3. Global management

Global trade is shaped by two main forces:

1. Regional trading alliances: EU, ASEAN, NAFTA

2. Global trade mechanisms: WTO, IMF, OECD

NAFTA North American free trade agreement Mexico Canada US Trade barriers were eliminated, 1994-2007 ASEAN Association of southeast Asian nations, because of the lack of any push towards regional interaction

WTO – world trade org. Helps countries to conduct trade through a system of rules Monitors and protects global trade Incl. 153 countries, that deals the rules among nations IMF- intern. Monetary fund Org. of 185 countries that promotes internat. monetary cooperation and provides advice, loans and technical assistance OECD org. for economic cooperation and development Helps its 30 members to achieve sustainable economic growth and employment.

Types of international organizations:

Multinational Corporation: refers to any and all types of international companies that maintain operations in multiple companies.

Multidomestic corporation: decetralizes managemet and other decisions to the local country. E.g. Nesquick Swiss.

Global Company: centralizes its management and other decisions to the home country. (Panasonic)

Transitional Company: eliminates artificial geographical barriers. (Thomson SA)

Methods of expansion:

Global Sourcing - purchasing materials or labour from around the world wherever it is cheapest

Exporting - making products domestically and selling them abroad

Importing – acquiring products made abroad and selling them domestically

Licensing – an organization gives another organization the right to make or sell its products using its technology or product specializations.

Franchising – an organization gives another organization the right to use its name and operating methods.

Strategic alliance – partnership between org. and one/more foreign company in which both share resources and knowledge, develop new products or build production facilities.

Foreign subsidiary – directly investing in a foreign country by setting up a separate production facility office.

4. Global environment

Economic environment:

Types of countries by economic system

1. Free market economy – resources are owned and controlled by the private sector

2. Planned economy – economic decisions are planned by the government

Cultural Environment:

National culture - values and attitudes shared by individuals from a specific country that shape their behaviour and beliefs.

Hofstedes’ framework – developed a widely used approach which helps managers to understand the differences between national cultures.So countries vary acc. To 5 dimensions:

• Individualistic/collectivistic

• High power distance/ low power distance

• Achievement/ nurturing

• Long – term orientation/ short term orientation

GLOBE – globe leadership and organizational behaviour effectiveness – a research program that studies cross-cultural leadership behaviours