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Assignment No.2
Submitted By:

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Muhammad Awais
[Sys ID: NUML-S20-11149]

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Submitted To:
Miss Sehar Zulfiqar

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Subject:
Management

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BBA 2 YEARS 1ST Semester (Morning)

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Summary of
Chapter

Managing
In the
Global
Environment
Organizational Environment:
The organizational environment is composed of all the forces that influence the
organization and its ability to achieve organizational goals. The environment is composed of:

1. Internal Environment
2. External Environment

Internal Environment
The organizational environment is composed of all the forces that influence the
organization and its ability to achieve organizational goals. The internal environment includes four
forces:

a) Owners and shareholders

b) The board of directors
c) The employees
d) The organizational culture

a) Owners and shareholders:

Owners and shareholders influence the organization by actively participating and by electing a
board of directors to represent their interests.

b) Board of Directors:

The board of directors supervises management and guides organizational direction.

c) Employees:

Employees conduct day-to-day activities, working in the various organizational functions.

d) Organizational Culture:

Organizational culture, which includes the underlying values and norms shared by
organizational members, form the foundation of the management system and if manager and employee
behavior.

Organization culture is shaped by guiding beliefs that create the foundation for the
organization’s direction and that form the basis of the norms that influence employee behavior. Cultures
can be strong or weak, depending on weather the values are widely accepted so that employees act
according to the values. Because culture brings employees together in pursuit of organizational goals,
thus helping guide and shape behavior, it is an important element in the internal environment.
How organizational culture is communicated?
Organization used these four methods to communicate and to other members of the
task environment:

1. Stories: Stories are frequently repeated narrative based on true events. Stories are told to new
employees, related during formal training sessions and repeated to customers as a way of
communicating organizational values.
2. Symbols: Symbols are objects, acts, or events that communicate meaning to others, including
employees and customers. Organizational logos, flags, awards, and posters are some examples
of symbols.
3. Ceremonies/Rituals: Ceremonies are planned activities that mark a special event or occasion.
It can reinforce organizational values, reward employees who achieve organizational goals and
create a shared experience that will form a bond among staff members.
4. Slogans: Slogans are phrases that express the organization’s key values.

The Role of National Culture:

National culture includes the set of values that a society considers important and the
norms of behavior that are approved or sanctioned in that society. National culture shapes individual
behavior.  Values and norms are the basic building blocks of national culture.

 Values: Values are ideas about what a society believes to be good, right, desirable, or beautiful.
Values are deeply embedded in society; carry a great deal of emotional significance, and any
change is likely to be slow and painful.
 Norms: Norms are unwritten social rules and codes of conduct that prescribe appropriate
behavior in particular situations and shape the behavior of people toward one another. Two
types of norms play a role in national culture:
1. Folkways: Folkways are the routine social conventions of everyday life, such as good
social manners, dressing appropriately, eating with the correct utensils, and behaving
neighborly. Folkways define the way people are expected to behave, but violation of
folkways is not a serious matter.
2. Mores: Mores are norms that are considered to be central to the functioning of society
and to social life. They have greater significance than folkways, and the violation of
them may result in serious punishment.

Hofstede’s Model of National Culture:

While employed as a psychologist for IBM, Gert Hofstede collected data on values and
norms from more than 100,000 IBM employees from 64 countries. He used this data to develop a model
of national culture, which is widely accepted and used. Based upon his research, Hofstede identified five
dimensions upon which various national cultures can be compared.
1) Individualism versus Collectivism:
 Individualism: Individualism values individual freedom and self-expression and
adherence to the principle that people should be judged by their own individual
achievements rather than their social background.
 Collectivism: In contrast, collectivism values subordination of the individual to the
goals of the group and adherence to the principle that people should be judged by their
contribution to the group.
o One of the major reasons why Japanese and American management practices differ is that
Japanese culture values collectivism and U.S. culture values individualism.

2) Power Distance:
By power distance, Hofstede meant the degree to which societies accept that inequalities in the
power and well being of their citizens are due to differences in individual’s physical and intellectual
capabilities and heritage.

3) Achievement versus Nurturing Orientation:

 Achievement Orientation: Societies that have an achievement orientation value

assertiveness, performance, competition, and success.
 Nurturing Orientation: Societies that have a nurturing orientation value the quality of
life, warm personal relationships, and services and care for the weak.
o Japan and the United States tend to be achievement oriented, while the Netherlands,
Denmark, and Sweden are more nurturing oriented.

4) Uncertainty Avoidance:
Societies as well as individuals differ in their tolerance for uncertainty and risk.

 Societies low on uncertainty avoidance such as the U.S. and Hong Kong are easygoing, value
diversity, and tolerate differences in personal beliefs.
 Societies high on uncertainty avoidance such as Japan and France are more rigid and skeptical
about people whose behaviors differ from the norm.

5) Long-Term Versus Short-Term Orientation:

 Long-Term Orientation: A national culture with a long-term orientation rests on

values such as thrift and persistence in achieving goals.
 Short-Term Orientation: A national culture with a short-term are concerned with
maintaining personal stability or happiness and living for the present.
 o Examples: Hong Kong and Taiwan, both of which are well known for their high rate of per
capita savings. The nations of France and the United States have a short-term orientation, and
their citizens tend to spend more and save less.

External Environment
The external environments contain all the forces outside the organization. The
external environment divided into two further environments:

1. Task Environment
2. General Environment

1) Task Environment:
The task environment is the set of forces and conditions that affect an organization’s
ability to obtain inputs and dispose of its outputs. It consists:

a) Customers
b) Competitors
c) Suppliers

a) Customers:

Customers are individuals and groups that buy goods and services that an organization
produces. An organization’s success depends on its ability to respond to the needs of its
customers.

o Changes in the number and types of customers or in customers’ tastes and needs can
result in opportunities or threats for managers.

b) Competitors:

Competitors are organizations that produce goods and services that are similar to a
particular organization’s goods and services.  In other words, competitors are vying for the same
customers.

o Rivalry between competitors is usually the most threatening and problematic force with
which managers must deal.
c) Suppliers:

Suppliers are the individuals and organizations that provide the input resources needed
by an organization in order to produce its goods and services. In exchange for providing an
organization with inputs, the supplier is compensated.  Inputs may include raw materials,
component parts, or employees.

o Changes in the nature, numbers or types of any supplier may result in opportunities and
threats to which managers must respond. Depending upon these factors, a supplier’s
bargaining position may be either strong or weak.

2) General Environment:
The general environment includes the wide-ranging economic, technological, socio-cultural,
demographic, political and legal, and global forces that affect the organization and its task environment.
Managers must constantly analyze forces in the general environment because these forces affect
ongoing planning and decision-making.

a) Economic Forces:

Economic forces, such as interest rates, inflation, unemployment, and economic growth,
affect the general health and well being of a nation or region of the world. Economic forces
produce many opportunities and threats for managers.

o Strong macroeconomic conditions, such as low levels of unemployment and falling

interest rates, often create opportunities for organizations.
o Worsening macroeconomic conditions, such as recession or rising inflation rates, often
pose a threat to organizations because they limit management’s ability to gain access to
the resources they need.

b) Technological Forces:

Technology is the combination of skills and equipment that managers use in the design,
production, and distribution of goods and services. Technological forces are the outcomes of
changes in the technology that managers use to design, produce, or distribute goods and
services.

o Technological change can create a threat to organizations by making established

products obsolete.
o It can also create a host of opportunities for the development of new products or
processes.
o Changes in information technology are also changing the very nature of work itself. 
 C) Socio-cultural Forces:

Socio-cultural forces are pressures emanating from the social structure of a country or
from its national culture. Social structure is the arrangement of relationships between
individuals and groups within a society. National culture is the set of values that a society
considers important and the norms of behavior that are approved or sanctioned in that society.

o A society’s social structure and national culture can also change over time.
o For example, in the United States, attitudes toward the role of women, love, and
marriage have changed in past decades.
 Demographic Forces: Demographic forces are outcomes of changes in, or changing attitudes
toward the characteristics of a population, such as age, gender, ethnic origin, race, sexual
orientation, and social class

d) Political/Legal Forces:

Political and legal forces are outcomes of changes in laws and regulations resulting from
political and legal developments within a society. Organizations must operate within the
boundaries of a nation’s legal and regulatory framework.  A nation’s political processes shape its
legal and regulatory environment. Changes in laws or regulations may create opportunities or
threats for organizations.

 Successful managers carefully monitor changes in laws and regulations to take

advantages of the opportunities and counter the threats they pose.


International Environment
Never before has an organization been able to cross national borders so easily
or so inexpensively, thanks to the high speed and low cost of today’s communication, transportation,
and information systems. Organizations are no longer confined to the sources or to the market potential
of a single country. To improve both efficiency and effectiveness, organizations are increasingly looking
beyond their home countries for product components, raw materials, and human resources; at the same
time they are working to bring new or existing products to market in other countries.

 Multinational corporations are those companies which produce goods and service in several
countries and manage its global activities from one organizational headquarters.
 Every organization is affected by the international environment.

For example if the prices of petrol increased in international market, then the cost of production will
increase automatically.
 Entering into Global Markets
Firms can move into the global business market through a range of activities
that reflect an increasing level of ownership, financial commitment, and risk. Here it come the need of
good market entry strategy plan to enter into a new market.

There are four ways to enter into a global market:

1. Exporting and Importing

2. Licensing
3. Joint Ventures
4. Direct Investment/Foreign Direct Investment

1) Exporting and Importing:

Many firms entering international markets start by exporting and importing.

 Exporting: Selling the products outs side the country in which they are produced. Typically
businesses choose this approach when they want to minimize their investment and avoid the
costs and the risk of maintaining factories or offices in other countries.
o Example: Joanne Henry, owner of Candy Flowers of Mentor, Ohio, eliminated artificial
flavoring, replaced plastic with cellophane wrapping, and changed the leaves on her
candy roses to make the product more attractive to overseas buyers; then she used
trade shows to introduce her products to buyers from retail stores in Italy, France and
Japan.
 Importing: Purchasing products from a supplier in another country and bringing them into the
organization’s home country. The importer may use the products or resell them to the other
customers. This approach allows the company to select from suppliers anywhere in the world to
get the best quality parts and services at the most reasonable price.
o Example: General Electric (GE) and Whirlpool appliance manufacturers, often buy
microwave ovens made by Asian suppliers attach the GE or Whirlpool brand name, and
then sell the ovens in the United States.

2) Licensing:
Another way to enter into global market is through licensing, an arrangement in which
one organization (licensor) sells to a second organization (licensee) the right to a patent, a brand name,
or a product so that the license can produce or market the product in another country. A typically
arrangement calls for the licensee to pay the licensor the minimum amount, with additional payment
based on a percentage of the sales or profits generated by the licensed products.

o Example: Walt Disney licensed the Disneyland name and characters such as Mickey
Mouse in a 45-year deal with the builders of Tokyo Disneyland, which opened in 1983.
 Disney initially invested no money but arranged to receive 10% of the tickets sales plus
5% of the concessional sales worth about $35 million annually.
 Franchising: One of the fastest growing forms of international licensing is franchising, in
which the licensor supplies a complete package of goods, services, and materials generally
accompanied by a well-known brand name, to the licensee. Franchising has become so
popular that licensees in other countries hold as many as 30,000 franchises from such U.S.
licensors as KFC and Coca-Cola.

3) Joint Ventures:
A joint venture is an arrangement in which two or more organizations cooperatively
develop, produce, or sell goods and services. The parent firms are independent of each other but share
control over the joint venture. In some cases, one company supplies the materials and the product
expertise, while the other supplies the knowledge to do business in the country they are targeting.

o Example: In Moscow, the first two Pizza Hut outlets were joint ventures, 49% owned by
Pizza Hut parent PepsiCo and 51% owned by the city of Moscow. The city contributed
two locations, and the PepsiCo contributed the recopies, the operational expertise, and
the management.

4) Direct Investment/ Foreign Direct Investment:

The highest level of ownership involvement and control of international operations is
direct investment, also known as foreign direct investment, which occurs when an organization acquires
an ownership interest in an overseas company or invests in production and marketing facilities in
another country. Direct investment allows the organization to gain more control over operations to
avoid many problematic trade barriers, and to learn firsthand about the needs of its customers.

o Example: As an entry to the European Market, General Electric bought a controlling

interest in Tungsram, a light bulb maker in Hungary with a 7% share of the Western
European market. Because of its majority interest, GE was able to make technological,
production, and management changes that boosted productivity by 30% and that
helped push Tungsram’s European sales to double-digit annual growth.