Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 4–1 Learning Outcomes Follow this Learning Outline as you read and study this chapter. 4.1 What’s Your Global perspective? 4.2 Understanding The global Environment 4.3 Doing Business Globally 4.4 Managing In A Global Environment. “I think there is a world market for maybe five computers”—Thomas Watson, Chairman of IBM, 1943

Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 4–2 Did You Know? Human Capital Video 2009

Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 4–3 What’s Your Global Perspective? ParochialismParochialism  Is a significant obstacle for managers working in a global business world. Why?  Is falling into the trap of ignoring others’ values and customs and rigidly applying an attitude of “ours is better than theirs” to foreign cultures.

Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 4–4 Adopting a Global Perspective Ethnocentric AttitudeEthnocentric Attitude Polycentric AttitudePolycentric Attitude Geocentric AttitudeGeocentric Attitude

Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 4–5 Regional Trading Agreements What is the purpose of trade agreements? How do they affect the quality of life for people?What is the purpose of trade agreements? How do they affect the quality of life for people? U.S.-Central America Free Trade Agreement (CAFTA)U.S.-Central America Free Trade Agreement (CAFTA) NAFTANAFTA Association of Southeast Asian Nations (ASEAN)Association of Southeast Asian Nations (ASEAN)  Trading alliance of 10 Southeast Asian nations African UnionAfrican Union South Asian Association for Regional Cooperation (SARRC)South Asian Association for Regional Cooperation (SARRC)

Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 4–6 The World Trade Organization (WTO) Evolved from the General Agreement on Tariffs and Trade (GATT) in 1995.Evolved from the General Agreement on Tariffs and Trade (GATT) in Functions as the only global organization dealing with the rules of trade among nations.Functions as the only global organization dealing with the rules of trade among nations. Has 149 member nations and 32 observer governments.Has 149 member nations and 32 observer governments. Monitors and promotes world trade.Monitors and promotes world trade.

Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 4–7 Different Types of International Organizations Multinational Corporation (MNC)Multinational Corporation (MNC)  Maintains operations in multiple countries.  Global - Producing a product the same way for every market that it is sold in. There are not any modifications made to the product the exact product sold in China would not change if sold in Europe. NIKE  Multidomestic - It sees customers as being unique. A multidomestic company modifies a product to accommodate the wants/needs of the market. Ex. A Coke Cola Sold China has a different taste from those sold in the U.S.

Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 4–8 Different Types of International Organizations (cont’d) Transnational Corporation (Borderless Organization)Transnational Corporation (Borderless Organization)  Is an MNC that has eliminated structural divisions that impose artificial geographic barriers and is organized along business lines that reflect a geocentric attitude.

Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 4–9 Exhibit 4–3How Organizations Go Global

Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 4–10 Other Forms of Globalization Strategic AlliancesStrategic Alliances  Partnerships between and organization and a foreign company in which both share resources and knowledge in developing new products or building new production facilities. Joint VentureJoint Venture  A specific type of strategic alliance in which the partners agree to form a separate, independent organization for some business purpose. Foreign SubsidiaryForeign Subsidiary  Directly investing in a foreign country by setting up a separate and independent production facility or office.

Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 4–11 Managing in A Global Environment The Legal EnvironmentThe Legal Environment Economic EnvironmentEconomic Environment Cultural EnvironmentCultural Environment

Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 4–12 Exhibit 4–4 What Are Americans Like Americans are very informal. Americans are direct. Americans are competitive. Americans are achievers. Americans are independent and individualistic. Americans are questioners. Americans dislike silence. Americans value punctuality. Americans value cleanliness. Sources: Based on M. Ernest (ed.), Predeparture Orientation Handbook: For Foreign Students and Scholars Planning to Study in the United States (Washington, DC: U.S. Information Agency, Bureau of Cultural Affairs, 1984), pp. 103–05; A. Bennett, “American Culture Is Often a Puzzle for Foreign Managers in the U.S.,” Wall Street Journal, February 12, 1986, p. 29; “Don’t Think Our Way’s the Only Way,” The Pryor Report, February 1988, p. 9; and B.J. Wattenberg, “The Attitudes behind American Exceptionalism,” U.S. News & World Report, August 7, 1989, p. 25.

Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 4–13 Hofstede’s Framework for Assessing Cultures Culture Individualism versus Collectivism Power Distance Uncertainty Avoidance Achievement versus Nurturing Long-Term versus Short-Term Orientation

Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 4–14 Exhibit 4–5 Hofstede’s Five Dimensions of National Culture (1) Individualistic — people look after their own and family interests Collectivistic — people expect group to look after and protect them Individualistic Collectivistic United States, Canada Japan Mexico, Thailand Australia (2) High power distance—Accepts wide differences in power, great deal of respect for those in authority Low power distance—Plays down inequalities: employees are not afraid to approach nor are in awe of the boss High power distance Low power distance Mexico, Singapore, Italy, Japan United States, Sweden

Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 4–15 Exhibit 4–5 Hofstede’s Five Dimensions of National Culture (3) High uncertainty avoidance—Threatened with ambiguity and experience high levels of anxiety Low uncertainty avoidance— Comfortable with risks; tolerant of different behavior and opinions High uncertainty avoidanceLow uncertainty avoidance Italy, Mexico, France United Kingdom Canada, United States, Singapore (4) Achievement—Values such as assertiveness, acquiring money and goods, and competition prevail Nurturing—Values such as relationships and concern for others prevail Achievement Nurturing United States, Japan, Canada, Greece France, Sweden Mexico

Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 4–16 Exhibit 4–5 Hofstede’s Five Dimensions of National Culture (5) Long-term orientation—People look to the future and value thrift and persistence Short-term orientation — People value tradition and the past Short-term thinking Long-term thinking Germany, Australia, China, Taiwan, Japan United States, Canada Hofstede Class Exercise

Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 4–17 Global Management in Today’s World ChallengesChallenges  Openness associated with globalization  Significant cultural differences (e.g., Americanization)  Adjusting leadership styles and management approaches RisksRisks  Loss of investments in unstable countries  Increased terrorism  Economic interdependence

Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 4–18 Globalization is not about every country around the globe. Eighty-seven percent of the world gross domestic product (GDP) is: - Europe (36%), - North America (31%), and - Asia (20%), with Asia enjoying the fastest growing GDP. The top nine countries of the world are in Europe, North America and Asia, and account for 66% of the world’s GDP: United States (26%), Japan (8%), Germany 6%), China (6%), United Kingdom (5%), France (5%), Italy (4%), Spain (3%) and Canada (3%).

Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 4–19 Arguments FOR Globalization Trade promotes free trade, which ultimately benefits everyone. Because free trade opens access to goods,services, capital, people, information, and technology, it provides countries with their best opportunity to advance Arguments AGAINST Globalization Trade Trading systems are not as free as globalization advocates say. Globalization is based on a system of trade that favors wealthy, industrialized countries. These countries control both the rules and the rule-making machinery, and they selectively impose trade barriers when it suits them.

Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 4–20 Arguments FOR Globalization JOBS creates jobs and fosters economic growth in those developing countries willing to open their economies to foreign investment. Open economies lead to more jobs, higher wages and better standards of living. Arguments AGAINST Globalization JOBS In developing countries, globalization exploits cheap labor and natural resources where laws protecting workers, human rights and the environment are weak or nonexistent. Globalization also leads to job losses in higher-wage countries due to imports or production shifts abroad

Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 4–21 Arguments FOR Globalization Goods & Services As markets become global, more goods and services are made available at lower cost to a wider group of people. More access leads to rising consumer demand and improved standards of living. In addition, global competition and cheap imports keep a lid on prices, so that inflation is less likely to derail economic growth. Arguments AGAINST Globalization Goods & Services While globalization may make less- expensive goods available to a wider consumer base, it is at the expense of the workers themselves. Globalization fuels resentment among people who cannot afford the luxuries available to the rich. It also creates demand through advertising for certain products (e.g.,tobacco), affecting the poor around the world and in the United States.