Management 13th Edition Schermerhorn Solutions Manual 1

Schermerhorn & Bachrach / Management, 13th Instructor’s Guide
Management 13th Edition

Schermerhorn Solutions Manual
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Chapter 5
GLOBAL MANAGEMENT AND CULTURAL
DIVERSITY
Takeaway Questions & Learning Objectives
In studying this chapter, students should consider the following questions and be able to complete the
accompanying objectives:
Takeaway 1: What are the management challenges of globalization?

Learning Objective: Discuss the implications of globalization for management and organizations.
Takeaway 2: What are global businesses, and how do they work?

Learning Objective: Describe global corporations and the issues they face and create.
Copyright © 2015 John Wiley & Sons, Inc. 5-1

Takeaway 3: What is culture, and how does it influence global management?

Learning Objective: Define culture and identify ways to describe diversity in global cultures.
Takeaway 4: How can we benefit from global management learning?

Learning Objective: Identify the benefits of global learning for management and organizations.
Overview
Students of management must understand the global economy in order to meet the challenges of the 21st
century. Indeed, the likelihood of students engaging in or being affected by some form of international
operations is extremely high. This chapter considers the obstacles and opportunities facing managers of
international activities and provides practical advice for meeting these challenges.
The chapter begins by considering the international business challenges of globalization. Among the
challenges, students are asked to consider global management, the global economy, market entry and
direct investment strategies. Next, the chapter describes the global business environment with its legal and
political systems, trade agreements and barriers, and economic alliances. Global businesses and what they
do follow, including the advantages and disadvantages of global corporations for host countries. Ethical
problems such as corruption, sweatshops and child labor are examined.
Next, the chapter examines culture and its link to global diversity. Here students will learn about the
details of culture through Edward T. Hall’s “silent” language of culture and Geert Hofstede’s dimension
of value differences. The chapter wraps up with a discussion of comparative management and its
implications for intercultural competency.
Lecture outline
Teaching Objective: To sensitize students to the impact of international activities on management

practices and to provide guidelines for effective management in the global arena.
Suggested Time: Two hours of class time are recommended for this chapter.
Takeaway Question 1: What are the management challenges of globalization?

Global management
Why companies go global
How companies go global
Global business environments
Takeaway Question 2: What are global businesses, and how do they work?
Types of global businesses

Pros and cons of global businesses

Ethics challenges for global businesses
Takeaway Question 3: What is culture, and how does it influence global management?
Cultural intelligence
Silent languages of culture
Tight and loose cultures
Values and national cultures
Takeaway Question 4: How can we benefit from global management learning?

Are management theories universal?
Intercultural competencies
Global learning goals
Supporting Materials
Figures
• Figure 5.1: Common Forms of International Business – From Market Entry to Direct Investment
Increasing Involvement in Ownership and Control of Foreign Operations Strategies
• Figure 5.2: What Should Go Right and What Can Go Wrong in Global Corporation and Host-
Country Relationships
• Figure 5.3: How Countries’ Short-term Thinking and Long-term Thinking Compare on
Hofstede’s Dimensions of National Culture
Thematic Boxes
• Analysis: Corruption and Bribes Haunt Global Business
• Choices: Reshoring Offers Alternative to China Manufacturing
• Ethics: Nationalism and Protectionism a Potent Mix
• Insight: Cultural Intelligence Opens Doors to Opportunity
• Wisdom: Nobel Peace Prize Winner Asks Global Firms to Fight Poverty
Management Learning Review

• Summary
• Self-Test
Management Skills & Competencies

• Evaluate Career Situations: What Would You Do?
• Reflect on the Self-Assessment: Global Intelligence
• Contribute to the Class Exercise: American Football
• Manage a Critical Incident: Silent Team Members
• Collaborate on the Team Activity: Globalization Pros and Cons

• Analyze the Case Study: Harley-Davidson: Style and Strategy Have Global Reach
Lecture Notes
MANAGEMENT AND GLOBALIZATION

Learning Objective: Discuss the implications of globalization for management and organizations.
GLOBAL MANAGEMENT
The global economy is making the diverse countries of the world increasingly interdependent
regarding resource supplies, product markets, and business competition.
Globalization is the process of growing interdependence among the components of the global
economy.
World 3.0 is a world where nations cooperate in the global economy while still respecting
different national characters and interests.
The graphic on page 99 of the text traces the “travels” of a t-shirt from the cotton fields of Texas
in the USA to the store in Tanzania, which shows how globalization works today.
DISCUSSION TOPIC
Prior to discussing this chapter in class, have each student find a recent newspaper or magazine article
that relates to globalization issues. Articles can easily be found in business publications such as The Wall
Street Journal, Business Week, Fortune, and Forbes, as well as many other publications such as the
“Money” section of USA Today, or popular magazines such as Time and Newsweek. Each student should
be prepared to discuss his/her article in class. Choose several students to talk about the key ideas in their
selected articles, and ask the entire class to help identify how these ideas relate to the challenges of
globalization.
Global management involves managing operations in more than one country.
A global manager is a manager who is informed about international developments, transnational

in outlook, competent in working with people from other cultures, and always aware of regional
developments in a changing world.
WHY COMPANIES GO GLOBAL
An international business conducts commercial transactions of goods and/or services across

national boundaries.

Reasons businesses go international:

• Profits: global operations offer profit potential
• Customers: global operations offer new markets to sell products.
• Suppliers: global operations offer access to needed raw materials.
• Capital: global operations offer access to financial resources.
• Labor: global operations offer lower labor costs.
• Risk: global operations spread assets among multiple countries.
HOW COMPANIES GO GLOBAL
FIGURE 5.1 from p. 101 in the text identifies the two common forms of international business
strategies – Market Entry and Direct Investment.
Global Sourcing
A common first step into international business is global sourcing, which is the process
of purchasing materials, manufacturing components, or business services from around the
world.
Exporting and Importing
A second form of international business involves exporting and/or importing.
Exporting is a form of international business that involves selling locally made products
in foreign markets.
Importing is a form of international business that involves buying foreign-made products

and selling them in domestic markets.
Licensing and Franchising
Other forms of international business include the licensing agreement and franchising.
A licensing agreement occurs when another firm pays a fee for the rights to make or sell
another company’s products in a specified region.
Franchising involves buying the rights to use another’s name and operating methods in
its home country.
Joint Ventures and Strategic Alliances

Foreign direct investment strategies require major capital commitments but create rights
of ownership and control over operations in the foreign country. Local job creation,
called insourcing, results from foreign direct investment.
A joint venture establishes business operations in a foreign country through co-

ownership arrangements that pool resources and share risks and control of business
operations.
International joint ventures are types of global strategic alliances in which foreign and
domestic firms work together for mutual benefit.
Foreign Subsidiaries
A foreign subsidiary is a local operation completely owned and controlled by a foreign

firm. While the subsidiary can be acquired, it may also be a greenfield venture, i.e., a
foreign subsidiary built from the ground up by the foreign owner.
GLOBAL BUSINESS ENVIRONMENTS
Legal and Political Systems
Global operations managers must be prepared to deal with the differences between home-
country and host-country laws and politics.
By using the planning technique of political-risk analysis, companies are able to forecast
a country’s political risk, which is the possible loss in value of a foreign investment due
to instability and political changes in the host country,
Trade Agreements and Trade Barriers
The World Trade Organization is an international organization that monitors

international trade and tries to resolve disputes among countries about tariffs and trade
restrictions.
The WTO members agree to give one another most favored nation status which gives a
trading partner most favorable treatment for imports and exports.
Even with most favored nation status, trade barriers still exist in the form of:
Tariffs: taxes that the government imposes on imports.
Nontariffs: quotas, import restrictions and protectionism, which is a call for tariffs and
favorable treatment to protect domestic industries from foreign competition.

Regional Economic Alliances
Regional economic alliances are growing around the world and represent a significant
challenge for global managers.
NAFTA (the North American Free Trade Agreement) is a trade agreement that links
Canada, Mexico, and the United States in a regional economic alliance.
The European Union is a political and economic alliance of 28 European countries that
have agreed to support mutual economic growth by removing barriers that previously
limited cross-border trade and business development.
The Euro is the common currency used in the European Union.
APEC (Asia Pacific Economic Cooperation) promotes free trade and investment among
its 21 members in the Pacific region.
ASEAN (Association of Southeast Asian Nations) has a goal of promoting economic

growth and progress among its 10 member nations.
SADC (South Africa Development Community) links 14 countries of southern Africa in

trade and economic development efforts.
DISCUSSION TOPIC
Divide the class into small discussion groups. Assign each group one of the following four geographic
regions: Europe, the Americas, Asia and the Pacific Rim, or Africa. Have the groups spend 10-12 minutes
identifying the potential challenges and opportunities that these areas face in the context of the global
economy. Have each group report out to the entire class with a brief summary of its key discussion points.
GLOBAL BUSINESS
Takeaway 2: What are global businesses, and how do they work?
Learning Objective: Describe global corporations and the issues they face and create.
A typical global corporation, also called multinational enterprise (MNE) and multinational
corporation (MNC), operates in many countries but has corporate headquarters in one home or
host country.
TYPES OF GLOBAL BUSINESSES
A transnational corporation is a multinational corporation that operates worldwide without

being identified with one national home. Executives of transnational organizations view the entire

world as their domain for acquiring resources, locating production facilities, marketing goods and
services, and communicating brand image.
DISCUSSION TOPIC
An easy way to get students involved in a discussion at this point is to ask them to provide examples of
global corporations or MNCs. Students should be able to quickly generate a long list of MNCs. Engage in
some discussion of where these firms have their operations and what types of products or services they
provide.
PROS AND CONS OF GLOBAL CORPORATIONS
Multinational host-country relationships provide shared opportunities with potential for growth,
income, learning and development
Globalization Gap: is where large multinational corporations and industrialized nations gain
disproportionately from the benefits of globalization.
Host-Country Issues
Host-country complaints about MNC: Excessive profits, economic domination,

interference with government, hire best local talent, limited technology transfer, and
disrespect for local customs.
Host-country benefits: larger tax bases, increased employment opportunities, technology

transfers, the introduction of new industries, and the development of local resources.
Home-County Issues
Multinational corporation complaints about host countries: profit limitations, overpriced

resources, exploitative rules, foreign exchange restrictions, and failure to uphold
contracts.
FIGURE 5.2 on page 108 of the text describes what should go right and what can go wrong in
global corporation and host country relationships.
ETHICS CHALLENGES FOR GLOBAL BUSINESSES
The ethical aspects of international business deserve special attention.

Corruption
Corruption involves engaging in illegal practices to further one’s business interests.

Bribery and other forms of corruption can pose significant challenges for a global
business.

The Foreign Corrupt Practices Act prohibits U.S. businesses and their representatives
from engaging in corrupt practices abroad.
Child labor and Sweatshops
Child labor is the full-time employment of children for work otherwise done by adults.
Sweatshops are business operations that employ workers at low wages for long hours
and in poor working conditions.
CULTURES AND GLOBAL DIVERSITY

Learning Objective: Define culture and identify ways to describe diversity in global cultures.
Culture is a shared set of beliefs, values, and patterns of behavior common to a group of people.
Culture shock is the confusion and discomfort that a person experiences when in an unfamiliar
culture.
CULTURAL INTELLIGENCE
Ethnocentrism is the tendency to consider one’s culture as superior to others.
Cultural intelligence is the ability to adapt, adjust, and work well across cultures.
The Box on page 113 of the text describes stages in adjusting to a new culture. These stages are:
• Confusion: first contacts with the new culture leave you anxious, uncomfortable, and in need
of information and advice.
• Small victories: continued interactions bring some “successes,” and your confidence grows in
handling daily affairs.
• The honeymoon: a time of wonderment, cultural immersion, and even infatuation, with local
ways viewed positively.
• Irritation and anger: a time when the “negatives” may overwhelm the “positives and the new
culture becomes a target of your criticism.
• Reality: a time of rebalancing; you are able to enjoy the new culture while recognizing less
desirable elements.
DISCUSSION TOPIC

If any of your students have lived or traveled abroad, ask them to describe their experiences and relate
them to the stages of adjusting to a new culture.
SILENT LANGUAGES OF CULTURE
The dimensions of Edward T. Hall’s “silent languages of culture” include context, time
orientation, and the use of space.
Context
In a low-context culture most communication takes place via the written or spoken
word.
In a high-context culture much communication takes place through nonverbal and

situational cues in addition to the written or spoken word.
Time
In a monochronic culture people tend to do one thing at a time.
In a polychronic culture time is used to accomplish many different things at once.
Space
Proxemics is how people use space to communicate.
TIGHT AND LOOSE CULTURES
In tight cultures, norms are strong and clear and guide behavior. Deviations from the norm are
noticed, discouraged and even sanctioned. Examples of tight cultures include Malaysia, Korea
and Japan.
In loose cultures social norms are relaxed and less clear cut and conformity may vary a great deal.
Examples of loose cultures include Ukraine, Hungary and Brazil.
VALUES AND NATIONAL CULTURES
Geert Hofstede’s work is often considered a benchmark for how cultural differences can
influence management and organizational practices.
FIGURE 5.3 on page 114 of the text describes how countries compare on Hofstede’s five
dimensions of national culture.
Five dimensions of value differences in national culture from Hofstede are:

1. Power distance: the degree to which a society accepts or rejects the unequal distribution of
power among people in organizations and the institutions of society.
2. Individualism-collectivism: the degree to which a society emphasizes individual

accomplishments and self-interests, versus collective accomplishments and the interests of
groups.
3. Uncertainty avoidance: the degree to which a society is uncomfortable with risk, change,
and situational uncertainty, versus having tolerance for them.
4. Masculinity-femininity: the degree to which a society values assertiveness and material

success, versus feelings, relationships, and quality of life.
5. Time orientation: the degree to which a society emphasizes the short-term versus long-term
goals and gratifications.

DISCUSSION TOPIC
Focus again on the students who, in the previous Discussion Topic, identified themselves as having lived
or traveled abroad. Ask them to identify the nation(s) and attempt, on the basis of their experiences, to
characterize those nations in terms of Hofstede’s dimensions of culture. If enough nations are represented,
a comparative analysis could be fruitful. Also compare these nations to the United States. You could also
try to link this analysis to Figure 5.3.
GLOBAL MANAGEMENT LEARNING

Learning Objective: Identify the benefits of global learning for management and organizations.
Comparative management studies how management perspectives and practices systematically

differ among countries and cultures.
ARE MANAGEMENT THEORIES UNIVERSAL?
The management process must be used appropriately and applied with sensitivity to local cultures
and situations.
Management practices are influenced by cultural values; practices that are successful in one
culture may work less well in others.
INTERCULTURAL COMPETENCIES
Intercultural competencies are skills and personal characteristics that help us to be successful in
cross cultural situations.
GLOBAL LEARNING GOALS
One’s intercultural competency is strengthened by combining intercultural knowledge with

management skills and applying these principles in a culturally relative way.
Takeaway Summary

• Global managers are informed about international developments and are competent in working with
people from different cultures.
• The forces of globalization create international business opportunities to pursue profits, customers,
capital, and low-cost suppliers and labor in different countries.

• Market entry strategies for international business include global sourcing, exporting and importing,
and licensing and franchising.
• Direct investment strategies of international business establish joint ventures or wholly owned
subsidiaries in foreign countries.
• General environment differences, including legal and political systems, often complicate international
business activities.
• Regional economic alliances, such as NAFTA, the EU, and SADC link nations of the world with the
goals of promoting economic development.
• The World Trade Organization (WTO) is a global institution that promotes free trade and open
markets around the world.
FOR DISCUSSION: What aspects of the U.S. legal-political environment could prove difficult for a
Chinese firm setting up a factory in America?
Takeaway 2: What are global businesses and how do they work?

• A global corporation is a multinational enterprise or multinational corporation with extensive
operations in multiple foreign countries.
• A transnational corporation tries to operate globally without a strong national identity and with a
worldwide mission and strategies.
• Global corporations can benefit host countries by offering broader tax bases, new technologies, and
employment opportunities.
• Global Corporations can cause problems for host countries if they interfere in local government,
extract excessive profits, and dominate the local economy.
• The U.S. Foreign Corrupt Practices Act prohibits American multinational corporations from engaging
in bribery and corrupt practices abroad.
FOR DISCUSSION: Is the Foreign Corrupt Practices Act unfair to American firms trying to compete for
business around the world?

• Culture is a shared set of beliefs, values, and behavior patterns common to a group of people.
• Culture shock is the discomfort people sometimes experience when interacting with persons from
cultures different from their own.
• Cultural intelligence is an individual capacity to understand, respect, and adapt to cultural differences.
• Hall’s “silent” languages of culture include the use of context, time, and interpersonal space.
• Hofstede’s five dimensions of value differences in national cultures are power distance, uncertainty
avoidance, individualism-collectivism, masculinity-femininity, and time orientation.
FOR DISCUSSION: Should religion be included on Hall’s list of the silent languages of culture?

• The field of comparative management studies how management is practiced around the world and
how management ideas are transferred from one country or culture to the next.
• The foundations for intercultural competency are found in perception management relationship
management and self-management.

• Global management learning must recognize that successful practices in one culture may work less
well in others.
FOR DISCUSSION: Even though cultural differences are readily apparent, is the tendency today for the
world’s cultures to converge and become more alike?
Key Terms
Child labor: the employment of children for work otherwise done by adults.
Comparative management: the study of how management systematically differs among countries and cultures.
Corruption: engaging in illegal practices to further one’s business interests.
Cultural intelligence: the ability to accept and adapt to new cultures.
Culture: a shared set of beliefs, values, and patterns of behavior common to a group of people.
Culture shock: the confusion and discomfort a person experiences when in an unfamiliar culture.
Ecological fallacy: assumes that a generalized cultural value applies equally well to all members of the culture.
Ethnocentrism: the tendency to consider one’s culture superior to others.
Euro: the common European currency.
European Union: a political and economic alliance of European countries that have agreed to support mutual
economic growth by removing barriers that previously limited cross-border trade and business development.
Exporting: a form of international business that involves selling locally made products in foreign markets.
Foreign Corrupt Practices Act: makes it illegal for U.S. firms and their representatives to engage in corrupt
practices overseas.
Foreign subsidiary: a local operation completely owned and controlled by a foreign firm.
Franchising: a form of licensing in which the foreign firm buys the rights to use another’s name and operating
methods in its home country.
Global corporation: a multinational enterprise (MNE) or multinational corporation (MNC) with extensive
operations in many foreign countries.
Global management: involves managing operations in more than one country.
Global manager: a manager who is culturally aware and informed on international affairs.
Global sourcing: the process of purchasing materials, manufacturing components, or business services from around
the world.
Global strategic alliance: a partnership in which foreign and domestic firms share resources and knowledge for
mutual gains.
Globalization: the process of growing interdependence among the elements of the global economy.
Globalization Gap: is where large multinational corporations and industrialized nations gain disproportionately
from the benefits of globalization.
Greenfield venture: a foreign subsidiary built from the ground up by the foreign owner.
High-context culture: a culture where much communication takes place through nonverbal and situational cues in
addition to the written or spoken word.
International business: conducts for-profit transactions of goods and services across national boundaries.
Importing: a form of international business that involves buying foreign-made products and selling them in
domestic markets.
Individualism – collectivism: the degree to which a society emphasizes individuals and their self-interests.
Insourcing: describes job creation through foreign direct investment.
Intercultural competencies: are skills and personal characteristics that help us to be successful in cross cultural
situations.

Joint venture: a co-ownership arrangement in which the foreign and local partners agree to pool resources, share
risks, and jointly operate the new business.
Licensing agreement: a form of international business whereby foreign firms pay a fee for rights to make or sell
another company’s products in a specified region.
Low-context culture: a culture in which most communication takes place via the written or spoken word.
Masculinity-femininity: the degree to which a society values assertiveness and materialism.
Monochronic cultures: cultures in which people tend to do one thing at a time.
Most favored nation status: gives a trading partner most favorable treatment for imports and exports.
NAFTA : a trade agreement that links Canada, Mexico, and the United States in a regional economic alliance.
Nontariff barriers: discourage imports in nontax ways such as quotas and government import restrictions.
Political risk: the potential loss in value of a foreign investment due to instability and political changes in the host
country.
Political risk analysis: tries to forecast political disruptions that can threaten the value of a foreign investment.
Polychronic cultures: cultures in which time is used to accomplish many different things at once.
Power distance: the degree to which a society accepts unequal distribution of power.
Protectionism: calls for tariffs and favorable treatments to protect domestic firms from foreign competition.
Proxemics: how people use space to communicate.
Sweatshop: business operations that employ workers at low wages for long hours and in poor working conditions.
Tariffs: taxes governments levy on imports from abroad.
Time orientation: the degree to which a society emphasizes short-term or long-term goals.
Transnational corporation: a global corporation that operates worldwide without being identified with one
national home.
Uncertainty avoidance: the degree to which a society tolerates risk and uncertainty.
World 3.0: is a world where nations cooperate in the global economy while still respecting different national
characters and interests.
World Trade Organization: a global organization established to promote free trade and open markets around the
world, and to resolve disputes among countries about tariffs and trade restrictions.
SELF-TEST ANSWERS
1. The reasons why businesses go international include gaining new markets, finding investment
capital, and reducing _______________.
(a) political risk (b) protectionism (c) lower labor costs (d) most favored nation status
2. When shoemaker, Rocky Brands decided to buy full ownership of a manufacturing company in the
Dominican Republic, Rocky was engaging in which form of international business?
(a) import/export (b) licensing (c) foreign subsidiary (d) joint venture
3. A form of international business that falls into the category of a direct investment strategy is
___________.
(a) exporting (b) joint venture (c) licensing (d) global sourcing
4. The World Trade Organization, would most likely become involved in disputes between countries
over ___________.
(a) exchange rates (b) ethnocentrism (c) nationalization (d) tariffs

5. Business complaints about copyright protection and intellectual property rights in some countries
illustrate how differences in ______ can impact international operations.
(a) legal environments (b) political stability (c) sustainable development (d) economic systems
6. In ______ cultures, members tend to do one thing at a time; in ______ cultures, members tend to do
many things at once.
(a) monochronic, polychronic (b) polycentric, geocentric (c) collectivist, individualist (d) neutral,
affective
7. A culture that places great value on expressing meaning in the written or spoken word is described
as ___________by Hall.
(a) monochronic (b) proxemic (c) collectivist (d) low-context
8. It is common in Malaysian culture for people to value teamwork and to display great respect for
authority. Hofstede would describe this culture as high in both ________________.
(a) uncertainty avoidance and feminism (b) universalism and particularism (c) collectivism and
power distance (d) long-term orientation and masculinity
9. In Hofstede’s study of national cultures, America was found to be the most ___________ compared
with other countries in his sample.
(a) individualistic (b) collectivist (c) feminine (d) long-term oriented
10. It is _________ when a foreign visitor takes offense at a local custom such as dining with one’s
fingers, considering it inferior to practices of his or her own culture.
(a) universalist (b) prescriptive (c) monochronic (d) enthnocentric
11. When Limited Brands buys cotton in Egypt, has tops sewn from it in Sri Lanka according to designs
made in Italy, and then offers them for sale in the United States, this form of international business is
known as ______.
(a) licensing (b) importing (c) joint venturing (d) global sourcing
12. The difference between an international business and a transnational corporation is that the
transnational __________.
(a) tries to operate around the world without a strong national identity (b) does business in only
one or two foreign countries (c) is led by ethnocentric managers (d) is based outside of North
America
13. The Foreign Corrupt Practices Act makes it illegal for ______________.
(a) Americans to engage in joint ventures abroad (b) foreign businesses to pay bribes to U.S.
government officials (c) U.S. businesses to make “payoffs” abroad to gain international business
contracts (d) foreign businesses to steal intellectual property from U.S. firms operating in their
countries

14. When a member of a cross-cultural team is hesitant to speak up and offer ideas, defers to the team
leader and avoids accepting praise for individual work, the person is displaying characteristics
consistent with a ________________ culture.
(a) monochronic (b) low context (c) tight (d) loose
15. Hofstede would describe a culture whose members respect age and authority and whose workers
defer to the preferences of their supervisors as ______.
(a) low masculinity (b) high particularism (c) high power distance (d) monochromic
16. Why do host countries sometimes complain about how global corporations operate within their
borders?
The relationship between a global corporation and a host country should be mutually beneficial.
Sometimes, however, host countries complain that MNCs take unfair advantage of them and do not
include them in the benefits of their international operations. The complaints against MNCs include
taking excessive profits out of the host country, hiring the best local labor, not respecting local laws
and customs, and dominating the local economy. Engaging in corrupt practices is another important
concern.
17. Why is the “power-distance” dimension of national culture important in management?

The power-distance dimension of national culture reflects the degree to which members of a society
accept status and authority inequalities. Since organizations are hierarchies with power varying
from top to bottom, the way power differences are viewed from one setting to the next is an
important management issue. Relations between managers and subordinates, or team leaders and
team members, will be very different in high-power-distance cultures than in low-power-distance
ones. The significance of these differences is most evident in international operations, when a
manager from a high-power-distance culture has to perform in a low-power-distance one, or vice
versa. In both cases, the cultural differences can cause problems as the manager deals with local
workers.
18. What is the difference between a culture that is tight and one that is loose?
In tight cultures, like Malaysia, there is an expectation that people will know and conform to
expected norms. If one deviates from these norms, his behavior will be noticed, discouraged or even
sanctioned. Consequently, people from tight cultures are more reluctant to volunteer, seek individual
praise, or stand out as an individual. In contrast, in loose cultures, like the Ukraine, social norms
are less clear cut and lack of conformity is more tolerated. As a result, workers from loose cultures
are more accepting of emotions, personal criticism, and have an expectation that their work will be
recognized.
19. How do regional economic alliances impact the global economy?

For each region of the world you should identify a major economic theme, issue, or element. For
example: Europe—the European Union should be discussed for its economic significance to member
countries and to outsiders; the Americas—NAFTA should be discussed for its current implications,
as well as its potential significance once Chile and other nations join; Asia—the Asia-Pacific
Economic Forum should be identified as a platform for growing regional economic cooperation

among a very economically powerful group of countries; Africa—the new nonracial democracy in
South Africa should be cited as a stimulus to broader outside investor interest in Africa.
20. Kim has just returned from her first business trip to Japan. While there, she was impressed with the
intense use of work teams. Now back in Iowa, she would like to totally reorganize the workflows
and processes of her canoe manufacturing company and its 75 employees around teams. There has
been very little emphasis on teamwork, and she now believes this is “the way to go.” Based on the
discussion of culture and management in this chapter, what advice would you offer Kim?
Kim must recognize that the cultural differences between the United States and Japan may affect the
success of group-oriented work practices such as quality circles and work teams. The United States
was the most individualistic culture in Hofstede’s study of national cultures; Japan is much more
collectivist. Group practices such as the quality circle and teams are natural and consistent with the
Japanese culture. When introduced into a more individualistic culture, these same practices might
cause difficulties or require some time for workers to get used to them. At the very least, Kim should
proceed with caution, discuss ideas for the new practices with the workers before making any
changes, and then monitor the changes closely, so that adjustments can be made to improve them as
the workers gain familiarity with them and have suggestions of their own.
MANAGEMENT SKILLS AND COMPETENCIES
EVALUATE CAREER SITUATIONS: WHAT WOULD YOU DO?
These answers will vary according to differences in students’ experiences, perceptions and values.
SELF-ASSESSMENT: GLOBAL INTELLIGENCE
Through this self-assessment, students can reflect on their readiness to interact and work with persons
from other cultures. A high score would suggest that they deem themselves to be well prepared for
intercultural relations; a low score would reveal a need to better prepare themselves for the global
workplace. Such insights can be very useful for students as they consider their preparedness for their
careers, and identify areas for self improvement.
Instructor’s Note
Through this self-assessment, students can reflect on their readiness to interact and work with persons
from other cultures. A high score would suggest that they deem themselves to be well-prepared for
intercultural relations; a low score would reveal a need to better prepare themselves for the global
workplace. Such insights can be very useful for students as they consider their preparedness for their
careers, and identify areas for self-improvement.
(Source: Developed from “Is Your Company Really Global,” Business Week, December 1, 1997.)

TEAM EXERCISE: AMERICAN FOOTBALL
This exercise is easy to script and do in class since students get right into it. It is especially good if
students from other countries are included in the teams. The exercise basically takes care of itself. Ask
students to apply Hofstede's framework once they have worked a bit on the exercise. Discussion can then
use Hofstede's model to analyze possible implications of other sports - e.g. cricket, soccer.
MANAGE A CRITICAL INCIDENT: SILENT TEAM MEMBERS
The course instructor professor assigned students to teams for a case study in two parts spaced two weeks
apart: Part A requires a preliminary oral presentation and Part B requires a final presentation and written
report. Your team has five members, including one each from Japan and Indonesia. The team had three
face-to-face meetings while preparing Part A. The Japanese and Indonesian members said very little,
although they had extensive notes of information retrieved from research on the Internet. But they were
even hesitant to answer when asked direct questions. The other three members created the preliminary
presentation and assigned parts for everyone to deliver. The Japanese and Indonesian team members
struggled with their parts of the presentation and didn’t contribute during the question-and-answer
session. The instructor said the team’s Part A presentation wasn’t focused and well integrated. She said
things would have to go much better on Part B if the team expected a high grade. The team is scheduled
to meet tonight to recap Part A and start work on Part B.
Questions
What can you say and do at this meeting to set the stage for higher performance on Part B? How might
team dynamics and cross-cultural diversity have contributed to the Part A results? What insights from
cultural models might explain the behavior of your Japanese and Indonesian teammates? How can they be
better engaged so that the team takes best advantage of all of members’ talents going forward? What role
can you play in future team meetings to help accomplish this goal?
COLLABORATE ON THE TEAM ACTIVITY: GLOBALIZATION PROS AND CONS
Question
“Globalization” is frequently in the news. You can easily read or listen to both advocates and opponents.
What is the bottom line? Is globalization good or bad, and for whom? What are the important issues to
consider as the world becomes even more connected?
Instructions
1. Agree on a good definition for the term “globalization.” Review various definitions and find the
common ground.
2. Read current events relating to globalization. Summarize the issues and arguments. What is the positive
side of globalization? What are the negatives that some might call its “dark” side?

3. Read what scholars say about globalization. Summarize their views on the forces and consequences of
globalization for small and large companies, for countries, for people and society at large.
4. Consider globalization from the perspective of your local community and its major employers. Is
globalization a threat or an opportunity in this context, and why?
5. Take a position on globalization pros and cons, and share it with the class. Justify your position.
CASE STUDY: HARLEY DAVIDSON: STYLE AND STRATEGY HAVE GLOBAL

REACH
Discussion Questions
1. If you were CEO of Harley-Davidson, how would you compare the advantages and disadvantages of
using exports, joint ventures, and foreign subsidiaries as ways of expanding international sales?
Here are some of the advantages and disadvantages for Harley-Davidson in expanding international
sales:
ADVANTAGES DISADVANTAGES
Using • expansion into other markets • potential modification of the product
Exports increasing both sales and profits. to meet local regulations.
• a reduced dependency on its • additional transportation costs.
existing domestic market. • need for an export license or special
• sale of excess capacity. permits.
• longer wait time for customer
payments.
Joint • more production capacity and • a sharing of power and profits.
Ventures access to expertise in a given • may take a long time to form.
market. • lack of cooperation between the
• a sharing of risks with a partner. partners.
• business flexibility, in that the • an imbalance of expertise or
venture partners can limit the life financial risk.
span and the areas the venture • risk of giving away technical
covers. expertise to a competitor.
• ease of exit from the business.
Foreign • complete control of the foreign • company bears complete financial
Subsidiaries operation. risk.
• no risk of losing technical • long learning curve with the
expertise to a foreign competitor. country’s culture and customs and
marketplace.
2. In America, Harley has shifted the positioning of its products away from simply motorcycles and
more toward being status symbols of a particular lifestyle. What are the implications of cultural
factors for positioning in other countries that Harley has targeted for growth—ones like Japan, China,
France, and Brazil?

With Asian, African, and South American societies leaning toward Western culture and all it has to
offer, Harley’s positioning itself as a “way of life” instead of a producer of products fits well.
Appealing to the ‘rebel’ side of human nature, those customers in Asia, Africa, and South America
show their individuality and non-conformity by owning and riding a Harley. As such, just as in the
United States, Harley will see success in these other markets, not by being a producer of motorcycles,
but rather as a “way of life.”
3. Problem Solving If you were advising Harley’s CEO on business expansion in sub-Saharan Africa,
what would you recommend in terms of setting up sales centers and manufacturing sites in countries like
South Africa, Kenya, and Zimbabwe? When a new location is targeted, what would you suggest as the
proper role for locals to play? Should they run everything, or should there be a mix of locals and
expatriates? And if the CEO wants to send expatriates from the United States into some locations, what
selection criteria would you recommend, and why?
The general environment factors students must consider include economic, legal-political,
technological, socio-cultural and natural environmental conditions. The most influential factors
would probably be economic and legal-political. With most of the world's economies experiencing a
recession, the economic conditions might positively influence the willingness of the host countries to
accommodate a new industry and employer. India is more receptive to private industry than China,
but China is increasingly receptive to foreign investment. Both countries would have legal-political
factors to consider including regulation of labor, wages, unions, exports and taxes.
Both countries would probably welcome a joint venture with fewer restrictions than a wholly owned
foreign subsidiary.
4. Further Research Is it accurate to say that Harley is still “on top of its game”? How well is the
company performing today in both domestic and global markets? Who are its top competitors in other
parts of the world, and how well does Harley compete against them? Does the electric Harley have what it
takes to fuel the company’s next stage of global growth?
Students are directed to research Harley Davidson and research how well it is doing. Evidence of
company performance requires more digging than the basic information about the company's
products students will find with most search engines. Consider discussing the type of criteria they
should be looking for in their research before they begin. Caution students to conduct their online
research with objective media sources. The college library may offer free searches such as EBSCO
Host that access a large number of periodicals including industry publications that may provide
thorough and accurate comparisons as well as current industry trends.

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Takeaway Questions & Learning Objectives

Takeaway 1: What are the management challenges of globalization?

Takeaway 2: What are global businesses, and how do they work?

Copyright © 2015 John Wiley & Sons, Inc. 5-1

Takeaway 3: What is culture, and how does it influence global management?

Takeaway 4: How can we benefit from global management learning?

Teaching Objective: To sensitize students to the impact of international activities on management

Takeaway Question 1: What are the management challenges of globalization?

Copyright © 2015 John Wiley & Sons, Inc. 5-2

Pros and cons of global businesses

Takeaway Question 4: How can we benefit from global management learning?

Management Learning Review

Management Skills & Competencies

Copyright © 2015 John Wiley & Sons, Inc. 5-3

MANAGEMENT AND GLOBALIZATION

Global management involves managing operations in more than one country.

A global manager is a manager who is informed about international developments, transnational

WHY COMPANIES GO GLOBAL

An international business conducts commercial transactions of goods and/or services across

Copyright © 2015 John Wiley & Sons, Inc. 5-4

Reasons businesses go international:

HOW COMPANIES GO GLOBAL

Exporting and Importing

A second form of international business involves exporting and/or importing.

Importing is a form of international business that involves buying foreign-made products

Licensing and Franchising

Joint Ventures and Strategic Alliances

Copyright © 2015 John Wiley & Sons, Inc. 5-5

A joint venture establishes business operations in a foreign country through co-

A foreign subsidiary is a local operation completely owned and controlled by a foreign

GLOBAL BUSINESS ENVIRONMENTS

Legal and Political Systems

Trade Agreements and Trade Barriers

The World Trade Organization is an international organization that monitors

Tariffs: taxes that the government imposes on imports.

Copyright © 2015 John Wiley & Sons, Inc. 5-6

Regional Economic Alliances

The Euro is the common currency used in the European Union.

ASEAN (Association of Southeast Asian Nations) has a goal of promoting economic

SADC (South Africa Development Community) links 14 countries of southern Africa in

TYPES OF GLOBAL BUSINESSES

A transnational corporation is a multinational corporation that operates worldwide without

Copyright © 2015 John Wiley & Sons, Inc. 5-7

PROS AND CONS OF GLOBAL CORPORATIONS

Host-country complaints about MNC: Excessive profits, economic domination,

Host-country benefits: larger tax bases, increased employment opportunities, technology

Multinational corporation complaints about host countries: profit limitations, overpriced

ETHICS CHALLENGES FOR GLOBAL BUSINESSES

The ethical aspects of international business deserve special attention.

Corruption involves engaging in illegal practices to further one’s business interests.

Copyright © 2015 John Wiley & Sons, Inc. 5-8

Child labor and Sweatshops

CULTURES AND GLOBAL DIVERSITY

Ethnocentrism is the tendency to consider one’s culture as superior to others.

Copyright © 2015 John Wiley & Sons, Inc. 5-9