Management (Robbins & Coulter) - Chapter 4

Parochialism

Viewing the world solely through your own perspectives,leading to an inability to regonize differences between people

Nationalism vs. Globalism Pendulum

←goes back to nationalism as politics change

globalism still exists→

How Organizations Go Global

• as you go up you have less control

• global sourcing has the least level of investment and the most control

• foreign subsidiary has the highest level of investment and the least control

How to apply cultural guidelines?

• At a simplistic level it means, “When in Rome, do as the Romans do”

• However, Hofstede and the GLOBE studies will help you alert managers to potential problems that might emerge due to cultural differences

What Americans are Like

• Americans are very informal.

• Americans are direct.

• Americans are competitive.

• Americans are achievers.

• Americans are independent and individualistic.

• Americans value personal space.

• Americans dislike silence.

• Americans value punctuality.

• Americans value cleanliness.

Political/Legal Environmet

• U.S. managers are accustomed to a stable legal and political system

• Managers must stay informed of the specific laws in countries where they do business

• Some countries have risky political climates(some countries have virtually meaningless contracts that will lead to never-ending court)

Globalization will continue despite its critics because

• The infrastructure is already in place for global trade.

• The evidence shows globalization is NOT the cause of unemployment—technology is the culprit.

• Managers need to develop requisite skills to be a global manager

Different Types of International Organizations

• Multinational corporation (MNC)

• Multidomestic corporation

• Global company

• Transnational or borderless organization

North American Free Trade Agreement (NAFTA)

• an agreement among the Mexican, Canadian, and U.S. governments in which barriers to trade have been eliminated

• Replaced by USMCA (July 2020)

British vote to Exit E U (2016)

also known as Brexit. The vote was in response to nationalist feelings in the UK

Donald Trump elected U S president (2016)

elected on an America First campaign due to distrust of career politicians

Trans-Pacific Partnership (2016)

TPP was a trade agreement among Pacific rim countries that fell apart for lack of support

USMCA (2018)

President Trump’s renegotiated version of NAFTA

Regional Trading Alliances

• Global competition and the global economy are shaped by regional trading agreements, including:

– European Union (EU)

– North American Free Trade Agreement (NAFTA)

The European Union

a union of 28 democratic European nations created as a unified economic and trade entity with the euro as a single common currency

World Trade Organization (WTO)

•global organization of 161 countries that deals with the rules of trade among nations

• Essentially replaced G A T T

International Monetary Fund (IMF)

An organization of 188 countries that promotes international monetary cooperation and provides advice, loans, and technical assistance

World Bank Group

a group of very closely associated institutions that provides financial and technical assistance to developing countries

GATT

a 1948 agreement between countries to reduce or eliminate trade barriers

Organization for Economic Cooperation and Development (OECD)

an international economic organization that helps its 34 member countries achieve sustainable economic growth and employment

Association of Southeast Asian Nations (ASEAN)

a trading alliance of 10 Southeast Asian nations

Global Milestones

• World Economic Forum (1974) is a Swiss non-profit foundation that brings world leaders together each year to discuss factors of common interest

• Margaret Thatcher elected Prime Minister of U K (1979). She was very pro free trade.

• Ronald Reagan elected U S President (1980). Joined Thatcher as a pro free trade advocate

• Fall of the Soviet Union (1991). Created 9 member states

Global Trade Mechanisms

•World Trade Organization (W T O)

•International Monetary Fund (I M F)

•World Bank Group

•General Agreement on Tariffs and Trade (G A T T)

•Organization for Economic Cooperation and Development (O E C D)

Ethnocentric attitude

view that home country has best work practices (also self-referencing criteria or SRC)

Polycentric attitude

view that managers in the host country know the best approaches

Geocentric attitude

A world oriented view that focuses on using the best approaches and people from around the globe

Transnational or borderness organization

An MNC in which artificial geographical barrieres are eliminated. Uses the best work practices regardless where there from.

Structures and techniquies organizations use as they go international?

1. Global sourcing
2. Exporting
3. Importing
4. Licensing
5. Franchising
6. Global strategic alliance
7. Joint venture
8. Foreign subsidiary

Global sourcing

• Purchasing materials or labor from around the world wherever it is cheapest

• reshoring→ don’t want all of it gone, some brought back to home country

• near-shoring→ some brought to a nearby shore to keep it close(especially since the pandemic)

Exporting

Making products domestically and selling them abroad

Importing

Acquiring products made abroad and selling them domestically

Licensing

• An organization gives another organization the right to make or sell its products using its technology or product specifications

• allowing a third party a license to sell products

• risk of property being stolen

Franchising

• An organization gives another organization the right to use its name and operating methods

• particularly restaurants

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

Joint venture

• A specific type of strategic alliance in which the partners agree to form a separate, independent organization for some business purpose

• may be 2 or more companies

Foreign subsidiary

• Directly investing in a foreign country by setting up a separate and independent production facility or office

• requires the most amount of investment

• you work by yourself

Free market economy

An economic system in which resources are primary owned and controlled by the private sector

Planned economy

• An economic system in which economic decisions are planned by a central government

• Ex: India

National culture

• The values and attitudes shared by individuals from a specific country that shape their behavior and beliefs about what is important

• Economies of Scale

• Thinking global act local

• Not necessary to know the language in other countries, but useful

Global Leadership and Organizational Behavior Effectiveness (GLOBE)

• Power distance

• Uncertainty avoidance

• Assertiveness

• Humane orientation

• Future orientation

• Institutional collectivism

• Gender differentiation

• In-group collectivism

• Performance orientation

Cultural intelligence

Cultural awareness and sensitivity skills.

Global mind set

Attributes that allow a leader to be effective in cross-cultural environments

Globalization

A process by which organizations develop influence or operations in other countries

nationalism

patriotic ideals and policies that glorify a country’s values

Law of comparative advantage

The economic proposition that a country should produce goods or services for which it has the lowest opportunity cost

Global company

An MNC that centralizes management and other decisions in the home country. It makes it's business in the place they come from or was raised.

What was the first monetary order that would govern financial relations between countries and explain its significance

The Bretton Woods conference - It was an agreement between the US, Canada, Western Europe, Australia, and Japan to establish the rules for commercial and financial relations. It shaped global trade by opening the door to ongoing agreements, institutions, and events like the IMF, GATT, and OECD and paved the way for future trade development.

The "Win-Win argument" (for globalization) was based on what?

• The law of comparative advantage

• Essentially says a ‘rising tide floats all boats.’

• Globalization benefits all trading partners.

Downsides to globalization:

1. Wage stagnation
2. Labor shipped to other countries
3. Inflow of immigrants
4. Increasing economic inequality
5. Undermines middle class

Advantages of globalization

1. Boosts economy
2. Increases wages
3. Provides lower cost goods to consumers

What is the reason for unemployment?

Technology (need more skilled workers)

National culture is shaped by:

Societys social traditions; Political and economical philosophy; and legal system

Hofstede's five dimensions of national culture

1. Power distance
2. Uncertainty avoidance
3. Future orientation (short/long term)
4. Institutional Collectivism (Individualistic/Collectivistic)
5. Humane orientation (achievement/nurturing)

Nine GLOBE dimensions

1. Power distance
2. Uncertainty avoidance
3. Future orientation (short/long term)
4. Institutional Collectivism (Individualistic/Collectivistic)
5. Humane orientation (achievement/nurturing)
6. Assertiveness
7. Gender differentiation
8. In-group collectivism
9. Performance orientation

Challenges of doing business globally?

1. The openness of globalization and cultural differences
2. Managing global workforce (need cultural intelligence and global mindset)

Globalization Highlights

• After W W I nations became more protectionist

• After W W I I the trend toward globalization started

• Numerous agreements, institutions, and events pushed for globalization