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Chapter 6
Managing in the Global
Environment
Global Management

Global Organizations
– Operate and compete globally
– Uncertain and unpredictable

Global Environment
– Forces and
conditions in the
world outside the
organization’s
boundaries
MGMT 321 - Chapter 6
Forces in the Organizational
Environment
MGMT 321 - Chapter 6
Task Environment
Set of forces and conditions that
originate with suppliers, distributors,
customers, and competitors
 Affect an organization’s ability to obtain
inputs and dispose of its outputs
 Most immediate and direct effect on
managers

MGMT 321 - Chapter 6
Suppliers
 Individuals
and organizations that provide
an organization with input resources
 Relationships can be difficult due to
materials shortages, unions, and lack of
substitutes
 Managers can reduce supplier effects by
increasing the number of suppliers
 Low-cost products made abroad can be an
opportunity for U.S. companies
 Global Outsourcing
MGMT 321 - Chapter 6
The Task Environment

Distributors
– Organizations that help other organizations
sell their goods or services to customers

Customers
– Individuals and groups that buy goods and
services that an organization produces

Competitors
– Current
– Potential
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Competitors

Rivalry between competitors is
potentially the most threatening force
– Price competition
– Falling prices
– Reduces access to resources
– Lowers profits
Vs.
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Vs.
Barriers to Entry and Competition
Figure 6.2
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General Environment
Economic
 Technological
 Demographic
 Socio-cultural
 Political and Legal

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Economic Forces
Interest rates, inflation, unemployment,
economic growth, and other factors
affecting the general financial health
 Successful managers:

– Realize the effects of economic forces
– Pay close attention to what is occurring in
the national and regional economies
MGMT 321 - Chapter 6
Technological Forces
Outcomes of changes in the technology
that managers use to design, produce,
or distribute goods and services
 Results in new opportunities or threats
 Often makes products obsolete very
quickly
 Changes are altering the very nature of
work itself, including the manager’s job

MGMT 321 - Chapter 6
Socio-cultural Forces
Pressures emanating from the social
structure of a country or society or from
the national culture
 Societies differ substantially in the
values and norms they emphasize
 Effective managers are sensitive to
differences between societies and
adjust their behaviors accordingly

MGMT 321 - Chapter 6
Demographic Forces
Aging populations in most industrialized
nations
 Organizations
need to find ways
to motivate and
utilize older
workers

MGMT 321 - Chapter 6
The General Environment
Political and Legal Forces
–Outcomes of changes in laws and
regulations, such as the deregulation of
industries, the privatization of organizations,
and increased emphasis on environmental
protection
• Increasingly nations are joining together into
political unions that allow for the free exchange of
resources and capital
MGMT 321 - Chapter 6
Process of Globalization

Globalization
– Specific and general forces that work together to
connect economic, political, and social systems
– Nations and peoples become increasingly
interdependent

Forms of capital that flow between countries:
–
–
–
–
Human capital
Financial capital
Resource capital
Political capital
MGMT 321 - Chapter 6
Declining Barriers to Trade and
Investment

Tariff
– A tax that government imposes on
imported or, occasionally, exported goods
– Intended to protect domestic industry and
jobs from foreign competition

Free-Trade Doctrine
– Each country should specialize in the
production of the goods and services that it
can produce most efficiently
MGMT 321 - Chapter 6
Declining Barriers of Distance and
Culture

Distance
– Markets were essentially closed because of
the slowness of communications

Culture
– Language barriers and cultural practices

Changes in distance and communication
– Improvements in transportation technology
and fast, secure communications
MGMT 321 - Chapter 6
Effects of Free Trade

NAFTA
– Abolishes 99% of tariffs on goods traded between
Mexico, Canada and the United States
– Increased investment by U.S. firms in Mexican
manufacturing facilities

CAFTA
– Same as NAFTA between United States and all
countries in Central America
– Approved by Dominican Republic, El Salvador,
Guatemala, Nicaragua, and Honduras
MGMT 321 - Chapter 6
The Role of National Culture

Values
– Ideas about what a society believes to be good,
desirable and beautiful
– Provide the basic underpinnings for notions of
freedom, democracy, honesty, loyalty, etc.

Norms
– Unwritten rules and codes of conduct that
prescribe how people should act

Mores
– Behavioral norms that are considered central to
functioning of society
MGMT 321 - Chapter 6
Hofstede’s Model of National
Culture
Figure 6.4
MGMT 321 - Chapter 6