Management Lecture 05 Global Org

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Management Lecture 05 Global Org Powered By Docstoc
					Principles of Management

          and the
     Global Organization
       Global Organizations
• Organizations that operate and compete
  not only domestically, but also globally
• Uncertain and unpredictable environment
•   Domestic Business
•   Home Country
•   International Business
•   Multinational Corporation
•   Multidomestic Management
•   Host Country
•   Transnational Management
          Why Go Global?
• Growing Importance of International
  – The Search for Resources
  – The Search for Customers
• National Comparative and Competitive
            Entering the Global Market
Approaches to
Internationalization   Advantages                              Disadvantages

Importing or           1. Small cash outlay                    1.   Tariffs and taxes
Exporting              2. Little risk                          2.   High transportation costs
                       3. No adaptation necessary              3.   Government restrictions

Licensing              1. Increased profitability              1.   Inflexibility
                       2. Extended profitability               2.   Helps competitors

Strategic Alliance/    1. Quick market entry                   1.   Shared ownership (limits
Joint Venture          2. Access to materials and technology        control and profits)

Direct Investment      1. Enhances control                     1.   Complexity
                       2. Existing infrastructure              2.   Greater economic and
                                                                    political risk
                                                               3.   Greater uncertainty
• Global Outsourcing
  – Purchase of inputs from foreign suppliers or
    the production of inputs abroad to lower
    production costs and improve product quality
    and design
• Offshore Production
  – Establishing assembly or manufacturing
    plants in other countries where labour and
    resource costs are relatively low
     General Environment

Technological              Socio-cultural

 Demographic         Political and Legal
   Political/Legal                       Economic                    Cultural
   Environment                          Environment                Environment
• Government stability             • Economic Development     • Values, symbols, beliefs,
• Incentives for                   • Natural resources         and language
 international trade               • Infrastructure           • Individual differences
• Controls on international       •   Balance of Trade         across cultures
 trade                            •   Balance of Payments
• Economic communities            •   Currency Issues
                                  •   Resource Availability

                         International management functions
            Declining Barriers
• 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.
• Import Quotas
• Voluntary Export Restraints
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
             Declining Barriers
• 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.
     Role of National Culture
  – 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.
 – Unwritten rules and codes of conduct that
   prescribe how people should act in particular
   • 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.
    National Culture and Global
• 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
Individual Behaviour Across Cultures

                             Orientation          Collectivism
                         Relative importance
  The interests of        of the interests of     The interests of
  the individual take     the individual vs.      the group take
  precedence               the interests of       precedence
                              the group

                                                Power Tolerance
 Power Respect
                             Orientation        Individuals assess
 Authority is inherent                          authority in view of
                         The appropriateness
 in one’s position                              its perceived right-
                          of power/authority    ness or their own
 within a hierarchy
                            within organi-      personal interests
 Uncertainty             Uncertainty      Uncertainty
 Acceptance              Orientation      Avoidance
 Positive response      An emotional      Prefer structure
 to change and new      response to       and a consistent
 opportunities         uncertainty and    routine

                          Goal            Passive Goal
Aggressive Goal
                        Orientation       Behavior
                       What motivates     Value social
Value material
                      people to achieve   relevance, quality
possessions, money,
                       different goals    of life, and the
and assertiveness
                                          welfare of others
Long-Term                Orientation
                     The extent to which     Outlook
Value dedication,    members of a culture
                                             Place less emphasis
hard work, and      adopt a long-term or a
                                             on hard work
self-image            short-term outlook
                       on work and life
Management Approaches to Global
• Ethnocentric Management
  – Values and interests of the parent company in its
    home country guide the decisions and actions of
    operations outside the home country
• Polycentric Management
  – Managers in the home country allow managers in
    other countries to make their own decisions in
    response to local needs and environmental pressures
• Geocentric Management
  – Managers take a global view of the organization’s
    international operations

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