Diane Marie Dy BS-Entrep1 BA11 MWF 8:30-9:30

I.

Parochiaism
– viewing the world solely through your own perspectives
– leading to an inability to recognize differences between people

Three Global Attitudes

1. Ethnocentric
– Parocialistic belief that the best work approaches and practices are those
from the home country
1. Polycentric
– The view that the managers in the host country know the best work
approaches and practices fro running their business
1. Geocentric
– The world-oriented view that focuses on the best approaches and people
from around the globe

• successful global management requires enhanced sensitivity to differences in

national customs and practices

II.

Regional Trading Alliances

– reshaped global competition

a. The European Union

– A unified economic and trade entity with 12 original members
(Belgium, Denmark, France, Greece, Ireland, Italy, Luxembourg, the
Netherlands, Portugal, Spain, UK, Germany)
– To reassert their economic position against the strength of the US and
Japan but couldn’t develop American and Japanese businesses
– Current status: union of 25 European nations; no barriers to travel,
employment, investment, trade
– Full unification happened when 12 countries became part of the
Economic and Monetary Union – the formal system responsible for
the development of the euro - a single European currency

b. North American Free Trade Agreement (NAFTA)

– An agreement among the Mexican, Canadian, and US governments in
which barriers to trade have been eliminated
– strengthened the economic power of all 3 countries

other trade alliances in Latin America

• LA nations are moving to become a part of free-trade blocs led by
Colombia, Mexico, and Venezuela.
• US – Central America Free Trade Agreement (CAFTA) promotes
trade liberalization between the US and 5 Central American
 countries (Costa Rica, El Salvador, Guatemala, Honduras,
Nicaragua)
• US signed a trade deal with Columbia that is said to be largest
Washington has negotiated with a LA country since signing NAFTA.
• Negotiators from 34 countries in the Western hemisphere continue
work on the Free Trade Area of the Americas (FTAA) but failed to
reach any agreement by 2005 Summit. So the future of FTAA
hanging.
• 8 South American countries are already part of the Southern Cone
Market or Mercosur, but are looking to become part of FTAA.

a. Association of Southeast Asian Nations (ASEAN)

– a trading alliance of 10 Southeast Asian nations
– promises to be one of the fastest growing economic regions of the world
and will be an increasingly important regional economic and political
alliance whose impact could rival NAFTA and EU.

III.

World Trade Organization (WTO)

– help businesses (importers and exporters) conduct their business
– monitors and promotes global trade

IV.

Multinational Corporation (MNC)

– is a broad term that that refers to any and all types of int’l companies that
maintain operations in multiple countries

TYPES:
Multidomestic Corporation
– decentralizes management and other decisions to the local country
– local employees are usually hired to manage business and marketing
strategies are tailored to that country’s unique characteristics
– reflects polycentric attitude

Global Company
– centralizes management and other decisions in the home country
– focuses on the need for global efficiency
– reflects the ethnocentric attitude

Transnational or Borderless Organization

– eliminates artificial geographical barriers
– reflects a geocentric attitude

Born Globals
– chooses to go global from inception
– aka international new ventures (INVs)
– commit resources upfront (materials, people, financing) to doing business
in more than one country
– are likely to continue to play an important role in the international
business
How Organizations Go International

Minimal investment
1. Global Sourcing
– purchasing materials or labor form from around the world wherever it is
cheap
– aka Global Outsourcing

Medium investment
1. exporting
– making products domestically and selling them abroad
1. importing
– acquiring products made abroad and selling them domestically

1. licensing
– an organization gives another organization the right to make or sell its
product using its technology or product specification

1. franchising
– an organization gives another organization the right to use its name and
operating methods

Significant investment
1. strategic alliances
– a partnership between an organization and a foreign company partner(s)
in which both share resources and knowledge in developing new products
or building production facilities

1. joint venture
– a specific type of strategic alliance in which the partners agree to form a
separate, independent organization for some business purpose

1. foreign subsidiary
– directly investing in a foreign country by setting up a separate and
independent production facility or office

IV.

Legal-Political Environment
– laws and regulations; stability of government
– managers must stay informed of the specific laws in countries where they
do business since the stability of a government is different
– managers must recognize the differences to understand the constraints
under which they operate and the opportunities that exists

Economic Government
– manager must be aware of economic issues when doing business in other
countries
– types:
○ market economy
 resources are primarily owned and controlled by the private
sector
○ command economy
 all economic decisions are planned by a central government
– currency exchange rates
○ the revaluation of currency can affect the managers’ decision and
the level of the company’s profit
– inflation rates
 ○ managers need to monitor inflation trends so they can make good
decisions and anticipate any possible changes in a country’s
monetary policies
– tax policies
○ managers need exact information on the various tax rules in
countries in which they operate to minimize their business’s overall
tax obligations

Cultural environment
– national culture
○ the values and attitudes shared by individuals from a specific
country that shaped their behavior and beliefs about what’s
important
– hofstede’s framework for assessing cultures
○ individualism versus collevtivism
○ power distance
○ uncertainty avoidance
○ achievement versus nurturing
○ long-term and short term orientation
– the GLOBE (global leadership and organizational behavior effectiveness
research program) framework for assessing cultures
○ assertiveness
○ future orientation
○ gender differentation
○ uncertainty avoidance
○ power distance
○ individualism/collectivism
○ in-group collectivism
○ performance orientation
○ humane orientation