Chapter Four Global Management: Managing Across Borders

McGraw-Hill/Irwin© 2006 The McGraw-Hill Companies, Inc. All rights reserved. Globalization  Globalization trend of the world economy toward becoming a more interdependent system. The Global Economy Global Economy refers to the increasing tendency of economies of theworld to interact with one another as one market instead of many national markets. Megamergers & Minifirms Worldwide Megamergers The trend in the 1990’s was that mid-sized firms would cross-border: merge with other big companies Minifirms The Internet and the World Wide Web allow small firms to: Get Started More Easily Maneuver Faster International Management Multinational corporation: is a business firm with operations in several countries. Multinational organization: is a nonprofit organization with operations in several countries.

McGraw-Hill/Irwin© 2006 The McGraw-Hill Companies, Inc. All rights reserved. You and International Management  You may deal with foreign customers or partners  You may deal with foreign suppliers  You may work for a foreign firm in the United States  You may work for an American firm outside the United States Why Companies Expand Internationally 1)Availability of supplies 2)New markets 3)Lower labor costs 4)Access to finance capital 5)Avoidance of tariffs & import quotas Principle Economic Systems 1)Free Market Economy: the production of goods and services are controlled by private enterprise and the interaction of forces of supply and demand, rather than by the government. 2)Command Economy: or central-planning economy the government owns most businesses and regulates the amounts, types, and prices of goods and services. 3)Mixed Economy: most of the important industries are owned by the government, but others are controlled by private enterprise.  Privatization state-owned businesses were sold off to private enterprise

McGraw-Hill/Irwin© 2006 The McGraw-Hill Companies, Inc. All rights reserved. The Successful International Manager:  Ethnocentric: believe that they are culturally superior.  Polycentric: feels native management in native country is best.  Geocentric: accepts diversity. Is:Is Not:

McGraw-Hill/Irwin© 2006 The McGraw-Hill Companies, Inc. All rights reserved. How Companies Expand Internationally Global Outsourcing Importing, exporting, & countertrading Licensing & franchising Joint ventures Wholly owned subsidiaries Highest risk & invest- ment Lowest risk & investment

McGraw-Hill/Irwin© 2006 The McGraw-Hill Companies, Inc. All rights reserved. Infrastructure & Resources  Infrastructure: consists of the physical facilities that form the basis for its level of economic development.  Exchange Rate: is the rate at which one country’s currency can be exchanged for another country’s currency. Government Systems  Democratic: rely on free elections and representative assemblies.  Totalitarian ruled by a dictator, a single political party, or a special-membership group. Political Legal Differences  Instability:  Seen in:  Riots  Civil disorders  Revolutions or changes in government  Expropriation: is a government’s seizure of a foreign companies assets. Political Legal Differences (Cont.)  Foreign Corrupt Practices Act of 1977: which makes it illegal for employees of the U.S. companies to bribe political decision makers in foreign nations.

McGraw-Hill/Irwin© 2006 The McGraw-Hill Companies, Inc. All rights reserved. Barriers to International Trade  Trade Protectionism: the use of government regulations to limit the import of goods and services  Protectionism Devices:  Tariffs  Import quotas  Embargoes Organizations Promoting Free Trade The World Trade Organization (WTO)  The World Bank  The International Monetary Fund (IMF) Major Trading Blocs Trading Bloc: also known as an economic community, is a group of nations within a geographical region that have agreed to remove trade barriers with each other NAFTA—North American Free Trade Agreement EU—European Union ASEAN—Association of Southeast Asian Nations Mercosur

McGraw-Hill/Irwin© 2006 The McGraw-Hill Companies, Inc. All rights reserved. National Culture  National Culture: shared set of beliefs, values, knowledge, and patterns of behavior common to a group of people.  Four Basic Cultural Areas 1.Language 2.Nonverbal Communication 3.Time orientation 4.Religion

McGraw-Hill/Irwin© 2006 The McGraw-Hill Companies, Inc. All rights reserved. Different Norms Thailand: Public displays of temper or affection are frowned on. Japan: Business cards are exchanged before bowing or handshaking. Malaysia: Touching someone casually, especially on the top of the head, is considered impolite. Indonesia: Handshaking and head noddings are customary greetings. The Philippines: Handshaking and a pat on the back are common greetings. South Korea: Men bow slightly and shake hands sometimes with two hands. Women refrain from shaking hands. China: Hugging or taking someone’s arm is considered inappropriate.