Global Economy Overview: Key Concepts and Strategies môn Principle of Management | Trường Đại học Quốc tế, Đại học Quốc gia Thành phố Hồ Chí Minh

I. GLOBAL ECONOMY
1. Global economy in which resource supplies, product markets, and business competition are
worldwide rather than local or national in scope.
2. Globalization is the growing interdependence among elements of the global economy
Globalisation is important because the flow affects jobs, salaries, income distributions, and so on.
3. World 3.0 is a world where nations cooperate in the global economy while still respecting different
national characters and interests.
4. The term used to describe management in businesses and organizations with interests in more than
one country is global management.
5. Global management will require global manager. The success of firms like these depends on being
able to attract and hire truly global managers who have strong global perspectives, are culturally
aware, and always stay informed about international developments.
6. International businesses are businesses that conduct for-profit transactions of goods and services
across national boundaries, like Nike.
- Nike does no domestic manufacturing. All of its products are made from sources abroad
- New Balance makes use of global suppliers and licensing its products internationally, and
produces at factories in the United States.
Both are doing international businesses for these common reasons:
-Profits—Gain profits through expanded operations.
-Customers—Enter new markets to gain new customers.
-Suppliers—Get access to materials, products, and services.
-Labor—Get access to lower-cost talented workers.
-Capital—Tap a larger pool of financial resources.
-Risk—Spread assets among multiple countries.
7. There would be 2 approaches:
a. Market-entry strategies that involve the sale of goods or services to foreign markets without expensive investments
b. Direct investment strategies require major capital commitments, create rights of ownership
and control over operations in the foreign country
Market entry strategies are the first steps in globalizing an organization:
-Global sourcing—the process of purchasing materials, manufacturing components, or locating
business services around the world.
-Exporting—selling locally made products in foreign markets.
-Importing—buying foreign-made products and selling them in domestic markets.
-Licensing agreement whereby foreign firms pay a fee for rights to make or sell another
company’s products in a specified region.
-Franchising is a form of licensing in which the foreign firm buys the rights to use another’s name
and operating methods in its home country.
Direct investment strategies:
-Foreign direct investment, or FDI, involves setÝng up and buying all or part of a business in
another country. And the ability to attract foreign business investors has been a key to
succeeding in the global economy -> insourcing is job creation through DI.
-When foreign firms invest in a new country, a common way to start is with a joint venture. This
is a co-ownership arrangement in which the foreign and local partners agree to pool resources,
share risks, and jointly operate the new business. It can be a part ownership of the local
organization or both can join together to have a new operation.
-International joint ventures are types of global strategic alliances in which foreign and domestic
firms work together for mutual benefit. Both gain their own benefits.
-A foreign subsidiary is a local operation completely owned and controlled by a foreign firm. Or a
company operating overseas that is part of a larger corporation with headquarters in another
country, often known as a parent company or a holding company.
oThe difference between a foreign subsidiary and a joint venture is that subsidiary is
operated as a completely foreign-owned enterprise while a joint-venture company is
owned by both foreign investors and at least one domestic investor.
-Greenfield ventures where it is built from constructing all facilities from start by the foreign
owner. You open a business in a new market without the help of another business which is
already present there. It has advantages of high level of control over business operations and
image, High level of quality control over the manufacturing and sale of products, and be able to
create jobs for the economy where the greenfield investment is taking place. However, this is
the riskiest form of foreign direct investment with potentially high market entry cost,
Government regulations and high fixed cost. II.
GLOBAL BUSINESS ENVIRONMENT
1. Legal and Political Systems
Some of the biggest risk in international business comes from differences in legal and political systems.
Global firms are expected to abide by local laws, some of which may be unfamiliar.
Political risk—the potential loss in value of an investment in or managerial control over a foreign asset
because of instability and political changes in the host country. The major threats of political risk today
come from terrorism, civil wars, armed conflicts, and new government systems and policies.
Most global firms use a planning technique called political-risk analysis to forecast the
probability of disruptive events that can threaten the security of a foreign investment.
2. Trade Agreements and Trade Barriers
When international businesses believe they are being mistreated in foreign countries, or when local
companies believe foreign competitors are disadvantaging them, their respective governments might
take the cases to the World Trade Organization.
Yet trade barriers are still common. They include
-Tariffs, which are taxes that governments impose on imports.
-Nontariff barriers that discourage imports in nontax ways such as quotas, import restrictions.
-Protectionism that give favorable treatment to domestic businesses.
The purpose for tariffs and protectionism is to protect local firms from foreign competition and save jobs for local workers.
3. Regional Economic Alliances: nations agree to work together for economic gains.
4. Global Businesses
a. Host-Country Issues
-Potential host-country costs are: complaints that global corporations extract excessive profits,
dominate the local economy, interfere with the local government, do not respect local customs
and laws, fail to help domestic firms develop, hire the most talented of local personnel, and fail
to transfer their most advanced technologies.
b. Home-Country Issues
-Global corporations can also get into trouble at home in the countries where they were founded
and where their headquarters are located.
-Even as many global firms try to operate as transnationals, home-country governments and
citizens still tend to identify them with local and national interests.
-Whenever a global business cuts back home-country jobs, or closes a domestic operation in
order to shift work to lower-cost international destinations, the loss is controversial.
-Corporate decision makers are likely to be called upon by government and community leaders
to reconsider and give priority to domestic social responsibilities.
5. Ethics Challenges for Global Businesses
-Corruption: occurs when people engage in illlegal practices to further their personal business interests.
-Child Labor and Sweatshops:
oChild labor—the employment of children to perform work otherwise done by adults, a
major ethics issue for global businesses as they follow the world’s low-cost
manufacturing from country to country
oSweatshops—business operations that employ workers at low wages for long hours in poor working conditions III.
CULTURE AND GLOBAL DIVERSITY
-Culture is the shared set of beliefs, values, and patterns of behavior common to a group of people.
-Culture shock is the confusion and discomfort a person experiences when in an unfamiliar culture.
-Ethnocentrism, a tendency to view one’s culture as su- perior to that of others.
-Cultural intelligence, the ability to adapt and adjust to new cultures.
1. The silent language of culture:
a. Context: cultures differ in their use of language in communication.
Most communication in low-context cultures takes place via the written or spoken word: say or write
what they mean and mean what they say.
In high-context cultures what is said or written may convey only part of the real message. The rest must
be interpreted from the situation, body language, physical setÝng, and even past relationships. b. Time
People in monochronic cultures often do one thing at a time. It is common in the United States, for
example, to schedule meetings with specific people and focus on a specific agenda
Members of polychronic cultures are more flexible toward time. They often try to work on many
different things at once, perhaps not in any particular order, and give in to distractions and interruptions c. Space
Proxemics, the study of how people use space to communicate.
2. Tight and Loose Cultures
The concept of cultural tightness-looseness:
(1) the strength of norms that govern social behavior, and
(2) the tolerance that exists for any deviations from the norms.
3. Values and National Cultures
5 cultural dimensions: power distance, uncertainty avoidance, individualism–collectivism, and masculinity
1.Power Distance is the extent to which power inequality is accepted by society. Even though
unequal distribution of power happens in many countries, cultures are not harmonious in terms of public acceptance.
2.Individualism – Collectivism is whether an individual value is perceived with a social system or
their achievements. Individualism is individuals taking personal interest over the purpose of the group.
3.Uncertainty Avoidance describes the tolerance of uncertain events. Culture with high
uncertainty avoidance dimension tends to minimize the unknowns with formal regulations and principles.
4.Masculinity – Femininity refers to society's dominant value. Masculinity underlines
achievements, assertiveness and valuable materials while Femininity stresses the importance of
equality and relationships between individuals.
5.Long-term Orientation and Short-term Orientation how every society has to maintain some links
with its own past while dealing with the challenges of the present and future. Chapter 8 I.
Why do managers plan? 1.
It creates a solid foundation for the other management functions. You know
where to put your staff and how to distribute your resources (organizing), you know what
activities need to be done and how to lead (leading) and you will be able to identify whether
there is a need for corrective actions (controlling)
Planning: The process of setting objectives and determining how to accomplish them
Objectives and goals: Identify the specific results or desired outcomes that one intends to achieve
Plan: A statement of action steps to be taken in order to accomplish the objectives 2. Steps of planning process:
1.Define your objectives—Identify desired goals or results in very specific ways.
2.Determine where you stand along with objectives—Evaluate your current
accomplishments relation with the desired results.
3.Develop premises regarding future conditions—Forecast future events.
4.Analyze alternatives and make a plan—Then list and evaluate possible activities.
5.Implement the plan and evaluate results—Take the plan into real practice, execute
it and measure your progress toward your goals.
The main focus in planning phase is objectives and goals. 3. Benefits of Planning a.
Planning Improves Focus and Flexibility
An organization with focus knows what it does best, its strengths and it knows the
needs of customers, and how to serve those needs well. A person with focus knows where he
or she wants to go in life and what his or her competencies are
An organization with flexibility is willing and able to change and adapt to shifting
circumstances without losing focus, and it operates with an orientation toward the future rather
than the past. An individual with flexibility adjusts career plans to fit new competencies,
developing opportunities as well as shifting market demands b.
Planning Improves Action Orientation
During planing phase, you are able to set your objectives and it helps focusing our
attention on priorities and avoiding the complacency —
trap being being carried along by the
flow of events and lose track of the actual target c.
Planning Improves Coordination and Control
The individuals, groups, and subsystems’ efforts must be combined into meaningful
contributions to the organization.
Good plans will help coordinate the activities of
individuals, groups, and subsystems to achieve the common goals. d. Planning and Time Management
Planning helps in terms of time management. Some tips for time management:
–DO say “no” to requests that distract from what you should be doing
–DO screen telephone calls, emails, and meeting requests
–DO prioritize your important and urgent work
–DO follow priorities; do most important and urgent work first
–DON’T let drop-in visitors instant messaging use up your time
–DON’T get bogged down in details that can be addressed later
–DON’T become calendar bound by letting others control your schedule
II. Types of Plans Used by Managers
By classifying plan in terms of period that plan is applied:
-Long-term plans looked three or more years into the future
-Short-term plans covered one year or less.
Long-term plan sets the context for staff to work on useful short-term plan
By classifying based on the scope that plan covers:
-Vision is what you want to be in the future, where you wanna to stand.
-Strategic plans focused on the performance of organization as a whole. They set
broad action directions and allocate resources for maximum performance impact.
-Tactical plans are developed and used to implement strategic plans. They specify
how the organization’s resources can be used to put strategies into action.
-Functional plans indicate how different components of the enterprise will
contribute to the overall strategy. It is a kind of tactical plans, but it focuses on each department
or sub-system of an organization.
-Operational plans are plans that identify behavior and describe what needs to be
done in the short term to support strategic and tactical plans. They include both standing plans
like policies and procedures that are used over and over again, and single-use plans like budgets
that apply to one specific task or time period. III.
Planning Tools and Techniques 1.Forecasting
Forecasting is the process of predicting what will happen in the future.
It relies on human judgement; hence, it is not recommended to base all your planning on forecasting. 2.Contingency Planning
Contingency planning is identifying alternative courses of action that can be
implemented if circumstances change. 3.Scenario Planning
Scenario planning is a long-term version of contingency planning.
It involves identifying several possible future scenarios and making plans to deal with
each scenario. In this sense, scenario planning forces us to think far ahead and be open to lots of
possibilities that can impact our plans, impact our operation or even the objectives. 4.Benchmarking
Benchmarking is the use of external and internal comparisons to better evaluate current
performance and identify possible ways to improve for the future
The purpose of benchmarking is to find out best practices then plan how to incorporate
these ideas into your own operations. 5.Staff Planning
The use of staff planners to help coordinate and energize all dept and other employees to
participate in planning. They can help to improve focus and expertise to a wide variety of
planning tasks. The risk is communication. People / staff need to work closely in planning and
commit to implementing the plan IV.
Implementing Plans 1. Goal Setting
Specific—clearly targeted key results and outcomes to be accomplished.
Timely—linked to specific timetables and “due dates.”
Measurable—described so results can be measured without ambiguity.
Challenging—include a stretch factor that moves toward real gains.
Attainable—although challenging, realistic and possible to achieve. 2. Goal Alignment
Goal alignment is important, cause what we do within a company should contribute to
each other and to the overall performance. Each sub-system has its own goal to achieve but those
goals have to aligned with each other in contributing to the accomplishment of common goals of org as a whole.
Within a team, goal alignment is needed so that all team members are aware of what the
purpose of their tasks and how their contributions can help achieving team’s goal:
–Jointly plan: set objectives, set standards, choose actions
–Individually set: perform tasks (member), provide support (leader)
–Jointly control: review results, discuss implications, renew cycle 3. Participation and Involvement
–“Participation” and “Involvement” are two of planning core components.
–Participatory planning includes in all planning steps the people who will be
affected by the plans and asked to help implement them.
–Participation can increase the creativity and information available for planning,
increase the understanding and acceptance of plans, as well as commitment to their success.
–Even though it is time consuming, it improves results by improve plan quality and
effectiveness when implementing. Chapter 9