Chapter 3
Managing in a Global
Environment
Global Perspectives
Parochialism
Is viewing the world exclusively through one’s own
eyes and perspectives.
Is not recognizing that others have different ways of
living and working.
Is a significant problem for managers working in a
global business world.
Is falling into the trap of ignoring others’ values and
customs and strictly applying an attitude of “ours is
better than theirs” to foreign cultures they'll find it
difficult to compete with other organizations around
the world that are seeking to understand foreign
customs and market differences.
3 Global Attitude
1. Ethnocentric Attitude
The parochalistic belief that the best work
approaches and practices are those of the home
country (the country in which the company’s
headquarters are located).
Managers with an ethnocentric attitude believe that
people in foreign countries don’t have the needed
skills, expertise, knowledge, or experience to make
the best business decisions as people in the home
country do.
They don’t trust foreign employees with key
decisions or technology.
Example: America and Britain
Global Perspectives
2. Polycentric Attitude
The view that the employees in the host country
(the foreign country in which the organization is
doing business) know the best work approaches
and practices for running their business.
Managers with this attitude view every foreign
operation as different and hard to understand
Thus, they’re likely to let employees there figure
out how best to do things.
Example: Nestle
Global Perspectives
3. Geocentric Attitude
A world-oriented view that focuses on using the
best approaches and people from around the
globe.
Managers with this type of attitude have a global
view and look for the best approaches and people
regardless of origin.
Example: Novertis
Regional Trading Agreements
The European Union (EU)
A unified economic and trade entity
Belgium, Denmark, France, Greece, Ireland, Italy,
Luxembourg, the Netherlands, Portugal, Spain, the
United Kingdom, Germany, Austria, Finland, and
Sweden
North American Free Trade Agreement (NAFTA)
Eliminated barriers to free trade (tariffs, import
licensing requirements, and customs user fees)
United States, Canada, and Mexico
Exhibit 4–1 European Union
Regional Trading Agreements
U.S.-Central America Free Trade Agreement (CAFTA)
Free Trade Area of the Americas
Southern Cone Common Market (Mercosur)
Association of Southeast Asian Nations (ASEAN)
Trading alliance of 10 Southeast Asian nations
African Union
South Asian Association for Regional Cooperation
(SARRC)
Exhibit 4–2 ASEAN Members
Source: Based on J. McClenahen and T. Clark, “ASEAN
at Work,” IW. May 19, 1997, p. 42.
Different Types of International
Organizations
Multinational Corporation (MNC): Maintains
operations in multiple countries.
Types of MNC:
Multi-domestic Corporation is an MNC that
decentralizes management and other decisions to
the local country.
 Reflects the polycentric attitude
 Doesn’t attempt to replicate its domestic successes by
managing foreign operations from its home country.
Instead, local employees typically are hired to manage
the business and marketing strategies are tailored to
that country’s unique characteristics.
 Example: Nestle
Different Types of International
Organizations
Global Company is an MNC that centralizes its
management and other decisions in the home
country.
 Reflects the ethnocentric attitude
 Treat the world market as an integrated whole and
focus on the need for global efficiency and cost
savings
 Example: Sony
Different Types of International
Organizations (cont’d)
Transnational Corporation (Borderless
Organization) is an MNC that has eliminated
structural divisions that impose artificial
geographic barriers.
 Reflects a geocentric attitude
 Example: IBM
Managing in A Global
Environment
The Legal Environment Ex: Bangladesh vs.
USA
Stability or instability of legal and political
systems:
 Legal procedures are established and followed
 Fair and honest elections held on a regular basis
Differences in the laws of various nations:
 Effects on business activities
 Effects on delivery of products and services
The Economic Environment
Economic Systems
Free market economy
 An economy in which resources are primarily owned
and controlled by the private sector. Ex: BD
Planned economy
 An economy in which all economic decisions are
planned by a central government. Ex: North Korea
Monetary and Financial Factors
Currency exchange rates
Inflation rates
Diverse tax policies
The Economic Environment
Infrastructure: refers to basic systems of
communication (telecommunications, television,
radio, and print media), transportation (roads and
highways, railroads, and airports), and energy
facilities (power plants and gas and electric
utilities). The Internet and technology use can
also be considered part of infrastructure.
Example: Ethiopia doesn’t accept any debit or
credit card which is a drawback in trading with
this country. Power problem in BD
The Economic Environment
Currency Conversion and Shifts: Shifts in
exchange rates can also influence the
attractiveness of various business decisions. A
devalued currency may make a nation less
desirable as an export destination because of
reduced demand in that market. However,
devaluation can make the nation desirable as
an investment opportunity because investments
there will be a bargain in terms of the investor’s
currency. Example: RMG in BD
The Cultural Environment
National Culture
Is the values and attitudes shared by individuals
from a specific country that shape their behavior
and their beliefs about what is important.
May have more influence on an organization than
the organization culture.
 Ex: Calling in first name in USA vs. UK