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GMS 200 (566)
Chapter 3

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Global Management Studies
GMS 200
Ricardo Reyes

Chapter 3 – Global Dimensions of Management Management and Globalization • Global economy – Resources, markets, and competition are worldwide in scope • Globalization – Process of growing interdependence among elements of the global economy Global Management • Global management – Involves managing operations in more than one country • Global manager – Culturally aware and informed on international affairs o Global manager is someone who is…:  Informed about international development  Transnational in outlook  Competent in working with multicultural people  Aware of regional developments in a changing world Why Companies Go Global • Profits – Greater profit potential • Customers – New markets to sell products • Suppliers – Access to needed products and services • Capital – Access to financial resources • Labour – Access to lower labour costs How Companies Go Global • Global Business – Conduct for-profit transactions for goods and services across national boundaries Market Entry Strategies: • Global sourcing – process of purchasing materials, manufacturing components, or business 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 – a fee is paid for rights to use another firm’s name and operating methods 1 Direct Investment Strategies: • Joint ventures – Operates in foreign country through co-ownership by foreign and local partners • Global strategic alliances – a partnership in which foreign and domestic firms share resources and knowledge for mutual gains o Foreign Direct Investment (FDI) is building, buying all, or buying part ownership of a business in another country o Insourcing – job creating through FDI • Foreign Subsidiaries – Local operation completely owned by a foreign firm Criteria for choosing a joint venture partner: • Familiarity with your firm’s major business • Strong local workforce • Future expansion possibilities • Value its customers • Strong local market for partner’s own products • Good profit potential • Sound financial standing Global Business Environments Complications in the Global Business Environment: • Political risk – the potential loss in value of a foreign investment due to instability and changes in host country • Local legal systems – complex and unfamiliar laws can create problems • World Trade Organization (WTO) – resolves trade and tariff disputes among countries o Protectionism can complicate global trading relationships • Regional Economic Alliances o NAFTA – North American Free Trade Agreement o EU – European Union o SADC – Southern Africa Development Community Global Businesses Types of Global Businesses: • Global Corporation o MNC (multinational corporation) with extensive business operations in more than one foreign country 2 • Transnational Corporation o MNC (multinational corporation) operations worldwide on a borderless basis Pros and Cons of Global Corporations Pros: Cons • Larger tax bases • Excessive profits • Increased employment opportunities • Domination of local economy • Technology transfers • Interference with local
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