BA 351Managing Organizations

Managing in a Global Environment

1

Clicker Buttons

Send or “enter”

button to submit a selection

Menu: press and hold to power

on/off

Directional buttons: navigate

menu options

Clear: erase an entry

Find Net / No Net: Need to change the session ID number

Denied: Need to change the user ID number

Change Session ID:>> Menu

>> Right directional button

>> Send

>> ”Yes” button

>> Enter ID & Send

2

True or False

China and India are the worlds fastest growing economies?

3

The Changing Pattern of International Business

Changing world output and world trade pictureThe U.S. no longer dominates the world economy

Large U.S. multinationals no longer dominate international business

The centrally planned communist economies that made up roughly half the world suddenly become accessible to Western businesses

The global economy has become more knowledge-intensive

4

The Changing Pattern of International Business (continued)

Lowered trade barriers General Agreement on Tariffs and

Trade (GATT) World Trade Organization (WTO)

Integrated Economic Markets The European Union (EU) The North American Free Trade Act

(NAFTA) Central American-Dominican Republic

Free Trade Agreement (CAFTA) The Association of Southeast Asian

Nations (ASEAN) The Asia Pacific Economic

Cooperation (APEC)

5

The Changing Pattern of International Business (continued)

Global consumer preferencesTastes and preferences are converging

Presence of mass media, exposure to goods from various countries, and standardized products

Globalized productionCost efficiency

6

Example of Globalized Production

Of the $20,000 sticker price of a General Motors Automobile LeMans: $6,000 goes to South Korea, where the car was

assembled $3,000 goes to Japan for sophisticated high-tech

parts (engines, transaxles, electronics) $800 goes to Taiwan, Singapore, and Japan for

small parts $500 goes to Great Britain for advertising and

marketing services $1,000 goes to Ireland for data processing $7,600 goes to GM and its external professional

firms in the United States 7

The Changing Pattern of International Business (continued)

Technological innovations Advances in communications,

information processing, and transportation technology

Fiber optics, wireless technology, the Internet and World Wide Web, and satellite technology

Management across cultures Adaptation to business strategies,

structures, operational policies, and human resource programs

8

Major Factors Affecting International Business

General business environment

Legal systemCommon lawCivil lawMuslim law

Economic environment

Cultural environmentCulture shock

9

Dimensions of CulturePower Distance

Individualism

Uncertainty Avoidance

Masculinity / Femininity

Long-term/ Short-term Orientation

10

Video

Cirque de SoleilAnswer these Qs:

1. How has the “global shift” contributed to the success of Cirque de Soleil? Why was this critical in the company’s beginning? What about now?

2. How does management across cultures affect Cirque de Soleil? 11

To succeed, Cirque makes special accommodations for cultural differences among its workers. ___________ can occur when a person is exposed to a new culture with different norms, customs, and expectations and has difficulty adjusting.

A) Culture Shock

B) Individualism

C) Uncertainty Avoidance

D) Power Distance

12

Entry Strategy and Strategic Alliances

Four key decisions of a firm contemplating foreign expansion:Which countries to enterWhen to enterScale of involvementHow to enter

13

Choosing Foreign Countries

The appeal of a particular country is likely to be greater when:

The size of the domestic market is largeThe present wealth of consumers in that

market is high and projected to grow in the future

The needed resources are readily availableThe firm’s product offerings are suitable to

a particular marketA positive business environment exists

14

When to Enter Foreign Countries and Scale of Involvement

When to EnterFirst-mover advantagesPioneering costs

Scale of InvolvementLowest if the firm simply decides to export its products to the foreign location

Highest if the firm decides to have a wholly owned subsidiary in the foreign country

15

Modes of EntryExporting

Turnkey Project

Licensing

Franchising

Strategic Alliance

Joint VentureWholly Owned

Subsidiary

16

Modes of EntryExporting – entering new markets by

sending products to other countries, still maintaining production facilities within the domestic borders

Turnkey projects – specialized type of exporting, where the firm handles the startup of the company and a local client is then handed the key

Licensing – entering new markets by transferring the rights to produce and sell products overseas to a foreign firm

17

Modes of EntryFranchising – entering new markets in

which the franchise pays a fee for using the brand name and agrees to follow the standards and rules

Joint venture – means of entering new markets where two or more independent firms agree to establish a separate firm

Strategic alliance – cooperative arrangements between competitors or potential competitors from different countries

Wholly owned subsidiary – entering new markets in which a firm fully owns its subsidiary in foreign countries

18

I wouldn’t suggest this mode of Entry

19

Various Modes of Entry Choices

Loss of competitive advantagePotential quality control problemsLimited ability to use profits in one country to increase competition in another country

Quick expansionLower development costs and risksLower political risk

Franchising

Loss of competitive advantageLimited ability to use profits in one country to increase competition in another country

Quick expansionLower expenses and risksLower political risk

Licensing

Competition from local clientLoss of competitive advantage

Access to closed marketsTurnkey Project

No low cost salesHigh transportation costs Potential tariffs

Economies of scaleLower foreign expenses

ExportingDisadvantagesAdvantagesMode of Entry

20

Various Modes of Entry Choices (continued)

Loss of competitive advantagePotential overestimation of partner’s capabilities

Access to closed marketsPooled resources increase partner’s capabilitiesComplementary skills & assets

Strategic Alliance

Large capital outlayLack of local knowledgeIncreased risk

Maximum control over proprietary knowledge/ technologyGreater strategic flexibilityEfficiencies of global production system

Wholly Owned Subsidiary

Potential for conflict of interestLoss of competitive advantage

Knowledge of local marketsLower development costs and riskAccess to closed markets

Joint Venture

DisadvantagesAdvantagesMode of Entry

21

Examples of Strategic Alliances

General Electric – Snecma of France

Toshiba – IBMMitsui – General Electric

GM – DaewooTexas Instrument – Compel Communications

Canon – Hewlett-Packard

Mitsubishi – Caterpillar

22

Take a look at China Brands

23

Why International Assignments End in Failure

Career blockage – the feeling that working abroad has gotten their career sidetracked, while people back home are climbing the corporate ladder

Culture shock – the inability to adjust to a different cultural environment

Lack of pre-departure cross-cultural training – little if any is offered to expatriates before going to a different country.

24

Why International Assignments End in Failure

Overemphasis on technical qualifications – the expatriate may lack cultural adaptability, even though they have the technical skills

Getting rid of a troublesome employee – provides the ability to solve interpersonal conflict, but at a huge expense to the company

Family problems – inability or unwillingness of the expatriate’s family to adapt to life in another country 25

Key HR Management Factors for Global Firms

SelectionSelection criterion should include cultural sensitivity

TrainingLength of assignment determines depth of training

Cross-cultural training is critical to success

Career DevelopmentInternational assignments should be part of career advancement plan

Compensation and BenefitsIncentives and quality-of-life concerns

26

Ethics and Social Responsibility

Sweatshops

27

Yes or No

Do you think U.S. companies have the moral responsibility to offer a so-called living wage and to fight exploitative practices in foreign countries, even if doing so means putting the company at a competitive disadvantage?

28

Yes or No

Do you think most consumers care about potential abuses of overseas contractors? Would most consumers be willing to pay slightly higher prices to improve the standard of living of foreign workers?

29

Yes or No

Some believe that a company might actually increase business by convincing customers that it is socially responsible and that it values human dignity more than making an extra buck. Do you agree?

30

Flowchart For Problem Resolution

Don’t Mess With It!

YES NO

YES

YOU IDIOT!

NO

Will it Blow UpIn Your Hands?

NO

Look The Other Way

Anyone ElseKnows? You’re SCREWED!

YESYES

NO

Hide ItCan You Blame Someone Else?

NO

NO PROBLEM!

Yes

Is It Working?

Did You Mess With It?

31