Managing in a Global Environment

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.

Why the Need for a Global Strategy Business is becoming a unified global field. For many, domestic markets are saturated. 4

Principles of International Business Always show respect and listen, don’t be in a hurry. Try to gain an appreciation for the differences between Hofsede’s “masculine” and “feminine” cultures. Do not feel your way is the best way. Emphasize points of agreement. Discern the perceived definitions of words. Save face as well as giving face. Don’t embarrass anyone in front of others Know or take someone who knows the culture. Understand that leadership may mean different things to different countries. Don’t lose your temper. Avoid clique-building. Always show respect. Leave the American task oriented, fast paced style at home Eliminate stereotypes. Be sensitive to the difference between low context culture and high context cultures Learn to tolerate a high degree of unpredictability.

Key Factors in the International Environment Legal-Political Political risk Laws, restrictions Government takeovers Tariffs, quotas, taxes Terrorism, political instability Key Factors in the International Environment Economic Economic development Resource & product markets Per capita income Infrastructure Exchange rates Economic conditions Organization Sociocultural Social values, beliefs Language Religion (objects, taboos, holidays) Kinship patterns Formal education, literacy Time orientation

The Economic Environment Includes such factors as: economic development. Infrastructure. resource and product markets. exchange rates. inflation, interest rates, and economic growth.

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. most visible changes in legal-political factors grow out of international trade agreements (GATT, EU, NAFTA).

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. Today, 100 member countries abide by the rules. 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.

European Union European Union (EU) Formed in 1958 to improve economic and social conditions. Has 15-nation alliance. EU’s monetary revolution, introduction of the Euro. Euro is the single European currency that replaced 11 national currencies.

Fifteen Nations Within the EU

North American Free Trade Agreement North American Free Trade Agreement (NAFTA) 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 and manufactured products.

Trade Alliances: Promise or Pitfall? Will trade blocs evolve into three powerful trading blocs? Will trade blocs lead to economic warfare? Only the future will answer these questions. Will stateless corporations bypass trading zones?

Sociocultural Environment Includes shared: knowledge. beliefs values common modes of behavior common ways of thinking

Dimensions of Social Value Systems Power distance. Uncertainty avoidance. Individualism & collectivism. Masculinity/femininity. Long term versus short term orientation.

Additional Cultural Influences for International Organizations Consideration 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 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

Two Keys When Operating Internationally Personal learning. Personal growth.