Outside-USA

Strategic
Planning

Lecture 2: Chapter Two

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 CHAPTER OBJECTIVES
1. Discuss the nature and implications of labor
union membership across Europe.
2. Discuss income tax rates and practices across
countries.
3. Explain the advantages and disadvantages of
entering global markets.
4. Discuss protectionism as it impacts the world
economy.
5. Explain when and why a firm (or industry) may
need to become more or less global in nature to
compete.
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CHAPTER OBJECTIVES (CONT.)
6. Discuss the global challenge facing American
firms.
7. Compare and contrast business culture in the
United States with many other countries.
8. Describe how management style varies globally.
9. Discuss communication differences across
countries.
10. Discuss Africa as the newest hotspot for business
entry.

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A COMPREHENSIVE STRATEGIC-
MANAGEMENT MODE

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GLOBAL/INTERNATIONAL ISSUES
► The underpinnings of strategic management hinge
on managers gaining an understanding of
competitors, markets, prices, suppliers, distributors,
governments, creditors, shareholders, and
customers worldwide.

► The price and quality of a firm’s products and

services must be competitive on a worldwide basis,
not just on a local basis.

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THE FIVE LARGEST (BY REVENUE)
COMPANIES IN NINE COUNTRIES (2012)

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FORTUNE’S MOST AND LEAST ADMIRED
COMPANIES IN THE WORLD FOR “GLOBAL
COMPETITIVENESS”

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MULTINATIONAL ORGANIZATIONS

► Multinational corporations
► Organizationsthat conduct business operations
across national borders

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 RISKS OF MULTINATIONAL
ORGANIZATIONS
Expropriation of assets
Currency losses through exchange rate fluctuations
Unfavorable Foreign Court Interpretations
Social/political disturbances
Import/export restrictions
Tariffs
Trade barriers

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ADVANTAGES OF INTERNATIONAL
OPERATIONS

1. Firms can gain new customers for their products.

2. Foreign operations can absorb excess capacity,
reduce unit costs, and spread economic risks over
a wider number of markets.
3. Foreign operations can allow firms to establish
low-cost production facilities in locations close to
raw materials and/or cheap labor.

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 ADVANTAGES OF INTERNATIONAL
OPERATIONS
4. Competitors in foreign markets may not exist, or
competition may be less intense than in domestic
markets.
5. Foreign operations may result in reduced tariffs,
lower taxes, and favorable political treatment.
6. Joint ventures can enable firms to learn the
technology, culture, and business practices of other
people and to make contacts with potential
customers, suppliers, creditors, and distributors in
foreign countries.
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ADVANTAGES OF INTERNATIONAL
OPERATIONS

7. Economies of scale can be achieved from

operation in global rather than solely domestic
markets.
8. A firm’s power and prestige in domestic
markets may be significantly enhanced if the
firm competes globally.

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DISADVANTAGES OF
INTERNATIONAL OPERATIONS

1. Foreign operations could be seized by nationalistic

factions.
2. Firms confront different social, cultural,
demographic, environmental, political,
governmental, legal, technological, economic, and
competitive forces when doing business
internationally.
3. Weaknesses of competitors in foreign lands are
often overestimated, and strengths are often
underestimated.
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DISADVANTAGES OF
INTERNATIONAL OPERATIONS
4. Language, culture, and value systems differ
among countries, which can create barriers to
communication and problems managing people.
5. Gaining an understanding of regional
organizations is often required in doing business
internationally.
6. Dealing with two or more monetary systems can
complicate international business operations.

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THE GLOBAL CHALLENGE

► America’s economy is becoming much less

American.
► A world economy and monetary system are
emerging.
► Markets are shifting rapidly and in many
cases converging in tastes, trends, and
prices.

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GLOBALIZATION

► Globalization
► process of doing business worldwide, so
strategic decisions are made based on global
profitability of the firm rather than just domestic
considerations

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GLOBALIZATION

► Global strategy
► includes designing, producing, and marketing
products with global needs in mind, instead of
considering individual countries alone
► integrates actions against competitors into a
worldwide plan

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CORPORATE TAX RATES ACROSS
COUNTRIES IN 2012

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CULTURAL PITFALLS THAT MAY HELP YOU
BE A BETTER MANAGER

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CULTURAL DIFFERENCES
BETWEEN U.S. AND FOREIGN
MANAGERS
► Americans place an exceptionally high priority on
time, viewing time as an asset. Many foreigners
place more worth on relationships.

► Personal touching and distance norms differ

around the world. Americans generally stand
about three feet from each other when carrying on
business conversations, but Arabs and Africans
stand about one foot apart.
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CULTURAL DIFFERENCES
BETWEEN U.S. AND FOREIGN
MANAGERS
► Family roles and relationships vary in different
countries.
► Business and daily life in some societies are
governed by religious factors.
► Time spent with the family and the quality of
relationships are more important in some cultures
than the personal achievement and
accomplishments espoused by the traditional U.S.
manager. 2-21
CULTURAL DIFFERENCES
BETWEEN U.S. AND FOREIGN
MANAGERS
► Many cultures around the world value modesty,
team spirit, collectivity, and patience much more
than competitiveness and individualism, which are
so important in the United States.
► Punctuality is a valued personal trait when
conducting business in the United States, but it is
not revered in many of the world’s societies.
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CULTURAL DIFFERENCES
BETWEEN U.S. AND FOREIGN
MANAGERS
► Toprevent social blunders when meeting with
managers from other lands, one must learn and
respect the rules of etiquette of others.

► Americans often do business with individuals

they do not know, unlike businesspersons in
many other cultures.
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COMMUNICATION DIFFERENCES
ACROSS COUNTRIES

► Italians, Germans, and French generally do not

soften up executives with praise before they
criticize. Americans do soften up folks, and this
practice seems manipulative to Europeans.

► Israelis are accustomed to fast-paced meetings

and have little patience for American
informality and small talk.
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COMMUNICATION DIFFERENCES
ACROSS COUNTRIES

► British executives often complain that American

executives chatter too much. Informality,
egalitarianism, and spontaneity from Americans in
business settings jolt many foreigners.
► Europeans feel they are being treated like children
when asked to wear name tags by Americans.
► Executives in India are used to interrupting one
another.
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COMMUNICATION DIFFERENCES
ACROSS COUNTRIES

► When negotiating orally with Malaysian or

Japanese executives, it is appropriate to allow
periodically for a time of silence.
► Refrain from asking foreign managers questions
such as “How was your weekend?” That is intrusive
to foreigners, who tend to regard their business and
private lives as totally separate.

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MEXICO-BUSINESS CULTURE

► Employers seek workers who are agreeable,

respectful, and obedient, rather than
innovative, creative, and independent.

► Mexican employers are paternalistic,

providing workers with more than a
paycheck, but in return they expect
allegiance.
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MEXICO-BUSINESS CULTURE

►Mexicans do not feel compelled to follow

rules that are not associated with a particular
person in authority they work for or know
well.

► Mexicans are very status conscious so

business titles and rank are important.
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JAPAN-BUSINESS CULTURE

► The Japanese place great importance on

group loyalty and consensus, a concept
called Wa.
► When confronted with disturbing questions or
opinions, Japanese managers tend to remain
silent.

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JAPAN-BUSINESS CULTURE

► Most Japanese managers are reserved, quiet,

distant, and introspective, whereas most U.S.
managers are talkative, insensitive, impulsive,
direct, and individual oriented.

► Unlike Americans, Japanese prefer to do business

on the basis of personal relationships rather than
impersonally speaking over the phone or by
written correspondence.
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BRAZIL-BUSINESS CULTURE
► Avoid embarrassing a Brazilian by criticizing
an individual publically. That causes that
person to lose face with all others at a
business meeting.
► Appointments are commonly cancelled or
changed at the last minute in Brazil, so do
not be surprised or get upset.

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GERMANY-BUSINESS CULTURE

► Germans are like Americans in that they do not

need a personal relationship to do business.
They are more interested in a businessperson’s
academic credentials and their company’s
credentials.
► German meetings adhere to strict agendas,
including starting and ending times.
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EGYPT-BUSINESS CULTURE

► Egyptians prefer to do business with those they

know and respect, so expect to spend time
cultivating a personal relationship before
business is conducted.
► In Egypt, business moves at a slow pace and
society is extremely bureaucratic.

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CHINA-BUSINESS CULTURE
► The Chinese rarely do business with companies
or people they do not know. Your position on an
organizational chart is extremely important in
business relationships.
► Arriving late to a meeting is an insult and could
negatively affect your relationship.
► Meetings require patience because mobile
phones ring frequently and conversations tend to
be boisterous.
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INDIA-BUSINESS CULTURE

► People in India do not like to say “no,”

verbally or nonverbally.
► Rather than disappoint you, they often will
say something is not available, or will offer
you the response that they think you want to
hear, or will be vague with you.

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INDIA-BUSINESS CULTURE

► Indians prefer to do business with those whom

they have established a relationship built upon
mutual trust and respect.
► Punctuality is important.

► Indians generally do not trust the legal system

and someone’s word is often sufficient to reach
an agreement.

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SAMPLING OF AFRICAN COUNTRIES—
EASE-OF-DOING-BUSINESS RANKINGS

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SAMPLING OF ASIAN COUNTRIES—EASE-
OF-DOING-BUSINESS RANKINGS

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SAMPLING OF EUROPEAN COUNTRIES—
EASE-OF-DOING-BUSINESS RANKINGS

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SAMPLING OF NORTH AND SOUTH AMERICAN
COUNTRIES—EASE-OF-DOING-BUSINESS
RANKINGS

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