Chapter 04 – Managing in the Global Environment
4-1
Chapter 04
Managing in the Global Environment
Learning Objectives 4-2
Key Definitions/Terms 4-2
Chapter Overview 4-4
Lecture Outline 4-4
Lecture Enhancers 4-14
Management in Action 4-17
Building Management Skills 4-20
Managing Ethically 4-22
Small Group Breakout Exercise 4-22
Be the Manager 4-23
Case in the News 4-24
Supplemental Features 4-25
Manager’s Hot Seat 4-25
Instructor’s PowerPoint Slides 4-26
CHAPTER CONTENTS
Chapter 04 – Managing in the Global Environment
4-2
LO 4-1. Explain why the ability to perceive, interpret, and respond
LO 4-2. Differentiate between the global task and global general
environments.
LO 4-3. Identify the main forces in both the global task and general
environments and describe the challenges that each force presents
to managers.
LO 4-4. Explain why the global environment is becoming more open and
LO 4-5. Discuss why national cultures differ and why it is important that
managers be sensitive to the effects of falling trade barriers and
regional trade associations on the political and social systems of
nations around the world.
achievement orientation: A worldview that values
assertiveness, performance, success, and
competition.
barriers to entry: Factors that make it difficult and
costly for an organization to enter a particular task
environment or industry.
brand loyalty: Customers’ preference for the
products of organizations currently existing in the
customers: Individuals and groups that buy the
goods and services an organization produces.
demographic forces: Outcomes of changes in, or
changing attitudes toward, the characteristics of a
population, such as age, gender, ethnic origin, race,
sexual orientation, and social class.
distributors: Organizations that help other
organizations sell their goods or services to
LEARNING OBJECTIVES
KEY DEFINITIONS/TERMS
Chapter 04 – Managing in the Global Environment
4-3
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
global environment: The set of global forces and
conditions that operate beyond an organization’s
boundaries but affect a manager’s ability to acquire
and utilize resources.
globalization: The set of specific and general
forces that work together to integrate and connect
economic, political, and social systems across
countries, cultures, or geographical regions so that
nations become increasingly interdependent and
similar.
global organization: An organization that operates
and competes in more than one country.
global outsourcing: The purchase or production of
inputs or final products from overseas suppliers to
lower costs and improve product quality or design.
individualism: A worldview that values individual
freedom and self-expression and adherence to the
principle that people should be judged by their
considers important and the norms of behavior that
are approved or sanctioned in that society.
norms: Unwritten, informal codes of conduct that
prescribe how people should act in particular
political and legal forces: Outcomes of changes in
laws and regulations, such as deregulation of
individuals’ physical and intellectual capabilities
and heritage.
short-term orientation: A worldview that values
personal stability or happiness and living for the
present.
social structure: The traditional system of
relationships established between people and
groups in a society.
sociocultural forces: Pressures emanating
from the social structure of a country or society or
from the national culture.
suppliers: Individuals and organizations that
provide an organization with the input resources
that it needs to produce goods and services.
tariff: A tax that a government imposes on
imported or, occasionally, exported goods.
technological forces: Outcomes of changes in the
technology managers use to design, produce, or
distribute goods and services.
Chapter 04 – Managing in the Global Environment
4-4
This chapter examines the organizations operating in a global environment. It identifies and examines
the changing environmental forces in both the global task and general environments that managers
must learn to understand. The chapter also discusses the impact on organizations and mangers as
NOTE ABOUT INSTRUCTOR’S POWERPOINT
SLIDES
The Instructor PowerPoint Slides include most
Student PowerPoint slides, along with additional
material that can be used to expand the lecture.
Images of the Instructor PowerPoint slides can be
found at the end of this chapter on page 4-28.
BASIC POWERPOINT SLIDE 1
(INSTRUCTOR’S POWERPOINT SLIDE 1)
Chapter Title
CHAPTER OVERVIEW
LECTURE OUTLINE
Chapter 04 – Managing in the Global Environment
I. What Is The Global Environment?
A. The global environment is a set of forces and conditions
in the world outside an organization’s boundary that affect
how it operates and shape its behavior. These forces change
over time and thus present managers with opportunities and
threats.
2. The general environment includes the wide-ranging
global, economic, technological, socio-cultural,
demographic, political and legal forces that affect the
LO 4-1: Explain why the
ability to perceive,
interpret and
respond
appropriately to the
global environment
is crucial for
managerial
Management Snapshot (pp. 125-126 of text)
Going Global Requires Effective Websites
How should managers think about globalization on the Internet?
Many organizations do not have a truly global website. For organizations selling goods on the
Internet, the checkout process alone is full of challenges. For example, online checkout forms often
do not work well in some cultures because of different cultural norms.
The 2015 Web Globalization Report Card from Global by Design provides input into the challenges
of globalizing a website. The report describes the best and worst practices in website globalization
and ranks the best and worst sites. It praises companies at the top of the list for their efforts at
localization. These efforts include having culture-specific content and using language that is not
only translated but also culturally nuanced. Use of a global design template also helped company
web pages score near the top of the list by providing a consistent look across countries. According to
the report card, firms at the bottom of the list often had websites that failed to follow the practices of
the high-ranking websites. For example, many fell short on localization and did not have a global
design template.
Chapter 04 – Managing in the Global Environment
II. The Task Environment
A. Suppliers are the individuals and organizations that
provide the input resources needed by an organization in
order to produce goods and services. In exchange for
providing an organization with inputs, the supplier is
compensated.
.
1. Changes in the nature, numbers or types of suppliers
produce opportunities and threats to which managers
must respond. Depending upon these factors, a supplier’s
bargaining position may be either strong or weak.
2. At a global level, managers have the opportunity to
buy products from foreign suppliers or to become their
own suppliers and manufacture their own products
abroad. It is important that managers recognize the
opportunities and threats associated with managing to
global supply chain.
3. Although the purchasing activities of global
companies have become increasing complicated as a
result of the development of skills and competencies in
different countries around the world, advances in
technology and the Internet often eases the process of
coordinating complicated international transactions.
4. Most large global companies utilize global
outsourcing, which is the process of purchasing or
LO 4-2: Differentiate
between the global
task and global
general
environments.
LO 4-3: Identify the main
forces in both the
global task and
general
environments and
describe the
challenges that each
force presents to
managers.
POWERPOINT SLIDES 4-8 TO
4-17
TEXT REFERENCE
Managing Globally: Stopping
Global Water Shortages
The textile industry has a huge
water footprint. One estimate
of cotton accounts for 2.6% of
pollution.
reduce the negative effect of
Chapter 04 – Managing in the Global Environment
D. Competitors are organizations that produce goods and
services that are similar to a particular organization’s goods
and services. In other words, competitors are organizations
trying to attract the same customers. Potential competitors
are the organizations that are not at present in a task
environment but could enter if they so choose.
1. The potential of new competitors entering an industry
is a function of that industry’s barriers to entry.
Barriers to entry are factors that make it difficult and
costly for an organization to enter a particular task
environment or industry. The greater the barriers to
entry, the smaller the number of competitors.
2. Barriers to entry result from three sources: economies
of scale, brand loyalty, and government regulations.
a. Economies of scale are the cost advantages
associated with large operations. They may result
from manufacturing products in large quantities,
buying inputs in bulk, or by fully utilizing the skills
and knowledge of employees.
c. At the national and global level, administrative
barriers are government policies that create barriers
An organization’s general environment can have profound
effects upon its task environment which may not be evident
to managers. Therefore, managers must constantly analyze
forces in the general environment because these forces affect
ongoing planning and decision-making.
textile production on the world’s
water supply. In 2014 Levi
Strauss & Co. made more than
100,000 pairs of jeans using
100% recycled water in China.
Nike and Adidas also are cutting
back on water use in their supply
chains by using an innovative
process that dyes polyester
without using water or
chemicals. The process involves
turning carbon dioxide into a
liquid by putting it under extreme
pressure. As the carbon dioxide
cools, it turns back into a gas that
can be recycled and used again.
(pp. 130-131)
McGraw-Hill Education.
opportunities for organizations to flourish.
2. Worsening macroeconomic conditions, such as
recession or rising inflation rates, often pose a threat to
organizations because they limit management’s ability to
gain access to the resources they need to survive and
B. Technological forces: Technology is the combination of
skills and equipment that managers use in the design,
production, and distribution of goods and services.
Technological forces are the outcomes of changes in the
technology that managers use to design, produce, or
distribute goods and services and can have profound
implications for managers and organizations.
1. Technological change can create a threat to
organizations by making established products obsolete. It
can also create a host of opportunities for the
development of new products or processes.
2. Changes in IT are also changing the very nature of
work itself. Telecommuting, videoconferencing, and text
C. Socio-cultural forces are pressures emanating from the
social structure of a country or society or from the national
culture. Social structure is the traditional system of
approved or sanctioned in that society.
1. Social structure and national culture not only differ
across societies but also change within societies over
time.
2. Individual managers and organizations must be
responsive to changes in, and differences among, the
D. Demographic forces are outcomes of changes in, or
changing attitudes toward, the characteristics of a population,
such as age, gender, ethnic origin, race, sexual orientation,
1. Demographic forces present managers with
Chapter 04 – Managing in the Global Environment
opportunities and threats and can have major
implications for organizations. For example, most
industrialized nations are experiencing the aging of their
populations as a consequence of falling birth and death
rates and the aging of the baby boom generation. This
demographic change has led to increasing opportunities
for organizations that cater to older people.
2. The aging of the population also has several
implications for the workplace, such as the relative
decline in the number of young people joining the
workforce and the willingness of older employees to
postpone retirement beyond the age of 65.
E. Political and legal forces are outcomes of changes in
laws and regulations resulting from political and legal
developments within a nation, world region, or across the
world.
1. A nation’s political processes shape laws that
constrain the operations of organizations and
managers, thereby creating both opportunities
and threats. For example, there has been a
movement toward deregulation and privatization
of organizations formerly owned or controlled
by the state.
2. The increasing political integration around the
world that has been taking place during the past
decades is another important political and legal
force affecting managers. The growth of the EU
is an example. The fall in legal trade barriers can
create both opportunities and threats.
IV. The Changing Global Environment
Managers need to recognize that their organizations exist and
compete in a global environment. Managers view today’s
global environment as open. In an open environment, global
companies are free to trade in whatever nations they choose.
A. The Process of Globalization: Globalization is the set of
specific and general forces that work together to integrate
LO 4-4: Explain why the
global environment
is becoming more
open and
competitive and
identify the forces
behind the process
of globalization that
increase the
Chapter 04 – Managing in the Global Environment
flow of capital, that is, valuable wealth-generating assets
or resources that people move through companies,
countries, and world regions to seek their greatest profits.
The four forms of capital that flow between countries
are:
a. human capital: the flow of people around the
world through immigration, migration, and
emigration.
b. financial capital: the flow of money across world
markets through overseas investment, credit,
lending, and aid.
c. resource capital: the flow of natural resources,
parts, and components between companies and
countries, such as metal, minerals, lumber, energy,
food products, microprocessors, and auto parts,
B. Declining Barriers to Trade and Investment: During
the 1920s and 1930s, many countries erected barriers to
1. The aim of import tariffs is to protect domestic
industries and jobs from foreign competition.
2. The reason for removing tariffs is that, very often,
allow free flow of goods between countries. They
TEXT REFERENCE
Managing Globally:
Translating Athletic Success
into Business Leadership
EY (formerly Ernst & Young) is
working to create a network of
retired elite female athletes,
former Olympians, and top
female leaders to encourage
female athletes to pursue
powerful careers after retiring
from sports.
A study by EY confirmed a
connection between sports and
level jobs played sports at the
primary, secondary,
postsecondary, or college level.
The women in the study agreed
However, EY contends that
many female athletes encounter
difficulties in moving their
success from the playing field to
business network to form
participation in sports and their
Chapter 04 – Managing in the Global Environment
attempted to achieve this through an international
treaty known as the General Agreement on Tariffs
and Trade (GATT).
c. GATT has been replaced by the World Trade
Organization (WTO), which continues the struggle
to reduce tariffs. It has more power to sanction
countries that break global agreements.
C. Declining Barriers of Distance and Culture: In the past,
1. Satellites, digital technology, the Internet, global
computer networks, and video teleconferencing have
revolutionized global communications over the past 30
years. As a result, reliable, secure, and instantaneous
communication is now possible in nearly any part of the
world.
2. Innovations in transportation technology have opened
3. The Internet and its millions of websites facilitate the
development of global communications networks and
media that have helped to create a worldwide culture
television networks such as CNN, BBC, HBO, ESPN,
and MTV can be received in many foreign nations, and
Hollywood films are streamed via the Internet
throughout the world.
D. Effects of Free Trade on Managers: The lowering of
barriers to trade and investment and the decline of distance
and culture barriers have created enormous opportunities for
intensity of competition that comes with lowering of barriers
to trade and investment.
leadership skills. (pp. 141-142)
Chapter 04 – Managing in the Global Environment
2. NAFTA (the North American Free Trade Agreement),
which became effective in 1994, had the aim of
abolishing tariffs on all goods and services traded
between Mexico, Canada and the U.S. by 2004.
Although it has not achieved this lofty goal, NAFTA has
removed most barriers on the cross-border flow of
resources.
a. The establishment of free trade areas creates an
opportunity for manufacturing organizations because
it allows them to reduce their costs. However, some
managers might see free trade agreements as a threat
because they expose a company to increased
competition.
b. There are many regional trade agreements around
the world, including the African Union and the
Cooperation Council for the Arab States of the Gulf.
V. The Role of National Culture
A. Cultural Values and Norms: Despite evidence that
countries are becoming similar to one another and that the
world is on the verge of becoming “a global village,”
significant cultural differences still exist between nations.
1. National culture includes the set of values, norms,
knowledge, beliefs, moral principles, laws, customs, and
other practices that unite the citizens of a country.
National culture shapes individual behavior by
specifying appropriate and inappropriate behavior and
interaction with others.
2. Values are ideas about what a society believes to be
3. Norms are unwritten social rules and codes of conduct
that prescribe appropriate behavior in particular
situations and are considered important by most
LO 4-5: Discuss why
national cultures differ
and why it is important
that managers be
sensitive to the effects
of falling trade
barriers and regional
trade associations on
the political and social
systems of nations
around the world.
POWERPOINT SLIDES 4-33 TO
4-42
TEXT REFERENCE
Management Insight:
Cultural Challenges Faced by
Expatriates in Global Business
Chapter 04 – Managing in the Global Environment
society to another. In many societies mores have
been enacted into law.
b. Folkways are the routine social conventions of
everyday life, such as good social manners, dressing
appropriately, eating with the correct utensils, and
behaving neighborly. Folkways define the way
people are expected to behave, but violation of
folkways is not a serious matter.
B. Hofstede’s Model of National Culture: Geert Hofstede,
a psychologist for IBM, collected data on values and norms
from more than 100,000 IBM employees from 64 countries.
He used this data to develop a model of national culture,
which is widely accepted and used.
the goals of the group and adherence to the principle that
is a noncommunist country where collectivism is highly
a. Societies in which inequalities are allowed to
persist or grow have high power distance. Workers
submit tips based on their
expatriate experiences. For
example, an expatriate provides a
list of five tips on how to live in
Japan. Other information on the
site is more general.
The HSBC survey ranks
countries based on experience,
economics, and raising children
abroad. Among the “best”
countries on the three factors are
Switzerland, Singapore, China,
Germany, and Bahrain. The
“worst” countries on the three
factors include Italy, Brazil,
United Kingdom, and Egypt. The
United States ranked 30th out of
report is that economies
classified as emerging and
employees abroad. ( pp. 151-152)
Chapter 04 – Managing in the Global Environment
4-14
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
value the quality of life, warm personal relationships,
and services and care for the weak. Japan and the United
States tend to be achievement oriented, while the
Netherlands, Denmark, and Sweden are more nurturing
oriented.
5. Societies as well as individuals differ in their tolerance
for uncertainty and risk. Societies low on uncertainty
avoidance, such as the U.S. and Hong Kong, are
easygoing, value diversity, and tolerate differences in
personal beliefs. Societies high on uncertainty avoidance,
such as Japan and France, are more rigid and skeptical
about people whose behaviors differ from the norm.
6. A national culture with a long-term orientation rests
on values such as thrift and persistence in achieving
goals, whereas a national culture with a short-term
orientation is concerned with personal stability or
happiness and living for the present.
C. National Culture and Global Management:
Differences among national cultures have important
implications for managers. Because of cultural differences,
management practices that are effective in one country might
be troublesome in another.
1. Often, management practices must be tailored to suit
the cultural contexts within which an organization
operates. Managers doing business with individuals from
another country must be sensitive to the value systems
and norms of that country and behave accordingly.
2. A culturally diverse management team can be a source
of strength for an organization participating in the global
marketplace. Organizations that employ managers from a
variety of cultural backgrounds are often better at
appreciating the differences in national culture and
tailoring their management systems and behaviors to
those differences.
LECTURE ENHANCERS
Chapter 04 – Managing in the Global Environment
4-15
An expatriate is someone who lives and works outside of his or her native country. Although there
have been some disagreements among researchers concerning the exact figures, it is safe to say that
between five and twenty percent of American expatriates sent abroad by their companies will return to
security bulletins, contingency plans, and emergency guidelines to keep them up to date about
potentially adverse conditions. Only 20% of survey respondents said their companies were keeping
them informed. Nearly 40% of survey respondents said they were prepared inadequately for an
international assignment, 56% cited poor coordination between local-country and home-office HR
departments, and 35% said that they expect to leave their current employer in five years.
Taken from “Expatriates Want More Support from Home” by Julie Britt, published in HR Magazine,
July 2002 and Management by Chuck Williams, third edition published by Thompson/Southwestern
Publishing Company, pp. 267-8.
Lecturer Enhancer 4.2
HOUSE CALLS FOR PETS
Chapter 04 – Managing in the Global Environment
Companion Paws is limited to small animals—mostly dogs and cats. Fees are comparable to those
charged in regular veterinary offices, Foster said. There is a discount if Foster treats more than one
animal during the same visit, and in some cases, neighbors have joined together to schedule
appointments.
On a typical day, Foster and Ward may visit a cat with “behavior problems,” give an insulin
injection to a diabetic cat whose owner is out of town, remove the sutures from a dog that recently had
surgery, or give annual vaccinations.
Foster, who worked at a Reston, Virginia veterinary clinic before striking out on her own, said that
she always liked the idea of a house call practice but that until recently, the scope of such a service
http://www.companionpaws.com/fame.htm accessed on Jan 1, 2010
Lecturer Enhancer 4.3
IT’S ALL ABOUT THE GUANXI
Business is based on relationships, and in the global marketplace relationships become more
important, and more complicated. In China, doing business depends on building “guanxi” or
connections. Considerable time and effort must be invested in forming and nurturing these
relationships, and it’s difficult, if not impossible, to conduct business without having this guanxi. Real
(Source: http://www.businessweek.com/magazine/content/07_47/b4059066.htm, accessed on June 18,
2008)