1. International Management Chapter Six Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

2. 6-2 Learning Objectives LO1 Discuss what integration of the global economy means for individual companies and their managers LO2 Describe how the world economy is becoming more integrated than ever before LO3 Define the strategies organizations use to compete in the global marketplace LO4 Compare the various entry modes organizations use to enter overseas markets

3. 6-3 Learning Objectives (cont.) LO5 Explain how companies can approach the task of staffing overseas operations LO6 Summarize the skills and knowledge managers need to manage globally. LO7 Identify ways in which cultural differences across countries influence management

4. 6-4 Implications of a Flat World 1. Expansion of international trade 2. Foreign direct investment (FDI) is playing an ever-increasing role in the global economy 3. Imports are penetrating deeper into the world’s largest economies 4. Companies are finding their home markets under attack from foreign competitors

5. 6-5 U.S. Exports as a Share of U.S. Output Figure 6.1

6. 6-6 Implications of a Flat World  Opportunities are greater  Environment is more complex and competitive

7. 6-7 Relative Growth in World Merchandise Exports by Major Product Group Figure 6.2

8. 6-8 The Role of Outsourcing  Outsourcing  Contracting with an outside provider to produce one or more of an organization’s goods or services.  Offshoring  Moving work to other countries.

9. 6-9 Factors to Consider for Offshoring  What is the competitive advantage of the products they offer?  Is the business in its early stages?  Can production savings be achieved locally?  Can the entire supply chain be improved?

10. 6-10 The Global Environment  The global economy is dominated by countries in three regions: North America, Western Europe, and Asia  Other developing countries and regions represent important areas for economic growth

11. 6-11 Key Issues of the Global Environment Table 6.1

12. 6-12 European Unification  Europe is integrating economically to form the biggest market in the world  Certain structural issues within Europe need to be corrected for the EU to function effectively.

13. 6-13 Top U.S. Trading Partners Based on Total Imports and Exports Figure 6.4

14. 6-14 Question What economic pact that combined the economies of the United States, Canada, and Mexico? A. HAFTA B. NAFTA C. EU D. South American FTA

15. 6-15 The Americas  North American Free Trade Agreement (NAFTA)  An economic pact that combined the economies of the United States, Canada, and Mexico into one of the world’s largest trading blocs

16. 6-16 Organizational Models Figure 6.5

17. 6-17 Choosing a Global Strategy  International model  composed of a company’s overseas subsidiaries and characterized by greater control by the parent company over the research function and local product and marketing strategies than in the multinational model.

18. 6-18 Choosing a Global Strategy  Multinational model  consists of the subsidiaries in each country in which a company does business and provides a great deal of discretion to those subsidiaries to respond to local conditions

19. 6-19 Choosing a Global Strategy  Global model  consists of a company’s overseas subsidiaries and characterized by centralized decision making and tight control by the parent company over most aspects of worldwide operations

20. 6-20 Choosing a Global Strategy  Transnational model  characterized by centralizing certain functions in locations that best achieve cost economies  basing other functions in the company’s national subsidiaries to facilitate greater local responsiveness  fostering communication among subsidiaries to permit transfer of technological expertise and skills.

21. 6-21 Comparison of Entry Modes Table 6.2

22. 6-22 Exporting Advantages of exporting:  Provides scale economies by avoiding the costs of manufacturing in other countries  Consistent with a pure global strategy

23. 6-23 Licensing  International licensing  an arrangement by which a licensee in another country buys the rights to manufacture a company’s product in its own country for a negotiated fee (typically, royalty payments on the number of units sold)

24. 6-24 Franchising  Franchising  the company sells limited rights to use its brand name to franchisees in return for a lump-sum payment and a share of the franchisee’s profits.

25. 6-25 Joint Ventures Joint ventures benefit a company through:  the local partner’s knowledge of the host country’s competitive conditions, culture, language, political systems, and business systems  the sharing of development costs and/or risks with the local partner.

26. 6-26 Managing across Borders  Expatriates  Parent-company nationals who are sent to work at a foreign subsidiary

27. 6-27 Managing across Borders  Host-country nationals  Natives of the country where an overseas subsidiary is located  Third-country nationals  Natives of a country other than the home country or the host country of an overseas subsidiary.

28. 6-28 Stressors and Coping Responses in the Developmental Stages of Expatriate Executives Table 6.3

29. 6-29 Skills of the Global Manager  15% of all employee transfers are to international locations  Failure rate ranges from 20%-70%  Failure rate  the number of expatriate managers of an overseas operation who come home early  communication is key to reducing the failure rate

30. 6-30 Identifying International Executives Table 6.4

31. 6-31 How to Prevent Failed Global Assignments Table 6.5

32. 6-32 Understanding Cultural Issues  Ethnocentrism  The tendency to judge others by the standards of one’s group or culture, which are seen as superior  Culture shock  The disorientation and stress associated with being in a foreign environment.

33. 6-33 Understanding Cultural Issues  Power distance  the extent to which a society accepts the fact that power in organizations is distributed unequally  Individualism/ collectivism  the extent to which people act on their own or as a part of a group.

34. 6-34 Understanding Cultural Issues  Uncertainty avoidance  the extent to which people in a society feel threatened by uncertain and ambiguous situations.  Masculinity/ femininity  the extent to which a society values quantity of life over quality of life

35. 6-35 Positions of 40 Countries on the Power Distance and Individualism Scales Figure 6.6

36. 6-36 Question What is a foreign national brought in to work at the parent company? A. Expatriate B. Non-patriate C. Inpatriate D. Unpatriate

37. 6-37 Understanding Cultural Issues  Inpatriate  A foreign national brought in to work at the parent company.

38. 6-38 Understanding Cultural Issues  Americans tend to have specific views about the purpose of meetings and how much time can be spent.  International workers may have different preconceptions about the nature and length of meetings, and managers should make sure foreign nationals are comfortable with the American approach.

39. 6-39 Understanding Cultural Issues  Workers from other countries can work long hours but, in countries with strong labor organizations, often get many more weeks of vacation than American workers.  Europeans in particular may balk at working on weekends.

40. 6-40 Video: Wal-Mart - Push into Africa  What are some advantages of entering a foreign market via an acquisition.?  Do you see any drawbacks to Wal-Mart’s recent decision to acquire the Mass Mart chain in South Africa?