CHAPTER 4Managing in the Global Environment1.docx

CHAPTER 4
Managing in the
Global Environment
1
Learning Objectives (1 of 2)
4-1. Explain why the ability to perceive, interpret, and respond
appropriately to the organizational environment is crucial for
managerial success.
4-2. Differentiate between the global task and global general
environments.
4-3. Identify the main forces in both the global task and general
environments, and describe the challenges that each force
presents to managers.
©McGraw-Hill Education.
2
4-4. Explain why the global environment is becoming more
open and competitive and identify the forces behind the process
of globalization that increase the opportunities, complexities,
challenges, and threats that managers face.
4-5. Discuss why national cultures differ and why it is

important that managers be sensitive to the effects of falling
trade barriers and regional trade associations on the political
and social systems of nations around the world.
3
What Is the Global Environment? (1 of 3)
Global Organizations
In more than one country
Uncertainty and unpredictability
Global Environment
Set of global forces and conditions that operate beyond an
organization’s boundaries but affect a manager’s ability to
acquire and utilize resources
Global forces change over time and thus present managers with
opportunities and threats.
New and efficient production technology can allow companies
to develop and sell more products.
The availability of lower-cost components gives a company the
change to acquire more resources and capital.
When new international markets open up, they present more
markets to a company.
4
Forces in the Global Environment

Figure 4.1
Jump to Appendix 1 long image description.
5
TOPICS FOR DISCUSSION (1 of 4)
Why is it important for managers to understand the forces in the
global environment that are acting on them and their
organizations? [LO 4-1]
The text defines an organization’s environment as the forces
outside of its boundaries that have the potential to affect the
way it operates. Changing forces present managers with
opportunities and threats. The organization’s environment
includes the task environment and the general environment
(some theorists include the internal environment as another kind
of environment.)
The task environment consists of forces from suppliers,
distributors, customers, and competitors.
The general environment refers to the wider economic,
technological, sociocultural, demographic, legal-political, and
global forces. The general environment affects the way an
organization operates. Managers must constantly analyze forces
in the general environment because these forces affect long-
term decision making and planning. Furthermore, these forces in

an organization’s general environment can have profound
effects on an organization’s task environment.
It is important to understand the forces in the task environment
because they have the ability to pressure and influence
managers on an ongoing, daily basis and have a significant
impact on short-term decision making. These forces affect an
organization’s ability to obtain inputs and dispose of its
outputs, which is critical to the success of any organization. For
example, it would be important for managers to understand the
economic forces present in their general environment because
they could affect their organization in both a positive and
negative manner. Low levels of unemployment and falling
interest rates provide opportunities for an organization. This
could result in a change in their customer base since people
have more money to spend on goods and services. A decline in
the economy could result in a threat to the financial health of an
organization. Declining economic conditions limit managers’
ability to gain access to the resources their organizations need
to survive. Furthermore, customers would have less money to
spend on goods and services.
6
Task Environment
Set of forces and conditions that originate with suppliers,
distributors, customers, and competitors and affect an
organization’s ability to obtain inputs and dispose of its outputs
because they influence managers daily

7
General Environment
The wide-ranging global, economic, technological, socio-
cultural, demographic, political, and legal forces that affect an
organization and its task environment
More difficult to identify and respond to than task environments
are general environments. But it is important to note that
changes in general environment forces can result in major
impacts on an organization.
8
The Task Environment (1 of 6)
Suppliers
Individuals and organizations that provide an organization with
the input resources that it needs to produce goods and services
Raw materials, component parts, labor (employees)
The text uses Dell Technologies as an example. One of the
many sources Dell uses is the training of future Dell employees.
By training these individuals, Dell provides itself with skilled
workers.
9
Suppliers
Changes in the nature, number, or types of suppliers produce
opportunities and threats to which managers must respond.

Depending upon these factors, a supplier’s bargaining position
may be either strong or weak.
At a global level, managers have the opportunity to buy
products from foreign suppliers or to become their own
suppliers and manufacture their own products abroad.
A strong bargaining position for suppliers may result in raised
prices. If a supplier is the only source for an organization and
that input is vital to that organization then a supplier has a
strong hand at the bargaining table.
10
Global Outsourcing
Global Outsourcing
The purchase or production of inputs or final products from
overseas suppliers to lower costs and improve product quality or
design
The text speaks of Apple’s connections to companies in Taiwan
and China. These companies supply Apple with chips, batteries,
and LCD displays that power its digital devices. Apple also
contracts with outsourcers such as Foxconn to assemble iPhones
and iPads and their other products. Global distribution is also
outsourced with companies such as FedEx.
11
Distributors
Organizations that help other organizations sell their goods or
services to customers

If distributors become so large and powerful that they can
control customers’ access to a goods and services, they can
threaten the organization by demanding that it reduce the prices
of its goods and services.
Examples: Federal Express, UPS, and the U.S. Postal Service
have become vital distributors for the millions of items bought
online and shipped to customers by companies both at home and
abroad.
12
Customers
Individuals and groups that buy the goods and services that an
organization produces
Identifying an organization’s main customers and producing the
goods and services they want is crucial to organizational and
managerial success.
Example: Dell’s customers can be segmented into several
distinct groups:
individuals who purchase PCs for home and mobile use,
small companies,
large companies, and
government agencies and educational institutions.
Changes in the number and types of customers or in customers’
tastes and needs create opportunities and threats.
13

Competitors
Organizations that produce goods and services that are similar
to a particular organization’s goods and services
A high level of rivalry typically results in price competition,
and falling prices reduce customer revenues and profits.
Potential Competitors
Organizations that presently are not in a task environment but
could enter if they so choose
14
Competitors are organizations trying to attract the same
customers, exemplified by competition among Dell, Apple, and
HP, as well as Sony and Toshiba.
When new competitors enter an industry, competition increases
and prices and profits decrease—as furniture and electronic
stores such as Best Buy have discovered as they battle Amazon.
Barriers to Entry
Factors that make it difficult and costly for the organization to
enter a particular task environment or industry
Economies of Scale
Cost advantages associated with large operations

The more difficult and costly it is to enter the task environment,
the higher are the barriers to entry. The higher the barriers to
entry, the fewer the competitors in an organization’s task
environment and thus the lower the threat of competition. With
fewer competitors, it is easier to obtain customers and keep
prices high.
15
Brand Loyalty
Customers’ preference for the products of organizations
currently existing in the task environment
Government Regulations
In some cases, act as a barrier to entry at both the industry and
the country level
A new entrant into a market will find it more difficult if another
company has great brand loyalty. They will need to invest in
advertising costs in order to garner customer awareness.
Deregulation in industries such as air transport and
telecommunications resulted in a high level of new entrants.
These new companies in the market forced existing companies
to operate more efficiently.
16
Barriers to Entry and Competition
Figure 4.2
Jump to Appendix 2 long image description.

17
The General Environment (1 of 6)
Economic Forces
Interest rates, inflation, unemployment, economic growth, and
other factors that affect the general health and well-being of a
nation or the regional economy of an organization
Low levels of unemployment and falling interest rates give
people more money to spend, and as a result organizations can
sell more goods and services. Good economic times affect the
supply of resources that become easier or more inexpensive to
acquire, and organizations have an opportunity to flourish.
18
How do political, legal, and economic forces shape national
culture? What characteristics of national culture do you think
have the most important effect on how successful a country is in
doing business abroad? [LO 4-3, 4-5]
National cultures differ in many ways, and although we seem to
be moving toward a more global culture, each country has a
culture that is a unique mix of competing and complimentary
forces. One force that seems pervasive to all aspects of a
nation’s culture is the political system that is in place. The
global range of political systems ranges from communism to

representative democracies, with many variations in between.
Citizens may elect individuals to represent their interests, as
they do in representative democracies, or have one single
political party or individual that monopolizes political power,
as is the case in totalitarian regimes, and this can have major
effects on the nation’s culture. The political culture is important
to managers trading with foreign countries because issues of
economic freedom and legal representation can arise that may
be more easily resolved in a democratic society.
Also, ethics is a concern for managers dealing with some
foreign countries, for example, totalitarian regimes that may not
respect human rights. A country’s economic system is
determined by the force that drives the production of goods and
services. A free market economy operates under the law of
supply and demand, and production is in the hands of private
enterprise. In a command economy, the government decides
which goods and services are produced, the quantity in which
they are produced, and the prices at which they are sold. A
mixed economy combines characteristics of free market and
command economies, with some government ownership and
some free enterprise. The economic system that is in place has
major ramifications for a nation’s culture. Fewer restrictions to
expansion to global markets make free market economies
attractive. In democracies, services tend to be better because
private enterprises must compete with each other for survival,
in contrast to a state-run industry where there is no competition.
Also, nations with free economies tend to have higher rates of
economic growth and are more economically developed, so their
citizens tend to have higher per capita incomes and more
spending power. The degree to which a nation’s populace can
support itself and its families has great impact on a nation’s
culture.
19

Technology
The combination of skills and equipment that managers use in
designing, producing, and distributing goods and services
Technological Forces
Outcomes of changes in the technology that managers use to
design, produce, or distribute goods and services
20
In the last few decades, technological change has accelerated,
due in part to advancements in microprocessors. In turn, most
businesses and industries have also made technological
advances. The coming years will likely see even more and
greater advances.
Sociocultural Forces
Pressures emanating from the social structure of a country or
society or from the national culture
Social Structure
The traditional system of relationships established between
people and groups in a society
High degree of social stratification: India and Tibet

Recognition of social classes: Great Britain and France
Lower degrees of social stratification: New Zealand and the
United States
21
National Culture
Set of values that a society considers important and the norms
of behavior that are approved or sanctioned in that society
Societal values and norms differ from country to country (or
even regions to regions, communities to communities). The
United States values individualism, wherein Korea and Japan
put community above the individual.
22
Demographic Forces
Outcomes of changes in or changing attitudes toward the
characteristics of a population, such as age, gender, ethnic
origin, race, sexual orientation, or social class
Most industrialized nations are experiencing the aging of their
populations.
An aging population.
There has been a relative decline in the number of young people
joining the workforce, and an increase in the numbers who are
postponing retirement beyond 65.
23

The population is aging because of a combination of declining
birth rates, declining death rates, and the aging of the baby
boom generation. What might some of the implications of this
demographic trend be for (a) a pharmaceutical company, and
(b) the home construction industry? [LO 4-1, 4-2, 4-3]
The aging population is an example of a demographic force in
an organization’s general environment. The aging of the
population has increased many opportunities for organizations
that provide goods and services to the older population. The
aging population will have a positive effect on the
pharmaceutical industry. People are living longer due to
advancements in the medical field in the form of cures for
diseases and medications that alleviate the debilitating effects
of old age. This results in a greater demand for prescription
drugs and medical supplies, the output of the pharmaceutical
industry. Furthermore, in order to effectively compete,
pharmaceutical companies must spend a tremendous amount of
money on research and development in order to remain
competitive in their industry. The reward of inventing a much-
needed medication is a patent that prevents other companies
from producing that medication for 17 years. Because they are
the sole producers of the medicine, in response to the demand
for the product, they have the capabilities to charge high prices
since they have no competition.
The home construction industry will see a change in the
demands of their customers. Older customers who have already
raised their families will be looking for homes and apartments
with less square footage. They also require easier accessibility,
such as single-level homes, fewer steps, and buildings equipped

with elevators. The older population has more time to spend on
socializing; clubhouses and swimming pools become more
popular.
24
Political and Legal Forces
Outcomes of changes in laws and regulations, such as the
deregulation of industries, the privatization of organizations,
and an increased emphasis on environmental protection
A deregulation trend is occurring in industries previously
controlled by the state, and organizations once owned by the
state are being privatized. This is happening through the
industrialized world. Increasingly, nations are forming political
unions that allow free exchange of resources and capital.
25
The Process of Globalization (1 of 2)
Globalization
The set of specific and general forces that work together to
integrate and connect economic, political, and social systems
across countries, cultures, or geographical regions so that
nations become increasingly interdependent and similar
The world is becoming increasingly interdependent; through
world markets and businesses, the international community has
become entwined.

26
The Process of Globalization (2 of 2)
Forces That Drive Globalization
Human capital
Financial capital
Resource capital
Political capital
The four principal forms of capital that flow between countries
are:
• Human capital: the flow of people around the world through
immigration, migration, and emigration.
• Financial capital: the flow of money capital across world
markets through overseas investment, credit, lending, and aid.
• Resource capital: the flow of natural resources, parts, and
components between companies and countries, such as metals,
minerals, lumber, energy, food products, microprocessors, and
auto parts.
• Political capital: the flow of power and influence around the
world using diplomacy, persuasion, aggression, and force of
arms to protect the right or access of a country, world region, or
political bloc to the other forms of capital.
27
Declining Barriers to Trade and Investment
Tariff
A tax that a government imposes on imported or, occasionally,
exported goods
Free-Trade Doctrine
The idea that if each country specializes in the production of the

goods and services that it can produce most efficiently, this will
make the best use of global resources
28
When one country imposes a tariff, another country follows,
resulting in retaliatory moves throughout the global market—a
good reason for the removal of tariffs.
Effects of Free Trade on Managers
Declining Trade Barriers
Opened enormous opportunities for managers to expand the
market for their goods and services
Allowed managers to now both buy and sell goods and services
globally
29
A more open global economy has resulted in not only more
opportunities for selling, but for buying as well. However,
buying from other countries is not always welcomed. As the text
points out: the apparel maker Ralph Lauren was heavily
criticized when it was discovered the uniforms it made for the
2012 U.S. Olympic team were manufactured in China.
Americans were not ready for their team uniforms to be made in
another country.
Regional Trade Agreements
North American Free Trade Agreement (NAFTA)

Aimed to abolish the tariffs on 99% of the goods traded between
Mexico, Canada, and the United States by 2004
It has removed most barriers on the cross-border flow of
resources, giving retail businesses in Canada and the United
States unrestricted access to the Mexican marketplace.
30
The benefits of NAFTA have included companies such as
Walmart and other U.S. retail chains expanding their operations
in Mexico. Mexican products now inhabit their shelves.
However, some managers feel the threat of the cross-border
industries. Mexican industries feel threatened by the efficiency
of U.S. industries. And U.S. companies experience the threat of
lower labor costs, such as in the textile industries in Mexico.
After the passage of NAFTA, many U.S. companies shifted
production operations to Mexico to take advantage of lower
labor costs and lower standards for environmental and worker
protection. As a result, they cut their costs and were better able
to survive in an increasingly competitive global environment.
Was their behavior ethical—that is, did the ends justify the
means? [LO 4-4]
The problem with the decision to shift production operations to
low-wage countries, like Mexico, is that eventually the wages
will increase due to increased demand for workers, and

companies will be forced to again shift their production
operations in pursuit of lower costs. In addition, American
workers feel slighted, understandably, when plants close and
layoffs occur due to these shifts. Increased competition to
provide low-priced, quality goods and services is indeed an
issue that managers must confront in a more open global
environment, but there are other alternatives to shifting
production to other countries. Organizations can avoid these
hazards by building efficiency and effectiveness into their
existing operations.
Decisions involving decentralization of management and other
cost-cutting measures can replace less ethical solutions. Also,
lax standards in environmental and worker protection can often
hurt the organization in terms of public relations and consumer
image. Nike has come under attack for its operations in foreign
countries, and Ivanka Trump experienced similar attacks for the
sweatshop conditions in the factories that produce her footwear
line. These disadvantages, while perhaps not as easily discerned
as effects on the bottom-line, need to be considered when an
organization contemplates relocation of production operations.
31
The Role of National Culture (1 of 2)
Values
Ideas about what a society believes to be good, desirable and
beautiful
Provides the underpinnings for notions of individual freedom,
democracy, truth, justice, honesty, loyalty, social obligation,
collective responsibility,
Very slow to change

32
Values change over time, often in what can be a slow and
painful process.
Example: the value systems of many formerly communist states
such as Georgia, Hungary, and Romania have undergone
significant changes as those countries move away from values
that emphasize state control toward values that emphasizes
individual freedom.
The Role of National Culture (2 of 2)
Norms
Unwritten informal codes of conduct that prescribe how people
should act in particular situations and are considered important
by most members of a group or organization
Mores
Norms that are considered to be central to functioning of
society and to social life
Folkways
Routine social conventions of everyday life
To violate a folkway would not be considered a serious or moral
matter. Folkways, or custom and practices, include good social
manners, the proper way of dining, behavior towards neighbors,
dress, and so forth. Someone who eats peas with a knife as
opposed to a fork (in Western countries), might be considered
eccentric, but certainly not immoral.
33
Hofstede’s Model of National Culture (1 of 6)
Individualism
A worldview that values individual freedom and self-expression

and adherence to the principle that people should be judged by
their individual achievements rather than by their social
background
34
Individualism is prevalent in Western countries where personal
success is admired. Being a successful entrepreneur is highly
valued in countries like the United States.
Collectivism
A worldview that values subordination of the individual to the
goals of the group and adherence to the principle that people
should be judged by their contribution to the group
35
In communist counties collectivism is valued, and yet Japan is a
noncommunist country where collectivism is also highly valued.
Power Distance
The degree to which societies accept the idea that inequalities
in the power and well-being of their citizens are due to
differences in individuals’ physical and intellectual capabilities
and heritage
36

Societies in which inequalities are allowed to persist or grow
over time have high power distance. In high-power-distance
societies, workers who are professionally successful amass
wealth and pass it on to their children, and, as a result,
inequalities may grow over time. In such societies, the gap
between rich and poor, with all the attendant political and social
consequences, grows very large. In contrast, in societies with
low power distance, large inequalities between citizens are not
allowed to develop.
Achievement Orientations
Worldview that values assertiveness, performance, success, and
competition
Nurturing Orientation
Worldview that values quality of life, warm personal
friendships, and care for the weak
37
The United States and Japan are achievement-oriented; Sweden
and Denmark are more nurturing-oriented.
Uncertainty Avoidance
Degree to which societies are willing to tolerate uncertainty and
risk
38
Low uncertainty avoidance cultures (e.g., U.S. and Hong Kong)
value diversity and tolerate differences in personal beliefs and

actions
High uncertainty avoidance societies (e.g., Japan and France)
are more rigid and skeptical about people whose behaviors or
beliefs differ from the norm
Long-Term Orientation
Worldview that values thrift and persistence in achieving goals
Short-Term Orientation
Worldview that values personal stability or happiness and living
for the present
39
Societies with a long-term orientation include Taiwan and Hong
Kong, well known for their high rate of per capita savings. The
United States and France have a short-term orientation, and
their citizens tend to spend more and save less.
National Culture and Global Management
Management practices that are effective in one country might be
troublesome in another.
Managers must be sensitive to the value systems and norms of
an individual’s country and behave accordingly.
Management must be aware of cultural differences and contexts
in other countries.

Example: Pay-for-performance works in the U.S., but doesn’t go
over as well in Japan.
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BE THE MANAGER
Analyze the major forces in the task environment of a retail
clothing store.
Retail clothing is by definition a representation of old and new.
The old is represented by the consumers who do not care about
the latest fashions and always purchase the same styles. The
new is represented by the consumers who love to keep up with
the latest fashions that they see on TV, in the movies, in
magazines, or on friends. Both can be lucrative markets, but one
must first analyze the environment. This includes the
competition as well as the general social, economic, political,
and global trends. For example, Levi Strauss responded to
Casual Fridays by marketing Dockers. Levi Strauss is a good
example of a company that markets a standard brand with little
change and is still in demand while also responding to changing
trends such as relaxed fit for the expanding waists of Baby
Boomers. Many catalog stores (such as L.L. Bean and Land’s
End) have also developed websites that allow customers to shop
from catalogs and order online.
41
APPENDICES
Long descriptions of images

Appendix 1: Forces in the Global Environment
The graphic is set in a circle that shows the organization at the
center, surrounded by the task environment (competitors,
distributors, customers, and suppliers).
The general environment is the outer circle, consisting of
technological forces, sociocultural forces, demographic forces,
political and legal forces, and economic forces.
Copyright McGraw-Hill Education. Permission required for
reproduction or display.
Return to slide.
43
Appendix 2: Barriers to Entry and Competition
Economies of scale, brand loyalty, and government regulation
lead to the creation of barriers to entry, which lead to deterring
potential competitors.
Return to slide.
44
CHAPTER 3
MANAGING ETHICS
AND DIVERSITY

©McGraw-Hill Education. All rights reserved. Authorized only
for instructor use in the classroom. No reproduction or further
distribution permitted without the prior written consent of
McGraw-Hill Education.
1
3-1. Illustrate how ethics help managers determine the right
way to behave when dealing with different stakeholder groups.
3-2. Explain why managers should behave ethically and strive
to create ethical organizational cultures.
3-3. Appreciate the increasing diversity of the workforce and of
the organizational environment.
2
3-4. Grasp the central role that managers play in the effective
management of diversity.
3-5. Understand why the effective management of diversity is
both an ethical and a business imperative.
3-6. Understand the two major forms of sexual harassment and
how they can be eliminated.

The Nature of Ethics (1 of 2)
Ethical Dilemma
A type of quandary in which people have to decide if they
should act in a way that might help another person or group
even though doing so might go against their own self-interest
An ethical dilemma often involves deciding which course of
action is the lesser of two evils. A manager might be asked to
make a decision that, although it will benefit one person, it
might also inflict harm on another.
4
The Nature of Ethics (2 of 2)
Ethics
The inner-guiding moral principles, values, and beliefs that
people use to analyze or interpret a situation and then decide
what is the “right” or appropriate way to behave
Ethics will guide a manager to what is inappropriate behavior
and to what actions to take in order to avoid harming another
person
5
Stakeholders and Ethics
Stakeholders
The people and groups that supply a company with its
productive resources and so have a claim on and a stake in the
company

Ethics matter to stakeholders because often they directly benefit
or are harmed by ethical decisions managers make.
6
Types of Company Stakeholders
Figure 3.1
Jump to Appendix 1 long description.
Stockholders
Stockholders want to ensure that managers are behaving
ethically and not risking investors’ capital by engaging in
actions that could hurt the company’s reputation.
They want to maximize their return on investment.
Because stockholders want to maximize the return on their
investment, they watch the company and its managers closely to
ensure that management is working diligently to increase the
company’s profitability.
8
Managers
Managers are responsible for using a company’s financial
capital and human resources to increase its performance and
thus its stock price.
They have the right to expect a good return or reward by
investing their human capital to improve a company’s
performance.

Frequently managers juggle multiple interests.
Sometimes difficult decisions challenge managers to uphold
ethical values because some decisions that benefit certain
stakeholder groups (managers and stockholders) harm other
groups (individual workers and local communities). For
example, in economic downturns or when a company
experiences performance shortfalls, layoffs may help cut costs
(thus benefiting shareholders) at the expense of the employees
laid off.
9
Topics for Discussion (1 of 5)
When are ethics and ethical standards especially important in
organizations? [LO 3-1]
It may be difficult for managers to determine how to apportion
harms or benefits among various stakeholder groups. In such
cases, ethical standards and guidelines are very important. For
example, when companies experience great financial losses,
they often engage in massive layoffs, without considering ways
to make such layoffs as painless as possible. It may also be
difficult for managers to determine how to fairly apportion
benefits among stakeholder groups, especially when
management is one of the stakeholder groups that may be
positively impacted. For example, when Chrysler amassed $9
billion in cash, managers wanted to use the money to protect the
company against future economic downturns, a tactic that would
give the managers themselves security. However, stockholders

felt that managers were making the wrong decision, and some of
this wealth should be shared with them.
Ethics and ethical standards are especially important in
organizations when decision making is not governed by legal or
governmental requirements. Because behavior considered
unethical in the United States may be acceptable in foreign
countries, international managers may also need guidelines to
apprise them of ethical standards in the States. Also, managers
must keep ethical standards in the forefront of their minds when
working in situations of intense pressure.
10
Employees
Companies can act ethically toward employees by creating an
occupational structure that fairly and equitably rewards
employees for their contributions.
Employees should feel that the recruitment, training,
performance appraisal, and reward systems used by
organizations do not discriminate against employees and are
fair.
11
Suppliers and Distributors
Suppliers expect to be paid fairly and promptly for their inputs.
Distributors expect to receive quality products at agreed-upon
prices.
Safety specifications are governed by the contracts a company

signs with its suppliers and distributors—lax oversight can have
tragic consequences.
12
Customers
Customers are the most critical stakeholder.
Company must work to increase efficiency and effectiveness in
order to create loyal customers and attract new ones.
By selling quality products at a fair price and providing good
after-sales service, a company can create loyal customers.
Striving to improve their products over time and provide
guarantees to customers about the integrity of their products,
will also ensure a loyal customer base.
13
Community, Society, and Nation
Community
Physical locations in which companies are located
towns or cities
or social milieus,
ethnic neighborhoods
Community provides a company with the physical and social
infrastructure that allows it to operate.
Through the salaries, wages, and taxes it pays, a company
contributes to the economy of its town or region and often
determines whether the community prospers or declines.
Similarly, a company affects the prosperity of a society and a

nation and, to the degree that a company is involved in global
trade, all the countries it operates in and thus the prosperity of
the global economy.
14
Four Ethical Rules
Figure 3.2
Utilitarian Rule
Decision that produces the greatest good for the greatest number
of people.
How do you measure the benefits and harms that will be done to
each stakeholder group?
How do you evaluate the rights and importance of each group?
Moral Rights rule
Decision that best maintains and protects the fundamental or
inalienable rights and privileges of the people affected by it.
Justice rule
Decision that distributes benefits and harms among people and
groups in a fair, equitable, or impartial way.
Practical rule
Decision that a manager has no hesitation about communicating
to people outside the company because the typical person would
think it is acceptable.
15
Practical Decision Model
Does my decision fall within the acceptable standards that apply
in business today?
Am I willing to see the decision communicated to all people and

groups affected by it?
Would the people with whom I have a significant personal
relationship approve of the decision?
The practical rule is that an ethical decision is one that a
manager has no hesitation or reluctance about communicating to
people outside the company because the typical person in a
society would think it is acceptable. Applying the practical rule
to analyze a business decision ensures that managers are taking
into account the interests of all stakeholders.
16
Why Should Managers Behave Ethically? (1 of 2)
The relentless pursuit of self-interest can lead to a collective
disaster when one or more people start to profit from being
unethical because this encourages other people to act in the
same way.
The text uses the example of an agricultural community in
which all have an equal right to the common land: “Pursuing
self-interest, each farmer acts to make the maximum use of the
free resource by grazing his or her own cattle and sheep.
Collectively, all the farmers overgraze the land, which quickly
becomes worn out. Then a strong wind blows away the exposed
topsoil, so the common land is destroyed. The pursuit of
individual self-interest with no consideration of societal
interests leads to disaster for each individual and for the whole
society because scarce resources are destroyed.”
17

Some Effects of Ethical/Unethical Behavior
Figure 3.3
Jump to Appendix 3 for the long description.
Why Should Managers Behave Ethically? (2 of 2)
Trust
Willingness of one person or group to have faith or confidence
in another person’s goodwill, even though this puts them at risk
Reputation
Esteem or high repute that individuals or organizations gain
when they behave ethically
The trustworthy actions of one person in a company can
encourage others to act in the same manner, generating trust
been all and leading to an efficient and effective organization.
19
Sources of an Organization’s Code of Ethics
Figure 3.4
Jump to Appendix 4 for long description.
Societal Ethics
Standards that govern how members of a society should deal
with each other on issues such as fairness, justice, poverty, and
the rights of the individual. People behave ethically because

they have internalized certain values, beliefs, and norms.
Professional Ethics
Standards that govern how members of a profession are to make
decisions when the way they should behave is not clear-cut—
medical and legal ethics.
Individual Ethics
Personal values and attitudes that govern how individuals
interact with other people.
20
Ethical Organizational Cultures (1 of 2)
Managers can ensure that important ethical values and norms
are a central component
of an organization’s culture.
Managers become ethical role models whose behavior is
scrutinized by their subordinates.
Managers can not only use the organizations code of ethics in a
decision-making process, but they can also create a culture that
supports ethical values and norms. The text uses the example of
Herb Kelleher and Southwest Airlines’ culture.
21
How can managers ensure that they create ethical organizational
cultures? [LO 3-2]

Leading by example is the primary way by which managers can
ensure that an ethical organizational culture is created. Because
employees expect those in authority to provide leadership and
set an example, managers must behave as role models of ethical
conduct, knowing that subordinates scrutinize their behavior. In
addition, managers can encourage an ethical culture by
establishing a code of ethics and by hiring an ethics ombudsman
with organization-wide authority.
22
Ethical Organizational Cultures (2 of 2)
Ethics Ombudsman
An ethics officer who monitors an organization’s practices and
procedures to be sure they are ethical
The ethics ombudsman communicates ethical standards to all
employees, creates systems to monitor employees’ adherence,
and trains how to respond to ethical dilemmas appropriately.
23
The Increasing Diversity of the Workforce and the Environment
Diversity
Differences among people due to age, gender, race, ethnicity,
religion, sexual orientation, socioeconomic background,
education, experience, physical appearance, capabilities,
disabilities, and any other characteristic used to distinguish
people
An important factor in an organization, if not dealt with

properly, diversity can have devastating effects on a company.
In a global environment it is critical for an organization to be
aware and to address diversity properly.
24
Diversity Concerns (1 of 2)
There is an ethical imperative for equal opportunity.
Effectively managing diversity can improve organizational
effectiveness.
There is evidence that diverse individuals continue to
experience unfair treatment in the workplace as a result of
biases, stereotypes, and overt discrimination.
Diversity Concerns (2 of 2)
Glass Ceiling
A metaphor alluding to the invisible barrier that prevents
minorities and women from being promoted to top corporate
positions
Glass Ceiling Commission, a federal commission, noted:
African-Americans experience the lowest promotion rate and
had the most difficult time climbing the corporate ladder,
Asians were stereotyped into technical jobs and
Hispanics were assumed to have less education than other
minority groups.
26
Sources of Diversity in the Workplace

Figure 3.5
Workforce Diversity: Age
Aging U.S. Population
Median age is 37.8.
By 2030, 20% of the population will be over 65.
Federal Age Discrimination Laws
1964 Title VII of the Civil Rights Act of 1964
1967 Age Discrimination in Employment Act
Managers need to be vigilant to ensure that employees are not
discriminated against because of age. Moreover, managers need
to ensure that the policies and procedures they have in place
treat all workers fairly, regardless of their ages.
28
Workforce Diversity: Gender
Women in the Workplace
U.S. workforce is 44.3% female.
Women’s weekly median earnings are $726 compared to $895
for men.
Women hold only 14.6% of executive officer positions in the
500 largest U.S. companies.
Research conducted by consulting firms suggests:

Female executives outperform their male colleagues in skills
such as motivating others, promoting good communication,
turning out high-quality work, and being good listeners.
Hagberg Group performed in-depth evaluations of 425 top
executives in a variety of industries, with each executive rated
by approximately 25 people. Of the 52 skills assessed, women
received higher ratings than men on 42 skills, although at times
the differences were small.
29
Workforce Diversity: Race and Ethnicity
Ethnicity
Grouping of people based on some shared characteristic such as
national origin
Ethnic Demographics of United States
72.4% white
16.3% Latino
12.6% African American
4.8% Asian
It is important to manage diversity effectively.
Bureau of Labor Statistics: much to be done still.
30
Workforce Diversity: Religion
Accommodation for Religious Beliefs
Scheduling of critical meetings
Providing flexible time off for holy days
Posting holy days for different religions on the company
calendar

Managers can gain employee loyalty by being respectful of
religious differences and by making even the smallest
accommodation for religious diversity.
Example: allowing employees to leave work early on certain
days instead of taking a lunch break or posting holidays for
different religions on the company calendar can go a long way
toward making individuals of diverse religions feel respected
and valued as well as enabling them to practice their faith.
31
Workforce Diversity: Capabilities and Disabilities
Disability Issues
Providing reasonable accommodations for individuals with
disabilities
Promoting a nondiscriminatory workplace environment
Educating the organization about disabilities
Managers must educate both themselves and their employees
about the disabilities, as well as the real capabilities, of those
who are disabled.
Example: during a Disability Awareness Week, administrators
at the University of Notre Dame sought to increase the public’s
knowledge of disabilities while heightening awareness
32
Why might some employees resent workplace accommodations
that are dictated by the Americans with Disabilities Act? [LO 3-
3]

Managers must often educate themselves and their employees
concerning the disabilities and abilities of those who are
disabled. Because many people are unaware of the prevalence of
disabilities and misinformed about their consequences, they do
not fully understand why accommodations are needed.
Unfortunately, there are anecdotes of employees abusing the
ADA by seeking unneeded accommodations for disabilities that
may not exist, which could lead to resentment by others. Worse
yet, such abuse may prevent persons with real disabilities from
revealing their disability so that they can receive the
accommodations they deserve.
33
Workforce Diversity: Socioeconomic Background
Managers need to be sensitive and responsive to the needs and
concerns of workers who might not be as well off as others.
Managers need to be aware of differences in income and
financial resources, access to child care, elder care options,
living situations, as well as the existence of sources of social
and family support. Indeed, managers must endeavor to give
such employees the opportunities to learn, advance, and make
meaningful contributions to their organizations while improving
their economic well-being.
34
Workforce Diversity: Sexual Orientation

Sexual Orientation Issues
Employment and workplace discrimination
Provision of domestic-partner benefits
Today, LGBT employees are increasingly having their rights
affirmed and many companies are now offering employees with
same-sex partners benefits.
35
Why are gay and lesbian workers and workers who test positive
for HIV sometimes discriminated against? [LO 3-3]
Unfortunately, a great deal of prejudice against gays and
lesbians exists in our society, and many have incorrectly labeled
AIDS/HIV as a ‘gay’ disease. AIDS/HIV cannot be spread
through casual contact. Yet out of fear, ignorance, or prejudice,
some people wish to avoid all contact with anyone who has
tested positive for the disease for fear of becoming infected.
36
Critical Managerial Roles
Managers have more influence than rank-and-file employees.
When managers commit to diversity, their authority and
positions of power and status influence other members of an
organization to make a similar commitment.

Managers can model that diversity is a valued goal. They can
institute policies and procedures that ensure equal treatment.
And they can act in liaison roles.
37
Effectively Managing Diversity Makes Good Business Sense
The diversity of organizational members can be a source of
competitive advantage.
The recruiting of diverse employees must be followed up with
ongoing effective management of diversity to retain those
employees.
Many organizations insist that their suppliers support diversity.
Effective management of diversity is necessary to avoid costly
lawsuits.
Target is one company that varies its products dependent on
different cities or regions.
38
Forms of Sexual Harassment (1 of 2)
Quid Pro Quo
Asking for or forcing an employee to perform sexual favors in
exchange for receiving some reward or avoiding negative
consequences
Even though the threat of losing one’s job if not compliant with
a demand to “sleep with me” is the extreme and probably the
first thing one thinks of when discussing sexual harassment,

quid pro quo can also be more subtle. It can also come in the
form of being threatened with not receiving a raise or a
promotion, having some other work-related opportunity held up
as enticement, or receiving negative consequences such as
demotion or dismissal.
39
Forms of Sexual Harassment (2 of 2)
Hostile Work Environment
Telling lewd jokes, displaying pornography, making sexually
oriented remarks about someone’s personal appearance, and
other sex-related actions that make the work environment
unpleasant
A hostile work environment not only interferes with an
employee’s ability to perform his or her job, it is also illegal.
Ignoring or promoting a hostile work environment could risk
costly lawsuit.
40
Steps to Eradicate Sexual Harassment (1 of 2)
Develop and clearly communicate a sexual harassment policy
endorsed by top management.
Use a fair complaint procedure to investigate charges of sexual
harassment.
Prohibitions against both quid pro quo and hostile work
environment sexual harassment should contain:
examples of types of behavior that are unacceptable,

a procedure for employees to use to report instances of
harassment,
a discussion of the disciplinary actions that will be taken when
harassment has taken place, and
(4) a commitment to educate and train organizational members
about sexual harassment.
41
Steps to Eradicate Sexual Harassment (2 of 2)
When it has been determined that sexual harassment has taken
place, take corrective action as soon as possible.
Provide sexual harassment education and training to all
organizational members, including managers.
As spoken of in the text, DuPont’s “A Matter of Respect”
educates employees about sexual harassment and eliminates its
occurrence. Employees participate in a four-hour workshop
wherein sexual harassment is defined, the company’s policy
against it is explained, and employees are told how to report
complaints and access a 24-hour hotline.
42
BE THE MANAGER
What are you going to do to address this issue?
You might meet with Susan to determine what kinds of
problems she is aware of. To act without more information
might create problems where none exists. If there is a problem,
consider contacting the Human Resources Department for their
advice and/or participation in responding to it, especially if it

involves an actionable offense such as sexual harassment.
You may also engage in “management by walking around” to
observe how workers interact with each other. You should not
make a big deal of the visits, but they must occur with enough
frequency to observe what is going in formal work settings as
well as informal social settings. Gradually, your subordinates
will become more comfortable with you, allowing you to
observe behaviors that may be unapparent on the surface. You
should encourage all subordinates to let you know about any
problems they are experiencing.
43
APPENDICES
Long descriptions of images
Appendix 1: Types of Company Stakeholders
The cluster graphic has the company at the center. A type of
company stakeholder is in each of the six circles that surround
the center: employees, stockholders, managers, suppliers and
distributors, customers, and community, society, and nation-
state.
Return to slide.
Appendix 2: Four Ethical Rules
The cluster graphic has rules for ethical decision making in the

center. Each of the four rectangles that surround the center
describes one of the four ethical rules. The rules are moral
rights rule, utilitarian rule, justice rule, and practical rule.
Moral Rights Rule: An ethical decision should maintain and
protect the fundamental rights and privileges of people.
Utilitarian Rule: An ethical decision should procure the greatest
good for the greatest number of people.
Justice Rule: An ethical decision should distribute benefits and
harm among people in a fair, equitable, and impartial manner.
Practical Rule: An ethical decision should be one that a
manager has no hesitation about communicating to people
outside the company because the typical person in a society
would think the decision is acceptable.
Return to slide.
Appendix 3: Some Effects of
Ethical/Unethical Behavior
Ethical behavior increases efficiency and effectiveness of
production and trade, increases company performance, and
increases national standard of living, well-being, and
prosperity.
Unethical behavior reduces efficiency and effectiveness of
production and trade, reduces company performance, and
reduces national standard of living, well-being, and prosperity.
Return to slide.

Appendix 4: Sources of an Organization’s Code of Ethics
Societal ethics, professional ethics, and individual ethics all
influence an organization’s code of ethics.
Societal ethics are the values and standards embodied in a
society’s laws, customs, practices, and norms and values.
Professional ethics are the values and standards that groups of
managers and workers use to decide how to behave
appropriately.
Individual ethics are the personal values and standards that
result from the influence of family, peers, upbringing, and
involvement in significant social institutions.
Return to slide.
Appendix 5: Sources of Diversity in the Workplace
A circle is divided equally into sources of diversity in the
workplace. The sources are age, gender, race, ethnicity,
religion, sexual orientation, socio-economic background,
capabilities or disabilities, education, experience, physical
appearance, and other characteristics.
Return to slide.

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