MANAGING IN A GLOBAL ENVIRONMENT

Parochialism – viewing the world solely through own’s eyes and perspectives.

- people with parochial attitude do not recognize that others have different ways of
living and working

ATTITUDE TOWARDS GLOBAL BUSINESS

1. Ethnocentric Attitude – is the parochialistic belief that the best work approaches and practices are
those of the home country (the country in which the company’s headquarters are located).

- Managers with an ethnocentric attitude believe that people in foreign

countries don’t have the needed skills, expertise, knowledge or experience to make the best business
decisions as people in the home country do.

- They don’t trust foreign employees with key decisions of technology

2. Polycentric Attitude – is the view that employees in the host country (the foreign country in which the
organization is doing business) know the best work approaches and practices for running their business.

- Managers with this attitude view every foreign operation as different and hard
to understand.

- They are likely to let employees there figure out how best to do things.

3. Geocentric Attitude – a world oriented view that focuses on using the best approaches and people
from around the globe

- Manager with this type of attitude have a global view and look for the best
approaches and people regardless of origin

GLOBAL TRADE TODAY IS SHAPED BY TWO FORCES:

1. Regional Trading Alliance – global competition is shaped by regional trading agreements including
European Union (EU), North American Free Trade Agreement (NAFTA) and Association of Southeast
Asian Nations.
European Union

- Is an economic and political partnership of 27 democratic European countries (Insert Image)

- Before EU, each European nation had border controls, taxes and subsidies, national policies, ad
protected industries. These barriers to travel, employment, investment, and trade prevented
European companies prevented from developing economic efficiencies
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North American Free Trade Agreement (NAFTA) and other latin American Agreements

- Were reached by the Mexican, Canadian and US governments in 1992, a vast economic bloc in
the world in terms of combined GDP of its members
- Between 1994, when NATFA went into effect, and 2007 (the most recent year for complete
statistics), merchandise trade between the United States and Canada and Mexico increased
from 4.4 percent to 6.6 percent
- Eliminating the barriers to free trade (tariffs, import licensing requirements, customs user fees)
strengthened the economic power of all three countries, but not equally.

Association of Southeast Asian Nations

- Is trading alliance of 10 Southeast Asian Nations

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2. Global Trade Mechanism

World Trade Organization – is a global organization of 153 countries that deals with the rules of trade
among nations

- Formed in 1995, the WTO evolved from the General Agreement on Tariifs and Trade (GATT), a
trade agreement in effect sicne the end of the World War II
- WTO is the only global organization that deals with trade rules among nations
- The goal of WTO is to help countries conduct trade through a system of rules
- It appears to play an important role in monitoring, promoting, and protecting global trade

International Monetary Fund and World bank Group

IMF – is an organization of 185 countries that promotes international monetary cooperation and
provides member countries with policy advice, temporary loans, and technical assistance to establish
and maintain financial stability and to strengthen economies
WBG – is a group of five closely associated institutions, all owned by its member countries that provides
vital financial and technical assistance to developing countries around the world.

- The goal is to promote long-term economic development and poverty reduction by providing
members with technical and financial support

Organization for Economic Cooperation and Development (OECD)

- The forerunner of the OECD, the Organization for European Economic Cooperation, was formed
in 1947 to administer American and Canadian aid under the Marshall Plan for the reconstruction
of Europe after World War II
- Today, the Organization for Economic Cooperation and Development (OECD) is a Paris-based
international economic organization whose mission is to help its 30 member countries achieve
sustainable economic growth and employment and raise the standard of living in member
countries while maintaining financial stability in order to contribute to the development of the
world economy

Different Types of International Organizations

multinational corporation (MNC) is any type of international company that maintains operations in
multiple countries

1. at maintains operations in multiple countries. One type of MNC is a multidomestic corporation, which
decentralizes management and other decisions to the local country

- This type of globalization reflects the polycentric attitude

- A multidomestic corporation doesn’t attempt to replicate its domestic successes by managing foreign
operations from its home country. Instead, local employees typically are hired to manage the business
and marketing strategies are tailored to that country’s unique characteristics.

2. global company, which centralizes its management and other decisions in the home country.

. This approach to globalization reflects the ethnocentric attitude

- Global companies treat the world market as an integrated whole and focus on the need for
global efficiency and cost savings. Although these companies may have considerable global
holdings, management decisions with company-wide implications are made from headquarters
in the home country.

3. Other companies use an arrangement that eliminates artificial geographical barriers. This type of MNC
is often called a transnational, or borderless, organization and reflects a geocentric attitude
How Organizations Go International

1. global sourcing (also called global outsourcing), which is purchasing materials or labor from around
the world wherever it is cheapest. The goal: take advantage of lower costs in order to be more
competitive

2. The next step in going international may involve exporting the organization’s products to other
countries—that is, making products domestically and selling them abroad. In addition, an organization
might do importing, which involves acquiring products made abroad and selling them domestically. Both
usually entail minimal investment and risk, which is why many small businesses often use these
approaches to doing business globally.

3. any small businesses often use these approaches to doing business globally. Managers also might use
licensing or franchising, which are similar approaches involving one organization giving another
organization the right to use its brand name, technology, or product specifications in return for a lump
sum payment or a fee usually based on sales. The only difference is that licensing is primarily used by
manufacturing organizations that make or sell another company’s products and franchising is primarily
used by service organizations that want to use another company’s name and operating methods.

4. When an organization has been doing business internationally for a while and has gained experience
in international markets, managers may decide to make more of a direct foreign investment. One way to
increase investment is through a strategic alliance, which is a partnership between an organization and
a foreign company partner or partners in which both share resources and knowledge in developing new
products or building production facilities.

A specific type of strategic alliance in which the partners form a separate, independent organization for
some business purpose is called a joint venture.

5. atively easy way for companies to compete globally. Finally, managers may choose to directly invest in
a foreign country by setting up a foreign subsidiary as a separate and independent facility or office. This
subsidiary can be managed as a multidomestic organization (local control) or as a global organization
(centralized control)

relevance of the political/legal,economic,and cultural environments to global business

The Political/Legal Environment

- Managers must stay informed of the specific laws in countries where they do business.
- Also, some countries have risky political climates.
- A global manager must be aware of economic issues when doing business in other countries
 - type of economic system. The two major types are a free market economy and a planned
economy.:

A free market economy is one in which resources are primarily owned and controlled by the private
sector.

A planned economy is one in which economic decisions are planned by a central government.

- Managers need to monitor inflation trends so they can anticipate possible changes in a country’s
monetary policies and make good business decisions regarding purchasing and pricing.
- Managers need accurate information on tax rules in countries in which they operate to minimize
their business’s overall tax obligation.

The Cultural Environment

- organizations have different cultures. Countries have cultures too.

- National culture includes the values and attitudes shared by individuals from a specific country
that shape their behavior and their beliefs about what is important.61

HOFSTEDE’S FRAMEWORK FOR ASSESSING CULTURES. Geert Hofstede developed one of the most
widely referenced approaches to helping managers better understand differences between national
cultures. His research found that countries vary on five dimensions of national culture.

Here are descriptions of these nine dimensions:

Power distance: the degree to which members of a society expect power to be unequally shared.
Uncertainty avoidance: a society’s reliance on social norms and procedures to alleviate the
unpredictability of future events.

Assertiveness: the extent to which a society encourages people to be tough, confrontational,

assertive, and competitive rather than modest and tender.

Humane orientation: the degree to which a society encourages and rewards individuals for being
fair, altruistic, generous, caring, and kind to others.

Future orientation: the extent to which a society encourages and rewards future-oriented behaviors
such as planning, investing in the future, and delaying gratification.

Institutional collectivism: the degree to which individuals are encouraged by societal institutions to
be integrated into groups within organizations and society.

Gender differentiation: the extent to which a society maximizes gender role differences as measured
by how much status and decision-making responsibilities women have.
 In-group collectivism: the extent to which members of a society take pride in membership in small
groups, such as their family and circle of close friends, and the organizations in which they’re
employed.

Performance orientation: the degree to which a society encourages and rewards group members for
performance improvement and excellence.

Global Management in Today’s World

THE CHALLENGE OF OPENNESS.

- One challenge is the increased threat of terrorism by a truly global terror network
- economic interdependence of trading countries
- The far more serious challenge for managers in the openness required by globalization comes
from intense underlying and fundamental cultural differences—differences that encompass
traditions, history, religious beliefs, and deep-seated values

CHALLENGES OF MANAGING A GLOBAL WORKFORCE

“As more Americans go to mainland China to take jobs, more Chinese and Americans are working side
by side. These cross-cultural partnerships, while beneficial in many ways, are also highlighting tensions
that expose differences in work experience, pay levels, and communication.”

Global companies with multicultural work teams are faced with the challenge of managing the cultural
differences in work-family relationships. The work-family practices and programs that are appropriate
and effective for employees in one country may not be the best solution for employees in other
locations.

Some researchers have suggested that managers need cultural intelligence or cultural awareness and
sensitivity skills. Cultural intelligence encompasses three main dimensions: (1) knowledge of culture as a
concept—how cultures vary and how they affect behavior; (2) mindfulness— the ability to pay attention
to signals and reactions in different cross-cultural situations; and (3) behavioral skills—using one’s
knowledge and mindfulness to choose appropriate behaviors in those situations

Other researchers have said that what effective global leaders need is a global mind-set, attributes that
allow a leader to be effective in cross-cultural environments.69Those attributes have three components
as shown