What’s your global perspective?

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  1. In a short essay, define parochialism. Next, discuss why parochialism is a problem for U.S. managers and discuss reasons why it is important to overcome parochialism in today’s business environment.


Parochialism is the process of viewing the world solely through one’s own eyes and perspectives. People with a parochial attitude do not recognize that others have different ways of living and working. Parochialism is a significant obstacle for managers working in a global business world. If managers fall into the trap of ignoring others’ values and customs and rigidly applying an attitude of “ours is better than theirs” to foreign cultures, they’ll find it difficult to compete with other organizations around the world that are seeking to understand foreign customs and market differences.

(easy; pp. 91-92; AACSB: Globalizations)

  1. In a short essay, list and discuss the three attitudes managers might have toward international business.


    1. Ethnocentric attitude—the parochialistic belief that the best work approaches and practices are those of the home country. Managers with an ethnocentric attitude believe that people in foreign countries do not have the needed skills, expertise, knowledge, or experience to make the best business decisions as people in the home country do. They wouldn’t trust foreign employees with key decisions.

    2. Polycentric attitude—the view that managers in the host country know the best work approaches and practices for running their business. Managers with a polycentric attitude view every foreign operation as different and hard to understand. Thus, these managers are likely to leave their foreign facilities alone and let foreign employees figure out how best to do things.

    3. Geocentric attitude—this is a world-oriented view that focuses on using the best approaches and people from around the globe. Managers with this type of attitude believe that it’s important to have a global view both at the organization’s headquarters in the home country and in the various foreign work facilities. Major issues and decisions are viewed globally by looking for the best approaches and people regardless of origin.

(moderate; pp. 92-93; AACSB: Globalizations)


  1. In a short essay, describe three major regional trading alliances.


    1. The European Union—the signing of the Maastricht Treaty created the formation of the European Union. This treaty united 12 countries—Belgium, Denmark, France, Greece, Ireland, Italy, Luxembourg, the Netherlands, Portugal, Spain, the United Kingdom, and Germany—as a unified economic and trade entity. The primary motivation for the joining of these European nations was to allow them to reassert their economic position against the strength of the United States and Japan. Three other countries—Austria, Finland, and Sweden—joined the group in 1995. In 2004, the EU added 10 new members—Cyprus, Malta, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Slovakia, and Slovenia. Four other countries (Bulgaria, Croatia, Romania, and Turkey) have applied for membership and Bulgaria and Romania are expected to join in 2007.

    2. North American Free Trade Agreement (NAFTA)—when the Mexican, Canadian, and U.S. governments reached agreements on key issues covered by NAFTA on August 12, 1992, a vast economic bloc was created. Between 1994, when NAFTA went into effect, and 2003 (the most recent year for complete statistics), exports to Canada increased 62 percent and exports to Mexico increased 106 percent. Eliminating the barriers to free trade (tariffs, import licensing requirements, customs user fees) has resulted in a strengthening of the economic power of all three countries.

    3. Association of Southeast Asian Nations (ASEAN)—the ASEAN is a trading alliance of 10 Southeast Asian nations. During the years ahead, Asia, and particularly the Southeast Asian region, promises to be one of the fastest-growing economic regions of the world. It will be an increasingly important regional economic and political alliance whose impact eventually could rival that of both NAFTA and the EU.

(moderate; pp. 94-96; AACSB: Globalizations)

  1. In a short essay, explain the differences among a multidomestic corporation, a global company, and a borderless organization. Include examples of companies for each of the types of organizations discussed.


    1. A multidomestic corporation is an MNC that decentralizes management and other decisions to the local country. This type of organization doesn’t attempt to replicate its domestic successes by managing foreign operations from its home country. Instead, local employees typically are hired to manage the business and marketing strategies are tailored to that country’s unique characteristics. This type of globalization reflects the polycentric attitude. For example, Switzerland-based Nestle can be described as a multidomestic corporation. With operations in almost every country on the globe, its managers match the company’s products to its consumers. In parts of Europe, Nestle sells products that are not available in the United States or Latin America. Another example of a multidomestic is Frito-Lay, a division of PepsiCo, which markets a Dorito chip in the British market that differs in both taste and texture from the U.S. and Canadian version. Many consumer companies manage their global businesses using this approach because they must adapt their products and services to meet the needs of the local markets.

    2. A second type of MNC, called a global company, centralizes its management and other decisions in the home country. These companies treat the world market as an integrated whole and focus on the need for global efficiency. Although these companies may have considerable global holdings, management decisions with company-wide implications are made from headquarters in the home country. This approach to globalization reflects the ethnocentric attitude. Some examples of companies that can be considered global companies include Sony, Deutsche Bank AG, and Merrill Lynch.

    3. Other companies are going international by eliminating structural divisions that impose artificial geographical barriers. This type of MNC is often called a transnational or borderless organization, and reflects a geocentric attitude. For example, IBM dropped its organizational structure based on country and reorganized into industry groups. And Spain’s Telefonica eliminated the geographic divisions between Madrid headquarters and its widespread phone companies. The company will be organized, instead, along business lines such as Internet services, cellular phones, and media operations. Managers choose this form of international organization to increase efficiency and effectiveness in a competitive global marketplace.

(difficult; pp. 97-98; AACSB: Globalizations)

  1. In a short essay, describe how managers are affected by the global economic environment. Name the four major global environmental factors that affect management, and explain why each is important.


    1. Type of economy—the two major types of economies are market economies and command economies. A market economy is one in which resources are primarily owned and controlled by the private sector. A command economy is one in which economic decisions are planned by a central government. Why would managers need to know about a country’s economic system? Because it has the potential to constrain decisions and actions. Other economic issues a manager might need to understand include currency exchange rates, inflation rates, and diverse tax policies.

    2. Currency strength—a global firm’s profits can vary dramatically depending on the strength of its home currency and the currencies of the countries in which it operates. For instance, China’s revaluation of the yuan in the summer of 2005 was cheered by General Motors even though a stronger yuan could raise the costs of Chinese-made parts that GM buys. Why would GM be happy about higher costs? Because a rising Chinese yuan could also lead to a stronger Japanese yen, which could hurt rival Toyota Motor Corporation. Any revaluation of a nation’s currency can affect managers’ decisions and the level of a company’s profits.

    3. Inflation—inflation means that prices for products and services are going up. But it also affects interest rates, exchange rates, the cost of living, and the general confidence in a country’s political and economic system. In most developing countries, consumer prices are rising more slowly than they were in the late 1990s, although inflation rates can, and do, vary widely. The World Factbook shows country inflation rates ranging from a negative 3.6 percent (Nauru) to a whopping positive 246 percent (Zimbabwe). Managers need to monitor inflation trends so they can make good decisions and anticipate any possible changes in a country’s monetary policies.

    4. Diverse tax policies—diverse tax policies are a major worry for a global manager. Some host countries are more restrictive than the organization’s home country. Others are far more lenient. About the only certainty is that tax rules differ from country to country. Managers need exact information on the various tax rules in countries in which they operate to minimize their business’s overall tax obligation.

(moderate, p. 102; AACSB: Globalizations)

  1. In a short essay, list and explain Hofstede’s five dimensions of national culture.


    1. Individualism versus collectivism—individualism refers to a loosely knit social framework in which people are supposed to look after their own interests and those of their immediate family. They can do so because of the large amount of freedom that an individualistic society allows its citizens. The opposite is collectivism, which is characterized by a tight social framework in which people expect others in groups of which they are a part to look after them and to protect them when they are in trouble. In exchange, they feel they owe absolute loyalty to the group.

    2. Power distance—Hofstede used the term power distance as a measure of the extent to which a society accepts the fact that power in institutions and organizations is distributed unequally. A large power distance society accepts wide differences in power in organizations. Employees show a great deal of respect for those in authority. Titles, rank, and status carry a lot of weight. When negotiating in large power distance countries, companies find that it helps to send representatives with titles at least as impressive as those with whom they are bargaining do. In contrast, a low power distance society plays down inequalities as much as possible. Superiors still have authority, but employees are not afraid of or in awe of the boss.

    3. Uncertainty avoidance—uncertainty avoidance is a cultural measure of the degree to which people tolerate risk and unconventional behavior. A society that’s high in uncertainty avoidance is characterized by a high level of anxiety among its people, which manifests itself in nervousness, high stress, and aggressiveness. Because people in these cultures feel threatened by uncertainty and ambiguity, political and social mechanisms are created to provide security and to reduce risk. Organizations in these cultures are likely to have formal rules and little tolerance for unusual ideas and behaviors.

    4. Achievement and nurturing—the fourth cultural dimension, like individualism and collectivism, is a dichotomy. Achievement is the degree to which values such as assertiveness, the acquisition of money and material goods, and competition prevail. Nurturing is a national cultural attribute that emphasizes relationships and concern for others.

    5. Long-term and short-term orientation—people in long-term orientation cultures look to the future and value thrift and persistence. A short-term orientation values the past and present and emphasizes respect for tradition and fulfilling social obligations.

(moderate; p. 105; AACSB: Globalizations)

  1. In a short essay, discuss the dimensions of the GLOBE framework. Describe how each dimension compares to Hofstede’s five dimensions of national culture.


The GLOBE (Global Leadership and Organizational Behavior Effectiveness) research program, which began in 1993, continues to investigate cross-cultural leadership behaviors. Using data from over 18,000 middle managers in 62 countries, the GLOBE research team identified nine dimensions on which national cultures differ:

    1. Assertiveness: The extent to which a society encourages people to be tough, confrontational, assertive, and competitive versus modest and tender. This is essentially equivalent to Hofstede’s achievement dimension.

    2. Future orientation: The extent to which a society encourages and rewards future-oriented behaviors such as planning, investing in the future, and delaying gratification. This is essentially equivalent to Hofstede’s long-term/short-term orientation.

    3. Gender differentiation: The extent to which a society maximizes gender role differences as measured by how much status and decision-making responsibilities women have. This dimension has no equivalent in Hofstede’s framework.

    4. Uncertainty avoidance: Similar to Hofstede’s description, the GLOBE team defined this dimension as a society’s reliance on social norms and procedures to alleviate the unpredictability of future events.

    5. Power distance: As did Hofstede, the GLOBE team defined this as the degree to which members of a society expect power to be unequally shared.

    6. Individualism/collectivism: Again, this term was defined, as Hofstede did, as the degree to which individuals are encouraged by societal institutions to be integrated into groups within organizations and society.

    7. In-group collectivism: In contrast to focusing on societal institutions, this dimension encompasses the extent to which members of a society take pride in membership in small groups, such as their family and circle of close friends, and the organizations in which they’re employed. This dimension has no equivalent in Hofstede’s framework.

    8. Performance orientation: This refers to the degree to which a society encourages and rewards group members for performance improvement and excellence. This dimension is similar to Hofstede’s achievement orientation.

    9. Humane orientation: This is defined as the degree to which a society encourages and rewards individuals for being fair, altruistic, generous, caring, and kind to others. This is similar to Hofstede’s nurturing dimension.

(difficult, pp. 105-106; AACSB: Globalizations)

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