Management Chap4

© 2014 Cengage Learning. All Rights Reserved.
May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
1. A Borderless World
2. Multinational Corporations
3. Getting Started Internationally
4. The International Business Environment
5. The Economic Environment
6. The Legal-Political Environment
7. The Sociocultural Environment
8. The Changing International Landscape
9. International Trade Alliances
© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
2
Organizations and managers are not isolated
from international forces
Trade barriers have fallen
Communication is faster, cheaper
Consumer tastes converge
The difficulties and risks of a borderless world

are matched by benefits and opportunities
3
 Globalization refers to the extent to which trade and
investments, information, social and cultural ideas,
and political cooperation flow between countries.
 One result is that countries, businesses, and people
become increasingly interdependent.
 Globalization provides a competitive edge at all
stages of developing, manufacturing, and marketing
products, and domestic markets are saturated for
many firms.
 The reality of today’s borderless companies means
consumers can no longer tell from which country
they’re buying
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5
 Ability of managers to appreciate and
influence individuals, groups, organizations,
and systems that represent:
Different social, cultural, political,
institutional, intellectual, and psychological
characteristics
 Develop by engaging with people from
different cultures
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 The size and volume of international
business is LARGE
Companies have revenue = GDP of small
country
Move assets from country to country
25% or more of its profit comes from outside
parent country
 MNC is managed as an integrated whole
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 Controlled by one management authority
 MNC managers must have a global
perspective
 Ethnocentric companies – place emphasis
on their home countries
 Polycentric companies – oriented toward
the markets of individual foreign host
countries
 Geocentric companies – world oriented
and favor no specific country
8
 68% of Americans say other countries
benefit the most from free trade
 53% believe free trade has hurt U.S.
 The United States’ primary concern is the

loss of jobs
9
 Business leaders insist that economic
benefits flow back to the U.S. economy
Lower prices and expanded markets
Increased profits and funds for innovation
 But American shoppers say they would pay

higher prices to keep down foreign
competition
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 An approach for multinationals to do good
 Corporations can alleviate problems and
make large profits by selling to the world’s
poor
 There are more than 4 billion people at the
lowest level of the economic pyramid
 Many companies are adopting BOP
strategies
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 Exporting – transferring products for sale to
foreign countries
 Outsourcing – also called offshoring, work
activities are done in countries with cheap
labor
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 Licensing – enabling a company to
produce and market a product in another
country
Franchising is licensing that provides a
complete package of materials and services
 Direct investing – high level of involvement,
company manages and controls assets
Joint venture and other types of partnerships
are common
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 Licensing is a strategy in which the
corporation (the licensor) in one country
makes certain resources available to
companies in another country (the
licensees). These resources can include
technology, managerial skills, and/or
patent and trademark rights that enable
the licensee(s) to produce and market a
product similar to what the licensor has
been producing.
16
 Franchising is a special form of
licensing that occurs when the
franchisee buys a complete package
of materials and services, including
equipment, products, product
ingredients, trademark and trade
name rights, managerial advice, and
a standardized operating system.
17
 Direct investing is a strategy in which the
corporation is involved in managing the
productive assets, which distinguishes it
from other entry strategies that permit less
managerial control. The most popular form
of direct investment is to engage in
strategic alliances and partnerships.
18
 In a joint venture, a company shares costs and
risks with another firm, typically in the host
country, to develop new products, build a
manufacturing facility, or set up a sales and
distribution network.
 A second option for direct investing is to create
a wholly owned foreign affiliate, over which the
company has complete control. Direct
acquisition of an affiliate may provide cost
savings over exporting by shortening
distribution channels and reducing storage
and transportation costs.
19
 The most costly and risky direct investment is
a greenfield venture, which occurs when a
company builds a subsidiary from scratch in
a foreign country. The advantage is that
the subsidiary is exactly what the company
wants and has the potential to be highly
profitable. The disadvantage is the
company has to acquire all market
knowledge, materials, people, and know-
how in a different culture, and mistakes are
possible.
20
 Planning, organizing, leading, and
controlling in multiple countries can be
challenging
It took McDonald’s a year to figure out that
Hindus in India do not eat beef
In Africa, the labels on bottles include
pictures to aid illiterate consumers
 Managers must be mindful in the global
marketplace
21
22
 Economic development – Countries are
categorized as either developed or
developing based on per capita income
Government policies
Market size
Financial markets
Infrastructure
23
24
 Economic interdependence
The current economic crisis has highlighted
how interconnected economies are around
the world
25
26
 Political risk is defined as the risk of lost
assets, earning power, or managerial
control
 Political instability includes riots, revolutions,
civil disorders, and frequent changes in
government
27
The values and behaviors that govern U.S.
business do not always translate
 Social values
 Communication differences
28
1. Power distance
2. Uncertainty avoidance
3. Individualism and collectivism
4. Masculinity and femininity
5. Long-term and short-term orientation
6. Indulgence versus Restraint
29
 Power distance. High power distance
means people accept inequality in power
among institutions, organizations, and
people.
 Countries that value high power distance
include Malaysia, and the Philippines. Low
power distance means people expect
equality in power. Countries that value low
power distance include Denmark, and
Israel.
30
 Uncertainty avoidance. High uncertainty
avoidance means that members of a society
feel uncomfortable with uncertainty and
ambiguity and thus support beliefs that promise
certainty and conformity.
 Countries that value high uncertainty
avoidance include Greece, Portugal, and
Uruguay. Low uncertainty avoidance means
people have high tolerance for the
unstructured and unpredictable. Countries that
value low uncertainty avoidance include
Singapore and Jamaica.
31
 Individualism and Collectivism. Individualism
reflects a value for a loosely knit social
framework in which individuals are expected to
take care of themselves.
 Countries with individualist values include the
United States, Canada, and Great Britain.
Collectivism is a preference for a tightly knit
social framework in which individuals look after
one another and organizations protect their
members’ interests. Countries with collectivist
values are Guatemala, Ecuador, and Panama.
32
 Masculinity and Femininity. Masculinity stands
for preference for achievement, heroism,
assertiveness, work centrality (with resultant
high stress), and material success.
 Societies with strong masculine values are
Japan, Italy, Mexico, and Germany. Femininity
reflects the values of relationships, modesty,
caring for the weak, and quality of life.
 Countries with feminine values include Sweden,
Norway, Costa Rica and France. Both men and
women subscribe to the dominant value in
masculine and feminine cultures.
33
Long-term orientation and short-term
orientation, was developed later.
 Long-term orientation includes a greater
concern for the future and highly values
thrift and perseverance.
 Short-term orientation is more concerned
with the past and the present and places a
high value on tradition and meeting social
obligations
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35
 Assertiveness
 Future orientation
 Gender differentiation
 Performance orientation
 Humane orientation
36
 Assertiveness is the extent to which a
society encourages toughness,
assertiveness, and competitiveness.
 Future orientation refers to the extent to
which a society encourages planning
for the future over short-term results.
 Gender differentiation refers to the extent to
which a society maximizes gender role
differences.
37
 Performance orientation is the extent to
which a society places emphasis on
performance and rewards people for
improvement.
 Humane orientation refers to the degree to
which a society encourages and rewards
people for being fair, altruistic, generous,
and caring.
38
39
40
 People from some cultures tend to
pay more attention to the social
context (social setting, nonverbal
behavior, social status) of their verbal
communication than Americans do.
41
 In a high-context culture, people are
sensitive to circumstances surrounding
social exchanges. People use
communication primarily to build personal
social relationships; meaning is derived from
context–setting, status, and nonverbal
behavior–more than from explicit words.
High-context cultures include Asian and
Arab countries.
42
 In a low-context culture, people use
communication primarily to exchange
facts and information; meaning is
derived primarily from words. Low-
context cultures tend to be American
and Northern European
43
 China Inc.
China manufactures many products for

U.S. companies
China is also a growing consumer market
Regulations and government policies

make doing business in China a
challenge
44
 Many companies today are going straight to China
as a first step into international business. Business is
booming and U.S. and European companies are
taking advantage of opportunities for all of the
strategies discussed above. Outsourcing is
probably the most widespread approach to
international involvement in China, but the country
is moving toward a consumer-driven economy,
with the fastest-growing middle class population.
 Doing business in China has never been smooth,
and new regulations are making it tougher. Despite
the problems, China is a market that foreign
managers can’t afford to ignore. Competition from
domestic companies in China is also growing fast.
45
Whereas China is strong in manufacturing, India is
a rising power in software design, services, and
precision engineering. One index lists more than
900 business services companies in India, which
employ around 575,000 people. With its large
Englishspeaking population, India has numerous
companies offering services such as callcenter
operations, data-processing, computer
programming and technical support,
accounting, and so forth.
46
Brazil is another country that is gaining increasing
attention of managers. Although Brazil’s
economic growth slowed in 2011, it is still one of
the fastest-growing emerging economies in the
world, with large and growing agricultural,
mining, manufacturing, and service sectors. The
country’s economy, already the seventh largest
in the world, is projected to move into fourth
place by 2050. The Brazilian government has
initiated major investments in the development
of infrastructure such as highways, ports, and
electricity projects.
47
 India is a service giant, growing in
software design and engineering
 Brazil is a country that is gaining the

attention of American managers
48
 General Agreement on Tariff and
Trade (GATT)
23 nations in 1947, a set of rules for
fair trade
 World Trade Organization (WTO)
Maturation of GATT into permanent
global institute
49
 European Union
1957 alliance to improve economic and
social conditions among members; evolved
to 27-nation European Union
 North American Free Trade Agreement
(NAFTA)
Merged the United States, Canada, and
Mexico into a single market
50
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Management Chap4

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© 2014 Cengage Learning. All Rights Reserved.

The difficulties and risks of a borderless world

 The United States’ primary concern is the

 But American shoppers say they would pay

China manufactures many products for

China is also a growing consumer market

Regulations and government policies

 Brazil is a country that is gaining the

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