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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 MGMT 321 - Chapter 6 Competitors Rivalry between competitors is potentially the most threatening force – Price competition – Falling prices – Reduces access to resources – Lowers profits Vs. MGMT 321 - Chapter 6 Vs. Barriers to Entry and Competition Figure 6.2 MGMT 321 - Chapter 6 General Environment Economic Technological Demographic Socio-cultural Political and Legal MGMT 321 - Chapter 6 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