PowerPoint Presentation to Accompany Chapter 5 of Management Fundamentals Canadian Edition Schermerhorn  Wright Prepared by: Michael K. McCuddy Adapted by: Lynda Anstett & Lorie Guest Published by: John Wiley & Sons Canada, Ltd.

Planning Ahead — Chapter 5 Study Questions What are the international management challenges of globalization? What are the forms and opportunities of international business? What are multinational corporations and what do they do? What is culture and how does it relate to global diversity? How do management practices and learning transfer across cultures? Management Fundamentals - Chapter 5

Management Fundamentals - Chapter 5 Study Question 1: What are the international management challenges of globalization? Key concepts in the challenges of globalization: Global economy Globalization International management Global manager Management Fundamentals - Chapter 5

Management Fundamentals - Chapter 5 Study Question 1: What are the international management challenges of globalization? Europe European Union (EU) Political and economic alliance European countries that agreed to support mutual economic growth Expanding to at 22 member countries with 375 million consumers Management Fundamentals - Chapter 5

Management Fundamentals - Chapter 5 Study Question 1: What are the international management challenges of globalization? The Americas North American Free Trade Agreement (NAFTA) Agreement for free flow of goods and services between the Canada, Mexico, and United States Free Trade of the Americas (FTAA) — Alaska to Chile — is a possibility Management Fundamentals - Chapter 5

Management Fundamentals - Chapter 5 Study Question 1: What are the international management challenges of globalization? Asia and the Pacific Rim Economic power of China and Japan Growth in other Pacific Rim countries Asian countries represent a third of the global marketplace Management Fundamentals - Chapter 5

Management Fundamentals - Chapter 5 Study Question 1: What are the international management challenges of globalization? Africa Increased attention to stable countries Beckons international business South African Development Community (SADC) links 14 countries in trade and economic development Management Fundamentals - Chapter 5

Figure 5.1 Africa, continent of opportunity. Management Fundamentals - Chapter 5

Management Fundamentals - Chapter 5 Study Question 2: What are the forms and opportunities of international business? Reasons for engaging in international business: Profits Customers Suppliers Capital Labor Management Fundamentals - Chapter 5

Management Fundamentals - Chapter 5 Study Question 2: 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 Management Fundamentals - Chapter 5

Management Fundamentals - Chapter 5 Figure 5.2 Common forms of international business—from market entry to direct investment strategies. Management Fundamentals - Chapter 5

Management Fundamentals - Chapter 5 Study Question 2: 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 Foreign subsidiaries Management Fundamentals - Chapter 5

Management Fundamentals - Chapter 5 Study Question 2: What are the forms and opportunities of international business? Criteria for choosing a joint venture partner: Familiarity with your firm’s major business. Strong local workforce. Future expansion possibilities. Strong local market for partner’s own products. Good profit potential. Sound financial standing. Management Fundamentals - Chapter 5

Management Fundamentals - Chapter 5 Study Question 2: What are the forms and opportunities of international business? Complications in the global business environment: Environment is complex, dynamic, and highly competitive. Global business executives must deal with differences in the environment of business in different countries. World Trade Organization resolves trade and tariff disputes among countries. Protectionism can complicate global trading relationships. Management Fundamentals - Chapter 5

Management Fundamentals - Chapter 5 Study Question 3: What are multinational corporations and what do they do? A multinational corporation (MNC) is a business with extensive international operations in more than one foreign country. Management Fundamentals - Chapter 5

Management Fundamentals - Chapter 5 Study Question 3: 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 Management Fundamentals - Chapter 5

Management Fundamentals - Chapter 5 Study Question 3: 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 Management Fundamentals - Chapter 5

Management Fundamentals - Chapter 5 Figure 5.3 What should go right and what can go wrong in MNC-host country relationships. Management Fundamentals - Chapter 5

Management Fundamentals - Chapter 5 Study Question 3: 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 Management Fundamentals - Chapter 5

Management Fundamentals - Chapter 5 Study Question 3: 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. Management Fundamentals - Chapter 5

Management Fundamentals - Chapter 5 Study Question 4: What is culture and how does it relate to 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 others. Management Fundamentals - Chapter 5

Management Fundamentals - Chapter 5 Study Question 4: What is culture and how does it relate to global diversity? Stages in adjusting to a new culture: Confusion Small victories The honeymoon Irritation and anger Reality Management Fundamentals - Chapter 5

Management Fundamentals - Chapter 5 Study Question 4: What is culture and how does it relate to global diversity? Popular dimensions of culture: Language Low-context cultures and high-context cultures Interpersonal space Time orientation Monochronic cultures and polychronic cultures Religion Contracts and agreements Management Fundamentals - Chapter 5

Management Fundamentals - Chapter 5 Study Question 4: What is culture and how does it relate to global diversity? Values and national cultures (Hofstede): Power distance Uncertainty avoidance Individualism-collectivism Masculinity-femininity Time orientation Management Fundamentals - Chapter 5

Management Fundamentals - Chapter 5 Figure 5.4 How countries compare on Hofstede’s dimension of national culture. Management Fundamentals - Chapter 5

Management Fundamentals - Chapter 5 Study Question 4: What is culture and how does it relate to 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. Management Fundamentals - Chapter 5

Management Fundamentals - Chapter 5 Study Question 5: How do management practices and learning transfer across cultures? Comparative management How management systematically differs among countries and/or cultures. Global managers Need to successfully apply management functions across international boundaries. Management Fundamentals - Chapter 5

Management Fundamentals - Chapter 5 Study Question 5: How do management practices and learning transfer across cultures? Planning and controlling Complexity of international environment makes global planning and controlling challenging. Planning and controlling risks: Currency risk Political risk Management Fundamentals - Chapter 5

Management Fundamentals - Chapter 5 Study Question 5: How do management practices and learning transfer across cultures? Organizing and leading Multinational organization structures Global area structure Global product structure Staffing international operations Competent locals Expatriates Management Fundamentals - Chapter 5

Figure 5.5 Alternative multinational structures for global operations. Management Fundamentals - Chapter 5

Management Fundamentals - Chapter 5 Study Question 5: How do management practices and learning transfer across cultures? Are management theories universal? North American 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. Management Fundamentals - Chapter 5

Management Fundamentals - Chapter 5 Study Question 5: How do management practices and learning transfer across cultures? Global organizational learning: Companies can and should learn from each other. Readiness for global organizational learning varies based on managerial attitudes. Ethnocentric attitudes Polycentric attitudes Geocentric attitudes Be alert, open, inquiring, but always cautious. Management Fundamentals - Chapter 5

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