GMS200 SUI SUI CHAPTER 3: GLOBAL DIMENSIONS ...

GMS200 SUI SUI CHAPTER 3: GLOBAL DIMENSIONS OF MANAGEMENT Chapter 3 Study Questions  What are the management challenges of globalization?  What are global businesses and what do they do?  What is culture and how does it impact global management?  How can we benefit from global management learning? Study Question 1: What are the management challenges of globalization?  Key concepts in the challenges of globalization:  Global economy  Globalization  International management  Global manager  Global economy  Resource supplies, product markets, and business competition are worldwide, rather than local  Globalization  The process of growing interdependence of these components in the global economy  Global management  Management in organizations with business interests in more than one country  Global manager  Informed about international developments  Transnational in outlook  Competent in working with multicultural people  Aware of regional developments in a changing world  Global businesses  Conduct for-profit transactions of goods and services across national boundaries  Reasons why businesses go global:  Profits  Customers  Suppliers  Capital  Labour  Market entry strategies  Involve the sale of goods or services to foreign markets but do not require expensive investments.  Types of market entry strategies:  Global sourcing  Exporting  Importing  Licensing agreement  Franchising Figure 3.1 Common forms of global business—from market entry to direct investment strategies.

GMS200 SUI SUI CHAPTER 3: GLOBAL DIMENSIONS OF MANAGEMENT  Global sourcing  Process of purchasing materials or services around the world for local use  Exporting  Selling locally made products in foreign markets  Importing  Buying foreign-made products and selling them domestically  Licensing agreement  One firm pays fee for rights to make or sell another company’s products  Franchising  Fee is paid for rights to use another firm’s name and operating methods  Foreign Direct Investment is building, buying all, or buying part ownership of a business in another country.  Insourcing o job creation through foreign direct investment  Types of direct investment strategies:  Joint ventures o operates in a foreign country through co-ownership by foreign and local partners  Global strategic alliances o a partnership in which foreign and domestic firms share resources and knowledge for mutual gains.  Foreign subsidiaries o local operation completely owned by a foreign firm Greenfield investment - builds an entirely new operation in a foreign country  Criteria for choosing a joint venture partner:  Familiarity with your firm’s major business.  Strong local workforce.  Future expansion possibilities.  Values its customers  Strong local market for partner’s own products.  Good profit potential.  Sound financial standing  Complications in the global business environment:  Political risk o the potential loss in value of a foreign investment due to instability and changes in host country  Local legal systems o complex and unfamiliar laws can create problems  World Trade Organization resolves trade and tariff disputes among countries.  Protectionism can complicate global trading relationships  Regional Economic Alliances  NAFTA – North American Free Trade Agreement  EU – European Union  SADC – Southern Africa Development Community

GMS200 SUI SUI CHAPTER 3: GLOBAL DIMENSIONS OF MANAGEMENT Study Question 2: What are global businesses and what do they do?  Types of global businesses:  Global corporation o MNC (multinational corporation) with extensive business operations in more than one foreign country  Transnational corporation o MNC (multinational corporation) operates worldwide on a borderless basis  Host-country benefits of MNC:  Larger tax bases  Increased employment opportunities  Technology transfers  Introduction of new industries  Development of local resources  Host country complaints about MNCs:  Excessive profits  Domination of local economy  Interference with local government  Hiring the best local talent  Limited technology transfer  Disrespect for local customs Figure 3.2 What should go right and what can go wrong in MNC-host country relationships.

 Ethical issues for MNCs:  Corruption — illegal practices that further one’s business interests.  Sweatshops — employing workers at low wages for long hours and in poor working conditions.  Child labour — full-time employment of children for work otherwise done by adults.  Sustainable development — meeting current needs without compromising future needs. Study Question 3: What is culture and how does it impact global management?  Culture  The shared set of beliefs, values, and patterns of behaviour common to a group of people.  Culture shock  Confusion and discomfort a person experiences in an unfamiliar culture.  Ethnocentrism  Tendency to consider one’s own culture as superior to others

GMS200 SUI SUI CHAPTER 3: GLOBAL DIMENSIONS OF MANAGEMENT

 Cultural intelligence  The ability to adapt and adjust to new cultures  Stages in adjusting to a new culture:  Confusion  Small victories  The honeymoon  Irritation and anger  Reality

 Silent Languages of culture:  Context o Low-context cultures – emphasize communication via spoken or written words. o High-context cultures – rely on nonverbal and situational cues as well as on spoken or written words in communication.  Silent Languages of culture:  Time o Monochronic cultures – people tend to do one thing at a time. o Polychronic cultures – time is used to accomplish many different things at once.  Space o Proxemics – is how people use space to communicate  Values and national cultures (Hofstede):  Power distance  Uncertainty avoidance  Individualism-collectivism  Masculinity-femininity  Time orientation Figure 3.3 How countries compare on Hofstede’s dimension of national culture.

GMS200 SUI SUI CHAPTER 3: GLOBAL DIMENSIONS OF MANAGEMENT Study Question 4: How can we benefit from global management learning?  Comparative management  How management perspectives and practices systematically differs among countries and cultures.  Are management theories universal?  U.S. management theories may be ethnocentric. o Participation and individual performance are not emphasized as much in other cultures.  Not all Japanese management practices can be applied successfully abroad.  Project GLOBE (Global Leadership and Organizational Behaviour Effectiveness)  Researches the leadership, organizational practices, and diversity among world cultures. o Power distance o Uncertainty avoidance o Gender egalitarianism o Future orientation o Institutional collectivism o In-group collectivism o Assertiveness o Performance orientation o Humane orientation Project GLOBE’s research on leadership practices across cultures  Facilitators of leadership success  Acting trustworthy, just, honest  Showing foresight, planning  Being positive, dynamic, motivating  Inspiring confidence  Being informed and communicative  Being a coordinator and team builder  Inhibitors of leadership success  Being a loner  Acting uncooperative  Being irritable  Acting autocratic Figure 3.4 Nine cultural dimensions used by Project GLOBE researchers.

GMS200 SUI SUI CHAPTER 3: GLOBAL DIMENSIONS OF MANAGEMENT  Global management attitudes and learning:  Companies can and should learn from each other.  Readiness for global organizational learning varies based on managerial attitudes. o Ethnocentric attitudes o Polycentric attitudes o Geocentric attitudes  Be alert, open, inquiring, but always cautious.