Management a practical introduction 3rd kinicky chapter 04

Kinicki/Williams, Management: A Practical Introduction 3e ©2008, McGraw-Hill/Irwin2 Managing Across Borders Globalization You & International Management Why & How Companies Expand Int

Kinicki/Williams, Management: A Practical Introduction 3e ©2008, McGraw-Hill/Irwin

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Managing Across Borders

Globalization

You & International Management

Why & How Companies Expand Internationally

Economic & Political-Legal Differences

Regional Economic Cooperation

Cultural Differences

4.1 Globalization: The Collapse Of

Time & Distance

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4.1 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

of economies of the world to interact with one another as one market instead of many national

markets.

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4.1 Globalization: The Collapse Of

Time & Distance

IS GLOBALIZATION A GOOD THING?

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

Positive Effects

U.S exports, international trade, and

U.S workers are connected

Growth of jobs and income in other

countries will mean growth of jobs and

income for the U.S.

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4.1 Globalization: The Collapse Of

Time & Distance

Two types of firms are emerging in the world

economy: mergers of huge companies into even

bigger companies, and small, fast-moving start-up companies

Companies in many industries are merging with

other companies to be bigger, cross-border

enterprises

Almost any firm can operate globally today

Thanks to the Internet and World Wide Web, small companies can get started more easily, and small

companies can maneuver faster

Globalization: The Collapse Of

Time & Distance

WHY SHOULD YOU LEARN ABOUT INTERNATIONAL MANAGEMENT?

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4.1 Globalization: The Collapse Of

Time & Distance

WHY SHOULD YOU LEARN ABOUT INTERNATIONAL MANAGEMENT?

International managers oversee the conduct of operations in, or with, organizations in foreign

countries

countries.

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4.1 Globalization: The Collapse Of

Time & Distance

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

4.2 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

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E4-10

McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc All rights reserved.

The Successful International Manager:

 Geocentric:

accepts diversity

Chapter 4: Global Management

CLASSROOM PERFORMANCE SYSTEM

A manager that believes his way is best is a manager

A) geocentric

B) polycentric

C) transcentric

D) ethnocentric

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Chapter 4: Global Management

CLASSROOM PERFORMANCE SYSTEM

A manager that believes his way is best is a manager

A) geocentric

B) polycentric

C) transcentric

D) ethnocentric

E4-11 Why Companies Expand

Internationally

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4.3 Why & How Companies

Expand Internationally

WHY DO COMPANIES EXPAND INTERNATIONALLY?

Firms expand internationally to take advantage of:

1 Availability of supplies - some companies have to go to

foreign countries to get their supplies

2 New markets - when domestic demand declines,

companies need to find new markets

3 Lower labor costs - manufacturing is cheaper where wages are lower

4 Access to finance capital - foreign financing, either private

or through a government, can entice companies to go

international

5 Avoidance of tariffs & import quotas - companies might

establish a foreign subsidiary to avoid tariffs or quotas

E4-9 You and International

Management

You may deal with foreign customers or partners

You may deal with foreign suppliers

You may work for a foreign firm in the United

States

You may work for an American firm outside the

United States

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McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc All rights reserved.

Practical Action: What You Can Do to Prepare for Overseas Assignments

Persuade your boss that you can handle overseas

duty and that the organization will benefit

Study up on your host country

Become skilled in the language

Become skilled in the culture

Problem solving

9 7

Basic computer

15 8

Technical

8 8

Management

5 11

Administrative

7 14

Interpersonal skills

27 31

Foreign language

For Women (percentage)

For Men (percentage)

Skills Most Lacking for Managers Overseas

Kinicki/Williams, Management: A Practical Introduction 3e ©2008, McGraw-Hill/Irwin

McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc All rights reserved.

How Companies Expand Internationally

Global Outsourcing

Importing, exporting, &

Wholly owned subsidiaries

Highest risk &

ment

invest-Lowest risk

&

investment

4.3 Why & How Companies

HOW DO COMPANIES EXPAND

INTERNATIONALLY?

There are five ways to expand internationally:

1 Global outsourcing - many companies engage in global

outsourcing (using suppliers outside the country to provide goods and services) – sometimes called contract

manufacturing

2 Importing, exporting, & countertrading - a company that

buys goods outside the country and resells them domestically

is importing , while a company that produces goods

domestically and sells them outside the country is exporting , and countertrading occurs when a firm barters for goods

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4.3 Why & How Companies

Expand Internationally

3 Licensing & franchising - licensing (when a company allows

a foreign company to pay a fee to make or distribute the first company’s product or service) and franchising (when a

company allows a foreign company to pay a fee and a share

of the profits in exchange for using the first company’s brand name and a package of materials and services) are very

similar

4 Joint ventures - when firms join forces to share the risks

and rewards of starting a new enterprise together in a foreign country, they form a joint venture or strategic alliance

5 Wholly-owned subsidiaries - a foreign subsidiary that is

totally owned and controlled by an organization is a wholly

owned subsidiary

4.4 Economic & Political-Legal Differences

HOW CAN MANAGERS ADJUST TO ECONOMIC

DIFFERENCES IN OTHER COUNTRIES?

Managers need to consider economic systems,

economic development, infrastructure and resources, and currency exchange rates in foreign markets

There are three types of economic systems: free

market, command, and mixed

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4.4 Economic & Political-Legal Differences

1 In a free market economy ( capitalism ) like the

U.S., the production of goods and services is

controlled by private enterprise and the interaction of the forces of supply and demand

2 In a command economy ( communism ) like North

Korea, the government owns most businesses and regulates the amount, types, and prices of goods

3 In a mixed economy ( socialism ) like many

European countries, most of the important industries are owned by the government, but others are

controlled by private enterprise

Chapter 4: Global Management

CLASSROOM PERFORMANCE SYSTEM

In which type of economy is the production of goods and services controlled by private enterprise?

A) command

B) centrally planned

C) free

D) mixed

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Chapter 4: Global Management

CLASSROOM PERFORMANCE SYSTEM

In which type of economy is the production of goods and services controlled by private enterprise?

A) command

B) centrally planned

C) free

D) mixed

4.4 Economic & Political-Legal Differences

There are two levels of economic development:

Countries with high levels of economic

development and generally high average incomes are developed countries

Developing or less developed countries include countries with low economic development and low average incomes

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4.4 Economic & Political-Legal Differences

A country’s infrastructure consists of the physical facilities that form the basis for its level of economic development

Thanks to cell phone service, many countries with poor communication infrastructure have been able to participate in the world economy

The rate at which one country’s currency can be exchanged for another country’s currency is the

exchange rate

A change of just a few percentage points can have

major implications for a company

Chapter 4: Global Management

CLASSROOM PERFORMANCE SYSTEM

Which of the following is not an example of a developed country?

A) New Zealand

B) Japan

C) France

D) Brazil

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Chapter 4: Global Management

CLASSROOM PERFORMANCE SYSTEM

Which of the following is not an example of a developed country?

A) New Zealand

B) Japan

C) France

D) Brazil

4.4 Economic & Political-Legal Differences

HOW CAN MANAGERS ADJUST TO

POLITICAL-LEGAL DIFFERENCES IN OTHER COUNTRIES?

Managers need to be aware of governmental

systems and the potential for political risk

Democratic governments rely on free elections and representative assemblies

Totalitarian governments are ruled by a dictator, a single political party, or a special-membership group

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4.4 Economic & Political-Legal Differences

The risk that political changes will cause loss of a company’s assets or impair its foreign operations is called political risk

Firms need to plan for instability and expropriation

(government seizure of a foreign country’s assets)

Companies need to be aware of laws that could

affect how they do business in other countries like the

U.S Foreign Corrupt Practices Act which makes it

illegal for employees of U.S companies to bribe

political decision makers in foreign nations

4.5 The World Of Free Trade:

Regional Economic Cooperation

WHAT IS FREE TRADE AND REGIONAL

Governments use barriers to protect domestic

industries from foreign competition

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4.5 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

4.5 The World Of Free Trade:

Regional Economic Cooperation

There are four major trading blocs:

1 The North American Free Trade Agreement or

NAFTA was formed in 1994 between the U.S.,

Canada, and Mexico

NAFTA’s goal is to eliminate 99 percent of tariffs on goods trade between members

2 The European Union was originally formed in 1957 and now includes 25 European countries

The EU is the world’s largest free market

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4.5 The World Of Free Trade:

Regional Economic Cooperation

3 The group of 21 Pacific Rim countries whose

purpose is to improve economic and political ties is called the Asia-Pacific Economic Cooperation or

APEC

APEC, founded in 1989, is working toward the

elimination of trade barriers

4 Mercosur is the largest trade bloc in Latin America and has four core members—Argentina, Brazil,

Paraguay, and Uruguay, and two associate members, Chile and Bolivia

MERCOSUR has reduced tariffs by 75 percent

4.5 The World Of Free Trade:

Regional Economic Cooperation

Three organizations facilitate international trade:

1 The World Trade Organization (WTO) is designed to

monitor and enforce trade agreements

 The WTO, which superseded GATT in 1995, has 146

members and covers trade in goods and services

2 The World Bank was established in 1944 to help rebuild

Europe

 Today, it provides low-interest loans to developing nations for improving transportation, education, health, and

telecommunications

3 The International Monetary Fund (IMF) is designed to assist

in smoothing the flow of money between nations

 The IMF was instrumental in bailing out nations affected by the Southeast Asian financial crisis

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Chapter 4: Global Management

CLASSROOM PERFORMANCE SYSTEM

Which trading bloc includes 21 Pacific Rim countries whose goal is to improve economic and political ties?

A) the EU

B) APEC

C) NAFTA

D) MERCOSUR

Chapter 4: Global Management

CLASSROOM PERFORMANCE SYSTEM

Which trading bloc includes 21 Pacific Rim countries whose goal is to improve economic and political ties?

A) the EU

B) APEC

C) NAFTA

D) MERCOSUR

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4.6 The Importance Of Understanding

Cultural Differences

WHY SHOULD MANAGERS UNDERSTAND

CULTURAL DIFFERENCES BETWEEN

 In high-context cultures like Japan and China, people rely

heavily on situational cues for meaning when communicating

with others

4.6 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 ( high )

2 power distance refers to how much people accept inequality