Managing in a Global Environment Chapter 4 Managing in a Global Environment

A Borderless World Organizations and managers are not isolated from international forces: Trade barriers have fallen Communication is faster, cheaper Consumer tastes converge The difficulties and risks of a borderless world are matched by benefits and opportunities Copyright ©2012 by South-Western, a division of Cengage Learning. All rights reserved.

4.1 Ranking of Six Countries on the Global Index Copyright ©2012 by South-Western, a division of Cengage Learning. All rights reserved.

4.2 Four Stages of Globalization Copyright ©2012 by South-Western, a division of Cengage Learning. All rights reserved.

International Market Strategies Exporting – transferring products for sale to foreign countries Outsourcing – also called off shoring, work activities are done in countries with cheap labor Licensing – enabling a company to produce and market a product in another country Franchising is licensing that provides a complete package of materials and services Direct Investing – high level of involvement, company manages and controls assets Joint venture and other types of partnerships are common Copyright ©2012 by South-Western, a division of Cengage Learning. All rights reserved.

4.3 Strategies for Entering the International Arena Copyright ©2012 by South-Western, a division of Cengage Learning. All rights reserved.

China Inc. China manufacturers many products for U.S. companies China is also a growing consumer market Regulations and government policies make doing business in China a challenge India is a service giant, growing in software design and engineering Brazil is a country that is gaining the attention of American managers Copyright ©2012 by South-Western, a division of Cengage Learning. All rights reserved.

The International Business Environment Planning, organizing, leading, and controlling in multiple countries can be challenging It took McDonalds a year to figure out that Hindus in India do not eat beef In Africa, the baby food includes pictures to aid illiterate consumers Managers must be mindful in the global marketplace Copyright ©2012 by South-Western, a division of Cengage Learning. All rights reserved.

4.4 Key Factors in International Environment Copyright ©2012 by South-Western, a division of Cengage Learning. All rights reserved.

The Economic Environment Economic Development - Countries are categorized as either developed or developing based on per capita income Government Policies Market Size Financial Markets Infrastructure Resource and Product Markets Companies must evaluate market demand The current economic crisis has highlighted how interconnected economies are around the world Copyright ©2012 by South-Western, a division of Cengage Learning. All rights reserved.

4.5 World Economic Forum Global Competitiveness The United States moved from #1 to #2! Copyright ©2012 by South-Western, a division of Cengage Learning. All rights reserved.

4.6 How Countries are Bearing the Economic Crisis Copyright ©2012 by South-Western, a division of Cengage Learning. All rights reserved.

The Legal-Political Environment Political risk is defined as the risk of lost assets, earning power, or managerial control Managers must be concerned with the political instability of global markets Copyright ©2012 by South-Western, a division of Cengage Learning. All rights reserved.

The Sociocultural Environment The values and behaviors that govern U.S. business do not always translate Social Values Communication Differences Other Cultural Characteristics Language Religion Social organization Education Attitudes Copyright ©2012 by South-Western, a division of Cengage Learning. All rights reserved.

Hofstede’s Value Dimensions Power Distance Uncertainty Avoidance Individualism and Collectivism Masculinity and Felinity Copyright ©2012 by South-Western, a division of Cengage Learning. All rights reserved.

GLOBE Project Value Dimensions Assertiveness Future orientation Uncertainty avoidance Gender differentiation Power distance Social collectivism Individual collectivism Performance orientation Humane orientation Copyright ©2012 by South-Western, a division of Cengage Learning. All rights reserved.

4.7 Country Ranking on Four GLOBE Value Dimensions Copyright ©2012 by South-Western, a division of Cengage Learning. All rights reserved.

4.8 Country Ranking on Selected GLOBE Value Dimensions Copyright ©2012 by South-Western, a division of Cengage Learning. All rights reserved.

4.9 High-Context and Low-Context Cultures Copyright ©2012 by South-Western, a division of Cengage Learning. All rights reserved.

Developing Cultural Intelligence Cultural intelligence – ability to use reasoning and observation skills Culturally flexible Adapt to new situations Managers must study the language and learn Cognitive, emotional, and physical intelligence Copyright ©2012 by South-Western, a division of Cengage Learning. All rights reserved.

International Trade Alliances General Agreement on Tariff and Trade (GATT) 23 nations in 1947, a set of rules for fair trade World Trade Organization (WTO) Maturation of GATT into permanent global institute European Union 1957 Alliance to improve economic and social conditions among members; evolved to 27-nation European Union North American Free Trade Agreement (NAFTA) Merged the United States, Canada, and Mexico into trading bloc Copyright ©2012 by South-Western, a division of Cengage Learning. All rights reserved.

4.10 European Union Copyright ©2012 by South-Western, a division of Cengage Learning. All rights reserved.

China-ASEAN Free Trade Area Trading alliance of ten countries World’s third largest free-trade area 1.9 billion people and $45 trillion in trade Remove all tariffs between China and ASEAN countries by 2015 Copyright ©2012 by South-Western, a division of Cengage Learning. All rights reserved.

The Impact of Multinational Corporations (MNC) The size and volume of international business is LARGE Companies have revenue = GDP of small country Move assets from country to country 25% or more of its profit comes from outside parent country MNC is managed as an integrated whole Controlled by one management authority MNC managers must have a global perspective Copyright ©2012 by South-Western, a division of Cengage Learning. All rights reserved.

The Globalization Backlash 68% of Americans say other countries benefit the most from free trade 53% believe free trade has hurt U.S. The United States’ primary concern is the loss of jobs $136 billion in wages will shift from the U.S. Business leaders insist that economic benefits flow back to the U.S. economy Lower prices and expanded markets Increased profits and funds for innovation But American shoppers say they would pay higher prices to keep down foreign competition Copyright ©2012 by South-Western, a division of Cengage Learning. All rights reserved.

Serving the Bottom of the Pyramid (BOP) An approach for multinationals to do good Corporations can alleviate problems and make large profits by selling to the world’s poor There are more than 4 billion people at the lowest level of the economic pyramid Many companies are adopting BOP strategies Copyright ©2012 by South-Western, a division of Cengage Learning. All rights reserved.