Managing in the Global Environment

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Managing in the Global Environment

• chapter six

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Learning Objectives

• Explain why the ability to perceive, interpret,
  and respond appropriately to the global
  environment is crucial for managerial success
• Differentiate between the global task and global
  general environments
• Identify the main forces in both the global task
  and general environments, and describe the
  challenges that each force presents to managers

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Learning Objectives (cont.)

• Explain why the global environment is becoming
  more open and competitive and identify the forces
  behind the process of globalization that
  increases the opportunities, complexities,
  challenges, and threats that managers face
• Discuss why national cultures differ and why it
  is important that managers be sensitive to the
  effects of falling trade barriers and regional
  trade associations on the political and social
  systems of nations around the world

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Global Organizations

• Global Organizations
• Organizations that operate and compete not only
  domestically, but also globally
• Uncertain and unpredictable

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What Is the Global Environment?

• Global Environment
• Set of forces and conditions in the world outside
  the organizations boundaries that affect the way
  it operates and shape its behavior
• Changes over time
• Presents managers with opportunities and threats

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Forces in the Global Environment
Figure 6.1
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What Is the Global Environment?

• Task Environment
• Set of forces and conditions that originate with
  suppliers, distributors, customers, and
  competitors
• Affects an organizations ability to obtain
  inputs and dispose of its outputs
• Most immediate and direct effect on managers

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What Is the Global Environment?

• General environment
• The wide-ranging global, economic, technological,
  sociocultural, demographic, political, and legal
  forces that affect an organization and its task
  environment.

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The Task Environment

• Suppliers
• Individuals and organizations that provide an
  organization with the input resources that it
  needs to produce goods and services
• Raw materials, component parts, labor (employees)

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Global Outsourcing

• Global Outsourcing
• The purchase or production of inputs or final
  products from overseas suppliers to lower costs
  and improve product quality or design.

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The Task Environment

• Distributors
• Organizations that help other organizations sell
  their goods or services to customers

• Powerful distributors can limit access to markets
  through its control of customers in those
  markets.
• Managers can counter the effects of distributors
  by seeking alternative distribution channels.

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The Task Environment

• Customers
• Individuals and groups that buy goods and
  services that an organization produces

• Identifying an organizations main customers and
  producing the goods and services they want is
  crucial to organizational and managerial success.

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The Task Environment

• Competitors
• Organizations that produce goods and services
  that are similar to a particular organizations
  goods and services
• Rivalry between competitors is potentially the
  most threatening force that managers deal with

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The Task Environment

• Barriers to Entry
• Factors that make it difficult and costly for the
  organization to enter a particular task
  environment or industry

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Barriers to Entry

• Economies of scale
• Cost advantages associated with large operations
• Brand loyalty
• Customers preference for the products of
  organizations currently existing in the task
  environment.
• Government regulations that impede entry

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Barriers to Entry and Competition
Figure 6.2
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The General Environment

• Economic Forces
• Interest rates, inflation, unemployment, economic
  growth, and other factors that affect the general
  health and well-being of a nation or the regional
  economy of an organization.

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The General Environment

• Technology
• The combination of skills and equipment that
  managers use in designing, producing, and
  distributing goods and services.

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The General Environment

• Technological Forces
• Outcomes of changes in the technology that
  managers use to design, produce, or distribute
  goods and services

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The General Environment

• Sociocultural Forces
• Pressures emanating from the social structure of
  a country or society or from the national culture

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Sociocultural Forces

• Social structure
• the arrangement of relationships between
  individuals and groups in society

• National culture
• the set of values that a society considers
  important and the norms of behavior that are
  approved or sanctioned in that society.

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The General Environment

• Demographic Forces
• Outcomes of change in, or changing attitudes
  toward, the characteristics of a population, such
  as age, gender, ethnic origin, race, sexual
  orientation, and social class

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The General Environment

• Political and Legal Forces
• Outcomes of changes in laws and regulations, such
  as deregulation of industries, privatization of
  organizations, and increased emphasis on
  environmental protection.

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The Global Environment
Figure 6.3
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Process of Globalization

• Globalization
• The set of specific and general forces that work
  together to integrate and connect economic,
  political, and social systems across countries,
  cultures, or geographical regions so that nations
  become increasingly interdependent and similar.

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Principal Forms of Capital that Flow Between
Countries
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Declining Barriers to Trade and Investment

• Tariff
• A tax that government imposes on imported or,
  occasionally, exported goods.
• Intended to protect domestic industry and jobs
  from foreign competition

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Example - USITC

• The United States International Trade Commission
  is an independent, quasi-judicial Federal agency
  with broad investigative responsibilities on
  matters of trade.
• The Commission also serves as a Federal resource
  where trade data and other trade policy-related
  information are gathered and analyzed.

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GATT and the Rise of Free Trade

• Free-Trade Doctrine
• The idea that if each country specializes in the
  production of the goods and services that it can
  produce most efficiently, this will make the best
  use of global resources and will result in lower
  prices

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Declining Barriers of Distance and Culture -
Unilever

• Distance
• Markets were essentially closed because of the
  slowness of communications over long distances.
• Culture
• Language barriers and cultural practices made
  managing overseas businesses difficult
• Changes in Distance and Communication
• Improvement in transportation technology and
  fast, secure communications have greatly reduced
  the barriers of physical and cultural distances.

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Effects of Free Trade on Managers

• Declining Trade Barriers
• Opened enormous opportunities for managers to
  expand the market for their goods and services.
• Allowed managers to now both buy and sell goods
  and services globally.
• Increased intensity of global competition such
  that managers now have a more dynamic and
  exciting job of managing.

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The Role of National Culture

• Values
• Ideas about what a society believes to be good,
  right, desirable and beautiful.
• Provide the basic underpinnings for notions of
  individual freedom, democracy, truth, justice,
  honesty, loyalty, love, sex, marriage, etc.

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The Role of National Culture

• Norms
• Unwritten rules and codes of conduct that
  prescribe how people should act in particular
  situations.
• Folkways, mores
• Many differences in mores from one society to
  another

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Hofstedes Model of National Culture
Figure 6.4
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Hofstedes Model of National Culture

• Individualism
• A worldview that values individual freedom and
  self-expression and adherence to the principle
  that people should be judged by their individual
  achievements rather their social background.
• Collectivism
• A worldview that values subordination of the
  individual to the goals of the group and
  adherence to the principle that people should be
  judged by their contribution to the group

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Hofstedes Model of National Culture

• Power Distance
• Degree to which societies accept the idea that
  inequalities in the power and well-being of their
  citizens are due to differences in individuals
  physical and intellectual capabilities and
  heritage

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Hofstedes Model of National Culture

• Achievement orientation
• A worldview that values assertiveness,
  performance, success, and competition
• Nurturing orientation
• A worldview that values the quality of life, warm
  personal friendships, and services and care for
  the weak.

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Hofstedes Model of National Culture

• Uncertainty Avoidance
• The degree to which societies are willing to
  tolerate uncertainty and risk.
• Low uncertainty avoidance cultures value
  diversity and tolerate a wide range of opinions
  and beliefs.
• High uncertainty avoidance societies are more
  rigid and expect high conformity in their
  citizens beliefs and norms of behavior.

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Hofstedes Model of National Culture

• Long-term orientation
• A worldview that values thrift and persistence in
  achieving goals.
• Short-term orientation
• A worldview that values personal stability or
  happiness and living for the present.

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Video Case The Delmar Dog Butler

• What forces in the global environment are leading
  to outsourcing?
• What has outsourcing meant to countries like
  India?
• Do you think outsourcing is helping or hurting
  America?