3

Managing
Globalization
 Learning Outcomes

After studying this chapter, you should be able to:

 Define globalization
 Describe the globalization process
 Explain the main causes of globalization
 Identify the pros and cons of globalization
 Discuss factors that affect organizations due to
globalization
 Identify issues related to managing multinational
organizations

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 Introduction

Definition of globalization based on different levels:

 A worldwide level
– refers to a growing economic interdependence
among countries which is reflected by the
increasing cross-border flows of goods, services,
capital and knowledge
 A specific country’s level
– refers to the extent of global inter-linkages of a
country’s economy

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 Introduction (cont.)
 A specific industry’s level
– refers to the degree to which an organization’s
competitive position in an industry of a country is
interdependent with that of another country
 A specific organization’s level
– refers to the extent of an organization’s expansion in
terms of revenue and asset base across countries
– refers to the extent to which the organization
engages in cross-border flows of capital, goods and
knowledge across subsidiaries

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 The Organization’s External
Environment
When an organization intends to expand globally,
there are several factors that the managers
have to consider or evaluate in an international
(external) environment before finalizing the
decision, which if overlooked, can create a
negative impact to the organization concerned.

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 The Organization’s External
Environment (cont.)
The external environment factors are:
 Economic
– Each country in the world has a different
economic system.
– Managers need to be familiar with the economic
system of the countries concerned, the level of
the country’s economic progress, and its
exchange rates.

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 The Organization’s External
Environment (cont.)
 Legal and political
– Each country has a different legal system.
– The laws of a country can be based upon
tradition, judicial precedence, common law,
codified law systems and international law.
– The political background, stability, government
influence, tariffs, quotas, trade controls of a
country will also need to be considered before
expansion into a country is done.

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 The Organization’s External
Environment (cont.)
 Sociocultural
– Managers must be able to adapt to the societal
differences such as the values, languages and
customs of a country.
 Technological
– The success of technological transfer is dependent
on the suitability of the technology, the social and
economic conditions of the country, and the
willingness and ability of the receiving party to use
and adapt the technology.

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 Process of Globalization

Created by:
 Spread of market-based systems
 Decline of trade and investment barriers
 Lowered costs of communication and
transportation

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 Implications of Globalization

Factors that create international business opportunities:

Production
Market
Technology
Natural resources, agricultural products and geographic
factors (climate or terrain)
Level of economic development and infrastructure
Cultural characteristics, social activities and demographic
trends
Changing political situations and legal factors

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 Implications of
Globalization (cont.)
 Limited opportunities for growth in domestic markets
 Intangible assets
 Pull and push factors

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 Classification of Factors
for Global Expansion of
Organizations
INTERNAL EXTERNAL
PROACTIVE Managerial urge Margin opportunities
Economies of scale Volume opportunities
Economies of scope Serving of internalized
Learning consumers
Locational advantages
Monitoring of competitors

REACTIVE Bandwagon effect Unsolicited orders

Excess stock Unattractive home market
Excess production Retaliatory
capacity Political pressure
Risk spreading
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 Constraints of Globalization

 Protectionist countertrends
 Consumer behaviour
 Business systems
 Social cultures

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 Benefits of Globalization

 Economies of scale, scope and learning

 Exploitable relationships between business
segments and geographic areas
 Shared organizational resources among
business units
 Differences in factor markets

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 The Global Manager

 Refers to:
– A manager who views markets and production
globally and looks for higher profits for his/her
organization on a global basis

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 Management Challenges in
a Global Organization

 Issues/challenges:
– Skills of a global manager
– Understanding cultural issues
– Addressing ethical issues
– Standardization or local customization
– Locating activities
– Choice of entry modes

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 Managing a Multinational
Organization

 Issues:
– Staffing
– Training
– Managing employees for international business
operations

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