MANAGING IN A GLOBALENVIRONMENT

8/21/2019 MANAGING IN A GLOBAL ENVIRONMENT

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Chapter 4

MANAGING IN A GLOBAL

ENVIRONMENT


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Learning Objectives You should learn to:

Explain the importance of viewingmanagement from a global perspective

Identify the three different attitudes

towards global businessDescribe the different regional trading

alliances

Explain why so many countries havebecome part of regional trading alliances

Contrast multinational, transnational, andborderless organizations

Prentice Hall, 2002 4-2


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Learning Objectives (cont.)

You should learn to:

Describe the typical stages by which

organizations go global

Explain the four dimensions of countryculture

Describe U.S. culture according to the

four dimensions of country culture Identify the adjustment challenges faced

by a manager on global assignment



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Who Owns What?

Global Environment

national borders have become

increasingly irrelevant

has potential for dramatic expansion oforganizations

presents numerous challenges for

managers


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Modern Organization Designs

CommunicationTechnology

Transportation

Technology

Globalization


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Transportation

Technology

Communication

TechnologyGlobalization Diversity

Cultural

Change

Demographic

Change

Effects of Globalization


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Transportation

Technology

CommunicationTechnology

GlobalizationDiversity

Cultural

change

Demographic

Change

Flexibility

Globalization and its impact on

organizations


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Transportation

technology

Communicatio

n technology

Globalization

Diversity

Cultural

Change

Demographic

Change

Flexibility

Hyper Competition

Faster pace of

change

Impact of Globalization On organizations


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Transportation

Technology

Communication

Technology

GlobalizationDiversity

FlexibilityCultural

Change

Demographic

Change

Hyper

Competition

Faster pace

of innovation

Smaller, flatter,networked

organizations

Globalization And Development of New

Organization Designs


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Whats Your Global Perspective?

Parochialismnation views the world solely through

its own eyes and perspectives

people do not recognize that otherpeople have different ways of livingand working

significant obstacle for global manager

rigidly apply an attitude of ours isbetter theirs


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Ethnocentric Attitude

parochialistic belief that the best work

approaches and practices are those of

the home country

believe that people of foreign countries

do not have the knowledge, skills,

expertise or experience as the people inhome country do

dont trust foreign employees with key

decisions and technology


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Polycentric Attitude

belief that host-country managers know

the best work approaches and practices

View foreign operations different and

hard to understand

likely to leave foreign facilities alone and

let foreign employees figure out howbest to do things


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Geocentric Attitude World oriented view

focuses on using the best approaches

and people from around the globe believe it is important to have global

view both at organizations headquarters

in home country and in various foreignfacilities

requires sensitivity to differences innational customs and practices


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Key Information about Three Global

Attitudes



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Understanding The Global

Environment

Regional Trading Alliances global competition is influenced by regional trading and

cooperation agreements

The European Union- created by Maastrict Treaty in

1992 a unified economic and trade entity

a single market without barriers to travel, employment,investment, and trade

Econom ic and Monetary Union (EMU) Euro- common currency

assertion of economic power against U.S. and Japan

created one of the worlds richest markets


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European Union Countries


European Union Countries


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Environment (cont.)

Regional Trading Alliances (cont.)North American Free Trade Agreement(NAFTA) links economies of U.S., Mexico, and

Canadasince 1994, eliminated barriers to free

trade such as tariffs, import licensingrequirements, customs user fees

other Latin American free-trade blocsFree Trade Area of the Americas(FTAA)

Southern Cone Common Market


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Mercousur MembersMercousur Members


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Environment (cont

Regional Trading Alliances (cont.)

Associat ion of Sou theast As ian

Nat ions (ASEAN)

alliance of 10 Southeast Asian

nations

created in one of the fastest growing

economic regions in the world

could rival NAFTA and EU


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ASEAN Members


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Different Types of Multinational

Organizations

Global Company maintain significant operations in multiple

countries but are managed from a base in thehome country

Treat world market as a integrated whole andfocus on the need for global efficiency

exemplifies the ethnocentric attitude

Multi Domestic Corporation maintains significant operations in more than one

country but decentralizes management to thelocal country

nationals hired to run operations in each country

marketing strategies tailored for each country

exemplifies the polycentric attitude


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Different Types of Global

Organizations

Transnat ional /bo rderlessorganizat ion

eliminates structural divisions that

impose artificial geographical barriersan attempt to increase efficiency and

effectiveness in a competitive global

marketplaceexemplifies the geocentric attitude


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How Organizations Go Global

Three Stages each stage requires more investment globally and

entails more risk

Stage I nominal steps toward being a global business

export ing-making products and selling them

overseas

impor t ing- selling products at home that aremade overseas

most organizations start doing business globally this

way

Involves minimal investment and minimal risk


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(cont.) Stage II

no physical presence of company employees

outside the companys home country

to handle sales, company may:

send domestic employees on regular overseasbusiness trips

hire foreign agents or brokers

to handle manufacturing may contract with a foreign

firm to produce the organizations products


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(cont.) Stage III

most serious commitment to pursue global markets

l icensingand f ranchis ing both involve an organization giving another

organization the right to use its brand name,

technology, or product specifications

licensing primarily used in manufacturing

franchising primarily used in service operations


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(cont.)

Stage III (cont.) strategic all iances

partnerships between an organization and a

foreign company

both organizations share resources andknowledge

both organizations share risks and rewards

jo in t ven tu re- partners agree to form a separate,

independent organization for some businesspurpose


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(cont)

Stage III (cont.) foreign subs id iary

involves direct investment in a foreign

country

establish a separate and

independent production facility or

officeentails the greatest commitment of

resources

poses the greatest amount of risk



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Stage I

Passive ResponseStage II

Initial Overt EntryStage III

Established International

Operations

Exporting

to foreign

countries

Importing

from foreign

countries

Hiring foreignrepresentation or

contracting with

foreign manufacturersLicensing/

Franchising

Foreign

Subsidiary

Joint

Ventures

Strategic

Alliances



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Managing In A Global

Environment

The Legal-Political Environment managers in foreign countries face greater

uncertainty

some countries have history of unstable

governments

must stay informed of laws in foreign countries

political interference is a fact of life in some

countries

The Economic Environment global manager must be attentive to:

differences in inflation rates around the world

tax rules differ from country to country

G


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Environment (cont.)

The Cultural Environment

nat ional cu l ture

the values and attitudes shared by

individuals from a specific country

shapes behavior and beliefs

has greater effect on employees than

organizational culturegetting information about a countrys

cultural differences is difficult

M i I A Gl b l


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Environment (cont.)

The Cultural Environment (cont.) Geert Hofstede- four dimensions of national

culture individualism versus collectivism

ind iv idual ism-\ loosely knit social framework

o people are supposed to look after their own interestsand those of their immediate family

o wealthier countries tend to be individualistic

col lect iv ism tightly knit social framework

o people expect others in groups in which they are a partto look after them

o owe absolute loyalty to the group

o poorer countries tend to be collectivistic

M i I A Gl b l


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Environment (cont

The Cultural Environment (cont.) Geert Hofstede (cont.)

pow er distance degree of acceptance of unequal distributions of power in

institutions and organizations

large power distance society accepts wide differences inpower

low power distance society plays down inequalities

uncertainty avoidance degree to which people tolerate risk and unconventional

behavior

low - tolerate risks and opinion differences

high - political and social mechanisms created to providesecurity and reduce risk

M i I A Gl b l


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Environment (cont.)

The Cultural Environment (cont.)

Geert Hofstede (cont.)

quantity versus quality of life/

Achievement Vs. Nurturingquant i ty o f l ife- culture values

assertiveness and the acquisition of

money and material goodsqual i ty of l i fe- value relationships

oshow sensitivity and concern for

the welfare of others


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Managing In A Global Environment

(cont.)

The Cultural Environment (cont.) Geert Hofstede (cont.)

Long- Versus Short TermOrientation

Long-term orientation

- Look to the future and value thrift and persistence- Leisure time is not so important

- Most important events in life will occur in future

Short-term orientation

- values the past and present

- emphasizes the respect for tradition and socialobligations

- leisure time is important and the most importantevents in life occurred in the past or resent

E l f H f t d C lt l


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Examples of Hofstedes Cultural

Dimensions



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Is A Global Assignment For You

Criteria Used When Making GlobalAssignment

technical and human factors are

considered

criteria used influenced by the

companys experience and

commitment to global operations include technical skills, language

fluency, flexibility, and family

adaptability


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Is A Global Assignment For You?

Factors That Determine Adjustmentto Global Assignment preassignment adjustm ent- depends on:

accurate expectations about the global job andthe country of assignment

Pre-departure training and previous experience

in -country adjustm ent- depends on: individual factors

organizational factors

organizational culture

organizational socialization

MANAGING IN A GLOBALENVIRONMENT

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