Chapter FourGlobalization: The Collapse of Time & DistanceExample: Worldwide E-Commerce – Amazon.comOne Big World Market: The Global EconomyWhy Learn About International Management?The Successful International ManagerSlide 7Why Companies Expand InternationallyFive Ways of Expanding InternationallyHow Companies Expand InternationallySlide 11Slide 12Slide 13Slide 14Barriers to International TradeOrganizations Promoting International TradeSlide 17Major Trading BlocsSlide 19The Importance of National CultureA Few ExamplesThe Globe Project’s Nine Cultural DimensionsSlide 23Slide 24Other Cultural VariationsU.S. Managers on Foreign Assignments: Why Do They Fail?Chapter FourGlobal Management:Managing Across BordersMcGraw-Hill/IrwinCopyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved.4-4-22Globalization: The Collapse of Time & DistanceGlobalization the trend of the world economy toward becoming a more interdependent systemthe “shrinking” of time and space as air travel and the electronic media have made it much easier and less costly for the people of the globe to communicate and do businessoffshoring and foreign direct investment in America (emerging auto industry in the south)4-4-33Example: Worldwide E-Commerce – Amazon.comJeffrey Bezos left Wall Street in 1994 to launch an online bookstore called Amazon.comExpanded from books to nonbook areasCan delivery goods to anywhere in the worldPartners with other businessesIt reported 2011 net sales of $48.07 billion,4-4-44One Big World Market: The Global EconomyGlobal economy the increasing tendency of the economies of the world to interact with one another as one market instead of many national marketsPositive effects more markets for American exportsNegative effects vast surplus funds from global investments flowed into U.S. that were invested badly in subprime mortgages4-4-55Why Learn About International Management?You may deal with foreign customers or partnersYou may deal with foreign employees or suppliersYou may work for a foreign firm in the United StatesYou may work for an American firm outside the United States – or for a foreign one4-4-66The Successful International ManagerEthnocentric managers believe that their native country, culture, language, and behavior are superior to all othersParochialism narrow view in which people see things solely through their own perspective4-4-77The Successful International ManagerPolycentric managers take the view that native managers in the foreign offices best understand native personnel and practices, and so the home office should leave them aloneGeocentric managers accept that there are differences and similarities between home and foreign personnel and practices and that they should use whatever techniques are most effective4-4-88Why Companies Expand Internationally1. Availability of supplies2. New markets3. Lower labor costs4. Access to finance capital5. Avoidance of tariffs & import quotas4-4-99Five Ways of Expanding InternationallyFigure 4.14-4-1010How Companies Expand InternationallyGlobal outsourcing using suppliers outside the U.S. to provide labor, goods, or serviceshttp://www.mint.com/blog/trends/outsourcing-12172010/4-4-1111How Companies Expand InternationallyImporting a company buys goods outside the country and resells them domestically Exporting a company produces goods domestically and sells them outside the countryCountertrading bartering goods for goods4-4-1212How Companies Expand InternationallyLicensing a firm allows a foreign company to pay it a fee to make or distribute the firm’s product or serviceFranchising a firm allows a foreign company to pay it a fee and a share of the profit in return for using the firm’s brand name and a package of materials and services4-4-1313How Companies Expand InternationallyJoint ventures formed with a foreign company to share the risks and rewards of starting a new enterprise together in a foreign country also known as a strategic alliance China enforces these on automakers4-4-1414How Companies Expand InternationallyWholly-owned subsidiary foreign subsidiary that is totally owned and controlled by an organizationGreenfield venture a foreign subsidiary that the owning organization has built from scratch.4-4-1515Barriers to International TradeTariffs customs duty, or tax, levied mainly on importsExample: NAFTA has cut duties in NA marketsImport quotas limits on the numbers of a product that can be importedEmbargoes complete ban on the import or export of certain products (Cuba)4-4-1616Organizations Promoting International TradeWorld Trade Organization (WTO) designed to monitor and enforce trade agreementsAgreements are based on the General Agreement on Tariffs and Trade (GATT)Consist of 153 countrieshttp://www.wto.org/4-4-1717Organizations Promoting International TradeWorld Bank purpose is to provide low-interest loans to developing nations for improving transportation, education, health, and telecommunicationshttp://www.worldbank.org/International Money Fund (IMF) designed to assist in smoothing the flow of money between nationshttp://www.imf.org/external/index.htm4-4-1818Major Trading BlocsTrading bloc group of nations within a geographic region that have agreed to remove trade barriers with one another also known as an economic community4-4-1919Major Trading BlocsNAFTA – U.S., Canada, MexicoEuropean Union – 27 trading partners in EuropeAPEC – group of 21 Pacific Rim countriesASEAN - trading bloc of 11 countries in AsiaMercosur – trading bloc in Latin AmericaCAFTA – Central America4-4-2020The Importance of National CultureCulture shared set of beliefs, values, knowledge, and patterns of behavior common to a groupLow-context culture shared meanings are primarily derived from written and spoken wordsHigh-context culture people rely heavily on situational cues for meaning when communicating with others4-4-2121A Few ExamplesHSBC Commercialshttp://www.youtube.com/watch?v=ZW6yxD4MpQohttp://www.cicb.net/en/home/examples4-214-4-2222The Globe Project’s Nine Cultural DimensionsPower distance how much unequal distribution of power should there be in organizations and societyUncertainty avoidance how much should people rely on social norms and