MAN 3025 - Module 4 Notes

4 Facets of Competitiveness in the Global Business Environment

1. Economic Performance - employment growth, unemployment rates, and food/gas prices

2. Government Efficiency - income distribution, and immigration policies and tarrids

3. Business Efficiency - growth and availability of skills, management practice (corporate governance and social responsibility)

4. Infrastructure - density of railroads and roadways, telecom investments and availability of broadband networks (technological factors), number of women with college degrees (public expenditures)

Globalization

the trend of the world economy toward becoming a more interdependent system

Global Village

the “shrinking” of time and space as air travel and the electronic media have made it easier for the people around the globe to communicate with one another

• previously, communication was much slower - by train or car

Global Economy 

increasing tendency of the economics of the world to interact with one another as one market instead of many national markets

• Catalysts:

  • countries began to open their economies to foreign investors 

  • communism ends in Eastern Europe

• Positive

  • helped countries produce more products and service more cheaply and quickly across the globe

  • investing in developing countries has increased capital, allowing for greater market growth across different global economies

• Negative

  • job losses

  • potential security threats because data must be shared

  • loss of control over quality standard

  • transportation costs

Multinational Corporation

business with operations in several countries 

ex. McDonald’s, Amazon, Walmart, CVS, etc.

Multination Organization

nonprofit organization with operations in several countries (NGOs)

ex. Red Cross, World Health Organization

Ethnocentric Managers

believe that their native country, culture, language, and behavior are superior to all others

• Ignorance to cultures

• Parochialism = a narrow view in which people see things solely through their own perspective

  • Usually will have a preference for purchasing products in their home country

Polycentric Managers

host-country nationals (local employees) know best how to run operations in their own company

• Advantage - fewer relocation costs, more established local networks, and higher team morale

• Disadvantages - home office having less control

Geocentric Managers

accept that there are differences and similarities between home and foreign personal and practices and that they should use whichever techniques are more effective

Why Companies Expand Internationally

1. Availability of Supplies

2. New Markets

3. Lower Labor Costs

4. Access to Finance Capital

5. Avoidance of Tariffs and Import Quotas

Outsourcing

Using suppliers outside the company to provide goods and services

• Gives you access to cheaper labor

Importing

a company buys goods outside the country and resell them domesstically

Exporting

a company produces goods domestically and sells them outside the country

Countertrading

bartering goods for goods

Licensing

a company allows a foreign company to pay it a fee to make or distribute the first company’s product or service

Franchising

a form of licensing in which a company allows a foreign company to pay it a fee and a share of its profit in return for using the first company’s brand name and a package of materials and services

• ex. Kentucky Fried Chicken, 7-Eleven, McDonald’s, Burger King, etc.

Strategic Allies or Joint Venture

two organizations that have joined forces to realize strategic advantages that neither would have if operating alone

Wholly Owned Subsidiary

a foreign subsidiary that is totally owned and controlled by another organization

• Ex. Walt Disney Company purchases 100% of Disney Land Paris

Greenfield Venture

a foreign subsidiary that the owning organization has built from scratcher F

Free Trade

the movement of goods and services among nations without political or economic obstruction

Trade Protectionism

the use of government regulations to limit the import of goods and services

• protect against foreign competition

Tariffs

a trade barrier in the form of a customs duty, or tax, levied mainly on imports

• Revenue Tariff = simply to raise money for the government

• Protective Tariff = raise the price of imported goods to make the prices of domestic products more competitive

Import Quota

a trade barrier in the form of a limit on the quantity of a product that can be imported

Sanction

the trade prohibition on certain types of products, services, or technology to another country for specific reasons

ex. nuclear nonproliferation, etc

• does not target medical or agricultural trade

Embargo

a complete ban or prohibition of trade of one country with another so that no goods or services can be imported or exported from or to the embargoed nation

• ex. In 1962, John F. Kennedy imposed a trade embargo on Cuba in 1962

Trade Bloc (economic community)

a group of nations within a geographical region that have agreed to remove trade barriers with one another

• North American Free Trade Agreement (NAFTA) - trading bloc with U.S., Canada, and Mexico

  • agreement to eliminate the tariffs and quotas between the countries to create positive impact of economic growth for everyone

• United States - Mexico - Canada Agreement (USMCA)

• European Union (EU)

Most Favored Nation

a condition in which a country grants other countries favorable trading treatment such as the reduction of import duties

Exchange Rates

the rate at which the currency of one area or country can be exchanged for the currency of another

• the values fluctuates in relation to economic conditions between the countries

Cross-Cultural Awareness

the ability to operate in different cultural settings

Culture

the shared set of beliefs, values, knowledge, and patterns of behavior common to a group of people

Low - Context Culture

shared meanings are primarily derived from written and spoken words

High-Context Culture

people rely heavily on situational and nonverbal cues for meaning when communicating with others

• the meaning of what a person says doesn’t come from the words they speak but rather from the context surrounding the words

Hofstede model of Four Cultural Dimensions

1. Individualism/Collectivism - how much people prefer a loose knit social framework or a tightly knit social framework in which people and organizations are expected to look after each other

2. Power Distance - people accept inequality in social situation

3. Uncertainty Avoidance - people’s tolerance for uncertainty and risk

4. Masculinity/Femininity - how much people value performance-oriented traits (masculine) or how much they embrace relationship oriented traits (feminine)

GLOBE Project

a massive and ongoing cross-cultural investigation of nine cultural dimensions involved in leadership and organizational process

1. Power Distance - how much unequal distribution of power should there be in organizations and society?

2. Uncertainty Avoidance - how much should people rely on social norms and rules to avoid uncertainty?

3. Institutional Collectivism - how much should leaders encourage and reward loyalty to the social unit?

4. In-group Collectivism - how much pride and loyalty should people have for their family or organization?

5. Gender Egalitarianism - how much should society maximize gender role differences?

6. Assertiveness - how confrontational and dominant should individuals be in social relationships

7. Future Orientation - how much should people delay gratification by planning and saving for the future?

8. Performance Orientation - how much should individuals by rewarded for improvement and excellence?

9. Human Orientation - how much should society encourage and reward people of being kind, fair, friendly, and generous?

Monochronic Time vs Polychronic Time

Monochromic Time - a presence for doing one thing at a time

Polychronic Time - a preference for doing more than one thing at a time

Expropriation

defined as a government’s seizure of a domestic or foreign company’s assets

Foreign Corrupt Practices Act

made it illegal for employees of U.S. companies to make “questionable” or “dubious” contributions to political decision makers in foreign nations

Expatriates

people living or working in foreign country