chapter 04

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Copyright 2011 Pearson Education

Management: Arab World Edition Robbins, Coulter, Sidani, JamaliChapter 4: Managing in a Global Environment

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4-* Copyright 2011 Pearson Education

Learning OutcomesFollow this Learning Outline as you read and study this chapter.4.1 What Is Your Global Perspective?Define parochialism.Contrast ethnocentric, polycentric, and geocentric attitudes towards global business.

4.2 Understanding The Global EnvironmentDescribe the status of international and regional trade alliances.Discuss the role of the WTO.




4.3 Doing Business GloballyContrast multinational, multidomestic, global, transnational, and born global organizations.Describe the different ways organizations can go international.

4.4 Managing In A Global Environment.Explain how the global legal-political and economic environments affect managers.Discuss Hofstedes five dimensions for assessing cultures.Describe the challenges of doing business globally in todays worldLearning Outcomes




The Global MarketplaceOpportunities and ChallengesCoping with the sudden appearance of new competitors.Acknowledging cultural, political, and economic differences.Dealing with increased uncertainty, fear, and anxiety.Adapting to changes in the global environment.Avoiding parochialism.




What Is Your Global Perspective?

1. Define parochialism.

2. Contrast ethnocentric, polycentric, and geocentric attitudes towards global business.



Whats Your Global Perspective?Parochialismis viewing the world solely through ones own eyes and perspectives.is not recognizing that others have different ways of living and working.is a significant obstacle for managers working in a global business world.is falling into the trap of ignoring others values and customs and rigidly applying an attitude of ours is better than theirs to foreign cultures.



Adopting a Global PerspectiveEthnocentric AttitudeThe parochialistic belief that the best work approaches and practices are those of the home country.Polycentric AttitudeThe view that the managers in the host country know the best work approaches and practices for running their business.Geocentric AttitudeA world-oriented view that focuses on using the best approaches and people from around the globe.




Understanding The Global Environment1.Describe the status of international and regional trade alliances.

2.Discuss the role of the WTO.




Regional Trading AgreementsThe European Union (EU)A unified economic and trade entity Belgium, Denmark, France, Greece, Ireland, Italy, Luxembourg, the Netherlands, Portugal, Spain, the United Kingdom, Germany, Austria, Finland and Sweden.




Exhibit 41European Union




Regional Trading Agreements (contd)North American Free Trade Agreement (NAFTA)Eliminated barriers to free trade (tariffs, import licensing requirements, and customs user fees)United States, Canada, and Mexico




Regional Trading Agreements (contd)The Council of Arab Economic Unity (CAEU) Established by Egypt, Iraq, Jordan, Kuwait, Libya, Mauritania, Palestine, Somalia, Sudan, Tunisia, Syria, United Arab Emirates and Yemen in June 1957. The organization aims to achieve economic integration, promoting an environment of free movement of labor, capital, and services.




Regional Trading Agreements (contd)The Greater Arab Free Trade Area (GAFTA) Is a pact made by the Arab League to achieve a complete Arab economic bloc that can compete internationally.The project was adopted in the Arab League Summit of Amman in 1997, with 17 Arab League members signing the pact. The agreement aims at reaching full liberalization of trade among member states and facilitating commercial activities.



Regional Trading Agreements (contd)The Gulf Cooperation Council (GCC) Created in 1981, it comprises the Arabian Gulf states of Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates.The objectives are to effect coordination, integration and interconnection in all fields, strengthening ties between their peoples, formulating similar regulations as well as fostering scientific and technical progress , and encouraging cooperation of the private sector.



Exhibit 42GCC Countries MAP source: http://www.gcccountries-business.com/_mgxroot/page_10769.html



Regional Trading Agreements (contd)Association of Southeast Asian Nations (ASEAN)Trading alliance of 10 Southeast Asian nationsAn increasingly important regional economic and political alliance whose impact could eventually rival that of NAFTA and the EU.



Regional Trading Agreements (contd)African Union (AU)the 53-nation African Union (AU) came into existence in 2002, with the vision of building an integrated, prosperous, and peaceful AfricaSouth Asian Association for Regional Cooperation (SARRC)(India, Pakistan, Sri Lanka, Bangladesh, Bhutan, Nepal, the Maldives, and Afghanistan)



The World Trade Organization (WTO)Evolved from the General Agreement on Tariffs and Trade (GATT) in 1995.Functions as the only global organization dealing with the rules of trade among nations.Has 149 member nations and 32 observer governments.Monitors and promotes world trade.



Doing Business Globally1.Contrast multinational, multidomestic, global, transnational, and born global organizations.

2.Describe the different ways organizations can go international.



Different Types of International OrganizationsMultinational Corporation (MNC)Maintains operations in multiple countries.Multidomestic CorporationIs an MNC that decentralizes management and other decisions to the local country.Global CompanyIs an MNC that centralizes its management and other decisions in the home country.



Different Types of International Organizations (contd)Transnational Corporation (Borderless Organization)An MNC that has eliminated structural divisions that impose artificial geographic barriers and is organized along business lines that reflect a geocentric attitude.




Exhibit 43How Organizations Go GlobalMAP source: http://www.gcccountries-business.com/_mgxroot/page_10769.html




Other Forms of GlobalizationStrategic AlliancesPartnerships between and organization and a foreign company in which both share resources and knowledge in developing new products or building new production facilities.Joint VentureA specific type of strategic alliance in which the partners agree to form a separate, independent organization for some business purpose.Foreign SubsidiaryDirectly investing in a foreign country by setting up a separate and independent production facility or office.




Managing in A Global Environment1.Explain how the global legal-political and economic environments affect managers.

2.Discuss Hofstedes five dimensions for assessing cultures.

3.Describe the challenges of doing business globally in todays world




Managing in A Global Environment



Managing in A Global EnvironmentThe Legal EnvironmentStability or instability of legal and political systemsLegal procedures are established and followedFair and honest elections held on a regular basisDifferences in the laws of various nationsEffects on business activitiesEffects on delivery of products and services




The Economic EnvironmentEconomic SystemsFree market economyAn economy in which resources are primarily owned and controlled by the private sector.Planned economyAn economy in which all economic decisions are planned by a central government.Monetary and Financial FactorsCurrency exchange ratesInflation ratesDiverse tax policies



The Cultural EnvironmentNational CultureIs the values and attitudes shared by individuals from a specific country that shape their behavior and their beliefs about what is important.May have more influence on an organization than the organization culture.



Exhibit 44Cultural Contrasts



Hofstedes Framework for Assessing Cultures



Exhibit 46 Hofstedes Five Dimensions of National Culture



GLOBE HighlightsPower distance The degree to which members of a society expect power to be unequally shared.Uncertainty avoidance A societys reliance on social norms and procedures to alleviate the unpredictability of future events. Assertiveness The extent to which a society encourages people to be tough, confrontational, assertive, and competitive rather than modest and tender.Source: M. Javidan and R. J. House, Cultural Acumen for the Global Manager: Lessons from Project GLOBE, Organizational Dynamics, Spring 2001, pp. 289305. Copyright 2001. Reprinted with permission from Elsevier.



GLOBE Highlights (contd)Humane orientationThe degree to which a society encourages and rewards individuals for being fair, altruistic, generous, caring, and kind to others.Future orientationThe extent to which a society encourages and rewards future-oriented behaviors such as planning, investing in the future, and delaying gratification.Institutional collectivismThe degree to which individuals are encouraged by societal institutions to be integrated into groups in organizations and society.Source: M. Javidan and R. J. House, Cultural Acumen for the Global Manager: Lessons from Project GLOBE, Organizational Dynamics, Spring 2001, pp. 289305. Copyright 2001. Reprinted with permission from Elsevier.



GLOBE Highlights (contd)Gender differentiation The extent to which a society maximizes gender role differences, as measured by how much status and decision-making responsibilities women have.In-group collectivism The extent to which members of a society take pride in membership in small groups, such as their families, their circles of close friends, and the organizations in which they are employed.Performance orientation The degree to which a society encourages and rewards group members for performance improvement and excellence. Source: M. Javidan and R. J. House, Cultural Acumen for the Global Manager: Lessons from Project GLOBE, Organizational Dynamics, Spring 2001, pp. 289305. Copyright 2001. Reprinted with permission from Elsevier.




Exhibit 47GLOBE Highlights (contd)




Global Management in Todays WorldChallengesOpenness associated with globalizationSignificant cultural differences (e.g., Americanization)Adjusting leadership styles and management approachesRisksLoss of investments in unstable countriesIncreased terrorismEconomic interdependence




Terms to Knowparochialismethnocentric attitudepolycentric attitudegeocentric attitudeEuropean Union (EU)EuroNorth American Free Trade Agreement (NAFTA)

The Council of Arab Economic Unity (CAEU) The Greater Arab Free Trade Area (GAFTA)The Gulf Cooperation Council (GCC) Association of Southeast Asian Nations (ASEAN)World Trade Organization (WTO)




Terms to Know (contd)multinational corporations (MNCs)multidomestic corporationglobal companytransnational or borderless organizationglobal sourcingexportingimportinglicensing

franchisingstrategic alliancesjoint ventureforeign subsidiarymarket economycommand economynational cultureGLOBE




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