Introduction to Management 11e

John Schermerhorn

Chapter 5:
International Management
Planning Ahead — Chapter 5 study questions

1. What are the management challenges of

globalization?
2. What are global businesses and what do they
do?
3. What is culture and how does it impact global
management?
4. How can we benefit from global management
learning?
Study Question 1: What are the management challenges of
globalization?

 Key concepts in the challenges of

globalization:
 Global economy
 Globalization
 Global
management
 Global manager

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Study Question 1: What are the management challenges of
globalization?

 Global economy
 Resource supplies, product markets, and
business competition are worldwide, rather
than local
 Globalization
 The process of growing interdependence of
these components in the global economy

Management 11e/ Chapter 5 4

Study Question 1: What are the management challenges of
globalization?

 Global management
 Management in organizations with business interests
in more than one country
 Global manager
 Aware of international developments
and the effect on societies
and economies
 Competent in working with
people from different cultures

Management 11e/ Chapter 5 5

Study Question 1: What are the management challenges of
globalization?

 Global businesses
 Conduct for-profit transactions of goods and
services across national boundaries
 Reasons why businesses go global:

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Study Question 1: What are the management challenges of
globalization?

 Market entry strategies

 involve the sale of goods or services to
foreign markets but do not require expensive
investments

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Study Question 1: What are the management challenges of
globalization?

 Types of market entry strategies:

 Global sourcing
 Exporting
 Importing
 Licensing agreement
 Franchising

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Figure 5.1 Common forms of global business—from market entry to
direct investment strategies

Management 11e/ Chapter 5 9

Study Question 1: What are the management challenges of globalization?

Management 11e/ Chapter 5 10

Study Question 1: What are the international business challenges of
globalization?

 Direct investment
strategies require
major capital
commitments but
create rights of
ownership and
control over foreign
operations

Management 11e/ Chapter 5 11

Study Question 1: What are the international business challenges of
globalization?

 Types of direct investment strategies:

Management 11e/ Chapter 5 12

Study Question 1: What are the international business challenges of
globalization?

Management 11e/ Chapter 5 13

Study Question 1: What are the international business challenges of
globalization?

Management 11e/ Chapter 5 14

Study Question 1: What are the international business challenges of
globalization?

 Legal and political systems

 Differing laws and practices regarding
 Business ownership
 Foreign currency exchange
 Protection of intellectual property rights
 Counterfeit merchandise

Management 11e/ Chapter 5 15

Study Question 1: What are the international business challenges of
globalization?

 Legal and political systems

 Political risk
 Potential loss in value of a foreign investment due
to instability and political changes in the host
country
 Political risk analysis
 Forecast political disruptions that threaten the
value of a foreign investment

Management 11e/ Chapter 5 16

Study Question 1: What are the international business challenges of
globalization?

 Trade Agreements and Trade Barrriers

 World Trade Organization
 Most favored nation status
 Tariffs
 Nontariff barriers
 Protectionism

Management 11e/ Chapter 5 17

Study Question 1: What are the international business challenges of
globalization?

 Regional Economic Alliances

 NAFTA – North American Free Trade
Agreement
 EU – European Union
 APEC – Asia Pacific Economic Cooperation
 ASEAN – Association of Southeast Asian
Nations
 SADC – Southern Africa Development
Community
Management 11e/ Chapter 5 18
Study Question 2: What are global businesses and what do they do?

 Types of global businesses:

 Global corporation
 MNC (multinational corporation) with extensive
business operations in more than one foreign
country
 Transnational corporation
 MNC (multinational corporation) operates
worldwide on a borderless basis

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Study Question 2: What are global businesses and what do they do?

 Mutual benefits for host country and

global corporation or MNC:
 Shared growth opportunities
 Shared income opportunities
 Shared learning opportunities
 Shared development opportunities

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Figure 5.2 What should go right and what can go wrong in MNC-
host country relationships

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Study Question 2: What are global businesses and what do they do?

 Host country complaints about MNCs:

 Excessive profits
 Domination of local economy
 Interference with local government
 Hiring the best local talent
 Limited technology transfer
 Disrespect for local customs

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Study Question 2: What are global businesses and what do they do?

 MNC complaints about host countries:

 Profit limitations
 Overpriced resources
 Exploitative rules
 Foreign exchange restrictions
 Failure to uphold contracts

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Study Question 2: What are global businesses and what do they do?

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Study Question 2: What are global businesses and what do they do?

 Ethical issues for Global Businesses:

 Corruption – illegal practices that further
one’s business interests
 Foreign Corrupt Practices Act – makes it
illegal for U.S. firms and their representatives
to engage in corrupt practices overseas
 Bribes to foreign officials
 Excessive commissions
 Non monetary gifts

Management 11e/ Chapter 5 25

Study Question 2: What are global businesses and what do they do?

 Child labor and Sweatshops:

 Child labor – full time employment of children
for work otherwise done by adults
 Sweatshops – employ workers at very low
wages for long hours in poor working
conditions

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Study Question 3: What is culture and how does it impact global
management?

Management 11e/ Chapter 5 27

Study Question 3: What is culture and how does it impact global
management?

 Stages in adjusting to
a new culture:

Management 11e/ Chapter 5 28

Study Question 3: What is culture and how does it impact global
management?

Silent
languages of
culture

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Study Question 3: What is culture and how does it impact global
management?

 Context
 Low context cultures - emphasize
communication via spoken or written words
 United States
 Canada
 Germany

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Study Question 3: What is culture and how does it impact global
management?

 Context
 High context cultures – rely on nonverbal and
situational cues as well
as on spoken or written
words
 Thailand
 Malaysia

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Study Question 3: What is culture and how does it impact global
management?

 Time
 Monochronic cultures – people
tend to do one thing at a time
 United States, Canada, Germany
 Polychronic cultures – time is
used to accomplish many
different things at once
 Egypt, Saudi Arabia, Mexico

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Study Question 3: What is culture and how does it impact global
management?

 Space
 Proxemics – study of how people use space
to communicate
 In the U.S. people value “personal space”
 Many Latin and Asian
cultures expect much
less personal space

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Study Question 3: What is culture and how does it impact global
management?

 Values and national cultures (Hofstede):

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Figure 5.3 How countries compare on Hofstede’s dimension of
national culture

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Study Question 4: How can we benefit from global management
learning?

 Project GLOBE (Global Leadership and

Organizational Behavior Effectiveness)
 Researches the leadership, organizational
practices, and diversity among world cultures
 Power distance
 Uncertainty avoidance
 Gender egalitarianism
 Future orientation

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Study Question 4: How can we benefit from global management
learning?

 Project GLOBE’s nine dimensions continued

 Institutional collectivism
 In-group collectivism
 Assertiveness
 Performance orientation
 Humane orientation

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Study Question 4: How can we benefit from global management
learning?

 Project GLOBE’s research on leadership

practices across cultures
 Facilitators of leadership success
 Acting trustworthy, just, honest
 Showing foresight, planning
 Being positive, dynamic, motivating
 Inspiring confidence
 Being informed and communicative
 Being a coordinator and team builder

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Study Question 4: How can we benefit from global management
learning?

 Project GLOBE’s research on leadership

practices across cultures
 Inhibitors of leadership success
 Being a loner
 Acting uncooperative
 Being irritable
 Acting autocratic

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Figure 5.4 Nine cultural dimensions used by Project GLOBE
researchers

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Study Question 4: How can we benefit from global management learning?

 Comparative management
 How management systematically differs
among countries and/or cultures
 Global managers
 Need to successfully apply management
functions across international boundaries

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Study Question 4: How can we benefit from global management learning?

 Global management learning:

 Companies can and should learn from each
other
 GLOBE dimensions
 Power distance
 Uncertainty avoidance
 Future orientation
 Etc.
 Be alert, open, inquiring, but always cautious
Management 11e/ Chapter 5 42
Chapter 5 Case

 Harley-Davidson: Style and Strategy have

Global Reach