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Chapter 6
Managing in the Global
Environment

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 Learning Objectives 1

1. Explain why the ability to perceive, interpret, and

respond appropriately to the global environment
is crucial for managerial success.
2. Differentiate between the global task and global
general environments.
3. Identify the main forces in both the global task
and general environments, and describe the
challenges that each force presents to managers.

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 Learning Objectives 2

4. Explain why the global environment is becoming

more open and competitive, and identify the
forces behind the process of globalization that
increase the opportunities, complexities,
challenges, and threats managers face.
5. Discuss why national cultures differ and why it is
important that managers be sensitive to the
effects of falling trade barriers and regional trade
associations on the political and social systems of
nations around the world.

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 Global Organizations
A global organization:
• An organization that operates and competes in
more than one country.
• Uncertain and unpredictable.

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 What Is the Global Environment? 1

Global environment:
The set of global forces and conditions that
operates beyond an organization’s boundaries but
affects a manager’s ability to acquire and utilize
resources.
These forces change over time and thus present
managers with:
• Opportunities: new production technology, lower-cost
components, new global markets.
• Threats: economic recession, oil shortages.

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 Figure 6.1 Forces in the Global Environment

Access the text alternative for slide images.

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 What Is the Global Environment? 2

Task environment:
The set of forces and conditions that originates with
suppliers, distributors, customers, and competitors
and affects an organization’s ability to obtain inputs
used to manufacture and sell the products or
services.
Immediate and direct effects on managers,
influencing managers daily.
• Example: Competitor’s spontaneous sale or new
product introduction.

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 What Is the Global Environment? 3

General environment:
The wide-ranging global, economic, technological,
sociocultural, demographic, political, and legal
forces that affect an organization and its task
environment.
More difficult to identify and respond to than task
environment elements.
• Example: Natural disasters, COVID-19.

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 The Task Environment: Suppliers
Suppliers are individuals and organizations that
provide an organization with the input resources
that it needs to produce goods and services.
• Examples: Raw materials, component parts, employees.
• Suppliers
• Relationships with suppliers can be difficult due to materials
shortages, unions, and lack of substitutes.
• Suppliers that are the sole source of a critical item are in a
strong bargaining position to raise their prices.
• Managers can reduce these supplier effects by increasing the
number of suppliers of an input.

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 The Task Environment: Global
Outsourcing
Global outsourcing refers to the purchase or
production of inputs or final products from
overseas suppliers to lower costs and
improve product quality or design.
• Example: Boeing 787 Dreamliner.
• However, some have brought jobs back to the United
States, starting in the 2010s, due to issues of reliability,
quality, and speed

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 The Task Environment: Distributors
Distributors help other organizations sell
their goods or services to customers.
• Examples: Delivery services, Walmart, Carrefour.

Powerful distributors can limit access to markets through its

control of customers in those markets.

The changing nature of distributors and distribution methods

can bring opportunities and threats to managers.
The power of a distributor may be strengthened or weakened
depending upon its size and the number of distribution
options available.

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 The Task Environment: Customers
Customers are individuals and groups that buy
goods and services that an organization
produces.
A manager’s ability to identify an organization’s main
customer groups and make the products that best
satisfy their particular needs is a crucial factor
affecting organizational and managerial success.
An organization’s success depends on its ability to respond
to the needs of its customers. Changes in the number and
types of customers or in customers’ tastes and needs can
result in opportunities or threats for managers.

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 The Task Environment: Customers
Customers
The most obvious opportunity associated with
expanding into the global environment is the
prospect of selling goods and services to new
customers.
Today, distinct national markets are merging into
one huge marketplace where the same basic
product can be sold to customers worldwide.
However, differences in national cultures may
require managers to customize products in order to
suit local preferences.

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 The Task Environment: Competitors
Competitors are organizations that produce
goods and services that are similar to a
particular organization’s goods and services.
Potential Competitors: Organizations that
presently are not in the task environment but
could enter if they so choose.

Rivalry between competitors is potentially the

most threatening force that managers deal
with.

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 The Task Environment: Barriers to Entry

Barriers to entry are factors that make it

difficult and costly for the organization to enter
a particular task environment or industry.
The greater the barriers to entry the smaller
the number of competitors.
Barriers to entry result from three main sources:
economies of scale, brand loyalty, and government
regulations.

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 Figure 6.2 Barriers to Entry and Competition

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 Barriers to Entry
Economies of scale:
• Cost advantages associated with large operations.

• They may result from manufacturing products in

large quantities, buying inputs in bulk, or by fully
utilizing the skills and knowledge of employees.

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 Barriers to Entry
Brand loyalty:
• Customers’ preference for the products of
organizations currently existing in the task
environment.

• If established organizations enjoy significant brand

loyalty, a new entrant will find it difficult and costly
to obtain market share.

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 Barriers to Entry
Government regulations at the national and
global level can impede entry.

It sometimes function as administrative

roadblocks that create barriers to entry and
limit the imports of goods from foreign
nations.

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 The General Environment: Economic Forces
Successful managers:
• Realize the important effects that economic forces have
on their organizations
• Pay close attention to what is occurring in the national
and regional economies to respond appropriately
Strong macroeconomic conditions as Interest rates,
inflation, unemployment, economic growth, and other
factors that affect the general health and well-being of a
nation or the regional economy of an organization & may
create opportunities or threats.
Example: Money Sony made during the 1990s global
economic boom due to advances in technology and the
growing global trade.

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 The General Environment: Technological Forces

Technology is the combination of skills and

equipment that managers use in designing,
producing, and distributing goods and
services.
The forces are the outcomes of changes in
technology.
• Changes in technology have altered our notions of
work, including a manager’s job.
• Recent example of changes: AMD’s new
generation of Ryzen processors.

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 The General Environment: Sociocultural
Forces 1

Sociocultural forces are pressures emanating

from the social structure of a country or society
or from the national culture.

• Societies differ substantially in the values and

norms they emphasize.
• Effective managers are sensitive to
differences between societies and adjust their
behaviors accordingly

• Example: Concern for diversity.

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 The General Environment: Sociocultural
Forces 2

Social structure:
• The traditional system of relationships established
between people and groups in a society.
• High degree of social stratification: many
distinctions among individuals and groups.
• Low degree of social stratification: few
distinctions among individuals and groups.

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 The General Environment: Sociocultural
Forces 2

Social structure:
• A high degree example is France, where most top
managers come from the upper classes of society.

• Social structure is lower in the United States and

New Zealand, where social structure reveals few
distinctions among people.

• A low degree example is the United States with

top managers coming from all strata of American
society.

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 The General Environment: Sociocultural
Forces 3

National culture:
• The set of values that a society considers
important and the norms of behavior that are
approved or sanctioned in that society.
• In the United States, individualism is highly
valued; in Korea and Japan individuals expected
to conform to group expectations.
• Can affect how managers motivate employees
and do business.

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 The General Environment: Demographic
Forces
Demographic forces are outcomes of
change in, or changing attitudes toward, the
characteristics of a population, such as age,
gender, ethnic origin, race, sexual orientation,
and social class.
• Example: Aging population creating need for
health care and medical industries.

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 The General Environment: Demographic
Forces
Demographic forces
• Most industrialized nations are experiencing the
aging of their populations as a consequence of
falling birth and death rates and the aging of the
Baby-Boomer generation.
• Organizations need to find ways to motivate and
utilize the skills and knowledge of older
employees.

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 The General Environment: Political and
Legal Forces
Political and legal forces are outcomes of
changes in laws and regulations:
Deregulation of industries.
Privatization of organizations.
Increased emphasis on environmental protection.
• Brexit.
• Example: EU investigation of Apple’s acquisition of
Shazam.

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 Graded Group Exercise:
Entering the Copying Business/ Retail Clothing Store

1. Decide what you must know about (a) your future customers,
(b) your future competitors, and (c) other critical forces in the
task environment if you are to be successful.

2. Evaluate the main barriers to entry into the copying

business/retail clothing store

3. Based on this analysis, list some of the steps we will take to

help your new copying business/retail clothing store succeed.

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 Assignment 1:
Case Study:
Huawei’s Contentious but High-Potential Environment

Check the case on Canvas, answer the questions and upload it.

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