Chapter 4 MANAGING IN A GLOBAL ENVIRONMENT © 2003 Pearson Education Canada Inc.4.1

LEARNING OBJECTIVES You should be able to: – Explain the importance of viewing management from a global perspective – Identify the three different attitudes towards global business – Describe the different regional trading alliances – Explain why so many countries have become part of regional trading alliances – Contrast multinational, transnational, and borderless organizations 4.2

© 2003 Pearson Education Canada Inc. LEARNING OBJECTIVES (continued) You should be able to: – Describe the typical stages by which organizations go global – Explain the four dimensions of country culture – Describe Canadian culture according to the four dimensions of country culture – Identify the adjustment challenges faced by a manager on global assignment 4.3

© 2003 Pearson Education Canada Inc. WHO OWNS WHAT? Global Environment – National borders have become increasingly irrelevant – Has potential for dramatic expansion of organizations – Presents numerous challenges for managers 4.4

COMPANIES THAT EXPORT MORE THAN 50% OF TOTAL SALES % of Sales Company McDonnell Douglas Canadian Wheat Board Chrysler Canada XCAN Grain Pool Pratt & Whitney Canada Avenor Inc. Donahue Inc. Domtar Inc. Weldwood of Canada Canfor Corp. 4.5© 2003 Pearson Education Canada Inc.

WHAT’S YOUR GLOBAL PERSPECTIVE? Parochialism – Nation views the world solely through its own eyes and perspectives – People do not recognize that other people have different ways of living and working – Significant obstacle for global managers Ethnocentric Attitude – Parochial belief that the best work approaches and practices are those of the home country – Lack trust in foreign employees with key decisions or technology 4.6

© 2003 Pearson Education Canada Inc. WHAT’S YOUR GLOBAL PERSPECTIVE? (continued) Polycentric Attitude – Belief that host-country managers know the best work approaches and practices – Let foreign employees determine work practices Geocentric Attitude – Focuses on using the best approaches and people from around the globe – Look for the best approaches and people regardless of the country of origin 4.7

KEY INFORMATION ABOUT THREE GLOBAL ATTITUDES (Exhibit 4.2) 4.8© 2003 Pearson Education Canada Inc.

UNDERSTANDING THE GLOBAL ENVIRONMENT Regional Trading Alliances – Global competition is influenced by regional trading and cooperation agreements – The European Union a unified economic and trade entity a single market without barriers to travel, employment, investment, and trade common currency (Euro) assertion of economic power against U.S. and Japan created one of the world’s richest markets 4.9

EUROPEAN UNION COUNTRIES (Exhibit 4.4)4.10© 2003 Pearson Education Canada Inc.

UNDERSTANDING THE GLOBAL ENVIRONMENT (continued) Regional Trading Alliances (continued) – North American Free Trade Agreement (NAFTA) links economies of Canada, Mexico and U.S. since 1994, eliminated barriers to free trade such as tariffs, import licensing requirements, customs user fees – Other Latin American free-trade blocs Free Trade Area of the Americas (FTAA) Southern Cone Common Market (Mercosur) 4.11

MERCOUSUR MEMBERS (Exhibit 4.5)4.12© 2003 Pearson Education Canada Inc.

UNDERSTANDING THE GLOBAL ENVIRONMENT (continued) Regional Trading Alliances (continued) – Association of Southeast Asian Nations (ASEAN) alliance of 10 Southeast Asian nations created in one of the fastest growing economic regions in the world could rival NAFTA and EU 4.13

ASEAN MEMBERS (Exhibit 4.6)4.14© 2003 Pearson Education Canada Inc.

UNDERSTANDING THE GLOBAL ENVIRONMENT (continued) Different Types of Global Organizations – Multinational corporation (MNC) maintain significant operations in multiple countries but are managed from a base in the home country – Transnational corporation (TNC) maintains significant operations in more than one country but decentralizes management to the local country nationals hired to run operations in each country marketing strategies tailored for each country 4.15

© 2003 Pearson Education Canada Inc. UNDERSTANDING THE GLOBAL ENVIRONMENT (continued) Different Types of Global Organizations (continued) – Borderless organization eliminates structural divisions that impose artificial geographical barriers an attempt to increase efficiency and effectiveness in a competitive global marketplace exemplifies the geocentric attitude 4.16

HOW ORGANIZATIONS GO GLOBAL (Exhibit 4.7) Stage I Passive Response Stage II Initial Overt Entry Stage III Established International Operations Exporting to foreign countries Importing from foreign countries Hiring foreign representation or contracting with foreign manufacturers Licensing/ Franchising Foreign Subsidiary Joint Ventures Strategic Alliances 4.17© 2003 Pearson Education Canada Inc.

MANAGING IN A GLOBAL ENVIRONMENT The Legal-Political Environment – Canada has stable legal and political systems – Managers in foreign countries face greater uncertainty The Economic Environment – Global manager must be attentive to: strength of home currency versus foreign currency differences in inflation rates around the world tax rules differ from country to country 4.18

© 2003 Pearson Education Canada Inc. MANAGING IN A GLOBAL ENVIRONMENT (continued) The Cultural Environment – National culture the values and attitudes shared by individuals from a specific country shapes behaviour and beliefs has greater effect on employees than organizational culture getting information about a country’s cultural differences is difficult 4.19

© 2003 Pearson Education Canada Inc. MANAGING IN A GLOBAL ENVIRONMENT (continued) The Cultural Environment (continued) – Four dimensions of national culture individualism versus collectivism – individualism - loosely knit social framework – collectivism - tightly knit social framework power distance - degree of acceptance of unequal distributions of power in institutions and organizations 4.20

© 2003 Pearson Education Canada Inc. MANAGING IN A GLOBAL ENVIRONMENT (continued) The Cultural Environment (continued) uncertainty avoidance - degree to which people tolerate risk and unconventional behaviour quantity versus quality – quantity of life - culture values assertiveness and the acquisition of money and material goods – quality of life - value relationships 4.21

EXAMPLES OF CULTURAL DIMENSIONS (Exhibit 4.9)4.22© 2003 Pearson Education Canada Inc.

IS A GLOBAL ASSIGNMENT FOR YOU? Criteria Used When Making Global Assignment – Technical and human factors are considered – Criteria used influenced by the company’s experience and commitment to global operations – Include technical skills, language fluency, flexibility, and family adaptability 4.23

© 2003 Pearson Education Canada Inc. IS A GLOBAL ASSIGNMENT FOR YOU? (continued) Factors That Determine Adjustment to Global Assignment – Preassignment adjustment--what are your expectations of this assignment and what is your experience with similar cultures? – In-country adjustment individual factors--positive attitude and interaction with co-workers organization factors--social support systems 4.24

FACTORS THAT AFFECT GLOBAL ADJUSTMENT (Exhibit 4.11) 4.25© 2003 Pearson Education Canada Inc.