Management

Stephen P. Robbins Mary Coulter

Chapter Managing in a
4 Global
Environment
 LEARNING OUTLINE

Follow this Learning Outline as you read and study this chapter

What’s Your Global perspective?

 Define parochialism.
 Contrast ethnocentric, polycentric, and geocentric attitudes
towards global business.

Understanding The global Environment

 Describe the current status of the EU, NAFTA, ASEAN and
other Regional Trade Allowances.
 Discuss the role of the WTO.
 LEARNING OUTLINE
Follow this Learning Outline as you read and study this chapter

Doing Business Globally

 Contrast multinational, multidomestic, global, transnational,

and born global organizations.
 Describe the different ways organizations can go international.

Managing In A Global Environment

• Explain how the global legal-political and economic environments

affect managers.
• Discuss Hofstede’s five dimensions for assessing cultures.
• Describe the challenges of doing business globally in today’s world.
 LEARNING OUTLINE

Follow this Learning Outline as you read and study this chapter

Managing In A Global Environment

 Explain how the global legal-political and economic

environments affect managers.
 Discuss Hofstede’s five dimensions for assessing cultures.
 Describe the challenges of doing business globally in today’s
world.
 The Global Marketplace

Opportunities and Challenges

 Coping with the unexpected appearance of new

competitors
 Acknowledging cultural, political, and economic
differences
 Dealing with increased uncertainty, fear, and worry

 Adapting to changes in the global environment

 Avoiding parochialism
What’s Your Global Perspective?

Parochialism

 Is viewing the world exclusively through one’s own

eyes and perspectives.
 Is not recognizing that others have different ways of
living and working.
 Is a significant problem for managers working in a
global business world.
 Is falling into the trap of ignoring others’ values and
customs and strictly applying an attitude of “ours is
better than theirs” to foreign cultures.
Adopting a Global Perspective

 Ethnocentric Attitude
The parochalistic belief that the best work approaches and
practices are those of the home country.
 Polycentric Attitude
The view that the managers in the host country know the
best work approaches and practices for running their
business.
 Geocentric Attitude
A world-oriented view that focuses on using the best
approaches and people from around the globe.
Regional Trading Agreements

 The European Union (EU)

A unified economic and trade entity
Belgium, Denmark, France, Greece, Ireland, Italy, Luxembourg,
the Netherlands, Portugal, Spain, the United Kingdom, Germany,
Austria, Finland, and Sweden

 North American Free Trade Agreement (NAFTA)

Eliminated barriers to free trade (tariffs, import
licensing requirements, and customs user fees)
United States, Canada, and Mexico

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European
Union

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 Regional Trading Agreements

 U.S.-Central America Free Trade Agreement (CAFTA)

 Free Trade Area of the Americas

 Southern Cone Common Market (Mercosur)

 Association of Southeast Asian Nations (ASEAN)

 African Union

 South Asian Association for Regional Cooperation

(SARRC)

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ASEAN Members
The World Trade Organization (WTO)

 Evolved from the General Agreement on Tariffs and Trade

(GATT) in 1995.
 Functions as the only global organization dealing with
the rules of trade among nations.
 Has 149 member nations and 32 observer
governments.
 Monitors and promotes world trade.
 Different Types of International
Organizations
• Multinational Corporation (MNC)
Maintains operations in multiple countries.
• Multidomestic Corporation
Is an MNC that decentralizes management and other decisions to the
local country.
• Global Company
Is an MNC that centralizes its management and other decisions in the
home country.
 Different Types of International
Organizations (cont’d)

• Transnational Corporation (Borderless

Organization)
 Is an MNC that has eliminated structural divisions that
impose artificial geographic barriers and is organized
along business lines that reflect a geocentric attitude.

Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall

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 Managing in A Global
Environment
• The Legal Environment
 Stability or instability of legal and political systems
 Legal procedures are established and followed
 Fair and honest elections held on a regular basis
 Differences in the laws of various nations
 Effects on business activities
 Effects on delivery of products and services

Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall

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 The Economic Environment
• Economic Systems
 Free market economy
 An economy in which resources are primarily owned and
controlled by the private sector.
 Planned economy
 An economy in which all economic decisions are planned by
a central government.
• Monetary and Financial Factors
 Currency exchange rates
 Inflation rates
 Diverse tax policies

Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall

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 The Cultural Environment
• National Culture
 Is the values and attitudes shared by individuals from
a specific country that shape their behavior and their
beliefs about what is important.
 May have more influence on an organization than the
organization culture.

Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall

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 Exhibit 4–4 What Are Americans
Like

Americans are very informal.

Americans are direct.
Americans are competitive.
Americansare
Americans areindependent
achievers. and individualistic.
Americans are questioners.
Americans dislike silence.
Americans value punctuality.
Americans value
cleanliness.
Sources: Based on M. Ernest (ed.), Predeparture Orientation Handbook: For Foreign Students and Scholars Planning to Study in the
United States (Washington, DC: U.S. Information Agency, Bureau of Cultural Affairs, 1984), pp. 103–05; A. Bennett, “American Culture Is
Often a Puzzle for Foreign Managers in the U.S.,” Wall Street Journal, February 12, 1986, p. 29; “Don’t Think Our Way’s the Only Way,”
CopyrightThe Pryor Pearson
© 2010 Report, February 1988,
Education, p. 9;
Inc. and B.J. Wattenberg,
Publishing as Prentice“The
HallAttitudes behind American Exceptionalism,” U.S. News & World
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Report, August 7, 1989, p. 25.
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 Global Management in
Today’s World
 Challenges
 Openness associated with globalization
 Significant cultural differences (e.g.,
Americanization)
 Adjusting leadership styles and
management approaches
 Risks
 Loss of investments in unstable
countries
 Increased terrorism
Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall
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
 4–20
Terms to Know
• parochialism  born globals
• ethnocentric attitude  global sourcing
• polycentric attitude  exporting
• geocentric attitude  importing
• European Union (EU)  licensing
• Euro  franchising
• North American Free Trade  strategic alliances
Agreement (NAFTA)  joint venture
• Association of Southeast Asian  foreign subsidiary
Nations (ASEAN)  market economy
• World Trade Organization  command economy
(WTO)
•  national culture
multinational corporations
(MNCs)  GLOBE
• multidomestic corporation  wikis
• global company  blogs
• transnational or
borderless organization
Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall