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Chapter 4

by: Stephanie De Angelis
Stephanie De Angelis

GPA 3.1

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Global Management
Managerial and Organizational Concepts
Professor Bhandari
Class Notes
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This 6 page Class Notes was uploaded by Stephanie De Angelis on Tuesday February 16, 2016. The Class Notes belongs to MGT 250 at Pace University - New York taught by Professor Bhandari in Winter 2016. Since its upload, it has received 56 views. For similar materials see Managerial and Organizational Concepts in Business, management at Pace University - New York.


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Date Created: 02/16/16
Chapter 4: Global Management Managing across Borders Vocabulary Asian­Pacific Economic Cooperation (APEC)­ a group of 21 Pacific Rim countries whose  purpose is to improve economic and political ties Association of Southeast Asian Nations (ASEAN)­ a trading bloc consisting of 10 countries in  Asia: Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore,  Thailand, and Vietnam Central America Free Trade Agreement (CAFTA)­ involves the US and Costa Rica, the  Dominican Republic, El Salvador, Guatemala, Honduras, and Nicaragua and is intended to  reduce tariffs and other barriers to free trade Countertrading­ bartering goods for goods Culture­ the shared set of beliefs, values, knowledge, and patterns of behavior common to a  group of people Dumping­ the practice of a foreign company’s exporting products abroad at a lower price than  the price in the home market – or even below the costs of production – in order to drive down the price of the domestic product E­commerce­ the buying and selling of products and services through computer networks Embargo­ a complete ban on the import of export of certain products Ethnocentric Managers­ managers that believe that their native country, culture, language, and  behavior are superior to all others European Union (EU)­ 28 trading partners in Europe Exchange Rate­ the rate at which the currency of one area or country can be exchanged for the  currency of another’s Expatriates­ people living or working in a foreign country Exporting­ a company produces goods domestically and sells them outside the country  Expropriation­ a government’s seizure of a domestic or foreign company’s assets Foreign Corrupt Practices Act­ makes it illegal for employees of US companies to make  “questionable” or “dubious” contributions to political decision makers in foreign nations Franchising­ a form of licensing in which a company allows a foreign company to pay it a fee  and a share of the profit in return for using the first company’s brand name and a package of  materials and services Free Trade­ the movement of goods and services among nations without political or economic  obstruction Geocentric Managers­ managers that accept that there are differences and similarities between  home and foreign personnel and practices that they should use whatever techniques are most  effective Global Economy­ the increasing tendency of the economies of the world to interact with one  another as one market instead of many national markets Global Outsourcing­ using suppliers outside the US to provide labor, goods, or services Global Village­ the “shrinking” of time and space as air travel and the electronic media have  made it easier for the people around the globe to communicate with one another Globalization­ the trend of the world economy toward becoming a more interdependent system Chapter 4: Global Management Managing across Borders GLOBE Project­ a massive and ongoing cross­cultural investigation of nine cultural dimensions  involved in leadership and organizational processes Greenfield Venture­ a foreign subsidiary that the owning organization has built from scratch High­context Culture­ people rely heavily on situational cues for meaning when communicating  with others Import Quota­ a trade barrier in the form of a limit on the numbers of a product that can be  imported Importing­ a company buys goods outside the country and resells them domestically International Monetary Fund (IMF)­ designed to assist in smoothing the flow of money between  nations Joint Venture­ something formed with a foreign company to share the risks and rewards of  starting a new enterprise together in a foreign country Licensing­ a company allows a foreign company to pay it a fee to make or distribute the first  company’s product or service Low­context Culture­ shared meanings which are primarily derived from written and spoken  words Maquiladoras­ manufacturing plants allowed to operate in Mexico with special privileges in  return for employing Mexican citizens Mercosur­ the largest trade bloc in Latin America and has five core members – Argentina,  Brazil, Paraguay, Uruguay, and Venezuela – and seven associate members: Bolivia, Chile,  Colombia, Ecuador, Guyana, Peru, and Suriname Monochromic Time­ a preference for doing one thing at a time Most Favored Nation­ a condition in which a country grants other countries favorable trading  treatment such as the reduction of import goods Multinational Corporation­ a business firm with operations in several countries Multinational Organization­ a nonprofit organization with operations in several countries North American Free Trade Agreement (NAFTA)­ a trading bloc consisting of the US, Canada,  and Mexico Offshoring­ using suppliers outside the US to provide labor, goods, or services Outsourcing­ using suppliers the company to provide goods and services Parochialism­ a narrow view in which people see things solely through their own perspective Polycentric Managers­ managers that take the view that native managers in the foreign offices  best understand native personnel and practices, so the home office should leave them alone Polychromic Time­ a preference for doing more than one thing at a time Tariff­ a trade barrier in the form of a customs duty, or tax, levied mainly on imports  Trade Protectionism­ the use of government regulations to limit the import of goods and services Trading Bloc­ a group of nations within a geographical region that have agreed to remove trade  barriers with one another Wholly­owned Subsidiary­ a foreign subsidiary that is totally owned and controlled by an  organization World Bank­ used to provide low­interest loans to developing nations for improving  transportation, education, health, and telecommunications  Chapter 4: Global Management Managing across Borders World Trade Organization (WTO)­ designed to monitor and enforce trade agreements 4.1 Globalization: The Collapse of Time & Distance Competition & Globalization: Who Will Be No. 1 Tomorrow? o The US is ranked #5 as most competitive in the world o On a per­person basis, the US is ranked #6 richest The Rise of the “Global Village” & Electronic Commerce  From Transportation to Communication o In 1844, telegraphs ended the Pony express o By 1876 it was competing with the telephone o By 1906, the commercial radio o By 1925, television o This is where philosopher Marshall McLuhan created the meaning of  global village  The Net, the Web, & the World o Of 7.2 billion people, 39% are internet users o With the web being created, came e­commerce One Big World Market: The Global Economy o Conditions such as the Berlin Wall coming down (the end of communism), Asian  countries opening their economies to foreign investors, and governments  deregulating their economies set up the conditions by which goods, people, and  money could move more freely throughout the world; aka a global economy  Positive Effects o Global economy seems to be good for everyone o Its revitalizing parts of industrial America o The world is more interconnected, which leads to better and more  affordable products  Negative Effects o Lead to the 2007­2009 recession in the US  o Outsourcing Cross­Border Business  Megamergers Operating Worldwide o The last 20 years have seen a surge in mergers: two or more companies  joining to be one o Industries involved include oil, telecommunications, automobiles, and  pharmaceuticals  Minifirms Operating worldwide o This creates to important results:  Small companies can maneuver faster Chapter 4: Global Management Managing across Borders  Small companies can maneuver more easily 4.2 You & International Management Why Learn about International Management o International management is management that oversees the conduct of operation  in or with organizations in foreign countries, whether it’s through a multinational  corporation or organization  Multinational Corporations o Example: McGraw­Hill (presence in 17 foreign countries)  Multinational Organizations o Example: the International Red Cross o Consider yourself in the following situations:  You may deal with foreign customers or partners  You may deal with foreign employees or suppliers  You may work for a foreign firm in the US  You may work for an American Firm outside the US – or for a foreign one The Successful International Manager: Geocentric, Not Ethnocentric or Polycentric  Ethnocentric Managers – “We Know Best” o Tend to believe that they ca export the managers and practices of their  home countries to anywhere in the world and that they will be more  capable and reliable o Ethnocentric is also called parochialism o It seems to be bad for businesses   Polycentric Managers – “They Know Best” o The attitude is opposite of ethnocentric managers  Geocentric Managers – “What’s Best Is What’s Effective, Regardless of Origin” o The payoff for being this type of manager is greater than ethnocentric or  polycentric 4.3 Why & How Companies Expand Internationally Why Companies Expand Internationally o It depends on the product or service that makes it wrong to restrict selling to just  its own company o Reasons why companies expand internationally o Availability of supplies o New markets o Lower labor costs o Access to finance capital o Avoidance of tariffs & import quotas How Companies Expand Internationally o Reference Figure 4.1 o Five ways of expanding internationally Chapter 4: Global Management Managing across Borders  Global outsourcing  Importing, exporting, & countertrading  Licensing & Franchising  Joint ventures  Wholly­owned subsidiaries 4.4 The World of Free Trade: Regional Economic Cooperation Barriers to International Trade o Countries try to exert protectionism by o Tariffs o Import quotas o Embargoes  Organizations Promoting International Trade o Three principal organizations designed to facilitate international trade are o World trade organization o The world bank o The international monetary fund Major Trading Blocks o NAFTA – the three countries of the North American Free Trade agreement o The EU – the 28 countries of the European Union o APEC – 21 countries of the Pacific Rim o ASEAN – 10 countries of the Association of Southeast Asian Nations o Mercosur – 12 countries of Latin America o CAFTA­DR – 7 countries of South America Most Favored Nation Trading Status o The purpose is to promote stronger and more stable ties between companies with  locations in more than one country Exchange Rates o Exchange rates go with the changing economic conditions 4.5 The Importance of Understanding Cultural Differences The Importance of National Culture o We learn out culture from an early age with people around us o It’s made of so many nuances, people from other cultures may feel a culture  shock Cultural Dimensions: The GLOBE Project o Misunderstands and miscommunications often arise in international business  relationships because people don’t understand the expectations of the other side  The GLOBAL Project’s Nine Cultural Dimensions Chapter 4: Global Management Managing across Borders o Power distance – the degree to which a society’s members expect power to be unequally shared o Uncertainty avoidance – the extent to which a society relies on social  norms and procedures to alleviate the unpredictability of future events o Institutional collectivism – the extent to which individuals are encouraged  and rewarded for loyalty to the group as opposed to pursuing individual  goals o In­group collectivism – the extent to which people should take pride in  being members of their family, circle of close friends, and their work  organization o Gender egalitarianism – the extent to which a society should minimize  gender discrimination and role inequalities o Assertiveness – the extent to which a society expects people to be  confrontational and competitive as opposed to tender and modest o Future orientation – the extent to which a society encourages investment  in the future, as by planning and saving o Performance orientation – the extent to which society encourages and  rewards its members for performance improvement and excellence o Humane orientation – the degree to which individuals are encouraged to  be altruistic, caring, kind, generous, and fair Other Cultural Variations o How to bridge cross­culture gaps o Language o Interpersonal space o Communication o Time orientation  Monochromic time  Polychromic time o Religion o Law & political stability  Instability  Expropriation  Corruption   Labor abusers


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