1.

It is often said that managers working in a domestic firm needs knowledge of

Global Business as well. Why is it said so? Discuss some of the important skills
required in Global Business.
Global Skills are increasingly becoming a key skill set for the 21st century.
Management practices and processes frequently differ across national and regional
boundaries. What may be acceptable managerial behaviour in one culture may be
counterproductive or even unacceptable in another. As managers increasingly find
themselves working across cultures, the need to understand these differences has
become increasingly important. In view of the seismic shifts around the world in
terms of how business is now conducted, corporations are scrambling to become
more competitive, more market sensitive, more innovative, and more nimble.
Following are some basic reasons to have knowledge of global business for
managers:
International business continues to seek global employment solutions,
whether through outsourcing, developing virtual teams across continents,
retaining local talent or sending senior staff to administer projects abroad,
prompting the need for effective and cohesive multi-cultural awareness and
communications.
Increasingly, key functions are being consolidated and outsourced to specific
locations. As more companies outsource to various providers around the
world, Global Skills take on increasing significance as job functions will
require us to engage with numerous cultures.
Given the complexity and increased emphasis on issues such as Corporate
Social Responsibility, employee safety and effective relationship building
among global partners and teams, infusing Global Skills plays a
demonstrative role in fostering a company culture.
From small business owners to the worlds largest corporations, products
and services are being packaged with an array of specific inputs from many
parts of the world. Without Global Skills, these long-distance teams quickly
find their levels of professional competence being called into question.
Whether a direct investment, merger or strategic partnership, business leaders require
Global Skills to effectively integrate senior management and workforce, foster cultural
compatibility and raise job competency and performance. To conduct business profitably in
an increasingly borderless world, managers need to learn how to understand and adapt
their business to their international clients and navigate through foreign cultures with ease.
Following are some of skills required in global business:
1. Communication skill:
2. Understanding of culture: This pertains to the understanding and appreciation of
the country and its societys norms, beliefs, rites, rituals, symbols, behaviours,
motivations and stories. Effective global managers value and manage cultural
diversity and consider this diversity an asset not a hindrance (Caligiuri 2006). Nardon
and Steers (2008) state that many inter-culture assignments occur on short notice
thereby giving managers limited time to learn about that particular culture, and
intimate understanding of the cultural diversity may be difficult due to geography. In
these circumstances cultural and cross-cultural awareness is learnt on the fly.
Despite the obstacles, understanding this diversity will be of great benefit to the
global managers.
Procter & Gamble will be mentioned again to illustrate this issue in relation to
business. Das (1994, 197-210) noticed that the company had trouble selling Vicks
Vaporub to Northern India, whereas sales in the South were high. He decided to
capitalise on the high market sales in the South instead of attempting to correct the
market in the North. The company profited. Das later discovered that the reason for
the poor sales in the North was due to the fact that people in this region did not like
to rub things on their body. Had Das ignored the market trend and decided to
expend resources attempting to impose the product on the North, poor sales figures
would likely have continued as products would remain on the shelves.
3. Negotiation skill:
4. Adaptable/flexible: This is the capacity to adjust or vary ones thoughts and thus
behaviour according to the immediate requirements of the condition or situation. An
adaptable or flexible mind will assess and analyse the foreign culture, compromise,
and then find innovative and creative ways to arrive at a solution (Stahl 2001, 197-
210).
5. Self-awareness/Emotional Intelligence: To be self-aware, the global managers
would have an astute insight of how they are perceived by others, clear insight of
themselves, and a clear insight of their own roles with respect to others in the group
(Maznevski and Zander 2001). Self-awarenesss will assist towards the development
of emotional intelligence, which is the subset of social intelligence that involves the
ability to monitor ones own and others feelings and emotions, to discriminate
among them and to use this information to guide ones thinking and actions
(Salovey and Mayer, 1990). It is this deep understanding and intuitiveness of self and
others that will assist the manager to transform and develop.
6. Skill to use and acquire new technology: The rapid onslaught of globalisation has
been largely due to advances in technology interconnecting companies across the
world. Goldsmith, Walt, and Doucet (1999) see technology savvy as a key
competency for global managers as it significantly impacts the organisations core
business. Technology is not only vital for communication, and effective information
management, but also greatly impacts the organisations production processes. In
the fast pace world of technology certain products, processes and services can be
outdated very quickly. It is therefore necessary for global managers to not only be
able to use technology, information systems and telecommunications effectively but
also understand its impact by assessing and analysing the affect it has on the global
operations of the firm (Kedia and Mukherji 1999). Technology solutions that may be
pertinent to the global managers include Business Intelligence tools such as the SQL
Server suite (Analysis Services, Reporting Services) and Oracle; and collaborative
tools such as Microsoft Office SharePoint Server, Skype, Microsoft Groove 2007,
Google Apps, and instant messaging tools such as MSN Messenger (P. Culmsee,
personal communication. May 3, 2008). Solutions such as those listed above may not
be required by all managers as it depends on the type of industry they are in, and the
organisation itself.
7. Capacity for managing uncertainty and conflict in the global environment: This is an
ability to function effectively in unfamiliar constantly changing, complex and
paradoxical environment (Kedia and Mukherji 1999) while maintaining patience and
composure (Stahl 2001, 197-210) demonstrating a high tolerance for ambiguity.
Global managers in this environment feel comfortable/at eased with rapid change
and corporate forecasting, and have a greater capacity for overcoming adversity
(Tubbs and Shultz 2006). This indicates an appreciation of challenge and an ability to
deal with situations and crisis directly rather than displaying an avoidance attitude.
In order to achieve this, others skills such as sound verbal and non-verbal
communication, for examples active listening, negotiation, interviewing, and non-
verbal cues), ability to scan the world for information, and an understanding of
diversity and its impact are a necessity.
8. International knowledge: Competency in this field means an understanding of the
different socio-political and economic policies governing each country. A global
organisation operates world-wide abiding by the rules and regulations that govern
that particular nation. Therefore it is essential to clearly understand the structure of
these systems, their decision-making processes, and how they impact business
operations and those around them (Whitfield 2003). Subject matter such as
international finance, international law, and comparative labour relations should be
familiar to the global manager (Caligiuri 2006). Knowledge in this field not only
assists in penetrating foreign markets distribution networks (Tan, Erramilli, and Liang
2001) and the smooth running of the business but it can be a competitive advantage.
Take Procter & Gamble for example. In the early 1980s, in their fight for higher
margins from the pharmaceutical industry, Indian pharmacists nationwide targeted
the company by boycotting Vicks products. Gurcharan Das, CEO of Procter &
Gambles Indian subsidiary realised that the Vicks products contained all natural
herbal ingredients, found in the age-old Sanskrit texts. Products compliant under this
Ayurvedic system of medicine in India could be sold in food shops, general stores,
and street kiosks. Das proved this compliance to the Delhi government and the local
FDA and had the registration changed from Western medicine to Indian medicine.
With the new registration, the company was able to expand its distribution channel
beyond pharmacies and build a new plant for Vicks, enjoying the tax-advantages and
lower labour costs (Das 1994, 197-210).
9. Global Mindset: To complete the managers global perspective, global managers
must possess a global mindset. It is a way of being, described by Rhinesmith (1992)
as a predisposition to see the world in a particular way that sets boundaries and
provides explanations for why things are the way they are, while at the same time
establishing guidance for ways in which we should behave acting as a filter.
Rhinesmith sees those with global mindsets to always drive for the bigger, broader
picture; accept the balance of contradictions; look towards organisational processes
rather than structure when dealing with uncertainty; value and leverage diversity of
teamwork and play to their advantage; view change as an opportunity rather than a
hindrance; and open to surprises, embracing challenge and uncertainty, and always
question the status quo. They are proactive and their thoughts and actions are not
limited to boundaries. They have the ability to effectively manage competition,
complexity, adaptability, diverse teams, uncertainty, and learning. Rhinesmith also
characterises them as having astute knowledge in technology, business and the
industry; highly developed conceptual capacity; flexibility to deal with the constant
changing global and local market demands; sensitivity to cultural diversity;
judgement in making risky decisions with little information; and the capacity for
reflection in seeking continuous improvement.
2. Culture plays one of the most important role in doing business globally. Describe
the various elements of culture. How does culture affect Global Business? Answer
the question with suitable examples.
Culture is a system of values and norms that are shared among a group of people
and that when taken together constitute a design for living. Culture acts as a
blueprint for how a group of people should behave if they want to fit in with the
group. Understanding the importance of culture and respecting the role it plays in
the lives of potential customers in foreign markets is vital and could mean the
difference between the success or failure of your overseas ventures. Understanding
the importance of culture is vital to the financial success of your company and shows
how culture should impact the decisions you make, your interactions with
customers, your advertising strategies, and your website localization.
- If you want to sell to foreign markets, you have to speak your customers
language. Localize your website. Do not only translate your website: pay
attention to cultural differences and customs.
- Companies that do not understand and appreciate cultural differences often
implement marketing strategies that are doomed for failure from the beginning.
Marketing strategies in one country do not always translate into success in
another country. It is therefore important to be culturally sensitive and aware
when producing, naming, selling, and advertising products.
- Businesses will do well to remember that consumers in different locations and
cultures are influenced by their economies, values, attitudes, and preferences,
and will therefore differ in what they buy, why they buy, how they buy, when
they buy, and where they buy.
- The importance of the possible outcomes of your marketing strategy, product
release, or website necessitates constant vigilance and consideration of the
culture of your target market. If you fail to do so, you may experience any
combination of the following consequences:
Consumers lose faith and confidence in your product and company.
Customer backlash and highly visible, negative public reactions.
Negative public relations and the erosion of the brand you have worked
hard to build.
Loss of revenue, sales opportunities, and customers.
Possible punishment in the form of retaliatory legislation or lawsuits.
Following are the various elements of culture:
1. Symbols: Something that represents meaning to the culture.
2. Values and attitudes: Something of great worth or value in a culture; a standard
or judgment of what is right, good, desirable, or held in high esteem. Values
provide the context within which the societys norms are established and
justified.
3. Manners and customs: manner is the way of doing something. It is the way of
acting, bearing or behaviour. People from one culture might behave differently
than people from other culture. For example people from US want to maintain
eye contact while talking. People from high context culture look down while
talking with senior.
4. Norms: Rules of behaviour that tell members of a culture how to behave in
various situations. Norms are the social rules that govern peoples action
towards one another.
5. Arts: A form of expression that comes in a variety of forms including music,
dance, drama, and visual arts.
6. Belief systems: Peoples culture guides his/her believe system. Believe of god is
different in different society and culture. There is culture specific belief in
marriage too. Western people believe in love marriage whereas people of Nepal
and India more believe on arrange marriage system. Some culture believes on
single god whereas some culture believes on multiple gods like Hindu
philosophy.
7. Social structure: The aspect of social structure if different on different cultures.
8. Religion
9. Language: Sounds and written symbols that a society uses to communicate and
interact.
10. Education
11. Physical Environment
12. Rules, Roles and status

3. An international manager must deal with different currencies to deal with
international trade and investment and therefore risk becomes prominent. What
determines demand and supply of any given currency in foreign exchange market
and why?
- As the countrys import rises the demand for foreign currency increases which in
result changes the exchange rate as the value of foreign currency increases with
compared to domestic currency.
Following factors determine the demand and supply of any given currency in
foreign exchange market:
1. Trade Balance: Exports, imports and the trade balance can influence the
demand of currency aimed at real transactions. An increasing trade surplus
will increase the demand for country's currency by foreigners (e.g. if the
United States is running a trade surplus, there will be demand from overseas
for the USD to pay for these goods), so that there should be a pressure for
appreciation. A trade deficit should lead to the currency weakening.
2. Relative Purchasing Power Parity: Another form of real determination of
exchange rate is offered by the "one price law" or the purchasing power
parity, according to which any freely good or service has the same price
worldwide, after taking into account nominal exchange rates. But in order to
equalize the price of several goods, more than one exchange rate may turn
out to be necessary, or an exchange rate that represents a tradable basket of
goods and services. The purchasing power parity exchange rate (PPP)
between a foreign currency and the U.S. dollar can be defined as:
PPP = (Cost of a Market Basket of Goods and Services at Foreign Prices) /
(Cost of the Same Market Basket of Goods and Services at U.S. Prices)
This gives us the exchange rate in terms of the units of foreign currency per
dollar. The dollars per unit of foreign currency is just the reciprocal.
The exchange rate between countries, therefore, should be such that the
currencies have equivalent purchasing power. For e.g. if a hamburger costs 3
US dollars in the United States and 100 yen in Japan, then the exchange rate
must be 100 yen per dollar. The foreign exchange market would adjust, over
the long term, to permit the functioning of the "one price law", because the
purchasing power of one currency increases (or decreases) relative to
another currency.
3. Relative Interest Rates: Interest rates on treasury bonds will influence the
decision of foreigners to purchase domestic currency in order to buy these
treasury bonds. Higher interest rates will attract capital from abroad, thereby
increasing demand for the currency, and therefore the currency will
appreciate. Note, what is important is difference between domestic and
foreign interest rates, thus a reduction in foreign interest rates would have a
similar effect. Accordingly, an increase of domestic interest rates by the
central bank could be considered a way to defend the currency.
But, it may be the case that foreigners rather buy shares instead of treasury
bonds. If this were the strongest component of currency demand, then an
increase of interest rate may even lead to the opposite results, since an
increase of interest rate quite often depresses the stock market, leading to
share sales by foreigners. A restrictive monetary policy (increasing interest
rates) usually also depresses the growth perspective of the economy. If
foreign direct investment are mainly attracted by future growth prospects
and they constitute a large component of capital flows, then this FDI inflow
might stop and the currency could weaken. Therefore, interest rates do have
an important impact on exchange rate but one has to be careful to check
additional conditions.

4. Inflation (Relative Price Changes): The inflation rate is also considered to be
a determinant of the exchange rate. A high inflation rate should be
accompanied by depreciation of the exchange rate. The more so if other
countries enjoy lower inflation rates, since it should be the difference
between domestic and foreign inflation rates to determine the direction and
the scale of exchange rate movements.
For example, if a hamburger costs 5% more in Japan than a year ago, while in
USA it costs 8% more, then the dollar should have been depreciated this year
by about 8%-5%=3%.
5. Speculation: Past and expected values of the exchange rate itself may impact
on current values of it. The activities of foreign exchange traders, speculators
and investors may turn out to be extremely relevant to the determination of
the market exchange rate. Financial instruments like futures and forwards
may also play an important role on the determination of exchange rates.
A foreign exchange speculator who expects the spot rate of a foreign
currency to be higher in three months can purchase the currency in the spot
market today at today's spot rate, hold it for three months, and then resell it
for the domestic currency in the spot market after three months. If he is
right, he will make a profit; otherwise, he will break even or incur a loss. On
the other hand, a foreign exchange speculator who expects the spot rate of a
foreign currency to be lower in three months can borrow the foreign
currency and exchange it for the national currency at today's spot rate. After
three months, if the spot rate on the foreign currency is sufficiently lower, he
can earn a profit by being able to repurchase the foreign currency (to repay
the foreign exchange loan) at the lower spot rate. To make a profit, the new
spot rate must be sufficiently lower to overcome the excess interest paid on
the foreign currency borrowed for three months, over the interest received
on an equal amount of the national currency deposited in a bank for three
months.
6. Political and Psychological Factors: Political or psychological factors are also
believed to have an influence on exchange rates. Many currencies have a
tradition of behaving in a particular way such as Swiss francs which are
known as a refuge or safe haven currency while the dollar moves (either up
or down) whenever there is a political crisis anywhere in the world. Exchange
rates can also fluctuate if there is a change in government.