1. Management Thoughts & Practices
MBA & BBA
Lecture 4
(Managing Global Environment)
By: Farhan Mir

2. Topics Managing Global Environment Global Perspective
Introduction
History and Evolution of Management
Organizational & Environmental Constraints
Managing Global Environment
Global Perspective
Need for going Global
Understanding Global Environment
Doing Business Globally
Managing in Global Environment

3. Trends in International Business
Why do companies expand internationally?
Expand sales (Extending Markets)
Cutting costs
Offering new products
Global Opportunities
(WTO allowing International companies more opportunities in Pakistani market & Vice Versa)
But once they enter into the global markets they also face global issues (Constraints of the global environment)

4. Trends in International Business
Source:

5. Trends in International Business
Wal-Mart USA
1489 Stores
1397 Supercenters
532 Sam’s Clubs
56 Neighborhood Markets
3474 Total Stores
1,000,000 + associates
Wal-Mart International
11 Argentina
23 Brazil
214 Canada
92 Germany
613 Mexico (1st int’l store in 1991)
52 Puerto Rico
265 Great Britain
31 China
15 Korea
1317 Total International
300,000 + associates

6. Trends in International Business
China:
Germany:
Mexico:
Korea:
United Kingdom:

7. Trends in International Business
Wal-Mart’s next market?

8. Perspective towards Globalization
Parochialism- narrow view of the world where you don’t recognize differences between people
Ethnocentric- best work approaches are that of the home country (where the business initiated)
Polycentric- managers in the host countries know the best work practices for running their business
Geocentric- world-oriented view that focuses on using the best approaches and people from the globe

9. Degree of Internationalization
Domestic business
All products and services within one country
Almost extinct
Mostly small businesses
International business
Operate primarily in one country
Some resources or revenues from other countries

10. Degree of Internationalization
Multinational business
Worldwide marketplace for inputs and outputs
Retain primary “headquarters” in one country
Global business
No overriding commitment to any single country
Government and legal restrictions make this category somewhat “hypothetical”

11. Degree of Internationalization
These are the largest export markets for this Finnish
company in Any idea what company this is?

12. Degree of Internationalization
Today, you might recognize this company as a major provider
of telecommunications, information technology, and electronics.

13. Degree of Internationalization
The company is Nokia,
and here are some of the countries it operates in today.
Europe, Africa
& Middle East
Asia-Pacific
Americas
Austria
Belgium
Bulgaria
Czech Republic Denmark Estonia Finland France
Germany Greece Hungary Ireland Italy Latvia
Lithuania Luxembourg Maghreb Netherlands Norway
Poland Portugal Romania Russia Slovakia Spain Sweden Switzerland Turkey UK
Australia China Hong Kong India Japan Korea Philippines Singapore Taiwan
USA
Brazil Canada
Source: Nokia.com

14. Degree of Internationalization (Some Examples)
Nestlé comes close to “global” business
Operations in over 100 countries

16. The Structure of the Global Market
Market Systems (Economic Integration)
European Union
NAFTA
AFTA
ASEAN
OPEC
Hundreds of others

17. European Union (EU)
Established in February 1992 as a treaty uniting 12 countries
Over 374 million people
Since other 7 countries also in negotiation process so the overall population increases
Before becoming part of EU all these countries had there own set of policies, tax structures and protected industries
Now a single market and a common currency (Euro)
No traveling barriers
No investment and employment barriers
Why EU?
Idea was to build alliance against the strong US and Japanese Economies
German automobiles now sold in EU
Nokia selling major telecommunication services throughout EU

18. European Union (EU)
Source: Robbins, 2002

20. Types of Global Organizations
Multinational Corporation (MNCs)
Maintains significant operations in multiple countries but manages them from a base in the home country
Sony
Transnational Corporation (TNC)
Maintains significant operations in multiple countries but decentralizes management to the local country
Nestle
Borderless Organization
Approaches global business from a geocentric approach and omits almost all barriers
IBM (developed itself into 13 divisions)

21. The Process of Internationalization
Exporting
Making products at home and selling them overseas
Most of the Sialkot Industry is based on this model
SAGA is one of the giant organization & CA is another one
Importing
Selling products home that are made overseas
You’ll find products of most of the international manufacturers in Pakistan even those organizations are not themselves present in the country
Most of the Australia is dominated by Chinese products imported for use
Licensing & Franchising
Manufacturing organizations allowing others to use their brand name, technology or product specification
Based on annual fee on sales
Service organization allowing others to sue their brand name, technology or product specification

22. The Process of Internationalization
Strategic Alliances
Doing business with partner organization overseas by sharing resources and developing new products and services
Joint Venture
A partnership in which the partner organization form a separate new organization by merging together
Foreign Subsidiary
Establishing and independent unit or facility in another country

23. The Process of Internationalization
Stage I
Passive Response
Stage II
Initial Overt Entry
Stage III
Established International
Operations
Foreign
Subsidiary
Joint
Ventures
Exporting
to foreign
countries
Strategic
Alliances
Hiring foreign
representation or
contracting with
foreign manufacturers
Importing
from foreign
countries
Licensing/
Franchising

24. Challenges for the Global Manager
Economic Environment
Resource allocation processes
Property ownership
Natural resources
Infrastructure
Political Environment
Government stability
International trade incentives
International trade controls
Economic communities
Cultural Environment
Values, Symbols, Beliefs, Language
International Management Functions

25. Challenges for the Global Manager
Cultural Environment
Often taken for granted
Not necessarily a problem, but can be disastrous
Language
Values, symbols, beliefs

26. Challenges for the Global Manager
Examples of cultural “bloopers”
GM’s Chevy Nova didn’t sell well in South America because “no va” means “it won’t go” in Spanish
In Taiwan, the translation of the Pepsi slogan “Come alive with the Pepsi generation” came out as “Pepsi will bring your ancestors back from the dead.”
Gerber changed its baby food packaging in Africa after it learned the largely illiterate population was accustomed to seeing a picture on the label of what was in the can
Coca-Cola had to alter the taste of its soft drink in China when the Chinese described it as “tasting like medicine.” The name “coca-cola” also had to be re-worked because it translated as “bite the wax tadpole”.

27. Challenges for the Global Manager- Global Distances

28. Hofstede’s Framework for Assessing National Cultures
Individualism versus Collectivism
Power Distance
Uncertainty Avoidance
Quantity versus Quality of Life
Long-term versus Short-term Orientation

29. Examples of Hofstede’s Cultural Dimensions

30. Careers in International Management- If you have got a International Assignment
Takes personal and business risks
Changes with feedback
Enjoys challenge
Takes advantage of opportunities
Open to criticism
Seeks feedback
Maintains flexibility
Success Factors
Cross-cultural sensitivity
Business knowledge
Courage
Motivates others
Personal integrity
Diagnostic skills
Commitment to success
There is more to being suited for global management than liking to travel or having a global perspective. A recent study by behavioral scientists at the University of Southern California identified fourteen personal characteristics which can distinguish persons with high potential for global management from those with low potential (see the table above).
A manager can get a tentative impression of his or her potential for managing internationally, by using a scale which ranges from “strong agreement” (number 7) to “strong disagreement” (number 1). The manager should place a number (from 1-7) next to each of the fourteen personal characteristics. Generally speaking, the higher the score, the more likely that he or she will have a high-potential for success.