58
Chapter 4
CHAPTER 4 MANAGING IN A GLOBAL ENVIRONMENT CHAPTER OUTLINE I.
II.
III. III.
I*. I*.
*. *I. *I.
*II. *II. *III. *III.
I/. I/.
Are You You Ready to Work Work Internationally? A Borderless World A. Globalization B. Developing a Global Mindset The Changing International Landscape A. Chin China a Inc. Inc. B. India India the !ervic !ervicee Giant Giant C. Brazil Brazil""s Gro#i Gro#ing ng Clo$ Clo$tt M$lt M$ltin inat atio ional nal Corp Corpor orat atio ions ns A. A Globa Globaliz lizati ation on Bac%las Bac%lash h B. !ervin !erving g the Bott Botto& o& o' the the ()ra&i ()ra&id d Gett Gettin ing g !tarte !tarted d Inter Interna nati tion onal all) l) A. +,po +,port rtin ing g B. -$ts -$tso$ o$rc rcin ing g C. Lice Licens nsin ing g D. Dire Direct ct Inve Invest stin ing g The Intern Internati ational onal B$sine B$siness ss +nviro +nviron&e n&ent nt The The +cono +cono&i &icc +nvi +nviro ron& n&en entt A. +cono&i +cono&icc Develop Develop&en &entt B. +cono&i +cono&icc Inte Interde rdepend pendenc encee The Legal( Legal(oli olitic tical al +nviron& +nviron&ent ent The !ocioc !ocioc$lt $lt$ra $rall +nviron& +nviron&ent ent A. !ocia !ociall *al *al$e $ess B. Co&&$n Co&&$nica icatio tion n Di''er Di''erence encess New Manager Self-Test: Self-Test: Are Are You You Culturally Intelligent? Inte Intern rnat atio ional nal Tra Trade de Alli Allian ances ces A. GATT GATT and the WTWTB. +$ro +$rope pean an 0ni 0nion on C. 1orth A&erican A&erican 2ree Trade Trade Agree& Agree&ent ent 31A2TA4 31A2TA4
ANNOTATED LEARNING OBJECTIVES A'ter st$d)ing this chapter st$dents sho$ld be able to 6. Define gloali!ation and e"#lain $ow it is %reating %reating a orderless world for today&s today&s 'anagers( Globalization re'ers to the e,tent to #hich trade a nd invest&ents in'or&ation social and c$lt$ral ideas and political cooperation 'lo# bet#een co$ntries. -ne res$lt is that that co$ntries b$sinesses 7 96: Cengage Learning. All ;ights ;eserved. Ma) not be scanned copied or d$plicated or posted to a p$blicl) accessible #ebsite in #hole or in part .
e,cept 'or $se as per&itted in a license distrib$ted #ith a certain prod$ct or service or other#ise on a pass#ordprotected #ebsite 'or classroo& $se.
5<
Chapter 4
and people beco&e increasingl) increasingl) interdependent. Globalization has been on the rise since the 6<=9s and &ost ind$strialized ind$strialized nations sho# a high degree o' globalization globalization toda). toda). B$siness is beco&ing a $ni'ied global 'ield as trade barriers 'all co&&$nication beco&es 'aster and cheaper and cons$&er tastes tastes in ever)thing 'ro& clothing clothing to cell$lar phones converge. converge. 2or &an) co&panies toda) toda) the onl) potential potential 'or signi'icant signi'icant gro#th lies lies overseas. The realit) o' toda)"s borderless co&panies also &eans cons$&ers can no longer tell 'ro& #hich co$ntr) the)"re b$)ing. . Des%rie a gloal 'indset and w$y it $as e%o'e i'#erati)e for %o'#anies o#erating internationally( !$cceeding on a global level re>$ires &ore than a desire to do b$siness globall) and a ne# set o' s%ills and techni>$es? it it re>$ires a global &indset. &indset. A gloal 'indset is is the abilit) o' &anagers to appreciate and in'l$ence individ$als gro$ps organizations and s)ste&s that represent di''erent social c$lt$ral political instit$tional instit$tional intellect$al and ps)chological characteristics. A &anager #ith a global &indset can perceive and respond to &an) d di''erent i''erent perspectives at the sa&e ti&e rather than being st$c% in a do&estic &indset that sees ever)thing 'ro& one"s o#n perspective. (eople #ho have had e,pos$re to di''erent di''erent c$lt$res develop a global &indset &indset easil). easil). -ne o' the best #a)s &anagers develop a global &indset is b) engaging #ith people 'ro& di''erent c$lt$res. c$lt$res. It enables co&panies to see the #orld thro$gh a di''erent lens. @. Dis%uss $ow t$e international lands%a#e is %$anging* in%luding t$e growing #ower of C$ina* C$ina* India* and +ra!il( Man) co&panies toda) are going straight to China as a 'irst step into international b$siness. B$siness is boo&ing and 0.!. and +$ropean co&panies are ta%ing advantage o' opport$nities 'or all o' the vario$s &ar%et entr) strategies. Altho$gh o$tso$rcing is probabl) the &ost #idespread approach to international involve&ent in China the co$ntr) is &oving to#ard a cons$&erdriven econo&) econo&) #ith the 'astestgro#ing &iddle class in histor). Doing b$siness in China has never been s&ooth and ne# reg$lations are &a%ing it even to$gher. Despite the proble&s proble&s China is a &ar%et that can"t be ignored. Co&petition 'ro& do&estic co&panies in China is also gro#ing. Whereas China is strong in &an$'act$ring India is a rising po#er in so't#are design services and precision engineering. With its large large +nglishspea%ing pop$lation India has n$&ero$s co&panies o''ering services s$ch as callcenter operations dataprocessing co&p$ter progra&&ing and technical s$pport acco$nting and so 'orth. Brazil contin$es to be one o' the 'astestgro#ing e&erging econo&ies in the #orld even tho$gh its econo&) slo#ed do#n in 966. Brazil has large and g ro#ing agric$lt$ral &ining &an$'act$ring and service sectors. The co$ntr)"s econo&) econo&) alread) the =th largest in the #orld is proected to &ove into 'o$rth place b) 959. Brazil has a )o$ng vibrant pop$lation pop$lation the largest in Latin A&erica and a rapidl) gro#ing &iddle class pop$lation. The Brazilian govern&ent has initiated &aor invest&ents in the develop&ent o' in'rastr$ct$re s$ch as high#a)s ports and electricit) proects.
7 96: Cengage Learning. All ;ights ;eserved. Ma) not be scanned scanned copied or d$plicated or posted to a p$blicl) accessible #ebsite in #hole or in part .
e,cept 'or $se as per&itted in a license distrib$ted #ith a certain prod$ct or service or other#ise on a pass#ordprotected #ebsite 'or classroo& $se.
Managing in a Gl!al En"irn#ent
:9
. Des%rie t$e %$ara%teristi%s of a 'ultinational %or#oration A &$ltinational corporation t)picall) receives &ore than 5 percent o' its total sales reven$es 'ro& operations o$tside the parent"s ho&e co$ntr). M1C"s have the 'ollo#ing distinctive &anagerial characteristics the) are &anaged as an integrated #orld#ide b$siness s)ste&? the) are $lti&atel) controlled b) a single &anage&ent a$thorit) that &a%es %e) strategic decisions relating to the parent and all a''iliates? and their top &anagers are pres$&ed to e,ercise a global perspective. In a 'e# cases the M1C &anage&ent philosophies &a) di''er 'ro& that $st described. Additional generic strategies available are to be an ethnocentric co&pan) that places e&phasis on their ho&e co$ntr) a pol)centric co&pan) that is oriented to#ard the &ar%ets o' individ$al 'oreign host co$ntries or a geocentric co&pan) that is tr$l) #orld oriented and 'avors no speci'ic co$ntr). In general a &$ltinational corporation can be tho$ght o' as a b$siness enterprise that is co&posed o' a''iliates located in di''erent co$ntries and #hose top &anagers &a%e decisions pri&aril) on the basis o' global b$siness opport$nities and obectives. 5. ,"#lain t$e otto' of t$e #yra'id %on%e#t( The botto& o' the p)ra&id 3B-(4 concept proposes that corporations can alleviate povert) and other social ills as #ell as &a%e signi'icant pro'its b) selling to the #orld"s poorest people. The ter& botto& o' the p)ra&id re'ers to the &ore than 'o$r billion people #ho &a%e $p the lo#est level o' the #orld"s econo&ic p)ra&id as de'ined b) per capita inco&e. :( Define four %o''on 'arket entry strategies: e"#orting* outsour%ing* li%ensing* and dire%t in)esting(
E$prting is considered to be lo# ris% and lo# cost. The 'ir& %eeps its prod$ction 'acilities in its ho&e co$ntr) and $ses &iddle&en or 'oreign distrib$tors to &ar%et its prod$cts abroad.. Gl!al %t&%r'ing or offs$oring &eans engaging in the international division o' labor so that #or% activities can be done in co$ntries #ith the cheapest so$rces o' labor an d s$pplies. The &ost recent trend is o$tso$rcing core processes s$ch as a$ diting or che&istr) research.
2oreign li'en&ing re>$ires a so&e#hat greater capital invest&ent and licensees are apt to have better contacts and greater e,perience #ith &ar%eting in their o#n co$ntries. The international 'ir& also &aintains so&e control over 'oreign prod$ction and &ar%eting and #ill have so&e opport$nit) 'or direct contact #ith 'oreign prod$cers and c$sto&ers. A #holl) o#ned s$bsidiar) or oint vent$re is a (ire't in"e&t#ent that represents the greatest costs and the greatest ris%s b$t also the greatest potential ret$rn. The 'ir& and its &anagers are close to the &ar%et and &a) act$all) send &anagers to the 'oreign co$ntries to r$n the b$siness in the host co$ntr).
7 96: Cengage Learning. All ;ights ;eserved. Ma) not be scanned copied or d$plicated or posted to a p$blicl) accessible #ebsite in #hole or in part . e,cept 'or $se as per&itted in a license distrib$ted #ith a certain prod$ct or service or other#ise on a pass#ordprotected #ebsite 'or classroo& $se.
:6
Chapter 4
=( Indi%ate $ow dissi'ilarities in t$e e%ono'i%* so%io%ultural* and legal-#oliti%al en)iron'ents t$roug$out t$e world %an affe%t usiness o#erations( +nviron&ental 'actors that a''ect international b$siness are si&ilar to the tas% and general environ&ental sectors described in Chapter @. Eo#ever #hen co&paring one co$ntr) #ith another the econo&ic legalpolitical and socioc$lt$ral sectors present the greatest di''ic$lties. The econo&ic environ&ent represents the econo&ic conditions in the co$ntr) #here the international organization operates. This part o' the environ&ent incl$des s$ch 'actors as econo&ic develop&ent in'rastr$ct$re reso$rce and prod$ct &ar%ets e,change rates in'lation interest rates and econo&ic gro#th. +cono&ic environ&ents in so&e co$ntries can be >$ite $nstable presenting a great deal o' ris% to co&panies operating #ithin those co$ntries. The socioc$lt$ral environ&ent incl$des a nation"s c$lt$re and social val$es. C$lt$re consists o' the shared %no#ledge belie's and val$es as #ell as the co&&on &odes o' behavior and #a)s o' thin%ing a&ong &e&bers o' a societ). C$lt$ral 'actors are &ore perple,ing than political legal and econo&ic 'actors in 'oreign co$ntries. C$lt$re is intangible pervasive and di''ic$lt to learn. It is absol$tel) i&perative that international b$sinesses co&prehend the signi'icance o' local c$lt$res and deal #ith the& e''ectivel). B$sinesses &$st deal #ith $n'a&iliar legalpolitical s)ste&s #hen the) go international as #ell as #ith &ore govern&ent s$pervision and reg$lation. !o&e o' the &aor legalpolitical concerns a''ecting international b$siness are political ris% political instabilit) and la#s and restrictions. 8. ,"#lain w$y it is i'#ortant for 'anagers to de)elo# t$eir %ultural intelligen%e( Developing c$lt$ral intelligence is i&perative 'or &anagers doing b$siness s$ccess'$ll) abroad. Man) &anagers 'ail to realize that the val$es and behaviors that t)picall) govern ho# b$siness is done in their o#n co$ntr) don"t al#a)s translate to the rest o' the #orld. A&erican &anagers in partic$lar are reg$larl) acc$sed o' an ethnocentric attit$de that ass$&es their #a) is the best #a). Ethn'entri&# re'ers to a nat$ral tendenc) o' people to regard their o#n c$lt$re as s$perior and to do#ngrade or dis&iss other c$lt$ral val$es. +thnocentris& can be 'o$nd in all co$ntries and strong ethnocentric attit$des #ithin a co$ntr) &a%e it di''ic$lt 'or 'oreign 'ir&s to operate there. A nation"s c$lt$re incl$des the shared %no#ledge belie's and val$es as #ell as the co&&on &odes o' behavior and #a)s o' thin%ing a&ong &e&bers o' a societ). C$lt$ral 'actors so&eti&es can be &ore perple,ing than political and econo&ic 'actors #hen #or%ing or living in a 'oreign co$ntr)
LECTURE OUTLINE AR, Y. R,ADY T WR/ INT,RNATINA00Y? 7 96: Cengage Learning. All ;ights ;eserved. Ma) not be scanned copied or d$plicated or posted to a p$blicl) accessible #ebsite in #hole or in part .
e,cept 'or $se as per&itted in a license distrib$ted #ith a certain prod$ct or service or other#ise on a pass#ordprotected #ebsite 'or classroo& $se.
Managing in a Gl!al En"irn#ent
:
A&erican &anagers o'ten displa) crossc$lt$ral ignorance d$ring b$siness negotiations co&pared to co$nterparts in other co$ntries. This e,ercise helps st$dents deter&ine the e,tent to #hich the) are read) to participate in international negotiations.
I.
A B-;D+;L+!! W-;LD
+,hibit .6
A. Globalization Gl!ali)atin re'ers to the e,tent to #hich trade and invest&ents in'or&ation social and c$lt$ral ideas and political cooperation 'lo# bet#een co$ntries. -ne res$lt is that co$ntries b$sinesses and people beco&e increasingl) interdependent. Globalization provides a co&petitive edge at all stages o' developing &an$'act$ring and &ar%eting prod$cts and do&estic &ar%ets are sat$rated 'or &an) 'ir&s. The realit) o' toda)"s borderless co&panies &eans cons$&ers can no longer tell 'ro& #hich co$ntr) the)"re b$)ing 3e.g. Fapan"s Eonda gets :5 percent o' its parts 'or the Accord 'ro& the 0nited !tates and Canada and General Motors 3GM4 &a%es the Chevrolet EE; in Me,ico #ith parts that co&e 'ro& all over the #orld4.
Globalization has been on the rise since the 6<=9s and &ost ind$strialized nations sho# a high degree o' globalization toda). The -2 !#iss +cono&ic Instit$te &eas$res econo&ic political and social aspects o' globalization and ran%s co$ntries on a globalization inde,. The &ost globalized co$ntries are Belgi$& Ireland A$stria the 1etherlands and !ingapore. B. Developing a Global Mindset
+,hibit .
A gl!al #in(&et is the abilit) o' &anagers to appreciate and in'l$ence individ$als gro$ps organizations and s)ste&s that represent di''erent social c$lt$ral political instit$tional intellect$al and ps)chological c haracteristics. A &anager #ith a global &indset can perceive and respond to &an) di''erent perspectives at the sa&e ti&e rather than being st$c% in a do&estic &indset that sees ever)thing 'ro& one"s o#n perspective. Developing a global &indset re>$ires &anagers #ho are gen$inel) c$rio$s and in>$isitive abo$t other people and c$lt$res are open&inded and non$dg&ental and can deal #ith a&big$it) and co&ple,it) #itho$t bec o&ing over#hel&ed or 'r$strated. Disc$ssion H$estion 5 Do you t$ink it&s #ossile for so'eone to de)elo# a gloal 'indset if t$ey ne)er li)e outside t$eir nati)e %ountry? 1ow 'ig$t t$ey do t$at? 1-T+! JJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJ JJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJ JJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJ
7 96: Cengage Learning. All ;ights ;eserved. Ma) not be scanned copied or d$plicated or posted to a p$blicl) accessible #ebsite in #hole or in part . e,cept 'or $se as per&itted in a license distrib$ted #ith a certain prod$ct or service or other#ise on a pass#ordprotected #ebsite 'or classroo& $se.
:@
Chapter 4
II. TE+ CEA1GI1G I1T+;1ATI-1AL LA1D!CA(+ A. China Inc. 6. Man) co&panies toda) are going straight to China as a 'irst step into international b$siness. B$siness is boo&ing and 0.!. and +$ropean co&panies are ta%ing advantage o' opport$nities 'or all o' the strategies disc$ssed above. -$tso$rcing is probabl) the &ost #idespread approach to international involve&ent in China b$t the co$ntr) is &oving to#ard a cons$&erdriven econo&) #ith the 'astestgro#ing &iddle class pop$lation. . Doing b$siness in China has never been s&ooth and ne# reg$lations are &a%ing it to$gher. Despite the proble&s China is a &ar%et that 'oreign &anagers can"t a''ord to ignore. Co&petition 'ro& do&estic co&panies in China is also g ro#ing 'ast. B. India the !ervice Giant 6. Whereas China is strong in &an$'act$ring India is a rising po#er in so't#are design services and precision engineering. -ne inde, lists &ore than <99 b$siness services co&panies in India #hich e&plo) aro$nd 5=5999 people. With its large +nglish spea%ing pop$lation India has n$&ero$s co&panies o''ering services s$ch as call center operations dataprocessing co&p$ter progra&&ing and technical s$pport acco$nting and so 'orth. By 2020, India’s pharmaceuticals industry will likely be a global leader. C. Brazil"s Gro#ing Clo$t
1. Brazil is another co$ntr) that is gaining increasing attention o' &anagers. Altho$gh Brazil"s econo&ic gro#th slo#ed it is still one o' the 'astestgro#ing e&erging econo&ies in the #orld #ith large and gro#ing agric$lt$ral &ining &an$'act$ring and service sectors. The co$ntr)"s econo&) alread) the seventh largest in the #orld is proected to &ove into 'o$rth place b) 959. The Brazilian govern&ent has initiated &aor invest&ents in the develop&ent o' in'rastr$ct$re s$ch as high#a)s ports and electricit) proects.
2. The choice of io de !aneiro to host the 201" #ummer $lympics is also an indication of Bra%il’s growing clout in the international arena.
Disc$ssion H$estion +ot$ C$ina and India are rising e%ono'i% #owers( 1ow 'ig$t your a##roa%$ to doing usiness wit$ C$ina* a %o''unist %ountry* e different fro' your a##roa%$ to doing usiness wit$ India* t$e world&s 'ost #o#ulous de'o%ra%y? In w$i%$ %ountry would you e"#e%t to en%ounter t$e 'ost rules? T$e 'ost ureau%ra%y? 1-T+! JJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJ JJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJ JJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJ 7 96: Cengage Learning. All ;ights ;eserved. Ma) not be scanned copied or d$plicated or posted to a p$blicl) accessible #ebsite in #hole or in part .
e,cept 'or $se as per&itted in a license distrib$ted #ith a certain prod$ct or service or other#ise on a pass#ordprotected #ebsite 'or classroo& $se.
Managing in a Gl!al En"irn#ent
:
III. M0LTI1ATI-1AL C-;(-;ATI-1! The size and vol$&e o' international b$sinesses are so large that the) are hard to co&prehend. Altho$gh the ter& has no precise de'inition a #%ltinatinal 'rpratin *MNC+ t)picall) receives &ore than 5 percent o' its total sales reven$es 'ro& operations o$tside the parent"s ho&e co$ntr). M1Cs also have the 'ollo#ing distinctive characteristics
M1Cs are &anaged as integrated #orld#ide b$siness s)ste&s in #hich 'oreign a''iliates act in close alliance and cooperation #ith one another. M1Cs are $lti&atel) controlled b) a single &anage&ent a$thorit) that &a%es %e) strategic decisions relating to the parent and all a''iliates. M1C top &anagers are pres$&ed to regard the entire #orld as one &ar%et 'or strategic decisions reso$rce ac>$isition and location o' prod$ction advertising and &ar%eting e''icienc).
,t$no%entri% %o'#anies place e&phasis on their ho&e co$ntries. 2oly%entri% %o'#anies are oriented to#ard the &ar%ets o' individ$al 'oreign host co$ntries. 3eo%entri% %o'#anies are tr$l) #orld oriented and 'avor no speci'ic co$ntr). Disc$ssion H$estion : S$ould a 'ultinational %or#oration o#erate as a tig$tly integrated* worldwide usiness syste'* or would it e 'ore effe%ti)e to let ea%$ national susidiary o#erate autono'ously? 1-T+! JJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJ JJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJ JJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJ A. A Globalization Bac%lash 6. As the #orld beco&es increasingl) interconnected a bac%lash over globalization is occ$rring. The loss o' obs as co&panies e,port #or% to co$ntries #ith lo#er #ages is a pri&ar) concern. . Activists charge that globalization not onl) h$rts A&ericans #ho lose their obs b$t contrib$tes to #orld#ide environ&ental destr$ction and loc%s people into povert). In the end it is not #hether globalization is good or bad b$t ho# b$siness and govern&ent can #or% together to ens$re that global advantages are shared 'airl). @. Another gro#ing tro$ble spot 'or &anagers is ho# overseas contractors and s$ppliers treat their e&plo)ees. Globalization increases the co&ple,it) beca$se &anagers have a hard ti&e %no#ing #ith #hich 'ir&s the) are doing b$siness. B. !erving the Botto& o' the ()ra&id 6. Altho$gh large &$ltinational organizations are acc$sed o' &an) negative contrib$tions to societ) the) also have the reso$rces needed to do good things in the #orld. The !tt# , the p-ra#i( *BOP+ concept proposes that corporations can 7 96: Cengage Learning. All ;ights ;eserved. Ma) not be scanned copied or d$plicated or posted to a p$blicl) accessible #ebsite in #hole or in part . e,cept 'or $se as per&itted in a license distrib$ted #ith a certain prod$ct or service or other#ise on a pass#ordprotected #ebsite 'or classroo& $se.
:5
Chapter 4
alleviate povert) and other social ills as #ell as &a%e signi'icant pro'its b) selling to the #orld"s poorest people. The ter& botto& o' the p)ra&id re'ers to the &ore than 'o$r billion people #ho &a%e $p the lo#est level o' the #orld"s econo&ic p)ra&id as de'ined b) percapita inco&e. . Altho$gh the B-( concept has gained signi'icant attention recentl) the basic idea is nothing ne#. 0nilever has been #or%ing 'or &an) )ears to prevent the spread o' disease in poor areas o' the #orld b) introd$cing ver) ine,pensive soap prod$cts to the people there. In this #a) the pro'it &otive goes handinhand #ith the desire to &a%e a contrib$tion to h$&an%ind. Disc$ssion H$estion @ Do you t$ink it is realisti% t$at +2 usiness #ra%ti%es %an $a)e a #ositi)e effe%t on #o)erty and ot$er so%ial #role's in de)elo#ing %ountries? Dis%uss( 1-T+! JJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJ JJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJ JJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJ
I*. G+TTI1G !TA;T+D I1T+;1ATI-1ALLK
+,hibit .@
-rganizations can beco&e involved internationall) in a co$ple o' di''erent #a)s. -ne #a) is to see% cheaper so$rces o' &aterial or labor o''shore #hich is called offs$oring or gloal outsour%ing . Another #a) is to i&ple&ent &ar%et entr) strategies s$ch as e,porting licensing and direct invest&ent. These #ar.et entr- &trategie& represent alternative #a)s to sell prod$cts and services in 'oreign &ar%ets. A. +,porting 6. E$prting is a strateg) in #hich the corporation &aintains its prod$ction 'acilities #ithin the ho&e nation and trans'ers its prod$cts 'or sale in 'oreign co$ntries. +,porting enables a co&pan) to &ar%et its prod$cts in other co$ntries at &odest reso$rce cost and #ith li&ited ris%. . +,porting does entail n$&ero$s proble&s based on ph)sical distances govern&ent reg$lations 'oreign c$rrencies and c$lt$ral di''erences b$t it is less e,pensive than co&&itting the 'ir&"s o#n capital to b$ild plants in host co$ntries. B. -$tso$rcing 6. Gl!al %t&%r'ing or offs$oring &eans engaging in the international division o' labor so that #or% activities can be done in co$ntries #ith the cheapest so$rces o' labor and s$pplies. a. The &ost recent trend is o$tso$rcing core processes s$ch as a$diting or che&istr) research. 7 96: Cengage Learning. All ;ights ;eserved. Ma) not be scanned copied or d$plicated or posted to a p$blicl) accessible #ebsite in #hole or in part .
e,cept 'or $se as per&itted in a license distrib$ted #ith a certain prod$ct or service or other#ise on a pass#ordprotected #ebsite 'or classroo& $se.
Managing in a Gl!al En"irn#ent
::
C. Licensing 6. Li'en&ing is a strateg) in #hich the corporation 3the licensor4 in one co$ntr) &a%es certain reso$rces available to co&panies in another co$ntr) 3the licensees4. These reso$rces can incl$de technolog) &anagerial s%ills andor patent and trade&ar% rights that enable the licensee3s4 to prod$ce and &ar%et a prod$ct si&ilar to #hat the licensor has been prod$cing. a. /ran'hi&ing is a special 'or& o' licensing that occ$rs #hen the 'ranchisee b$)s a co&plete pac%age o' &aterials and services incl$ding e>$ip&ent prod$cts prod$ct ingredients trade&ar% and trade na&e rights &anagerial advice and a standardized operating s)ste&. D. Direct Investing 6. Dire't in"e&ting is a strateg) in #hich the corporation is involved in &anaging the prod$ctive assets #hich disting$ishes it 'ro& other entr) strategies that per&it less &anagerial control. The &ost pop$lar 'or& o' direct invest&ent is to engage in strategic alliances and partnerships. a. In a 0int "ent%re a co&pan) shares costs and ris%s #ith another 'ir& t)picall) in the host co$ntr) to develop ne# prod$cts b$ild a &an$'act$ring 'acilit) or set $p a sales and distrib$tion net#or%. b. A second option 'or direct investing is to create a 1hll- 1ne( ,reign a,,iliate over #hich the co&pan) has co&plete control. Direct ac>$isition o' an a''iliate &a) provide cost savings over e,porting b) shortening distrib$tion channels and red$cing storage and transportation costs. c. The &ost costl) and ris%) direct invest&ent is a green,iel( "ent%re #hich occ$rs #hen a co&pan) b$ilds a s$bsidiar) 'ro& scratch in a 'oreign co$ntr). The advantage is that the s$bsidiar) is e,actl) #hat the co&pan) #ants and has the potential to be highl) pro'itable. The disadvantage is the co&pan) has to ac>$ire all &ar%et %no#ledge &aterials people and %no#ho# in a di''erent c$lt$re and &ista%es are possible. Disc$ssion H$estion So'nio* a start-u# running s$oe %o'#any in California* de%ided to start selling its #rodu%ts around t$e world fro' t$e )ery eginning( In general ter's* na'e so'e of t$e %$allenges a start-u# %o'#any su%$ as So'nio 'ig$t fa%e internationally( 1otesJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJ JJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJ JJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJ
7 96: Cengage Learning. All ;ights ;eserved. Ma) not be scanned copied or d$plicated or posted to a p$blicl) accessible #ebsite in #hole or in part . e,cept 'or $se as per&itted in a license distrib$ted #ith a certain prod$ct or service or other#ise on a pass#ordprotected #ebsite 'or classroo& $se.
:=
Chapter 4
*. TE+ I1T+;1ATI-1AL B0!I1+!! +1*I;-1M+1T
+,hibit .
International &anage&ent is the &anage&ent o' b$siness operations cond$cted in &ore than one co$ntr). The '$nda&ental tas%s o' b$siness &anage&ent do not change in an) s$bstantive #a) #hen a 'ir& is transacting b$siness across international borders? ho#ever &anagers #ill e,perience greater di''ic$lties and ris%s #hen per'or&ing these &anage&ent '$nctions on an international scale. The econo&ic legalpolitical and socioc$lt$ral sectors present the greatest di''ic$lties in co&paring one co$ntr) to another.
*I. TE+ +C-1-MIC +1*I;-1M+1T A. +cono&ic Develop&ent 6. +cono&ic develop&ent di''ers #idel) a&ong the co$ntries and regions o' the #orld and co$ntries can be categorized as de)elo#ing or de)elo#ed co$ntries. Developing co$ntries are re'erred to as less-de)elo#ed %ountries 3LDCs4. The criterion traditionall) $sed to classi') co$ntries is per capita inco&e. Most international 'ir&s are head>$artered in econo&icall) advanced co$ntries? ho#ever &an) co&panies are investing in Asia +astern +$rope and Latin A&erica. . In,ra&tr%'t%re re'ers to a co$ntr)"s ph)sical 'acilities s$pport econo&ic activities s$ch as transportation energ) prod$cing 'acilities and co&&$nications. Co&panies operating in LDCs &$st contend #ith lo#er levels o' techno log) and perple,ing logistical distrib$tion and co&&$nication proble&s. B. +cono&ic Interdependence
+,hibit .5
6. The recent 'inancial crisis has &ade it ab$ndantl) clear $st ho# econo&icall) interconnected the #orld is. Altho$gh the recent crisis &a) see& at)pical savv) international &anagers realize that their co&panies #ill probabl) be b$''eted b) si&ilar crises 'airl) reg$larl). The Asian 'inancial crisis o' 6<<=6<<8 a''ected 'ir&s in 1orth A&erica +$rope and other parts o' the #orld. More recentl) Greece"s inabilit) to &a%e pa)&ents on its debt spar%ed a panic that deval$ed the e$ro and threatened the stabilit) o' 'inancial &ar%ets #orld#ide. +,hibit .: . Another re'lection o' econo&ic interdependence is the 'act that parts s$pplies and labor 'or &an) co&panies co&e 'ro& aro$nd the #orld #hich presents &anagers #ith ne# challenges.
*II. TE+ L+GAL(-LITICAL +1*I;-1M+1T A. Pliti'al ri&. is a co&pan)"s ris% o' loss o' assets earning po#er or &anagerial control d$e to politicall) based events or actions b) host govern&ents. It incl$des govern&ent 7 96: Cengage Learning. All ;ights ;eserved. Ma) not be scanned copied or d$plicated or posted to a p$blicl) accessible #ebsite in #hole or in part .
e,cept 'or $se as per&itted in a license distrib$ted #ith a certain prod$ct or service or other#ise on a pass#ordprotected #ebsite 'or classroo& $se.
Managing in a Gl!al En"irn#ent
:8
ta%eovers o' propert) and acts o' violence directed against a 'ir&"s properties or e&plo)ees. B. Pliti'al in&ta!ilit- re'ers to events s$ch as riots revol$tions civil disorders or govern&ent $pheavals that a''ect the operations o' an international co&pan). A revol$tionar) #ave o' protests in the Arab #orld that began in the late 969 %no#n as the Ara S#ring* has created a t$&$lt$o$s environ&ent 'or b$sinesses operating in the region. (olitical ris% and political instabilit) re&ain elevated thro$gho$t the Arab #orld ca$sing proble&s 'or both local an d 'oreign organizations. C. Govern&ent la#s and reg$lations di''er 'ro& co$ntr) to co$ntr) and present a challenge 'or international 'ir&s. Disc$ssion H$estion = W$y do you t$ink 'any #eo#le are so frig$tened y gloali!ation? +ased on w$at is o%%urring in t$e world today* do you e"#e%t t$e gloali!ation a%klas$ to grow stronger or weaker o)er t$e ne"t de%ade? 1-T+! JJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJ JJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJ JJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJ
*II. TE+ !-CI-C0LT0;AL +1*I;-1M+1T A. !ocial *al$es 6. A nation"s c$lt$re incl$des the shared %no#ledge belie's and val$es as #ell as the co&&on &odes o' behavior and #a)s o' thin%ing a&ong &e&bers o' a societ). -ne #a) &anagers can co&prehend local c$lt$res is to $nderstand di''erences in social val$es. A&erican &anagers are reg$larl) acc$sed o' an ethnocentric attit$de that ass$&es that the A&erican #a) is the best #a). Ethn'entri&# is an attit$de #hich &eans that people have a tendenc) to regard their o#n c$lt$re as s$perior and to do#ngrade other c$lt$res. !trong ethnocentric attit$des #ithin a co$ntr) &a%e it di''ic$lt 'or 'oreign 'ir&s to operate there. There are 'o$r di&ensions o' national social val$e s)ste&s as #ell as other c$lt$ral characteristics that in'l$ence organizational and e&plo)ee #or%ing relationships. a. Eo'stede"s *al$e Di&ensions
+,hibit .=
P1er (i&tan'e . Eigh po#er distance &eans people accept ine>$alit) in po#er a&ong instit$tions organizations and people. Co$ntries that val$e high po#er distance incl$de Mala)sia and the (hilippines. Lo# po#er distance &eans people e,pect e>$alit) in po#er. Co$ntries that val$e lo# po#er distance incl$de Den&ar% and Israel. Un'ertaint- a"i(an'e . Eigh $ncertaint) avoidance &eans that &e&bers o' a societ) 'eel $nco&'ortable #ith $ncertaint) and a&big$it) and th$s s$pport belie's that pro&ise certaint) and con'or&it). Co$ntries that val$e high
7 96: Cengage Learning. All ;ights ;eserved. Ma) not be scanned copied or d$plicated or posted to a p$blicl) accessible #ebsite in #hole or in part . e,cept 'or $se as per&itted in a license distrib$ted #ith a certain prod$ct or service or other#ise on a pass#ordprotected #ebsite 'or classroo& $se.
:<
Chapter 4
$ncertaint) avoidance incl$de Greece (ort$gal and 0r$g$a). Lo# $ncertaint) avoidance &eans people have high tolerance 'or the $nstr$ct$red and $npredictable. Co$ntries that val$e lo# $ncertaint) avoidance incl$de !ingapore and Fa&aica. In(i"i(%ali&# and Clle'ti"i&# . Individ$alis& re'lects a val$e 'or a loosel) %nit social 'ra&e#or% in #hich individ$als are e,pected to ta%e care o' the&selves. Co$ntries #ith individ$alist val$es incl$de the 0nited !tates Canada and Great Britain. Collectivis& is a pre'erence 'or a tightl) %nit social 'ra&e#or% in #hich individ$als loo% a'ter one another and organizations protect their &e&bers" interests. Co$ntries #ith collectivist val$es are G$ate&ala +c$ador and (ana&a. Ma&'%linit- and /e#ininit- . Masc$linit) stands 'or pre'erence 'or achieve&ent herois& assertiveness #or% centralit) 3#ith res$ltant high stress4 and &aterial s$ccess. !ocieties #ith strong &asc$line val$es are Fapan Ital) Me,ico and Ger&an). 2e&ininit) re'lects the val$es o' relationships &odest) caring 'or the #ea% and >$alit) o' li'e. Co$ntries #ith 'e&inine val$es incl$de !#eden 1or#a) Costa ;ica and 2rance. Both &en and #o&en s$bscribe to the do&inant val$e in &asc$line and 'e&inine c$lt$res. A 'i'th di&ension lng2ter# rientatin and &hrt2ter# rientatin #as developed later. Longter& orientation incl$des a greater concern 'or the '$t$re and highl) val$es thri't and perseverance. !hortter& orientation is &ore concerned #ith the past and the present and places a high val$e on tradition and &eeting social obligations.
. GL-B+ (roect *al$e Di&ensions
+,hibit .8
a. ;esearch b) the GL-B+ (roect 3Global Leadership and -rganizational Behavior +''ectiveness4 $sed data collected 'ro& 68999 &anagers in : co$ntries. The) collected data on nine di&ensions.
Asserti)eness is the e,tent to #hich a societ) enco$rages to$ghness assertiveness and co&petitiveness. 4uture orientation re'ers to the e,tent to #hich a societ) enco$rages planning 'or the '$t$re over shortter& res$lts. 3ender differentiation re'ers to the e,tent to #hich a societ) &a,i&izes gender role di''erences. 2erfor'an%e orientation is the e,tent to #hich a societ) places e&phasis on per'or&ance and re#ards people 'or i&prove&ent. 1u'ane orientation re'ers to the degree to #hich a societ) enco$rages and re#ards people 'or being 'air altr$istic genero$s and caring.
b. GL-B+ research provides a &ore co&prehensive vie# o' c$lt$ral si&ilarities and di''erences than Eo'stede"s.
7 96: Cengage Learning. All ;ights ;eserved. Ma) not be scanned copied or d$plicated or posted to a p$blicl) accessible #ebsite in #hole or in part .
e,cept 'or $se as per&itted in a license distrib$ted #ith a certain prod$ct or service or other#ise on a pass#ordprotected #ebsite 'or classroo& $se.
Managing in a Gl!al En"irn#ent
=9
@. !ocial val$es have great in'l$ence on organizational '$nctioning and &anage&ent st)les. Disc$ssion H$estion 69 1ow 'ig$t t$e so%ial )alue of low )ersus $ig$ #ower distan%e influen%e $ow you would lead and 'oti)ate e'#loyees? W$at aout t$e )alue of low )ersus $ig$ #erfor'an%e orientation? 1-T+! JJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJ JJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJ JJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJ B. Co&&$nication Di''erences
+,hibit .<
6. (eople 'ro& so&e c$lt$res tend to pa) &ore attention to the social conte,t 3social setting nonverbal behavior social stat$s4 o' their verbal co&&$nication than A&ericans do. a. In a high2'nte$t '%lt%re people are sensitive to circ$&stances s$rro$nding social e,changes. (eople $se co&&$nication pri&aril) to b$ild personal social relationships? &eaning is derived 'ro& conte,tsetting stat$s and nonverbal behavior&ore than 'ro& e,plicit #ords. Eighconte,t c$lt$res incl$de Asian and Arab co$ntries. b. In a l12'nte$t '%lt%re people $se co&&$nication pri&aril) to e,change 'acts and in'or&ation? &eaning is derived pri&aril) 'ro& #ords. Lo#conte,t c$lt$res tend to be A&erican and 1orthern +$ropean.
N,W MANA3,R S,04-T,ST: AR, Y. C.0T.RA00Y INT,00I3,NT? The ob o' a &anager de&ands a lot and be'ore long activities #ill incl$de sit$ations that #ill test a &anager"s %no#ledge o' and capacit) 'or dealing #ith people 'ro& other national c$lt$res.. This e,ercise #ill help st$dents deter&ine their capacit) 'or dealing #ith crossc$lt$ral sit$ation. Disc$ssion H$estion< W$i%$ style of %o''uni%ating do you t$ink would e 'ost enefi%ial to t$e long-ter' su%%ess of a .(S( %o'#any o#erating internationally5$ig$-%onte"t or low-%onte"t %o''uni%ations? W$y? 1-T+! JJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJ JJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJ JJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJ *III. I1T+;1ATI-1AL T;AD+ ALLIA1C+! A. GATT and the World Trade -rganization 7 96: Cengage Learning. All ;ights ;eserved. Ma) not be scanned copied or d$plicated or posted to a p$blicl) accessible #ebsite in #hole or in part . e,cept 'or $se as per&itted in a license distrib$ted #ith a certain prod$ct or service or other#ise on a pass#ordprotected #ebsite 'or classroo& $se.
=6
Chapter 4
6. The General Agree&ent on Trade and Tari''s 3GATT4 signed b) @ nations in 6<= started as a set o' r$les to ens$re nondiscri&ination provide clear proced$res settle disp$tes and enco$rage participation o' LDCs in international trade. GATT and its s$ccessor the World Trade -rganization 3WT-4 pri&aril) $se tari'' concessions as a tool to increase trade. Me&bers agree to li&it the level o' tari''s the) #ill i&pose on i&ports 'ro& other &e&bers.
. The World Trade -rganization 3WT-4 #as established b) the 6<8: to 6<< 0r$g$a) ro$nd. As o' F$l) 998 65@ co$ntries #ere &e&bers o' the WT-. As a per&anent &e&bership organization the WT- is bringing greater trade liberalization in goods in'or&ation technological develop&ents and services. The WT- is also ho#ever partl) responsible 'or a gro#ing bac%lash against global trade. B. +$ropean 0nion
+,hibit .69
6. +$ropean +cono&ic Co&&$nit) no# called the +$ropean 0nion 3+04 #as 'or&ed in 6<5= to i&prove econo&ic and social conditions a&ong its &e&bers and has since e,panded to a =nation alliance. The biggest e,pansion ca&e in 99 #hen ten ne# &e&bers 'ro& so$thern and eastern +$rope oined. T$r%e) has opened negotiations. The goal o' +0 is to create a single&ar%et s)ste& 'or +$rope"s &illions o' cons$&ers allo#ing people goods and services to &ove 'reel). The &ost signi'icant aspect is the +0"s &onetar) revol$tion and the introd$ction o' the e%r the single +$ropean c$rrenc) that co$ld event$all) replace = +$ropean c$rrencies. . The econo&ic crisis has revived national lo)alties and crossborder resent&ents slo#ing the &ove to#ard a $ni'ied and cohesive +$ropean identit).
@. !&all b$t vocal 'actions in several co$ntries incl$ding the 0nited ingdo& are arg$ing that co&panies and citizens #o$ld be better o'' #ithdra#ing 'ro& the e$rozone. !o&e anal)sts thin% a broad brea%$p o' the e$rozone is $nli%el) b$t e$rozone econo&ies are at a crossroads. C. 1orth A&erican 2ree Trade Agree&ent 31A2TA4 6. 1A2TA #ent into e''ect on Fan$ar) 6 6<< and &erged the 0.!. Canada and Me,ico into a single &ega &ar%et. The agree&ent bro%e do#n tari''s and trade restrictions on &ost agric$lt$ral and &an$'act$red prod$cts over a 65)ear period. . -pinions re&ained divided over the bene'its o' 1A2TA? so&e call it a s$ccess and others re'er to it as a dis&al 'ail$re. Advocates sa) that it has increased trade invest&ent and inco&e and contin$es to enable all three co$ntries to co&pete &ore e''ectivel) #ith rival Asian and +$ropean 'ir&s. 7 96: Cengage Learning. All ;ights ;eserved. Ma) not be scanned copied or d$plicated or posted to a p$blicl) accessible #ebsite in #hole or in part .
e,cept 'or $se as per&itted in a license distrib$ted #ith a certain prod$ct or service or other#ise on a pass#ordprotected #ebsite 'or classroo& $se.
Managing in a Gl!al En"irn#ent
=
Disc$ssion H$estion 8 Two .(S( %o'#anies are %o'#eting to take o)er a large fa%tory in t$e C!e%$ Re#uli%( ne delegation tours t$e fa%ility and asks 6uestions aout $ow t$e #lant 'ig$t e run 'ore effi%iently( T$e ot$er delegation fo%uses on ways to i'#ro)e working %onditions and #rodu%e a etter #rodu%t( W$i%$ delegation do you t$ink is 'ore likely to su%%eed wit$ t$e #lant? W$y? W$at infor'ation would you want to %olle%t to de%ide w$et$er to a%6uire t$e #lant for your %o'#any? 1-T+! JJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJ JJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJ JJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJ
S%gge&te( An&1er& t En(2O,2Chapter Di&'%&&in 3%e&tin& 6. W$at s#e%ifi%ally would t$e e"#erien%e of li)ing and working in anot$er %ountry %ontriute to your skills and effe%ti)eness as a 'anager in your own %ountry? Generall) spea%ing the global e,pos$re o' #or%ing in another co$ntr) helps people develop s%ills and net#or%s that #ill gro# over ti&e and instills a greater level o' sensitivit) to opport$nities. More speci'icall) s$ch e,pos$re helps &anagers $nderstand other c$lt$res and learn to #or% &ore e''ectivel) #ith the& b) learning abo$t the social val$es o' those other c$lt$res. This is increasingl) &ore critical even in one"s o#n co$ntr) as the #or%'orce beco&es &ore and &ore diverse. Also beca$se e''ective &anage&ent st)les di''er 'ro& one co$ntr) to another learning to #or% e''ectivel) in another co$ntr) #ill &a%e &anagers &ore 'le,ible in dealing #ith a variet) o' c$lt$ral and ethnic sit$ations in the 0.!.
. +ot$ C$ina and India are rising e%ono'i% #owers( 1ow 'ig$t your a##roa%$ to doing usiness wit$ C$ina* a %o''unist %ountry* e different fro' your a##roa%$ to doing usiness wit$ India* t$e world&s 'ost #o#ulous de'o%ra%y? In w$i%$ %ountry would you e"#e%t to en%ounter t$e 'ost rules? T$e 'ost ureau%ra%y? Doing b$siness in China #o$ld be di''erent than doing b$siness in India beca$se China has ne# reg$lations and govern&ent policies that are &a%ing li'e hard 'or 'oreign co&panies in all ind$stries. Managers in China have to b$ild relationships #ith local reg$lators and local o''icials and so&e 'ir&s have had proble&s getting paid. In 'act Chinese &anagers #ithhold pa)&ents as a tactic in price negotiations beca$se these organizations are not $st co&panies b$t also political entities. D$e to signi'icant c$lt$ral di''erences the Chinese c$lt$re b$ild relationships #hich co$nt &ore than contract. -n the other hand n$&ero$s co&panies see India as a &aor so$rce o' technological and scienti'ic brainpo#er and the 'act that India has a large +nglish spea%ing pop$lation &a%es it a nat$ral 'or 0.!. co&pan ies #ho #ant to o$tso$rce services. 7 96: Cengage Learning. All ;ights ;eserved. Ma) not be scanned copied or d$plicated or posted to a p$blicl) accessible #ebsite in #hole or in part . e,cept 'or $se as per&itted in a license distrib$ted #ith a certain prod$ct or service or other#ise on a pass#ordprotected #ebsite 'or classroo& $se.
=@
Chapter 4
@. Do you t$ink it is realisti% t$at +2 usiness #ra%ti%es %an $a)e a #ositi)e effe%t on #o)erty and ot$er so%ial #role's in de)elo#ing %ountries? Dis%uss( The botto& o' the p)ra&id 3B-(4 concept proposes that corporations can alleviate povert) and other social ills as #ell as &a%e signi'icant pro'its b) selling to the #orld"s poorest people. The ter& botto& o' the p)ra&id re'ers to the &ore than 'o$r billion people #ho &a%e $p the lo#est level o' the #orld"s econo&ic p)ra&id as de'ined b) per capita inco&e. An e,a&ple o' ho# botto& o' the p)ra&id b$siness practices can have a positive e''ect on povert) and other social proble&s is 0nilever"s 3'or&erl) Lever Brothers4 e''orts over &an) )ears to prevent the spread o' disease in poor areas o' the #orld b) introd$cing ver) ine,pensive soap prod$cts to the people there. Another e,a&ple is (rocter N Ga&ble"s e''orts to get people in developing co$ntries to $se diapers and 'e&inine h)giene prod$cts that sell at lo# prices. In these cases and others co&panies positivel) i&pact the general health o' the pop$lation or even red$ce disease b) providing prod$cts at prices speci'icall) set to be a''ordable to those in ver) lo# per capita areas o' the #orld. . So'nio* a start-u# running s$oe %o'#any in California* de%ided to start selling its #rodu%ts around t$e world fro' t$e )ery eginning( In general ter's* na'e so'e of t$e %$allenges a start-u# %o'#any su%$ as So'nio 'ig$t fa%e internationally( The basic &anage&ent '$nctions o' planning organizing leading and controlling are the sa&e #hether a co&pan) operates do&esticall) or internationall). Eo#ever &anagers #ill e,perience greater di''ic$lties and ris%s #hen per'or&ing these &anage&ent '$nctions on an international scale. When operating on an international b asis it is i&portant 'or &anagers to give considerable tho$ght to econo&ic legalpolitical and socioc$lt$ral 'actors. International b$sinesses get a''ected b) the in'rastr$ct$re and econo&ic proble&s o' the co$ntries #here the b$siness has to set $p. Di''ering la#s and reg$lations &a%e doing b$siness a challenge 'or international 'ir&s. Managers #or%ing internationall) sho$ld also g$ard against ethnocentris& #hich is the nat$ral tendenc) a&ong people to regard their o#n c$lt$re as s$perior to others. 5. Do you t$ink it&s #ossile for so'eone to de)elo# a gloal 'indset if t$ey ne)er li)e outside t$eir nati)e %ountry? 1ow 'ig$t t$ey do t$at? It is possible 'or so&eone to develop a global &indset even i' the) never live o$tside their native co$nt) b) $nderstanding and appreciating di''erences in social val$es. (eople 'ro& so&e c$lt$res tend to pa) &ore attention to the social conte,t 3social setting nonverbal social stat$s etc.4 o' their verbal co&&$nication. 2or e,a&ple A&erican &anagers #or%ing in China have discovered that social conte,t is considerabl) &ore i&portant in that c$lt$re and the) need to learn to s$ppress their i&patience and devote the ti&e necessar) to establish personal and social relationships. :. S$ould a 'ultinational %or#oration o#erate as a tig$tly integrated* worldwide usiness syste'* or would it e 'ore effe%ti)e to let ea%$ national susidiary o#erate autono'ously? W$y?
7 96: Cengage Learning. All ;ights ;eserved. Ma) not be scanned copied or d$plicated or posted to a p$blicl) accessible #ebsite in #hole or in part .
e,cept 'or $se as per&itted in a license distrib$ted #ith a certain prod$ct or service or other#ise on a pass#ordprotected #ebsite 'or classroo& $se.
Managing in a Gl!al En"irn#ent
=
There is no single correct ans#er to this >$estion beca$se arg$&ents can be &ade both #a)s. The ans#er depends partl) on the goals and strateg) o' the &$ltinational corporation. -perating as an integrated #orld#ide s)ste& &eans that the parent co&pan) and its 'oreign a''iliates #or% together to '$l'ill co&&on b$siness obectives. !$ch global integration allo#s a &$ltinational corporation to attain econo&ies o' scale in prod$ction and also to ac>$ire reso$rces and co&ponent parts #herever in the #orld it is &ost advantageo$s to do so. -perating as an integrated s)ste& is o'ten associated #ith a globalization strateg) and #ith a decentralized decision&a%ing process. The reason 'or going &$ltinational is to gain the advantage o' operating in several co$ntries si&$ltaneo$sl) #hich is o'ten 'acilitated thro$gh $ni'or& policies as #ell as standard prod$cts and b$siness practices. This approach can prod$ce cost savings and $ni'or&l) high>$alit) per'or&ance thro$gho$t the 'ir&. Letting each s$bsidiar) operate a$tono&o$sl) &eans that s$bsidiaries are 'ree to respond to econo&ic political and c$lt$ral conditions o' the nation in #hich the) are located. Eead>$arters personnel are not li%el) to be 'a&iliar #ith conditions in each co$ntr) or b e capable o' >$ic%l) responding to changes in local conditions. The strongest arg$&ent in 'avor o' a decentralized organization that lets s$bsidiaries operate a$tono&o$sl) is the diversit) o' environ&ents that e,ist aro$nd the #orld. A$tono&) also &a) red$ce political ris% b) overco&ing the i&age o' o$tside control. =. W$y do you t$ink 'any #eo#le are so frig$tened y gloali!ation? +ased on w$at is o%%urring in t$e world today* do you e"#e%t t$e gloali!ation a%klas$ to grow stronger or weaker o)er t$e ne"t de%ade? Generall) it &a) be that people #ho are a'raid o' globalization thin% the) #ill so&eho# co&e o$t on the losing end as globalization r$ns its co$rse. The) &a) be 'rightened b) the sheer size and po#er o' large &$ltinational corporations sensing that the) are si&pl) and grad$all) losing all vestiges o' control over their lives as these enor&o$s organizations beco&e &ore and &ore po#er'$l driving the needs o' societ) and the agendas o' #orld govern&ents to an evergreater e,tent. More speci'icall) the globalization bac%lash &a) be pri&aril) the res$lt o' p$blic perception that other co$ntries bene'it 'ro& 'ree trade to a &$ch greater e,tent than does the 0nited !tates. The dra&atic loss o' obs res$lting 'ro& e,pansion o' o$tso$rcing to other co$ntries has led to increasing p$blic resent&ent. Managers and co&panies &a) 'ace signi'icant p$blic relations di''ic$lties in response to o$tso$rcing actions. Managers &a) even 'ace the o$tso$rcing o' their o#n obs as $p to @.@ &illion &ostl) #hitecollar obs shi't 'ro& the 0.!. to lo##age co$ntries b) 965. Interestingl) tho$gh 0.!. co&panies are also 'inding a gro#ing interest on the part o' overseas co&panies in o$tso$rcing to the 0.!. The bac%lash against globalization is li%el) to beco&e stronger over the ne,t decade as trade agree&ents #ith India China and other co$ntries contin$e to e,pand and M1Cs beco&e larger and &ore po#er'$l in an environ&ent o' &ini&al reg$lation. 8. Two .(S( %o'#anies are %o'#eting to take o)er a large fa%tory in t$e C!e%$ Re#uli%( ne delegation tours t$e fa%ility and asks 6uestions aout $ow t$e #lant 'ig$t e run 'ore effi%iently( T$e ot$er delegation fo%uses on ways to i'#ro)e working %onditions and #rodu%e 7 96: Cengage Learning. All ;ights ;eserved. Ma) not be scanned copied or d$plicated or posted to a p$blicl) accessible #ebsite in #hole or in part . e,cept 'or $se as per&itted in a license distrib$ted #ith a certain prod$ct or service or other#ise on a pass#ordprotected #ebsite 'or classroo& $se.
=5
Chapter 4
a etter #rodu%t( W$i%$ delegation do you t$ink is 'ore likely to su%%eed wit$ t$e #lant? W$y? W$at infor'ation would you want to %olle%t to de%ide w$et$er to a%6uire t$e #lant for your %o'#any? There is no clear ans#er to this >$estion. The Czech ;ep$blic is a 'or&er co&&$nistbloc co$ntr) and a ne#l) e&erging de&ocratic econo&) and its people have been $sed to &an$'act$ring 'acilities r$n b) the govern&ent. The plant &a) need s$bstantial i&prove&ents in e''icienc). -n the other hand the #or%ing conditions there &a) be in need o' s$bstantial i&prove&ent as #ell and prod$ct >$ alit) #ill be i&portant to s$ccess. It #o$ld be i&portant to gather a great deal o' in'or&ation abo$t each o' the di&ensions o' the econo&ic legalpolitical and socioc$lt$ral aspects o' the Czech ;ep$blic and in partic$lar the local area in #hich the plant is located. <. W$i%$ style of %o''uni%ating do you t$ink would e 'ost enefi%ial to t$e long-ter' su%%ess of a .(S( %o'#any o#erating internationally5$ig$-%onte"t or low-%onte"t %o''uni%ations? W$y? It see&s li%el) that highconte,t co&&$nications #o$ld be &ore bene'icial to the longter& s$ccess o' a 0.!. co&pan) operating internationall) beca$se the &ost rapidl) developing econo&ies are in Asian and Arab co$ntries #hich tend to be highconte,t c$lt$res. This &a) present signi'icant di''ic$lties 'or A&erican &anagers &ost o' #ho& are &ales 'ro& lo# conte,t c$lt$res. 69. 1ow 'ig$t t$e so%ial )alue of low )ersus $ig$ #ower distan%e influen%e $ow you would lead and 'oti)ate e'#loyees? W$at aout t$e )alue of low )ersus $ig$ #erfor'an%e orientation? (o#er distance re'ers to the e,tent to #hich accept ine>$alit) in po#er a&ong instit$tions organizations and people. Lo# po#er distance &eans that people e,pect e>$alit) in po#er. In co$ntries #ith lo# po#er distance it #ill be i&portant to sho# e>$alit) in both tangible and intangible #a)s. !tat$s s)&bols s$ch as large o''ices or reserved par%ing spaces 'or e,ec$tives #ill ca$se proble&s a&ong the #or%'orce. +&plo)ees #ill e,pect to participate in decision &a%ing and tea&#or% is li%el) to be an e''ective str$ct$re 'or the organization. In a high po#er distance co$ntr) people #ill e,pect those at higher levels in the organization to have certain per%s and #ill also e,pect the& to &a%e the decisions. A societ) #ith a high per'or&ance orientation places high e&phasis on per'or&ance and re#ards people 'or per'or&ance i&prove&ents and e,cellence. +&plo)ees in a high per'or&ance orientation societ) can be &otivated b) re#ards 'or e,cellent per'or&ance and b) developing innovative #a)s to i&prove per'or&ance. A lo# per'or&ance orientation &eans people pa) less attention to per'or&ance and &ore attention to lo)alt) belonging and bac%gro$nd. +&plo)ees in lo# per'or&ance orientation societies can be &otivated b) the perception that their &anagers and co&panies are lo)al to the& and b) the creation o' a O'a&il)" at&osphere #ithin their co&panies. In addition the) are li%el) to go to great lengths in their per'or&ance 'or &anagers #ho sho# an obvio$s interest in their e&plo)ees as individ$als and 'ello# h$&an beings. 7 96: Cengage Learning. All ;ights ;eserved. Ma) not be scanned copied or d$plicated or posted to a p$blicl) accessible #ebsite in #hole or in part .
e,cept 'or $se as per&itted in a license distrib$ted #ith a certain prod$ct or service or other#ise on a pass#ordprotected #ebsite 'or classroo& $se.
Managing in a Gl!al En"irn#ent
=:
Appl- %r S.ill&5 E$periential E$er'i&e 6hat are %r S'ial Val%e&7
A global environ&ent re>$ires that &anagers have to deal #ith people #ho hold &an) di''erent val$es and ideas. Ko$r scores have both individ$al and societal &eaning. Co&pare )o$r scores to other st$dents to $nderstand )o$r perception o' the di''erent val$es in )o$r colleag$e gro$p. -n #hich o' the 'ive val$es #o$ld )o$ personall) li%e to score higherP Lo#erP These 'ive val$es also di''er #idel) across national c$lt$res. Go to the Web site ###.geert ho'stedeJdi&ensions.php and co&pare )o$r co$ntr)"s scores on the 'ive val$es to the scores o' people 'ro& other co$ntries. 3At this site the ter& 'as%ulinity is $sed instead o' asserti)eness.4 What s$rprises )o$ abo$t the di''erences across co$ntriesP
Appl- %r S.ill&5 S#all Gr%p Brea.%t 6here Ha"e % Been7
This e,ercise as%s st$dents to create lists o' co$ntries the)"ve visited o$tside their ho&e co$ntries record the pop$lation o' each co$ntr) co&p$te the percentage o' the #orld"s pop$lation 'or each co$ntr) pop$lation and esti&ate the grand total o' n$&ber o' co$ntries and percentage o' #orld pop$lation visited b) their gro$ps. -nce that is co&pleted the) sho$ld disc$ss reasons 'or the variabilit) a&ong gro$p &e&bers and the i&plications o' high e,pos$re 3to other co$ntries4 vers$s lo# e,pos$re #ith regard to a career in &anage&ent.
Appl- %r S.ill&5 Ethi'al Dile##a AH Bite'h
6. Do t$e %lini%al trials in Alania( You&ll e ale to ring t$e drug to 'arket faster and %$ea#er* w$i%$ will e good for A1 +iote%$&s e'#loyees and in)estors and good for t$e 'illions of #eo#le w$o suffer fro' an"iety atta%ks( The proble& #ith this option is that #hen the trials end in Albania 'ree treat&ent 'or those patients #ill be discontin$ed and the) are li%el) to be too poor to b$) the dr$g even i' it #as &ar%eted there. . Do t$e %lini%al trials in t$e .nited States( ,)en t$oug$ it will %ertainly e 'ore e"#ensi)e and ti'e-%onsu'ing* you&ll feel as if you&re li)ing u# to t$e # art of t$e 1i##o%rati% at$ t$at instru%ted you to 7#res%rie regi'ens for t$e good of 'y #atients a%%ording to 'y aility and 'y 8udg'ent and ne)er do $ar' to anyone(9 This option &a) be best i' Eassan"s pri&ar) concern lies in not violating his o#n val$es #ith regard to the Eippocratic -ath and he does not #ant to or has do$bts abo$t his abilit) to establish a co&passionate $se progra& in Albania a'ter trials there are co&pleted. -' co$rse i' he considers the dela) o' doing the trials in the 0.!. to be doing har& to those 7 96: Cengage Learning. All ;ights ;eserved. Ma) not be scanned copied or d$plicated or posted to a p$blicl) accessible #ebsite in #hole or in part . e,cept 'or $se as per&itted in a license distrib$ted #ith a certain prod$ct or service or other#ise on a pass#ordprotected #ebsite 'or classroo& $se.
==
Chapter 4
individ$als #ho &ight be able to get the dr$g sooner i' the trials #ere done in Albania then this &a) not be the best option. @. Do t$e %lini%al trials in Alania* and if t$e drug is a##ro)ed* use #art of t$e #rofits to set u# a %o'#assionate use #rogra' in Alania* e)en t$oug$ setting u# a distriution syste' and training do%tors to ad'inister t$e drug* 'onitor #atients for ad)erse effe%ts* and tra%k results will entail %onsiderale e"#ense( I' Eassan believes the dr$g #ill event$all) prod$c e ade>$ate pro'its to pa) 'or a co&passionate $se progra& in Albania to contin$e treat&ent 'or those #ho participate in clinical trials there and that the dr$g #ill be approved 'ollo#ing those trials then this is probabl) the best option 'or hi&. Ee can get the dr$g to patients in the 0.!. sooner and he #ill not be abandoning the Albanian patients #ho participate in the trials th$s $pholding his Eippocratic -ath in both respects.
Appl- %r S.ill&5 Ca&e ,r Criti'al Anal-&i& 6e 6ant Mre G%itar&8
6. 1ow a%%urate is Ada' Wainwrig$t&s analysis of t$e situation at 3uitarras Do'ingue!? Do you t$ink %rafts'ans$i# is in%o'#atile wit$ in%reasing #rodu%ti)ity in t$is %o'#any? W$y? Ada& Wain#right"s anal)sis o' the sit$ation at G$itarras Do&ing$ez is not acc$rate. Ada& does not $nderstand the #or%ing and &anage&ent at G$itarras Do&ing$ez. There are &aor di''erences in social val$es bet#een G$itarras Do&ing$ez in !pain and Ada& Wain#right"s #or% place in the 0.!. Cra'ts&anship is inco&patible #ith increasing prod$ctivit) in this co&pan) as each g$itar is a creation rather than a strea&lined prod$ct. At G$itarras Do&ing$ez cra'ts&anship is given para&o$nt i&portance not prod$ctivit). . W$at so%ial )alues are #resent in 3uitarras Do'ingue!* t$at see' different fro' .(S( so%ial )alues ,"$iit ;(< and ,"$iit ;(=>? ,"#lain( The social val$es present in G$itarras Do&ing$ez are >$ite di''erent 'ro& 0.!. social val$es. There is greater e&phasis on high per'or&ance in the 0.!. #hereas in !pain the e&phasis is on lo)alt) belonging and bac%gro$nd. @. W$at do you re%o''end Wainwrig$t do to in%rease #rodu%tion in a usiness setting t$at does not see' to )alue $ig$ #rodu%tion? Wain#right sho$ld co&&$nicate &ore #ith !alvador and e,plain hi& the need 'or increased prod$ction. In a b$siness setting that does not see& to val$e high prod$ction Wain#right sho$ld not s$ggest abo$t the operations in the 0.!. rather he sho$ld as% !alvador #hat best can be done to increase prod$ction in the !panish set $p.
On the J! Vi(e Ca&e An&1er& 7 96: Cengage Learning. All ;ights ;eserved. Ma) not be scanned copied or d$plicated or posted to a p$blicl) accessible #ebsite in #hole or in part .
e,cept 'or $se as per&itted in a license distrib$ted #ith a certain prod$ct or service or other#ise on a pass#ordprotected #ebsite 'or classroo& $se.
Managing in a Gl!al En"irn#ent
=8
Bla'. Dia#n( E9%ip#ent5 Managing in a Gl!al En"irn#ent
6. What evidence do )o$ see o' a global &indset in these &anagersP List at least three e,a&ples o' global thin%ing provided in the video. Blac% Dia&ond ta%es into consideration the di''erences in c$lt$re and perspective a&ong its global distrib$tors. 2or e,a&ple the +$ropean &ar%et is di''erent than the A&erican &ar%et even tho$gh both appeal to individ$als #ho are passionate abo$t cli&bing and &o$ntaineering.
Blac% Dia&ond treats e&plo)ees in its 'actories in the sa&e ethical #a) #orld#ide. There are no s#eatshops. +&plo)ees #orld#ide #or% in sa'e #elllit clean 'actories. Blac% Dia&ond ta%es charge o' its distrib$tors #orld#ide so that the co&pan)"s c$lt$ral val$es are $pheld globall). There is a certi'ication process that is $sed globall) to ens$re that the co&pan) standards are &et.
. ;e'erencing the co&&on traits o' an M1C described in the te,t e,plain #h) )o$ thin% Blac% Dia&ond is or is not a &$ltinational corporation. A &$ltinational corporation 3M1C4 t)picall) receives &ore than 5 percent o' its total sales reven$es 'ro& operations o$tside the ho&e co$ntr). Blac% Dia&ond is a M1C beca$se it appeals to a ver) specialized gro$p o' people Qthose interested in &o$ntaineering. Its &ar%et &$st be global beca$se the costs o' research and develop&ent 'or its prod$cts is so high that the co&pan) co$ld not be pro'itable i' it onl) did b$siness in the 0nited !tates. An M1C also has the 'ollo#ing characteristics
Blac% Dia&ond is &anaged as an integrated #orld#ide b$siness s)ste& in #hich 'oreign a''iliates act in cooperation #ith one another. Capital technolog) and people are trans'erred a&ong a''iliates. Blac% Dia&ond ac>$ires &aterials and &an$'act$re parts #herever it is &ost advantageo$s to do so. As an M1C Blac% Dia&ond is controlled b) a single &anage&ent a$thorit) that &a%es %e) strategic decisions. Centralization o' &anage&ent is re>$ired to &aintain #orld#ide integration and pro'it &a,i&ization. Blac% Dia&ond"s top &anagers e,ercise a global perspective. The) regard the entire #orld as one &ar%et 'or strategic decisions reso$rce ac>$isition and location o' prod$ction.
@. Describe at least t#o environ&ental 'actors a''ecting this b$siness and s$&&arize ho# the &anagers are responding to these 'actors. The !ocioc$lt$ral +nviron&ent a''ects this b$siness beca$se &an) o' Blac% Dia&ond"s 'actor) #or%ers in co$ntries s$ch as Bangladesh have little or no 'or&al ed$cation. The co&pan) is responding b) o''ering e&plo)ees ed$cational opport$nities. 7 96: Cengage Learning. All ;ights ;eserved. Ma) not be scanned copied or d$plicated or posted to a p$blicl) accessible #ebsite in #hole or in part . e,cept 'or $se as per&itted in a license distrib$ted #ith a certain prod$ct or service or other#ise on a pass#ordprotected #ebsite 'or classroo& $se.
=<
Chapter 4
The Legal(olitical +nviron&ent a''ects this b$siness beca$se host govern&ents have &)riad la#s concerning libel stat$tes cons$&er protection in 'or&ation and labeling e&plo)&ent and sa'et) and #ages. Blac% Dia&ond"s &anagers &$st learn these r$les and reg$lations and abide b) the&. The) ass$re that the #or%ers are treated h$&anel) and #or% in a sa'e clean #elllit 'actor).
7 96: Cengage Learning. All ;ights ;eserved. Ma) not be scanned copied or d$plicated or posted to a p$blicl) accessible #ebsite in #hole or in part .
e,cept 'or $se as per&itted in a license distrib$ted #ith a certain prod$ct or service or other#ise on a pass#ordprotected #ebsite 'or classroo& $se.
