1. The Environment of International Business Organizations

2. Chapter Outline The Organization’s Environments
The General Environment
The Task Environment
The Internal Environment
The Ethical and Social Environment of Management
Individual Ethics in Organizations
Social Responsibility and Organizations
Managing Social Responsibility

3. Chapter Outline (cont’d)
The International Environment of Management
Trends in International Business
Managing the Process of Internationalization
Levels of International Business Activity
The Context of International Business
The Organization’s Culture
The Importance of Organization Culture
Determinants of Organization Culture
Managing Organization Culture

4. The Organization’s Environment
External Environment
General environment is everything outside an organization’s boundaries—economic, legal, political, socio-cultural, international, and technical forces.
Task environment is composed of specific groups and organizations that effect the firm.
Internal Environment
Conditions and forces within an organization. 3

5. The Organization and Its Environments
Owners
Employees
Physical environment
Board of directors
Culture
Competitors
International
dimension
Political-
legal
Technological
Sociocultural
Economic
Regulators
Customers
Strategic
partners
Suppliers
Internal environment
Task environment
External environment
General environment

6. The External Environment
The General Environment
The set of broad dimensions and forces in an organization’s surroundings that create its overall context.
Economic dimension is the overall health and vitality of the economic system in which the organization operates.
Technological dimension refers to the methods available for converting resources into products or services. 7

7. The External Environment
The General Environment (cont’d)
Sociocultural dimension includes the customs, mores, values, and demographic characteristics of the society in which the organization functions.
Political-legal dimension is the extent of government regulation of business and the general relationship between business and government.
International dimension is the extent to which the organization is affected by business in other countries. 7

8. The External Environment
The Task Environment
Specific groups affecting the organization
Competitors seeking the same resources as the organization.
Customers who acquire an organization’s products or resources.
Suppliers that provide resources for the organization.
Regulators (agencies and interest groups) that control, legislate, or influence the organization’s policies and practices.
Strategic partners (allies) who are in a joint venture or partnership with the organization. 9

9. McDonald’s Task Environment
Competitors •
Burger King
Wendy’s
Subway
Dairy Queen
Customers
Individual
consumers
Institutional
customers
Suppliers
Coca-Cola
Wholesale food
processors
Packaging
manufacturers
Strategic Partners
Wal-Mart
Disney
Foreign partners
Regulators
Food and Drug
Administration
Securities and
Exchange
Commission
Environmental
Protection
Agency
Internal environment
Task environment
Figure 2.1

10. How Organizations and Environments Interact

11. How Business and Government Influence Each Other
The government influences business
through direct and indirect regulation: •
Environmental protection legislation
Consumer protection legislation
Employee protection legislation
Securities legislation
The tax codes
Business influences the government through:
Personal contacts and networks
Lobbying
Political action committees (PACs)
Favors and other influence tactics

12. Five-Forces Analysis (Porter)

13. The Internal Environment
Conditions and stakeholder forces within an organization
Owners with legal property rights to a business.
Board of directors elected by the stockholders to oversee the general management of the firm to best serve the stockholders’ interest.
Employees who work for the firm and have a vested interest in its continued operation and existence.
Physical work environment of the organization and the work that people do. 11

14. Individual Ethics In Organizations
An individual’s personal beliefs regarding what is right and wrong or good and bad.
Ethical Behavior
This behavior is in the eye of the beholder. However, it also refers to behavior that conforms to generally accepted social norms.
Examples of Unethical Behavior
“Borrowing” office supplies for personal use.
“Surfing the Net” on company time.

15. Determinants of Individual Ethics

16. Managerial Ethics Three areas of concern for managerial ethics
Employees
Organization •
Conflicts of interest
Secrecy and
confidentiality
Honesty
Hiring and firing
Wages and working
conditions
Privacy and respect
Subject to ethical ambiguities
Advertising and promotions
Ordering and purchasing
Bargaining and negotiation
Financial disclosure
Shipping and solicitation
Other business relationships
Economic Agents
Customers
Competitors
Stockholders
Suppliers
Dealers
Unions
Managerial Ethics
Three areas of concern for managerial ethics
The relationships of the firm to the employee.
The employee to the firm.
The firm to other economic agents.

17. Ethics in Organizations
Managing Ethical Behavior
Begins with top management which establishes the organization’s culture and defines what will and will not be acceptable behavior.
Includes training on how to handle different ethical dilemmas.
Developing a code of ethics.
Written statement of the values and ethical standards that guide the firm’s actions.

18. Social Responsibility and Organizations
The set of obligations (to behave responsibly) that an organization has to protect and enhance the social context in which it functions.
Areas of Social Responsibility
Stakeholders: customers, employees, and investors.
The natural environment: environmentally sensitive products, recycling, and public safety.
The general social welfare: charitable contributions, and support for social issues such as child labor and human rights.

19. Arguments For and Against Social Responsibility1.
Business creates problems and
should therefore help solve them. 2.
Corporations are citizens in our
society. 3.
Business often has the resources
necessary to solve problems. 4.
Business is a partner in our
society, along with the govern-
ment and the general population.
Social
Responsibility
The purpose of business in U.S.
society is to generate profit
for owners.
Involvement in social programs
gives business too much power.
There is potential for conflicts
of interest.
Business lacks the expertise to
manage social programs.
Arguments For Social Responsibility
Arguments Against Social Responsibility
Figure 2.2

20. Arguments For and Against Social Responsibility

21. Approaches to Social Responsibility
Source: Barney, Jay B. and Ricky W. Griffin, The Management of Organizations. Copyright © 1992 by Houghton Mifflin Company. Used with permissions.

22. Managing Social Responsibility: Formal Organizational Dimensions
Legal Compliance
Extent to which the organization conforms to local, state, federal, and international laws.
Ethical Compliance
Extent to which members of the organization follow basic ethical/legal standards of behavior.
Philanthropic Giving
Awarding of funds or gifts to charities and other social programs.

23. Managing Social Responsibility: Informal Organizational Dimensions
Organizational Leadership and Culture
Leadership practices and the culture of the organization can help define the social responsibility stance an organization and its members will adopt.
Whistle Blowing
The organizational response to the disclosure by an employee of illegal or unethical conduct on the part of others within the organization is indicative of the organization’s stance on social responsibility.

24. Trends in International Business
Economic Recovery
Industrialized nations in Europe and Asia have rebuilt their economic systems that were devastated in WWII.
Decreasing Isolation from Foreign Competition
U.S. consumer goods markets are open to overseas competitors.
Increasing Globalization of World Markets
Volume of international trade has increased more than 3,000% from 1960 to 2000.

25. Managing The Process of Globalization
Exporting
Making a product in the firm’s domestic market and selling it in another country.
Importing
Bringing a good, service, or capital into a home country from abroad.
Licensing
An arrangement whereby a firm allows a foreign company to manufacture or market the products and uses its brand name, trademark, technology, patent, copyright, or other assets.

26. Managing The Process of Globalization
Strategic Alliance and Joint Ventures
Two or more firms jointly cooperate for mutual gain, by sharing business costs and/or sharing ownership of a new enterprise.
Direct Investment
Occurs when a firm headquartered in one country builds or purchases operating facilities or subsidiaries in a foreign country.
Maquiladoras are light-assembly plants built in northern Mexico close to the U.S. border which are given special tax breaks by the Mexican government.

27. Managing The Process of Globalization

28. Environmental Challenges of International Management

29. Advantages and Disadvantages of Various Approaches to Internationalization
Table 2.1

30. Controls on International Trade
Key Concepts
Tariffs are collected on goods shipped across national boundaries.
Quotas are limits placed on the number or value of goods that can be traded as exports or imports.
Export restraint agreements are voluntary limits on the volume or value of goods exported to, or imported from, another country.

31. The Structure of the Global Economy
Economic Communities
Sets of countries that engage in high levels of trade with each other through the elimination of trade barriers such as quotas and tariffs.
European Union (EU)
North American Free Trade Agreement (NAFTA)
Latin American Integration Association
Caribbean Common Market

32. European Union (EU) Member Nations
Source: Lucas, George H., Robert P. Bush, and Larry R. Gresham, Retailing. Copyright © by Houghton Mifflin Company. Used with permissions.
Figure 2.3

33. The Cultural Environment
Language
In Japanese the word “hai” can mean either “yes” or “I understand.”
General Motors’ brand name “Nova” pronounced as “no va” in Spanish means “doesn’t go.”
The Meaning of Colors
Green is popular in Muslim countries, yet it signifies death in other countries.
Pink is associated with feminine characteristics in the U.S.; yellow is the most feminine color in other countries.

34. The Organization and Culture
Organization Culture
The collection of values, beliefs, behaviors, customs, and attitudes that characterize a community of people.
The Importance of Organization Culture
Culture determines the overall “feel” of the organization, although it may vary across different segments of the organization.
Culture is a powerful force that can shape the firm’s overall effectiveness and long-term success.

35. The Organization’s Culture
Determinants of Organization Culture
Organization’s founder (personal values and beliefs).
Symbols, stories, heroes, slogans, and ceremonies that embody and personify the spirit of the organization.
Corporate success that strengthens the culture.
Shared experiences that bond organizational members together.

36. Organization Culture (cont’d)
Managing Organization Culture
Understand the current culture to understand whether to maintain or change it.
Articulate the culture through slogans, ceremonies, and shared experiences.
Reward and promote people whose behaviors are consistent with desired cultural values.

37. Organization Culture Changing Organization Culture
Develop a clear idea of what kind of culture you want to create.
Bring in outsiders to important managerial positions.
Adopt new slogans, stories, ceremonies, and purposely break with tradition.