1. Managing in a Global Environment
Chapter 4
Managing in a Global Environment

2. A Borderless World
Organizations and managers are not isolated from international forces:
Trade barriers have fallen
Communication is faster, cheaper
Consumer tastes converge
The difficulties and risks of a borderless world are matched by benefits and opportunities
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3. International Market Strategies
Exporting : Home made products sold in foreign countries. Counter trade (Barter)
Global Outsourcing: (offshoring) engaging in international division of labor, cheap labor
Licensing: Corporation in one country makes certain resources available in another (tech. skill, same taste/product everywhere.
Direct Investing: managing the productive assets. Joint venture, partnership. E.g.. car
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4. International Management
Management of business operations conducted in more than one country.
The fundamental tasks of IM (financing, production, distribution of goods / services)
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5. The International Business Environment
Planning, organizing, leading, and controlling in multiple countries can be challenging, complex.
It took McDonalds a year to figure out that Hindus in India do not eat beef
In Africa, the baby food includes pictures to aid illiterate consumers
Managers must be mindful in the global market place.
When they are comparing one country with another, the economic, legal-political and socio cultural sectors present greatest difficulties.
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6. 4.4 Key Factors in International Environment
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7. The Economic Environment
Economic Development - Countries are categorized as either developed or developing based on per capita income
Developed countries based on PCI = GDP / pop.
Developing countries (LDCs)
Resource and Product Markets
When operating in another country, managers must evaluate market demand for their products and services
ECONOMIC INTERDEPENDANCE-
The current economic crisis has highlighted how interconnected economies are around the world
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8. The Legal-Political Environment
Business must deal with unfamiliar political systems when they go international.
Issues faced:
Political risk is defined as the risk of lost assets, earning power, or managerial control due to political events….
Managers must be concerned with the political instability of global markets.
Political instability includes riots ,revolutions, civil disorders and frequent changes in government.
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9. The Sociocultural Environment
One way managers can get a handle on local cultures is to understand differences in social values.
Social Values
Communication Differences
Other Cultural Characteristics
Language
Religion
Social organization
Education
Attitudes
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10. Hofstede’s Value Dimensions
Power Distance: people accept inequality in power
among organizations, or people. High/low power (P. 105)
Uncertainty Avoidance: members of a society feel uncomfortable with uncertainty and supports beliefs that promise certainty, etc.
Individualism and Collectivism:Individuals take care of themselves. US, Canada. Organizations protect their members interests. China, Ecuador.
Masculinity and Femininity: Prefer for achievements, heroism.Relationship, group decision,cooperation,depend
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11. Developing Cultural Intelligence
Managers working internationally need cultural intelligence.
Cultural intelligence – ability to use reasoning and observation skills to interpret unfamiliar situations and devise appropriate behavioral response
Culturally flexible
Adapt to new situations
Managers must study the language and learn
Cultural Intelligence includes three components.
Cognitive, emotional, and physical intelligence
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12. CEP
Cognitive intelligence: observe and learn skills and able to pick up on clues to understanding.
Emotional aspect: able to understand assimilate into a difficult culture.
Physical: to shift his talking manner, expressions, and body language in tune with the people of different culture.
CQ requires the head, heart and body work in unity.
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13. Working in a foreign environment is stressful. Homesick, loneliness.
Cultural shock: refers to the anxiety and frustration as a result of meeting with strange and unfamiliar cues (signal to say or not)
Working in a foreign environment is stressful.
Homesick, loneliness.
Completely different language, food, values, believes, and ways of doing things.
Person with high CQ is able to overcome this.
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14. International Trade Alliances
General Agreement on Tariff and Trade (GATT)
23 nations in 1947, a set of rules for fair trade esp. LDCs.
Aimed at reducing trade restrictions. Cut tariff.
World Trade Organization (WTO)
Maturation (growth) of GATT into permanent global institute.
European Union (European Economic Community)
1957 Alliance to improve economic and social conditions among members; evolved to 27-nation European Union
North American Free Trade Agreement (NAFTA)
Merged the United States, Canada, and Mexico into trading bloc. January 1, To increase investment, jobs, exports….
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15. China-ASEAN Free Trade Area
Trading alliance of ten countries
Association of South East Asian Nations
Later China joined in January 2010.
World’s third largest free-trade area
1.9 billion people and $45 trillion in trade
Remove all tariffs between China and ASEAN countries by 2015.
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16. The Impact of Multinational Corporations (MNC)
The size and volume of international business is LARGE
Companies have revenue = GDP of small country
Move assets from country to country
25% or more of its profit comes from outside parent country
MNC is managed as an integrated whole
Controlled by one management authority
MNC managers must have a global perspective
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17. Serving the Bottom of the Pyramid (BOP)
An approach for multinationals to do good
Corporations can alleviate problems and make large profits by selling to the world’s poor
There are more than 4 billion people at the lowest level of the economic pyramid.
PCI=US $ /4 of them earn < 1dollar/day.
Many companies are adopting BOP strategies
Produce and sell products tailored to POOR.
Approach that combines business with corporate social responsibilities is Serving the Bottom of the Pyramid (BPO)
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