International Management

Introduction to Management 11e
John Schermerhorn
Chapter 5:Chapter 5:
International ManagementInternational Management

Planning Ahead — Chapter 5 study questions
1. What are the management challenges of
globalization?
2. What are global businesses and what do they
do?
3. What is culture and how does it impact global
management?
4. How can we benefit from global management
learning?

Study Question 1: What are the management challenges of
globalization?
 Key concepts in the challenges of
globalization:
 Global economy
 Globalization
 Global
management
 Global manager
Management 11e/ Chapter 5 3

globalization?
 Global economy
 Resource supplies, product markets, and
business competition are worldwide, rather
than local
 Globalization
 The process of growing interdependence of
these components in the global economy

globalization?
 Global management
 Management in organizations with business interests
in more than one country
 Global manager
 Aware of international developments
and the effect on societies
and economies
 Competent in working with
people from different cultures

globalization?
 Global businesses
 Conduct for-profit transactions of goods and
services across national boundaries
 Reasons why businesses go global:

globalization?
 Market entry strategies
 involve the sale of goods or services to
foreign markets but do not require expensive
investments

globalization?
 Types of market entry strategies:
 Global sourcing
 Exporting
 Importing
 Licensing agreement
 Franchising

Figure 5.1 Common forms of global business—from market entry to
direct investment strategies

Study Question 1: What are the management challenges of globalization?

Study Question 1: What are the international business challenges of
globalization?
 Direct investment
strategies require
major capital
commitments but
create rights of
ownership and
control over foreign
operations

globalization?
 Types of direct investment strategies:

globalization?

globalization?
 Legal and political systems
 Differing laws and practices regarding
 Business ownership
 Foreign currency exchange
 Protection of intellectual property rights
 Counterfeit merchandise

globalization?
 Legal and political systems
 Political risk
 Potential loss in value of a foreign investment due
to instability and political changes in the host
country
 Political risk analysis
 Forecast political disruptions that threaten the
value of a foreign investment

globalization?
 Trade Agreements and Trade Barrriers
 World Trade Organization
 Most favored nation status
 Tariffs
 Nontariff barriers
 Protectionism

globalization?
 Regional Economic Alliances
 NAFTA – North American Free Trade
Agreement
 EU – European Union
 APEC – Asia Pacific Economic Cooperation
 ASEAN – Association of Southeast Asian
Nations
 SADC – Southern Africa Development
Community

Study Question 2: What are global businesses and what do they do?
 Types of global businesses:
 Global corporation
 MNC (multinational corporation) with extensive
business operations in more than one foreign
country
 Transnational corporation
 MNC (multinational corporation) operates
worldwide on a borderless basis

 Mutual benefits for host country and
global corporation or MNC:
 Shared growth opportunities
 Shared income opportunities
 Shared learning opportunities
 Shared development opportunities

Figure 5.2 What should go right and what can go wrong in MNC-
host country relationships

 Host country complaints about MNCs:
 Excessive profits
 Domination of local economy
 Interference with local government
 Hiring the best local talent
 Limited technology transfer
 Disrespect for local customs

 MNC complaints about host countries:
 Profit limitations
 Overpriced resources
 Exploitative rules
 Foreign exchange restrictions
 Failure to uphold contracts

 Ethical issues for Global Businesses:
 Corruption – illegal practices that further
one’s business interests
 Foreign Corrupt Practices Act – makes it
illegal for U.S. firms and their representatives
to engage in corrupt practices overseas
 Bribes to foreign officials
 Excessive commissions
 Non monetary gifts

 Child labor and Sweatshops:
 Child labor – full time employment of children
for work otherwise done by adults
 Sweatshops – employ workers at very low
wages for long hours in poor working
conditions

Study Question 3: What is culture and how does it impact global
management?

management?
 Stages in adjusting to
a new culture:

management?
Silent
languages of
culture

management?
 Context
 Low context cultures - emphasize
communication via spoken or written words
 United States
 Canada
 Germany

management?
 Context
 High context cultures – rely on nonverbal and
situational cues as well
as on spoken or written
words
 Thailand
 Malaysia

management?
 Time
 Monochronic cultures – people
tend to do one thing at a time
 United States, Canada, Germany
 Polychronic cultures – time is
used to accomplish many
different things at once
 Egypt, Saudi Arabia, Mexico

management?
 Space
 Proxemics – study of how people use space
to communicate
 In the U.S. people value “personal space”
 Many Latin and Asian
cultures expect much
less personal space

management?
 Values and national cultures (Hofstede):

Figure 5.3 How countries compare on Hofstede’s dimension of
national culture

Study Question 4: How can we benefit from global management
learning?
 Project GLOBE (Global Leadership and
Organizational Behavior Effectiveness)
 Researches the leadership, organizational
practices, and diversity among world cultures
 Power distance
 Uncertainty avoidance
 Gender egalitarianism
 Future orientation

learning?
 Project GLOBE’s nine dimensions continued
 Institutional collectivism
 In-group collectivism
 Assertiveness
 Performance orientation
 Humane orientation

learning?
 Project GLOBE’s research on leadership
practices across cultures
 Facilitators of leadership success
 Acting trustworthy, just, honest
 Showing foresight, planning
 Being positive, dynamic, motivating
 Inspiring confidence
 Being informed and communicative
 Being a coordinator and team builder

learning?
 Project GLOBE’s research on leadership
practices across cultures
 Inhibitors of leadership success
 Being a loner
 Acting uncooperative
 Being irritable
 Acting autocratic

Figure 5.4 Nine cultural dimensions used by Project GLOBE
researchers

Study Question 4: How can we benefit from global management learning?
 Comparative management
 How management systematically differs
among countries and/or cultures
 Global managers
 Need to successfully apply management
functions across international boundaries

Study Question 4: How can we benefit from global management learning?
 Global management learning:
 Companies can and should learn from each
other
 GLOBE dimensions
 Power distance
 Uncertainty avoidance
 Future orientation
 Etc.
 Be alert, open, inquiring, but always cautious

Chapter 5 Case
 Harley-Davidson: Style and Strategy have
Global Reach

International Management

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