Global Managment

Management
Fourteenth Edition, Global Edition
Chapter 3
Global Management
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Learning Objectives
3.1 Contrast ethnocentric, polycentric, and geocentric
attitudes toward global business.
Develop your skill at collaborating in cross-cultural
settings.
3.2 Discuss the importance of regional trading alliances and
global trade mechanisms.
3.3 Describe the structures and techniques organizations
use as they go international.
3.4 Explain the relevance of the political/legal, economic,
and cultural environments to global business.
Know how to be culturally aware.
Copyright © 2018 Pearson Education, Ltd. All Rights Reserved
What’s Your Global Perspective?
Parochialism: viewing the world solely
through your own perspectives, leading to an
inability to recognize differences between
people

Three Possible Global Attitudes
• Ethnocentric: view that home country has best
work practices
• Polycentric: view that managers in the host
country know the best approaches
• Geocentric: world-oriented view; wants to use
best practices from around the globe

Regional Trading Alliances
• Global competition and the global economy are
shaped by regional trading agreements, including:
– European Union (EU)
– North American Free Trade Agreement
(NAFTA)
– Association of Southeast Asian Nations
(ASEAN)

The European Union
• European Union (EU): a union of 28 democratic
European nations created as a unified economic
and trade entity with the Euro as a single common
currency
• Exhibit 4-1 shows the members of the European Union.

North American Free Trade Agreement
(NAFTA)
• North American Free Trade Agreement
(NAFTA): an agreement among the Mexican,
Canadian, and U.S. governments in which barriers
to trade have been eliminated

Association of Southeast Asian Nations
(ASEAN)
• Association of Southeast Asian Nations
(ASEAN): a trading alliance of 10 Southeast Asian
nations The picture can't be display ed.
• Exhibit 3-2 shows the members of ASEAN.

Other Trade Alliances
• African Union (AU)
• East African
Community (EAC)
• South Asian
Association for
Regional
Cooperation
(SAARC)
• Trans-Pacific
Partnership (TPP) • Exhibit 4-3 shows the current members of
TPP and countries indicating a desire to join.
Global Trade Mechanisms
• World Trade Organization (WTO)
• International Monetary Fund (IMF)
• World Bank Group
• Organization for Economic Cooperation and
Development (OECD)

World Trade Organization
• World Trade Organization (WTO): global
organization of 161 countries that deals with the
rules of trade among nations

International Monetary Fund and World
Bank Group
• International Monetary Fund (IMF): An
organization of 188 countries that promotes
international monetary cooperation and provides
advice, loans, and technical assistance
• World Bank Group: a group of very closely
associated institutions that provides financial and
technical assistance to developing countries

Organization for Economic Cooperation
and Development
• Organization for Economic Cooperation and
Development (OECD): an international economic
organization that helps its 34 member countries
achieve sustainable economic growth and
employment

How Organizations Go International
• Multinational corporation (MNC):is any type of international
company that maintains operations in multiple countries.
• Multidomestic corporation
One type of MNC is a multidomestic corporation, which decentralizes
management and other decisions to the local country.
• Global company
Another type of MNC is a global company, which centralizes its
management and other decisions in the home country.
• Transnational or borderless organization

It uses an arrangement that eliminates artificial geographical barriers.
Exhibit 3-4
How Organizations Go Global
Exhibit 3-4 shows the different approaches companies can use to go global.
Going Global: Global sourcing
• Global sourcing: purchasing materials or labor
from around the world wherever it is cheapest.

Going Global: Exporting and Importing
• Exporting: making products domestically and
selling them abroad
• Importing: acquiring products made abroad and
selling them domestically

Going Global: Licensing and Franchising
• Licensing: an organization gives another
organization the right to make or sell its products
using its technology or product specifications
• Franchising: an organization gives another
organization the right to use its name and
operating methods

Going Global: Strategic Alliances and Joint
Ventures
• Strategic Alliance: partnership between an
organization and foreign company partner(s) in
which both share resources and knowledge
in developing new products or building production
facilities
• Joint Venture: A specific type of strategic alliance
in which the partners agree to form a separate,
independent organization for some business
purpose

Going Global: Foreign Subsidiary
• Foreign Subsidiary: directly investing in a foreign
country by setting up a separate and independent
production facility or office

Managing in a Global Environment
• What challenges will a manager face in a new
country?
Political/Legal Environment
– U.S. managers are accustomed to a stable
legal and political system
– Managers must stay informed of the specific
laws in countries where they do business
– Some countries have risky political climates

Economic Environment
• Free Market Economy: an economic system in
which resources are primarily owned and
controlled by the private sector
• Planned Economy: an economic system in which
economic decisions are planned by a central
government

Cultural Environment
• National Culture—the values and attitudes
shared by individuals from a specific country that
shape their behavior and beliefs about what is
important.

Global Leadership and Organizational
Behavior Effectiveness (GLOBE)
• Power distance
• Uncertainty avoidance
• Assertiveness
• Humane orientation
• Future orientation
• Institutional collectivism
• Gender differentiation
• In-group collectivism
• Performance orientation
Global Management in Today’s World
• The Challenge of Openness
– Increased threat of terrorism
– Economic interdependence of trading countries
– Intense fundamental cultural differences
• Cultural Intelligence: cultural awareness and
sensitivity skills
• Global Mind-Set: attributes that allow a leader to
be effective in cross-cultural environments

Exhibit 3-7
A Global Mind-Set
Intellectual Knowledge of international business

capital: and the capacity to understand how
business works on a global scale
Psychological Openness to new ideas and
capital: experiences
Social capital: Ability to form connections and build

trusting relationships with people who
are different from you
Exhibit 3-7 shows components of a global mind-set.

For more details, read Chapter 3 of the
textbook.

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Management

Fourteenth Edition, Global Edition

Copyright © 2018 Pearson Education, Ltd. All Rights Reserved

Copyright © 2018 Pearson Education, Ltd. All Rights Reserved

Copyright © 2018 Pearson Education, Ltd. All Rights Reserved

• Exhibit 4-1 shows the members of the European Union.

Copyright © 2018 Pearson Education, Ltd. All Rights Reserved

• Exhibit 3-2 shows the members of ASEAN.

Copyright © 2018 Pearson Education, Ltd. All Rights Reserved

Copyright © 2018 Pearson Education, Ltd. All Rights Reserved

Copyright © 2018 Pearson Education, Ltd. All Rights Reserved

Copyright © 2018 Pearson Education, Ltd. All Rights Reserved

Copyright © 2018 Pearson Education, Ltd. All Rights Reserved

• Transnational or borderless organization

Copyright © 2018 Pearson Education, Ltd. All Rights Reserved

Copyright © 2018 Pearson Education, Ltd. All Rights Reserved

Copyright © 2018 Pearson Education, Ltd. All Rights Reserved

Copyright © 2018 Pearson Education, Ltd. All Rights Reserved

Copyright © 2018 Pearson Education, Ltd. All Rights Reserved

Copyright © 2018 Pearson Education, Ltd. All Rights Reserved

Copyright © 2018 Pearson Education, Ltd. All Rights Reserved

Copyright © 2018 Pearson Education, Ltd. All Rights Reserved

Copyright © 2018 Pearson Education, Ltd. All Rights Reserved

Intellectual Knowledge of international business

Social capital: Ability to form connections and build

Exhibit 3-7 shows components of a global mind-set.

Copyright © 2018 Pearson Education, Ltd. All Rights Reserved

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