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How has globalization affected different world regions? What are

some of the benefits and costs of globalization for different sectors of

society?

• Globalization: the process of integration among countries around the world with a vision of a single market entity:

Social Economic Political Technological Cultural

• Internationalization: the process of a business crossing national and cultural borders.

Globalization: Pros and Cons

• Benefits of Globalization: wealth, jobs, technology, lower prices.

• Criticisms of Globalization:

off-shoring of business service jobs to lower-wage countries;

growing trade deficits; slow wage growth; environmental and social impacts.pro con

Global and Regional Integration:

• Global Agreements :

World Trade Organization (WTO)

(General Agreement on Tariffs and Trade

(GATT))

• Regional Agreements :

North American Free Trade Agreement (NAFTA)

U.S.-Central American Free Trade Agreement (CAFTA)

European Union (EU)

Association of Southeast Asian Nations (ASEAN)

Free Trade Agreement of the Americas (FTAA)

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1. Define the four basic predispositions MNCs have toward their international operations.

Four distinct predispositions toward doing things in a particular way:

1. Ethnocentric

2. Polycentric

3. Regio-centric

4. Geocentric strategic predisposition

• Ethnocentric predisposition

– A nationalistic philosophy of management whereby the values and interests of the parent company guide strategic decisions.

• Polycentric predisposition

– A philosophy of management whereby strategic decisions are tailored to suit the cultures of the countries where the MNC operates.

• Regio-centric predisposition

– A philosophy of management whereby the firm tries to blend its own interests with those of its subsidiaries on a regional basis.

• Geocentric predisposition

– A philosophy of management whereby the company tries to integrate a global systems approach to decision making.

• Question In what way are parochialism and simplification

barriers to effective cross-cultural management? In each case,

give an example.

Cross-Cultural Differences and Similarities

• Parochialism and Simplification

– Parochialism: view world through own eyes and

perspectives

– Simplification: exhibit same orientation toward different

cultural groups

• Similarities across cultures:

– Not possible to do business same way in every global

location

– Procedures and strategies that work well at home can’t be

adopted overseas without modifications

– Some similarities have been found

• Russia and U.S. (for example)

– Traditional management

– Communication

– Human resources

– Networking activities

– OB Mod

• Differences across cultures

– Far more differences than similarities found in cross-cultural

research

– Wages, compensation, pay equity, maternity leave

– Importance of criteria used in evaluation of employees

Question 1. In what way do formalization, specialization, and

centralization have an impact on MNC organization

structures?

Organizational Characteristicsof MNCs

• Formalization: use of defined structures and systems in decision making, communicating, and controlling

• Specialization: Assign individuals to specific, well-defined tasks

• Centralization: Important decisions are made at the top

Question 2. Which cultures are more likely to focus on

external controls? Which cultures would consider

direct controls more important than indirect?

Internal and external perspectives of control – one is often given

more attention than the other.

External control focus needed to find out what customers want and

be prepared to respond appropriately

Management wants to ensure market for goods and services exist

Types of Control: Direct Controls

• Use of face-to-face personal meetings for purpose of monitoring operations

• Examples: top executives visit overseas affiliates to learn of problems and challenges; design structure that makes

unit highly responsive to home-office requests and communications

Types of Control: Indirect

• Use of reports and other written forms of communication to control operations at subsidiaries

• Financial statements

• Financial statement prepared to meet national accounting standards prescribed by host country

• Statement prepared to comply with accounting principles and standards required by home country

• Statement prepared to meet financial consolidation requirements of home country

Question Most MNCs need not enter foreign markets to face challenges of dealing with multiculturalism. Do you agree or disagree

1. Why are MNCs getting involved in corporate social responsibility? Are they displaying a sense of social responsibility, or is this merely a matter of good business? Defend your answer.

Corporate Response to Social Obligations

• Agreements and codes of conduct committing MNCs to maintain certain standards

• Codes help offset real or perceived concern that companies move jobs to avoid higher labor or environmental standards in their home markets

• Contribute to raising of standard in developing world by exporting higher standard to local firms in these countries

Political Risks are any governmental action or politically motivated event that could adversely affect the long-run profitability or value of a firm.

Macropolitical risk event - an event that affects all foreign firms doing business in a country or region.

Micropolitical risk event - an event that affects one industry or company or only a few companies.

Examples of political risk events:

Expropriation of corporate assets without prompt and adequate compensation

Forced sale of equity to host-country nationals, usually at or below depreciated book value

Discriminatory treatment against foreign firms in the application of regulations or laws

Barriers to repatriation of funds (profits or equity)

Loss of technology or other intellectual property (such as patents, trademarks, or trade names)

Interference in managerial decision making

Dishonesty by government officials, including canceling or altering contractual agreements, extortion demands, and so forth.

Ways of Managing Political Risk:

Adaption

Equity sharing

Participative management

Localization of the operation

Development assistance

Dependency

Input control

Market control

Position control

Staged contribution strategies

Hedging

Political risk insurance Local debt financing

Although increased globalization has been credited with increasing global standards of living, there have also been some concerns regarding multinational companies exploiting foreign resources. Discuss the various perspectives toward corporate social responsibility. Also discuss your impression of the proper perspective.

Multinational corporations (MNCs) have been and—to a lesser extent—continue to be at the center of debate regarding social responsibility, particularly the benefits versus harm wrought by their operations around the world, especially in less developed countries.

Ways of dealing with specific situations:

Moral universalism - using a moral standard that is accepted by all cultures

Ethnocentric approach - a company applies the morality used in its home country regardless of the host country's system of ethics

Ethical relativism - a company simply adopts the local moral code whatever country in which it is operating

Managers are faced with not only considering stakeholders in the host country but also with weighing their concerns against those of the stakeholders in the domestic country. A corporation's stance toward social responsibility should perhaps range from assuming some responsibility for economic development in

the host country to taking an active role in identifying and solving world problems.

Explain the process you would follow to if you were faced with an ethical dilemma.

The first place to look would be to consult the laws of both the home and the host country.

Second, you would consult the International Codes of Conduct for multinational enterprises.

Third, you would want to consult the company's code of ethics.

Fourth, you have the right and obligation to consult your superiors.

Finally, you must fall back upon your own moral code of ethics.

In the end you have to follow your own conscience and decide what is best for you.

Describe the various steps involved in the process and differentiate between the steps involved in the strategic planning process versus the strategic implementation process.

Steps in the strategic formulation process

Strategic Planning Process

Define/clarify mission and objectives

Assess environment for threats, opportunities

Assess internal strengths and weaknesses

Consider alternative strategies using competitive analysis

Choose Strategy

Implementation Process

Implement strategy through complementary structure, systems, and operational processes

Set up controls and evaluation systems to ensure success, feedback to planning