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Chapter 3

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Global Management Studies
GMS 200
Sui Sui

GMS200 SUI SUI CHAPTER 3: GLOBAL DIMENSIONS OF MANAGEMENT Chapter 3 Study Questions  What are the management challenges of globalization?  What are global businesses and what do they do?  What is culture and how does it impact global management?  How can we benefit from global management learning? Study Question 1: What are the management challenges of globalization?  Key concepts in the challenges of globalization:  Global economy  Globalization  International management  Global manager  Global economy  Resource supplies, product markets, and business competition are worldwide, rather than local  Globalization  The process of growing interdependence of these components in the global economy  Global management  Management in organizations with business interests in more than one country  Global manager  Informed about international developments  Transnational in outlook  Competent in working with multicultural people  Aware of regional developments in a changing world  Global businesses  Conduct for-profit transactions of goods and services across national boundaries  Reasons why businesses go global:  Profits  Customers  Suppliers  Capital  Labour  Market entry strategies  Involve the sale of goods or services to foreign markets but do not require expensive investments.  Types of market entry strategies:  Global sourcing  Exporting  Importing  Licensing agreement  Franchising Figure 3.1 Common forms of global business—from market entry to direct investment strategies. GMS200 SUI SUI CHAPTER 3: GLOBAL DIMENSIONS OF MANAGEMENT  Global sourcing  Process of purchasing materials or services around the world for local use  Exporting  Selling locally made products in foreign markets  Importing  Buying foreign-made products and selling them domestically  Licensing agreement  One firm pays fee for rights to make or sell another company’s products  Franchising  Fee is paid for rights to use another firm’s name and operating methods  Foreign Direct Investment is building, buying all, or buying part ownership of a business in another country.  Insourcing o job creation through foreign direct investment  Types of direct investment strategies:  Joint ventures o operates in a foreign country through co-ownership by foreign and local partners  Global strategic alliances o a partnership in which foreign and domestic firms share resources and knowledge for mutual gains.  Foreign subsidiaries o local operation completely owned by a foreign firm Greenfield investment - builds an entirely new operation in a foreign country  Criteria for choosing a joint venture partner:  Familiarity with your firm’s major business.  Strong local workforce.  Future expansion possibilities.  Values its customers  Strong local market for partner’s own products.  Good profit potential.  Sound financial standing  Complications in the global business environment:  Political risk o the potential loss in value of a foreign investment due to instability and changes in host country  Local legal systems o complex and unfamiliar laws can create problems  World Trade Organization resolves trade and tariff disputes among countries.  Protectionism can complicate global trading relationships  Regional Economic Alliances  NAFTA – North American Free Trade Agreement  EU – European Union  SADC – Southern Africa Development Community GMS200 SUI SUI CHAPTER 3: GLOBAL DIMENSIONS OF MANAGEMENT Study Question 2: What are global businesses and what do they do?  Types of global businesses:  Global corporation o MNC (multinational corporation) with extensive business operations in more than one foreign country  Transnational corporation o MNC (multinational corporation) operates worldwide on a borderless basis  Host-country benefits of MNC:  Larger tax bases  Increased employment opportunities  Technology
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