Principles and Dynamics of Management

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Principles and Dynamics of Management
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Presentation Outline
Chapter 3 The Environment And Corporate
Culture Case Analysis Rio Grande Supply
Company Chapter 4 Managing in a Global
Environment Case Analysis Shui Fabrics
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CHAPTER 3
The Environment And Corporate Culture
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LEARNING OBJECTIVES

• Describe the general and task environments and
  the dimensions of each.
• Explain the strategies managers use to help
  organizations adapt to an uncertain or turbulent
  environment.
• Define corporate culture and give organizational
  examples.
• Explain organizational symbols, stories, heroes,
  slogans, and ceremonies and their relationship to
  corporate culture.
• Describe how corporate culture relates to the
  environment.
• Define a cultural leader and explain the tools a
  cultural leader uses to create a high-performance
  culture.

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• The environment surprises many managers and
  leaves them unable to adopt their companies to
  new competition, shifting consumer interests, or
  new technologies.
• Example Xerox was dominant in its industry for
  many years, but managers missed cues from the
  environment and got blindsided by rivals Canon
  and Ricoh when they began selling comparable copy
  machines at lower prices.
• To be effective, managers must monitor and
  respond to the environment an open systems
  view. The events that have the greatest impact
  on an organization typically originate in the
  external environment.
• Globalization and worldwide societal turbulence
  affect companies in new ways, making the
  international environment of growing concern to
  managers everywhere.

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• The tremendous and far reaching changes
  occurring in todays world can be understood by
  defining and examining components of the external
  environment.
• The external organizational environment
  includes all elements existing outside the
  boundary of the organization that have the
  potential to affect the organization.
• The organizations external environment can be
  further conceptualized as having two layers
  general and task environments.

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The general environment is the outer layer that
is widely dispersed and affects organizations
indirectly.
General Environment
Technological
Task Environment
Customers
International
Socio cultural
Internal Environment
Labor Market
Competitors
Employees
Culture
Management
Suppliers
Economic
Legal/Political
The dimensions of the general environment include
international, technological, socio cultural,
economic, and legal-political.
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• International Dimension - represents events
  originating in foreign countries as well as
  opportunities for U.S. (or Philippine) companies
  in other countries.
• Technological Dimension - includes scientific and
  technological advancements in the industry and
  society at large.
• Socio Cultural Dimension - represents the
  demographic characteristics, norms, customs and
  values of the population within which the
  organization operates.
• Economic Dimension - represents the overall
  economic health of the country or region in
  which the organization operates.
• Legal-political Dimension - includes federal,
  state and local government regulations and
  political activities designed to influence
  company behavior.

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The task environment is closer to the
organization and includes the sector that
conducts day-to-day transactions with the
organization and directly influence its basic
operations and performance.
General Environment
Technological
Task Environment
Customers
Socio cultural
International
Internal Environment
Labor Market
Competitors
Employees
Culture
Management
Suppliers
Economics
Legal/Political
The task environment includes customers,
competitors, suppliers, and the labor market.
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• Customers - People and organizations in the
  environment who acquire goods or services from
  the organization.
• Competitors Other organizations in the same
  industry or type of business that provide goods
  and services to the same set of customers.
• Suppliers People and organizations who provide
  the raw materials the organization uses to
  produce its output.
• Labor Market The people available for hire by
  the organization. Every organizations needs a
  supply of trained, qualified personnel.

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Why do organizations care so much about factors
in the external environment?
The reason is that the environment creates
uncertainty for the managers and they must
respond by designing the organization to adapt to
the environment

• Environmental Uncertainty
• Organizations must manage environmental
  uncertainty to be effective
• Uncertainty means that the managers do not have
  sufficient information about environmental
  factors to understand and predict environmental
  needs and changes

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As indicated in below illustration, environmental
characteristics that influence uncertainty are
the numbers of factors that affect the
organization and the extent to which those
factors change.
High Uncertainty
Adapt to Environment
High
Rate of Change in Factors in Environment
Low Uncertainty
Low
High
Low
Numbers of Factors in Environment
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• In an organization in a highly uncertain
  environment everything seems to be changing.
• In that case, an important quality for a new
  manager is mindfulness, which includes the
  qualities of being open minded and an independent
  thinker.
• In a stable environment, closed minded manager
  may perform okay because much work can be done in
  the same old way.
• In an uncertain environment, even a new manager
  needs to facilitate new thinking, new ideas and a
  new ways of working.

CHAPTER 3 The Environment and Corporate Culture
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• ADAPTING TO THE ENVIRONMENT
• If an organization faces increased uncertainty
  with respect to competition, customers, suppliers
  or government regulations managers can use
  strategies to adapt these changes, including
• boundary-spanning roles,
• interorganizational partnerships, and
• mergers or joint ventures.

CHAPTER 3 The Environment and Corporate Culture
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• Boundary-spanning roles
• Roles assumed by people and/or departments
  that link and coordinate the organization with
  key elements in the external environment.
• Boundary-spanners have two purposes for the
  organization 1) Detect and process information
  about changes in the environment 2) Represent
  the organizations interests to the environment.
• Boundary-spanning has many ways/approaches to
  span the boundary (e.g. Marketing and purchasing
  departments span the boundary to work with
  customers and suppliers, both face to face and
  through market research)
• Boundary-spanning is an increasingly important
  task in organizations because environmental
  shifts can happen quickly in todays world.
• Managers need good information about their
  competitors, customers, and other elements of the
  environment to make good decisions. Thus, the
  most successful companies involve everyone in
  boundary-spanning activities.

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• Interorganizational Partnership
• An increasingly popular strategy for adapting
  the environment is to reduce boundaries and
  increase collaboration with other organizations.
• Managers shift from adversarial orientation to a
  partnership orientation, as summarized in the
  exhibit in the next slide.

CHAPTER 3 The Environment and Corporate Culture
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The Shift to a Partnership Paradigm

• From Adversarial Orientation
• Suspicion, competition, arms length
• Price, efficiency, own profits
• Information and feedback limited
• Lawsuits to resolve conflict
• Minimal involvement and up-front investment
• Short-term contracts
• Contracts limit the relationship

• To Partnership Orientation
• Trust, value added to both sides
• Equity, fair dealing, everyone profits
• E-business links to share information and
  conduct digital transactions
• Close coordination virtual teams and people
  onsite
• Involvement in partners design and production
• Long-term contracts
• Business assistance goes beyond the contract

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• Mergers and Joint Ventures
• A step beyond strategic partnerships is for
  companies to become involve in mergers or joint
  ventures to reduce environmental uncertainty.
• A merger occurs when two or more organizations
  combine to become one e.g. Wells Fargo merged
  with Northwest Corp. to form the nations fourth
  largest bank corporation.
• A joint venture involves a strategic alliance or
  program by two or more organizations.
• A joint venture typically occurs when a project
  is too complex, expensive, or uncertain for one
  firm to handle alone.
• Many small businesses are also turning to joint
  ventures with large firms or international
  partners. A larger partner can provide sales
  staff, distribution channels, financial resources
  or a research staff.

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The internal environment within which managers
work includes corporate culture, production
technology, organization structure and physical
facilities. Corporate culture surfaces as
extremely important to competitive advantage.
General Environment
Technological
Task Environment
Customers
Socio cultural
International
Internal Environment
Labor Market
Competitors
Employees
Culture
Management
Suppliers
Economics
Legal/Political
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Culture The set of key values, beliefs,
understandings and norms that members of an
organization share. The concept of culture helps
managers to understand the hidden, complex
aspects of organizational life. Culture is a
pattern of shared values and assumptions about
how things are done within the organization. This
pattern is learned by members as they cope with
external and internal problems and taught to new
members as the correct way to perceive, think,
and feel. Culture can be analyzed at three
levels, as illustrated below
Exhibit 3.5 Levels of Corporate Culture
C
Culture that can be seen at the surface level
Visible 1. Artifacts such as dress, office
layout, symbols, slogans, ceremonies
Invisible 2. Expressed values, such as The
Penny Idea,The HP way 3. Underlying
assumptions and deep beliefs, such as people
here care about one another like a family.
Deeper values shared understandings held by
organization members
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• The fundamental values that characterize an
  organizations culture can be understood through
  the visible manifestations of the following
• Symbol An object, act or event that conveys
  meaning to others. Symbols can be considered a
  rich, nonverbal language that vibrantly conveys
  the organizations important values concerning
  how people relate to one another and interact
  with the environment.
• Stories A narrative based on the true events
  and repeated frequently and shared among
  organizational employees.
• Heroes A figure who exemplifies the deeds,
  character and attributes of a strong corporate
  culture. Heroes are role models for employees to
  follow.
• Slogans A phrase or sentence that succinctly
  express corporate value.
• Ceremonies - A planned activity at a special
  event that is conducted for the benefit of an
  audience.

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ENVIRONMENT AND CULTURE A big influence on
internal corporate culture is the external
environment. Cultures can vary widely across
organization however, organizations within the
same industry often reveal similar cultural
characteristics because they are operating in
similar environments. The internal culture should
embody what it takes to succeed in the
environment. Adaptive Cultures Research at
Harvard on 207 U.S. firms illustrated the
critical relationship between corporate culture
and the external environment. The study found out
that a strong corporate culture alone did not
ensure business success unless the culture
encouraged healthy adaptation to the external
environment. As illustrated in Exhibit 3.6,
adaptive corporate cultures have different values
and behavior from unadaptive cultures.
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Exhibit 3.6 Environmentally Adaptive versus
Unadaptive Corporate Culture
Adaptive Corporate Cultures
Unadaptive Corporate Cultures
Visible Behavior Expressed Values
Managers pay close attention to all their
constituencies, especially customers, and
initiate change when needed to serve their
legitimate interests, even if it entails taking
some risks. Managers care deeply about
customers, stockholders, and employees. They
strongly value people and processes that can
create useful change (e.g. leadership initiatives
up and down the management hierarchy.
Managers tend to behave somewhat insularly,
politically, and bureaucratically. As a result,
they do not change their strategies quickly to
adjust to or take advantage of changes in their
business environment. Managers care mainly about
themselves, their immediate work group, or some
product (or technology) associated with that work
group. They value the orderly and risk-reducing
management process much more highly than the
leadership initiatives.
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TYPES OF CULTURES There are four categories or
types of culture as illustrated below in Exhibit
3.7. These categories are based on two
dimensions (1) the extent to which external
environment requires flexibility or stability
and (2) the extent to which a companys strategic
focus is internal or external.
Four Types of Corporate Cultures
Needs of the Environment
Flexibility
Stability
External
Adaptability Culture
Achievement Culture
Strategic Focus
Involvement Culture
Consistency Culture
Internal
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• The four categories associated with these
  differences are adaptability, achievement,
  involvement and consistency.
• Adaptability Culture emerges in an environment
  that requires fast response and high-risk
  decision making. A culture characterized by
  values that support the companys ability to
  interpret and translate signals from the
  environment into new behavior responses.
• Achievement Culture A results-oriented culture
  that values competitiveness, aggressiveness,
  personal initiative and achievements. An
  emphasize on winning and achieving specific
  ambitious goals is the glue that holds the
  organization together.
• Involvement Culture emphasizes an internal
  focus on the involvement and participation of
  employees rapidly adapt the changing needs of the
  environment. A culture that places high value on
  meetings the needs of employees and values
  cooperation and equality.
• Consistency Culture uses internal focus and
  consistency orientation for a stable
  environment. A culture that values and rewards a
  methodical, rational, orderly way of doing things.

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• Managing the High-Performance Culture
• High-Performance Culture - A culture based on a
  solid organizational mission or purpose that uses
  shared adaptive values to guide decisions and
  business practices and to encourage individual
  employee ownership of both bottom-line results
  and the organizations cultural backbone.
• Cultural Leadership A primary way in which
  managers shaped cultural norms and values to
  build a high-performance culture. Managers must
  overcommunicate to ensure that employees
  understand the new culture values, and they
  signal these values in actions as well as words.
• A cultural leader defines and uses signals and
  symbols to influence corporate culture. They
  influence two key areas
• The cultural leader articulates a vision for the
  organizational culture that employees can believe
  in.
• The cultural leader heeds the day-to day
  activities that reinforce the cultural vision.

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Exhibit 3.8 below illustrates four organizational
outcomes based on the relative attention managers
pay to cultural values and business performances.
Combining Culture and Performance
Good for short-term bottom line, but is it
sustainable? C
Both bottom-line results and inspiration. Sustaina
ble success via a high-performance culture. D
High
Attention to Business Performance
May be going out of business. Little emphasis on
results or values. A
Strong culture is good for moral, but can
managers afford to keep it up without business
results? B
Low
High
Low
Attention to Values
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Interpretation A company in Quadrant A pays
little attention to either values or business
results and is unlikely to survive for long.
Managers in Quadrant B organizations are highly
focused on creating a strong cohesive culture,
but they dont tie organizational values
directly to goals and desired business results.
Quadrant C represents organizations that are
focused primarily on bottom-line results and pay
little attention to organizational values. This
approach may be profitable in the short run, but
the success is difficult to sustain over the
long-term - the reason behind is that the glue
that holds the organization together that is,
shared cultural values- is missing. Company in
Quadrant D put high emphasis on both culture and
solid business performance as drivers of
organizational success. Managers in these
organization align values with the companys
day-to-day operations hiring practices,
performance management, budgeting, criteria for
promotions and rewards. Quadrant D organization
represent high-performance culture.
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CASE ANALYSIS
Rio Grande Supply Co.
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• Relevant Facts (1 of 3)
• Jasper Hennings, president of Rio Grande Supply
  Co., knew full well a companys top executives
  were largely responsible for determining a firms
  corporate culture. Thats why he took such
  personal pride in the culture of his Texas-based
  wholesale plumbing supply company. It didnt
  just pay lip service to the values it espoused
  integrity, honesty, and a respect for each
  individual employee. His management team set a
  good example by living those principles.
• The importance of Jasper attached to respecting
  each individual was apparent in the companys
  Internet use policy. It was abundantly clear
  that employees werent to use Rio Grandes
  computers for anything but business-related
  activities. However, Jasper himself had vetoed
  the inclusion of what was becoming a standard
  provision in such policies that management had
  the right to access and review anything employees
  created, stored, sent, or received on company
  equipment. He cut short any talk of installing
  software filters that would prevent abuse of the
  corporate computer system. Still, the company
  reserved the right to take disciplinary action,
  including the possible termination, and to press
  criminal charges if an employee was found to have
  violated the policy.

Case Analysis Rio Grande Supply Co.
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• Relevant Facts (2/3)
• Henry Darger, his hard-working chief of
  operations and a member of his church, had
  summarily fired a female employee for having
  accessed another workers e-mail surreptitiously.
  She hadnt taken her dismissal well. Just ask
  Darger what hes up to when he shuts his office
  door, she snarled as she stormed out of Jaspers
  office. She made what Jasper hoped was an idle
  threat to hire a lawyer. When Jasper asked Henry
  what the fired employee could possibly have
  meant, tears began to roll down the operations
  chiefs face. He admitted that ever since a
  young nephew had committed suicide the year
  before and a business helped his wife start had
  failed, hed increasingly been seeking escape
  from his troubles by logging onto adult
  pornography sites. At first, hed indulged at
  home, but of late hed found himself spending
  hours at work visiting pornographic sites, the
  more explicit the better.
• Henrys immediate dismissal of the woman whod
  tapped into another employees e-mail when the
  operations chief was violating the Internet
  policy himself was hypocritical. The person
  charged with enforcing that policy needed to be
  held to the highest standeards.

Case Analysis Rio Grande Supply Co.
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• Relevant Facts (3/3)
• Jasper knew that Rio Grande employees routinely
  used computers at their desks to check personal
  e-mail, do banking transactions, check the
  weather, or make vacation arrangements. The
  company had turned a blind eye because it didnt
  seem worth the effort of enforcing the
  ahrd-and-fast policy for such minor infractions.
• Henry was a valued, if clearly troubled,
  employee. Replacing him would be costly and
  difficult. If Jasper decided to keep him on, the
  president clearly had no choice but to cross the
  line and get involved in Henrys private life,
  and he would be treating Darger differently from
  the treatment the female employee received.

Case Analysis Rio Grande Supply Co.
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• Question1-A What environment factors have
  helped to create the situation Jasper Hennings
  faces?
• The following environment factors have helped to
  create the situation Jasper Hennings faces
• Technological (External Environment)
  considering the technology advancement, it is
  probable that the companys employee do non-work
  related matters such us downloading and research
  using the internet.
• Internal Environment the company did not
  adjust to the technology advancement. The
  company should have taken measure i.e. installing
  software filters that would have prevented abuse
  of the companys computer system.

Case Analysis Rio Grande Supply Co.
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• Question1-B What factors does Jasper need to
  consider when deciding on his course of action?
• Jasper needs to consider the following factors on
  his course of action?
• The companys policies.
• The people that will be affected by the his
  decision. This includes the people of the
  company who might be affected either positively
  or negatively.
• The possible consequences of his decision.

Case Analysis Rio Grande Supply Co.
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• Question2-A Analyze Rio Grandes culture. In
  addition to the expressed cultural values and
  beliefs, what other subconscious values and
  beliefs do you detect?
• In addition to the expressed cultural values and
  beliefs, following are Rio Grandes subconscious
  values and beliefs
• Empathy/compassion
• Self preservation
• Right to decide on things which are favorable
  to the company
• Note Please see the explanation for the above
  values in the next slide.

Case Analysis Rio Grande Supply Co.
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• Question2-B Are conflicting values present?
  When values are in conflict , how would you
  decide which ones takes precedence?
• Yes, the following values are in conflict
• Honesty vs. Self preservation Prior to the
  termination of the female employee, some
  employees of the company including the
  terminated female employee were already aware of
  Henry Dargers illegal access to adult
  pornography sites but they did not report it to
  Jasper probably because of fear of losing their
  job.
• Right to decide on things which are favorable
  to the company vs. Respect for each employee of
  the company Jasper vetoed the inclusion of what
  was becoming a standard provision in the
  companys internet and computer use policies that
  management had the right to access and review
  anything employees created, stored, sent, or
  received on company equipment. This is in
  conflict with the respect for each employees
  privacy value of the company.
• Respect for the company policy versus
  compassion Jaspers struggle whether to punish
  Henry in accordance with the companys policy or
  to keep him to the company.
• When values are in conflict , the value that
  takes precedence is the one that produce the
  greatest net benefit for the greatest number.

Case Analysis Rio Grande Supply Co.
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• Questions3 Assume you are Jasper. What are
  the first two action steps you would take to
  handle the Henry Darger situation? How would your
  role as a cultural leader influence your
  decision? What message will your solution send
  to the other managers and rank-and-file
  employees?
• If I were jasper, I will do the following to
  handle Henry Dargers situation
• Terminate Henry so that his actions will not
  be a precedent to other employees.
• Meet the management team to analyze the root
  cause of the incident and identify possible
  improvements of the companys current processes
  and internal controls to prevent same incident to
  happen again.
• As a cultural leader, I am pressured to make the
  best possible decision because the people of the
  company look up to me. I am expected to perform
  my duties and responsibilities in accordance with
  the standards of the company.
• Terminating Henry is in accordance with the
  companys policies. Thus, this would bring a
  message to every employees that Im serious in
  implementing the companys policies. Thus, every
  employees will uphold strict compliance to the
  policies and procedures of the company.

Case Analysis Rio Grande Supply Co.
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CHAPTER 4
Managing in a Global Environment
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LEARNING OBJECTIVES

• Describe the merging borderless world
• Define international management and explain how
  it differs from the management of domestic
  business operations
• Indicate how dissimilarities in the economic,
  sociocultural, and legal-political environments
  throughout the world can affect business
  operations
• Describe the market entry strategies that
  business use to develop foreign markets
• Describe the characteristics of a multinational
  corporation
• Explain the challenges of managing in a global
  environment

Chapter 4 Managing in a Global Environment
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A Borderless World

• A Borderless
• World
• The
• International
• Business
• Environment
• The Economic
• Environment
• The Legal-Politcal
• Environment
• The Sociocultural
• Environment

• Business is becoming a unified, global field
• Companies that think globally have a competitive
  edge
• Domestic markets are saturated for many companies
• Consumers can no longer tell from which country
  they are buying

Chapter 4 Managing in a Global Environment
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Four Stages of Globalization

• A Borderless
• World
• The
• International
• Business
• Environment
• The Economic
• Environment
• The Legal-Politcal
• Environment
• The Sociocultural
• Environment
• International Trade

The process of globalization typically passes
through four distinct stages Domestic
stage market potential is limited to the home
country production and marketing facilities
located at home International stage exports
increase company usually adopts a multi-domestic
approach Multinational stage marketing and
production facilities located in many
countries more than 1/3 of its sales outside the
home country Global (or stateless)
stage making sales and acquiring resources in
whatever country offers the best opportunities
and lowest cost ownership, control, and top
management tend to be dispersed
Chapter 4 Managing in a Global Environment
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Four Stages of Globalization

• A Borderless
• World
• The
• International
• Business
• Environment
• The Economic
• Environment
• The Legal-Politcal
• Environment
• The Sociocultural
• Environment
• International Trade

Chapter 4 Managing in a Global Environment
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The International Business Environment

• A Borderless
• World
• The
• International
• Business
• Environment
• The Economic
• Environment
• The Legal-Politcal
• Environment
• The Sociocultural
• Environment
• International Trade

• It is the management of business operations
  conducted in more than one country.
• It applies the same basic management functions of
  planning, organizing, leading and controlling.

Chapter 4 Managing in a Global Environment
44
Key Factors in the International Environment

• A Borderless
• World
• The
• International
• Business
• Environment
• The Economic
• Environment
• The Legal-Politcal
• Environment
• The Sociocultural
• Environment
• International Trade

• Economic
• Economic development
• Infrastructure
• Resource and product markets
• Per capita Income
• Exchange rates
• Economic conditions

• Legal-Political
• Political risk
• Government takeovers
• Tariffs, quotas, taxes
• Terrorism, political instability
• Laws, regulations

Organization

• Sociocultural
• Socio values, beliefs
• Language
• Religion (objects, taboos, holidays)
• Kinship patterns
• Formal education, literary
• Time orientation

Chapter 4 Managing in a Global Environment
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The Economic Environment

• A Borderless
• World
• The
• International
• Business
• Environment
• The Economic
• Environment
• The Legal-Politcal
• Environment
• The Sociocultural
• Environment

• Represents the economic conditions in the country
  where the international organization operates
• This includes factors as
• Economic development
• Infrastructure
• Resource and product markets
• Exchange Rates
• Inflation
• Interest Rates
• Economic Growth

Chapter 4 Managing in a Global Environment
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The Economic Environment

• A Borderless
• World
• The
• International
• Business
• Environment
• The Economic
• Environment
• The Legal-Politcal
• Environment
• The Sociocultural
• Environment
• International Trade

• Economic Development
• Countries categorized as developing or
  developed
• Criterion used to classify is per capita income
• Developing countries have low per capita incomes
• LDCs located in Asia, Africa, and South America
• Developed are North America, Europe, Japan
• Driving global growth in Asia, Eastern Europe,
  Latin America
• Infrastructure
• A countrys physical facilities that support
  economic activities like
• Airports, highways, and railroads
• Energy-producing facilities
• Communication facilities

Chapter 4 Managing in a Global Environment
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The Economic Environment

• A Borderless
• World
• The
• International
• Business
• Environment
• The Economic
• Environment
• The Legal-Politcal
• Environment
• The Sociocultural
• Environment
• International Trade

• Resource and Product Markets
• Managers must evaluate market demand
• To develop plants, resource markets must be
  available raw materials and labor
• Exchange Rate
• Rate at which one countrys currency is exchanged
  for another countrys
• Has become a major concern for companies doing
  business internationally
• Changes in the exchange rate can have major
  implications for profitability of international
  operations

Chapter 4 Managing in a Global Environment
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The Legal-Political Environment

• A Borderless
• World
• The
• International
• Business
• Environment
• The Economic
• Environment
• The Legal-
• Politcal
• Environment
• The Sociocultural
• Environment

• Major legal-political factors affecting
  international business are
• Political risk
• Political instability
• Laws and regulations

Chapter 4 Managing in a Global Environment
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The Legal-Political Environment

• A Borderless
• World
• The
• International
• Business
• Environment
• The Economic
• Environment
• The Legal-
• Politcal
• Environment
• The Sociocultural
• Environment

• Political risk
• Defined as a companys risk of loss of assets,
  earning power, or managerial control due to
  politically based events or actions by the host
  governments
• Political instability
• Events such as riots, revolutions, or government
  upheavals that affect the operations of an
  international company Laws and regulations
• Laws and Regulations
• This pertains to legislations which differ from
  country to country

Chapter 4 Managing in a Global Environment
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The Social Environment

• A Borderless
• World
• The
• International
• Business
• Environment
• The Economic
• Environment
• The Legal-
• Politcal
• Environment
• The
• Sociocultural
• Environment

• A nations culture includes the shared knowledge,
  beliefs and values, as well as the common modes
  of behavior and ways of thinking, among members
  of society
• There are 4 dimensions of national value systems
  that influence organization and employee working
  relationship. (Hofstedes Value Dimension)
• Power distance
• Uncertainty avoidance
• Individualism and collectivism
• Masculinity/femininity
• Long-term orientation vs short-term orientation

Chapter 4 Managing in a Global Environment
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Hofstedes Value Dimension

• A Borderless
• World
• The
• International
• Business
• Environment
• The Economic
• Environment
• The Legal-
• Politcal
• Environment
• The
• Sociocultural
• Environment

• Power distance
• Refers to the degree distance means people accept
  inequality in power among institutions,
  organizations, and people
• Uncertainty avoidance
• High uncertainty avoidance means that members of
  a society feel uncomfortable with uncertainty and
  ambiguity
• Individualism and collectivism
• Individualism reflects a value for a loosely knit
  social framework in which individuals are
  expected to take care of themselves
• Collectivism means a preference for a tightly
  knit social framework in which individuals look
  after one another and organizations protect their
  members interest

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52
Hofstedes Value Dimension

• A Borderless
• World
• The
• International
• Business
• Environment
• The Economic
• Environment
• The Legal-
• Politcal
• Environment
• The
• Sociocultural
• Environment

• Masculinity/femininity
• Masculine cultures stress the importance of
  achievement, heroism, assertiveness, and material
  success
• Feminine cultures value relationships, modesty,
  caring for the weak, and quality of life
• Long-term orientation vs short-term orientation
• Long-Term Orientation is found China and other
  Asian countries includes a greater concern for
  the future and highly values thrift and
  perseverance
• Short-Term Orientation means that people expect
  fairly rapid feedback from decisions, expect
  quick profits, frequent job evaluations and
  promotions, etc.

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Example of how countries rate on the four
dimensions

• A Borderless
• World
• The
• International
• Business
• Environment
• The Economic
• Environment
• The Legal-
• Politcal
• Environment
• The
• Sociocultural

• Rank Ordering of Ten Countries

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54
The Social Environment

• A Borderless
• World
• The
• International
• Business
• Environment
• The Economic
• Environment
• The Legal-
• Politcal
• Environment
• The
• Sociocultural
• Environment

• The GLOBE (Global Leadership and Organizational
  Behavior Effectiveness) Project Value dimension
  identified 9 dimensions that explain cultural
  differences
• Assertiveness
• Future orientation
• Uncertainty avoidance
• Gender differentiation
• Power distance
• Societal collectivism
• Individual collectivism
• Performance orientation
• Human orientation

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55
The GLOBE Project Value Dimensions

• A Borderless
• World
• The
• International
• Business
• Environment
• The Economic
• Environment
• The Legal-
• Politcal
• Environment
• The
• Sociocultural
• Environment

• Assertiveness
• A high value on assertiveness means a society
  encourages toughness, assertiveness, and
  competitiveness while low assertiveness means
  that people value tenderness and concern for
  other over being competitive
• Future orientation
• This refers to the extent to which a society
  encourages and rewards planning for the future
  over short-term results and quick gratification
• Uncertainty avoidance
• This is the degree to which members of a society
  feel uncomfortable with uncertainty and ambiguity

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56
The GLOBE Project Value Dimensions

• A Borderless
• World
• The
• International
• Business
• Environment
• The Economic
• Environment
• The Legal-
• Politcal
• Environment
• The
• Sociocultural
• Environment

• Gender differentiation
• This refers to the extent to which a society
  maximizes gender role differences
• Power distance
• This refers to the degree to which people expect
  and accept equality or inequality in
  relationships and institutions
• Societal collectivism
• Is the degree to which practices in institutions
  encourage a tightly-knit collectivist society in
  which people are important part of a group, or a
  highly individualistic society

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57
The GLOBE Project Value Dimensions

• A Borderless
• World
• The
• International
• Business
• Environment
• The Economic
• Environment
• The Legal-
• Politcal
• Environment
• The
• Sociocultural
• Environment

• Individual collectivism
• This dimensions looks at the degree to which
  individuals take pride in being members of a
  family, close circle of friends, team, or
  organization
• Performance orientation
• High performance orientation places high emphasis
  on performance and rewards people for performance
  improvements
• Low performance orientation means people pay less
  attention to performance andmore attention to
  loyalty, belonging and background
• Human orientation
• This refers to the degree to which society
  encourages and rewards people for being fair,
  altruistic, generous, and caring

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58
Example of Country Rankings on Selected GLOBE
Value Dimensions

• Managers
• Challenges
• A Borderless
• World
• The
• International
• Business
• Environment
• The Economic
• Environment
• The Legal-
• Politcal
• Environment
• The

Chapter 4 Managing in a Global Environment
59
The Social Environment

• A Borderless
• World
• The
• International
• Business
• Environment
• The Economic
• Environment
• The Legal-
• Politcal
• Environment
• The
• Sociocultural
• Environment

• Other cultural characteristics that influence
  international organizations are
• Language
• Religion
• Attitudes
• Social organization
• Education

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60
International Trade Alliances

• Managers
• Challenges
• A Borderless
• World
• The
• International
• Business
• Environment
• The Economic
• Environment
• The Legal-
• Politcal
• Environment
• The

• One of the visible changes in the international
  business environment has been the development of
  regional trading alliances and international
  trade agreements.
• GATT and the World Trade Organization
• European Union
• North America Free Trade Agreement
• Other Trade Alliances
• The Global Backlash

Chapter 4 Managing in a Global Environment
61
GATT and the World Trade Organization

• International
• Trade
• Alliances
• GATT
• and WTO
• European
• Union
• NAFTA

• General Agreement on Tariffs and Trade (GATT)
• Signed by 23 nations in 1947 as a set of rules
• Ensured nondiscrimination, clear procedures,
  negotiation of disputes, and participation of
  lesser developed countries in international trade
• Today, 147 member countries abide by the rules
• Primary tools WTO uses on tariff concessions,
  countries agree to limit level of tariffs on
  imports from other WTO members
• Most favored nation clause
• World Trade Organization (WTO)
• Goal, is to guide and sometimes urge the nations
  of the world toward free trade and open markets
• Encompasses GATT and all of its agreements
• Has legal authority to arbitrate disputes on 400
  trade issues
• Partly responsible for backlash against global
  trade

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European Union

• International
• Trade
• Alliances
• GATT
• and WTO
• European
• Union
• NAFTA

• Formed in 1957 to improve economic and social
  conditions
• Has grown to 25-nation alliance
• Initiative Europe 92 called for creation of open
  markets for Europes 340 million consumers
• Biggest expansion in 2004 10 new members from
  southern and eastern Europe
• Observers feared EU would become a trade barrier
• EUs monetary revolution, introduction of the Euro

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North America Free Trade Agreement

• International
• Trade
• Alliances
• GATT
• and WTO
• European
• Union
• NAFTA

• Went into effect on January 1, 1994
• Merged the United States, Canada, and Mexico with
  more that 421 million consumers
• Breaks down tariffs and trade restrictions on
  most agriculture and manufactured products
• August 12, 1992 agreements in number of key areas
  include agriculture, autos, transport,
  intellectual property

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64
Getting Started Internationally

• Managers
• Challenges
• A Borderless
• World
• The
• International
• Business
• Environment
• The Economic
• Environment
• The Legal-
• Politcal
• Environment
• The

• Small and medium-size companies have a couple of
  ways to become involved internationally.
• Global Outsourcing
• Exporting
• Licensing
• Direct Investing
• This are called market entry strategies because
  they represent ways to sell products and services
  in foreign markets

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65
Strategies for Entering International Markets

• Managers
• Challenges
• A Borderless
• World
• The
• International
• Business
• Environment
• The Economic
• Environment
• The Legal-
• Politcal
• Environment
• The

Greenfield Venture
Acquisition
Joint Venture
Franchising
Licensing
Exporting
66
Exporting

• Getting Started
• Internationally
• Exporting
• Licensing
• Franchising
• Joint Venture
• Acquisition
• Greenfield
• Venture

An entry strategy in which the organization
maintains its production facilities within its
own country and transfers its products for sale
in foreign countries
Licensing
An entry strategy in which an organization in
one country makes certain resources available to
companies in another in order to participate in
the production and sale of its products abroad
Franchising
A form of licensing in which an organization
provides its foreign franchisees with a complete
package of materials and services
67
Joint Venture

• Getting Started
• Internationally
• Exporting
• Licensing
• Franchising
• Joint Venture
• Acquisition
• Greenfield
• Venture

A variation of direct investment in which an
organization shares costs and risks with another
firm to build a manufacturing facility, develop
new products, or set up a sales and distribution
network
Acquisition
A foreign subsidiary over which an organization
had complete control
Greenfield Venture
The most risky type of direct investment, whereby
a company builds a subsidiary from scratch in a
foreign country
68
Multinational Corporations (MNC)

• Managers
• Challenges
• A Borderless
• World
• The
• International
• Business
• Environment
• The Economic
• Environment
• The Legal-
• Politcal
• Environment
• The

• An MNC are companies that receives gt25 total
  sales revenues from operations outside parent
  companys home country
• Also called global corporation or transnational
  corporation
• MNCs has the following distinctive managerial
  characteristics
• Managed as integrated worldwide business system
• Controlled by single management authority
• Top managers exercise global perspective

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69
Managing in a Global Environment

• Managers
• Challenges
• A Borderless
• World
• The
• International
• Business
• Environment
• The Economic
• Environment
• The Legal-
• Politcal
• Environment
• The

• Managing in a foreign country is particularly
  challenging
• Managers should be sensitive to cultural
  subtleties and understand that the ways to
  provide proper leadership, decision making,
  motivation and control vary in different cultures

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70
CASE ANALYSIS
Shui Fabrics
71
Question1 How would you characterize the main
economic, legal-political, and sociocultural
differences influencing the relationship between
the partners in Shui Fabrics? What GLOBE Project
dimensions would help you understand the
differences in Chinese and American perspectives
illustrated in the case?
Case Analysis Shui Fabrics
72
Answer to Question1 (continuation)
Case Analysis Shui Fabrics
73
Answer to Question1 (continuation)
Case Analysis Shui Fabrics
74
Answer to Question1 (continuation)
Case Analysis Shui Fabrics
75
Question2 How would you define Shuis core
problem? Are sociocultural differences the main
underlying cause of this problem? Why or why not?
How would you handle the conflict with your boss
back in the United States? Shuis core problem
is that Rocky Rivers president Paul Danvers is
not satisfied with 5 percent as an ROI. He would
like to stretch it to something like 20 percent.
Therefore, hes not satisfied with the profit
Shui is generating. Sociocultural differences
had a great influence with the problem Shui is
facing. As discussed in our answer in question
number 1, Americans tend to have a strong
ethnocentric attitude where, like Paul, thinks
their way would always be the best way in
handling things even they are operating in a
foreign country. He doesnt seem to understand or
mind the difference between their culture with
the Chineses.   If we were Ray, we would remind
Paul about the social and cultural difference of
our partner with us. Like what other successful
companies did, we can also improve our success by
paying attention to the culture of our partner.
We should be flexible and meet at the middle.
Cultural differences, like how Chiu Wai think and
see things, would always affect our working
relationship with them but interpreting the
culture where the organization is and developing
sensitivity would avoid the costly cultural
blunders as a result.
Case Analysis Shui Fabrics
76
Question3 If you were Ray Betzell, what other
options to the 50-50 joint venture would you
consider for manufacturing textiles in China?
Make the argument that one of these options is
more likely to meet Rocky Rivers expectations
than the partnership already in place. The
other option that we will consider for
manufacturing textiles in China aside from the
joint venture that we presently have is GLOBAL
OUTSOURCING. We would outsource to obtain the
cheapest labor and supplies than doing it in our
country. Its difference with our joint venture
is that we would not share costs and risks with
the other firm in which the textiles will be
made. That would be a lesser cost on our part and
all the risk will be shouldered by the other
firm.
Case Analysis Shui Fabrics
77
END OF REPORT