Managing in the Global

Environment
Chapter 6
Global Organizations and the Environment

Global Organization
• An organization that operates and competes in more than one
country
• International companies and Global companies
• Uncertain and unpredictable environments

Global Environment
• The set of global forces and conditions that operates beyond an
organization’s boundaries but affects a manager’s ability to acquire
and utilize resources.
Apple’s Global Supply Chain
Nutella’s Global Supply Chain
Forces in the Global Environment
Global Outsourcing
• Global Outsourcing
• The purchase or production of inputs or final products from overseas
suppliers to lower costs and improve product quality or design.
• Offshoring

• Reshoring
• The recent trend to bring manufacturing and jobs back to the United States
• http://www.onlinemba.com/blog/video-why-outsourcing-is-bad-for-
business/

vs
Vacation Day Comparison
Barriers to Entry

Factors that make it difficult and costly for the organization to enter a particular
task environment or industry
Examples:
• Economies of scale
• Cost advantages associated with large operations
• Brand loyalty
• Customers’ preference for the products of organizations currently existing in
the task environment.
• Government regulations that impede entry
Barriers to Entry and Competition
Process of Globalization

Globalization
• 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.
Principal Forms of Capital that Flow Between
Countries

Human Financial
capital capital

Resource Political
capital capital
Declining Barriers to Trade
and Investment
• Protectionism
• Tariff
• A tax that government imposes on imported or, occasionally,
exported goods.
• Intended to protect domestic industry and jobs from foreign
competition
• Nontariff barriers
• Quotas
• Voluntary export restraints
• Government import standard
• Subsidies
The European Union

The EU and the next seven largest economies in the

world by nominal GDP. (IMF, 2009)[105]
The Power of NAFTA
The Power of China???
U.S.-China Trade Facts
• U.S. goods and services trade with
China totaled $539 billion in 2011.
Exports totaled $129 billion; Imports
totaled $411 billion. The U.S. goods
and services trade deficit with China
was $282 billion in 2011.
• U.S. foreign direct investment (FDI)
in China (stock) was $60.5 billion in
2010 (latest data available), a
21.4%these
While increase from 2009.
numbers seem
large, the U.S. nominal GDP
was estimated to be over
$15 trillion in 2011.
 Tariffs – US vs. Them

http://theadvocate.com/news/10100983-123/industry-officials-praise-mexican-sugar
GATT and the Rise of Free Trade

Free-Trade Doctrine
• 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 and will result in lower prices

The United States International Trade Commission is an

“independent, quasi-judicial Federal agency with broad
investigative responsibilities on matters of trade.”
Declining Barriers of Distance and Culture -
Unilever
Distance
• Markets were essentially closed because of the slowness of communications
over long distances.
Culture
• Language barriers and cultural practices made managing overseas businesses
difficult
Changes in Distance and Communication
• Improvement in transportation technology and fast, secure communications
have greatly reduced the barriers of physical and cultural distances.
 Legal and Political Challenges

• Regulation and deregulation

• Privatization
• Changing political parties
• Anti monopoly rulings
• International Agreements
Effects of Free Trade on Managers

Lowering of Trade Barriers

• Opened enormous opportunities for managers to expand
the market for their goods and services.
• Allowed managers to now both buy and sell goods and
services globally.
• Increased intensity of global competition such that
managers now have a more dynamic and exciting job of
managing.
The Role of National Culture

Values
• Ideas about what a society believes to be good, right,
desirable and beautiful.
• Provide the basic underpinnings for notions of individual
freedom, democracy, truth, justice, honesty, loyalty,
love, sex, marriage, etc.
The Role of National Culture

Norms: Unwritten, informal codes of conduct that

prescribe how people should act in particular
situations and are considered important by most
members of a group or organization
• Mores: Norms that are considered to be central to the
functioning of society and to social life.
• Folkways: The routine social conventions of everyday life.
Hofstede’s Framework for Assessing
Cultures
Individualism
versus
Collectivism

Long-Term
versus Power
Short-Term Distance
Orientation

Culture

Achievement
Uncertainty
versus
Avoidance
Nurturing
Hofstede on the Internet -http://www.geert-
hofstede.com/
 Hofstede’s Five Dimensions of National Culture

(1) Individualistic — people look after their own and family interests
Collectivistic — people expect group to look after and protect them

Individualistic Collectivistic
United States, Canada Japan Mexico, Thailand
Australia

(2) High power distance—Accepts wide differences in power, great

deal of respect for those in authority
Low power distance—Plays down inequalities: employees are not
afraid to approach nor are in awe of the boss

High power distance Low power distance

Mexico, Singapore, Italy, Japan United States, Sweden
 Hofstede’s Five Dimensions of National Culture

(3) High uncertainty avoidance—Threatened with ambiguity and

experience high levels of anxiety
Low uncertainty avoidance— Comfortable with risks; tolerant of
different behavior and opinions

High uncertainty avoidance Low uncertainty avoidance

Italy, Mexico, France United Kingdom Canada, United States,
Singapore

(4) Achievement—Values such as assertiveness, acquiring money and goods,

and competition prevail
Nurturing—Values such as relationships and concern for others prevail

Achievement Nurturing
United States, Japan, Canada, Greece France, Sweden
Mexico
 Hofstede’s Five Dimensions of National Culture

(5) Long-term orientation—People look to the future and value thrift

and persistence
Short-term orientation — People value tradition and the past
Short-term thinking Long-term thinking
Germany, Australia, China, Taiwan, Japan
United States, Canada
Managing in a Global Environment
Expatriates: Employees who work on overseas assignments

Challenges
• Expatriate success rates for U.S. employees are low.
• Different management styles
• Dealing with cultural diversity; culture shock

Advantages
• Access to key skills
• Innovation
• Training