Principles and Dynamics of
Management
Presentation Outline
Chapter 3 – The Environment And Corporate Culture
Case Analysis – Rio Grande Supply Company
Chapter 4 – Managing in a Global Environment
Case Analysis – Shui Fabrics
The Environment And Corporate Culture
.
Manager’s
Challenge
The External
Environment
 The environment surprises many managers and
leaves them unable to adopt their companies to new
competition, shifting consumer interests, or new
technologies.
The
Organization:
Environment
Relationship
Example: Xerox was dominant in its industry for many years,
but managers missed cues from the environment and got
blindsided by rivals Canon and Ricoh when they began selling
comparable copy machines at lower prices.
The Internal
Environment:
Corporate
Culture
 To be effective, managers must monitor and respond
to the environment – an open systems view. The events
that have the greatest impact on an organization typically
originate in the external environment.
Environment
and Culture
Shaping
Corporate
Culture
For Innovative
Response
Globalization and worldwide societal turbulence affect
companies in new ways, making the international
environment of growing concern to managers
everywhere.
Manager’s
Challenge
The External
Environment
The
Organization:
Environment
Relationship
The Internal
Environment:
Corporate
Culture
Environment
and Culture
Shaping
Corporate
Culture
For Innovative
Response
 The tremendous and far reaching changes occurring
in today’s world can be understood by defining and
examining components of the external environment.
 The external organizational environment includes
all elements existing outside the boundary of the
organization that have the potential to affect the
organization.
 The organization’s external environment can be
further conceptualized as having two layers: general and
task environments.
Manager’s
Challenge
The general environment is the outer layer that is widely dispersed
and affects organizations indirectly.
The External
Environment
Environment
and Culture
Customers
Internal
Environment
Employees
Culture
Management
Competitors
The Internal
Environment:
Corporate
Culture
Task
Environment
Labor Market
The
Organization:
Environment
Relationship
General Environment
Suppliers
Shaping
Corporate
Culture
For Innovative
Response
The dimensions of the general environment include international,
technological, socio cultural, economic, and legal-political.
Manager’s
Challenge
The External
Environment
The
Organization:
Environment
Relationship
The Internal
Environment:
Corporate
Culture
Environment
and Culture
Shaping
Corporate
Culture
For Innovative
Response
International Dimension - represents events originating in
foreign countries as well as opportunities for U.S. (or Philippine)
companies in other countries.
Technological Dimension - includes scientific and
technological advancements in the industry and society at
large.
Socio Cultural Dimension - represents the demographic
characteristics, norms, customs and values of the population
within which the organization operates.
Economic Dimension - represents the overall economic
health of the country or region in which the organization
operates.
Legal-political Dimension - includes federal, state and local
government regulations and political activities designed to
influence company behavior.
Manager’s
Challenge
The External
Environment
The
Organization:
Environment
Relationship
The Internal
Environment:
Corporate
Culture
The task environment is closer to the organization and includes the
sector that conducts day-to-day transactions with the organization
and directly influence its basic operations and performance.
General Environment
Technological
Task
Environment
Internal
Environment
Environment
and Culture
Shaping
Corporate
Culture
For Innovative
Response
The task environment includes customers, competitors, suppliers,
and the labor market.
Manager’s
Challenge
The External
Environment
The
Organization:
Environment
Relationship
The Internal
Environment:
Corporate
Culture
Environment
and Culture
Shaping
Corporate
Culture
For Innovative
Response
Customers - People and organizations in the environment who
acquire goods or services from the organization.
Competitors – Other organizations in the same industry or type
of business that provide goods and services to the same set of
customers.
Suppliers – People and organizations who provide the raw
materials the organization uses to produce its output.
Labor Market – The people available for hire by the
organization. Every organizations needs a supply of trained,
qualified personnel.
Manager’s
Challenge
Why do organizations care so much about factors in the
external environment?
The External
Environment
The
Organization:
Environment
Relationship
The Internal
Environment:
Corporate
Culture
Environment
and Culture
Shaping
Corporate
Culture
For Innovative
Response
The reason is that the environment
creates uncertainty for the managers
and they must respond by designing
the organization to adapt to the
environment
Environmental Uncertainty
 Organizations must manage environmental uncertainty to be
effective
 Uncertainty means that the managers do not have sufficient
information about environmental factors to understand and
predict environmental needs and changes
Manager’s
Challenge
The External
Environment
As indicated in below illustration, environmental characteristics
that influence uncertainty are the numbers of factors that affect the
organization and the extent to which those factors change.
The
Organization:
Environment
Relationship
Environment
and Culture
Shaping
Corporate
Culture
For Innovative
Response
Rate of Change in
Factors in
Environment
The Internal
Environment:
Corporate
Culture
High
Low
High
Uncertainty
Low
Uncertainty
Low
High
Numbers of Factors in
Environment
Adapt to
Environment
Manager’s
Challenge
The External
Environment
The
Organization:
Environment
Relationship
 In an organization in a highly uncertain environment
everything seems to be changing.
 In that case, an important quality for a new manager is
“mindfulness”, which includes the qualities of being open
minded and an independent thinker.
The Internal
Environment:
Corporate
Culture
 In a stable environment, closed minded manager may
perform okay because much work can be done in the same old
way.
Environment
and Culture
In an uncertain environment, even a new manager needs to
facilitate new thinking, new ideas and a new ways of working.
Shaping
Corporate
Culture
For Innovative
Response
CHAPTER 3 : The Environment and Corporate Culture
Manager’s
Challenge
The External
Environment
The
Organization:
Environment
Relationship
The Internal
Environment:
Corporate
Culture
Environment
and Culture
ADAPTING TO THE ENVIRONMENT
If an organization faces increased uncertainty with
respect to competition, customers, suppliers or
government regulations managers can use strategies to
adapt these changes, including
boundary-spanning roles,
interorganizational partnerships, and
mergers or joint ventures.
Shaping
Corporate
Culture
For Innovative
Response
CHAPTER 3 : The Environment and Corporate Culture
Manager’s
Challenge
The External
Environment
The
Organization:
Environment
Relationship
The Internal
Environment:
Corporate
Culture
Environment
and Culture
Shaping
Corporate
Culture
For Innovative
Response
Boundary-spanning roles
 Roles assumed by people and/or departments that link and
coordinate the organization with key elements in the external
environment.
 Boundary-spanners have two purposes for the organization:
1) Detect and process information about changes in the
environment; 2) Represent the organization’s interests to the
environment.
 Boundary-spanning has many ways/approaches to span the
boundary (e.g. Marketing and purchasing departments span the
boundary to work with customers and suppliers, both face to
face and through market research)
Boundary-spanning is an increasingly important task in
organizations because environmental shifts can happen quickly
in today’s world.
Managers need good information about their competitors,
customers, and other elements of the environment to make
good decisions. Thus, the most successful companies involve
everyone in boundary-spanning activities.
Manager’s
Challenge
The External
Environment
The
Organization:
Environment
Relationship
The Internal
Environment:
Corporate
Culture
Interorganizational Partnership
 An increasingly popular strategy for adapting the
environment is to reduce boundaries and increase
collaboration with other organizations.
Managers shift from adversarial orientation to a
partnership orientation, as summarized in the exhibit in
the next slide.
Environment
and Culture
Shaping
Corporate
Culture
For Innovative
Response
CHAPTER 3 : The Environment and Corporate Culture
Manager’s
Challenge
The Shift to a Partnership Paradigm
The External
Environment
The
Organization:
Environment
Relationship
The Internal
Environment:
Corporate
Culture
Environment
and Culture
Shaping
Corporate
Culture
For Innovative
Response
To Partnership Orientation
•Suspicion, competition,
arm’s length
•Price, efficiency, own profits
•Information and feedback
limited
•Lawsuits to resolve conflict
• Minimal involvement and upfront investment
• Short-term contracts
• Contracts limit the relationship
•Trust, value added to both
sides
•Equity, fair dealing, everyone
profits
• E-business links to share
information and conduct digital
transactions
•Close coordination; virtual
teams and people onsite
•Involvement in partner’s
design and production
• Long-term contracts
• Business assistance goes
beyond the contract
Manager’s
Challenge
The External
Environment
The
Organization:
Environment
Relationship
The Internal
Environment:
Corporate
Culture
Environment
and Culture
Shaping
Corporate
Culture
For Innovative
Response
Mergers and Joint Ventures
 A step beyond strategic partnerships is for companies to
become involve in mergers or joint ventures to reduce
environmental uncertainty.
A merger occurs when two or more organizations combine
to become one e.g. Wells Fargo merged with Northwest Corp.
to form the nation’s fourth largest bank corporation.
A joint venture involves a strategic alliance or program by
two or more organizations.
A joint venture typically occurs when a project is too
complex, expensive, or uncertain for one firm to handle alone.
Many small businesses are also turning to joint ventures
with large firms or international partners. A larger partner can
provide sales staff, distribution channels, financial resources
or a research staff.
Manager’s
Challenge
The External
Environment
The
Organization:
Environment
Relationship
The Internal
Environment:
Corporate
Culture
Environment
and Culture
Shaping
Corporate
Culture
For Innovative
Response
The internal environment within which managers work includes
corporate culture, production technology, organization structure
and physical facilities. Corporate culture surfaces as extremely
important to competitive advantage.
General Environment
Technological
Task
Environment
Internal
Environment
Manager’s
Challenge
The External
Environment
The
Organization:
Environment
Relationship
Culture – The set of key values, beliefs, understandings and
norms that members of an organization share. The concept of
culture helps managers to understand the hidden, complex
aspects of organizational life. Culture is a pattern of shared
values and assumptions about how things are done within the
organization. This pattern is learned by members as they cope
with external and internal problems and taught to new members
as the correct way to perceive, think, and feel.
Culture can be analyzed at three levels, as illustrated below
The Internal Exhibit 3.5: Levels of Corporate Culture
Environment:
Culture that can
Visible
Corporate
1. Artifacts such as dress, office
be seen at the
Culture
layout, symbols, slogans,
surface level
Environment
and Culture
Shaping
Corporate
Culture
For Innovative
Response
ceremonies
Invisible
2. ExpressedCvalues, such as
“The Penny Idea,””The HP way”
3. Underlying assumptions and
deep beliefs, such as “people
here care about one another
like a family.
Deeper values
& shared
understanding
s held by
organization
members
Manager’s
Challenge
The External
Environment
The
Organization:
Environment
Relationship
The Internal
Environment:
Corporate
Culture
Environment
and Culture
Shaping
Corporate
Culture
For Innovative
Response
The
fundamental
values
that
characterize
an
organization’s culture can be understood through the
visible manifestations of the following:
Symbol – An object, act or event that conveys meaning to
others. Symbols can be considered a rich, nonverbal language
that vibrantly conveys the organization’s important values
concerning how people relate to one another and interact with
the environment.
Stories – A narrative based on the true events and repeated
frequently and shared among organizational employees.
Heroes – A figure who exemplifies the deeds, character and
attributes of a strong corporate culture. Heroes are role models
for employees to follow.
Slogans – A phrase or sentence that succinctly express
corporate value.
Ceremonies - A planned activity at a special event that is
conducted for the benefit of an audience.
Manager’s
Challenge
The External
Environment
The
Organization:
Environment
Relationship
The Internal
Environment:
Corporate
Culture
Environment
and Culture
Shaping
Corporate
Culture
For Innovative
Response
ENVIRONMENT AND CULTURE
A big influence on internal corporate culture is the external
environment. Cultures can vary widely across organization;
however, organizations within the same industry often
reveal similar cultural characteristics because they are
operating in similar environments. The internal culture
should embody what it takes to succeed in the
environment.
Adaptive Cultures
Research at Harvard on 207 U.S. firms illustrated the
critical relationship between corporate culture and the
external environment. The study found out that a strong
corporate culture alone did not ensure business success
unless the culture encouraged healthy adaptation to the
external environment. As illustrated in Exhibit 3.6, adaptive
corporate cultures have different values and behavior from
unadaptive cultures.
Manager’s
Challenge
The External
Environment
The
Organization:
Environment
Relationship
The Internal
Environment:
Corporate
Culture
Exhibit 3.6: Environmentally Adaptive versus Unadaptive Corporate
Culture
Adaptive Corporate Cultures Unadaptive Corporate Cultures
Visible
Behavior
Managers pay close
attention to all their
constituencies, especially
customers, and initiate
change when needed to
serve their legitimate
interests, even if it entails
taking some risks.
Managers care deeply
about customers,
Environment
Expressed stockholders, and
and Culture
employees. They strongly
Values
value people and
Shaping
processes that can create
Corporate
useful change (e.g.
Culture
leadership initiatives up
For Innovative
and down the management
Response
hierarchy.
Managers tend to behave
somewhat insularly,
politically, and
bureaucratically. As a result,
they do not change their
strategies quickly to adjust to
or take advantage of
changes in their business
environment.
Managers care mainly about
themselves, their immediate
work group, or some product
(or technology) associated
with that work group. They
value the orderly and riskreducing management
process much more highly
than the leadership
initiatives.
The External
Environment
The
Organization:
Environment
Relationship
The Internal
Environment:
Corporate
Culture
Environment
and Culture
Shaping
Corporate
Culture
For Innovative
Response
TYPES OF CULTURES
There are four categories or types of culture as illustrated
below in Exhibit 3.7. These categories are based on two
dimensions: (1) the extent to which external environment
requires flexibility or stability; and (2) the extent to which a
company’s strategic focus is internal or external.
Four Types of Corporate Cultures
Needs of the Environment
Flexibility
Stability
External
Strategic Focus
Manager’s
Challenge
Internal
Manager’s
Challenge
The External
Environment
The
Organization:
Environment
Relationship
The Internal
Environment:
Corporate
Culture
Environment
and Culture
Shaping
Corporate
Culture
For Innovative
Response
The four categories associated with these differences are
adaptability, achievement, involvement and consistency.
Adaptability Culture – emerges in an environment that
requires fast response and high-risk decision making. A culture
characterized by values that support the company’s ability to
interpret and translate signals from the environment into new
behavior responses.
Achievement Culture – A results-oriented culture that values
competitiveness,
aggressiveness, personal initiative and
achievements. An emphasize on winning and achieving specific
ambitious goals is the glue that holds the organization together.
Involvement Culture – emphasizes an internal focus on the
involvement and participation of employees rapidly adapt the
changing needs of the environment. A culture that places high
value on meetings the needs of employees and values
cooperation and equality.
Consistency Culture – uses internal focus and consistency
orientation for a stable environment. A culture that values and
rewards a methodical, rational, orderly way of doing things.
Manager’s
Challenge
The External
Environment
The
Organization:
Environment
Relationship
The Internal
Environment:
Corporate
Culture
Managing the High-Performance Culture
High-Performance Culture
- A culture based on a solid
organizational mission or purpose that uses shared adaptive
values to guide decisions and business practices and to
encourage individual employee ownership of both bottom-line
results and the organization’s cultural backbone.
Cultural Leadership – A primary way in which managers shaped
cultural norms and values to build a high-performance culture.
Managers must overcommunicate to ensure that employees
understand the new culture values, and they signal these values in
actions as well as words.
Environment and A cultural leader defines and uses signals and symbols to
Culture
influence corporate culture. They influence two key areas:
Shaping
1. The cultural leader articulates a vision for the organizational
Corporate
culture that employees can believe in.
2. The cultural leader heeds the day-to day activities that
Culture
reinforce the cultural vision.
For Innovative
Response
The External
Environment
The
Organization:
Environment
Relationship
The Internal
Environment:
Corporate
Culture
Environment and
Culture
Shaping
Corporate
Culture
For Innovative
Response
Exhibit 3.8 below illustrates four organizational outcomes based on
the relative attention managers pay to cultural values and business
performances.
Combining Culture and Performance
High
Attention to Business Performance
Manager’s
Challenge
Good for short-term
bottom line, but is it
sustainable?
Both bottom-line
results and
inspiration.
Sustainable success
via a highperformance culture.
C
D
May be going out of
business. Little
emphasis on results
or values.
Strong culture is
good for moral, but
can managers afford
to keep it up without
business results?
A
B
Low
Low
Attention to Values
High
Manager’s
Challenge
Interpretation:
The External
Environment
A company in Quadrant A pays little attention to either values or
business results and is unlikely to survive for long.
The
Organization:
Environment
Relationship
Managers in Quadrant B organizations are highly focused on
creating a strong cohesive culture, but they don’t tie organizational
values directly to goals and desired business results.
Quadrant C represents organizations that are focused primarily on
bottom-line results and pay little attention to organizational values.
This approach may be profitable in the short run, but the success is
difficult to sustain over the long-term - the reason behind is that the
“glue” that holds the organization together – that is, shared cultural
Environment and values- is missing.
Culture
Company in Quadrant D put high emphasis on both culture and
Shaping
solid business performance as drivers of organizational success.
Corporate Managers in these organization align values with the company’s
day-to-day
operations
–
hiring
practices,
performance
Culture
For Innovative management, budgeting, criteria for promotions and rewards.
Response Quadrant D organization represent high-performance culture.
The Internal
Environment:
Corporate
Culture
CASE ANALYSIS
Rio Grande Supply Co.
Relevant Facts (1 of 3)
 Jasper Hennings, president of Rio Grande Supply Co., knew full well a
company’s top executives were largely responsible for determining a
firm’s corporate culture. That’s why he took such personal pride in the
culture of his Texas-based wholesale plumbing supply company. It didn’t
just pay lip service to the values it espoused: integrity, honesty, and a
respect for each individual employee. His management team set a good
example by living those principles.
 The importance of Jasper attached to respecting each individual was
apparent in the company’s Internet use policy. It was abundantly clear
that employees weren’t to use Rio Grande’s computers for anything but
business-related activities. However, Jasper himself had vetoed the
inclusion of what was becoming a standard provision in such policies
that management had the right to access and review anything employees
created, stored, sent, or received on company equipment. He cut short
any talk of installing software filters that would prevent abuse of the
corporate computer system. Still, the company reserved the right to take
disciplinary action, including the possible termination, and to press
criminal charges if an employee was found to have violated the policy.
Case Analysis: Rio Grande Supply Co.
Relevant Facts (2/3)
 Henry Darger, his hard-working chief of operations and a member of his
church, had summarily fired a female employee for having accessed
another worker’s e-mail surreptitiously. She hadn’t taken her dismissal
well. “Just ask Darger what he’s up to when he shuts his office door,”
she snarled as she stormed out of Jasper’s office. She made what
Jasper hoped was an idle threat to hire a lawyer. When Jasper asked
Henry what the fired employee could possibly have meant, tears began to
roll down the operations chief’s face. He admitted that ever since a
young nephew had committed suicide the year before and a business
helped his wife start had failed, he’d increasingly been seeking escape
from his troubles by logging onto adult pornography sites. At first, he’d
indulged at home, but of late he’d found himself spending hours at work
visiting pornographic sites, the more explicit the better.
 Henry’s immediate dismissal of the woman who’d tapped into another
employee’s e-mail when the operations chief was violating the Internet
policy himself was hypocritical. The person charged with enforcing that
policy needed to be held to the highest standeards.
Case Analysis: Rio Grande Supply Co.
Relevant Facts (3/3)
 Jasper knew that Rio Grande employees routinely used computers at
their desks to check personal e-mail, do banking transactions, check the
weather, or make vacation arrangements. The company had turned a
blind eye because it didn’t seem worth the effort of enforcing the ahrdand-fast policy for such minor infractions.
 Henry was a valued, if clearly troubled, employee. Replacing him would
be costly and difficult. If Jasper decided to keep him on, the president
clearly had no choice but to cross the line and get involved in Henry’s
private life, and he would be treating Darger differently from the
treatment the female employee received.
Case Analysis: Rio Grande Supply Co.
Question#1-A: What environment factors have helped to create the situation
Jasper Hennings faces?
The following environment factors have helped to create the situation Jasper
Hennings faces:
 Technological (External Environment) – considering the technology
advancement, it is probable that the company’s employee do non-work related
matters such us downloading and research using the internet.
 Internal Environment – the company did not adjust to the technology
advancement. The company should have taken measure i.e. installing software
filters that would have prevented abuse of the company’s computer system.
Case Analysis: Rio Grande Supply Co.
Question#1-B: What factors does Jasper need to consider when deciding on his
course of action?
Jasper needs to consider the following factors on his course of action?
 The company’s policies.
 The people that will be affected by the his decision. This includes the people of
the company who might be affected either positively or negatively.
 The possible consequences of his decision.
Case Analysis: Rio Grande Supply Co.
Question#2-A: Analyze Rio Grande’s culture. In addition to the expressed cultural
values and beliefs, what other subconscious values and beliefs do you detect?
In addition to the expressed cultural values and beliefs, following are Rio Grande’s
subconscious values and beliefs
 Empathy/compassion
 Self preservation
 Right to decide on things which are favorable to the company
Note: Please see the explanation for the above values in the next slide.
Case Analysis: Rio Grande Supply Co.
Question#2-B: Are conflicting values present? When values are in conflict , how
would you decide which ones takes precedence?
Yes, the following values are in conflict:
 Honesty vs. Self preservation – Prior to the termination of the female
employee, some employee’s of the company including the terminated female
employee were already aware of “Henry Darger’s illegal access to adult
pornography sites” but they did not report it to Jasper probably because of fear of
losing their job.
 Right to decide on things which are favorable to the company vs. Respect for
each employee of the company – Jasper vetoed the inclusion of what was
becoming a standard provision in the company’s internet and computer use
policies that management had the right to access and review anything employees
created, stored, sent, or received on company equipment. This is in conflict with
the “respect for each employee’s privacy” value of the company.
 Respect for the company policy versus compassion – Jasper’s struggle
whether to punish Henry in accordance with the company’s policy or to keep him
to the company.
When values are in conflict , the value that takes precedence is the one that
produce the greatest net benefit for the greatest number.
Case Analysis: Rio Grande Supply Co.
Questions#3: Assume you are Jasper. What are the first two action steps you
would take to handle the Henry Darger situation? How would your role as a
cultural leader influence your decision? What message will your solution send to
the other managers and rank-and-file employees?
If I were jasper, I will do the following to handle Henry Darger’s situation:
1) Terminate Henry – so that “his actions” will not be a precedent to other
employees.
2) Meet the management team to analyze the root cause of the incident and
identify possible improvements of the company’s current processes and
internal controls to prevent same incident to happen again.
As a cultural leader, I am pressured to make the best possible decision because
the people of the company look up to me. I am expected to perform my duties
and responsibilities in accordance with the standards of the company.
Terminating Henry is in accordance with the company’s policies. Thus, this would
bring a message to every employees that I’m serious in implementing the
company’s policies. Thus, every employees will uphold strict compliance to the
policies and procedures of the company.
Case Analysis: Rio Grande Supply Co.
Managing in a Global Environment
1. Describe the merging borderless world
2. Define international management and explain how it differs from
the management of domestic business operations
3. Indicate how dissimilarities in the economic, sociocultural, and
legal-political environments throughout the world can affect
business operations
4. Describe the market entry strategies that business use to develop
foreign markets
5. Describe the characteristics of a multinational corporation
6. Explain the challenges of managing in a global environment
Chapter 4 : Managing in a Global Environment
A Borderless World

Business is becoming a
unified, global field

Companies that think
globally have a competitive
edge


Domestic markets are
saturated for many
companies
Consumers can no longer
tell from which country they
are buying
A Borderless
World
The
International
Business
Environment
The Economic
Environment
The Legal-Politcal
Environment
The Sociocultural
Environment
International Trade
Alliances
Getting Started
Internationally
Multinational
Corporations
Managing in a
Global
Environment
Chapter 4 : Managing in a Global Environment
Four Stages of Globalization
The process of globalization typically passes through four
distinct stages
Domestic stage:
market potential is limited to the home country
production and marketing facilities located at home
International stage:
exports increase
company usually adopts a multi-domestic approach
Multinational stage:
marketing and production facilities located in many countries
more than 1/3 of its sales outside the home country
Global (or stateless) stage:
making sales and acquiring resources in whatever country
offers the best opportunities and lowest cost
ownership, control, and top management tend to be dispersed
Chapter 4 : Managing in a Global Environment
A Borderless
World
The
International
Business
Environment
The Economic
Environment
The Legal-Politcal
Environment
The Sociocultural
Environment
International Trade
Alliances
Getting Started
Internationally
Multinational
Corporations
Managing in a
Global
Environment
A Borderless
World
Four Stages of Globalization
The
International
Business
Environment
Domestic
Strategic Orientation
Export-oriented
Domestically oriented
multidomestic
Initial foreign
Stage of Development
involvement
Cultural Sensitivity
International
Of little importance
Manager Assumptions "One best way"
Multinational
Multinational
Global
The Economic
Environment
Global
The Legal-Politcal
Environment
Explosion of
Competitive positioning
Global
international operations
Very important
"Many good ways"
Somewhat important Critically mportant
"The least-cost way"
"Many good ways"
The Sociocultural
Environment
International Trade
Alliances
Getting Started
Internationally
Multinational
Corporations
Managing in a
Global
Environment
Chapter 4 : Managing in a Global Environment
The International Business Environment


It is the management of business
operations conducted in more than one
country.
It applies the same basic management
functions of planning, organizing, leading
and controlling.
A Borderless
World
The
International
Business
Environment
The Economic
Environment
The Legal-Politcal
Environment
The Sociocultural
Environment
International Trade
Alliances
Getting Started
Internationally
Multinational
Corporations
Managing in a
Global
Environment
Chapter 4 : Managing in a Global Environment
Key Factors in the International
Environment
Economic
•Economic
development
•Infrastructure
•Resource and
product markets
•Per capita
Income
•Exchange rates
•Economic
conditions
Legal-Political
•Political risk
•Government
takeovers
•Tariffs, quotas, taxes
Organization
•Terrorism, political
instability
•Laws, regulations
Sociocultural
•Socio values, beliefs
•Language
•Religion (objects, taboos, holidays)
•Kinship patterns
•Formal education, literary
•Time orientation
Chapter 4 : Managing in a Global Environment
A Borderless
World
The
International
Business
Environment
The Economic
Environment
The Legal-Politcal
Environment
The Sociocultural
Environment
International Trade
Alliances
Getting Started
Internationally
Multinational
Corporations
Managing in a
Global
Environment
The Economic Environment


Represents the economic conditions in
the country where the international
organization operates
This includes factors as
 Economic development
 Infrastructure
 Resource and product markets
 Exchange Rates
 Inflation
 Interest Rates
 Economic Growth
Chapter 4 : Managing in a Global Environment
A Borderless
World
The
International
Business
Environment
The Economic
Environment
The Legal-Politcal
Environment
The Sociocultural
Environment
International Trade
Alliances
Getting Started
Internationally
Multinational
Corporations
Managing in a
Global
Environment
The Economic Environment

Economic Development
 Countries categorized as “developing” or “developed”
 Criterion used to classify is per capita income
 Developing countries have low per capita incomes
 LDCs located in Asia, Africa, and South America
 Developed are North America, Europe, & Japan
 Driving global growth in Asia, Eastern Europe, & Latin
America

Infrastructure
 A country’s physical facilities that support economic
activities like
 Airports, highways, and railroads
 Energy-producing facilities
 Communication facilities
Chapter 4 : Managing in a Global Environment
A Borderless
World
The
International
Business
Environment
The Economic
Environment
The Legal-Politcal
Environment
The Sociocultural
Environment
International Trade
Alliances
Getting Started
Internationally
Multinational
Corporations
Managing in a
Global
Environment
The Economic Environment

Resource and Product Markets
 Managers must evaluate market demand
 To develop plants, resource markets must be available –
A Borderless
World
The
International
Business
Environment
The Economic
Environment
raw materials and labor
The Legal-Politcal
Environment

Exchange Rate
 Rate at which one country’s currency is exchanged for
another country’s
 Has become a major concern for companies doing
business internationally
 Changes in the exchange rate can have major
implications for profitability of international operations
The Sociocultural
Environment
International Trade
Alliances
Getting Started
Internationally
Multinational
Corporations
Managing in a
Global
Environment
Chapter 4 : Managing in a Global Environment
The Legal-Political Environment

Major legal-political factors affecting
international business are
 Political risk
 Political instability
 Laws and regulations
A Borderless
World
The
International
Business
Environment
The Economic
Environment
The LegalPolitcal
Environment
The Sociocultural
Environment
International Trade
Alliances
Getting Started
Internationally
Multinational
Corporations
Managing in a
Global
Environment
Chapter 4 : Managing in a Global Environment
The Legal-Political Environment
 Political risk
 Defined as a company’s risk of loss of assets,
earning power, or managerial control due to
politically based events or actions by the host
governments
 Political instability
 Events such as riots, revolutions, or government
upheavals that affect the operations of an
international company Laws and regulations
 Laws and Regulations
 This pertains to legislations which differ from
country to country
A Borderless
World
The
International
Business
Environment
The Economic
Environment
The LegalPolitcal
Environment
The Sociocultural
Environment
International Trade
Alliances
Getting Started
Internationally
Multinational
Corporations
Managing in a
Global
Environment
Chapter 4 : Managing in a Global Environment
The Social Environment
 A nation’s culture includes the shared knowledge,
beliefs and values, as well as the common modes
of behavior and ways of thinking, among
members of society
 There are 4 dimensions of national value systems
that influence organization and employee working
relationship. (Hofstede’s Value Dimension)





Power distance
Uncertainty avoidance
Individualism and collectivism
Masculinity/femininity
Long-term orientation vs short-term orientation
A Borderless
World
The
International
Business
Environment
The Economic
Environment
The LegalPolitcal
Environment
The
Sociocultural
Environment
International Trade
Alliances
Getting Started
Internationally
Multinational
Corporations
Managing in a
Global
Environment
Chapter 4 : Managing in a Global Environment
Hofstede’s Value Dimension
 Power distance
 Refers to the degree distance means people accept
inequality in power among institutions, organizations, and
people
 Uncertainty avoidance
 High uncertainty avoidance means that members of a
society feel uncomfortable with uncertainty and ambiguity
 Individualism and collectivism
 Individualism reflects a value for a loosely knit social
framework in which individuals are expected to take care
of themselves
 Collectivism means a preference for a tightly knit social
framework in which individuals look after one another and
organizations protect their members interest
Chapter 4 : Managing in a Global Environment
A Borderless
World
The
International
Business
Environment
The Economic
Environment
The LegalPolitcal
Environment
The
Sociocultural
Environment
International Trade
Alliances
Getting Started
Internationally
Multinational
Corporations
Managing in a
Global
Environment
Hofstede’s Value Dimension
 Masculinity/femininity
 Masculine cultures stress the importance of achievement,
heroism, assertiveness, and material success
 Feminine cultures value relationships, modesty, caring for
the weak, and quality of life
 Long-term orientation vs short-term orientation
 Long-Term Orientation is found China and other Asian
countries includes a greater concern for the future and
highly values thrift and perseverance
 Short-Term Orientation means that people expect fairly
rapid feedback from decisions, expect quick profits,
frequent job evaluations and promotions, etc.
A Borderless
World
The
International
Business
Environment
The Economic
Environment
The LegalPolitcal
Environment
The
Sociocultural
Environment
International Trade
Alliances
Getting Started
Internationally
Multinational
Corporations
Managing in a
Global
Environment
Chapter 4 : Managing in a Global Environment
Example of how countries rate on the four
dimensions
Rank Ordering of Ten Countries
A Borderless
World
The
International
Business
Environment
The Economic
Environment
The LegalPolitcal
Environment
The
Sociocultural
Environment
International Trade
Alliances
Getting Started
Internationally
Multinational
Corporations
Managing in a
Global
Environment
Chapter 4 : Managing in a Global Environment
The Social Environment

The GLOBE (Global Leadership and
Organizational Behavior Effectiveness)
Project Value dimension identified 9
dimensions that explain cultural differences
 Assertiveness
 Future orientation
 Uncertainty avoidance
 Gender differentiation
 Power distance
 Societal collectivism
 Individual collectivism
 Performance orientation
 Human orientation
Chapter 4 : Managing in a Global Environment
A Borderless
World
The
International
Business
Environment
The Economic
Environment
The LegalPolitcal
Environment
The
Sociocultural
Environment
International Trade
Alliances
Getting Started
Internationally
Multinational
Corporations
Managing in a
Global
Environment
The GLOBE Project Value Dimensions

Assertiveness
 A high value on assertiveness means a society
encourages toughness, assertiveness, and
competitiveness while low assertiveness means that
people value tenderness and concern for other over
being competitive

Future orientation
 This refers to the extent to which a society
encourages and rewards planning for the future
over short-term results and quick gratification

Uncertainty avoidance
 This is the degree to which members of a society
feel uncomfortable with uncertainty and ambiguity
Chapter 4 : Managing in a Global Environment
A Borderless
World
The
International
Business
Environment
The Economic
Environment
The LegalPolitcal
Environment
The
Sociocultural
Environment
International Trade
Alliances
Getting Started
Internationally
Multinational
Corporations
Managing in a
Global
Environment
The GLOBE Project Value Dimensions

Gender differentiation
 This refers to the extent to which a society
maximizes gender role differences

Power distance
 This refers to the degree to which people expect
and accept equality or inequality in relationships and
institutions

Societal collectivism
 Is the degree to which practices in institutions
encourage a tightly-knit collectivist society in which
people are important part of a group, or a highly
individualistic society
A Borderless
World
The
International
Business
Environment
The Economic
Environment
The LegalPolitcal
Environment
The
Sociocultural
Environment
International Trade
Alliances
Getting Started
Internationally
Multinational
Corporations
Managing in a
Global
Environment
Chapter 4 : Managing in a Global Environment
The GLOBE Project Value Dimensions

Individual collectivism
 This dimensions looks at the degree to which
individuals take pride in being members of a family,
close circle of friends, team, or organization

Performance orientation
 High performance orientation places high emphasis
on performance and rewards people for
performance improvements
 Low performance orientation means people pay
less attention to performance andmore attention to
loyalty, belonging and background

Human orientation
 This refers to the degree to which society encourages
and rewards people for being fair, altruistic, generous,
and caring
Chapter 4 : Managing in a Global Environment
A Borderless
World
The
International
Business
Environment
The Economic
Environment
The LegalPolitcal
Environment
The
Sociocultural
Environment
International Trade
Alliances
Getting Started
Internationally
Multinational
Corporations
Managing in a
Global
Environment
Example of Country Rankings on
Selected GLOBE Value Dimensions
Dimension
Low
Medium
High
Assertiveness
Sweden
Switzerland
Japan
Egypt
Iceland
France
Spain
United States
Germany
Future Orientation
Russia
Italy
Kuwait
Slovenia
Australia
India
Denmark
Canada
Singapore
Gender
Differentiation
Sweden
Denmark
Poland
Italy
Brazil
Netherlands
South Korea
Egypt
China
Performance
Orientation
Russia
Greece
Venezuela
Israel
England
Japan
United States
Taiwan
Hong Kong
Germany
France
Singapore
New Zealand
Sweden
United States
Indonesia
Egypt
Iceland
Humane Orientation
Chapter 4 : Managing in a Global Environment
Managers
Challenges
A Borderless
World
The
International
Business
Environment
The Economic
Environment
The LegalPolitcal
Environment
The
Sociocultural
Environment
International Trade
Alliances
Getting Started
Internationally
Multinational
Corporations
Managing in a
Global
Environment
The Social Environment
 Other cultural characteristics that
influence international organizations are
 Language
 Religion
 Attitudes
 Social organization
 Education
A Borderless
World
The
International
Business
Environment
The Economic
Environment
The LegalPolitcal
Environment
The
Sociocultural
Environment
International Trade
Alliances
Getting Started
Internationally
Multinational
Corporations
Managing in a
Global
Environment
Chapter 4 : Managing in a Global Environment
Managers
Challenges
International Trade Alliances

One of the visible changes in the international
business environment has been the
development of regional trading alliances and
international trade agreements.
 GATT and the World Trade Organization
 European Union
 North America Free Trade Agreement
 Other Trade Alliances
 The Global Backlash
A Borderless
World
The
International
Business
Environment
The Economic
Environment
The LegalPolitcal
Environment
The
Sociocultural
Environment
International Trade
Alliances
Getting Started
Internationally
Multinational
Corporations
Chapter 4 : Managing in a Global Environment
Managing in a
Global
Environment
GATT and the World Trade Organization

General Agreement on Tariffs and Trade (GATT)
 Signed by 23 nations in 1947 as a set of rules
 Ensured nondiscrimination, clear procedures, negotiation of
disputes, and participation of lesser developed countries in
international trade
 Today, 147 member countries abide by the rules
 Primary tools WTO uses on tariff concessions, countries agree
to limit level of tariffs on imports from other WTO members
 Most favored nation clause

World Trade Organization (WTO)
 Goal, is to guide and sometimes urge the nations of the world
toward free trade and open markets
 Encompasses GATT and all of its agreements
 Has legal authority to arbitrate disputes on 400 trade issues
 Partly responsible for backlash against global trade
Chapter 4 : Managing in a Global Environment
International
Trade
Alliances
GATT
and WTO
European
Union
NAFTA
European Union

Formed in 1957 to improve
economic and social conditions

Has grown to 25-nation alliance

Initiative Europe ’92 called for
creation of open markets for
Europe’s 340 million consumers

Biggest expansion in 2004 – 10
new members from southern
and eastern Europe

Observers feared EU would
become a trade barrier

EU’s monetary revolution,
introduction of the Euro
Chapter 4 : Managing in a Global Environment
International
Trade
Alliances
GATT
and WTO
European
Union
NAFTA
North America Free Trade Agreement

Went into effect on January 1,
1994

Merged the United States,
Canada, and Mexico with more
that 421 million consumers

Breaks down tariffs and trade
restrictions on most agriculture
and manufactured products

August 12, 1992 agreements in
number of key areas include:
agriculture, autos, transport, &
intellectual property
Chapter 4 : Managing in a Global Environment
International
Trade
Alliances
GATT
and WTO
European
Union
NAFTA
Getting Started Internationally
 Small and medium-size companies have a couple
of ways to become involved internationally.




Global Outsourcing
Exporting
Licensing
Direct Investing
 This are called market entry strategies because
they represent ways to sell products and services in
foreign markets
Managers
Challenges
A Borderless
World
The
International
Business
Environment
The Economic
Environment
The LegalPolitcal
Environment
The
Sociocultural
Environment
International Trade
Alliances
Getting Started
Internationally
Multinational
Corporations
Chapter 4 : Managing in a Global Environment
Managing in a
Global
Environment
Strategies for Entering International Markets
Ownership of Foreign Operations
High
Greenfield
Venture
Acquisition
A Borderless
World
The
International
Business
Environment
The Economic
Environment
Joint Venture
The LegalPolitcal
Environment
Franchising
The
Sociocultural
Environment
Licensing
International Trade
Alliances
Exporting
Low
Low
Managers
Challenges
Cost to Enter Foreign Operations
High
Getting Started
Internationally
Multinational
Corporations
Managing in a
Global
Environment
Exporting
Getting Started
Internationally
Exporting
An entry strategy in which the organization maintains its
production facilities within its own country and transfers its
products for sale in foreign countries
Licensing
Franchising
Joint Venture
Licensing
An entry strategy in which an organization in one country
makes certain resources available to companies in another in
order to participate in the production and sale of its products
abroad
Franchising
A form of licensing in which an organization provides its foreign
franchisees with a complete package of materials and
services
Acquisition
Greenfield
Venture
Joint Venture
Getting Started
Internationally
A variation of direct investment in which an organization
shares costs and risks with another firm to build a
manufacturing facility, develop new products, or set up a sales
and distribution network
Exporting
Licensing
Franchising
Joint Venture
Acquisition
Acquisition
A foreign subsidiary over which an organization had complete
control
Greenfield Venture
The most risky type of direct investment, whereby a company
builds a subsidiary from scratch in a foreign country
Greenfield
Venture
Multinational Corporations (MNC)
 An MNC are companies that receives >25% total
sales revenues from operations outside parent
company’s home country
 Also called global corporation or transnational
corporation
 MNCs has the following distinctive managerial
characteristics:
 Managed as integrated worldwide business system
 Controlled by single management authority
 Top managers exercise global perspective
Managers
Challenges
A Borderless
World
The
International
Business
Environment
The Economic
Environment
The LegalPolitcal
Environment
The
Sociocultural
Environment
International Trade
Alliances
Getting Started
Internationally
Multinational
Corporations
Chapter 4 : Managing in a Global Environment
Managing in a
Global
Environment
Managing in a Global Environment


Managing in a foreign
country is particularly
challenging
Managers should be
sensitive to cultural
subtleties and
understand that the
ways to provide proper
leadership, decision
making, motivation and
control vary in different
cultures
Managers
Challenges
A Borderless
World
The
International
Business
Environment
The Economic
Environment
The LegalPolitcal
Environment
The
Sociocultural
Environment
International Trade
Alliances
Getting Started
Internationally
Multinational
Corporations
Chapter 4 : Managing in a Global Environment
Managing in a
Global
Environment
CASE ANALYSIS
Shui Fabrics
Question#1 How would you characterize the main economic, legal-political, and
sociocultural differences influencing the relationship between the partners in Shui
Fabrics? What GLOBE Project dimensions would help you understand the
differences in Chinese and American perspectives illustrated in the case?
ECONOMIC
DIFFERENCES
SHANGHAI FABRIC
LTD. (CHINA)
ROCKY RIVER
INDUSTRIES (USA)
Economic Development
Developing
Country
Developed Country
Infrastructure
Lower levels of
technology and
perplexing logistical,
distribution, and
communication problems
Great physical facilities
Resource & Product
Markets
Raw materials and labor Raw materials might not
is always available at low always be available and
cost
labor are at high cost
Exchange Rates
Not that volatile
Case Analysis: Shui Fabrics
Mostly stable
Answer to Question#1 (continuation)
LEGAL-POLITICAL
DIFFERENCES
SHANGHAI FABRIC
LTD. (CHINA)
ROCKY RIVER
INDUSTRIES (USA)
Political Risk
Very high political risk
Low Political risk
Political Instability
Stable
Stable
Laws & Regulations
Stable at the moment to
encourage investors
Current U.S. tariffs and
quotas could change at
any time
Case Analysis: Shui Fabrics
Answer to Question#1 (continuation)
SOCIOCULTURAL
DIFFERENCES
SHANGHAI FABRIC
LTD. (CHINA)
ROCKY RIVER
INDUSTRIES (USA)
Power Distance
High power distance
Mid power distance
Uncertainty Avoidance
Low uncertainty avoidance
Individualism & Collectivism
Low uncertainty
avoidance
Collectivist
Masculinity/Femininity
Femininity
Masculinity
Case Analysis: Shui Fabrics
Individualist
Answer to Question#1 (continuation)
GLOBE PROJECT DIMENSIONS
CHINESE
AMERICAN
Case Analysis: Shui Fabrics














Low value on assertiveness
Encourages and rewards planning for the
future
Low uncertainty avoidance
High power distance
Individual Collectivism
Low performance orientation
High humane orientation
High value on assertiveness
Short-term results and quick gratification
Low uncertainty avoidance
Mid power distance
Individualist
High performance orientation
Mid humane orientation
Question#2 How would you define Shui’s core problem? Are sociocultural
differences the main underlying cause of this problem? Why or why not? How
would you handle the conflict with your boss back in the United States?
Shui’s core problem is that Rocky River’s president Paul Danvers is not satisfied
with 5 percent as an ROI. He would like to stretch it to something like 20 percent.
Therefore, he’s not satisfied with the profit Shui is generating.
Sociocultural differences had a great influence with the problem Shui is facing. As
discussed in our answer in question number 1, Americans tend to have a strong
ethnocentric attitude where, like Paul, thinks their way would always be the best
way in handling things even they are operating in a foreign country. He doesn’t
seem to understand or mind the difference between their culture with the
Chinese’s.
If we were Ray, we would remind Paul about the social and cultural difference of
our partner with us. Like what other successful companies did, we can also
improve our success by paying attention to the culture of our partner. We should
be flexible and meet at the middle. Cultural differences, like how Chiu Wai think
and see things, would always affect our working relationship with them but
interpreting the culture where the organization is and developing sensitivity would
avoid the costly cultural blunders as a result.
Case Analysis: Shui Fabrics
Question#3: If you were Ray Betzell, what other options to the 50-50 joint venture
would you consider for manufacturing textiles in China? Make the argument that
one of these options is more likely to meet Rocky River’s expectations than the
partnership already in place.
The other option that we will consider for manufacturing textiles in China aside
from the joint venture that we presently have is GLOBAL OUTSOURCING. We
would outsource to obtain the cheapest labor and supplies than doing it in our
country. It’s difference with our joint venture is that we would not share costs and
risks with the other firm in which the textiles will be made. That would be a lesser
cost on our part and all the risk will be shouldered by the other firm.
Case Analysis: Shui Fabrics
END OF REPORT