Managing in a Global Environment
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True or False
China and India are the worlds fastest growing
economies?
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The Changing Pattern of International
Business
 Changing
world output and world trade picture
 The
U.S. no longer dominates the world economy
 Large U.S. multinationals no longer dominate
international business
 The centrally planned communist economies that
made up roughly half the world suddenly become
accessible to Western businesses
 The global economy has become more
knowledge-intensive
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The Changing Pattern of International
Business
(continued)
 Lowered
trade barriers
 General
Agreement on Tariffs and Trade (GATT)
 World Trade Organization (WTO)
 Integrated
Economic Markets
 The
European Union (EU)
 The
North American Free Trade Act (NAFTA)
 Central
American-Dominican Republic Free Trade
Agreement (CAFTA)
 The
Association of Southeast Asian Nations
(ASEAN)
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The Changing Pattern of International
Business
(continued)
 Global
consumer preferences
 Tastes
and preferences are
converging
 Presence
of mass media, exposure to
goods from various countries, and
standardized products
 Globalized
 Cost
production
efficiency
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Example of Globalized Production
Of the $20,000 sticker price of a General Motors
Automobile LeMans:
 $6,000
goes to South Korea, where the car was assembled
 $3,000 goes to Japan for sophisticated high-tech parts (engines,
transaxles, electronics)
 $800 goes to Taiwan, Singapore, and Japan for small parts
 $500 goes to Great Britain for advertising and marketing
services
 $1,000 goes to Ireland for data processing
 $7,600 goes to GM and its external professional firms in the
United States
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The Changing Pattern of International
Business
(continued)
 Technological
innovations
 Advances
in communications, information
processing, and transportation technology
 Fiber
optics, wireless technology, the Internet and
World Wide Web, and satellite technology
 Management
across cultures
 Adaptation
to business strategies, structures,
operational policies, and human resource programs
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Major Factors Affecting International
Business
 General
 Legal
business environment
system
 Common
law
 Civil
law
 Muslim law
 Economic
 Cultural
 Culture
environment
environment
shock
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Dimensions of Culture
Power Distance
Individualism
Uncertainty Avoidance
Masculinity / Femininity
Long-term/ Short-term
Orientation
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Video

Cirque de Soleil
Answer these Qs:
1.
How has the “global shift”
contributed to the success of Cirque
de Soleil? Why was this critical in the
company’s beginning? What about
now?
How does management across
cultures affect Cirque de Soleil?
2.
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To succeed, Cirque makes special accommodations
for cultural differences among its workers.
___________ can occur when a person is exposed to
a new culture with different norms, customs, and
expectations and has difficulty adjusting.
A)
B)
C)
D)
Culture Shock
Individualism
Uncertainty Avoidance
Power Distance
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Entry Strategy and Strategic Alliances
Four key decisions of a firm contemplating
foreign expansion:
 Which
countries to enter
 When to enter
 Scale of involvement
 How to enter
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Choosing Foreign Countries
The appeal of a particular country is likely to be
greater when:
 The
size of the domestic market is large
 The present wealth of consumers in that market is high
and projected to grow in the future
 The needed resources are readily available
 The firm’s product offerings are suitable to a particular
market
 A positive business environment exists
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When to Enter Foreign Countries
and Scale of Involvement
When
to Enter
First-mover
advantages
Pioneering costs
Scale
of Involvement
Lowest
if the firm simply decides to export
its products to the foreign location
Highest if the firm decides to have a wholly
owned subsidiary in the foreign country
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Modes of Entry
Exporting
Turnkey Project
Licensing
Franchising
Joint Venture
Wholly Owned
Subsidiary
Strategic Alliance
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Modes of Entry
 Exporting
– entering new markets by sending products to
other countries, still maintaining production facilities
within the domestic borders
 Turnkey
projects – specialized type of exporting, where
the firm handles the startup of the company and a local
client is then handed the key
 Licensing
– entering new markets by transferring the
rights to produce and sell products overseas to a foreign
firm
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Modes of Entry
 Franchising
– entering new markets in which the
franchise pays a fee for using the brand name and agrees
to follow the standards and rules
 Joint venture – means of entering new markets where
two or more independent firms agree to establish a
separate firm
 Strategic alliance – cooperative arrangements between
competitors or potential competitors from different
countries
 Wholly owned subsidiary – entering new markets in
which a firm fully owns its subsidiary in foreign countries18
I wouldn’t suggest this mode of Entry
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Various Modes of Entry Choices
Mode of Entry
Advantages
Disadvantages
Exporting
Economies of scale
Lower foreign expenses
Turnkey Project
Access to closed markets
No low cost sales
High transportation costs
Potential tariffs
Competition from local client
Loss of competitive advantage
Licensing
Quick expansion
Lower expenses and risks
Lower political risk
Loss of competitive advantage
Limited ability to use profits in one country
to increase competition in another country
Franchising
Quick expansion
Lower development costs and
risks
Lower political risk
Loss of competitive advantage
Potential quality control problems
Limited ability to use profits in one country
to increase competition in another country
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Various Modes of Entry Choices
(continued)
Mode of Entry
Advantages
Disadvantages
Joint Venture
Knowledge of local markets
Lower development costs and risk
Access to closed markets
Potential for conflict of interest
Loss of competitive advantage
Strategic
Alliance
Access to closed markets
Pooled resources increase
partner’s capabilities
Complementary skills & assets
Loss of competitive advantage
Potential overestimation of partner’s
capabilities
Wholly Owned
Subsidiary
Maximum control over proprietary
knowledge/ technology
Greater strategic flexibility
Efficiencies of global production
system
Large capital outlay
Lack of local knowledge
Increased risk
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Examples of Strategic Alliances
General
Electric – Snecma of
France
Toshiba – IBM
Mitsui – General Electric
GM – Daewoo
Texas Instrument – Compel
Communications
Canon – Hewlett-Packard
Mitsubishi – Caterpillar
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Take a look at China Brands
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Why International Assignments End in
Failure
 Career
blockage – the feeling that working abroad
has gotten their career sidetracked, while people
back home are climbing the corporate ladder
 Culture
shock – the inability to adjust to a different
cultural environment
 Lack
of pre-departure cross-cultural training – little
if any is offered to expatriates before going to a
different country.
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Why International Assignments End in
Failure
 Overemphasis
on technical qualifications – the expatriate
may lack cultural adaptability, even though they have the
technical skills
 Getting
rid of a troublesome employee – provides the
ability to solve interpersonal conflict, but at a huge
expense to the company
 Family
problems – inability or unwillingness of the
expatriate’s family to adapt to life in another country
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Key HR Management
Factors for Global Firms
 Selection
 Selection
criterion should include cultural sensitivity
 Training
 Length
of assignment determines depth of training
 Cross-cultural training is critical to success
 Career
Development
 International
assignments should be part of career
advancement plan
 Compensation
 Incentives
and Benefits
and quality-of-life concerns
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Ethics and Social Responsibility
Sweatshops
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Yes or No

Do you think U.S. companies have the moral
responsibility to offer a so-called living wage and
to fight exploitative practices in foreign
countries, even if doing so means putting the
company at a competitive disadvantage?
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Yes or No

Do you think most consumers care about
potential abuses of overseas contractors? Would
most consumers be willing to pay slightly higher
prices to improve the standard of living of
foreign workers?
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Yes or No

Some believe that a company might actually
increase business by convincing customers that
it is socially responsible and that it values human
dignity more than making an extra buck. Do
you agree?
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Flowchart For Problem Resolution
NO
YES
Is It Working?
Don’t Mess With It!
YES
Did You Mess
With It?
YOU IDIOT!
NO
Anyone Else
Knows?
NO
Hide It
YES
You’re SCREWED!
NO
Can You Blame
Someone Else?
YES
Will it Blow Up
In Your Hands?
NO
Look The Other Way
Yes
NO PROBLEM!
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