Managing in

the Global
Environment
chapter six

Learning Objectives
1. Explain why the ability to perceive, interpret, and
respond appropriately to the global environment is
crucial for managerial success
2. Differentiate between the global task and global
general environments
3. Identify the main forces in both the global task and
general environments, and describe the challenges
that each force presents to managers

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Learning Objectives (cont.)

4. Explain why the global environment is becoming
more open and competitive and identify the forces
behind the process of globalization that increases
the opportunities, complexities, challenges, and
threats that managers face
5. Discuss why national cultures differ and why it is
important that managers be sensitive to the effects
of falling trade barriers and regional trade
associations on the political and social systems of
nations around the world
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Global Organizations
Global Organizations
Organizations that operate and compete not only
domestically, but also globally
Uncertain and
unpredictable

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What Is the Global Environment?

Global Environment
Set of forces and conditions in the world outside
the organizations boundaries that affect the way
it operates and shape its behavior
Changes over time
Presents managers with opportunities and
threats

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Forces in the Global Environment

Figure 6.1

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What Is the Global Environment?

Task Environment
Set of forces and conditions that originate with
suppliers, distributors, customers, and
competitors
Affects an organizations ability to obtain inputs
and dispose of its outputs
Most immediate and direct effect on managers

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What Is the Global Environment?

General environment
The wide-ranging global, economic,
technological, sociocultural, demographic,
political, and legal forces that affect an
organization and its task environment.

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The Task Environment

Suppliers
Individuals and organizations that provide an
organization with the input resources that it
needs to produce goods and services
Raw materials, component parts, labor (employees)

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Global Outsourcing
Global Outsourcing
The purchase or production of inputs or final
products from overseas suppliers to lower costs
and improve product quality or design.

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The Task Environment

Distributors
Organizations that help other organizations sell
their goods or services to customers
If distributors become so large and powerful that
they can control customers access to a particular
organizations goods and services, they can threaten
the organization by demanding that it reduce the
prices of its goods and services.

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The Task Environment

Customers
Individuals and groups
that buy goods and
services that an
organization produces

Identifying an
organizations main
customers and
producing the goods
and services they want
is crucial to
organizational and
managerial success.

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The Task Environment

Competitors
Organizations that produce goods and services
that are similar to a particular organizations
goods and services
Rivalry between competitors is potentially the most
threatening force that managers deal with

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The Task Environment

Barriers to Entry
Factors that make it difficult and costly for the
organization to enter a particular task
environment or industry

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Barriers to Entry
Economies of scale
Cost advantages associated with large operations

Brand loyalty
Customers preference for the products of
organizations currently existing in the task
environment.

Government regulations that impede entry

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Barriers to Entry and Competition

Figure 6.2

16

The General Environment

Economic Forces
Interest rates, inflation, unemployment,
economic growth, and other factors that affect
the general health and well-being of a nation or
the regional economy of an organization.

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The General Environment

Technology
The combination of skills and equipment that
managers use in designing, producing, and
distributing goods and services.

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The General Environment

Technological Forces
Outcomes of changes in the technology that
managers use to design, produce, or distribute
goods and services

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The General Environment

Sociocultural Forces
Pressures emanating from the social structure of
a country or society or from the national culture

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Sociocultural Forces
Social structure
the traditional system
of relationships
established between
people and groups in
society

National culture
the set of values that a
society considers
important and the
norms of behavior
that are approved or
sanctioned in that
society.

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The General Environment

Demographic Forces
Outcomes of change in, or changing attitudes
toward, the characteristics of a population, such
as age, gender, ethnic origin, race, sexual
orientation, and social class

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The General Environment

Political and Legal Forces
Outcomes of changes in laws and regulations,
such as deregulation of industries, privatization of
organizations, and increased emphasis on
environmental protection.

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The Global Environment

Figure 6.3
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Process of Globalization
Globalization
The set of specific and general forces that work
together to integrate and connect economic,
political, and social systems across countries,
cultures, or geographical regions so that nations
become increasingly interdependent and similar.

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Principal Forms of Capital that Flow

Between Countries
Human capital

Financial
capital

Resource
capital

Political
capital
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Declining Barriers to Trade and

Investment
Tariff
A tax that government imposes on imported or,
occasionally, exported goods.
Intended to protect domestic industry and jobs
from foreign competition

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Example - WTO
The World Trade Organization (WTO) is the only
global international organization dealing with the
rules of trade between nations.
At its heart are the WTO agreements, negotiated and
signed by the bulk of the worlds trading nations and
ratified in their parliaments.
The goal is to help producers of goods and services,
exporters, and importers conduct their business.

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GATT and the Rise of Free Trade

Free-Trade Doctrine
The idea that if each country specializes in the
production of the goods and services that it can
produce most efficiently, this will make the best
use of global resources and will result in lower
prices

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Declining Barriers of Distance and

Culture - Unilever
Distance
Markets were essentially closed because of the
slowness of communications over long distances.

Culture
Language barriers and cultural practices made
managing overseas businesses difficult

Changes in Distance and Communication

Improvement in transportation technology and fast,
secure communications have greatly reduced the
barriers of physical and cultural distances.
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Effects of Free Trade on Managers

Declining Trade Barriers
Opened enormous opportunities for managers to
expand the market for their goods and services.
Allowed managers to now both buy and sell
goods and services globally.
Increased intensity of global competition such
that managers now have a more dynamic and
exciting job of managing.

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The Role of National Culture

Values
Ideas about what a society believes to be good,
right, desirable and beautiful.
Provide the basic underpinnings for notions of
individual freedom, democracy, truth, justice,
honesty, loyalty,
love, sex, marriage, etc.

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The Role of National Culture

Norms
Unwritten rules and codes of conduct that
prescribe how people should act in particular
situations.
Folkways, mores
Many differences in mores from one society to
another

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Hofstedes Model of National

Culture

Figure 6.4
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Hofstedes Model of National

Culture
Individualism
A worldview that values individual freedom and selfexpression and adherence to the principle that
people should be judged by their individual
achievements rather their social background.

Collectivism
A worldview that values subordination of the
individual to the goals of the group and adherence to
the principle that people should be judged by their
contribution to the group
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Hofstedes Model of National

Culture
Power Distance
Degree to which societies accept the idea that
inequalities in the power and well-being of their
citizens are due to differences in individuals
physical and intellectual capabilities and heritage

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Hofstedes Model of National

Culture
Achievement orientation
A worldview that values assertiveness,
performance, success, and competition

Nurturing orientation
A worldview that values the quality of life, warm
personal friendships, and services and care for
the weak.

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Hofstedes Model of National

Culture
Uncertainty Avoidance
The degree to which societies are willing to
tolerate uncertainty and risk.
Low uncertainty avoidance cultures value
diversity and tolerate a wide range of opinions
and beliefs.
High uncertainty avoidance societies are more
rigid and expect high conformity in their citizens
beliefs and norms of behavior.
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Hofstedes Model of National

Culture
Long-term orientation
A worldview that values thrift and persistence in
achieving goals.

Short-term orientation
A worldview that values personal stability or
happiness and living for the present.

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Video Case: The Delmar Dog Butler

What forces in the global environment are
leading to outsourcing?
What has outsourcing meant to countries like
India?
Do you think outsourcing is helping or hurting
America?

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