Managing in a Global Environment

in a Global Environment
Chapter 4
Management


Stephen P. Robbins Mary Coulter
tenth edition

Outcomes Follow this Learning Outline as you read and study this

chapter.

4.1 What’s Your Global perspective?
Define parochialism.
Contrast ethnocentric, polycentric, and geocentric attitudes towards global business.
4.2 Understanding The global Environment
Describe the current status of the EU, NAFTA, ASEAN and other Regional Trade Allowances.
Discuss the role of the WTO.

Outcomes
4.3 Doing Business Globally
Contrast multinational, multidomestic, global, transnational, and born

global organizations.
Describe the different ways organizations can go international.
4.4 Managing In A Global Environment.
Explain how the global legal-political and economic environments affect managers.
Discuss Hofstede’s five dimensions for assessing cultures.
Describe the challenges of doing business globally in today’s world.

Outcomes
4.4 Managing In A Global Environment.
Explain how the global legal-political

and economic environments affect managers.
Discuss Hofstede’s five dimensions for assessing cultures.
Describe the challenges of doing business globally in today’s world.

Global Marketplace
Opportunities and Challenges
Coping with the sudden appearance of new

competitors
Acknowledging cultural, political, and economic differences
Dealing with increased uncertainty, fear, and anxiety
Adapting to changes in the global environment
Avoiding parochialism

Your Global Perspective?
Parochialism
Is viewing the world solely through one’s own

eyes and perspectives.
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.

a Global Perspective
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.

Trading Agreements
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
North American Free Trade Agreement (NAFTA)
Eliminated barriers to free trade (tariffs, import licensing requirements, and customs user fees)
United States, Canada, and Mexico

4–1 European Union

Trading Agreements
U.S.-Central America Free Trade Agreement (CAFTA)
Free Trade Area of

the Americas
Southern Cone Common Market (Mercosur)
Association of Southeast Asian Nations (ASEAN)
Trading alliance of 10 Southeast Asian nations
African Union
South Asian Association for Regional Cooperation (SARRC)

4–2 ASEAN Members
Source: Based on J. McClenahen and T. Clark, “ASEAN

at Work,” IW. May 19, 1997, p. 42.

World Trade Organization (WTO)
Evolved from the General Agreement on Tariffs

and Trade (GATT) in 1995.
Functions as the only global organization dealing with the rules of trade among nations.
Has 149 member nations and 32 observer governments.
Monitors and promotes world trade.

Types of International Organizations
Multinational Corporation (MNC)
Maintains operations in multiple countries.
Multidomestic

Corporation
Is an MNC that decentralizes management and other decisions to the local country.
Global Company
Is an MNC that centralizes its management and other decisions in the home country.

Types of International Organizations (cont’d)
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.

4–3 How Organizations Go Global

Forms of Globalization
Strategic Alliances
Partnerships between and organization and a foreign

company in which both share resources and knowledge in developing new products or building new 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.
Foreign Subsidiary
Directly investing in a foreign country by setting up a separate and independent production facility or office.

in A Global Environment
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
Differences in the laws of various nations
Effects on business activities
Effects on delivery of products and services

Economic Environment
Economic Systems
Free market economy
An economy in which resources are

primarily owned and controlled by the private sector.
Planned 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

Cultural Environment
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.

4–4 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. 103–05; A. Bennett, “American Culture Is Often a Puzzle for Foreign Managers in the U.S.,” Wall Street Journal, February 12, 1986, p. 29; “Don’t Think Our Way’s 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.

Framework for Assessing Cultures

4–5 Hofstede’s Five Dimensions of

National Culture

(1) Individualistic — people look after their own and family interests
Collectivistic — people expect group to look after and protect them

Individualistic Collectivistic
United States, Canada Japan Mexico, Thailand
Australia

(2) High power distance—Accepts wide differences in power, great deal of respect for those in authority
Low power distance—Plays down inequalities: employees are not afraid to approach nor are in awe of the boss

High power distance Low power distance
Mexico, Singapore, Italy, Japan United States, Sweden

4–5 Hofstede’s Five Dimensions of

National Culture

(3) High uncertainty avoidance—Threatened with ambiguity and experience high levels of anxiety
Low uncertainty avoidance— Comfortable with risks; tolerant of different behavior and opinions

High uncertainty avoidance Low uncertainty avoidance
Italy, Mexico, France United Kingdom Canada, United States, Singapore

(4) Achievement—Values such as assertiveness, acquiring money and goods, and competition prevail
Nurturing—Values such as relationships and concern for others prevail

Achievement Nurturing
United States, Japan, Canada, Greece France, Sweden
Mexico

4–5 Hofstede’s Five Dimensions of

National Culture

(5) Long-term orientation—People look to the future and value thrift and persistence
Short-term orientation — People value tradition and the past
Short-term thinking Long-term thinking
Germany, Australia, China, Taiwan, Japan
United States, Canada

4–6 GLOBE Highlights
Source: M. Javidan and R. J. House, “Cultural Acumen

for the Global Manager: Lessons from Project GLOBE,” Organizational Dynamics, Spring 2001, pp. 289–305. Copyright © 2001. Reprinted with permission from Elsevier.

Management in Today’s World
Challenges
Openness associated with globalization
Significant cultural differences (e.g.,

Americanization)
Adjusting leadership styles and management approaches
Risks
Loss of investments in unstable countries
Increased terrorism
Economic interdependence

to Know
parochialism
ethnocentric attitude
polycentric attitude
geocentric attitude
European Union (EU)
Euro
North American Free Trade

Agreement (NAFTA)
Association of Southeast Asian Nations (ASEAN)
World Trade Organization (WTO)
multinational corporations (MNCs)
multidomestic corporation
global company
transnational or borderless organization

born globals
global sourcing
exporting
importing
licensing
franchising
strategic alliances
joint venture
foreign subsidiary
market economy
command economy
national culture
GLOBE
wikis
blogs

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