MANAGING IN A GLOBAL ENVIRONMENT

1. MANAGING IN A GLOBAL ENVIRONMENT DonyEkoPrasetyo, S.IP.

2. Global Organizations • Organizations that operate and compete not only domestically, but also globally • Uncertain and unpredictable

3. Global Environment • Set of forces and conditions in the world outside the organization’s boundaries that affect the way it operates and shape its behavior • Changes over time • Presents managers with opportunities and threats

4. Task Environment • Set of forces and conditions that originate with suppliers, distributors, customers, and competitors • Affect an organization’s ability to obtain inputs and dispose of its outputs • Most immediate and direct effect on managers

5. Forces in the Organizational Environment

6. The Task Environment Suppliers • Individuals and organizations that provide an organization with the input resources that it needs to produce goods and services • Raw materials, component parts, labor (employees)

7. The Task Environment Distributors • Organizations that help other organizations sell their goods or services to customers • Powerful distributors can limit access to markets through its control of customers in those markets. • Managers can counter the effects of distributors by seeking alternative distribution channels.

8. The Task Environment Customers • Individuals and groups that buy goods and services that an organization produces • Identifying an organization’s main customers and producing the goods and services they want is crucial to organizational and managerial success.

9. The Task Environment Competitors • Organizations that produce goods and services that are similar to a particular organization’s goods and services Vs. Vs.

10. The General Environment Economic Forces • Interest rates, inflation, unemployment, economic growth, and other factors that affect the general health and well-being of a country or world region

11. The General Environment • Technology • Combination of tools, machines, computers, skills, information, and knowledge that managers use in the design, production, and distribution of goods and services

12. The General Environment Sociocultural Forces • Pressures emanating from the social structure of a country or society or from the national culture • Social structure: the arrangement of relationships between individuals and groups in society • National culture: the set of values that a society considers important and the norms of behavior that are approved or sanctioned in that society.

13. The General Environment Demographic Forces • Outcomes of change in, or changing attitudes toward, the characteristics of a population, such as age, gender, ethnic origin, race, sexual orientation, and social class

14. The General Environment Political and Legal Forces • Outcomes of changes in laws and regulations, such as the deregulation of industries, the privatization of organizations, and increased emphasis on environmental protection • Increasingly nations are joining together into political unions that allow for the free exchange of resources and capital

15. The Global Marketplace • Opportunities and Challenges • Coping with the unexpected appearance of new competitors • Acknowledging cultural, political, and economic differences • Dealing with increased uncertainty, fear, and worry • Adapting to changes in the global environment • Avoiding parochialism

16. Adopting a Global Perspective • Ethnocentric Attitude • The parochalistic belief that the best work approaches and practices are those of the home country. • Polycentric Attitude • The view that the managers in the host country know the best work approaches and practices for running their business. • Geocentric Attitude • A world-oriented view that focuses on using the best approaches and people from around the globe.

18. Regional Trading Agreements • The European Union (EU) • A unified economic and trade entity • Belgium, Denmark, France, Greece, Ireland, Italy, Luxembourg, the Netherlands, Portugal, Spain, the United Kingdom, Germany, Austria, Finland, and Sweden • North American Free Trade Agreement (NAFTA) • Eliminated barriers to free trade (tariffs, import licensing requirements, and customs user fees) • United States, Canada, and Mexico

19. European Union

20. Regional Trading Agreements • U.S.-Central America Free Trade Agreement (CAFTA) • Free Trade Area of the Americas • Southern Cone Common Market (Mercosur) • Association of Southeast Asian Nations (ASEAN) • Trading alliance of 10 Southeast Asian nations • African Union • South Asian Association for Regional Cooperation (SARRC)

21. ASEAN Members Source: Based on J. McClenahen and T. Clark, “ASEAN at Work,” IW. May 19, 1997, p. 42.

22. The World Trade Organization (WTO) • Evolved from the General Agreement on Tariffs and Trade (GATT) in 1995. • Functions as the only global organization dealing with the rules of trade among nations. • Has 149 member nations and 32 observer governments. • Monitors and promotes world trade.

23. Different Types of International Organizations • Multinational Corporation (MNC) • Maintains operations in multiple countries. • Multidomestic Corporation • Is an MNC that decentralizes management and other decisions to the local country. • Global Company • Is an MNC that centralizes its management and other decisions in the home country.

24. Different Types of International Organizations (cont’d) • Transnational Corporation (Borderless Organization) • Is an MNC that has eliminated structural divisions that impose artificial geographic barriers and is organized along business lines that reflect a geocentric attitude.

25. How Organizations Go Global

26. Other Forms of Globalization • Strategic Alliances • Partnerships between and organization and a foreign company in which both share resources and knowledge in developing new products or building new production facilities. • Joint Venture • A specific type of strategic alliance in which the partners agree to form a separate, independent organization for some business purpose. • Foreign Subsidiary • Directly investing in a foreign country by setting up a separate and independent production facility or office.

27. Managing in A Global Environment • The Legal Environment • Stability or instability of legal and political systems • Legal procedures are established and followed • Fair and honest elections held on a regular basis • Differences in the laws of various nations • Effects on business activities • Effects on delivery of products and services

28. The Economic Environment • Economic Systems • Free market economy • An economy in which resources are primarily owned and controlled by the private sector. • Planned economy • An economy in which all economic decisions are planned by a central government. • Monetary and Financial Factors • Currency exchange rates • Inflation rates • Diverse tax policies

29. The Cultural Environment • National Culture • Is the values and attitudes shared by individuals from a specific country that shape their behavior and their beliefs about what is important. • May have more influence on an organization than the organization culture.

30. The Role of National Culture Values • Ideas about what a society believes to be good, desirable and beautiful. • Provide the basic underpinnings for notions of individual freedom, democracy, truth, justice, honesty, loyalty, love, sex, marriage, etc.

31. The 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 (e.g., dress codes and social manners) • Mores—behavioral norms that are considered central to functioning of society and much more significant than folkways (e.g., theft and adultery), and they are often enacted into law. • Many differences in mores from one society to another

32. Hofstede’s Model of National Culture Figure 6.4

33. Hofstede’s Model of National Culture • Individualism • A worldview that values individual freedom and self-expression and adherence to the principle that people should be judged by their individual achievements rather their social background. • Collectivism • A worldview that values subordination of the individual to the goals of the group and adherence to the principle that people should be judged by their contribution to the group

34. Hofstede’s Model of National Culture Power Distance • A society’s acceptance of differences in the well being of citizens due to differences in heritage, and physical and intellectual capabilities (individualism).

35. Hofstede’s Model of National Culture Achievement versus Nurturing Orientation • Achievement-oriented societies value assertiveness, performance, and success and are results-oriented. • Nurturing-oriented cultures value quality of life, personal relationships, and service.

36. Hofstede’s Model of National Culture Uncertainty Avoidance • Societies and people differ in their tolerance for uncertainty and risk. • Low uncertainty avoidance cultures (e.g., U.S. and Hong Kong) value diversity and tolerate a wide range of opinions and beliefs. • High uncertainty avoidance societies (e.g., Japan and France) are more rigid and expect high conformity in their citizens’ beliefs and norms of behavior.

37. Hofstede’s Model of National Culture Long Term Outlook • Cultures with a long-term orientation rest on values such as thrift and persistence in achieving goals • Cultures with a short-term orientation are concerned with maintaining personal stability or happiness and living for the present