Managing Global Environment

MANAGING IN A GLOBAL
ENVIRONMENT
Prepared By : ZAREEN SHAIKH, SZABIST Larkana
Session-4
Class-BBA-2

The International BusinessThe International Business
EnvironmentEnvironment
 Greater difficulties and risks whenGreater difficulties and risks when
performing management functions - dueperforming management functions - due
to differences in culture, language,to differences in culture, language,
economies, laws, political stability, etc.economies, laws, political stability, etc.

Stages of GlobalizationStages of Globalization
1.1. Domestic StageDomestic Stage = All production and marketing facilities= All production and marketing facilities
at home.at home.
2.2. International StageInternational Stage = International Division is typically= International Division is typically
part of the structure, but is not dominant.part of the structure, but is not dominant.
3.3. Multinational StageMultinational Stage = Marketing and production in many= Marketing and production in many
countries and 1/3 of sales from outside home country.countries and 1/3 of sales from outside home country.
4.4. Global StageGlobal Stage =Making sales and acquiring(to get=Making sales and acquiring(to get
something) resources in whatever country offers thesomething) resources in whatever country offers the
best deal.best deal.
Ownership, control, and top management tend to beOwnership, control, and top management tend to be
dispersed.dispersed.

INTERNATIONAL BUSINESS
MANAGEMENT

ENVIRONMENTALENVIRONMENTAL
FORCESFORCES
1. Economic environment
2. Legal/ Political environmental
4. Socio-cultural environment
5. Technological environment

Economic environment
 Economic Development (Developed &
Less Developed Countries)
 Infrastructure
 Resource & Product Markets
 Exchange rates

Legal/ Political environment
 Political Risk and Instability
 Laws and Regulations
GATT
WTO
EU
NAFTA
TRADE ALLIANCES

Hofstede’s Dimensions of CultureHofstede’s Dimensions of Culture
(National Social Values)(National Social Values)
 Power DistancePower Distance
 Uncertainty AvoidanceUncertainty Avoidance
 Individualism/CollectivismIndividualism/Collectivism
 Masculinity/FemininityMasculinity/Femininity
 Time OrientationTime Orientation

Power DistancePower Distance
High power distanceHigh power distance means peoplemeans people
accept inequality in power amongaccept inequality in power among
institutions, organizations, and peopleinstitutions, organizations, and people
Uncertainty AvoidanceUncertainty Avoidance
High uncertaintyHigh uncertainty avoidance means thatavoidance means that
members of a society feelmembers of a society feel
uncomfortable with uncertainty anduncomfortable with uncertainty and
ambiguityambiguity

IndividualismIndividualism
 IndividualismIndividualism reflects a value for areflects a value for a
loosely knit social framework in whichloosely knit social framework in which
individuals are expected to take care ofindividuals are expected to take care of
themselvesthemselves
CollectivismCollectivism
 CollectivismCollectivism is a preference for a tightlyis a preference for a tightly
knit social framework in whichknit social framework in which
individuals look after one anotherindividuals look after one another

Masculinity/FemininityMasculinity/Femininity
(Toughness/Tenderness)(Toughness/Tenderness)
(Achievement/Nurturing)(Achievement/Nurturing)
 MasculineMasculine cultures stress thecultures stress the
importance of achievement, heroism,importance of achievement, heroism,
assertiveness, and material successassertiveness, and material success
 FeminineFeminine cultures value relationships,cultures value relationships,
modesty, caring for the weak, andmodesty, caring for the weak, and
quality of lifequality of life

Time OrientationTime Orientation
 Short-Term OrientationShort-Term Orientation means a greatermeans a greater
concern with the past and present and aconcern with the past and present and a
high value on meeting social obligations.high value on meeting social obligations.
 Long-Term OrientationLong-Term Orientation means a greatermeans a greater
concern for the future and high value onconcern for the future and high value on
the saving and determination.the saving and determination.

Technological EnvironmentTechnological Environment
Changing at “lightning speed”
Internet and telecommunications
Increasing bandwidth/high-speed access
Reduced costs of entry/ leapfrogging
E-business
Customization (“the long end of the tail”)
E-retailing and financial services
 Movement of money across borders
 “E-cash” – a currency without a country
Outsourcing and offshoring
Information as a commodity
The 24-hour office – increased productivity/lower cost

How Organizations Go Global
Three Stages of Globalization
 Stage I
 Exporting products for sale overseas and importing
products from overseas to sell in the home country.
 Stage II
 Committing to directly sell home-country products in
overseas markets or contracting for products to be
manufactured overseas and sold in the home country.
 Stage III
 Licensing manufacturing and franchising services to foreign
firms to use the brand name, technology, or product
specifications developed by the firm.

Other Forms of Globalization
Strategic Alliances
Partnerships between an 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.

Class Debate:
The Pros and Cons of
Globalization

THE PROS AND CONSTHE PROS AND CONS
OF GLOBALIZATIONOF GLOBALIZATION
1. Where do you stand?
2. Key themes to consider
a. Impact on Labor
b. Impact on Equality
c. Impact on Government
d. Impact on the Environment
e. Impact on Culture and Community

Impact on LaborImpact on Labor
 Positive effects
 Increased job opportunities
 Upgraded education system
 Increased training
 Negative effects
 Job displacement
 Loss of industries or
economic groups
 Lowered labor standards
 Downward wage pressure
 Decreased union power
 Diminished social contract

Impact on EqualityImpact on Equality
Positive effects
 Increased income / reduced
poverty
 Increased wages for education or
technically skilled
 Improved economic conditions
 Rich become richer
 Greater access to goods
 Lower cost of goods
 Increased food supply (in some
Negative effects
 Greater disparity between
haves and have-nots within
and across countries
 Some downward pressure
on wages for the poorly
educated or unskilled
 Worsened economic
conditions in marginalized
countries
 Poor become poorer

Impact on GovernmentImpact on Government
Positive effects
 Increased economic
development
 Expanded infrastructure
 Transfer of modern
management techniques
 Greater interdependence
among business
partners
Negative effects
 MNC power increased
 MNCs externalize cost to countries
 Competition results in too many
concessions
 MNCs influence local policies
 Companies incorporate in low tax
countries
 Pressure to reduce social benefits

Impact on the EnvironmentImpact on the Environment
Positive effects
 More efficient use of
resources
 Increased demand for and
transfer of more efficient
technologies
 Increased incomes lead to
greater concern for
environmental protection
Negative effects
 Increased consumption
 Advertising creates artificial
needs
 Greater use of fossil fuels
(increased travel)
 Increased surplus and scarcity
 More factories require more
infrastructure

Impact on Culture/CommunityImpact on Culture/Community
 Positive effects
 Increased cultural exposure
and understanding
 Closer cross-border ties
 Negative effects
 More mobility disrupts social
life, particularly in remote or
rural communities
 Disintegration of local
communities
 Cultural homogenization
and monoculture / reduced
cultural diversity

Globalization: Pros and ConsGlobalization: Pros and Cons
Globalization as “moral conflict”
Impacts of Globalization
Increases economic interdependence
Creates winners and losers
Implications of the debate
For academics
 Need for more objective research
 Need to question assumptions and be open to alternatives
For companies
 Be aware of multiple stakeholder interests
 Follow the guidelines of the UN Global Compact

ConclusionConclusion
Implications for Managers
Lifelong learning
the “most valuable asset is the ability to learn how to learn” (Thomas
Friedman, The World is Flat)
Responsiveness
be alert for changes and quick to respond
Adaptability
knowing how to work with others
being comfortable with uncertainty and ambiguity
Both a local and global perspective
see the big picture (global economy/whole organization)
understand the details of operating at the local level

Managing Global Environment

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