1. Schermerhorn - Chapter 31 Chapter 3 Globalization and International Management  Planning Ahead What are the processes of globalization? What is the environment of international business? How does culture create global diversity? How do management practices transfer across cultures?

2. Schermerhorn - Chapter 32 Processes of Globalization  The New Europe European Union (EU) grouping of European countries who agreed to support mutual economic growth 11 of these countries have agreed to adopt the Euro (common currency)

3. Schermerhorn - Chapter 33 Processes of Globalization  The Americas North American Free Trade Agreement (NAFTA) Agreement for free flow of goods and services between the U.S., Canada and Mexico Free Trade of the Americas (FTAA) is a possibility Other agreements MERCOSUR Andrean Pact CARICOM

4. Schermerhorn - Chapter 34 Processes of Globalization  Maquiladoras foreign manufacturing plants allowed to operate in Mexico allowed special privileges in exchange for hiring Mexican labor  import materials, components and equipment with duty paid on “value added”

5. Schermerhorn - Chapter 35 Processes of Globalization  Maquiladoras advantages increased employment and prosperity disadvantages social costs in border towns exploitation of less expensive Mexican labor

6. Schermerhorn - Chapter 36 Processes of Globalization  Asia and the Pacific Rim Asia and Pacific Rim economies are expected to be larger than those of the EU China is the world’s largest single-country marketplace Japanese companies account for many Fortune 500 companies

7. Schermerhorn - Chapter 37 Processes of Globalization  Africa beckons international business increased attention to stable countries

8. Schermerhorn - Chapter 38 Environment of International Business  Forms of International Business Global Sourcing manufacturing and/or purchasing components worldwide and assembling them into a final product

9. Schermerhorn - Chapter 39 International Managment  International management involves pursuing organizational objectives in an international setting.

10. Schermerhorn - Chapter 310 Environment of International Business  Forms of International Business Exporting selling locally made products in foreign markets Importing buying foreign made products and selling them in domestic markets

11. Schermerhorn - Chapter 311 Environment of International Business  Forms of International Business Licensing Agreement pay a fee to acquire the rights to sell another company’s products franchising is form of licensing

12. Schermerhorn - Chapter 312 Environment of International Business  Forms of International Business Direct Investment Strategies joint ventures strategic alliances wholly owned subsidiary

13. Schermerhorn - Chapter 313 Multinational Corporations  Multinational Corporation (MNC) business with extensive international operations in more than one country

14. Schermerhorn - Chapter 314 Multinational Corporations  Advantages of MNCs larger tax bases increased employment opportunities technology transfers introduction of new industries development of local resources

15. Schermerhorn - Chapter 315 Multinational Corporations  Disadvantages of MNCs extract excessive profits dominate local economy do not respect local customs and laws fail to help domestic firms develop do not transfer most advanced technology

16. Schermerhorn - Chapter 316 I.A. GLOBAL ORGANIZATIONS FOR A GLOBAL ECONOMY Multinational company (MNC): a business that exercises strategic control over production and/or marketing facilities in two or more countries. Global corporation: worldwide network of fully integrated design, production, and marketing operations. (This is a global MNC.) Multi-Domestic MNC: This is a corporation that operates in various countries. Each country has nationals running most operations and there is little involvement with other parts of company outside of each country. (Insurance, real estate).

17. Schermerhorn - Chapter 317 Give local examples of international business  Evans Construction Company  Harmon Industries

18. Schermerhorn - Chapter 318 Financial Performance of MNC’s  Two studies  1. U.S. study found that 58 MNC’s out- performed 43 solely domestic companies.  2. British study found profitability increased with foreign involvement.  Could be just this time in history.

19. Schermerhorn - Chapter 319 Pros and Cons of Global Operations  Ethical Issues in Multinational Operations Foreign Corrupt Practices Act Sweatshops Environmental protection

20. Schermerhorn - Chapter 320 Culture and Global Diversity  Culture shared set of beliefs, values and patterns of behavior common to a group of people

21. Schermerhorn - Chapter 321 Culture and Global Diversity  Ethnocentric tendency to view one’s own culture as superior to others Geocentric viewing all cultures with respect as required

22. Schermerhorn - Chapter 322 Culture and Global Diversity  Silent Language Culture shock discomfort a person feels in an unfamiliar culture

23. Schermerhorn - Chapter 323 Culture and Global Diversity  Spoken Language Low-context explicit spoken and written word examples: US, Germany High-context words convey only part of the message examples: Middle East, Asia

24. Schermerhorn - Chapter 324 Culture and Global Diversity  Use of Space (Proxemics) interpersonal distance used in communication Latin Americans tend to be close Americans value more space

25. Schermerhorn - Chapter 325 Culture and Global Diversity  Time Orientation Monochronic (our text calls it sequential) time is allotted do one thing at a time Polychronic time is allotted to do many things at once

26. Schermerhorn - Chapter 326 Culture and Global Diversity  Religion may influence business practices source of ethical and moral teaching Can affect business ethics (At times in the last l 1,500 years, it was against some religions to loan money and get interest.

27. Schermerhorn - Chapter 327 Culture and Global Diversity  Role of Contracts some cultures view as final and binding others view as a starting point some expect contracts to be written others accept “word” as binding

28. Schermerhorn - Chapter 328 Culture and Global Diversity  Values and National Cultures (Hofstede) Power distance Uncertainty avoidance Individualism-collectivism Masculinity-femininity Short-term - long-term orientation

29. Schermerhorn - Chapter 329 American management theories might not apply abroad Hofstede’s study of 116,000 IBM employees indicates differences in Power Distance, Uncertainty Avoidance, Individualism versus Collectivism, and Masculinity/Femininity

30. Schermerhorn - Chapter 330 III. A. continued. SURVEY OF HOFSTEDE’S CULTURAL DIMENSIONS Instructions: Rate yourself on each of the four dimensions by circling a response. Next, rate your native culture by drawing an X through the appropriate response.  Power distance: How readily do individuals accept the unequal distribution of power in organizations and institutions? Low power distance (equality)High Power distance (rank) 1----2----3----4----5----6----7----8----9----10 Add a zero after your score.

31. Schermerhorn - Chapter 331 SURVEY OF HOFSTEDE’S CULTURAL DIMENSIONS (continued)  Uncertainty avoidance: How threatening are uncertain and ambiguous situations, and how important are rules, conformity, and absolute truths? Avoid uncertainty (rules)Accept uncertainty (chance) 1----2----3----4----5----6----7----8----9----10 To score this subtract your score from 10 and add a then add a zero after your score.

32. Schermerhorn - Chapter 332 SURVEY OF HOFSTEDE’S CULTURAL DIMENSIONS (continued)  Individualism-collectivism: Are people responsible for their own welfare within a loosely knit social framework, or does the group look out for individuals in exchange for loyalty?  Personal responsibilityCollective responsibility 1----2----3----4----5----6----7----8----9----10 Add a zero after your score.

33. Schermerhorn - Chapter 333 SURVEY OF HOFSTEDE’S CULTURAL DIMENSIONS (continued) Masculinity-femininity: How important are masculine attitudes (assertiveness, money and possessions, and performance) versus feminine attitudes (concern for people, the quality of life, and the environment)? Masculine attitudesFeminine attitudes 1----2----3----4----5----6----7----8----9----10 To score this item subtract your score from 10 and then add a zero.

34. Schermerhorn - Chapter 334 U. S. RANKINGS  POWER DISTANCE 15/40, 25 other countries have greater differences  UNCERTAINTY AVOIDANCE 9/40, we don’t mind uncertainty  INDIVIDUALISM 1/40  MASCULINITY 28/40, 12 countries more masculine

35. Schermerhorn - Chapter 335 OTHER SOURCES OF CULTURAL DIVERSITY  Time monochronic time(called sequential in our test): perception of time as a straight line broken into standard units. (“Time is money. It is spent, saved, or wasted.”) polychronic time: perception of time as flexible, elastic, and multidimensional.

36. Schermerhorn - Chapter 336 OTHER SOURCES OF CULTURAL DIVERSITY (continued) For Discussion: 1.Do you tend to be monochronic or polychronic? Explain. How well do you deal with people who have the opposite orientation toward time?

37. Schermerhorn - Chapter 337 For Discussion: 2.How close is “too close” when you are carrying on a business conversation with a stranger? OTHER SOURCES OF CULTURAL DIVERSITY (continued)

38. Schermerhorn - Chapter 338 OTHER SOURCES OF CULTURAL DIVERSITY (continued) For Discussion: 3.How important is it to have a mastery of the local language when doing business in a foreign country?

39. Schermerhorn - Chapter 339 U.S. is often handicapped in international trade  Little cross-country experience  Low context culture  Little multi-language experience  Lack of confidence and overconfidence  Little time spent on preparation

40. Schermerhorn - Chapter 340 To teach our EXPETRIATES CROSS- CULTURAL TRAINING TECHNIQUES  Documentary programs  Culture assimilator (practice in simulation)  Language instruction  Sensitivity training  Field experience

41. Schermerhorn - Chapter 341 CROSS-CULTURAL TRAINING TECHNIQUES (continued) For Discussion: 1.If you were going on an 18-month assignment in a country where something other than your native language is spoken, which of these training programs would you want? Why?

42. Schermerhorn - Chapter 342 CROSS-CULTURAL TRAINING TECHNIQUES (continued) 2.Could you transact a complex business negotiation in two or more languages? How much of an advantage are your foreign-language skills in the job market today?.

43. Schermerhorn - Chapter 343 Culture and Global Diversity  Understanding Cultural Differences Attitudes toward environment inner-directed (individual can change things) When people believe they can change things they are often individualistic and are those who move society and business along. outer-directed (individual can’t change things)

44. Schermerhorn - Chapter 344 Management Across Cultures  Comparative Management is the study of how management systematically differs from one country and/or culture to the next global manager  someone comfortable with cultural diversity  quick to find opportunity in unfamiliar settings  Some studies show all across the world, most workers can be developed to work under participative styles of leadership.

45. Schermerhorn - Chapter 345 Culture and Global Diversity  Are Management Theories Universal? U.S. management theories may be ethnocentric emphasis on participation and individual performance are not applicable to some other cultures

46. Schermerhorn - Chapter 346 Culture and Global Diversity  Are Management Theories Universal? Japanese management practices lifetime employment job rotation and broad career experience shared information collective decision-making quality emphasis These practices are not easy to translate into US management, but Ouchi suggest how to modify Japanese for US management.

47. Schermerhorn - Chapter 347 THEORY Z (Ouchi)  Theory Y, people like to work. It is natural and enjoyable.  Theory Z In U.S. it means longer termed employment, slow evaluation, cross-functional career paths, democratic decision making with individual responsibility greater than in Japan.  Theory X, people dislike work and responsibilitly

48. Schermerhorn - Chapter 348 Culture and Global Diversity  Global Organizational Learning cultural awareness facilitates more informed transfers of management practices