1. Global Management: Managing Across Borders
Chapter Four
Global Management: Managing Across Borders

2. Globalization Globalization trend of the world economy toward becoming
a more interdependent system.
McGraw-Hill/Irwin
© 2006 The McGraw-Hill Companies, Inc. All rights reserved.

3. B4-2
The Global Economy
Global Economy refers to the increasing tendency of economies of the world to interact with one another as one market instead of many national markets.
McGraw-Hill/Irwin
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4. Megamergers & Minifirms Worldwide
B4-3
Megamergers & Minifirms Worldwide
Minifirms
The Internet and the World Wide Web allow small firms to:
Get Started More Easily
Maneuver Faster
Megamergers
The trend in the 1990’s was that mid-sized firms would cross-border: merge with other big companies
McGraw-Hill/Irwin
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5. International Management
B4-4
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
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6. You and International Management
B4-5
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
McGraw-Hill/Irwin
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7. The Successful International Manager:
B4-6
The Successful International Manager:
Is:
Is Not:
Ethnocentric: believe that they are culturally superior.
Polycentric: feels native management in native country is best.
Geocentric: accepts diversity.
McGraw-Hill/Irwin
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8. Why Companies Expand Internationally
B4-7
Why Companies Expand Internationally
Availability of supplies
New markets
Lower labor costs
Access to finance capital
Avoidance of tariffs & import quotas
McGraw-Hill/Irwin
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9. How Companies Expand Internationally
B4-8
Panel 4.1
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
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10. Principle Economic Systems
B4-9
Principle Economic Systems
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.
Command Economy: or central-planning economy the government owns most businesses and regulates the amounts, types, and prices of goods and services.
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
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11. Infrastructure & Resources
B4-10
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.
McGraw-Hill/Irwin
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12. B4-11
Government Systems
Democratic: rely on free elections and representative assemblies.
Totalitarian ruled by a dictator, a single political party, or a special-membership group.
McGraw-Hill/Irwin
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13. Political Legal Differences
B4-12
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.
McGraw-Hill/Irwin
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14. Political Legal Differences (Cont.)
B4-13
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
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15. 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
McGraw-Hill/Irwin
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16. Organizations Promoting Free Trade
B4-15
Organizations Promoting Free Trade
The World Trade Organization (WTO)
The World Bank
The International Monetary Fund (IMF)
McGraw-Hill/Irwin
© 2006 The McGraw-Hill Companies, Inc. All rights reserved.

17. 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.

18. B4-17
National Culture
National Culture: shared set of beliefs, values, knowledge, and patterns of behavior common to a group of people.
McGraw-Hill/Irwin
© 2006 The McGraw-Hill Companies, Inc. All rights reserved.

19. Four Basic Cultural Areas
Language
Nonverbal Communication
Time orientation
Religion
McGraw-Hill/Irwin
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20. Different Norms China:
B4-19
Panel 4.2
Different Norms
China:
Hugging or taking someone’s arm is considered inappropriate.
Malaysia:
Touching someone casually, especially on the top of the head, is considered impolite.
South Korea:
Men bow slightly and shake hands sometimes with two hands. Women refrain from shaking hands.
Indonesia:
Handshaking and head noddings are customary greetings.
Japan:
Business cards are exchanged before bowing or handshaking.
The Philippines:
Handshaking and a pat on the back are common greetings.
Thailand:
Public displays of temper or affection are frowned on.
McGraw-Hill/Irwin
© 2006 The McGraw-Hill Companies, Inc. All rights reserved.

21. Key Terms Used in This Chapter
Association of Southeast Asian Nations (ASEAN)
Command economy
Countertrading
Culture
Democratic governments
Developed countries
Dumping
E-commerce
Embargo
Ethnocentric managers
European Union (EU)
Exchange rate
Expatriate manager
Exporting
Foreign Corrupt Practices Act
Franchising
Free-market economy
Free trade
Geocentric managers
Global economy
Global outsourcing
Global village
Globalization
Greenfield venture
Import quota
McGraw-Hill/Irwin
© 2006 The McGraw-Hill Companies, Inc. All rights reserved.

22. Key Terms Used in This Chapter (Cont.)
Importing
Infrastructure
International Monetary Fund (IMF)
Joint venture
Less-developed countries
Licensing
Maquiladoras
Mercosur
Mixed economy
Monochronic time
Most favored nation
Multinational corporation
Multinational organization
Nonverbal communication
North American Free Trade Agreement (NAFTA)
Outsourcing
Political risk
Polycentric managers
Polychronic time
Privatization
Tariff
Totalitarian governments
Trade protectionism
McGraw-Hill/Irwin
© 2006 The McGraw-Hill Companies, Inc. All rights reserved.

23. Key Terms Used in This Chapter (Cont.)
Trading bloc
Wholly-owned subsidiary
World Bank
World Trade Organization (WTO)
McGraw-Hill/Irwin
© 2006 The McGraw-Hill Companies, Inc. All rights reserved.