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Management, by WilliamsSouth-Western College PublishingCopyright © 2003
Chapter 8Chapter 8
Global Management
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Management, by WilliamsSouth-Western College PublishingCopyright © 2003
What Would What Would YouYou Do? Do? Wal-Mart’s International StrategyWal-Mart’s International Strategy
Dominant retailer in U.S. Major global competitor is Carrefour Which countries should Wal-Mart enter? What impact will free trade agreements have? Global consistency vs. local adaptation
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Management, by WilliamsSouth-Western College PublishingCopyright © 2003
After discussing this section, you should be able to:
Learning ObjectivesLearning ObjectivesWhat Is Global Business?What Is Global Business?
1. describe the impact of global business on the U.S.
2. discuss the trade rules and agreements that govern global trade.
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Management, by WilliamsSouth-Western College PublishingCopyright © 2003
Impact of Global BusinessImpact of Global Business
“Foreigners” Buying up American Companies
American Companies are not Competitive in the World Market
Americans Buying American Products
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Management, by WilliamsSouth-Western College PublishingCopyright © 2003
Foreign Investment in the U.S.Foreign Investment in the U.S.
United KingdomGerman
NetherlandsCanadaFranceJapan
LuxemborgSwitzerland
IrelandBermuda
Dollars (Millions)
10,000 20,000 30,000 40,000 50,0000
1994-19991994-1999
Adapted from Exhibit 8.1
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Management, by WilliamsSouth-Western College PublishingCopyright © 2003
U.S. Direct Foreign Investment AbroadU.S. Direct Foreign Investment AbroadUnited Kingdom
CanadaNetherlands
GermanyJapan
BermudaFrance
SwitzerlandBrazil
AustraliaMexico
Panama
Dollars (Millions)40,000 80,000 120,000 160,0000
1994-19991994-1999
Adapted from Exhibit 8.2
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Management, by WilliamsSouth-Western College PublishingCopyright © 2003
Global High-Technology Market ShareGlobal High-Technology Market Share
United StatesUnited States31%31%
CanadaCanada1%1%
JapanJapan22%22%
GermanyGermany7%7%
FranceFrance3%3%
United KingdomUnited Kingdom5%5%
ItalyItaly1%1%
ChinaChina6%6%
South KoreaSouth Korea4%4%
TaiwanTaiwan2%2%
SingaporeSingapore2%2%
All Other CountriesAll Other Countries22%22%
Average Global High Technology Market Share, 1993-1997Average Global High Technology Market Share, 1993-1997
Adapted from Exhibit 8.3
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Management, by WilliamsSouth-Western College PublishingCopyright © 2003
Buying AmericanBuying American
Americans say they want to “Buy American”
Country of manufacture where the product is made
Country of origin company’s home country
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Management, by WilliamsSouth-Western College PublishingCopyright © 2003
Trade Rules and AgreementsTrade Rules and Agreements
Trade Barriers
Trade Agreements
Consumers, Trade Barriers and Trade Agreements
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Management, by WilliamsSouth-Western College PublishingCopyright © 2003
Trade BarriersTrade Barriers
Tariff Nontariff barriers
Quotas Voluntary export restraints Government import standards Government subsidies Customs valuation/classification
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Management, by WilliamsSouth-Western College PublishingCopyright © 2003
Trade AgreementsTrade Agreements
General Agreement on Tariffs & Trade (GATT)
Regional Trading Zones Maastricht Treaty of Europe NAFTA FTAA ASEAN & APEC
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Management, by WilliamsSouth-Western College PublishingCopyright © 2003
World Trade OrganizationWorld Trade Organization
Location: Location: Geneva, SwitzerlandGeneva, SwitzerlandEstablished: Established: 1 January 19951 January 1995Created by: Created by: Uruguay Round Uruguay Round negotiations (1988-1994)negotiations (1988-1994)Membership:Membership: 142 countries (as of 142 countries (as of 26 July 2001)26 July 2001)Budget: 127 million Swiss francs Budget: 127 million Swiss francs for 2000for 2000Secretariat staff: 500Secretariat staff: 500Head: Mike Moore (director-Head: Mike Moore (director-generalgeneral
Functions:Functions: Administering WTO trade Administering WTO trade
agreementsagreements Forum for trade Forum for trade
negotiationsnegotiations Handling trade disputesHandling trade disputes Monitoring national trade Monitoring national trade
policiespolicies Technical assistance and Technical assistance and
training for developing training for developing countriescountries
Cooperation with other Cooperation with other international organizationsinternational organizations
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Management, by WilliamsSouth-Western College PublishingCopyright © 2003
GATTGATT
Worldwide trade agreement Designed to reduce and eliminate tariffs
and subsidies Protect intellectual property
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Management, by WilliamsSouth-Western College PublishingCopyright © 2003
Maastricht Treaty of EuropeMaastricht Treaty of Europe
Originally, 12 (now 15) European countries
13 other countries have applied Transform these different countries into
the European Union Open up trade among member nations Create the “Euro” currency
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Management, by WilliamsSouth-Western College PublishingCopyright © 2003
North American Free Trade North American Free Trade Agreement - NAFTAAgreement - NAFTA
Canada, United States, & Mexico Liberalizes trade among these three
nations Eliminate tariffs and barriers
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Management, by WilliamsSouth-Western College PublishingCopyright © 2003
Free Trade Area of the AmericasFree Trade Area of the Americas
Proposed agreement Unite 34 countries in North & South America
Reduce trade barriers to zero Standardize financial markets Process for handling trade disputes
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Management, by WilliamsSouth-Western College PublishingCopyright © 2003
Association of South East NationsAssociation of South East NationsAsia-Pacific Economic CooperationAsia-Pacific Economic Cooperation
ASEAN Indonesia, Thailand, Philippines,
Malaysia, Singapore, & Brunei APEC
U.S., Canada, Japan, South Korea, Australia, New Zealand, China, Hong Kong, & ASEAN members
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Management, by WilliamsSouth-Western College PublishingCopyright © 2003
Consumers, Trade Barriers, & Trade Consumers, Trade Barriers, & Trade AgreementsAgreements American annual income less than many
countries Cost of living, however, is also less here Open trade gives American consumers
many choices
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Management, by WilliamsSouth-Western College PublishingCopyright © 2003
After discussing this section, you should be able to:
Learning ObjectivesLearning ObjectivesHow to Go Global?How to Go Global?
3. explain why companies choose to standardize or adapt their business procedures.
4. explain the different ways that companies can organize to do business globally.
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Management, by WilliamsSouth-Western College PublishingCopyright © 2003
Consistency or Adaptation?Consistency or Adaptation?
Globalconsistency
Localadaptation
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Management, by WilliamsSouth-Western College PublishingCopyright © 2003
Forms for Global BusinessForms for Global Business
ExportingCooperative Contract
•licensing•franchise
Strategic Alliances- Joint Ventures
Wholly OwnedAffiliates
Global NewVentures
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Management, by WilliamsSouth-Western College PublishingCopyright © 2003
Been There, Done ThatBeen There, Done That
13,000 restaurants in the U.S. 15,000 restaurants in 119 other countries How can McDonald’s maintain its
projected growth rate? What are the limiting factors? What must McDonald’s do to keep the
character of its company aligned with its international presence?
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Management, by WilliamsSouth-Western College PublishingCopyright © 2003
After discussing this section, you should be able to:
Learning ObjectivesLearning ObjectivesWhere to Go Global?Where to Go Global?
5. explain how to find a favorable business climate.
6. discuss the importance of identifying and adapting to cultural differences.
7. explain how to successfully prepare workers for international assignments.
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Management, by WilliamsSouth-Western College PublishingCopyright © 2003
Finding the Best Business ClimateFinding the Best Business Climate
Growing Markets
Choosing an Office/Manufacturing Location
Minimizing PoliticalRisk
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Management, by WilliamsSouth-Western College PublishingCopyright © 2003
Growing MarketsGrowing Markets
Purchasing Power comparison of a standard set of goods
and services in different countries more means greater growth potential
Degree of Global Competition the number & quality of companies
already in the market more means less growth potential
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Management, by WilliamsSouth-Western College PublishingCopyright © 2003
Consumption of Coca-ColaConsumption of Coca-ColaP
er C
apit
a C
onsu
mp
tion
of
Coc
a-C
ola
Per
Cap
ita
Con
sum
pti
on o
f C
oca-
Col
a
Purchasing Power (per capita real GDP)Purchasing Power (per capita real GDP)
00 1000010000 2000020000 3000030000 400004000000
200200
300300
400400
500500
100100
.
...
.
.
.
.
.
..
..
..
.
ChinaChina
ColumbiaColumbiaPhillipinesPhillipines
BrazilBrazil
MexicoMexico
ChileChile
ArgentinaArgentina
KoreaKoreaItalyItaly
Great Great BritainBritain
SpainSpainAustraliaAustralia
GermanyGermanyJapanJapan
FranceFrance
United United StatesStates
Adapted from Exhibit 8.6
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Management, by WilliamsSouth-Western College PublishingCopyright © 2003
Choosing an Office/Manufacturing Choosing an Office/Manufacturing LocationLocation Quantity factors
work force quality company strategy
Quality factors costs and barriers
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Management, by WilliamsSouth-Western College PublishingCopyright © 2003
Quality of Netherlands Workforce Quality of Netherlands Workforce for Call Center Jobsfor Call Center Jobs
Adapte from Exhibit 8.7
0 20 40 60 80 100 120 140
Ireland
UK
France
Germany
Belgium
Netherlands
Two Languages Three Languages More than Three Languages
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Management, by WilliamsSouth-Western College PublishingCopyright © 2003
United States1. New York City2. San Francisco3. Chicago4. Wash. D.C. area5. San Jose
Latin America1. Buenos Aires2. San Juan3. Mexico City4. Sao Paulo5. Santiago
Europe1. London2. Frankfurt3. Helsinki4. Amsterdam5. Dublin
Asia Pacific1. Hong Kong2. Sydney3. Singapore4. Auckland5. Tokyo
World’s Best Cities for BusinessWorld’s Best Cities for Business
Adapted from Exhibit 8.8
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Management, by WilliamsSouth-Western College PublishingCopyright © 2003
Minimizing Political RisksMinimizing Political Risks
Political uncertainty risk of major changes in political regimes
Policy uncertainty risk associated with changes in laws and
government policies directed at businesses
Strategies avoidance control avoidance
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Management, by WilliamsSouth-Western College PublishingCopyright © 2003
Political Risk: 10 Riskiest CountriesPolitical Risk: 10 Riskiest CountriesInternational Country Risk International Country Risk GuideGuide
Ten Riskiest CountriesTen Riskiest Countries1.1. Sierra LeoneSierra Leone2.2. YugoslaviaYugoslavia3.3. SomaliaSomalia4.4. Guinea-BissauGuinea-Bissau5.5. ZimbabweZimbabwe6.6. Congo, Dem. RepublicCongo, Dem. Republic7.7. IraqIraq8.8. MoldovaMoldova9.9. Korea, D.P.R.Korea, D.P.R.10.10. LiberiaLiberia
Coplin-O’Leary Risk Coplin-O’Leary Risk RatingsRatings
Ten Riskiest CountriesTen Riskiest Countries1.1. EcuadorEcuador2.2. IraqIraq3.3. CubaCuba4.4. RussiaRussia5.5. MyanmarMyanmar6.6. SudanSudan7.7. VietnamVietnam8.8. CameroonCameroon9.9. PakistanPakistan10.10. NigeriaNigeria
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Management, by WilliamsSouth-Western College PublishingCopyright © 2003
Political Risk: 10 Least Risky CountriesPolitical Risk: 10 Least Risky CountriesInternational Country Risk International Country Risk GuideGuide
Ten Least Risky CountriesTen Least Risky Countries1.1. SingaporeSingapore2.2. NorwayNorway2.2. SwitzerlandSwitzerland4.4. LuxembourgLuxembourg5.5. NetherlandsNetherlands6.6. FinlandFinland7.7. BruneiBrunei8.8. DenmarkDenmark9.9. CanadaCanada10.10. SwedenSweden
Coplin-O’Leary Risk Coplin-O’Leary Risk RatingsRatings
Ten Least Risky CountriesTen Least Risky Countries1.1. SwitzerlandSwitzerland2.2. BulgariaBulgaria3.3. SingaporeSingapore4.4. BelgiumBelgium5.5. IrelandIreland6.6. FinlandFinland7.7. AustriaAustria8.8. CanadaCanada9.9. NetherlandsNetherlands10.10. United KingdomUnited Kingdom
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Management, by WilliamsSouth-Western College PublishingCopyright © 2003
Becoming Aware of Cultural Becoming Aware of Cultural Differences - Geert HofstedeDifferences - Geert Hofstede
Power distance Individualism Short-term/Long-term orientation Masculinity v. femininity Uncertainty avoidance
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Management, by WilliamsSouth-Western College PublishingCopyright © 2003
Hofstede’s Five Cultural DimensionsHofstede’s Five Cultural Dimensions
USAGermany
JapanFrance
NetherlandsHong Kong
IndonesiaWest Africa
RussiaChina
400400
350350
300300
250250
200200
150150
100100
5050
00Ho
fste
de
’s C
ult
ura
l Dim
ens
ion
sPower DistancePower Distance IndividualismIndividualism MasculinityMasculinity Uncertainty AvoidanceUncertainty Avoidance Long-Term OrientationLong-Term Orientation
Adapted from Exhibit 8.10
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Management, by WilliamsSouth-Western College PublishingCopyright © 2003
Preparing for an International Preparing for an International AssignmentAssignment
Language andCross-Cultural
Training
Spouse, Family,and
Dual-CareerIssues
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Management, by WilliamsSouth-Western College PublishingCopyright © 2003
What Really Works?What Really Works?
Cross-Cultural Training
Psychological Well-Being & Self-Development
10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Fostering Relationships with Native Citizens
10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Probability of success 79%
Probability of success 74%
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Management, by WilliamsSouth-Western College PublishingCopyright © 2003
What Really Works? (What Really Works? (Cont’d.)Cont’d.)
Accurate Cultural Perceptions
10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Rapid Adjustment to Foreign Cultures & Countries
10% 20% 30% 40% 50% 60% 70% 80% 90% 100%Probability of success 74%
Probability of success 74%
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Management, by WilliamsSouth-Western College PublishingCopyright © 2003
What Really Works? (What Really Works? (Cont’d.)Cont’d.)
On-the-Job Performance
10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Probability of success 71%
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Management, by WilliamsSouth-Western College PublishingCopyright © 2003
What What ReallyReally Happened? Happened? Wal-Mart’s International StrategyWal-Mart’s International Strategy
Currently Carrefour (its major global competitor) has been able to match or better Wal-Mart’s prices
Wal-Mart is increasing local adaptation to meet customer needs, but maintaining some global consistency to take advantage of purchasing power