Chapter 3

Managing in a Global Environment

The International Business Environment

difficulties and risks when performing management functions - due to differences in culture, language, economies, laws, political stability, etc.

Stages of Globalization
1. Domestic Stage = All production and marketing facilities at home. 2. International Stage = International Division is typically part of the structure, but is not dominant. 3. Multinational Stage = Marketing and production in many countries and 1/4 of sales from outside home country. 4. Global Stage =Making sales and acquiring resources in whatever country offers the best deal. Ownership, control, and top management tend to be dispersed.

Multinational/Global Corporations
The

revenue of GM is comparable to the gross domestic product (GDP) of Finland Revenue of General Electric is equal to the GDP of Israel Revenue of Toyota is similar to the GDP of Hong Kong.

Multinational/Global Corporations
are criticized for: Excessive profits Lack of technology transfer Lack of respect for local culture Interference with governments complain about host countries: Profit limitations Overpriced resources Foreign exchange restrictions Failure to meet contract obligations

Getting Started Internationally

Outsourcing (e.g., Nike) Exporting (e.g., L.L. Bean) Licensing (e.g., Lowenbrau) Franchising (e.g., McDonalds)

Direct Investing Joint Venture (e.g., Toyota and GM have made cars jointly) Wholly Owned Foreign Affiliates Acquisition (e.g.,BP purchasing AMOCO) Greenfield Venture (e.g., Toyota making cars in Kentucky)
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Hofstedes Dimensions of Culture (National Social Values)

Distance Uncertainty Avoidance Individualism/Collectivism Masculinity/Femininity Time Orientation

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Power Distance
High power distance means people accept inequality in power among institutions, organizations, and people

Uncertainty Avoidance
High uncertainty avoidance means that members of a society feel uncomfortable with uncertainty and ambiguity
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Individualism & Collectivism

reflects a value for a loosely knit social framework in which individuals are expected to take care of themselves Collectivism is a preference for a tightly knit social framework in which individuals look after one another

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Masculinity/Femininity (Toughness/Tenderness) (Achievement/Nurturing)

cultures stress the importance of achievement, heroism, assertiveness, and material success Feminine cultures value relationships, modesty, caring for the weak, and quality of life
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Time Orientation
Short-Term

Orientation means that people expect fairly rapid feedback from decisions, expect quick profits, frequent job evaluations and promotions, etc.

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Other Cultural Characteristics

Orientation (monochronic vs. polychronic)

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Managing Cross-Culturally
Must

be culturally flexible and easily adapt to new situations and ways of doing things Cannot be ethnocentric Culture Shock = frustration and anxiety from different culture Motivating Must fit the incentives with the culture
Controlling-

Often are unable to fire unproductive employees and must find creative ways of dealing with them.
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Characteristics of U.S. Managers as viewed by other Nations

Negative:

Informal, frank, trustworthy Innovative, openminded, pragmatic Entrepreneurial, profitoriented Eager to get things done Work harder than Europeans

Work less hard than Asians Short-term orientation Judge persons worth by their wealth Loyal to unit, not firm Not well-rounded educationally Parochial
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Chapter 3

World Trade Organization

replaced GATT (General Agreement on Tariffs and Trade) in 1995 157 Members as of February 2012
About 25 nations are candidates or observers Iran is the largest candidate in economic power

WTO More Power than GATT

rulings on trade disputes Monitoring trade policies

Most Favored Nation (MFN) = members granted reduced tariffs, etc. WTO: MFN status now called Normal Trade Relations (NTR)
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European Union (EU)

in 1958 to improve economic and social conditions among its members 27 nation alliance is an open market for Europe's 400+ million consumers. Moving toward one economy and one currency (Euro)

EU Reforms and Deregulation

sales Telecommunications Social policy Monetary union

Banking
Insurance Health

Safety

standards Airlines

Advantages of the EU
Increased

competition and economies of scale will enable companies to grow large and efficient Will become more competitive in the United States and other world markets.

North American Free Trade Agreement (NAFTA) 1994

Mexico, and U.S. Alliance including approximately 400 million consumers Expected to spur growth and investment, increase exports, and expand jobs in all three nations

Opposition to NAFTA
Many

opposed the agreement due to fear of job losses to Mexico Others fear weakened pollution standards and toxic dumping.

Some NAFTA Effects

in a joint venture with Wal-Mart to operate Wal-Marts and Sams Clubs in 20 Mexican cities Cinemark Theaters building movie multiplexes in several large Mexican cities Mexican investors buy Del Monte foods

Alliances-Promise or Pitfall?
Will

there emerge multiple competitive trading blocs? Will just three powerful trading blocs dominate: Americas, Europe, ASEAN (Southeast Asia)? Will the expansion of global corporations weaken the trading blocs?