1. Globalization

2. Declining Barriers to Trade
Free-Trade Doctrine: Everyone is better off if each country specializes in what it can produce most efficiently
Tariffs declining globally (GATT, regional trading alliances)
Trends to democracy and free-market policies open markets
Barriers of distance and culture diminish as transportation and communications technologies improve
National borders are increasingly irrelevant as barriers to trade

3. Regional Trading Alliances
Build size of market and reduce costs of trade in group:
The European Union - created 1992
A single, rich market without barriers to travel, employment, investment, and trade
North American Free Trade Agreement (NAFTA)
Eliminated barriers to free trade such as tariffs, import licensing requirements, customs user fees between U.S., Mexico, Canada
Mercosur (South America)
Association of Southeast Asian Nations (ASEAN)

4. Effects of Free Trade on Managers
Managers need to learn to compete globally
Declining trade barriers = huge opportunities:
Expand markets
Opportunities to (out)source globally
Declining trade barriers = huge challenges:
Intense competition: Anyone, anywhere
Managing and operating in foreign countries
Global legal-political environments differ (e.g., stability)
Global economic environments differ (e.g., inflation)
Employment Dislocation

5. Global Perspectives on Management
There are fundamentally different perspectives that managers have about the right way to manage:
Parochialism: Managers view the world solely through its own eyes and perspectives, do not recognize differences
Ethnocentric Attitude: Managers believe home country knows best; centralize, hold key decisions / technology close
Polycentric Attitude: Managers believe host-country managers know best; decentralize, let each country manage own unit
Geocentric Attitude: Managers try to transcend barriers and use the best from around the globe, regardless of location

6. Global Perspectives and Organizational Models:
Exxon Mobil
Nestle
ABB
Organization: Multinational Transnational Borderless
Economy of scale
and efficiency
Exhibit 4.2

7. How Organizations Go Global
Stage I
Passive Response
Stage II
Initial Overt Entry
Stage III
Established International
Operations
Learning & Resources
Foreign
Subsidiary
More Risk and Investment
Joint
Ventures
Exporting
to foreign
countries
Strategic
Alliances
Put a big arrow about learning
Hiring foreign
representation or
contracting with
foreign manufacturers
Importing
from foreign
countries
Licensing/
Franchising
Exhibit 4.7

8. The International Environment
Legal-political
Differences
Stable/Unstable
Economic
Currency fluctuations
Taxes
National Cultural

9. National Cultural Environments
National Culture: The values and attitudes shared by individuals from a specific country
what a society believes to be good, desirable and beautiful.
Provides conceptual support for democracy, truth, appropriate roles for men and women.
Usually not static but very slow to change.
Influences employees more than organizational culture
But not necessarily easy to find out (taken for granted)

10. Hofstede’s Model of National Cultural Values
Dimensions along which national cultures vary:
Power distance – influence and control unequally distributed
Uncertainty avoidance – Avoidance of ambiguity and risk, conformity to norms
Individualism – expectation that people take care of themselves / masters of own destiny.
Compared to Collectivism, expectation that others in the group will look after them and should be looked after.
Quantity of Life – assertiveness, acquisition of money, indifference to others
Compared with Quality of Life, valuing relationships and showing sensitivity and concern for the welfare of others.

11. Relative Ranking of Four Countries On Cultural Values5 c r e s 50 40 30 20 10
Cultural Value Dimension
Power
Distance
Uncertainty
Avoidance
Individualism
Quantity
/Quality
Confucian
Dynamics
Rank Numbers:
1 = Highest; 50 = Lowest
Canada
USA
Taiwan
Japan
high
low
See Also Exhibit 4.9
Source: Adapted from G. Hofstede and M. H. Bond. The Confucius connection:
From cultural roots to economic growth. Organization Dynamics, Spring 1988, pp

12. How Cultural Values Affect Organizations (Examples)
Power distance:
Manager-subordinate relationships
Uncertainty avoidance:
Receptiveness to new ideas, changing rules, competition
“Most organizations would be better off if conflict could be eliminated forever”
“If you want a competent person to do a job properly, it is often best to provide him or her with very precise instructions on how to do it”

13. How Cultural Values Affect Organizations (Examples)
Individualism & Collectivism
Individual merit & incentive pay systems
(Individual vs. group merit pay, seniority systems)
Managers Hot Seat Video (relationship & task)

14. How Cultural Values Affect Organizations (Examples)
Quantity v. Quality of Life:
Attitudes to downsizing, benefits, competition
Dutch engineer applying to US firm story (assertiveness)