Chapter 3 Managing the Global Environment Chapter 3

LEARNING OUTLINE Follow this Learning Outline as you read and study this chapter. • What’s Your Global Perspective? – Contrast ethnocentric, polycentric, and geocentric attitudes toward global business. – Explain why it’s important for managers to be sensitive to global differences. Chapter 3, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Eighth Canadian Edition. Copyright © 2005 Pearson Education Canada Inc. 2

LEARNING OUTLINE (cont’d) Follow this Learning Outline as you read and study this chapter. • Understanding the Global Environment – Describe the current composition and currency situation of the European Union. – Discuss the North American Free Trade Agreement and other regional trade alliances in Latin America. – Define the Association of Southeast Asian Nations. – Explain the interdependence that globalization involves. Chapter 3, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Eighth Canadian Edition. Copyright © 2005 Pearson Education Canada Inc. 3

LEARNING OUTLINE (cont’d) Follow this Learning Outline as you read and study this chapter. • Understanding the Global Environment (cont’d) – Discuss the role of the World Trade Organization. – Contrast multinational corporations, transnational corporations, and borderless organizations. – Describe the different ways that organizations can go global. – Define exporting, importing, licensing, and franchising. – Describe global strategic alliances, joint ventures, and foreign subsidiaries. Chapter 3, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Eighth Canadian Edition. Copyright © 2005 Pearson Education Canada Inc. 4

LEARNING OUTLINE (cont’d) Follow this Learning Outline as you read and study this chapter. • Managing in a Global Environment – Explain how the global legal-political environment affects managers. – Explain the nine GLOBE dimensions for assessing cultures. – Discuss the challenges of doing business globally in today’s world. Chapter 3, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Eighth Canadian Edition. Copyright © 2005 Pearson Education Canada Inc. 5

What’s Your Global Perspective? • Ethnocentric Attitude – Belief that home country has the best work approaches and practices • Polycentric Attitude – View that managers in host country know the best approaches and practices • Geocentric Attitude – A world-oriented view that focuses on using the best approaches and people from around the globe Chapter 3, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Eighth Canadian Edition. Copyright © 2005 Pearson Education Canada Inc. 6

Exhibit 3. 1 Global Attitudes Chapter 3, Stephen P. Robbins, Mary Coulter, and Nancy

Regional Trading Alliances • 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 – Economic and monetary union (Euro) • North American Free Trade Agreement (NAFTA) – Eliminated barriers to free trade (tariffs, import licensing requirements, and customs user fees) • United States, Canada, and Mexico Chapter 3, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Eighth Canadian Edition. Copyright © 2005 Pearson Education Canada Inc. 8

Exhibit 3. 2 European Union Countries Chapter 3, Stephen P. Robbins, Mary Coulter, and

Regional Trading Alliances (cont’d) • Free Trade Area of the Americas (FTAA) • Southern Cone Common Market (Mercosur) • Association of Southeast Asian Nations (ASEAN) – Trading alliance of 10 Southeast Asian nations • African Union Chapter 3, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Eighth Canadian Edition. Copyright © 2005 Pearson Education Canada Inc. 10

Exhibit 3. 3 ASEAN Members Source: Based on J. Mc. Clenahen and T. Clark, “ASEAN at Work, ” IW. May 19, 1997, p. 42. Chapter 3, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Eighth Canadian Edition. Copyright © 2005 Pearson Education Canada Inc. 11

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 147 member nations • Monitors and promotes world trade Chapter 3, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Eighth Canadian Edition. Copyright © 2005 Pearson Education Canada Inc. 12

Different Types of Global Organizations • Multinational Corporation (MNC) – A firm that maintains operations in multiple countries but manages from the home country • Transnational Corporation (TNC) – A firm that maintains operations in several countries but decentralizes management to the local country • Borderless Organization – A firm that organizes along business lines without consideration to artificial geographic barriers Chapter 3, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Eighth Canadian Edition. Copyright © 2005 Pearson Education Canada Inc. 13

Exhibit 3. 4 How Organizations Go Global Exporting to or importing from foreign countries Low Hiring foreign representation or contracting with foreign managers Licensing/ Franchising Strategic Alliances Degree of Risk and Investment Chapter 3, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Eighth Canadian Edition. Copyright © 2005 Pearson Education Canada Inc. Foreign Subsidiary High 14

How Organizations Go Global • Exporting – Making products at home and selling them overseas • Importing – Selling products at home that are made overseas Chapter 3, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Eighth Canadian Edition. Copyright © 2005 Pearson Education Canada Inc. 15

How Organizations Go Global (cont’d) • Internal Sales or Manufacturing – Selling or having products made in foreign factories with no physical presence • Licensing and Franchising – Giving another organization the right to use brand name, technology, or product specifications • Licensing (manufacturing organizations) • Franchising (service organizations) Chapter 3, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Eighth Canadian Edition. Copyright © 2005 Pearson Education Canada Inc. 16

How Organizations Go Global (cont’d) • Strategic Alliance – Partnership between an 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 Chapter 3, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Eighth Canadian Edition. Copyright © 2005 Pearson Education Canada Inc. 17

Managing in a Global Environment • The Legal-Political 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 Chapter 3, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Eighth Canadian Edition. Copyright © 2005 Pearson Education Canada Inc. 18

Managing in a Global Environment (cont’d) • The Economic Environment – Economic Systems • Market economy – An economy in which resources are primarily owned and controlled by the private sector • Command 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 Chapter 3, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Eighth Canadian Edition. Copyright © 2005 Pearson Education Canada Inc. 19

Managing in a Global Environment (cont’d) • The Cultural Environment – National Culture • Values and attitudes shared by individuals from a specific country that shape their behaviour and their beliefs about what is important • May have more influence on an organization than the organization culture Chapter 3, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Eighth Canadian Edition. Copyright © 2005 Pearson Education Canada Inc. 20

The GLOBE* Framework for Assessing Cultures • • • Assertiveness Future orientation Gender differentiation Uncertainty avoidance Power distance • • Individualism/collectivism In-group collectivism Performance orientation Humane orientation *Global Leadership and Organizational Behaviour Effectiveness Chapter 3, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Eighth Canadian Edition. Copyright © 2005 Pearson Education Canada Inc. 21

Exhibit 3. 5 Globe Rankings Chapter 3, Stephen P. Robbins, Mary Coulter, and Nancy

The Challenge of Global Management • Increased threat of terrorism • Economic interdependence of trading • Dealing with increased uncertainty, fear, and anxiety • Acknowledging cultural, political, and economic differences • Avoiding parochialism Chapter 3, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Eighth Canadian Edition. Copyright © 2005 Pearson Education Canada Inc. 23