Fundamental of Management. Lecture 3
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Transcript of Fundamental of Management. Lecture 3
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Lecture 3Managing in a Global Environment
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Organizations and managers are not isolated from international forces:– Trade barriers have fallen– Communication is faster, cheaper– Consumer tastes converge
The difficulties and risks of a borderless world are matched by benefits and opportunities
A Borderless World
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4.1 Ranking of Six Countries on the Global Index
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4.2 Four Stages of Globalization
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• Exporting – transferring products for sale to foreign countries
• Outsourcing – also called off shoring, work activities are done in countries with cheap labor
• Licensing – enabling a company to produce and market a product in another country
– Franchising is licensing that provides a complete package of materials and services
• Direct Investing – high level of involvement, company manages and controls assets
– Joint venture and other types of partnerships are common
International Market Strategies
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4.3 Strategies for Entering the International Arena
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China manufacturers many products for U.S. companies
China is also a growing consumer market
Regulations and government policies make doing business in China a challenge
India is a service giant, growing in software design and engineering
Brazil is a country that is gaining the attention of American managers
China Inc.
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• Planning, organizing, leading, and controlling in multiple countries can be challenging– It took McDonalds a year to figure out that Hindus in
India do not eat beef
– In Africa, the baby food includes pictures to aid illiterate consumers
• Managers must be mindful in the global marketplace
The International Business Environment
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4.4 Key Factors in International Environment
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• Economic Development - Countries are categorized as either developed or developing based on per capita income
– Government Policies
– Market Size
– Financial Markets
– Infrastructure
• Resource and Product Markets
– Companies must evaluate market demand
The current economic crisis has highlighted how interconnected economies are around the world
The Economic Environment
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4.5 World Economic Forum Global Competitiveness
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The United States moved from #1 to #2!
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4.6 How Countries are Bearing
the Economic Crisis
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• Political risk is defined as the risk of lost assets, earning power, or managerial control
• Managers must be concerned with the political instability of global markets
The Legal-Political Environment
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The values and behaviors that govern U.S. business do not always translate
– Social Values– Communication Differences– Other Cultural Characteristics
→ Language→ Religion→ Social organization→ Education→ Attitudes
The Sociocultural Environment
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Power Distance
Uncertainty Avoidance
Individualism and Collectivism
Masculinity and Felinity
Hofstede’s Value Dimensions
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• Assertiveness• Future orientation• Uncertainty avoidance• Gender differentiation• Power distance
GLOBE Project Value Dimensions
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• Social collectivism• Individual collectivism• Performance
orientation• Humane orientation
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4.7 Country Ranking on Four GLOBE Value Dimensions
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4.8 Country Ranking on Selected GLOBE Value Dimensions
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4.9 High-Context and Low-Context Cultures
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• Cultural intelligence – ability to use reasoning and observation skills– Culturally flexible– Adapt to new situations
• Managers must study the language and learn
• Cognitive, emotional, and physical intelligence
Developing Cultural Intelligence
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• General Agreement on Tariff and Trade (GATT)– 23 nations in 1947, a set of rules for fair trade
• World Trade Organization (WTO)– Maturation of GATT into permanent global institute
• European Union– 1957 Alliance to improve economic and social conditions
among members; evolved to 27-nation European Union• North American Free Trade Agreement (NAFTA)– Merged the United States, Canada, and Mexico into trading
bloc
International Trade Alliances
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4.10 European Union
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Trading alliance of ten countries
World’s third largest free-trade area
1.9 billion people and $45 trillion in trade
Remove all tariffs between China and ASEAN countries by 2015
China-ASEAN Free Trade Area
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• The size and volume of international business is LARGE– Companies have revenue = GDP of small country– Move assets from country to country– 25% or more of its profit comes from outside parent
country• MNC is managed as an integrated whole• Controlled by one management authority• MNC managers must have a global perspective
The Impact of Multinational Corporations (MNC)
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• 68% of Americans say other countries benefit the most from free trade– 53% believe free trade has hurt U.S.
• The United States’ primary concern is the loss of jobs– $136 billion in wages will shift from the U.S.
• Business leaders insist that economic benefits flow back to the U.S. economy– Lower prices and expanded markets– Increased profits and funds for innovation
• But American shoppers say they would pay higher prices to keep down foreign competition
The Globalization Backlash
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An approach for multinationals to do good
Corporations can alleviate problems and make large profits by selling to the world’s poor
There are more than 4 billion people at the lowest level of the economic pyramid
Many companies are adopting BOP strategies
Serving the Bottom of the Pyramid (BOP)
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