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Chapter 3 Global Management

What’s Your Global Perspective?

Parochialism-viewing the world solely through your own perspectives, leading to an inability to
recognize differences between people
-do not recognize that others have different ways of living and working
-ignore others’ values and customs
-”ours is better than theirs”
3 possible global attitudes:
1. Ethnocentric attitude-the parochialistic belief that the best work approaches and
practices are those of home country
Home country-the country in which the company’s headquarters are located
2. Polycentric attitude-the view that the managers in the host country know the best work
approaches and practices for running their business
Host country-the foreign country in which the organization in doing business

3. Geocentric attitude-a world-oriented view that focuses on using the best approaches
and people from around the globe
-developing an understanding of cross-cultural differences

Understanding the Global Environment

2 forces that shape the global trade today:
1. Regional Trading Alliances
1. European Union (EU)- a union of 27 European nations created as a unified
economic and trade entity
2. North American Free Trade Agreement (NAFTA) and other Latin
American Agreements-an agreement among the Mexican, Canadian and US
governments in which barriers to trade have been eliminated
3. Association of Southeast Asian Nations (ASEAN)-a trading alliance of 10
Southeast Asian Nations
4.East African Community (EAC) -Burundi, Kenya, Rwanda, Tanzania and
5. South Asian Association for Regional Cooperation (SAARC)-India, Pakistan,
Sri Lanka, Bangladesh, Bhutan, Nepal and Maldives

2. Global Trade Mechanisms

1. World Trade Organization (WTO)-a global organization of 153 countries that
deals with the rules of trade among nations
2. International Monetary Fund (IMF)-An organization of 185 countries that
promotes international monetary cooperation and provides advice, loans and technical
3. World Bank Group-a group of 5 closely associated institutions that provides
financial and technical assistance to developing countries
4. Organization for Economic Cooperation and Development (OECD)-an
international economic organization that helps its 30 member countries achieve
sustainable economic growth and employment

Doing Business Globally

Different Types of International Organizations
1. Multinational Corporation (MNC)-a broad term that refers to any and all types of
international companies that maintain operations in multiple countries
2.Multidomestic Corporation -an MNC that decentralizes management and other
decisions to the local country
3. Global Company-an MNC that centralizes management and other decisions in the
home country
4. Translational or borderless organization-an MNC in which artificial geographical
barriers are eliminated

How Organizations Go International

1. Global sourcing-purchasing materials or labor from around the world wherever it is
the cheapest
2. Exporting-making products domestically and selling them abroad
3. Importing-acquiring products made abroad and selling them domestically
4. Licensing-an organization gives another organization the right to make or sell its
products using its technology or product specifications
5. Franchising-an organization gives another organization the right to use its name and
operating methods
6. Strategic alliance-a partnership between an organization and a foreign company
partner in which both share resources and knowledge in developing new products or building
production facilities
7. Joint adventure-a specific type of strategic alliance and in which the partners agree
to form a separate independent organization for some business purpose
8. Foreign subsidiary-directly investing in a foreign country by setting up a separate
and independent production facility or office

Managing in a Global Environment

1. Political/Legal
2. Economic
Free market economy-resources are primarily owned and controlled by the private sector
Planned economy-economic decisions are planned by a central government
Economic issues;
1. Country’s type of economic systems
2. Economic issues managers need to understand include currency exchange
rates, inflation rates and diverse tax policies
3. Tax policies can be a major economic worry
3. Cultural

National Culture-the values and attitudes shared by individuals from a specific country that
shape their behavior and beliefs about what is important

(Geert) Hofstede’s Framework for Assessing Cultures

Hofstede’s 5 dimensions of National Culture;
1. Individualistic-People look after their own and family interests
Collectivistic-people expect the group to look after and protect them
2. High power distance-accepts wide differences in power, great deal of respect for those
in authority
Low Power distance-plays down inequalities: employees are not afraid to approach nor
are in awe of the boss
3. High uncertainty avoidance-threatened with ambiguity and experience high levels of
Low uncertainty avoidance-Comfortable with risks; tolerant of different behavior and
4. Achievement-values such as assertiveness, acquiring money and goods, and
competition prevail
Nurturing-values such as relationships and concern for others prevail
5. Long-Term Orientation-people look to the future and value thrift and persistence
Short-Term Orientation-people value tradition and the past

GLOBE-the research program that studies cross-cultural leadership behaviors

Globe Leadership and Organizational Behavior Effectiveness (GLOBE)
1. Power Distance-the degree to which members of a society expect power to be
unequally shared
2. Uncertainty avoidance-a society’s reliance on social norms and procedures to alleviate
the unpredictability of future events
3. Assertiveness-the extent to which a society encourages people to be tough,
confrontational, assertive, and competitive rather than modest and tender
4. Humane Orientation-the degree to which a society encourages and rewards individuals
for being fair, altruistic, generous, caring and kind to others
5. Future orientation-the extent to which a society encourages and rewards future-
oriented behaviors such as planning, investing in the future and delaying gratification
6. Institutional collectivism-the degree to which individuals are encouraged by societal
institutions to be integrated into groups within organizations and society
7. Gender Differentiation-the extent to which a society maximizes gender role differences
as measured by how much status and decision-making responsibilities women have
8. In-group collectivism-the extent to which members of a society take pride in
membership in small groups, such as their family and circle of close friends, and the
organizations in which they’re employed
9. Performance orientation-the degree to which a society encourages and rewards group
members for performance improvement and excellence

Global management in today's world

1. The challenge of openness
-increased threat of terrorism by a truly global terror network
-economic interdependence of trading countries
-intense underlying and fundamental cultural differences
2. Challenges of managing a global workforce
1. cultural intelligence
3 main dimension:
1. Knowledge of culture-how cultures vary and how they affect behavior
2. Mindfulness-the ability to pay attention to signals and reactions in
different cross-cultural situations
3. Behavioral skills-using one’s knowledge and mindfulness to choose
appropriate behaviors in those situation
2. Global mindset
3 components:
1. Intellectual capital-knowledge of international business and the capacity
to understand how business works on a global scale
2. Psychological Capital-openness to new ideas and experiences
3. Social Capital-ability to form connections and build trusting relationships
with people who are different from you