Marketing Manager Course - Chapter 2
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McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved.
Chapter
2
Managing in a
Global Environment
McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved.
Learning Objectives
After reading this chapter, you should be able to:
Understand the landscape of the global market.
Develop an awareness for the role of culture in international
management.
Recognize the major options firms face when they choose a
global strategy and the conditions that make a strategic
choice most appropriate.
Determine the best mode of entry into foreign markets given
each firm’s unique characteristics.
Develop effective human resource practices for managing
international subsidiaries.
Become aware of ethical issues in international operations.
McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved.
The Changing Pattern of International Business
Changing world output and world trade
picture
The U.S. no longer dominates the world economy
Large U.S. multinationals no longer dominate
international business
The centrally planned communist economies that
made up roughly half the world suddenly become
accessible to Western businesses
The global economy has become more knowledge-
intensive
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The Changing Pattern of International Business
(continued)
Lowered trade barriers
General Agreement on Tariffs and Trade
(GATT)
World Trade Organization (WTO)
Integrated Economic Markets
The European Union (EU)
The North American Free Trade Act
(NAFTA)
The Association of Southeast Asian Nations
(ASEAN)
The Asia Pacific Economic Cooperation
McGraw-Hill
(APEC) © 2004 The McGraw-Hill Companies, Inc. All rights reserved.
The Changing Pattern of International Business
(continued)
Global consumer preferences
Tastes and preferences are converging
Presence of mass media, exposure to
goods from various countries, and
standardized products
Globalized production
Cost efficiency
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Example of Globalized Production
Of the $20,000 sticker price of a General Motors
Automobile LeMans:
$6,000 goes to South Korea, where the car was assembled
$3,000 goes to Japan for sophisticated high-tech parts
(engines, transaxles, electronics)
$800 goes to Taiwan, Singapore, and Japan for small
parts
$500 goes to Great Britain for advertising and marketing
services
$1,000 goes to Ireland for data processing
$7,600 goes to GM and its external professional firms in
the United States
McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved.
The Changing Pattern of International Business
(continued)
Technological innovations
Advances in communications, information
processing, and transportation technology
Fiber optics, wireless technology, the Internet
and World Wide Web, and satellite technology
Management across cultures
Adaptation to business strategies, structures,
operational policies, and human resource
programs
McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved.
Major Factors Affecting International Business
General business environment
Legal system
Common law
Civil law
Muslim law
Economic environment
Cultural environment
Culture shock
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Dimensions of Culture
Power Distance
Individualism
Uncertainty Avoidance
Masculinity / Femininity
Long-term/ Short-term
Orientation
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Entry Strategy and Strategic Alliances
Four key decisions of a firm contemplating foreign
expansion:
Which countries to enter
When to enter
Scale of involvement
How to enter
McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved.
Choosing Foreign Countries
The appeal of a particular country is likely to be greater
when:
The size of the domestic market is large
The present wealth of consumers in that market is high and
projected to grow in the future
The needed resources are readily available
The firm’s product offerings are suitable to a particular
market
A positive business environment exists
McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved.
When to Enter Foreign Countries
and Scale of Involvement
When to Enter
First-mover advantages
Pioneering costs
Scale of Involvement
Lowest if the firm simply decides to export its products to the
foreign location
Highest if the firm decides to have a wholly owned
subsidiary in the foreign country
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Modes of Entry
Exporting Turnkey Project
Licensing
Franchising
Joint Venture
Wholly Owned
Subsidiary Strategic Alliance
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Advantages and Disadvantages of
Various Modes of Entry Choices
Mode of Entry Advantages Disadvantages
Exporting Economies of scale No low cost sales
Lower foreign expenses High transportation costs
Potential tariffs
Turnkey Project Access to closed markets Competition from local client
Loss of competitive advantage
Licensing Quick expansion Loss of competitive advantage
Lower expenses and risks Limited ability to use profits in one country to
Lower political risk increase competition in another country
Franchising Quick expansion Loss of competitive advantage
Lower development costs and risks Potential quality control problems
Lower political risk Limited ability to use profits in one country to
increase competition in another country
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Advantages and Disadvantages of Various
Modes of Entry Choices (continued)
Mode of Entry Advantages Disadvantages
Joint Venture Knowledge of local markets Potential for conflict of interest
Lower development costs and risk Loss of competitive advantage
Access to closed markets
Strategic Alliance Access to closed markets Loss of competitive advantage
Pooled resources increase partner’s Potential overestimation of partner’s
capabilities capabilities
Complementary skills & assets
Wholly Owned Maximum control over proprietary Large capital outlay
Subsidiary knowledge/ technology Lack of local knowledge
Greater strategic flexibility Increased risk
Efficiencies of global production system
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Examples of Strategic Alliances
General Electric – Snecma of
France
Toshiba – IBM
Mitsui – General Electric
Toyota – GM, TRW
Canon – Hewlett-Packard
Mitsubishi – Caterpillar
McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved.
Basic Approaches to Managing an
International Subsidiary
Ethnocentric Approach
Polycentric Approach
Geocentric Approach
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Why International Assignments End in Failure
Career blockage
Culture shock
Lack of pre-departure cross-cultural training
Overemphasis on technical qualifications
Getting rid of a troublesome employee
Family problems
McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved.
Key Human Resource Management
Factors for Global Firms
Selection
Selection criterion should include cultural sensitivity
Training
Length of assignment determines depth of training
Cross-cultural training is critical to success
Career Development
International assignments should be part of career
advancement plan
Compensation and Benefits
Incentives and quality-of-life concerns
McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved.
