Managing in the Global Environment

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Managing in the Global Environment
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Global Organizations

• Organizations that operate and compete in more
  than one country
• Uncertain and unpredictable because things are
  constantlychanging

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Organizational Environment

• Set of forces and conditions outside the
  organizations boundaries but affect a managers
  ability to acquire and utilize resources
• Because they have the potential to affect your
  company they are opportunities and threats to
  your company

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Forces in the Organizational Environment
Figure 4.1
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Task Environment

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

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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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The Task Environment

• Suppliers
• Relationships with suppliers can be difficult due
  to materials shortages, unions, and lack of
  substitutes.
• Suppliers that are the sole source of a critical
  item are in a strong bargaining position to raise
  their prices.
• Managers can reduce these supplier effects by
  increasing the number of suppliers of an input.

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Global Outsourcing

• Purchase of inputs from foreign suppliers or the
  production of inputs abroad to lower production
  costs and improve product quality and design
• Currently has a badconnotation in USA

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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.

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The Task Environment

• Customers
• Individuals and groups that buy goods and
  services that an organization produces
• Must identify an organizations main customers
  and produce the goods and services they want
• Global customers
• Many goods can now be sold the same everywhere
• Still have many differences between countries in
  tastes and styles

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The Task Environment

• Competitors
• Organizations that produce goods and services
  that are similar to a particular organizations
  goods and services
• Potential Competitors
• Organizations that presently are not in the task
  environment but could enter if they so chose
• Strong competitive rivalry results in price
  competition, and falling prices reduce access to
  resources and lower profits.

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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
• 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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General Environment
Economic
Socio-cultural
Technological
Forces
Demographic
Political and Legal
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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

• 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
• 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
• Most industrialized nations are experiencing the
  aging of their populations

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The General Environment

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

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The General Environment

• Global Forces
• Outcomes of changes in international
  relationships changes in nations economic,
  political, and legal systems and changes in
  technology, such as falling trade barriers, the
  growth of representative democracies, and
  reliable and instantaneous communication
• GATT, NAFTA, EU

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The Global Environment
Figure 4.3
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Declining Barriers to Trade and Investment

• Tariff
• A tax that government imposes on imported or,
  occasionally, exported goods.
• 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

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Declining Barriers to Trade and Investment

• GATT
• General agreement on Tariffs and Trade started
  after WWII and aimed at increasing global trades
  through reduction of tariffs
• Replaced by World Trade Organization (WTO) in
  1993
• Declining Barriers of distance and culture
• Technology has enabled goods and information to
  be exchanged rapidly anywhere in the world

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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.

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Effects of Free Trade on Managers

• North American Free Trade Agreement (NAFTA)
• Abolishes 99 of tariffs on goods traded between
  Mexico, Canada and the United States
• Unrestricted cross-border flows of resources
• Increased investment by U.S. firms in Mexican
  manufacturing facilities due lower wage costs in
  Mexico
• Recently expanded with CAFTA

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The Role of National Culture

• Values
• Ideas about what a society believes to be good,
  desirable and beautiful.
• Provides conceptual support for democracy, truth,
  appropriate roles for men, and women.
• Usually not static but very slow to change.

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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.
• Folkwaysroutine social conventions of everyday
  life
• Mores - norms that are considered to be central
  to functioning of society and to social life

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Hofstedes Model of National Culture
Figure 4.4
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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 than by 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
• A societys acceptance of differences in the well
  being of citizens due to differences in heritage
  and physical and intellectual capabilities
  (individualism).
• Also the degree to which society accepts gaps in
  wealth and status

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Hofstedes Model of National Culture

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

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Hofstedes Model of National Culture

• Uncertainty Avoidance degree to which societies
  are willing to tolerate uncertainty and risk
• Low uncertainty avoidance cultures (e.g., U.S.
  and Hong Kong) value diversity and tolerate
  differences in personal beliefs and actions
• High uncertainty avoidance societies (e.g., Japan
  and France) are more rigid and skeptical about
  people whose behaviors or beliefs differ from the
  norm

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Hofstedes Model of National Culture

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

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National Culture and Global Management

• Management practices that are effective in one
  culture might be troublesome in another
• Managers must be sensitive to the value systems
  and norms of an individuals country and behave
  accordingly