Management 11e John Schermerhorn Chapter 5: Global Management and Cultural Diversity

Planning Ahead — Chapter 5 study questions What are the management challenges of globalization? What are global businesses and what do they do? What is culture and how does it impact global management? How can we benefit from global management learning?

Study Question 1: What are the management challenges of globalization? Key concepts in the challenges of globalization: Global economy Globalization Global management Global manager Management 11e/ Chapter 5

Study Question 1: What are the management challenges of globalization? Global economy Resource supplies, product markets, and business competition are worldwide, rather than local Globalization The process of growing interdependence of these components in the global economy Management 11e/ Chapter 5

Study Question 1: What are the management challenges of globalization? Global management Management in organizations with business interests in more than one country Global manager Aware of international developments and the effect on societies and economies Competent in working with people from different cultures Management 11e/ Chapter 5

Study Question 1: What are the management challenges of globalization? Global businesses Conduct for-profit transactions of goods and services across national boundaries Reasons why businesses go global: Profits Customers Suppliers Capital Labor Risk Management 11e/ Chapter 5

Study Question 1: What are the management challenges of globalization? Market entry strategies involve the sale of goods or services to foreign markets but do not require expensive investments Management 11e/ Chapter 5

Study Question 1: What are the management challenges of globalization? Types of market entry strategies: Global sourcing Exporting Importing Licensing agreement Franchising Management 11e/ Chapter 5

Figure 5.1 Common forms of global business—from market entry to direct investment strategies Management 11e/ Chapter 5

Study Question 1: What are the management challenges of globalization? Global sourcing the process of purchasing materials or services around the world for local use Exporting selling locally made products in foreign markets Importing buying foreign-made products and selling them domestically Licensing agreement one firm pays fee for rights to make or sell another company’s products Franchising a fee is paid for rights to use another firm’s name and operating methods Management 11e/ Chapter 5

Study Question 1: What are the international business challenges of globalization? Direct investment strategies require major capital commitments but create rights of ownership and control over foreign operations Management 11e/ Chapter 5

local operation completely owned by a foreign firm Study Question 1: What are the international business challenges of globalization? Types of direct investment strategies: Joint ventures operates in a foreign country through co-ownership by foreign and local partners Strategic alliances a partnership in which foreign and domestic firms share resources and knowledge for mutual gains Foreign subsidiaries local operation completely owned by a foreign firm Management 11e/ Chapter 5

Study Question 1: What are the international business challenges of globalization? Criteria for choosing a joint venture partner: Familiarity with your firm’s major business Strong local workforce Future expansion possibilities Values its customers Strong local market for partner’s own products Good profit potential Sound financial standing Management 11e/ Chapter 5

Study Question 1: What are the international business challenges of globalization? Global business environments Legal and political systems Trade agreements and trade barriers Regional economic alliances Management 11e/ Chapter 5

Legal and political systems Study Question 1: What are the international business challenges of globalization? Legal and political systems Differing laws and practices regarding Business ownership Foreign currency exchange Protection of intellectual property rights Counterfeit merchandise Management 11e/ Chapter 5

Legal and political systems Study Question 1: What are the international business challenges of globalization? Legal and political systems Political risk Potential loss in value of a foreign investment due to instability and political changes in the host country Political risk analysis Forecast political disruptions that threaten the value of a foreign investment Management 11e/ Chapter 5

Trade Agreements and Trade Barrriers Study Question 1: What are the international business challenges of globalization? Trade Agreements and Trade Barrriers World Trade Organization Most favored nation status Tariffs Nontariff barriers Protectionism Management 11e/ Chapter 5

Regional Economic Alliances Study Question 1: What are the international business challenges of globalization? Regional Economic Alliances NAFTA – North American Free Trade Agreement EU – European Union APEC – Asia Pacific Economic Cooperation ASEAN – Association of Southeast Asian Nations SADC – Southern Africa Development Community Management 11e/ Chapter 5

Study Question 2: What are global businesses and what do they do? Types of global businesses: Global corporation MNC (multinational corporation) with extensive business operations in more than one foreign country Transnational corporation MNC (multinational corporation) operates worldwide on a borderless basis Management 11e/ Chapter 5

Study Question 2: What are global businesses and what do they do? Mutual benefits for host country and global corporation or MNC: Shared growth opportunities Shared income opportunities Shared learning opportunities Shared development opportunities Management 11e/ Chapter 5

Figure 5.2 What should go right and what can go wrong in MNC-host country relationships Management 11e/ Chapter 5

Study Question 2: What are global businesses 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 11e/ Chapter 5

Study Question 2: What are global businesses and what do they do? MNC complaints about host countries: Profit limitations Overpriced resources Exploitative rules Foreign exchange restrictions Failure to uphold contracts Management 11e/ Chapter 5

Study Question 2: What are global businesses and what do they do? Ethical issues for Global Businesses: 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 11e/ Chapter 5

Study Question 2: What are global businesses and what do they do? Ethical issues for Global Businesses: Corruption – illegal practices that further one’s business interests Foreign Corrupt Practices Act – makes it illegal for U.S. firms and their representatives to engage in corrupt practices overseas Bribes to foreign officials Excessive commissions Non monetary gifts Management 11e/ Chapter 5

Study Question 2: What are global businesses and what do they do? Child labor and Sweatshops: Child labor – full time employment of children for work otherwise done by adults Sweatshops – employ workers at very low wages for long hours in poor working conditions Management 11e/ Chapter 5

Study Question 3: What is culture and how does it impact global management? 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 Cultural intelligence The ability to adapt and adjust to new cultures Ethnocentrism Tendency to consider one’s own culture as superior to others Management 11e/ Chapter 5

Stages in adjusting to a new culture: Study Question 3: What is culture and how does it impact global management? Confusion Small victories The honeymoon Irritation and anger Reality Stages in adjusting to a new culture: Management 11e/ Chapter 5

Study Question 3: What is culture and how does it impact global management? Context Low context High context Time Monochronic Polychronic Space Proxemics Silent languages of culture Management 11e/ Chapter 5

Study Question 3: What is culture and how does it impact global management? Context Low context cultures - emphasize communication via spoken or written words United States Canada Germany Management 11e/ Chapter 5

Study Question 3: What is culture and how does it impact global management? Context High context cultures – rely on nonverbal and situational cues as well as on spoken or written words Thailand Malaysia Management 11e/ Chapter 5

Study Question 3: What is culture and how does it impact global management? Time Monochronic cultures – people tend to do one thing at a time United States, Canada, Germany Polychronic cultures – time is used to accomplish many different things at once Egypt, Saudi Arabia, Mexico Management 11e/ Chapter 5

Space Proxemics – study of how people use space to communicate Study Question 3: What is culture and how does it impact global management? Space Proxemics – study of how people use space to communicate In the U.S. people value “personal space” Many Latin and Asian cultures expect much less personal space Management 11e/ Chapter 5

Values and national cultures (Hofstede): Study Question 3: What is culture and how does it impact global management? Values and national cultures (Hofstede): Power distance Uncertainty avoidance Individualism-collectivism Masculinity-femininity Time orientation Management 11e/ Chapter 5

Figure 5.3 How countries compare on Hofstede’s dimension of national culture Management 11e/ Chapter 5

Study Question 4: How can we benefit from global management learning? Project GLOBE (Global Leadership and Organizational Behavior Effectiveness) Researches the leadership, organizational practices, and diversity among world cultures Power distance Uncertainty avoidance Gender egalitarianism Future orientation Management 11e/ Chapter 5

Study Question 4: How can we benefit from global management learning? Project GLOBE’s nine dimensions continued Institutional collectivism In-group collectivism Assertiveness Performance orientation Humane orientation Management 11e/ Chapter 5

Study Question 4: How can we benefit from global management learning? Project GLOBE’s research on leadership practices across cultures Facilitators of leadership success Acting trustworthy, just, honest Showing foresight, planning Being positive, dynamic, motivating Inspiring confidence Being informed and communicative Being a coordinator and team builder Management 11e/ Chapter 5

Study Question 4: How can we benefit from global management learning? Project GLOBE’s research on leadership practices across cultures Inhibitors of leadership success Being a loner Acting uncooperative Being irritable Acting autocratic Management 11e/ Chapter 5

Figure 5.4 Nine cultural dimensions used by Project GLOBE researchers Management 11e/ Chapter 5

Study Question 4: How can we benefit from global management learning? Comparative management How management systematically differs among countries and/or cultures Global managers Need to successfully apply management functions across international boundaries Management 11e/ Chapter 5

Study Question 4: How can we benefit from global management learning? Companies can and should learn from each other GLOBE dimensions Power distance Uncertainty avoidance Future orientation Etc. Be alert, open, inquiring, but always cautious Management 11e/ Chapter 5

Management 11e/ Chapter 5 Case Harley-Davidson: Style and strategy have global reach

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