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CURRENT TOPICS IN

MANAGEMENT

MODULE 7

INTRODUCTION TO MANAGEMENT

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MGT 301 PREPARED & PRESENTED BY: ALI RASHID CHEEMA

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What Is Global Business?

Global Business

The buying and selling of goods and

services by people from different

countries.

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The Impact of Global Business

Multinational Corporation

A corporation that owns businesses in

two or more countries.

Direct Foreign Investment

A method of investment in which acompany builds a new business or buys an

existing business in a foreign country.

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ASEAN and APEC

• ASEAN – Brunei Darussalam, Cambodia, Indonesia, Laos,

Malaysia, Myanmar, Philippines, Singapore,

Thailand, and Vietnam

• APEC

– Australia, Canada, Chile, China, Hong Kong,

Japan, Mexico, New Zealand, Papua NewGuinea, Peru, Russia, South Korea, Taiwan,

United States, and ASEAN members (except

Cambodia, Laos, and Myanmar)

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Choosing an Office/Manufacturing

Location

• Qualitative factors

– work force quality

– company strategy

• Quantitative factors

– kind of facility

– exchange rates

– transportation and labor

costs

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World’s Best Cities for Business

United States

1. New York City2. Chicago

3. Toronto4. Atlanta5. Los Angeles

Latin America

1. Santiago2. Miami

3. Sao Paulo4. Monterrey5. Mexico City

Asia Pacific

1. Shanghai2. Beijing

3. New Delhi4. Hong Kong5. Mumbai

Europe

1. London2. Paris

3. Frankfurt4. Brussels5. Amsterdam

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Minimizing Political Risk

• Political uncertainty – risk of major changes in political regimes

• Policy uncertainty

– risk associated with changes in laws and

government policies directed at businesses

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Becoming Aware of

Cultural DifferencesNational Culture

The set of shared values and beliefs

that affects the perceptions, decisions,

and behavior of the people from aparticular country.

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Cultural Differences

• Recognize cultural differences

• Decide how to adapt your company to those

differences

• Do not base adaptations on outdated and

incorrect assumptions about a company’s culture

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The Global Environment

• In the past, managers have viewed the globalsector as closed.

– Each country or market was assumed to be

isolated from others. – Firms did not consider global competition,

exports.

• Today’s environment is very different.

– Managers need to view it as an open market.

– Organizations buy and sell around the world.

– Managers need to learn to compete globally.

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Tariff Barriers

• A tariff is a barriers to trade. – Tariffs are taxes levied upon imports.

– These seek to protect jobs in the home country.

– Other countries usually retaliate.

• Free trade: in a free trade agreement, each countryseeks to specialize in things they make mostefficiently.

– If India is more efficient in making textiles, and theUSA in making computer software, then eachcountry should focus on these.

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Effects on Managers

• Declining barriers have opened great opportunities formanagers.

– Managers can not only sell goods and services butalso buy resources and components globally.

• Managers now face a more dynamic and exciting jobdue to global competition.

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Free Trade

NAFTA: North American Free Trade Agreement. – Abolishes most tariffs on goods traded between

Mexico, Canada and the U.S.

– Allows unrestricted cross-border flows of

resources. – Many U.S. firms have now invested in Mexico.

• This is a manufacturing opportunity.

–

Wage costs are lower in Mexico. – Can serve Mexico with a plant in Mexico and

reduce freight.

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Global Task Environment

Suppliers

Distributors

Customers

CompetitorsForces yielding

Opportunities

and threats

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Suppliers & Distributors

• Managers buy products from global suppliers or makeitems abroad and supply themselves.

– Key is to keep quality high and costs low.

• Global outsourcing: firms buy inputs fromthroughout the world.

– GM might build engines in Mexico, transmissionsin Korea, and seats in the U.S.

– Finished goods become global products.• Distributors: each country often has a unique system

of distribution.

– Managers must identify all the issues.

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Customers & Competitors

• Formerly distinct national markets are merging into ahuge global market.

– True for both consumer and business goods.

– Creates large opportunities.• Still, managers often must customize products to fit

the culture.

– McDonald's sells a local soft drink in Brazil.

• Global competitors present new threats.

– Increases competition abroad as well as at home.

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Long-Term and Short-Term

Outlook

• Long-term outlook is based on values of saving, and persistence.

– Taiwan and Hong Kong are cultures that are long -term in outlook.

• Short-term outlook seeks the maintenance of personal

stability or happiness right now. – France and the U. S. are examples of this approach.

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International Expansion

• Importing and Exporting: the least complex method ofexpansion.

– Exporting: firm makes products and sells abroad.

– Importing: firm sells products made abroad.

• Licensing: firm allows foreign organization to make anddistribute goods for a fee.

– Helps the home firm since it does not have to set up acomplete production and distribution network.

• Franchising: company sells a foreign organization therights to use brand name and know-how in return for payment and profit percentage.

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Ethics, SocialResponsibility,

and Diversity

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Ethics and Stakeholders

• Stakeholders: people or groups that have an interestin the organization.

– Stakeholders include employees, customers,shareholders, suppliers, and others.

– Stakeholders often want different outcomes andmanagers must work to satisfy as many as possible.

• Ethics: a set of beliefs about right and wrong.

– Ethics guide people in dealings with stakeholdersand others, to determine appropriate actions.

– Managers often must choose between theconflicting interest of stakeholders.

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Ethics

It is difficult to know when a decision is ethical. Hereis a good test:

Managerial Ethics:

If a manager makes a decision falling within usualstandards, is willing to personally communicate thedecision to stakeholders, and believes friends wouldapprove, then it is likely an ethical decision.

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Ethical Model

Social Ethics:

Legal rules, customs

Professional Ethics:

Values in workplaceIndividual Ethics:

Family influence

Organization’s

Code of Ethics

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Ethical Origins

• Professional ethics: values and standards used bygroups of managers in the workplace.

– Applied when decisions are not clear-cut ethically.

– Example: physicians and lawyers have professionalassociations that enforce these.

• Individual ethics: values of an individual resultingfrom their family& upbringing.

– If behavior is not illegal, people will often disagreeon if it is ethical.

– Ethics of top managers set the tone for firms.

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MGT 301 PREPARED & PRESENTED BY: ALI RASHID CHEEMA 25

Ethical Decisions

• A key ethical issue is how to disperse harm and benefitsamong stakeholders.

– If a firm is very profitable for two years, who shouldreceive the profits? Employees, managers and

stockholders all want a share. – Should we keep the cash for future slowdowns?

What is the ethical decision?

• What about the reverse, when firms must layoffworkers.

• Final point: stockholders are the legal owners of the firm!

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Ethical Decisions

• Some other issues managers must consider.

– Should you hold payment to suppliers as long as possible to benefit your firm?

• This will harm your supplier who is astakeholder.

– Should you pay severance pay to laid off workers?

• This may decrease the stockholder's return.

– Should you buy goods from overseas firms thathire children?

• If you don’t the children might not earn enough

money to eat.

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Social Responsibility

• Social Responsibility: the manager’s duty to nurture,

protect and enhance the welfare of stakeholders.

There are many ways managers respond to this duty:

• Obstructionist response: managers choose not to be

socially responsible. – Managers behave illegally and unethically.

– They hide and cover-up problems.

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• Defensive response: managers stay within the law butmake no attempt to exercise additional socialresponsibility.

– Put shareholder interest above all other stakeholders.

– Managers say society should make laws if change isneeded.

• Accommodative response: managers realize the needfor social responsibility.

– Try to balance the interests of all stakeholders.

• Proactive response: managers actively embrace social

responsibility. – Go out of their way to learn about and help

stakeholders.

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Levels of Responsibility

Obstruction

response

Defensive

response

Accommodative

response

Proactive

response

Low HighSocial responsibil i ty

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MGT 301 PREPARED & PRESENTED BY:ALI RASHID CHEEMA 30

How to Manage Diversity

• Increase diversity awareness: managers need to become aware of their own bias.

• Understand cultural differences and their impact on

working styles.• Practice effective communication with diverse

groups.

• Be sure top management is committed to diversity.

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