Bakrie University

Faculty of Economics
Principles of Management
Week 4
Managing in a Global Environment
Overview
Possible Global Attitudes
Understanding The global Environment
Doing Business Globally
Managing In A Global Environment
Social Responsibility and Ethical Behavior

Muchsin Saggaff Shihab, MBA, Ph.D.

 Possible Global Attitudes
Parochialism
viewing the world solely through your own perspectives, leading to an
inability to recognize differences between people.
Is not recognizing that others have different ways of living and working.
Is a significant obstacle for managers working in a global business
world.
Is falling into the trap of ignoring others values and customs and rigidly
applying an attitude of ours is better than theirs to foreign cultures.
Ethnocentric Attitude
The parochialistic belief that the best work approaches and practices
are those of the home country.
Polycentric Attitude
The view that the managers in the host country know the best work
approaches and practices for running their business.
Geocentric Attitude
A world-oriented view that focuses on using the best approaches and
people from around the globe.

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Understanding Global Environment
Regional Trading Agreements
General Purposes?
The European Union (EU)
A unified economic and trade entity
Belgium, Denmark, France, Greece, Ireland, Italy, Luxembourg, the
Netherlands, Portugal, Spain, the United Kingdom, Germany, Austria, Finland,
and Sweden
Economic and monetary union (Euro)
North American Free Trade Agreement (NAFTA)
Eliminated barriers to free trade (tariffs, import licensing requirements, and
customs user fees)
United States, Canada, and Mexico
U.S.-Central America Free Trade Agreement (CAFTA)
Association of Southeast Asian Nations (ASEAN)
Trading alliance of 10 Southeast Asian nations
South Asian Association for Regional Cooperation (SARRC)
WTOHow it was formed?
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Different Types of International Organizations
Multinational Corporation (MNC)
a broad term that refers to any and all types of international companies that
maintain operations in multiple countries.
Maintains operations in multiple countries
1. Multidomestic Corporation
Is an MNC that decentralizes management and other decisions to the
local country.
2. Global Company
Is an MNC that centralizes its management and other decisions in the
home country.
3. Transnational Corporation (Borderless Organization)
Is an MNC that has eliminated structural divisions that impose artificial
geographic barriers and is organized along business lines that reflect a
geocentric attitude.
4. Born Globals/International New Ventures (INVs)
Commit resources upfront (material, people, financing) to doing business
in more than one country.
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Exhibit : How Organizations Go Global

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Managing in A Global Environment
Challenges and Risks
The Legal Environment
Stability or instability of legal and political systems
Legal procedures are established and followed
Fair and honest elections held on a regular basis
Economic Systems
Market economy
An economy in which resources are primarily owned and controlled by the private sector.
Command economy
An economy in which all economic decisions are planned by a central government.
Monetary and Financial Factors
Currency exchange rates
Inflation rates
Diverse tax policies
Culture
National Culture
Is the values and attitudes shared by individuals from a specific country that
shape their behavior and their beliefs about what is important.
May have more influence on an organization than the organization culture.
Global Leadership and Organizational Behavior Effectiveness (GLOBE)
program - a research program that studies cross-cultural leadership behaviors.
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Exhibit: Hofstedes Five Dimensions
of National Culture
Hofstedes Indexes, Language, and Linguistic
Distance
National Culture:Globe Highlights
 Exhibit : What Are Americans Like

Americans are very informal.

Americans are direct.
Americans are competitive.
Americans are achievers.
Americans are independent and individualistic.
Americans are questioners.
Americans dislike silence.
Americans value punctuality.
Americans value cleanliness.
Sources: Based on M. Ernest (ed.), Predeparture Orientation Handbook: For Foreign Students and Scholars Planning to Study in the
United States (Washington, DC: U.S. Information Agency, Bureau of Cultural Affairs, 1984), pp. 10305; A. Bennett, American Culture Is
Often a Puzzle for Foreign Managers in the U.S., Wall Street Journal, February 12, 1986, p. 29; Dont Think Our Ways the Only Way,
The Pryor Report, February 1988, p. 9; and B.J. Wattenberg, The Attitudes behind American Exceptionalism, U.S. News & World
Report, August 7, 1989, p. 25.

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 What Is Social Responsibility?
The Classical View
Managements only social responsibility is to maximize profits
(create a financial return) by operating the business in the best
interests of the stockholders (owners of the corporation).
Expending the firms resources on doing social good
unjustifiably increases costs that lower profits to the owners and
raises prices to consumers.
The Socioeconomic View
Managements social responsibility goes beyond making profits
to include protecting and improving societys welfare.
Corporations are not independent entities responsible only to
stockholders.
Firms have a moral responsibility to larger society to become
involved in social, legal, and political issues.
To do the right thing 511
From Obligation to Responsiveness to
Responsibility
Social Obligation
The obligation of a business to meet its economic and
legal responsibilities and nothing more.
Social Responsiveness
When a firm engages in social actions in response to
some popular social need.
Social Responsibility
A businesss intention, beyond its legal and economic
obligations, to do the right things and act in ways that
are good for society.
What are the arguments For and Against CSR? 512
The Greening of Management
How Organizations Go Green?
Legal (or Light Green) Approach
Firms simply do what is legally required by obeying laws, rules,
and regulations willingly and without legal challenge.
Market Approach
Firms respond to the preferences of their customers for
environmentally friendly products.
Stakeholder Approach
Firms work to meet the environmental demands of multiple
stakeholdersemployees, suppliers, and the community.
Activist Approach
Firms look for ways to respect and preserve environment and be
actively socially responsible.
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Values-Based Management
Values-Based Management
An approach to managing in which managers
establish and uphold an organizations shared values.
The Purposes of Shared Values
Guiding managerial decisions
Shaping employee behavior
Influencing the direction of marketing efforts
Building team spirit
The Bottom Line on Shared Corporate Values
An organizations values are reflected in the decisions
and actions of its employees.
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Exhibit 56 Purposes of Shared Values

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 Managerial Ethics
Ethics Defined
Principles, values, and beliefs that define what is right
and wrong behavior.

Exhibit 55 Factors That Determine Ethical and UnethicalBehavior

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Factors That Affect Employee Ethics
Moral Development
A measure of independence from outside influences
Levels of Individual Moral Development
Pre-conventional level
Conventional level
Principled level
Stage of moral development interacts with:
Individual characteristics
The organizations structural design
The organizations culture
The intensity of the ethical issue

Copyright 2010 Pearson Education, Inc. Publishing as Prentice Hall 517

Issue Intensity
Characteristics determine issue
intensity or how important an ethical
issue is to an individual: greatness of
harm, consensus of wrong,
probability of harm, immediacy of
consequences, proximity to victim(s),
and concentration of effect.
Exhibit: Ethical Intensity
Ethics in an International Context
Ethical standards are not universal.
Social and cultural differences determine acceptable behaviors.
Foreign Corrupt Practices Act
Makes it illegal to corrupt a foreign official, yet token payments to
officials are permissible when doing so is an accepted practice in
that country.
The Global Compact
How Managers Can Improve Ethical Behavior in An
Organization
1. Hire individuals with high ethical standards.
2. Establish codes of ethics and decision rules.
3. Lead by example.
4. Set realistic job goals and include ethics in performance appraisals.
5. Provide ethics training.
6. Conduct independent social audits.
7. Provide support for individuals facing ethical dilemmas.

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 Jet Blue
1. What effect might Mr. Neelemans prior experience in
aviation have had on his business model for JetBlue?
As an entrepreneur, how does this venture differ from
his previous endeavors?
2. How would you say the quantitative approach has
helped Mr. Neeleman to formulate a strategy for
JetBlue? Do you think it will continue to be useful to
him in the future? Explain.
3. In order to adopt a contingency approach at JetBlue,
which variables would you advise Mr. Neeleman to
take into account? Explain.

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