Management

Stephen P. Robbins Mary Coulter

Chapter Managing in a
4 Global
Environment
Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 4–1
Learning Outcomes
Follow this Learning Outline as you read and study
this chapter.

4.1 What’s Your Global perspective?

• Define parochialism.
• Contrast ethnocentric, polycentric, and geocentric
attitudes towards global business.
4.2 Understanding The global Environment
• Describe the current status of the EU, NAFTA,
ASEAN and other Regional Trade Allowances.
• Discuss the role of the WTO.

Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 4–2

The Global Marketplace
• Opportunities and Challenges
 Coping with the unexpected appearance of new
competitors
 Acknowledging cultural, political, and economic
differences
 Dealing with increased uncertainty, fear, and worry
 Adapting to changes in the global environment
 Avoiding parochialism

Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 4–3

What’s Your Global
Perspective?
• Parochialism
 Is viewing the world exclusively through one’s own
eyes and perspectives.
 Is not recognizing that others have different ways of
living and working.
 Is a significant problem for managers working in a
global business world.
 Is falling into the trap of ignoring others’ values and
customs and strictly applying an attitude of “ours is
better than theirs” to foreign cultures.

Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 4–4

Adopting a Global Perspective
• Ethnocentric Attitude
 The parochialistic belief that the best work
approaches and practices are those of the home
country.
• Polycentric Attitude
 The view that the managers in the host country know
the best work approaches and practices for running
their business.
• Geocentric Attitude
 A world-oriented view that focuses on using the best
approaches and people from around the globe.

Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 4–5

Regional Trading Alliances
• SAARC
 Established on December 1985
Member Countries include Bangladesh, Bhutan,
India, Maldives, Nepal, Pakistan & Srilanka
The Association provides a platform for the
peoples of South Asia to work together with a
spirit of friendship, trust and Understanding

4–6
Contd.
 Cooperation in the SAARC is based on the
respect for principles:-
• Sovereign Equality
• Political Independence
• Decisions taken based on unanimity

Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 4–7

Agreed Areas of Cooperation:
Agriculture and rural development
Women ,Youth & Children
Environment & Forestry
Health and Population Activities
Human Resource Development
Now they are also working on eliminating tariffs
between member countries

Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 4–8

Contd.
• The European Union (EU)
 A unified economic and trade entity
 Belgium, Denmark, France, Greece, Ireland, Italy,
Luxembourg, the Netherlands, Portugal, Spain, the United
Kingdom, Germany, Austria, Finland, and Sweden

• North American Free Trade Agreement (NAFTA)

 Eliminated barriers to free trade (tariffs, import
licensing requirements, and customs user fees)
 United States, Canada, and Mexico

Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 4–9

Exhibit 4–1 European Union

Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 4–10

Regional Trading Agreements
• U.S.-Central America Free Trade Agreement (CAFTA)
• Southern Cone Common Market (Mercosur)
• Association of Southeast Asian Nations (ASEAN)
 Trading alliance of 10 Southeast Asian nations
• African Union

Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 4–11

 Exhibit 4–2 ASEAN Members

Source: Based on J. McClenahen and T. Clark,

“ASEAN at Work,” IW. May 19, 1997, p. 42.

Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 4–12

The World Trade Organization
(WTO)
• Evolved from the General Agreement on Tariffs
and Trade (GATT) in 1995.
• Functions as the only global organization
dealing with the rules of trade among nations.
• Monitors and promotes world trade.

Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 4–13

Different Types of International
Organizations
• Multinational Corporation (MNC)
 Maintains operations in multiple countries.
• Multidomestic Corporation
 Is an MNC that decentralizes management and other
decisions to the local country.
• Global Company
 Is an MNC that centralizes its management and other
decisions in the home country.

Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 4–14

Different Types of International
Organizations (cont’d)

• Transnational Corporation (Borderless

Organization)
 Is an MNC that has eliminated structural divisions that
impose artificial geographic barriers and is organized
along business lines that reflect a geocentric attitude.

Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 4–15

How the organizations going
Global
• Global sourcing:
• Purchasing materials and labor from around the
world based on lowest cost
• The goal is to take advantage of lower costs in
order to be more competitive

Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 4–16

How the organizations going
Global

 Exporting
Making products domestically and selling them
abroad
 Importing
Acquiring products made abroad and selling them
domestically

Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 4–17

Contd.
 Licensing
Involving one organization giving another
organization the right to use its brand name,
technology, product specifications in return of
some lump sum payment or a fee usually based
on sales

(Used by manufacturing Organization to make

and sell product)

Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 4–18

Contd.
 Franchising
It is used by service organization to use another
company’s name and operating methods

Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 4–19

Contd.
 Strategic Alliance
A partnership between an organization and a
foreign company partner in which both share
resources and knowledge in developing new
products.
Example: Honda motor Company and General
Electric teamed up to produce a new jet engine

Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 4–20

Contd.
• Joint Venture
A form of strategic Alliance in which partners
form a separate independent organization for
some business purpose
Example:
Hewlett-packard has numerous joint ventures with
various suppliers around the globe to develop
different components for its computer equipment

Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 4–21

Contd.
 Foreign Subsidiary
Managers choose directly invest in a foreign
country as a separate and independent facility or
office.
This subsidiary can be managed as multi
domestic or as a global organization.

Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 4–22

 Terms to Know
• parochialism • born globals
• ethnocentric attitude • global sourcing
• polycentric attitude • exporting
• geocentric attitude • importing
• European Union (EU) • licensing
• North American Free Trade • franchising
Agreement (NAFTA) • strategic alliances
• Association of Southeast Asian • joint venture
Nations (ASEAN) • foreign subsidiary
• World Trade Organization
(WTO)
• multinational corporations
(MNCs)
• multidomestic corporation
• global company
• transnational or borderless
organization

Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 4–23