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Global Issues In Management
Spring 2007 Global Issues in Management
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Global Issues in Management
A more complex external environment Legal and political factors Economic factors Cultural differences Spring 2007 Global Issues in Management
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Global Issues in Management
Why Globalize? New markets CocaCola Disney More sources for innovative ideas Demand for global services FedEx Netscape Keep up with competition Low cost manufacturing Low cost…but what about productivity Ethical issues Spring 2007 Global Issues in Management
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Profiting from Global Expansion
International firms can: Earn a greater return from distinctive skills or core competencies Realize location efficiencies by dispersing operations to locations where they can be performed most efficiently Realize economies of scale Realize economies of scope Worldwide learning Multimarket flexibility Spring 2007 Global Issues in Management
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What Makes Globalization Possible?
Technology Transportation Communications Open markets Economic integration Peace Corporate strategy Spring 2007 Global Issues in Management
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Approaches to International Business
Geocentric Use the best methods, no matter what the source Ethnocentric Home country methods are the best Polycentric Host country methods are the best Spring 2007 Global Issues in Management
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Global Issues in Management
Borders Economic, political and cultural factors may apply to regions, not just countries These factors may also vary within countries (Belgium, Canada, for example) But, important to know the map Spring 2007 Global Issues in Management
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The International Environment: Economic
Differing levels of economic development Infrastructure (or lack thereof…) Transportation Energy Communications Resources and markets Availability of raw materials Untapped markets Exchange rates, taxes, inflation Growing trend towards market economies Spring 2007 Global Issues in Management
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Global Issues in Management
Economic Systems Market Economy Private ownership Supply and demand Command Economy Centralized ownership Planned production Mixed Economy Some public ownership in national interest: health care, communications State Directed Economy Government oversight and coordination of economic activities State subsidies Spring 2007 Global Issues in Management
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The International Environment: Political
Treaties and alliances NAFTA European Union Political risk and instability War and / or revolution Terrorists, kidnapping and riots Nationalization An opportunity? Eastern Europe Laws and regulations Spring 2007 Global Issues in Management
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North American Free Trade Agreement
Became law: January 1,1994 Over 15 year period: tariffs reduced (99% of goods traded) NTBs reduced investment opportunities increased Protects intellectual property Applies national environmental standards Spring 2007 Global Issues in Management
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Global Issues in Management
Cultural Differences Issues to get in trouble with… Language Religion Languages to speak Cultural differences Business practices and etiquette Spring 2007 Global Issues in Management
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Global Issues in Management
Language Issues U.S. one of few countries where we don’t learn a second (or a third) language Languages learned in school often do not translate to business usage Do you try? Not in France, not unless you can pronounce it right ! Other countries, yes: it’s a gesture of goodwill But, even if the language is the same, will we understand? Spring 2007 Global Issues in Management
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Global Issues in Management
Sources: Languages of the World Spring 2007 Global Issues in Management
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Global Issues in Management
Religious Issues Islam: Ramadan fasting 5 daily prayers (15 minutes or so), even at work Modest dress for women (including head scarf) Friday, not Sunday (noon prayers on Fridays) Spring 2007 Global Issues in Management
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Global Issues in Management
Dress “Casual Days” are a U.S. custom Very conservative dress for women in Islamic countries Removing one’s shoes Across Asia Russian homes Spring 2007 Global Issues in Management
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Addressing Other People
Formality Herr und Frau, not first names in Germany; U.S. is almost alone in using first names Titles (Dr., Professor, “Assistant Vice President”, etc.) very important everywhere but U.S. Be careful, if you know language, with formal and informal pronouns Business cards essential in Mexico, Europe, Japan Personal space: much smaller in Latin America, Spain, Italy Spring 2007 Global Issues in Management
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Cultural Dimensions (Hofstede)
These are very important to understand The dimensions: Collectivism - Individualism Power Distance Uncertainty Avoidance Quality of Life Spring 2007 Global Issues in Management
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Collectivism - Individualism
Identification with group vs. identification as an individual Collective cultures: Think in terms of in-groups and out-groups Life decisions made by group Look after one’s in-group, no matter what Individualistic cultures Concern for self and immediate family Individual privacy Association with level of economic development Spring 2007 Global Issues in Management
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Global Issues in Management
Power Distance The extent to which a culture accepts that power is distributed unevenly High power distance People have a place in society, high or low Superiors are to be respected Less trust and cooperation; more likelihood of corruption Low power distance Equal rights for everyone Hierarchies are established for convenience Power can be judged to be legitimate or not Spring 2007 Global Issues in Management
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Uncertainty Avoidance
The extent to which a society feels threatened by ambiguity and uncertainty High uncertainty avoidance Lots of policies, rules, regulations Hard work valued, time is money Acceptance of authority Conflict avoided Low uncertainty avoidance Look to common sense Tolerance, constructive conflict Aggression less accepted Spring 2007 Global Issues in Management
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Global Issues in Management
Quality of Life The extent to which society values typically “masculine” values, such as assertiveness, and acquisition of things, as opposed to caring for others and quality of life. Masculine cultures Clear gender roles Live to work Ambition, success valued Machismo Feminine cultures Sympathy for the unfortunate Work to live People are important Spring 2007 Global Issues in Management
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Global Issues in Management
A Fifth Dimension Confucian Work Dynamic Based on work done in East Asia by “Chinese Cultural Connection” group Focus on: Long-term Order Thrift Persistence Respect for tradition Spring 2007 Global Issues in Management
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Stages in Going International
Export to Foreign Countries Stage 2 Hire Foreign Agents / Brokers Contract Foreign Managers Stage 3 Licensing or Franchising Joint Ventures - Foreign Subsidiary Spring 2007 Global Issues in Management
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Firms Face Two Conflicting Pressures Overseas
Reduce costs Respond to local needs Spring 2007 Global Issues in Management
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Global Issues in Management
Local Responsiveness Different consumer tastes and preferences MTV – cricket in India Ben & Jerry’s – ice cream in Japan Whirlpool – the World Washer in India Different infrastructure and practice Left hand vs. right hand drive cars Cup holders Differences in distribution channels Pharmaceuticals Pillsbury – flour in India Government demands Local content rules Spring 2007 Global Issues in Management
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Global Issues in Management
Four Basic Strategies Global Strategy Transnational Strategy High Cost and efficiency pressures Low Home Replication Strategy Multi domestic Strategy Low High Pressures for local responsiveness Spring 2007 Global Issues in Management
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Home Replication Strategy
Go where locals don’t have your skills Little adaptation. Products developed at home (centralization) Possibly a commodity item Manufacturing and marketing in each location Makes sense where low skills, competition, and costs exist Spring 2007 Global Issues in Management 12-17
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Global Issues in Management
Microsoft Korea Kuwait Latvia Lebanon Luxembourg Malaysia Mauritius Morocco Namibia Netherlands New Zealand Nigeria Norway Pakistan Panama Peru Philippines Poland Portugal Puerto Rico Romania Russia Saudi Arabia Singapore Slovakia Slovenia South Africa Spain Sweden Switzerland Taiwan Thailand Tunisia Turkey Ukraine United Arab Emirates United Kingdom Uruguay Venezuela Vietnam Argentina Australia Austria Belgium Bolivia Brazil Bulgaria Canada Chile China Colombia Costa Rica Cote D'Ivoire Croatia Czech Republic Denmark Dominican Republic Ecuador Egypt El Salvador Finland France Germany Greece Guatemala Hong Kong Hungary India Indonesia Ireland Israel Italy Jamaica Mexico Japan Jordan Kenya Spring 2007 Global Issues in Management 31.4% of revenue outside U.S
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Global Issues in Management
Not always the best strategy, though Spring 2007 Global Issues in Management
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Multi-Domestic Strategy
Maximize local responsiveness Customize the product and marketing strategy to national demands Extremely decentralized Often the strategy of choice for consumer products Good for high local responsiveness and low cost reduction pressures Nestle: No indication of any pet food in Paraguay Major brand in Chile 6 pet food brands in U.S. Spring 2007 Global Issues in Management 12-18
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Global Issues in Management
Global Strategy Best use of economies of scale and scope This is a low cost strategy Utilize product standardization to create a global product Not good where local responsiveness demand is high Spring 2007 Global Issues in Management
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Transnational Strategy
Core competencies can develop in any of the firm’s worldwide operations Flow of skills and product offerings occurs throughout the firm - not only from home firm to foreign subsidiary (global learning) Makes sense where there is pressure for both cost reduction and local responsiveness But….costs involved in communication and coordination Spring 2007 Global Issues in Management
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