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CHAPTER 4
Managing in a global environment

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A BORDERLESS WORLD

• Organisations pursuing a global strategy need to

recognise the impact of a world without borders
• Managers need new competences:
– Ability to learn new languages
– Networking skills
– Developing a global mind-set

INTERNATIONAL BUSINESS ACTIVITY
• The sum total of all business transactions that cross
borders
• Includes trade and foreign direct investment (FDI)
• Includes a firm’s suppliers, distributors, and customers
• Is impacted by a range of national and global
regulators
• One estimate of the total value of international business
is:
– US $16.0 trillion in goods annually
– US $ 4.8 trillion in services annually
(Hill, Hult, Wickramasekera, Mackenzie & Gordon 2019)

– US $5.3 trillion in foreign exchange transactions every

day
(Hill, Hult, Wickramasekera, Liesch & Mackenzie 2017)

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MANAGING IN THE GLOBAL MARKETPLACE
Managing an international business is different from
managing a domestic business
– Managers face a greater and more complex range of
influences and problems.
– Competition is intense.
– International companies must work within the limits
imposed by government intervention and the global
trading system.
– International transactions require conversion of
currency and are exposed to foreign exchange rate
risk.

KNOWLEDGE AND SKILLS FUNDAMENTALS

• Understanding of the international environment including

risk assessment
• Understanding of culture
• Understanding of regional trade
• Understanding of market entry options
• Cross-cultural interpersonal skills
• Applying those skills to identify opportunities and threats in
the international business environment

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A MALAYSIAN ADVENTURE
An Australian team was negotiating in KL, trying to set up a deal with a Chinese
family business in Malaysia. The company was informally structured, and the
organisational chart they were shown was obviously inaccurate. For instance, the
second son was titled Finance manager, but spent most of his time in marketing.
Finance was the responsibility of a sister-in-law, whose name did not appear on the
chart. Never-the-less, the president of the Malaysian company, first son of the late
founder, impressed his visitors with his obvious sincerity and determination to
reach a settlement.

After three days, an informal agreement was reached and the young man
announced that after sorting out a few last details, he would sign the deal, probably
in the next 24 hours.

The Australians congratulated themselves on concluding the deal so rapidly. They

looked forward to the opportunity to discuss further collaboration. But for the next
two days they heard nothing from the young president and telephone calls failed to
reach him.

Then the younger brother appeared. He greatly regretted that no deal could be
made. Their widowed mother had refused her eldest son permission to sign. The
Australians had neither seen nor heard of the lady before. They discovered that
she held no office in the company. However, her family authority translated into
absolute right of veto over the company's business.

GLOBALISATION

• The trend towards greater integration

and interdependence among national
institutions and economies
• This term is often used in a very
broad way to cover a range of trends
• Includes globalisation of markets,
production and services

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DRIVERS OF GLOBALISATION
• Two macro factors seem to underlie the trend towards
greater globalisation
– Declining trade and investment barriers: the decline in
barriers to the free flow of goods, services and capital.
– The role of technological change: particularly the
dramatic developments in recent years in
communication, information processing and
transportation technologies.
– The evolution of globalisation has been accompanied
by the development of global institutions to support
international transactions

DRIVERS OF GLOBALISATION 
Declining trade and investment barriers
• After WWII, the industrialised countries of the West began the
process of removing barriers to the free flow of goods, services and
capital between nations.
• Under GATT, over 100 nations negotiated further decreases in
tariffs and made progress on a number of non-tariff issues.
• Under the WTO, a mechanism now exists for dispute resolution and
the enforcement of trade laws.
• A push to cut tariffs on industrial goods, services and agricultural
products.
• This has increased international trade (both exporting and
importing), world output and foreign direct investment.

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GLOBALISATION OF MARKETS
• Globalisation of markets
– The convergence of buyer
preferences in markets around
the world
– Global products can allow cost
reductions due to
standardization, or permit export
opportunities when home
markets are saturated

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GLOBALISATION OF PRODUCTION
• Globalisation of production
– The dispersal of production
activities to locations around
the world that are:
• Low-cost

• High-quality producers of a
particular good

• Co-located with essential process

inputs

– Offshoring as a form of
outsourcing

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GLOBALISATION OF SERVICES
• Services are typically
consumed at the same
time and place that they
are produced, but
technology can overcome
geographic constraints
– Call centres in India and
Philippines (BPO)
– Data and text exchange via
email or intranet

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APPROACHES TO EXPLOITING WORLD MARKETS

• Globalisation
– the establishment of worldwide operations and
the development of standardised products and
marketing.

• Localisation
– local markets are linked together within a region,
allowing more local responsiveness and
specialisation.

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PRESSURES TO GLOBALISE

The degree to which companies need to integrate and coordinate all of

their value chain activities on a worldwide basis to achieve global
efficiencies and better respond to competitive threats:
– High production costs.
– Declining tariffs, which encourage trading across borders and
open up new markets.
– Increasing competitive pressure (often resulting from regional
trading blocs).
– The ICT explosion, which makes the coordination of remote
operations easier and also increases the commonality of
consumer tastes.

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PRESSURES TO LOCALISE

The degree to which companies need to tailor their products or

services to satisfy local market demands:
– Unique consumer preferences resulting from cultural or
national differences.
– Localised business development to counter aggressive
local competition.
– Government regulation (eg pricing, advertising, HRM
practices)

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Four corporate‐level international strategies
(Bartlett and Ghoshal)

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INTERNATIONAL STRATEGY CHOICES

• International Strategy
– A basic strategy in industries with relatively low pressures for
global integration and local responsiveness, often involving the
export of specialised products or services developed in a firm’s
home market.

• Global Standardisation Strategy

– Goals and directions are set out on a worldwide basis to
maximise efficiencies with little customisation of products or
services across markets.

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INTERNATIONAL STRATEGY CHOICES

• Localisation (multi-domestic) Strategy
– Goals are developed and implemented independently for
specific countries because of a high need for local
responsiveness.

• Transnational Strategy
– A firm moves key activities to wherever they can be carried
out best while still adapting to local product or service
preferences.

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Two sides of the coin…

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DEVELOPING A GLOBAL MIND-SET

• Managers need the ability to appreciate and influence
individuals, groups, organisations and systems that
represent different social, cultural, political, institutional,
intellectual and psychological characteristics
• Requires:
– Genuine interest and curiosity in other cultures
– Open-mindedness
– Ability to deal with ambiguity and complexity

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IMPORTANCE OF STUDYING
INTERNATIONAL BUSINESS

• Today’s companies can locate where it makes sense

for them to locate
• Services and jobs are shifting to countries where
operating costs are lower
– Concerns around loss of jobs in local market
• Thinking locally can be limiting

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MULTINATIONAL CORPORATIONS

• A multicultural corporation (MNC) is an organisation

that receives more than 25% of its total sales revenues
from operations outside the parent company's home
country
• Also referred to as a global or transnational company

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MULTINATIONAL CORPORATIONS

• MNC is managed as an integrated worldwide business

system
• Key strategic decisions made by a single management
authority
• Top managers presumed to display a global
perspective

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MULTINATIONAL CORPORATIONS
• Personal challenges for global managers.
– Being culturally flexible and adaptable to new
situations.
• Developing cultural intelligence.
• Managing cross-culturally.
• Global learning.
– Embracing learning and adaptability across
borders.

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MARKET ENTRY STRATEGIES FOR

THE INTERNATIONAL ARENA

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CULTURE

• The culture of a society comprises the shared values,

understandings, assumptions, and goals that are
learned from earlier generations, imposed by present
members of a society, and passed on to succeeding
generations.

Hofstede, cited in Deresky & Christopher 2008

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HOW CULTURES AFFECT 
MANAGEMENT APPROACHES
• Centralised decision • Decentralised decision making
making • Risk seeking
• Risk averse • Group rewards
• Individual rewards • Formal procedures
• Informal procedures • Low organisational loyalty
• High organisational loyalty • Competition encouraged
• Co-operation encouraged

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CULTURAL CONTEXT
• Context
– Background information (other than what is said or written) that
helps one understand and perceive others.
• High-Context versus Low-Context Cultures
– High-context cultures put great weight on background information
whereas low-context cultures view it as extraneous.
– High-context cultures
• Feelings and thoughts are not explicitly expressed
• The listener has to read between the lines and interpret
meaning
– Low-context cultures
• Feelings and thoughts are expressed in words, and information
is more readily available

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Comparing High-
Context and Low-
Context Cultures

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NATIONAL CULTURE ‐ HOFSTEDE
• Individualism v collectivism
– degree to which individual goals are valued over group goals
• Power distance
– extent to which unequal power distribution is accepted
• Uncertainty avoidance
– degree to which ambiguity is tolerated
• Masculinity v femininity
– achievement (assertiveness, competitiveness, materialism) v
nurturing
• Long term v short term orientation
– Degree to which the society focusses on planning and thrift
• Indulgence v restraint
– Degree to which people’s desires are restrained by social norms
Hofstede (1983); Hofstede & Bond (1988);
Hofstede, Hofstede & Minkov (2010)

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HOFSTEDE’S CULTURAL DIMENSIONS (1)
• Individualism
– The tendency of people to look after themselves and their
immediate family only (USA, Canada, Australia)
• strong work ethic
• promotions based on merit

• Collectivism
– The tendency of people to belong to groups and to look after
each other in exchange for loyalty to the group (China, South
American cultures)
• weaker work ethic
• promotions based on seniority

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HOFSTEDE’S CULTURAL DIMENSIONS (2)
• Power Distance (Large or Small)
– The extent to which less powerful members of institutions
accept that power is distributed unequally
• Large PD (Mexico, South Korea, India)
– blindly obey order of superiors
– hierarchical organisational structure
• Small PD (Australia, USA, Denmark, Canada)
– decentralised decision making
– flat organisational structures

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HOFSTEDE’S CULTURAL DIMENSIONS (3)
• Uncertainty Avoidance (High or Low)
– The extent to which people feel threatened by ambiguous
situations
• High (Germany, Japan, Spain)
– high need for security
– strong beliefs in experts, rules and procedures
• Low (Denmark, UK, Singapore)
– willing to accept risks
– less structuring of activities

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HOFSTEDE’S CULTURAL DIMENSIONS (4)

• Masculinity
– the dominant values in society are success, money and
material things (Japan)
• emphasis on earning and recognition
• high stress workplace
• Femininity
– the dominant values in society are caring for others and the
quality of life (Scandinavian cultures)
• employment security
• employee freedom

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HOFSTEDE’S CULTURAL DIMENSIONS (5)

• Long term orientation (Vs. Short term)

– The degree that people value thrift, savings, and persistence
(China)
• Emphasis on hard work
• Emphasis on building lasting organisations
• Short term orientation
– The degree that people live in the present (Australia, USA)
• Focus on the present
• Acceptance that organisations will come and go

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INTERNATIONAL TRADE ALLIANCES

• GATT – General Agreement on Trade and Tariffs

• WTO – World Trade Organisation
• EU
• USMCA (formerly NAFTA)
• ASEAN

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SUSTAINABLE DEVELOPMENT: A
GLOBAL ISSUE AND OPPORTUNITY

• Consumers increasingly buy from companies who

promote ‘doing good’
• However some companies turn a blind eye to
substandard approaches:
– e.g. – Nike using sweatshops in its production lines
– e.g. – Child and slave labour in the production of
cocoa.

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