ManagingintheGlobalEnvironmentMcGraw-Hill/IrwinContemporaryManagement,5/eCopyright?2008TheMcGraw-HillCompanies,Inc.Allrightsreserved.chaptersixLearningObjectivesExplainwhytheabilitytoperceive,interpret,andrespondappropriatelytotheglobalenvironmentiscrucialformanagerialsuccessDifferentiatebetweentheglobaltaskandglobalgeneralenvironmentsIdentifythemainforcesinboththeglobaltaskandgeneralenvironments,anddescribethechallengesthateachforcepresentstomanagersMcGraw-Hill/Irwin?2006TheMcGraw-HillCompanies,Inc.Allrightsreserved.3LearningObjectivesExplainwhytheglobalenvironmentisbecomingmoreopenandcompetitiveandidentifytheforcesbehindtheprocessofglobalizationthatincreasestheopportunities,complexities,challenges,andthreatsthatmanagersface4LearningObjectivesDiscusswhynationalculturesdifferandwhyitisimportantthatmanagersbesensitivetotheeffectsoffallingtradebarriersandregionaltradeassociationsonthepoliticalandsocialsystemsofnationsaroundtheworld5GlobalOrganizationsOrganizationsthatoperateandcompetenotonlydomestically,butalsogloballyUncertainand

unpredictable6GlobalEnvironmentSetofforcesandconditionsintheworldoutsidetheorganization’sboundariesthataffectthewayitoperatesandshapeitsbehaviorChangesovertimePresentsmanagerswithopportunitiesandthreats7TaskEnvironmentSetofforcesandconditionsthatoriginatewithsuppliers,distributors,customers,andcompetitorsAffectanorganization’sabilitytoobtaininputsanddisposeofitsoutputsMostimmediateanddirecteffectonmanagers8ForcesintheOrganizationalEnvironment9Question?Whichpartofthetaskenvironmentprovidesanorganizationwiththeinputresourcesthatitneedstoproducegoodsandservices?CustomersSuppliersCompetitorsDistributors10TheTaskEnvironmentSuppliersIndividualsandorganizationsthatprovideanorganizationwiththeinputresourcesthatitneedstoproducegoodsandservicesRawmaterials,componentparts,labor(employees)11TheTaskEnvironmentSuppliersRelationshipswithsupplierscanbedifficultduetomaterialsshortages,unions,andlackofsubstitutes.Suppliersthatarethesolesourceofacriticalitemareinastrongbargainingpositiontoraisetheirprices.Managerscanreducethesesuppliereffectsbyincreasingthenumberofsuppliersofaninput.12SuppliersIt’simportantthatmanagersrecognizetheopportunitiesandthreatsassociatedwithmanagingtheglobalsupplychain13SuppliersGainingaccesstolow-costproductsmadeabroadrepresentsanopportunityforU.S.companiestolowertheirinputcostsManagerswhofailtoutilizelow-costoverseassupplierscreateathreatandputtheirorganizationsatacompetitivedisadvantage14GlobalOutsourcingProcessbywhichorganizationspurchaseinputsfromothercompaniesorproduceinputsthemselvesthroughouttheworldtolowerproductioncostsandimprovethequalityordesignoftheirproducts15TheTaskEnvironmentDistributorsOrganizationsthathelpotherorganizationsselltheirgoodsorservicestocustomersPowerfuldistributorscanlimitaccesstomarketsthroughitscontrolofcustomersinthosemarkets.Managerscancountertheeffectsofdistributorsbyseekingalternativedistributionchannels.16TheTaskEnvironmentCustomersIndividualsandgroupsthatbuygoodsandservicesthatanorganizationproducesIdentifyinganorganization’smaincustomersandproducingthegoodsandservicestheywantiscrucialtoorganizationalandmanagerialsuccess.17TheTaskEnvironmentCompetitorsOrganizationsthatproducegoodsandservicesthataresimilartoaparticularorganization’sgoodsandservicesVs.Vs.18TheTaskEnvironmentPotentialCompetitorsOrganizationsthatpresentlyarenotinthetaskenvironmentbutcouldenteriftheysochoose19TheTaskEnvironmentRivalrybetweencompetitorsispotentiallythemostthreateningforcethatmanagersdealwithStrongcompetitiverivalryresultsinpricecompetition,andfallingpricesreduceaccesstoresourcesandlowerprofits20TheTaskEnvironmentBarrierstoEntryFactorsthatmakeitdifficultandcostlyfortheorganizationtoenteraparticulartaskenvironmentorindustry21BarrierstoEntryEconomiesofscaleCostadvantagesassociatedwithlargeoperationsBrandloyaltyCustomers’preferencefortheproductsoforganizationscurrentlyexistinginthetaskenvironment.Governmentregulationsthatimpedeentry22BarrierstoEntryandCompetitionFigure6.223GeneralEnvironmentEconomicTechnologicalSocio-culturalDemographicPoliticalandLegalForces24TheGeneralEnvironmentEconomicForcesInterestrates,inflation,unemployment,economicgrowth,andotherfactorsthataffectthegeneralhealthandwell-beingofacountryorworldregion25EconomicForcesSuccessfulmanagers:RealizetheimportanteffectsthateconomicforceshaveontheirorganizationsPaycloseattentiontowhatisoccurringinthenationalandregionaleconomiestorespondappropriately26TheGeneralEnvironmentTechnologyCombinationoftools,machines,computers,skills,information,andknowledgethatmanagersuseinthedesign,production,anddistribution

ofgoodsand

services27TheGeneralEnvironmentTechnologicalForcesOutcomesofchangesinthetechnologythatmanagersusetodesign,produce,ordistributegoodsandservices28TheGeneralEnvironmentTechnologicalForcesResultsinnewopportunitiesorthreatstomanagersOftenmakesproductsobsoletevery

quicklyChangesarealteringtheverynatureofworkitself,includingthemanager’sjob29TheGeneralEnvironmentSocioculturalForcesPressuresemanatingfromthesocialstructureofacountryorsocietyorfromthenationalcultureSocialstructure:thearrangementofrelationshipsbetweenindividualsandgroupsinsocietyNationalculture:thesetofvaluesthatasocietyconsidersimportantandthenormsofbehaviorthatareapprovedorsanctionedinthatsociety.30TheGeneralEnvironmentSocioculturalForcesSocietiesdiffersubstantiallyinthevaluesandnormstheyemphasize.Effectivemanagersaresensitivetodifferencesbetweensocietiesandadjusttheirbehaviorsaccordingly31TheGeneralEnvironmentDemographicForcesOutcomesofchangein,orchangingattitudestoward,thecharacteristicsofapopulation,suchasage,gender,ethnicorigin,race,sexualorientation,andsocialclass32TheGeneralEnvironmentDemographicForcesMostindustrializednationsareexperiencingtheagingoftheirpopulationsasaconsequenceoffailingbirthanddeathratesandtheagingofthebaby-boomgenerationOrganizationsneedtofindwaystomotivateandutilizetheskillsandknowledgeofolderemployees33TheGeneralEnvironmentPoliticalandLegalForcesOutcomesofchangesinlawsandregulations,suchasthederegulationofindustries,theprivatizationoforganizations,andincreasedemphasisonenvironmentalprotectionIncreasinglynationsarejoiningtogetherintopoliticalunionsthatallowforthefreeexchangeofresourcesandcapital34TheGlobalEnvironmentFigure6.335TheChangingGlobalEnvironmentManagersnowrecognizethatcompaniesexistandcompeteinatrulyglobalmarketManagersconstantlyconfrontthechallengesofglobalcompetitionEstablishingoperationsinacountryabroadObtaininginputsfromsuppliersabroadChallengesofmanaginginadifferentnationalculture36ProcessofGlobalizationGlobalizationSetofspecificandgeneralforcesthatworktogethertointegrateandconnecteconomic,political,andsocialsystemsacrosscountries,cultures,orgeographicalregionsResultisthatnationsandpeoplesbecomeincreasinglyinterdependent37DiscussionQuestion?Whatistheprincipalformofcapitalthatflowsbetweencountries?HumanPoliticalResourceFinancial38ProcessofGlobalizationFourprincipalformsofcapitalthatflowbetweencountriesare:HumancapitalFinancialcapitalResourcecapitalPoliticalcapital39DecliningBarrierstoTradeandInvestmentTariffAtaxthatgovernmentimposesonimportedor,occasionally,exportedgoods.IntendedtoprotectdomesticindustryandjobsfromforeigncompetitionOthercountriesusuallyretaliatetheirowntariffs,actionsthateventuallyreducetheoverallamountoftradeandimpedeseconomicgrowth.40GATTandtheRiseofFreeTradeFree-TradeDoctrineTheideathatifeachcountryspecializesintheproductionofthegoodsandservicesthatitcanproducemostefficiently,thiswillmakethebestuseofglobalresources41DecliningBarriersofDistanceandCultureDistanceMarketswereessentiallyclosedbecauseoftheslownessofcommunicationsoverlongdistances.CultureLanguagebarriersandculturalpracticesmademanagingoverseasbusinessesdifficultChangesinDistanceandCommunicationImprovementintransportationtechnologyandfast,securecommunicationshavegreatlyreducedthebarriersofphysicalandculturaldistances.42EffectsofFreeTradeonManagersDecliningTradeBarriersOpenedenormousopportunitiesformanagerstoexpandthemarketfortheirgoodsandservices.Allowedmanagerstonowbothbuyandsellgoodsandservicesglobally.Increasedintensityofglobalcompetitionsuchthatmanagersnowhaveamoredynamicandexcitingjobofmanaging.43EffectsofFreeTradeonManagersNorthAmericanFreeTradeAgreement(NAFTA)Abolishes99%oftariffsongoodstradedbetweenMexico,CanadaandtheUnitedStatesUnrestrictedcross-borderflowsofresourcesIncreasedinvestmentbyU.S.firmsinMexicanmanufacturingfacilitiesduelowerwagecostsinMexicoOpportunitiesandThreatsTheopportunitytoservemoremarketsIncreasedcompetitionfromNAFTAcompetitors44EffectsofFreeTradeonManagersCAFTARegionaltradeagreementdesignedtoeliminatetariffsonproductsbetweentheUnitedStatesandallcountriesinCentralAmericaApprovedbyDominicanRepublic,ElSalvador,Guatemala,Nicaragua,andHonduras45Question?Whatareideasaboutwhatasocietybelievestobegood,desirableandbeautiful?NormsNeedsRolesValues46TheRoleofNationalCultureValuesIdeasaboutwhatasocietybelievestobegood,desirableandbeautiful.Providethebasicunderpinningsfornotionsofindividualfreedom,democracy,truth,justice,honesty,loyalty,

love,sex,marriage,etc.47TheRoleofNationalCultureNormsUnwrittenrulesandcodesofconductthatprescribehowpeopleshouldactinparticularsituations.Folkways—routinesocialconventionsofdailylife(e.g.,dresscodesandsocialmanners)Mores—behavioralnormsthatareconsideredcentraltofunctioningofsocietyandmuchmoresignificantthanfolkways(e.g.,theftandadultery),andtheyareoftenenactedintolaw.Manydifferencesinmoresfromonesocietytoanother48Hofstede’sModelofNationalCultureFigure6.449Hofstede’sModelofNationalCultureIndividualismAworldviewthatvaluesindividualfreedomandself-expressionandadherencetotheprinciplethatpeopleshouldbejudgedbytheirindividualachievementsrathertheirsocialbackground.CollectivismAworldviewthatvaluessubordinationoftheindividualtothegoalsofthegroupandadherencetotheprinciplethatpeopleshouldbejudgedbytheircontributiontothegroup50Hofstede’sModelofNationalCulturePowerDistanceAsociety’sacceptanceofdifferencesinthewellbeingofcitizensduetodifferencesinheritage,andphysicalandintellectualcapabilities(individualism).51Hofstede’sModelofNationalCultureA