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Management, 10/e
John R. Schermerhorn, Jr. Chapter 5: International Management

Prepared by: Jim LoPresti University of Colorado, Boulder Published by: John Wiley & Sons, Inc.

Planning Ahead Chapter 5 study questions

 What are the management challenges

of globalization?  What are global businesses and what do they do?  What is culture and how does it impact global management?  How can we benefit from global management learning?

Management 10/e - Chapter 5

Study Question 1: What are the management challenges of globalization?

 Key concepts in the challenges of

globalization:
   

Global economy Globalization International management Global manager

Management 10/e - Chapter 5

Study Question 1: What are the management challenges of globalization?

 Global economy


Resource supplies, product markets, and business competition are worldwide, rather than local

 Globalization


The process of growing interdependence of these components in the global economy

Management 10/e - Chapter 5

Study Question 1: What are the management challenges of globalization?

 Global management
Management in organizations with business interests in more than one country

 Global manager
   

Informed about international developments Transnational in outlook Competent in working with multicultural people Aware of regional developments in a changing world
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Study Question 1: What are the management challenges of globalization?

 Global businesses
Conduct for-profit transactions of goods and
services across national boundaries

 Reasons why businesses go global:

    

Profits Customers Suppliers Capital Labor

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Study Question 1: What are the management challenges of globalization?

 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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Figure 5.1 Common forms of global businessfrom market

entry to direct investment strategies.

Management 10/e - Chapter 5

Study Question 1: What are the management challenges of globalization?

 Global sourcing
 the process of purchasing materials or services

around the world for local use

 Exporting
 selling locally made products in foreign markets

 Importing
 buying foreign-made products and selling them

domestically

 Licensing agreement
 one firm pays fee for rights to make or sell another

companys products

 Franchising
 a fee is paid for rights to use another firms name and operating methods
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Study Question 1: What are the international

business challenges of globalization?

 Direct investment strategies require major capital commitments but create rights of ownership and control over foreign operations.
 Types of direct investment strategies:
 Joint ventures
 operates in a foreign country through co-ownership

by foreign and local partners

 Strategic alliances
 a partnership in which foreign and domestic firms

share resources and knowledge for mutual gains.

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Study Question 1: What are the international

business challenges of globalization? Types of direct investment strategies:

 Foreign subsidiaries
o local operation completely owned by a foreign firm
 Greenfield investment - builds an entirely new
operation in a foreign country

 Foreign direct investment.



building, buying or buying part ownership of a business in another country. job creation through foreign direct investment

 Insourcing


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Study Question 1: What are the international

business challenges of globalization?

 Criteria for choosing a joint venture

partner:
 Familiarity with your firms major business.  Strong local workforce.  Future expansion possibilities.  Values its customers  Strong local market for partners own

products.
 Good profit potential.  Sound financial standing.
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Study Question 1: What are the international

business challenges of globalization?

 Complications in the global business environment:
 Political risk

 the potential loss in value of a foreign investment due to instability and changes in host country
 Local legal systems

 complex and unfamiliar laws can create problems

 World Trade Organization resolves trade and tariff

disputes among countries.

 Protectionism can complicate global trading

relationships.
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Study Question 1: What are the international

business challenges of globalization?

 Regional Economic Alliances
 NAFTA North American Free Trade

Agreement
 CAFTA Central American Free Trade

Agreement
 EU European Union  APEC Asia Pacific Economic Cooperation  SADC Southern Africa Development

Community
Management 10/e - Chapter 5 14

Study Question 2: What are global businesses

and what do they do?

 Types of global businesses:



Global corporation


MNC (multinational corporation) with extensive business operations in more than one foreign country MNC (multinational corporation) operates worldwide on a borderless basis

Transnational corporation


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Study Question 2: What are global businesses

and what do they do?

 Mutual benefits for host country

and global corporation or MNC:

   

Shared growth opportunities Shared income opportunities Shared learning opportunities Shared development opportunities

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Study Question 2: What are global businesses

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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Figure 5.2 What should go right and what can go wrong in MNC-host country relationships.

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Study Question 2: What are global businesses

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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Study Question 2: What are global businesses

and what do they do?

 Ethical issues for MNCs:


Corruption illegal practices that further ones 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.

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Study Question 3: What is culture and how

does it impact global management?

 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. The ability to adapt and adjust to new cultures Tendency to consider ones own culture as superior to others.
Management 10/e - Chapter 5 21

 

Cultural intelligence


Ethnocentrism


Study Question 3: What is culture and how

does it impact global management?

 Stages in adjusting to a new

culture:
    

Confusion Small victories The honeymoon Irritation and anger Reality

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Study Question 3: What is culture and how

does it impact global management?

 Popular dimensions of culture:


 

Language  Low-context cultures and high-context cultures Interpersonal space  proxemics Time orientation  Monochronic cultures and polychronic cultures Religion Contracts and agreements

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Study Question 3: What is culture and how

does it impact global management?

 Values and national cultures

(Hofstede):
    

Power distance Uncertainty avoidance Individualism-collectivism Masculinity-femininity Time orientation

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Figure 5.3 How countries compare on Hofstedes dimension of national culture.

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Study Question 3: What is culture and how does it relate to global diversity?

 Project GLOBE (Global Leadership

and Organizational Behavior Effectiveness)



Researches the leadership, organizational practices, and diversity among world cultures.
Power distance  Uncertainty avoidance  Gender egalitarianism  Future orientation

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Study Question 3: What is culture and how does it relate to global diversity?

Project GLOBEs nine dimensions continued

 Institutional

collectivism  In-group collectivism  Assertiveness  Performance orientation  Humane orientation

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Study Question 3: What is culture and how does it relate to global diversity?

Project GLOBEs research on leadership practices across cultures

 Facilitators
 Acting

of leadership success

trustworthy, just, honest  Showing foresight, planning  Being positive, dynamic, motivating  Inspiring confidence  Being informed and communicative  Being a coordinator and team builder
Management 10/e - Chapter 5 28

Study Question 3: What is culture and how does it relate to global diversity?

Project GLOBEs research on leadership practices across cultures

 Inhibitors
 Being  Acting  Being  Acting

of leadership success

a loner uncooperative irritable autocratic

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Study Question 4: How can we benefit from

global management learning?

 Comparative management


How management systematically differs among countries and/or cultures.

Global managers


Need to successfully apply management functions across international boundaries.

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Figure 5.4 Nine cultural dimensions used by Project GLOBE researchers.

A large team of international researchers collaborated in Project GLOBE to examine societal cultures using the nine cultural dimensions shown in the figure. When results from extensive empirical studies were analyzed for 62 countries, they were found to fall into ten culture clusters. Countries within a cluster share many societal cultural practices; countries tend to differ significantly across clusters in their cultural practices. Management 10/e - Chapter 5 31

Study Question 4: How can we benefit from

global management learning?

 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.

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Study Question 4: How can we benefit from

global management learning?

 Global management learning:


Companies can and should learn from each other. Readiness for global organizational learning varies based on managerial attitudes.  Ethnocentric attitudes
 Polycentric  Geocentric

attitudes attitudes

Be alert, open, inquiring, but always cautious.

Management 10/e - Chapter 5 33

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