1 I CONTENT

1. Introduction to management and organisations

Content
2. Models of management

3. Organisational culture and environment

4. Managing in a global environment

5. Corporate responsibility

6. Planning

7. Decision making

8. Strategic management

9. Organisational structure and design

10. Information systems and e-business

11. Creativity, innovation and change

2 I MANAGING IN A GLOBAL ENVIRONMENT

4. Managing in a global environment

Principles of Management
2017/18

Prof. Dr. Maud H. Schmiedeknecht

3 I MANAGING IN A GLOBAL ENVIRONMENT

Learning Objective

1. Contrast ethnocentric, polycentric, and geocentric attitudes toward global business

• Develop your skill at collaborating in cross-cultural settings

2. Discuss the importance of regional trading alliances and global trade mechanisms

3. Describe the structures and techniques organisations use as they go international

4. Explain the relevance of the political/legal, economic, and cultural environments to

global business
• Know how to be culturally aware
4 I MANAGING IN A GLOBAL ENVIRONMENT

International management is the practice of managing

business operations in more than one country
International management
■ International management
• is the practice of managing business operations in more than one country
■ Career point of view:
• Working as an expatriate manager in another country
• Joining or managing an international team with members from several countries
• Managing in a global organisation whose employees, systems and structures are truly
international in that they no longer reflect its original, national base
5 I MANAGING IN A GLOBAL ENVIRONMENT

What has led to this increasingly global business world?

Factors driving globalization in an industry

Market factors
 Homogeneous market needs
 Global customers
Economic factors  Shortening product lifecycle
 Worldwide economies of  Transferable brands and advertising
scale in manufacturing  Internationalising distribution channels Environmental factors
or distribution
 Falling transportation costs
 Steep learning curve
Potential for global strategy  Improving communications
 Worldwide sourcing
 Government policies
efficiencies
 Technology change
 Significant differences in Competitive factors
country costs
 Competitive interdependence among
 Rising product countries
development
 Global moves of competitors
 Opportunity to pre-empt a competitor‘s
global moves
BODDY (2014), P.128
6 I MANAGING IN A GLOBAL ENVIRONMENT

When organisations go international, they often use

different approaches
How organisations go global (I)

Foreign Subsidiary
Significant
Strategic Alliance – Joint Venture
Global investment

Franchising

Licensing

Exporting and Importing

Minimal
Global Sourcing

CP. ROBBINS/COULTER (2016), P.138

7 I MANAGING IN A GLOBAL ENVIRONMENT

When organisations go international, they often use

different approaches
How organisations go global (II)
Offshoring Licensing
contracting out activities to companies in other one firm gives another firm the right to use assets such
countries who can do the work more cost-effectively as patents or technology in exchange for a fee

Foreign direct investment (FDI)

Franchising
investing shareholder funds directly in another practice of extending a business by giving other
country, by building or buying physical facilities, or by organisations, in return for a fee, the right to use your
buying a company brand name, technology or product specifications

Global sourcing (or global outsourcing)

Purchasing materials or labor from around the Joint ventures
world based on lowest cost Is an alliance in which the partners agree to form a
separate, independent organisation for a specific
Exporting and importing business purpose
transporting physical products (raw materials or
finished goods) or delivering services across Wholly-owned subsidiary
national boundaries
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Activity: How organisations go global

 Which approach(es) has your company chosen to go global?

9 I MANAGING IN A GLOBAL ENVIRONMENT

Why did Ikea go international?

Case Example: IKEA (I) Customer Drivers

 young professional
couples are “global
consumers”
Cost Drivers Competitive Drivers

 economies of  no real global

scale competition
MOTIVATION

 transportation
costs
Governmental Drivers

 no governmental - Scandinavia (since 1963)

restraints - West-Europe (since 1973)
 trade agreements - North America (since 1976)
- Asia (`90s)
10 I MANAGING IN A GLOBAL ENVIRONMENT

Depending on market characteristics different models were

chosen
Case Example: IKEA (II)

Characteristics Advantages

AFFILIATES  stable markets  large operational control

 similarities to Scandinavia  control of financial resources
 e.g. Germany, USA  ensuring standardization
 close to costumer

FRANCHISING  unknown, small markets  local know-how

 high risk markets  quick market entry
 e.g. Malaysia, Saudi Arabia  Corporate Identity
 low financial risk

JOINT VENTURES  markets with great potential  overcomes cultural distance

 high cultural distance  quick market entry
import barriers  shared investment
 e.g. China  local knowledge & resources
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International managers engage in trade agreements and

economic alliances
Legal context – trade agreements and trading blocs (I)
■ General Agreement on Tariffs and Trade (GATT)
• reduces the tendency of national governments to put tariffs on physical goods to protect
domestic companies
• Main tool: tariff concessions

■ World Trade Organization (WTO)

• Monitors international trade and arbitrates in disputes between countries over the
interpretation of tariffs and other barriers to trade
• Seeking world agreement on rules governing foreign investment
12 I MANAGING IN A GLOBAL ENVIRONMENT

The European Commission is encouraging European trade

by proposing changes in national laws to make it easier
Legal context – trade agreements and trading blocs (II)
■ European Union (EU)
The EU continues to deepen integration to enable
the free movement of goods and services and so
improve efficiency by:
• harmonising technical regulations between
member states
• creating a common industrial policy
(e.g. eliminating subsidies for businesses)
• liberalising services (such as mail) across the EU
• harmonising rules on employment and
environmental protection
• facilitating cross-border mergers
• recognising professional qualifications
to enable freer movement of labour
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When agreements in key issues covered by NAFTA were

reached in 1992, a vast economic bloc was created
Legal context – trade agreements and trading blocs (III)
■ North American Free Trade Agreement (NAFTA)
• Eliminated barriers to free trade (tariffs, import licensing requirements, and customs user fees)
• United States, Canada, and Mexico

■ Association of Southeast Asian Nations (ASEAN)

• To accelerate the economic growth,
social progress and cultural development
in the region through joint endeavours in
the spirit of equality and partnership in
order to strengthen the foundation for a
prosperous and peaceful community
of Southeast Asian Nations
14 I MANAGING IN A GLOBAL ENVIRONMENT

People with a parochial attitude do not recognise that

others have different ways of living and working
Parochialism
■ is viewing the world solely through its own eyes and perspectives
■ is not recognizing that others have different ways of living and working
■ is a significant obstacle for managers working in a global business world
■ is falling into the trap of ignoring others’ values and customs and rigidly applying an
attitude of “ours is better than theirs” to foreign cultures

Monolingualism is one sign that a nation suffers from parochialism.

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Geocentric attitude requires eliminating parochial attitudes

& developing an understanding of cross-cultural differences
Key information about global attitudes
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Several scholars have developed survey instruments to

classify and compare national cultures
Socio-cultural context – Hofstede’s Framework for assessing Cultures
Culture
The collective programming of the mind which Individualism
distinguishes the members of one group or versus
category of people from another Collectivism

Long-Term
Design versus
Short-Term
Power
Distance
Hofstede surveyed: 116,000 IBMers of Orientation
53 countries concerning preferences on
Culture
Management Style and Work Environment
Achievement
Goal versus
Uncertainty
Avoidance
• What is the impact of Culture Differences Nurturing

on Management
• What is the influence of culture on
preferred processing style
17 I MANAGING IN A GLOBAL ENVIRONMENT

Geert Hofstede developed an approach helping managers

better understand differences between national cultures
Hofestede’s comparison of national cultures (I)

Individualism vs. collectivism (IDV): degree to which people in a society are integrated into groups

Individualistic Collectivistic
people look after their own and family interests people expect group to look after and protect them

United Kingdom, Canada, Australia Japan Mexico, Thailand

Power distance index (PDI): the extent to which the less powerful members of organizations and institutions (like the
family) accept and expect that power is distributed unequally

Low power distance High power distance

plays down inequalities: accepts wide differences in power;
employees are not afraid to approach the boss great deal of respect for those in authority

United States, Sweden Italy, Japan Mexico, Singapore, France

18 I MANAGING IN A GLOBAL ENVIRONMENT

Geert Hofstede developed an approach helping managers

better understand differences between national cultures
Hofestede’s comparison of national cultures (II)

Uncertainty avoidance index (UAI): a society's tolerance for ambiguity

Low uncertainty avoidance High uncertainty avoidance

Comfortable with risks; threatened with ambiguity and experience high levels of
tolerant of different behaviour and opinions anxiety

Canada, United States, Singapore United Kingdom Italy, Mexico, France

Achievement vs. Nurturing (MAS):

Achievement Nurturing
Values such as assertiveness, acquiring money and goods, Values such as relationships and concern for others
and competition prevail prevail

United States, Japan, Mexico Spain, Indonisia Italy, India

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Geert Hofstede developed an approach helping managers

better understand differences between national cultures
Hofestede’s comparison of national cultures (III)

Long-term vs. short-term orientation (LTO): connection of the past with the current and future actions

Short-term thinking Long-term thinking

people value tradition and the past people look to the future and value thrift and persistence

Germany, Australia, United Kingdom, Canada China, Taiwan, Japan

Indulgence vs. restraint (IND): measure of happiness

Indulgence
Restraint
believe themselves to be in control of their own life and
believe other factors dictate their life and emotions
emotions

Australia Spain, Indonisia Italy, India

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Activity: Comparing cultures

 Form a group amongst your student colleagues made up of people from different
countries

 Identify the main characteristics of the respective cultures in your group

 Gather any evidence about how members think they affect the work of managing

 Compare your evidence on cultural differences with that from Hofstede‘s research
21 I MANAGING IN A GLOBAL ENVIRONMENT

Key terms

 international management  joint venture

 parochialism  foreign subsidiary
 ethnocentric attitude  national culture
 polycentric attitude  power distance
 geocentric attitude  uncertainty avoidance
 global sourcing  individualism
 exporting  collectivism
 importing  nurturing
 licensing  achievement
 franchising
 strategic alliances