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Similar a Fundamental of Management. Lecture 3 (20)
Fundamental of Management. Lecture 3
- 2. A Borderless World
Organizations and managers are not isolated from
international forces:
– Trade barriers have fallen
– Communication is faster, cheaper
– Consumer tastes converge
The difficulties and risks of a borderless world are
matched by benefits and opportunities
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- 3. 4.1 Ranking of Six Countries
on the Global Index
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- 4. 4.2 Four Stages of Globalization
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- 5. International Market Strategies
• Exporting – transferring products for sale to foreign
countries
• Outsourcing – also called off shoring, work activities are
done in countries with cheap labor
• Licensing – enabling a company to produce and market a
product in another country
– Franchising is licensing that provides a complete package of
materials and services
• Direct Investing – high level of involvement, company
manages and controls assets
– Joint venture and other types of partnerships are common
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- 6. 4.3 Strategies for Entering the
International Arena
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- 7. China Inc.
China manufacturers many products for U.S. companies
China is also a growing consumer market
Regulations and government policies make doing
business in China a challenge
India is a service giant, growing in software design and
engineering
Brazil is a country that is gaining the attention of
American managers
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- 8. The International Business Environment
• Planning, organizing, leading, and controlling in
multiple countries can be challenging
– It took McDonalds a year to figure out that Hindus in
India do not eat beef
– In Africa, the baby food includes pictures to aid
illiterate consumers
• Managers must be mindful in the global
marketplace
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- 9. 4.4 Key Factors in
International Environment
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- 10. The Economic Environment
• Economic Development - Countries are categorized as either
developed or developing based on per capita income
– Government Policies
– Market Size
– Financial Markets
– Infrastructure
• Resource and Product Markets
– Companies must evaluate market demand
The current economic crisis has highlighted how interconnected
economies are around the world
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- 11. 4.5 World Economic Forum
Global Competitiveness
The United
States moved
from #1 to #2!
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- 12. 4.6 How Countries are Bearing
the Economic Crisis
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- 13. The Legal-Political Environment
• Political risk is defined as the risk of lost assets,
earning power, or managerial control
• Managers must be concerned with the political
instability of global markets
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- 14. The Sociocultural Environment
The values and behaviors that govern U.S.
business do not always translate
– Social Values
– Communication Differences
– Other Cultural Characteristics
→ Language
→ Religion
→ Social organization
→ Education
→ Attitudes
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- 15. Hofstede’s Value Dimensions
Power Distance
Uncertainty Avoidance
Individualism and Collectivism
Masculinity and Felinity
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- 16. GLOBE Project Value Dimensions
• Assertiveness
• Future orientation
• Uncertainty avoidance
• Gender differentiation
• Power distance
• Social collectivism
• Individual collectivism
• Performance
orientation
• Humane orientation
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- 17. 4.7 Country Ranking on Four
GLOBE Value Dimensions
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- 18. 4.8 Country Ranking on Selected
GLOBE Value Dimensions
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- 19. 4.9 High-Context and
Low-Context Cultures
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- 20. Developing Cultural Intelligence
• Cultural intelligence – ability to use reasoning
and observation skills
– Culturally flexible
– Adapt to new situations
• Managers must study the language and learn
• Cognitive, emotional, and physical intelligence
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- 21. International Trade Alliances
• General Agreement on Tariff and Trade (GATT)
– 23 nations in 1947, a set of rules for fair trade
• World Trade Organization (WTO)
– Maturation of GATT into permanent global institute
• European Union
– 1957 Alliance to improve economic and social conditions
among members; evolved to 27-nation European Union
• North American Free Trade Agreement (NAFTA)
– Merged the United States, Canada, and Mexico into
trading bloc
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- 22. 4.10 European Union
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- 23. China-ASEAN Free Trade Area
Trading alliance of ten countries
World’s third largest free-trade area
1.9 billion people and $45 trillion in
trade
Remove all tariffs between China
and ASEAN countries by 2015
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- 24. The Impact of Multinational
Corporations (MNC)
• The size and volume of international business is
LARGE
– Companies have revenue = GDP of small country
– Move assets from country to country
– 25% or more of its profit comes from outside parent
country
• MNC is managed as an integrated whole
• Controlled by one management authority
• MNC managers must have a global perspective
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- 25. The Globalization Backlash
• 68% of Americans say other countries benefit the most
from free trade
– 53% believe free trade has hurt U.S.
• The United States’ primary concern is the loss of jobs
– $136 billion in wages will shift from the U.S.
• Business leaders insist that economic benefits flow back to
the U.S. economy
– Lower prices and expanded markets
– Increased profits and funds for innovation
• But American shoppers say they would pay higher prices
to keep down foreign competition
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- 26. Serving the Bottom
of the Pyramid (BOP)
An approach for multinationals to do good
Corporations can alleviate problems and make
large profits by selling to the world’s poor
There are more than 4 billion people at the
lowest level of the economic pyramid
Many companies are adopting BOP strategies
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