Management Chapter 3 Homework Outsourcing Probably The Most Widespread Approach International

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CHAPTER 3

MANAGING IN A GLOBAL ENVIRONMENT

CHAPTER OUTLINE

Are You Ready to Be a Manager?

I. A Borderless World

II. Getting Started Internationally

A. Exporting

B. Outsourcing

III. The Changing International Landscape

A. China Inc.

B. India, the Service Giant

C. Brazil’s Growing Clout

IV. The International Business Environment

V. The Economic Environment

A. Economic Development

B. Resource and Product Markets

C. Economic Interdependence

VI. The Legal-Political Environment

VII. The Sociocultural Environment

A. Social Values

VIII. International Trade Alliances

A. GATT and the World Trade Organization

B. European Union

C. North American Free Trade Agreement (NAFTA)

D. China-ASEAN Free Trade Area

IX. International Issues

A. The Globalization Backlash

B. Serving the Bottom of the Pyramid

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ANNOTATED LEARNING OBJECTIVES

After studying this chapter, students should be able to:

1. Define globalization and explain how it is creating a borderless world for today’s managers.

Globalization refers to the extent to which trade and investments, information, social and cultural

ideas, and political cooperation flow between countries. One result is that countries, businesses,

2. Describe various approaches businesses use to enter the international arena.

Market-entry strategies represent alternative ways to sell products and services in foreign

markets. Market-entry strategies include:

a. Exporting is a strategy in which the organization maintains its production facilities within

3. Discuss how the international landscape is changing, including the growing power of China,

India, and Brazil.

Many companies today are going straight to China as a first step into international business.

Business is booming and U.S. and European companies are taking advantage of opportunities for

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4. Define international management and explain how it differs from the management of

domestic business operations.

International management is the management of business operations conducted in more than one

5. Indicate how dissimilarities in the economic, sociocultural, and legal-political environments

throughout the world can affect business operations.

Environmental factors that affect international business are similar to the task and general

environmental sectors described in Chapter 2. However, when comparing one country with

another, the economic, legal-political, and sociocultural sectors present the greatest difficulties.

6. Discuss why cultural intelligence is necessary for managers working in foreign countries.

Cultural intelligence (CQ) refers to a person’s ability to use reasoning and observation skills to

interpret unfamiliar gestures and situations and devise appropriate behavioral responses.

Managing in a foreign country is particularly challenging. Before undertaking a foreign

7. Describe how regional trading alliances are reshaping the international business

environment.

8. Describe the globalization backlash and explain the bottom of the pyramid concept.

As the world becomes increasingly interconnected, a backlash over globalization is occurring.

The loss of jobs as companies export work to countries with lower wages is a primary concern.

LECTURE OUTLINE

Are You Ready to Be a Manager?

I. A BORDERLESS WORLD

INSTRUCTOR’S NOTES___________________________________________________________

______________________________________________________________________________

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______________________________________________________________________________

A. A manager’s reality is that isolation from international forces is no longer possible.

Today, even small companies can locate different parts of their organizations wherever it

makes the most business sense. Virtual connections enable close, rapid coordination

among people working in different parts of the world, so it is no longer necessary to keep

everything in one place. A borderless world means consumers can no longer tell from

which country they’re buying.

New Manager’s Self-Test: Are You Ready to Work Internationally?

American managers often display cross-cultural ignorance during business negotiations

compared to counterparts in other countries. American habits can be disturbing; these include

Exhibit 3.1: Ranking of Six Countries on the Globalization Index

Exhibit 3.2: Four Stages of Globalization

B. Globalization refers to the extent to which trade and investments, information, social and

cultural ideas, and political cooperation flow between countries. The process of

globalization typically passes through four distinct stages:

2. International. Exports increase and the company adopts a multidomestic

3. Multinational. Company has marketing and production facilities located in many

II. GETTING STARTED INTERNATIONALLY

INSTRUCTOR’S NOTES___________________________________________________________

______________________________________________________________________________

Organizations can become involved internationally in a couple of different ways. One way is to

Exhibit 3.3: Strategies for Entering International Arena

A. Exporting

2. Exporting enables a company to market its products in other countries at modest

3. Countertrade is a form of exporting to less-developed countries that involves the

B. Outsourcing

1. Global outsourcing, or offshoring, means engaging in the international division of

III. THE CHANGING INTERNATIONAL LANDSCAPE

A. China Inc.

1. Many companies today are going straight to China as a first step into international

business. Business is booming and U.S. and European companies are taking

B. India, the Service Giant

1. Whereas China is strong in manufacturing, India is a rising power in software design,

services, and precision engineering. Nearly 50 percent of microchip engineering for

C. Brazil’s Growing Clout

1. Brazil’s economy was projected to grow as much as 6 percent in 2010, and its stock

IV. THE INTERNATIONAL BUSINESS ENVIRONMENT

INSTRUCTOR’S NOTES___________________________________________________________

______________________________________________________________________________

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______________________________________________________________________________

A. International management is the management of business operations conducted in more

than one country. The fundamental tasks of business management do not change in any

B. The economic, legal-political, and sociocultural sectors present the greatest difficulties in

comparing one country to another.

Business Blooper: Aeroflot

Two recent incidents on Russia’s Aeroflot Airlines suggest that the airline lacks management

oversight. The pilot of a jet taking off from London was chatting with passengers when they

Discussion Question #5: What steps could a company take to avoid making product design and

marketing mistakes when introducing new consumer products into Brazil?

Exhibit 3.4: Key Factors in the International Environment

V. THE ECONOMIC ENVIRONMENT

INSTRUCTOR’S NOTES___________________________________________________________

______________________________________________________________________________

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A. Economic Development

1. Economic development differs widely among the countries and regions of the world,

3. Infrastructure refers to a country’s physical facilities support economic activities

4. Companies operating in LDCs must contend with lower levels of technology and

B. Resource and Product Markets

1. When operating in another country, company managers must evaluate the market

2. If the firm wants to develop manufacturing plants, however, resource markets for raw

Exhibit 3.5: World Economic Forum Global Competitiveness Rankings 2009-2010

C. Economic Interdependence

1. The recent crisis that began in the United States with the collapse of the housing

3. In 2010, Greece’s inability to make payments on its debt sparked a panic that

Exhibit 3.6: How Companies Are Bearing the Economic Crisis: Misery Index, 2010

Compared to 2000

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VI. THE LEGAL-POLITICAL ENVIRONMENT

INSTRUCTOR’S NOTES___________________________________________________________

______________________________________________________________________________

A. Political risk is a company’s risk of loss of assets, earning power, or managerial control

B. Political instability refers to events such as riots, revolutions, civil disorders or

C. Government laws and regulations differ from country to country and present a challenge

VII. THE SOCIOCULTURAL ENVIRONMENT

INSTRUCTOR’S NOTES___________________________________________________________

______________________________________________________________________________

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______________________________________________________________________________

A. Social Values

1. Culture is intangible, pervasive, and difficult for outsiders to learn. One way

Exhibit 3.7: Rank Orderings of Ten Countries along Four Dimensions

of National Value Systems

a. Power distance. High power distance means people accept inequality in power

among institutions, organizations, and people. Countries that value high power

b. Uncertainty avoidance. High uncertainty avoidance means that members of a

society feel uncomfortable with uncertainty and ambiguity and thus support

c. Individualism and collectivism. Individualism reflects a value for a loosely knit

social framework in which individuals are expected to take care of themselves.

d. Masculinity and femininity. Masculinity stands for preference for achievement,

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e. Long-term orientation and Short-term orientation. Long-term orientation

3. GLOBE Project Value Dimensions. Research by the GLOBE Project (Global

Leadership and Organizational Behavior Effectiveness) used data collected from

18,000 managers in 62 countries. They collected data on nine dimensions. GLOBE

research adds the following dimensions to those identified by Hofstede.

a. Assertiveness is the extent to which a society encourages toughness, assertiveness,

and competitiveness.

4. Social values have great influence on organizational functioning and management

styles.

Spotlight on Skills: How Well Do You Play the Culture Game?

This exercise helps students determine how good they are at understanding cross-cultural

differences in communication and etiquette.

Exhibit 3.8: Examples of Country Rankings on Selected GLOBE Value Dimensions

B. Communication Differences

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

exchanges. People use communication primarily to build personal social

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

Discussion Question #8: 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?

Spotlight on Skills: Communication Skills Abroad

Every culture has its own way of communicating. Nevertheless, this feature offers some basic

principles to follow in international business relations.

2. Try to gain an appreciation for the differences between Hofstede’s “masculine” and

“feminine” cultures.

4. Emphasize points of agreement.

6. Safe face and “give” face as well; this can be a way of showing honor to others.

8. Don’t assume the other country views leadership the same way you do.

10. Don’t embarrass anyone in front of others.

12. Be aware that most Asian countries are “high–context cultures” based on a complicated

system of relationships and moral codes.

14. Be aware that some countries, such as Israel, are even more fast-paced, and people there

get impatient with American “small talk”.

16. If you travel to the increasingly visited “out-of-the-way” locations, learn to tolerate

Exhibit 3.9: High-Context and Low-Context Cultures

C. Other Cultural Characteristics

1. Other cultural characteristics that influence international organizations are language,