2015 Cengage Learning MGMT7 2015 Cengage Learning 81 discuss the impact of global business and the trade rules and agreements that govern it 82 explain why companies choose to standardize or adapt their business procedures ID: 721075
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Chapter 8Global Management
© 2015 Cengage Learning
MGMT7Slide2
© 2015 Cengage Learning
8-1 discuss the impact of global business and the trade rules and agreements that govern it
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explain why companies choose to standardize or adapt their business procedures
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explain the different ways that companies can organize to do business globally
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explain how to find a favorable business climate
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discuss the importance of identifying and adapting to cultural differences
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explain how to successfully prepare workers for international assignmentsSlide3
The Impact of Global Business
Multinational corporationsDirect foreign investment© 2015
Cengage Learning
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Trade Barriers
Tariff – direct tax on imported goodsNontariff barriersquotasvoluntary export restraintsgovernment import standards
subsidies
customs classification
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Trade Agreements
General Agreement on Tariffs and Trade (GATT)Existed from 1947 to 1995Agreement to regulate trade among more than 120 countries“Substantial reduction of tariffs and other trade barriers and the elimination of tariffs.”
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World Trade Organization
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Regional Trading Zones
Maastricht Treaty of EuropeNAFTACAFTA-DRUNASURASEANAPEC
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Consumers, Trade Barriers, and Trade Agreements
Trade agreements increase choices, competition, and purchase power…decrease prices. Free trade agreements create new business opportunities…
…but also intensify competition.
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Consistency or Adaptation
Global consistencywhen a multinational company has offices, manufacturing plants, and distribution facilities in different countries and runs them all using the same rules, guidelines, policies, and procedures Local adaptationwhen 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 for Global Business
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ExportingSelling domestically made products to foreign markets
Advantagesmakes company less dependent on domestic salesgives company more controlDisadvantagesgoods subject to trade barriers
transportation costs
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Cooperative Contracts
Licensinga domestic company, the licensor, receives royalty payments for allowing another company, the licensee, to produce its product, sell its service, or use its brand name in a particular foreign market.Advantagescompanies earn money without investing more money
companies can avoid trade barriers
Disadvantages
licensor gives up control over product quality
licensees can become competitors
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Cooperative Contracts
Franchise a collection of networked firms in which the manufacturer or marketer of a product or service, the franchisor, licenses the entire business to another person or organization, the franchisee.Advantages
fast way to enter foreign markets
gives franchisor additional cash flow
Disadvantages
loss of control
culture bound
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Strategic Alliances
When companies combine key resources, costs, risks, technology, and people. Most common form is joint ventures. Advantagescompanies avoid trade barriers
companies only bear part of the costs
partners can learn from each other
Disadvantages
Profits have to be shared
merging of cultures
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Wholly Owned Affiliates
Foreign offices, facilities, and manufacturing plants that are 100 percent owned by the parent company Advantages parent company receives all of the profits and has complete control
Disadvantages
losses for parent company can be enormous
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Global New Ventures
Companies founded with an active global strategy.© 2015 Cengage Learning
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Growing Markets
Purchasing powerGrowth potential
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How Consumption of Coca-Cola Varies with Purchasing Power around the World
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Choosing a Location
Qualitative factors workforce qualitycompany strategyQuantitative factors
kind of facility being built
trade barriers
exchange rates
transportation and labor costs
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World’s Best Cities for Business
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Minimizing Political Risk
Political uncertaintyPolicy uncertainty
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Strategies for Dealing with Political Risk
Avoidance divesting or selling business to avoid risk
Control
active strategy to prevent or reduce political risks
Cooperation
using joint ventures and collaborative contracts
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Overview of Political Risk in the Middle East
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Becoming Aware of Cultural Differences
Five Dimensions of Culture Power distance Individualism Masculinity/femininity
Uncertainty avoidance
Short-term/long-term orientation
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Hofstede’s Five Cultural Dimensions
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Language and Cross-Cultural Training
Documentary trainingCultural simulationsField simulation training
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Spouse, Family, and Dual-Career Issues
Adaptability screening assesses how well managers and families are likely to adjust to a foreign cultureLanguage and cross-cultural training for the family is just as, if not more, important than training for employees.
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Holden Outerwear
1. Which stage of globalization characterizes Holden Outerwear’s international involvement? 2. Identify Holden’s primary approach to entering the international market. What are the benefits of this entry strategy? 3. What are the challenges of international management for leaders at Holden?
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