MGT chapter 3
3.3
--A large volume of international business is being carried out by large international businesses that can be thought of as global corporations, stateless corporations, or transnational corporations. In the business world, these large international firms typically are called multinational corporations (MNCs), and they have been the subject of enormous attention.MNCs can move a wealth of assets from country to country and influence national economies, politics, and cultures. -The Maharaja Mac and Vegetable Burger served at this McDonald's in New Delhi, India, represent how this multinational corporation (MNC) changed its business model by decentralizing its operations -Although the term has no precise definition, a multinational corporation (MNC) typically receives more than 25 percent of its total sales revenues from operations outside the parent's home country. During the recent economic slump, the percentage of revenue from foreign operations increased for many multinationals because of stronger sales in developing markets such as China and India. An MNC also has the following distinctive managerial characteristics: An MNC is managed as an integrated worldwide business system in which foreign affiliates act in close alliance and cooperation with one another. Capital, technology, and people are transferred among country affiliates. The MNC can acquire materials and manufacture parts wherever in the world it is most advantageous to do so. An MNC is ultimately controlled by a single management authority that makes key strategic decisions relating to the parent and all affiliates. Although some headquarters are binational, such as the Royal Dutch/Shell Group, some centralization of management is required to maintain worldwide integration and profit maximization for the enterprise as a whole. MNC top managers are presumed to exercise a global perspective. They regard the entire world as one market for strategic decisions, resource acquisition, and location of production, advertising, and marketing efficiency. In a few cases, the MNC management philosophy may differ from that just described. -One approach that combines business with social responsibility is referred to as serving the bottom of the pyramid. The bottom of the pyramid (BOP) concept proposes that corporations can alleviate poverty and other social ills, as well as make significant profits, by selling to the world's poorest people. The term bottom of the pyramid refers to the more than 4 billion people who make up the lowest level of the world's economic "pyramid," as defined by per-capita income. These people earn less than US$1,500 a year, with about one-fourth of them earning less than a dollar a day.*
3.1
--In the past, many managers who were sent on overseas assignments lived an insular lifestyle that kept them from truly becoming immersed in the foreign culture. " -The rise of social media has opened new opportunities for students as well as managers to create networks of relationships that cross-cultural divides. In addition, international travel, foreign study, and learning a foreign language are key activities for developing a global mindset -Managers expand globally in two ways—by both thinking and doing.* Learning by thinking requires a genuine curiosity about other people and cultures, an interest in and study of world affairs and international business, and the ability to open your mind and appreciate different viewpoints. Learning by doing means cultivating relationships with people across cultural and national boundaries. -People who have had exposure to different cultures and speak different languages develop a global mindset more easily. Global leaders often speak multiple languages and have extensive experience interacting with people different from themselves. -The cognitive dimensionmeans knowing about the global environment and global business, mentally understanding how cultures differ, and having the ability to interpret complex global changes. The psychological dimension is the emotional and affective aspect. This includes a liking for diverse ways of thinking and acting, a willingness to take risks, and the energy and self-confidence to deal with the unpredictable and uncertain. The social dimension concerns the ability to behave in ways that build trusting relationships with people who are different from oneself.* -A manager with a global mindset can perceive and respond to many different perspectives at the same time rather than being stuck in a domestic mindset that sees everything from one's own cultural perspective. Reliance Industries, the largest private-sector company in India, specifically lists "global mindset" as one of the core competencies for its managers.* -As more managers find themselves working in foreign countries or working with foreign firms within their own country, they need a mindset that enables them to navigate through ambiguities and complexities that far exceed anything they encounter within their traditional management responsibilities.* A global mindsetcan be defined as the ability of managers to appreciate and influence individuals, groups, organizations, and systems that represent different social, cultural, political, institutional, intellectual, and psychological characteristics.* -Succeeding on a global level requires more than a desire to go global and a new set of skills and techniques; it requires that managers and organizations develop a global mindset. -Every manager today needs to think globally because the whole world is a source of business threats and opportunities. Even managers who spend their entire careers working in their hometowns must be aware of the international environment and will probably interact with people from other cultures. In addition, the reality facing most managers is that isolation from international forces is no longer possible. Organizations in all fields are being reordered around the goal of addressing needs and desires that transcend national boundaries. -International management is the management of business operations conducted in more than one country. The fundamental tasks of business management do not change in any substantive way when a firm is transacting business across international borders. The basic management functions of planning, organizing, leading, and controlling are the same whether a company operates domestically or internationally. -Business, just like crime, has become a unified, global field. Events, ideas, and trends that influence organizations in one country are likely to influence them in other countries as well. -The organization must have a strong values-driven culture. -Bossless environments are especially effective where creativity is essential. -Bossless environments increase customer satisfaction. -Bossless designs may reflect national culture. -Globalization refers to the extent to which trade and investments, information, social and cultural ideas, and political cooperation flow between countries. One result is that countries, businesses, and people become increasingly interdependent. -JGlobalization and increasing interdependence have dramatically shifted the environment for managers, with a decreasing number of large international corporations located in the United States.
3.6
-A nation's culture includes the shared knowledge, beliefs, and values, as well as the common modes of behavior and ways of thinking, among members of a society. Cultural factors sometimes can be more perplexing than political and economic factors when working or living in a foreign country. -Many managers fail to realize that the values and behaviors that typically govern how business is done in their own country don't always translate to the rest of the world. U.S. managers in particular are regularly accused of an ethnocentric attitude that assumes their way is the best way. Ethnocentrism refers to a natural tendency of people to regard their own culture as superior and to downgrade or dismiss other cultural values. Ethnocentrism can be found in all countries, and strong ethnocentric attitudes within a country make it difficult for foreign firms to operate there. One way that managers can fight their own ethnocentric tendencies is to understand and appreciate differences in social values. -Power distance. High power distance means that people accept inequality in power among institutions, organizations, and people. Low power distance means that people expect equality in power. Countries that value high power distance include Malaysia, India, and the Philippines. Countries that value low power distance include Denmark, Israel, and New Zealand. Uncertainty avoidance. High uncertainty avoidance means that members of a society feel uncomfortable with uncertainty and ambiguity and thus support beliefs that promise certainty and conformity. Low uncertainty avoidance means that people have great tolerance for the unstructured, the unclear, and the unpredictable. High uncertainty avoidance countries include Greece, Portugal, and Uruguay. Countries with low uncertainty avoidance values include Sweden, Singapore, and Jamaica. Individualism and collectivism. Individualism reflects a value for a loosely knit social framework in which individuals are expected to take care of themselves. Collectivism means a preference for a tightly knit social framework in which individuals look after one another and organizations protect their members' interests. Countries with individualist values include the United States, Canada, and Great Britain. Countries with collectivist values include China, Mexico, and Brazil. Masculinity-femininity. Masculinity stands for preference for achievement, heroism, assertiveness, work centrality (with resultant high stress), and material success. Femininity reflects the values of relationships, cooperation, group decision making, and quality of life. Societies with strong masculine values include Japan, Germany, Italy, and Mexico. Countries with feminine values include Sweden, Costa Rica, Norway, and France. Both men and women subscribe to the dominant value in masculine and feminine cultures. -Hofstede and his colleagues later identified a fifth dimension: long-term orientation versus short-term orientation. Long-term orientation, found in China and other Asian countries, includes a greater concern for the future and highly values thrift and perseverance. A short-term orientation, found in Russia and West Africa, is more concerned with the past and the present and places a high value on tradition and meeting social obligations.* R -In addition to the ones identified by Hofstede, the GLOBE project identifies the following characteristics:* Assertiveness. A high value on assertiveness means that a society encourages toughness, assertiveness, and competitiveness. Low assertiveness means that people value tenderness and concern for others over being competitive. Future orientation. Similar to Hofstede's time orientation, this dimension refers to the extent to which a society encourages and rewards planning for the future over short-term results and quick gratification. Gender differentiation. This dimension refers to the extent to which a society maximizes gender role differences. In countries with low gender differentiation, such as Denmark, women typically have a high status and play a large role in decision making. Countries with high gender differentiation accord men higher social, political, and economic status. Performance orientation. A society with a high performance orientation places great emphasis on performance and rewards people for performance improvements and excellence. A low performance orientation means that people pay less attention to performance and more attention to loyalty, belonging, and background. Humane orientation. The final dimension refers to the degree to which a society encourages and rewards people for being fair, altruistic, generous, and caring. A country high on humane orientation places great value on helping others and being kind. A country low on this orientation expects people to take care of themselves. Self-enhancement and gratification have high importance. -In organizations where everyone shares the same culture, a great deal of successful communication can take place implicitly. Implicit communication means that people send and receive unspoken cues, such as tone of voice or body language, in addition to the explicit spoken words when talking with others -In a high-context culture, people are sensitive to circumstances surrounding social exchanges. People use communication primarily to build personal social relationships; meaning is derived from context—setting, status, and nonverbal behavior—more than from explicit words; relationships and trust are more important than business; and the welfare and harmony of the group are valued. In a low-context culture, people use communication primarily to exchange facts and information; meaning is derived primarily from words; business transactions are more important than building relationships and trust; and individual welfare and achievement are more important than the group.*High-context cultures include Asian and Arab countries. Low-context cultures tend to be North American and Northern European. Even within North America, cultural subgroups vary in the extent to which context counts, which explains why differences among groups can hinder successful communication. -Understanding the subtle contextual differences among cultures requires high cultural intelligence (CQ), a person's ability to use reasoning and observation skills to interpret unfamiliar gestures and situations and devise appropriate behavioral responses.* Cultural intelligence includes three components that work together: cognitive, emotional, and physical.* The cognitive component involves a person's observational and learning skills and the ability to pick up on clues to understanding. The emotional aspect concerns one's self-confidence and self-motivation.The third component of cultural intelligence, the physical, refers to a person's ability to shift his or her speech patterns, expressions, and body language to be in tune with people from a different culture. Most managers aren't equally strong in all three areas, but maximizing cultural intelligence requires that they draw upon all three facets.
3.7
-Another highly visible change in the international business environment in recent years has been the development of regional trading alliances and international trade agreements. -The General Agreement on Tariffs and Trade (GATT), signed by 23 nations in 1947, started as a set of rules to ensure nondiscrimination, clear procedures, the negotiation of disputes, and the participation of lesser-developed countries in international trade.* GATT sponsored eight rounds of international trade negotiations aimed at reducing trade restrictions. -The WTO represents the maturation of GATT into a permanent global institution that can monitor international trade and has legal authority to arbitrate disputes on some 400 trade issues. As of February 2016, 162 countries, including China, Vietnam, and Ukraine, were members of the organization. As a permanent membership organization, the WTO is bringing increased trade liberalization in goods, information, technological developments, and services; strong enforcement of rules and regulations; and great power to resolve disputes among trading partners. -An alliance begun in 1957 to improve economic and social conditions among its members, the European Economic Community has evolved into the 28-nation European Union (EU),The goal of the EU is to create a powerful single-market system for Europe's millions of consumers, allowing people, goods, and services to move freely. The increased competition and economies of scale within Europe enable companies to grow large and efficient and to become more competitive in the United States and other world markets. Another aspect of European unification is the introduction of the euro. Several member states of the EU have adopted the euro, a single European currency that replaced national currencies in Austria, Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, the Netherlands, Portugal, Slovakia, Slovenia, and Spain.*However, not all has gone smoothly for the integration, particularly since the global recession began. Small but vocal factions in several countries are arguing that companies and citizens would be better off withdrawing from the eurozone. The United Kingdom, which never adopted the euro, voted in June 2016 to withdraw from the European Union entirely. Its -The North American Free Trade Agreement (NAFTA), which went into effect on January 1, 1994, merged the United States, Canada, and Mexico into a single market. Intended to spur growth and investment, increase exports, and expand jobs in all three nations, NAFTA broke down tariffs and trade restrictions over a 15-year period in a number of key areas. Thus, by 2008, virtually all U.S. industrial exports into Canada and Mexico were duty free. Over the first decade of NAFTA, U.S. trade with Mexico increased more than threefold, while trade with Canada also rose dramatically.* Significantly, NAFTA spurred the entry of small businesses into the global arena. JHowever, opinions over the benefits of NAFTA appear to be as divided as they were when talks began, with some people calling it a spectacular success and others referring to it as a dismal failure.* Although NAFTA has not lived up to its grand expectations, experts stress that it increased trade, investment, and income and continues to enable companies in all three countries to compete more effectively with rival Asian and European firms.* -A recent proposed trade alliance is the Trans-Pacific Partnership, a trade agreement among 12 countries, including the United States, Canada, Japan, and Malaysia. The agreement is designed to reduce trade barriers, promote economic growth and job creation, promote transparency, and enhance labor and environmental protections in the participating countries. The Trans-Pacific Partnership (TPP) is an expansion of the Trans-Pacific Strategic Economic Partnership Agreement signed by Brunei, Chile, New Zealand, and Singapore in 2005. Beginning in 2008, eight additional countries (Australia, Canada, Japan, Malaysia, Mexico, Peru, the United States, and Vietnam) joined discussions for a broader agreement, which was signed in February 2016 but is subject to approval by each member country. The TPP is the largest regional agreement in history. Together the countries of the TPP represent about 40 percent of the world's economic power. U.S. President Barack Obama made a strong push for the TPP, saying it would bolster the U.S. economy and increase national security in a fast-growing region, but the agreement has come under fire from both Republican and Democratic members of Congress, as well as 2016 presidential candidates Hilary Clinton, Donald Trump, and Bernie Sanders.
3.5
-Differing laws and regulations make doing business a challenge for international firms. Host governments have myriad laws concerning libel statutes, consumer protection, information and labeling, employment and safety, and wages. International managers must learn these rules and regulations and abide by them. In addition, managers must deal with unfamiliar political systems when they go international, as well as with increased government supervision and regulation. Government officials and the general public often view foreign companies as outsiders (or even intruders) and are suspicious of their impact on economic independence and political sovereignty. -Political risk is defined as the risk of loss of assets, earning power, or managerial control due to politically based events or actions by host governments. Although many developing countries today welcome and support foreign firms, political risk is a major concern for international companies, which face a broader and more complex array of threats than ever.* I -Another frequently cited problem for international companies is political instability, which includes riots, revolutions, civil disorders, and frequent changes in government.
3.2
-For the past several years, foreign companies have invested more in business in China than they spent anywhere else in the world. A market that was of little interest a decade ago has become the one place that nearly every manager is thinking about. With the fastest-growing middle class in history, China is the largest or second-largest market for a variety of products and services, including mobile phones, automobiles, consumer electronics, luxury goods, and Internet use.However, doing business in China has never been smooth, and it appears to be getting even tougher.ut another reason involves cultural differences. "Chinese culture will build a relationship before the contract," said Arthur Bowring, managing director of the Hong Kong Shipowners Association. "The relationship is always something that can be talked about. The contract is just a set of papers that you keep in your bottom drawer."* Despite the problems, China is a market that foreign managers can't afford to ignore. -India, second only to China in population, has taken a different path toward economic development. Whereas China is strong in manufacturing, India is a rising power in software design, services, and precision engineering. Numerous companies see India as a major source of technological and scientific brainpower, and the country's large English-speaking population makes it a natural for U.S. companies wanting to outsource services. India is the industry leader in IT (Information Technology) outsourcing, for example.*Some of the fastest-growing industries in India are pharmaceuticals, medical devices, and diagnostics.India has a large number of highly trained scientists, doctors, and researchers, and U.S. pharmaceutical and health care firms, such as Abbott Laboratories and Bristol-Myers Squibb, have opened R&D centers there. India is also a growing manufacturer of pharmaceuticals and is the world's largest exporter of generic drugs. -
3.4
-Organizations have a couple of ways to become involved internationally. One is to seek cheaper resources, such as materials or labor, offshore, which is called offshoring or global outsourcing. Another is to develop markets for finished products or services outside their home countries through strategies such as exporting and partnerships -Exporting. Many companies first get involved internationally by exporting. With exporting, the company maintains its production facilities within the home nation and transfers its products for sale in foreign countries. Exporting enables a company to market its products in other countries at modest resource cost and with limited risk. Exporting does entail numerous problems based on physical distances, government regulations, foreign currencies, and cultural differences, but it is less expensive than committing the firm's own capital to build plants in host countries. Outsourcing. Global outsourcing, also called offshoring, means engaging in the international division of labor so that work activities can be done in countries with the cheapest sources of labor and supplies. Millions of low-level jobs, such as textile manufacturing, call center operations, and credit card processing, have been outsourced to low-wage countries in recent years. The Internet and plunging telecommunications costs have enabled companies to outsource more and higher-level work as well, such as software development, accounting, and medical services. Partnerships. Partnerships represent a higher level of involvement in international trade. One popular type of partnership is a joint venture. In a joint venture, a company shares costs and risks with another firm, typically in the host country, to develop new products, build a manufacturing facility, or set up a sales and distribution network.* A partnership is often the fastest, cheapest, and least risky way to get into the global game. In addition to joint ventures, the complexity of today's global business environment is spurring managers at many companies to develop alliance networks, which are collections of partnerships with various other firms, often across international boundaries.* -
remember this
-The basic management functions are the same in either a domestic or an international subsidiary, but managers will experience greater difficulties and risks when performing these functions internationally. -International management means managing business operations in more than one country. Today's companies and managers operate in a borderless world that provides both risks and opportunities. -Globalization refers to the extent to which trade and investments, information, ideas, and political cooperation flow between countries. -To succeed on a global level requires managers at all levels to have a global mindset, which is the ability to appreciate and influence individuals, groups, organizations, and systems that represent different social, cultural, political, institutional, intellectual, and psychological characteristics. -Many companies are going straight to China or India as a first step into international business. -China is strong in manufacturing, whereas India is a major provider of services. -The Chinese company Lenovo has emerged as the country's first global corporation, with managers coming from 14 different nations, living and working in six cities on three continents. -Managers also look to China and India as sources of lower-cost technological and scientific brainpower. -A multinational corporation (MNC) is an organization that receives more than 25 percent of its total sales revenues from operations outside the parent company's home country and has a number of distinctive managerial characteristics. -Nestlé SA is a good example of a multinational corporation. -Some researchers distinguish among ethnocentric companies, which place emphasis on their home countries; polycentric companies, which are oriented toward the markets of individual host countries; and geocentric companies, which are truly world-oriented. -Multinational corporations have the resources to reach and serve the world's poorest people who cannot afford the typical products and services offered by big companies. -The bottom of the pyramid (BOP) concept proposes that corporations can alleviate poverty and other social ills, as well as make significant profits, by selling to the world's poor. -Godrej & Boyce created an innovative battery-powered refrigerator called the chotuKool for rural markets in India. -Two major alternatives for engaging in the international arena are to seek cheaper resources via outsourcing and to develop markets outside the home country. -Global outsourcing, sometimes called offshoring, means engaging in the international division of labor so as to obtain the cheapest sources of labor and supplies, regardless of country. -Exporting is a market-entry strategy in which a company maintains production facilities within its home country and transfers products for sale in foreign countries. -With a joint venture, an organization shares costs and risks with another firm in a foreign country to build a facility, develop new products, or set up a sales and distribution network. -Starbucks has used joint ventures to expand in China and India. -Complicated legal and political forces can create huge risks for international managers and organizations. -Political risk refers to a company's risk of loss of assets, earning power, or managerial control due to politically based events or actions by host governments. -Political instability includes events such as riots, revolutions, or government upheavals that can affect the operations of an international company. -A revolutionary wave of protests in the Arab world that began in late 2010, known as the Arab Spring, has created a tumultuous environment for businesses operating in the region. Millions of refugees fleeing the civil war in Syria have created a crisis in Middle Eastern and European countries. -Managers must understand and follow the differing laws and regulations in the various countries where they do business.\- -Managers working internationally should guard against ethnocentrism, which is the natural tendency among people to regard their own culture as superior to others. -- -Hofstede's sociocultural value dimensions measure power distance, uncertainty avoidance, individualism-collectivism, and masculinity-femininity. -Power distance is the degree to which people accept inequality in power among institutions, organizations, and people. -Uncertainty avoidance is characterized by people's intolerance for uncertainty and ambiguity and resulting support for beliefs that promise certainty and conformity. -Individualism refers to a preference for a loosely knit social framework in which individuals are expected to take care of themselves. -Collectivism refers to a preference for a tightly knit social framework in which individuals look after one another and organizations protect their members' interests. -Masculinity is a cultural preference for achievement, heroism, assertiveness, work centrality, and material success. -Femininity is a cultural preference for relationships, cooperation, group decision making, and quality of life. -Hofstede later identified another dimension: long-term orientation, which reflects a greater concern for the future and a high value on thrift and perseverance versus short-term orientation, which reflects a concern with the past and present and a high value on meeting current obligations. -Additional value dimensions recently identified by the GLOBE Project are assertiveness, future orientation, gender differentiation, performance orientation, and humane orientation. -The potential for communication breakdowns increases when managers are interacting with people from different countries and varied cultural backgrounds. -Implicit communication refers to sending and receiving unspoken cues such as tone of voice or body language as well as spoken words. -A high-context culture is one in which people use communication to build personal relationships. -In a low-context culture, people use communication primarily to exchange facts and information. T-he United States exemplifies a low-context culture. China is an example of a high-context culture. -Managers who develop cultural intelligence are more successful in international assignments. -Cultural intelligence (CQ) refers to a person's ability to use reasoning and observation to interpret culturally unfamiliar situations and know how to respond appropriately. The three aspects of CQ are cognitive CQ, emotional CQ, and physical CQ. -Regional trading alliances and international trade agreements are reshaping global business. -The World Trade Organization (WTO) is a permanent membership organization that monitors trade and has authority to arbitrate disputes among 159 member countries. -Two important, yet sometimes controversial, regional alliances are the European Union (EU) and the North American Free Trade Agreement (NAFTA). -The euro is a single European currency that has replaced the currencies of 19 EU member nations. -The Trans-Pacific Partnership is a proposed trade agreement among 12 countries, including the United States, Canada, Japan, Malaysia, and Vietnam.