Managing in a Global Environment

We will emphases the growing importance of an international perspective on management. Successful companies are expanding their business overseas and are competing with foreign companies on their home turf. Major alternatives for serving foreign markets are exporting, licensing, franchising, and direct investing through joint ventures or wholly owned subsidiaries. Business in the global arena involves special risks and difficulties because of complicated economic, legal-political, and sociocultural forces. Moreover, the global environment changes rapidly as illustrated by the emergence of the WTO, the EU, the NAFTA, and other emerging trade alliances. The expansion of free-trade policies has sparked a globalization backlash among people who are fearful of losing their jobs and economic security, as well as those who believe economic globalization hurts poor people worldwide.

Much of growth in international business has been carried out by large business called MNCs. These large companies exist in an almost borderless world, encouraging the free flow of ideas, products, manufacturing, and the marketing among countries to achieve the greatest efficiencies. Managers in MNCs as well as those in smaller companies doing business internationally face many challenges. Managers often experience culture shock when transferred to foreign countries. They must learn to be sensitive to cultural differences and tailor their management style to the culture. Social and cultural values differ across cultures, and these influence appropriate patterns of leadership, decision-making, motivation, and managerial control.

International markets provide many opportunities but are fraught with difficulty, as Well-Mart, described at the beginning of this chapter, discovered. The company first began expanding internationally nearly 15 years ago and has learned a great deal about doing business in foreign countries. However, its success in some markets led it to underestimate the potential difficulties it would face when entering Germany. Managers are having to step back and revaluate the competition, the cultural clashes, and the regulatory hurdles they face. They believe the company’s troubles there can be overcome with time and experience. The German situation may have taught Wal-Mart executives to take a more cautious approach as the company moves into Japan. In that country, where Wal-Mart faces tremendous cultural, societal, and organizational obstacles, managers see a slow, systematic process as the best route toward eventual success. Wal-Mart chose to work with a local partner, Seiyu, whose name remains on stores. The American giant is staying in the shadows for now, focusing on getting all its systems in place and training local managers. It goofed in Germany by rushing to overhaul stores and lower prices before basic operational systems were ready. The Japanese managers are helping Wal-Mart understand and respond to local needs, and the subtle, patient approach is enabling executives to learn through trial and error. For a large, rich company like Wal-Mart, managers can afford to lose money internationally as the price of learning. Smaller organizations have to be more cautious and well prepared when entering the global marketplace. As a means of learning across borders, here is a poem that addresses cultural differences.