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Chapter 3

GMS 200 Chapter Notes - Chapter 3: Cival, Culture Shock, Management System

Global Management Studies
Course Code
GMS 200
Deborah De Lange

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Monday, February 1, 2016
GMS 200
Chapter Three
Management and Globalization 3.1
this is the age of the global economy. in which resource supplies, product markets,
and business competition are worldwide, rather than local or national in scope
it is also time heavily influenced by the forces of globalization, the process of growing
interdependence among the components in the global economy
some see the effects as a “borderless world” where economic integration becomes so
extreme that nation states hardly matter anymore
but international management scholar Pankaj describes us as moving toward what he
calls World 3.0, its where nations cooperate in the global economy while still
respecting one another’s national characters and special interests
Global Management
global management, describes management in business and organizations interests
in more than one country
leaders press forward with global initiatives, the management challenges and
opportunities of working across national and cultural borders must be mastered
global manager, is someone informed about the international developments,
transnational in outlook, competent in working with people from different culture, and
always aware of regional developments in a changing world. simply put, are culturally
aware and informed on international affairs
Why do Companies Go Global
“where the right infrastructure is, with the right educated workforce, with the right
supportive government”
addressing nike and new balance; different strategies as they deal with the
opportunities and threats of a global economy
how businesses naturally grow and go international for reasons such as:
profits— global operations offer greater profit potential
customers— “ “ offer new markets to sell products
Suppliers— “ “ offer access to needed products and services
Capital— “ “ offer access to financial resources
Labour— “ “ offer access to lower labour costs
How Companies Go Global
a global business conducts commercial transactions across boundaries

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Monday, February 1, 2016
market-entry strategies that involve the sale of goods or services to foreign markets
without expensive investment
direct investment require major capital commitments, but they also create rights of
ownership and control over operations in the foreign country
global sourcing, materials or services are purchased around the world for local use
the goal is to produce them at the lowest costs, ie china is a major outsourcing
exporting, local products are sold abroad to foreign customers
the goal of exporting is to find new customers and expand markets by selling one’s
products and services in other countries
for government concerned about economic growth, expanding exports helps keep
local businesses strong at a time when the potential is high for job loss to lower-wage
importing, involves the selling in domestic markets of products acquired abroad
licensing agreement, a local firm pays a fee to a foreign firm for rights to make or sell
its products
franchising, a fee is paid to a foreign business for rights to locally operate using its
name, branding, and methods.
firms such as McDonalds, Wendys, Subway, and others sell facility designs,
equipment, product ingredients and recipes and management systems to foreign
investors, while retaining certain product and operating controls
foreign direct investment (FDI), is building, buying all, or buying part ownership of a
business in another country
insourcing, is job creation through foreign direct investment
joint venture, operates in a foreign country through co-ownership by foreign and local
partners. when foreign firms do invest in a new country, a common way to start is with
joint venture. this is a co-ownership arrangement in which the foreign and local
partners agree to pool resources, share risks, and jointly operate the new business
international joint ventures are types of global strategic alliances in which foreign
and domestic firms act as partners by sharing resources and knowledge for mutual

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Monday, February 1, 2016
benefit, that they could not do or would have difficulty doing on their own(local partner)
and access to new markets(outside market)
foreign subsidiary, is a local operation completely owned by a foreign firm. While the
subsidiary can be acquires, it may be built entirely new by Greenfield investments,
builds an entirely new operation in a foreign country
Global Business Environments
Legal and Political Systems
a major planning concern in gm, involves political risk, the potential loss in value of
an investment in or managerial control over a foreign asst because of instability and
political changes in the host country
ie, terrorism, cival wars, armed conflicts and military disruptions, shifting governments
system through elections or forced takeovers and new laws and economic policies
though they cant be prevented they can be anticipated. most firms use a planning
technique called political-risk analysis to forecast political disruptions that can
threaten the value of a foreign investment
gm’s must be prepared to deal with differences
common legal problems faced by international businesses involve incorporation
practices and business ownership; negotiating and implementing contracts with
foreign parties; handling foreign exchange and intellectual property rights— patents,
trademarks, and copyrights
Trade Agreements and Trade Barriers
World Trade Organization is an international organization that monitors international
trade and tries to resolve disputes among countries about tariffs and trade restrictions
the WTO was established to promote free trade and open markets around the world
the WTO members agree to give one another most favoured nation status which gives
a trading partner most favourable treatment for imports and exports
yet trade barriers that limit freedom of trade are still common
they include tariffs, which are basically taxes that government impose on imports
and other forms of protectionism that give favourable treatment to domestic
Regional Economic Alliances
NAFTA (the North American Free Trade Agreement) is a trade agreement that links
Canada, Mexico, and the United States in a regional economic alliance
this alliance creates a trade zone with minimal barriers, which frees the flow of goods
and services, workers, and investments among the three countries
arguments on the positive side of NAFTA include greater cross-border trade, benefits
to farm exports, greater productivity of manufacturers, and reform of the Mexican
business environment
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