Globalization
Punnett refers to globalization as:
"...growth of trade and investment, accompanied by the growth in international businesses and the integration of economies around the world." (p. 7)
Pros & Cons of Globalization
...
Forces for Globalization
1. New competitors
2. Disintegrating borders
3. Growing trade and investment
4. Global products/consumers
5. Internet and IT
6. Rise of global standards
Developed Economy
tend to have a high per capita income (average $37,545 in 2012 - World Bank)
Most of workforce is aging
Attractive to managers because:
numbers, large potential markets, available resources
OECD
Organization for Economic Co-operation and Development
BRICS
Brazil, Russia, India, China, South Africa
Least Developed Countries (LDCs)
poorest nations in the world
In 2012, only accounted for 2% of the world's GDP, but 12% of total population
Why do managers need to understand the political system of the country they work in?
Managers need to understand the political system of the country where they work, because the type of system determines who makes the rules, how they are enforced, or if they are likely to change
Developing Economy
Have low per capita incomes
80% of the world lives and works in this type of ecomnomy
Workforce is young
Depends heavily on the sale primary commodities
Emerging Economy
faster growing, relatively prosperous developing countries (30). Includes:
Brazil, Russia, India, China and South Africa (BRICS)
Indonesia, Turkey, South Korea, Mexico ...
Impact of level of development
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Macro Environment
Comprised of the Political, Legal/Regulatory, Economic, and Technological Environments
Political Environment
Form of government
Political stability
Foreign policy
State companies
Role of military
Level of terrorism
Restrictions on imports/exports
Economic Environment
Economic system
State of development
Economic stability
GNP
International financial standing
Monetary/fiscal policies
Foreign investment
Legal/Regulatory Environment
Legal system
Prevailing international laws
Protectionist laws
Tax laws
Role of contracts
Protection for proprietary property
Environmental protection
Technological Environment
Level of technology
Availability of local technical skills
Technical requirements of country
Appropriability
Transfer of technology
Infrastructure
Political Risk
Any governmental action or politically motivated event that could adversely affect the long-run profitability or value of a firm
Types of Political Risk
Forced divestment- a government requires that a company gives up all its assets against its will
Unwelcome regulations- include new taxes, local ownership or management requirements, reinvestment provisions, limits on the size or location, and foreign exc
Managing Political Risk: Avoidance
Avoid investment or withdraw
Managing Political Risk: Integrative
Accommodate the risk.
(Equity sharing, Employ locals at all levels, Localization, Be a good citizen, Development assistance)
Managing Political Risk: Defensive Strategies
keep subsidiary dependent on the parent firm
Political risk insurance
private insurance or governmental agency - Overseas Private Investment Corporation (OPIC)
Macro-political
...
Micro-political
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Expropriation
local government seizes foreign-owned assets of a firm and provides inadequate compensation
Confiscation
assets seized with no compensation provided
Social/Cultural Environment
Population size
Population growth
Population dispersion
Age distribution
Literacy and numeracy
Cultural values
Gender roles
Foreign Corrupt Practices Act (FCPA)
Passed in 1970
A. Who -- The FCPA potentially applies to any individual, firm, officer, director,
employee, or agent of a firm and any stockholder acting on behalf of a firm.
Individuals and firms may also be penalized if they order, authorize, or assist
Culture
is a learned, shared, compelling, interrelated set of symbols whose meaning provides a set of orientations for members of a society. These orientations, taken together, provide solutions to problems that all societies must solve if they are to remain viab
Country Clusters
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Hofstede's Value Survey Model
Power Distance (High-Low)
Individualism-Collectivism
Uncertainty Avoidance (High-Low)
Masculinity-Femininity
Long-Term vs. Short-Term Orientation ("Confucian Dynamism")
Indulgence vs. Restraint
Trompenaars
Universalism-Particularism
Neutral-Affective
Achievement-Ascription
Diffuse-Specific
Universalism
Belief that ideas and practices can be applied everywhere in the world without modification
Focus more on formal rules, business contracts are adhered to closely, people believe "a deal is a deal
Particularism
Members of the culture focus on the special nature of present circumstances and relationships when applying rules. Something cannot be done the same everywhere
Legal contracts often modified
Focus on relationships
"Deals" are flexible to the situation and
Achievement
Members of the culture accord status to people based on their achievement. Performance is valued
no matter who you are
Ascription
Members of the culture accord status to people based on their age, gender, social connections, education,
profession
Specific
Members of the culture expect managers to segregate out task relationships with subordinates and insulate them from other dealings
Strong separation of work and private life
Believe relationships don't have much of an impact on work objectives - can work
Diffuse
Members of the culture accept that every life space and level of personality permeates all others
Mix private and business lives
Relationships important
People spend time outside work hours with colleagues and clients
Neutral
Members of the culture do not telegraph their feelings, but keep them carefully controlled and subdued
Affective
Members of the culture show their feelings plainly by laughing, smiling, grimacing, scowling, and gesturing. They attempt to find immediate outlets for feelings
Benefits of Value-Based Guidelines
Increase customer goodwill
Enhance corporate culture
Avoid litigation
Benefit society
Risks of Ethical Violations
Consumer boycotts
Poor employee morale
Strained relations with foreign governments
Legal sanctions
Bottom line suffers
Milton Friedman on Social Responsibility
A company's social responsibility is to make as much money as possible for its shareholders
Archie Carroll on Social Responsibility
The social responsibility of business encompasses the economic, legal, ethical and discretionary expectations that society has of obligations at a given point in time
Punnet on Transparency
Decisions that involve ethical questions are often difficult to make because there are no rules that necessarily apply in all situations. The best advice for managers who want to be ethical is to think carefully about the implications of any decision or
Universalism in Ethics
advocates the need for a moral standard that is accepted by all cultures
Ethnocentric Approach
using morality of home country
Ethical relativism (culturally contingent)
adopting the local moral code of whatever country the company is operating in
Limitations of Value Survey Model
Hofstede reports scores 1 to 100 for each country in his sample. The scores he reported are based on employees within one organization, a large U.S. multinational company (IBM).