Chapter 6

Managing in the
Global
Environment

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 Global Organizations

 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?

 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.

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 Forces in the Global Environment

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 What Is the Global Environment?

 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 and dispose of its outputs
influence managers daily

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 What Is the Global Environment?

 General environment
The wide-ranging global, economic,
technological, sociocultural, demographic,
political, and legal forces that affect an
organization and its task environment.

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 The Task Environment

 Suppliers
Individuals and organizations that provide an
organization with the input resources that it
needs to produce goods and services

 Raw materials, component parts, employees

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 Global Outsourcing

 Global Outsourcing
The purchase or production of inputs or final
products from overseas suppliers to lower costs
and improve product quality or design.

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 The Task Environment

 Distributors
Organizations that help other organizations sell
their goods or services to customers

 Powerful distributors can limit access to markets

through its control of customers in those markets.

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 The Task Environment

 Customers
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.

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 The Task Environment

 Competitors
Organizations that produce goods and services
that are similar to a particular organization’s
goods and services

 Rivalry between competitors is potentially the

most threatening force that managers deal with

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 The Task Environment

 Barriers to Entry
Factors that make it difficult and costly for the
organization to enter a particular task
environment or industry

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 Barriers to Entry

 Economies of scale
Cost advantages associated with large operations
 Brand loyalty
Customers’ preference for the products of
organizations currently existing in the task
environment.
 Government regulations that impede entry

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 Barriers to Entry and Competition

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 The General Environment

 Economic Forces
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.

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 The General Environment

 Technology
The combination of skills and equipment that
managers use in designing, producing, and
distributing goods and services.

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 The General Environment

 Technological Forces
Outcomes of changes in the technology that
managers use to design, produce, or distribute
goods and services

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 The General Environment

 Sociocultural Forces
Pressures emanating from the social structure of
a country or society or from the national culture

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 Sociocultural Forces

Social structure National culture

The traditional the set of values that
system of a society considers
relationships important and the
established between norms of behavior
people and groups in that are approved or
a society sanctioned in that
society

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 The General Environment

 Demographic Forces
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

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 The General Environment

 Political and Legal Forces

Outcomes of changes in laws and regulations,
such as deregulation of industries, privatization of
organizations, and increased emphasis on
environmental protection.

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 Process of Globalization

 Globalization
The set of specific and general forces that work
together to integrate and connect economic,
political, and social systems across countries,
cultures, or geographical regions so that nations
become increasingly interdependent and similar.

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 Principal Forms of Capital that Flow
Between Countries

Human Financial
capital capital

Resource Political
capital capital
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 Declining Barriers to Trade
and Investment
 Tariff
A tax that government imposes on imported or,
occasionally, exported goods.
Intended to protect domestic industry and jobs
from foreign competition

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 GATT and the Rise of Free Trade

 Free-Trade Doctrine
The idea that if each country specializes in the
production of the goods and services that it can
produce most efficiently, this will make the best
use of global resources and will result in lower
prices

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 Declining Barriers of Distance and
Culture - Unilever
 Distance
Markets were essentially closed because of the
slowness of communications over long distances.
 Culture
Language barriers and cultural practices made
managing overseas businesses difficult
 Changes in Distance and Communication
Improvement in transportation technology and fast,
secure communications have greatly reduced the
barriers of physical and cultural distances.

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 Effects of Free Trade on Managers

 Lowering of Trade Barriers

Opened enormous opportunities for managers to
expand the market for their goods and services.
Allowed managers to now both buy and sell
goods and services globally.
Increased intensity of global competition such
that managers now have a more dynamic and
exciting job of managing.

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 The Role of National Culture

 Values
Ideas about what a society believes to be good,
right, desirable and beautiful.
Provide the basic underpinnings for notions of
individual freedom, democracy, truth, justice,
honesty, loyalty,
love, sex, marriage, etc.

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 The Role of National Culture

 Norms
Unwritten, informal codes of conduct that
prescribe how people should act in particular
situations and are considered important by most
members of a group or organization
Folkways, mores

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 Norms

Mores Folkways
Norms that are The routine social
considered to be conventions of
central to the everyday life.
functioning of society
and to social life.

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 Hofstede’s Model of
National Culture
 Individualism
A worldview that values individual freedom and
self-expression and adherence to the principle
that people should be judged by their individual
achievements rather their social background.
 Collectivism
A worldview that values subordination of the
individual to the goals of the group and
adherence to the principle that people should be
judged by their contribution to the group

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 Hofstede’s Model of
National Culture
 Power Distance
Degree to which societies accept the idea that
inequalities in the power and well-being of their
citizens are due to differences in individuals’
physical and intellectual capabilities and heritage

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 Hofstede’s Model of
National Culture
 Achievement orientation
A worldview that values assertiveness,
performance, success, and competition
 Nurturing orientation
A worldview that values the quality of life, warm
personal friendships, and services and care for
the weak.

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 Hofstede’s Model of National Culture

 Uncertainty Avoidance
The degree to which societies are willing to
tolerate uncertainty and risk.
 Low uncertainty avoidance cultures are easygoing,
value diversity, and tolerate differences in personal
beliefs and actions
 High uncertainty avoidance societies are more rigid
and expect high conformity in their citizens’ beliefs
and norms of behavior.

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 Hofstede’s Model of
National Culture
 Long-term orientation
A worldview that values thrift and persistence in
achieving goals.
 Short-term orientation
A worldview that values personal stability or
happiness and living for the present.

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