1. Global Management Chapter 4

2. Globalization The trend of the world economy toward becoming a more interdependent system.

3. Three important developments… The rise of the global village and electronic commerce. Global Village – The shrinking of time and space as air travel and the electronic media have made it easier for people around the globe to communicate with one another.

4. Global Village The “shrinking” of time and space as air travel and the electronic media have made it easier for the people of the globe to communicate with one another. Cell phones: 1983 first cellular system By 2007 – 2.8 billion cell phones and 1.6 million new ones each day

5. E-commerce (electronic commerce) The buying and selling of products and services through computer networks.

6. Global economy The increasing tendency of the economies of the world to interact with one another as one market instead of many national markets. The global market driven by electronic information forces things to get bigger and smaller at the same time.

7. Megamergers operating worldwide The last 20 years have seen a surge in mergers.

8. Minifirms operating worldwide The Internet and the WWW will allow almost anyone to be global, with two important results: Small companies can get started more easily. Small companies can maneuver faster.

9. Megafirms AOL and Time Warner Verizon and MCI SBC (Southern Bell) and AT and T Walt Disney and Pixar

11. Multinational Corporation A business firm with operations in several countries.

12. Multinational Organization A nonprofit organization with operations in several countries.

13. We need to be aware of cultural aspects when dealing with other cultures 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 of the United States – or for a foreign one

14. Ethnocentric Manager Believe that their native country, culture, language, and behavior are superior to all others. Parochialism – a narrow view in which people see things solely through their own perspective.

15. Polycentric managers Take the view that native managers in the foreign offices best understand native personnel and practices, and so the home office should leave them alone.

16. Geocentric Managers Accept that there are differences and similarities between home and foreign personnel and practices and that they should use whatever techniques are most effective.

17. Apple iPod Hard Drive: Japan Outsourced to the Philippines and China Chips: Taiwan

18. Why do companies expand internationally? Availability of supplies New markets Lower labor costs Access to finance capital Avoidance of tariffs and important quotas

19. Maquiladoras Manufacturing plants allowed to operate in Mexico with special privileges in return for employing Mexican citizens.

20. 5 ways of expanding internationally 1. Global outsourcing Outsourcing: using suppliers outside the company to provide goods and services. Global outsourcing: using suppliers outside the United States to provide labor, goods, or services.

21. 2.Importing, Exporting, and Countertrading Importing: a company buys goods outside the country and resells domestically. Eg – Jeep Wrangler (some made in Canada) Exporting: a company produces gods domestically and sells them outside the country Countertrading: bartering goods for goods.

22. 3. Licensing and Franchising Licensing: a company allows a foreign company to pay it a fee to make or distribute the first company’s product or service. Franchising: a form of licensing in which a company allows a foreign company to pay it a fee and a share of the profit in return for using the first company’s brand name and a package of materials and services.

23. 4. Joint Ventures Also known as a strategic alliance Join with a foreign company to share the risks and rewards of starting a new enterprise together in a foreign country.

24. 5. Wholly-owned subsidiaries A foreign subsidiary that is totally owned and controlled by an organization. Greenfield Venture: a foreign subsidiary that the owning organization has built from scratch.

25. Free Trade The movement of goods and services among nations without political or economic obstruction.

26. Top ten in terms of imports and exports w/ US 1. Canada 2. China 3. Mexico 4. Japan 5. Germany 6. United Kingdom 7. South Korea 8. Taiwan 9. Saudi Arabia 10. France

27. Barriers to International Trade

28. Trade Protectionism The use of government regulations to limit the import of goods and services. Used to protect their domestic industries against foreign competition. Tariffs Import Quotas Embargoes

29. Tariffs A trade barrier in the form of a customs duty or tax, levied mainly on imports. Revenue Tariffs (raise money for the government Protective Tariffs (raise the price of imported goods)

30. Import Quotas A trade barrier in the form of a limit on the numbers of a product that can be imported. Intent is to protect domestic industry by restricting the availability of foreign products.

31. Dumping Quotas are designed to prevent dumping: The practice of a foreign company’s exporting products abroad at a lower price than the price in the home market - or even below the costs of production – in order to drive down the price of the domestic product.

32. Embargoes A complete ban on the import or export of certain products. Cuban cigars and sugar

33. Three principal organizations designed to facilitate international trade : World Trade Organization (WTO) World Bank International Monetary Fund

34. World Trade Organization (WTO) 151 member countries Designed to monitor and enforce trade agreements In 1995 WTO succeeded General Agreement on Tariffs and Trade (GATT) as the world forum for trade negotiations and has the formal legal structure for deciding trade disputes.

35. Covers Services and property rights Telecommunications (cell phones, pagers, data transmission, satellite communications)

36. The World Bank Founded after World War II to help European countries rebuild. Purpose: to provide low-interest loans to developing nations for improving transportation, education, health, and communications. 185 member nations

37. The International Monetary Fund 185 member nations Designed to assist in smoothing the flow of money between nations Last resort lender that makes short- term loans to countries suffering from unfavorable balance of payments because of imports, exports, and other matters

38. Trading Bloc Also known as an economic community The five major trading blocs: NAFTA nations European Union APEC countries Mercosur CAFTA

39. NAFTA – North American Free Trade Agreement A trading bloc consisting of the United States, Canada, and Mexico Agreement to eliminate 99% of the tariffs and quotas among these countries, allowing for freer flow of goods, services, and capital in North America

40. The EU (European Union) 27 trading partners in Europe A union of borderless neighbors and the world’s largest free market eg. 2002 – common currency – the euro

41. APEC – Asia-Pacific Economic Cooperation 21 Pacific Rim countries whose purpose is to improve economic and political ties Founded in 1989 – APEC members have worked to reduce tariffs and other trade barriers across the Asia- Pacific region

42. ASEAN – 10 Countries of the Association of Southeast Asian Nations A trade bloc consisting of 10 countries in Asia.

43. Mercosur – Ten countries of Latin America The largest trade bloc in Latin America and has four core members; Argentina, Brazil, Paraguay, Uraquay Five associate members: Bolivia, Chili, Colombia, Ecuador, Peru Reducing tariffs by 75% and strive for full economic integration

44. CAFTA – Seven countries of Central America Newest trade agreement United States Costa Rica Dominican Republic El Salvador Guatemala Honduras Nicaragua

45. Most favored nation Trading status describes a condition in which a country grants other countries favorable trading treatment such as the reduction of important duties To promote stronger and more stable ties between countries in the two countries

46. Culture The shared set of beliefs, values, knowledge, and patterns of behavior common to a group of people. Culture shock: feelings of discomfort and disorientation associated with being in an unfamiliar culture.

47. Low-context culture Shared meanings are primarily derived from written and spoken words.

48. High-context culture People rely heavily on situational cues for meaning when communicating with others.

49. The Globe Project Robert J. House Started in 1993 University of Pennsylvania A massive and ongoing cross-cultural investigation on nine cultural dimensions involved in leadership and organizational processes.

50. Nine Dimensions 1. Power Distance – expresses the degree to which a society’s members expect power to be unequally shared. 2. Uncertainty Avoidance – expresses the extent to which a society relies on social norms and procedures to alleviate the unpredictability of future events.

51. 3. Institutional Collectivism – expresses the extent to which individuals are encouraged and rewarded for loyalty to the group as opposed to pursuing individual goals. 4. In-group Collectivism – expresses the extent to which people should take pride in being members of their family, circle of close friends, and their work organization.

52. 5. Gender Egalitarianism – expresses the extent to which a society should minimize gender discrimination and role inequalities. 6. Assertiveness – represents the extent to which a society expects people to be confrontational and competitive as opposed to tender and modest.

53. 7. Future Orientation – expresses the extent to which a society encourages investment in the future, as by planning and saving. 8. Performance Orientation – expresses the extend to which society encourages and rewards its members for performance improvement and excellence.

54. 9. Humane Orientation – represents the degree to which individuals are encouraged to be altruistic, caring, kind, generous, and fair.

55. Misunderstandings and miscommunications often arise in international business relationships because people don’t understand the expectations of the other side.

56. Hofstede model of four cultural dimensions Individualism/collectivism Power distance Uncertainty avoidance Masculinity/femininity

57. Individualism/collectivism How loosely or tightly are people socially bonded. Individualism: a preference for a loosely knot social framework in which people are expected to take care of themselves Collectivism: indicates a preference for a tightly knit social framework in which people and organizations are expected to look after each other

58. Power Distance How much do people accept inequality in power? Refers to the degree to which people accept inequality in social situations.

59. Uncertainty avoidance How strongly do people desire certainty? Being comfortable with risk and uncertaintly – different degrees

60. Masculinity/femininity How much do people embrace stereotypical male or female traits? Masculine traits: achievement, assertiveness, and material success Feminine traits: cooperation, group decision making

61. GLOBE Projects Nine Cultural Dimensions A massive and on-going cross-cultural investigation of nine cultural dimensions involved in leadership and organizational processes.

62. Other cultural variations Language Interpersonal space Time orientation Monochronic time: doing one thing at a time Polychronic time: a preference for doing more than one thing at a time Religion

63. Law and Political Stability Instability Expropriation – a government’s seizure of a domestic of foreign company’s assets.

64. Corruption Foreign Corrupt Practices Act – makes it illegal for employees of U.S. companies to make “questionable” or “dubious” contributions to political decision makers in foreign nations.

65. Labor Abuses

66. Monochromic time A preference for doing one thing at a time. Polychronic time – a preference for doing more than one thing at a time.

67. Expatriates People living or working in a foreign country.

68. International Business Culture - Global Culture Etiquette Guides to Doing Business Abroad