Management 13th edtion by schermerhorn bachrach chapter 05

John R. Schermerhorn, Jr.

5

Daniel G. Bachrach

Management
th
13 edition

Chapter 5
Global Management and Cultural
Diversity


Planning Ahead — Key Takeaways
 What are the management challenges of globalization?
 What are global businesses and how do they work?
 What is culture and how does it influence global management?
 How can we benefit from global management learning?

Copyright ©2015 John Wiley & Sons, Inc.


Chapter 5 Outline

1. Management and Globalization


Global management



Why companies go global



How companies go global



Global business environments

2. Global Businesses


Types of global businesses



Pros and cons of global businesses



Ethics challenges for global businesses

Copyright ©2015 John Wiley & Sons, Inc.


Chapter 5 Outline

3. Culture and Global Diversity


Cultural intelligence



Silent languages of culture



Tight and loose cultures



Values and national cultures

4. Global Management Learning


Are management theories universal?



Intercultural competencies



Global learning goals

Copyright ©2015 John Wiley & Sons, Inc.


Management and Globalization
 Key concepts in the challenges of globalization:
 Global economy
 Globalization
 Global management
 World 3.0
 Global manager

Copyright ©2015 John Wiley & Sons, Inc.


Management and Globalization

 Global economy
 Resources, markets, and competition are worldwide in scope

 Globalization
 The process of growing interdependence among elements in the global economy

 World 3.0
 Nations cooperate while respecting different national characters and interests

Copyright ©2015 John Wiley & Sons, Inc.


Management and Globalization

 Global management
 Managing business and organizations with business interests in more than one country

 Global manager
 Is culturally aware and informed on international affairs

Copyright ©2015 John Wiley & Sons, Inc.


Management and Globalization

 International businesses
 Conducting for-profit transactions of goods and services across national boundaries

 Reasons why businesses go global:

Profits

Customers

Suppliers

Capital

Labor

Copyright ©2015 John Wiley & Sons, Inc.

Risk

Management and Globalization

 Market entry strategies
involve the sale of goods or services to foreign markets but do not require
expensive investments

Copyright ©2015 John Wiley & Sons, Inc.


Management and Globalization

 Types of market entry strategies:
 Global sourcing
 Exporting
 Importing
 Licensing agreement
 Franchising

 Types of direct investment strategies:
 Joint venture
 Strategic alliance
 Owned subsidiary

Copyright ©2015 John Wiley & Sons, Inc.


Figure 5.1 Common forms of global business—from market entry to direct
investment strategies

Copyright ©2015 John Wiley & Sons, Inc.


•

Copyright ©2015 John Wiley & Sons, Inc.

Franchising
a fee is paid for rights to use another firm’s name and operating

Licensing agreement

methods

•

one firm pays fee for rights to make or sell another company’s

Importing

products

Exporting
the process of purchasing materials or services around the world

•

selling locally made products in foreign markets

•

buying foreign-made products and selling them domestically

•

Global sourcing
for local use

Management and Globalization


Management and Globalization

Insourcing refers to local job creation that results from
foreign direct investment

Copyright ©2015 John Wiley & Sons, Inc.


Management and Globalization

Types of insourcing:

Joint
ventures
operates
in a foreign
country through coownership by foreign and
local partners

a partnership in which
Strategic
alliances
foreign and domestic

firms share resources and
knowledge for mutual

Foreign subsidiaries
local operation completely
owned by a foreign firm

gains

Copyright ©2015 John Wiley & Sons, Inc.


Management and Globalization

Criteria for choosing a joint venture partner:

•
•
•
•
•
•
•

Familiarity with your firm’s major business

Strong local workforce
Future expansion possibilities
Values its customers
Strong local market for partner’s own products
Good profit potential
Sound financial standing

Copyright ©2015 John Wiley & Sons, Inc.


Management and Globalization

Legal and political systems

Global business environments
Trade agreements and trade barriers

Regional economic alliances

Copyright ©2015 John Wiley & Sons, Inc.


Management and Globalization

Legal and political systems

Differing laws and practices regarding
 Business ownership
 Foreign currency exchange
 Protection of intellectual property rights

 Counterfeit merchandise

Copyright ©2015 John Wiley & Sons, Inc.


Management and Globalization

Legal and political systems

Political risk
 Potential loss in value of a foreign investment due to instability and political changes in
the host country

Political risk analysis
 Forecast political disruptions that threaten the value of a foreign investment

Copyright ©2015 John Wiley & Sons, Inc.


Management and Globalization

 Trade Agreements and Trade Barriers
World Trade Organization
 Most favored nation status
 Tariffs
 Nontariff barriers
 Protectionism

Copyright ©2015 John Wiley & Sons, Inc.

Management and Globalization

Regional Economic Alliances

 NAFTA – North American Free Trade Agreement
 EU – European Union
 APEC – Asia Pacific Economic Cooperation
 ASEAN – Association of Southeast Asian Nations
 SADC – Southern Africa Development Community

Copyright ©2015 John Wiley & Sons, Inc.


Global Businesses

 Types of global businesses:
Global corporation
 MNE (multinational enterprise) or MNC (multinational corporation) with extensive
business operations in more than one foreign country

Transnational corporation
 A global corporation that operates worldwide on a borderless basis

Copyright ©2015 John Wiley & Sons, Inc.


Global Businesses

 Mutual benefits for host country and global corporation or MNC:

 Shared growth opportunities
 Shared income opportunities
 Shared learning opportunities
 Shared development opportunities

Copyright ©2015 John Wiley & Sons, Inc.


Figure 5.2 What should go right and what can go wrong in global
corporation and host-country relationships

Copyright ©2015 John Wiley & Sons, Inc.


Global Businesses

 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

Copyright ©2015 John Wiley & Sons, Inc.


Global Businesses

 MNC complaints about host countries:

Profit limitations
Overpriced resources
Exploitative rules
Foreign exchange restrictions
Failure to uphold contracts

Copyright ©2015 John Wiley & Sons, Inc.