Chapter 2: Environmental Constraints on Managers Understanding the Global Environment Business Management 12

Understanding the Global Environment The global environment presents both opportunities and challenges for managers. With the marketplace now global and national borders becoming increasingly irrelevant, the potential for organizations to grow is expanding dramatically.

Understanding the Global Environment Managers working within the global environment must deal with: Cultural differences Economic differences Political differences New competition from around the globe that can appear at any time

Global Trade An important part of the global environment is global trade. Global trade has been around for centuries, and is shaped by several regional trading alliances and agreements that are negotiated through the World Trade Organization Examples: European Union (EU) North America Free Trade Agreement (NAFTA)

The Legal-Political Environment Canadian managers are used to stable legal and political systems, this however is not the case in some countries of the world Managers in such countries face uncertainty and are not always to accurately predict outcomes due to such circumstances Example: Google in China See clip: http://abcnews.go.com/Technology/video/google-shuts-down-china-site-10177013

The Economic Environment The global manager must be aware of the economic system under which a country operates when conducting business globally A market economy is one in which resources are primarily owned and controlled by the private sector (Ex. Canada) A planned economy is one in which all economic decisions are planned by a central government

The Cultural Environment National culture has a greater effect on employees than does their organization’s culture…what is national culture? National culture are the values and attitudes shared by individuals from a specific country that shape their behaviour and beliefs about what is important.

HOFSTEDE’S CULTURAL DIMENSIONS Studied 116,000 IBM employees in 40 different countries He was able to classify their values and attitudes into four distinct categories His research proved useful to managers in determining Canada’s placement (Scale: High to low) Good managers must recognize the differences in order to be successful.

Individualism Vs. Collectivism Individualism – Look after their own interests and those of the immediate family (Example: US, Canada) Collectivism - People prefer to act as members of a group and expect to be looked after and protected. (Example: Mexico, Thailand)

Power Distance Power Distance – A society that accepts that power is unequal within an organization or institution. Employees have a high regard and respect for those in positions of authority.

Uncertainty Avoidance Uncertainty Avoidance – This refers to the degree to which people tolerate risk and prefer structured over unstructured situations. People in a society with high uncertainty avoidance tend to be stressed, nervous and aggressive.

Achievement Vs. Nurturing Achievement is the degree to which values such as assertiveness, making money and buying material goods and competition is seen as important (Example: US, Japan) Nurturing emphasizes relationships and concern for others. (Example: France, Sweden)

Long Term and Short Term Orientation This attribute looks at a country’s orientation toward work and life. Long term Orientation – People look to the future and value thrift and persistence; leisure time unimportant. (Example: China, Japan) Short term Orientation – People value the past and present and emphasizes respect for tradition and fulfilling social obligations; leisure time important (Example: Canada, US, Australia)

Canada has Individualism (IDV) as the highest ranking (80) Hofstede Dimension, and is indicative of a society with a more individualistic attitude and relatively loose bonds with others. Canadian's lowest ranking Dimension is Long Term Orientation at 23, this low LTO ranking is indicative of societies' belief in meeting its obligations and tends to reflect an appreciation for cultural traditions.