CHAPTER FOUR Flashcards
To understand the history of globalization today, what are the three main terminology?
Globalization → refers to a process by which organizations develop influence or operations across international borders. Allows for the free movement of people, goods, investments, and information technology to flow across borders
Nationalism (opposite of globalization) → Policies such as tariffs that glorify a country’s values, advocates for independence from other countries and places a countries people and businesses first
Parochialism → viewing the world solely through one’s own eyes and perspectives, people with this attitude don’t recognize that others have different ways of living and working (ignore others values and customs)
Managers are found to have one of three attitudes, explain the attitudes
Ethnocentric attitude → the best work approaches and practices are those of the home country, believe that people in foreign countries don’t have the needed skills, expertise, knowledge to make business decisions as well as people in the home country do
Polycentric attitude → view that employees in the host country (foreign) know the best work approaches and practices for running their business
Geocentric attitude → world oriented view that focuses on using the best approaches and people from around the globe
Explain The Win Win argument
The “every country wins” argument was largely based on the law of comparative advantage – that a country should produce goods and services for which it has the lowest opportunity costs (low cost of production → country is able to compete in global markets)
What is the downside of globalization, what happened? What did people begin steering towards?
Critics began arguing that globalization was the major reason for the suffering from wage stagnation, it was keeping wages down for countries like the US and UK by allowing an inflow of immigrants. People argued that globalization and capitalism together have worked to enhance inequality in much of the Western countries.
People began steering towards nationalism; protectionist policies, and increased border controls were being seen as the solution to problems such as unemployment etc
Explain Globalization today, and why it is still intact?
The voices of nationalism and protectionism are the loudest they’ve been, however, globalization is far from dead, globalization is here to stay, why?
It took decades to build the infrastructure and supply chains that support today’s global companies such as Apple and IKEA. They are global firms that have offices, stores, manufacturing facilities in dozens of different countries where they employ tens of millions of workers worldwide. – little political will to undo what has taken decades to build
Overwhelming evidence that free trade is NOT the cause of unemployment, rather technology is, only 13 percent of manufacturing jobs losses in the US was due to trade the REST is due to enhanced productivity attributable to automation
With globalization to stay, managers must ensure what?
That they have the attitudes and skills that global management requires
Continue to develop geocentric attitude and build their cross-cultural sensibilities
Gain international experience by working with global firms and seeking out foreign assignments
Ability to speak more languages as it has a likely chance of opening up doors for decades to come
Important for managers of small businesses to gain an understanding of global markets and learn how to take their business international
Explain the different types of international organizations
Multinational corporation (MNC) → any type of international company that maintains operations in multiple countries
One type of MNC is a multidomestic corporation → decentralizes management and other decisions to the local company (polycentric attitude), and does not replicate its domestic successes by managing foreign operations from its home country. Instead local employees typically are hired to manage the business.
Another type of MNC is a global company → centralizes its management and other decisions in the home country (ethnocentric attitude). Global companies treat the world market as an integrated whole and focus on the need for global efficiency and cost savings
Another type of MNC is transnational or borderless organization → Where other countries use an arrangement that eliminates artificial geographical barriers, (reflects geocentric attitude).
How can organizations go international?
Managers who want to get into a global market may start with global sourcing → purchasing materials or labor from around the world wherever it is cheapest. The goal is to take advantage of lower costs in order to be more competitive
The next step is to involve exporting the organization’s products to other countries – making products domestically and selling them abroad. You could also do importing which involves acquiring products made abroad and selling them domestically
Managers also might use licensing or franchising, which are similar approaches involving one organization giving another organization the right to use its brand name, technology, or product specifications in return for a payment or a fee usually based on sales
Through strategic alliance – partnership between an organization and a foreign company partner or partners in which both share resources and knowledge in developing new products. A specific type of strategic alliance is called a joint venture – where two or more companies create a single legal entity in which each owns a share
Foreign subsidiary → managers may choose to directly invest in a foreign country
what factors must a manager look out for when managing in a global environment?
The Political/Legal Environment
Managers need to know the laws in the various countries in which their organization operates and stay on top of legal changes.
Laws in some countries can be challenging to executives as doing business in different countries comes with different rules.
There are political risks in doing business globally and these political risks are on the rise. The political uncertainty levels have been increasing
The Economic Environment
Global manager must be awake of economic issues when doing business in other countries, it is important to understand a country’s type of economic system
Free market economy → one in which resources are primarily owned and controlled by the private sector
Planned economy → one in which economic decisions are planned by a central government
It is important for global managers to understand currency, exchange rates, inflation rates, and tax policies
The Cultural Environment
National culture → values and attitudes shared by individuals from a specific country that shape their behavior and their beliefs about what is important
To a manager national culture has a greater effect on employers than their organizations culture
What is Hofstede’s framework of assessing cultures?
He developed one of the most widely referenced approaches to helping managers better understand differences between national cultures. His research found that countries vary on five dimensions of national culture
