Place Slide Title Text Here ©2013 John Wiley & Sons, Inc. All rights reserved ©2013 John Wiley & Sons, Inc. All rights reserved. JOHN R. SCHERMERHORN, JR. MANAGEMENT 12 th Edition Chapter 5 Global Management and Cultural Diversity

Place Slide Title Text Here ©2013 John Wiley & Sons, Inc. All rights reserved. 5-2 Planning Ahead — Chapter 5 Study Questions 1.What are the management challenges of globalization? 2.What are global businesses and what do they do? 3.What is culture and how does it impact global management? 4.How can we benefit from global management learning?

Place Slide Title Text Here ©2013 John Wiley & Sons, Inc. All rights reserved. 5-3 Chapter 5 Learning Dashboard 1.Management and Globalization 1.Global management 2.Why companies go global 3.How companies go global 4.Global business environments 2.Global Businesses 1.Types of global businesses 2.Pros and cons of global businesses 3.Ethics challenges for global businesses 4.Global business environments

Place Slide Title Text Here ©2013 John Wiley & Sons, Inc. All rights reserved. 5-4 Chapter 5 Learning Dashboard 3.Culture and Global Diversity 1.Cultural intelligence 2.Silent languages of culture 3.Tight and loose cultures 4.Values and national cultures 4.Global Management Learning 1.Are management theories universal? 2.Global learning goals

Place Slide Title Text Here ©2013 John Wiley & Sons, Inc. All rights reserved. 5-5 Takeaway 1: Management and Globalization Key concepts in the challenges of globalization: – Global economy – Globalization – Global management – World 3.0 – Global manager 5

Place Slide Title Text Here ©2013 John Wiley & Sons, Inc. All rights reserved. 5-6 Takeaway 1: Management and Globalization Global economy – Resources, markets, and competition are worldwide in scope Globalization – The process of growing interdependence among elements in the global economy World 3.0 – Nations cooperate while respecting different national characters and interests

Place Slide Title Text Here ©2013 John Wiley & Sons, Inc. All rights reserved. 5-7 Takeaway 1: Management and Globalization Global management – Managing in organizations with business interests in more than one country Global manager – Is culturally aware and informed on international affairs

Place Slide Title Text Here ©2013 John Wiley & Sons, Inc. All rights reserved. 5-8 Takeaway 1: Management and Globalization International businesses – Conducting for-profit transactions of goods and services across national boundaries Reasons why businesses go global: ProfitsCustomersSuppliersCapitalLaborRisk

Place Slide Title Text Here ©2013 John Wiley & Sons, Inc. All rights reserved. 5-9 Takeaway 1: Management and Globalization Market entry strategies – involve the sale of goods or services to foreign markets but do not require expensive investments

Place Slide Title Text Here ©2013 John Wiley & Sons, Inc. All rights reserved Takeaway 1: Management and Globalization Types of market entry strategies: – Global sourcing – Exporting – Importing – Licensing agreement – Franchising Types of direct investment strategies: – Joint venture – Strategic alliance – Foreign subsidiary

Place Slide Title Text Here ©2013 John Wiley & Sons, Inc. All rights reserved Figure 5.1 Common forms of global business—from market entry to direct investment strategies

Place Slide Title Text Here ©2013 John Wiley & Sons, Inc. All rights reserved Takeaway 1: Management and Globalization the process of purchasing materials or services around the world for local use Global sourcing selling locally made products in foreign markets Exporting buying foreign-made products and selling them domestically Importing one firm pays fee for rights to make or sell another company’s products Licensing agreement a fee is paid for rights to use another firm’s name and operating methods Franchising

Place Slide Title Text Here ©2013 John Wiley & Sons, Inc. All rights reserved Takeaway 1: Management and Globalization? Insourcing refers to local job creation that results from foreign direct investment

Place Slide Title Text Here ©2013 John Wiley & Sons, Inc. All rights reserved Takeaway 1: Management and Globalization Types of insourcing: 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

Place Slide Title Text Here ©2013 John Wiley & Sons, Inc. All rights reserved Takeaway 1: Management and Globalization? 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 Criteria for choosing a joint venture partner:

Place Slide Title Text Here ©2013 John Wiley & Sons, Inc. All rights reserved Takeaway 1: Management and Globalization Global business environments Legal and political systemsTrade agreements and trade barriersRegional economic alliances

Place Slide Title Text Here ©2013 John Wiley & Sons, Inc. All rights reserved Takeaway 1: Management and Globalization Legal and political systems – Differing laws and practices regarding Business ownership Foreign currency exchange Protection of intellectual property rights – Counterfeit merchandise

Place Slide Title Text Here ©2013 John Wiley & Sons, Inc. All rights reserved Takeaway 1: Management and 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

Place Slide Title Text Here ©2013 John Wiley & Sons, Inc. All rights reserved Takeaway 1: Management and Globalization Trade Agreements and Trade Barriers – World Trade Organization Most favored nation status Tariffs Nontariff barriers Protectionism

Place Slide Title Text Here ©2013 John Wiley & Sons, Inc. All rights reserved Takeaway 1: Management and 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

Place Slide Title Text Here ©2013 John Wiley & Sons, Inc. All rights reserved Takeaway 2: Global Businesses Types of global businesses: – Global corporation MNE (multinational enterprise) or MNC (multinational corporation) with extensive business operations in more than one foreign country – Transnational corporation A global corporation that operates worldwide on a borderless basis

Place Slide Title Text Here ©2013 John Wiley & Sons, Inc. All rights reserved Takeaway 2: Global Businesses Mutual benefits for host country and global corporation or MNC: – Shared growth opportunities – Shared income opportunities – Shared learning opportunities – Shared development opportunities

Place Slide Title Text Here ©2013 John Wiley & Sons, Inc. All rights reserved Figure 5.2 What should go right and what can go wrong in MNC-host country relationships

Place Slide Title Text Here ©2013 John Wiley & Sons, Inc. All rights reserved Takeaway 2: Global Businesses 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

Place Slide Title Text Here ©2013 John Wiley & Sons, Inc. All rights reserved Takeaway 2: Global Businesses MNC complaints about host countries: – Profit limitations – Overpriced resources – Exploitative rules – Foreign exchange restrictions – Failure to uphold contracts

Place Slide Title Text Here ©2013 John Wiley & Sons, Inc. All rights reserved Takeaway 2: Global Businesses Corruption Sweatshops Child labor Ethical challenges for Global Businesses:

Place Slide Title Text Here ©2013 John Wiley & Sons, Inc. All rights reserved Takeaway 2: Global Businesses 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

Place Slide Title Text Here ©2013 John Wiley & Sons, Inc. All rights reserved Takeaway 2: Global Businesses 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

Place Slide Title Text Here ©2013 John Wiley & Sons, Inc. All rights reserved Takeaway 3: Culture and Global Diversity The shared set of beliefs, values, and patterns of behavior common to a group of people Culture Confusion and discomfort a person experiences in an unfamiliar culture Culture shock The ability to adapt and adjust to new cultures Cultural intelligence Tendency to consider one’s own culture as superior to others Ethnocentrism

Place Slide Title Text Here ©2013 John Wiley & Sons, Inc. All rights reserved Takeaway 3: Culture and Global Diversity Stages in adjusting to a new culture: ConfusionSmall victoriesThe honeymoonIrritation and angerReality

Place Slide Title Text Here ©2013 John Wiley & Sons, Inc. All rights reserved Takeaway 3: Culture and Global Diversity Context Low context High context Time Monochronic Polychronic Space Proxemics Silent languages of culture

Place Slide Title Text Here ©2013 John Wiley & Sons, Inc. All rights reserved Takeaway 3: Culture and Global Diversity Context – Low context cultures - emphasize communication via spoken or written words United States Canada Germany

Place Slide Title Text Here ©2013 John Wiley & Sons, Inc. All rights reserved Takeaway 3: Culture and Global Diversity Context – High context cultures – rely on nonverbal and situational cues as well as on spoken or written words Thailand Malaysia

Place Slide Title Text Here ©2013 John Wiley & Sons, Inc. All rights reserved Takeaway 3: Culture and Global Diversity 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

Place Slide Title Text Here ©2013 John Wiley & Sons, Inc. All rights reserved Takeaway 3: Culture and Global Diversity 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

Place Slide Title Text Here ©2013 John Wiley & Sons, Inc. All rights reserved Takeaway 3: Culture and Global Diversity Tight and Loose Cultures – Cultural tightness-looseness Strength of norms that govern social behavior Tolerance for any deviance from norms Tight = Japan, Korea Loose = Brazil, Hungary

Place Slide Title Text Here ©2013 John Wiley & Sons, Inc. All rights reserved Power distance Uncertainty avoidance Individualism- collectivism Masculinity- femininity Time orientation Takeaway 3: Culture and Global Diversity Values and national cultures (Hofstede):

Place Slide Title Text Here ©2013 John Wiley & Sons, Inc. All rights reserved Figure 5.3 How countries compare on Hofstede’s dimension of national culture

Place Slide Title Text Here ©2013 John Wiley & Sons, Inc. All rights reserved Takeaway 4: 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

Place Slide Title Text Here ©2013 John Wiley & Sons, Inc. All rights reserved Takeaway 4: Global Management Learning Global learning goals: – Not universal – Engage critical thinking – Look everywhere for new management ideas – Always consider culture!