Mgt 201 - Management Process

Chapter 4
by
Heinz Weihrich, Mark V Cannice, Harold Koontz
12th edition, McGraw Hill

Managing in a Global Environment

 The Global Marketplace
• Opportunities and Challenges:
⮚ Coping with the –
sudden appearance of new competitors

⮚ Acknowledging –
cultural, political, and economic differences

⮚ Dealing with increased uncertainty, fear, and anxiety

⮚ Adapting to changes in the global environment

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 Regional Trading Agreements
• The European Union (EU)
⮚ A unified economic and trade entity
❖Belgium, Denmark, France, Greece, Ireland, Italy,
Luxembourg, the Netherlands, Portugal, Spain, the United
Kingdom, Germany, Austria, Finland, and Sweden

⮚ Economic and monetary union (Euro)

• North American Free Trade Agreement (NAFTA)

⮚ Eliminated barriers to free trade (tariffs, import
licensing requirements, and customs user fees)
❖United States, Canada, and Mexico

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European Union Countries

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 Regional Trading Agreements (cont’d)

• U.S.- Central America Free Trade Agreement (CAFTA)

• Association of Southeast Asian Nations (ASEAN)

• African Union

• South Asian Association for Regional Cooperation (SAARC)

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Source: Adapted from ASEAN Secretariat 2009: 21-22
 The World Trade Organization (WTO)
• General Agreement on Tariffs and Trade (GATT) in 1995.

• Functions as the only global organization

dealing with the rules of trade among nations.

• Has 161 member nations and 32 observer governments.

• Monitors and promotes world trade.

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 How Organizations Go Global
• Three Stages of Globalization
⮚ Stage I:
❖-Exporting products for sale overseas and
-Importing products from overseas to sell in the home country.

⮚ Stage II:
📫Committing –
directly Sell home-country products in overseas markets
OR
- Contracting for products to be
manufactured overseas and sold in the home country.

⮚ Stage III:
❖ Licensing, manufacturing and franchising services to foreign firms
to use the brand name, technology, or product specifications
developed by the firm.
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How Organizations Go Global

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 Global Sourcing:

• Purchasing materials or labor from around the world

wherever it is cheap

• Franchising: An organization gives another organization

right to use its name and operating materials.

 Other Forms of Globalization
• Strategic Alliances:
⮚ Partnerships between an organization and a foreign company
in which both share resources, expertise, goodwill, capital
and knowledge in developing new products or building new
production facilities.
Example: Asian Paints, the largest paint-maker in India, acquired a
strategic stake in Singapore-based Berger International in 2002.
• Joint Venture:
⮚ A specific type of strategic alliance in which the partners agree

to form a separate, independent organization for some business purpose.

• Foreign Subsidiary:
⮚ Directly investing in a foreign country by setting up
a separate and independent production facility or office.
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 Managing in A Global Environment
• The Legal Environment:

⮚ Stability or instability of legal and political systems:

❖Legal procedures are established and followed

❖Fair and honest elections held on a regular basis

⮚ Differences in the laws of various nations:

❖Effects on business activities

❖Effects on delivery of products and services

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 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
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 The Cultural Environment
• National Culture
⮚ National Culture is the values and attitudes
shared by individuals from a specific country
that shape their behavior and their beliefs
about what is important.

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 Global Management in Today’s World

• Challenges:
⮚ Significant cultural differences (e.g., Americanization)
⮚ Adjusting leadership styles and management approaches

⮚ Technological disruption era.

• Risks:
⮚ Loss of investments in unstable countries
⮚ Increased terrorism
⮚ Influx of immigrants/non-immi (overall human)

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