Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 4–1
Managing in aManaging in a
GlobalGlobal
EnvironmentEnvironment
ChapterChapter
44
Management
Stephen P. Robbins Mary Coulter
tenth edition

Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 4–2
Learning OutcomesLearning Outcomes
Follow this Learning Outline as you read and studyFollow this Learning Outline as you read and study
this chapter.this chapter.
4.1 What’s Your Global perspective?
• Define parochialism.Define parochialism.
• Contrast ethnocentric, polycentric, and geocentricContrast ethnocentric, polycentric, and geocentric
attitudes towards global business.attitudes towards global business.
4.2 Understanding The global Environment
• Describe the current status of the EU, NAFTA,Describe the current status of the EU, NAFTA,
ASEAN and other Regional Trade Allowances.ASEAN and other Regional Trade Allowances.
• Discuss the role of the WTO.Discuss the role of the WTO.

Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 4–3
Learning OutcomesLearning Outcomes
4.3 Doing Business Globally
• Contrast multinational, multidomestic, global,Contrast multinational, multidomestic, global,
transnational, and born global organizations.transnational, and born global organizations.
• Describe the different ways organizations can goDescribe the different ways organizations can go
international.international.
4.4 Managing In A Global Environment.
• Explain how the global legal-political and economicExplain how the global legal-political and economic
environments affect managers.environments affect managers.
• Discuss Hofstede’s five dimensions for assessingDiscuss Hofstede’s five dimensions for assessing
cultures.cultures.
• Describe the challenges of doing business globally inDescribe the challenges of doing business globally in
today’s world.today’s world.

Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 4–4
Learning OutcomesLearning Outcomes
4.4 Managing In A Global Environment.
• Explain how the global legal-political and economicExplain how the global legal-political and economic
environments affect managers.environments affect managers.
• Discuss Hofstede’s five dimensions for assessingDiscuss Hofstede’s five dimensions for assessing
cultures.cultures.
• Describe the challenges of doing business globally inDescribe the challenges of doing business globally in
today’s world.today’s world.

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The Global MarketplaceThe Global Marketplace
• Opportunities and ChallengesOpportunities and Challenges
 Coping with the unexpected appearance of newCoping with the unexpected appearance of new
competitorscompetitors
 Acknowledging cultural, political, and economicAcknowledging cultural, political, and economic
differencesdifferences
 Dealing with increased uncertainty, fear, and worryDealing with increased uncertainty, fear, and worry
 Adapting to changes in the global environmentAdapting to changes in the global environment
 Avoiding parochialismAvoiding parochialism

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

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Adopting a Global PerspectiveAdopting a Global Perspective
• Ethnocentric AttitudeEthnocentric Attitude
 The parochalistic belief that the best work approachesThe parochalistic belief that the best work approaches
and practices are those of theand practices are those of the homehome country.country.
• Polycentric AttitudePolycentric Attitude
 The view that the managers in theThe view that the managers in the hosthost country knowcountry know
the best work approaches and practices for runningthe best work approaches and practices for running
their business.their business.
• Geocentric AttitudeGeocentric Attitude
 AA world-orientedworld-oriented view that focuses on using the bestview that focuses on using the best
approaches and people from around the globe.approaches and people from around the globe.

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Regional Trading AgreementsRegional Trading Agreements
• The European Union (EU)The European Union (EU)
 A unified economic and trade entityA unified economic and trade entity
 Belgium, Denmark, France, Greece, Ireland, Italy,Belgium, Denmark, France, Greece, Ireland, Italy,
Luxembourg, the Netherlands, Portugal, Spain, the UnitedLuxembourg, the Netherlands, Portugal, Spain, the United
Kingdom, Germany, Austria, Finland, and SwedenKingdom, Germany, Austria, Finland, and Sweden
• North American Free Trade Agreement (NAFTA)North American Free Trade Agreement (NAFTA)
 Eliminated barriers to free trade (tariffs, importEliminated barriers to free trade (tariffs, import
licensing requirements, and customs user fees)licensing requirements, and customs user fees)
 United States, Canada, and MexicoUnited States, Canada, and Mexico

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Exhibit 4–1Exhibit 4–1 European UnionEuropean Union

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Regional Trading AgreementsRegional Trading Agreements
• U.S.-Central America Free Trade Agreement (CAFTA)U.S.-Central America Free Trade Agreement (CAFTA)
• Free Trade Area of the AmericasFree Trade Area of the Americas
• Southern Cone Common Market (Mercosur)Southern Cone Common Market (Mercosur)
• Association of Southeast Asian Nations (ASEAN)Association of Southeast Asian Nations (ASEAN)
 Trading alliance of 10 Southeast Asian nationsTrading alliance of 10 Southeast Asian nations
• African UnionAfrican Union
• South Asian Association for Regional CooperationSouth Asian Association for Regional Cooperation
(SARRC)(SARRC)

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Exhibit 4–2Exhibit 4–2 ASEAN MembersASEAN Members
Source: Based on J. McClenahen and T. Clark,
“ASEAN at Work,” IW. May 19, 1997, p. 42.

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The World Trade OrganizationThe World Trade Organization
(WTO)(WTO)
• Evolved from the General Agreement on TariffsEvolved from the General Agreement on Tariffs
and Trade (GATT) in 1995.and Trade (GATT) in 1995.
• Functions as the only global organizationFunctions as the only global organization
dealing with the rules of trade among nations.dealing with the rules of trade among nations.
• Has 149 member nations and 32 observerHas 149 member nations and 32 observer
governments.governments.
• Monitors and promotes world trade.Monitors and promotes world trade.

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

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Different Types of InternationalDifferent Types of International
Organizations (cont’d)Organizations (cont’d)
• Transnational Corporation (BorderlessTransnational Corporation (Borderless
Organization)Organization)
 Is an MNC that has eliminated structural divisions thatIs an MNC that has eliminated structural divisions that
impose artificial geographic barriers and is organizedimpose artificial geographic barriers and is organized
along business lines that reflect a geocentric attitude.along business lines that reflect a geocentric attitude.

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Managing in A GlobalManaging in A Global
EnvironmentEnvironment
• The Legal EnvironmentThe Legal Environment
 Stability or instability of legal and political systemsStability or instability of legal and political systems
 Legal procedures are established and followedLegal procedures are established and followed
 Fair and honest elections held on a regular basisFair and honest elections held on a regular basis
 Differences in the laws of various nationsDifferences in the laws of various nations
 Effects on business activitiesEffects on business activities
 Effects on delivery of products and servicesEffects on delivery of products and services

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The Economic EnvironmentThe Economic Environment
• Economic SystemsEconomic Systems
 Free market economyFree market economy
 An economy in which resources are primarily owned andAn economy in which resources are primarily owned and
controlled by the private sector.controlled by the private sector.
 Planned economyPlanned economy
 An economy in which all economic decisions are planned byAn economy in which all economic decisions are planned by
a central government.a central government.
• Monetary and Financial FactorsMonetary and Financial Factors
 Currency exchange ratesCurrency exchange rates
 Inflation ratesInflation rates
 Diverse tax policiesDiverse tax policies

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The Cultural EnvironmentThe Cultural Environment
• National CultureNational Culture
 Is the values and attitudes shared by individuals fromIs the values and attitudes shared by individuals from
a specific country that shape their behavior and theira specific country that shape their behavior and their
beliefs about what is important.beliefs about what is important.
 May have more influence on an organization than theMay have more influence on an organization than the
organization culture.organization culture.

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Exhibit 4–4Exhibit 4–4 What Are Americans LikeWhat Are Americans Like
Americans are very informal.
Americans are direct.
Americans are competitive.
Americans are achievers.
Americans are independent and individualistic.
Americans are questioners.
Americans dislike silence.
Americans value punctuality.
Americans value cleanliness.
Sources: Based on M. Ernest (ed.), Predeparture Orientation Handbook: For Foreign Students and Scholars Planning to Study in the
United States (Washington, DC: U.S. Information Agency, Bureau of Cultural Affairs, 1984), pp. 103–05; A. Bennett, “American Culture Is
Often a Puzzle for Foreign Managers in the U.S.,” Wall Street Journal, February 12, 1986, p. 29; “Don’t Think Our Way’s the Only Way,”
The Pryor Report, February 1988, p. 9; and B.J. Wattenberg, “The Attitudes behind American Exceptionalism,” U.S. News & World
Report, August 7, 1989, p. 25.

Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 4–19
Global Management in Today’sGlobal Management in Today’s
WorldWorld
• ChallengesChallenges
 Openness associated with globalizationOpenness associated with globalization
 Significant cultural differences (e.g., Americanization)Significant cultural differences (e.g., Americanization)
 Adjusting leadership styles and managementAdjusting leadership styles and management
approachesapproaches
• RisksRisks
 Loss of investments in unstable countriesLoss of investments in unstable countries
 Increased terrorismIncreased terrorism
 Economic interdependenceEconomic interdependence

Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 4–20
Terms to KnowTerms to Know
• parochialismparochialism
• ethnocentric attitudeethnocentric attitude
• polycentric attitudepolycentric attitude
• geocentric attitudegeocentric attitude
• European Union (EU)European Union (EU)
• EuroEuro
• North American Free TradeNorth American Free Trade
Agreement (NAFTA)Agreement (NAFTA)
• Association of Southeast AsianAssociation of Southeast Asian
Nations (ASEAN)Nations (ASEAN)
• World Trade OrganizationWorld Trade Organization
(WTO)(WTO)
• multinational corporationsmultinational corporations
(MNCs)(MNCs)
• multidomestic corporationmultidomestic corporation
• global companyglobal company
• transnational or borderlesstransnational or borderless
organizationorganization
• born globalsborn globals
• global sourcingglobal sourcing
• exportingexporting
• importingimporting
• licensinglicensing
• franchisingfranchising
• strategic alliancesstrategic alliances
• joint venturejoint venture
• foreign subsidiaryforeign subsidiary
• market economymarket economy
• command economycommand economy
• national culturenational culture
• GLOBEGLOBE
• wikiswikis
• blogsblogs