Chapter Six

Managing in the Global Environment

McGraw-Hill/Irwin

Copyright 2009 by The McGraw-Hill Companies, Inc. All rights reserved.

Learning Objectives
1. Explain why the ability to perceive, interpret, and respond appropriately to the global environment is crucial for managerial success 2. Differentiate between the global task and global general environments 3. Identify the main forces in both the global task and general environments, and describe the challenges that each force presents to managers

6-2

Learning Objectives
4. Explain why the global environment is becoming more open and competitive and identify the forces behind the process of globalization that increases the opportunities, complexities, challenges, and threats that managers face 5. Discuss why national cultures differ and why it is important that managers be sensitive to the effects of falling trade barriers and regional trade associations on the political and social systems of nations around the world

6-3

Global Organizations
Global Organizations
Organizations that operate and compete not only domestically, but also globally Uncertain and unpredictable

6-4

What Is the Global Environment?

Global Environment
Set of forces and conditions in the world outside the organizations boundaries that affect the way it operates and shape its behavior Changes over time Presents managers with opportunities and threats

6-5

Task Environment
Task Environment
Set of forces and conditions that originate with suppliers, distributors, customers, and competitors Affects an organizations ability to obtain inputs and dispose of its outputs Most immediate and direct effect on managers

6-6

Forces in the Global Environment

Figure 6.1

6-7

Question?
Which part of the task environment provides an organization with the input resources that it needs to produce goods and services? A. Customers B. Suppliers C. Competitors D. Distributors
6-8

The Task Environment

Suppliers
Individuals and organizations that provide an organization with the input resources that it needs to produce goods and services
Raw materials, component parts, labor (employees)

6-9

Global Outsourcing
Global Outsourcing
Organizations purchase inputs from other companies or produce inputs themselves throughout the world to lower production costs and improve the quality or design of their products

6-10

The Task Environment

Distributors
Organizations that help other organizations sell their goods or services to customers
Powerful distributors can limit access to markets through its control of customers in those markets. Managers can counter the effects of distributors by seeking alternative distribution channels.

6-11

The Task Environment

Customers
Individuals and groups that buy goods and services that an organization produces
Identifying an organizations main customers and producing the goods and services they want is crucial to organizational and managerial success.

6-12

The Task Environment

Competitors
Organizations that produce goods and services that are similar to a particular organizations goods and services
Rivalry between competitors is potentially the most threatening force that managers deal with

6-13

The Task Environment

Barriers to Entry
Factors that make it difficult and costly for the organization to enter a particular task environment or industry Economies of scale, brand loyalty, government regulations

6-14

Barriers to Entry and Competition

Figure 6.2

6-15

The General Environment

Economic Forces
factors that affect the general health and wellbeing of a country or world region Interest rates, inflation, unemployment, economic growth

6-16

The General Environment

Technology
Combination of tools, machines, computers, skills, information, and knowledge that managers use in the design, production, and distribution of goods and services

6-17

The General Environment

Technological Forces
Outcomes of changes in the technology that managers use to design, produce, or distribute goods and services

6-18

The General Environment

Sociocultural Forces
Pressures emanating from the social structure of a country or society or from the national culture
Social structure: the arrangement of relationships between individuals and groups in society National culture: the set of values that a society considers important and the norms of behavior that are approved or sanctioned in that society.

6-19

The General Environment

Demographic Forces
Outcomes of change in, or changing attitudes toward, the characteristics of a population, such as age, gender, ethnic origin, race, sexual orientation, and social class

6-20

The General Environment

Political and Legal Forces
Outcomes of changes in laws and regulations, deregulation of industries, the privatization of organizations, and increased emphasis on environmental protection
Increasingly nations are joining together into political unions that allow for the free exchange of resources and capital

6-21

The Global Environment

Figure 6.3
6-22

Process of Globalization
Globalization
Set of specific and general forces that work together to integrate and connect economic, political, and social systems across countries, cultures, or geographical regions Result is that nations and peoples become increasingly interdependent

6-23

Discussion Question?
What is the principal form of capital that flows between countries? A. Human B. Political C. Resource D. Financial

6-24

Process of Globalization
Four principal forms of capital that flow between countries are:
Human capital Financial capital Resource capital Political capital

6-25

Declining Barriers to Trade and Investment

Tariff
A tax that government imposes on imported or, occasionally, exported goods. Intended to protect domestic industry and jobs from foreign competition

6-26

GATT and the Rise of Free Trade

Free-Trade Doctrine
The idea that if each country specializes in the production of the goods and services that it can produce most efficiently, this will make the best use of global resources and will result in lower prices

6-27

Declining Barriers of Distance and Culture

Distance
Markets were essentially closed because of the slowness of communications over long distances.

Culture
Language barriers and cultural practices made managing overseas businesses difficult

Changes in Distance and Communication

Improvement in transportation technology and fast, secure communications have greatly reduced the barriers of physical and cultural distances.
6-28

Effects of Free Trade on Managers

Declining Trade Barriers
Opened enormous opportunities for managers to expand the market for their goods and services. Allowed managers to now both buy and sell goods and services globally. Increased intensity of global competition such that managers now have a more dynamic and exciting job of managing.
6-29

Question?
What are ideas about what a society believes to be good, desirable and beautiful? A. Norms B. Needs C. Roles D. Values

6-30

The Role of National Culture

Values
Ideas about what a society believes to be good, desirable and beautiful. Provide the basic underpinnings for notions of individual freedom, democracy, truth, justice, honesty, loyalty, love, sex, marriage, etc.

6-31

The Role of National Culture

Norms
Unwritten rules and codes of conduct that prescribe how people should act in particular situations.
Folkwaysroutine social conventions of daily life (e.g., dress codes and social manners) Moresbehavioral norms that are considered central to functioning of society and much more significant than folkways (e.g., theft and adultery), and they are often enacted into law.

Many differences in mores from one society to another

6-32

Hofstedes Model of National Culture

Figure 6.4
6-33

Hofstedes Model of National Culture

Individualism
A worldview that values individual freedom and self-expression and adherence to the principle that people should be judged by their individual achievements rather their social background.

Collectivism
A worldview that values subordination of the individual to the goals of the group and adherence to the principle that people should be judged by their contribution to the group
6-34

Hofstedes Model of National Culture

Power Distance
Degree to which societies accept the idea that inequalities in the power and well-being of their citizens are due to differences in individuals physical and intellectual capabilities and heritage

6-35

Hofstedes Model of National Culture

Achievement versus Nurturing Orientation
Achievement-oriented societies value assertiveness, performance, and success and are results-oriented. Nurturing-oriented cultures value quality of life, personal relationships, and service.

6-36

Hofstedes Model of National Culture

Uncertainty Avoidance
Societies and people differ in their tolerance for uncertainty and risk. Low uncertainty avoidance cultures (e.g., U.S. and Hong Kong) value diversity and tolerate a wide range of opinions and beliefs. High uncertainty avoidance societies (e.g., Japan and France) are more rigid and expect high conformity in their citizens beliefs and norms of behavior.
6-37

Hofstedes Model of National Culture

Long-term vs. Short-term Orientation
Cultures with a long-term orientation rest on values such as thrift and persistence in achieving goals Cultures with a short-term orientation are concerned with maintaining personal stability or happiness and living for the present

6-38

Movie Example: Gung Ho

What decisions should the Assan Motors executives consider before opening a plant in the U.S.?

6-39

Video Case: The Delmar Dog Butler

What forces in the global environment are leading to outsourcing? What has outsourcing meant to countries like India? Do you think outsourcing is helping or hurting America?

6-40