John R. Schermerhorn, Jr.

5 Daniel G. Bachrach

Introduction to
Management
13th edition

CHAPTER 5
INTERNATIONAL
MANAGEMENT
PLANNING AHEAD — KEY TAKEAWAYS
 What are the management challenges of
globalization?
 What are global businesses and how do they
work?
 What is culture and how does it influence global
management?
 How can we benefit from global management
learning?

Copyright ©2015 John Wiley & Sons, Inc.

 CHAPTER 5 OUTLINE
1. Management and Globalization
 Global management
 Why companies go global
 How companies go global
 Global business environments
2. Global Businesses
 Types of global businesses
 Pros and cons of global businesses
 Ethics challenges for global businesses

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 CHAPTER 5 OUTLINE
3. Culture and Global Diversity
 Cultural intelligence
 Silent languages of culture
 Tight and loose cultures
 Values and national cultures
4. Global Management Learning
 Are management theories universal?
 Intercultural competencies
 Global learning goals

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 MANAGEMENT AND GLOBALIZATION
 Key concepts in the challenges of globalization:
 Global economy
 Globalization
 Global management
 World 3.0
 Global manager

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 MANAGEMENT AND GLOBALIZATION

 Global economy
 Resources, markets, and competition are worldwide
in scope
 Globalization
 Theprocess of growing interdependence among
elements in the global economy
 World 3.0
 Nationscooperate while respecting different national
characters and interests

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 MANAGEMENT AND
GLOBALIZATION
 Global management
 Managing business and organizations with business
interests in more than one country

 Global manager
 Is culturally aware and informed on international affairs

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 MANAGEMENT AND GLOBALIZATION

 International businesses
 Conducting for-profit transactions of goods and
services across national boundaries
 Reasons why businesses go global:

Profits Customers Suppliers Capital Labor Risk

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 MANAGEMENT AND
GLOBALIZATION
 Market entry strategies
involve the sale of goods or services to foreign
markets but do not require expensive
investments

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MANAGEMENT AND GLOBALIZATION

 Types of market entry strategies:

 Global sourcing
 Exporting
 Importing
 Licensing agreement
 Franchising

 Types of direct investment strategies:

 Jointventure
 Strategic alliance
 Owned subsidiary

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FIGURE 5.1 COMMON FORMS OF GLOBAL BUSINESS—
FROM MARKET ENTRY TO DIRECT INVESTMENT
STRATEGIES

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MANAGEMENT AND GLOBALIZATION

• the process of purchasing materials or

Global sourcing services around the world for local use

• selling locally made products in foreign

Exporting markets

• buying foreign-made products and

Importing selling them domestically

Licensing • one firm pays fee for rights to make or

agreement sell another company’s products

• a fee is paid for rights to use another

Franchising firm’s name and operating methods

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MANAGEMENT AND GLOBALIZATION

Insourcing refers to local job

creation that results from foreign
direct investment

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 MANAGEMENT AND GLOBALIZATION

Types of insourcing:

Joint Strategic Foreign

ventures alliances subsidiaries
a partnership
operates in a in which
foreign country foreign and local operation
through co- domestic firms completely
ownership by share owned by a
foreign and resources and foreign firm
local partners knowledge for
mutual gains

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MANAGEMENT AND GLOBALIZATION
Criteria for choosing a joint
venture partner:
• Familiarity with your firm’s major business
• Strong local workforce
• Future expansion possibilities
• Values its customers
• Strong local market for partner’s own
products
• Good profit potential
• Sound financial standing

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MANAGEMENT AND GLOBALIZATION

Global business
environments
Legal and political systems

Trade agreements and trade barriers

Regional economic alliances

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 MANAGEMENT AND GLOBALIZATION

Legal and political systems

Differing laws and practices regarding
 Business ownership
 Foreign currency exchange

 Protection of intellectual property rights

 Counterfeit merchandise

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 MANAGEMENT AND GLOBALIZATION

Legal and political systems

Political risk
 Potential loss in value of a foreign investment due
to instability and political changes in the host
country
Political risk analysis
 Forecast political disruptions that threaten the value
of a foreign investment

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 MANAGEMENT AND GLOBALIZATION

 Trade Agreements and Trade Barriers

World Trade Organization
 Most favored nation status
 Tariffs

 Nontariff barriers

 Protectionism

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MANAGEMENT AND GLOBALIZATION

Regional Economic Alliances

 NAFTA – North American Free Trade Agreement
 EU – European Union
 APEC – Asia Pacific Economic Cooperation
 ASEAN – Association of Southeast Asian Nations
 SADC – Southern Africa Development Community

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 GLOBAL BUSINESSES

 Types of global businesses:

Global corporation
 MNE (multinational enterprise) or MNC
(multinational corporation) with extensive business
operations in more than one foreign country
Transnational corporation
 A global corporation that operates worldwide on a
borderless basis

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 GLOBAL BUSINESSES

 Mutual benefits for host country and

global corporation or MNC:
 Shared growth opportunities
 Shared income opportunities
 Shared learning opportunities
 Shared development opportunities

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FIGURE 5.2 WHAT SHOULD GO RIGHT AND WHAT
CAN GO WRONG IN GLOBAL CORPORATION AND
HOST-COUNTRY RELATIONSHIPS

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 GLOBAL BUSINESSES
 Host country complaints about MNCs:
Excessive profits
Domination of local economy
Interference with local government
Hiring the best local talent
Limited technology transfer
Disrespect for local customs

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 GLOBAL BUSINESSES

 MNC complaints about host countries:

Profitlimitations
Overpriced resources
Exploitative rules
Foreign exchange restrictions
Failure to uphold contracts

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 GLOBAL BUSINESSES

Ethical challenges
for Global
Businesses:
• Corruption
• Sweatshops
• Child labor
• Conflict minerals

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 GLOBAL BUSINESSES

 Ethical issues for Global Businesses:

Corruption – illegal practices that further
one’s business interests
Foreign Corrupt Practices Act – makes it
illegal for U.S. firms and their representatives
to engage in corrupt practices overseas
 Bribes to foreign officials
 Excessive commissions

 Non monetary gifts

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 GLOBAL BUSINESSES

 Child labor and Sweatshops:

Child labor – full time employment of children
for work otherwise done by adults
Sweatshops – employ workers at very low
wages for long hours in poor working
conditions

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CULTURES AND GLOBAL DIVERSITY
Culture

• The shared set of beliefs, values, and patterns of behavior

common to a group of people

Culture shock

• Confusion and discomfort a person experiences in an

unfamiliar culture

Cultural intelligence

• The ability to adapt and adjust to new cultures

Ethnocentrism

• Tendency to consider one’s own culture as superior to others

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CULTURES AND GLOBAL DIVERSITY

Confusion

Stages in adjusting to a
new culture: Small victories

The honeymoon

Irritation and
anger

Reality

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CULTURES AND GLOBAL DIVERSITY

Silent Context
languages of • Low context
culture • High context

Space Time
• Monochronic
• Proxemics
• Polychronic

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 CULTURES AND GLOBAL DIVERSITY

Context
Low context cultures - emphasize
communication via spoken or written words
 United States
 Canada

 Germany

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 CULTURES AND GLOBAL DIVERSITY

Context
High context cultures – rely on nonverbal and
situational cues as well as on spoken or
written words
 Thailand
 Malaysia

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CULTURES AND GLOBAL DIVERSITY

Time
Monochronic cultures – people tend to do
one thing at a time
United States

Polychronic cultures – time is used to

accomplish many different things at once
Egypt

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 CULTURES AND GLOBAL DIVERSITY

Space
Proxemics– study of how people use space
to communicate
 In the U.S. people value “personal space”
 Many Latin and Asian cultures expect much less

personal space

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 CULTURES AND GLOBAL DIVERSITY

Tight and Loose Cultures

 Cultural tightness-looseness
• Strength of norms that govern social behavior
• Tolerance for any deviance from norms
• Tight = Japan, Korea, Malaysia
• Loose = Brazil, Hungary, Australia

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CULTURES AND GLOBAL DIVERSITY

Values and national cultures (Hofstede):

Power Uncertainty Individualism- Masculinity- Time

distance avoidance collectivism femininity orientation

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FIGURE 5.3 HOW COUNTRIES’ SHORT-TERM
THINKING AND LONG-TERM THINKING
COMPARE ON HOFSTEDE’S DIMENSIONS OF
NATIONAL CULTURE.

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 GLOBAL MANAGEMENT LEARNING

 Comparative management
How management systematically differs
among countries and/or cultures
 Intercultural competencies
 Skills and personal characteristics that help
us be successful in cross-cultural situations.
 Global managers
Need to successfully apply management
functions across international boundaries

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 GLOBAL MANAGEMENT LEARNING

Global learning goals:

Notuniversal
Engage critical thinking
Look everywhere for new management ideas
Always consider culture!

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