Transcript Chapter 4: Managing in a Global Environment

Chapter 3
Managing in a Global
Environment
The International Business
Environment
 Greater difficulties
and risks when
performing management functions - due
to differences in culture, language,
economies, laws, political stability, etc.
The International Business
Environment
GM’s Political Risk System
Leadership (15pts.)
Social Cohesion (10)
External Involvement (10)
Development (10)
Economic Management (10)
The International Business
Environment
GM’s Political Risk System (cont.)
Finance (10)
Energy (10)
Labor (10)
Automotive (15)
Stages of Globalization
1. Domestic Stage = All production and
marketing facilities at home.
2. International Stage = International
Division is typically part of the structure,
but is not dominant.
Stages of Globalization
3. Multinational Stage = Marketing and
production in many countries and 1/3 of
sales from outside home country.
-Ford had a sales branch in France in
1908 and a manufacturing facility in
England in 1911.
4. Global Stage = Not identified with any
single country, look for opportunities
most anywhere.
Multinational/Global
Corporations
 The
revenue of GM is comparable to the
gross domestic product (GDP) of Finland
 Revenue of General Electric is equal to
the GDP of Israel
 Revenue of Toyota is similar to the GDP
of Hong Kong.
Multinational/Global
Corporations
 Ranked
by market value, July 31, 1996
1. General Electric
2. Royal Dutch/Shell (Nether./U.K.)
3. Coca-Cola
4. NTT (Japan)
5. Exxon
Multinational/Global
Corporations
are criticized for:
Excessive profits
Lack of technology transfer
Lack of respect for local culture
Interference with governments
Multinational/Global
Corporations
complain about host countries:
Profit limitations
Overpriced resources
Foreign exchange restrictions
Failure to meet contract obligations
What Are:
 GATT?
 EC?
 NAFTA?
GATT
General Agreement on Tariffs and
Trade
GATT
General Agreement on Tariffs and
Trade
 125
member nations.
 For settling international trade disputes
 Most Favored Nation (MFN) = members
grant each other most favorable trade
treatment (reduced tariffs, etc.)
 GATT has changed to WTO (World
Trade Org.)
European Community (EC)
European Community (EC)
 Formed
in 1958 to improve economic and
social conditions among its members
 15 nation alliance is an open market for
Europe's 340 million consumers.
 Moving toward one economy and one
currency
EC Reforms and
Deregulation
Banking
 Insurance
 Health
 Safety standards
 Airlines

EC Reforms and
Deregulation
Banking
 Insurance
 Health
 Safety standards
 Airlines

 Auto
sales
 Telecommunications
 Social policy
 Monetary union
Advantages of the EC
 Increased
competition and economies of
scale will enable companies to grow large
and efficient
 Will become more competitive in the
United States and other world markets.
North American Free Trade
Agreement (NAFTA) 1994
 Canada,
 Why?
Mexico, and U.S.
North American Free Trade
Agreement (NAFTA) 1994
 Alliance
of 360 million consumers
 Expected to spur growth and investment,
increase exports, and expand jobs in all
three nations
Opposition to NAFTA
 Many
opposed the agreement due to fear
of job losses to Mexico
 Others fear weakened pollution
standards and toxic dumping.
Some NAFTA Effects
 Cifra
in a joint venture with Wal-Mart to
operate Wal-Marts and Sam’s Clubs in
20 Mexican cities
 Cinemark Theaters building movie
multiplexes in several large Mexican
cities
 Mexican investors buy Del Monte foods
Alliances-Promise or Pitfall?
 Will
there emerge multiple competitive
trading blocs?
 Will just three powerful trading blocs
dominate: Americas, Europe, Pacific
Rim (APEC - Asian-Pacific Economic
Forum)?
 Will the expansion of global corporations
weaken the trading blocs?
Hofstede’s Dimensions of
Culture
 Power
Distance
 Uncertainty Avoidance
 Individualism/Collectivism
 Masculinity/Femininity
 (Time Orientation)
Power Distance
 High
power distance means people accept
inequality in power among institutions,
organizations, and people
Uncertainty Avoidance
 High
uncertainty avoidance means that
members of a society feel uncomfortable
with uncertainty and ambiguity
Individualism & Collectivism
 Individualism
reflects a value for a loosely
knit social framework in which
individuals are expected to take care of
themselves
 Collectivism is a preference for a tightly
knit social framework in which
individuals look after one another
Masculinity/Femininity
(Toughness/Tenderness)
 Masculine
cultures stress the importance
of achievement, heroism, assertiveness,
and material success
 Feminine cultures value relationships,
modesty, caring for the weak, and quality
of life
Time Orientation
 Short-Term
Orientation means that people
expect fairly rapid feedback from
decisions, expect quick profits, frequent
job evaluations and promotions, etc.
NAFTA Countries’ Cultures
 U.S.
and Canada virtually identical on
Power Dist. & Uncert. Avoid. U.S. a little
higher on Individualism & Masculinity.
 Mexico lower than U.S. and Canada on
Individualism and higher on the other 3.
 With the exception of Masculinity,
Mexico is more similar to France than its
NAFTA partners.
Other Cultural
Characteristics
 Language
 Religion
 Space
 Time
Orientation (monochronic vs.
polychronic)
Managing Cross-Culturally
 Must
be culturally flexible and easily
adapt to new situations and ways of doing
things
 Cannot be ethnocentric
 Culture Shock = frustration and anxiety
from different culture.
Managing Cross-Culturally
 Motivating
-
Must fit the incentives with the culture
 Controlling-
Often are unable to fire unproductive
employees and must find creative ways of
dealing with them.
Positive Characteristics of
U.S. Managers as viewed by
other Nations
 Informal,
frank, trustworthy
 Innovative, open-minded, pragmatic
 Entrepreneurial, profit-oriented
 Eager to get things done
 Work harder than Europeans
Negative Characteristics of
U.S. Managers as viewed by
other Nations
 Work
less hard than Asians
 Short-term orientation
 Judge person’s worth by their wealth
 Loyal to unit, not firm
 Not well-rounded educationally
 Parochial
Getting Started
Internationally
(Market Entry Strategies)
 Global Outsourcing (e.g., Nike)
 Exporting (e.g., L.L. Bean)
 Licensing (e.g., Lowenbrau)
 Franchising (e.g., McDonald’s)
Getting Started
Internationally (cont.)
 Direct
Investing
– Joint Venture (e.g., NUMMI)
– Wholly Owned Foreign
Affiliates
Acquisition
(BP purch. AMOCO)
Greenfield Venture
(Toyota in Kentucky)
Top U.S. Exporters (1994)
 1.
General Motors
 2. Ford Motors
 3. Boeing
 4. Chrysler
 5. General Electric
 6. Motorola
 7. IBM
 8. Philip Morris