Global Management: Managing

across borders
By: Estephany Gerona
 Globalization, Global Village, e-
commerce and Global economy
• Globalization the trend of the world economy
toward becoming a more interdependent
system.
• Global Village is the shrinking of time and
space as air travel and the electronic media
have made it easier for the people of the
globe to communicate with one another.
 Globalization, Global Village, e-
commerce and Global economy

• E-commerce or electronic commerce, the

buying and selling of products and services
through computer networks.
• Global economy refers to the increasing
tendency of the economies of the world to
interact with one another as one market
instead of many national markets
 International Management
• Multinational Corporation (multinational
enterprise) is a business firm with operations
in several countries. (Procter and Gamble,
Unilever, Coca-cola, toyota)
• Multinational Organization is a non profit
organization with operations in several
countries. (red cross, world health
organization)
 Types of International Managers
• Ethnocentric Managers “we know best” -
managers who believe that their native
country, culture, language, and behavior are
superior to others. Parochialism a view of
people who see things solely through their
own perspective.
• Polycentric Managers “ they know best” –
managers who believe that native managers
in foreign offices best understand native
personnel and practices so the home office
should leave them alone.
 Types of International Managers
• Geocentric Managers “what’s best is what’s
effective, regardless of origin” – managers
that accept that there are differences and
similarities between home and foreign
personnel and practices that they should use
whatever techniques are most effective.
– Expatriate Manager a manager living or working
in a foreign country.
 Reasons for expansion
1. Availability of Supplies
2. New Markets
3. Lower Labor Costs
Maquiladoras – manufacturing plants allowed
to operate in Mexico with special privileges in
return for employing Mexican citizens.
4. Access to Finance Capital
5. Avoidance of Tariffs and Import Quotas
 Five ways of Expanding Internationally

Importing, Licensing Joint Wholly

Global owned
Exporting and and Ventures
Outsourcing subsidiaries
Countertrading Franchising

Lowest Risk Highest

and Risk and
Investment Investment
 Expansion..
• Global Outsourcing – using
suppliers outside the company
to provide labor, goods and
services.
• Importing a company who
buys goods and services
outside the country and sells
them locally.
• Exporting a company produces
goods and services
domestically and sells them
outside the country
• Countertrading is bartering of
goods for goods.
• Licensing a company allows a
foreign company to pay a fee
to make or distribute its
products and services.
• Franchising a form of licensing
which a company allows foreign
company to pay a fee and share of
the profit in return for using the
said company’s brand name,
materials and services.
• Joint Ventures – a strategic alliance
with foreign company to share risks
and rewards for starting new
enterprise together.
• Wholly owned subsidiary – a foreign
subsidiary that is totally owned and
controlled by and organization.
– Greenfield Venture is a foreign
subsidiary that the owning
organization has built from
scratch.
 ECONOMIC SYSTEMS
• Free Market Economy – (lassiez faire) the
production of goods and services is controlled by
private enterprise and the interaction of the
forces of supply and demand, rather by the
government.
• Command Economy – the government owns
most businesses and regulates the amounts,
types, and prices of goods and services.
• Mixed Economy- important industries are owned
by the govt., but others are controlled by private
enterprise.
 Privatization, Developed and Less
developed countries
• Privatization – state owned businesses were sold
off to private enterprise.
• Developed Countries – are those with high level of
economic development and generally high average
level of income among their citizens. (First world
Countries)
• Less Developed Countries (developing countries)
consists of nations with low economic
development and low average incomes. (third
world countries.
• Second world countries – mostly are communist
nations.
 Economic development..
• Infrastructure are the physical facilities that
form the basis of economic development.
• Exchange Rate is the rate at which country’s
currency can be exchanged for another
country’s currency.
• Inflation Rate is the sudden increase on the
price of prime commodities.
 Political Legal Differences
GOVERNMENT SYSTEMS
•Democratic Governments rely on free elections,
representative assemblies and under control of
citizens.
•Totalitarian Governments are ruled by dictator, a
single political party or special membership group.
•Parliamentary Government
•Monarchy
 Political-legal…
• Laws and Regulations
• Political Risk – the risk in changes in politics
and government which directly impairs the
company.
– Instability
– Expropriation
 The World of Free Trade
• FREE TRADE the movement of goods and
services among nations without political or
economic obstruction.
• BARRIERS TO INTERNATIONAL TRADE
– TRADE PROTECTIONISM the use of government
regulations to limit the import of goods and
services.
– TARIFFS a trade barrier in the form of customs
duty, taxes levied on imports.
 Barriers..
• IMPORT QUOTA a trade barrier in the form of
limit of numbers of a product that can be
imported.
– DUMPING the practice of foreign company
exporting products abroad at a lower price in the
home market.
• EMBARGOES a complete ban on the import or
export of certain products.
 WORLD OGRANIZATIONS
• WORLD TRADE ORGANIZATION (WTO) it consists
of 148 countries. It is designed to monitor and
enforce trade agreements. GATT
• WORLD BANK is to provide low interest loans to
developing nations for improving transportation,
education, health and telecommunications. (184
country members)
• INTERNATIONAL MONETARY FUND (182
members) is designed to assist in smoothing the
flow of money between nations.
Major Trading Blocs