Chapter 2: Environmental
Constraints on Managers
Understanding the Global
Environment
Business Management 12
Understanding the Global
Environment
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The global environment presents
both opportunities and challenges for
managers.
With the marketplace now global and
national borders becoming
increasingly irrelevant, the potential
for organizations to grow is
expanding dramatically.
Understanding the Global
Environment
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Managers working within the global
environment must deal with:
Cultural differences
Economic differences
Political differences
New competition from around the
globe that can appear at any time
Global Trade
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An important part of the global
environment is global trade.
Global trade has been around for
centuries, and is shaped by several
regional trading alliances and agreements
that are negotiated through the World
Trade Organization
Examples: European Union (EU)
North America Free Trade
Agreement (NAFTA)
The Legal-Political Environment
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Canadian managers are used to stable
legal and political systems, this however is
not the case in some countries of the
world
Managers in such countries face
uncertainty and are not always to
accurately predict outcomes due to such
circumstances
Example: Google in China
See clip:
http://abcnews.go.com/Technology/video/
google-shuts-down-china-site-10177013
The Economic Environment
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The global manager must be aware of the
economic system under which a country
operates when conducting business
globally
A market economy is one in which
resources are primarily owned and
controlled by the private sector (Ex.
Canada)
A planned economy is one in which all
economic decisions are planned by a
central government
The Cultural Environment
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National culture has a greater effect
on employees than does their
organization’s culture…what is
national culture?
National culture are the values and
attitudes shared by individuals from
a specific country that shape their
behaviour and beliefs about what is
important.
HOFSTEDE’S CULTURAL
DIMENSIONS
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Studied 116,000 IBM employees in 40
different countries
He was able to classify their values and
attitudes into four distinct categories
His research proved useful to managers in
determining Canada’s placement (Scale:
High to low)
Good managers must recognize the
differences in order to be successful.
Individualism Vs. Collectivism
Individualism – Look after their own
interests and those of the immediate
family (Example: US, Canada)
Collectivism - People prefer to act
as members of a group and expect to
be looked after and protected.
(Example: Mexico, Thailand)
Power Distance
Power Distance – A society that
accepts that power is unequal
within an organization or institution.
Employees have a high regard and
respect for those in positions of
authority.
Uncertainty Avoidance
Uncertainty Avoidance – This refers
to the degree to which people
tolerate risk and prefer structured
over unstructured situations. People
in a society with high uncertainty
avoidance tend to be stressed,
nervous and aggressive.
Achievement Vs. Nurturing
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Achievement is the degree to which
values such as assertiveness, making
money and buying material goods
and competition is seen as important
(Example: US, Japan)
Nurturing emphasizes relationships
and concern for others. (Example:
France, Sweden)
Long Term and Short Term
Orientation
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This attribute looks at a country’s
orientation toward work and life.
Long term Orientation – People look to
the future and value thrift and
persistence; leisure time unimportant.
(Example: China, Japan)
Short term Orientation – People value
the past and present and emphasizes
respect for tradition and fulfilling social
obligations; leisure time important
(Example: Canada, US, Australia)
Canada has
Individualism (IDV)
as the highest
ranking (80)
Hofstede Dimension,
and is indicative of a
society with a more
individualistic
attitude and
relatively loose
bonds with others.
Canadian's lowest ranking
Dimension is Long Term
Orientation at 23, this low
LTO ranking is indicative
of societies' belief in
meeting its obligations
and tends to reflect an
appreciation for cultural
traditions.