1. Chapter 8 Global Management
Management Principles
Chapter 8 Global Management
Craig W. Fontaine, Ph.D.

2. International management challenges of globalization
Europe
European Union (EU)
Political and economic alliance European countries that agreed to support mutual economic growth
Expanding to at 22 member countries with 375 million consumers
Management Fundamentals - Chapter 5

3. International management challenges of globalization
The Americas
North American Free Trade Agreement (NAFTA)
Agreement for free flow of goods and services between the Canada, Mexico, and United States
Free Trade of the Americas (FTAA) — Alaska to Chile — is a possibility
Management Fundamentals - Chapter 5

4. International management challenges of globalization
Asia and the Pacific Rim
Economic power of China and Japan
Growth in other Pacific Rim countries
Asian countries represent a third of the global marketplace
Management Fundamentals - Chapter 5

5. International management challenges of globalization

6. International management challenges of globalization
Africa
Increased attention to stable countries
Beckons international business
South African Development Community (SADC) links 14 countries in trade and economic development
Management Fundamentals - Chapter 5

7. Key concepts of globalization:
Globalization Basics
Key concepts of globalization:
Global economy
Globalization
International management
Global manager

8. Globalization Basics Global economy Globalization
Resource supplies, product markets, and business competition are worldwide, rather than local
Globalization
The process of growing interdependence of these components in the global economy

9. Globalization Basics International management Global manager
Management in organizations with business interests in more than one country
Global manager
Informed about international developments
Transnational in outlook
Competent in working with multicultural people
Aware of regional developments in a changing world

10. Globalization Basics International businesses
Conduct for-profit transactions of goods and services across national boundaries
Reasons why businesses go international:
Profits
Customers
Suppliers
Capital
Labor

11. Globalization Basics
Market entry strategies involve the sale of goods or services to foreign markets but do not require expensive investments.
Types of market entry strategies:
Global sourcing
Exporting
Importing
Licensing agreement
Franchising

12. Common forms of international business—from market entry to direct investment strategies.

13. Going Global
Levels of Involvement in International Business

14. Issues in globalization
Complications in the global business environment:
Environment is complex, dynamic, and highly competitive.
Global business executives must deal with differences in the environment of business in different countries.
World Trade Organization resolves trade and tariff disputes among countries.
Protectionism can complicate global trading relationships.

15. Trading Agreements &Trading Blocs
Definition: Preferential trading agreements
Members of bloc favored over non-members
Expected Advantages to trading blocs
Creation of new markets for producers
Lower priced goods/services for consumer
Promote political stability & economic prosperity
Much of world divided into regional trading blocs

16. Types of Trading Agreements &Trading Blocs
Trade Preference Association: Members lower govt. barriers on goods from other members only (e.g., Preferred nation designation).
Free Trade Area: Members eliminate barriers against other members but maintain individual barriers against goods from non-members (e.g., NAFTA).

17. Types of Trading Agreements &Trading Blocs
Customs Union: Members eliminate govt. barriers against members imports and establish common tariffs against non-members (e.g, EC, Mercosur).
Common Market: Barriers to all transactions removed b/n members, incl. transfers of labor, capital, & services. Common barriers against non-members (e.g., EU).

18. The 25 Nations of the European Union

19. What are multinational corporations ?
A multinational corporation (MNC) is a business with extensive international operations in more than one foreign country.

20. Why multinational corporations?
Mutual benefits for host country and MNC:
Shared growth opportunities
Shared income opportunities
Shared learning opportunities
Shared development opportunities

21. Problems Experienced by HOST Countries
Host country complaints about MNCs:
Excessive profits
Domination of local economy
Interference with local government
Hiring the best local talent
Limited technology transfer
Disrespect for local customs

22. Problems Experienced by Multinational Companies
MNC complaints about host countries:
Profit limitations
Overpriced resources
Exploitative rules
Foreign exchange restrictions
Failure to uphold contracts

23. Ethical Concerns for Multinational Corporations
Ethical issues for MNCs:
Corruption — illegal practices that further one’s business interests.
Sweatshops — employing workers at low wages for long hours and in poor working conditions.
Child labor — full-time employment of children for work otherwise done by adults.

24. What should go right and what can go wrong in MNC-host country relationships.

25. Corruption in Business and Government

26. Complicated the Roles for Managers
Planning and controlling
Complexity of international environment makes global planning and controlling challenging.
Planning and controlling risks:
Currency risk
Political risk
Management Fundamentals - Chapter 5

27. Complicated the Roles for Managers
Organizing and leading
Multinational organization structures
Global area structure
Global product structure
Staffing international operations
Competent locals
Expatriates
Management Fundamentals - Chapter 5

28. New Challenges for Managers
Comparative management
How management systematically differs among countries and/or cultures.
Global managers
Need to successfully apply management functions across international boundaries.
Management Fundamentals - Chapter 5

29. New Challenges for Managers
Are management theories universal?
North American management theories may be ethnocentric.
Participation and individual performance are not emphasized as much in other cultures.
Management Fundamentals - Chapter 5

30. Culture has many Components
Popular dimensions of culture:
Language
Low-context cultures and high-context cultures
Interpersonal space
Time orientation
Religion
Contracts and formal agreements
Management Fundamentals - Chapter 5

31. Management Fundamentals - Chapter 5
Remember Hofstede?
Values and national cultures:
Power distance
Uncertainty avoidance
Individualism-collectivism
Masculinity-femininity
Time orientation
Management Fundamentals - Chapter 5

32. Project GLOBE
Project GLOBE (Global Leadership and Organizational Behavior Effectiveness)
Researches the leadership, organizational practices, and diversity among world cultures.
Power distance
Uncertainty avoidance
Gender egalitarianism
Future orientation

33. Beyond Hofstede Project GLOBE’s nine dimensions continued
Institutional collectivism
In-group collectivism
Assertiveness
Performance orientation
Humane orientation

34. Nine cultural dimensions used by Project GLOBE researchers.
A large team of international researchers collaborated in Project GLOBE to examine societal cultures using the nine cultural dimensions shown in the figure.  When results from extensive empirical studies were analyzed for 62 countries, they were found to fall into ten culture clusters. Countries within a cluster share many societal cultural practices; countries tend to differ significantly across clusters in their cultural practices.

35. Employees in an International Workforce
Parent-country national – employee who was born and works in the country in which an organization’s headquarters is located.
Host-country national – employee who is a citizen of the country (other than parent country) in which an organization operates a facility.
Third-country national – employee who is a citizen of a country that is neither the parent country nor the host country of the employer.
When organizations operate globally, their employees are very likely to be citizens of more than one country. Employees may come from the employer’s parent country, a host country, or a third country

36. Employees in an International Workforce
When organizations operate overseas, they hire a combination of parent-country nationals, host-country nationals, or third-country nationals.
Expatriates – employees assigned to work in another country.
The extent to which organizations use parent-country, host-country, or third-country nationals varies.

37. Managers and Culture Culture Culture shock Cultural intelligence
The shared set of beliefs, values, and patterns of behavior common to a group of people.
Culture shock
Confusion and discomfort a person experiences in an unfamiliar culture.
Cultural intelligence
The ability to adapt and adjust to new cultures
Ethnocentrism
Tendency to consider one’s own culture as superior to others.

38. When Managers go Abroad
Stages in adjusting to a new culture:
Confusion
Small victories
The honeymoon
Irritation and anger
Reality

39. Expatriate Adjustment Stages
Source: GMAC Relocation Services, used with permission.

40. Causes of Expatriate Assignment Failure
Source: Based on data from Global Relocation Trends Survey Report (New York: GMAC GRS/Windham International, 2000), 48.

41. Global Employee Selection Factors

42. Spouse, Family, and Dual-Career Issues
Adaptability screening
assesses how well managers and families are likely to adjust to a foreign culture
Language and cross-cultural training for the family is just as, if not more, important than training for employees.

43. Selecting Expatriate Managers
Expatriate managers need technical competence in the area of operations.
In addition, many other skills are necessary to be successful in an overseas assignment:
Ability to maintain a positive self-image and feeling of well-being
Ability to foster relationships with host-country nationals
Ability to perceive and evaluate the host country’s environment accurately
Most international organizations assign managers to foreign posts. These assignments give rise to significant human resource challenges:
Selecting managers for these assignments
Preparing them
Compensating them
Helping them adjust to a return home
The same kinds of HRM principles that apply to domestic positions can help organizations avoid mistakes in managing expatriates:
Planning and goal setting
Selection aimed at achieving the HR goals
Performance management that includes evaluation of whether the overseas assignment delivered value relative to the costs involved

44. Compensating Expatriates
After setting the total pay, the organization divides this amount into the four components of the total pay package:
Base salary
Tax equalization allowance
Benefits
Allowances

45. Typical Expatriate Compensation Components

46. Global Assignment Management Cycle

47. Helping Expatriates Return Home
Repatriation – the process of preparing expatriates to return home from foreign assignment.
Communication: the expatriate receives information and recognizes changes at home while abroad
Validation: giving the expatriate recognition for the overseas service when this person returns home.
As the expatriate’s assignment nears its end, the human resource department faces a final challenge: helping the expatriate make the transition back to his or her home country.
The process of preparing expatriates to return home from a foreign assignment is called repatriation.