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Globalization and Business

Globalization is the internationalization of business activities and the shift toward an integrated global economy.

The Changing Environment of Business

The changing environment of business presents both opportunities and challenges for managers today. Five important environmental forces are globalization, diversity, technology, ethics and corporate governance, and new employment relationships.

The Growth of International Business

First, communication and transportation have improved dramatically over the past several decades. Telephone service has improved, communication networks span the globe and can interact via satellite, and once-remote areas have become routinely accessible. It is simply easier to conduct international business today than was the case just a few years ago.

Second, businesses have expanded internationally to increase their markets. Companies in smaller countries, such as Nestl in Switzerland and Heineken in the Netherlands, recognized long ago that their domestic markets were too small to sustain much growth and therefore moved into the international arena. Many U.S. firms, on the other hand, have only found it advantageous to enter foreign markets in the last half-century. Now, though, most midsize and even many small firms routinely buy and/or sell products and services in other countries.

Third, more and more firms are moving into international markets to control costs, especially to reduce labor costs.

Finally, many organizations have become international in response to competition. If an organization starts gaining strength in international markets, its competitors often must follow suit to avoid falling too far behind in sales and profitability.

Cross-Cultural Differences and Similarities

Culture is the set of shared values, often taken for granted, that help people in a group, organization, or society understand which actions are considered acceptable and which are deemed unacceptable.

One major review of the literature on international management reached five basic conclusions.

1. Behavior in organizational settings does indeed vary across cultures.
2. Culture itself is one major cause of this variation.
3. Although the causes and consequences of behavior within organizational settings remain quite diverse across cultures, organizations and the ways they are structured appear to be growing increasingly similar. Hence, managerial practices at a general level may be becoming more and more alike, but the people who work within organizations still differ markedly.
4. The same individual behaves differently in different cultural settings.
5. Cultural diversity can be an important source of synergy in enhancing organizational effectiveness.

Geert Hofstede, a Dutch researcher, studied workers and managers in 60 countries and found that specific attitudes and behaviors differed significantly because of the values and beliefs that characterized those countries.

Two primary dimensions that Hofstede found:

Individualismexists to the extent that people in a culture define themselves primarily as individuals rather than as part of one or more groups or organizations.

Collectivism is characterized by tight social frameworks in which people tend to base their identities on the group or organization to which they belong.

Power distance, which can also be called orientation to authority, is the extent to which people accept as normal an unequal distribution of power.

Uncertainty avoidance, which can also be called preference for stability, is the extent to which people feel threatened by unknown situations and prefer to be in clear and unambiguous situations.

Masculinity, which might be more accurately called assertiveness or materialism, is the extent to which the dominant values in a society emphasize aggressiveness and the acquisition of money and other possessions as opposed to concern for people, relationships among people, and overall quality of life.

Hofstede's framework has recently been expanded to include long-termversus short-term orientation.

Long-term values include focusing on the future, working on projects that have a distant payoff, persistence, and thrift.

Short-term values are more oriented toward the past and the present and include respect for traditions and social obligations.

Diversity and Business

A second major environmental shift in recent years has been the increased attention devoted to the concept of diversity. Workforce diversity refers to the important similarities and differences among the employees of organizations. 3M defines its goals regarding workforce diversity as "valuing uniqueness, while respecting differences, maximizing individual potentials, and synergizing collective talents and experiences for the growth and success of 3M."

Stereotypes -can lead to the even more dangerous process of prejudice toward others.

Prejudices are judgments about others that reinforce beliefs about superiority and inferiority. They can lead to an exaggerated assessment of the worth of one group and a diminished assessment of the worth of others

Dimensions of Diversity

In the United States, race and gender have been considered the primary dimensions of diversity. The earliest civil rights laws, for instance, were aimed at correcting racial segregation.

The primary dimensions of diversity are those factors that are either inborn or exert extraordinary influence on early socialization. These include age, race and ethnicity, gender, physical and mental abilities, and sexual orientation.13 These factors make up the essence of who we are as human beings.

Secondary dimensions of diversityinclude factors that matter to us as individuals and that to some extent define us to others; however, they may be less permanent than primary dimensions and can be adapted or changed. These include educational, background, geographical location, income, marital status, military experience, parental status, religious beliefs, and work experience.

Global Workforce Diversity

Similar statistics on workforce diversity are found in other countries. In Canada, for instance, minorities are the fastest-growing segment of the population and the workforce.

The Value of Diversity

The United States has historically been seen as a "melting pot" of people from many different countries, cultures, and backgrounds. For centuries, it was assumed that people who came from other countries should assimilate into the existing cultural context they were entering. Although equal employment opportunity and accompanying affirmativeaction legislation have had significant effects on diversifying workplaces, they sometimes focused on bringing into the workplace people from culturally different groups and fully assimilating them into the existing organization. In organizations, however, integration proved difficult to implement.

Assimilationis the process through which members of a minority group become socialized into learning the ways of the majority group. In organizations this entails hiring people from diverse backgrounds and attempting to mold them to fit into the existing organizational culture.

Benefits of Valuing Diversity Valuing diversity means putting an end to the assumption that everyone who is not a member of the dominant group must assimilate. This is not easily accomplished in most organizations. '

Technology and Business

Technology refers to the methods used to create products, including both physical goods and intangible services. Technological change has become a major driver for other forms of organization change. Moreover, it also has widespread effects on the behaviors of people inside an organization. Three specific areas of technology worth noting here are: (1) the shift toward a service-based economy, (2) the growing use of technology for competitive advantage, and (3) mushrooming change in information technology.

Manufacturing and Service Technologies

Manufacturingis a form of business that combines and transforms resources into tangible outcomes that are then sold to others.

For example, the Goodyear Tire and Rubber Company is a manufacturer because it combines rubber and chemical compounds and uses blending equipment and molding machines to create tires. Broyhill is a manufacturer because it buys wood and metal components, pads, and fabric and then combines them into furniture. And Apple is a manufacturer because it uses electronic, metal, plastic, and composite components to build smartphones, computers, and other digital products.

A service organizationis one that transforms resources into an intangible output and creates time or place utility for its customers.

Technology and Competition

Technologyis the basis of competition for some firms, especially those whose goals include being the technology leaders in their industries. A company, for example, might focus its efforts on being the lowest-cost producer or on always having the most technologically advanced products on the market. But because of the rapid pace of new developments, keeping a leadership position based on technology is becoming increasingly challenging.

Information Technology

Most people are very familiar with advances in information technology. Cellular telephones, electronic books, smart phones such as the iPhone and Blackberry, the iPad, and digital cameras, as well as technologically based social networking sites like Facebook, are just a few of the many recent innovations that have changed how people live and work.25 Breakthroughs in information technology have resulted in leaner organizations, more flexible operations, increased collaboration among employees, more flexible work sites, and improved management processes and systems. On the other hand, they have also resulted in less personal communication, less "down time" for managers and employees, and an increased sense of urgency vis--vis decision making and communication changes that have not necessarily always been beneficial.

Ethics and Corporate

Ethics are a person's beliefs regarding what is right or wrong in a given situation.

Managerial Ethics- Managers face a variety of ethical situations. In most cases these situations involve how the organization treats its employees, how employees treat the organization, and how employees and organizations treat other economic agents.

How an Organization Treats Its Employees

One important area of managerial ethics is the treatment of employees by the organization. This area includes policies such as hiring and firing, wages and working conditions, and employee privacy and respect.

Both ethical and legal guidelines suggest that hiring and firingdecisions should be based solely on an individual's ability to perform the job.

Wages and working conditions, although tightly regulated, are also areas for potential controversy.

Finally, most observers would also agree that an organization is obligated to protect the privacy of its employees.

How Employees Treat the Organization

Numerous ethical issues also stem from how employees treat the organization, especially in regard to conflicts of interest, secrecy and confidentiality, and honesty.

Ethical Issues in Corporate Governance

Corporate governancerefers to the oversight of a public corporation by its board of directors.

New Employment Relationship

- a final significant area of environmental change that is particularly relevant for business today.

The Management of Knowledge Workers

Knowledge Workers - those employees who add value in an organization simply because of what they know.

computer scientist

physical scientists

engineers

product designers

video game developers

These employees require intensive and highly specialized training, and not everyone is willing to make the human capital investments necessary to move into these jobs. Even after knowledge workers are on the job, retraining and training updates are critical so that their skills do not become obsolete.

Outsourcing - the practice of hiring other firms to do work previously performed by the organization itself; when this work is moved overseas, it is often called offshoring.

- it is an increasingly popular strategy because it helps firms focus on their core activities and avoid getting sidetracked by secondary activities.

Temp and Contingency Workers

Contingent Worker - a person who works for an organization on something other than a permanent or full-time basis.

- another trend that has impacted employment relationships in business involves the use of contingent or temporary workers

Categories of Contingent Workers

independent contractors

on-call workers

temporary employees

contract and leased employees

part-time workers

An organization with a large contingent workforce must make some decisions about the treatment of contingent workers relative to the treatment of permanent, full time workers.

Managers must understand that they need to develop a strategy for integrating contingent workers according to some sound logic and then follow that strategy consistently over time.

Tiered Workforce - exists when one group of an organization's workforces has a contractual arrangement with the organization objectively different from another group performing the same jobs.