Chapter 3 – Integrative Managerial Issues
CHAPTER
3
INTEGRATIVE
MANAGERIAL
ISSUES
LEARNING OUTCOMES
After reading this chapter, students should be able to:
3-1. Explain globalization and its impact on organizations.
3-2. Discuss how society’s expectations are influencing managers and organizations.
3-3. Discuss the factors that lead to ethical and unethical behavior in organizations.
3-4. Describe how the workforce is changing and its impact on the way organizations are
managed.
Management Myth
MYTH: Employees are less ethical today than in the past.
TRUTH: Ethical misconduct is at an all-time low.
SUMMARY
The media may be the cause of this myth. Topics that are publicized are not always in line with
current practices. The idea that, “good news doesn’t sell newspapers,” has some truth to it. The
issue of employees behaving ethically is an important one for today’s managers. However,
managers also face other important issues associated with globalization and with employing and
engaging a diverse global workforce. Because each of these topics—diversity, globalization, and
ethics/social responsibility—are integrated throughout many aspects of what managers do and
how they manage, we’re going to look closer at these integrative managerial issues in this
chapter.
Teaching Tip:
Discuss this case with students, asking them:
• Have you seen any unethical conduct in your workplace and if so, how was this handled?
3-36
Copyright ©2017 Pearson Education, Inc.
Chapter 3 – Integrative Managerial Issues
I. WHAT IS GLOBALIZATION AND HOW DOES IT AFFECT ORGANIZATIONS?
A. Introduction
1. Management is no longer constrained by national borders.
a) Major events such as catastrophic natural disasters and the global economic
meltdown of the past few years have created challenges for managers doing
business globally.
b) BMW, a German-owned firm, builds cars in South Carolina.
c) McDonald’s sells hamburgers in China.
d) The world has become a global village, a boundaryless world where goods and
services are produced and marketed worldwide.
2. To be effective in this boundaryless world, managers need to adapt.
B. What does it mean to Be Global?
1. Organizations are considered global if they exchange goods and services with
consumers in other countries. This marketplace globalization is the most common
approach to being global.
2. Many organizations are considered global because they use managerial and technical
employee talent from other countries.
3. An organization can be considered global if it uses financial sources and resources
outside its home country, also known as financial globalization.
C. How Do Organizations Go Global?
1. An organization going global typically proceeds through stages as shown in Exhibit
3-1.
2. The first step toward going international may start with global sourcing (also called
global outsourcing), which is purchasing materials or labor from around the world
wherever it is the cheapest.
a) As companies think about the best places to do business, they face choices of
offshore, onshore, or nearshore. Then, as a company takes that next step in going
global, each successive stage beyond global sourcing requires more investment
and thus entails more risk for each organization.
3. The next step may involve exporting – making products domestically and selling
them abroad.
4. An organization might do importing, or acquiring products made abroad and selling
them domestically.
a) Both usually entail minimal investment and risk.
5. Licensing or franchising, involve one organization giving another organization the
right to use its brand name, technology, or product specifications in return for a lump
sum payment or a fee.
3-37
Copyright ©2017 Pearson Education, Inc.
Chapter 3 – Integrative Managerial Issues
a) The only difference is that licensing is primarily used by manufacturing
organizations that make or sell another company’s products, and franchising is
primarily used by service organizations that want to use another company’s name
and operating methods.
6. Direct investments may include:
a) A global strategic alliance – a partnership between an organization and a foreign
company partner or partners.
b) Joint ventures are a specific type of strategic alliance in which the partners form
a separate, independent organization for some business purpose.
1) These partnerships provide a relatively easy way for companies to compete
globally.
c) A foreign subsidiary is a separate and independent facility or office. The greatest
commitment (and risk) occurs when the organization sets up a foreign subsidiary.
D. What Are the Different Types of Global Organizations?
1. Multinational companies or MNCs are any type of international company that
maintains operations in multiple countries.
a) Companies such as John Deere, Ford, and Sony are examples.
2. Types of MNC’s:
a) A multidomestic corporation – decentralizes management and other decisions to
the local country where it is doing business.
b) Transnational or borderless organization – companies that use an arrangement
that eliminates artificial geographical barriers.
c) Global Corporation – centralizes its management and other decisions in the
home country.
E. What Do Managers Need to Know About Managing in a Global Organization?
1. A global world presents new challenges for managers.
a) U.S. managers in the past held a rather parochial view of the world of business.
b) Parochialism is a narrow focus in which managers see things only through their
own eyes and from their own perspectives.
1) This view can’t succeed in a global village, nor is it the dominant view held
today.
2) Tall countries have different values, morals, customs, political and economic
systems, and laws, all of which can affect how a business is managed.
3) Organizational success can come from a variety of managerial practices.
4) For example, status is perceived differently in different countries:
(1) In France, status is the result of factors important to the organization.
3-38
Copyright ©2017 Pearson Education, Inc.
Chapter 3 – Integrative Managerial Issues
(2) In the United States, status is more a function of what individuals have
personally accomplished.
2. Countries also have differences in their laws:
a) In the United States, laws guard against employers’ taking action against
employees solely on the basis of an employee’s age.
b) Similar laws do not exist in all other countries.
3. Viewing the global environment from any single perspective may be potentially
problematic.
4. An appropriate approach is recognizing the cultural dimensions of a country’s
environment.
5. A study of the differences of cultural environments was conducted by Geert Hofstede.
From the Past to the Present
Hofstede in the 1970s and 1980s surveyed over 116,000 employees in forty countries—all of
whom worked for IBM.
Hofstede found that managers and employees vary on the following five value dimensions of
national culture:
1. Power distance.
2. Individualism versus collectivism.
3. Quantity of life versus quality of life.
4. Uncertainty avoidance.
5. Long-term versus short-term orientation.
Questions students should consider:
Using Hofstede’s data for Mexico and the United States, how do you think employees in
each country (a) might react to a team-based rewards program; (b) would be likely to view
their relationship with their boss; and (c) might react to a change in work processes?
What does this example tell you about the importance of understanding cultural differences?
Teaching Tip:
Comparisons can be made between many different countries. Google Geert Hofstede to see a
version of Hofstede’s five dimensions and a graph for roughly 50 of the world’s largest countries.
6. The Global Leadership and Organizational Behavior Effectiveness (GLOBE)
research program has updated Hofstede’s research.
a) Using data from 17,000 organizations in 62 countries, GLOBE identified 9
dimensions on which national culture differ:
1) Assertiveness
3-39
Copyright ©2017 Pearson Education, Inc.
Chapter 3 – Integrative Managerial Issues
(1) High: Spain, United States, and Greece
(2) Moderate: Egypt, Ireland, and Philippines
(3) Low: Sweden, New Zealand, and Switzerland
2) Future orientation
(1) High: Denmark, Canada, and Netherlands
(2) Moderate: Slovenia, Egypt, and Ireland
(3) Low: Russia, Argentina, and Poland
3) Gender differentiation
(1) High: South Korea, Egypt, and Morocco
(2) Moderate: Italy, Brazil, and Argentina
(3) Low: Sweden, Denmark, and Slovenia
4) Uncertainty avoidance
(1) High: Austria, Denmark, and Germany
(2) Moderate: Israel, United States, and Mexico
(3) Low: Russia, Hungary, and Bolivia
5) Power distance
(1) High: Russia, Spain, and Thailand
(2) Moderate: England, France, and Brazil
(3) Low: Denmark, Netherlands, and South Africa
6) Individualism/collectivism
(1) High: Greece, Hungary, and Germany
(2) Moderate: Hong Kong, United States, and Egypt
(3) Low: Denmark, Singapore, and Japan
7) In-group collectivism
(1) High: Egypt, China, and Morocco
(2) Moderate: Japan, Israel, and Qatar
(3) Low: Denmark, Sweden, and New Zealand
8) Performance orientation
(1) High: United States, Taiwan, and New Zealand
(2) Moderate: Sweden, Israel, and Spain
(3) Low: Russia, Argentina, and Greece
9) Humane orientation
(1) High: Indonesia, Egypt, and Malaysia
3-40
Copyright ©2017 Pearson Education, Inc.
Chapter 3 – Integrative Managerial Issues
(2) Moderate: Hong Kong, Sweden, and Taiwan
(3) Low: Germany, Spain, and France
b) The GLOBE study confirms that Hofstede’s original dimensions are still valid,
and has added some additional dimensions.
c) It also provides us with an update measure of where countries rate on each
dimension.
d) We can expect future cross-cultural studies of human behavior to increasingly use
the GLOBE dimensions to assess differences between countries.
II. WHAT DOES SOCIETY EXPECT FROM ORGANIZATIONS AND MANAGERS?
A. Introduction
1. TOMS Shoes has a unique idea to promote corporate social responsibility. For each
pair of shoes it sells, it donates a pair to a child in need. Founded by Blake Mycoskle,
who experienced firsthand the injuries that children suffer when they have no shoes,
the business concept is one of mixing charity with commerce.
2. For Blake Mycoskle, the ability for TOMS to produce a profit is just as important as
his commitment to social responsibility. The question for TOMS concerns their ability
to stay profitable and still be socially responsible.
B. How Can Organizations Demonstrate Socially Responsible Action?
1. Social responsibility (also known as corporate social responsibility (CSR)) is a
business’s intention, beyond its legal and economic obligations, to do the right things
and act in ways that are good for society.
a) This definition assumes that a business (1) obeys the law, (2) pursues economic
interest, and (3) views a business as a moral agent.
2. Social obligation occurs when a firm engages in social actions because of its
obligation to meet certain economic and legal responsibilities.
3. Social responsiveness is seen when a firm engages in social actions in response to
some popular social need.
4. Social responsibility adds an ethical imperative to do those things that make society
better and to not do those that could make it worse.
C. Should Organizations Be Socially Involved?
1. The importance of corporate social responsibility surfaced in the 1960s when social
activists questioned the singular economic objective of business.
2. Managers are now regularly confronted with decisions that have a dimension of social
responsibility.
3-41
Copyright ©2017 Pearson Education, Inc.
Chapter 3 – Integrative Managerial Issues
3. Arguments for and against social responsibility can be seen in Exhibit 3-2.
4. Few terms have been defined in as many different ways as social responsibility.
Social responsibility can include: philanthropy, pricing, employee relations, resource
conversation, product quality, and doing business in countries with oppressive
governments, etc.
5. A majority of studies have found a positive relationship between social involvement
and economic performance, but some caution in this regard is necessary because of
methodological questions associated with the measurement of social responsibility
and economic performance.
D. What Is Sustainability and Why Is It Important?
1. Many companies have announced plans to move to more environmentally
sustainable products and services including Walmart’s plan to remove 20 million
metric tons of greenhouse gas emissions from supply chains.
2. Sustainability has become a mainstream issue for managers. Managing in a
sustainable way includes widening corporate responsibility not only to managing in
an efficient and effective way, but also to responding strategically to a wide range of
environmental and societal challenges.
3. Sustainability has been defined as a company’s ability to achieve its business goals
and increase long-term shareholder value by integrating economic, environmental,
and social opportunities into its business strategies.
4. Following sustainability practices is one way in which organizations can show
customers their commitment to being responsible.
III.WHAT FACTORS DETERMINE ETHICAL AND UNETHICAL BEHAVIORS?
The term ethics refers to principles, values, and beliefs that define what is right and wrong
behavior.
A. In What Ways Can Ethics Be Viewed?
1. The Utilitarian View: What action provides the greatest amount of good for the
greatest number of people?
2. The Rights View: Human beings have certain moral entitlements that must be
respected at all times.
3. Theory of Justice View: Benefits and burdens are equitably distributed. The goal is
to be equitable, fair, and impartial in making decisions.
3-42
Copyright ©2017 Pearson Education, Inc.
Chapter 3 – Integrative Managerial Issues
4. Individual ethics also depend on several factors. These factors include an individual’s
morality, values, personality, and experiences; the organization’s culture; and the
ethical issue being faced.
B. How Can Managers Encourage Ethical Behavior?
1. Hire employees with high ethical standards, establish codes of ethics, lead by
example, link job goals and performance appraisal, provide ethics training, and
implement protective mechanisms for employees who face ethical dilemmas. By
themselves, such actions won’t have much of an impact. But if an organization has a
comprehensive ethics program in place, it can potentially improve an organization’s
ethical climate.
2. A code of ethics is a formal statement of an organization’s primary values and the
ethical rules it expects employees to follow. In addition, decision rules can be
developed to guide managers in handling ethical dilemmas in decision making.
3. Top management’s leadership and commitment to ethical behavior is extremely
important since the cultural tone for an organization is established by its top
managers. Exhibit 3-3 contains suggestions for being an ethical leader.
4. Employees’ job goals should be tangible and realistic, because clear and realistic
goals reduce ambiguity and motivate rather than punish. Job goals are usually a key
issue in the performance appraisal process.
5. If an organization wants employees to uphold high ethical standards, this dimension
must be included in the appraisal process. Performance appraisals should include this
dimension, rather than focusing solely on economic outcomes.
6. Ethics training should be used to help teach ethical problem solving and to present
simulations of ethical situations that could arise. At the least, ethics training should
increase awareness of ethical issues.
3-43
Copyright ©2017 Pearson Education, Inc.