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Managing in the Global Environment : 

Managing in the Global Environment McGraw-Hill/Irwin Contemporary Management, 5/e Copyright © 2008 The McGraw-Hill Companies, Inc. All rights reserved. chapter six

Learning Objectives : 

6-3 Learning Objectives Explain why the ability to perceive, interpret, and respond appropriately to the global environment is crucial for managerial success Differentiate between the global task and global general environments Identify the main forces in both the global task and general environments, and describe the challenges that each force presents to managers McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.

Learning Objectives : 

6-4 Learning Objectives Explain why the global environment is becoming more open and competitive and identify the forces behind the process of globalization that increases the opportunities, complexities, challenges, and threats that managers face

Learning Objectives : 

6-5 Learning Objectives Discuss why national cultures differ and why it is important that managers be sensitive to the effects of falling trade barriers and regional trade associations on the political and social systems of nations around the world

1. Global Organizations : 

6-6 1. Global Organizations Organizations that operate and compete not only domestically, but also globally Uncertain and unpredictable

1. Global Environment : 

6-7 1. 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 These forces changes over time Presents managers with opportunities and threats

1. Global Environment : 

6-8 1. Global Environment Global Environment: Task Environment General Environment

2. Task Environment : 

6-9 2. 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

2. Forces in the Organizational Environment : 

6-10 2. Forces in the Organizational Environment

2.1 Question? : 

6-11 2.1 Question? Which part of the task environment provides an organization with the input resources that it needs to produce goods and services? Customers Suppliers Competitors Distributors

2.1 The Task Environment : 

6-12 2.1 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 (e.g. Outsourcing)

2.1 The Task Environment : 

6-13 2.1 The Task Environment Suppliers Relationships with suppliers can be difficult due to materials shortages, unions, and lack of substitutes. Suppliers that are the sole source of a critical item are in a strong bargaining position to raise their prices. Managers can reduce these supplier effects by increasing the number of suppliers of an input.

2.1 Suppliers : 

6-14 2.1 Suppliers It’s important that managers recognize the opportunities and threats associated with managing the global supply chain

2.1 Suppliers : 

6-15 2.1 Suppliers Gaining access to low-cost products made abroad represents an opportunity for U.S. companies to lower their input costs Managers who fail to utilize low-cost overseas suppliers create a threat and put their organizations at a competitive disadvantage

2.1 Global Outsourcing : 

6-16 2.1 Global Outsourcing Process by which organizations purchase inputs from other companies or produce inputs themselves throughout the world to lower production costs and improve the quality or design of their products

2.2 The Task Environment : 

6-17 2.2 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.

2.3 The Task Environment : 

6-18 2.3 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.

2.4 The Task Environment : 

6-19 2.4 The Task Environment Competitors Organizations that produce goods and services that are similar to a particular organization’s goods and services Vs. Vs.

2.4 The Task Environment : 

6-20 2.4 The Task Environment Potential Competitors Organizations that presently are not in the task environment but could enter if they so choose

2.4 The Task Environment : 

6-21 2.4 The Task Environment Rivalry between competitors is potentially the most threatening force that managers deal with Strong competitive rivalry results in price competition, and falling prices reduce access to resources and lower profits

2.4 The Task Environment : 

6-22 2.4 The Task Environment Barriers to Entry Factors that make it difficult and costly for the organization to enter a particular task environment or industry The greater the barriers to entry, the smaller the number of competitors

2.4 Reasons of Barriers to Entry : 

6-23 2.4 Reasons of Barriers to Entry 2.4.1 Economies of Scale Cost advantages associated with large operations 2.4.2 Brand loyalty Customers’ preference for the products of organizations currently existing in the task environment. 2.4.3 Government regulations that impede 阻止entry function as administrative roadblocks that create barriers to entry and limit the imports of goods from foreign nations

2.4 Barriers to Entry and Competition : 

6-24 2.4 Barriers to Entry and Competition Figure 6.2

Porter's 5 Forces : 

6-25 Porter's 5 Forces

+++Porter's 5 Forces : 

6-26 +++Porter's 5 Forces ^

3. General Environment : 

6-27 3. General Environment Economic Technological Socio-cultural Demographic Political and Legal Forces

3.1 The General Environment : 

6-28 3.1 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 Economic forces produce many opportunities and threats for managers. e.g. Chile Earthquake

+++3.1 The General Environment : 

6-29 +++3.1 The General Environment Economic Forces Strong macroeconomic conditions, such as low levels of unemployment and falling interest rates, often create opportunities for organizations. Worsening macroeconomic conditions, such as recession or rising inflation rates, often pose a threat to organizations because they limit management’s ability to gain access to the resources they need.

3.1 Economic Forces : 

6-30 3.1 Economic Forces Successful managers can: Realize the important effects that economic forces have on their organizations Pay close attention to what is occurring in the national and regional economies to respond appropriately

The General Environment : 

6-31 The General Environment 3.2 Technology Combination of tools, machines, computers, skills, information, and knowledge that managers use in the design, production, and distribution of goods and services

3.2 The General Environment : 

6-32 3.2 The General Environment Technological Forces Outcomes of changes in the technology that managers use to design, produce, or distribute goods and services

+++3.2 The General Environment : 

6-33 +++3.2 The General Environment Technological Forces Results in new opportunities or threats to managers Often makes products obsolete very quickly Managers must often move quickly to respond to such technological change if their organizations are to survive and prosper. Changes are altering the very nature of work itself, including the manager’s job e.g. Digital Camera and Film, Nanotechnology Laundry Washing Ball Video: http://www.youtube.com/watch?v=XRChWEtz1ZU&feature=related Video: 洗衣球dvd 5分鐘廣告加見證

3.3 The General Environment : 

6-34 3.3 The General Environment Sociocultural Forces Pressures emanating 發源 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 認可 in that society.

3.3 The General Environment : 

6-35 3.3 The General Environment Sociocultural Forces Societies differ substantially in the values and norms they emphasize Effective managers are sensitive to differences between societies and adjust their behaviors accordingly e.g. McDonald

3.4 The General Environment : 

6-36 3.4 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

3.4 The General Environment : 

6-37 3.4 The General Environment Demographic Forces Most industrialized nations are experiencing the aging of their populations as a consequence of falling birth and death rates and the aging of the baby-boom generation Organizations need to find ways to motivate and utilize the skills and knowledge of older employees the relative decline in the number of young people joining the workforce and the willingness of older employees to postpone retirement past the age of 65. Baby boomer - a person born during a baby boom, especially after the WWII (between 1946 and 1964)

3.5 The General Environment : 

6-38 3.5 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

+++3.5 The General Environment : 

6-39 +++3.5 The General Environment Political and Legal Forces e.g. The movement toward deregulation and privatization of organizations formerly owned or controlled by the state The fall in legal trade barriers can create both opportunities and threats

3.5 The Global Environment : 

6-40 3.5 The Global Environment Figure 6.3 ^

3.5 The Changing Global Environment : 

6-41 3.5 The Changing Global Environment Managers now recognize that companies exist and compete in a truly global market Managers constantly confront the challenges of global competition Establishing operations in a country abroad (e.g. World Factory – China) Obtaining inputs from suppliers abroad Challenges of managing in a different national culture

+++Compared withMacro Environment : 

6-42 +++Compared withMacro Environment Major external and uncontrollable factors that influence an organization's decision making, and affect its performance and strategies. These factors include Economic Demographics Legal Political Social conditions Technological changes Natural forces e.g. Chile earthquake 0358.HK: JIANGXI COPPER)

4. Process of Globalization : 

6-43 4. Process of Globalization Globalization Set of specific and general forces that work together to integrate and connect economic, political, and social systems across countries, cultures, or geographical regions Result is that nations and peoples become increasingly interdependent

+++4. Why Globalization : 

6-44 +++4. Why Globalization Companies seek their investment through which capital can earn the greatest returns The result of globalization is that nations and peoples become increasingly interdependent because the world’s markets and businesses become increasingly interconnected.

4. Discussion Question? : 

6-45 4. Discussion Question? What is the principal form of capital that flows between countries? Human Political Resource Financial ^

4. Process of Globalization : 

6-46 4. Process of Globalization 4 principal forms of capital that flow between countries are (p.229): Human capital Financial capital Resource capital Political capital ^

+++4. Principal Form of Capital : 

6-47 +++4. Principal Form of Capital Human capital The flow of people around the world through immigration, migration, and emigration Financial capital The flow of money capital across world markets through overseas investment, credit, lending, and aid ^

+++4. Principal Form of Capital : 

6-48 +++4. Principal Form of Capital Resource capital The flow of natural resources and semifinished products between companies and countries e.g. metals, minerals, lumber, energy, food products, microprocessors, and auto parts Political capital The flow of power and influence around the world using diplomacy, persuasion, aggression ^

4.2 Declining Barriers to Trade and Investment : 

6-49 4.2 Declining Barriers to Trade and Investment Tariff 關稅 A tax that government imposes on imported or, occasionally, exported goods. Intended to protect domestic industry and jobs from foreign competition Other countries usually retaliate 報復 their own tariffs, actions that eventually reduce the overall amount of trade and impedes 妨礙 economic growth.

4.2 GATT and the Rise of Free Trade : 

6-50 4.2 GATT and the Rise of Free Trade Free-Trade Doctrine The idea that if each country specializes in the production of the goods and services that it can produce most efficiently, this will make the best use of global resources GATT (General Agreement on Tariffs and Trade) - attempt to achieve free trade through this international treaty GATT has been replaced by the World Trade Organization (WTO) continues the struggle to reduce tariffs

4.2 GATT and the Rise of Free Trade : 

6-51 4.2 GATT and the Rise of Free Trade Free-Trade Doctrine (p.230) Predicts that if each country agrees to specialize in the production of the goods and services that it can produce most efficiently, this will make the best use of global capital resources and will result in lower prices If India is more efficient in making textiles, and the United States is more efficient in making computer software, then each country should focus on their respective strengths and trade for the other’s goods. ^

4.3 Declining Barriers of Distance and Culture : 

6-52 4.3 Declining Barriers of Distance and Culture Distance Markets were essentially closed because of the slowness of communications over long distances. Culture Language barriers and cultural practices made managing overseas businesses difficult Changes in Distance and Communication Improvement in transportation technology (e.g. the growth of commercial jet travel) and fast, secure communications (e.g. Internet, television networks) have greatly reduced the barriers of physical and cultural distances. ^

4.4 Effects of Free Trade on Managers : 

6-53 4.4 Effects of Free Trade on Managers Declining Trade Barriers Opened enormous opportunities for managers to expand the market for their goods and services. Allowed managers to now both buy and sell goods and services globally. Increased intensity of global competition such that managers now have a more dynamic and exciting job of managing. ^

4.4 Effects of Free Trade on Managers : 

6-54 4.4 Effects of Free Trade on Managers North American Free Trade Agreement (NAFTA) Abolishes 99% of tariffs on goods traded between Mexico, Canada and the United States Unrestricted cross-border flows of resources Increased investment by U.S. firms in Mexican manufacturing facilities due lower wage costs in Mexico Opportunities and Threats The opportunity to serve more markets Increased competition from NAFTA competitors ^

4.4 Effects of Free Trade on Managers : 

6-55 4.4 Effects of Free Trade on Managers CAFTA Regional trade agreement designed to eliminate tariffs on products between the United States and all countries in Central America Approved by Dominican Republic, El Salvador, Guatemala, Nicaragua, and Honduras ^

5. Question? : 

6-56 5. Question? What are ideas about what a society believes to be good, desirable and beautiful? Norms Needs Roles Values

5.1 The Role of National Culture : 

6-57 5.1 The Role of National Culture 5.1.1 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.

5.1 The Role of National Culture : 

6-58 5.1 The Role of National Culture 5.1.2 Norms Unwritten rules and codes of conduct that prescribe how people should act in particular situations. 5.1.2.1 Folkways 風俗習慣 routine social conventions of daily life (e.g., good social manners, dressing appropriately, eating with the correct utensils, and behaving neighborly) define the way people are expected to behave, but violation of folkways is not a serious matter

5.1 The Role of National Culture : 

6-59 5.1 The Role of National Culture 5.1.2.2 Mores 習俗 behavioral norms that are considered central to functioning of society and much more significant than folkways (e.g., theft and adultery 通姦), and they are often enacted into law. They have greater significance than folkways, and the violation of them may result in serious punishment Many differences in mores from one society to another

+++5.2 Hofstede’s Model of National Culture : 

6-60 +++5.2 Hofstede’s Model of National Culture While employed as a Dutch psychologist for IBM, Geert Hofstede collected data on values and norms from more than 100,000 IBM employees from 64 countries. He used this data to develop a model of national culture, which is widely accepted and used. Based upon his research, Hofstede identified five dimensions upon which various national cultures can be compared.

5.2 Hofstede’s Model of National Culture : 

6-61 5.2 Hofstede’s Model of National Culture Figure 6.4

5.2.1 Hofstede’s Model of National Culture : 

6-62 5.2.1 Hofstede’s Model of National Culture 5.2.1 Individualism Vs Collectivism Individualism 個人主義 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 集體主義 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

+++5.2.1 Hofstede’s Model of National Culture : 

6-63 +++5.2.1 Hofstede’s Model of National Culture Collectivism 集體主義 widespread in communist countries, but has become less prevalent since the collapse of those nations. Japan is a noncommunist country where collectivism is highly valued. (e.g. Japanese kids)

+++5.2.1 Hofstede’s Model of National Culture : 

6-64 +++5.2.1 Hofstede’s Model of National Culture 5.2.1 Individualism Vs Collectivism In some societies people need to belong to a group and have a loyalty to the group. Children learn to say `we'. This is true of countries such as Japan, India and China. In other societies such as in the UK & US, individualism is more important, with a lower emphasis on loyalty and protection. Children learn to say `I'. In strong collectivist countries there tends to be greater expectations of the employer's obligations towards the employee and his or her family. Source: http://www.thefreelibrary.com/Geert+Hofstede+:+Cultural+Diversity-a085608618

+++5.2.1 Hofstede’s Model of National Culture : 

6-65 +++5.2.1 Hofstede’s Model of National Culture 5.2.1 Individualism Vs Collectivism Source: http://www.mindtools.com/pages/article/newLDR_66.htm

+++Hofstede’s Model of National Culture : 

6-66 +++Hofstede’s Model of National Culture 5.2.2 Power Distance the degree to which a society’s acceptance of differences in the well being of citizens due to differences in heritage, and physical and intellectual capabilities Societies in which inequalities are allowed to persist or grow have high power distance Workers who are professionally successful amass 積聚 wealth and pass it on to their children, allowing inequalities between rich and poor that may grow over time

+++Hofstede’s Model of National Culture : 

6-67 +++Hofstede’s Model of National Culture 5.2.2 Power Distance In societies with low power distance, large inequalities are not allowed to develop. The governments of these countries use taxation and social welfare programs to reduce the gap between the rich and the poor.

+++Hofstede’s Model of National Culture : 

6-68 +++Hofstede’s Model of National Culture 5.2.2 High Power Distance Country: Inequality is fundamentally good Everyone has a place: some are high, some are low Most people should be dependent on a leader The powerful are entitled to privileges The powerful should not hide their power Source: Hsiu-Li Chen Ph. D., Graduate School of International Business, Ming Chuan Univ

+++Hofstede’s Model of National Culture : 

6-69 +++Hofstede’s Model of National Culture 5.2.2 High Power Distance Country: Source: http://www.mindtools.com/pages/article/newLDR_66.htm

Hofstede’s Model of National Culture : 

6-70 Hofstede’s Model of National Culture 5.2.3 Achievement Vs Nurturing Orientation Achievement-oriented societies value assertiveness 獨斷, performance, and success and are results-oriented. Nurturing-oriented cultures value quality of life, personal relationships, and service. Japan and the United States tend to be achievement oriented, while the Netherlands, Denmark, and Sweden are more nurturing oriented.

Hofstede’s Model of National Culture : 

6-71 Hofstede’s Model of National Culture 5.2.4 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.

Hofstede’s Model of National Culture : 

6-72 Hofstede’s Model of National Culture 5.2.5 Long Term Outlook Orientation toward life and work Cultures with a long-term orientation rest on values such as thrift (節儉 money saving) and persistence in achieving goals Cultures with a short-term orientation are concerned with maintaining personal stability or happiness and living for the present

+++Hofstede’s Model of National Culture : 

6-73 +++Hofstede’s Model of National Culture Pros: Hofstede provided a definition of culture and how culture can be measured. His research showed that cultural differences matter. Managers in international organisations operate according to their country's values, rather than to the organisation's culture. Employees from related national cultures work in similar fashions, thereby reducing the chance of conflicts. Hofstede's model provides managers of cross-cultural relations a tool to help them understand differences in value sets and behaviour. Source: http://www.provenmodels.com/11/five-dimensions-of-culture/hofstede

+++Hofstede’s Model of National Culture : 

6-74 +++Hofstede’s Model of National Culture Cons: Culture is a far too complex and multifaceted to be used as a straightforward organisational change control. "You do not control culture, at best you shape it" (Green). (Source: http://www.provenmodels.com/11/five-dimensions-of-culture/hofstede) Seems to identify cultures with nations based on the supposition 推斷 that within each nation there is a uniform national culture (http://en.wikipedia.org/wiki/Geert_Hofstede#Criticism)

5.3 National Culture and Global Management : 

6-75 5.3 National Culture and Global Management Management practices that are effective in one culture often will not work as well in another culture Managers must be sensitive to the value systems and norms of an individual’s country and behave accordingly Organizations that employ managers from a variety of cultural backgrounds are often better at appreciating the differences in national culture and tailoring their management systems and behavior to accommodate those differences. Geert Hofstede™ Cultural Dimensions - http://www.geert-hofstede.com/index.shtml

Movie Example: Gung Ho : 

6-76 Movie Example: Gung Ho What decisions should the Asian executives consider before opening a plant in the U.S.? ^

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