Managing in a Global EnvironmentChapterChapter4Management Stephen P. Robbins Mary Coultertenth edition1Copyright 2010 Pearson Education, Inc. Publishing as Prentice HallLearning OutcomesFollow this Learning Outline as you read and study Follow this Learning Outline as you read and study this chapter.this chapter.4.1 Whats Your Global perspective?4.1 Whats Your Global perspective? Define parochialism.Define parochialism. Contrast ethnocentric, polycentric, and geocentric Contrast ethnocentric, polycentric, and geocentric attitudes towards global business.attitudes towards global business.4.2 Understanding The global Environment4.2 Understanding The global Environment Describe the current status of the EU, NAFTA, Describe the current status of the EU, NAFTA, ASEAN and other Regional Trade Allowances.ASEAN and other Regional Trade Allowances. Discuss the role of the WTO.Discuss the role of the WTO.2Copyright 2010 Pearson Education, Inc. Publishing as Prentice HallLearning Outcomes4.3 Doing Business Globally4.3 Doing Business Globally Contrast multinational, multidomestic, global, Contrast multinational, multidomestic, global, transnational, and born global organizations.transnational, and born global organizations. Describe the different ways organizations can go Describe the different ways organizations can go international.international.4.4 Managing In A Global Environment.4.4 Managing In A Global Environment. Explain how the global legal-political and economic Explain how the global legal-political and economic environments affect managers.environments affect managers. Discuss Hofstedes five dimensions for assessing Discuss Hofstedes five dimensions for assessing cultures.cultures. Describe the challenges of doing business globally in Describe the challenges of doing business globally in todays world.todays world.3Copyright 2010 Pearson Education, Inc. Publishing as Prentice HallLearning Outcomes4.4 Managing In a Global Environment. Explain how the global legal-political and economic Explain how the global legal-political and economic environments affect managers.environments affect managers. Discuss Hofstedes five dimensions for assessing Discuss Hofstedes five dimensions for assessing cultures.cultures. Describe the challenges of doing business globally in Describe the challenges of doing business globally in todays world.todays world.4Copyright 2010 Pearson Education, Inc. Publishing as Prentice HallThe Global MarketplaceOpportunities and ChallengesOpportunities and ChallengesCoping with the sudden appearance of new Coping with the sudden appearance of new competitorscompetitorsAcknowledging cultural, political, and economic Acknowledging cultural, political, and economic differencesdifferencesDealing with increased uncertainty, fear, and anxietyDealing with increased uncertainty, fear, and anxietyAdapting to changes in the global environmentAdapting to changes in the global environmentAvoiding parochialismAvoiding parochialism5Copyright 2010 Pearson Education, Inc. Publishing as Prentice HallWhats Your Global Perspective?ParochialismParochialismIs viewing the world solely through ones own eyes Is viewing the world solely through ones own eyes and perspectives.and perspectives.Is not recognizing that others have different ways of Is not recognizing that others have different ways of living and working.living and working.Is a significant obstacle for managers working in a Is a significant obstacle for managers working in a global business world.global business world.Is falling into the trap of ignoring others values and Is falling into the trap of ignoring others values and customs and rigidly applying an attitude of “ours is customs and rigidly applying an attitude of “ours is better than theirs” to foreign cultures.better than theirs” to foreign cultures.6Copyright 2010 Pearson Education, Inc. Publishing as Prentice HallAdopting a Global PerspectiveEthnocentric AttitudeEthnocentric AttitudeThe parochialistic belief that the best work The parochialistic belief that the best work approaches and practices are those of the approaches and practices are those of the homehome country.country.Polycentric AttitudePolycentric AttitudeThe view that the managers in the The view that the managers in the hosthost country know country know the best work approaches and practices for running the best work approaches and practices for running their business.their business.Geocentric AttitudeGeocentric AttitudeA A world-orientedworld-oriented view that focuses on using the best view that focuses on using the best approaches and people from around the globe.approaches and people from around the globe.7Copyright 2010 Pearson Education, Inc. Publishing as Prentice HallRegional Trading AgreementsThe European Union (EU)The European Union (EU)A unified economic and trade entity A unified economic and trade entity v vBelgium, Denmark, France, Greece, Ireland, Italy, Belgium, Denmark, France, Greece, Ireland, Italy, Luxembourg, the Netherlands, Portugal, Spain, the United Luxembourg, the Netherlands, Portugal, Spain, the United Kingdom, Germany, Austria, Finland, and SwedenKingdom, Germany, Austria, Finland, and SwedenNorth American Free Trade Agreement (NAFTA)North American Free Trade Agreement (NAFTA)Eliminated barriers to free trade (tariffs, import Eliminated barriers to free trade (tariffs, import licensing requirements, and customs user fees)licensing requirements, and customs user fees)v vUnited States, Canada, and MexicoUnited States, Canada, and Mexico8Copyright 2010 Pearson Education, Inc. Publishing as Prentice HallExhibit 41Exhibit 41 European Union European Union 9Copyright 2010 Pearson Education, Inc. Publishing as Prentice HallRegional Trading Agreements U.S.-Central America Free Trade Agreement (CAFTA)U.S.-Central America Free Trade Agreement (CAFTA) Free Trade Area of the AmericasFree Trade Area of the Americas Southern Cone Common Market (Mercosur)Southern Cone Common Market (Mercosur) Association of Southeast Asian Nations (ASEAN)Association of Southeast Asian Nations (ASEAN)Trading alliance of 10 Southeast Asian nationsTrading alliance of 10 Southeast Asian nations African UnionAfrican Union South Asian Association for Regional Cooperation South Asian Association for Regional Cooperation (SARRC)(SARRC)10Copyright 2010 Pearson Education, Inc. Publishing as Prentice HallExhibit 42Exhibit 42 ASEAN MembersASEAN MembersSource: Based on J. McClenahen and T. Clark, “ASEAN at Work,” IW. May 19, 1997, p. 42.11Copyright 2010 Pearson Education, Inc. Publishing as Prentice HallThe World Trade Organization (WTO)Evolved from the General Agreement on Tariffs Evolved from the General Agreement on Tariffs and Trade (GATT) in 1995.and Trade (GATT) in 1995.Functions as the only global organization Functions as the only global organization dealing with the rules of trade among nations.dealing with the rules of trade among nations.Has 149 member nations and 32 observer Has 149 member nations and 32 observer governments.governments.Monitors and promotes world trade.Monitors and promotes world trade.12Copyright 2010 Pearson Education, Inc. Publishing as Prentice HallDifferent Types of International OrganizationsMultinational Corporation (MNC)Multinational Corporation (MNC)Maintains operations in multiple countries.Maintains operations in multiple countries.Multidomestic CorporationMultidomestic CorporationIs an MNC that decentralizes management and other Is an MNC that decentralizes management and other decisions to the local country.decisions to the local country.Global CompanyGlobal CompanyIs an MNC that Is an MNC that centralizes centralizes its management and its management and other decisions in the home country.other decisions in the home country.13Copyright 2010 Pearson Education, Inc. Publishing as Prentice HallDifferent Types of International Organizations (contd)Transnational Corporation (Borderless Transnational Corporation (Borderless Organization)Organization)Is an MNC that has eliminated structural divisions that Is an MNC that has eliminated structural divisions that impose artificial geographic barriers and is organized impose artificial geographic barriers and is organized along business lines that reflect a geocentric attitude.along business lines that reflect a geocentric attitude.14Copyright 2010 Pearson Education, Inc. Publishing as Prentice HallExhibit 43Exhibit 43 How Organizations Go GlobalHow Organizations Go Global15Copyright 2010 Pearson Education, Inc. Publishing as Prentice HallOther Forms of GlobalizationStrategic AlliancesStrategic AlliancesPartnerships between and organization and a foreign Partnerships between and organization and a foreign company in which both share resources and company in which both share resources and knowledge in developing new products or building knowledge in developing new products or building new production facilities.new production facilities.Joint VentureJoint VentureA specific type of strategic alliance in which the A specific type of strategic alliance in which the partners agree to form a separate, independent partners agree to form a separate, independent organization for some business purpose.organization for some business purpose.Foreign SubsidiaryForeign SubsidiaryDirectly investing in a foreign country by setting up a Directly investing in a foreign country by setting up a separate and independent production facility or office. separate and independent production facility or office. 16Copyright 2010 Pearson Education, Inc. Publishing as Prentice HallManaging in A Global EnvironmentThe Legal EnvironmentThe Legal EnvironmentStability or instability of legal and political systemsStability or instability of legal and political systemsv vLegal procedures are established and followedLegal procedures are established and followedv vFair and honest elections held on a regular basisFair and honest elections held on a regular basisDifferences in the laws of various nationsDifferences in the laws of various nationsv vEffects on business activitiesEffects on business activitiesv vEffects on delivery of products and servicesEffects on delivery of products and services17Copyright 2010 Pearson Education, Inc. Publishing as Prentice HallThe Economic EnvironmentEconomic SystemsEconomic SystemsFree market economyFree market economyv vAn economy in which resources are primarily owned and An economy in which resources are primarily owned and controlled by the private sector.controlled by the private sector.Planned economyPlanned economyv vAn economy in which all economic decisions are planned by An economy in which all economic decisions are planned by a central government.a central government.Monetary and Financial FactorsMonetary and Financial FactorsCurrency exchange ratesCurrency exchange ratesInflation ratesInflation ratesDiverse tax policiesDiverse tax policies18Copyright 2010 Pearson Education, Inc. Publishing as Prentice HallThe Cultural EnvironmentNational CultureNational CultureIs the values and attitudes shared by individuals from Is the values and attitudes shared by individuals from a specific country that shape their behavior and their a specific country that shape their behavior and their beliefs about what is important.beliefs about what is important.May have more influence on an organization than the May have more influence on an organization than the organization culture.organization culture.19Copyright 2010 Pearson Education, Inc. Publishing as Prentice HallExhibit 44Exhibit 44 What Are Americans Like What Are Americans LikeAmericans are very informal.Americans are direct.Americans are competitive.Americans are achievers.Americans are independent and individualistic.Americans are questioners.Americans dislike silence.Americans value punctuality.Americans value cleanliness.Sources: Based on M. Ernest (ed.), Predeparture Orientation Handbook: For Foreign Students and Scholars Planning to Study in the United States (Washington, DC: U.S. Information Agency, Bureau of Cultural Affairs, 1984), pp. 10305; A. Bennett, “American Culture Is Often a Puzzle for Foreign Managers in the U.S.,” Wall Street Journal, February 12, 1986, p. 29; “Dont Think Our Ways the Only Way,” The Pryor Report, February 1988, p. 9; and B.J. Wattenberg, “The Attitudes behind American Exceptionalism,” U.S. News & World Report, August 7, 1989, p. 25.20Copyright 2010 Pearson Education, Inc. Publishing as Prentice HallHofstedes Framework for Assessing CulturesIndividualismversusCollectivismPowerDistanceUncertaintyAvoidanceAchievement versus NurturingLong-TermversusShort-Term OrientationCulture21Copyright 2010 Pearson Education, Inc. Publishing as Prentice HallExhibit 45 Hofstedes Five Dimensions of National Culture(1) Individualistic people look after their own and family interests Collectivistic people expect group to look after and protect them Individualistic Collectivistic United States, Canada Japan Mexico, Thailand Australia(2) High power distanceAccepts wide differences in power, great deal of respect for those in authority Low power distancePlays down inequalities: employees are not afraid to approach nor are in awe of the boss High power distance Low power distance Mexico, Singapore, Italy, Japan United States, Sweden22Copyright 2010 Pearson Education, Inc. Publishing as Prentice HallExhibit 45 Hofstedes Five Dimensions of National Culture(3) High uncertainty avoidanceThreatened with ambiguity and experience high levels of anxiety Low uncertainty avoidance Comfortable with risks; tolerant of different behavior and opinions High uncertainty avoidanceLow uncertainty avoidance Italy, Mexico, France United Kingdom Canada, United States, Singapore(4) AchievementValues such as assertiveness, acquiring money and goods, and competition prevail NurturingValues such as relationships and concern for others prevail Achievement Nurturing United States, Japan, Canada, Greece France, Sweden Mexico23Copyright 2010 Pearson Education, Inc. Publishing as Prentice HallExhibit 45 Hofstedes Five Dimensions of National Culture(5) Long-term orientationPeople look to the future and value thrift and persistence Short-term orientation People value tradition and the past Short-term thinking Long-term thinking Germany, Australia, China, Taiwan, Japan United States, Canada 24Copyright 2010 Pearson Education, Inc. Publishing as Prentice HallExhibit 46Exhibit 46 GLOBE HighlightsGLOBE HighlightsSource: M. Javidan and R. J. House, “Cultural Acumen for the Global Manager: Lessons from Project GLOBE,” Organizational Dynamics, Spring 2001, pp. 289305. Copyright 2001. Reprinted with permission from Elsevier.25Copyright 2010 Pearson Education, Inc. Publishing as Prentice HallGlobal Management in Todays WorldChallengesChallengesOpenness associated with globalizationOpenness associated with globalizationSignificant cultural differences (e.g., Americanization)Significant cultural differences (e.g., Americanization)Adjusting leadership styles and management Adjusting leadership styles and management approachesapproachesRisksRisksLoss of investments in unstable countriesLoss of investments in unstable countriesIncreased terrorismIncreased terrorismEconomic interdependence Economic interdependence 26Copyright 2010 Pearson Education, Inc. Publishing as Prentice HallTerms to Know parochialismparochialism ethnocentric attitudeethnocentric attitude polycentric attitudepolycentric attitude geocentric attitudegeocentric attitude European Union (EU)European Union (EU) EuroEuro North American Free Trade North American Free Trade Agreement (NAFTA)Agreement (NAFTA) Association of Southeast Asian Association of Southeast Asian Nations (ASEAN)Nations (ASEAN) World Trade Organization World Trade Organization (WTO)(WTO) multinational corporations multinational corporations (MNCs)(MNCs) multidomestic corporationmultidomestic corporation global companyglobal company transnational or borderless transnational or borderless organizationorganization born globals born globals global sourcingglobal sourcing exportingexporting importingimporting licensinglicensing franchisingfranchising strategic alliancesstrategic alliances joint venturejoint venture foreign subsidiaryforeign subsidiary market economymarket economy command economycommand economy national culturenational culture GLOBEGLOBE wikiswikis blogsblogs27Copyright 2010 Pearson Education, Inc. Publishing as Prentice HallAll rights reserved. No part of this publication may be reproduced, All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher. otherwise, without the prior written permission of the publisher. Printed in the United States of America.Printed in the United States of America.28Copyright 2010 Pearson Education, Inc. Publishing as Prentice Hall