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Managing in a

Global Business Environment

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Objectives

Understand the landscape of the global market.

Develop an awareness for the role of culture in international

Business management.

Determine the best mode of entry into foreign markets giveneach firms unique characteristics.

Develop effective human resource practices for managing

international subsidiaries.

Become aware of ethical issues in international operations.

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The Changing Pattern of InternationalBusiness

Changing world output and world trade

picture

The U.S. no longer dominates the world economy

Large U.S. multinationals no longer dominate

international business

The global economy has become more knowledge-

intensive

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The Changing Pattern of InternationalBusiness (continued)

Lowered trade barriers

General Agreement on Tariffs and Trade(GATT)

World Trade Organization (WTO)

Integrated Economic Markets

The European Union (EU)

The North American Free Trade Act

(NAFTA)

The Association of Southeast Asian Nations

(ASEAN)

The Asia Pacific Economic Cooperation

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The Changing Pattern of InternationalBusiness(continued)

Global consumer preferences

Tastes and preferences are converging

Presence of mass media, exposure to

goods from various countries, and

standardized products

Globalized productionCost efficiency

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Example of Globalized Production

Of the $20,000 sticker price of a General MotorsAutomobiles:

$6,000 goes to South Korea, where the car was assembled

$3,000 goes to Japan for sophisticated high-tech parts(engines, transaxles, electronics)

$800 goes to Taiwan, Singapore, and Japan for smallparts

$500 goes to Great Britain for advertising and marketing

services$1,000 goes to Ireland for data processing

$7,600 goes to GM and its external professional firms inthe United States

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The Changing Pattern of InternationalBusiness(continued)

Technological innovations

Advances in communications, information

processing, and transportation technology

Fiber optics, wireless technology, the Internet

and World Wide Web, and satellite technology

Management across cultures

Adaptation to business strategies, structures,

operational policies, and human resource

programs

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Major Factors Affecting InternationalBusiness

General business environment

Political System

Government Policies

Government Ideology

Physical System Infrastructure Development

Natural Resource

Economic Environment

Economic resources

Economic growth

Cultural environment

Culture shock

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Entry Strategy and Strategic Alliances

Four key decisions of a firm contemplating foreign

expansion:

Which countries to enter

When to enterScale of involvement

How to enter

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Choosing Foreign Countries

The appeal of a particular country is likely to begreater when:

The size of the domestic market is large

The present wealth of consumers in that market is high andprojected to grow in the future

The needed resources are readily available

The firms product offerings are suitable to a particular

market

A positive business environment exists

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When to Enter Foreign Countriesand Scale of Involvement

When to Enter

First-mover advantages

Pioneering costs

Scale of Involvement

Lowest if the firm simply decides to export its products to the

foreign location

Highest if the firm decides to have a wholly ownedsubsidiary in the foreign country

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Modes of Entry

Exporting Turnkey Project

Licensing

Franchising

Merger

AcquisitionWholly Owned

Subsidiary

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Advantages and Disadvantages ofVarious Modes of Entry Choices

Loss of competitive advantage

Potential quality control problems

Quick expansion

Lower development costs and risks

Lower political risk

Franchising

Loss of competitive advantageQuick expansion

Lower expenses and risks

Lower political risk

Licensing

Competition from local client

Loss of competitive advantage

Access to closed marketsTurnkey Project

High transportation costs

Potential tariffs

Economies of scale

Lower foreign expenses

Exporting

DisadvantagesAdvantagesMode of Entry

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Advantages and Disadvantages of VariousModes of Entry Choices(continued)

Loss of competitive advantage

Potential overestimation of partners

capabilities

Access to closed markets

Pooled resources increase partners

capabilities

Complementary skills & assets

Strategic Alliance

Large capital outlay

Lack of local knowledge

Increased risk

Maximum control over proprietary

knowledge/ technology

Greater strategic flexibility

Efficiencies of global production system

Wholly Owned

Subsidiary

Potential for conflict of interest

Loss of competitive advantage

Knowledge of local markets

Lower development costs and risk

Access to closed markets

Joint Venture

DisadvantagesAdvantagesMode of Entry

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Examples of Strategic Alliances

General ElectricSnecma of

France

ToshibaIBM

MitsuiGeneral Electric

ToyotaGM, TRW

CanonHewlett-Packard

MitsubishiCaterpillar

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Basic Approaches to Managing anInternational Subsidiary

Ethnocentric Approach

Polycentric Approach

Geocentric Approach

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Why International Assignments End inFailure

Culture shock

Lack of pre-departure cross-cultural trainingOveremphasis on technical qualifications

Getting rid of a troublesome employee

Family problems

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Key Human Resource ManagementFactors for Global Firms

Selection

Selection criterion should include cultural sensitivity

Training

Length of assignment determines depth of training

Cross-cultural training is critical to success

Career Development

International assignments should be part of careeradvancement plan

Compensation and Benefits

Incentives and quality-of-life concerns

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Applications of ManagementPerspectives

For the Manager

Firms are prevented from capitalizing on business

opportunities overseas by a lack of awareness of:

How to enter foreign markets

How to operate in diverse national settings

By developing a better appreciation of the unique

challenges that may confront them, managers can

learn how to function well overseas.

Groom managers for their role in globalization.

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Applications of ManagementPerspectives

For Managing TeamsMany firms are entering joint ventures with companies in

other countries.

Joint ventures usually require teams made up of employees

from different nations.

The ability of international teams to work together in aclimate of mutual respect is a key to success.

This requires:Cross-cultural sensitivity.

Understanding of the international context in which the firmoperates.

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Applications of ManagementPerspectivesFor Individuals

The career mobility of employees is likely to be

enhanced if they have international skills.

International savvy is increasingly valued.

Many firms require employees to have

international experience before they can move into

the upper management ranks.

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Thank You