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The challenges of managing in a global economy

Updated Monday 2nd September 2013

International trade has exploded over the last 30 years. Are managers ready for the challenges of working in different business environments?

I have spent the last few months as academic advisor to a fascinating new documentary series that is being broadcast on the BBC World News channel: Escape from the Boardroom.

In this series we see the chief executives of firms around the world challenged to escape the boardroom and take up a series of challenges set by their employees. In many cases the issues they face are related to the challenges of operating in a global arena.

For example we see Christine Sfeir investigating the potential to take her restaurant chain from the Lebanon into the USA. We see Victor Muller from the Netherlands working with a Chinese partner to take his new supercar to markets in the USA and China. We see Mark Goldring from the international aid organization Oxfam, looking at the functioning of his UK based organization in Zambia.

The products and goals of each of the organizations we look at are very different and they operate across different countries. However, they each face the challenges that have been created by increasing globalization of trade.

A stacked area chart of growth in world trade 620 552 Creative commons image Icon The Open University/World Bank under Creative-Commons license Growth in world trade. Select to enlarge. International trade has existed throughout human history, but the growth in international trade across the last three decades has been remarkable. Total world trade in manufactured goods and commercial services has grown around 300% in the last decade alone. As two writers noted back in 1999:

Within virtually a single generation, our comfortable existence in a familiar home culture has been shaken by an awareness that we cannot escape being part of this global, interconnected environment ... Leaders at the helm of the corporations of the future will need the capacity to step out of their own comfort zone and adapt to other realities.

—Kets d Vries & Florent-Treacy, 1999

Since they wrote these words the pace of globalization increased dramatically. Even the dramatic worldwide financial crisis of 2008/9 created only a temporary reversal to this trend.

Few firms remain untouched by the globalization of markets, supply chains and information. More than ever before managers are required to sell and buy goods and services in other countries, to manage integrated operations around the world and to work with individuals and firms from many different countries. The balance of economic power is also shifting with many predicting that China and India will soon come to dominate the World Economy.

At the same time there continue to be important and complex differences between countries in the way businesses are structured and managed and in the legal, economic and political structures that managers and firms in those countries have to deal with.

Below, I look at these issues in some of the countries that are covered in the Escape from the Boardroom series.

Bar chart of dealing with construction permits 650 550 Creative commons image Icon The Open University/doingbusiness.org under Creative-Commons license Dealing with construction permits To give just a few examples, the ease of doing business in different countries can vary greatly as can employment laws.

The charts between now and the end of the article look at the time taken and documents involved in getting permission to construct a building, import goods and enforce a contract. The final chart looks at employment rules in different countries. Select a chart to open a larger version.

These are just a few examples of the very different business environments in each country. National cultures also have an important effect.

For example, countries vary significantly in assumptions about the role of managers, the role of women in the workforce, the emphasis on individual striving versus loyalty to the group and willingness to provide or accept direct feedback on individual performance. This can affect many aspects of doing business from effective ways to manage employees to approaches to negotiation to the ways in which firms collaborate and build networks.

Bar chart of difficulty of importing goods 650 500 Creative commons image Icon The Open University/doingbusiness.org under Creative-Commons license Difficulty of importing goods Faced with this complexity, there is a great need for experienced managers who have the global mindset necessary to work effectively across borders. However, many multinational firms find such managers to be a scarce resource.

In Anne Tyler’s book The Accidental Tourist, the main protagonist Macon writes travel guides for business travellers:

Macon hated travel. He careened through foreign territories on a desperate kind of blitz – squinching his eyes shut and holding his breath and hanging on for dear life, he sometimes imagined – and then settled back home with a sigh of relief to produce his chunky passport-sized paperbacks. Accidental Tourist in France. Accidental Tourist in Germany. In Belgium. No author’s name, just a logo: a winged armchair on the cover.

He covered only the cities in these guides, for people taking business trips flew into cities and out again and didn’t see the countryside at all. They didn’t see the cities for that matter. Their concern was how to pretend they had never left home. What hotels in Madrid boasted king-sized Beauty-rest mattresses? What restaurants in Tokyo offered Sweet’n’Low? Did Amsterdam have a McDonald’s? Did Mexico City have a Taco Bell? Did any place in Rome sell Chef Boyardee ravioli? Other travelers hoped to discover distinctive local wines; Macon’s readers searched for pasteurized and homogenized milk.

650 500 Creative commons image Icon The Open University/doingbusiness.org under Creative-Commons license Redundancy rules It is all too easy in business life to be like Macon, remaining in the bubble of your own culture and never engaging with or even seeing the important differences between countries. Just because managers are physically operating across boundaries, this does not necessarily imply that their minds are well travelled.

Just as with travel as a tourist, it can be tempting and relatively easy when doing business in unfamiliar countries to insulate yourself from any meaningful engagement with the local culture and from noticing the different ways in which the business environment works.

The notion of ‘global mindset’ is quite the reverse and concerns openness to and awareness of diversity in both culture and institutions between countries and the ability to think about business challenges in ways which are relatively independent of (or at least aware of) the assumptions and mindsets of a single country or context.

A bar chart of enforcing contracts around the world 650 500 Creative commons image Icon The Open University/doingbusiness.org under Creative-Commons license Enforcing contracts Schon Beechler and Mansour Javidan argue that for senior managers a global mindset needs to have three distinct components: global intellectual capital, global psychological capital and global social capital.

Global intellectual capital consists of knowledge of your global industry, its value network and your own organization with in it; the capability and willingness to engage with multiple perspectives on complex global challenges; and strong cultural acumen.

Global psychological capital is having an effective mindset for managing cross-national challenges. This includes self-belief; respect, openness and curiosity towards other cultures; willingness to make an emotional connection across cultures; and a good dose of optimism.

Global social capital consists of the personal networks, relationships and shared understandings with others across national boundaries that managers can develop and foster over years of international engagement.

This is a challenging set of capabilities to develop and impossible without real experience. However, as Macon illustrates above, experience is not the same as learning and many managers never get there. Beechler and Javidan suggest that beyond experience, managers need to cultivate a particular approach:

  • curiosity about the world and a commitment to becoming smarter about how the world works
  • seeking exposure to diversity and novelty
  • an explicit and self-conscious articulation of your own current mindset
  • a systematic attempt to develop an integrated perspective brings together knowledge about both culture and markets

Further reading

  • Beechler, S. and Javidan, M. (2007) ‘Leading with a global mindset’ in Mansour Javidan, Richard M. Steers, Michael A. Hitt (eds.) The Global Mindset (Advances in International Management, Volume 19), Emerald Group Publishing Limited, pp.131–69.
  • International Finance Corporation (2013) Doing Business. Accessed 8/8/2013.
  • Tyler, A. (1992) The Accidental Tourist, London, Vintage.
  • World Trade Organization (2013) International Trade and Tariff Data. Accessed 8/8/2013
 

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