chapter 1 1 6 6 managing in a global environment

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Chapter 6 Managing in a Global Environment

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Page 1: Chapter 1 1 6 6 Managing in a Global Environment

Ch

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Ch

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66Managing in a

Global EnvironmentManaging in a

Global Environment

Page 2: Chapter 1 1 6 6 Managing in a Global Environment

6-2© 2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin

Results of Examination #1Results of Examination #1

A: 10

B: 8

C: 5

D: 1

Page 3: Chapter 1 1 6 6 Managing in a Global Environment

6-3© 2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin

OverviewOverview

Managers must be able to perceive, interpret, and respond appropriately to the organizational environment.

Each of the main forces in a global organization’s task and general environments present challenges.

McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.

Page 4: Chapter 1 1 6 6 Managing in a Global Environment

6-4© 2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin

OverviewOverview

The global environment is becoming more competitive and complex; opportunities, challenges and threats are increasing

Managers have global perspective, knowledge of other cultures, and monitor developments

Page 5: Chapter 1 1 6 6 Managing in a Global Environment

6-5© 2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin

Global OrganizationsGlobal Organizations Most organizations now operate and compete both

domestically and globally Virtually everyone, whether overseas or in their

back yard, is forced to think globally If you don’t go find the world, it will come find you!

Page 6: Chapter 1 1 6 6 Managing in a Global Environment

6-6© 2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin

Organizational EnvironmentOrganizational Environment

Forces and conditions outside the organization that can potentially affect the way it operates

Opportunities and threats: the same thing. You say “tomato”, I say “tomahto.” Successful people view nearly everything as an opportunity.

Page 7: Chapter 1 1 6 6 Managing in a Global Environment

6-7© 2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin

Task EnvironmentTask Environment

Forces and conditions that originate with suppliers, distributors, customers, and competitors

Affect an organization’s ability to obtain inputs and dispose of outputs

Most immediate and direct effect on managers – the inner ring

Page 8: Chapter 1 1 6 6 Managing in a Global Environment

6-8© 2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin

The Task EnvironmentThe Task Environment

SuppliersIndividuals and organizations that provide

resources to produce goods and servicesSupply-chain management is the foundation

of value creation. Sole-source suppliers of a critical item are in a strong

bargaining position; aggravated by just-in-time supply chain (solution: multiple suppliers)

What does Wal-Mart do when it gets more than 70% of a supplier’s business?

Page 9: Chapter 1 1 6 6 Managing in a Global Environment

6-9© 2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin

The Task EnvironmentThe Task Environment

Distributors and FranchiseesOrganizations that help other organizations sell their goods or services to customers Powerful distributors/franchisees can limit access to

markets through control of customers in those markets.

Auto dealer to automaker: “These are my customers, not yours!”

Managers can counter the effects of distributors by seeking alternative distribution channels – go around them – unless hobbled by law and regulation.

Page 10: Chapter 1 1 6 6 Managing in a Global Environment

6-10© 2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin

WarningWarning

Make suppliers and distributors partners; make your success their success. Companies following this strategy usually have a long-term stakeholder perspective.

Page 11: Chapter 1 1 6 6 Managing in a Global Environment

6-11© 2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin

The Task EnvironmentThe Task Environment

CustomersIndividuals and groups that buy goods and services an organization producesIdentifying your main customers and giving them

what they want is crucial to success.WHO WILL BUY? All of business based on

answering this key question and three others we will explore later.

Page 12: Chapter 1 1 6 6 Managing in a Global Environment

6-12© 2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin

The Task EnvironmentThe Task Environment

Competitors – present and potential:

> Organizations that produce similar goods and services or could do so

> Strong rivalry improves quality and reduces price, but can create lower profits, product commoditization, and mutually assured destruction

Page 13: Chapter 1 1 6 6 Managing in a Global Environment

6-13© 2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin

The Task EnvironmentThe Task Environment

Barriers to Entry Factors that make it difficult for an organization to

enter a particular market or industry (for example, heavy capital investment)

Economies of scale and brand loyalty enjoyed by competitors already in the market (example: full-sized trucks)

Government regulations (Japan, Korea, France, China)

Page 14: Chapter 1 1 6 6 Managing in a Global Environment

6-14© 2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin

The General EnvironmentThe General Environment

Economic Forces Interest rates, inflation, unemployment, economic

growth, and other factors that affect the general health and well-being of a national or a regional economy

The Fed, the President, Congress, the price of oil, global warming…

These forces profoundly impact the firm but are largely beyond your control.

Welcome to the outer ring!

Page 15: Chapter 1 1 6 6 Managing in a Global Environment

6-15© 2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin

The General EnvironmentThe General Environment

Technological ForcesOutcomes of changes in the technology that managers use to design, produce, or distribute goods and services Result in new opportunities or threats Often obsolete products quickly and disruptively Can change how managers manage (example: IT) Developing examples – Toyota’s big

bet on hybrids, I-phone, Blackberry, Kindle

Page 16: Chapter 1 1 6 6 Managing in a Global Environment

6-16© 2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin

The General EnvironmentThe General Environment

Sociocultural ForcesPressures emanating from a country’s social structure (the arrangement of relationships between individuals and groups)> National culture: the values a society holds dear and the

behavioral norms approved or disapproved in that society

> Cultures, social structures, values, and norms differ throughout the world and they evolve; observe and adapt (When in Rome…)

Page 17: Chapter 1 1 6 6 Managing in a Global Environment

6-17© 2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin

The General EnvironmentThe General Environment

Demographic Forces

Examples:Entry of women into the workforce expands

the need for child careRe-designing products for aging boomersNeed to automate factories because of a

shrinking workforce

“Demographics are destiny”

Page 18: Chapter 1 1 6 6 Managing in a Global Environment

6-18© 2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin

The General Environment The General Environment

Political and Legal Forces Outcomes of changes in laws and regulations,

such as the deregulation of industries, the privatization of organizations, increased emphasis on environmental protection, changing trade agreements Changes in laws and regulations increase the cost of

resources and/or limit their use – lead, asbestos, mercury, DDT, but also can present new opportunities.

Page 19: Chapter 1 1 6 6 Managing in a Global Environment

6-19© 2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin

The General Environment The General Environment

Global Forces Outcomes of changes in international

relationships; changes in nations’ economic, political, and legal systems; and changes in technology, such as falling trade barriers, the growth of representative democracies, and reliable and instantaneous communication (example: Iraq will eventually be a significant U.S. trade partner)

Important opportunities and threats to managers: The economic integration of countries through free-trade

agreements (GATT, NAFTA, EU) that decrease the barriers to trade. Toyota’s “Americas” blueprint

Page 20: Chapter 1 1 6 6 Managing in a Global Environment

6-20© 2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin

Barriers to Trade and InvestmentBarriers to Trade and Investment

Tariff (self-defeating over long term) A tax that government imposes on imported

or, occasionally, exported goods.Intended to protect domestic industry and jobs

from foreign competitionOther countries usually retaliate with their own

tariffs, which can eventually reduce the overall amount of trade, impeding global economic growth

Smoot-Hawley and the Great Depression

Page 21: Chapter 1 1 6 6 Managing in a Global Environment

6-21© 2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin

GATT and the Rise of Free TradeGATT and the Rise of Free Trade

Comparative Advantage (Ricardo)If each country specializes in making the goods and

services it can produce most efficiently, this will make the best use of global resources.

If China is more efficient at making textiles and the United States is more efficient at making computer software, then each country should focus on its respective strength and trade for the other’s goods.

Status quo, job dislocation and the associated politics often upset this ideal. The U.S. Congress should focus on preparation and support, not protectionism.

Page 22: Chapter 1 1 6 6 Managing in a Global Environment

6-22© 2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin

Declining Barriers of Distance and Culture

Declining Barriers of Distance and Culture

Distance Markets were essentially closed because of the slowness of

long-distance communications – now Beijing is next door to Biloxi.

Culture Language barriers and cultural practices made managing

overseas businesses difficult – by in large, English is now the language of international business.

Changes in Distance and Communication Improvement in transportation technology and fast, secure

communications have greatly reduced the barriers of physical and cultural distances.

Page 23: Chapter 1 1 6 6 Managing in a Global Environment

6-23© 2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin

Effects of Free Trade on ManagersEffects of Free Trade on Managers

Declining Trade Barriers; both threat and opportunity Open enormous opportunities for managers

to purchase inputs and market outputs globally

But also increase intensity and complexity of global competition – more excitement and more risk (policing your supply chain)

For every yin there is a yang.

Page 24: Chapter 1 1 6 6 Managing in a Global Environment

6-24© 2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin

The Role of National CultureThe Role of National Culture

Values What a society believes to be good,

desirable and beautiful.Provides conceptual support for democracy,

truth, appropriate roles for men and women.Usually not static, but

slow to change

Page 25: Chapter 1 1 6 6 Managing in a Global Environment

6-25© 2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin

The Role of National CultureThe Role of National Culture

Norms Unwritten rules and codes of conduct that

prescribe how people should act in particular situations. Folkways: routine social conventions of daily life (dress

codes and social manners) Mores: behavioral norms considered central to functioning

of society and much more significant than folkways (theft and adultery); often enacted into law

Norms vary from country to country

Page 26: Chapter 1 1 6 6 Managing in a Global Environment

6-26© 2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin

Hofstede’s Model of National Culture

Hofstede’s Model of National Culture

Individualism A view that values individual freedom, self-expression,

personal rights, and the need for persons to be judged by achievement rather than social background – the U.S. and to a lesser degree the U.K.

Collectivism A view that subordinates individual goals to group goals –

Japan and communist countries and maybe the U.S. if we continue along the path we are currently traveling

Page 27: Chapter 1 1 6 6 Managing in a Global Environment

6-27© 2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin

Hofstede’s Model of National Culture

Hofstede’s Model of National Culture

Power DistanceA society’s acceptance of differences in the well-being of citizens due to differences in heritage and capability>High power distance societies tolerate misery and a very

wide gap between rich and poor (e.g., Panama and Malaysia)

>Low power distance societies such as the United States and Germany reduce the gap by taxation and welfare programs that transfer wealth from rich to poor (progressives: “From greed to need”)

Page 28: Chapter 1 1 6 6 Managing in a Global Environment

6-28© 2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin

Hofstede’s Model of National Culture

Hofstede’s Model of National Culture

Achievement versus Nurturing

>Achievement-oriented societies value assertiveness, performance, and results (U.S., Korea)

>Nurturing-oriented societies value quality of life, personal relationships, and service (Sweden, Denmark)

Page 29: Chapter 1 1 6 6 Managing in a Global Environment

6-29© 2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin

Hofstede’s Model of National Culture

Hofstede’s Model of National Culture

Long-term Outlook

Societies with a long-term outlook(Japan)

value saving and persistence (Ants)

Societies with a short-term viewpoint

(United States) seek immediate personal

gratification (Grasshoppers)