Managing in the Global Environment Chapter Four Copyright

Managing in the Global Environment Chapter Four Copyright © 2015 Mc. Graw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of Mc. Graw-Hill Education.

Learning Objectives LO 4 -1 Explain why the ability to perceive, interpret, and respond appropriately to the organizational environment is crucial for managerial success LO 4 -2 Differentiate between the global task and global general environments LO 4 -3 Identify the main forces in both the global task and general environments, and describe the challenges that each force presents to managers 4 -2

Learning Objectives LO 4 -4 Explain why the global environment is becoming more open and competitive and identify the forces behind the process of globalization that increase the opportunities, complexities, challenges, and threats that managers face LO 4 -5 Discuss why national cultures differ and why it is important that managers be sensitive to the effects of falling trade barriers and regional trade associations on the political and social systems of nations around the world 4 -3

What is the Global Environment? ªGlobal Organizations ª Global Environment 9 Organizations that operate and compete in more than one country 9 Uncertain and unpredictable 9 Set of global forces and conditions that operate beyond an organization’s boundaries but affect a manager’s ability to acquire and utilize resources 4 -4

Forces in the Global Environment Figure 4. 1 4 -5

What is the Global Environment? ªTask Environment 9 Set of forces and conditions that originate with suppliers, distributors, customers, and competitors and affect an organization’s ability to obtain inputs and dispose of its outputs because they influence managers daily 4 -6

What is the Global Environment? ªGeneral environment 9 the wide-ranging global, economic, technological, socio-cultural, demographic, political, and legal forces that affect an organization and its task environment 4 -7

Question? What are individuals and organizations that provide an organization with the input resources that it needs to produce goods and services? A. B. C. D. Customers Suppliers Distributors Competitors 4 -8

The Task Environment ªSuppliers 9 Individuals and organizations that provide an organization with the input resources that it needs to produce goods and services • Raw materials, component parts, labor (employees) 4 -9

Suppliers ªRelationships with suppliers can be difficult due to materials shortages, unions, and lack of substitutes. 9 Suppliers that are the sole source of a critical item are in a strong bargaining position to raise their prices. ª Managers can reduce these supplier effects by increasing the number of suppliers of an input. 4 -10

Global Outsourcing ªGlobal Outsourcing 9 The purchase or production of inputs or final products from overseas suppliers to lower costs and improve product quality or design. 4 -11

The Task Environment ªDistributors 9 Organizations that help other organizations sell their goods or services to customers ª If distributors become so large and powerful that they can control customers’ access to a goods and services, they can threaten the organization by demanding that it reduce the prices of its goods and services 4 -12

The Task Environment ªCustomers 9 Individuals and groups that buy the goods and services that an organization produces ª Identifying an organization’s main customers and producing the goods and services they want is crucial to organizational and managerial success 4 -13

The Task Environment ªCompetitors 9 Organizations that produce goods and services that are similar to a particular organization’s goods and services ª A high level of rivalry typically results in price competition, and falling prices reduce customer revenues and profits 4 -14

The Task Environment ªBarriers to Entry 9 Factors that make it difficult and costly for the organization to enter a particular task environment or industry 4 -15

Barriers to Entry ªEconomies of scale 9 Cost advantages associated with large operations ªBrand loyalty 9 Customers’ preference for the products of organizations currently existing in the task environment ªGovernment regulations 4 -16

Barriers to Entry and Competition Figure 4. 2 4 -17

Question? What are pressures emanating from the social structure of a country or society or from the national culture? A. Economic forces B. Technological forces C. Socio-cultural forces D. Demographic forces 4 -18

The General Environment ªEconomic Forces 9 Interest rates, inflation, unemployment, economic growth, and other factors that affect the general health and well-being of a nation or the regional economy of an organization 4 -19

The General Environment ªTechnological Forces 9 Outcomes of changes in the technology that managers use to design, produce, or distribute goods and services ªSociocultural Forces 9 Pressures emanating from the social structure of a country or society or from the national culture 4 -20

Discussion Question? What technology has had the biggest impact on business in the last 50 years? A. Internet B. Smart phones C. Computers D. Email 4 -21

Sociocultural Forces ªSocial structure 9 The traditional system of relationships established between people and groups in a society. ªNational culture 9 the set of values that a society considers important and the norms of behavior that are approved or sanctioned in that society. 4 -22

The General Environment ªDemographic Forces 9 Outcomes of change in, or changing attitudes toward, the characteristics of a population, such as age, gender, ethnic origin, race, sexual orientation, and social class ª Most industrialized nations are experiencing the aging of their populations 4 -23

The General Environment ªPolitical and Legal Forces 9 Outcomes of changes in laws and regulations, such as the deregulation of industries, the privatization of organizations, and increased emphasis on environmental protection 4 -24

The Global Environment Figure 4. 3 4 -25

The Process of Globalization ªGlobalization 9 the set of specific and general forces that work together to integrate and connect economic, political, and social systems across countries, cultures, or geographical regions so that nations become increasingly interdependent and similar 4 -26

GATT and the Rise of Free Trade ªFree-Trade Doctrine 9 The idea that if each country specializes in the production of the goods and services that it can produce most efficiently, this will make the best use of global resources 4 -27

Effects of Free Trade on Managers ªDeclining Trade Barriers 9 Opened enormous opportunities for managers to expand the market for their goods and services. 9 Allowed managers to now both buy and sell goods and services globally. 4 -28

Regional Trade Agreements ªNorth American Free Trade Agreement (NAFTA) 9 aimed to abolish the tariffs on 99% of the goods traded between Mexico, Canada, and the United States by 2004 ª Has removed most barriers on the cross-border flow of resources, giving retail businesses in Canada and the United States unrestricted access to the Mexican marketplace 4 -29

The Role of National Culture ªValues 9 Ideas about what a society believes to be good, desirable and beautiful 9 Provides the underpinnings for notions of individual freedom, democracy, truth, justice, honesty, loyalty, social obligation, collective responsibility, 9 Very slow to change 4 -30

Norms ªFolkways 9 routine social conventions of everyday life ªMores 9 norms that are considered to be central to functioning of society and to social life 4 -31

Hofstede’s Model of National Culture Figure 4. 4 4 -32

Hofstede’s Model of National Culture ªIndividualism 9 A worldview that values individual freedom and self-expression and adherence to the principle that people should be judged by their individual achievements rather than by their social background 4 -33

Hofstede’s Model of National Culture ªCollectivism 9 A worldview that values subordination of the individual to the goals of the group and adherence to the principle that people should be judged by their contribution to the group 4 -34

Hofstede’s Model of National Culture ªPower Distance 9 The degree to which societies accept the idea that inequalities in the power and well-being of their citizens are due to differences in individuals’ physical and intellectual capabilities and heritage 4 -35

Hofstede’s Model of National Culture ªAchievement orientations 9 worldview that values assertiveness, performance, success, and competition ªNurturing orientation 9 worldview that values quality of life, warm personal friendships, and services and care for the weak 4 -36

Hofstede’s Model of National Culture ªUncertainty Avoidance 9 degree to which societies are willing to tolerate uncertainty and risk 4 -37

Hofstede’s Model of National Culture ªLong-Term orientation 9 worldview that values thrift and persistence in achieving goals ªShort-term orientation 9 worldview that values personal stability or happiness and living for the present 4 -38

National Culture and Global Management ªManagement practices that are effective in one country might be troublesome in another ªManagers must be sensitive to the value systems and norms of an individual’s country and behave accordingly 4 -39

Video: Tim Hortons ªTim Hortons CEO Don Schroeder describes the donut shop as a "modern day pub“. Do you agree or disagree? ªCan Tim Hortons expand successfully in the US? 4 -40