Chapter 3: Global Management

Managing Across Borders

Globalization
You & International Management
Why & How Companies Expand Internationally
Economic & Political-Legal Differences
Regional Economic Cooperation
Cultural Differences

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 3.1 Globalization: The Collapse Of
Time & Distance

WHAT IS GLOBALIZATION?

Globalization is the trend of the world economy

toward becoming a more interdependent system

Today, we are witnessing a shrinking of time and

space as air travel and the electronic media have
made it easier for people around the world to
communicate with each other
We call this the global village

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 3.1 Globalization: The Collapse Of
Time & Distance

IS GLOBALIZATION A GOOD THING?

The global economy refers to the increasing tendency of the

economies of the world to interact with one another as one
market instead of many national markets
Growth in jobs and income in one country means growth in
jobs and income in other countries—a win-win situation
However, global interdependency can be negative when
negative events in one country generate negative events in
other countries
Outsourcing jobs also brings negative effects to the country
that loses the jobs

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 3.1 Globalization: The Collapse Of
Time & Distance

WHY SHOULD YOU LEARN ABOUT

INTERNATIONAL MANAGEMENT?

You need to learn about international management because

you may find yourself in any of the following situations:
dealing with customers or partners from different cultures
buying components, raw materials, or services from foreign
suppliers
working for a superior from a foreign country
working in a foreign subsidiary or for a foreign firm located in
another country

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 3.2 You & International Management

There are three primary attitudes among international

managers:
managers who believe that their native country, culture,
language, and behavior are superior to all others are
ethnocentric managers
managers who believe native managers in foreign offices
best understand native personnel and practices, and so the
home office should leave them alone are polycentric
managers
Geocentric managers accept that there are differences and
similarities between home and foreign personnel and
practices, and that they should use whatever techniques are
most effective

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 3.3 Why & How Companies
Expand Internationally

WHY DO COMPANIES EXPAND

INTERNATIONALLY?

Firms expand internationally to take advantage of:

1. Availability of supplies
2. New markets
3. Lower labor costs
4. Access to finance capital
5. Avoidance of tariffs & import quotas
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 3.3 Why & How Companies
Expand Internationally

HOW DO COMPANIES EXPAND

INTERNATIONALLY?

There are five ways to expand internationally:

1. Global outsourcing
2. Importing, exporting, and countertrading
3. Licensing and franchising
4. Joint ventures
5. Wholly-owned subsidiaries

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 3.5 The World Of Free Trade:
Regional Economic Cooperation

There are three main types of trade barriers:

1. Trade barriers in the form of a customs duty, or tax, levied
mainly on imports are called tariffs
2. Trade barriers that limit the numbers of a product that can
be imported are import quotas
3. Embargoes are complete bans on the import or export of
certain products

Groups of nations within a geographic region that have

agreed to remove trade barriers with one another are called
trading blocs or economic communities

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 3.6 The Importance Of Understanding
Cultural Differences

WHY SHOULD MANAGERS UNDERSTAND

CULTURAL DIFFERENCES BETWEEN
COUNTRIES?

Culture is the shared set of beliefs, values, knowledge, and

patterns of behavior common to a group of people
Misunderstandings and miscommunications in international
business often occur because of cultural misunderstandings
In low-context cultures like Germany and the U.S., shared
meanings are primarily derived from written and spoken words
In high-context cultures like Japan and China, people rely
heavily on situational cues for meaning when communicating
with others

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 3.6 The Importance Of Understanding
Cultural Differences

Geert Hofstede identified four dimensions along which

national cultures vary
1. individualism/collectivism describes how loosely or tightly
people are socially bonded
2. power distance refers to how much people accept inequality
in power
3. uncertainty avoidance describes how strongly people desire
uncertainty
4. masculinity/femininity refers to how much people embrace
stereotypical male or female traits

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 3.6 The Importance Of Understanding
Cultural Differences

The GLOBE project is an ongoing cross-cultural

investigation of nine cultural dimensions involved in
leadership and organizational processes
1. institutional collectivism - how much should
leaders encourage and reward loyalty to the social
unit
2. in-group collectivism - how much pride and loyalty
should people have for their family or organization
3. power distance - how much unequal distribution of
power should there be in society and organizations
4. uncertainty avoidance - how much should people
rely on social norms and rules to avoid uncertainty
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 3.6 The Importance Of Understanding
Cultural Differences

5. gender differentiation - how much should society

maximize gender role differences
6. assertiveness - how confrontational and dominant
should individuals be in social relationships
7. future orientation - how much should people delay
gratifications by planning and saving for the future
8. performance orientation - how much should
individuals be rewarded for improvement and
excellence
9. humane orientation - how much should society
encourage and reward people for being kind, fair,
friendly, and generous
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 3.6 The Importance Of Understanding
Cultural Differences

Managers need to bridge cross-cultural gaps by

understanding basic cultural across four areas
1. Language - more than 3,000 different languages are
spoken in the world
2. Interpersonal space - how close people should be when
communicating varies by culture
3. Time orientation - time orientation varies by culture
4. Religion - Christianity has the largest following with 2.1
billion adherents, Islam is next with 1.3 billion followers, then
Hinduism, Buddhism, and Judaism

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