Cross cultural management 3e by cullen ch01

Countries of the World: The Arrived, the Coming, and the Struggling• Developed countries: mature economies with substantial per capita Gross Domestic Product, international trade, and in

Chapter 1

Multinational Management in a

Changing World

Learning Objectives

• Define multinational management

• Understand the characteristics of a multinational

company

• Understand the nature of the global economy and the key forces that drive globalization

• Know the basic classification of the world’s economies

• Define multinational management

• Understand the characteristics of a multinational

Multinational Management

• Formulation of strategies and management systems to take advantage of international opportunities and

respond to international threats

• Formulation of strategies and management systems to take advantage of international opportunities and

respond to international threats

The Nature of the Multinational Company

• Any company that engages in business functions

beyond its domestic borders

• Includes both large and small companies

• Any company that engages in business functions

beyond its domestic borders

• Includes both large and small companies

Exhibit 1.1 – The Largest

Companies in the World

• Worldwide trend of the economies of the world

becoming borderless and interlinked

• Not all economies are participating or benefiting

equally in the process

• Important forces are driving globalization

• It is also important to look at classifications of the

world’s economies

• Worldwide trend of the economies of the world

becoming borderless and interlinked

• Not all economies are participating or benefiting

equally in the process

• Important forces are driving globalization

• It is also important to look at classifications of the

world’s economies

Countries of the World: The Arrived, the Coming, and the Struggling

• Developed countries: mature economies with

substantial per capita Gross Domestic Product,

international trade, and investments

• Developing countries: economies that have grown

extensively over past two decades, e.g., Hong Kong,

Singapore, South Korea

• Developed countries: mature economies with

substantial per capita Gross Domestic Product,

international trade, and investments

• Developing countries: economies that have grown

extensively over past two decades, e.g., Hong Kong,

Singapore, South Korea

Countries of the World: The Arrived, the Coming, and the Struggling

• Transition economies: countries that have changed

from mostly communist systems to market/capitalistic systems,

• e.g., Czech republic, Hungary, Poland

• Less developed countries: have yet to show much

progress in the global economy

• most are located in Central and South America and Africa

• Transition economies: countries that have changed

from mostly communist systems to market/capitalistic systems,

• e.g., Czech republic, Hungary, Poland

• Less developed countries: have yet to show much

progress in the global economy

• most are located in Central and South America and Africa

Exhibit 1.2: Selected

Economies of the World

The Globalizing Economy:

Seven Key Trends

• Disintegrating borders

• Growing cross-border trade and investment

• The rise of global products and global customers

• Privatizations

• Disintegrating borders

• Growing cross-border trade and investment

• The rise of global products and global customers

• Privatizations

The Globalizing Economy:

7 Key Trends

• New competitors in the world market

• The rise of global standards of quality and production

• The Internet and information technology

• New competitors in the world market

• The rise of global standards of quality and production

• The Internet and information technology

Exhibit 1.3: The Globalizing

Economy

Borders Are Disintegrating:

The World Trade Organization

• Formal structure for continued negotiations and for

settling trade disputes among nations

• 1947: Nations met to reduce tariffs from 45% to

less than 5%—resulted in the General Agreement

on Tariffs and Trade (GATT)

• 1986: Negotiations began in Uruguay to continue

reducing tariffs

• Formal structure for continued negotiations and for

settling trade disputes among nations

• 1947: Nations met to reduce tariffs from 45% to

less than 5%—resulted in the General Agreement

on Tariffs and Trade (GATT)

• 1986: Negotiations began in Uruguay to continue

reducing tariffs

World Trade Organization

• 1997: Trade ministers from countries representing 92%

of world trade agreed to eliminate tariffs on software,

computer chips, telecommunication equipment, and

computers

• WTO has, nevertheless, some critics

• Not all countries are participating equally in WTO

• 1997: Trade ministers from countries representing 92%

of world trade agreed to eliminate tariffs on software,

computer chips, telecommunication equipment, and

computers

• WTO has, nevertheless, some critics

• Not all countries are participating equally in WTO

Regional Trade Agreements

• Regional Trade Agreements—agreements among

nations to reduce tariffs and develop similar technical and economic standards

• European Union: includes a large number of

European countries

• Allows free movement of goods and services and

a common currency

• Regional Trade Agreements—agreements among

nations to reduce tariffs and develop similar technical

and economic standards

• European Union: includes a large number of

European countries

• Allows free movement of goods and services and

a common currency

Regional Trade Agreements

• The North American Free Trade Agreement

(NAFTA): links United States, Canada, and Mexico

in an economic bloc

• Allows freer exchange of goods and services

• The Asia-Pacific-Economic Cooperation (APEC):

looser confederation of 19 Asian nations with less

specific agreements on trade facilitation

• The North American Free Trade Agreement

(NAFTA): links United States, Canada, and Mexico

in an economic bloc

• Allows freer exchange of goods and services

• The Asia-Pacific-Economic Cooperation (APEC):

looser confederation of 19 Asian nations with less

specific agreements on trade facilitation

Sell Anywhere, Locate Anywhere

• World trade growth: average of 6.5% per year between

1990 and 2000

• Nearly half of the over $5 trillion in world trade is

among the European union, the U.S., and Japan—the TRIAD

• World trade growth: average of 6.5% per year between

1990 and 2000

• Nearly half of the over $5 trillion in world trade is

among the European union, the U.S., and Japan—the TRIAD

Exhibit 1.5 – Leading

Exporting and Importing

Countries

Exhibit 1.5 – Leading

Exporting and Importing

Countries, continued

Exhibit 1.6: Recent

Growth/Decline for Leading

Importers and Exporters

Exhibit 1.6: Recent

Growth/Decline for Leading

Importers and Exporters

Sell Anywhere, Locate Anywhere

• Foreign Direct Investment (FDI) occurs when a

multinational company from one country has an

ownership position located in another country

• FDI increased by more that 36% between 1996 and

2000

• Post 9/11 has seen a decline in FDI

• Nevertheless, it remains a significant factor

• Foreign Direct Investment (FDI) occurs when a

multinational company from one country has an

ownership position located in another country

• FDI increased by more that 36% between 1996 and

2000

• Post 9/11 has seen a decline in FDI

• Nevertheless, it remains a significant factor

Exhibit 1.7 – Top 25

Companies by Foreign Asset

Ownership

Foreign Direct Investment

• Developed countries get the bulk of FDI (69%) while

developing countries get around 30%

• Least developed countries get minimal FDI

• Implications for managers—significant opportunities

around the world

• Multinational managers should look at risk rating of

countries

• Developed countries get the bulk of FDI (69%) while

developing countries get around 30%

• Least developed countries get minimal FDI

• Implications for managers—significant opportunities

around the world

• Multinational managers should look at risk rating of

countries

Exhibit 1.8: Risk Ratings of

Selected Countries

The Internet and Information Technology

• Electronic Communication — E-mail, World Wide Web, etc

• Allows multinationals to communicate with company locations throughout the world

• Multinationals can also monitor worldwide

The Rise of Global Products and Global Customers

• The needs of customers for many products and

services are growing more similar,

• e.g., McDonald’s, Boeing, Toyota

• Global customers search the world for their supplies

without regard for national boundaries

• The needs of customers for many products and

services are growing more similar,

• e.g., McDonald’s, Boeing, Toyota

• Global customers search the world for their supplies

without regard for national boundaries

• Two types of privatization contribute to the global

economy — the developed world and the developing

• Two types of privatization contribute to the global

economy — the developed world and the developing

world

• The Developed Countries

• Use privatization to make formerly

government-controlled enterprises more competitive in the global economy

• The Developing Countries

• Use privatization to jump-start their economies or to speed the transition from a communist to a capitalist

• The Developed Countries

• Use privatization to make formerly

government-controlled enterprises more competitive in the global economy

• The Developing Countries

• Use privatization to jump-start their economies or to speed the transition from a communist to a capitalist

• Chinese companies are also on the move.

• Free market reforms are creating a potential group of

Exhibit 1.9: Top 25 Emerging

Market Economies

New Competitors are Emerging

• Global trade has two important effects in developing

new competitors:

• When developing countries are used as low-wage

platforms for high-tech assembly, multinationals

facilitate the transfer of technology

• Aggressive multinationals are also expanding

beyond their own borders

• Global trade has two important effects in developing

new competitors:

• When developing countries are used as low-wage

platforms for high-tech assembly, multinationals

facilitate the transfer of technology

• Aggressive multinationals are also expanding

beyond their own borders

The Rise of Global Standards

• Companies can make one or only a few versions of

product for the world market

• This is cheaper than making different versions for

different countries

• Drive to develop common standards to save money

• Companies can make one or only a few versions of

product for the world market

• This is cheaper than making different versions for

different countries

• Drive to develop common standards to save money

Next Generation of Multinational Managers:

Characteristics

• Global mindset

• Ability to work with people from diverse backgrounds

• Long-range perspective

• Ability to manage change and transition

• Ability to create systems for learning and changing

organizations

• Global mindset

• Ability to work with people from diverse backgrounds

• Long-range perspective

• Ability to manage change and transition

• Ability to create systems for learning and changing

organizations

Next Generation of Multinational Managers:

Characteristics

• Talent to motivate all employees to achieve excellence

• Accomplished negotiation skills

• Willingness to seek overseas assignments

• Understanding of national cultures

• Talent to motivate all employees to achieve excellence

• Accomplished negotiation skills

• Willingness to seek overseas assignments

• Understanding of national cultures

Multinational Management: A Strategic Approach

• Considers how managers formulate and implement

strategies to compete successfully in the global

economy

• Strategies are the maneuvers or activities used to

increase and sustain organizational performance

• Multinational strategies must include maneuvers that

deal with operating in more than one country and

• Considers how managers formulate and implement

strategies to compete successfully in the global

economy

• Strategies are the maneuvers or activities used to

increase and sustain organizational performance

• Multinational strategies must include maneuvers that

deal with operating in more than one country and