CHAPTER 3:MANAGING IN A GLOBAL DIVERSE

ENVIRONMENT

CH 3© 2015 SAGE Publications

Global Business in the Global Village• Global business: buying and selling of goods amongst

different countries• Global village: companies conducting business

worldwide without boundaries

Different Types of Global Business• Domestic Business: Conducts business in only one

country• International Business: Based primarily in one country

but transacts business in other countries• Multinational Corporations (MNC): Has ownership of

operations in two or more countries

Foreign and Transnational Companies • Foreign subsidiaries or affiliates: company owned and

controlled by another company making up a combined company called the holding or parent company

• Transnational Company type: eliminates artificial geographical barriers and does not have a single national headquarter

Foreign Trade• Foreign Trade is conducting business with other countries• Foreign trade generally, but not always, benefits a

company• Dumping is when a company sells a product in another country

at a loss with the intention of driving out the competition

Trade Barriers• Embargo: Total ban on the importing of a product from

one or more countries• Quotas: Sets a limit on the number or volume of a

product that can be imported or exported during a set period of time

• Subsidies: Include government grants, loans and a tax breaks given to domestic companies

• Tariff (Tax Method): Direct tax on imports to make foreign products more expensive

World Trade Organization (WTO)• Allows organizations and governments to work together

to develop free trade among countries

Trade Agreements• There are six major trade agreements around the globe:

• North American Free Trade Agreement (NAFTA)• Dominican Republic-Central American Free Trade Agreement

(CAFTA-DR) • Union of South American Nations (UNASUR)• European Union (EU)• Association of Southeast Asian Nations (ASEAN)• Asia-Pacific Economic Cooperation (APEC)

Exchange Rates• Exchange Rates: the value of one country’s currency

when accepted by/convereted to another country• Balance of Trade: The difference between the value of the

products and services a country exports and imports.

The Balance of Trade• Trade deficit: a country importing more than it exports • Trade surplus: a country exporting more than it imports

Becoming a Business Global• Global Sourcing: Hiring others outside the firm to

perform work worldwide• Importing and Exporting: Commerce that moves goods

or services into or out of a country• Licensing and Franchising: Licensor allows the licensee

to make its products, serves or intellectual property for a fee

Becoming a Business Global• Contracting: A foreign company making a product or

providing a service for domestic one• Contract manufacturing vs. Management Contracting• Strategic Alliances and Joint Ventures Strategic • Alliance is an agreement to share resources that does not

necessarily involve creating a new company.• Joint venture is created when two or more firms share

ownership of a new company • Direct Investment: The building or buying operating

facilities in a foreign country

Business Practices of Global Companies• Global Management Team- Top level managers who are

foreign nationals • Global Strategy- One strategy for the entire company not

one per subsidiary

Business Practices of Global Companies• Global Operations and Products- Standardized operations

and products worldwide to attain economies of scale• Global Technology and R&D- Technology research and

development centralized in one country, rather than duplicated at each subsidiary

Business Practices of Global Companies• Global Financing- Search world markets to get the best

rates and terms when borrowing money for the long term; short term financing is largely arranged in individual countries using local financial institutions

• Global Marketing- Global products and marketing are adapted for local markets and are often developed by local agencies

Workplace Diversity• Diversity: the variety of people with different group

identities within the same workplace • Diversity has a major impact on employees’ work

related values and attitudes and can affect the way an organization is managed

Workplace Diversity• Age• Gender• Race and Ethnicity• Disability• Other

Hofstede National Culture Diversity• Power Distance • Individualism vs. Collectivism• Assertiveness vs. Nurturing• Uncertainty Avoidance vs. Acceptance• Long term vs. Short term Orientation

Power Distance• High Power Distance Cultures

• Employees expect and accept that management will make all decisions with little input from them

• China, Philippines, & most Arab countries• Low Power Distance Cultures

• Employees expect to be consulted on decisions of management and want to participate

• Israel, United States, & most European countries

Individualism vs. Collectivism• Individualism

• Individualist cultures believe the individual should be self-sufficient with loyalty to themselves first and the group and company second

• United States & Netherlands• Collectivism

• Places society, the group & the company first• Indonesia & China

Assertiveness vs. Nurturing• Assertiveness

• Assertive cultures are more aggressive and competitive with focus on achievement and material possessions

• Indonesia & China• Nurturing

• Nurturing cultures emphasize the importance of relationships, modesty, caring and quality of life

• Netherlands & France

Uncertainty Avoidance vs. Acceptance• Uncertainty Avoidance

• Uncertainty avoidance cultures like structure, security, and are less likely to take risk

• Japan & Germany• Uncertainty Acceptance

• Uncertainty acceptance cultures are more comfortable dealing with the unknown, changes and take more risk

• Hong Kong

Long Term vs. Short Term Orientation• Long Term Orientation

• Long term cultures look to the future and value thrift• China & Hong Kong

• Short Term Orientation• Short term cultures focus on the past and present, and value

immediate gratification • United States & Germany

GLOBE’s Expanded Dimensions• Global Leadership and Organizational Behavior

Effectiveness (GLOBE) Initiative- Expanded Hofstede's 5 dimensions into 9• Assertiveness• Future Orientation• Gender differences• Uncertainty Avoidance• Power Distance• Social Collectivism• In-Group Collectivism• Performance Orientation • Humane Orientation

Dimensions Low Moderate High

Assertiveness:People are tough, confrontational, and competitive

SwitzerlandNew Zealand

IrelandPhilippines

Spain United States

Future Orientation:People plan, delaying to invest in the future

RussiaArgentina

SloveniaIndiaUnited States

NetherlandsCanada

Gender differences:People have great gender role differences

Sweden DenmarkUnited States

BrazilItaly

Egypt China

Uncertainty Avoidance:People are uncomfortable with the unknown/ambiguity

BoliviaHungary

MexicoUnited States

Austria Germany

Power distance:People accept power inequality differences

NetherlandsUnited States

France Thailand

Dimensions Low Moderate High

Societal Collectivism:Teamwork is encouraged( vs. individualism)

Greece Germany

Hong KongUnited States

Japan Singapore

In-Group Collectivism:People take pride in membership (family, team, organization)

DenmarkNew Zealand

IsraelJapanUnited States

China Morocco

Performance Orientation:People strive for improvement and excellence

RussiaVenezuela

EnglandSweden

TaiwanUnited States

Humane Orientation:People are fair, caring and kind to others

SingaporeSpain

United StatesHong Kong

IndonesiaIceland