1. Managing the Global Environment
Chapter 3
Managing the Global Environment

2. What’s Your Global Perspective?
Parochialism - viewing the world solely through its own eyes and perspectives, leading to an inability to recognize differences between people.
‘ours is better than theirs’

3. What’s Your Global Perspective?
Ethnocentric Attitude
Belief that home country (country in which the company’s headquarters are located) has the best work approaches and practices
Polycentric Attitude
View that managers in host country (foreign country in which the organization is doing business) know the best approaches and practices
Geocentric Attitude
A world-oriented view that focuses on using the best approaches and people from around the globe

4. Exhibit 3.1 Global Attitudes

5. Regional Trading Alliances
The European Union (EU)
A unified economic and trade entity
28 democratic European countries
Economic and monetary union (Euro)
North American Free Trade Agreement (NAFTA)
Eliminated barriers to free trade
United States, Canada, and Mexico

6. Exhibit 3.2 European Union Countries

7. Regional Trading Alliances (cont’d)
Association of Southeast Asian Nations (ASEAN)
Trading alliance of 10 Southeast Asian nations

8. Exhibit 3.3 ASEAN Members
Source: Based on J. McClenahen and T. Clark, “ASEAN at Work,” IW. May 19, 1997, p. 42.

9. The World Trade Organization (WTO)
Evolved from the General Agreement on Tariffs and Trade (GATT) in 1995
Functions as the only global organization dealing with the rules of trade among nations
Has 164 member nations
Monitors and promotes world trade

10. Different Types of Global Organizations
Multidomestic Corporation
A firm that maintains operations in multiple countries but decentralizes management to the local country.
It reflects polycentric attitude
Nestle in different countries.
Global Company
A firm that maintains operations in several countries and centralizes management and other decisions in the home country.
It reflects ethnocentric approach. Sony, Starwood Hotels etc.

11. Different Types of Global Organizations (CONT)
Transnational/Borderless Organization
A firm that organizes along business lines without consideration to artificial geographic barriers
It reflects geocentric approach. Ford is applying “ One Ford concept” along the globe.
Chapter 3, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Eighth Canadian Edition.
Copyright © 2005 Pearson Education Canada Inc.

12. Exhibit 3.4 How Organizations Go Global
Exporting to
Hiring foreign
Licensing/
Strategic
Foreign
or importing
representation
Franchising
Alliances
Subsidiary
from foreign
or contracting
countries
with foreign
managers
Low
Degree of Risk and Investment
High

13. How Organizations Go Global
Exporting
Making products at home and selling them overseas
Importing
Selling products at home that are made overseas

14. How Organizations Go Global (cont’d)
Contract Manufacturing
Selling or having products made in foreign factories with no physical presence
Licensing and Franchising
Giving another organization the right to use brand name, technology, or product specifications
Licensing (manufacturing organizations)
Franchising (service organizations)

15. How Organizations Go Global (cont’d)
Strategic Alliance
Partnership between an organization and a foreign company in which both share resources and knowledge in developing new products or building new production facilities
Honda Motor and General Electric teamed up to produce new jet engine
Facebook and Skype

16. Joint Venture --- Maruti Suzuki
A specific type of strategic alliance in which the partners agree to form a separate, independent organization for some business purpose
HP has joint ventures with suppliers around the globe to develop different component for its computer equipment.
--- Maruti Suzuki
Chapter 3, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Eighth Canadian Edition.
Copyright © 2005 Pearson Education Canada Inc.

17. Managing in a Global Environment
The Legal-Political Environment
Stability or instability of legal and political systems
Legal procedures are established and followed
Fair and honest elections held on a regular basis
Differences in the laws of various nations
Effects on business activities
Effects on delivery of products and services

18. Managing in a Global Environment (cont’d)
The Economic Environment
Economic Systems
Market economy
An economy in which resources are primarily owned and controlled by the private sector
Command economy
An economy in which all economic decisions are planned by a central government
Monetary and Financial Factors
Currency exchange rates
Inflation rates
Diverse tax policies

19. Managing in a Global Environment (cont’d)
The Cultural Environment
National Culture
Values and attitudes shared by individuals from a specific country that shape their behaviour and their beliefs about what is important
May have more influence on an organization than the organization culture

20. Hofstede’s Framework for Assessing Cultures
Individualism/collectivism
Power distance
Uncertainty avoidance
Achievement/Nurturing
Long-term and Short-term Orientation
Page 113 Exhibit: 3.5