Management, 7e Schermerhorn Prepared by Michael K. McCuddy Valparaiso University John Wiley & Sons, Inc

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Schermerhorn Chapter 53 Chapter 5 Global Dimensions of Management  Planning ahead—study questions –What are the management challenges of globalization? –What are the forms and opportunities of international business? –What are multinational corporations and what do they do? –How does culture create global diversity? –How do management practices and learning transfer across cultures?

Schermerhorn Chapter 54 What are the management challenges of globalization?  Modern managers operate in a complex global arena: –Resource supplies, product markets, and business competition are global in nature. –There is a growing interdependence of supplies, markets, and competition. –Global managers must think and act globally.

Schermerhorn Chapter 55 What are the management challenges of globalization?  Europe –European Union (EU) Grouping of 15 Western European countries that agreed to support mutual economic growth Expected to expand to at least 25 members

Schermerhorn Chapter 56 What are the management challenges of globalization?  The Americas –North American Free Trade Agreement (NAFTA) Agreement for free flow of goods and services between the U.S., Canada, and Mexico –Free Trade of the Americas (FTAA)—Alaska to Chile—is a possibility

Schermerhorn Chapter 57 What are the management challenges of globalization?  Asian and the Pacific Rim –Rivals EU in size and is growing –Economic power of Japan and China –Asia-Pacific Economic Cooperation (APEC) is a growing regional economic alliance –Human rights and intellectual property issues

Schermerhorn Chapter 58 What are the management challenges of globalization?  Africa –Beckons international business –Increased attention to stable countries –South African Development Community (SADC) links 12 countries in trade and economic development

Schermerhorn Chapter 59 What are the forms and opportunities of international business?  Reasons for engaging in international business: – Profits – Customers – Suppliers – Capital – Labor

Schermerhorn Chapter 510 What are the forms and opportunities of international business?  Market entry strategies involve the sale of goods or services to foreign markets but do not require expensive investments.  Types of market entry strategies: – Global sourcing –Exporting –Importing –Licensing agreement –Franchising

Schermerhorn Chapter 511 What are the forms and opportunities of international business?  Direct investment strategies require major capital commitments but create rights of ownership and control over foreign operations.  Types of direct investment strategies: – Joint ventures –Wholly owned subsidiaries

Schermerhorn Chapter 512 What are multinational corporations and what do they do?  A multinational corporation (MNC) is a business with extensive international operations in more than one country.

Schermerhorn Chapter 513 What are multinational corporations and what do they do?  Types of multinational corporations: –Ethnocentric MNC Exerts strict control over foreign operations –Polycentric MNC Gives foreign operations more freedom to operate as separate entities –Geocentric MNC Seeks total integration of global operations

Schermerhorn Chapter 514 What are multinational corporations and what do they do?  Mutual benefits for host country and MNC: –Shared growth opportunities –Shared income opportunities –Shared learning opportunities –Shared development opportunities

Schermerhorn Chapter 515 What are multinational corporations and what do they do?  Host country complaints about MNCs: –Excessive profits –Domination of local economy –Interference with local government –Hiring the best local talent –Limited technology transfer –Disrespect for local customs

Schermerhorn Chapter 516 What are multinational corporations and what do they do?  MNC complaints about host countries: –Profit limitations –Overpriced resources –Exploitative rules –Foreign exchange restrictions –Failure to uphold contracts

Schermerhorn Chapter 517 What are multinational corporations and what do they do?  Ethical issues for MNCs: –Corruption—illegal practices that further one’s business interests. –Sweatshops—employing workers at low wages, for long hours and in poor working conditions. –Child labor—full-time employment of children for work otherwise done by adults. –Sustainable development—meeting current needs without compromising future needs. –ISO 14000—responsible environmental policies.

Schermerhorn Chapter 518 How does culture create global diversity?  Culture – The shared set of beliefs, values, and patterns of behavior common to a group of people.  Culture shock –Confusion and discomfort a person experiences in an unfamiliar culture.  Ethnocentrism –Tendency to consider one’s own culture as superior to all others.

Schermerhorn Chapter 519 How does culture create global diversity?  Popular dimensions of culture: –Language Low-context cultures and high-context cultures –Use of space –Time orientation Monochronic cultures and polychronic cultures –Religion –Role of contracts

Schermerhorn Chapter 520 How does culture create global diversity?  Values and national cultures (Hofstede): –Power distance –Uncertainty avoidance –Individualism-collectivism –Masculinity-femininity –Time orientation

Schermerhorn Chapter 521 How does culture create global diversity?  Understanding cultural differences (Trompenaars): –Relationships with people: Universalism versus particularism Individualism versus collectivism Neutral versus affective Specific versus diffuse Achievement versus prescription –Attitudes toward time—sequential and synchronic views. –Attitudes toward environment—inner-directed and outer-directed cultures.

Schermerhorn Chapter 522 How do management practices and learning transfer across cultures?  Comparative management –How management systematically differs among countries and/or cultures.  Global managers –Need to apply management functions across international boundaries.

Schermerhorn Chapter 523 How do management practices and learning transfer across cultures?  Planning and controlling: – Complexity of international operating environment –Political risk  Organizing and leading: –Multinational organization structures Multinational geographic structure Multinational product structure –Staffing international operations Competent locals Expatriates

Schermerhorn Chapter 524 How do management practices and learning transfer across cultures?  Are management theories universal? –U.S. management theories may be ethnocentric. Participation and individual performance are not emphasized as much in other cultures. – Not all Japanese management practices can be applied successfully abroad. Lifetime employment, job rotation and broad career experience, shared information, collective decision-making, and quality emphasis. Keiretsu—long-term alliances for attaining common interests.

Schermerhorn Chapter 525 How do management practices and learning transfer across cultures?  Global organizational learning: –Companies can and should learn from each other. –Caution should be exercised in transferring management practices. –Cultural awareness facilitates more informed transfers of management practices.