4. Managing in a Global Environment
20 December 2023
19:13
Globalization
The process of developing
influence or operations in
other countries.
Ethnocentric
View that home country has the
best work practices
- Parochialism: viewing the
world solely through your
own perspectives
(inability to recognize
differences)
≠
Nationalism
Patriotic ideals and policies
that glorify a country's
values
Polycentric
View that managers
in the host country
know the best
approaches
Geocentric
World-oriented view,
wants to use the best
practices from around
the globe
Global trade mechanisms
- World Trade Organization (WTO)
Global organization that deals with the rules of trade among nations (essentially
replaced GATT)
- International Monetary Fund (IMF)
Global organization that promotes international monetary cooperation and
provides advice, loans and technical assistance
- World Bank Group
Group of very closely associated intitutions that provides financial and technical
assistance to developing countries
- General Agreement on Tariffs and Trade (GATT)
Agreement to reduce and eliminate trade barriers
- Organization for Economic Cooperation and Development (OECD)
International economic organization that helps its member countries achieve
sustainable economic growth and employment
Regional Trading Alliances
European Union (EU)
Union of 27 democratic
European nations created
as a unified economic and
trade entity with the euro
as a single common
currency (Euro zone: 20
nations)
North American Free Trade
Agreement (NAFTA)
An agreement among the Mexican,
Canadian and USA governments in
which barriers to trade have been
eliminated
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Association of
Southeast Asian
Nations (ASEAN)
Trade alliance
between 10
southeast asian
nations
Other major events shaping globalization
- Shanghai Cooperation Organization (2003) - group of 8 countries that promises to
promote free trade, among others
- We are the 99% Protest Movement (2011) - group protesting income and wealth
inequality in the USA
- Made in Chine 2025 (2015) - initiative led by the chinese government to make China
dominant in high-tech manufacturing by 2025
- British vote to exit EU (Brexit, 2016) - in response to nationalist feelings in the UK
- Donald Trump elected US president (2016) - took various nationalist actions
- Covid-19 pandemic (2019)
- Russia-Ukraine war (2022)
The case for Globalization
The case against Globalization
- Win-Win Argument - based on the
law of comparative advantage:
Globalization benefits all trading
partners
- Jobs leave high labor cost nations and flow to
cheap labor nations
- Cheap goods worldwide created wage stagnation
for the middle class
- Globalization and capitalism together have
increased wealth inequality
- Some groups are harmed by globalization
Different types of international organizations
Multinational corporations (MNC)
Mantains operations in multiple countries
- Multidomestic corporation
Descentralizes management and other decisions to the local country (polycentric attitude)
- Global company
Centralzes its management and other decisions in the home country (ethnocentric attitude)
- Transnational or borderless organization
Decisions are not limited regionally (geocentric attitude)
How organizations go international
- Global sourcing
Purchasing materials or labor from around the world wherever its cheapest
- Exporting
Making products domesticall and selling them abroad
- Importing
Acquiring products abroad and selling them domestically
- Licensing
An organization gives another the right to sell its products using its technology or product
specifications
- Franchising
An organization gives another the right to use its name and operating methods
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Managing in a global environment
Political/Legal environment
- Need to respect the laws of each country
- Uncertainty regarding government stability and current policies
Economic environment
- Need to take into account different exchange rates, inflation rates, local rates
- Defferent actions in market economies and centralized economies
Cultural Environment
- Need to adapt management practices to the cultural reality of each country
GLOBE model
(Global Leadership and Organizational
Behavior Effectiveness)
- Power distance
- Uncertainty avoidance
- Assertiveness
- Humane orientation
- Future orientation
- Institutional collectivism
- Gender differentiation
- In-group collectivism
- Performance orientation
Hofstede's model
- Individualistic/Collectivistic
- High/Low power distance
- High/Low uncertainty
avoidance
- Achievement/Nurturing
- Long-term/Short-term
orientation
These models help managers anticipate some potential problems that might
emerge due to cultural differences
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Synthesis
Globalization
The process of developing
influence or operations in
other countries.
≠
Nationalism
Patriotic ideals and policies
that glorify a country's
values
3 views:
- Ethnocentric: home country knows the best practices
- Polycentric: adapt to the local country
- Geocentric: using approaches from all over the world
Global trade mechanisms
- World Trade Organization (WTO)
- International Monetary Fund (IMF)
- World Bank Group
- General Agreement on Tariffs and Trade
(GATT)
- Organization for Economic Cooperation
and Development (OECD)
The case for Globalization
- Win-Win Argument based on the law of
comparative
advantage:
Globalization benefits
all trading partners
VS.
Regional trading alliances
- EU
- NAFTA
- ASEAN
- (…)
The case against Globalization
- Jobs leave high labor cost nations and
flow to cheap labor nations
- Cheap goods worldwide created wage
stagnation for the middle class
- Globalization and capitalism together
have increased wealth inequality
- Some groups are harmed by
globalization
Different types of international organizations
Multinational corporations (MNC)
- Multidomestic corporation
Polycentric attitude
- Global company
Ethnocentric attitude
- Transnational or borderless
organization
Geocentric attitude
How organizations go
international:
- Global sourcing
- Exporting
- Importing
- Licensing
- Franchising
Managing in a global environment
- Need to respect the laws of each country
- Uncertainty regarding government stability and current policies
- Need to take into account different exchange rates, inflation rates, local rates
- Defferent actions in market economies and centralized economies
- Need to adapt management practices to the cultural reality of each country
○ Hofstede's & GLOBE models
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