MGT 101 - Chapter 4, Global Management.

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Global Management Managing across

Borders

PPT12

Chapter Four

© 2016 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.

Major Questions You Should Be Able to Answer

4.1 What three important developments of globalization will probably affect me?

4.2 Why learn about international management, and what characterizes the successful international manager?

4.3 Why do companies expand internationally, and how do they do it?

Major Questions You Should Be Able to Answer

4.4 What are barriers to free trade, and what major organizations and trading blocs promote trade?

4.5 What are the principal areas of cultural differences?

Competition & Globalization: Who Will Be No. 1 Tomorrow?

Globalization

the trend of the world economy toward becoming a more interdependent system

The Rise of the “Global Village” & Electronic Commerce

Global village

the “shrinking” of time and space as air travel and the electronic media have made it much easier for the people of the globe to communicate with one another

The Rise of the “Global Village” & Electronic Commerce

E-commerce

the buying and selling of products and services through computer networks

U.S. retail e-commerce sales were estimated at $263.3 billion for 2013, up 16.9% over the previous year

One Big World Market: The Global Economy

Global economy

the increasing tendency of the economies of the world to interact with one another as one market instead of many national markets

One Big World Market: The Global Economy

Positive effects

world will be far more interconnected leading to better and more affordable products, as well as ever better communication among nations

Negative effects

the movement, or outsourcing, of formerly well- paying jobs overseas as companies seek cheaper labor costs, particularly in manufacturing

One Big World Market: The Global Economy

Minifirms operating worldwide

Small companies can get started more easily

Small companies can maneuver faster

Question

Jelene sells her art through her own web site and her etsy store. She receives questions from many different countries. Jelene is engaged in _________.

A. E-commerce B. Global trading C. Counter-trading D. Embargo

http://www.jelene.com/main.html

Why Learn About International Management?

Multinational corporation

business firm with operations in several countries

Multinational organization

nonprofit organization with operations in several countries

Why Learn About International Management?

You may deal with foreign customers or partners

You may deal with foreign employees or suppliers

You may work for a foreign firm in the United States

You may work for an American firm outside the United States – or for a foreign one

The Successful International Manager

Ethnocentric managers

believe that their native country, culture, language, and behavior are superior to all others

Parochialism

narrow view in which people see things solely through their own perspective

The Successful International Manager

Polycentric managers

take the view that native managers in the foreign offices best understand native personnel and practices, and so the home office should leave them alone

The Successful International Manager

Geocentric managers

accept that there are differences and similarities between home and foreign personnel and practices and that they should use whatever techniques are most effective

Question

Alvin accepts that differences and similarities exist between home and foreign personnel and practices, and that the company should use whatever techniques are most effective. Alvin can be described as:

A. Ethnocentric B. Polycentric C. Geocentric D. Expatriate

Being a Star Road Warrior

Lesson 1: Frequent travel may be needed because personal encounters are essential

Lesson 2: Travel may be global, but understanding must be local

Lesson 3: Travel downtime can be used to expand business contacts

Why Companies Expand Internationally

1. Availability of supplies 2. New markets 3. Lower labor costs 4. Access to finance capital 5. Avoidance of tariffs & import quotas

Five Ways of Expanding Internationally

Figure 4.1

How Companies Expand Internationally

Global outsourcing

using suppliers outside the United States to provide labor, goods, or services

Also called offshoring

How Companies Expand Internationally

Importing

a company buys goods outside the country and resells them domestically

Exporting

a company produces goods domestically and sells them outside the country

Countertrading

bartering goods for goods

Top 10 exporting countries, 1999 and 2013

Table 4.2

How Companies Expand Internationally

Licensing

a company allows a foreign company to pay it a fee to make or distribute the firm’s product or service

Franchising

a company allows a foreign company to pay it a fee and a share of the profit in return for using the company’s brand name and a package of materials and services

How Companies Expand Internationally

Joint ventures

formed with a foreign company to share the risks and rewards of starting a new enterprise together in a foreign country

also known as a strategic alliance

How Companies Expand Internationally

Wholly-owned subsidiary

foreign subsidiary that is totally owned and controlled by an organization

Greenfield venture

a foreign subsidiary that the owning organization has built from scratch.

Question

XYZ Corporation builds a manufacturing plant in Mexico, employs Mexican citizens and receives favorable tax treatment by the Mexican government. XYZ is:

A. Using a maquiladora B. Countertrading C. Outsourcing D. Franchising

Barriers to International Trade

Tariffs

customs duty, or tax, levied mainly on imports

Import quotas

limits on the numbers of a product that can be imported

Embargoes

complete ban on the import or export of certain products

Organizations Promoting International Trade

World Trade Organization (WTO)

designed to monitor and enforce trade agreements

Agreements are based on the General Agreement on Tariffs and Trade (GATT)

Consist of 159 countries

Organizations Promoting International Trade

World Bank

purpose is to provide low-interest loans to developing nations for improving transportation, education, health, and telecommunications

International Money Fund (IMF)

designed to assist in smoothing the flow of money between nations

Major Trading Blocs

Trading bloc

group of nations within a geographic region that have agreed to remove trade barriers with one another

also known as an economic community

Major Trading Blocs

NAFTA – U.S., Canada, Mexico

European Union – 28 trading partners in Europe

APEC – group of 21 Pacific Rim countries

ASEAN - trading bloc of 10 countries in Asia

Mercosur – trading bloc in Latin America

CAFTA – Central America

Question

The U.S. does not allow the import of Cuban sugar and cigars. This is an example of a(n):

A. Embargo B. Tariff C. Quota D. Maquiladora

Most Favored Nation Trading Status

Most favored nation trading status

describes a condition in which a country grants other countries favorable trading treatment such as the reduction of import duties.

The Importance of National Culture

Culture

shared set of beliefs, values, knowledge, and patterns of behavior common to a group of people

Cultural Dimensions: The GLOBE Project

Low-context culture

shared meanings are primarily derived from written and spoken words

High-context culture

people rely heavily on situational cues for meaning when communicating with others

The Globe Project’s Nine Cultural Dimensions

Power distance

how much unequal distribution of power should there be in organizations and society

Uncertainty avoidance

how much should people rely on social norms and rules to avoid uncertainty

Institutional collectivism

how much should leaders encourage and reward loyalty to the social unit

The Globe Project’s Nine Cultural Dimensions

In-group collectivism

how much pride and loyalty should people have for their family or organization

Gender egalitarianism

how much should society maximize gender role differences

Assertiveness

how confrontational and dominant should individuals be in social relationships

The Globe Project’s Nine Cultural Dimensions

Future orientation

how much should people delay gratification by planning and saving for the future

Performance orientation

how much should individuals be rewarded for improvement and excellence

Humane orientation

how much should society encourage and reward people for being kind, fair, friendly, and generous

Other Cultural Variations

1. Language 2. Interpersonal space 3. Communication 4. Time orientation

• Monochronic, Polychronic

5. Religion 6. Law and political stability

U.S. Managers on Foreign Assignments: Why Do They Fail?

Expatriates

people living or working in a foreign country

10%–20% of all U.S. managers sent abroad returned early because of job dissatisfaction or adjustment difficulties