Chapter 11 Global International Issues Strategic Management Concepts

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Global Issues Global considerations impact virtually all strategic decisions n A world market has emerged n It is difficult for a firm to survive relying solely on domestic markets n Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 3

Multinational Organizations n International firms or multinational corporations face many complex variables: q q q q q Social Cultural Demographic Environmental Political Governmental Legal Technological Competitive opportunities and threats Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 4

Potential Advantages of International Operations Gain new customers n Absorb excess capacity, reduce unit costs, and spread economic risks n Allow firms to establish low-cost production facilities n Competition may be less intense n Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 5

Potential Advantages of International Operations (continued) Reduced tariffs, lower taxes, and favorable political treatment n Joint ventures can enable firms to learn new technology, culture, and business practices n Economies of scale n Power and prestige in domestic markets may be significantly enhanced n Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 6

Potential Disadvantages of International Operations n n n Foreign operations could be seized Different and often little-understood social, cultural, demographic, environmental, political, governmental, legal, technological, economic, and competitive forces Weakness of competitors overestimated Different language, culture, and value systems Understanding of regional organizations needed Dealing with two or money systems Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 7

Reasons for Global Expansion Advancements in telecommunications n Growth in demand for goods and services outside the U. S. is considerably higher than inside n 95% of the world's population lives outside the U. S. n Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 8

Globalization n Globalization: q n The process of doing business worldwide Global strategy includes considering global needs during q q q Design Production Marketing Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 9

Cultural Differences n n n n n Time Space Family roles Religious factors Family time Values Eating Rules of etiquette Importance of relationships Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 10

European Business Cultures Participatory management n Most workers are unionized n More frequent vacations and holidays n Guaranteed permanent employment common n Workers often resent pay for performance, commissions, and objective measurement and reward systems n Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 11

Asian Business Cultures First names are not generally used in business n Extended periods of silence are important n A sale is the beginning, not the end of a relationship n Resting, listening, meditating, and thinking are considered productive n Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 12

Mexican Business Culture n n n Low tolerance for adversarial relations or friction at work Employers are paternalistic Workers do not expect self-expression or initiative at work Businesses stress collectivism, continuity, cooperation, belongingness, formality, and doing exactly what you are told Rarely entertain business associates at homes Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 13

Mexican Business Culture (continued) n n n Preserving one’s honor, saving face, and looking important are valued Opinions expressed by employees are often regarded as back talk Supervisors are viewed as weak if they explain the rationale for their orders to workers Mexicans often do not follow rules Life is slower in Mexico, tardiness is common Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 14

Japanese Business Culture n n n Importance of group loyalty and consensus called “Wa” Constant discussion and compromise Silence is a plus in formal meetings When confronted with disturbing questions, managers often remain silent Managers are reserved, quiet, distant, introspective, and other oriented Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 15

Communication Differences Across Cultures n n Italians, Germans, and French do not soften up executives with praise before a criticism Israelis are accustomed to fast paced meetings British executives complain that Americans chatter too much Europeans feel that they are being treated like children when asked to wear nametags Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 16

Communication Differences Across Cultures (continued) Executives in India are used to interrupting each other n In Malaysia and Japan periods of silence are appropriate, no silence is needed in Israel n “How was your weekend? ” is considered intrusive by many business people n Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 17

Worldwide Tax Rates n n n n US and Japan 38% Asia-Pacific Region 30% Germany 30% Great Britain 28% France 27% Europe 26% Ireland near 0% Former Soviet-Bloc nations near 0% Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 18