McGraw-Hill/Irwin Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved. Chapter 04 Managing in the Global Environment

4-2 Learning Objectives Explain why the ability to perceive, interpret, and respond appropriately to the global environment is crucial for managerial success Differentiate between the global task and global general environments Identify the main forces in both the global task and general environments and describe the challenges that each force presents to managers

4-3 Learning Objectives Explain why the global environment is becoming more open and competitive and identify the forces behind the process of globalization that increase the opportunities, complexities, challenges, and threats that managers face Discuss why national cultures differ and why it is important that managers be sensitive to the effects of falling trade barriers and regional trade associations on the political and social systems of nations around the world

4-4 What is the Global Environment? Global organizations Organizations that operate and compete in more than one country Operating in the global environment is uncertain and unpredictable Global environment Set of global forces and conditions that operate beyond an organization’s boundaries but affect a manager’s ability to acquire and utilize resources

4-5 Figure Forces in the Global Environment

4-6 What is the Global Environment? Task environment: Set of forces and conditions that originate with suppliers, distributors, customers, and competitors and affect an organization’s ability to obtain inputs and dispose of its outputs because they influence managers daily General environment: Wide-ranging global, economic, technological, sociocultural, demographic, political, and legal forces that affect an organization and its task environment

4-7 The Task Environment Actions of suppliers, distributors, customers, and competitors: Affect a manager’s ability to obtain resources and dispose of outputs Have a significant impact on short-term decision making

4-8 Question What are individuals and organizations that provide an organization with the input resources that it needs to produce goods and services? A. Customers B. Suppliers C. Distributors D. Competitors

4-9 The Task Environment Suppliers: Individuals and organizations that provide an organization with the input resources that it needs to produce goods and services Raw materials, component parts, labor (employees) Relationships with suppliers can be difficult due to materials shortages, unions, and lack of substitutes Suppliers that are the sole source of a vital item will be in a strong bargaining position to raise their prices Managers can reduce these supplier effects by increasing the number of suppliers of an input

4-10 The Task Environment Global outsourcing: Purchase or production of inputs or final products from overseas suppliers to lower costs and improve product quality or design Has grown enormously to take advantage of national differences in the cost and quality of resources

4-11 The Task Environment Distributors: Organizations that help other organizations sell their goods or services to customers Changing nature of distributors and distribution methods can bring opportunities and threats for managers Large and powerful distributors can control access to a particular organization’s goods and services

4-12 The Task Environment Customers: Individuals and groups that buy the goods and services that an organization produces An organization’s success depends on its responsiveness towards satisfying customers' needs

4-13 The Task Environment Competitors: Organizations that produce goods and services that are similar to a particular organization’s goods and services Strong competitive rivalry results in price competition, and falling prices reduce customer revenues and profits

4-14 Figure Barriers to Entry and Competition

4-15 Question What are pressures emanating from the social structure of a country or society or from the national culture? A. Economic forces B. Technological forces C. Socio-cultural forces D. Demographic forces

4-16 The General Environment Economic, technological, sociocultural, demographic, political, and legal forces in the general environment have important effects on forces in the task environment

4-17 The General Environment Economic forces: Interest rates, inflation, unemployment, economic growth, and other factors that affect the general health and well- being of a nation or the regional economy of an organization Technological forces: Outcomes of changes in the technology that managers use to design, produce, or distribute goods and services

4-18 Question What technology has had the biggest impact on business in the last 50 years? A. Internet B. Cell phones C. Computers D.

4-19 The General Environment Sociocultural forces: Pressures emanating from the social structure of a country or society or from the national culture Social structure: Traditional system of relationships established between people and groups in a society National culture: Set of values that a society considers important and the norms of behavior that are approved or sanctioned in that society

4-20 The General Environment Demographic forces: Outcomes of change in, or changing attitudes toward, the characteristics of a population, such as age, gender, ethnic origin, race, sexual orientation, and social class Most industrialized nations are experiencing the aging of their populations

4-21 The General Environment Political and legal forces: Outcomes of changes in laws and regulations, such as the deregulation of industries, the privatization of organizations, and increased emphasis on environmental protection Political integration of countries is an important political and legal force affecting managers and organizations

4-22 The Global Environment

4-23 The Changing Global Environment 21st century has banished the idea that the world is composed of distinct national countries and markets that are separated physically, economically, and culturally As a result of falling trade barriers, managers view the global environment as open—free to buy and sell goods and services across the globe

4-24 The Process of Globalization Globalization Set of specific and general forces that work together to integrate and connect economic, political, and social systems Interlinking countries, cultures, or geographic regions Nations and people become increasingly interdependent and similar Economic advances associated with globalization result from 4 capital flows - Human, Financial, Resource, Political

4-25 Declining Barriers to Trade and Investment Free-trade doctrine: Idea that, if each country specializes in the production of the goods and services that it can produce most efficiently, this will make the best use of global resources Removing barriers to the free flow of resources and capital between countries, through an international treaty known as the General Agreement on Tariffs and Trade lead to the rise of free trade

4-26 Declining Barriers of Distance and Culture Advances in communications and transportation technology has reduced the barriers of distance and culture Revolutionary developments in satellites, digital technology, the Internet and global computer networks, and video teleconferencing make communication reliable, secure, and instantaneous

4-27 Effects of Free Trade on Managers Declining trade barriers Has created enormous opportunities for companies to expand the market for their goods and services through exports and investments in countries overseas The growth of regional trade agreements such as the North American Free Trade Agreement (NAFTA), the Central American Free Trade Agreement (CAFTA), presents opportunities and threats for managers and their organizations

4-28 The Role of National Culture Values: Ideas about what a society believes to be good, desirable and beautiful Provides conceptual support for notions of individual freedom, democracy, truth, justice, honesty, loyalty, social obligation, collective responsibility, appropriate roles for men, and women Not static and change over time

4-29 The Role of National Culture Norms: Unwritten, informal codes of conduct that prescribe appropriate behavior in particular situations and are considered important by most members of a group or organization Mores: Norms that are considered to be central to functioning of society and to social life Folkways: Routine social conventions of everyday life

4-30 Hofstede’s Model of National Culture Individualism: Worldview that values individual freedom and self-expression and adherence to the principle that people should be judged by their individual achievements rather than by their social background Collectivism: Worldview that values subordination of the individual to the goals of the group and adherence to the principle that people should be judged by their contribution to the group

4-31 Hofstede’s Model of National Culture Power distance: Degree to which societies accept the idea that inequalities in the power and well- being of their citizens are due to differences in individuals’ physical and intellectual capabilities and heritage Achievement orientations: Worldview that values assertiveness, performance, success, and competition Nurturing orientation: Worldview that values quality of life, warm personal friendships, and services and care for the weak

4-32 Hofstede’s Model of National Culture Uncertainty avoidance: Degree to which societies are willing to tolerate uncertainty and risk Long-term orientation: Worldview that values thrift and persistence in achieving goals Short-term orientation: Worldview that values personal stability or happiness and living for the present

4-33 Figure Hofstede’s Model of National Culture

4-34 National Culture and Global Management Management practices that are effective in one culture might be troublesome in another Managers must be sensitive to the value systems and norms of an individual’s country and behave accordingly Culturally diverse management team can be a source of strength for an organization