MANAGER’S BRIEFCASE The Keys to Global Success
M aking everything from 99-cent hamburgers (McDonald ‘s) to $150 million jumbo jets (Boeing), managers of global companies must overcome obstacles when competing in unfamiliar markets. Globa l managers acknowledge certain common threads in their approaches to management and offer the following advice:
• Communicate Effectively. Cultural differences in business relationships and etiquette are central to global business and require cross-cultural competency. Effective global managers welcome uniqueness and ambiguity while demonstrating flex- ibility, respect, and empathy.
• Know the Customer. Successful managers understand how a company’s different products serve the needs of international cus- tomers. Then, they ensure that the company remains flexible and capable enough to customize products that meet those needs.
• Emphasize Global Awareness. Good global managers inte- grate foreign markets into business strategy from the outset. They ensure that products and services are designed and bui lt w ith global markets in mind, and not used as dumping grounds for the home market ‘s outdated products.
• Market Effectively. The world will beat a path to your door to buy your “better mousetrap ” only if it knows about it. A poor marketing effort can cause great products to fade into obscurity while an international marketing blunder can bring unwanted media attention. Top global managers match quality products w ith excellent marketing.
• Monitor Global Markets. Successful managers keep a watch- ful eye on business environments for shifting political, legal, and socioeconomic conditions. They make obtaining accurate information a top priority.
before NAFfA, Brazil under military rule, and the former Warsaw Pact of communist nations- all of which had extremely poor environmental records. Again, the evidence does not support claims of lower environmental standards being the result of economic openness and globalization.
FUTURE MARKETS Opponents to globalization claim that international firms exploit local labor markets and the environment to produce goods that are then exported back to the home countries. Such claims may not only perpetuate a false image of corporations but may also have no factual basis. Most international firms today support reasonable labor and environmental laws because (if for no other reason) they want to expand future local markets for their goods and services. They recognize that healthy future markets will require a sustainable approach to business expansion. When analyzing a country prior to investing, companies today often examine a location for its potential as a future market as well as a production base. Less than 5 percent of U.S. firms invest in developing countries to obtain low-cost resources and then export finished products back to the United States. For additional insights into how managers today succeed by respecting unfamiliar markets, see the Manager’s Briefcase, titled, “The Keys to Global Success.”
QUICK STUDY 5
1. What are the claims of those who say globalization eliminates jobs, lowers wages, and exploits workers?
2. Identify the arguments of those who say globalization creates jobs and boosts wages. 3. Why do critics say globalization adversely affects labor standards, environmental regula-
tions, and future markets? 4. How do supporters of globalization argue that it does not harm labor standards, environ-
mental regulations, and future markets?
Globalization and Income Inequality Perhaps no controversy swirling around globalization is more complex than the debate over its effect on income inequality. Here, we focus on three main aspects of the debate: inequality within nations, inequality between nations, and global inequality.
INEQUALITY WITHIN NATIONS The first aspect of the inequality debate is whether globalization is increasing income inequality among people within nations. Opponents of globalization argue that freer trade and investment allows international companies to close factories in high-wage, developed nations and to move them to low-wage, developing nations. They argue that this increases the wage gap between white-collar and blue-collar occupations in rich nations.
CHAPTER 1 • GLOBALIZATION 21
Two studies of developed and developing nations find contradictory evidence on this argument. The first study, of 38 countries over almost 30 years, supports the increasing inequal- ity argument. The study found that as a nation increases its openness to trade, income growth among the poorest 40 percent of a nation’s population declines, whereas income growth among other groups increases.22 The second study, of 80 countries over 40 years, failed to support the increasing inequality argument. It found that incomes of the poor rise one-for-one with overall economic growth and concluded that the poor benefit from international trade along with the rest of a nation.23 The mixed findings of these two studies are typical of a large set of research exam- ining inequality between developed and developing nations.
Two studies of developing nations only are more consistent in their findings. One study found that an increase in the ratio of trade to national output of 1 percent raised average income levels by 0.5 to 2 percent. Another study showed that incomes of the poor kept pace with growth in average incomes in economies (and periods) of fast trade integration, but that the poor fell behind during periods of declining openness.24 Results of these two studies suggest that, by inte- grating their economies into the global economy, developing nations (by far the nations with the most to gain) can boost the incomes of their poorest citizens.
A new approach being developed takes a multidimensional view of poverty and deprivation. Proponents of this approach say that the problem with focusing on income alone is that higher income does not necessarily translate into better health or nutrition. The new approach examines 10 basic factors, including whether the family home has a decent toilet and electricity service; whether children are enrolled in school; and whether family members are malnourished or must walk more than 30 minutes to obtain clean drinking water. A household is considered poor if it is deprived on over 30 percent of the indicators. This new approach reveals important differences among poor regions. For example, whereas material measures contribute more to poverty in sub- Saharan Africa, malnutrition is a bigger factor in South Asia.25
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