2. SPECIAL CHALLENGES OF INTERNATIONAL MANAGEMENTAlthough much of what is management remains the same in an international context, the manager's job can be greatly complicated when a firm begins international operations. The special challenges that face managers in the international arena flow from the three broad categories shown in Figure - attributes of the economic environment, attributes of the political environment, and attributes of the cultural environment of international business.
CHALLENGES OF IB MANAGEMENT
The Economic EnvironmentThere are four characteristics in particular that can help managers anticipate the kinds of challenges they are likely to face in working abroad:•Resource Allocation Processes•Property Ownership•Natural Resources•Infrastructure
The Economic EnvironmentResource Allocation ProcessesResource Allocation Processesis the way that resources are allocated among individuals and companies in an economic system. There are two pure methods of resource allocation:•a market economy •a command economy.
The Economic EnvironmentResource Allocation ProcessesIn a pure market economy, the key element is freedom of choice. Consumers are free to make decisions about:•which products they prefer to purchase•firms are free to decide what products and services to provide •as long as both the consumer and the firm are free to decide to be in the market, then supply and demand determine which firms and which products will be available.
The Economic EnvironmentResource Allocation ProcessesA command economy operates under different principles:•the government decides what is made, where it is shipped, and at what price it will be sold•the rationale is that the government can take a broad view of how resources should be allocated for the good of the whole country•individual consumers and firms would maximize their own wealth, not the overall wealth of the country
The Economic EnvironmentResource Allocation ProcessesIn reality, there are few, if any, pure command or pure market economies. If we view the two at opposite ends of a continuum, most economies tend to be on one or the other side of the midpoint - that is, the economy is relatively market-like or relatively command-like.
The Economic EnvironmentProperty OwnershipThere are two pure types - complete private ownership and complete public ownership:•In systems with private ownership, individuals and companies - not the government - own and operate the companies that conduct business.