Managing in a Global
Environment
Learning Outcomes
After studying this chapter, you should be able to:
◉ Define globalization and explain how it is creating a borderless world for
today’s managers
◉ Describe a global mindset and why it has become imperative for companies
operating internationally
◉ Describe the characteristics of a multinational corporation
◉ Indicate how dissimilarities in the economic, sociocultural, and legal
political environments throughout the world can affect business operations.
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Nearly 70 percent of executives and management professionals
say that developing global competencies and cultural differences
are very important or extremely important to the future success of
their companies
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Globalization
◉ Globalization refers to the extent to which trade and
investments, information, social and cultural ideas, and political
cooperation flow between countries
◉ Globalization has been on the rise since the 1970s, and most
industrialized nations show a high degree of globalization today
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Developing a Global Mindset
◉ A global mindset can be defined as the ability of managers to appreciate and
influence individuals, groups, organizations, and systems that represent
different social, cultural, political, institutional, intellectual, and psychological
characteristics
◉ Succeeding on a global level requires more than a desire to go global
◉ A manager with a global mindset can perceive and respond to many different
perspectives at the same time
◉ A global mindset requires skills, understanding, and competencies in three
dimensions
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Dimensions of Global Mindset
◉ Cognitive dimension means knowing about the global environment and global
business, mentally understanding how cultures differ, and having the ability to interpret
complex global changes.
◉ Psychological dimension is the emotional and affective aspect. This includes a
liking for diverse ways of thinking and acting, a willingness to take risks, and the
energy and self-confidence to deal with the unpredictable and uncertain.
◉ Social dimension concerns the ability to behave in ways that build trusting
relationships with people who are different from oneself
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How do people expand their global mindset ?
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Expanding Global Mindset
Managers expand globally in two ways—by both thinking and
doing.
◉ Learning by thinking requires a genuine curiosity about
other people and cultures
◉ Learning by doing means cultivating relationships with
people across cultural and national boundaries
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Multinational Corporations
◉ A broad term that refers to any and all types of international
companies that maintain operations in multiple countries
◉ A multinational corporation (MNC) typically receives more
than 25 percent of its total sales revenues from operations
outside the parent’s home country
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Characteristics of Multinational Corporations
An MNC also has the following distinctive managerial characteristics:
◉ An MNC is managed as an integrated worldwide business system in
which foreign affiliates act in close alliance and cooperation with
one another
◉ An MNC is ultimately controlled by a single management authority
that makes key strategic decisions relating to the parent and all
affiliates
◉ MNC top managers are presumed to exercise a global perspective
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MNC management philosophy
◉ Ethnocentric companies, which place emphasis on their
home countries
◉ Polycentric companies, which are oriented toward the
markets of individual foreign host countries
◉ Geocentric companies which are truly world-oriented
and favor no specific country
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The International Business Environment
◉ International management is the management of business operations
conducted in more than one country.
◉ The fundamental tasks of business management do not change in any
substantive way when a firm is transacting business across international
borders
◉ The basic management functions of planning, organizing, leading, and
controlling are the same whether a company operates domestically or
internationally.
◉ However, managers will experience greater difficulties and risks when
performing these management functions on an international scale.
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What should managers of emerging global companies look for to
avoid making obvious international mistakes?
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The Economic Environment
◉ The economic environment represents the economic conditions in the
country where the international organization operates
◉ Economic development differs widely among the countries and regions of
the world.
◉ Countries can be categorized as either developing or developed.
◉ Developing countries are referred to as less-developed countries (LDCs).
◉ The criterion traditionally used to classify countries as developed or
developing is per-capita income, which is the income generated by the
nation’s production of goods and services divided by total population.
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The Legal-Political Environment
◉ Differing laws and regulations make doing business a challenge for
international firms
◉ International managers must learn these rules and regulations and
abide by them.
◉ In addition, managers must deal with unfamiliar political systems
when they go international, as well as with more government
supervision and regulation
◉ Political risk is defined as the risk of loss of assets, earning power,
or managerial control due to politically based events or actions by
host governments 17
The Sociocultural Environment
◉ A nation’s culture includes the shared knowledge, beliefs, and
values, as well as the common modes of behavior and ways of
thinking among members of a society.
◉ Cultural factors sometimes can be more perplexing than
political and economic factors when working or living in a
foreign country.
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Hofstede’s Value Dimensions
1. Power distance. High power distance means that people accept inequality in power among
institutions, organizations, and people. Low power distance means that people expect
equality in power
2. Uncertainty avoidance. High uncertainty avoidance means that members of a society feel
uncomfortable with uncertainty and ambiguity and thus support beliefs that promise certainty
and conformity. Low uncertainty avoidance means that people have great tolerance for the
unstructured, the unclear, and the unpredictable
3. Individualism and collectivism. Individualism reflects a value for a loosely knit social
framework in which individuals are expected to take care of themselves. Collectivism means
a preference for a tightly knit social framework
4. Masculinity/femininity. Masculinity stands for preference for achievement, heroism,
assertiveness, work centrality (with resultant high stress), and material success. Femininity
reflects the values of relationships, cooperation, group decision making
5. Long-term orientation, includes a greater concern for the future and highly values thrift and
perseverance. A short-term orientation, is more concerned with the past and the present and
places a high value on tradition and meeting social obligations 19
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Let’s review some concepts
◉ Globalization refers to the extent to To succeed on a global level requires managers at all levels to have a
which trade and investments, global mindset, which is the ability to appreciate and influence
information, social and cultural ideas, individuals, groups, organizations, and systems that represent different
and political cooperation flow between social, cultural, political, institutional, intellectual, and psychological
countries characteristics
Managers must understand and
follow the differing laws and
regulations in the various countries
A multinational corporation (MNC) is an Countries vary widely in terms of where they do business
organization that receives more than 25 percent of economic development and are
its total sales revenues from operations outside classified as either developed
the parent company’s home country and has a countries or less-developed
number of distinctive managerial characteristics. countries (LDCs).
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