GLOBAL

1
GLOBAL ENVIRONMENT
Emerging Borderless World

• What is meant by the term?
• Customers
• Resources
• Manufacturing

What are signs of this Borderless Business
Environment?
What factors are facilitating this Environment?
2
GLOBAL ENVIRONMENT
Levels Of Globalization

• Domestic Stage
• Control Home Country
• Production Home Country
• Marketing Home Country
• Managers Home Country

• International Stage (Exporting)
• Control Home Country
• Production Home Country
• Marketing Home Country (Directed by
  International divison)
• Managers Home Country

• Multinational Stage
• Control Home Country
• Production Multiple Countries locations
• Marketing Multiple Countries locations
• Managers Home or Host Country

• Global Stage
• Control Multiple Countries
• Production Multiple Countries locations
• Marketing Multiple Countries locations
• Managers Global

3
GLOBAL ENVIRONMENT
Internal Business Environment

• Does the Basic Management Functions Change?
• Financing
• Production
• Distribution

• Does the Basic Management Functions Change?
• Planning
• Organizing
• Motivating
• Control

• What Does Change?
• Perceptions
• Expectations
• Norms

4
GLOBAL ENVIRONMENT
Economic Environment

• Economic Development
• Market Feasibility
• Labor availability
• LDCs
• Per Capita Income

• Infrastructure
• Def Physical facilities that support economic
  activity.
• Phones, Electricity, Transportation, Housing,
  Mail Service, Internet?

Resources Product Market Location of
Production is based on

• Availability of Raw materials, Customers, Labor
  or Political

If host country does not have necessary resources
and in place then organization will have to add
to accommodate business model.

• Supply base, Schools, Intermediate goods

5
GLOBAL ENVIRONMENT
Exchange Rate
Def Rate of one country currency in exchange for
another.
How does this impact the organization?
Exporting Product Home Currency goes up in
value then sales in Importing Country goes
Down Why?
Production Resources in Host Country Home
Currency goes up in value then sales in Importing
Country goes
No Change Why?

• Potential impact on organization is in transfer
  of profits to Home country.
• There are ways to minimize the impact

6
GLOBAL ENVIRONMENT
Legal / Political Environment

• Political Risk
• Def Risk of loss of assets, earnings, power or
  managerial control due to politically based
  events or acts by the host government.
• Govt nationalization of industries
• Govt sanctioned riots
• actions against company as the result of company
  or home
• government decisions.

• Political Instability
• Civil war

• Laws Regulations
• Transfer of profits
• Ownership
• Product related
• Taxation

7
GLOBAL ENVIRONMENT
Trade Alliances
Def Agreements between countries that are
designed to stimulate trade between members.
Current Past Alliances European Union
(EU) North America Free Trade Agreement (NAFTA)
1989 Economic Community of West African States
(ECOWAS) 1992 Association of South East Asian
Nations (ASEAN) 1978 Latin American Free Trade
Association (LAFTA) 1960

• Impact on External Organizations
• Barriers to entry for new organizations
• Expansion of large global organizations

8
GLOBAL ENVIRONMENT
Types of Trade Alliances

• 1) Free Trade Areas (FTA)
• Requires nations to remove all tariffs among
  members
• 2) Customs Unions
• Have a common external tariff policy for non
  members
• 3) Common Market
• Permit free flow of all factors of production
  (capital, labor, technology)
• 4) Economic Union
• Pursues common monetary fiscal policies
• 5) Political Union
• Same political position, merging into one nation

9
GLOBAL ENVIRONMENT
Sociocultural Environment
Culture Shared knowledge, beliefs and values
as well as modes of behavior and ways of thinking.
If organizations and managers acknowledge the
importance of considering the host country
culture when doing business. Then why dont they
get it right?

• Difficulty in applying the cultural information
  in all situations.
• Perceptions and bias of source of cultural
  information.
• Ethnocentrism Regarding ones own culture to
  be superior
• Use of past practices that gave successful
  results.

10
GLOBAL ENVIRONMENT
Cultural Characteristics That Influence
International Organizations

• Geert Hofstede Research
• 1) Power DistanceDegree to which people accept
  inequality in power.
• Low People expect equality in power
• High People do not expect equality in power
• 2) Uncertainty Avoidance Intolerance for
  uncertainty or ambiguity.
• Low High tolerance for uncertainty
• High Uncomfortable with uncertainty
• 3) Individualism Collectivism
• Individualism reflects a value where the
  individual takes care of themselves.
• Collectivism reflects values where each member
  looks out for other members interest.
• 4) Masculinity / Femininity
• Masculinity reflects preferences for
  achievement, heroism,
• assertiveness, and work centered.
• Femininity reflect preferences towards
  relationships, cooperation,
• group decision making quality of life.

11
GLOBAL ENVIRONMENT
Other Influences on International Organizations

• 1) Religion
• Sacred objects
• philosophical attitudes towards life taboos
  beliefs
• 2) Social Organization
• Social Status
• Family relationships
• Social mobility
• 3) Education
• Literacy
• Qualified Employees

12
GLOBAL ENVIRONMENT
Getting Started Internationally
1) Outsourcing Work Adv Lower labor /or
raw materials Disadv Lose some production
control 2) Exporting Adv retain control,
minimal risk, easy way to gain international
experience Disadv Subject to currency
fluctuations 3) Licensing
Franchising Adv Requires little capital only
way to tap into some countries Provides life
extension for mature products good alternative
to foreign production marketing Royalties are
guaranteed. Disadv No control over production
marketing Must have a distinctive product or
technology Royalties are small compare to
potential profits potential development of
competition. 4) Joint Venture Adv Takes
advantage of each partners strengths (
technology, capital. Disadv Personal conflicts
has weaknesses of each partner
13
GLOBAL ENVIRONMENT
Getting Started Internationally
5) Wholly Owned Foreign Affliiate Adv
Complete control established distribution
established production marketing host country
managers Disadv More capital risk Seen as
outsiders
6) Barter Def transfer of goods and services
for other goods and services Adv no currency
exchange issues Good for countries with no hard
currency Disadv converting goods for currency
uncertain profit margins
7) Co-Production Def Selling a product to a
customer with the intent for the customer to pay
in full or partially by making components for the
product being sold or a like product. Adv
Allows the sale of expensive products or to
countries with insufficient capital. Disadv Has
a limitation on what can be produced ( technology
transfer or finite amount of work)
14
GLOBAL ENVIRONMENT
Managing A Global Environment
Focus on sensitivity to cultural subtleties and
understand ways to provide proper leadership,
decision making, motivation control.
What do you think are factors facing managers on
an international assignment?

• Language
• Shared Experience
• Loneliness
• Homesickness

What factors should you have or look for in a
manager for an international assignment?

• Adventurous
• Adaptability
• Accepting

15
GLOBAL ENVIRONMENT
Preparation for Assignment

• How do members of the host country relate to
  typical areas of management?
• Leading
• Decision Making
• Motivation
• Controlling

• How should a company ensure the readiness of a
  Manager for an international assignment?
• Language training
• Assignment to position in the International
  division of the home office.
• Networking
• Knowledge of issues
• Problem resolution
• Short trips to host country
• Culture training
• Mentoring by host country manager