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Introduction to Business CultureIntroduction to Business Culture
-1
Opening Profile: Economic Crisis Spreads Through Financial
Globalization
Opening Profile: Economic Crisis Spreads Through Financial
Globalization
What caused the global economy to collapse?
Toxic Assets: Highly leveraged securities Subprime mortgage mess Finance has become one of the most
international of industries Failure of banks and other financial
institutes: Fannie Mae & Freddie Mac Lehman Brothers AIG And many more…
What caused the global economy to collapse?
Toxic Assets: Highly leveraged securities Subprime mortgage mess Finance has become one of the most
international of industries Failure of banks and other financial
institutes: Fannie Mae & Freddie Mac Lehman Brothers AIG And many more…
1-2
Opening Profile: Typical Challenges that Managers Face in the 21st
Century
Opening Profile: Typical Challenges that Managers Face in the 21st
Century
Political and cultural differences
Global competition Terrorism Technology Finding ways to balance their
social responsibilities, their images, and their competitive strategies
Political and cultural differences
Global competition Terrorism Technology Finding ways to balance their
social responsibilities, their images, and their competitive strategies
1-3Copyright ©2011 Pearson Education, Inc. publishing as Prentice Hall
What is International Management?
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The process of developing strategies, designing and operating systems, and
working with people around the world to ensure sustained
competitive advantage
What is Globalization?What is Globalization?
Global competition characterized by networks of international linkages that bind countries, institutions, and people in an interdependent global
economy
1-5
Challenges to GlobalismChallenges to Globalism
Backlash against capitalism and rekindling of nationalism
Increased protectionism of high-demand resources
Need to develop top managers with international understanding and experience
Backlash against capitalism and rekindling of nationalism
Increased protectionism of high-demand resources
Need to develop top managers with international understanding and experience
1-6
Benefits of GlobalismBenefits of Globalism
Access to more markets
Growth of developing economies
Opportunities for flexibility and efficiency
Opportunities for small and medium-sized enterprises (SMEs)
Access to more markets
Growth of developing economies
Opportunities for flexibility and efficiency
Opportunities for small and medium-sized enterprises (SMEs)
Regional Trading BlocksRegional Trading Blocks
The dominance of the United States is already over.
What is emerging is a world economy of blocs represented by: NAFTA, EU, and ASEAN.
Much of today’s world trade takes place within these three regional free-trade blocs:
Western Europe, Asia, and the Americas
Much of today’s world trade are grouped around three dominant currencies:
euro, yen, and the dollar
The dominance of the United States is already over.
What is emerging is a world economy of blocs represented by: NAFTA, EU, and ASEAN.
Much of today’s world trade takes place within these three regional free-trade blocs:
Western Europe, Asia, and the Americas
Much of today’s world trade are grouped around three dominant currencies:
euro, yen, and the dollar
1-8
The European Union EU
The European Union EU
A unified market over 400 million people living in 27 nations
EU poses two challenges for global managers:
1. “Fortress” Europe2. Dealing with multiple cultures within
this unified market
A unified market over 400 million people living in 27 nations
EU poses two challenges for global managers:
1. “Fortress” Europe2. Dealing with multiple cultures within
this unified market
1-9Copyright ©2011 Pearson Education, Inc. publishing as Prentice Hall
ASIACHINA
INDIA
ASEAN/SAARC
JAPAN
ASIAN TIGERS
Copyright ©2011 Pearson Education, Inc. publishing as Prentice Hall 10
The AmericasThe Americas
North American Free Trade Agreement (NAFTA)
Central America Free Trade Agreement (CAFTA)
MERCOSUR
North American Free Trade Agreement (NAFTA)
Central America Free Trade Agreement (CAFTA)
MERCOSUR
1-11Copyright ©2011 Pearson Education, Inc. publishing as Prentice Hall
Other Regions in the WorldOther Regions in the World
The Russian Federation Middle East The African Union—AU South Africa Less developed countries—LDCs
Low Gross National Product (GNP)Low Gross Domestic Product (GDP)Large, relatively unskilled workforceHigh international debt
The Russian Federation Middle East The African Union—AU South Africa Less developed countries—LDCs
Low Gross National Product (GNP)Low Gross Domestic Product (GDP)Large, relatively unskilled workforceHigh international debt
1-12Copyright ©2011 Pearson Education, Inc. publishing as Prentice Hall
Comparative Management in Focus:
China Keeps on growing
Comparative Management in Focus:
China Keeps on growing
1-13Copyright ©2011 Pearson Education, Inc. publishing as Prentice Hall
Management Focus: Intel Brings Changes to Vietnam’s Economy
and Culture
Management Focus: Intel Brings Changes to Vietnam’s Economy
and Culture
United States opened trade relations with Vietnam in 2000.
Vietnam’s rapid growth can be contributed to those aspects of globalization that attracts corporations such as Intel.
Intel is taking advantage of new markets and lower costs of production.
Intel’s success started with awareness of the tight control of the Vietnamese government.
United States opened trade relations with Vietnam in 2000.
Vietnam’s rapid growth can be contributed to those aspects of globalization that attracts corporations such as Intel.
Intel is taking advantage of new markets and lower costs of production.
Intel’s success started with awareness of the tight control of the Vietnamese government.
1-14Copyright ©2011 Pearson Education, Inc. publishing as Prentice Hall
The Impact of the Information Technology
The Impact of the Information Technology
Making Geographic barriers less relevant
Lowering cultural barriers
Encouraging convergence of consumers’ tastes and preferences
Making Geographic barriers less relevant
Lowering cultural barriers
Encouraging convergence of consumers’ tastes and preferences
1-15Copyright ©2011 Pearson Education, Inc. publishing as Prentice Hall
Globalization of Human CapitalGlobalization of Human Capital
Increasing trend in the offshoring of manufacturing jobs and outsourcing of white-color jobs
Prediction that 3.3 million U.S. jobs in service sector may be lost/outsourced by 2015
Increasing trend in the offshoring of manufacturing jobs and outsourcing of white-color jobs
Prediction that 3.3 million U.S. jobs in service sector may be lost/outsourced by 2015
1-16Copyright ©2011 Pearson Education, Inc. publishing as Prentice Hall
The Global Manager’s RoleThe Global Manager’s Role
1-17
The Political and Economic Environment
The Political and Economic Environment
Sustainability—economic, political, social, and environmental—has become a significant worldwide issue
Ethnicity—a driving force behind political instability around the world
Religion—religious disputes lie at the heart of regional instabilities: former Yugoslavia, Northern Island, the Middle East…
Sustainability—economic, political, social, and environmental—has become a significant worldwide issue
Ethnicity—a driving force behind political instability around the world
Religion—religious disputes lie at the heart of regional instabilities: former Yugoslavia, Northern Island, the Middle East…
1-18
Political RiskPolitical Risk
Examples:Examples:
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Any governmental action or politically motivated event that could adversely affect the
long-run profitability or value of a firm
Venezuela took control of cement plants and offices belonging to
Mexico, after failing to reach an agreement in nationalization talks.
Bolivian president’s move to nationalize the
national gas industry followed that in
Venezuela.
The Political Risk Cont.The Political Risk Cont.
Typical Political RisksTypical Political Risks Political Risk Assessment
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Expropriation and confiscation
Nationalization Terrorism Macro-political risk event Micro-political risk event Discriminatory treatment Barriers to repatriation of
funds Interference in managerial
decision making Dishonesty by government
officials
Expropriation and confiscation
Nationalization Terrorism Macro-political risk event Micro-political risk event Discriminatory treatment Barriers to repatriation of
funds Interference in managerial
decision making Dishonesty by government
officials
Helps companies manage exposure to risk and minimize financial loss
Two forms:Consultation with
expertsDevelopment of
internal staff capabilities
Helps companies manage exposure to risk and minimize financial loss
Two forms:Consultation with
expertsDevelopment of
internal staff capabilities
Managing Political RiskManaging Political Risk
Avoidance and Adaptation
Avoidance and Adaptation
Dependency and Hedging
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Equity sharing
Participating management
Localization of the operation
Development assistance
Equity sharing
Participating management
Localization of the operation
Development assistance
Input controlMarket controlPosition controlStaged contribution
Political risk insurance Local debt financing
Input controlMarket controlPosition controlStaged contribution
Political risk insurance Local debt financing
Copyright ©2011 Pearson Education, Inc. publishing as Prentice Hall
Managing Terrorism RiskManaging Terrorism Risk
Develop a benevolent image (IBM and Exxon).
Maintain a low profile and minimize publicity.
Using teams to monitor terrorist activities
Hiring counterterrorism consultants
Develop a benevolent image (IBM and Exxon).
Maintain a low profile and minimize publicity.
Using teams to monitor terrorist activities
Hiring counterterrorism consultants
1-22Copyright ©2011 Pearson Education, Inc. publishing as Prentice Hall
Economic RiskEconomic Risk
Is closely related to political risk
Is determined by a country’s ability or intention to meet its financial obligations
Is closely related to political risk
Is determined by a country’s ability or intention to meet its financial obligations
1-23Copyright ©2011 Pearson Education, Inc. publishing as Prentice Hall
Categories of Economic RiskCategories of Economic Risk
1. Loss of profitability due to abrupt changes in monetary and fiscal policies
2. Loss of profitability due to changes in foreign investment policies
3. Risk of currency exchange rate Example: devaluation of peso in 1990s
1. Loss of profitability due to abrupt changes in monetary and fiscal policies
2. Loss of profitability due to changes in foreign investment policies
3. Risk of currency exchange rate Example: devaluation of peso in 1990s
1-24
Managing the Economic RiskManaging the Economic Risk
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The Legal EnvironmentThe Legal Environment
Consists of the local laws and legal systems of those countries in which an international company operates and of international law, which governs relationships between sovereign countries
Consists of the local laws and legal systems of those countries in which an international company operates and of international law, which governs relationships between sovereign countries
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The Legal EnvironmentThe Legal Environment
Types of Legal Systems
Types of Legal Systems
Approaches to Contract Law
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Common law
Civil law
Islamic law
Common law
Civil law
Islamic law
Common law: details must be written in the contract to be enforced
Civil law: assumes promises will be enforced without specifying the details
In Asia the contract may be in the relationship, not on the paper
Common law: details must be written in the contract to be enforced
Civil law: assumes promises will be enforced without specifying the details
In Asia the contract may be in the relationship, not on the paper
Other Regulatory IssuesOther Regulatory Issues
Protectionist policies, such as tariffs or quotas
The attractiveness of the tax system
The level of government involvement in the economic and regulatory environment
Protectionist policies, such as tariffs or quotas
The attractiveness of the tax system
The level of government involvement in the economic and regulatory environment
1-28
The Technological EnvironmentThe Technological Environment
The appropriability of technologyThe International Convention for the
Protection of Industrial Property (the Paris Union)
Inappropriate use of technology by others
Appropriateness of technology for the local environment
The appropriability of technologyThe International Convention for the
Protection of Industrial Property (the Paris Union)
Inappropriate use of technology by others
Appropriateness of technology for the local environment
1-29
Global E-BusinessGlobal E-Business
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