Chapter 3 - Global Management

GLOBAL
MANAGEMENT
Chapter 3
WHAT’S YOUR GLOBAL PERSPECTIVE?
 Parochialism
 Is viewing the world exclusively through
one’s own eyes and perspectives.
 Is not recognizing that others have a
different ways of living and working.
 Is a significant problem for managers working
in a global business world.
 Is falling into the trap of ignoring others’
value and customs and strictly applying an
attitude of “ours is better than theirs” to
foreign cultures.
WHAT’S YOUR GLOBAL
PERSPECTIVE?
 Ethnocentric Attitude
 Belief
that home country has the best work
approaches and practices
 Polycentric Attitude
 Viewthat managers in host country know the
best approaches and practices
 Geocentric Attitude
A world-oriented view that focuses on using the
best approaches and people from around the
globe
3
REGIONAL TRADING ALLIANCES
 The European Union (EU)
A unified economic and trade entity
 Belgium, Denmark, France, Greece, Ireland, Italy,
Luxembourg, the Netherlands, Portugal, Spain, the
United Kingdom, Germany, Austria, Finland, and
Sweden
 Economic and monetary union (Euro)
 North American Free Trade Agreement
(NAFTA)
 Eliminated barriers to free trade (tariffs, import
licensing requirements, and customs user fees)
 United States, Canada, and Mexico
4
REGIONAL TRADING ALLIANCES
 U.S.- Central America Free Trade Agreement

(CAFTA)
 Free Trade Area of the Americas
 Southern Cone Common Market (Mercosur)
 Association of Southeast Asian Nations
(ASEAN)
 African Union
 South Asian Association for Regional
Cooperation (SAARC)
ASEAN MEMBERS
SAARC MEMBERS
THE WORLD TRADE
ORGANIZATION (WTO)
 Evolved from the General Agreement on
Tariffs and Trade (GATT) in 1995
 Functions as the only global organization
dealing with the rules of trade among nations
 Has 147 member nations
 Monitors and promotes world trade
9
DIFFERENT TYPES OF GLOBAL
ORGANIZATIONS
 Multinational Corporation (MNC)
◦ A firm that maintains operations in multiple
countries but manages from the home
country
 Multidomestic Corporation (TNC)
◦ Is an MNC that decentralizes management
and other decisions to the local country.
 Global Company
Is an MNC that centralizes its management

and other decisions in the home country.
10
DIFFERENT TYPES OF GLOBAL
ORGANIZATIONS
Transnational or Borderless Organization
 Is an MNC that has eliminated structural
divisions that impose artificial geographic
barriers and is organized along business lines
that reflect a geocentric attitude
HOW ORGANIZATIONS GO
GLOBAL
 Global sourcing
 Purchasing
materials or labor from around the
world where it is cheapest
 Exporting
 Makingproducts at home and selling them
overseas
 Importing
 Selling products at home that are made overseas
13
GLOBAL (CONT’D)
 Licensing
 Giving another organization the right to make or
sell its products using its technology, or product
specifications
 Licensing (manufacturing organizations)
 Franchising
 Giving
another organization the right to use
make its name and operating methods
 Franchising (service organizations)
14
GLOBAL (CONT’D)
 Strategic Alliance
 Partnershipbetween an organization and a foreign
company in which both share resources and
knowledge in developing new products or building
new production facilities
- Joint Venture
A specific type of strategic alliance in which the
partners agree to form a separate, independent
organization for some business purpose
 Foreign Subsidiary
 Directly investing in a foreign country by setting up
a separate and independent production facility or
office
15
MANAGING IN A GLOBAL
ENVIRONMENT
 The Political/Legal Environment
 Stability or instability of legal and political
systems
 Legal procedures are established and followed
 Fair and honest elections held on a regular basis
 Differences in the laws of various nations
 Effects on business activities
 Effects on delivery of products and services
16
ENVIRONMENT (CONT’D)
 The Economic Environment
 Economic Systems
 Market economy
 Aneconomy in which resources are primarily owned and
controlled by the private sector
 Planned economy
 Aneconomy in which all economic decisions are planned
by a central government
 Monetary and Financial Factors
 Currency exchange rates
 Inflation rates
 Diverse tax policies
17
ENVIRONMENT (CONT’D)
 The Cultural Environment
 National Culture
 Values and attitudes shared by individuals from a
specific country that shape their behaviour and their
beliefs about what is important
 May have more influence on an organization than the
organization culture
18
GLOBAL MANAGEMENT IN
TODAY’S WORLD
 Challenges
 Openness associated with globalization
 Significant cultural differences (e.g.,
Americanization)
 Adjusting leadership styles and management
approaches
 Risks
 Loss of investment in unstable countries
 Increased threat of terrorism
 Economic interdependence of trading
 Dealing with increased uncertainty, fear, and anxiety

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GLOBAL

 U.S.- Central America Free Trade Agreement

Is an MNC that centralizes its management

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