Chapter 4 - Managing in Global Environment (Self-Study)

MANAGEMENT
RICHARD L. DAFT
Managing in a Global
Environment
CHAPTER 4
chapter4 Learning Outcomes
• Describe the emerging borderless world and some issues
of particular concern for today’s managers.
• Describe market entry strategies that business use to
develop foreign markets.
• Define international management and explain how it differs
from the management of domestic business operations.
• Indicate how dissimilarities in the economic, sociocultural,
and legal-political environments throughout the world can
affect business operations.
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Copyright ©2010 by South-Western, a division of Cengage
Learning. All rights reserved.
chapter4 A Borderless World
• Isolation from international forces is no

longer possible
– Trade barriers are falling
– Communication is faster and cheaper
– Consumer tastes are converging
• Virtual connections enable close, rapid
coordination among people working in
different parts of the world
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Getting Started
chapter4
Internationally
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Strategies for Entering
chapter4
International Markets
• Exporting – transfers products for sale in
foreign countries.
• The seller of such goods and services is
referred to as an exporter; the foreign buyer
is referred to as an importer.
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• Products/raw materials that are produced in the
home country are transported to a host country to
be sold
• The lowest risk among the entry methods
• Exporters also can realize experience and
location economies by mass producing products
in one location for the purpose of exporting
• Transportation costs such as shipping and air
cargo can be very expensive and present the risk
of accidents
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chapter4
• Global Outsourcing – transferring the labor
of specific tasks to low cost countries.
• Outsourcing refers to the way in which
companies entrust the processes of their
business functions to external vendors.
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chapter4
• Licensing – allowing an operation in another
country to produce and sell company
products.
• A very quick way of expanding and marketing your
business globally
• However, licensors might have a tough time keeping
track of the quality, performance and marketing of their
licensed products in the host countries
• Risks their products to be imitated or copied by their own
licensees which in the end will create competitors to
them in the future
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• Franchising – providing a foreign
organization with package of materials and
services
• Franchising is the practice of the right to use
a firm's business model and brand for a
prescribed period of time
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chapter4
• Joint Venture - is a business entity created
by two or more parties, share ownership
(60% / 40%) and shared returns (profit).
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chapter4
• A joint venture is usually the entry method by which
companies use to penetrate into a foreign country using
foreign direct investment (FDI).
• Joint ventures with local companies help foreign
companies to learn and adapt to the local laws and
cultural requirements.
• However, when the partners’ objectives are no longer
similar, there tend to be conflicts and battles between the
parties involved regarding ownership and control of
resources of the joint venture.
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chapter4
• Acquisition – Mergers and acquisitions
(M&A) are transactions in which the
ownership of companies and their operating
units are transferred or combined
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chapter4 Wholly-owned subsidiary
• When a foreign firm invests into a subsidiary in a host
country without any partners, which means that it owns
100 percent of the subsidiary.
• Suitable for companies that need full control of their
business in the foreign market.
• Allows the company to retain the full profit without having
to share it with partners.
• However, this means that costs, risks or losses are also
born fully by the company.
• Can be applied using either greenfield investment or
acquisition.
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International Business
chapter4
Strategies
1. International Strategy
2. Global Strategy
3. Multidomestic Strategy
4. Transnational Strategy
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International Strategy
chapter4
• A company takes the products produced in the
home country and sell them internationally with
minimal local customization
• Company may centralize all research and
development (R&D) functions in the home
country
• However, the company may duplicate certain
functions such as manufacturing and marketing
in each of its host countries.
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Global Strategy
chapter4
• Company is concerned mostly on the reduction of
costs, and less on localizing or adapting to the
host country’s culture
• Focuses on achieving global economies of scale
in its operations
• Decision making is left mainly to home country
since subsidiaries role are mainly to implement
strategies developed by the home country
• Examples of industries – automobiles,
semiconductors, electronic products, etc.
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Multidomestic Strategy
chapter4
• Opposite of global strategy
• Company’s foreign subsidiaries are independent
from home country
• Adapting to the local culture and exploiting
opportunities in the host country
• Home country will give subsidiary more freedom to
implement their own way of doing business and
adopts a decentralized approach of managing its
assets and capabilities
• Examples of industry – retailing, consumer
packaged goods, etc.
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Transnational Strategy
chapter4
• An ideal strategy that tries to balance both the
needs to reduce costs as well as to localize
products to the home country’s culture
• Its subsidiaries rely more on each other in terms
of knowledge and resources
• Different subsidiaries have their own role in a
specialized capacity, and thus in the end they
need to cooperate closely with each other to
produce the products and services
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MANAGEMENT

• Isolation from international forces is no

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