Chapter 7: Global Management P a g e | 1
Effective Management 7th Edition
Chapter 7: Global Management
Pedagogy Map
This chapter begins with the learning outcome summaries and terms covered in the chapter, followed by a
set of lesson plans for you to use to deliver the content in Chapter 7.
Lesson Plan for Lecture (for large sections)
Lesson Plan for Group Work (for smaller classes)
Assignments with Teaching Tips and Solutions
Highlighted Assignments Key Points
What Would You Do? Groupon has grown rapidly, but there are few barriers to
entry to its market and it faces stiff competition as it expands
to global markets.
Management Team Decision Students are asked to deliberate on how a company should
deal with cultural backlash as it expands to global markets.
Additional Assignments Key Points
Management Team Decision Can social entrepreneurship work for a start-up?
Chapter 7: Global Management P a g e | 2
Learning Outcomes
7-1 Discuss the impact of global business and the trade rules and agreements that govern it.
Today, there are more than 104,000 multinational corporations worldwide; just 9 percent are based in the
United States. Global business affects the United States in two ways: through direct foreign investment in
the United States by foreign companies, and through U.S. companies investment in business in other
7-2 Explain why companies choose to standardize or adapt their business procedures.
Global business requires a balance between global consistency and local adaptation. Global consistency
7-3 Explain the different ways that companies can organize to do business globally.
The phase model of globalization says that as companies move from a domestic to a global orientation,
7-4 Explain how to find a favorable business climate.
The first step in deciding where to take your company globally is finding an attractive business climate.
Chapter 7: Global Management P a g e | 3
7-5 Discuss the importance of identifying and adapting to cultural differences.
National culture is the set of shared values and beliefs that affects the perceptions, decisions, and behavior
of the people from a particular country. The first step in dealing with culture is to recognize meaningful
7-6 Explain how to successfully prepare workers for international assignments.
Many expatriates return prematurely from international assignments because of poor performance.
However, premature return is much less likely to happen if employees receive language and cross-cultural
Terms
Asia-Pacific Economic Cooperation (APEC)
Association of Southeast Asian Nations
(ASEAN)
cooperative contract
customs classification
direct foreign investment
Dominican Republic Central America Free
Trade Agreement (CAFTA-DR)
expatriate
exporting
franchise
Maastricht Treaty of Europe
multinational corporation
national culture
nontariff barriers
North American Free Trade Agreement
(NAFTA)
policy uncertainty
political uncertainty
protectionism
purchasing power
quota
Chapter 7: Global Management P a g e | 4
Lesson Plan for Lecture
Pre-Class Prep for You: Pre-Class Prep for Your Students:
Review chapter and determine what points to
cover.
Bring PPT slides.
Read Chapter 7, bring book.
Warm Up Begin Chapter 7 by asking your students the following series of questions:
Without looking, which of you knows (or is confident that you know) where
your backpack was made? Where? [Students can shout out answers]
Ok, who thinks they know where their backpack was made? Where? [Students
can shout out answers]
Topics PowerPoint Slides Activities
7-1 Global Business,
Trade Rules, and Trade
Agreements
7-1b Trade Barriers
7-1d Consumers, Trade
Barriers, and Trade
Agreements
1: Global Management
2. What Would You Do?
3: The Impact of Global
Investment in the United
5: U.S. Direct Foreign
Investment Abroad
6: Trade Barriers
7: Nontariff Barriers
7-2 Consistency or
Adaptation?
13: Consistency or
Adaptation
An issue around which to
spark discussion is the
Chapter 7: Global Management P a g e | 5
7-3 Forms for Global
Business
7-3b Cooperative
Contracts
7-3d Wholly Owned
Affiliates (Build or Buy)
7-3e Global New Ventures
14: The Phase Model of
Globalizations
16: Cooperative
Contracts
Contracts
18: Strategic Alliances
19: Wholly Owned
7-4 Finding the Best
Business Climates
7-4a Growing Markets
7-4b Choosing an
7-4c Minimizing Political
21: Growing Markets
22: Choosing a Location
23: Minimizing Political
Risk
If you have an electronic
classroom, consider doing a
free online geography
game. Have students shout
usually have time limits of
7-5 Becoming Aware of
Cultural Differences
25: Becoming Aware of
Cultural Differences
7-6 Preparing for an
International
Assignment
7-6a Language and Cross-
26: Language and Cross-
Cultural Training
27: Spouse, Family, and
Dual-Career Issues
Management Workplace 30: Holden Outerwear Launch video in slide
30. Questions on slide
can guide discussion.
Adjust lecture to include the activities in the right column. Some activities should be
done before introducing the concept, some after.
Special
Items
Spark a debate among your students by asking them to respond to the following
statement:
Chapter 7: Global Management P a g e | 6
Lesson Plan for Group Work
Pre-Class Prep for You: Pre-Class Prep for Students:
Review material to cover and modify the
lesson plan to meet your needs.
Set up the classroom so that small groups of
4 5 students can sit together.
Read Chapter 7, bring book.
Warm Up Begin Chapter 7 by asking your students the following questions:
Without looking, which of you knows (or is confident that you know) where
Content
Delivery
The first section of the chapter has a lot of content that you can use to spark debate
among students. For this reason, you may want to hold off from lecturing on Global
Business, Trade Rules, and Trade Agreements (Section 7-1) until after you do the group
activity World Trade and You.
Lecture on Global Business, Trade Rules, and Trade Agreements (Section 7-1).
Break for the following group activity:
World Trade and You
Divide the class into small groups of 3 5 students. Before beginning the activity, ask
students if anyone can describe the function of the WTO. Ask if anyone can explain
why the WTO is so controversial (cite the inevitable protests and violence that
accompany any meeting of the WTO). Assign each group to either assemble
If you didnt lecture on Section 7-1 prior to the activity, do so now.
Segue into the next section by asking students So, if we postulate that global business is
good for consumers and companies alike, whats the best way to go global? Perhaps
before we can answer that, we should consider the choices a company has when going
global.
Chapter 7: Global Management P a g e | 7
Around the World
If you have an electronic classroom, consider doing a geography game at
Introduce the sections on culture by asking if any of your students have ever lived,
worked, or studied abroad and where. If they have, ask them what they considered the
biggest difference between the host culture and the students culture of origin.
Lecture on Becoming Aware of Cultural Differences and Preparing for an International
Assignment (Sections 7-5 and 7-6).
Conclusion
and
Assignments:
1. To follow up on the discussion of where and how to go global, assign students to
2. If you have finished covering Chapter 7, assign students to review Chapter 7 and
read the next chapter on your syllabus.
Remind students about any upcoming events.
Assignments with Teaching Tips and Solutions
What Would You Do Case Assignment
What Really Happened? Solution
GROUPON
In the opening case you learned that Groupon, the daily deal coupon company, had grown from 400
subscribers and 30 daily deals in 30 cities in December 2008 to 35 million subscribers and 900 daily deals
in 550 markets today, thus getting to $1 billion in sales faster than any other company. Local companies
As Groupon goes global, should it adapt its business to different cultures?
National culture is the set of shared values and beliefs that affects the perceptions, decisions, and behavior
term/long-term orientation.
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So, given that it just offers daily deals, can Groupon have a standard set of products or should they be
different in each market and culture? Not surprisingly, Groupon has found that people in different
countries and cultures dont respond to the same offers. For example, in India the most popular daily
Finally, in a nod to the importance of culture, especially with humor, which can differ tremendously
across cultures, Groupon now realizes that its 70 Chicago-based ad writers, some of whom have comedy
backgrounds linked to Chicagos famous Second City comedy troupe, may not be able to write persuasive
Similarly, who should make key decisions managers at headquarters or managers in each country?
One of the key issues in global business is determining whether the way you run your business in one
country is the right way to run that business in another. In other words, how can you strike the right
balance between global consistency and local adaptation? Global consistency means that when a company
like Groupon has offices and facilities in different countries, it will use the same rules, guidelines,
If companies focus too much on local adaptation, they run the risk of losing the cost efficiencies and
productivity that result from using standardized rules and procedures throughout the world. However, if
companies lean too much toward global consistency, they run the risk of their business being poorly
suited to particular countries markets, cultures, and employees (i.e., a lack of local adaptation).
Groupon has discovered that, in part, it must adapt its business as it does business around the world.
While the web side of its business works most places (that is, using email and text, websites, and
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Another part of balancing consistency with local adaptation, at least for now, is maintaining a large call
center in Chicago. Unlike Facebook and Google, which hire software engineers to automate their
websites, Groupon relies on call center-based sales force in Chicago to sell and maintain relationships
with client companies. Every time it opens in a new city, its sales force is charged with identifying and
then approaching businesses who could be interested in using Groupon to provide discounts to customers.
The question is whether it makes sense for Groupon to have similar call centers in the other regions or
countries in which it now does business.
How should Groupon expand internationally? Should it license its Web services to businesses in each
area, form a strategic alliance with key foreign business partners, or completely own and control each
Groupon business throughout the world?
Determining how to organize your company for successful entry into foreign markets is a key decision in
going global. When companies produce products in their home countries and sell those products to
customers in foreign countries, they are exporting. When an organization wants to expand its business
globally without making a large financial commitment, it signs a cooperative contract with a foreign
The challenge for Groupon is that just 3 years after its start-up, it may be the fastest-growing start-up
company of all time, but it also faces the most quickly established set of global competitors ever
Chapter 7: Global Management P a g e | 10
Backed with several hundred million dollars in funding, Groupon used an approach in which it combined
strategic alliances and wholly-owned affiliates. In short, just as Google offered a $6 billion buy out to
Groupon, Groupon has offered to buy the market leaders that it has identified in 50 different countries.
Groupon board member Kevin Efrusy says, To see people copy you is difficult to adjust to. But Groupon
immediately looked at it as an opportunity. You could pick the best that‘s out there and save a lot of
time. The strategy, he says, is to find the best local teams. Then give them the tools they need to be
Management Team Decision
CULTULRAL BACKLASH IN INDIA
Purpose
A company that is looking to do business overseas cannot ignore cultural differences if it is to be
successful. This exercise asks students to consider how they would deal with critical differences between
cultures as their company seeks to branch out into overseas markets.
Setting It Up
You can introduce this case to students by creating a table that shows the various cultural differences
between the U.S. and a foreign country, ideally one that has been the site of much foreign investment
such as China, India, Brazil, or Russia. You can then ask students how a company should deal with these
differences in order to find success.
Questions
1. How would you, as the manager of this company, deal with the risk associated with doing
business in countries that feel threatened by American culture?
Students are likely to respond in one of two ways either the company must learn how to do deal
with the risk, or the company should cut its losses and terminate its business. In general, students
choosing the former answer should show awareness that it is critical for a company to learn as
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2. How might your company use an alliance with local companies to adapt to local concerns about
American culture?
Companies that look to do business overseas often choose strategic alliances, most commonly in
the form of joint ventures. The advantage of joint ventures is that a domestic company combines
key resources, costs, risks, technology, and, most importantly for this case, people, with a foreign
Practice Being a Manager
HOMETOWN CULTURE
Exercise Overview and Objective
This exercise uses students familiarity with their hometown culture to examine the role of culture in
global business, particularly in the situation of market entry. The objective is to help students recognize
important features of a particular culture, and then to consider the role that such features might play in
successful market entry by a multinational corporation.
Preparation
Students should complete Step 1 (1 2 page paper on the major cultural features of their hometown) prior
to the in-class discussion of this exercise. It is important to remind all students that their audience for
these papers is the management of a company outside their own country of origin. For example, a
student whose hometown is Fayetteville, Arkansas, might write her paper to an audience of French
managers. A student whose hometown is Sao Paulo, Brazil, might write his paper to an audience of U.S.
You should decide in advance how you would like to group students for the in-class exercise.
Students will discuss their hometown papers, and then work together to agree on some
recommendations for a multinational that plans to enter their hometowns (see Step 4company entering
all hometowns simultaneously). One approach for forming groups is to cluster students who are likely to
represent a variety of places of origin.
In-Class Use
Students should be organized in small discussion groups (3 5 students). Each group should begin with
Step 3, taking turns to introduce themselves, identifying their hometown (and neighborhood/borough as
Chapter 7: Global Management P a g e | 12
1. To what degree might the company use consistent (same) approach in entering your
hometowns? (Exercise, Step 4)
2. Is one or more of your hometowns likely to require a foreign multinational to make more
particular adaptations? (Exercise, Step 4)
These questions should foster discussion around one of the central themes of global managementthe
desire to achieve consistency across global markets (i.e., global economies of scale and scope); and the
need for adaptation to local differences (i.e., customer needs and desires that vary by location/culture).
When all groups have completed Step 5, you may begin the class discussion of the challenges of
entering global markets (including the consistency/adaptation issue). It is not necessary for the groups to
Self-Assessment
ARE YOU NATION-MINDED OR WORLD-MINDED?
In-Class Use
Give students 5 7 minutes to complete the inventory.
Scoring
Steps 1 2: Interpreting Worldmindedness Scores
Scoring instructions are given at the end of the inventory. Students will compute a raw score, but they
will want to know what it means. Heres what you can tell them:
People who are flexible, adaptable, open to other cultures, and have good relationship skills are more
successful on international assignments. In a sense, we could say that these people have greater
“worldmindedness.” Individuals who are strong in worldmindedness look at problems as problems of
humanity rather than American problems, or Japanese problems, or Spanish problems. In contrast,
people who are weak in worldmindedness are “nationminded.” They define themselves and others by
Chapter 7: Global Management P a g e | 13
This survey is based on research presented in R. W. Boatler, Study Abroad: Impact on Student
Worldmindedness, Journal of Teaching in International Business 2, no. 2 (1990): 1317; R.W.
Boatler, Worldminded Attitude Change in a Study Abroad Program: Contact and Content Issues,
Journal of Teaching in International Business 3, no. 4 (1992): 5968; H. Lancaster, Learning to
Manage in a Global Workplace (Youre on Your Own), The Wall Street Journal, June 2, 1998, B1;
D. L. Sampson & H. P. Smith, A Scale to Measure Worldminded Attitudes, Journal of Social
Worldmindedness by Major Average WM Score
Arts and Sciences 104.65
Except for undecided majors, Business majors have the lowest worldmindedness
scores.
Worldmindedness by Major Average WM Score
No foreign languages 99.07
Speaking more languages leads to increased worldmindedness.
Worldmindedness by Language and Major
Average WM
Score
Business Majors
No foreign language 88.76
One, fair 92.15
One, good/excellent 94.18