Global Dimensions of Management – Chapter 5
INTERNATIONAL MANAGEMENT AND GLOBALIZATION
Key concepts in the challenges of globalization
Global economy- where resources, markets, and competition are worldwide in scope.
Globalization- process of growing interdependence among elements of the global economy.
The term used to describe management in organizations with business interests in more than one country is
A new breed of manager, the global manager is culturally aware and informed about international affairs.
The European Union (EU) is a political and economic alliance of European countries. It supports mutual economic
growth by removing barriers that previously limited cross-border trade and business development. Expanding to 22
member countries with 375 million consumers. Euro is the common European currency.
Cana, The United States, and Mexico are joined in the North American Free Trade Agreement (NAFTA)- agreement
for free flow of goods, services, between the three countries. At times an issue in NAFTA controversies,
maquiladoras- are foreign manufacturing plants that operate in Mexico with special privileges. Free Trade of the
Americas (FTAA) – Alaska to Chile- is a possibility.
•••Asia and the Pacific Rim
China and India have a large growth annual rate. Both combined add 25 million people each year to their economic
base. Southeast Asia has a high literacy rate, an educated workforce, and a population that speaks English, it intends
to become a world centre for business process outsourcing.
Economic power of China and Japan. Growth in other pacific rim countries. Asian countries represent a third of the
global market place.
Ghana has established a growing presence in the market for business process outsourcing. Africa suffers from lowest
economic growth and continuing AIDS epidemic and businesses tend to avoid unstable places. The Southern African
Development Community (SADC) links 14 countries of southern Africa in trade and economic development efforts.
They harmonize and rationalize strategies for sustainable development.
INTERNATIONAL BUSINESS CHALLENGES
International businesses conduct for profit transactions of goods and services across national borders
•••Why companies go International
International businesses are the engines for moving raw material, finished products, and specialized services from one
country to another. Reasons why businesses go international are:
( 1 ) Profits – offer greater profit
( 2 ) Customers – new markets to sell product to
( 3 ) Suppliers – access to needed raw materials
( 4 ) Capital – access to financial resources
( 5 ) Labour – access to lower labour costs
•••Forms of International Business
•Market Entry Strategies
-involve the sale of goods or services to foreign markets but do not require expensive capital investments.
Forms of international business:
-Global sourcing: process of purchasing materials, manufacturing components, or business services around the world.
-Exporting: selling local products in foreign markets
-Importing: buying foreign made products and selling them in domestic markets -Licensing agreement: foreign firm pays fee for rights to make or sell another company’s products in a region.
-Franchising: form of licensing in which the foreign firm buys the rights to use another’s name and operating methods
in its home country.
•Direct Investment Strategies
-Joint ventures and wholly owned subsidiaries. They require major capital commitments but create rights of
ownership and control over foreign operations
-Joint ventures: operates in a foreign country through co-ownership with local partners. They pool resources and
share risks and control for business operations.
International joint ventures are strategic alliances that help partners gain things through co operation.
-Foreign subsidiary is a local operation completely
owned by a foreign firm. Foreign subsidiary may be
formed through direct investment in start up
operations called Greenfield ventures.
•••Complications in the global business environment
Environment is complex, dynamic and highly competitive.
Differences in legal environments among nations create substantial international business challenges.
They must deal with a variety of special laws regarding occupational health, safety, equal employment opportunity,
sexual harassment etc. Common legal problems involve incorporation practices and business ownership, protecting
patents, trademarks, copyrights, contracts etc.
When disputes between nation relate to international trade they can end up before the World Trade
Organization(WTO) – member nations agree to negotiate and resolve disputes about tariffs and trade restrictions.
Most favoured nation status – giving a trading partner most favourable treatment for imports and exports.
Protectionism is a call for tariffs and favourable treatments to protect domestic firms from foreign competition.
A multinational corporation (MNC) is a business with extensive international operations in more than one foreign
•••Types of multinational corporations
A typical MNC operates in many countries but has corporate headquarters in one home or host country. (Apple)
A transnational corporation is an MNC that operates worldwide on a borderless basis without being identified with
one national home.
•••Pros and Cons of multinational corporations
The UN has reported that MNC’s hold one third of the world’s productive asset and control 70% of world trade.
Pros: larger tax bases, increased employment opportunities, technology
transfers, introduction of new industries, and the development of local
Cons: complaints that MNCs extract excessive profits, dominate the
local economy, interfere with the local government, do not respect
local customs and laws, fail to help domestic firms develop, hire the most talented of local personnel, and do not
transfer their most advanced technologies.
Cons: complaints about transferring job out of the country, shifting capital investments abroad, and engaging in
corrupt practices in foreign settings.
•••Ethical issues for multinational corporations
-Corruption: engaging in illegal practice to further one’s business interests is a source of continuing controversy. The
Canadian Corruption of Foreign Public Officials Act (1998).
-Sweatshops: employ workers at very low wages for very long hours and in poor working conditions.
-Child Labour is the full time employment of children for work otherwise done by adults. -Environmental protection: industrial pollution of cities, hazardous waste, and depletion of natural resources are now
worldwide concerns. ISO 14000 offers a set of certification standards for responsible environmental policies.
-Sustainable Development: meets the needs of the present without compromising the ability of future generations to
meet their own needs.
CULTURE AND GLOBAL DIVERSITY
Culture is a shared set of beliefs, values and patterns of behaviour common to a group of people.
Culture shock is the confusion and discomfort a person experiences when in an unfamiliar culture.
Ethnocentrism is the tendency to consider one’s culture as superior to others.
Stages in adjusting to a new culture: Confusion, Small victories, Honeymoon, irritation and anger, reality.
•••Popular Dimensions of culture
Language is a medium of culture and provides access to cultural understanding needed to conduct business and
develop personal relationships. Common languages for businesses: English, French, German or Spanish. According to
Edward T. Hall there are systematic and important differences in the way cultures utilize language in communication.
Low-text cultures emphasize communication via spoken or written words. (Canada, US, Germany)
High-context cultures rely on non verbal and situational cues as well as spoken or written words in communication.