Don Hellriegel

Susan E. Jackson
John W. Slocum, Jr.

Prepared by
Argie Butler
Texas A&M University

Learning Goals
1. State the trends affecting organizations in a global
economy
2. Describe how a countrys culture can affect an
organizations business practices
3. Explain how politicallegal forces impact global
business
4. Discuss how three major international trade
agreements affect global competition and cooperation
5. Describe six strategies used by organizations to grow
globally
Chapter 5: PowerPoint 5.1

Borderless
organizations

Foreign
Exchange
rates

Worldwide labor
pool

Worldwide
communication

Global
Importance
________ of parts of exports
and imports
Chapter 5: PowerPoint 5.2 (Adapted from Table 5.1)

Expanding
Nature of
trade

It is now possible for more people than ever to

collaborate and compete in real time with more
people on different kinds of work from different
corners of the planet and on more equal footing
than at any previous time in the history of the
world using computers, e-mail, teleconferencing
and dynamic software.

Thomas L. Friedman, Author, The World is Flat

Chapter 5: PowerPoint 5.3

Cultural
Distance
Value
Systems

Social
Change

Culture
_________
Chapter 5: PowerPoint 5.4 (Adapted from Figure 5.1)

Time
Orientation

Importance of Cultural Orientation

100
90
80
70
60
50

Mexico
USA

40
30
20
10
0

Pow erDistance
Distance
Uncertainty
Avoidance
Individualism
Gender-Role
Orientation
Power
Uncertainty
Individualism
Gender-Role
Avoidance
Orientation
Cultural Value Dimension

Chapter 5: PowerPoint 5.5 (Adapted from Figure 5.2)

Issue

United States

Mexico

Subordinates
dependence needs

Moderate
dependence on
supervisor

______
dependence on
supervisor

Consultation

Expect to be
consulted
___________
leadership

Expect little
consultation
A benevolent
autocrat or
paternalistic
father figure

Ideal superior

Chapter 5: PowerPoint 5.6 (Adapted from Table 5.2)

Issue

United States

Mexico

Rules and
regulations

Apply to all

____________ are
above rules and
regulations and
take advantage of
privileges

Status symbols

Are accepted as
symbols of
authority, but are
not necessary

Are very important

evidence of the
authority of
superiors

Chapter 5: PowerPoint 5.7 (Adapted from Table 5.2)

Characteristics

United States

Mexico

Decision making

Participation,
___________ to
employees

Centralized,
concentrated at top

Responsibility

Employees assume
responsibility for
their own lives

Employees expect
close paternalistic
supervisors

Organization chart

Indicative of unequal
______________;
reflects information
flow in organization

Indicative of
unequal roles;
reflects power
relationships of key
family members

Chapter 5: PowerPoint 5.8 (Adapted from Table 5.3)

Characteristics

United States

Mexico

Hiring criteria

Demonstrated
performance

Family or personal
ties

Performance
feedback

Employee accepts
______________

Critical feedback
resented

Leadership pattern Democratic leader

Planning process

Benevolent dictator

Long term, proactive, Short term, reactive,

formal
unstructured

Source: Adapted from T.H. Becker. Doing Business in the New

Latin America. Westport, CT: Praeger, 2004, 135-136.
Chapter 5: PowerPoint 5.9 (Adapted from Table 5.3)

Aspects of Cultural
Distance

Examples of Industries
Affected by Cultural
Distance

Different languages

Consumer foods

Different ethnicities
Different religions

Tobacco products
Products that have high
linguistic content (TV)

Different ___________

Auto (size, features)

Chapter 5: PowerPoint 5.10 (Adapted from Table 5.4)

 Political risk: probability that governmental decisions or

events in a country will negatively affect the long-term
profitability of an __________
Major Dimensions of political risk
Domestic instability Low

High

Foreign conflict

Low

High

Political climate

Low

High

Economic climate

Low

High

__________

Low

High

Chapter 5: PowerPoint 5.11

Country Rank

Country Score*

1 (least Corrupt)
2
14
17
21
65
117
130
158 (Most Corrupt)

Iceland (9.7)
Finland and New Zealand (9.6)
Canada (8.4)
United States (7.6)
Japan and Chile (7.5)
Mexico (3.5)
Philippines and Bolivia (2.5)
Venezuela (2.3)
Bangladesh and Chad (1.7)

*Score relates to degree of corrupt behaviors by analysts. Scores can

range from 10 (not corrupt) to 0 (highly corrupt).
Chapter 5: PowerPoint 5.12 (Adapted from Table 5.5)

____________ is designed to help home-based industries

or firms avoid (or reduce) potential (or actual)
competitive threats from abroad
______: a government tax on goods or services entering
the country
______: a restriction on the quantity of a countrys
imports and sometimes exports
_______: a direct or indirect payment by a government
to domestic firms to make selling or investing abroad
cheaper for them
_______: an alliance of producers engaged in the same
type of business that is formed to limit or eliminate
competition and control production and prices
Chapter 5: PowerPoint 5.13

Political Mechanisms Related to

Various Degrees of Corruption
v______: an improper payment made to induce
the recipient to do something for the payer

__________: a payment made to ensure that the

recipient doesnt harm the payer in some way

vGrease payments: small payments used to

get lower level government employees to speed
up required paperwork
Chapter 5: PowerPoint 5.14

Every morning in Africa, a gazelle wakes up and

knows it must run faster than a lion or it will be
killed. Every morning a lion wakes up and knows
that it must outrun the slowest gazelle or it will starve
to death. It doesnt matter whether or not you are a
gazelle or lion. When the sun comes up, you better
start running.
Jack Perkowski, Chairman and CEO, ASIMCO
Technologies
Chapter 5: PowerPoint 5.15

 Represents 160 negotiated trade agreements

among countries
Key Functions
Cooperating with other International Organizations
Providing a forum for
trade negotiations

Handling trade
________ between
nations

Administering
WTO
agreement
Monitoring
Providing
national trade
technical assistance and
policies
training for people in
developing countries
Chapter 5: PowerPoint 5.16

Promotes peace by
handling trade disputes
constructively

Rules make life easier

for all organizations
to follow

Benefits
Trade stimulates
_______________
and reduces the cost
of living

Chapter 5: PowerPoint 5.17

System
encourages good
government

Major International Trade Agreements:

WTO Fundamental Principles
q __________________ principle: when country A
grants a tariff concession to country B, the same
concession automatically applies to all other
countries that are members of WTO
q __________ principle: each member country will
not be forced to reduce tariffs unilaterally. A tariff
concession is made only in return for comparable
concessions from the other countries

q Transparency principle: tariffs are to be

readily visible to all countries
Chapter 5: PowerPoint 5.18

Created a freer trade zone among Canada, Mexico,

and United States
removed and reduced barriers to trade, such
as tariffs, quotas, and licenses
increased trade
tightened ______________________ protection

____________ plants: foreign-owned plants located in

Mexico that border the U.S.
account for 40% of Mexicos manufacturing
wages range from $15 - $20 a day
employ more than 1.2 million people
Chapter 5: PowerPoint 5.19

q An organization with the goals of creating a single

market among member nations and establishing the
free movement of goods, people, services, and capital
currently 28 member countries

q Removes/Reduces:
physical barriers at country borders
technical barriers that prevent goods
produced in one country being sold in others

q _______ barriers:
red-tape and tax systems that hinder trade
financial barriers that prevent/hinder free
movement of investment capital

q Created the EURO as currency

Chapter 5: PowerPoint 5.20

High

Global

Complexity

Multidomestic
Alliances
Franchising
Licensing
Exporting

Low
Low

Resource Commitment

Chapter 5: PowerPoint 5.21 (Adapted from Figure 5.4)

High

Maintaining facilities within a _____________

and shipping goods and services abroad for sale
in foreign markets (e.g., California Sunshine;
Thomson Publishing)
q Benefits:
no cash outlays
extends products/services to other countries
most sales done via Internet
Chapter 5: PowerPoint 5.22

Firm (the ________) in one country giving other domestic or

foreign firms (________) the right to use a patent, trademark,
technology, production process, or product in return for the
payment of a ______________ (e.g., Coca-Cola; PepsiCo)

q Benefits:
little financial risk
increase market awareness
no production plants
q Risks:
violation of intellectual property rights
licensee fails to pay royalty or fee
licensee steals technology
Chapter 5: PowerPoint 5.23

Parent organization (the __________) granting other

companies or individuals (___________) the right to
use its trademarked name and to produce and sell its
goods or services (e.g., KFC, Marriott)
q Benefits:

parent company maintains control of brand

image, manufacturing and services
increase global presence
franchisee tailors marketing to local area(s)

q Risks:

need to monitor franchisee

franchisee operates independently and
doesnt perform services according to contract

Chapter 5: PowerPoint 5.24

An agreement between two or more organizations to

pool physical, financial, and human resources to
achieve ____________ (e.g., Nestl; LOreal)
q Benefits:

share costs and risks of capital intense projects

desire for partners to learn from each other
partners shape competition in the industry

q Risks:

political uncertainty
partners can become competitors
economic uncertainty
partners develop different goals

Chapter 5: PowerPoint 5.25

Adjusting products, services, and practices to individual

countries or regions (e.g., Pacific Rim versus Western
Europe versus North America) (e.g., Dominos Pizza;
Procter & Gamble)

q Benefits:

firm taps into country values for product ____________

marketing campaigns tailored to country
firm understands local distribution system
extending global brand name

q Risks:

large financial investment required

shared services
high level of coordination needed across firm
reliance on ______________ to implement strategy

Chapter 5: PowerPoint 5.26

Procter and Gamble chose a multidomestic

strategy because we believe that this leads to
superior understanding of consumers and their
needs and it develops close relationships with
suppliers. This structure also enables product
divisions to share information and key activities.

A.G. Lafley, CEO and President, Procter and Gamble

Chapter 5: PowerPoint 5.27

Stresses worldwide consistency, ______________ and

relatively low cost (e.g., Black & Decker, Kodak)
q Benefits:

worldwide standards
promotes brand recognition
coordination of global ____________
distribution advantages

q Risks:

assumes customers needs are similar across globe

high level of financial investment in plants and
equipment
national currency fluctuations
loss of ___________ between plants

Chapter 5: PowerPoint 5.28