Managing in a Global Environment: Understanding the Impact of Globalization and Strategies for International Success

1. Chapter 4 Managing in a Global Environment

2. A Borderless World Organizations and managers are not isolated from international forces • Trade barriers have fallen • Communication is faster, cheaper • Consumer tastes converge Organizations address the needs and desires that transcend national boundries

3. 4.1 Ranking of Six Countries on the Globalization Index

4. Global Mindset • Ability of managers to appreciate and influence individuals, groups, organizations, and systems that represent: • Different social, cultural, political, institutional, intellectual, and psychological characteristics • Develop by engaging with people from different cultures

5. 4.2 The Dimensions of a Global Mindset

6. Changing International Landscape • China Inc. • China manufactures many products for U.S. companies • China is also a growing consumer market • Regulations and government policies make doing business in China a challenge

7. Changing International Landscape • India is a service giant, growing in software design and engineering • Brazilis a country that is gaining the attention of American managers

8. The Impact of Multinational Corporations (MNC) • The size and volume of international business is LARGE • Companies have revenue = GDP of small country • Move assets from country to country • 25% or more of its profit comes from outside parent country • MNC is managed as an integrated whole

9. The Impact of Multinational Corporations (MNC) • Controlled by one management authority • MNC managers must have a global perspective • Ethnocentric companies – place emphasis on their home countries • Polycentric companies – oriented toward the markets of individual foreign host countries • Geocentric companies – world oriented and favor no specific country

10. The Globalization Backlash • 68% of Americans say other countries benefit the most from free trade • 53% believe free trade has hurt U.S. • The United States’ primary concern is the loss of jobs • Another trouble spot is how overseas contractors and suppliers treatemployees

11. The Globalization Backlash • Business leaders insist that economic benefits flow back to the U.S. economy • Lower prices and expanded markets • Increased profits and funds for innovation • But American shoppers say they would pay higher prices to keep down foreign competition

12. Serving the Bottom of the Pyramid (BOP) • An approach for multinationals to do good • Corporations can alleviate problems and make large profits by selling to the world’s poor • There are more than 4 billion people at the lowest level of the economic pyramid • Many companies are adopting BOP strategies

13. 4.3 Strategies for Entering the International Arena

14. International Market Strategies • Exporting –transferring products for sale to foreign countries • Outsourcing –also called offshoring, work activities are done in countries with cheap labor

15. International Market Strategies • Licensing –enabling a company to produce and market a product in another country • Franchising is licensing that provides a complete package of materials and services • Direct investing –high level of involvement, company manages and controls assets • Joint venture and other types of partnerships are common– wholly owned subsidiary, greenfield venture

16. The International Business Environment • Planning, organizing, leading, and controlling in multiple countries can be challenging • It took McDonald’s a year to figure out that Hindus in India do not eat beef • In Africa, the labels on bottles include pictures to aid illiterate consumers • Managers must be mindful in the global marketplace

17. 4.4 Key Factors in International Environment

18. The Economic Environment • Economic development –Countries are categorized as either developed or developing based on per capita income • Government policies • Market size • Financial markets • Infrastructure

19. 4.4Country Competitiveness Comparison 2011–2012

20. Economic Environment • Economic interdependence The current economic crisis has highlighted how interconnected economies are around the world

21. 4.6 How Countries are Bearing the Economic Crisis

22. The Legal-Political Environment • Political risk is defined as the risk of lost assets, earning power, or managerial control • Political instability includes riots, revolutions, civil disorders, and frequent changes in government

23. The Sociocultural Environment The values and behaviors that govern U.S. business do not always translate • Social values • Communication differences

24. Hofstede’s Value Dimensions • Power distance • Uncertainty avoidance • Individualism and collectivism • Masculinity and femininity

25. 4.7 Rank Orderings of Ten Countries Along Four Dimensions of National Value Systems

26. GLOBE Project Value Dimensions • Assertiveness • Future orientation • Gender differentiation • Performance orientation • Humane orientation

27. 4.8 Examples of Country Rankings on Selected GLOBE Value Dimensions

28. 4.9 High-Context and Low-Context Cultures

29. International Trade Alliances • General Agreement on Tariff and Trade (GATT) • 23 nations in 1947, a set of rules for fair trade • World Trade Organization (WTO) • Maturation of GATT into permanent global institute

30. International Trade Alliances • European Union • 1957 alliance to improve economic and social conditions among members; evolved to 28-nation European Union • North American Free Trade Agreement (NAFTA) • Merged the United States, Canada, and Mexico into a single market

31. 4.10 The Nations of the European Union