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Chapter Six
Managing in the Global Environment
McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved.
6-2
Global Organizations
Global Organizations ≈Organizations that operate and compete not
only domestically, but also globally≈Uncertain and
unpredictable
6-3
What Is the Global Environment?
Global Environment ≈Set of forces and conditions in the world
outside the organization’s boundaries that affect the way it operates and shape its behavior
≈Changes over time≈Presents managers with opportunities and
threats
6-4
Task Environment
Task Environment ≈Set of forces and conditions that originate with
suppliers, distributors, customers, and competitors
≈Affects an organization’s ability to obtain inputs and dispose of its outputs
≈Most immediate and direct effect on managers
6-5
Forces in the Global Environment
Figure 6.1
6-6
The Task Environment
Suppliers≈Individuals and organizations that provide an
organization with the input resources that it needs to produce goods and services Raw materials, component parts, labor (employees)
≈Relationships with suppliers can be difficult due to materials shortages, unions, and lack of substitutes. Suppliers that are the sole source of a critical item are in a
strong bargaining position to raise their prices. Managers can reduce these supplier effects by increasing the
number of suppliers of an input.
6-7
Global Outsourcing
Global Outsourcing ≈Organizations purchase inputs from other
companies or produce inputs themselves throughout the world to lower production costs and improve the quality or design of their products
6-8
The Task Environment
Distributors≈Organizations that help other organizations
sell their goods or services to customers Powerful distributors can limit access to markets
through its control of customers in those markets. Managers can counter the effects of distributors by
seeking alternative distribution channels.
6-9
The Task Environment
Customers≈Individuals and groups that buy goods and
services that an organization produces Identifying an organization’s main customers and
producing the goods and services they want is crucial to organizational and managerial success.
6-10
The Task Environment
Competitors≈Organizations that produce goods and
services that are similar to a particular organization’s goods and services Rivalry between competitors is potentially the most
threatening force that managers deal with
6-11
The Task Environment
Barriers to Entry≈Factors that make it difficult and costly for the
organization to enter a particular task environment or industry
≈Economies of scale, brand loyalty, government regulations
6-12
Barriers to Entry and Competition
Figure 6.2
6-13
The General Environment
Economic Forces≈factors that affect the general health and well-
being of a country or world region≈Interest rates, inflation, unemployment,
economic growth
6-14
The General Environment
Technology≈Combination of tools, machines, computers,
skills, information, and knowledge that managers use in the design, production, and distribution of goods and services
6-15
The General Environment
Technological Forces≈Outcomes of changes in the technology that
managers use to design, produce, or distribute goods and services
6-16
The General Environment
Sociocultural Forces≈Pressures emanating from the social structure
of a country or society or from the national culture Social structure: the arrangement of relationships
between individuals and groups in society National culture: the set of values that a society
considers important and the norms of behavior that are approved or sanctioned in that society.
6-17
The General Environment
Demographic Forces≈Outcomes of change in, or changing attitudes
toward, the characteristics of a population, such as age, gender, ethnic origin, race, sexual orientation, and social class
6-18
The General Environment
Political and Legal Forces≈Outcomes of changes in laws and regulations, ≈deregulation of industries, the privatization of
organizations, and increased emphasis on environmental protection Increasingly nations are joining together into
political unions that allow for the free exchange of resources and capital
6-19
The Global Environment
Figure 6.3
6-20
Process of Globalization
Globalization≈Set of specific and general forces that work together to integrate and
connect economic, political, and social systems across countries, cultures, or geographical regions
≈Result is that nations and peoples become increasingly interdependent
Managers now recognize that companies exist and compete in a truly global market
Managers constantly confront the challenges of global competition≈Establishing operations in a country abroad≈Obtaining inputs from suppliers abroad≈Challenges of managing in a different national culture
6-21
Process of Globalization
Four principal forms of capital that flow between countries are:≈Human capital≈Financial capital≈Resource capital≈Political capital
6-22
Declining Barriers to Trade and Investment
Tariff≈A tax that government imposes on imported
or, occasionally, exported goods.≈Intended to protect domestic industry and jobs
from foreign competition
6-23
GATT and the Rise of Free Trade
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 and will result in lower prices
6-24
Declining Barriers of Distance and Culture
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.
6-25
Effects of Free Trade on Managers
Declining Trade Barriers≈Opened enormous opportunities for managers
to expand the market for their goods and services.
≈Allowed managers to now both buy and sell goods and services globally.
≈Increased intensity of global competition such that managers now have a more dynamic and exciting job of managing.
6-26
The Role of National Culture
Values≈Ideas about what a society believes to be good,
desirable and beautiful.≈Provide the basic underpinnings for notions of
individual freedom, democracy, truth, justice, honesty, loyalty, love, sex, marriage, etc.
Norms≈Unwritten rules and codes of conduct that prescribe
how people should act in particular situations.
6-27
Hofstede’s Model of National Culture
Figure 6.4
6-28
Hofstede’s Model of National Culture
Individualism≈A worldview that values individual freedom and self-
expression and adherence to the principle that people should be judged by their individual achievements rather their social background.
Collectivism≈A worldview that values subordination of the individual
to the goals of the group and adherence to the principle that people should be judged by their contribution to the group
6-29
Hofstede’s Model of National Culture
Power Distance≈Degree to which societies accept the idea that
inequalities in the power and well-being of their citizens are due to differences in individuals’ physical and intellectual capabilities and heritage
6-30
Hofstede’s Model of National Culture
Achievement versus Nurturing Orientation≈Achievement-oriented societies value
assertiveness, performance, and success and are results-oriented.
≈Nurturing-oriented cultures value quality of life, personal relationships, and service.
6-31
Hofstede’s Model of National Culture
Uncertainty Avoidance≈Societies and people differ in their tolerance
for uncertainty and risk.≈Low uncertainty avoidance cultures (e.g., U.S.
and Hong Kong) value diversity and tolerate a wide range of opinions and beliefs.
≈High uncertainty avoidance societies (e.g., Japan and France) are more rigid and expect high conformity in their citizens’ beliefs and norms of behavior.
6-32
Hofstede’s Model of National Culture
Long-term vs. Short-term Orientation≈Cultures with a long-term orientation rest on
values such as thrift and persistence in achieving goals
≈Cultures with a short-term orientation are concerned with maintaining personal stability or happiness and living for the present