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					                         Chapter
                     5
                     1
       Ch 6
  Managing in a
Global Environment
              Organizational Environment
 Set of forces and conditions outside the
  organization’s boundaries that have the
  potential to affect the way the organization
  operates
 Opportunities and threats




                                                                               6-2
McGraw-Hill/Irwin             © 2006 The McGraw-Hill Companies, Inc. All rights reserved.
                    Forces in the Organizational
                            Environment




        Figure 6.1
                                                                                      6-3
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                    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
                                                                               6-4
McGraw-Hill/Irwin             © 2006 The McGraw-Hill Companies, Inc. All rights reserved.
                    General Environment
 General   Environment includes the wide-
   ranging global, economic, technological,
   sociocultural, demographic, political,
   and legal forces the organization and its
   task environment.



                                                                                 6-5
McGraw-Hill/Irwin               © 2006 The McGraw-Hill Companies, Inc. All rights reserved.
               Global Organizations and Global
                        Environment

 Global Organizations: Organizations that operate
  and compete not only domestically, but also globally.
  They work in uncertain and unpredictable
  environment.
 Global Environment: Set of forces and conditions in
  the world outside an organization’s boundaries that
  affect how it operates and shape its behavior.
 These forces change over time and thus present
  managers with Opportunities and threats


                                                                                   6-6
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                    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)
        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.
                                                                                                  6-7
McGraw-Hill/Irwin                                © 2006 The McGraw-Hill Companies, Inc. All rights reserved.
                    Global Outsourcing
Purchase of inputs from foreign suppliers
 or the production of inputs abroad to
 lower production
 costs and improve
 product quality and
 design


                                                                                 6-8
McGraw-Hill/Irwin               © 2006 The McGraw-Hill Companies, Inc. All rights reserved.
                    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.


                                                                                         6-9
McGraw-Hill/Irwin                       © 2006 The McGraw-Hill Companies, Inc. All rights reserved.
                    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.



                                                                                         6-10
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                    The Task Environment
Competitors
        Organizations that produce goods and services
         that are similar to a particular organization’s goods
         and services
        Potential Competitors
              Organizations that presently are not in the task
               environment but could enter if they so chose
        Strong competitive rivalry results in price
         competition, and falling prices reduce access to
         resources and lower profits.
                                                                                                 6-11
McGraw-Hill/Irwin                               © 2006 The McGraw-Hill Companies, Inc. All rights reserved.
                    The Task Environment
Rivalry between competitors is potentially
 the most threatening force that
 managers deal with


                                               Vs.
                      Vs.




                                                                                 6-12
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                    The Task Environment
Barriers to Entry
        Factors that make it difficult and costly for
         the organization to enter a particular task
         environment or industry




                                                                                     6-13
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                        Barriers to Entry
 Economies               of scale
        Cost advantages associated with large
         operations
 Brand             loyalty
              Customers’ preference for the products of
               organizations currently existing in the task
               environment.
 Government               regulations that impede
   entry
                                                                                            6-14
McGraw-Hill/Irwin                          © 2006 The McGraw-Hill Companies, Inc. All rights reserved.
          Barriers to Entry and Competition




        Figure 6.2
                                                                               6-15
McGraw-Hill/Irwin             © 2006 The McGraw-Hill Companies, Inc. All rights reserved.
                    General Environment

                          Economic

      Technological                        Socio-cultural
                           Forces

         Demographic            Political and Legal


                                                                                     6-16
McGraw-Hill/Irwin                   © 2006 The McGraw-Hill Companies, Inc. All rights reserved.
                    The General Environment
Economic Forces
        Interest rates, inflation, unemployment,
         economic growth, and other factors that
         affect the general health and well-being of
         a nation or the regional economy of an
         organization
        Managers usually cannot impact or control
         these.
        Forces have profound impact on the firm.
                                                                                   6-17
McGraw-Hill/Irwin                 © 2006 The McGraw-Hill Companies, Inc. All rights reserved.
                    The General Environment
Technological Forces
       Outcomes of changes in the technology
        that managers use to design, produce, or
        distribute goods and services
           Results in new opportunities or threats to
            managers
           Often makes products obsolete very
            quickly.
           Can change how managers manage.

                                                                                         6-18
McGraw-Hill/Irwin                       © 2006 The McGraw-Hill Companies, Inc. All rights reserved.
                    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.
        Cultures and their associated social structures,
         values, and norms differ widely throughout the
         world.

                                                                                                 6-19
McGraw-Hill/Irwin                               © 2006 The McGraw-Hill Companies, Inc. All rights reserved.
                    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
              During the past two decades, women have entered the
               workforce in increasing numbers and most industrial
               countries’ populations are aging.
              This will change the opportunities for firms competing in
               these areas as demands for child care and health care are
               forecast to increase dramatically.
                                                                                               6-20
McGraw-Hill/Irwin                             © 2006 The McGraw-Hill Companies, Inc. All rights reserved.
                    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
              Increases in laws and regulations increase the
               costs of resources and limit the uses of
               resources that managers are responsible for
               acquiring and using effectively and efficiently.
                                                                                            6-21
McGraw-Hill/Irwin                          © 2006 The McGraw-Hill Companies, Inc. All rights reserved.
                    The General Environment
Global Forces
        Outcomes of changes in international
         relationships; changes in nations’ economic,
         political, and legal systems; and changes in
         technology, such as falling trade barriers, the
         growth of representative democracies, and reliable
         and instantaneous communication
        Important opportunities and threats to managers:
              The economic integration of countries through free-trade
               agreements (GATT, NAFTA, EU) that decrease the
               barriers to trade.

                                                                                                6-22
McGraw-Hill/Irwin                              © 2006 The McGraw-Hill Companies, Inc. All rights reserved.
   The Global General Environment
        Political and Legal Forces
        Economic Forces
        Changes in Political and Legal and Economic Forces
        Sociocultural Forces
   Choosing a Way to Expand Internationally
        Importing and Exporting
        Licensing and Franchising
        Strategic Alliances
        Joint venture
        Foreign direct investment (FDI)
        Wholly Owned Foreign Subsidiaries

                                                                                           6-23
McGraw-Hill/Irwin                         © 2006 The McGraw-Hill Companies, Inc. All rights reserved.
                    The Global Environment




     Figure 6.3
                                                                                   6-24
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         Declining Barriers to Trade and
                   Investment
Tariff
        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 their own tariffs,
             actions that eventually reduce the overall
             amount of trade and impedes economic growth.


                                                                                           6-25
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   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
              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.
                                                                                            6-26
McGraw-Hill/Irwin                          © 2006 The McGraw-Hill Companies, Inc. All rights reserved.
   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 and fast,
         secure communications have greatly reduced the
         barriers of physical and cultural distances.
                                                                                       6-27
McGraw-Hill/Irwin                     © 2006 The McGraw-Hill Companies, Inc. All rights reserved.
 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.
                                                                                 6-28
McGraw-Hill/Irwin               © 2006 The McGraw-Hill Companies, Inc. All rights reserved.
 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
                                                                                                6-29
McGraw-Hill/Irwin                              © 2006 The McGraw-Hill Companies, Inc. All rights reserved.
             The Role of National Culture
Values
        Ideas about what a society believes to be
         good, desirable and beautiful.
            Provides conceptual support for democracy,
             truth, appropriate roles for men, and women.
            Usually not static but
             very slow to change.



                                                                                        6-30
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             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.
        Norms vary from country to country.

                                                                                                6-31
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     Hofstede’s Model of National Culture




           Figure 6.4
                                                                           6-32
McGraw-Hill/Irwin         © 2006 The McGraw-Hill Companies, Inc. All rights reserved.
           Hofstede’s Model of National
                     Culture
 Individualism
        A worldview that values individual freedom and
         self-expression and holds a strong belief in
         personal rights and the need for persons to be
         judged by their achievements rather their social
         background.
 Collectivism
        A worldview that values subordination of the
         individual to the goals of the group.
        Widespread under communism and prevalent in
         Japan as well.                                                                 6-33
McGraw-Hill/Irwin                      © 2006 The McGraw-Hill Companies, Inc. All rights reserved.
         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).
                   In high power distance societies, the gap between
                    rich and poor becomes very wide (e.g., Panama and
                    Malaysia).
                   In the low power distance societies of western
                    cultures (e.g., United States and Germany), the gap
                    between rich and poor is reduced by taxation and
                    welfare programs.

                                                                                                  6-34
McGraw-Hill/Irwin                                © 2006 The McGraw-Hill Companies, Inc. All rights reserved.
         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.
            The United States and Japan are
             achievement-oriented; Sweden and Denmark
             are more nurturing-oriented.

                                                                                        6-35
McGraw-Hill/Irwin                      © 2006 The McGraw-Hill Companies, Inc. All rights reserved.
         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.
                                                                                       6-36
McGraw-Hill/Irwin                     © 2006 The McGraw-Hill Companies, Inc. All rights reserved.
         Hofstede’s Model of National
                   Culture
Long Term Outlook
        Cultures (e.g., Taiwan and Hong Kong)
         with a long-term in outlook are based on
         the values of saving, and persistence.
        Short-term outlook societies (e.g., France
         and the United States) seek the
         maintenance of personal stability or
         happiness in the present.
                                                                                   6-37
McGraw-Hill/Irwin                 © 2006 The McGraw-Hill Companies, Inc. All rights reserved.
              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

                                                                               6-38
McGraw-Hill/Irwin             © 2006 The McGraw-Hill Companies, Inc. All rights reserved.

				
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