Management, 7eSchermerhorn
Prepared by
Michael K. McCuddy
Valparaiso University
John Wiley & Sons, Inc
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Chapter 5Global Dimensions of Management
Planning ahead—study questions– What are the management challenges of globalization?
– What are the forms and opportunities of international business?
– What are multinational corporations and what do they do?
– How does culture create global diversity?
– How do management practices and learning transfer across cultures?
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What are the management challenges of globalization?
Modern managers operate in a complex
global arena:
– Resource supplies, product markets, and
business competition are global in nature.
– There is a growing interdependence of supplies,
markets, and competition.
– Global managers must think and act globally.
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What are the management challenges of globalization?
Europe
– European Union (EU)
• Grouping of 15
Western European
countries that agreed to
support mutual
economic growth
• Expected to expand to
at least 25 members
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What are the management challenges of globalization?
The Americas– North American Free Trade
Agreement (NAFTA)
• Agreement for free flow of
goods and services
between the U.S., Canada,
and Mexico
– Free Trade of the Americas
(FTAA)—Alaska to Chile
—is a possibility
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What are the management challenges of globalization?
Asian and the Pacific Rim– Rivals EU in size and is
growing
– Economic power of Japan and China
– Asia-Pacific Economic Cooperation (APEC) is a growing regional economic alliance
– Human rights and intellectual property issues
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What are the management challenges of globalization?
Africa– Beckons international
business– Increased attention to
stable countries– South African
Development Community (SADC) links 12 countries in trade and economic development
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What are the forms and opportunities of international business?
Reasons for engaging in international business:– Profits
– Customers
– Suppliers
– Capital
– Labor
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What are the forms and opportunities of international business?
Market entry strategies involve the sale of goods or services to foreign markets but do not require expensive investments.
Types of market entry strategies:– Global sourcing
– Exporting
– Importing
– Licensing agreement
– Franchising
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What are the forms and opportunities of international business?
Direct investment strategies require major capital commitments but create rights of ownership and control over foreign operations.
Types of direct investment strategies:– Joint ventures
– Wholly owned subsidiaries
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What are multinational corporations and what do they do?
A multinational corporation (MNC) is a business with extensive international operations in more than one country.
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What are multinational corporations and what do they do?
Types of multinational corporations:
– Ethnocentric MNC
• Exerts strict control over foreign operations
– Polycentric MNC
• Gives foreign operations more freedom to operate as separate
entities
– Geocentric MNC
• Seeks total integration of global operations
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What are multinational corporations and what do they do?
Mutual benefits for host country and MNC:
– Shared growth opportunities
– Shared income opportunities
– Shared learning opportunities
– Shared development opportunities
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What are multinational corporations and what do they do?
Host country complaints about MNCs:
– Excessive profits
– Domination of local economy
– Interference with local government
– Hiring the best local talent
– Limited technology transfer
– Disrespect for local customs
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What are multinational corporations and what do they do?
MNC complaints about host countries:
– Profit limitations
– Overpriced resources
– Exploitative rules
– Foreign exchange restrictions
– Failure to uphold contracts
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What are multinational corporations and what do they do?
Ethical issues for MNCs:
– Corruption—illegal practices that further one’s business interests.
– Sweatshops—employing workers at low wages, for long hours and
in poor working conditions.
– Child labor—full-time employment of children for work otherwise
done by adults.
– Sustainable development—meeting current needs without
compromising future needs.
– ISO 14000—responsible environmental policies.
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How does culture create global diversity?
Culture – The shared set of beliefs, values, and patterns of
behavior common to a group of people.
Culture shock – Confusion and discomfort a person experiences in an
unfamiliar culture.
Ethnocentrism– Tendency to consider one’s own culture as superior to
all others.
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How does culture create global diversity?
Popular dimensions of culture:– Language
• Low-context cultures and high-context cultures
– Use of space– Time orientation
• Monochronic cultures and polychronic cultures
– Religion– Role of contracts
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How does culture create global diversity?
Values and national cultures (Hofstede):
– Power distance
– Uncertainty avoidance
– Individualism-collectivism
– Masculinity-femininity
– Time orientation
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How does culture create global diversity?
Understanding cultural differences (Trompenaars):– Relationships with people:
• Universalism versus particularism• Individualism versus collectivism• Neutral versus affective• Specific versus diffuse• Achievement versus prescription
– Attitudes toward time—sequential and synchronic views.
– Attitudes toward environment—inner-directed and outer-directed cultures.
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How do management practices and learning transfer across cultures?
Comparative management
– How management systematically differs among
countries and/or cultures.
Global managers
– Need to apply management functions across
international boundaries.
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How do management practices and learning transfer across cultures? Planning and controlling:
– Complexity of international operating environment– Political risk
Organizing and leading:– Multinational organization structures
• Multinational geographic structure• Multinational product structure
– Staffing international operations• Competent locals• Expatriates
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How do management practices and learning transfer across cultures?
Are management theories universal?– U.S. management theories may be ethnocentric.
• Participation and individual performance are not emphasized as much in other cultures.
– Not all Japanese management practices can be applied successfully abroad.
• Lifetime employment, job rotation and broad career experience, shared information, collective decision-making, and quality emphasis.
• Keiretsu—long-term alliances for attaining common interests.
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How do management practices and learning transfer across cultures?
Global organizational learning:
– Companies can and should learn from each
other.
– Caution should be exercised in transferring
management practices.
– Cultural awareness facilitates more informed
transfers of management practices.