3 chapter

Let’s Get Real:

Meet the Manager
Cheryl Trewatha
Sr. Group Manager Quality Assurance
Target Corp.
Brooklyn Park, MN

MY JOB:
My team validates that Target branded product shipped
You’ll be hearing more from this real from anywhere in the world meets U.S. federal, state, and
manager throughout the chapter. Target quality, safety, and performance standards.

BEST PART OF MY JOB:

Because my team is responsible for handling the diverse
group of products from the more than a dozen countries
that we manufacture in, we are always facing new,
unique, and ever-changing problems to solve.
 Managing in a
Global Environment

3.1 3.2 3.3 3.4

Contrast ethnocentric, Discuss the Describe the structures Explain the relevance
polycentric, and importance of and techniques of the political/legal,
geocentric attitudes regional trading organizations use as economic, and
toward global alliances and global they go international. cultural environments
business. trade mechanisms. page 77 to global business.
page 71 page 72 page 80

LEARNING OUTCOMES

WORST PART OF MY JOB:

Trying to interpret laws and regulations set by state and federal governing bodies
around product manufacturing and compliance and apply them to a worldwide
manufacturing base.

BEST MANAGEMENT ADVICE EVER RECEIVED:

Your team is your most valuable resource; be sure to maximize its potential.

69
A Manager’s Dilemma
Crunchy Taco—Potato. Paneer standards of living and an enthusiasm to embrace
(cheese) and Potato Burritos.1 These Western brands.” However,Yum’s push into India puts
names may sound strange unless it into a battle with the other major fast-food compa-
you’re a customer at a Taco Bell nies for the wallets and appetites of consumers in
restaurant in India. Yum Brands Inc. one of the world’s most populous countries.
(the parent company of Taco Bell, Although 60 percent of Yum’s profits now come
Pizza Hut, and KFC) opened its first from overseas markets, Graham Allen and Niren
Taco Bell in Bangalore in early 2010. Chaudhary, the managing director of Yum’s India
With an increasingly affluent con- business, recognize the challenges that face them
sumer base, India is an attractive in establishing a strong presence in India. One such
market for fast-food chains. Graham challenge is understanding the cultural differences
Allen, president of Yum’s international in managing employees. How will corporate
division, said, “What we’re seeing in processes and procedures need to change to ac-
India is similar to what we saw in commodate its newly hired Indian employees?
China a decade ago. You have a
young population with improving
What Would You Do?
Despite their vast experience in global markets, managers at Yum Brands still face chal-
lenges as they enter new markets. Even large successful organizations with talented man-
agers (such as Yum Brands) don’t always do it right. Despite these challenges, going global
is something that most organizations want to do. A study of U.S. manufacturing firms
found that companies that operated in multiple countries had twice the sales growth and
significantly higher profitability than strictly domestic firms.2 However, if managers don’t
closely monitor changes in their global environment or don’t consider specific location
characteristics as they plan, organize, lead, and control, they may find limited global suc-
cess. In this chapter, we’re going to discuss the issues managers face as they manage in a
global environment.

Who Owns What?

One way to see how global the marketplace has become is to consider the country of own-
ership origin for some familiar products. You might be surprised to find that many products
you thought were made by U.S. companies aren’t! Take the following quiz3 and then check
your answers at the end of the chapter on page 95.
1. Tombstone and DiGiorno frozen pizzas are products of a company based in:
a. Italy b. United States c. Canada d. Switzerland
2. Lebedyansky juices are owned by a company based in:
a. Japan b. United Kingdom c. United States d. Russia
3. Rajah spices are products of a company based in:
a. United States b. Brazil c. India d. Switzerland
4. Tetley Tea is owned by a company located in:
a. Great Britain b. India c. Japan d. Spain
5. Volvo cars are products of a company based in:
a. United States b. United Kingdom c. Japan d. China
6. Dos Equis, Tecate, and Sol beer products are owned by a company based in:
a. The Netherlands b. Mexico c. United States d. Colombia
7. The company that produces Boboli pizza crust is based in:
a. United States b. Mexico c. Italy d. Spain
70
 CHAPTER 3 | MANAGING IN A GLOBAL ENVIRONMENT 71

8. The parent company of Braun electric shavers is located in:

a. Switzerland b. Germany c. United States d. Japan
9. The company that owns Sephora Cosmetics retail stores is located in:
a. Germany b. Canada c. France d. United States
10. The digital ad firm Barbarian Group is owned by a company based in:
a. United Kingdom b. United States c. Greece d. South Korea
11. Lean Cuisine frozen meals are products of a company based in:
a. Germany b. United States c. Switzerland d. Brazil
12. The British newspaper, the Independent, is owned by a company based in:
a. Russia b. United Kingdom c. South Africa d. Canada
13. The company that makes French’s mustard is based in:
a. China b. United Kingdom c. Japan d. United States
14. Eight O’Clock Coffee is owned by a company located in:
a. India b. Costa Rica c. United States d. Canada
15. Frédérick Fekkai & Co. hair care products are marketed by a company based in:
a. Switzerland b. United States c. France d. Italy
How well did you do? Were you aware of how many products we use every day that are
made by companies not based in the United States? Probably not! Most of us don’t fully ap-
preciate the truly global nature of today’s marketplace.

What’s Your Global Perspective? 3.1

LEARNING OUTCOME
It’s not unusual for Germans, Italians, or Indonesians to speak three or four languages. Contrast ethnocentric,
“More than half of all primary school children in China now learn English and the polycentric, and geocentric
number of English speakers in India and China—500 million—now exceeds the total attitudes toward global
number of mother-tongue English speakers elsewhere in the world.” On the other hand, business.
most U.S. children study only English in school—only 24,000 are studying Chinese. And
only 22 percent of the population in the United States speaks a language other than
English.4 Americans tend to think of English as the only international business language
and don’t see a need to study other languages. This could lead to future problems as
a major research report commissioned by the British Council says that the “competitive-
ness of both Britain and the United States is being undermined” by only speaking
English.5
Monolingualism is one sign that a nation suffers from parochialism—viewing the
world solely through one’s own eyes and perspectives.6 People with a parochial attitude
do not recognize that others have different ways of living and working. They ignore oth-
ers’ values and customs and rigidly apply an attitude of “ours is better than theirs” to for-
eign cultures. This type of narrow, restricted attitude is one approach that managers might
take, but isn’t the only one.7 In fact, there are three possible global attitudes. Let’s look at
each more closely.
First, an ethnocentric attitude is the parochialistic belief that the best work approaches
and practices are those of the home country (the country in which the company’s headquar-
ters are located). Managers with an ethnocentric attitude believe that people in foreign coun-
tries don’t have the needed skills, expertise, knowledge, or experience to make the best
business decisions as people in the home country do. They don’t trust foreign employees
with key decisions or technology.

parochialism ethnocentric attitude

Viewing the world solely through your own The parochialistic belief that the best work
perspectives, leading to an inability to approaches and practices are those of the
recognize differences between people home country
72 PART TWO | INTEGRATIVE MANAGERIAL ISSUES

She was recently named, for the Next, a polycentric attitude is the view that employees
fourth year straight, the Most in the host country (the foreign country in which the organi-
zation is doing business) know the best work approaches and
Powerful Woman in Business by
practices for running their business. Managers with this atti-
Fortune magazine and was named tude view every foreign operation as different and hard to un-
one of the 100 most powerful derstand. Thus, they’re likely to let employees there figure out
women in the world by Forbes how best to do things.
The final type of global attitude managers might have
magazine.9 “She” is Indra Nooyi,
is a geocentric attitude, a world-oriented view that
CEO of PepsiCo. Born in India, Ms. focuses on using the best approaches and people from
Nooyi joined PepsiCo as head of around the globe. Managers with this type of attitude have
corporate strategy in 1994 and a global view and look for the best approaches and people
regardless of origin. For instance, Carlos Ghosn, CEO of
moved quickly up the ladder to be-
Nissan and Renault, was born in Brazil to Lebanese
come chief executive officer. In 2007, she also assumed the role of chairman of parents, educated in France, and speaks four languages
PepsiCo’s board of directors. As the CEO of a large American company, Nooyi fluently. He could very well be the “model of the modern
recognizes how important her company’s global business operations are. On a major corporate leader in a globalized world bestraddled
by multinational companies.”8 Ghosn’s background and
recent trip to China, a critical market for PepsiCo, Nooyi didn’t take the usual
perspective have given him a much broader understanding
“CEO tour” of conference rooms, but spent 10 days immersing herself in China. of what it takes to manage in a global environment, some-
She says, “I wanted to look at how people live, how they eat, what the growth thing that is characteristic of the geocentric attitude. A geo-
possibilities are.” Here’s a leader who knows what it will take to succeed in centric attitude requires eliminating parochial attitudes and
developing an understanding of cross-cultural differences.
today’s global environment.
That’s the type of approach successful managers will need
in today’s global environment.

LEARNING OUTCOME
3.2 Understanding the Global
Discuss the importance of Environment
regional trading alliances and
One important feature of today’s global environment is global trade which, if you remem-
global trade mechanisms.
ber history class, isn’t new. Countries and organizations have been trading with each other
for centuries.10 And it continues strong today, as we saw in the chapter-opening quiz. Global
trade today is shaped by two forces: regional trading alliances and trade mechanisms that en-
sure that global trade can happen.

Regional Trading Alliances

Global competition once was considered country against country—the United States ver-
sus Japan, France versus Germany, Mexico versus Canada, and so on. Now, global compe-
tition is shaped by regional trading agreements including the European Union (EU), North
American Free Trade Agreement (NAFTA), the Association of Southeast Asian Nations
(ASEAN), and others.

THE EUROPEAN UNION. The European Union (EU) is an economic and political part-
nership of 27 democratic European countries. (See Exhibit 3-1.) Three countries (Croatia,
Macedonia, and Turkey) have applied for membership and analysts predict that Croatia will
be the next to gain membership in 2012 or 2013.11 When the 12 original members formed the
EU in 1992, the primary motivation was to reassert the region’s economic position against the
United States and Japan. Before then, each European nation had border controls, taxes, and
subsidies; nationalistic policies; and protected industries. These barriers to travel, employ-
ment, investment, and trade prevented European companies from developing economic effi-
ciencies. Now with these barriers removed, the economic power represented by the EU is
considerable. Its current membership covers a population base of nearly half a billion people
and accounts for approximately 31 percent of the world’s total economic output.12
 CHAPTER 3 | MANAGING IN A GLOBAL ENVIRONMENT 73

EXHIBIT 3-1
Finland European Union
Norway Map
Sweden
Iceland
Estonia

a
North

Se
United Sea R u s s i a
Latvia

ic
Ireland Kingdom Denmark

lt
a Lithuania
B
N o r t h Russia
A t l a n t i c
O c e a n Netherlands Belarus
English Channel
Poland
European Union Belgium Germany
Countries Ukraine
Luxembourg Czech Rep.
Applied for Slovakia
Membership Bay
of
France Moldova
Switzerland Austria
Biscay Hungary
Slovenia Romania
Croatia
Bosnia-
Portugal Herzegovina Serbia Bl ack Sea
Andorra Ad
Italy ria Montenegro Bulgaria
Spain tic
Se
a Macedonia
Albania
Tyrrhenian
M e d i t Sea Turkey
e r
r a
Ionian Greece Aegean
n e Sea Sea
a n
0 250 500 Miles
S
0 250 500 Kilometers
e a Cyprus
Malta

Another step toward full unification occurred when the common European currency, the
euro, was adopted. The euro is currently in use in 16 of the 27 member states and all new
member countries must adopt the euro. Only Denmark, the United Kingdom, and Sweden
have been allowed to opt out of using the euro.13 Another push in unification has been at-
tempts to develop a unified European constitution. EU leaders struggled for nearly a decade
to enact a treaty designed to strengthen the EU and give it a full-time president. The so-
called Lisbon Treaty (or Reform Treaty) has one remaining hurdle—a signature from the
president of the Czech Republic.14 This treaty would provide EU with a common legal frame-
work and the tools to meet the challenges of a changing world including climatic and de-
mographic changes, globalization, security, and energy. And backers feel the new structure
would help strengthen the EU’s common foreign policy. Many believe that a more unified
Europe could have more power and say in the global arena. As the former Italian prime min-
ister and European Commission president said, “Europe has lost and lost and lost weight in
the world.”15
The last couple of years were difficult economically for the EU and its members, like
it was for many global regions. “The traditional concept of ‘solidarity’ is being under-
mined by protectionist pressures in some member countries and the rigors of maintaining
a common currency for a region that has diverse economic needs.”16 Some analysts believe
that the EU is at a pivotal point. “They can spur growth across the region by following
through on long-overdue pledges to trim benefits and free up labor markets. Or they can

polycentric attitude European Union (EU)

The view that the managers in the host country A union of 27 European nations created as a
know the best work approaches and practices unified economic and trade entity
for running their business
euro
geocentric attitude A single common European currency
A world-oriented view that focuses on using
the best approaches and people from around
the globe
74 PART TWO | INTEGRATIVE MANAGERIAL ISSUES

Since NAFTA went into effect in 1994, trade between

Mexico and Canada has grown fivefold. Canadian-
based aircraft maker Bombardier is boosting
Mexico’s aerospace industry by adding the country
to its global manufacturing network. At a new plant
built by Bombardier in Queretaro, Mexico, employees
produce electrical harnesses (shown in this photo),
fuselages, and flight controls for all Bombardier
aircraft in production. The company also plans to
build a new facility in Queretaro to make the
composite structure for its new Learjet 85 business jet.
The plants in Mexico help Bombardier reduce
production costs and put the company closer to
the growing demand for its aircraft in the Latin
American markets.

face a decade of economic stagnation.”17 Another major issue faced by the 16 euro zone
members—the massive debt crisis in Greece. But leaders bridged sharp philosophical di-
vides and joined forces with the International Monetary Fund to forge an agreement to bail
out Greece as its debt troubles intensified.18
The euro zone is the world’s largest unified economy after the United States and a major
source of world demand for goods and services. Therefore, the importance of this regional
trading alliance will continue to evolve as EU members work together to assert the region’s
economic power with successful European businesses continuing to play a crucial role in the
global economy.

NORTH AMERICAN FREE TRADE AGREEMENT (NAFTA) AND OTHER LATIN AMERICAN
AGREEMENTS. When agreements in key issues covered by the North American Free
Trade Agreement (NAFTA) were reached by the Mexican, Canadian, and U.S. govern-
ments in 1992, a vast economic bloc was created. As of 2010, it remains the largest trade
bloc in the world in terms of combined GDP of its members.19 Between 1994, when
NAFTA went into effect, and 2007 (the most recent year for complete statistics), merchan-
dise trade between the United States and Canada and Mexico increased from 4.4 percent to
6.6 percent.20 Eliminating the barriers to free trade (tariffs, import licensing requirements,
customs user fees) strengthened the economic power of all three countries, but not equally.
Mexico, especially, has struggled to prosper from free trade. Although Mexico’s exports
increased dramatically under NAFTA (quintupling to $292 billion during 2008), large
numbers of people still migrate to the United States in search of jobs and prosperity. The
dream of a richer and more prosperous Mexico has not been realized.21 And the recent
worldwide recession has not helped the situation either. However, despite the criticisms
and the challenges, the North American trading bloc remains a powerful force in today’s
global economy.
Other Latin American nations have become part of free trade blocs, as well. Colom-
bia, Mexico, and Venezuela led the way when all three signed an economic pact in 1994
eliminating import duties and tariffs. Another agreement, the U.S.–Central America Free
Trade Agreement (CAFTA), promotes trade liberalization between the United States
and five Central American countries: Costa Rica, El Salvador, Guatemala, Honduras,
and Nicaragua. However, only El Salvador and Costa Rica have joined. The other coun-
tries have yet to change laws to be in line with the agreement.22 The United States also
signed a trade deal with Colombia that is said to be the “largest Washington has con-
cluded with a Latin American country since signing” NAFTA.23 Also, negotiators from
34 countries in the Western Hemisphere continue work on a Free Trade Area of the
 CHAPTER 3 | MANAGING IN A GLOBAL ENVIRONMENT 75

Americas (FTAA) agreement, which was to have been operational no later than 2005, a
missed targeted deadline. Leaders of these nations have yet to reach any agreement,
leaving the future of the FTAA up in the air.24 However, another free trade bloc of 10
South American countries known as the Southern Common Market or Mercosur already
exists. Some South Americans see Mercosur as an effective way to combine resources
to better compete against other global economic powers, especially the EU and NAFTA.
With the future of FTAA highly doubtful, this regional alliance could take on new
importance.

ASSOCIATION OF SOUTHEAST ASIAN NATIONS (ASEAN). The Association of

Southeast Asian Nations (ASEAN) is a trading alliance of 10 Southeast Asian nations.
(See Exhibit 3-2.) The ASEAN region has a population over 591 million with a combined
GDP of US$1.5 trillion.25 In addition to these 10 nations, leaders from a group dubbed
ASEAN+3, which include China, Japan, and South Korea, have met to discuss trade
issues. Also, leaders from India, Australia, and New Zealand have participated in trade
talks with ASEAN+3 as well. The main issue with creating a trade bloc of all 16 nations
has been the lack of any push toward regional integration. Despite the Asian culture’s
emphasis on consensus building, “ASEAN’s biggest problem is that individual members
haven’t been willing to sacrifice for the common good.”26 Although Southeast Asian
leaders agree that closer regional integration would help economic growth, the large differ-
ences in wealth among ASEAN members have made it “difficult to create common stan-
dards because national standards remain so far apart.”27 However, the challenges brought
on by the recent worldwide recession, which adversely affected many countries in this
region, triggered greater interest in pushing for integration. In fact, on January 1, 2010,
China and ASEAN launched an ambitious free trade agreement, making it the world’s third
largest trade bloc.28 In addition to these free trade alliances, it’s hoped that by 2015, an
established ASEAN economic community will allow goods, skilled workers, and capital to
move freely among member countries.

EXHIBIT 3-2
Current members ASEAN Map
Source: Based on J. McClenahen and
T. Clark, “ASEAN at Work,” IW, May 19,
Myanmar 1997, p. 42.
Laos

Thailand
Vietnam Philippines
Cambodia

Brunei
Malaysia

Singapore

Indonesia

North American Free Trade Agreement Association of Southeast Asian

(NAFTA) Nations (ASEAN)
An agreement among the Mexican, Canadian, A trading alliance of 10 Southeast Asian
and U.S. governments in which barriers to trade nations
have been eliminated
76 PART TWO | INTEGRATIVE MANAGERIAL ISSUES

Despite the barriers and challenges, progress toward regional integration continues.
This fast-growing region means ASEAN and other Asian trade alliances will be increas-
ingly important globally with an impact that eventually could rival that of both NAFTA
and the EU.

OTHER TRADE ALLIANCES. Other regions around the world have developed regional
trading alliances as well. For instance, the 53-nation African Union (AU), which came into
existence in 2002, has the vision of “building an integrated, prosperous and peaceful
Africa.”29 Members of this alliance have created an economic development plan to achieve
greater unity among Africa’s nations. Like members of other trade alliances, these coun-
tries hope to gain economic, social, cultural, and trade benefits from their association.
Such cooperation couldn’t be more important as Africa’s economic output is booming like
never before. GDP growth rates have been averaging 4.8 percent, the highest rate outside
Asia, with most of that growth coming domestically. In addition, Africa has been experi-
encing a “virtually unprecedented period of political stability with governments steadily
deregulating industries and developing infrastructure.”30
Five east African nations—Burundi, Kenya, Rwanda, Tanzania, and Uganda—have
formed a common market called the East African Community (EAC).31 Under this agree-
ment, goods can be sold across borders without tariffs. The next step for the EAC will be
monetary union, although that will take time to implement.
Finally, the South Asian Association for Regional Cooperation (SAARC) composed of
It’s important to know about global eight member states (India, Pakistan, Sri Lanka, Bangladesh, Bhutan, Nepal, the Maldives,
business because all businesses are and Afghanistan) began eliminating tariffs in 2006.32 Its aim, like all the other regional trad-
impacted by the global market place. If ing alliances, is to allow free flow of goods and services.
you don’t directly import the products or The preceding discussion indicates that global trade is alive and well. Regional trade
services you sell you are mostly likely
competing against an imported product.
alliances continue to be developed in areas where member countries believe it’s in their best
interest economically and globally to band together and strengthen their economic position.

Global Trade Mechanisms

Global trade among nations doesn’t just happen on its own. As trade issues arise, global trade
systems ensure that trade continues efficiently and effectively. Indeed, one of the realities of
globalization is the interdependence of countries—that is, what happens in one can impact
others, good or bad. For example, the financial crisis that started in the United States in 2008
threw the global economy into a tailspin. Although things spiraled precariously out of con-
trol, it didn’t completely collapse. Why? Because governmental interventions and trade and
financial mechanisms helped avert a potential crisis. We’re going to look at four important
global trade mechanisms: the World Trade Organization, the International Monetary Fund,
the World Bank Group, and the Organization for Economic Cooperation and Development.

WORLD TRADE ORGANIZATION. The World Trade Organization (WTO) is a global

organization of 153 countries that deals with the rules of trade among nations.33 Formed in
1995, the WTO evolved from the General Agreement on Tariffs and Trade (GATT), a trade
agreement in effect since the end of World War II. Today, the WTO is the only global
organization that deals with trade rules among nations. Its membership consists of
153 member countries and 30 observer governments (which have a specific time frame
within which they must apply to become members). The goal of the WTO is to help coun-
tries conduct trade through a system of rules. Although critics have staged vocal protests
against the WTO claiming that global trade destroys jobs and the natural environment, it
appears to play an important role in monitoring, promoting, and protecting global trade. For
instance, the WTO recently ruled that the European plane maker Airbus received improper
European Union subsidies for the A380 super jumbo jet and several other airplanes, hurting
its American rival, Boeing.34 Airbus has the right to appeal the ruling, but even after appeal-
ing, any member ultimately found to have provided improper subsidies is obliged to bring
its policies into compliance with global trade rules. Failure to comply could bring trade
 CHAPTER 3 | MANAGING IN A GLOBAL ENVIRONMENT 77

sanctions. In another recent news story, the U.S. government is weighing whether to file a
WTO complaint against China’s Internet censorship.35 In addition, the WTO played a pivotal
role in keeping global trade active during the global economic crisis. WTO Director-
by the numbers 42

General Pascal Lamy said, “During these difficult times, the multilateral trading system has
once again proven its value. WTO rules and principles have assisted governments in keep-
ing markets open and they now provide a platform from which trade can grow as the global
93 percent of public middle and
high schools in the United
States offer Spanish; only
4 percent offer Chinese.
economy improves.”36 These examples illustrate the types of trade issues with which the

32
WTO deals. Such issues are best handled by an organization such as the WTO and it has percent of college graduates
played, without a doubt, an important role in promoting and protecting global trade. surveyed saw themselves
using a language other than
their first language at work.
INTERNATIONAL MONETARY FUND AND WORLD BANK GROUP. Two other important
and necessary global trade mechanisms include the International Monetary Fund and the
World Bank Group. The International Monetary Fund (IMF) is an organization of 185
countries that promotes international monetary cooperation and provides member coun-
70 percent of Americans aged
18 to 24 have not traveled
outside the United States in
the last three years.
tries with policy advice, temporary loans, and technical assistance to establish and main-
tain financial stability and to strengthen economies.37 The World Bank Group is a group
of five closely associated institutions, all owned by its member countries, that provides
vital financial and technical assistance to developing countries around the world. The goal
20 percent of U.S. homes house
residents who speak a foreign
language.
of the World Bank Group is to promote long-term economic development and poverty
reduction by providing members with technical and financial support.38 For instance, dur-
ing the recent global recession, financial commitments by the World Bank Group reached 54 percent of business travelers
said they’re more successful in
their career because of global
$100 billion as it helped nations respond to and recover from the economic downturn.39 business travel experience.
Both entities have an important role in supporting and promoting global business.

22
percent of U.S. workers say
they “live to work” rather
ORGANIZATION FOR ECONOMIC COOPERATION AND DEVELOPMENT (OECD). The than “work to live”.
forerunner of the OECD, the Organization for European Economic Cooperation, was formed
in 1947 to administer American and Canadian aid under the Marshall Plan for the reconstruc-
tion of Europe after World War II. Today, the Organization for Economic Cooperation
and Development (OECD) is a Paris-based international economic organization whose mis-
16 percent of French workers
say they “live to work”.

sion is to help its 30 member countries achieve sustainable economic growth and employment
and raise the standard of living in member countries while maintaining financial stability in
order to contribute to the development of the world economy.40 When needed, the OECD gets
involved in negotiations with OECD countries so they can agree on “rules of the game” for
international cooperation. One current focus is combating small-scale bribery in overseas
commerce. The OECD says such “so-called facilitation payments are corrosive . . . particu-
larly on sustainable economic development and the rule of law.”41 With a long history of
facilitating economic growth around the globe, the OECD now shares its expertise and accu-
mulated experiences with more than 70 developing and emerging market economies.

Doing Business Globally 3.3

LEARNING OUTCOME
Daimler, Nissan Motor, and Renault are part of a strategic partnership that is sharing small- Describe the structures
car technology and power trains—an arrangement that all three automakers say will allow and techniques organizations
them to better compete in an environment where cutting costs is crucial. Until he moved to use as they go international.
Japan, Arturo Vega, a Spanish-language teacher, had no idea that the Sofyl brand of yogurt
he always bought in his native Mexico was actually made by a Japanese company called
Yakult Honsha. Reckitt Benckiser, the U.K.-based maker of consumer products (Lysol,
Woolite, and French’s mustard are just a few of its products), has operations in more than

World Trade Organization (WTO) World Bank Group Organization for Economic Coopera-
A global organization of 153 countries that A group of five closely associated institutions tion and Development (OECD)
deals with the rules of trade among nations that provides financial and technical assistance An international economic organization that
International Monetary Fund (IMF) to developing countries helps its 30 member countries achieve
An organization of 185 countries that promotes sustainable economic growth and employment
international monetary cooperation and
provides advice, loans, and technical assistance
78 PART TWO | INTEGRATIVE MANAGERIAL ISSUES

60 countries and its top 400 managers represent 53 different nationalities. The Missouri
State Employees’ Retirement System pays retirement benefits to recipients in 20 countries
outside the United States.43 As these examples show, organizations in different industries and
from different countries do business globally. But how do they do so?

Different Types of International Organizations

Companies doing business globally aren’t new. DuPont started doing business in China in
1863. H.J. Heinz Company was manufacturing food products in the United Kingdom in
1905. Ford Motor Company set up its first overseas sales branch in France in 1908. By the
1920s, other companies, including Fiat, Unilever, and Royal Dutch/Shell had gone interna-
tional. But it wasn’t until the mid-1960s that international companies became quite common.
Today, few companies don’t do business internationally. However, there’s not a generally
accepted approach to describe the different types of international companies; different au-
thors call them different things. We use the terms multinational, multidomestic, global, and
transnational.44 A multinational corporation (MNC) is any type of international company
that maintains operations in multiple countries.
One type of MNC is a multidomestic corporation, which decentralizes management
and other decisions to the local country. This type of globalization reflects the polycentric
attitude. A multidomestic corporation doesn’t attempt to replicate its domestic successes by
managing foreign operations from its home country. Instead, local employees typically are
hired to manage the business and marketing strategies are tailored to that country’s unique
This baby in Ryazan, Russia, enjoys characteristics. For example, Switzerland-based Nestlé is a multidomestic corporation. With
Nestlé’s baby food that may not be operations in almost every country on the globe, its managers match the company’s prod-
available in other parts of the world. ucts to its consumers. In parts of Europe, Nestlé sells products that are not available in the
That’s because Nestlé believes that “food United States or Latin America. Another example is Frito-Lay, a division of PepsiCo, which
is a local matter.” As a multidomestic
corporation, Nestlé spans the globe in
markets a Dorito chip in the British market that differs in both taste and texture from the U.S.
marketing more than 10,000 products in and Canadian version. Even the king of retailing, Walmart Stores, has learned that it must
130 countries. The company adapts its “think locally to act globally” as it tailors its inventories and store formats to local tastes.45
products to local cultures, tastes, Many consumer product companies organize their global businesses using this approach
traditions, and consumer needs. because they must adapt their products to meet the needs of local markets.
Wherever possible, Nestlé produces its
products locally and uses local raw
Another type of MNC is a global company, which centralizes its management and
materials and components. Even though other decisions in the home country. This approach to globalization reflects the ethnocen-
some Nestlé brands are global, others tric attitude. Global companies treat the world market as an integrated whole and focus on
are marketed in specific geographic the need for global efficiency and cost savings. Although these companies may have con-
areas, such as the Middle East, and many siderable global holdings, management decisions with company-wide implications are made
are local to a country or to an area
within a country.
from headquarters in the home country. Some examples of global companies include Sony,
Deutsche Bank AG, Starwood Hotels, and Merrill Lynch.
Other companies use an arrangement that eliminates artificial geo-
graphical barriers. This type of MNC is often called a transnational, or
borderless, organization and reflects a geocentric attitude.46 For exam-
ple, IBM dropped its organizational structure based on country and reorgan-
ized into industry groups. Ford Motor Company is pursuing what it calls the
One Ford concept as it integrates its operations around the world. Another
company, Thomson SA, which is legally based in France, has eight major
locations around the globe. The CEO said, “We don’t want people to think
we’re based anyplace.”47 Managers choose this approach to increase effi-
ciency and effectiveness in a competitive global marketplace.48

How Organizations Go International

When organizations do go international, they often use different ap-
proaches. (See Exhibit 3-3.) Managers who want to get into a global mar-
ket with minimal investment may start with global sourcing (also called
global outsourcing), which is purchasing materials or labor from around
the world wherever it is cheapest. The goal: take advantage of lower costs
80 PART TWO | INTEGRATIVE MANAGERIAL ISSUES

engine. A specific type of strategic alliance in which the partners form a separate,
independent organization for some business purpose is called a joint venture. For example,
Hewlett-Packard has had numerous joint ventures with various suppliers around the globe
to develop different components for its computer equipment. These partnerships provide a
relatively easy way for companies to compete globally.
Finally, managers may choose to directly invest in a foreign country by setting up a
foreign subsidiary as a separate and independent facility or office. This subsidiary can be
managed as a multidomestic organization (local control) or as a global organization (central-
ized control). As you can probably guess, this arrangement involves the greatest commitment
of resources and poses the greatest amount of risk. For instance, United Plastics Group of
Westmont, Illinois, built two injection-molding facilities in Suzhou, China. The company’s
executive vice president for business development said that level of investment was necessary
because “it fulfilled our mission of being a global supplier to our global accounts.”50

LEARNING OUTCOME
3.4 Managing in a Global Environment
Explain the relevance of the Assume for a moment that you’re a manager going to work for a branch of a global orga-
political/legal, economic, and nization in a foreign country. You know that your environment will differ from the one at
cultural environments to global home, but how? What should you look for?
business. Any manager who finds himself or herself in a new country faces challenges. In this
section, we’ll look at some of these challenges. Although our discussion is presented through
the eyes of a U.S. manager, this framework could be used by any manager regardless of na-
tional origin who manages in a foreign environment.

The Political/Legal Environment

U.S. managers are accustomed to a stable legal and political system. Changes tend to be slow,
and legal and political procedures are well established. Elections are held at regular intervals,
and even when the political party in power changes after an election, it’s unlikely that anything
too radical will happen. The stability of laws allows for accurate predictions. However, this cer-
tainly isn’t true for all countries. Managers must stay informed of the specific laws in coun-
tries where they do business. For instance, the president of Zimbabwe is pushing ahead with
plans to force foreign companies to sell majority stakes to locals.51 Such a law would be a
major barrier to foreign business investment. In China, foreign businesses are finding a less-
than-welcoming climate as government policies are making it more difficult to do business
there.52 And Swedish retailer Ikea has halted further investment in Russia because of contin-
ual governmental red tape delays. Per Kaufmann, Ikea’s Russia country manager, said the de-
cision was “due to the unpredictability of the administrative processes in some regions.”53
Also, some countries have risky political climates. Chicago-based Aon Corporation does
an annual political risk assessment, and its 2010 report found that businesses faced the high-
est level of risk in Afghanistan, Congo DRC, Iran, Iraq, North Korea, Somalia, Sudan,
Venezuela, Yemen, and Zimbabwe. Company analysts said that political and financial insta-
bility remained a feature of the business landscape as a result of the global recession. They also
said that “2010 will see elevated political risk levels continue before an overall tendency for
improving global business conditions becomes established.”54 Managers of businesses in coun-
tries with higher risk levels face dramatically greater uncertainty. In addition, political inter-
My advice for someone who has little ference is a fact of life in some regions, especially in some Asian countries such as China.55
global experience is research all aspects Keep in mind that a country’s political/legal environment doesn’t have to be risky or un-
of that country’s culture and find a liaison stable to be a concern to managers. Just the fact that it differs from that of the home coun-
native to the culture to take as a partner
to gain the needed perspective.
try (United States or other) is important. Managers must recognize these differences if they
hope to understand the constraints and opportunities that exist.

The Economic Environment

Strange as it may sound, 17,000 tons of Parmesan cheese, with an estimated value of
$187 million, are being held in the vaults of the Italian bank Credito Emiliano. The cheese
is collateral from Italian cheese makers struggling through the recession.56 Such an example
 CHAPTER 3 | MANAGING IN A GLOBAL ENVIRONMENT 81

of an economic factor of business may seem peculiar for those of us in the United States,
but it’s not all that unusual for Italian businesses.
A global manager must be aware of economic issues when doing business in other
countries. First, it’s important to understand a country’s type of economic system. The two
major types are a free market economy and a planned economy. A free market economy
is one in which resources are primarily owned and controlled by the private sector. A
planned economy is one in which economic decisions are planned by a central govern-
ment. Actually, no economy is purely free market or planned. For instance, the United
States and United Kingdom are toward the free market end of the spectrum but do have
governmental intervention and controls. The economies of Vietnam and North Korea are
more planned. China is also a more planned economy, but until recently had been moving
toward being more free market. Why would managers need to know about a country’s eco-
nomic system? Because it, too, has the potential to constrain decisions. Other economic is-
sues managers need to understand include currency exchange rates, inflation rates, and
diverse tax policies.
An MNC’s profits can vary dramatically depending on the strength of its home currency
and the currencies of the countries in which it operates. For instance, prior to the overall
global economic slowdown, the rising value of the euro against both the dollar and the yen
had contributed to strong profits for German companies.57 Any currency exchange revalua-
tions can affect managers’ decisions and the level of a company’s profits.
Inflation means that prices for products and services are increasing. But it also affects
interest rates, exchange rates, the cost of living, and the general confidence in a country’s
political and economic system. Country inflation rates can, and do, vary widely. The World
Factbook shows rates ranging from a negative 3.9 percent in Qatar to a positive 34 percent
in the Seychelles.58 Managers need to monitor inflation trends so they can anticipate possi-
ble changes in a country’s monetary policies and make good business decisions regarding
purchasing and pricing.
Finally, tax policies can be a major economic worry. Some countries’ tax laws are
more restrictive than those in an MNC’s home country. Others are more lenient. About the
only certainty is that they differ from country to country. Managers need accurate informa-
tion on tax rules in countries in which they operate to minimize their business’s overall tax
obligation.

The Cultural Environment

Managing today’s talented global workforce can be a challenge!59 A large multinational
oil company found that employee productivity in one of its Mexican plants was off
20 percent and sent a U.S. manager to find out why. After talking to several employees,
the manager discovered that the company used to have a monthly fiesta in the parking lot
for all the employees and their families. Another U.S. manager had canceled the fiestas
saying they were a waste of time and money. The message employees were getting was that
the company didn’t care about their families anymore. When the fiestas were reinstated,
productivity and employee morale soared. At Hewlett-Packard, a cross-global team of
U.S. and French engineers were assigned to work together on a software project. The U.S.
engineers sent long, detailed e-mails to their counterparts in France. The French engi-
neers viewed the lengthy e-mails as patronizing and replied with quick, concise e-mails.
This made the U.S. engineers think that the French were hiding something from them.
The situation spiraled out of control and negatively affected output until team members
went through cultural training.60

joint venture free market economy

A specific type of strategic alliance in which the An economic system in which resources are
partners agree to form a separate, independent primarily owned and controlled by the private
organization for some business purpose sector
foreign subsidiary planned economy
Directly investing in a foreign country by setting An economic system in which economic
up a separate and independent production decisions are planned by a central
facility or office government
82 PART TWO | INTEGRATIVE MANAGERIAL ISSUES

As we know from Chapter 2, organizations have different cultures. Countries have

cultures too. National culture includes the values and attitudes shared by individuals
from a specific country that shape their behavior and their beliefs about what is
important.61
Which is more important to a manager—national culture or organizational culture? For
example, is an IBM facility in Germany more likely to reflect German culture or IBM’s cor-
porate culture? Research indicates that national culture has a greater effect on employees
than does their organization’s culture.62 German employees at an IBM facility in Munich will
be influenced more by German culture than by IBM’s culture.
Legal, political, and economic differences among countries are fairly obvious. The
Japanese manager who works in the United States or his or her American counterpart who
works in Japan can get information about laws or tax policies without too much effort.
Getting information about cultural differences isn’t quite that easy! The primary reason? It’s
difficult for natives to explain their country’s unique cultural characteristics to someone else.
For instance, if you were born and raised in the United States, how would you describe U.S.
culture? In other words, what are Americans like? Think about it for a moment and see which
characteristics in Exhibit 3-4 you identified.

HOFSTEDE’S FRAMEWORK FOR ASSESSING CULTURES. Geert Hofstede developed one

of the most widely referenced approaches to helping managers better understand differ-
ences between national cultures. His research found that countries vary on five dimensions
of national culture. These dimensions are described in Exhibit 3-5, which also shows some
of the countries characterized by those dimensions.

THE GLOBE FRAMEWORK FOR ASSESSING CULTURES. The Global Leadership and
Organizational Behavior Effectiveness (GLOBE) research program extended
Hofstede’s work by investigating cross-cultural leadership behaviors and gives man-
agers additional information to help them identify and manage cultural differences.
Using data from more than 18,000 managers in 62 countries, the GLOBE research
team (led by Robert House) identified nine dimensions on which national cultures

EXHIBIT 3-4
• Americans are very informal. They tend to treat people alike even when great differences
What Are Americans Like?
in age or social standing are evident.
• Americans are direct. They don’t talk around things. To some foreigners, this may appear
as abrupt or even rude behavior.
• Americans are competitive. Some foreigners may find Americans assertive or overbearing.
• Americans are achievers. They like to keep score, whether at work or at play. They
emphasize accomplishments.
• Americans are independent and individualistic. They place a high value on freedom and
believe that individuals can shape and control their own destiny.
• Americans are questioners. They ask a lot of questions, even of someone they have just
met. Many may seem pointless (“How ya’ doin’?”) or personal (“What kind of work do
you do?”).
• Americans dislike silence. They would rather talk about the weather than deal with silence
in a conversation.
• Americans value punctuality. They keep appointment calendars and live according to
schedules and clocks.
• Americans value cleanliness. They often seem obsessed with bathing, eliminating body
odors, and wearing clean clothes.

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. 103–105; 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.
 CHAPTER 3 | MANAGING IN A GLOBAL ENVIRONMENT 83

EXHIBIT 3-5
1. Individualistic—People look after their own and family interests Hofstede’s Five Dimensions
Collectivistic—People expect the group to look after and protect them of National Culture
Individualistic Collectivistic
United States, Canada, Australia Japan Mexico, Thailand
2. High power distance—Accepts wide differences in power; great deal of respect for those
in authority
Low power distance—Plays down inequalities: employees are not afraid to approach nor
are in awe of the boss
High power Low power
distance distance
Mexico, Singapore, France Italy, Japan United States, Sweden
3. High uncertainty avoidance—Threatened with ambiguity and experience high levels of
anxiety
Low uncertainty avoidance—Comfortable with risks; tolerant of different behavior and
opinions
High uncertainty Low uncertainty
avoidance avoidance
Italy, Mexico, France United Kingdom Canada, United States, Singapore
4. Achievement—Values such as assertiveness, acquiring money and goods, and
competition prevail
Nurturing—Values such as relationships and concern for others prevail
Achievement Nurturing
United States, Japan, Mexico Canada, Greece France, Sweden
5. Long-term orientation—People look to the future and value thrift and persistence
Short-term orientation—People value tradition and the past
Short-term Long-term
orientation orientation
Germany, Australia, United States, Canada China, Taiwan, Japan

differ.63 Two dimensions (power distance and uncertainty avoidance) fit directly with
Hofstede’s. Four are similar to Hofstede’s (assertiveness, which is similar to achieve-
ment-nurturing; humane orientation, which is similar to the nurturing dimension;
future orientation, which is similar to long-term and short-term orientation; and
institutional collectivism, which is similar to individualism-collectivism). The remain-
ing three (gender differentiation, in-group collectivism, and performance orientation)
offer additional insights into a country’s culture. Here are descriptions of these nine
dimensions:
 Power distance: the degree to which members of a society expect power to be
unequally shared.
 Uncertainty avoidance: a society’s reliance on social norms and procedures to alleviate
the unpredictability of future events.
 Assertiveness: the extent to which a society encourages people to be tough, confronta-
tional, assertive, and competitive rather than modest and tender.
 Humane orientation: the degree to which a society encourages and rewards individ-
uals for being fair, altruistic, generous, caring, and kind to others.
 Future orientation: the extent to which a society encourages and rewards future-oriented
behaviors such as planning, investing in the future, and delaying gratification.

national culture Global Leadership and Organiza-

The values and attitudes shared by individuals tional Behavior Effectiveness
from a specific country that shape their
behavior and beliefs about what is important (GLOBE) program
The research program that studies cross-cultural
leadership behaviors
84 PART TWO | INTEGRATIVE MANAGERIAL ISSUES

 Institutional collectivism: the degree to which individuals are encouraged by societal

institutions to be integrated into groups within organizations and society.
 Gender differentiation: the extent to which a society maximizes gender role differences
as measured by how much status and decision-making responsibilities women have.
 In-group collectivism: the extent to which members of a society take pride in mem-
bership in small groups, such as their family and circle of close friends, and the organ-
izations in which they’re employed.
 Performance orientation: the degree to which a society encourages and rewards group
members for performance improvement and excellence.
Exhibit 3-6 provides information on how different countries rank on these nine dimensions.

Global Management in Today’s World

Doing business globally today isn’t easy! As we look at managing in today’s global en-
vironment, we want to focus on two important aspects. The first aspect involves the chal-
lenges associated with globalization, especially in relation to the openness that’s part of
being global. The second aspect revolves around the challenges of managing a global
workforce.

THE CHALLENGE OF OPENNESS. The push to go global has been widespread.

Advocates praise the economic and social benefits that come from globalization, but
globalization also creates challenges because of the openness that’s necessary for it to

EXHIBIT 3-6 Countries Countries Countries

GLOBE Highlights Dimension Rating Low Rating Moderate Rating High
Assertiveness Sweden Egypt Spain
New Zealand Ireland United States
Switzerland Philippines Greece
Future orientation Russia Slovenia Denmark
Argentina Egypt Canada
Poland Ireland Netherlands
Gender differentiation Sweden Italy South Korea
Denmark Brazil Egypt
Slovenia Argentina Morocco
Uncertainty avoidance Russia Israel Austria
Hungary United States Denmark
Bolivia Mexico Germany
Power distance Denmark England Russia
Netherlands France Spain
South Africa Brazil Thailand
Individualism/collectivism* Denmark Hong Kong Greece
Singapore United States Hungary
Japan Egypt Germany
In-group collectivism Denmark Japan Egypt
Sweden Israel China
New Zealand Qatar Morocco
Performance orientation Russia Sweden United States
Argentina Israel Taiwan
Greece Spain New Zealand
Humane orientation Germany Hong Kong Indonesia
Spain Sweden Egypt
France Taiwan Malaysia
*A low score is synonymous with collectivism.
Source: M. Javidan and R. J. House, “Cultural Acumen for the Global Manager: Lessons from Project GLOBE,”
Organizational Dynamics, Spring 2001, pp. 289–305. Copyright © 2001. Reprinted with permission from Elsevier.
 CHAPTER 3 | MANAGING IN A GLOBAL ENVIRONMENT 85

work. One challenge is the increased threat of terrorism by a truly global terror network.
Globalization is meant to open up trade and to break down the geographical barriers sep-
arating countries. Yet, opening up means just that—being open to the bad as well as the
good. From the Philippines and the United Kingdom to Israel and Pakistan, organiza-
tions and employees face the risk of terrorist attacks. Another challenge from openness
is the economic interdependence of trading countries. As we saw over the last couple of
years, the faltering of one country’s economy can have a domino effect on other coun-
tries with which it does business. So far, however, the world economy has proved to be
quite resilient. And as we discussed earlier, structures that are currently in place, such as
the World Trade Organization and the International Monetary Fund, help to isolate and
address potential problems.
The far more serious challenge for managers in the openness required by globaliza-
tion comes from intense underlying and fundamental cultural differences—differences
that encompass traditions, history, religious beliefs, and deep-seated values. Managing
in such an environment can be extremely complicated. Even though globalization has
long been praised for its economic benefits, some individuals think that globalization is
simply a euphemism for “Americanization”—that is, the way U.S. cultural values and
U.S. business philosophy are said to be slowly taking over the world.64 At its best, propo-
nents of Americanization hope others will see how progressive, efficient, industrious, and
free U.S. society and businesses are and want to emulate that way of doing things.
However, critics claim that this attitude of the “almighty American dollar wanting to
spread the American way to every single country,” has created many problems.65 Although
history is filled with clashes between civilizations, what’s unique now is the speed and
ease with which misunderstandings and disagreements can erupt and escalate. The Inter-
net, television and other media, and global air travel have brought the good and the bad
of American entertainment, products, and behaviors to every corner of the globe. For
those who don’t like what Americans do, say, or believe, this exposure can lead to resent-
ment, dislike, distrust, and even outright hatred.

CHALLENGES OF MANAGING A GLOBAL WORKFORCE.

 “As more Americans go to mainland China to take jobs, more Chinese and Americans
are working side by side. These cross-cultural partnerships, while beneficial in many
ways, are also highlighting tensions that expose differences in work experience, pay
levels, and communication.”66
 Global companies with multicultural work teams are faced with the challenge of man-
aging the cultural differences in work-family relationships. The work-family practices
and programs that are appropriate and effective for employees in one country may not
be the best solution for employees in other locations.67
These examples indicate challenges that are associated with managing a global work-
force. As globalization continues to be important for businesses, it’s obvious that managers
need to understand how to best manage that global workforce. Some researchers have
suggested that managers need cultural intelligence or cultural awareness and sensitiv-
ity skills.68 Cultural intelligence encompasses three main dimensions: (1) knowledge of
culture as a concept—how cultures vary and how they affect behavior; (2) mindfulness—
the ability to pay attention to signals and reactions in different cross-cultural situations;
and (3) behavioral skills—using one’s knowledge and mindfulness to choose appropriate
behaviors in those situations.
Other researchers have said that what effective global leaders need is a global mind-set,
attributes that allow a leader to be effective in cross-cultural environments.69 Those attributes
have three components as shown in Exhibit 3-7.

cultural intelligence global mind-set

Cultural awareness and sensitivity skills Attributes that allow a leader to be effective in
cross-cultural environments
86 PART TWO | INTEGRATIVE MANAGERIAL ISSUES

EXHIBIT 3-7
A Global Mind-Set Intellectual capital: Knowledge of international business
and the capacity to understand how
business works on a global scale

Psychological capital: Openness to new ideas and experiences

Social capital: Ability to form connections and build

trusting relationships with people
who are different from you

Source: Based on M. Javidan, M. Teagarden, and D. Bowen, “Making It Overseas,” Harvard Business Review,
April 2010, pp. 109–113; and J. McGregor (ed.), “Testing Managers’ Global IQ,” Bloomberg BusinessWeek,
September 28, 2009, p. 68.

Leaders who possess such cross-cultural skills and abilities—whether cultural intelli-
gence or a global mind-set—will be important assets to global organizations. Successfully
managing in today’s global environment will require incredible sensitivity and understand-
ing. Managers from any country will need to be aware of how their decisions and actions
will be viewed, not only by those who may agree, but more importantly, by those who may
disagree. They will need to adjust their leadership styles and management approaches to
accommodate these diverse views, and at the same time be as efficient and effective as pos-
sible in reaching the organization’s goals.
 CHAPTER 3 | MANAGING IN A GLOBAL ENVIRONMENT 87

What Would You

Do?
Let’s Get Real:
My Response to A Manager’s Dilemma, page 70
All aspects of a country’s culture should be researched to understand
the dynamics of the culture and their traditions. Some aspects that
should be thoroughly understood are:

• Understand the length of a normal workday and local laws

surrounding overtime pay and maximum allowable hours in a
workweek.
• What transit challenges employees may face and what flexibility
may be provided to accommodate mass transit schedules or work
shifts that may be set off-cycle from peak traffic times.
• What accommodations employees may prefer such as small
Cheryl Trewatha
kitchens, locker rooms, or prayer space.
Sr. Group Manager
Quality Assurance
• What a competitive benefits package may look like, including health Target Corp.
benefits and access to doctors for employees and their families. Brooklyn Park, MN
These points are important in attracting a qualified workforce, but an
understanding of how to reward and motivate employees in a different
culture is imperative for retention of your trained workforce.
Understand what types of recognition would be of value and who it
should come from. Is recognition between a boss and employee pri-
vately or in front of a peer group most valued? What types of awards
are most valued: plaques, paid time off or awards of monetary value?
How do you make the most of the innovation of your employees? How
does the culture affect the chain of command? What is the appropriate
way to surface new ideas that may challenge a current process? Pro-
vide the appropriate vehicle dictated by the culture to ensure all ideas
can be brought forth. Your employees will possess the ideas needed to
move your business forward and to implement the changes needed to
retain your staff. Be sure not to miss the opportunity to maximize this
most valued resource!!
 PREPARING FOR: Exams/Quizzes
CHAPTER SUMMARY
by Learning Outcomes
LEARNING 3.1 Contrast ethnocentric, polycentric, and geocentric attitudes toward
OUTCOME
global business.
Parochialism is viewing the world solely through your own eyes and perspectives and not
recognizing that others have different ways of living and working. An ethnocentric atti-
tude is the parochialistic belief that the best work approaches and practices are those of
the home country. A polycentric attitude is the view that the managers in the host country
know the best work approaches and practices for running their business. And a geocentric
attitude is a world-oriented view that focuses on using the best approaches and people
from around the globe.

LEARNING
OUTCOME
3.2 Discuss the importance of regional trading alliances and global
trade mechanisms.
The European Union consists of 27 democratic countries with three countries having
applied for membership. Sixteen countries have adopted the euro and all new member
countries must adopt it. NAFTA continues to help Canada, Mexico, and the United States
strengthen their global economic power. The U.S.–CAFTA alliance is still trying to get off
the ground as is the proposed FTAA. Because of the delays for CAFTA and FTAA,
Mercosur (Southern Common Market) will likely take on new importance. ASEAN is a
trading alliance of ten Southeast Asian nations, a region that remains important in the
global economy. The African Union and SAARC are relatively new but will continue to
see benefits from their alliances. To counteract some of the risks in global trade, the
World Trade Organization (WTO) plays an important role in monitoring and promoting
trade relationships. The International Monetary Fund (IMF) and the World Bank Group
are two entities that provide monetary support and advice to their member countries. The
Organization for Economic Cooperation and Development assists its member countries
with financial support in achieving sustainable economic growth and employment.

LEARNING
OUTCOME
3.3 Describe the structures and techniques organizations use as they
go international.
A multinational corporation is an international company that maintains operations in
multiple countries. A multidomestic organization is an MNC that decentralizes manage-
ment and other decisions to the local country (the polycentric attitude). A global organi-
zation is an MNC that centralizes management and other decisions in the home country
(the ethnocentric attitude). A transnational organization (the geocentric attitude) is an
MNC that has eliminated artificial geographical barriers and uses the best work
practices and approaches from wherever. Global sourcing is purchasing materials or
labor from around the world wherever it is cheapest. Exporting is making products
domestically and selling them abroad. Importing is acquiring products made abroad and
selling them domestically. Licensing is used by manufacturing organizations that make
or sell another company’s products and gives that organization the right to use the
company’s brand name, technology, or product specifications. Franchising is similar but
is usually used by service organizations that want to use another company’s name and
operating methods. A global strategic alliance is a partnership between an organization
and foreign company partners in which they share resources and knowledge to develop
new products or build facilities. A joint venture is a specific type of strategic alliance in
which the partners agree to form a separate, independent organization for some business
purpose. A foreign subsidiary is a direct investment in a foreign country that a company
creates by establishing a separate and independent facility or office.

88