Lesson 4: Managing in a Global Environment

Global Organizations are those which operate and compete in more than one
country.

Four Stages of Globalization

1. Domestic stage- market potential is limited to the home country, with all
production and marketing facilities located at home.

2. International stage- exports increase, and the company usually adopts a

multidomestic approach, meaning that competition is handled for each country
independently.

3. Multinational stage, the company has marketing and production facilities

located in many countries, with more than one-third of its sales outside the home
country. These companies adopt a globalization approach, meaning they focus
on delivering a similar product to multiple countries.

4. Global (or stateless) stage- These corporations operate in true global fashion,
making sales and acquiring resources in whatever country offers the best
opportunities and lowest cost. At this stage, ownership, control, and top
management tend to be dispersed among several nationalities.

Organizations have a couple of ways to become involved internationally. One is to

seek cheaper sources of materials or labor offshore, which is called offshoring or global
outsourcing.

Market Entry Strategies

Exporting- An entry strategy in which the organization maintains its production facilities
within its home country and transfers its products for sale in foreign countries.
Global outsourcing- also called offshoring, means engaging in the international
division of labor so that work activities can be done in countries with the cheapest
sources of labor and supplies.
Licensing- With licensing, a corporation (the licensor) in one country makes certain
resources available to companies in another country (the licensee). These resources
include technology, managerial skills, and/or patent and trademark rights.
Joint venture- A variation of direct investment in which an organization shares costs
and risks with another firm to build a manufacturing facility, develop new products, or set
up a sales and distribution network.
Greenfield venture- The riskiest type of direct investment, whereby a company builds a
subsidiary from scratch in a foreign country.

Key Factors in the International Environment

 Economic- represents the economic conditions in the country where the
international organization operates.
 Legal-Political- Businesses must deal with unfamiliar political systems when
they go international, as well as with more government supervision and
regulation.
Political Risk a company’s risk of loss of assets, earning power, or managerial
control due to politically based events or actions by host governments.
 Sociocultural- A nation’s culture includes the shared knowledge, beliefs, and
values, as well as the common modes of behavior and ways of thinking among
members of a society.

Hofstede’s Value Dimensions

1. Power distance- High power distance means that people accept inequality in power
among institutions, organizations, and people. Low power distance means that people
expect equality in power.
2. 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.
3. Individualism and collectivism- Individualism reflects a value for a loosely knit social
framework in which individuals are expected to take care of themselves. Collectivism
means a preference for a tightly knit social framework in which individuals look after one
another and organizations protect their members’ interests.
4. Masculinity/femininity. Masculinity stands for preference for achievement, heroism,
assertiveness, work centrality (with resultant high stress), and material success.
Femininity reflects the values of relationships, cooperation, group decision making, and
quality of life.

Long-Term Orientation- A greater concern for the future and high value on thrift and
perseverance.
Short-Term Orientation- A concern with the past and present and a high value on meeting
social obligations.
High-Context Culture- A culture in which communication is used to enhance personal
relationships.
Low-Context Culture- A culture in which communication is used to exchange facts and
information.

GATT and the World Trade Organization

The General Agreement on Tariffs and Trade (GATT), signed by 23 nations in 1947, started
as a set of rules to ensure nondiscrimination, clear procedures, the negotiation of disputes,
and the participation of lesser-developed countries in international trade.
European Union
An alliance begun in 1957 to improve economic and social conditions among its members.