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MANAGING IN A
GLOBAL
ENVIRONMENT
Instructor: Nida Rasheed

Globalization
◦ The process of developing influence or operations in other countries
Nationalism: patriotic ideals and policies that glorify a country’s values.
◦ It’s not unusual for Germans, Italians, or Indonesians to speak three or
four languages. “More than half of all primary school children in China
now learn English and the number of English speakers in India and
China—500 million—now exceeds the total number of mother-tongue
English speakers elsewhere in the world.” On the other hand, 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 leading to Monolingualism.

◦ Parochialism: viewing the world solely through your own
perspectives, leading to an inability to recognize differences
between people.
◦ People with a parochial attitude do not recognize that others have
different ways of living and working. They ignore others’ values and
customs and rigidly apply an attitude of “ours is better than theirs”
to foreign cultures.
◦ This type of narrow, restricted attitude is one approach that
managers might take, but isn’t the only one. In fact, there are three
possible global attitudes.

Ethnocentric attitude
◦ The parochialistic belief that the best work approaches and
practices are those of the home country (the country in which
the company’s headquarters are located).
◦ Managers with an ethnocentric attitude believe that people in
foreign countries 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
employee with key decisions or technology.

Polycentric attitude is
◦ The view that employees in the host country (the foreign country
in which the organization is doing business) know the best work
approaches and practices for running their business. Managers
with this attitude view every foreign operation as different and
hard to understand.
◦ Thus, they’re likely to let employees in the host country figure out
how best to do things.

Geocentric attitude
◦ A world-oriented view that focuses on using the best approaches
and people from around the globe. Managers with this type of
attitude have a global view and look for the best approaches
and people regardless of origin.

Geocentric attitude
◦ For instance, Carlos Ghosn, CEO of Nissan and Renault, was born
in Brazil to Lebanese parents, educated in France, and speaks
four languages fluently. He could very well be the “model of the
modern major corporate leader in a globalized world
bestraddled by multinational companies.” Ghosn’s background
and perspective have given him a much broader understanding
of what it takes to manage in a global environment, some- thing
that is characteristic of the geocentric attitude. A geocentric
attitude requires eliminating parochial attitudes and developing
an understanding of cross-cultural differences.
◦ That’s the type of approach successful managers will need in
today’s global environment.

Types of International
Organizations
Multi National
Corporation
Multidomestic
corporation
Global
company
Transnational/
Borderless
organization

Multinational corporation (MNCs)
◦ A multinational corporation (MNC) is any type of international
company that maintains operations in multiple countries.
◦ 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 characteristics.

Multinational Corporation
◦ For example, Switzerland-based Nestlé is a multidomestic corporation. With operations
in almost every country on the globe, its managers match the company’s products to
its consumers. In parts of Europe, Nestlé sells products that are not available in the
United States or Latin America.
◦ Another example is Frito-Lay, a division of PepsiCo, which markets a Dorito chip in the
British market that differs in both taste and texture from the U.S. and Canadian version.
Even the king of retailing, Walmart Stores, has learned that it must “think locally to act
globally” as it tailors its inventories and store formats to local tastes.
◦ Many consumer product companies organize their global businesses using this
approach because they must adapt their products to meet the needs of local markets.

Global company
◦ Centralizes its management and other decisions in the home country. This approach to
globalization reflects the ethnocentric attitude. Global companies treat the world
market as an integrated whole and focus on the need for global efficiency and cost
savings. Although these companies may have considerable global holdings,
management decisions with company-wide implications are made from headquarters
in the home country.
◦ Some examples of global companies include Sony, Deutsche Bank AG, Starwood
Hotels, and Merrill Lynch.

Transnational or Borderless
organization
◦ Use an arrangement that eliminates artificial geographical barriers reflects a geocentric
attitude.
◦ For example, IBM dropped its organizational structure based on country and
reorganized 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.” Managers choose this approach to increase efficiency and
effectiveness in a competitive global marketplace.

How Organizations Go
International
◦ Managers who want to get into a global market 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
in order to be more competitive.

◦ Although global sourcing may be the first step to going international for many
companies, they often continue to use this approach because of the competitive
advantages it offers. Each successive stage of going international beyond global
sourcing, however, requires more investment and thus entails more risk for the
organization.
◦ The next step in going international may involve exporting the organization’s products
to other countries—that is, making products domestically and selling them abroad. In
addition, an organization might do importing, which involves acquiring products made
abroad and selling them domestically. Both usually entail minimal investment and risk,
which is why many small businesses often use these approaches to doing business
globally.

◦ Managers also might use licensing or franchising, which are similar approaches
involving one organization giving another organization the right to use its brand name,
technology, or product specifications in return for a lump sum payment or a fee usually
based on sales. The only difference is that licensing is primarily used by manufacturing
organizations that make or sell another company’s products and franchising is primarily
used by service organizations that want to use another company’s name and
operating methods.

◦ Strategic alliance
◦ A partnership between an organization and a foreign company
partner or partners in which both share resources and knowledge in
developing new products or building production facilities.
◦ For example, Honda Motor and General Electric teamed up to
produce a new jet 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.

◦ 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 (centralized control). As you can probably guess,
this arrangement involves the greatest commitment of resources
and poses the greatest amount of risk.

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Chapter number 5 Principles of manaegment

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