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Chapter 4

Uploaded by

Mohammad Ramadane
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Chapter 4: Managing in a Global Environment

Learning Outcomes
Follow this Learning Outline as you read and study this chapter.
4.1 Contrast ethnocentric, polycentric, and geocentric
attitudes toward global business
•Define parochialism.
•Contrast ethnocentric, polycentric, and geocentric attitudes
towards global business.

4.2 Discuss the importance of regional trading alliances


and the World Trade Organization.
•Describe the status of international and regional trade
alliances.
•Discuss the role of the WTO.
Learning Outcomes
4.3 Describe the structures and techniques organizations
use as they go international
• Contrast multinational, multidomestic, global, transnational, and born global
organizations.
• Describe the different ways organizations can go international.

4.4 Explain the relevance of the political/legal, economic,


and cultural environments to global business
• Explain how the global legal-political and economic environments affect managers
• Discuss Hofstede’s five dimensions for assessing cultures.
• Describe the challenges of doing business globally
What Is Your Global Perspective?

Parochialism…
is viewing the world solely through one’s own eyes and perspectives.
is not recognizing that others have different ways of living and working.
is a significant obstacle for managers working in a global business world.
is falling into the trap of ignoring others’ values and customs and rigidly applying an
attitude of “ours is better than theirs” to foreign cultures.
What is Your Global Perspective
(cont’d)

Ethnocentric Attitude
The parochialistic 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.
Regional Trading Alliances
(cont’d)
The World Trade Organization
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.
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.
Different Types of International
Organizations (cont’d)
Global Company
Is an MNC that centralizes its management and other decisions in the home
country.

Transnational Corporation (Borderless Organization)


An MNC that has eliminated structural divisions that impose artificial
geographic barriers and is organized along business lines that reflect a
geocentric attitude.
Exhibit 4–3 How Organizations Go Global

MAP source: http://www.gcccountries-business.com/_mgxroot/page_10769.html


How Organizations Go
International
Global Sourcing (Global Outsourcing)
•Purchasing materials or labor from around the world based on lowest cost.
The goal is to take advantage of lower costs in order to be more competitive.
Exporting
•Exporting the organization’s products to other countries – that is, making
products domestically and selling them abroad
Licensing or franchising
•one organization giving another organization the right to use its brand
name, technology, or product specifications in return for a fixed payment or a
fee (usually based on sales).

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How Organizations Go
International (cont’d)
Strategic Alliances
Partnerships between and organization and a foreign company in which both share resources and
knowledge in developing new products or building new production facilities.

Joint Venture
A specific type of strategic alliance in which the partners agree to form a separate, independent
organization for some business purpose.

Foreign Subsidiary
Directly investing in a foreign country by setting up a separate and independent production facility or
office.
Exhibit 4–4 World Internet Usage and Population Statistics

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The Political/Legal
Environment
The Political/ 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
•Some countries have risky political climates
The Economic Environment
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
The Cultural Environment

National Culture
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.
Exhibit 4–4 Cultural Contrasts
Hofstede’s Framework for Assessing
Cultures
Exhibit 4–6 Hofstede’s
Five Dimensions of National Culture
The GLOBE Framework
for Assessing Cultures
Power distance - The degree to which members of a society expect power to be
unequally shared.

Uncertainty avoidance - A society’s reliance on social norms and procedures to


alleviate the unpredictability of future events.

Assertiveness -The extent to which a society encourages people to be tough,


confrontational, assertive, and competitive rather than modest and tender.
Source: M. Javidan and R. J. House, “Cultural Acumen for the Global Manager: Lessons from Project GLOBE,” Organizational Dynamics, Spring 2001, pp. 289–305. Copyright © 2001. Reprinted with
permission from Elsevier.
The GLOBE Framework for
Assessing Cultures (cont’d)
Humane orientation
The degree to which a society encourages and rewards individuals for being fair, altruistic, generous,
caring, and kind to others.

Future orientation
The extent to which a society encourages and rewards future-oriented behaviors such as planning,
investing in the future, and delaying gratification.

Institutional collectivism
The degree to which individuals are encouraged by societal institutions to be integrated into groups in
organizations and society.
Source: M. Javidan and R. J. House, “Cultural Acumen for the Global Manager: Lessons from Project GLOBE,” Organizational Dynamics,
Spring 2001, pp. 289–305. Copyright © 2001. Reprinted with permission from Elsevier.
The GLOBE Framework for Assessing
Cultures (cont’d)
Gender differentiation — The extent to which a society
maximizes gender role differences, as measured by how much
status and decision-making responsibilities women have.

In-group collectivism — The extent to which members of a


society take pride in membership in small groups, such as their
families, their circles of close friends, and the organizations in
which they are employed.

Performance orientation — The degree to which a society


encourages and rewards group members for performance
improvement and excellence.
Source: M. Javidan and R. J. House, “Cultural Acumen for the Global Manager: Lessons from Project GLOBE,” Organizational Dynamics, Spring 2001, pp. 289–
305. Copyright © 2001. Reprinted with permission from Elsevier.
Exhibit 4–7 GLOBE Highlights
Quick Learning Review
Three of the nine dimensions for assessing country cultures in GLOBE studies are:
a. Power distance, client orientation and future orientation
b. Power distance, assertiveness and client orientation
c. Humane orientation, future orientation and client orientation
d. Assertiveness, power distance and future orientation
The main challenges of doing business globally in today’s world involve:
a. The openness associated with globalization and the significant cultural differences between
countries
b. Long-term orientation and significant culturaldifferences between countries
c. The openness associated with globalization and long-term orientation
d. Long-term/short-term orientation

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