PowerPoint Presentation to Accompany
John R. Schermerhorn, Jr .
and Barry Wright
Prepared by: Jim LoPresti
University of Colorado, Boulder
Revised by: Dr. Shavin Malhotra
Ryerson University, Toronto, Ontario
Published by: John Wiley & Sons Canada, Ltd

Planning Ahead — Chapter 3 study questions
 What are the management challenges of globalization?
 What are global businesses and what do they do?
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What is culture and how does it impact global management?
How can we benefit from global management learning ?
Management 2e - Chapter 3 2

Study Question 1: What are the management challenges of globalization ?
 Key concepts in the challenges of globalization:
• Global economy
• Globalization
• International management
• Global manager
Management 2e - Chapter 3 3

Study Question 1: What are the management challenges of globalization ?
 Global economy
• Resource supplies, product markets, and business competition are worldwide, rather than local
 Globalization
• The process of growing interdependence of these components in the global economy
Management 2e - Chapter 3 4

Study Question 1: What are the management challenges of globalization ?
 Global management
• Management in organizations with business interests in more than one country
 Global manager
• Informed about international developments
• Transnational in outlook
• Competent in working with multicultural people
• Aware of regional developments in a changing world
Management 2e - Chapter 3 5

Study Question 1: What are the management challenges of globalization ?
 Global businesses
• Conduct for-profit transactions of goods and services across national boundaries
 Reasons why businesses go global :
• Profits
• Customers
• Suppliers
• Capital
• Labour
Management 2e - Chapter 3 6

Study Question 1: What are the management challenges of globalization ?
 Market entry strategies involve the sale of goods or services to foreign markets but do not require expensive investments .
 Types of market entry strategies :
• Global sourcing
• Exporting
• Importing
• Licensing agreement
• Franchising
Management 2e - Chapter 3 7

Figure 3.1
Common forms of global business—from market entry to direct investment strategies.
Management 2e - Chapter 3 8

Study Question 1: What are the management challenges of globalization ?
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Global sourcing
 the process of purchasing materials or services around the world for local use
Exporting
 selling locally made products in foreign markets
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Importing
 buying foreign-made products and selling them domestically
Licensing agreement
 one firm pays fee for rights to make or sell another company’s products
 Franchising
 a fee is paid for rights to use another firm’s name and operating methods
Management 2e - Chapter 3 9

Study Question 1: What are the management challenges of globalization ?
 Foreign Direct Investment is building, buying all, or buying part ownership of a business in another country.
• Insourcing
• job creation through foreign direct investment
Management 2e - Chapter 3 10

Study Question 1: What are the management challenges of globalization ?
Types of direct investment strategies :
•
•
Joint ventures
• operates in a foreign country through co-ownership by foreign and local partners
Global strategic alliances
• a partnership in which foreign and domestic firms share resources and knowledge for mutual gains.
• Foreign subsidiaries o local operation completely owned by a foreign firm
 Greenfield investment builds an entirely new operation in a foreign country
Management 2e - Chapter 3 11

Study Question 1: What are the management challenges of globalization ?
 Criteria for choosing a joint venture partner:
•
• Familiarity with your firm’s major business.
Strong local workforce.
•
•
•
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• Future expansion possibilities.
Values its customers
Strong local market for partner’s own products.
Good profit potential.
Sound financial standing .
Management 2e - Chapter 3 12

Study Question 1: What are the management challenges of globalization ?
 Complications in the global business environment
:
•
•
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• Political risk
 the potential loss in value of a foreign investment due to instability and changes in host country
Local legal systems
 complex and unfamiliar laws can create problems
World Trade Organization resolves trade and tariff disputes among countries.
Protectionism can complicate global trading relationships.
Management 2e - Chapter 3 13

Study Question 1: What are the management challenges of globalization ?
 Regional Economic Alliances
•
• NAFTA – North American Free Trade
Agreement
EU – European Union
• SADC – Southern Africa Development
Community
Management 2e - Chapter 3 14

Study Question 2: What are global businesses and what do they do?
 Types of global businesses:
• Global corporation
• MNC (multinational corporation) with extensive business operations in more than one foreign country
• Transnational corporation
• MNC (multinational corporation) operates worldwide on a borderless basis
Management 2e - Chapter 3 15

Study Question 2: What are global businesses and what do they do?
 Host-country benefits of MNC:
• Larger tax bases
• Increased employment opportunities
• Technology transfers
• Introduction of new industries
• Development of local resources
Management 2e - Chapter 3 16

Study Question 2: What are global businesses and what do they do?
 Host country complaints about MNCs:
• Excessive profits
• Domination of local economy
• Interference with local government
• Hiring the best local talent
• Limited technology transfer
• Disrespect for local customs
Management 2e - Chapter 3 17

Figure 3.2 What should go right and what can go wrong in MNC-host country relationships.
Management 2e - Chapter 3 18

Study Question 2: What are global businesses and what do they do?
 Ethical issues for MNCs :
• Corruption — illegal practices that further one’s business interests.
• Sweatshops — employing workers at low wages for long hours and in poor working conditions.
• Child labour — full-time employment of children for work otherwise done by adults.
• Sustainable development — meeting current needs without compromising future needs.
Management 2e - Chapter 3 19

Study Question 3: What is culture and how does it impact global management?
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Culture
• The shared set of beliefs, values, and patterns of behaviour common to a group of people.
Culture shock
• Confusion and discomfort a person experiences in an unfamiliar culture.
Ethnocentrism
• Tendency to consider one’s own culture as superior to others.
Cultural intelligence
• The ability to adapt and adjust to new cultures
Management 2e - Chapter 3 20

Study Question 3: What is culture and how does it impact global management?
 Stages in adjusting to a new culture:
• Confusion
• Small victories
• The honeymoon
• Irritation and anger
• Reality
Management 2e - Chapter 3 21

Study Question 3: What is culture and how does it impact global management?
 Silent Languages of culture:
• Context
• Low-context cultures – emphasize communication via spoken or written words.
• High-context cultures – rely on nonverbal and situational cues as well as on spoken or written words in communication.
Management 2e - Chapter 3 22

Study Question 3: What is culture and how does it impact global management?
 Silent Languages of culture:
• Time
• Monochronic cultures – people tend to do one thing at a time.
• Polychronic cultures – time is used to accomplish many different things at once.
• Space
• Proxemics – is how people use space to communicate.
Management 2e - Chapter 3 23

Study Question 3: What is culture and how does it impact global management?
 Values and national cultures (Hofstede):
• Power distance
• Uncertainty avoidance
• Individualism-collectivism
• Masculinity-femininity
• Time orientation
Management 2e - Chapter 3 24

Figure 3.3 How countries compare on Hofstede’s dimension of national culture.
Management 2e - Chapter 3 25

Study Question 4: How can we benefit from global management learning?
 Comparative management
• How management perspectives and practices systematically differs among countries and cultures .
Management 2e - Chapter 3 26

Study Question 4: How can we benefit from global management learning?
 Are management theories universal?
• U.S. management theories may be ethnocentric.
• Participation and individual performance are not emphasized as much in other cultures.
• Not all Japanese management practices can be applied successfully abroad.
Management 2e - Chapter 3 27

Study Question 4: How can we benefit from global management learning?
 Project GLOBE (Global Leadership and
Organizational Behaviour Effectiveness)
• Researches the leadership, organizational practices, and diversity among world cultures.
• Power distance
• Uncertainty avoidance
• Gender egalitarianism
• Future orientation
Management 2e - Chapter 3 28

Study Question 4: How can we benefit from global management learning?
• Project GLOBE’s nine dimensions continued
• Institutional collectivism
• In-group collectivism
• Assertiveness
• Performance orientation
• Humane orientation
Management 2e - Chapter 3 29

Study Question 4: How can we benefit from global management learning?
Project GLOBE’s research on leadership practices across cultures
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• Acting trustworthy, just, honest
• Showing foresight, planning
• Being positive, dynamic, motivating
• Inspiring confidence
• Being informed and communicative
• Being a coordinator and team builder
Management 2e - Chapter 3 30

Study Question 4: How can we benefit from global management learning?
Project GLOBE’s research on leadership practices across cultures
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• Being a loner
• Acting uncooperative
• Being irritable
• Acting autocratic
Management 2e - Chapter 3 31

Figure 3.4 Nine cultural dimensions used by Project
GLOBE researchers.
A large team of international researchers collaborated in Project GLOBE to examine societal cultures using the nine cultural dimensions shown in the figure. When results from extensive empirical studies were analyzed for 62 countries, they were found to fall into ten culture clusters. Countries within a cluster share many societal cultural practices; countries tend to differ significantly across clusters in their cultural practices.
Management 2e - Chapter 3 32

Study Question 4: How can we benefit from global management learning?
 Global management attitudes and learning
:
• Companies can and should learn from each other.
• Readiness for global organizational learning varies based on managerial attitudes.
• Ethnocentric attitudes
• Polycentric attitudes
• Geocentric attitudes
• Be alert, open, inquiring, but always cautious.
Management 2e - Chapter 3 33

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