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5/21/2016 University of Phoenix: Management PRINTED BY: cherylesowell2012@email.phoenix.edu. Printing is for personal, private use only. No part of this book may be reproduced or transmitted
5/21/2016 University of Phoenix: Management PRINTED BY: cherylesowell2012@email.phoenix.edu. Printing is for personal, private use only. No part of this book may be reproduced or transmitted without publisher's prior permission. Violators will be prosecuted. https://phoenix.vitalsource.com/#/books/9781119092988/cfi/6/26!/4/2/2/4/2@0:14.2 1/42 5/21/2016 University of Phoenix: Management International travel is rich with cultural diversity. But even a day out shopping or a walk across the college campus can be a trip around the world ... if you are willing to take it. UniversalImagesGroup/Getty Images https://phoenix.vitalsource.com/#/books/9781119092988/cfi/6/26!/4/2/2/4/2@0:14.2 2/42 5/21/2016 University of Phoenix: Management 5 Global Management and Cultural Diversity There are many faces in the neighborhood CHAPTER QUICK START Our time of global change and turmoil makes the implications of globalization for managers, organizations, and everyday living ever more important to understand. Global corporations offer benefits and create controversies cultural differences are a source of enrichment and the roots of misunderstandings for travelers, business executives, and government leaders. This chapter introduces the essentials of global management and cultural diversity with a focus on global learning. Key Takeaways Discuss the implications of globalization for management and organizations. Describe global corporations and the issues they face and create. Define culture and identify ways to describe diversity in global cultures. Identify the benefits of global learning for management and organizations. what to look for inside > MANAGEMENT IS REAL analysis> MAKE DATA YOUR FRIEND Corruption and Bribes Haunt Global Business choices> THINK BEFORE YOU ACT Reshoring Offers Alternative to China Manufacturing ethics> KNOW RIGHT FROM WRONG Nationalism and Protectionism a Potent Mix insight> LEARN ABOUT YOURSELF Cultural Intelligence Opens Doors to Opportunity wisdom> LEARN FROM ROLE MODELS Nobel Peace Prize Winner Asks Global Firms to Fight Poverty SKILLS MAKE YOU VALUABLE EVALUATE Career Situations: What Would You Do? REFLECT On the SelfAssessment: Global Intelligence https://phoenix.vitalsource.com/#/books/9781119092988/cfi/6/26!/4/2/2/4/2@0:14.2 3/42 5/21/2016 University of Phoenix: Management CONTRIBUTE To the Class Exercise: American Football MANAGE A Critical Incident: Silent Team Members COLLABORATE On the Team Activity: Globalization Pros and Cons ANALYZE The Case Study: HarleyDavidson: Style and Strategy with a Global Reach Our dynamic, growing global community is rich with information, opportunities, controversies, and complications. We get realtime news from around the world on our smart mobile devicesgiving us in the truest sense, the wherewithal to be true global citizens. When such crises as the Japanese tsunami or civil unrest like the Arab Spring occur, social media, including Twitter, Instagram, and Facebook, join major news organizations to get information and news out instantaneously. We play online games like World of WarCraft or Rift with people from around the world in actual time, and colleges and universities in the United States offer a vast array of international study abroad programs for students. As for traveling the globe, companies today really are travelers also. IBM has more employees in India than the U.S.1 AnheuserBusch, maker of \"America's King of Beers,\" is owned by the Belgian firm InBev. Ben & Jerry's is owned by the BritishDutch firm Unilever. India's Tata Group owns Jaguar, Land Rover, Tetley, and Eight O'Clock. China's Geely owns Volvo. Japan's Honda, Nissan, and Toyota receive 80% to 90% of their profits from sales in America.2 Components for Boeing planes come from 5,400 suppliers located in 40 countries!3 Management and Globalization TAKEAWAY 1 What are the management challenges of globalization? LEARN MORE ABOUT | Global management Why companies go global How companies go global Global business environments We live and work in the age of the global economy in which resources, supplies, product markets, and business competition have a worldwiderather than a local or nationalscope. It is a time heavily influenced by the forces of globalization, defined as the growing interdependence among the components in the global economy. Some see globalization as creating a \"borderless world\" where economic integration becomes so extreme that nationstates hardly matter anymore.4 But international management scholar Pankaj Ghemawat describes what he calls World 3.0, a form of globalization in which national identities remain strong even as countries cooperate in the global economy.5 National leaders try to balance economic gains from global integration with local needs and priorities. https://phoenix.vitalsource.com/#/books/9781119092988/cfi/6/26!/4/2/2/4/2@0:14.2 4/42 5/21/2016 University of Phoenix: Management In the global economy, resources, markets, and competition are worldwide in scope. Globalization is the growing interdependence among elements of the global economy. World 3.0 is a world where nations balance cooperation in the global economy with national identities and interests. There's no better way to illustrate the global economy than with the example of the clothes we wear. For example, where did you buy your favorite Tshirt? Where was it made? Where will it end up? In a fascinating book titled The Travels of a TShirt in the Global Economy, economist Pietra Rivoli tracks the origins and disposition of a Tshirt that she bought while on vacation in Florida.6 As can be seen here, Rivoli's Tshirt lived a very complicated global life before she bought it. That life began with cotton grown in Texas. It then moved on to China where the cotton was processed and white Tshirts were manufactured. The Tshirts were then sold to a firm in the United States that silkscreened and sold them to retail shops for resale to American customers. These customers eventually donated the used Tshirts to a charity that sold them to a recycler. The recycler sold them to a vendor in Africa, who then distributed the Tshirts to local markets to be sold yet again to local customers. It's quite an international story, as this Tshirt travels the global commercial highways and byways of the world. The Limited Brands story, and many other examples like it, leave little doubt as to why Harvard scholar and consultant Rosabeth Moss Kanter once described globalization as \"one of the most powerful and pervasive influences on nations, businesses, workplaces, communities, and lives.\"7 Global Management https://phoenix.vitalsource.com/#/books/9781119092988/cfi/6/26!/4/2/2/4/2@0:14.2 5/42 5/21/2016 University of Phoenix: Management Honda in OhioAllen Kinzer, now retired, was the first American manager Honda hired for its Marysville, Ohio, plant. Many people were worried whether U.S. workers could adapt to the Japanese firm's production methods, technology, and style. Says Kinzer: \"It wasn't easy blending the cultures anyone who knew anything about the industry at the time would have to say it was a bold move.\" Honda now employs 4,200 workers, who produce 440,000 vehicles per year. It is one among literally hundreds of foreign firms offering employment opportunities to U.S. workers.8 Haier in South CarolinaThe Haier Group is one of China's bestknown appliance makers. CEO Zhang Ruimin built a factory in Camden, South Carolina, with the goal of taking a larger share of America's refrigerator market. But the plant was expensive and American workers resented Haier's organizational culture and topdown management style. Work hats that showed different ranks and seniority, for example, didn't go over well in South Carolina. But Zhang stayed with the project, saying, \"First the hard, then smooth. That's the way to win.\"9 The prior vignettes introduce the opportunities and complexities of global management, which describes management in businesses and organizations with interests in more than one country. For many firms, global management is a way of life today. Procter & Gamble, for example, pursues a global strategy with customers in over 180 countries. The majority of McDonald's sales now come from outside the United States, with the \"Golden Arches\" prominent on city streets from Moscow to Tokyo to Budapest to Rio de Janeiro. Toyota has 14 plants employing more than 35,000 workers in North America. The success of firms like these depends on attracting and hiring truly global managers with a strong global perspective, who are culturally aware, and who are informed about current international issues and events. Global management involves managing business and organizations with interests in more than one country. A truly global manager is culturally aware and informed on international affairs. Why Companies Go Global John Chambers, chairman and CEO of Cisco Systems Inc., once said: \"I will put my jobs anywhere in the world where the right infrastructure is, with the right educated workforce, with the right supportive government.\"10 Cisco, Honda, Haier, and other firms like these are classic international businesses that conduct forprofit transactions of goods and services across national boundaries. Nike is another truly international businessits swoosh is one of the world's most recognized brands. An international business conducts forprofit transactions of goods and services across national boundaries. Did you know that Nike has no domestic manufacturing infrastructure? All of its products are sourced internationally, including 100+ factories in China alone. Its competitor, New Balance, takes a different approach. Although extensively leveraging global suppliers and licensing its products internationally, New Balance still produces one out of every four of https://phoenix.vitalsource.com/#/books/9781119092988/cfi/6/26!/4/2/2/4/2@0:14.2 6/42 5/21/2016 University of Phoenix: Management its shoes at factories in the United States.11 The two firms follow somewhat different strategies, but each is actively global. Both firmsand others like themseek these benefits of international business. Benefits of international business ProfitsGain profits through expanded operations. CustomersEnter new markets to gain new customers. SuppliersGet access to materials, products, and services. LaborGet access to lowercost, talented workers. CapitalTap into a larger pool of financial resources. RiskSpread assets among multiple countries. Today you can add another benefit to this list, economic developmentwhere a global firm does business in foreign countries with direct intent to help the local economy. Coffee giants Green Mountain Coffee, Peet's Coffee & Tea, and Starbucks, for example, help Rwandan farmers improve production and marketing methods. They send advisers to teach local coffee growers how to meet high international standards so that their products can be sold worldwide. This commitment to economic development generates a win-win scenario: The global coffee firm gets a quality product at a good price, the local coffee growers gain skills and market opportunities, and the domestic economy improves.12 A developmentfocused approach to international business energizes a virtuous circle, where all parties to the relationship keep getting stronger as they work with one another. wisdom> LEARN FROM ROLE MODELS > \"Now every time I want to address a problem, I create a business ... we can create a world where poverty doesn't exist.\" Nobel Peace Prize Winner Asks Global Firms to Fight Poverty https://phoenix.vitalsource.com/#/books/9781119092988/cfi/6/26!/4/2/2/4/2@0:14.2 7/42 5/21/2016 University of Phoenix: Management Micheline Pelletier/Corbis Should global businesses balance the pursuit of profit with genuine efforts to do public good? A strong and positive \"Yes!\" is the answer offered by economist and Nobel Peace Prize winner Muhammad Yunus. He gained fame for creating the Grameen Bank to offer microcredit loans to help fight poverty in his home country of Bangladesh. The bank loans small amounts (as low as $30) to applicants of low income (96% of whom are women) so that they can start their own small businesses and establish financial independence. This model of microfinance has now spread around the world, serving some 200 million borrowers. The next step for Yunus has been to ask global firms to unlock the power of business to tackle poverty and other enduring social problems. In his book Creating a World without Poverty, Yunus advocates a social business model whereby a company's products or services are targeted to benefit people suffering from social ills. \"Now every time I want to address a problem, I create a business\" that he says is \"focused on problem solving, not on money making.\" Yunus's call to the global business community was heard by German yogurt maker Danone. Danone joined with Yunus to start Grameen Danone as the world's first multinational social business. It manufactures nutritional yogurt and sells it at low prices in Bangladesh to help the 46% of local children who are undernourished. Profits are reinvested rather than paid out as dividends. \"We can create a world where poverty doesn't exist,\" claims Yunus, who hopes that \"at least 1 percent of the world economy be made up with social business\" within five years. He was awarded the Congressional Gold Medal in 2013 in recognition of his efforts \"to combat global poverty.\" FIND INSPIRATION When a multinational company travels into countries where social problems like poverty, disease, and illiteracy are present, should it find a https://phoenix.vitalsource.com/#/books/9781119092988/cfi/6/26!/4/2/2/4/2@0:14.2 8/42 5/21/2016 University of Phoenix: Management way to help? Can the social business model work in the global business context? Or is this something most likely to remain \"unusual\" rather than \"common\" in the future? Do you agree that global corporations can become powerful tools for eliminating social problems? Why or why not? How Companies Go Global The ways of pursuing international business are shown in Figure 5.1. When a business is becoming international, global sourcing, exporting/importing, licensing and franchising are typically the most common ways to begin. These are marketentry strategies that involve the sale of goods or services to foreign markets that don't require an expensive investment. Strategic alliances, joint ventures, and wholly owned subsidiaries are direct investment strategies. These approaches do require a major capital commitment, but also create rights of ownership and control over operations in the foreign country. Global Sourcing The first step taken into international business by many firms is global sourcingthe process of purchasing materials, manufacturing components, or locating business services around the world. It is an international division of labor in which activities are performed in countries where they can be accomplished effectively at low cost. Global sourcing at Boeing, for example, means that aircraft parts and components flow in from a complex global supply chain for final assembly into 787 Dreamliners at American plants center fuselage from Italy, landing gear from France, flight deck interiors from Japan, and more. In the service sector, it may mean setting up tollfree customer support call centers in the Philippines, locating research and development centers in Brazil or Russia, or hiring physicians in India to read medical Xrays.13 In global sourcing, materials or services are purchased around the world for local use. Most manufacturers todayof toys, shoes, electronics, furniture, clothing, aircraftmake extensive use of global sourcing. China is still a major outsourcing destination and in many areas has become the factory for the world. If you use an Apple iPod, iPhone, or iPad, for example, the chances are good that it was assembled by a Taiwaneseowned company called Hon Hai Precision Industry at plants located in China. These plants are hugeemploying as many as 350,000+ workers, who produce products not just for Apple, but for other firms like Sony and HewlettPackard. You may have heard of Hon Hai through its trade name, Foxconn, and from news coverage of controversies over its treatment of workers.14 Global firms have to work hard to maintain brand reputations while dealing with complex global supply chains, and aggressive international audits are now common. Even with a rigorous auditing program, however, Apple suffered a blow to its reputation when a financial analyst downgraded the firm's stock for \"moral reasons\" after discovering some of its global suppliers paid low wages to their workers.15 Problems with sketchy foreign contractors, rising labor rates, and higher costs for transportation in global supply chains are among the reasons why some firms have started to reduce their outsourcing and do more reshoringmoving foreign manufacturing and jobs back home. Further reasons for reshoring include opportunities to access cheaper energy, stable wage rates, better quality control, and good public https://phoenix.vitalsource.com/#/books/9781119092988/cfi/6/26!/4/2/2/4/2@0:14.2 9/42 5/21/2016 University of Phoenix: Management relations by starting or expanding domestic operations. A survey of large U.S.based manufacturers by the Boston Consulting Group (BCG) found that over half of U.S. firms had either started reshoring or were likely to do so in the future. The report concluded that \"Companies are realizing that the economics of manufacturing are swinging in favor of the U.S.\"16 Reshoring shifts foreign manufacturing and jobs back to domestic locations. FIGURE 5.1 Common forms of international businessfrom market entry to direct investment increasing involvement in ownership and control of foreign operations strategies. choices> THINK BEFORE YOU ACT > \"It's probably 30 percent cheaper to manufacture in China. But factor in shipping and all the other B.S. that you have to endure.\" Reshoring Offers Alternative to China Manufacturing Pgiam/iStockphoto Over the past 15 to 20 years, if you were a manufacturer you went to China, at least as https://phoenix.vitalsource.com/#/books/9781119092988/cfi/6/26!/4/2/2/4/2@0:14.2 10/42 5/21/2016 University of Phoenix: Management a first stop on your global scouting trip. However, things have changed. A San Diego- based CEO says: \"Now people are trying to come back.\" Why so? LightSaver Technologies tried for two years to get things done in China. Now its work is back in California. CEO Jerry Anderson says China has lost its allure: \"It's probably 30 percent cheaper to manufacture in China. But factor in shipping and all the other B.S. that you have to endure.\" Transportation costs and time are up for goods moved from China to the United States and other world markets. Labor costs are up rising about 20% a year. Business risks in China, if not up, are at least more visible. Theft of intellectual property is a problem. One small manufacturer says: \"They're infamous over there for knocking [products] off.\" Another complains: \"Now prices are escalating, quality is dropping, and deliveries are being delayed.\" YOUR TAKE? The Economist says China \"is still a manufacturing power.\" With super efficient plants and supply chain infrastructure it remains a bargain for labor costs. So, are you on the reshoring side or the offshoring side of the issue? What facts are available to support or undermine your position? Try to think of this issue from a consumer's perspective. If you can buy a child's toy made in China for $8, would you be willing to pay $12 so that it could be labeled \"Made in America\"? Should more of America's businesses, large and small, say, \"Not worth the trouble!\" when Chinese manufacturers come calling with offers? Exporting and Importing A second form of international business involves exportingselling locally made products in foreign markets. The flipside of exporting is importingbuying foreign made products and selling them in domestic markets. In exporting, local products are sold abroad to foreign customers. Importing involves the selling in domestic markets of products acquired abroad. Because the growth of export industries creates local jobs, governments often offer special advice and assistance to businesses seeking to develop or expand export markets. After visiting a U.S. government-sponsored trade fair in China, Bruce Boxerman, president of a then small Cincinnati firm, Richards Industries, decided to take advantage of the growing market for precision valves. The decision doubled export sales in 10 years and one his employees said: \"It wasn't long ago that guys looked at globalization like it is going to cause all of us to lose our jobs. Now it's probably going to save our jobs.\"17 And it certainly did. Richards is now the parent company to six product lines and has over 200 sales representatives around the world. Licensing and Franchising International business also takes place through the licensing agreement, where foreign firms pay a fee for rights to make or sell another company's products in a specified region. The license typically grants access to a unique manufacturing https://phoenix.vitalsource.com/#/books/9781119092988/cfi/6/26!/4/2/2/4/2@0:14.2 11/42 5/21/2016 University of Phoenix: Management technology, special patent, or trademark. Such licensing, however, involves potential risk.18 New Balance, for example, licensed a Chinese supplier to produce one of its brands. Even after New Balance revoked the license, the supplier continued to produce and distribute the shoes around Asia. It was only through expensive, drawnout litigation in China's courts that New Balance was able to deal with the problem.19 In a licensing agreement a local firm pays a fee to a foreign firm for rights to make or sell its products. Franchising is a form of licensing in which a foreign firm buys the rights to use another's name and operating methods in its home country. The international version operates in a similar way to domestic franchising agreements. Such firms as McDonald's, Wendy's, and Subway, for example, sell facility designs, equipment, product ingredients, recipes, and management systems to foreign investors, while retaining certain brand, product, and operating controls. One of the challenges associated with international franchising can be the creation of locally popular menu items while retaining coherence with broader branding goals. In franchising, a fee is paid to a foreign business for rights to locally operate using its name, branding, and methods. Joint Ventures and Strategic Alliances Foreign direct investment, or FDI, involves setting up and buying all or part of a business in another country. For many countries, the ability to attract foreign business investors has been a key to succeeding in the global economy. The term insourcing is often used to describe foreign direct investment, or FDI, that results in local job creation. FDI in the United States totals over $125 billion, for example, and creates just under 6 million local jobs.20 Insourcing is job creation through foreign direct investment. When foreign firms do invest in another country, a common way to start is with a joint venture. This is a coownership arrangement in which foreign and local partners agree to pool resources, share risks, and jointly operate the new business. Sometimes the joint venture is formed when a foreign partner buys part ownership in an existing local firm. In other cases it is formed as an entirely new operation that the foreign and local partners jointly start up together. A joint venture operates in a foreign country through coownership by foreign and local partners. International joint ventures are types of global strategic alliances in which foreign and domestic firms work together for mutual benefit. Partners in alliance hope to generate more market penetration and profits by cooperating than they would have been able to achieve alone. For the local partner, an alliance may bring access to technology and opportunities to learn new skills. For the foreign partner, an alliance may bring access to new markets and the expert assistance of locals who understand domestic markets and the local business context. A global strategic alliance is a partnership in which foreign and domestic firms share resources and knowledge for mutual gains. Joint ventures pose potential business risks and partners must be carefully chosen.21 https://phoenix.vitalsource.com/#/books/9781119092988/cfi/6/26!/4/2/2/4/2@0:14.2 12/42 5/21/2016 University of Phoenix: Management Sometimes partners' goals do not match, for example, when the foreign firm seeks profits and cost efficiencies while the local firm seeks maximum employment and acquisition of new technology.22 Although the loss of business secrets also is a potential risk, the line between acceptable business practice and infringement can be very hard to define in international contexts. Some time ago a new car was marketed in China by a firm partially owned by General Motor's Chinese joint venture partner. The carcalled \"Chery\"looked very similar to a GM model, and the firm complained that its design had been copied. The competitor denied it and went on to become China's largest independent automakerChery International, which sells its cars at home and abroad.23 How to Choose a Joint Venture Partner Familiar with firm's major business Employs a strong local workforce Values its customers Has potential for future expansion Has strong local market Has good profit potential Has sound financial standing Foreign Subsidiaries One way around some of the risks and problems associated with joint ventures and strategic alliances is full ownership of the foreign operation. A foreign subsidiary is a local operation completely owned and controlled by a foreign firm. These subsidiaries may be built from the ground up as a greenfield venture. They also can be established by acquisition, wherein the outside firm purchases an entire local operation. A foreign subsidiary is a local operation completely owned by a foreign firm. A greenfield venture is a foreign subsidiary built from the ground up by the foreign owner. Although a foreign subsidiary represents the highest level of involvement in international operations, it can be very profitable to approach an international venture in this way. When Nissan opened a plant in Canton, Mississippi, an auto analyst said: \"It's a smart strategy ... building more in their regional markets, as well as being able to meet consumers' needs more quickly.\"24 The analyst could also have pointed out that this plant allowed Nissan to claim reputational benefits by dealing with American customers as a \"local\" employer rather than a \"foreign\" company. Global Business Environments When Nissan comes to America or GM goes to China, a lot of what takes place in the foreign business environment is very different from what is common at home. Not only must global managers master the demands of operating with worldwide suppliers, distributors, customers, and competitors, they must also deal successfully with many unique local challenges. https://phoenix.vitalsource.com/#/books/9781119092988/cfi/6/26!/4/2/2/4/2@0:14.2 13/42 5/21/2016 University of Phoenix: Management Legal and Political Systems Some of the most substantial risks in international business come from differences in legal and political systems. Global firms are expected to abide by local laws, many of which may be unfamiliar. The more homecountry and hostcountry laws differ, the harder it is for international businesses to adapt to local rules, regulations, and customs. See, for example, the legal complications faced by Google with the European Union.25 Legal Problems Faced by Google in Europe The European Court of Justice rules that individuals have a \"right to be forgotten\" in some instances and that Google must delete their search results on request. Tax authorities in France bill Google for 1 billion Euro in back taxes. German economy minister Sigmar Gabriel says that breaking up Google \"must be seriously considered\" because of its market dominance. European Commission under pressure to revise and strengthen an antitrust agreement previously reached with Google over precedence shown to its own businesses in search results. Common legal problems faced by international businesses involve incorporation practices and business ownership negotiation and implementation of contracts with foreign parties handling of foreign exchange and intellectual property rightspatents, trademarks, and copyrights. You may be most familiar with the intellectual property issue as it relates to movie and music downloads, sale of fake designer fashions, or software pirating. Companies like Microsoft, Sony, and Louis Vuitton think about this issue in terms of lost profits due to their products or designs being copied and sold as imitations by foreign firms. After a lengthy and complex legal battle, for example, Starbucks won a major intellectual property case it had taken to the Chinese courts. A local firm was using Starbucks' Chinese name, \"Xingbake\" (Xing means \"star\" and bake is pronounced \"bah kuh\"), and was also copying its caf designs.26 Political turmoil, violence, and government changes constitute another area of concern known as political riskthe potential loss in value of an investment in or managerial control over a foreign asset because of instability and political changes in the host country. The major threats associated with political risk today come from terrorism, civil wars, armed conflicts, and new government systems and policies. Although these threats can't be prevented, they can be anticipated. Political risk is the potential loss in value of a foreign investment due to instability and political changes in the host country. Most global firms use a planning technique called politicalrisk analysis to forecast the probability of disruptive events that can threaten the security of foreign investments. Consider, for example, the criminal drug violence in Mexico. What are some of the implications for business investors? Although involvement in Mexico clearly represents an exercise in political risk, thus far, foreign investment in Mexico is on the increase. The country's proximity to U.S. markets and lowcost skilled labor are still attractive. Gonzalo Cano, quality manager at a large Lego plant in Monterrey, says: \"Security is an issue but it does not get in the way. Companies are taking the long view.\"27 https://phoenix.vitalsource.com/#/books/9781119092988/cfi/6/26!/4/2/2/4/2@0:14.2 14/42 5/21/2016 University of Phoenix: Management Politicalrisk analysis tries to forecast political disruptions that can threaten the value of a foreign investment. Trade Agreements and Trade Barriers When international businesses believe they are being mistreated in foreign countries, or when local companies believe foreign competitors are disadvantaging them, their respective governments can take these cases to the World Trade Organization (WTO). The WTO is a global organization established to promote free trade and open markets around the world. Its member nations, presently 151 of them, agree to negotiate and resolve disputes about tariffs and trade restrictions.28 World Trade Organization member nations agree to negotiate and resolve disputes about tariffs and trade restrictions. WTO members are supposed to give one another most favored nation statusthe most favorable treatment for imports and exports. Yet trade barriers are still common. They include outright tariffs, which constitute taxes that governments impose on imports. They also include nontariff barriers that discourage imports in nontax ways. These include quotas, import restrictions, and other forms of protectionism that give favorable treatment to domestic businesses. Foreign firms complain, for example, that the Chinese government creates barriers that make it hard for them to succeed. A spokesperson for the U.S. Chamber of Commerce says that American multinationals like Caterpillar, Boeing, Motorola, and others have been hurt by \"systematic efforts by China to develop policies that build their domestic enterprises at the expense of U.S. firms.\"29 Most favored nation status gives a trading partner most favorable treatment for imports and exports. Tariffs are taxes governments levy on imports from abroad. Nontariff barriers to trade discourage imports in nontax ways such as quotas and government import restrictions. Protectionism is a call for tariffs and favorable treatments to protect domestic firms from foreign competition. One goal of most tariffs and protectionism is to protect local firms from foreign competition and save local jobs. These issues are reflected in political campaigns and electionyear debates. These aren't easy issues to solve. Government leaders face the often conflicting goals of seeking freer international trade, while still protecting domestic industries. Such political dilemmas create controversies for the WTO in its role as a global arbiter of trade issues. For example, in one claim filed with the WTO, the United States complained that China's \"legal structure for protecting and enforcing copyright and trademark protections\" was \"deficient\" and not in compliance with WTO rules. China's response was that the suit was out of line with WTO rules and that \"we strongly oppose the U.S. attempt to impose on developing members through this case.\"30 When both sides of a case like this present defensible positions it is difficult to establish a clear way to resolving the key issues, particularly when the issues are shaded by cultural differences. ethics> KNOW RIGHT FROM WRONG https://phoenix.vitalsource.com/#/books/9781119092988/cfi/6/26!/4/2/2/4/2@0:14.2 15/42 5/21/2016 University of Phoenix: Management > Bolivia's president announced that his government was nationalizing \"all natural resources, what our ancestors fought for.\" Nationalism and Protectionism a Potent Mix AIZAR RALDES/AFP/Getty Images/Newscom The headline read \"Bolivia Seizes Control of Oil and Gas Fields.\" Although oil industry executives couldn't say that this wasn't anticipated, it still must have been shocking when Bolivia's government announced that it was taking control of the country's oil and gas fields. The announcement said: \"We are beginning by nationalizing oil and gas tomorrow we will add mining, forestry, and all natural resources, what our ancestors fought for.\" Immediately following the announcement, Bolivia's armed forces secured all of the country's oil and gas fields. President Evo Morales set forth new terms that gave a state owned firm 82% of all revenues, leaving 18% for the foreign firms. He said: \"Only those firms that respect these new terms will be allowed to operate in the country.\" The implicit threat was that any firms not willing to sign new contracts would be sent home. While foreign governments described this nationalization as an \"unfriendly move,\" Morales considered it patriotic. His position was that any existing contracts with the state were in violation of the constitution, and that Bolivia's natural resources belonged to its people. WHAT DO YOU THINK? https://phoenix.vitalsource.com/#/books/9781119092988/cfi/6/26!/4/2/2/4/2@0:14.2 16/42 5/21/2016 University of Phoenix: Management If you were the CEO of one of the global oil firms operating in Bolivia, how would you react to this nationalization? Would you resist and raise the ethics issue of honoring existing contracts with the Bolivian government? Or would you comply and accept the new terms being offered? As an everyday citizen of the world, do you agree or disagree with the argument that Bolivia's natural resources are national treasures that belong to the people, not foreign investors? What ethical issues inform the decision to nationalize Bolivia's oil and gas industry? Regional Economic Alliances One of the characteristics of globalization is the growth of regional economic alliances, where nations agree to work together for economic gains. NAFTA, the North American Free Trade Agreement, is an example. Formed in 1994 by the United States, Canada, and Mexico, NAFTA created a trade zone that frees the flow of goods and services, workers, and investment among the three countries. Regional economic alliances link member countries in agreements to work together for economic gains. NAFTA is the North American Free Trade Agreement linking Canada, the United States, and Mexico in an economic alliance. Many American firms have taken advantage of NAFTA, moving production facilities from the United States to Mexico, largely to benefit from lower wages paid to skilled Mexican workers. This labor shift has both pros and cons, and NAFTA remains a controversial topic in some political debates. Arguments in support credit NAFTA with greater cross border trade, greater productivity of U.S. manufacturers, and reform of the Mexican business environment. Arguments against blame NAFTA for substantial job losses to Mexico, lower wages for American workers who want to keep their jobs, and a wider trade deficit with Mexico.31 That said, the NAFTA story is increasingly positive. Intellectual property is well protected under the agreement, and global supply chain issues are making Mexico increasingly attractive as a manufacturing destination. The Boston Consulting Group estimates that by 2015 Mexico will offer manufacturers a 30% labor cost advantage over China.32 The European Union (EU) is a regional economic and political alliance of global importance. The financial health of the EU is regularly in the news, as upswings and downswings in its economy affect the entire world. The EU comprises 28 member countries that have agreed to support mutual interests by integrating themselves politicallythere is now a European Parliament, and economicallymember countries have removed barriers that previously limited crossborder trade and business development. Seventeen EU members also are part of a common currency, the Euro, which has grown to the point where it is a major alternative and competitor to the U.S. dollar in the global economy. The European Union is a political and economic alliance of European countries. The Euro is now the common European currency. https://phoenix.vitalsource.com/#/books/9781119092988/cfi/6/26!/4/2/2/4/2@0:14.2 17/42 5/21/2016 University of Phoenix: Management In Asia and the Pacific Rim, 21 member nations established the Asia Pacific Economic Cooperation (APEC) to promote free trade and investment in the Pacific region. Businesses from APEC countries have access to a region of superstar economic status, home to some of the world's fastest growing economies such as China, Republic of Korea, Indonesia, Russia, and Australia. The market potential of member countries, close to 3 billion consumers, far exceeds NAFTA and the EU. Also in Asia, the 10 nations of the Association of Southeast Asian Nations (ASEAN) cooperate with a stated goal of promoting economic growth and progress. The Asia Pacific Economic Cooperation (APEC) links 21 countries to promote free trade and investment in the Pacific region. Africa also is increasingly center stage in world business headlines.33 The region's economies are growing, the middle class is expanding, and there is a promising rise in entrepreneurship.34 Companies like HarleyDavidson, Walmart, Caterpillar, and Google are making their presenceand continental ambitionsknown as they set up offices, invest in dealerships, and buy local companies.35 The Southern Africa Development Community (SADC) links 14 countries in southern Africa in trade and economic development efforts. Its website posts this vision: \"a future in a regional community that will ensure economic wellbeing, improvement of the standards of living and quality of life, freedom and social justice, and peace and security for the peoples of Southern Africa.\"36 The Southern Africa Development Community (SADC) links 14 countries of southern Africa in trade and economic development efforts. Learning Check 1 TAKEAWAYQUESTION 1 What are the management challenges of globalization? BE SURE YOU CAN define globalization and discuss its implications for international management list five reasons companies pursue international business opportunities describe and give examples of global sourcing, exporting/importing, franchising/licensing, joint ventures, and foreign subsidiaries discuss how differences in legal environments can affect businesses operating internationally explain the goals of the WTO discuss the significance of regional economic alliances such as NAFTA, the EU, APEC, and SADC Global Businesses TAKEAWAY 2 What are global businesses and how do they work? Types of global businesses Pros and cons of global LEARN MORE ABOUT | businesses Ethics challenges for global businesses If you travel abroad, many of your favorite brands and products will travel with you. You can have a McDonald's sandwich in over 100 countries, follow it with a HagenDazs ice cream in 50, and then brush up with Procter & Gamble's Crest toothpaste in 180. https://phoenix.vitalsource.com/#/books/9781119092988/cfi/6/26!/4/2/2/4/2@0:14.2 18/42 5/21/2016 University of Phoenix: Management Economists even use the \"Big Mac\" index, which compares the U.S. dollar price of the McDonald's sandwich around the world, to track purchasing power parity among the world's currencies.37 Sample Big Mac Index United States $4.62 Sweden $6.29 Brazil $5.25 Euro area $4.96 Australia $4.47 Mexico $2.78 China $2.64 Russia $2.62 Types of Global Businesses Global corporations, also called multinational enterprises (MNEs) and multinational corporations (MNCs), are business firms with extensive international operations in many foreign countries. The largest global corporations are identified in annual listings such as Fortune magazine's Global 500 and the Financial Times' FT Global 500. They include familiar names such as Walmart, BP, Toyota, Nestl, BMW, Hitachi, Caterpillar, Sony, and Samsung, as well as others you may not recognize, such as the big oil and gas producers PetroChina (China), Gazprom (Russia), and Total (France). A global corporation is a multinational enterprise (MNE) or multinational corporation (MNC) that conducts commercial transactions across national boundaries. There is likely no doubt in your mind that HewlettPackard and General Motors are American firms, while Sony and Honda are Japanese. But, this may not be how executives at these companies want their firms to be viewed. These firms and many other global firms act more like transnational corporations that do business around the world without being identified with one national home.38 The Economist magazine has even started publishing a \"Domestic Density Index\" as a measure of corporate identity using the percentage of sales, employees, and shareholders that are domestic to the home country as well as the nationality of the CEO. Sample domestic identity scores include CocaCola (62%), Apple (65%), and GE (63%).39 A transnational corporation is a global corporation or MNE that operates worldwide on a borderless basis. Executives of transnational firms view the entire world as their domain for acquiring resources, locating production facilities, marketing goods and services, and communicating brand images. The goal is described by a global executive as \"source everywhere, manufacture everywhere, sell everywhere.\"40 The resulting dense, overlapping, and worldwide manufacturing and marketing networks often make it https://phoenix.vitalsource.com/#/books/9781119092988/cfi/6/26!/4/2/2/4/2@0:14.2 19/42 5/21/2016 University of Phoenix: Management difficult to distinguish one country's firms from the next. When shopping at an Aldi store or browsing Hugo Boss clothes, would you know they're German companies? Which company is really more Americanthe Indian giant Tata, which gets some 50% of its revenues from North America, or IBM, which gets over 65% of its revenues from outside the United States?41 Pros and Cons of Global Businesses What difference does a company's nationality make? Does it really matter to an American whether local jobs come from a domestic giant like IBM or a foreign firm like Honda? How about size? Does it matter that Exxon/Mobil's revenues are larger than Sweden's gross domestic product (GDP)?42 What about wealth? Is what some call the globalization gaplarge multinationals and industrialized nations gaining disproportionately from globalization, a matter for social and personal concern?43 The globalization gap is where large multinational corporations and industrialized nations gain disproportionately from the benefits of globalization. HostCountry Issues Ideally, global corporations and the countries that host them should both reap benefits. But things can go right and wrong in these relationships.44 Potential hostcountry benefits shown in Figure 5.2 include a larger tax base, increased employment opportunities, technology transfers, introduction of new industries, and development of local resources. Potential hostcountry costs include complaints that global corporations extract excessive profits, dominate the local economy, interfere with the local governments, fail to respect local customs and laws, fail to help domestic firms develop, hire the most talented local personnel away from domestic firms, and fail to transfer their most advanced technologies to the host country. FIGURE 5.2 What should go right and what can go wrong in global corporation and hostcountry relationships. HomeCountry Issues Global corporations also can get into trouble at home in the countries where they were founded and where their headquarters are located. Even as many global firms try to https://phoenix.vitalsource.com/#/books/9781119092988/cfi/6/26!/4/2/2/4/2@0:14.2 20/42 5/21/2016 University of Phoenix: Management operate as transnationals, homecountry governments and citizens still tend to identify them with local and national interests. They also expect global firms to act as good domestic citizens.45 When a global business cuts back homecountry jobs, or closes a domestic operation in order to source work to lowercost international providers, the loss is controversial. Corporate decision makers are likely to be called on by government and community leaders to reconsider and give priority to domestic social responsibilities. Other homecountry criticisms of global firms include sending investment capital abroad and engaging in corruption. American lawmakers are concerned about corporate tax inversion, where a U.S.based MNC buys a firm in a lowtax country in order to shield foreign earnings from U.S. taxes. Tax inversion is where a U.S.based MNC buys a firm in a lowtax country in order to shield foreign earnings from U.S. taxes. Ethics Challenges for Global Businesses Dateline Bangladesh: The collapse of eightstory Rana Plaza, an industrial building for garment factories, resulted in 1,129 deaths and 2,215 injuries. Although warnings had been issued about cracks in the building, employees faced loss of pay if they refused to work. Rana Plaza factories are connected to a global supply chain producing apparel for brands including Benetton, Cato Fashions, the Children's Place, and Walmart.46 We live at a time of increasing global democratization of information and communication technologies, and the ready availability of reports on ethicstied outcomes from global business activity. Customers, governments and other stakeholders, and the public at large have access to more information about what is happening with MNCs and their complex supply chains than ever before. The consequences of business actionsthe good and the bad, and anywhere in the worldhave never been more visible and impactful. Although bad decisions will continue to be made, it's harder to hide them from intense public scrutiny and significant public relations and financial backlash.47 Corruption Corruption occurs when people engage illegal practices to further their personal business interests. It's a source of continuing controversy and often makes headline news in the international business context.48 There is no doubt that corruption poses significant challenges for global managers. The civic society organization Transparency International is devoted to eliminating corrupt practices around the world. Its annual reports and publications track corruption and are a source of insight for both executives and policymakers.49 But corruption issues aren't always neat and clearcut. An American executive, for example, says that payoffs are needed to get shipments through customs in Russia even though all legal taxes and tariffs are already paid. Local customs brokers build these payments into their invoices.50 What do you think? Should the act of paying for what you already deserve to receive be considered a bribe? Should U.S. firms facing such situations be allowed to do whatever is locally acceptable? How do you sort right from wrong when considering how to negotiate local customs and business expectations? Corruption involves illegal practices to further one's business interests. The Foreign Corrupt Practices Act (FCPA) makes it illegal for U.S. firms and their https://phoenix.vitalsource.com/#/books/9781119092988/cfi/6/26!/4/2/2/4/2@0:14.2 21/42 5/21/2016 University of Phoenix: Management representatives to engage in corrupt practices overseas.51 U.S. companies are not supposed to pay or offer bribes or excessive commissionsincluding nonmonetary gifts to foreign officials in return for business favors. Critics claim that the FCPA fails to recognize the realities of business practice in many foreign nations. Critics believe the FCPA puts U.S. companies at a competitive disadvantage because they can't offer the same \"deals\" or \"perks\" as businesses from other nations, deals locals may regard as standard business practice. But other nations, such as the United Kingdom with its Bribery Act, have begun to pass similar laws and the U.S. Department of Justice isn't backing down. Penalties levied by the U.S. government are now running over $1 billion per year.52 The Foreign Corrupt Practices Act (FCPA) makes it illegal for U.S. firms and their representatives to engage in corrupt practices overseas. analysis> MAKE DATA YOUR FRIEND https://phoenix.vitalsource.com/#/books/9781119092988/cfi/6/26!/4/2/2/4/2@0:14.2 22/42 5/21/2016 University of Phoenix: Management > Transparency International wants to end the \"devastating impact of corruption on men, women, and children around the world.\" Corruption and Bribes Haunt Global Business AFP/Getty Images If you want a world free of corruption and bribes, you share a lot in common with the global civil society organization Transparency International. TI's mission is to \"create change for a world free of corruption.\" The organization publishes regular surveys and reports on corruption and bribery around the world. Some recent data reflecting on countryspecific patterns of corruption can be seen below: Corruption: Best and worst out of 178 countries in perceived public sector corruption. (Note: & = ties) BestDenmark, Finland, & New Zealand (#1), Sweden (#4), Singapore (#5) WorstAfghanistan, North Korea, Somalia (#174), Sudan (#173), Myanmar (#172) In BetweensUnited States (#19), Costa Rica (#48), Italy (#72), India (#94), Vietnam (#123) Bribery: Best and worst of 20 countries in likelihood of home country firms' willingness to pay bribes abroad. BestNetherlands & Switzerland (#1), Belgium (#3), Germany & Japan (#4) WorstRussia (#28), China (#27), Mexico (#26), Indonesia (#25) In BetweensCanada (#6), United States (#10), Brazil (#14), Turkey (#19) YOUR THOUGHTS? Are there any patterns evident in these data? Does it surprise you that the United States didn't make the \"best\" lists? How could TI's website be used by https://phoenix.vitalsource.com/#/books/9781119092988/cfi/6/26!/4/2/2/4/2@0:14.2 23/42 5/21/2016 University of Phoenix: Management global business executives? Is there a meaningful difference between \"corruption\" and \"bribery\" in international business? What does the absence of a set of standardized global practices mean for an even international business playing field? Child Labor and Sweatshops The facts are startling: 215 million child laborers worldwide, 115 million of them working in hazardous conditions.53 Child laborthe employment of children to perform work otherwise performed by adults, is a major ethics issue that haunts global businesses as they follow the world's lowcost manufacturing from country to country. More than likely, you've heard about child labor used in the manufacture of handmade carpets, but what about your favorite electronic device whose components are largely made by foreign suppliers?54 Companies find it difficult to always know for certain just who is employed in a foreign factory producing for global brands. After an Apple audit identified 106 underage workers used by 11 of its 400 suppliers, Apple required the firms to return children to their homes, pay for their enrollment in local schools, and pay their families what the children would have earned in annual income.55 Child labor is the employment of children for work otherwise done by adults. Child labor isn't the only ethicscritical labor issue facing global managers. Sweatshops business operations that employ workers at low wages for long hours in poor working conditionsare another key ethical issue. The Bangladesh garment industry, for example, depends on workers, often female and illiterate, who are trying to escape lives of poverty. Their complaints include blocked elevators, filthy tap water, and unclean overflowing toilets in the factories.56 The Rana Plaza tragedy mentioned earlier exposed unsafe buildings and sweatshop conditions in factories throughout the country. When Walmart audited some 200 factories in its Bangladesh supply chains, 15% failed safety inspections. Walmart now claims it has a \"zero tolerance policy\" when its standards are violated and will cancel business contracts with any supplier that subcontracts work to others without informing Walmart.57 Sweatshops employ workers at very low wages for long hours in poor working conditions. Conflict Minerals It's no secret that the sale of scarce minerals helps support warlords and perpetuates strife in places such as the Democratic Republic of Congo and surrounding region. Called conflict minerals because monies gained from their sale help finance armed violence, they also are indispensable to manyif not allthe electrical devices we love and are so dependent upon in everyday living.58 It just isn't possible to make a phone, tablet, gaming console, or other smart device, without components that use minerals like tin, tungsten, gold, and tantalum, each of which might be mined in conflict areas.59 Conflict minerals are ones sourced in the Democratic Republic of Congo and surrounding region and whose sale finances armed groups that perpetuate violence. Identifying the source of the minerals used in electronics manufacturing is extremely https://phoenix.vitalsource.com/#/books/9781119092988/cfi/6/26!/4/2/2/4/2@0:14.2 24/42 5/21/2016 University of Phoenix: Management difficult in the dense and sometimes murky world of global sourcing. Who knows, for example, how many times a supply of tungsten may have been passed from hand to hand and where its original source might be located? Yet, certification of sourced minerals as \"conflict free\" is exactly what section 1502 of the DoddFrank Act of 2010 required of U.S. companies. After the law was appealed, the court ruled that firms would only have to report to the Securities and Exchange Commission that they had investigated their supply chains for conflict minerals.60 Whether you believe the original DoddFrank provision requiring \"conflictfree\" certification or the later court ruling requiring \"investigation\" is the right approach, the fact is that companies have a lot to gain in reputation and moral standing by tracing the minerals used in their products and rejecting those sourced in conflict areas. But, this task is exceedingly complex. Apple, for example, says it uses some 200 smelters in 30 countries. HP says as many as 10 middlemen may stand between it and the original sources of some minerals. And Intel, which was one of the first firms to submit an audit report to the SEC, says that its chips are conflict free but that it had visited 85 smelters in 21 countries to establish the audit trail.61 Learning Check 2 TAKEAWAYQUESTION 2 What are global businesses and how do they work? BE SURE YOU CAN differentiate a multinational corporation from a transnational corporation list at least three hostcountry complaints and three homecountry complaints about global business operations give examples of corruption, sweatshops, and child labor in international businesses Cultures and Global Diversity TAKEAWAY 3 What is culture and how does it influence global management? Cultural intelligence Silent languages of culture Tight and LEARN MORE ABOUT | loose cultures Values and national cultures Situation: A U.S. executive goes to meet a business contact in Saudi Arabia. He sits in the office with crossed legs and the sole of his shoe exposed. Both are unintentional signs of disrespect in the local culture. He passes documents to the host using his left hand, which Muslims in Saudi Arabia generally consider to be unclean. He declines when coffee is offered, which suggests criticism of the Saudi's hospitality. Outcome: A $10 million contract is lost to a Korean executive better versed in the local culture.62 \"Culture\" matters, as we often say, and cultural miscues can be costly in international business and politics. Culture is the shared set of beliefs, values, and patterns of behavior common to a group of people.63 Culture shock is the confusion and discomfort a person experiences when in an unfamiliar culture. The box on stages in adjusting to a new culture is a reminder that these feelings must be mastered to travel comfortably and do business around the world. Have you ever had a surprising cross https://phoenix.vitalsource.com/#/books/9781119092988/cfi/6/26!/4/2/2/4/2@0:14.2 25/42 5/21/2016 University of Phoenix: Management cultural experience? Have you personally experienced culture shock? Culture is a shared set of beliefs, values, and patterns of behavior common to a group of people. Culture shock is the confusion and discomfort a person experiences when in an unfamiliar culture. Cultural Intelligence The American's behavior in Saudi Arabia was selfcentered. He ignored and showed no concern for the culture of his Arab host. This displayed ethnocentrism, a tendency to view one's culture as superior to that of others. Some might excuse him as suffering from culture shock. Perhaps he was exhausted after a long international flight. Maybe he was so uncomfortable upon arrival that all he could think about was making a deal and leaving Saudi Arabia as quickly as possible. Still others might give him the benefit of the doubt as being wellintentioned but not having time to learn enough about Saudi culture before making the trip. Ethnocentrism is the tendency to consider one's culture superior to others. insight> LEARN ABOUT YOURSELF Cultural Intelligence Opens Doors to Opportunity The complications and drama of global events are constant reminders that the ability to work and communicate well across cultures is one of the great challenges of our time. It is hard to pass a day, for example, without encountering Asia's influence on global politics and economics. When our business and government leaders venture into Asia, we want them to be successful. They must have high cultural intelligence, including an awareness of Confucian values such as those shown in the box. Confucian Values in Asian Cultures Harmonyworks well in a group, doesn't disrupt group order, puts group before selfinterests Hierarchyaccepts authority and hierarchical nature of society doesn't challenge superiors Benevolenceacts kindly and understandingly toward others paternalistic, willing to teach and help subordinates Loyaltyloyal to organization and supervisor, dedicated to job, grateful for job and supportive of superiors Learningeager for new knowledge, works hard to learn new job skills, strives for high performance Cultural differences can be frustrating and even feel threatening. Our ways of doing things may seem strange or even offensive to others, and viceversa. Consultant Richard Lewis warns of \"cultural spectacles\" that limit our vision, causing us to see and interpret things with the biases of our own culture. Cultural intelligence, by https://phoenix.vitalsource.com/#/books/9781119092988/cfi/6/26!/4/2/2/4/2@0:14.2 26/42 5/21/2016 University of Phoenix: Management contrast, helps us to adapt to new cultures and work well in culturally diverse situations. It helps us break the habits of our culture and engage the ways of others with interest, respect, and learning. Importantly, it is a musthave competency in our global marketplace. GET TO KNOW YOURSELF BETTER The cultural diversity of a college campus offers a trip around the world ... if we're willing to reach out, learn, and embrace it. Take advantage of global diversity in your community. Observe and criticize yourself as you meet, interact with, and otherwise come into contact with persons from other cultures. Take notes on what you perceive as cultural differences and on your \"first tendencies\" in reacting to these differences. Assess what this suggests about your cultural intelligence. Make a list of what could be your strengths and weaknesses as a global manager. Write down personal reflections on your capacity to work well across cultural boundaries. Regardless of possible reasons for the executive's cultural mistakes, they still worked to this his disadvantage. They also showed a lack of something critical to success in global managementcultural intelligence. Often called \"CQ\" for \"cultural quotient,\" cultural intelligence is the ability to adapt, adjust, and work well across cultures.64 Cultural intelligence is the ability to adapt, adjust, and work well across cultures. Where do you stand when it comes to cultural intelligence? People with cultural intelligence are flexible in dealing with cultural differences and willing to learn from what is unfamiliar. They use that learning to selfregulate and modify their behaviors to act with sensitivity toward another culture's ways. In other words, someone high in cultural intelligence views cultural differences not as a threat but as an opportunity to learn.65 You can do a quick test of your CQ by asking and answering these questions:66 1. Am I aware of the cultural knowledge I use in crosscultural situations? 2. Do I know about the cultural values, practices, and religious beliefs of other cultures? 3. Do I enjoy interacting with people from diverse cultures? 4. Do I change my behavior when a crosscultural situation requires it? Silent Languages of Culture The capacities to listen, observe, and learn are key building blocks of cultural intelligence. These skills and competencies can be developed by better understanding what the anthropologist Edward T. Hall calls the \"silent\" languages of culture.67 He believes that these silent languages are found in a culture's approach to context, time, and space. Context If we look and listen carefully, Hall says we'll recognize how cultures differ in their use of language in communication.68 Most communication in lowcontext cultures takes place via the written or spoken word. This is common in the United States, Canada, and https://phoenix.vitalsource.com/#/books/9781119092988/cfi/6/26!/4/2/2/4/2@0:14.2 27/42 5/21/2016 University of Phoenix: Management Germany, for example. Americans in particular tend to say or write what they mean and mean what they say. Things aren't this way in many parts of the world. Lowcontext cultures emphasize communication via spoken or written words. In highcontext cultures what is actually said or written may convey only part, and sometimes a very small part, of the real message. The rest must be interpreted from the situation, body language, physical setting, and even past relationships among the people involved. Dinner parties, social gatherings, and golf outings in highcontext cultures such as Thailand and Malaysia, for example, are ways for potential business partners to get to know one another. Only after social relationships are established and a context for communication is developed does it become possible to begin making business deals. Highcontext cultures rely on nonverbal and situational cues as well as on spoken or written words in communication. Time Hall describes differences in how cultures deal with time. People in monochronic cultures often do one thing at a time. It is common in the United States, for example, to schedule meetings with specific people and focus on a specific agenda for an allotted period of time.69 If someone is late to a meeting or brings an uninvited guest, this is viewed unfavorably. In monochronic cultu
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