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Management 13Th Edition Schermerhorn Solutions Manual Full Chapter PDF
Management 13Th Edition Schermerhorn Solutions Manual Full Chapter PDF
Management 13Th Edition Schermerhorn Solutions Manual Full Chapter PDF
Chapter 5
GLOBAL MANAGEMENT AND CULTURAL
DIVERSITY
In studying this chapter, students should consider the following questions and be able to complete the
accompanying objectives:
Overview
Students of management must understand the global economy in order to meet the challenges of the 21st
century. Indeed, the likelihood of students engaging in or being affected by some form of international
operations is extremely high. This chapter considers the obstacles and opportunities facing managers of
international activities and provides practical advice for meeting these challenges.
The chapter begins by considering the international business challenges of globalization. Among the
challenges, students are asked to consider global management, the global economy, market entry and
direct investment strategies. Next, the chapter describes the global business environment with its legal and
political systems, trade agreements and barriers, and economic alliances. Global businesses and what they
do follow, including the advantages and disadvantages of global corporations for host countries. Ethical
problems such as corruption, sweatshops and child labor are examined.
Next, the chapter examines culture and its link to global diversity. Here students will learn about the
details of culture through Edward T. Hall’s “silent” language of culture and Geert Hofstede’s dimension
of value differences. The chapter wraps up with a discussion of comparative management and its
implications for intercultural competency.
Lecture outline
Suggested Time: Two hours of class time are recommended for this chapter.
Takeaway Question 2: What are global businesses, and how do they work?
Types of global businesses
Takeaway Question 3: What is culture, and how does it influence global management?
Cultural intelligence
Silent languages of culture
Tight and loose cultures
Values and national cultures
Supporting Materials
Figures
• Figure 5.1: Common Forms of International Business – From Market Entry to Direct Investment
Increasing Involvement in Ownership and Control of Foreign Operations Strategies
• Figure 5.2: What Should Go Right and What Can Go Wrong in Global Corporation and Host-
Country Relationships
• Figure 5.3: How Countries’ Short-term Thinking and Long-term Thinking Compare on
Hofstede’s Dimensions of National Culture
Thematic Boxes
• Analysis: Corruption and Bribes Haunt Global Business
• Choices: Reshoring Offers Alternative to China Manufacturing
• Ethics: Nationalism and Protectionism a Potent Mix
• Insight: Cultural Intelligence Opens Doors to Opportunity
• Wisdom: Nobel Peace Prize Winner Asks Global Firms to Fight Poverty
• Analyze the Case Study: Harley-Davidson: Style and Strategy Have Global Reach
Lecture Notes
GLOBAL MANAGEMENT
The global economy is making the diverse countries of the world increasingly interdependent
regarding resource supplies, product markets, and business competition.
Globalization is the process of growing interdependence among the components of the global
economy.
World 3.0 is a world where nations cooperate in the global economy while still respecting
different national characters and interests.
The graphic on page 99 of the text traces the “travels” of a t-shirt from the cotton fields of Texas
in the USA to the store in Tanzania, which shows how globalization works today.
DISCUSSION TOPIC
Prior to discussing this chapter in class, have each student find a recent newspaper or magazine article
that relates to globalization issues. Articles can easily be found in business publications such as The Wall
Street Journal, Business Week, Fortune, and Forbes, as well as many other publications such as the
“Money” section of USA Today, or popular magazines such as Time and Newsweek. Each student should
be prepared to discuss his/her article in class. Choose several students to talk about the key ideas in their
selected articles, and ask the entire class to help identify how these ideas relate to the challenges of
globalization.
FIGURE 5.1 from p. 101 in the text identifies the two common forms of international business
strategies – Market Entry and Direct Investment.
Global Sourcing
A common first step into international business is global sourcing, which is the process
of purchasing materials, manufacturing components, or business services from around the
world.
Exporting is a form of international business that involves selling locally made products
in foreign markets.
Other forms of international business include the licensing agreement and franchising.
A licensing agreement occurs when another firm pays a fee for the rights to make or sell
another company’s products in a specified region.
Franchising involves buying the rights to use another’s name and operating methods in
its home country.
Foreign direct investment strategies require major capital commitments but create rights
of ownership and control over operations in the foreign country. Local job creation,
called insourcing, results from foreign direct investment.
International joint ventures are types of global strategic alliances in which foreign and
domestic firms work together for mutual benefit.
Foreign Subsidiaries
Global operations managers must be prepared to deal with the differences between home-
country and host-country laws and politics.
By using the planning technique of political-risk analysis, companies are able to forecast
a country’s political risk, which is the possible loss in value of a foreign investment due
to instability and political changes in the host country,
The WTO members agree to give one another most favored nation status which gives a
trading partner most favorable treatment for imports and exports.
Even with most favored nation status, trade barriers still exist in the form of:
Nontariffs: quotas, import restrictions and protectionism, which is a call for tariffs and
favorable treatment to protect domestic industries from foreign competition.
Regional economic alliances are growing around the world and represent a significant
challenge for global managers.
NAFTA (the North American Free Trade Agreement) is a trade agreement that links
Canada, Mexico, and the United States in a regional economic alliance.
The European Union is a political and economic alliance of 28 European countries that
have agreed to support mutual economic growth by removing barriers that previously
limited cross-border trade and business development.
APEC (Asia Pacific Economic Cooperation) promotes free trade and investment among
its 21 members in the Pacific region.
DISCUSSION TOPIC
Divide the class into small discussion groups. Assign each group one of the following four geographic
regions: Europe, the Americas, Asia and the Pacific Rim, or Africa. Have the groups spend 10-12 minutes
identifying the potential challenges and opportunities that these areas face in the context of the global
economy. Have each group report out to the entire class with a brief summary of its key discussion points.
GLOBAL BUSINESS
Takeaway 2: What are global businesses, and how do they work?
Learning Objective: Describe global corporations and the issues they face and create.
A typical global corporation, also called multinational enterprise (MNE) and multinational
corporation (MNC), operates in many countries but has corporate headquarters in one home or
host country.
world as their domain for acquiring resources, locating production facilities, marketing goods and
services, and communicating brand image.
DISCUSSION TOPIC
An easy way to get students involved in a discussion at this point is to ask them to provide examples of
global corporations or MNCs. Students should be able to quickly generate a long list of MNCs. Engage in
some discussion of where these firms have their operations and what types of products or services they
provide.
Multinational host-country relationships provide shared opportunities with potential for growth,
income, learning and development
Globalization Gap: is where large multinational corporations and industrialized nations gain
disproportionately from the benefits of globalization.
Host-Country Issues
Home-County Issues
FIGURE 5.2 on page 108 of the text describes what should go right and what can go wrong in
global corporation and host country relationships.
The Foreign Corrupt Practices Act prohibits U.S. businesses and their representatives
from engaging in corrupt practices abroad.
Child labor is the full-time employment of children for work otherwise done by adults.
Sweatshops are business operations that employ workers at low wages for long hours
and in poor working conditions.
Culture is a shared set of beliefs, values, and patterns of behavior common to a group of people.
Culture shock is the confusion and discomfort that a person experiences when in an unfamiliar
culture.
CULTURAL INTELLIGENCE
Cultural intelligence is the ability to adapt, adjust, and work well across cultures.
The Box on page 113 of the text describes stages in adjusting to a new culture. These stages are:
• Confusion: first contacts with the new culture leave you anxious, uncomfortable, and in need
of information and advice.
• Small victories: continued interactions bring some “successes,” and your confidence grows in
handling daily affairs.
• The honeymoon: a time of wonderment, cultural immersion, and even infatuation, with local
ways viewed positively.
• Irritation and anger: a time when the “negatives” may overwhelm the “positives and the new
culture becomes a target of your criticism.
• Reality: a time of rebalancing; you are able to enjoy the new culture while recognizing less
desirable elements.
DISCUSSION TOPIC
If any of your students have lived or traveled abroad, ask them to describe their experiences and relate
them to the stages of adjusting to a new culture.
The dimensions of Edward T. Hall’s “silent languages of culture” include context, time
orientation, and the use of space.
Context
In a low-context culture most communication takes place via the written or spoken
word.
Time
Space
In tight cultures, norms are strong and clear and guide behavior. Deviations from the norm are
noticed, discouraged and even sanctioned. Examples of tight cultures include Malaysia, Korea
and Japan.
In loose cultures social norms are relaxed and less clear cut and conformity may vary a great deal.
Examples of loose cultures include Ukraine, Hungary and Brazil.
Geert Hofstede’s work is often considered a benchmark for how cultural differences can
influence management and organizational practices.
FIGURE 5.3 on page 114 of the text describes how countries compare on Hofstede’s five
dimensions of national culture.
1. Power distance: the degree to which a society accepts or rejects the unequal distribution of
power among people in organizations and the institutions of society.
3. Uncertainty avoidance: the degree to which a society is uncomfortable with risk, change,
and situational uncertainty, versus having tolerance for them.
5. Time orientation: the degree to which a society emphasizes the short-term versus long-term
goals and gratifications.
DISCUSSION TOPIC
Focus again on the students who, in the previous Discussion Topic, identified themselves as having lived
or traveled abroad. Ask them to identify the nation(s) and attempt, on the basis of their experiences, to
characterize those nations in terms of Hofstede’s dimensions of culture. If enough nations are represented,
a comparative analysis could be fruitful. Also compare these nations to the United States. You could also
try to link this analysis to Figure 5.3.
The management process must be used appropriately and applied with sensitivity to local cultures
and situations.
Management practices are influenced by cultural values; practices that are successful in one
culture may work less well in others.
INTERCULTURAL COMPETENCIES
Intercultural competencies are skills and personal characteristics that help us to be successful in
cross cultural situations.
Takeaway Summary
• Market entry strategies for international business include global sourcing, exporting and importing,
and licensing and franchising.
• Direct investment strategies of international business establish joint ventures or wholly owned
subsidiaries in foreign countries.
• General environment differences, including legal and political systems, often complicate international
business activities.
• Regional economic alliances, such as NAFTA, the EU, and SADC link nations of the world with the
goals of promoting economic development.
• The World Trade Organization (WTO) is a global institution that promotes free trade and open
markets around the world.
FOR DISCUSSION: What aspects of the U.S. legal-political environment could prove difficult for a
Chinese firm setting up a factory in America?
• Global management learning must recognize that successful practices in one culture may work less
well in others.
FOR DISCUSSION: Even though cultural differences are readily apparent, is the tendency today for the
world’s cultures to converge and become more alike?
Key Terms
Child labor: the employment of children for work otherwise done by adults.
Comparative management: the study of how management systematically differs among countries and cultures.
Corruption: engaging in illegal practices to further one’s business interests.
Cultural intelligence: the ability to accept and adapt to new cultures.
Culture: a shared set of beliefs, values, and patterns of behavior common to a group of people.
Culture shock: the confusion and discomfort a person experiences when in an unfamiliar culture.
Ecological fallacy: assumes that a generalized cultural value applies equally well to all members of the culture.
Ethnocentrism: the tendency to consider one’s culture superior to others.
Euro: the common European currency.
European Union: a political and economic alliance of European countries that have agreed to support mutual
economic growth by removing barriers that previously limited cross-border trade and business development.
Exporting: a form of international business that involves selling locally made products in foreign markets.
Foreign Corrupt Practices Act: makes it illegal for U.S. firms and their representatives to engage in corrupt
practices overseas.
Foreign subsidiary: a local operation completely owned and controlled by a foreign firm.
Franchising: a form of licensing in which the foreign firm buys the rights to use another’s name and operating
methods in its home country.
Global corporation: a multinational enterprise (MNE) or multinational corporation (MNC) with extensive
operations in many foreign countries.
Global management: involves managing operations in more than one country.
Global manager: a manager who is culturally aware and informed on international affairs.
Global sourcing: the process of purchasing materials, manufacturing components, or business services from around
the world.
Global strategic alliance: a partnership in which foreign and domestic firms share resources and knowledge for
mutual gains.
Globalization: the process of growing interdependence among the elements of the global economy.
Globalization Gap: is where large multinational corporations and industrialized nations gain disproportionately
from the benefits of globalization.
Greenfield venture: a foreign subsidiary built from the ground up by the foreign owner.
High-context culture: a culture where much communication takes place through nonverbal and situational cues in
addition to the written or spoken word.
International business: conducts for-profit transactions of goods and services across national boundaries.
Importing: a form of international business that involves buying foreign-made products and selling them in
domestic markets.
Individualism – collectivism: the degree to which a society emphasizes individuals and their self-interests.
Insourcing: describes job creation through foreign direct investment.
Intercultural competencies: are skills and personal characteristics that help us to be successful in cross cultural
situations.
Joint venture: a co-ownership arrangement in which the foreign and local partners agree to pool resources, share
risks, and jointly operate the new business.
Licensing agreement: a form of international business whereby foreign firms pay a fee for rights to make or sell
another company’s products in a specified region.
Low-context culture: a culture in which most communication takes place via the written or spoken word.
Masculinity-femininity: the degree to which a society values assertiveness and materialism.
Monochronic cultures: cultures in which people tend to do one thing at a time.
Most favored nation status: gives a trading partner most favorable treatment for imports and exports.
NAFTA : a trade agreement that links Canada, Mexico, and the United States in a regional economic alliance.
Nontariff barriers: discourage imports in nontax ways such as quotas and government import restrictions.
Political risk: the potential loss in value of a foreign investment due to instability and political changes in the host
country.
Political risk analysis: tries to forecast political disruptions that can threaten the value of a foreign investment.
Polychronic cultures: cultures in which time is used to accomplish many different things at once.
Power distance: the degree to which a society accepts unequal distribution of power.
Protectionism: calls for tariffs and favorable treatments to protect domestic firms from foreign competition.
Proxemics: how people use space to communicate.
Sweatshop: business operations that employ workers at low wages for long hours and in poor working conditions.
Tariffs: taxes governments levy on imports from abroad.
Time orientation: the degree to which a society emphasizes short-term or long-term goals.
Transnational corporation: a global corporation that operates worldwide without being identified with one
national home.
Uncertainty avoidance: the degree to which a society tolerates risk and uncertainty.
World 3.0: is a world where nations cooperate in the global economy while still respecting different national
characters and interests.
World Trade Organization: a global organization established to promote free trade and open markets around the
world, and to resolve disputes among countries about tariffs and trade restrictions.
SELF-TEST ANSWERS
1. The reasons why businesses go international include gaining new markets, finding investment
capital, and reducing _______________.
(a) political risk (b) protectionism (c) lower labor costs (d) most favored nation status
2. When shoemaker, Rocky Brands decided to buy full ownership of a manufacturing company in the
Dominican Republic, Rocky was engaging in which form of international business?
(a) import/export (b) licensing (c) foreign subsidiary (d) joint venture
3. A form of international business that falls into the category of a direct investment strategy is
___________.
(a) exporting (b) joint venture (c) licensing (d) global sourcing
4. The World Trade Organization, would most likely become involved in disputes between countries
over ___________.
(a) exchange rates (b) ethnocentrism (c) nationalization (d) tariffs
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