© 2006 by South-Western, a division of Thomson Learning. All rights reserved. 3-1 Managing in a Global Environment Chapter 3

© 2006 by South-Western, a division of Thomson Learning. All rights reserved. 3-2 Learning Objectives 1. Describe the emerging borderless world. 2. Define international management and explain how it differs from the management of domestic business operations. 3. Indicate how dissimilarities in the economic, sociocultural, and legal-political environments throughout the world can affect business operations. 4. Describe market entry strategies that businesses use to develop foreign markets. 5. Describe the characteristics of a multinational corporation. 6. Explain the challenges of managing in a global environment.

© 2006 by South-Western, a division of Thomson Learning. All rights reserved. 3-3 Four Stages of Globalization Domestic stage market potential is limited to the home country. production and marketing facilities located at home..

© 2006 by South-Western, a division of Thomson Learning. All rights reserved. 3-4 Four Stages of Globalization (contd.) International stage exports increase. company usually adopts a multi-domestic approach.

© 2006 by South-Western, a division of Thomson Learning. All rights reserved. 3-5 Four Stages of Globalization (contd.) Multinational stage marketing and production facilities located in many countries. more than 1/3 of its sales outside the home country.

© 2006 by South-Western, a division of Thomson Learning. All rights reserved. 3-6 Four Stages of Globalization (contd.) Global (or stateless) stage making sales and acquiring resources in whatever country offers the best deal. ownership, control, and top management tend to be dispersed.

© 2006 by South-Western, a division of Thomson Learning. All rights reserved. 3-7 Why the Need for a Global Strategy Business is becoming a unified global field. For many, domestic markets are saturated.

© 2006 by South-Western, a division of Thomson Learning. All rights reserved. 3-8 Principles of International Business Relations 1. Always show respect and listen, dont be in a hurry. 2. Try to gain an appreciation for the differences between Hofsedes masculine and feminine cultures. 3. Do not feel your way is the best way. 4. Emphasize points of agreement. 5. Discern the perceived definitions of words. 6. Save face as well as giving face. 7. Dont embarrass anyone in front of others. 8. Know or take someone who knows the culture.

© 2006 by South-Western, a division of Thomson Learning. All rights reserved. 3-9 Principles of International Business Relations (contd.) 9. Understand that leadership may mean different things to different countries. 10. Dont lose your temper. 11. Avoid clique-building. 12. Always show respect. 13. Leave the American task oriented, fast paced style at home. 14. Eliminate stereotypes. 15. Be sensitive to the difference between low context culture and high context cultures. 16. Learn to tolerate a high degree of unpredictability.

© 2006 by South-Western, a division of Thomson Learning. All rights reserved Organization Sociocultural Social values, beliefs Language Religion (objects, taboos, holidays) Kinship patterns Formal education, literacy Time orientation Legal-Political Political risk Laws, restrictions Government takeovers Tariffs, quotas, taxes Terrorism, political instability Economic Economic development Resource & product markets Per capita income Infrastructure Exchange rates Economic conditions Ex. 3.2 Key Factors in the International Environment

© 2006 by South-Western, a division of Thomson Learning. All rights reserved The Economic Environment Includes such factors as: economic development. Infrastructure. resource and product markets. exchange rates. inflation, interest rates, and economic growth.

© 2006 by South-Western, a division of Thomson Learning. All rights reserved Legal-Political Environment Political Risk risk of loss of assets, earning power, or managerial control. Political Instability includes government takeovers, civil disorders. Laws and Regulations laws and regulations differ from country to country.

© 2006 by South-Western, a division of Thomson Learning. All rights reserved Sociocultural Environment Includes shared: knowledge beliefs values common modes of behavior common ways of thinking

© 2006 by South-Western, a division of Thomson Learning. All rights reserved Dimensions of Social Value Systems Power distance. Uncertainty avoidance. Individualism & collectivism. Masculinity/femininity. Long term versus short term orientation.

© 2006 by South-Western, a division of Thomson Learning. All rights reserved GLOBE Project Value Dimensions Assertiveness Future orientation Uncertainty avoidance Gender differentiation Power distance Societal collectivism Individual collectivism Performance orientation Humane orientation

© 2006 by South-Western, a division of Thomson Learning. All rights reserved Additional Cultural Influences for International Organizations Consideration Language Religion Attitudes Social organization Education

© 2006 by South-Western, a division of Thomson Learning. All rights reserved GATT General Agreement on Tariffs and Trade (GATT) Signed by 23 nations in 1947 as a set or rules. Ensured nondiscrimination, clear procedures, negotiation of disputes, and participation of lesser developed countries in international trade. Primary tools GATT successor, WTO. tariff concessions, countries agree to limit level of tariffs on imports from other members. most favored nation clause. Overall goal: closer relationships among member nations. help operate the global marketplace more efficiently.

© 2006 by South-Western, a division of Thomson Learning. All rights reserved European Union European Union (EU) Formed in 1957 to improve economic and social conditions. Has 25-nation alliance. EUs monetary revolution, introduction of the Euro. Euro is the single European currency that replaced 12 national currencies.

© 2006 by South-Western, a division of Thomson Learning. All rights reserved North American Free Trade Agreement North American Free Trade Agreement (NAFTA) went into effect on January 1, merged the United States, Canada, and Mexico with more that 421 million consumers. breaks down tariffs and trade restrictions on most agriculture and manufactured products.

© 2006 by South-Western, a division of Thomson Learning. All rights reserved Market Entry Strategies … represent alternative ways to sell products and services in foreign markets.

© 2006 by South-Western, a division of Thomson Learning. All rights reserved Outsourcing … to seek cheaper sources of supply offshore. … to seek cheaper sources of supply offshore.

© 2006 by South-Western, a division of Thomson Learning. All rights reserved Ex. 3.6 Strategies for Entering International Markets Greenfield Venture Acquisition Joint Venture Franchising Licensing Exporting High Low Ownership of Foreign Operations Cost to Enter Foreign Operations

© 2006 by South-Western, a division of Thomson Learning. All rights reserved Managing Cross Culturally Managers must be sensitive to cultural subtleties in: leadership decision making motivation control must be culturally flexible and easily adapt to new situations cannot be ethnocentric Culture Shock may lead to frustration and anxiety