DP

Global Management

Overview;

  • Few items today are manufactured and sold in only one country.

  • Many products are made from parts originating in many countries and sold worldwide.

  • We live in a global and interconnected environment.

Globalization; The process of developing influence or operations in other countries.

Nationalism; Patriotic ideals and policies that glorify a country’s values.

Parochialism; Viewing the world solely through your own perspective, leading to failure to recognize differences between people.

Three Possible Global Attitudes;

  • Ethnocentric: Belief that the home country has the best work practices.

  • Polycentric: Belief that managers in the host country know the best approaches.

  • Geocentric: World-oriented view that seeks to use the best practices globally.

Globalization Highlights;

  • After WWI nations became more protectionist.

  • After WWII the trend toward globalization started.

  • Numerous agreements, institutions, and events pushed globalization.

Global Trade Mechanisms;

  • World Trade Organization (WTO)

  • International Monetary Fund (IMF)

  • World Bank Group

  • General Agreement on Tariffs and Trade (GATT)

  • Organization for Economic Cooperation and Development (OECD)

World Trade Organization (WTO); Global organization of 161 countries that deals with the rules of trade among nations. It replaced GATT.

International Monetary Fund (IMF); Organization of 188 countries that promotes monetary cooperation, provides advice, loans, and technical assistance.

World Bank Group; Closely associated institutions that provide financial and technical assistance to developing countries.

GATT; A 1948 agreement between countries to reduce or eliminate trade barriers.

OECD; International economic organization that helps its 34 member countries achieve sustainable growth and employment.

ASEAN; Trading alliance of 10 Southeast Asian nations.

Other Globalization Milestones;

  • World Economic Forum (1974) – annual global discussions.

  • Margaret Thatcher elected UK PM (1979) – pro free trade.

  • Ronald Reagan elected US President (1980) – pro free trade.

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

Regional Trading Alliances;

  • European Union (EU): Union of 28 democratic European nations, single currency = euro.

  • NAFTA: Trade agreement between Mexico, Canada, and the US (replaced by USMCA in 2020).

Other Major Events Shaping Globalization;

  • Shanghai Cooperation Organization (2003) – promotes free trade.

  • “We Are the 99%” Movement (2011) – protested inequality in the US.

  • Made in China 2025 (2015) – China’s push to dominate high-tech manufacturing.

  • Brexit (2016) – UK vote to exit EU.

  • Donald Trump elected US President (2016) – “America First” policies.

  • Trans-Pacific Partnership collapsed (2016).

  • USMCA signed (2018).

Case for Globalization;

  • “Win-Win Argument” based on comparative advantage.

  • Rising tide floats all boats – all trading partners benefit.

Case Against Globalization;

  • Jobs left developed nations for cheap labor countries.

  • Cheap goods created wage stagnation.

  • Globalization + capitalism increased inequality.

  • Some groups are harmed by globalization.

Globalization Today and Managerial Implications;

  • Globalization will continue due to existing infrastructure.

  • Technology, not globalization, is the main cause of unemployment.

  • Managers must develop global management skills.

Types of International Organizations;

  • Multinational corporation (MNC).

  • Multidomestic corporation.

  • Global company.

  • Transnational/borderless organization.

How Organizations Go International;

  • Global sourcing: Buying materials/labor wherever cheapest.

  • Exporting: Producing domestically, selling abroad.

  • Importing: Buying abroad, selling domestically.

  • Licensing: Allowing another org. to make/sell using technology.

  • Franchising: Allowing another org. to use name and operating methods.

  • Strategic Alliance: Partnership with resource/knowledge sharing (e.g., Uber + Spotify).

  • Joint Venture: Strategic alliance forming a new independent org.

  • Foreign Subsidiary: Direct investment by setting up production abroad.

Political/Legal Environment;

  • US managers are used to stability.

  • Managers must know laws in each country.

  • Some nations have risky climates.

Economic Environment;

  • Free Market Economy: Resources owned by private sector (e.g., USA).

  • Planned Economy: Decisions made by central government (e.g., North Korea).

Cultural Environment;

  • National culture = shared values/attitudes shaping behavior and beliefs.

Hofstede’s Five Dimensions of National Culture;

  1. Individualism vs. Collectivism

  2. Power Distance

  3. Uncertainty Avoidance

  4. Masculinity vs. Femininity

  5. Long-term vs. Short-term Orientation

GLOBE Program;

  • Extended Hofstede’s work using data from 18,000 managers in 62 countries.

  • Identified 9 cultural dimensions: performance orientation, assertiveness, future orientation, humane orientation, institutional collectivism, in-group collectivism, gender egalitarianism, power distance, uncertainty avoidance.

Applying Cultural Guidelines;

  • “When in Rome, do as the Romans do.”

  • Hofstede and GLOBE highlight potential cultural conflicts.

Global Management Challenges;

  • Openness brings risks: terrorism, economic interdependence, cultural differences.

Global Leadership Skills;

  • Cultural Intelligence: Awareness and sensitivity to cultures.

  • Global Mindset: Effectiveness in cross-cultural environments.

Global Mindset Components;

  • Intellectual capital: Knowledge of global business.

  • Psychological capital: Openness to ideas and experiences.

  • Social capital: Ability to form trust and relationships across cultures.