Chapter 5 - Global Management and Cultural Diversity October 3, 2023
Culture - Shared set of beliefs, values, and patterns of behaviour common to a group of people
Culture Shock - Confusion and discomfort a person experiences in an unfamiliar culture
Ethnocentrism - Tendency to consider one’s own culture as superior to others
Stages in adjusting to a new culture
● Confusion
● Small victories
● The honeymoon
● Irritation and anger
● Reality
1st Dimension: Context
Low context cultures - Emphasize communication via spoken or written words
● United States
● Canada
● Germany
High context cultures - rely on nonverbal and situational cues as well as spoken or written
words
● Thailand
● Malaysia
2nd Dimension: Time
Monochronic cultures - people tend to do one thing at a time
● Canada
Polychronic cultures - time is used to accomplish many different things at once
● Germany
3rd Dimension - Space
Proxemics - study of how people use space to communicate
● In North America people value “personal space”
● Many Latin and Asian cultures expect much less personal space
Tight and Loose Cultures
● Cultural tightness-looseness
○ Strength of norms that govern social behaviour
○ Tolerance for any deviation from norms
○ Loose culture: Australia, Brazil, Hungary
○ Tight Culture: Japan, Korea, Malaysia
Comparative management: Management practices systematically differ among countries
and/or cultures
No one best way to manage, management practices are influenced by cultural values.
Something that may work in one country might not in another.
Intercultural competencies
● Not only being sensitive to cultural differences, but also acting competent
● Perception management: flexible and non-judgemental
● Relationship management: sensitive to others’ emotions and feelings
● Self-management: understand her or his own emotions and values
Chapter 5 - Part 2
Why do businesses go global?
● Profit
● Customers
● Suppliers
● Labor
● Capital
● Risk
We call these reasons MOTIVES
Foreign Market Entry
Types of market entry strategies:
● Global sourcing - business buys goods and services from international markets across
political boundaries to save money by using cheap raw materials or skilled labour from
low-cost countries
● Exporting - selling products to other countries
● Importing - buying products from other countries
● Licensing Agreement - licensor grants the licensee the right to produce and sell goods,
apply a brand name or trademark, or use patented technology owned by the licensor
● Franchising - joint venture between a franchisor and a franchisee. The franchisor is the
original business. It sells the right to use its name and idea. The franchisee buys this
right to sell the franchisor's goods or services under an existing business model and
trademark
Foreign Direct Investments (FDIs)
● Joint ventures: operates in a foreign country through co-ownership by foreign and local
partners
● Foreign subsidiaries: local operation completely owned by a foreign firm
Uppsala Model - based on four core concepts: market commitment, market knowledge, current
activities and commitment decisions
Global Business Environments
● Legal and Political systems
○ Different laws regarding:
○ Business ownership
○ Negotiation and implementation of contracts
○ Foreign currency exchange
○ Protection of intellectual property rights
○ Political Risk - Potential loss in value or control of a foreign investment due to
instability and political changes
● Trade Agreements and Trade Barriers
○ World Trade Organization (WTO) deals with:
○ Tariffs as trade barriers
○ Non-tariff barriers (protectionism)
● Regional Economic Alliances
○ NAFTA (North American Free Trade Agreement) or CUSMA (Canada-US-Mexico
Agreement)
○ EU (European Union) UK is not part of EU
○ APEC (Asia Pacific Economic Cooperation)
○ ASEAN (Association of Southeast Asian Nations)
○ SADC (Southern Africa Development Community)
○ TPP11 (Trans-Pacific Partnership) USA is not part of TPP11
Global Corporation
● Transnational Corporation (TCN) - Global corporation that operates worldwide on a
borderless basis without being identified to one national home
Ethical Challenges
● Corruption - illegal practices that further one’s business interests
● Corruption of Foreign Public Officials Act (CFPOA) - makes it illegal for Canadian
firms to engage in corrupt practices overseas
● Conflict Minerals - gains from sale of minerals used to help finance armed violence
● Child labour - employment of children for work otherwise done by adults
● Sweatshops - employs workers for long hours with barely any pay in terrible work
conditions
