Chapter 4

Managing in a Global
Environment
Learning Objectives
Contrast ethnocentric, polycentric, and geocentric attitudes toward global
business.
Develop your skill at collaborating in cross-cultural settings.
Discuss the importance of regional trading alliances and global trade
mechanisms.
Describe the structures and techniques organizations use as they go international.
Explain the relevance of the political/legal, economic, and cultural environments
to global business.
Know how to be culturally aware
WHO owns what?
One way to see how global the marketplace has become is to consider the country of origin for some
familiar products.
Activity
1. The Candy Crush Saga mobile video game was developed by a company based in:
a. United States b. Sweden c. France d. Japan
2. Transportation network company Uber Technologies is a company based in:
a. Poland b. United Kingdom c. United States d. Germany
3. Rajah spices are products of a company based in:
a. United States b. Brazil c. India d. Switzerland
4. Dos Equis, Tecate, and Sol beer products are owned by a company based in:
b. The Netherlands b. Mexico c. United States d. Colombia
5. The America’s Got Talent show is a part of a franchise based in:
c. United States b. United Kingdom c. Italy d. Spain
6. Chobani Greek yogurt is owned by a company based in:
d. Japan b. France c. United States d. India
 Activity
7. The manufacturer of the Swatch watch is based in:
a. Germany b. United States c. Switzerland d. Brazil
8. The British newspaper the Independent is owned by a company based in:
a. Russia b. United Kingdom c. South Africa d. Canada
9. Spotify is owned by a company located in:
a. Sweden b. United Kingdom c. United States d. Canada
WHAT’S your global perspective?
Parochialism
Viewing world solely(mangers) through your own perspectives, leading to an inability
Viewing the y to recognize differences between people.
They ignore others’ values and customs and rigidly apply an attitude of “ours is better than
theirs” to foreign cultures.
In fact, there are three possible global attitudes.
 Ethnocentric attitude (Home country and foreign country)
 Polycentric attitude
 Geocentric attitude
Ethnocentric attitude
The belief that the best work approaches and practices are those of the
home country.
Polycentric attitude
The view that the managers in the host country(foreign Countries) know
the best work approaches and practices for running their business.
Geocentric attitude
A world-oriented view that focuses on using the best approaches and
people from around the globe.
DOF (wide Degree of Freedom)/ Empowerment of employees
GLOBAL MIND SET
UNDERSTANDING the global trade
environment
Countries and organizations have been trading with each other
for centuries.
Global trade today is shaped by two forces:
• Regional trading alliances and
• Global Trade mechanisms that ensure that global trade can
happen.
Regional Trading Alliances
TA reducing the trade barrier such as tariffs or taxes imposed upon imported
goods.
Now, global competition and the global economy are shaped by regional trading
agreements, including the
 European Union (EU)
 North American Free Trade Agreement(NAFTA), and
 The Association of Southeast Asian Nations (ASEAN),
European Union (EU)
A union of 28 European nations created as a unified economic and trade entity.
euro
A single common European currency
• North American Free Trade Agreement (NAFTA)
An agreement among the Mexican, Canadian, and U.S. governments in which barriers to trade
have been eliminated.
• Association of Southeast Asian Nations (ASEAN)
A trading alliance of 10 Southeast Asian nations.
OTHER TRADE ALLIANCES
Other regions around the world have also developed regional trading alliances.
For instance, the 54-nation African Union (AU), which came into existence in 2002.
Five east African nations have formed a common market called the East African
Community (EAC). Under this agreement, goods can be sold across borders without
tariffs. The next step for the EAC will be monetary union, although that will take time to
implement.
The South Asian Association for Regional Cooperation (SAARC), composed of eight
member states (India, Pakistan, Sri Lanka, Bangladesh, Bhutan, Nepal, the Maldives, and
Afghanistan), began eliminating tariffs in 2006.
 Finally, in 2015, 12 countries forged the terms of a trade alliance called the Trans- Pacific
Partnership (TPP). The countries involved in the agreement include the United States, Canada,
Mexico, Japan, Australia, and seven other countries around the Pacific region, excluding China.

 The preceding discussion indicates that global trade is alive and well.
 Regional trade alliances continue to be developed in areas where member countries believe it’s
in their best interest economically and globally to band together and strengthen their economic
position.
Global Trade Mechanisms
We’re going to look at four important global trade mechanisms:
• The World Trade Organization
• The International Monetary Fund IMF
• The World Bank Group, and
• The Organization for Economic Cooperation and Development.
• World Trade Organization (WTO)
A global organization of 161 countries that deals with the rules of trade among nations.
• International Monetary Fund (IMF)
An organization of 188 countries that promotes international monetary cooperation and provides
advice, Temporary loans, and technical assistance to establish
1. Financial stability.
2. To strengthen Economies.
• World Bank Group
A group of five closely associated institutions that provides financial and technical assistance to
developing countries.
• Organization for Economic Cooperation and Development (OECD)
An international economic organization that helps its 34 member countries
achieve sustainable economic growth and employment.
DOING business globally
Today, few companies don’t do business internationally. However, there’s not a
generally accepted approach to describe the different types of international companies;
different authors call them different things.
We use the terms
 Multinational/ MNC’s
 Multi-domestic
 Global company, and
 Transnational or borderless organization
 Multinational corporation (MNC)
A broad term that refers to any and all types of international companies that maintain operations in
multiple countries e.g Walmart
 Multidomestic corporation
An MNC that decentralizes management and other decisions to the local country.
This type of globalization reflects Polycentric attitude. E.g Nestle
 Global company
An MNC that centralizes management and other decisions in the home country. Managers This type of
globalization reflects on Ethnocentric attitude e.g Sony
 Transnational or borderless organization
An MNC in which artificial geographical barriers are eliminated. Reflects the Geocentric attitude e.g IBM
How Organizations Go International?

1. Exporting
2. Importing
3. Joint Venture.
4. Foreign Subsidiary
5. licensing
6. Franchising
1. Global sourcing/ Global Outsourcing
 Purchasing materials or labor from around the world wherever it is cheapest.
 Global sourcing goal is take advantage of lower costs in order to be more
competitive. (Competitive Advantage)
 The next step in going international may involve
 Exporting
Making products domestically and selling them abroad.
 Importing
Acquiring products made abroad and selling them domestically.
Price determination is done Demand and Supply.
 Licensing
An organization gives another organization the right to make or sell its products using its technology or
product specifications.
Used by Manufacturing Organization.
 Franchising
An organization gives another organization the right to use its name and operating methods.
Used by Service organization.
 Strategic alliance
A partnership between an organization and foreign company partner(s) in which both share resources and
knowledge in developing new products or building production facilities.
1.Joint venture
A specific type of strategic alliance in which the partners agree to form a separate, independent
organization for some business purpose.
2.Foreign subsidiary
Directly investing or in a foreign country by setting up a separate and independent production facility
office.
 Any manager who finds himself or herself in a new country faces
challenges. PESTLE Factors

 The Political/Legal Environment

The growing complexity of the political and legal landscapes in the global environment is one
of the most important trends affecting global business.
Legal and political forces are unique to each country, and sometimes the laws of one contradict
those of another, or are ignored altogether e.g. Child labor.
 The Economic Environment
A global manager must be aware of economic(currency rate $, Tax & interest rate, Inflation)
issues when doing business in other countries.
First, it’s important to understand a country’s type of economic system.
1. Free market economy
2. Planned economy
 Free market economy
An economic system in which resources are primarily owned and controlled by the private sector.
 Planned economy
An economic system in which economic decisions are planned by a central government. For example
US and China.
 Other economic issues managers need to understand include
(1) Currency exchange rates,
(2) Inflation rates, and
(3) diverse tax policies
 The Cultural Environment
Most often, cross-cultural challenges are described between countries that speak different
languages, and these language differences can result in conflict or misunderstandings.
National culture
 The values and attitudes shared by individuals from a specific country that shape their behavior and beliefs about what is
important.
 Geert HOFSTEDE’S Five Dimensions of National Culture. Difference in Work-Related Value
 THE GLOBE FRAMEWORK FOR
ASSESSING CULTURES
 Global Leadership and Organizational Behavior Effectiveness (GLOBE) program
The research program that studies cross-cultural leadership behaviors. Research is led by Robert House and this
on going research is extended Hofstede’s work.
 For each of these dimensions, we have indicated which countries rated high, which rated moderate, and which
rated low.
 Power distance: the extent to which a society accepts that power in institutions and organizations is distributed
unequally.
(High: Russia, Spain, and Thailand.
Moderate: England, France, and Brazil.
Low: Denmark, the Netherlands, and South Africa.)
 Uncertainty avoidance: a society’s reliance on social norms and procedures to improve the unpredictability
of future events.
(High: Austria, Denmark, and Germany.
Moderate: Israel, United States, and Mexico.
Low: Russia, Hungary, and Bolivia.)
 Assertiveness: the extent to which a society encourages people to be tough, confrontational, assertive,
and competitive rather than modest and tender.
(High: Spain, United States, and Greece. Moderate: Egypt, Ireland, and Philippines. Low: Sweden, New
Zealand, and Switzerland.)
 Humane orientation: the degree to which a society encourages and rewards individuals for being fair,
altruistic, generous, caring, and kind to others.
(High: Indonesia, Egypt, and Malaysia. Moderate: Hong Kong, Sweden, and Taiwan. Low: Germany, Spain,
and France.)
 Future orientation: the extent to which a society encourages and rewards future-oriented behaviors
such as planning, investing in the future, and delaying gratification.
(High: Denmark, Canada, and the Netherlands. Moderate: Slovenia, Egypt, and Ireland. Low: Russia,
Argentina, and Poland.)
 Institutional collectivism: the degree to which individuals are encouraged by societal institutions to be
integrated into groups within organizations and society.
(High: Greece, Hungary, and Germany. Moderate: Hong Kong, United States, and Egypt. Low: Denmark,
Singapore, and Japan.)
Contd.
 Gender differentiation: the extent to which a society maximizes gender role differences as
measured by how much status and decision-making responsibilities women have.
(High: South Korea, Egypt, and Morocco. Moderate: Italy, Brazil, and Argentina. Low: Sweden,
Denmark, and Slovenia.)
 In-group collectivism: the extent to which members of a society take pride in membership in
small groups, such as their family and circle of close friends, and the organizations in which
they’re employed.
(High: Egypt, China, and Morocco. Moderate: Japan, Israel, and Qatar. Low: Denmark,
Sweden, and New Zealand.)
 Performance orientation: the degree to which a society encourages and rewards group
members for performance improvement and excellence.
(High: United States, Taiwan, and New Zealand, Moderate: Sweden, Israel, and Spain. Low:
Russia, Argentina, and Greece.)
Challenges of Managing a Global Workforce/
Workplace?
 Language barriers/Communication
 Technology problem/ Working method
 Pay level
 Financial challenges
 Challenges of Managing a Global Workforce
 Cross-cultural work teams can have many benefits, but conflicts can arise due to
differences in work methods, pay levels, and language barriers.
 Global companies with multicultural work teams are faced with the challenge of
managing the cultural differences in work-family relationships.
 Some researchers have suggested that managers need (solution)
 1. Cultural intelligence or cultural awareness and sensitivity skills.
 Cultural intelligence encompasses three main dimensions:
(1) knowledge of culture as a concept how cultures vary and how they affect behavior;
(2) Mindfulness: the ability to pay attention to signals and reactions in different cross-
cultural situations; and
(3) Behavioral skills: using one’s knowledge and mindfulness to choose appropriate
behaviors in those situations.
2. Global Mind-Set: World oriented view
Global mind-set
 Other researchers have said that what affective global leaders need is a global mind-
set, attributes that allow a leader to be effective in cross-cultural environments . Those
attributes have three components, as