Intro to Management Session 21 (Final)
Terms in this set (40)
the shift toward a more integrated and interdependent world economy
• interdependent, integrated global economic system
• self-contained national economies
6 Factors that Drive Globalization
(Reasons for Globalization)
1. Diminishing Distance and Communication Challenges
2. Evolving Political Economies
3. Recognition of the Mutual Benefits
4. Declining Barriers to Trade
5. The Development of the Multi-National Enterprise (MNE)
6. Development & Support of Global Institutions
1. Overcome Distance and Communication
distance & communication challenges
s*: markets were historically closed b/c of the slowness of travel & communications over long distances
:* language barriers & cultural practices made managing overseas businesses difficult
:* improvement in transportation tech & fast, secure communications have greatly reduced the barriers of physical & cultural distances
2. Evolving Political Economies
: interdependent nature of the economic, political, and legal systems within a country.
• positive changes in the political economies of many countries have resulted in more mutual receptivity to trade relations with other countries
3. Recognition of the mutual benefits
: idea that if each country specialized in the production of the goods and services that it can produce most efficiently, this will make the best use of global resources and will result in lower prices.
• if Indian companies are highly efficient in the production of textiles and U.S. companies are highly efficient in the production of computer software, then, under a free-trade agreement, capital would move to India and be invested there to produce textiles, while capital from around the world would flow to the United States and be invested in its innovative computer software companies
4. Declining barriers to trade
Reduction of Tariffs
: tariffs are a tax that government imposes on imported or exported goods.
• intended to protect domestic industry and jobs from foreign competition.
T*: General Agreement on Tariffs & Trade (signed in April 1947)
• Other countries usually retaliate their own tariffs, actions that eventually reduce the overall amount of trade and impedes economic growth
Lowering of Trade Barriers:
• opened enormous opportunities to expand the market
• allowed to buy & sell goods and services globally
• increased intensity of global competition
5. Development of Multinational Enterprise (MNE)
: any business that has productive activities in two or more countries
• since the 1960s:
- the number of non-US multinationals & mini-multinationals has risen
6. Development of Global Institutions
help manage, regulate, and police the global marketplace
• promote the establishment of multinational treaties to govern the global business system
• examples: GATT, WTO, IMF, World Bank, UN, G20
set of specific and general forces that work together to integrate and connect economic, political, and social systems across countries, cultures, or geographical regions so that nations become increasingly interdependent and similar.
What does globalization mean for firms?
impact of the six factors means firms will:
- view the world, rather than just their home country, as their market
- locate production and other factors (R&D) in the optimal location for that activity
but firms may also find their home markets under attacks by foreign firms!
Barriers to Entry
factors that make it difficult and costly for the organization to enter a particular task environment or industry
economies of scale:
cost advantages associated w/ large operations
customers' preference for the products of organizations currently existing in the task environment
that impede entry
Globalization of Production
sourcing of goods and services from locations around the globe to take advantage of national differences in the cost and quality of
factors of production
(such as labor, energy, land, and capital)
• companies can:
- lower overall cost structure
- improve the quality or functionality of product offering
purchase or production of inputs or final products from overseas suppliers to lower costs and improve product quality or design.
set of forces and conditions in the world outside the organization's boundaries that affect the way it operates and shapes its behavior
• changes over time
• presents opportunities and threats
Forces in the
1. Task Environment
set of forces and conditions that originate with
suppliers, distributors, customers, & competitors
and affect an organization's ability to obtain inputs and dispose of its outputs because they influence managers daily. (middle circle)
2. General Environment
the wide-ranging global, economic, technological, sociocultural, demographic, political, and legal forces that affect an organization and its task environment. (outer circle)
Forces in the
1. Sociocultural Forces
pressures emanating from the social structure of a country or society or from the national culture.
2. Political and Legal Forces
outcomes of changes in laws and regulations, such as deregulation of industries, privatization of organizations, and increased emphasis on environmental protection.
3. Economic Forces
interest rates, inflation, unemployment, economic growth, and other factors that affect the general health and well-being of a nation or the regional economy of an organization.
4. Technological Forces
outcomes of changes in the technology that managers use to design, produce, or distribute goods and services.
5. Demographic Forces
outcomes of change in, or changing attitudes toward, the characteristics of a population, such as age, gender, ethnic origin, race, sexual orientation, and social class.
Forces in the
between competitors is potentially the most threatening
that managers deal with.
access to raw materials, component parts, and labor (employees) can be critical in foreign markets.
powerful distributors can limit access to markets through its
control of customers
in those markets.
and producing the goods & services they want is crucial to organizational and managerial
-unwritten, informal codes of conduct that prescribe how people should act in particular situations and are considered important by most members of a group or organization.
Role of National Culture
• ideas about what a society believes to be good, right, desirable and beautiful.
• provides the basic underpinnings for notions of individual freedom, democracy, truth, justice, honestly, loyalty, love, sex, marriage, etc.
• unwritten, informal codes of conduct that prescribe how people should act in particular situations & are considered important by most members of a group or organization
• folkways, mores
Hofstede's Dimensions of National Culture
• Individualism vs Collectivism
• Low/High Power Distance
• Achievement vs Nurturing Orientation
• Low/High Uncertainty Avoidance
• Short-Term/Long-Term Orientation
worldview that values subordination of the individual to the goals of the group and adherence to the principle that people should be judged by their contribution to the group.
worldview that values individual freedom and self-expression and adherence to the principle that people should be judged by their individual achievements rather than their social background.
degree to which societies accept the idea that inequalities in the power and well-being of their citizens are due to differences in individuals' physical and intellectual capabilities and heritage.
worldview that values the quality of life, warm personal friendships, and services and care for the weak.
worldview that values assertiveness, performance, success, and competition.
degree to which societies are willing to tolerate uncertainty and risk
high uncertainty avoidance:
:* societies are more rigid and expect high conformity in their citizens' beliefs and norms of behavior
low uncertainty avoidance:
:* cultures are easygoing, value diversity, and tolerate differences in personal beliefs and actions
Long Term Orientation
worldview that values thrift and persistence in achieving goals.
Short Term Orientation
worldview that values personal stability or happiness and living for the present.
natural cultures vary by these dimensions
• variations in dimensions by country are
not necessarily bad or good
d*, just reflect differences in cultures
• understanding the general nature of a culture using these dimensions helps to
better appreciate & engage
e* with members of that culture
• not everyone within a culture necessarily exhibits the same characteristics as suggested by the dimensions. the dimensions
apply overall to a society's proclivity rather than to specific attributes of any one individual