A Borderless World

1
A Borderless World

• 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

2

• The Other Side of Outsourcing Video

3
Four Stages of Globalization

• 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

4
Global (stateless) Corporations

• Number is increasing
• Awareness of national borders decreasing
• Rising managers expected to know a 2nd or 3rd
  language
• Corporate Example Nestle (Swiss)
• CEO Peter BrabeckLetmathe (Austrian)
• Half of general managers (non-Swiss)
• Strong faith in regional managers who are native
  to the region

5
International Environment Factors

• 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

6
Economic Environment Factors

• Economic development
• Infrastructure
• Resource and product markets
• Exchange rates
• Inflation
• Interest rates
• Economic growth

7
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

8
Infrastructure

• A countrys physical facilities that support
  economic activities
• Airports, highways, and railroads
• Energy-producing facilities
• Communication facilities

9
Resource and Product Markets

• When operating in another country...
• Managers must evaluate market demand
• To develop plants, resource markets must be
  available raw materials and labor

10
Exchange Rates

• 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

11
The Legal-Political Environment

• Political Risk due to events or actions by host
  governments
• Loss of assets
• Loss of earning power
• Loss of managerial control
• Government takeovers
• Acts of violence

12
Political Instability

• Events such as riots, revolutions, or government
  upheavals that affect the operations of an
  international company

13
Laws and Regulations

• Government laws and regulations differ from
  country to country
• Make doing business a true challenge for
  international firms
• Internet has increased impact of foreign laws on
  U.S. companies expands potential for doing
  business on global basis

14
Sociocultural Environment

• Culture shared knowledge, beliefs, values,
  common modes of behavior, and ways of thinking
  among members of a society
• Intangible
• Pervasive
• Difficult for outsider to learn
• Managers need to understand difference in social
  values to comprehend local cultures and deal with
  them effectively

15
Hofstedes Value Dimensions

• Research national value systems influence
  organizational and employee working relationships
• Power distance (high accept inequality)
• Uncertainty avoidance (uncomfortable with
  uncertainty)
• Individualism and collectivism (Individualism
  take care of themselves)
• Masculinity/femininity (preference for
  achievement/assertiveness femininity for
  relationship)
• Long-term/short-term orientation 5th dimension

16
Four Dimensions of National Value
17
GLOBE Value Dimensions
Global Leadership and Organizational Behavior
Effectiveness project
More comprehensive view of cultural similarities
and differences

• Assertiveness
• Future orientation
• Uncertainty avoidance
• Gender differentiation

• Power distance
• Societal collectivism
• Individual collectivism
• Performance orientation
• Humane orientation

18
International Cultural Influences

• Other Cultural Characteristics
• Language
• Religion
• Attitudes
• Social Organization
• Education
• Linguistic pluralism several languages exist
• Ethnocentrism regard own culture superior

19
Strategies for EnteringInternational Markets
High
Greenfield Venture
Acquisition
Joint Venture
Ownership of Foreign Operations
Franchising
Licensing
Exporting
Low
Cost to Enter Foreign Operations
High
Low
20
Multinational Corporations (MNC)

• Receives gt25 total sales revenues from
  operations outside parent companys home country
• Managed as integrated worldwide business system
• Controlled by single management authority
• Top managers exercise global perspective

21
Managing in a Global Environment

• Managers must be sensitive to cultural subtleties
  
• Personal challenges culture shock
• Managing Cross-culturally
• Leading
• Decision making
• Motivating
• Controlling
• Managers must be culturally flexible and easily
  adapt to new situations