chapter 8 global management. learning outcomes after reading this chapter, you should be able to:...
TRANSCRIPT
Chapter 8
Global Management
Learning OutcomesAfter reading this chapter, you should beable to:
1. Discuss the impact of global business and the trade rules and agreements that govern it.
2. Explain why companies choose to standardize or adapt their business procedures.
3. Explain the different ways that companies can organize to do business globally.
4. Explain how to find a favourable business climate.5. Discuss the importance of identifying and adapting to
cultural differences.6. explain how to successfully prepare workers for
international assignments.
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What Is Global Business?• The buying and selling of
goods and services by people from different countries
• Multinational corporation: corporation that owns businesses in two or more countries
• 1970: 7,000 multinational corporations
• 2010: more than 77,000
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Foreign Direct Investment in Canada, 1998-2007 Cumulative at Year End
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Direct Foreign Investment
• A method of investment in which a company builds a new business or buys an existing business in a foreign country– Molson purchased the fourth-largest beer
company in Mexico (Brewery Group).– Molson has since merged with Coors and is
known as the Molson Coors Brewing Company.
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Trade Barriers
Trade Barriers•Reduce purchase of imported goodsTariff•Direct tax on imported goodsProtectionism•Protect local companies from foreign competition
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Nontariff BarriersQuotas: Imports of raw sugar cane are
limited.Voluntary export restraints:
limit the amount of a product that can be imported annually
Government import standards:
protect the health and safety of citizens
Government subsidies:
Bombardier: Canadian taxpayers pick up the subsidy costs
Customs valuation/ classification:
CBSA customs classifications for imported goods
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Trade Barriers in Canada
1.21.2
Class Activity: Canadian Border Services Agency
• Canadian Border Services Agency• Tariff Treatments
Read through the Canadian Border Services Agency website, and look through the guide of importing under tariff treatments.
What did you learn?
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Beyond the Book
GATT: General Agreement on Tariffs and Trade
Purpose• To make it easier and cheaper to buy foreign products
in all countriesGATT Accomplishments• Tariffs cut 40 percent on average worldwide
by 2005• Tariffs eliminated in 10 specific industries• Stricter limits put on government subsidies• Established protections for intellectual property • Trade disputes between countries are fully settled by
arbitration panels from the WTO.Copyright © 2015 by Nelson Education Ltd. 8-9
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World Trade Organization: Fact FileLocation: Geneva, SwitzerlandEstablished: January 1, 1995Created by: Uruguay Round negotiations (1986-1994)Membership: 159 countriesBudget: 197 million Swiss francs for 2013Secretariat staff: 640Head: Roberto Azevedo (director-general)
1.31.3
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World Trade Organization: Fact FileFunctions:•Administering WTO trade agreements•Forum for trade negotiations•Handling trade disputes•Monitoring national trade policies•Technical assistance and training for developing countries•Cooperation with other international organizations
1.31.3
Regional Trading Zones
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Maastricht Treaty of Europe
Implemented in 1992 and includes Belgium, Denmark, France, Germany, Greece, Ireland, Italy, Luxembourg, the Netherlands, Portugal, Spain, and the United Kingdom
NAFTA North American Free Trade Agreement between the United States, Canada, and Mexico went into effect January 1, 1994
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CAFTA-DR Central America Free Trade Agreement between the United States, the Dominican Republic, and the Central American countries of Costa Rica, El Salvador, Guatemala, Honduras, and Nicaragua went into effect August 2005
UNASUR Union of South American Nations,a regional trade agreement between Argentina, Brazil, Paraguay, Uruguay, Venezuela, Bolivia, Colombia, Ecuador, Peru, Guyana, Suriname, and Chile, went into effect May 23, 2008
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ASEAN Association of Southeast Asian Nations trade agreement between Brunei Darussalam, Cambodia, Indonesia, Lao PDR, Malaysia, Myanmar, the Philippines, Singapore, Thailand, and Vietnam
APEC Asia-Pacific Economic Cooperation is a broader agreement that includes Australia, Canada, Chile, the People’s Republic of China, Hong Kong (China), Japan, Mexico, New Zealand, Papua New Guinea, Peru, Russia, South Korea, Taiwan, the United States, and all the members of ASEAN except Cambodia, Lao PDR, and Myanmar.
Global Map of Regional Trade Agreements
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Consumers, Trade Barriers, and Trade Agreements
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What $1 gets you in Canada
What $1 gets you in Japan
What $1 gets you in Switzerland
Why? Foreign and domestic competition.
1.41.4
How to Go Global?: Consistency or Adaptation?
Global Consistency•When a multinational company has offices/plants in different countries and uses the same rules, guidelines, policies, and proceduresLocal Adaptation•When a multinational company modifies its rules, guidelines, policies, and procedures to adapt to differences in foreign customers, governments, and regulatory agencies
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Forms of Global Business
• Export– Produce products in home countries and sell to
customers in foreign countries• Cooperative Contract
– Franchise: the manufacturer or marketer licenses the entire business to another
– Licensing agreement: receives royalty payments from another company that produces its product, sell its service, or uses its brand name in a foreign market
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Forms of Global Business
• Strategic Alliances – Joint venture: two existing companies
collaborate to form a third company– 100 percent owned by the parent
company• Global New Ventures
– new companies founded with an active global strategy
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Exporting
ADVANTAGES• Less dependence on
home market sales• Greater degree of
control over research, design, and production decisions
DISADVANTAGES• Many exports are
subject to tariff and nontariff barriers.
• Transportation costs can increase the price.
• Companies may depend on foreign importers for product distribution.
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Licensing
ADVANTAGES• Allows companies to
earn profits without investing more money
• The licensor invests in production equipment and facilities.
• Helps companies avoid tariff and nontariff barriers
DISADVANTAGES• The licensor gives up
control over quality of the product or service sold by the foreign licensee.
• Licensees can eventually become competitors.
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Franchise
ADVANTAGES• Fast way to enter
foreign markets• Good strategy when a
company’s domestic sales have slowed
DISADVANTAGES• Franchisors face a loss of
control. • Franchising success may
be culture-bound.
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Joint Venture
ADVANTAGES• Helps companies avoid
tariff and nontariff barriers to entry
• Participating companies bear only part of the costs and risks
• Advantageous to smaller local partners
DISADVANTAGES• Companies must share
profits.• Joint venture
represents a merging of four cultures.
• With equal ownership, power struggles and a lack of leadership may occur.
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Wholly Owned Affiliates(Build or Buy)
ADVANTAGES• Parent company
receives all of the profits and has complete control
DISADVANTAGES• Expense of building new
operations or buying existing business
• Losses can be immense if the venture fails.
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Finding the Best Business Climate
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World’s Best Cities for Business
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Class Activity:Ten Best Places to Start a Business in the World
Ten Best Places to Start A Business in the World
Read the article, and discuss the places you knew would be on the list and those that surprised you. Share your rationale.
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Beyond the Book
Overview of Political Risk in the Middle East
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Hofstede’s Five Cultural Dimensions
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Class Activity: Hofstede’s Five Cultural Dimensions
To generate a graphical comparison of two different countries’ cultures, go to Hofstede's Five Cultural Dimensions.
•Select a “home culture.” •Then select a “host culture.” •A graph comparing the countries on each of Hofstede’s five cultural differences willautomatically be generated.
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Beyond the Book
Hofstede’s Work
• Hofstede’s work is especially useful if we want to avoid charges of ethnocentricity.– where everything is seen from the
perception of an individual’s home country• The other thing that Hofstede’s work can help
us deal with is culture shock.• It is meant to help us explore the cultural
differences between North American companies and their suppliers and customers around the globe.
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Becoming Aware of Cultural Differences
National Culture
• The set of shared values and beliefs that affects the perceptions, decisions, and behaviour of the people from a particular country
Cultural Dimensions(Geert Hofstede)
• Power distance• Individualism• Masculinity and
femininity• Uncertainty avoidance • Short-term/long-term
orientation
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Preparing for an International Assignment
Expatriate: someone who lives and works outside his or her native country•1.5 million expatriates reside in the United States.•750,000 reside in the United Kingdom.•250,000 reside in China.•Average is $1 million/three-year assignment
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Preparing for an International Assignment
Language and Cross-Cultural Trainingof managers about to working internationally receive pre-departure training
Consideration of Spouse, Family, and Dual-Career Issuesof families receive language and cross-culture training
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