international management chapter 06 copyright © 2011 by the mcgraw-hill companies, inc. all rights...
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International International ManagementManagement
Chapter 06Chapter 06
Copyright © 2011 by the McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin
Learning ObjectivesLearning Objectives
LO1 Describe how the world economy is becoming more integrated than ever before
LO2 Discuss what integration of the global economy means for individuals companies and their managers
LO3 Define the strategies organizations use to compete in the global marketplace
LO4 Compare the various entry modes organizations use to enter overseas markets
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Learning Objectives (cont.)Learning Objectives (cont.)
LO5 Explain how companies can approach the task of staffing overseas operations
LO6 Summarize the skills and knowledge managers need to manage globally.
LO7 Identify ways in which cultural differences across countries influence management
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The Global EnvironmentThe Global Environment
The global economy is dominated by countries in three regions: North America, Western Europe, and Asia.
Other developing countries and regions represent important areas for economic growth
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The Global EconomyThe Global Economy
6-5Figure 6.1
European UnificationEuropean Unification
Europe is integrating economically to form the biggest market in the world
Certain structural issues within Europe need to be corrected for the EU to function effectively.
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U.S. Trading PartnersU.S. Trading PartnersBased on Total Imports and ExportsBased on Total Imports and Exports
Figure 6.26-7
QuestionQuestion
What economic pact that combined the economies of the United States, Canada, and Mexico?
A.HAFTAB.NAFTAC.EUD.South American FTA
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The AmericasThe Americas
North American Free Trade Agreement (NAFTA) An economic pact that combined the economies
of the United States, Canada, and Mexico into one of the world’s largest trading bloc
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Consequences of a Global EconomyConsequences of a Global Economy
1. Expansion of international trade2. Foreign direct investment (FDI) is playing an
ever-increasing role in the global economy3. Imports are penetrating deeper into the
world’s largest economies4. Companies are finding their home markets
under attack from foreign competitors
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Growing Proportion ofGrowing Proportion ofGoods Being ExportedGoods Being Exported
6-11Figure 6.3
Consequences of a Global EconomyConsequences of a Global Economy
Opportunities are greater Environment is more complex and
competitive
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Relative Growth in Relative Growth in World Merchandise TradeWorld Merchandise Trade
Figure 6.4 6-13
The Role of OutsourcingThe Role of Outsourcing
Outsourcing Contracting with an
outside provider to produce one or more of an organization’s goods or services.
Offshoring Moving work to other
countries.
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Factors to Consider for OffshoringFactors to Consider for Offshoring
What is the competitive advantage of the products they offer?
Is the business in its early stages? Can production savings be achieved locally? Can the entire supply chain be improved?
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Organizational ModelsOrganizational Models
6-16Figure 6.5
Choosing a Global StrategyChoosing a Global Strategy
International model composed of a company’s overseas subsidiaries
and characterized by greater control by the parent company over the research function and local product and marketing strategies than in the multinational model.
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Choosing a Global StrategyChoosing a Global Strategy
Multinational model consists of the subsidiaries in each country in
which a company does business, with ultimate control exercised by the parent company.
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Choosing a Global StrategyChoosing a Global Strategy
Global model consisting of a company’s overseas subsidiaries
and characterized by centralized decision making and tight control by the parent company over most aspects of worldwide operations
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Choosing a Global StrategyChoosing a Global Strategy
Transnational model characterized by centralizing certain functions in
locations that best achieve cost economies basing other functions in the company’s national
subsidiaries to facilitate greater local responsiveness
fostering communication among subsidiaries to permit transfer of technological expertise and skills.
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Comparison of Entry ModesComparison of Entry Modes
6-21Table 6.2
Entry ModeEntry Mode
Advantages of exporting: Provides scale economies by avoiding the
costs of manufacturing in other countries Consistent with a pure global strategy
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Entry ModeEntry Mode
International licensing an arrangement by which a licensee in another
country buys the rights to manufacture a company’s product in its own country for a negotiated fee (typically, royalty payments on the number of units sold)
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Entry ModeEntry Mode
Franchising the company sells limited rights to use its brand
name to franchisees in return for a lump-sum payment and a share of the franchisee’s profits.
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Entry ModeEntry Mode
Joint ventures benefit a company through: the local partner’s knowledge of the host
country’s competitive conditions, culture, language, political systems, and business systems
the sharing of development costs and/or risks with the local partner.
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Managing across BordersManaging across Borders
Expatriates Parent-company
nationals who are sent to work at a foreign subsidiary
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Managing across BordersManaging across Borders
Host-country nationals Natives of the country
where an overseas subsidiary is located
Third-country nationals Natives of a country
other than the home country or the host country of an overseas subsidiary.
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Skills of the Global ManagerSkills of the Global Manager
15% of all employee transfers are to international locations
Failure rate ranges from 20%-70% Failure rate
the number of expatriate managers of an overseas operation who come home early
Communication is key to reducing the failure rate
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Identifying International ExecutivesIdentifying International Executives
6-29Table 6.4
How to Prevent Failed Global AssignmentsHow to Prevent Failed Global Assignments
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Table 6.5
Understanding Cultural IssuesUnderstanding Cultural Issues
Ethnocentrism The tendency to judge
others by the standards of one’s group or culture, which are seen as superior
Culture shock The disorientation and
stress associated with being in a foreign environment.
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Understanding Cultural IssuesUnderstanding Cultural Issues
Power distance the extent to which a
society accepts the fact that power in organizations is distributed unequally
Individualism/collectivism the extent to which people
act on their own or as a part of a group.
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Understanding Cultural IssuesUnderstanding Cultural Issues
Uncertainty avoidance the extent to which
people in a society feel threatened by uncertain and ambiguous situations.
Masculinity/femininity the extent to which a
society values quantity of life over quality of life
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Positions of 40 Countries on the Power Positions of 40 Countries on the Power Distance and Individualism ScalesDistance and Individualism Scales
6-34Figure 6.6
QuestionQuestion
What is a foreign national brought in to work at the parent company?
A.ExpatriateB.Non-patriateC.InpatriateD.Unpatriate
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Understanding Cultural IssuesUnderstanding Cultural Issues
Inpatriate A foreign national
brought in to work at the parent company.
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Understanding Cultural IssuesUnderstanding Cultural Issues
Americans tend to have specific views about the purpose of meetings and how much time can be spent.
International workers may have different preconceptions about the nature and length of meetings, and managers should make sure foreign nationals are comfortable with the American approach.
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Understanding Cultural IssuesUnderstanding Cultural Issues
Workers from other countries can work long hours but, in countries with strong labor organizations, often get many more weeks of vacation than American workers.
Europeans in particular may balk at working on weekends.
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Ethical Issues in International ManagementEthical Issues in International Management
Research suggests that regardless of nationality or religion, most people embrace a set of five core values: compassion, fairness, honesty, responsibility, and respect for others.
These values lie at the heart of human rights issues and seem to transcend more superficial differences among Americans, Europeans, and Asians
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Destination CEO: Papa John’sDestination CEO: Papa John’s
Discuss Papa John’s international growth strategy, and why it is important to its future.
What, in your opinion, will be the next “big thing” in the pizza industry; and why?
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