Chapter 3
Managing in a Global
Environment
The International Business
Environment
 Greater
difficulties and risks when
performing management functions - due
to differences in culture, language,
economies, laws, political stability, etc.
Multinational/Global
Corporations
are criticized for:
Excessive profits
Lack of technology
transfer
Lack of respect for
local culture
Interference with
governments
complain about host
countries:
Profit limitations
Overpriced resources
Foreign exchange
restrictions
Failure to meet
contract obligations
Getting Started
Internationally
Importing/
Outsourcing (e.g.,
Nike)
 Exporting (e.g., L.L.
Bean)
 Licensing (e.g.,
Lowenbrau)
 Franchising (e.g.,
McDonald’s)


Direct Investing
– Joint Venture (e.g.,
Toyota and GM have
made cars jointly)
– Wholly Owned Foreign
Affiliates
 Acquisition
(e.g.,BP purchasing
AMOCO)
 Greenfield Venture
(e.g., Toyota making
cars in Kentucky)
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Hofstede’s Dimensions of
Culture (National Social Values)
 Power
Distance
 Uncertainty Avoidance
 Individualism/Collectivism
 Masculinity/Femininity
 Time Orientation
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Power Distance
High power 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
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Individualism & Collectivism
 Individualism
reflects a value for a loosely
knit social framework in which
individuals are expected to take care of
themselves
 Collectivism is a preference for a tightly
knit social framework in which
individuals look after one another
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Masculinity/Femininity
(Toughness/Tenderness)
(Achievement/Nurturing)
 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
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Time Orientation
 Short-Term
Orientation means that people
expect fairly rapid feedback from
decisions, expect quick profits, frequent
job evaluations and promotions, etc.
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Other Cultural
Characteristics
 Language
 Religion
 Space
 Time
Orientation (monochronic vs.
polychronic)
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1
Managing Cross-Culturally
Must be culturally flexible and easily adapt to
new situations and ways of doing things
 Cannot be ethnocentric
 Culture Shock = frustration and anxiety from
different culture
 Motivating 
Must fit the incentives with the culture

ControllingOften are unable to fire unproductive
employees and must find creative ways of
dealing with them.
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1
World Trade Organization


WTO replaced GATT (General Agreement on
Tariffs and Trade) in 1995
157 Members as of February 2012
About 25 nations are candidates or “observers”
 Iran is the largest candidate in economic power


WTO More Power than GATT
 Enforcing
rulings on trade disputes
 Monitoring trade policies
GATT: Most Favored Nation (MFN) =
members granted reduced tariffs, etc.
 WTO: MFN status now called Normal
Trade Relations (NTR)

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European Union (EU)
 Formed
in 1958 to improve economic and
social conditions among its members
 27 nation alliance is an open market for
Europe's 400+ million consumers.
 Moving toward one economy and one
currency (Euro)
Advantages of the EU
 Increased
competition and economies of
scale will enable companies to grow large
and efficient
 Will become more competitive in the
United States and other world markets.
North American Free Trade
Agreement (NAFTA) 1994
 Canada,
Mexico, and U.S.
 Alliance including approximately 400
million consumers
 To spur growth and investment, increase
exports, and expand jobs in all three
nations
Opposition to NAFTA
 Many
opposed the agreement due to fear
of job losses to Mexico
 Others fear weakened pollution
standards and toxic dumping.