978-1305502215 Chapter 3 Part 2

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Managing in a Global Environment •

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B. Communication Differences Exhibit 3.9

1. People from some cultures tend to pay more attention to the social context (social

setting, nonverbal behavior, social status) of their verbal communication than

Americans do.

a. In a high-context culture, people are sensitive to circumstances surrounding

social exchanges. People use communication primarily to build personal social

relationships; meaning is derived from context—setting, status, and nonverbal

behavior—more than from explicit words. High-context cultures include Asian

and Arab countries.

b. In a low-context culture, people use communication primarily to exchange facts

and information; meaning is derived primarily from words. Low-context cultures

tend to be American and Northern European.

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NEW MANAGER SELF-TEST: ARE YOU CULTURALLY INTELLIGENT?

The job of a manager demands a lot, and before long, activities will include situations that will

test a manager’s knowledge of and capacity for dealing with people from other national cultures.

This exercise will help students determine their capacity for dealing with cross-cultural

situations.

IX. INTERNATIONAL TRADE ALLIANCES

A. GATT and the WTO

1. The General Agreement on Trade and Tariffs (GATT), signed by 23 nations in

1947, started as a set of rules to ensure nondiscrimination, provide clear procedures,

settle disputes, and encourage participation of LDCs in international trade. GATT

and its successor, the World Trade Organization (WTO), primarily use tariff

concessions as a tool to increase trade. Members agree to limit the level of tariffs

they will impose on imports from other members.

2. The World Trade Organization (WTO) was established by the 1986 to 1994

Uruguay round. As of July 2008, 153 countries were members of the WTO. As a

permanent membership organization, the WTO is bringing greater trade

liberalization in goods, information, technological developments, and services. The

Managing in a Global Environment •

WTO is also, however, partly responsible for a growing backlash against global

trade.

B. European Union Exhibit 3.10

1. European Economic Community, now called the European Union (EU), was

formed in 1957 to improve economic and social conditions among its members, and

has since expanded to a 27-nation alliance. The biggest expansion came in 2004

when ten new members from southern and eastern Europe joined. Turkey has

opened negotiations. The goal of EU is to create a single-market system for

Europe’s millions of consumers, allowing people, goods, and services to move

freely. The most significant aspect is the EU’s monetary revolution and the

introduction of the euro, the single European currency that could eventually replace

27 European currencies.

2. The economic crisis has revived national loyalties and cross-border resentments,

slowing the move toward a unified and cohesive “European identity.” However,

some analysts think that a broad breakup of the eurozone is unlikely.

C. North American Free Trade Agreement (NAFTA)

1. NAFTA went into effect on January 1, 1994, and merged the U.S., Canada, and

Mexico into a single mega market. The agreement broke down tariffs and trade

restrictions on most agricultural and manufactured products over a 15-year period.

2. Opinions remained divided over the benefits of NAFTA; some call it a success and

others refer to it as a dismal failure. Advocates say that it has increased trade,

investment, and income and continues to enable all three countries to compete more

effectively with rival Asian and European firms.

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SUGGESTED ANSWERS TO END–OF-CHAPTER DISCUSSION

QUESTIONS

1. What specifically would the experience of living and working in another country contribute

to your skills and effectiveness as a manager in your own country?

Generally speaking, the global exposure of working in another country helps people develop

2. Both China and India are rising economic powers. How might your approach to doing

business with China, a communist country, be different from your approach to doing

business with India, the world’s most populous democracy? In which country would you

expect to encounter the most rules? The most bureaucracy?

Doing business in China would be different than doing business in India because China has new

3. Do you think it is realistic that BOP business practices can have a positive effect on poverty

and other social problems in developing countries? Discuss.

The bottom of the pyramid (BOP) concept proposes that corporations can alleviate poverty and

other social ills, as well as make significant profits, by selling to the world’s poorest people. The

4. Somnio, a start-up running shoe company in California, decided to start selling its products

around the world from the very beginning. In general terms, name some of the challenges a

start-up company such as Somnio might face internationally.

The basic management functions of planning, organizing, leading, and controlling are the same

5. Do you think it’s possible for someone to develop a global mindset if they never live outside

their native country? How might they do that?

6. Should a multinational corporation operate as a tightly integrated, worldwide business

system, or would it be more effective to let each national subsidiary operate autonomously?

Why?

There is no single correct answer to this question because arguments can be made both ways.

The answer depends partly on the goals and strategy of the multinational corporation. Operating

7. Why do you think many people are so frightened by globalization? Based on what is

occurring in the world today, do you expect the globalization backlash to grow stronger or

weaker over the next decade?

Generally, it may be that people who are afraid of globalization think they will somehow come

Managing in a Global Environment •

More specifically, the globalization backlash may be primarily the result of public perception

that other countries benefit from free trade to a much greater extent than does the United States.

8. Two U.S. companies are competing to take over a large factory in the Czech Republic. One

delegation tours the facility and asks questions about how the plant might be run more

efficiently. The other delegation focuses on ways to improve working conditions and produce

a better product. Which delegation do you think is more likely to succeed with the plant?

Why? What information would you want to collect to decide whether to acquire the plant for

your company?

9. Which style of communicating do you think would be most beneficial to the long-term success

of a U.S. company operating internationally—high-context or low-context communications?

Why?

10. How might the social value of low versus high power distance influence how you would lead

and motivate employees? What about the value of low versus high performance orientation?

Power distance refers to the extent to which people accept inequality in power among

institutions, organizations, and people. Low power distance means that people expect equality in

Managing in a Global Environment •

decision-making, and teamwork is likely to be an effective structure for the organization. In a

high power distance country, people will expect those at higher levels in the organization to have

certain perks and will also expect them to make the decisions.

A society with a high performance orientation places high emphasis on performance and rewards

people for performance improvements and excellence. Employees in a high performance

orientation society can be motivated by rewards for excellent performance and by developing

innovative ways to improve performance. A low performance orientation means people pay less

attention to performance and more attention to loyalty, belonging, and background. Employees

in low performance orientation societies can be motivated by the perception that their managers

and companies are loyal to them, and by the creation of a “family” atmosphere within their

companies. In addition, they are likely to go to great lengths in their performance for managers

who show an obvious interest in their employees as individuals and fellow human beings.

APPLY YOUR SKILLS: SELF-LEARNING

Rate Your Global Management Potential

The world is truly shrinking, and the number of companies doing business abroad increases each

year. In coming years it will become harder and harder to find medium- and large-sized

companies that do not have some international interactions, whether that be importing or

exporting parts and supplies, needs for assembling abroad, or international subsidiaries, joint

ventures, or strategic alliances.

Professionals incapable of being flexible in their work and interpersonal approaches will have a

difficult time adapting in this new environment and can therefore be the cause of the loss of

millions of dollars for their companies.

Other cultures may value things differently than Americans. These sometimes include

socializing before deal making rather than rushing right into the business negotiations. This is

because in some other cultures, relationships are more important than contracts (which are more

important here), and therefore the relationships must be solid. Trustworthiness is determined

there by knowing the person rather than relying on words written in papers. Some other cultures

are more patient and introspective than the American one. Therefore, they see Americans as too

pushy and impatient. If you want to work in such an environment, you must learn to be more

patient and to allow for silence at times.

One of the best ways to begin to prepare yourself for this world of globalized business is to begin

reading about events in other parts of the world, studying other cultures, learning a language,

traveling without being merely a “tourist,” and seeking out foreign restaurants, as well as foreign

students. Look at the differences as something new and fascinating. The people who fail in

international assignments are often those who are ethnocentric and cannot see the beauty in other

cultures, but tend to constantly compare them in terms of how deficient they are compared to the

U.S. Successful American expatriates, though, view new cultures with an attitude of curiosity

and a sense of wonder.

Managing in a Global Environment •

APPLY YOUR SKILLS: GROUP LEARNING

Global Entrepreneurship IQ

This exercise asks students to compare questions in terms of the ease of doing business. Since

they would not likely know the answers, this will give them an opportunity to make a guess and

then compare their guess to the results of researching the World Bank 2013 information given as

the source for the questions.

APPLY YOUR SKILLS: ETHICAL DILEMMA

AH Biotech

1. Do the clinical trials in Albania. You’ll be able to bring the drug to market faster and

cheaper, which will be good for AH Biotech’s employees and investors and good for the

millions of people who suffer from anxiety attacks.

2. Do the clinical trials in the United States. Even though it will certainly be more expensive

and time-consuming, you’ll feel as if you’re living up to the part of the Hippocratic Oath that

instructed you to “prescribe regimens for the good of my patients according to my ability

and my judgment and never do harm to anyone.”

3. Do the clinical trials in Albania, and if the drug is approved, use part of the profits to set up

a compassionate use program in Albania, even though setting up a distribution system and

Managing in a Global Environment •

training doctors to administer the drug, monitor patients for adverse effects, and track

results will entail considerable expense.

APPLY YOUR SKILLS: CASE FOR CRITICAL ANALYSIS

We Want More Guitars!

1. How accurate is Adam Wainwright’s analysis of the situation at Guitarras Dominguez? Do

you think craftsmanship is incompatible with increasing productivity in this company? Why?

2. What social values are present in Guitarras Dominguez that seem different from U.S. social

values (see Exhibits 3.7 and 3.8)? Explain.

3. What do you recommend Adam do to increase production in a business setting that does not

seem to value high production?

Managing in a Global Environment •

ON THE JOB VIDEO CASE ANSWERS

Black Diamond Equipment: Managing in a Global Environment

1. What evidence do you see of a global mindset in these managers? List at least three examples

of global thinking provided in the video.

• Black Diamond takes into consideration the differences in culture and perspective

2. Referencing the common traits of an MNC described in the text, explain why you think Black

Diamond is or is not a multinational corporation.

A multinational corporation (MNC) typically receives more than 25 percent of its total sales

revenues from operations outside the home country. Black Diamond is an MNC because it

3. Describe at least two environmental factors affecting this business, and summarize how the

managers are responding to these factors.

Managing in a Global Environment •

The sociocultural environment affects this business because many of Black Diamond’s factory

workers in countries such as Bangladesh have little or no formal education. The company is

responding by offering employees educational opportunities.

The legal-political environment affects this business because host governments have myriad laws

concerning libel statutes, consumer protection, information and labeling, employment and safety,

and wages. Black Diamond’s managers must learn these rules and regulations and abide by them.

They assure that the workers are treated humanely and work in a safe, clean, well-lit factory.