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This chapter introduces the emergence of the globally integrated business world. Globalization has reduced the traditional barriers to cross-border trade and investment (distance, time zones, language, differences in government regulations, culture, and business systems). A.What Is Globalization? Globalization is a shift toward a more integrated and interdependent world economy. Globalization has two components: the globalization of markets and the globalization of production. The Globalization of Markets The globalization of markets refers to the merging of historically distinct and separate national markets into one huge global marketplace. In many markets, the emergence of a global marketplace has begun to occur. There are three causes: falling barriers to cross-border trade have made it easier to sell internationally; consumer tastes and preferences are converging on some global norm helping to create a global market; and firms are facilitating the trend by offering standardized products worldwide, thus creating a global market. The Globalization of Production The globalization of production refers to the sourcing of goods and services from locations around the globe to take advantage of national differences in the cost and quality of factors of production (such as labor, energy, land, and capital). By doing this, companies hope to lower their overall cost structure and/or improve the quality or functionality of their product offering, thereby allowing them to compete more effectively. Economist Robert Reich argues that because firms frequently outsource production, products can now often be considered “global products.” However, firms are not always able to produce in the optimal location because of formal and informal barriers to trade between countries, barriers to foreign direct investment, transportation costs, issues associated with economic and political risk, and the sheer managerial challenge of coordinating a globally dispersed supply chain. B. The Emergence of Global Institutions Globalization has created the need for institutions to help manage, regulate, and police the global marketplace. Institutions that have been created to help perform these functions are the General Agreement on Tariffs and Trade (GATT), the World Trade Organization (WTO), the International Monetary Fund (IMF), the World Bank, the United Nations (UN), and the Group of Twenty (G20). The World Trade Organization (WTO) is primarily responsible for policing the world trading system and making sure nation-states adhere to the rules laid down in trade treaties. The International Monetary Fund (IMF) was created to maintain order in the international monetary system, and the World Bank was set up to promote economic development. The United Nations (UN) was created to preserve peace through international cooperation. The Group of Twenty (G20) is comprised of the finance ministers and central bank governors of the 19 largest economies in the world, plus representatives from the European Union and the European Central Bank. The G20 represents 90 percent of global GDP and 80 percent of international global trade. C. Drivers of Globalization These two macro factors underlie the trend toward greater globalization: the decline in the barriers to free flow of goods, services, and capital; and technological change in communications, information processing, and transportation technologies. Declining Trade and Investment Barriers International trade occurs when a firm exports goods or services to consumers in another country. Foreign direct investment (FDI) occurs when a firm invests resources in business activities outside its home country. The pressure from customers to make available any goods and services anywhere for their needs and wants has been facilitated by country governments removing restrictions on imports to their countries. However, declining barriers to cross-border trade and investment cannot be taken for granted. Role of Technological Change While the lowering of trade barriers made globalization of markets and production a theoretical possibility, technological change made it a tangible reality. Managers today operate in an environment that offers more opportunities, yet is also more complex and competitive than that of a generation ago. D.The Globalization Debate Firms should be aware that while the more integrated global economy presents new opportunities, it also could result in political and economic disruptions that may throw plans into disarray Antiglobalization Protests Is the shift toward a more integrated and interdependent global economy a good thing? Antiglobalization protesters now turn up at almost every major meeting of a global institution. Protesters fear that globalization is forever changing the world in a negative way. Globalization, Jobs, and Income Critics of globalization worry that jobs are being lost to low-wage nations. Supporters of globalization argue that free trade will result in countries specializing in the production of those goods and services that they can produce most efficiently, while importing goods and services that they cannot produce as efficiently. Globalization, Labor Policies, and the Environment Critics of globalization argue that free trade encourages firms from advanced nations to move manufacturing facilities offshore to less developed countries with lax environmental and labor regulations. Supporters of free trade point out that tougher environmental regulation and stricter labor standards go hand in hand with economic progress and that foreign investment often helps a country to raise its standards. Globalization and National Sovereignty Critics of globalization worry that economic power is shifting away from national governments and toward supranational organizations such as the World Trade Organization (WTO), the European Union (EU), and the United Nations. However, supporters of globalization contend that the power of these organizations is limited to what nation-states agree to grant, and that the power of the organizations lies in their ability to get countries to agree to follow certain actions. Globalization and the World's Poor Critics of globalization argue that the gap between rich and poor has gotten wider and that the benefits of globalization have not been shared equally. Supporters of free trade suggest that the actions of governments have made limited economic improvement in many countries. E. Managing in the Global Marketplace Managing an international business (any firm that engages in international trade or investment) is different from managing a domestic business because countries differ, managers face a greater and more complex range of problems, international companies must work within the limits imposed by governmental intervention and the global trading system, and international transactions require converting funds and being susceptible to exchange rate changes.

 A.What is controlling? Controlling- the process of monitoring, comparing, and correcting work performance. Purpose of control- to ensure that activities are completed in ways that lead to the attainment of goals. B.Why is control important? Planning: Controls inform managers about whether organizational goals are being achieved, and if not, the reason why. Empowering employees: Control systems can offer information and feedback on employee performance and minimize the chance of potential problems. Protecting the workplace: Controls enhance physical security (assets) and help reduce workplace interruptions. C. The Control Process 1.Definition of Control Process The control process is a three-step process of measuring actual performance, comparing actual performance against a standard, and taking managerial action to correct deviations or to address inadequate standards. Step 1. Measuring Actual Performance To determine what actual performance is a manager must first get information about it. Thus, the first step in control is measuring. • HOW WE MEASURE. 4 approaches used by managers to measure and report actual performance are personal observations, statistical reports, oral reports, and written reports. Exhibit 18-3 summarizes the advantages and drawbacks of each approach. Most managers use a combination of these approaches. • WHAT WE MEASURE. What is measured is probably more critical to the control process than how it’s measured. Because selecting the wrong criteria can create serious problems Besides, what is measured often determines what employees will do. Some control criteria can be used for any management situation: employee satisfaction or turnover and absenteeism rates. Keeping costs, output, sales within budget is also a fairly common control measure. Step 2. Comparing Actual Performance Against the Standard The comparing step determines the variation between actual performance and the standard. Although some variation in performance can be expected in all activities, it’s critical to determine an acceptable range of variation (see Exhibit 17-4) • Significance of variation is determined by: • The acceptable range of variation from the standard (forecast or budget). • The size (large or small) and direction (over or under) of the variation from the standard (forecast or budget). Step 3. Taking Managerial Action Managers can choose among three possible courses of action: do nothing, correct the actual performance, or revise the standards. • Courses of Action • “Doing nothing” • Only if deviation is judged to be insignificant. • Correcting actual (current) performance • Immediate corrective action to correct the problem at once. • Basic corrective action to locate and to correct the source of the deviation. • Corrective Actions • Change strategy, structure, compensation scheme, or training programs; redesign jobs; or fire employees • Revising the standard • Examining the standard to ascertain whether or not the standard is realistic, fair, and achievable. • Upholding the validity of the standard. • Resetting goals that were initially set too low or too high. Part 3: Types of Control Feedforward Control: A control that prevents anticipated problems before actual occurrences of the problem. Example: A manager who conducts employee training using the coaching method.When the trainee is performing the task, the manager observes him closely by standing on his side. The objective is to discover if any deviations from the intended processes take place. Concurrent Control: A control that takes place while the monitored activity is in progress. Example: The development by companies of job descriptions and job specifications. It may be recalled that job description identifies the job that has to be done, thus clarifying working relationships, responsibility areas, and authority relationships. It thus assists in preventing unnecessary duplication of effort and potential organisational conflict. Feedback Control: A control that takes place after an activity is done. *Advantages: • Provide managers with information on the effectiveness of their planning efforts. • Enhance employee motivation by providing them with information on how well they are doing. Example: At the end of an accounting year, the manager should carefully review the analysis of the budget control report. Controlling for Organizational Performance 1.What Is Performance? The end result of an activity 2.What Is Organizational Performance? What can make high level Organization Performance? The accumulated end results of all of the organization’s work processes and activities • Designing strategies, work processes, and work activities. • Coordinating the work of employees Measures of Organizational Performance Organization productivity - Productivity: the overall output of goods and/or services divided by the inputs needed to generate that output - Organizations and individual work units want to be productive. They want to produce the most goods and services using the least amount of inputs. Output is measured by the sales revenue (selling price * number sold). Input is measured by the costs of acquiring and transforming resources into outputs. (materials, labor expense, and facilities) Ultimately, productivity is a measure of how efficiently employees do their work. Organizational Effectiveness - Measuring how appropriate organizational goals are and how well the organization is achieving its goals. Note: That’s the bottom line for managers and it’s what guides managerial decisions in designing strategies and work activities and in coordinating the work of employees Industry and Company Rankings - Rankings give managers (and others) an indicator of how well their company performs in comparison to others

The quality of leadership is an important element in an organization’s success, since leaders influence employees to work together toward the fulfillment of a company’s mission and the achievement of its goals. WHO ARE LEADERS, AND WHAT IS LEADERSHIP Certain distinctions can be made between managers and leaders. A. While managers are appointed and have legitimate power within the organization, a leader is someone who can influence others and who has managerial authority. B. Leadership is the process of influencing a group to achieve goals. A. EARLY LEADERSHIP THEORIES Researchers began to study leadership in the early twentieth century and developed behavioral theories that focused on the leader (trait theories) and how the leader interacts with his or her group members. 1. Leadership Trait Theories Research in the 1920s and 1930s focused on traits of the leader, with the intent to isolate characteristics that might by used to differentiate leaders from non leaders. Identifying a set of traits consistently associated with the process of leadership proved to be more successful than one set of traits that would always differentiate leaders from nonleaders. 2. Leadership Behavior Theories Researchers began to hope that a behavioral theories approach would provide more definitive information about the nature of leadership than did trait theories. - University of Iowa Studies- Kurt Lewin and his associates explored three leadership styles: autocratic, democratic, and laissez-faire. - The Ohio State Studies identified two important dimensions of leader behavior: initiating structure and consideration. - University of Michigan Studies identified two dimensions of leader behavior: leaders who were employee oriented and leaders who were production oriented. - The Managerial Grid is a two-dimensional grid used to appraise leadership styles using “concern for people” and “concern for production” as dimensions. Predicting leadership success involved more than isolating a few leader traits or behavior. The lack of success in attaining consistent results led to a focus on situational influences. B. CONTINGENCY THEORIES OF LEADERSHIP 1. The Fiedler contingency model, developed by Fred Fiedler, is a contingency theory proposing that effective group performance depended upon the proper match between a leader’s style of interacting with his/her followers and the degree to which the situation allowed the leader to control and influence. - Fiedler developed the least-preferred coworker (LPC) questionnaire, which measures whether a person is task or relationship oriented. This questionnaire contained 18 pairs of contrasting adjectives. Respondents were asked to think of all the coworkers they had ever had and to describe the person they least preferred to work with, using the 18 sets of adjectives. Fiedler believed that a person’s basic leadership style could be determined on the basis of their answers. - Fiedler also isolated three situational criteria that he believed could be manipulated to create the proper match with the behavioral orientation of the leader: a. Leader-member relations described the degree of confidence, trust, and respect subordinates have in their leader. b. Task structure described the degree to which job assignments were formalized and procedurized. c. Position power described the degree of influence a leader had over power-based activities such as hiring, firing, discipline, promotions, and salary increases. - Next, Fiedler used the above variables to evaluate the situation. He defined eight different situations in which a leader could find himself or herself. (See Exhibit 17-3) - The Fiedler model proposes matching an individual’s LPC and an assessment of the three contingency variables to achieve maximum leadership effectiveness. - Fiedler concluded that task-oriented leaders tend to perform better in situations that are either very favorable or very unfavorable to them. - He concluded that relationship-oriented leaders perform better in moderately favorable situations. - Fiedler believed that an individual’s leadership style was fixed; he concluded that leader effectiveness could be improved in only two ways: - Bring in a new leader whose style fits better to the situation. - Change the situation to fit the leader. 2. Hersey and Blanchard’s Situational Leadership Theory (SLT) is a leadership contingency theory developed by Paul Hersey and Ken Blanchard that focuses on followers’ readiness. - Hersey and Blanchard propose that successful leadership is achieved by selecting the right leadership style that matches the level of the followers’ readiness. - Readiness is the extent to which people have the ability and willingness to accomplish a specific task. - SLT uses the same leadership dimensions identified by Fiedler: task and relationship behaviors. - Each of the two leadership dimensions is considered either high or low and then combined into four specific leadership styles. - Research efforts to test and support this theory generally have been disappointing, possibly because of internal ambiguities or inconsistencies in the model itself. 3. Path-goal theory is a leadership theory that purports that it is the leader’s job to assist his or her followers in attaining their goals and to provide the direction or support needed to ensure that their goals are compatible with the overall objectives of the organization. Four leadership behaviors were identified by House: - The directive leader lets subordinates know what is expected of them, schedules work to be done, and gives specific guidance on how to accomplish tasks. - The supportive leader is friendly and shows concern for subordinates’ needs. - The participative leader consults with subordinates and uses their suggestions before making a decision. - The achievement-oriented leader sets challenging goals and expects subordinates to perform at their highest level. The path-goal theory proposes two classes of situational or contingency variables that moderate the leadership behavior-outcome relationship: - Variables in the environment that are outside of the control of the follower - Variables that are part of the personal characteristics of the follower The following hypotheses have evolved from path-goal theory: - Directive leadership leads to greater satisfaction when tasks are ambiguous or stressful than when they are highly structured and well laid out. - Supportive leadership results in high employee performance and satisfaction when subordinates are performing structured tasks. - Directive leadership leads to higher employee satisfaction when there is substantive conflict within a work group. - Achievement-oriented leadership increases subordinates' expectancies that effort will lead to high performance when tasks are ambiguously structured. - Subordinates with an external locus of control will be more satisfied with a directive style. - Achievement-oriented leadership will increase subordinates’ expectations that effort will lead to high performance when tasks are ambiguously structured. C. CONTEMPORARY VIEWS ON LEADERSHIP 1. Transformational-Transactional Leadership What is the difference between transactional and transformational leaders? - Transactional leaders are leaders who lead primarily by using social exchanges (or transactions). - Transformational leaders are leaders who stimulate and inspire (transform) followers to achieve extraordinary outcomes. Evidence supporting the superiority of transformational leadership over transactional leadership is overwhelmingly impressive. 2. Charismatic-Visionary Leadership - A charismatic leader is an enthusiastic, self-confident leader whose personality and actions influence people to behave in certain ways. - Five personal characteristics of charismatic leaders have been identified. Charismatic leaders have a vision, are able to articulate that vision, are willing to take risks to achieve that vision, are sensitive to both environmental constraints and follower needs, and exhibit behaviors that are out of the ordinary - An increasing amount of research shows impressive correlations between charismatic leadership and high performance and satisfaction among followers. Most experts think that individuals can be trained to exhibit charismatic behaviors. - Charismatic leadership may not always be needed to achieve high levels of employee performance. This type of leadership may be most appropriate when an employee’s job has a significant amount of ideological content. - Visionary leadership is the ability to create and articulate a realistic, credible, and attractive vision of the future that improves upon the present situation. - If the vision is properly selected and implemented, it can energize individuals to use their skills, talents, and resources to fulfill the vision. - An organization’s vision should tap into people’s emotions and inspire enthusiasm. Visions that are clearly communicated are generally more accepted. 3. Team Leadership. As work teams become more prevalent in the workplace, the role of team leader becomes increasingly important. - The existence of work teams necessitates that managers learn how to become effective team leaders. Skillful team leaders master the difficult balancing act of knowing when to leave their teams alone and when to become involved. A team leader has two priorities: - Managing the team’s external boundaries - Facilitating the team process These two priorities can be broken down into four specific leadership roles (see Exhibit 17-5): - Liaisons with external constituencies - Troubleshooters - Conflict managers - Coaches