Unit 18 Global Business Environment

Prepared By :Ms. Dina Al Natour

LO3 Evaluate how operating in a global market influences
an organisation’s structure, culture leadership and functions
After studying this chapter, you should be able to:

 D1
 Business environment
 Type of business in terms scope (local , global)
 Local define , example
 Global define example
 Benefits and risks of global business
 Recommendations : Business Analysis (SWOT , PESTEL , Value chain)
After studying this chapter, you should be able to:

 How does the global market influence organisational governance and leadership style ,
structure, culture and functions
 Leadership theories
 McKinsey 7S model of organisational structure
 Hofstede’s Dimensions of Culture
 The influence of ethical and sustainable globalisation.
01 THE INFLUENCES OF
GLOBALIZATION ON
ORGANISATIONAL GOVERNANCE
Influences of globalisation on organizational governance

The corporate governance is the set of rules,

principles and procedures governing the structure
and functioning of the governing bodies of a
company.

a system by which an organization makes and

implements decisions in follow up its objectives."
Governance systems include the management
processes designed to deliver on performance
objectives while considering stakeholder
interests.
Influences of globalisation on organizational governance

Specifically, it establishes the relationships

between the board of directors, the
shareholders and the other of the interested
parties, and stipulates the rules by which the
process of decision making regarding the
company is governed for the generation of
value.
Influences of globalisation on organizational governance

in a globalised world, the concept of

governance is being used to describe the
regulation of interdependent relations in the
absence of overarching political authority,
such as in the international system.
-How globalization effect the corporate governance

When the company changes from local to global,

corporate governance will be affected by
globalization by changing the laws of countries
and legislations that differ from one country to
another such as increased taxes, trade laws and
economic scale that will have a strong impact on
stakeholders within companies such as
shareholders and executives of senior
management, customers, suppliers, funders,
government and society
-How globalization effect the corporate governance

 increased standard of living .

 that would lead to increased income and
prosperity
 Corporate governance protects firms against
some long term loss. When corporations
have social responsibilities, they calculate
their risk and the cost of failure.
 a company has to have responsibility to
shareholders and also all stakeholders which
means that it has responsibility to all society.
-How globalization effect the corporate governance
02
GLOBALIZATION AND
LEADERSHIP
-How globalization effect leadership

Globalization has affected leadership and management

style in many ways through the customer and markets,
competition, international employee transfer and
increased opportunities.

Globalization has a great impact on businesses in many

ways it has made business much more difficult, complex
and at the same time profitable. It is a fact that
leadership style for every country is different and it is
not necessary that a good leader in one country will be a
good leader in another country.
-How globalization effect leadership

As countries have their own cultures, ways, beliefs,

customs and social standards it is very important for a
leader to understand and consider them. A leader who
has the knowledge or who is familiar with a country’s
customs, culture, ethics, ways, and traditions is the one
who will provide effective and beneficial leadership to
the business.

So for leadership to be effective culture, standards and

customs of the country must be taken into
consideration
-How globalization effect leadership

• No one best form of leadership

• We have seen that there are many alternative

forms and styles of leadership.

• Clearly, there is no one ‘best’ form of

leadership that will result in the maintenance of
morale among group members and high work
performance.

• An effective manager will clearly recognise that

different styles of leadership are called for in
different situations
-How globalization effect leadership

• Variables effecting leadership

• Characteristics of the manager – personality, attitudes, abilities, value-system
and personal credibility

• Characteristics of the followers – diversity, needs and expectations, attitudes,

knowledge, confidence and experience, and motivation and commitment;

• Type and nature of the organisation, organisation culture and structure;

• Nature of the tasks to be achieved and time scales; technology, systems of

communication and methods of work organisation; informal organisation.
-How globalization effect leadership

• The Path-Goal model is a theory based on

specifying a leader's style or behavior that best fits
the employee and work environment in order to
achieve a goal.

• The goal is to increase your employees' motivation,

empowerment, and satisfaction so they become
productive members of the organization.

• Also, guide the employees through their path in the

obtainment of their daily work activities (goals) 
-How globalization effect leadership

Four types of leaders:

1. Directive: ‫ الموجه‬/ ‫االرشادي‬

focuses on the work to be done
2. Supportive: ‫الداعم‬
focuses on the well-being of the worker
3. Participative:‫المشارك‬
consults with employees in decision-making
4. Achievement-Oriented: ‫التحدي‬
sets challenging goals
-How globalization effect leadership
03
MCKINSEY 7S MODEL OF
ORGANIZATIONAL STRUCTURE
McKinsey 7S Model of Organisational Structure

 McKinsey 7S model is a strategic

planning tool which is used to analyse a
firm’s internal environment by
considering alignment of interconnected
and interdependent 7S elements:
structure; strategy; systems; style; staff;
skills; and shared values.
 These elements are shown in figure 1.
McKinsey 7S Model of Organisational Structure

 Hard Elements
 Structure. This shows how the firm is organised, for
example, in terms of divisions and strategic business
units (SBUs) which shows the flow of information,
span of control and chain of ‘command’ in the firm.
 It shows who supervises who; who reports to whom;
who is in charge of a certain group of people; who
takes responsibility for a certain group’s decisions and
actions; etc.
 This is represented by an organisational chart in the
firm’s documents.
McKinsey 7S Model of Organisational Structure

 A firm’s structure is determined by: its age and size;

technology involved in its operations; organisational
culture; complexity and dynamism of its environment;
the qualifications of staff; and external control that the
firm faces.
McKinsey 7S Model of Organisational Structure

 For example, a firm serving a global market has high

degree of specialisation in its structure since it must
go through formal and complicated procedures along
the value chain.
 This is why most firms have a divisional structure in
which a division is responsible for a certain
geographical area. Such areas may include: Europe,
Africa, Middle East, North America, etc.
McKinsey 7S Model of Organisational Structure

 However, some have a blend of divisional structure

and matrix structure to effectively serve customers’
high expectations as the environment changes. This
implies that the firm will try to flatten its structure or
adopt a horizontal structure such that hierarchical
arrangement does not be very bureaucratic and rigid.
McKinsey 7S Model of Organisational Structure

 Systems. This refers to the routines/processes and

procedures that a firm’s employees go through in
creating value for customers. This implies that
systems are what transform a firm’s inputs into
outputs. This involves making daily decisions and
choices to meet set goals following the firm’s strategy
—it involves putting strategy into action.
McKinsey 7S Model of Organisational Structure

 For a firm that serves a global market, this require

dividing work into several tasks/jobs: division of
labour enables putting people where they perform
best. Similarly, a global market forces the firm to
have some level of decentralisation such that some
decisions and choices are taken nearest to the
customers in local markets.
McKinsey 7S Model of Organisational Structure

 However, to maintain some level of control, some

units, for example, strategic planning have to remain
at the headquarters/centralised such that strategic
direction of the firm guides decision making at all
functional and operational levels. This is why global
firms have formal hierarchical communication
channels to ensure that the corporate centre controls
standards and costs in decentralised units.
McKinsey 7S Model of Organisational Structure

 Strategy. This refers to the overall direction and

plan of action of the firm aimed at achieving
competitive advantage over the long-term. This is
derived from the firm’s vision, mission and long-term
goals as the firm attempts to compete successfully in
the global market.
McKinsey 7S Model of Organisational Structure

 A firm may decide to increase its sales by a certain

target percentage by expanding its market for
existing products using similar marketing activities.
This becomes the strategy that operational units
must follow to increase sales. Another firm may
target increasing sales by selling existing products to
a bigger market but using locally customised
marketing activities. These two different strategies
will depend on the structure and systems of a
particular firm.
McKinsey 7S Model of Organisational Structure

 Soft Elements

 Style. This refers to the leadership style expressed

by the firm’s top management. This include how
managers make decisions and choices (their
behaviour) at the workplace.
 A global market may require having a balance
between participatory and authoritarian leadership
style since there is need for both giving employees a
chance to innovate and retaining control over the
firm’s strategic direction.
McKinsey 7S Model of Organisational Structure

This is why global firms tend to emphasise clearly

stated goals which are derived from the overall vision
and mission (at a strategic level) and communicated
downwards to guide implementation at functional and
operational levels. This requires having clear formal
instructions down the management hierarchy for
consistent strategy implementation
McKinsey 7S Model of Organisational Structure

 Staff. This refers to the number of employees a firm

needs and how they will be recruited, rewarded, etc.
A global firm needs staff that knows the diversity of
their global market and targets it accordingly. Such
diversity dictates the appropriate structure the firm
should use, for example, a decentralised divisional
structure.
McKinsey 7S Model of Organisational Structure

 The structure adopted then determines the number

of staff needed to serve the global market. For
example, the number of staff at headquarters/the
corporate center can be reduced while that in
divisions increased to fully serve and satisfy
customers in local markets. The corporate center
may remain with strategists and customer support
staff while other functions like finance and
operations are decentralised.
McKinsey 7S Model of Organisational Structure

 Skills. This refers to what the firm’s employees can

do well: the firm’s competences.
 A global market will need staff with diverse
competences to suit the diverse customer needs,
tastes, preferences, and cultures.
 Whereas there tends to be gathering of cultures,
standardisation of products and procedures may not
work competitively everywhere and every time.
McKinsey 7S Model of Organisational Structure

 There may be a need for ‘customised

standardisation’ depending on diversity of the
global market served. Still, the required skills
will be determined by the firm’s structure,
systems and strategy. The need for diverse
skills in a global market justifies the need to
continuously train staff to ensure that their
competences enable satisfying changing
customer needs, tastes and preferences.
McKinsey 7S Model of Organisational Structure

 Shared Values. These are the traditions,

norms, standards, etc. which are the basis for
employees’ behaviour, choices, and
decisions: the agreed and sometimes
unwritten way of doing things in the firm.
McKinsey 7S Model of Organisational Structure

This guides the structure to be adopted by the firm

and systems to be used. For example, if a global
market requires valuing participation of all members
in decision making, innovative risk taking, and
recognising individual input, a bureaucratic
controlling structure will be considered
inappropriate. This is because there will be a need
for flexibility to allow room for innovation and
creativity which too much control can frustrate.
McKinsey 7S Model of Organisational Structure

Conclusion

A global market determines: what structure a firm should adopt; what systems the firm should use;
what strategy the firm should follow; what leadership style the firm’s management should express;
how many staff it should have; what skills its employees need to have; and what shared values
should be cherished by the firm. Therefore, a global market influences organisations by influencing
all McKinsey 7S elements of a given firm since all the elements are interconnected and
interdependent in complex ways.
04
HOFSTEDE’S DIMENSIONS OF
CULTURE
Hofstede’s dimensions of culture theory and application

The Study conducted by Geert Hofstede (1980), is

considered a key turning point in our understanding
of cross-cultural impacts in the workplace. The study
was conducted on groups that had a lot in common,
such as age, gender and department of work, but
came from different cultural backgrounds.

Hofstede identified five dimensions on which

cultural differences
 Hofstede’s dimensions of culture theory and application

Uncertainty–avoidance

This dimension analyses cultural risks and uncertainty. People

with high uncertainty–avoidance are averse to risk taking and
ambiguity in the work environment. They prefer consistency,
predictability and personal control. They tend to prefer things to
be done in a certain way, value hard work and show low
tolerance for anything ‘out of the ordinary’, including ideas and
behaviour.

Conversely, those with low uncertainty–avoidance consider

workplace ambiguity a way of life; they are more relaxed in the
way they deal with unpredictability and open to the unexpected.

Example

‫شيرين‬
‫ليلى عوض‬
Hofstede’s dimensions of culture theory and application
Power–distance

This dimension concerns the degree of authority superiors

are expected to exercise over subordinates. In cultures with
high power–distance scores, power inequalities are accepted
as the norm. People live by rigid dictatorial hierarchies, with
rules reflected by an individual’s rank. This means
subordinates are expected to follow managers’ orders
without questioning or personal input.

By contrast, in lower-scoring, more equality countries,

people strive to share distribution of power and question
inequalities. Workers can expect to be able to address
managers by their first names, ask for help where needed
and participate in meetings and decisions whatever their
position.

‫عمار‬
‫سليمان‬
Hofstede’s dimensions of culture theory and application

Individualism–collectivism

This dimension analyses the degree to which people derive

their sense of identity on their uniqueness and personal
accomplishments, meaning they compete and enjoy success
individually.

Contrarily, collectivist cultures prize strong social frameworks

and group accomplishments over individual achievements.
People are expected to put the interests of the group ahead of
their own; in business this means personal relationships are
considered to be very important and there can be hostility
towards outsiders.

‫ايمان‬
‫عثمان‬
‫محمد ابو سنينة‬
Hofstede’s dimensions of culture theory and application

Masculinity–femininity

This dimension relates to the value different cultures

associate with certain aspects of life. Cultures denoted
as ‘masculine’ place emphasis on facets such as
performance, wealth and material possessions. These
nations are competitive by nature and usually ‘tough’ in
their approach rather than sensitive.

Conversely, so-called ‘feminine’ value systems take a

more cooperative approach with an emphasis on social
conscience. ‘Feminine’ countries focus on social
factors, such as interpersonal relations, interactions
with people and quality of life.
‫محمد عماوي‬
‫هدى‬
‫منذر‬
Hofstede’s dimensions of culture theory and application

5- Long Term Orientation (LTO):

Long-term orientation shows focus on the future and

involves delaying short-term success in order to
achieve long-term success. Long-term orientation
emphasizes persistence and long-term growth.
Short-term orientation shows focus on the near future,
involves delivering short-term success and places a
stronger emphasis on the present than the future.
Short-term orientation emphasizes quick results and
respect for tradition.

‫انس‬
‫حمزة‬
05  The influence of ethical and
sustainable globalization.
The influence of ethical and sustainable globalization.

• Business ethics (also corporate ethics) “is a form

of applied ethics or professional ethics that
examines ethical principles and moral
or ethical problems that arise in a
business environment. It applies to all aspects
of business conduct and is relevant to the conduct
of individuals and entire organizations”.
The influence of ethical and sustainable globalization.

• Globalization has brought about greater

involvement with ethical considerations and most
importantly achieving competitive advantage
through business ethics.

• Globalization and business ethics are linked as they

affect a company’s ability to commit to its
shareholders, in particular to external investors, and
preserve the trust needed for further investment
and growth.
The influence of ethical and sustainable globalization.

• Social responsibility is the responsibility of an

organisation for the impacts of its decisions and
activities on society and the environment, through
transparent and ethical behaviour that:

1. Contributes to sustainable development, including

the health and the welfare of society
2. Takes into account the expectations of
stakeholders
3. Is in compliance with applicable law
4. Is integrated throughout the organization.
The influence of ethical and sustainable globalization.

• The aim is to increase long-term profits and

shareholder trust through positive public relations
and high ethical standards to reduce business and
legal risk by taking responsibility for corporate
actions.
• CSR strategies encourage the company to make a
positive impact on the environment
and stakeholders including consumers, employees,
investors, communities, and others.
• Sustainability

• Meeting the needs of the present without

compromising the ability of future generations to
meet their own needs
THANK YOU