Chapter

4 Managing in a Global
Environment
Source: Stephen P. Robbins & Mary Coulter

Source: Stephen P. Robbins & Mary Coulter

4–1
Learning Outcomes
4.1 Contrast ethnocentric, polycentric, and geocentric attitudes
towards global business.
4.2 Discuss the importance of regional trading alliances and global
trade mechanisms.
4.3 Discuss the importance of regional trading alliances and global
trade mechanisms.
4.3 Discuss the importance of regional trading alliances and global
trade mechanisms.
4–2
The Global Marketplace
Opportunities and Challenges
➢Coping with the unexpected appearance of new competitors
➢Acknowledging cultural, political, and economic differences
➢Dealing with increased uncertainty, fear, and worry
➢Adapting to changes in the global environment
➢Avoiding parochialism

4–3
What’s Your Global Perspective?
• Parochialism
➢Is viewing the world exclusively through one’s own
eyes and perspectives.
➢Is not recognizing that others have different ways of
living and working.
➢Is a significant problem for managers working in a
global business world.
➢Is falling into the trap of ignoring others’ values and
customs and strictly applying an attitude of “ours is
better than theirs” to foreign cultures.

4–4
Adopting a Global Perspective
• Ethnocentric Attitude
➢The parochalistic belief that the best work approaches
and practices are those of the home country.
• Polycentric Attitude
➢The view that the 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.
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Regional Trading Agreements
• The European Union (EU)
➢A unified economic and trade entity
❖ Belgium,Denmark, France, Greece, Ireland, Italy,
Luxembourg, the Netherlands, Portugal, Spain, the United
Kingdom, Germany, Austria, Finland, and Sweden

• North American Free Trade Agreement (NAFTA)

➢Eliminated barriers to free trade (tariffs, import
licensing requirements, and customs user fees)
❖ United States, Canada, and Mexico

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Regional Trading Agreements
• U.S.-Central America Free Trade Agreement (CAFTA)
• Free Trade Area of the Americas
• Southern Cone Common Market (Mercosur)
• Association of Southeast Asian Nations (ASEAN)
➢Trading alliance of 10 Southeast Asian nations
• African Union
• South Asian Association for Regional Cooperation
(SARRC)

4–7
 Exhibit 4–2 ASEAN Members

Source: Based on J. McClenahen and T. Clark,

“ASEAN at Work,” IW. May 19, 1997, p. 42.

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The World Trade Organization (WTO)
• Evolved from the General Agreement on Tariffs
and Trade (GATT) in 1995.
• Functions as the only global organization
dealing with the rules of trade among nations.
• Has 149 member nations and 32 observer
governments.
• Monitors and promotes world trade.

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 Different Types of International Organizations
• Multinational Corporation (MNC)
➢Maintains operations in multiple countries.
• Multidomestic Corporation
➢Is an MNC that decentralizes management and other
decisions to the local country.
• Global Company
➢Is an MNC that centralizes its management and other
decisions in the home country.

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Different Types of International
Organizations (cont’d)
• Transnational Corporation (Borderless
Organization)
➢Is an MNC that has eliminated structural divisions that
impose artificial geographic barriers and is organized
along business lines that reflect a geocentric attitude.

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Managing in A Global Environment : External
Environment
• The Legal Environment
➢Stability or instability of legal and political systems
❖ Legal procedures are established and followed
❖ Fair and honest elections held on a regular basis
➢Differences in the laws of various nations
❖ Effects on business activities
❖ Effects on delivery of products and services

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The Economic Environment
• Economic Systems
➢Free market economy
❖ An economy in which resources are primarily owned and
controlled by the private sector.
➢Planned economy
❖ An economy in which all economic decisions are planned by a
central government.
• Monetary and Financial Factors
➢Currency exchange rates
➢Inflation rates
➢Diverse tax policies
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The Cultural Environment
• National Culture
➢Is the values and attitudes shared by individuals from
a specific country that shape their behavior and their
beliefs about what is important.
➢May have more influence on an organization than the
organization culture.

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 Exhibit 4–4 What Are Americans Like
Americans 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. 103–05; A. Bennett, “American Culture Is
Often a Puzzle for Foreign Managers in the U.S.,” Wall Street Journal, February 12, 1986, p. 29; “Don’t Think Our Way’s 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.

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Global Management in Today’s World
• Challenges
➢Openness associated with globalization
➢Significant cultural differences (e.g., Americanization)
➢Adjusting leadership styles and management approaches
• Risks
➢Loss of investments in unstable countries
➢Increased terrorism
➢Economic interdependence

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 Terms to Know
• parochialism • born globals
• ethnocentric attitude • global sourcing
• polycentric attitude • exporting
• geocentric attitude • importing
• European Union (EU) • licensing
• Euro • franchising
• North American Free Trade • strategic alliances
Agreement (NAFTA) • joint venture
• Association of Southeast Asian • foreign subsidiary
Nations (ASEAN) • market economy
• World Trade Organization • command economy
(WTO)
• national culture
• multinational corporations
(MNCs) • GLOBE
• multidomestic corporation • wikis
• global company • blogs
• transnational or borderless
organization
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