The Global Manager

Contemporary Issues and Corporate Responses

Otto Lerbinger

• Publisher: Bloomsbury Academic
• Year: 2013
• Print ISBN:
  9781137310545
• Edition: 1
• eBook ISBN:
  9781350305175
• Topic: Business
• Subtopic: International Business
• Index: Business

It examines the context in which multi-national companies operate and how the key players interact with each other and with the external business environment. It takes an issues based approach that explores contemporary issues that impact global business activity and examines the managerial responses to those issues. An excellent course text.

part 1

multinationals engage players in the global arena

chapter 1

globalization creates the need for global managers

Objectives

1. Understand why globalization has created the need for global managers.

2. Recognize the differences between the domains of international business and international business.

3. Appreciate the importance of why multinational corporations must learn to establish sound relationships in the international arena.

4. Understand the stakeholder relations and triangle approaches taken to identify the constituents and “players” with which it must deal.

5. Learn how issues are identified and chosen and how the issues management process helps.

6. Understand the key attributes of a global manager.

7. Recognize the rise of corporate diplomacy and its similarity with traditional diplomacy.

The irreversible reality facing business is the long-term shift from a local to a global marketplace. People, goods, and ideas easily travel across geographic boundaries, increasing the wealth of nations and improving living conditions of people. The meshing of economies into integrated global markets, called globalization, has elevated many businesses to the status of multinational enterprises (MNEs) that face magnified challenges.¹ Their markets are widespread, their network of relationships is wide and their sociopolitical environments are complex.

The globalization movement has been the most powerful and pervasive force in the modern world. It continues to expand as fast as optic fibers are stretched around the world and aircraft and ships travel across the seas. People, goods, and ideas easily move across geographic boundaries, increasing the wealth of nations and improving living conditions. This meshing of economies into integrated global markets is the joint result of national economic policies, overseas expansion of business organizations, and development of international institutions.

The forces that created globalization

In his influential book, The World Is Flat, Thomas L. Friedman, a New York Times columnist, explains globalization and describes the ten forces that created globalization and the “multiple new forms and tools for collaboration that this flattening has created.”² These forces explain how a shift in ideologies, technological advances, and management innovations penetrated existing barriers and led to greater international trade.³

Friedman starts with the momentous event of November 9, 1989, when the Berlin Wall fell. “It tipped the balance of power across the world toward those advocating democratic, consensual, free-market-oriented governance, and away from those advocating authoritarian rule with centrally planned economies.”⁴ He characterizes communism as “a great system for making people equally poor” and capitalism, in contrast, as making “ people unequally rich.”⁵ He linked this first force with the coming together in the late 1980s and early 1990s of the global information revolution, created by diffusion of personal computers, fax machines, Windows, and dial-up modems connected to a global telephone network.

In explaining his second force, he continues with the theme of technological advances by referring to August 9, 1995, when Netscape went public. Friedman considers Netscape’s browser one of the most important inventions in modern history because of two developments: the PC-based computing platform went to an Internet- based platform and Netscape developed proprietary-free protocols like HTTP. This innovation enabled hordes of people to get connected with one another and led the way for the subsequent digitization revolution.

The power of information technology was advanced by a third and fourth force as work flow software enabled all internal departments – sales, marketing, manufacturing, billing, and inventory – to become interoperable no matter what machines or software each of them was running – and as open-sourcing led to such modern manifestations as blogs.

Outsourcing and offshoring are Friedmans fifth and sixth forces. Outsourcing – which was stimulated by the Y2K problem at the turn of the 21st century of requiring existing computers to accommodate the year 2000 as well as the 1900s – enabled an organization to transfer activities like call centers elsewhere. India became a major destination of outsourcing by taking advantage of the worlds abundance of fiber optic cables. Offshoring meant sending labor-intensive work to low-wage countries like China, which also had the advantage of having acquired new technologies and modern business practices.

Supply chaining, the seventh force, was a similar development. It enabled Wal-Mart to move 2.3 billion general merchandise cartons a year down its supply chain to its stores. Its sophisticated information systems enabled it to know “exactly what its customers were buying and could feed that information to all the manufacturers, so the shelves would always be stocked with the right items at the right time.”⁶ An eight force, insourcing, enabled companies like UPS to design and synchronize global supply chains for both large and small companies.

The ninth force, in-forming, represented by Google, Yahoo!, and MSN Web search, became a total equalizer by giving everyone the same basic access to overall research information that anyone has. The final force, which Friedman calls The Steroids (Digital, Mobile, Personal, and Virtual), amplified and further empowered all other forms of collaboration from more places than ever.

Friedmans review of the ideological, technological, and managerial innovation forces convincingly demonstrates that globalization is more than simply removing trade barriers among nations. It forced companies to fundamentally change the way they conducted business. He believes globalization has presented us with new opportunities, new challenges, and new partners. He fears that new threats accompany these benefits, the greatest ones being an excess of protectionism and excessive fears of another 9/11 “that prompt us to wall ourselves in, in search of economic security.”⁷ Both, he says, would be a disaster for us and for the world. The scope of international business and management has accordingly expanded and includes an extended role for multinational corporations (MNCs) and other private and public sector entities. Under the banner of the free market system, corporations have spread sales and operations throughout the world and thereby become MNCs. Globalization has created the need for the internationalization of business.

In his following book, Hot, Flat, and Crowded, Friedman moves to a new phase of globalization that addresses two enormously powerful forces that are impacting our planet in fundamental ways: global warming and the soaring global population growth.⁸ Just as globalization forced companies to fundamentally change the way they conducted business by presenting them with new opportunities, new challenges, and new partners, they must now reinvent themselves by adopting what he calls a “Code Green.” It refers to a plan to “tackle some of the biggest challenges facing our business and our world,” which he describes as combating climate change, reducing waste, safeguarding natural resources, trading ethically and building a healthier nation.”⁹ Friedman quotes an apt Chinese proverb that says, “When the wind changes direction, there are those who build walls and those who build windmills.”¹⁰ Global managers must be among the windmill-building leaders who are willing and able to find answers to the challenges of the new hot, flat, and crowded world.

Management approaches to globalization

The international business and international management domains

Two approaches have dominated the internationalization of business: international business (IB) and international management (IM), which are accorded separate domains by the Academy of Management. IB, as Charles W. Hills points out in his International Business text, focuses on functional policy areas.¹¹ They include the strategy and structure of the IB; business operations of exporting, importing, and countertrade; global manufacturing and materials management; global marketing and R&D; global human resource management; accounting in the IB; and financial management in the IB. These specialized functional areas are represented by books such as Human Resource Management in a Global Context, Sustainable Global Outsourcing, and Strategic International Marketing in the international setting.¹²

This international setting is described by IB with reference to: (1) national differences in political economy and culture; (2) global trade and investment environment, including international trade theory, political economy of international trade, foreign direct investment, and regional economic integration; (3) global monetary system, including foreign exchange market, foreign exchange and international monetary system, and global capital market. Furthermore, Alan M. Rugman and Thoms L. Brewer’s The Oxford Handbook of International Business includes several chapters on the history and theory of the MNE, on the political and policy environment, strategy for MNEs, managing the MNE, and regional studies.¹³

Instead of focusing on the functions of business, the IM approach is more broadly concerned with management processes. As reviewed by Jean J. Boddewyn, the IM division of the Academy of Management describes its domain as “Content pertaining to management theory, research, and practices with an international or cross-cultural dimension.”¹⁴ Some general subjects typically included are internationalization, decision making, and negotiation. A major topic mentioned is “investigations of the cross-border differential impact of cultural, social, economic, technological, and political forces on organizational forms and management practices.” Boddewyn sees two central issues as defining the IM domain: (1) why, when and how a business firm decides to “go international,” and (2) why, when, and how its organizational behavior is altered by internationalization. She concludes that even “defining ‘international management’ remains a tricky issue.”¹⁵

Nevertheless, in his textbook, International Management, Rajib N. Sanyal offers this definition: “International management involves planning, organizing, leading, and controlling the people working in an organization on a worldwide basis in order to achieve the organizations goals.”¹⁶ A distinguishing feature of the international aspect is that these management tasks are performed in multiplace political, cultural, and economic environments. Managers must devise competitive strategies on a much larger geographical scale and potentially deal with 185 sovereign countries each of which can create rules and regulations within their borders.

To complement the IB and IM approaches, a third one is represented by this book – a focus on international relations (IRs) as practiced by global managers – managers who operate in several locations, across borders and time zones, and know how to deal with different cultures. IR centers on associations with the large number and variety of players in the international arena and the contemporary issues with which they must deal. The title of this book, The Global Manager, was chosen to emphasize the importance in management of the international realm and the ability of management to build enduring relationships.

Central importance of relationships

Relations with a new set of international players in host societies are a distinctive aspect of an IB as distinguished from a domestic one. Sincere and sustainable relationships must be established with those whose cooperation is needed to achieve organizational goals. These relationships go beyond the typical establishment of business operations and the marketing of products and services. A wider range of contacts must be cultivated and new networks formed. Narrow economic transactions are expanded by getting to know one’s customers, business partners and other stakeholders, and to recognize and promote connections with government and civil society bodies on all levels. The forging of new international relationships might also include investing in the construction of physical and social infrastructure that supports business relationships, such as subsidiary offices and communication facilities. Global managers must be aware that in the process of building sound relationships with other players they are also constructing a global social system.¹⁷

Among the first writers on the special importance of relationships in an international context were George Lodge and Richard Walton.¹⁸ They recognized that to compete globally American corporations had to change their relationships both inside and out. They must move away from the adversarial, arm’s length, short-term, contractual, and rigid ways of the past toward cooperation, intimacy, long-term planning, consensuality, and flexibility. Global managers were advised not only to improve their interpersonal communication skills but also to alter their attitudes, values, and concept of a business.

Corporations that build relationships are more likely to succeed. Samuel B. Graves and Sandra A. Waddock call them “visionary companies” and “built-to-last companies” and say that they focus on more than profits by treating their multiple stakeholders generously. They refer to a study that shows that these companies outperform others both financially and in the ways they ...

Table of contents

• Cover
• Title Page
• Copyright
• Contents
• Foreword
• Acknowledgments
• Part 1. Multinationals engage players in the global arena
• Part 2. Contemporary issues
• Part 3. Corporate responses
• Part 4. Corporate governance: direction and guiding values
• Afterword
• Notes
• Index