Management: Global Management in Today's World (2021) PDF

Management Topic Fifteenth Edition, Global Edition 6 Global Managemen t Chapter 4...

Management Topic Fifteenth Edition, Global Edition 6 Global Managemen t Chapter 4 Managing in a Global Environment Copyright © 2021 Pearson Education Ltd.  Learning objectives 1. Contrast ethnocentric, polycentric, and geocentric attitudes toward global business. 2. Discuss the importance of regional trading alliances and global trade mechanisms. 3. Describe the structures and techniques organizations use as they go international. 4. Explain the relevance of the political/legal, economic, and cultural environments to global business. 2  What’s Your Global Perspective? 1. Ethnocentric Attitude – the parochialistic belief that the best work approaches and practices are those of the home country believe that people in foreign countries do not have the needed skills to make the best business decisions 2. Polycentric Attitude – the view that the managers in the host country know the best work approaches and practices for running their business. view every foreign operation as different and hard to understand let managers there figure out how best to do things 3  Global Perspectives (cont.) 3. Geocentric Attitude – a world-oriented view that wants to use the best approaches and people from around the globe. have a global view and look for the best approaches and people regardless of origin 4  Understanding the Global Environment – Trading Alliances Global competition and the global economy are shaped by regional trading agreements, including: European Union (EU) – a union of 28 democratic European nations created as a unified economic and trade entity with the Euro as a single common currency. Economic power represented by the EU is considerable (largest GDP) Membership covers large population base Accounts for large percentage of world’s global 5 exports and imports  Exhibit 4.1 European Union Map Exhibit 4.1 shows the members of the European Union. 6 Copyright © 2021 Pearson Education Ltd.  Trading Alliances (cont.) North American Free Trade Agreement (NAFTA) – an agreement among the Mexican, Canadian, and U.S. governments in which certain barriers to trade have been eliminated. (Refer to USMCA for update [NAFTA renegotiation]) Association of Southeast Asian Nations (ASEAN) – a trading alliance of 10 Southeast Asian nations. 7  Global Trade Mechanisms World Trade Organization (WTO) – a global organization of 161 countries that deals with the rules of trade among nations. International Monetary Fund (IMF) – an organization of 188 countries that promotes international monetary cooperation and provides advice, loans, and technical assistance. 8  Global Trade Mechanisms (cont.) World Bank Group – a group of five closely associated institutions that provides financial and technical assistance to developing countries. Organization for Economic Cooperation and Development (OECD) – an international economic organization that helps its 34 member countries achieve sustainable economic growth and employment. 9  Exhibit 4.2 Nationalism vs. Globalism Pendulum Exhibit 4.2 shows the timeline and general shifts in attitude between globalism and nationalism. 10 Copyright © 2021 Pearson Education Ltd. Multinational Corporation (MNC) Multinational Corporation (MNC) – a broad term that refers to any and all types of international companies that maintain operations in multiple countries. Three Types of MNC Multidomestic Corporation Decentralizes decisions to local/host country Reflects: polycentric attitude Local managers hired in host country Customizing products and marketing strategies to that country’s unique characteristics 11  Multinational Corporation (MNC) (cont.) Global Company Centralizes decisions in home country Reflects: ethnocentric attitude Transnational or Borderless Organization Artificial geographical barriers are eliminated Reflects: geocentric attitude. For example, IBM dropped its organizational structure based on country and reorganized into industry groups. For example, Ford Motor Company is pursuing what it calls the One Ford concept as it integrates its operations 12 around the world  How Organizations Go International Global Sourcing – purchasing materials or labor from around the world wherever it is cheapest. minimal investment and risk goal: take advantage of lower costs in order to be more competitive. Exporting – making products domestically and selling them abroad. Importing – acquiring products made abroad and selling them domestically 13  How Organizations Go International(cont.) Licensing or Franchising – an organization gives 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 – licensing – manufacturing organizations: make another company’s products – franchising - service organizations: use another company’s name and operating methods 14  How Organizations Go Global (cont.) Strategic Alliance – a partnership between an organization and one or more foreign company partner(s) in which both share resources and knowledge in developing new products or building production facilities. Joint Venture – a specific type of strategic alliance in which the partners agree to form a separate, independent organization for some business purpose Foreign Subsidiary – directly investing in a foreign country by setting up a separate and independent production facility or office. No partnership Maximum commitment of resources and risk 15  Exhibit 4.3 How Organizations Go Global Exhibit 4.3 shows the different approaches companies can use to go global. 16 Copyright © 2021 Pearson Education Ltd.  Managing in a Global Environment The Political/Legal Environment – U.S. managers are accustomed to a stable legal and political system – Managers must stay informed of the specific laws in countries where they do business – Some countries have risky political climates – Managers must recognize the differences : – a country’s political/legal environment 17 The Economic Environment Free Market Economy – an economic system in which resources are primarily owned and controlled by the private sector. Planned Economy – an economic system in which economic decisions are planned by a central government. 18  The Cultural Environment National Culture – the values and attitudes shared by individuals from a specific country that shape their behavior and beliefs about what is important. Hofstede’s framework for assessing cultures  Hofstede’s Five Dimensions of National Culture – one of the most widely referenced approaches to helping managers better understand differences between national cultures. help you alert managers to potential problems that might emerge due to cultural differences 19  Exhibit 4.5 Hofstede’s Five Dimensions of National Culture Exhibit 4.5 shows Hofstede’s Five Dimensions of National Culture. 20 Copyright © 2021 Pearson Education Ltd. Hofstede’s Five Dimensions of National Culture “Individualistic” to “Collectivistic.” Individualistic: – People look after their own and family interests Collectivistic: – People expect the group to look after and protect them Power distance: High power distance: – Accepts wide differences in power; great deal of respect for those in authority Low power distance: – Plays down inequalities: employees are not 21 afraid to approach nor are Copyright in awe of boss © 2021 Pearson Education Ltd. Hofstede’s Five Dimensions of National Culture (cont.) “Uncertainty avoidance” High uncertainty avoidance: –Threatened with ambiguity and experience high levels of anxiety Low uncertainty avoidance: –Comfortable with risks; tolerant of different behavior and opinions “Achievement” to “Nurturing.”: Achievement: –Values such as assertiveness, acquiring money and goods, and competition prevail Nurturing: 22 –Values such as relationships and concern for others prevail Copyright © 2021 Pearson Education Ltd. Hofstede’s Five Dimensions of National Culture (cont.) “Long-term orientation” to “Short-term orientation” Long-term orientation: –People look to the future and value thrift and persistence; countries shown are China, Taiwan and Japan Short- term orientation: –People value tradition and the past; countries shown are Germany, Australia, United States, and Canada 23 Copyright © 2021 Pearson Education Ltd.  Global Management in Today’s World (14 edition of R&C) th Managerial Implication: Global Mind-Set: attributes that allow a leader to be effective in cross-cultural environments Exhibit 3-7 A Global Mind-Set (14 edition of R&C) th 24 24 Review Learning Objective 1 Contrast ethnocentric, polycentric, and geocentric attitudes toward global business. - Ethnocentric Attitude – the parochialistic belief that the best work approaches and practices are those of the home country. - Polycentric attitude – managers in the host country know the best work approaches and practices for running their business. - Geocentric attitude – a world-oriented view that focuses on using the best approaches and people from around the globe. 25 Review Learning objective 2 Discuss the importance of regional trading alliances and global trade mechanisms. – The European Union consists of 28 democratic countries. – NAFTA helps Canada, Mexico, and the United States strengthen their global economic power. (Refer to USMCA for update) – ASEAN is a trading alliance of 10 Southeast Asian nations. 26  Review Learning Objective 2 (cont.) - World Trade Organization (WTO) monitors and promotes trade relationships. - The International Monetary Fund (IMF) and the World Bank Group provide monetary support. - The Organization for Economic Cooperation and Development assists its member countries with financial support. Pendulum is swinging back toward nationalism. – Trump’s election on “America First” platform highlights the change. – Britain votes to exit the E U (Brexit). – Trade war with China 27  Review Learning objective 3 Describe the structures and techniques organizations use as they go international. – A multinational corporation – an international company that maintains operations in multiple countries. – A multidomestic organization – an MNC that decentralizes management and other decisions to the local country. – A global organization – an MNC that centralizes management and other decisions in the home country. – A transnational organization – an MNC that has eliminated artificial geographical barriers. 28  Review Learning objective 3 (cont.) - Global sourcing – purchasing materials or labor from around the world wherever it is cheapest. - Exporting – making products domestically and selling them abroad. - Importing – acquiring products made abroad and selling them domestically. - Licensing or Franchising – an organization gives 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 29  Review Learning objective 3 (cont.) Strategic alliance – partnership between an organization and foreign company partners to develop new products or build facilities. Joint venture – a strategic alliance in which the partners agree to form a separate, independent organization for some business purpose. Foreign subsidiary is a direct investment in a foreign country that a company creates by establishing a separate and independent facility or office. 30 Review Learning objective 4 Explain the relevance of the political/legal, economic, and cultural environments to global business. – The laws and political stability of a country are issues in the global political/legal environment with which managers must be familiar – Managers must be aware of a country’s economic issues such as currency exchange rates, inflation rates, and tax policies. 31  Review Learning objective 4 (cont.) – Geert Hofstede identified five dimensions for assessing a country’s culture: individualism- collectivism, power distance, uncertainty avoidance, achievement-nurturing, and long- term/short-term orientation. 32  Chapter Review 1. Which of the following is NOT the perspective/attitude of global management? A. Geocentric B. Ethnocentric C. Parochialism D. Polycentric 33  Chapter Review 2. ____________ corporation decentralizes management and decisions to local country. A. Multinational B. Multi-cultural C. Multi-boundary D. Multidomestic 34  Chapter Review 3. A large radio manufacturer has _________ the right from Dobby Laboratory to use their technology in their radios. A. joint-ventured B. exported C. licensed D. franchised 35  Chapter Review 4. American pharmaceutical giant Eli Lilly partners with the Belgium-based company Galapagos to develop treatments for osteoporosis. Lilly also partners with Canada’s BioMS medical group in a development agreement for a novel treatment for multiple sclerosis. In Japan, Lilly is partnering with Kyowa Hakko Kogyo Co., Ltd. to bring a targeted cancer treatment to market. These are examples of _________. A. joint-ventured B. strategic alliance C. foreign subsidiary D. licensing 36  Chapter Review 5. The top management dislikes unknown situation especially when a current product is promoted in new market. He is high on _______________ according to Hofstede’s model. 6. In _______________ orientation societies, people look to the future and value thrift and persistence according to Hofstede’s model. 37 Terms to Know Parochialism World Bank Group Ethnocentric attitude Organization for Economic Polycentric attitude Cooperation and Geocentric attitude Development (OECD) European Union (EU) Multinational corporation Euro (MNC) North American Free Trade Multidomestic corporation Agreement (NAFTA) (Refer to Global company USMCA for update) Transnational or borderless Association of Southeast organization Asian Nations (ASEAN) Global sourcing World Trade Organization Exporting (WTO) Importing International Monetary Fund (IMF) Licensing 38 Terms to Know Franchising Strategic alliance Joint venture Foreign subsidiary Free market economy Planned economy National Culture Hofstede’s Five Dimensions 39