Business Management

3A
COBMA3

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 Week 2
Lesson 3: Global and International Issues
(Chapter 11)
Introduction
By the end of this lesson you should be able to discuss the nature of doing
business globally and be able to discuss the advantages and challenges facing
global business, It is also important to note how cultures differ
 Learning Outcome:
2. Explore the outside USA strategic planning

Assessment Criteria:
2.1. Discuss the nature of doing business globally.
2.2. Explain the advantages and disadvantages of doing business globally.
2.3. Discuss the global challenge facing firms and why this is a strategic issue.
2.4. Discuss how American culture differs from foreign business culture.
 What will be covered
in today’s lesson?
The Nature of Doing

Week Business Globally

Advantages and

2
Disadvantages of Doing
Business Globally

Lesson The Global Challenge

3 U.S. versus Foreign Business

Culture
Business Culture across
Countries
Business Climate across
Countries
Global/International Issues
• The underpinnings of strategic management hinge on managers gaining an
understanding of competitors, markets, prices, suppliers, distributors,
governments, creditors, shareholders, and customers worldwide.
• The price and quality of a firm’s products and services must be competitive on a
worldwide basis, not just on a local basis.
The Nature of Doing Business Globally
• Exports of goods and services from the United States account for only 13
percent of U.S. gross domestic product.
• Globalization
‒ process of doing business worldwide, so strategic decisions are made based
on global profitability of the firm rather than just domestic considerations.
• Global Strategy
‒ includes designing, producing, and marketing products with global needs in
mind, instead of considering individual countries alone.

EXEMPLARY STRATEGIST: Andre Calantzopoulos, CEO of Philip Morris

International (p. 352)

Table 11-1: The Five Largest Companies in Nine Countries (2018) (p. 353)
The Nature of Doing Business Globally
Multinational Firms
• Organizations that conduct business operations across national borders.
• The strategic-management process is conceptually the same for multinational
firms as for purely domestic firms; however, the process is more complex for
international firms as a result of more variables and relationships.

Labour Unions
• The existence or prevalence of labour unions can be an important factor in many
strategic decisions, such as where to locate stores or factories because
companies often like to avoid unions.
The Nature of Doing Business Globally
Tax Rates
• Tax rates in countries can represent an important strategic consideration
regarding where to build manufacturing facilities or retail stores or even where to
acquire other firms.

Table 11-2: Corporate Tax Rates for Various Countries in 2018 (from High to Low)
(p. 355)
Advantages and Disadvantages of Doing
Business Globally
Advantages:
1. Firms can gain new customers for their products.
2. Foreign operations can absorb excess capacity, reduce unit costs, and spread
economic risks over a wider number of markets.
3. Foreign operations can allow firms to establish low-cost production facilities in locations
close to raw materials or cheap labor.
4. Competitors in foreign markets may not exist, or competition may be less intense than
in domestic markets.
5. Foreign operations may result in reduced tariffs, lower taxes, and favorable political
treatment.
6. Multinational joint ventures can enable firms to learn the technology, culture, and
business practices of other people and to make contacts with potential customers,
suppliers, creditors, and distributors in foreign countries.
Advantages and Disadvantages of Doing
Business Globally
7. Economies of scale can be achieved from operation in global rather than solely
domestic markets.
8. A firm’s power and prestige in domestic markets may be significantly enhanced if the
firm competes globally.
Advantages and Disadvantages of Doing
Business Globally
Disadvantages:
1. Foreign operations could be seized by nationalistic factions.
2. Firms confront different and often little-understood social, cultural, demographic,
environmental, political, governmental, legal, technological, economic, and
competitive forces.
3. Weaknesses of competitors in foreign lands are often overestimated, and strengths
are often underestimated.
4. Language, culture, and value systems differ among countries, which can create
barriers to communication.
5. Gaining an understanding of regional organizations is difficult.
6. Dealing with two or more monetary systems can complicate international business
operations.
The Global Challenge
• America's economy is becoming much less American.
• A world economy and monetary system are emerging.
• Markets are shifting rapidly and in many cases converging in tastes, trends, and
prices.
• Protectionism
‒ Refers to countries imposing tariffs, taxes, and regulations on firms outside
the country to favor their own companies and people.
‒ The U.S. and China in early 2018 are imposing tariffs on each other’s
products imported.
The Global Challenge
Outsourcing and Reshoring
• Outsourcing involves companies hiring other companies to take over various
parts of their functional operations, such as human resources, information
systems, payroll, accounting, customer service, and even marketing.
• Reshoring refers to U.S. companies moving a portion of their manufacturing
back to the United States.

Table 11-3: Potential Benefits of Outsourcing (p. 358)

U.S. versus Foreign Business Culture
• To be successful in world markets, U.S. managers must obtain a better
knowledge of historical, cultural, and religious forces that motivate and drive
people in other countries.
• For multinational firms, knowledge of business culture variation across countries
can be essential for gaining and sustaining competitive advantage.

Table 11-4: Cultural Pitfalls That May Help You Be a Better Manager (p. 359)
U.S. versus Foreign Business Culture
• Cultural Differences between U.S. and Foreign Managers
1. Americans place an exceptionally high priority on time, viewing time as an
asset. Many foreigners place more worth on relationships.
2. Personal touching and distance norms differ around the world. Americans
generally stand about three feet from each other when carrying on business
conversations, but Arabs and Africans stand about one foot apart.
3. Family roles and relationships vary in different countries.
4. Business and daily life in some societies are governed by religious factors.
5. Many cultures around the world value modesty, team spirit, collectivity, and
patience much more than competitiveness and individualism, which are so
important in the United States.
U.S. versus Foreign Business Culture
6. Eating habits differ dramatically across cultures.
7. Rules of etiquette vary and managers must learn the rules of others.
8. Americans often do business with individuals they do not know, unlike
businesspersons in many other cultures.
U.S. versus Foreign Business Culture
Communication Differences across Countries
• Americans sometimes come across as intrusive, manipulative, and garrulous;
this impression may reduce their effectiveness in communication.
• Managers from the United States are much more action-oriented than their
counterparts around the world; they rush to appointments, conferences, and
meetings—and then feel the day has been productive.
• U.S. managers often use blunt criticism, ask prying questions, and make quick
decisions.
Business Culture across Countries
Mexico
• Employers seek workers who are agreeable, respectful, and obedient, rather
than innovative, creative, and independent.
• Mexican employers are paternalistic, providing workers with more than a
paycheck, but in return they expect allegiance.

ETHICS CAPSULE 11: Which Two U.S.-Based Airlines Are Worst on Customer
Service? (p. 361)
Business Culture across Countries
Japan
• The Japanese place great importance on group loyalty and consensus, a
concept called Wa.
• When confronted with disturbing questions or opinions, Japanese managers
tend to remain silent.
Business Culture across Countries
China
• The Chinese rarely do business with companies or people they do not know.
• Your position on an organizational chart is extremely important in business
relationships.
• Arriving late to a meeting is an insult and could negatively affect your
relationship.
• Meetings require patience because mobile phones ring frequently and
conversations tend to be boisterous.
Business Culture across Countries
India
• People in India do not like to say “no,” verbally or nonverbally.
• Rather than disappoint you, they often will say something is not available, or will
offer you the response that they think you want to hear, or will be vague with
you.
• Indians prefer to do business with those whom they have established a
relationship built upon mutual trust and respect.
• Punctuality is important.
• Indians generally do not trust the legal system and someone’s word is often
sufficient to reach an agreement.
Business Climate across Countries
• Ease of doing business rankings based on how easy it is to:
‒ start a business
‒ deal with construction permits
‒ register property
‒ get credit
‒ protect investors
‒ pay taxes
‒ trade across borders
‒ enforce contracts
‒ resolve insolvency
‒ get electricity
Table 11-5: The Top 10 Nations That Are Easiest to Do Business with Across
Continents (p. 364)
Business Climate across Countries
The African Continent
• About 30 African countries are considered democracies.
• Currencies in Africa are stabilizing and many countries are fund-raising to build
modern highways, ports, and power grids.
• Many African and non-African companies are launching operations in Africa due
to the rapidly growing middle class and an average G D P growth of 5 percent
for the continent through 2020.
• McKinsey predicts that by 2025, 50 percent of Africa will be online.
Business Climate across Countries
China
• As the world’s most populous country, China’s economic output annually
exceeds the United States.
• China ranks about 90th out of 190 countries in terms of doing business.
• China accounts for nearly one-third of the global market for cars.
• China has a relatively low ranking in ease of doing business because of human
rights issues and substantial disregard for copyright, patent, and trademark rules
of law.
Business Climate across Countries
Indonesia
• Indonesia is a democratic Pacific archipelago comprised of thousands of
islands.
• Indonesia’s currency is the rupiah and its economy is one of the fastest growing
in Asia, behind China and the Philippines.
• Indonesia’s G D P growth is 5 percent in 2017.
• The economic forecast for Indonesia is very bright.
Business Climate across Countries
India
• India ranks 130 in terms of ease of doing business.
• While it ranks the lowest among B R I C S nations, India has made substantial
progress in some areas.
Business Climate across Countries
Mexico
• The country of Mexico is now the fourth-largest auto exporter in the world,
behind Japan, Germany, and South Korea.
• Mexico auto industry now employs one of every six Mexican factory workers and
comprises one third of all exports from Mexico.
• Foreign direct investment (F D I) in Mexico has surged to exceed $30 billion
annually.

GLOBAL CAPSULE 11 – China Aims for Superiority in Quantum Computing (p. 366)
Implications for Strategists

Figure 11-2: How to Gain and Sustain Competitive Advantages (p. 367)

Implications for Students

 Issues for Review and
Discussion
• Students must work through questions 11-1 to 11-31 for revision.
End of Chapter Case
Study
The Cohesion Case: Coca-Cola Company
2018 (p. 56-65)
Also do an additional internet search for more
information by searching the term: Company Profile:
Coca-Cola

Application of Theory Activity:

Set 1: Strategic planning for Coca-Cola
• Exercise 11A, Steps 1-2 (p. 369)
• Exercise 11 B, Steps 1-4 (p. 370)

Source: David, F. R., David, F. R. & David, M. E.

2023. Strategic Management: A Competitive Advantage
Approach: Concepts and Cases. 17th ed. Pearson
Practice Quiz
•Please complete the Practice Quiz on
myLMS: Week 2 – Lesson 3

Practice Activity
•Please complete the Practice Activity on
myLMS: Week 2 – Lesson 3
What Happens Next?
•Lesson 4: Ethics/social responsibility/sustainability (Chapter
10)
‒ Learning outcome 3: Understand ethics, social
responsibility, and sustainability