)Nations (ASEAN)• World Trade Organization (WTO)World Trade Organization (WTO)• multinational corporations (MNCs)multinational corporations (MNCs)• multidomestic corporationmultidomestic corporation• global companyglobal company• transnational or borderless transnational or borderless

organizationorganization

• born globals born globals • global sourcingglobal sourcing• exportingexporting• importingimporting• licensinglicensing• franchisingfranchising• strategic alliancesstrategic alliances• joint venturejoint venture• foreign subsidiaryforeign subsidiary• market economymarket economy• command economycommand economy• national culturenational culture• GLOBEGLOBE• wikiswikis• blogsblogs