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Organizations and managers are not isolated
from international forces
Trade barriers have fallen
Communication is faster, cheaper
Consumer tastes converge

Organizations address the needs and desires

that transcend national boundries

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 Ability of managers to appreciate and
influence individuals, groups, organizations,
and systems that represent:
Different social, cultural, political,
institutional, intellectual, and psychological
characteristics
 Develop by engaging with people from
different cultures

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 China Inc.

China manufactures many products for

U.S. companies

China is also a growing consumer market

Regulations and government policies

make doing business in China a
challenge

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 India is a service giant, growing in software
design and engineering

 Brazil is a country that is gaining the

attention of American managers

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 The size and volume of international
business is LARGE
Companies have revenue = GDP of small
country
Move assets from country to country
25% or more of its profit comes from outside
parent country
 MNC is managed as an integrated whole

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 Controlled by one management authority
 MNC managers must have a global
perspective
 Ethnocentric companies – place emphasis
on their home countries
 Polycentric companies – oriented toward
the markets of individual foreign host
countries
 Geocentric companies – world oriented
and favor no specific country
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 68% of Americans say other countries
benefit the most from free trade
53% believe free trade has hurt U.S.

 The United States’ primary concern is the

loss of jobs

 Another trouble spot is how overseas

contractors and suppliers treat employees
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 Business leaders insist that economic
benefits flow back to the U.S. economy
Lower prices and expanded markets
Increased profits and funds for innovation

 But American shoppers say they would pay

higher prices to keep down foreign
competition

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 An approach for multinationals to do good
 Corporations can alleviate problems and
make large profits by selling to the world’s
poor
 There are more than 4 billion people at the
lowest level of the economic pyramid
 Many companies are adopting BOP
strategies

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 Exporting – transferring products for sale to
foreign countries
 Outsourcing – also called offshoring, work
activities are done in countries with cheap
labor

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 Licensing – enabling a company to produce
and market a product in another country
 Franchising is licensing that provides a complete
package of materials and services

 Direct investing – high level of involvement,

company manages and controls assets
 Joint venture and other types of partnerships are
common – wholly owned subsidiary, greenfield
venture

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 Planning, organizing, leading, and
controlling in multiple countries can be
challenging
It took McDonald’s a year to figure out that
Hindus in India do not eat beef
In Africa, the labels on bottles include
pictures to aid illiterate consumers
 Managers must be mindful in the global
marketplace
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 Economic development – Countries are
categorized as either developed or
developing based on per capita income
Government policies

Market size
Financial markets
Infrastructure

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 Economic interdependence
The current economic crisis has highlighted
how interconnected economies are around
the world

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 Political risk is defined as the risk of lost
assets, earning power, or managerial
control
 Political instability includes riots, revolutions,
civil disorders, and frequent changes in
government

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The values and behaviors that govern U.S.
business do not always translate
 Social values
 Communication differences

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 Power distance
 Uncertainty avoidance
 Individualism and collectivism
 Masculinity and femininity

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 Assertiveness
 Future orientation
 Gender differentiation
 Performance orientation
 Humane orientation

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 General Agreement on Tariff and Trade
(GATT)
23 nations in 1947, a set of rules for fair trade
 World Trade Organization (WTO)
Maturation of GATT into permanent global
institute

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 European Union
1957 alliance to improve economic and
social conditions among members; evolved
to 28-nation European Union
 North American Free Trade Agreement
(NAFTA)
Merged the United States, Canada, and
Mexico into a single market

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