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PowerPoint Presentation by Charlie Cook The Environment of Managing Gary Dessler Principles and Practices for Tomorrow’s Leaders Copyright © 2004 Prentice Hall, Inc. All rights reserved. Managing in a Global Environment Managing in a Global Environment 17 C H A P T E R
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Copyright © 2004 Prentice Hall. All rights reserved.17–2 Chapter Objectives After studying this chapter and the case exercises at the end, you should be able to: 1.List the sociocultural and legal/political errors managers make when expanding abroad. 2.Tell a manager why a company is (or is not) a suitable candidate for expanding into a specific country, based on the cultural, and geographic distance between that country and the company’s home country. 3.List the reasons why you would (or would not) be a good global manager.
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Copyright © 2004 Prentice Hall. All rights reserved.17–3 Chapter Objectives (cont’d) 4.Specify the basic global strategy a manager should pursue, and why. 5.Specify the type of basic global organization structure a manager should use, and why. 6.Tell a manager what he or she did wrong in leading and motivating employees abroad.
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Copyright © 2004 Prentice Hall. All rights reserved.17–4 Ways of Doing Business Abroad Exporting Selling abroad, either directly to target customers or indirectly by retaining foreign sales agents and distributors. Licensing An arrangement whereby a firm (the licensor) grants a foreign firm the right to use intangible property. Franchising The granting of a right by a parent company to another firm to do business in a prescribed manner.
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Copyright © 2004 Prentice Hall. All rights reserved.17–5 Ways of Doing Business Abroad (cont’d) Foreign Direct Investment Operations in one country controlled by entities in a foreign country. Strategic Alliance An agreement between potential or actual competitors to achieve common objectives. Joint Venture The participation of two or more companies in an enterprise such that each party contributes assets, owns the entity to some degree, and shares risk.
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Copyright © 2004 Prentice Hall. All rights reserved.17–6 Ways of Doing Business Abroad (cont’d) Wholly Owned Subsidiary A firm that is owned 100% by a foreign firm.
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Copyright © 2004 Prentice Hall. All rights reserved.17–7 The Language of International Business International Trade The export or import of goods or services to consumers in another country. International Business Any firm that engages in international trade or investment; also refers to business activities that involve the movement of resources, goods, services, and skills across national boundaries. International Management The performance of the management process across national boundaries.
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Copyright © 2004 Prentice Hall. All rights reserved.17–8 The Language of International Business Multinational Corporation (MNC) A company that operates manufacturing and marketing facilities in two or more countries: managers of the parent firm, whose owners are mostly in the firm’s home country, coordinate the MNC’s operation.
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Copyright © 2004 Prentice Hall. All rights reserved.17–9 The Economic Environment Economic Systems Market economies Supply and demand determine what is produced, in what quantities, and at what prices. Command economies Yearly targets on five-year plans with specific production goals are set by the government which also sets prices for each sector of the economy. Mixed economies Some sectors are left to private ownership and free market mechanisms, while others are largely owned and managed by the government.
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Copyright © 2004 Prentice Hall. All rights reserved.17–10 The Economic Environment (cont’d) Economic Development A measure of the how extensively the industrial infrastructure is developed for a given country. Gross Domestic Product (GDP) The market value of all goods and services that have been bought for final use during a period of time, and, therefore, is the basic measure of a nation’s economic activity.
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Copyright © 2004 Prentice Hall. All rights reserved.17–11 The Economic Environment (cont’d) Exchange Rate The rate at which one country’s currency can be exchanged for another country’s currency. Trade Barrier A governmental influence that is usually aimed at reducing the competitiveness of imported products or services. Tariff A government tax on imports. Quota A legal restriction on the import of particular goods.
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Copyright © 2004 Prentice Hall. All rights reserved.17–12 The Economic Environment (cont’d) Exchange Rate The rate at which one country’s currency can be exchanged for another country’s currency. Trade Barrier A governmental influence that is aimed at reducing the competitiveness of imported products or services. Tariff: A government tax on imports. Quota:A legal restriction on the import of particular goods. Subsidy: A direct payment a country makes to support a domestic producer.
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Copyright © 2004 Prentice Hall. All rights reserved.17–13 Economic Integration and Free Trade Free Trade All trade barriers among participating countries are removed, so there is an unrestricted exchange of goods among these countries. Economic Integration The result of two or more nations minimizing trade restrictions to obtain the advantages of free trade. Free Trade Area A type of economic integration in which all barriers to trade among members are removed.
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Copyright © 2004 Prentice Hall. All rights reserved.17–14 Economic Integration Customs Union A situation in which trade barriers among members are removed and a common trade policy exists with respect to nonmembers. Common Market A system in which no barriers to trade exist among member countries, and a common external trade policy is in force that governs trade with nonmembers Factors of production, such as labor, capital, and technology, move freely among members.
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Copyright © 2004 Prentice Hall. All rights reserved.17–15 Levels of Economic Integration FIGURE 17–1
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Copyright © 2004 Prentice Hall. All rights reserved.17–16 European Union (EU) Organizational Structure FIGURE 17–2 Source: From “Survey of Europe,” The Economics, October 23, 1999, p. 0. @ 00 The Economist Newspaper Group, Inc. Reprinted with permission. Further reproduction prohibited. www.economist.com.
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Copyright © 2004 Prentice Hall. All rights reserved.17–17 Legal and Political Environment Common Law A legal system where tradition and precedent—not written statutes—govern legal decisions. Other Code Law A legal system that uses a comprehensive set of written statutes. International Law A body of law is embodied in treaties and other types of agreements among nations.
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Copyright © 2004 Prentice Hall. All rights reserved.17–18 The Technological Environment Technology transfer The transfer, often to another country, of systematic knowledge for the manufacturing of a product, for the application of a process, or for the rendering of a service; it does not extend to the mere sales or lease of goods. Successful technology requires: A needed and suitable technology. Favorable social and economic conditions. The willingness and ability of the receiving party to use and adapt the technology
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Copyright © 2004 Prentice Hall. All rights reserved.17–19 FIGURE 17–3 Determinants of Global Distance Source: Adapted from Pankaj Ghemawat, “Distance Still Matters,” Harvard Business Review, September, 2001, p. 140.
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Copyright © 2004 Prentice Hall. All rights reserved.17–20 FIGURE 17–4 Industry Sensitivity to Distance Source: Pankaj Ghemawat, “Distance Still Matters,” Harvard Business Review, September 2001, pp. 142–43.
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Copyright © 2004 Prentice Hall. All rights reserved.17–21 International Expansion Factors before expanding abroad: Cultural distance (languages and religions) Administrative distance (absence of shared monetary or political associations) Geographic distance (physical remoteness) Economic distance (differences in consumer incomes).
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Copyright © 2004 Prentice Hall. All rights reserved.17–22
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Copyright © 2004 Prentice Hall. All rights reserved.17–23 Managing Globally Ethnocentric A management philosophy that leads to the creation of home-market-oriented firms. Polycentric A management philosophy oriented toward pursuing a limited number of individual foreign markets. Regiocentric (also Geocentric) A management philosophy oriented toward larger areas, including the global marketplace.
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Copyright © 2004 Prentice Hall. All rights reserved.17–24 FIGURE 17–5 Environmental Influences and Global Strategy Source: Adapted from Figures 2 and 5 and discussion in Sumantra Ghoshal and Nitin Nohria, Reprinted from John Daniels and Lee Radebaugh, International Business (Upper Saddle River, NJ: Prentice Hall, 2001), p. 529. “Horses for Courses: Organizational Forms for Multinational Corporations,” Sloan Management Review, Winter 1993, pp. 23–36.
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Copyright © 2004 Prentice Hall. All rights reserved.17–25 FIGURE 17–6 International Organizations
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Copyright © 2004 Prentice Hall. All rights reserved.17–26 Values Basic beliefs about what is important and unimportant, and what one should and should not do. Hofstede’s measures of global values: Power distance (acceptance of inequality) Individualism versus collectivism Masculinity versus femininity (assertiveness versus caring) Uncertainty avoidance (desire for certainty and stability)
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Copyright © 2004 Prentice Hall. All rights reserved.17–27 FIGURE 17–7 Country Clusters Based on Power Distance Source: Source: Adapted from G. Hofstede, Culture’s Consequences (Beverly Hills, CA: Sage Publications, 1984).
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Copyright © 2004 Prentice Hall. All rights reserved.17–28
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Copyright © 2004 Prentice Hall. All rights reserved.17–29
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