GLOBAL
MANAGEMENT
Chapter 6
MGMT 370
GLOBAL ENVIRONMENT
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The global economy is dominated by
countries in three regions: North
America, Western Europe, and Asia.
Other developing countries and
regions represent important areas
for economic growth
GLOBAL ECONOMY
GLOBAL MANAGEMENT
Global economy and
globalization
 International
management
 Global managers
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International Business Forms
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Market Entry Strategies
•Global sourcing
•Offshoring
•Exporting and Importing
•Licensing agreement
•Franchising
International Business Forms
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Direct Investment Strategies
• Joint ventures
• Foreign subsidiary
Organizational Models
Organizational Models
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Multinational model
• consists of the subsidiaries in each country
in which a company does business, with
ultimate control exercised by the parent
company.
Global model
• consisting of a company’s overseas
subsidiaries and characterized by
centralized decision making and tight
control by the parent company over most
aspects of worldwide operations
Managing Across Borders
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Expatriates
• Parent-company nationals who are sent
to work at a foreign subsidiary
Host-country nationals
• Natives of the country where an overseas
subsidiary is located
Third-country nationals
• Natives of a country other than the home
country or the host country of an
overseas subsidiary.
Managing Globally
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15% of all employee transfers are to
international locations
Failure rate ranges from 20%-70%
Failure rate
• the number of expatriate managers of
an overseas operation who come home
early
• Communication is key to reducing the
failure rate
Identifying International
Executives
How to Prevent Failed Global
Assignments
Organizational Models
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Transnational model
• characterized by centralizing certain
functions in locations that best achieve
cost economies
• basing other functions in the company’s
national subsidiaries to facilitate greater
local responsiveness
• fostering communication among
subsidiaries to permit transfer of
technological expertise and skills.
Comparison of Entry Modes
Comparison of Entry Modes
Advantages of exporting:
 Provides scale economies by avoiding
the costs of manufacturing in other
countries
 Consistent with a pure global
strategy
Organizational Models
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International licensing
• an arrangement by which a licensee in
another country buys the rights to
manufacture a company’s product in its
own country for a negotiated fee
(typically, royalty payments on the
number of units sold).
Global Organizations
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Ethical Issues
• Corruption
• Sweatshops
• Child labor
• Sustainability
Regional Economic Alliances
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European Union
• Europe is integrating economically to form the
biggest market in the world
• Certain structural issues within Europe need to
be corrected for the EU to function effectively.
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North American Free Trade
Agreement (NAFTA)
• An economic pact that combined the
economies of the United States, Canada, and
Mexico into one of the world’s largest trading
bloc
U.S. Trading Partners
Based on Total Imports and Exports
GLOBAL ENVIRONMENT
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Legal Environment
• World Trade Organization
(WTO)
• Most favored nation
• Protectionism
CONSEQUENCES OF A
GLOBAL ECONOMY
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4.
Expansion of international trade
Foreign direct investment (FDI) is
playing an ever-increasing role in the
global economy
Imports are penetrating deeper into the
world’s largest economies
Companies are finding their home
markets under attack from foreign
competitors
Growing Proportion of
Goods Being Exported
Consequences of a Global
Economy
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Opportunities are greater
Environment is more complex and
competitive
Relative Growth in
World Merchandise Trade
Culture and Global Diversity
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Ethnocentrism
Culture shock
Cultural Intelligence
Culture types
• Low-context vs. high-context
• Monochronic vs. polychronic
• Proxemics
Values and Societal Cultures
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Power distance
Uncertainty avoidance
Individualism vs. Collectivism
Masculinity vs. Femininity
Short vs. Long-term Focus
PROJECT GLOBE ON CULTURE
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Power distance
Uncertainty avoidance
Gender egalitarianism
Future orientation
Institutional collectivism
In-group collectivism
Assertiveness
Performance orientation
Humane orientation
Understanding Cultural
Issues
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Inpatriate
• A foreign national brought in to work at
the parent company.
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Regardless of nationality or religion, most
people embrace a set of five core values:
compassion, fairness, honesty, responsibility,
and respect for others.
• These values lie at the heart of human rights issues
and seem to transcend other differences among
Americans, Europeans, and Asians
MANAGING ACROSS CULTURES
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Comparative management
Hofstede studies
• Are management theories
universal?
• Global organizational learning