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The Global Environment Of Business: New Paradigms For International Management

5311 words - 22 pages

Forces outside the firm’s traditional boundaries are increasingly important in determining the firm’s success. These forces in “the environment of business” differ among nations and over time, continually confronting the firm with new issues that require modifications in strategies and management practices. Managing in the context of turbulence has become an ongoing reality. Readers will learn how to modify their strategies and management practices and adapt to this new reality.
SOCIAL FORCES
The subject of ethical codes and CSR crystallizes many social challenges. At the one extreme are those who, like Milton Friedman (1970/2001), advocate the guiding principle of shareholder value ...view middle of the document...

Meanwhile, international NGOs and national governments are negotiating CSR agreements to create global standards. For the MNE, corporate governance with division of responsibilities between the parent and its subsidiaries adds confusion to the implementation of global strategies and adds difficulties to the creation of appropriate procedures for global reporting and enforcement. CSR has become a central management issue in a world where public expectations, legal requirements, and social needs all differ significantly among nations and where the MNE must continually reconcile its universal ethical positions with nation-specific realities.
A major force underlying the CSR challenges in international business is the difference in culture among countries. The impacts of cultural differences extend beyond CSR to include the business behaviour of local management and employees, as well as the preferences of consumers. For the MNE, there are advantages in creating a globally consistent set of organizational structures and incentives and a unified marketing program. Yet there may be many instances where exceptions geared to the local culture may be most effective. Countless articles have utilized the typology created by Hofstede and Bond (1988) in order to analyze the implications of cross-country cultural differences for management decisions. On the basis of extensive surveys, Hofstede and Bond conclude that each country’s culture can be best examined in accordance with five dimensions: individualism/collectivism, uncertainty avoidance, power distance, masculinity/femininity, and long-term versus short-term orientation. Not only do cultural differences impact CSR, they also impact consumer preferences and marketing, as well as structures within firms and industries. For example, cultures differ in regard to the weight they place on attributes such as quality, privacy, service reliability, the introduction of breakthrough services, and the means of consumer communication with the firm. The retail MNE in particular must create an international expansion strategy on a country-by-country basis, focusing on differences in consumer preferences and the need for market segmentation.
For many cultures, personal relationships are built on an ongoing exchange of favours. Personal relationships and trust form a central determinant of success, both within the firm and in its external interactions. In China, the pervasive importance of guanxi demonstrates the benefits that MNEs derive from developing ongoing and long-term exchanges of favours that link individuals, as well as the organizations in which they work. Government approvals can be expedited, and informal preferences can place an MNE ahead of its competitors. Furthermore, without a tradition of business jurisprudence, rapid contract enforcement may become impossible with the result that one must rely on personal relationships to cope with misinterpretations and misunderstandings. Continual changes in...

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