BA 310 study guide pt 3 - Global Management Regional...

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Global Management Regional Trading Alliances: Agreements among groups of partner countries to facilitate inter- partner trade. Used to. - Increase market size - Reduce trade barriers. Trends in importance for trade of national borders and regional trading alliances. National borders are increasingly IRRELEVANT as barriers to trade Regional trading alliances provide: Pros: By breaking trade barriers = huge opportunities. There is a larger market and global sourcing occurs. Cons: By breaking trade barriers = huge challenges. An increase in intense competition. Cultural and language barriers by operating in foreign markets. Stability which is the introduction of global politics. Inflation which differs in different economies. Employee dislocation. Parochialism: Managers view the world solely through its own eyes and perspectives, do not recognize differences. Do not recognize different way of living and working. The following fall under parochialism: Major advantages and disadvantages of multinational, transnational, and borderless firms Ethnocentric (Multinational Corporation): Managers believe home country knows best; centralize; hold key decisions/technology close. Managers believe that people in foreign countries do not have the needed skills or experience to make the best business decisions as people in the home country do. Management only trusts their own. Country in which headquarters are located. Inflexible, social/political backlash. EXAMPLE: When Japanese auto manufacturers moved manufacturing facilities overseas (e.g., to the U.S.), they were criticized because key management positions, as well as R&D and design, were kept in Japan. More recently, some of these firm’s designs were criticized as stodgy and conservative both at home in Japan and in the U.S. This led some firms to establish design facilities in the U.S., which is a leader in this area. Polycentric (Transnational Corporation): Managers in host country (foreign country in which doing business) know the best work way for running their business. They view each foreign entity as different and will in turn leave foreign employees to figure out how to do things. More knowledge of foreign markets and support from host govt. Drawbacks include duplication of work + reduced inefficiency. EXAMPLE: Nestle sells chocolate and confectioneries throughout Europe. Tastes in different countries vary, so Nestle has set up distribution networks and factories in each country. Country heads are particularly powerful and often conflict over the appropriate strategic direction for the firm. Geocentric (Borderless Corporation): The world oriented view that focused on using the best approached and people from around the globe. Global view encompasses polycentric and ethnocentric. Balanced global and local objectives. But this is very difficult to achieve.
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EXAMPLE: ABB (Asea-Brown-Bovieri) sells heavy electric and power equipment to utilities worldwide. When the company was formed through merger, R&D and production
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BA 310 study guide pt 3 - Global Management Regional...

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