MANAGEMENT

RICHARD L. DAFT
Managing in a Global
Environment
CHAPTER 4
chapter4 Learning Outcomes
• Describe the emerging borderless world and some issues of particular
concern for today’s managers.
• Describe market entry strategies that business use to develop foreign
markets.
• Define international management and explain how it differs from the
management of domestic business operations.
• Indicate how dissimilarities in the economic, sociocultural, and legal-
political environments throughout the world can affect business
operations.
• Describe how regional trading alliances are reshaping the international
business environment.
• Describe the characteristics of a multinational corporation.
• Explain cultural intelligence and why it is necessary for managers working
in foreign countries.
3
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 Are You Ready To Work
chapter4
Internationally?
• Cross-cultural skills are extremely important

• Every manager needs to think globally

• The future of business and society is being

shaped by global relationships

• A global mind-set is becoming a prerequisite

for managers
4
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chapter4 A Borderless World

• Isolation from international forces is no

longer possible
– Trade barriers are falling
– Communication is faster and cheaper
– Consumer tastes are converging
• Virtual connections enable close, rapid
coordination among people working in
different parts of the world 5
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chapter4 Four Stages of Globalization

6
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 Strategies for Entering
chapter4
International Markets
• Exporting – transfers products for sale in
foreign countries
• Global Outsourcing – transferring the labor of
specific tasks to low cost countries
• Licensing – allowing an operation in another
country to produce and sale company products
• Franchising – providing a foreign organization
with package of materials and services
• Direct Investing - a production facility in
another country
7
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 Getting Started
chapter4
Internationally

8
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chapter4 China Inc.
• Opportunities in China are booming
• Companies are engaging in all strategies
– The most common practice is outsourcing
• Multinationals are manufacturing a large variety
of products in China
• China is attractive for low-cost manufacturing
• India is attractive in software design, services
and engineering
• An author has named the phenomenon Chindia
9
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 Key Factors in The
chapter4
International Environment

10
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chapter4 The Economic Environment

•• Economic
Economicdevelopment
developmentdiffers
differsaround
around
the
theworld
world
––Countries
Countriescan
canbe
becategorized
categorizedas
asdeveloped
developedor
or
less-developed
less-developed
•• Companies
Companiesmust
mustbe
beable
ableto
toaccess
accessthe
the
resources
resourcesneeded
neededto
toproduce
producetheir
their
products
products
•• Volatility
Volatilityininexchange
exchangerates
ratescan
canimpact
impactaa
businesses
businessesbottom-line
bottom-line
11
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 World Economic Forum
chapter4
Global Competitiveness

12
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 The Legal-Political
chapter4
Environment

 Government supervision

 Political instability

 Laws and regulations

13
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 The Sociocultural
chapter4
Environment

 Shared knowledge
 Beliefs
 Values
 Modes of behavior

Values and behaviors from the US do not translate

around the world
14
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 Country Ranking and
chapter4
National Value Systems

15
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 Hofstede’s Value
chapter4
Dimensions
National value systems that influence
organizational and employee working
relationships

Power Uncertainty
Distance Avoidance

Individualism
Masculinity/
and
Femininity
Collectivism
16
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 GLOBE Project Value
chapter4
Dimensions
Global Leadership and Organizational Behavior
Effectiveness (GLOBE)
• Assertiveness
• Future Orientation
• Uncertainty Avoidance
• Gender Differentiation Extension of
• Power Distance Hofstede’s
assessment
• Societal Collectivism
• Individual Collectivism
• Performance Orientation
• Humane Orientation
17
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 Country Rankings and
chapter4
GLOBE Rankings

18
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chapter4 Communication Differences

• Some cultures pay more attention to the social

context of communication
– Social Setting
– Nonverbal Behavior
– Social Status

• High-context cultures are sensitive to social

exchanges
• Low-context cultures use communication to
exchange facts and information
19
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 High-Context and Low-
chapter4
Context Cultures

20
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 Other Cultural
chapter4
Characteristics

 Language
 Religion
 Social Organization
 Education
 Attitudes

21
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 International Trade
chapter4
Alliances
• General Agreement on Tariffs and Trade (GATT)
– Signed in 1947 by 23 nations
– Nondiscrimination, clear procedures, negotiations and disputes
regarding trade
• World Trade Organization (WTO)
– Permanent global organization from GATT
– As of July 2007: 151 Countries
• European Union
– Begun in 1957 to improve economic and social conditions in
European Economic Community
– Evolved into the 27-nation European Union
– Goal is to develop single market system
• North America Free Trade Agreement (NAFTA)
– United States, Canada, and Mexico
– Trading bloc to spur growth and investment
22
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 The Nations of the
chapter4
European Union

23
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chapter4 The Globalization Backlash

• As the world becomes more global, a

backlash is growing
• 68% of American say other countries
benefit more from trade
• One of the key concerns is job loss
• Many argue that globalization benefits the
economy
24
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chapter4 Multinational Corporations
• More than 25% of its total sales revenue
come from outside the home country
• In 2007, 42% of the global sales of US
multinationals come from their foreign
affiliates
• An MNC is managed as an integrated
business system
• MNCs are controlled by a single
management authority
• MNC managers have a global
perspective
25
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 Managing In A Global
chapter4
Environment
• Developing Cultural Intelligence
– Cultural flexibility and ability to adapt
– Cognitive, emotional and physical
• Managing Cross-Culturally
– Expatriates can be successful by focusing on:
• Human Resources
• Leading
• Decision Making
• Motivating
26
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