Global Management: Managing Across Borders Chapter Four Global Management: Managing Across Borders

Globalization Globalization trend of the world economy toward becoming a more interdependent system. McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.

B4-2 The Global Economy Global Economy refers to the increasing tendency of economies of the world to interact with one another as one market instead of many national markets. McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.

Megamergers & Minifirms Worldwide B4-3 Megamergers & Minifirms Worldwide Minifirms The Internet and the World Wide Web allow small firms to: Get Started More Easily Maneuver Faster Megamergers The trend in the 1990’s was that mid-sized firms would cross-border: merge with other big companies McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.

International Management B4-4 International Management Multinational corporation: is a business firm with operations in several countries. Multinational organization: is a nonprofit organization with operations in several countries. McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.

You and International Management B4-5 You and International Management You may deal with foreign customers or partners You may deal with foreign suppliers You may work for a foreign firm in the United States You may work for an American firm outside the United States McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.

The Successful International Manager: B4-6 The Successful International Manager: Is: Is Not: Ethnocentric: believe that they are culturally superior. Polycentric: feels native management in native country is best. Geocentric: accepts diversity. McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.

Why Companies Expand Internationally B4-7 Why Companies Expand Internationally Availability of supplies New markets Lower labor costs Access to finance capital Avoidance of tariffs & import quotas McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.

How Companies Expand Internationally B4-8 Panel 4.1 How Companies Expand Internationally Global Outsourcing Importing, exporting, & countertrading Licensing & franchising Joint ventures Wholly owned subsidiaries Highest risk & invest-ment Lowest risk & investment McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.

Principle Economic Systems B4-9 Principle Economic Systems Free Market Economy: the production of goods and services are controlled by private enterprise and the interaction of forces of supply and demand, rather than by the government. Command Economy: or central-planning economy the government owns most businesses and regulates the amounts, types, and prices of goods and services. Mixed Economy: most of the important industries are owned by the government, but others are controlled by private enterprise. Privatization state-owned businesses were sold off to private enterprise McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.

Infrastructure & Resources B4-10 Infrastructure & Resources Infrastructure: consists of the physical facilities that form the basis for its level of economic development. Exchange Rate: is the rate at which one country’s currency can be exchanged for another country’s currency. McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.

B4-11 Government Systems Democratic: rely on free elections and representative assemblies. Totalitarian ruled by a dictator, a single political party, or a special-membership group. McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.

Political Legal Differences B4-12 Political Legal Differences Instability: Seen in: Riots Civil disorders Revolutions or changes in government Expropriation: is a government’s seizure of a foreign companies assets. McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.

Political Legal Differences (Cont.) B4-13 Political Legal Differences (Cont.) Foreign Corrupt Practices Act of 1977: which makes it illegal for employees of the U.S. companies to bribe political decision makers in foreign nations. McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.

Barriers to International Trade Trade Protectionism: the use of government regulations to limit the import of goods and services Protectionism Devices: Tariffs Import quotas Embargoes McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.

Organizations Promoting Free Trade B4-15 Organizations Promoting Free Trade The World Trade Organization (WTO) The World Bank The International Monetary Fund (IMF) McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.

Major Trading Blocs Trading Bloc: also known as an economic community, is a group of nations within a geographical region that have agreed to remove trade barriers with each other. NAFTA—North American Free Trade Agreement EU—European Union ASEAN—Association of Southeast Asian Nations Mercosur McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.

B4-17 National Culture National Culture: shared set of beliefs, values, knowledge, and patterns of behavior common to a group of people. McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.

Four Basic Cultural Areas Language Nonverbal Communication Time orientation Religion McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.

Different Norms China: B4-19 Panel 4.2 Different Norms China: Hugging or taking someone’s arm is considered inappropriate. Malaysia: Touching someone casually, especially on the top of the head, is considered impolite. South Korea: Men bow slightly and shake hands sometimes with two hands. Women refrain from shaking hands. Indonesia: Handshaking and head noddings are customary greetings. Japan: Business cards are exchanged before bowing or handshaking. The Philippines: Handshaking and a pat on the back are common greetings. Thailand: Public displays of temper or affection are frowned on. McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.

Key Terms Used in This Chapter Association of Southeast Asian Nations (ASEAN) Command economy Countertrading Culture Democratic governments Developed countries Dumping E-commerce Embargo Ethnocentric managers European Union (EU) Exchange rate Expatriate manager Exporting Foreign Corrupt Practices Act Franchising Free-market economy Free trade Geocentric managers Global economy Global outsourcing Global village Globalization Greenfield venture Import quota McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.

Key Terms Used in This Chapter (Cont.) Importing Infrastructure International Monetary Fund (IMF) Joint venture Less-developed countries Licensing Maquiladoras Mercosur Mixed economy Monochronic time Most favored nation Multinational corporation Multinational organization Nonverbal communication North American Free Trade Agreement (NAFTA) Outsourcing Political risk Polycentric managers Polychronic time Privatization Tariff Totalitarian governments Trade protectionism McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.

Key Terms Used in This Chapter (Cont.) Trading bloc Wholly-owned subsidiary World Bank World Trade Organization (WTO) McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.