Managing in the Global Environment Chapter 6

Global Organizations and the Environment Global Organization An organization that operates and competes in more than one country International companies and Global companies Uncertain and unpredictable environments 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.

Apple’s Global Supply Chain

Nutella’s Global Supply Chain

Forces in the Global Environment

Global Outsourcing The purchase or production of inputs or final products from overseas suppliers to lower costs and improve product quality or design. Offshoring Reshoring The recent trend to bring manufacturing and jobs back to the United States business/ business/ vs

World Compensation Bureau of Labor Statistics, 2013

Productivity versus Wages in the United States

Vacation Day Comparison

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

Barriers to Entry and Competition

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.

Principal Forms of Capital that Flow Between Countries Human capital Financial capital Resource capital Political capital

Declining Barriers to Trade and Investment Protectionism Tariff A tax that government imposes on imported or, occasionally, exported goods. Intended to protect domestic industry and jobs from foreign competition Nontariff barriers Quotas Voluntary export restraints Government import standard Subsidies

The European Union The EU and the next seven largest economies in the world by nominal GDP. (IMF, 2009) [105]IMF [105]

The Power of NAFTA

The Power of China??? U.S.-China Trade Facts U.S. goods and services trade with China totaled $539 billion in Exports totaled $129 billion; Imports totaled $411 billion. The U.S. goods and services trade deficit with China was $282 billion in U.S. foreign direct investment (FDI) in China (stock) was $60.5 billion in 2010 (latest data available), a 21.4% increase from While these numbers seem large, the U.S. nominal GDP was estimated to be over $15 trillion in 2011.

Tariffs – US vs. Them

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 The United States International Trade Commission is an “independent, quasi-judicial Federal agency with broad investigative responsibilities on matters of trade.”United States International Trade Commission

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.

Legal and Political Challenges Regulation and deregulation Privatization Changing political parties Anti monopoly rulings International Agreements

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.

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.

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

Hofstede’s Framework for Assessing Cultures Culture Individualism versus Collectivism Power Distance Uncertainty Avoidance Achievement versus Nurturing Long-Term versus Short-Term Orientation

Hofstede on the Internet - hofstede.com/ hofstede.com/

Hofstede’s Five Dimensions of National Culture (1) Individualistic — people look after their own and family interests Collectivistic — people expect group to look after and protect them Individualistic Collectivistic United States, Canada Japan Mexico, Thailand Australia (2) High power distance—Accepts wide differences in power, great deal of respect for those in authority Low power distance—Plays down inequalities: employees are not afraid to approach nor are in awe of the boss High power distance Low power distance Mexico, Singapore, Italy, Japan United States, Sweden

Hofstede’s Five Dimensions of National Culture (3) High uncertainty avoidance—Threatened with ambiguity and experience high levels of anxiety Low uncertainty avoidance— Comfortable with risks; tolerant of different behavior and opinions High uncertainty avoidanceLow uncertainty avoidance Italy, Mexico, France United Kingdom Canada, United States, Singapore (4) Achievement—Values such as assertiveness, acquiring money and goods, and competition prevail Nurturing—Values such as relationships and concern for others prevail Achievement Nurturing United States, Japan, Canada, Greece France, Sweden Mexico

Hofstede’s Five Dimensions of National Culture (5) Long-term orientation—People look to the future and value thrift and persistence Short-term orientation — People value tradition and the past Short-term thinking Long-term thinking Germany, Australia, China, Taiwan, Japan United States, Canada

Managing in a Global Environment Expatriates: Employees who work on overseas assignments Challenges Expatriate success rates for U.S. employees are low. Different management styles Dealing with cultural diversity; culture shock Advantages Access to key skills Innovation Training