Globalization

1. Globalization

2. Declining Barriers to Trade • Free-Trade Doctrine: Everyone is better off if each country specializes in what it can produce most efficiently • Tariffs declining globally (GATT, regional trading alliances) • Trends to democracy and free-market policies open markets • Barriers of distance and culture diminish as transportation and communications technologies improve • National borders are increasingly irrelevant as barriers to trade

3. Regional Trading Alliances • Build size of market and reduce costs of trade in group: • The European Union - created 1992 • A single, rich market without barriers to travel, employment, investment, and trade • North American Free Trade Agreement (NAFTA) • Eliminated barriers to free trade such as tariffs, import licensing requirements, customs user fees between U.S., Mexico, Canada • Mercosur (South America) • Association of Southeast Asian Nations (ASEAN)

4. Effects of Free Trade on Managers • Managers need to learn to compete globally • Declining trade barriers = huge opportunities: • Expand markets • Opportunities to (out)source globally • Declining trade barriers = huge challenges: • Intense competition: Anyone, anywhere • Managing and operating in foreign countries • Global legal-political environments differ (e.g., stability) • Global economic environments differ (e.g., inflation) • Employment Dislocation

5. Global Perspectives on Management • There are fundamentally different perspectives that managers have about the right way to manage: • Parochialism: Managers view the world solely through its own eyes and perspectives, do not recognize differences • Ethnocentric Attitude: Managers believe home country knows best; centralize, hold key decisions / technology close • Polycentric Attitude: Managers believe host-country managers know best; decentralize, let each country manage own unit • Geocentric Attitude: Managers try to transcend barriers and use the best from around the globe, regardless of location

6. Exxon Mobil Nestle ABB Global Perspectives and Organizational Models: Organization: Multinational Transnational Borderless • Economy of scale • and efficiency Exhibit 4.2

7. How Organizations Go Global Stage I Passive Response Stage II Initial Overt Entry Stage III Established International Operations Learning & Resources Foreign Subsidiary More Risk and Investment Joint Ventures Exporting to foreign countries Strategic Alliances Hiring foreign representation or contracting with foreign manufacturers Importing from foreign countries Licensing/ Franchising Exhibit 4.7

8. The International Environment • Legal-political • Differences • Stable/Unstable • Economic • Currency fluctuations • Taxes • National Cultural

9. National Cultural Environments • National Culture: The values and attitudes shared by individuals from a specific country • what a society believes to be good, desirable and beautiful. • Provides conceptual support for democracy, truth, appropriate roles for men and women. • Usually not static but very slow to change. • Influences employees more than organizational culture • But not necessarily easy to find out (taken for granted)

10. Hofstede’s Model of National Cultural Values • Dimensions along which national cultures vary: • Power distance – influence and control unequally distributed • Uncertainty avoidance – Avoidance of ambiguity and risk, conformity to norms • Individualism – expectation that people take care of themselves / masters of own destiny. • Compared to Collectivism, expectation that others in the group will look after them and should be looked after. • Quantity of Life – assertiveness, acquisition of money, indifference to others • Compared with Quality of Life, valuing relationships and showing sensitivity and concern for the welfare of others.

11. low 50 40 30 20 10 R a n k i n g o u t o f 5 0 c o u n t r i e s Canada Canada USA USA Taiwan Taiwan Japan Japan high Quantity /Quality Power Distance Uncertainty Avoidance Individualism Confucian Dynamics Cultural Value Dimension Rank Numbers: 1 = Highest; 50 = Lowest Relative Ranking of Four Countries On Cultural Values See Also Exhibit 4.9 Source: Adapted from G. Hofstede and M. H. Bond. The Confucius connection: From cultural roots to economic growth. Organization Dynamics, Spring 1988, pp. 12-13

12. How Cultural Values Affect Organizations (Examples) • Power distance: • Manager-subordinate relationships • Uncertainty avoidance: • Receptiveness to new ideas, changing rules, competition • “Most organizations would be better off if conflict could be eliminated forever” • “If you want a competent person to do a job properly, it is often best to provide him or her with very precise instructions on how to do it”

13. How Cultural Values Affect Organizations (Examples) • Individualism & Collectivism • Individual merit & incentive pay systems • (Individual vs. group merit pay, seniority systems) • Managers Hot Seat Video (relationship & task)

14. How Cultural Values Affect Organizations (Examples) • Quantity v. Quality of Life: • Attitudes to downsizing, benefits, competition • Dutch engineer applying to US firm story (assertiveness)