Chapter 8

Global Management

©2004 by Nelson, a division of Thomson Canada Limited

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 What Would You Do?

Wal-Mart’s International
Strategy
 dominant retailer in Canada and USA
 major global competitor is Carrefour
 which countries should Wal-Mart
enter?
 what impact will free-trade
agreements have?
©2004 by Nelson, a division of Thomson Canada Limited
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 What Is Global
business?
After reading these next two
sections, you should be able to:

1. describe the impact of global

business on Canada
2. discuss the trade rules and
agreements that govern global
trade
©2004 by Nelson, a division of Thomson Canada Limited
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 Impact of Global
Business
 Foreign direct investment
 Global competition
 Multinational corporations

©2004 by Nelson, a division of Thomson Canada Limited

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 Regional Distribution of
Inward Direct Foreign
Investment

Region Percent

United States 72
European Union 19
Asia-Pacific 5
Latin America 2
All Other
Adapted from Exhibit 8.1
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©2004 by Nelson, a division of Thomson Canada Limited
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 Regional Distribution of
Outward Direct Foreign
Investment

Region Percent

United States 52
European Union 19
Latin America 19
Asia-Pacific 6
All Other
Adapted from Exhibit 8.2
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©2004 by Nelson, a division of Thomson Canada Limited
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 Multinational
Corporation
Multinational Corporation
 corporation that owns businesses in two or
more countries
Country of Manufacture
 country where product is made and
assembled
Country of Origin
 Home country where headquarters is
located
©2004 by Nelson, a division of Thomson Canada Limited
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 Trade Rules and
Agreements

 Trade barriers

 Trade agreements

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 Trade Barriers
 Tariff
 Nontariff
 quotas
 voluntary export restraints
 government standards
 government subsidies
 Customs valuation/classification

©2004 by Nelson, a division of Thomson Canada Limited

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 Trade Agreements
General Agreement on Tariffs and
Trade (GATT)
Regional Trading Zones
 Maastricht Treaty of Europe
 NAFTA
 FTAA
 ASEAN and APEC

©2004 by Nelson, a division of Thomson Canada Limited

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 GATT
 Worldwide trade agreement
 Designed to reduce and eliminate
tariffs and subsidies
 Protect intellectual property

©2004 by Nelson, a division of Thomson Canada Limited

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 Maastricht Treaty
of Europe
 Now 15 member countries
 Created the European Union
 Facilitate trade among members
 The currency is the “Euro”

©2004 by Nelson, a division of Thomson Canada Limited

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 North America Free
Trade Agreement
(NAFTA)
 Canada, United
States, & Mexico
 Liberalizes trade
among these
nations
 Eliminates tariffs
and barriers

©2004 by Nelson, a division of Thomson Canada Limited

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 Free Trade Area
of the Americas
 Proposed agreement
 Unite 36 countries in North and
South America
 Negotiations to finish by 2005

©2004 by Nelson, a division of Thomson Canada Limited

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 Association of South-East
Nations (ASEAN) and Asia-Pacific
Economic Cooperation (APEC)

ASEAN
 Indonesia, Thailand, Philippines,

Malaysia, Singapore, & Brunei

APEC
 Canada, United States, Japan,

South Korea, Australia, New

Zealand, China, Taiwan, Hong
Kong, & ASEAN members
©2004 by Nelson, a division of Thomson Canada Limited
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 Learning Objectives:
How to Go Global
While there is no magical formula to
answer these questions, after
reading these next two sections, you
should be able to:

3. explain why companies choose to

standardize or adapt their business
procedures
4. explain the different ways that
companies can organize to do business
globally
©2004 by Nelson, a division of Thomson Canada Limited
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 Consistency or
Adaptation?
Consistency
 A multinational corporation runs its

offices, plants, and facilities in different

countries under the same rules, policies,
and procedures
Adaptation
 Multinational corporations modify

standard operating procedures to adapt

to local differences

©2004 by Nelson, a division of Thomson Canada Limited

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 Forms for Global
Business
 Exporting
 Cooperative contracts
 Strategic alliances
 Wholly owned affiliates
 Global new ventures

©2004 by Nelson, a division of Thomson Canada Limited

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 Learning Objectives:
Where to Go Global
After reading these next three
sections, you should be able to:

5. explain how to find a favorable

business climate
6. discuss the importance of identifying
and adapting to cultural differences
7. explain how to successfully prepare
workers for international assignments
©2004 by Nelson, a division of Thomson Canada Limited
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 Finding the Best
Business Climate
 Positioning for growing markets
 Choosing an office/manufacturing
location
 Minimizing political risk

©2004 by Nelson, a division of Thomson Canada Limited

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 Positioning for
Growing Markets
 Purchasing power
 comparison of the relative cost of a
standard set of goods and services in
different countries
 more means greater growth potential
 Degree of global competition
 the number and quality of companies
that already compete in foreign
markets
©2004 by Nelson, a division of Thomson Canada Limited
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 Choosing an
Office/Manufacturing
Location
 Qualitative factors
 Work force quality
 Company strategy
 Quantitative factors
 Costs and barriers

©2004 by Nelson, a division of Thomson Canada Limited

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 World’s Best Cities
for Business
United States
1. New York City
2. San Francisco
3. Chicago
4. Washington,
D.C.
5. San Jose

Adapted from Exhibit 8.4

©2004 by Nelson, a division of Thomson Canada Limited

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 World’s Best Cities
for Business
Europe
1. London
2. Frankfurt
3. Helsinki
4. Amsterdam
5. Dublin
Adapted from Exhibit 8.4

©2004 by Nelson, a division of Thomson Canada Limited

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 Minimizing Political
Risk
 Political uncertainty
 Risk of major changes in political regimes
 Policy uncertainty
 Risk associated with changes in laws and
government policies directed at businesses
 Strategies
 avoidance
 control
 cooperation
©2004 by Nelson, a division of Thomson Canada Limited
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 Becoming Aware of
Cultural Differences
 National culture
 power distance
 individualism
 masculinity/femininity
 uncertainty avoidance
 short-term/long-term

©2004 by Nelson, a division of Thomson Canada Limited

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 Cultural Dimensions

Exhibit 8.5

©2004 by Nelson, a division of Thomson Canada Limited

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 Preparing for an
International
Assignment

 Language and cross-cultural

training
 Consideration of spouse, family,
and dual-career issues

©2004 by Nelson, a division of Thomson Canada Limited

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 What Really Works
Cross-Cultural Training

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 What Really Works

©2004 by Nelson, a division of Thomson Canada Limited

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 What Really Happened?
 Wal-Mart entered Brazil, Britain,
and Germany
 Carrefour has been a strong
competitor
 Increasing focus on local
adaptation, but maintaining some
global consistency

©2004 by Nelson, a division of Thomson Canada Limited

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