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The International Business Environment International management, management of business operations in more than one country The fundamental tasks of business management do not change The basic management functions are the same Greater difficulties and risks when performing these management functions 4

Four Stages of Globalization Domestic stage: market potential is limited to the home country production and marketing facilities located at home International stage: exports increase company usually adopts a multi-domestic approach Multinational stage: marketing and production facilities located in many countries more than 1/3 of its sales outside the home country 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

Stage of Globalization 1. Domestic 2. International 3. Multinational 4. Global Strategic Orientation Domestically Oriented Export- Oriented multi-domestic Multinational Global Stage of Development Initial foreign involvement Competitive positioning Explosion of international operations Global Cultural Sensitivity Of little importance Very important Somewhat important Critically important Manager Assumptions “One best way” “Many good ways” “The least-cost way” “Many good ways” SOURCE: Based on Nancy J. Adler, International Dimensions of Organizational Behavior, 4th ed. (Cincinnati, Ohio: South-Western, 2002), 8-9.

Economic Environment Issues Economic development Infrastructure Resource and product markets Exchange rates Inflation Interest rates Economic growth

Economic Development Countries can be categorized as either “developing” or “developed” Criterion used to classify is per capita income Developing countries have low per capita incomes LDCs are generally located in Asia, Africa, and South America Developed countries include North America, Europe, and Japan Driving global growth is Asia, Eastern Europe, and Latin America

The Legal-Political Concerns Political Risk Loss of assets Loss of earning power Loss of managerial control Government takeovers Acts of violence Laws and Regulations Libel statues Consumer protection Information and labeling Employment safety Wages International Organization Political Instability Riots Revolutions Civil disorders Changes in government

International Trade Agreements Most visible changes in legal-political factors grow out of international trade agreements: GATT WTO EU NAFTA “The World Trade Organization (WTO) is the only global international organization dealing with the rules of trade between nations. The goal is to help producers of goods and services, exporters, and importers conduct their business.”

International Environment 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 Today, 100 member countries abide by the rules Primary tools GATT uses on tariff concessions, countries agree to limit level of tariffs on imports from other GATT members Most favored nation clause

WTO Goal, is to guide and sometimes urge the nations of the world toward free trade and open markets Encompasses GATT and all of its agreements Has legal authority to arbitrate disputes on 400 trade issues Partly responsible for backlash against global trade

European Union Formed in 1958 to improve economic and social conditions Has 15-nation alliance Initiative Europe ’92 called for creation of open markets for Europe’s 340 million consumers Observers fear that the EU will become a trade barrier EU’s monetary revolution, introduction of the Euro Euro is the single European currency that replaced 11 national currencies Eventually replace up to 15 domestic currencies

Fifteen Nations of The EU

North American Free Trade Agreement Went into effect on January 1, 1994 Merged the United States, Canada, and Mexico with more that 360 million consumers Breaks down tariffs and trade restrictions on most agriculture and manufactured products August 12, 1992 agreements in number of key areas include: agriculture, autos, transport, & intellectual property

Four Dimensions of National Value System

International Cultural Influences Language Religion Attitudes Social Organization Education

Strategies for Entering International Markets High Greenfield Venture Acquisition Joint Venture Ownership of Foreign Operations Franchising Licensing Exporting Low Low Cost to Enter Foreign Operations High

Managing in a Global Environment 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