Managing in a Global Environment

The Global Business Environment—Discussion Guide

Slide 1 THINK ABOUT IT

Globalization has had a great impact on the way you live.

• Innovations in technology and transportation have made the world much more accessible to you than it was to your counterparts in previous decades.

• This “shrinking of the world” influences everyone and everything—and businesses are no exception.

KEY CONCEPTS

Slide #2 Globalization has both positive and negative impacts on businesses.

• Globalization is the rapid and unimpeded flow of capital, labor, and ideas across national borders.

  • The result is that various regions across the globe now have integrated societies, cultures, and economies—this is due to methods of communication, transportation, and trade becoming faster and more efficient all the time.

  • Globalization has changed the way we think, communicate, travel, and live.

  • The world has become “smaller,” more connected, and more accessible.

• Globalization has numerous advantages:

  • Globalization allows businesses to enter new markets where they have greater opportunities to succeed.

  • Businesses can save money and cut down on costs when they have access to a greater variety of resources or can move operations to more affordable locations.

  • Free exchange of ideas contributes to greater business as well.

  • Consumers now have a bigger and better variety of choices than at any other time in history.

• However, globalization also has several disadvantages:

  • Globalization escalates competition to fierce levels, which keeps prices down for consumers, but can make it difficult for some businesses to succeed.

  • Another disadvantage of globalization is brain drain, or when a country loses its most talented, educated employees to jobs in other countries.

  • Businesses can also receive backlash for offshoring, or moving jobs to countries with lower costs.

  • Rapid globalization has created a negative impact on the environment as well.

Discussion #1: Ask students to discuss the advantages and disadvantages associated with the seemingly limitless options in today’s global market. How does this impact businesses? Consumers?

Slide #3 Three factors contribute to the existence of a global business environment, while natural barriers still maintain distinctions.

• Three factors drive the existence of a global business environment:

  • Introduction of new technologies

    • The Internet has created a flow of ideas and communication that circles the planet, and it has changed the way businesses think and operate.

    • Though transacting business online presents some unique challenges, it also presents great opportunities.

    • Other technologies include inexpensive worldwide telephone service, and wireless and remote connections.

  • Faster and more accessible modes of transportation

    • The ability to travel more freely contributes to the spread of culture and ideas throughout the world, and also makes it easier to conduct business on an international level.

    • Faster ships, better trucks, and stronger infrastructures (basic roads, services, utilities, etc.) have also contributed to more efficient transportation of goods throughout the world.

  • Lessened political barriers between countries

    • Just a generation ago, there was limited flow of ideas and trade between certain regions and the rest of the globe.

    • Today, the United States has friendships and trading partnerships with many formerly closed nations, and the world is much more politically and economically open than it used to be.

• Though it may seem as if the world is becoming one large “melting pot,” there are still plenty of natural barriers maintaining distinctions between specific countries and regions, including:

  • Language

  • Distance and geography

  • Culture

  • Political climate

  • Infrastructure

  • Nationalism

Discussion #2: Ask students to discuss advances in technology they have experienced over their own lives. Have they felt any drawbacks with changing technology?

Slide #4 Businesses go abroad for many reasons.

• Expanding a business internationally can involve a great deal of time, effort, and money.

• Businesses go abroad for the following reasons:

  • To make more money

    • When domestic businesses expand their companies to include overseas markets, they are following the opportunity to increase profitability.

  • To remain competitive

    • If a competing company is expanding, a business might have to take similar steps to force entry into foreign markets to hand onto market share.

  • To build brand value in new and expanded target markets

    • Expanding overseas allows businesses to make a bigger profit, stay competitive, and build strong brand value.

  • To find new resources

    • A company may expand internationally to find new, better, or less expensive resources, from labor to facilities.

  • To diversify and save on taxes

    • Businesses can enter foreign markets in search of better tax rates and as a method of financial diversification.

Slide #5 Businesses can enter a foreign market in numerous ways.

• Before expanding, businesses should conduct thorough planning and market research, looking closely at:

  • Products

  • Price

  • Distribution systems

  • Promotions

• There are many ways for a business to enter international markets, including:

  • Exporting

  • Licensing

  • Franchising

  • Forming joint ventures or strategic alliances

  • Creating wholly owned subsidiaries

  • Establishing multinational firms

Discussion #3: Ask students to brainstorm examples of how businesses would need to adjust products/price/distribution systems/promotion when expanding overseas. What specific alterations would a company need to make when expanding to Asia or South America?

Global Trade—Discussion Guide

Slide 1 THINK ABOUT IT

The next time you’re at home, look in your closet.

• You probably see clothes that took a long economic journey to get there.

• This journey was the result of trade between producers and buyers—people who make products, and those who buy them.

• You might find the producers and buyers in the same town or different parts of the world.

• Buyers want the best products at the lowest prices. And sometimes, they can only get those products from other countries.

• Producers are willing to trade with buyers in other countries because they represent new, profitable markets.

• Both groups win when international trade occurs.

KEY CONCEPTS

Slide #2 Global trade has several key benefits.

• Global trade occurs when a product is produced in one country and consumed in another.

  • Goods or services bought from producers in other countries are known as imports.

  • Exports are goods or services businesses sell to other countries, and they are purchased by individuals (importers), businesses, or even governments.

• Global trade takes place when different countries have different resources.

  • Countries are more efficient when they produce and trade the goods and services for which their resources are best suited.

    • When one country can produce a good or service at a lower cost than another country can, it has an absolute advantage over that country.

    • A nation has a comparative advantage if it specializes in and produces the goods and services at which it is most efficient relative to another country.

  • Global trade can be a win-win for all countries involved.

• Specific benefits of global trade include:

  • A better variety and quantity of goods and services

  • An improved standard of living for the citizens in both trading countries

  • Access to and availability of scarce resources, such as oil and diamonds

  • Lower prices for goods and services due to increased competition

  • Possible exchange of ideas and technology among countries

  • Enhanced relations among trading countries

  • Increased income for the shipping and/or airline industries due to increased freight/tourism

Discussion #1: Ask students to discuss how they benefit directly from global trade. What products would they lose access to if the country adopted an isolationist policy?

Slide #3 Global trade and world events affect the U.S. economy.

• Global trade is vital to the U.S. economy, especially as one of the world’s largest exporters and importers, and many world events affect businesses across the country.

• Fluctuations can impact:

  • Balance of payments

    • It is the annual accounting record tracking all monetary transactions with other countries.

    • A nation needs to make more money than it spends.

  • Balance of trade

    • It is the difference between the value of a nation’s imports and exports.

  • Competition

    • It forces companies to keep prices low and create better products.

    • It keeps the economy lean and efficient by forcing out unsuccessful businesses.

  • Value of currency

    • Currencies vary due to global economic and political activities.

    • A strong currency increases imports from countries with lower valued currency because the foreign goods are cheaper to buy, and it discourages exports.

    • Likewise, a weak currency decreases imports because it costs more to buy outside the country, but it increases exports.

Slide #4 Governments can limit trade with restrictions.

• Governments limit global trade through a variety of trade barriers, or restrictions.

• The most frequently used trade barriers include:

  • Tariffs

    • Taxes on certain imported goods

  • Quotas

    • Limits on the volume of exports or imports that move into or out of a country

  • Subsidies

    • Protections for domestic industries from foreign competition

  • Product standards

    • Criteria for determining a product’s ability to meet specified guidelines

Discussion #2: Ask students to discuss why a government might enact trade barriers.

Slide #5 There are various ways to improve global trade relations.

• Several organizations and trade agreements worldwide have been established to encourage positive global trade, including the following:

  • European Union

    • It reduces trade barriers among its members.

    • This regional free-trade agreement has united its member nations into one economy, improving negotiating ability.

  • World Trade Organization

    • This global organization sets the rules of trade among nations throughout the world.

    • It administers trade agreements, handles trade disputes, and acts as a forum for trade negotiations for its member nations.

  • United States—Mexico—Canada Agreement

    • This eliminated many trade barriers among Canada, the U.S., and Mexico, including most tariffs, quotas, and customs regulations.

• Many countries also use other methods to improve their global trade relations, including:

  • Trade centers

  • Trade missions

  • Trade talks

Discussion #3: Ask students to brainstorm reasons why a country might be hesitant to participate in the global trade arena. What examples or reasoning could be used to persuade this country of the value of global trade?

Globalization—Discussion Guide

Performance Indicator: Discuss the impact of globalization on business

Slide 1 THINK ABOUT IT

Globalization refers to the increasing interdependence and integration of national economies around the world.

• This concept affects the economy, society, and environment in various ways, including nearly all businesses today.

• As increasing numbers enter the global marketplace, companies are experiencing the effects of globalization, along with its various advantages and risks, due to:

  • Rapidly changing technology

  • Greater interconnectedness

  • Escalation in international competition

KEY CONCEPTS

Slide #2 Globalization results in increased competition.

• With more and more companies selling greater numbers of products at cheaper prices, global competition forces business to:

  • Streamline their processes

  • Adjust product pricing

  • Improve customer service

  • Adapt to technological advances

  • Rapidly produce goods and services

• Competing in the international marketplace offers businesses access to new consumers and the chance to lower expenses.

• Customers have more choices than ever before, and they expect high quality and low prices as quickly as possible.

  • If a business is unable to meet these expectations, plenty of other companies are more than happy to step in.

Discussion #1: Ask students to brainstorm potential disadvantages of an increasingly competitive global business environment. Is more competition always better?

Slide #3 Globalization fast-tracks business technology and knowledge.

• Information can easily and instantaneously be exchanged among countries and companies.

  • This swift transfer of knowledge means businesses can constantly adapt to the rapidly developing global markets.

• Advances in technology have transformed the global business environment.

  • Companies use the latest technology to improve every aspect of their production processes, from quality to efficiency, to create better products for more customers in the global marketplace.

  • Investors, consumers, and businesses now have access to valuable information to pursue economic opportunities, including better global economic trend analyses and improved collaboration with connections around the world.

• Globalization has also impacted management structures.

  • Today, successful management requires respecting diversity in increasingly heterogeneous workplaces and uniting people from vastly dissimilar backgrounds to work together in harmony.

  • Virtual teams can span different time zones, so managers should be skilled in technology and managing remotely via email, conference calls, video calls, etc.

Discussion #2: Ask students to discuss other skills management should implement in the global business environment. How can technology improve or hinder these interactions?

Slide #4 Businesses face risks and disadvantages when entering the global marketplace.

• Risks include:

  • Price and profit swings

  • Elevated levels of imitation

  • Unstable and unpredictable demand in a larger market

  • Constant pressure from new competitors due to the intensification of competition

• Some of the disadvantages of globalization include:

  • Potential for loss of tradition and culture in less-developed economies

  • Increase in wealth inequality

  • Opportunity for exploitation of labor

  • Environmental degradation

Slide #5 Businesses experience opportunities when entering the global marketplace.

• Opportunities include:

  • Increased employment opportunities

  • Cheaper prices due to competition

  • Better quality products

  • Greater variety

  • Improved communication

  • More innovation

  • Greater opportunities for the exchange of ideas from cultural intermingling

• Businesses can communicate with their partners and consumers more effectively while better managing their distribution networks.

• Local producers can quickly and easily sell their products in the global marketplace.

• Economies can grow more efficiently due to foreign investors providing funds toward investment areas that aren’t met domestically.

  • These countries can then become more competitive international economic contributors.

• Some of the advantages of globalization include:

  • Expanded markets

  • Cheaper resources

  • Improved standards of living

  • Better economic opportunities

Discussion #3: Ask students to weigh the advantages and disadvantages of globalization. Who benefits and in what way? Who or what can be harmed? What policies or procedures can be implemented to maximize benefits while minimizing damage?

Trade Alliances—Discussion Guide

Slide 1 THINK ABOUT IT

Free trade optimizes a country’s resources and increases the diversity and quality of its products.

• All trade alliances influence international trade.

• Free trade agreements both positively and negatively impact jobs, business growth, and standard of living in countries around the world.

KEY CONCEPTS

Slide #2 Countries hold various kinds of trade agreements.

• Free trade agreements are pacts used to regulate taxes, tariffs, and duties that these countries impose on each other.

• Countries hold different trade agreements, including:

  • Free trade areas

    • These exist when two or more countries in an area agree to reduce or remove trade barriers on all goods coming from the other members.

  • Customs unions

    • These exist when a group of countries removes trade barriers between the members and enacts an additional common external tariff against other countries or non-members, of which the revenue is shared among the group members.

  • Common markets

    • These exist when free trade extends to all resources, not just tangible products.

    • Eliminating all barriers to business, including the removal of tariffs, allows the free movement of capital, goods, services, and labor.

• There are several levels of agreements that enable participating countries to trade competitively:

  • Unilateral

    • This agreement occurs when one country imposes restrictions on trade.

    • It is typically implemented as a type of foreign aid to help boost an emerging market’s economy and create new markets for exporters.

  • Bilateral

    • This is an agreement between two countries to loosen trade restrictions by lowering tariffs and labeling each other with preferred trade status with the goal of expanding business opportunities.

  • Multilateral

    • This complex agreement among three or more countries is far-reaching, powerful, and negotiated to best satisfy each participant.

    • All countries grant each other the lowest tariffs and most-favored-nation status.

Discussion #1: Ask students to compare bilateral and multilateral agreements. What are the advantages and disadvantages of each?

Slide #3 Businesses enjoy several benefits as a result of trade alliances.

• Increased economic growth

  • When tariffs are removed, consumers benefit from lower prices on imported goods.

• Foreign direct investment

  • Domestic businesses can expand when investors provide capital.

• More dynamic business climate

  • Due to lowered protections for local businesses, companies are motivated to become dynamic, global competitors.

• Lower government spending

  • Government funds can be better allocated when they aren’t subsidizing local industries.

• Expertise

  • Global companies can partner with local industries to pass on new methods, training, and best practices in developing local resources.

• Technology transfer

  • Multinational companies can share access to the newest technologies, increasing job opportunities and growing local economies.

Slide #4 Trade alliances may negatively impact business in multiple ways.

• Increased job outsourcing

  • When importing from countries with a lower standard of living, products cost less. Companies can struggle to compete and may reduce their workforce.

• Intellectual property theft

  • Corporations can have their ideas stolen when developing countries don’t have effective laws in place to protect patents and inventions.

• Crowd out domestic industries

  • Traditional economies that rely on family farming are unable to compete with subsidized agribusiness, forcing farmers to look for work in cities.

• Poor working conditions

  • Emerging market countries often lack adequate labor protections.

• Natural resource degradation

  • Without environmental protections, deforestation and strip-mining wreak havoc on the environment.

• Native culture destruction

  • Indigenous peoples are uprooted, and local cultures are devastated.

• One solution is the inclusion of specific protective regulations in trade agreements, including labor laws and environmental protections.

Discussion #2: Ask students to discuss the ethical responsibility of businesses that engage in trade alliances with countries that facilitate poor working conditions or natural resource destruction. How should that business measure its responsibility in contributing to these conditions?

Slide #5 Trade alliances influence supply chains.

• Trade agreements allow businesses in each country to make best use of their resources, knowledge, and skills while importing goods and services that aren’t available domestically.

• The combination of foreign trade and local production boosts economies and better satisfies consumer needs.

• Trade agreements can make it easier or more difficult for businesses to trade across international borders.

• Changes in trade policies influence the supply chain even if businesses aren’t importers or exporters.

  • If a business sources materials abroad or uses an international shipping company, that business and its customers are impacted by global trade.

  • Changes in trade policies can affect the price of materials, whether by import tariffs, export quotas, or subsidies for local producers, forcing businesses to adjust supply chains to reduce costs in operations or raise prices for customers.

Discussion #3: Ask students to discuss how disruptions in trade policies can impact inefficient supply chains. How should a business prepare for these scenarios?

Global Management—Discussion Guide

Performance Indicator: Describe the nature of global management

Slide 1 THINK ABOUT IT

Globalization has opened the gates to international trade, the world is more connected with each passing day, and we’re all going global.

• As more companies enter the international marketplace and conduct business abroad, the way they optimize and manage their resources is of critical importance.

• Global management is composed of the methods a business uses to streamline their operations, strategies, products, and people to become more effective and efficient competitors in the international marketplace.

KEY CONCEPTS

Slide #2 Global management is very important in today’s interconnected business environment.

• In today’s increasingly interconnected, rapidly changing, almost borderless and cross-cultural marketplace, global management is more important than ever.

• Global management encompasses the ways an organization conducts international business, from sales and marketing to finance and hiring practices.

• In the modern global environment, businesses interact with various cultures, countries, ethnicities, languages, and time zones.

• They must adapt to new markets, meet diverse customer needs, and work with teams from different backgrounds and experience levels.

• Global management differs from management in its breadth and scope: a global manager supervises a technologically linked team of individuals from assorted cultures based in different parts of the world.

• Global managers need a diverse set of skills to successfully compete in the dynamic international marketplace.

Slide #3 There are many benefits associated with global management.

• Going global opens businesses to new customer markets, suppliers, and partners.

• Geographical limits on talent recruitment are diminished, meaning businesses have greater access to qualified personnel.

• Virtual work environments also increase flexibility for employees, which can improve job satisfaction and retention.

• Multicultural management teams offer companies a competitive advantage.

  • When global managers possess the necessary international expertise and direct understanding of the culture and values of a region, they can attract the most capable candidates, reducing turnover and unnecessary expenses.

Discussion #1: Ask students to brainstorm additional benefits that are linked to employing a multicultural management team in international operations.

Slide #4 There are numerous challenges associated with global management.

• Human resources

  • Businesses often face challenges in tailoring the recruiting, training, and development processes to new countries.

  • They can also run into problems with staffing policies and compensation packages, as well as managing remotely and conducting performance evaluations from a distance.

  • Human resource professionals must comply with foreign labor laws and other legal restrictions.

• Communication and culture

  • Tone, nuance, and body language can be misinterpreted, and messages can be lost in translation.

  • Cohesive company culture is more difficult to build across borders.

  • Employees may not understand the social customs and culture of new business partners and team members.

  • Products and content may need translated and adapted to each new market.

• Trade

  • Businesses can face numerous trade barriers, regulatory hurdles, governmental controls, export licenses, and customs regulations.

  • International logistics and shipping regulations are complex and time-consuming.

• Finances

  • Businesses must account for currency differences, foreign exchange rates, international transaction costs, and accounting modifications.

  • There are additional costs involved in developing products and creating marketing materials for international markets.

Discussion #2: Ask students to discuss differences in cultural communication. How do other cultures interpret nonverbal communication (facial expressions, eye contact, gestures, etc.) and values (assertiveness, respect, openness, etc.)? How should businesses account for and address these differences?

Slide #5 It is essential to adopt a global mindset when managing internationally.

• A global mindset is the ability to identify and instinctively adjust one’s behavior when interacting with people from different backgrounds.

• It applies to both individuals and organizations, and is critical to navigating cross-cultural communication while nurturing successful business relationships.

• Businesses that embrace a global mindset boast a competitive advantage, and they experience fewer cultural blunders that can inhibit productivity and hurt business partnerships.

• Essential elements of a global mindset include:

  • Intellectual capital: global business savvy and multicultural outlook

  • Psychological capital: appetite for diversity and self-assurance

  • Social capital: diplomacy and intercultural empathy

• Global managers leading multicultural, virtual teams must develop a specific set of skills to best collaborate both across borders and among their own teams.

• Flexibility in management is key, in addition to facilitating clear communication, direct feedback, respectful disagreement, and encouraging efforts to learn and adapt to the corresponding business and cultural norms.

Discussion #3: Ask students to discuss the similarities and differences between management and global management.