Managing in A Global Environment

Managing in a Global
Environment
Prepared by: Dr. Ma. Beth S. Concepcion

Learning Outcomes
• Contrasted ethnocentric, polycentric, and geocentric attitudes
toward global business.
• Defined globalization and explained how it affects the
organization
• Identified the different types of global organizations
• Describe the structures and techniques organizations use as
they go international.
mbconcepcion  2019
Introduction
Developing Your Global Perspective—
Working with People from Other Cultures
• 61 % of HR managers say that there is a great need

for cross-cultural understanding and savvy in
business settings.
Welcome to the 21st century! That’s why it’s

important for you to develop your global perspective—
especially your cultural intelligence!
Globalization
The process by which businesses or other organizations

develop international influence or start operating on an
international scale.
Introduction
• It’s not unusual for Germans, Italians, or Filipinos to speak
three or four languages.
• Americans tend to think of English as the only international

business language and don’t see a need to study other
languages.
• Relying only on English hurts the future competitive abilities

of both Britain and the United States (British Council Report)
Introduction
Parochialism
• An obstacle for managers in global
business
• Viewing the world solely through
your own perspectives, leading to an
inability to recognize differences
between people
• Managers who follow “ours is better
than theirs”
Three Global Attitudes
ethnocentric polycentric
attitude attitude
geocentric
attitude mbconcepcion  2019
Ethnocentric Attitude
• is the parochial belief that the best work approaches and practices
are those of the home country (the country in which the
company’s headquarters are located)
• Managers with an ethnocentric attitude believe that people in
foreign countries don’t have the needed skills, expertise,
knowledge, or experience to make business decisions as well as
people in the home country do.
• They don’t trust foreign employees with key decisions or
technology.
• Examples: American and British
Polycentric attitude
• The view that the managers in the host country (the foreign
country in which the organization is doing business) know the
best work approaches and practices for running their
business
• Managers with this attitude view every foreign operation as
different and hard to understand. Thus, they’re likely to let
employees in those locations figure out how best to do things.
• Example: Nestle
Geocentric attitude
• A world-oriented view that focuses on using the best
approaches and people from around the globe
• Managers with this type of attitude have a global view and
look for the best approaches and people regardless of origin
• requires eliminating parochial attitudes and developing an
understanding of cross-cultural differences.
Geocentric attitude
Example:
• Carlos Ghosn, CEO of Nissan and Renault, was born in Brazil to
Lebanese parents, educated in France, and speaks four languages
fluently.
• His background and perspective have given him a much broader
understanding of what it takes to manage in a global environment
Understanding the GLOBAL ENVIRONMENT
One important feature of today’s global environment is global trade. Countries

and organizations have been trading with each other for centuries. And it
continues strong today. Global trade today is shaped by two forces: regional
trading alliances and trade mechanisms that ensure that global trade can
happen.
Regional Trading Alliances
The European Union (EU)
• is an economic and political partnership of 28 democratic
European countries.
• the countries must meet the criteria, which include
democracy, rule of law, a market economy, and adherence to
the EU’s goals of political and economic union.
• common European currency, the euro , was adopted by 18
out of 28 countries
North American Free Trade Agreement (Nafta ) and Other
Latin American Agreements
• Mexican, Canadian, and U.S.
• Eliminating the barriers to free trade (tariffs, import
licensing requirements, customs user fees) has
strengthened the economic power of all three countries.
North American Free Trade Agreement (Nafta ) and Other
Latin American Agreements
NAFTA has made it easier for Canadian-
based aircraft maker Bombardier to operate
across Canadian, U.S., and Mexican borders.
At its plant in Queretaro, Mexico, shown here,
Bombardier employs some 2,000 workers to
produce aircraft parts, boosting Mexico’s
aerospace industry and putting Bombardier
closer to customers in Latin American
markets.
Source: Susana Gonzalez/Bloomberg/Getty Images
Association of Southeast
Asian Nations (ASEAN)
• is a trading alliance of
10 Southeast Asian
nations.
• U.S.-Central America Free Trade Agreement (CAFTA)
• Free Trade Area of the Americas
• Southern Cone Common Market (Mercosur)
• African Union
• South Asian Association for Regional Cooperation (SARRC
Global Trade Mechanisms
• Global trade among nations doesn’t just happen on its
own. As trade issues arise, global trade systems ensure
that trade continues efficiently and effectively.
• One of the realities of globalization is the
interdependence of countries—that is, what happens in
one can impact others, good or bad
e.g. The financial crisis in the US in 2008 threw the global
economy
Four important global trade mechanisms:
1. World Trade Organization (WTO)
• A global organization of 159 countries that deals with the
rules of trade among nations
• the only global organization that deals with trade rules
among nations.
2. International Monetary Fund
• An organization of 188 countries that promotes international
monetary cooperation and provides advice, loans, and
technical assistance
3. World Bank Group
• A group of five closely associated institutions that
provides financial and technical assistance to
developing countries
• 189 member countries
4. Organization For Economic Cooperation and
Development (OECD)
• An international economic organization that helps its
30 member countries achieve sustainable economic
growth and employment
Doing Business Globally
Convenience store operator 7-Eleven, a
subsidiary of Japan based Seven & iHoldings,
has created a profitable niche in Jakarta by
adapting its stores to Indonesian ways.
Procter & Gamble Company relocated the top executives

from its global skin, cosmetics, and personal-care unit
from its Cincinnati headquarters to Singapore.
Different Types of International Organizations
• Multinational corporation (MNC)

– is any type of international company that maintains operations
in multiple countries.
• Examples
– Ford Motor Company set up its first overseas sales branch in
France in 1908
– By the 1920s, other companies, including Fiat, Unilever, and
Royal Dutch/Shell, had gone international.
Types of multinational corporation (MNC)

1. Multidomestic corporation
– An MNC that decentralizes management and other decisions to the local
country
– This type of globalization reflects the polycentric attitude.
– doesn’t attempt to replicate its domestic successes by managing foreign
operations from its home country. Instead, local employees typically are hired
to manage the business, and marketing strategies are tailored to that
country’s unique characteristics

1. Multidomestic corporation
This baby in Ryazan, Russia, enjoys Nestlé’s baby food that
may not be available in other parts of the world. That’s
because Nestlé believes that “food is a local matter.” As a
multidomestic corporation, Nestlé spans the globe in
marketing more than 10,000 products in 130 countries. The
company adapts its products to local cultures, tastes,
traditions, and consumer needs. Wherever possible, Nestlé
produces its products locally and uses local raw materials
and components. Even though some Nestlé brands are
global, others are marketed in specific geographic areas,
such as the Middle East, and many are local to a country or
to an area within a country.

2. Global company
– A type of MNC which centralizes its management and other decisions in the
home country.
– This approach to globalization reflects the ethnocentric attitude
– management decisions with company-wide implications are made from
headquarters in the home country.
– Some examples of global companies include Sony, Deutsche Bank AG,

3. transnational, or borderless, organization
– companies use an arrangement that eliminates artificial geographical barriers
– reflects a geocentric attitude
For example:
– IBM dropped its organizational structure based on country and reorganized
into industry groups.
– Ford Motor Company is pursuing what it calls the One Ford concept as it
integrates its operations around the world
How Organizations Go International
Global sourcing
• Purchasing materials or labor from around the world wherever it is
cheapest
• For instance, Massachusetts General Hospital uses radiologists in India to
interpret CT scans.
Exporting
• Making products domestically and selling them abroad
Importing
• Acquiring products made abroad and selling them domestically
Licensing
• An organization gives another organization the right to make or sell its
products using its technology or product specifications
Franchising
• An organization gives another organization the right to use its name and
operating methods
• E.g.
– South Koreans can indulge in Dunkin’ Donuts coffee
– Hong Kong residents can dine on Shakey’s Pizza
Strategic alliance
• A partnership between an organization and foreign company partner(s) in
which both share resources and knowledge in developing new products or
building production facilities
– Joint venture: specific type of strategic alliance in which the partners form a
separate, independent organization for some business purpose
China’s Lenovo CEO Yang Yuanqing (left) and Japan’s NEC President
Nobuhiro Endo formed a strategic alliance to create a new joint venture
called NEC Lenovo Japan Group to sell personal computers in Japan.
The joint venture gives the two electronics firms the opportunity to expand
their business in Japan, the third-largest PC market in the world.
Source: Yoshikazu Tsuno/AFP/Getty Images/
Newscom
Hewlett-Packard has had numerous joint ventures with various suppliers

around the globe to develop different components for its computer
equipment.
Foreign subsidiary: Directly investing in a foreign country by setting up a
separate and independent production facility or office
– This subsidiary can be managed as a multidomestic organization (local
control) or as a global organization (centralized control).
– E.g.
United Plastics Group of Westmont, Illinois, built two injection-molding facilities in

Suzhou, China. The company’s executive vice president for business development said
that level of investment was necessary because “it fulfilled our mission of being a global
supplier to our global accounts.”
Managing in a Global Environment
• The Legal-Political Environment
– Stability or instability of legal and political systems
• Legal procedures are established and followed
– Differences in the laws of various nations
• Effects on business activities
• Effects on delivery of products and services
• 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
• 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
• Power distance: the degree to which members of a society expect power to
be unequally shared.
• Uncertainty avoidance: a society’s reliance on social norms and procedures to

alleviate the unpredictability of future events.
• Assertiveness: the extent to which a society encourages people to be tough,

confrontational, assertive, and competitive rather than modest and tender.
• Humane orientation: the degree to which a society encourages and rewards

individuals for being fair, altruistic, generous, caring, and kind to others.
• Future orientation: the extent to which a society encourages and rewards future-oriented
behaviors such as planning, investing in the future, and delaying gratification.
• Institutional collectivism: the degree to which individuals are encouraged by societal

institutions to be integrated into groups within organizations and society.
• Gender differentiation: the extent to which a society maximizes gender role differences as
measured by how much status and decision-making responsibilities women have.
• In-group collectivism: the extent to which members of a society take pride in membership in
small groups, such as their family and circle of close friends, and the organizations in which
they’re employed.
• Performance orientation: the degree to which a society encourages and rewards group
members for performance improvement and excellence.
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
A Global Mindset
References
• Robbins, S. P., Coulter, M., DeCenzo (2017). Fundamentals of

management, Management Myths Debunked (10th Edition).
Pearson Education
• Robbins, S. P. & Coulter, M (2016). Management (13th

Edition). Prentice Hall

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Managing in a Global

Prepared by: Dr. Ma. Beth S. Concepcion

• 61 % of HR managers say that there is a great need

Welcome to the 21st century! That’s why it’s

The process by which businesses or other organizations

• Americans tend to think of English as the only international

• Relying only on English hurts the future competitive abilities

One important feature of today’s global environment is global trade. Countries

Procter & Gamble Company relocated the top executives

• Multinational corporation (MNC)

Types of multinational corporation (MNC)

Types of multinational corporation (MNC)

Types of multinational corporation (MNC)

Types of multinational corporation (MNC)

Hewlett-Packard has had numerous joint ventures with various suppliers

United Plastics Group of Westmont, Illinois, built two injection-molding facilities in

• Uncertainty avoidance: a society’s reliance on social norms and procedures to

• Assertiveness: the extent to which a society encourages people to be tough,

• Humane orientation: the degree to which a society encourages and rewards

• Institutional collectivism: the degree to which individuals are encouraged by societal

• Increased threat of terrorism

• Robbins, S. P., Coulter, M., DeCenzo (2017). Fundamentals of

• Robbins, S. P. & Coulter, M (2016). Management (13th

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