1. International Management
BADM 729
Dr. Yvonne Stedham

2. International Management
Review -- Session #1 and 2
Personal Introduction
Course Introduction
Management Principles
Content Overview
Questions
What is different about an international organization?
Can you apply what you have learned about “running or managing a business” in an international context?
Expect to learn?
Framework
Format Overview (Syllabus) – Questions? Quiz vs Readings? Termpaper Sign-up

3. .Organizations and Organizational Effectiveness
What is an organization? Why do organizations exist?
When is an organization effective?
Efficiency vs effectiveness?

4. .Organizations and Organizational Effectiveness
What is an organization? Why do organizations exist?
Organizations = People
Mission, goals, objectives --- concerted effort; efficiency; effectiveness.
When is an organization effective?
Distinguish between efficiency and effectiveness. Distinguish effectiveness measures for the short, intermediate, and long run.

5. Measurement of organizational effectiveness
Long run?
Intermediate run?
Short run?
A contingency approach to management

6. Measurement of organizational effectiveness
Long run: Survival
Intermediate run: Adaptation, Responsiveness
Short run: Productivity, Efficiency
A contingency approach to management (as opposed to “administrative theory” of management): It’s management’s task to create the best possible fit between the external and internal environments of the organization and must ensure internal consistency between the organization’s elements.

7. The Organization

8. The International Organization

9. Current Information
National Public Radio (NPR)
FM 88.7, 90.5

10. The International Organization
What is “internationalization”?
Reasons for going international
Types of international organizations
Stages of Development to an International O.
Effectiveness of Internationalization

11. Internationalization
is the process by which firms
increase their awareness
of the influence of international activities on their future
and establish
and conduct
transactions with firms from other countries.

12. Reasons for becoming an international organization
Profit = Revenue – Cost = (Volume*Price) - Cost
A desire for continued growth.
2. Domestic market saturation
3. The potential to now exploit a new technological advantage
4. Preferable suppliers (quality, cost)
5. Labor market (supply, quality, cost)
6. Government involvement/restrictions

13. 7. Reducing distance to customers (cost)
8. Tariff barriers
9. Increased foreign competition in home country
10. Reduce general business risk by diversifying
into other countries

14. Types of "international" organizations
International organization:Any organization that exports to/imports from organizations in other countries with primarily domestic production - Multidomestic.
Multinational organization: An organization with operations in different countries but each is viewed as a relatively separate enterprise.
Global organization: An enterprise structured so that national boundaries become blurred. The best people are hired irrespective of national origin. Transnational

15. Graphic Representation
Headquarters – Subsidiary Relationship
Level of Global Participation

16. The Relationship between Level of Internationalization and Firm Performance
There is a strong relationship between the degree of internationalization and organizational performance
Degree of internationalization is measured as "sales generated by foreign affiliates" and MNE (multinational enterprise) performance is measured as "profit to sales" or "profit to assets".
Performance is at a max. at a level of internationalization of 60 to 80% and then decreases with continuing internationalization

17. Stages Model of Internationalization
Outward looking perspective: activities/issues related to the other countries (e.g., exporting) vs an inward perspective (e.g., importing)
Descriptive
Reflects the commonly observed pattern of increased commitment to international business

18. Four stages:
1.indirect/ad hoc exporting - perhaps from unsolicited export orders
2.active exporting and/or licensing
3.active exporting, licensing, and joint equity investments in foreign manufacture
4.full-scale multinational marketing and production

19. An International Organization
Definition:
operates in multiple environments, home country and one or more host countries, has foreign sales, and a nationality mix of managers and owners.
Characteristics:
1. centralized ownership
2. common pool of resources
3. global, integrated strategy

20. Review Types of international organizations
Criterion -- Level of Global Participation
International/Multi-Domestic
Multinational
Transnational/Global
Stages of Development to an International O.
Descriptive Model
Effectiveness of Internationalization
Relationship between extent of internationalization and performance
Headquarters of well-known companies (Exercise)

21. External Environment: Theory
Competitiveness
International Competitiveness
Porter Diamond: The major determinants of national competitive advantage - why some nations succeed and others fail in international competition. Porter's research is based on studying 100 industries in 10 nations.
- Reading: Competitive Advantage of Nations, Porter
Gabbye, Lance, Dan

22. National Competitive Advantage
PORTER DIAMOND
National Competitive Advantage
Four broad attributes of a nation shape the environment in which local firms compete, and these attributes promote or impede the creation of competitive advantage:
1. Factor endowments or conditions
2. Demand conditions
3. Related and supporting industries
4. Firm strategy, structure, rivalry

23. Porter’s Diamond
Why a nation achieves success in a particular industry?
Why Japan -- automobile, cameras
Why SUI -- precision instruments, pharmaceuticals
Why Germany and U.S. -- chemical
Diamond of four mutually reinforcing factors
1. Factor Endowment -- Basic, Advanced (Nokia, Ericsson)
2. Demand Conditions -- Quality, Innovativeness
3. Related Industries -- Suppliers (U.S. - semiconductor/comp)
4. Strategy, Structure, Rivalry -- Executive background
=> Domestic environment encourages the development of characteristics that make company internationally competitive

24. Rugman-Verbeke Model:
1. Firm specific advantages: relative to competitors -- technological experience, salesforce, customer loyalty
2. Country specific advantages: source of advantage lies outside the firm -economic (labor - qual., quan., cost; natural resources); - non-economic (social, cultural); -governmental (property rights, free enterprise)
Compare to Porter’s model

25. References for Porter
1. Michael Porter, The Competitive Advantage of Nations. Free Press
2. M. Grant, The Competitive Advantage of Nations: An Assessment. Strategic Management Journal, 12,

26. External Environment: Theory - Trade Agreements
Why? Protectionism? Pro /Con
Trade Area
Common tariffs among members -- individual tariffs with non-members. NAFTA, ASEAN (Brunei, Indonesia, Malaysia, Philippines, Singapore, Thailand, Vietnam Mill)
Customs Union
Common tariffs for non-members. ANDEAN (Bolivia, Ecuador, Peru, Columbia, Venezuela)
Common Market
Free flow of goods and labor. Mercosur (Brazil, Paraguay, Uruguay, Argentina, Chile)
Economic Union
European Union Members; Euro; European Parliament, Court of Justice
Political Union
Increasing economic integration

27. The External Environment
Political Environment
Form of government
Political stability
Foreign policy
State companies
Role of military
Level of terrorism
Restrictions on imports/exports
Economic Environment
Economic system
Stage of development
Economic stability
GNP
Int’l financial standing
Monetary/fiscal policies
Foreign investment

28. The External Environment
Regulatory Environment
Legal system
Prevailing int’l laws
Protectionist laws
Tax laws
Role of contracts
Protection for proprietary property
Technological Environment
Level of technology
Availability of local technical skills
Technical requirements of country
Transfer of technology
Infrastructure
Environmental protection

29. External Environment: Current Developments- Overview
Relevant variables: GDP ; GDP/capita ; GDP growth; factor endowments; demand conditions
The GDP (gross domestic product):
The value of the final output of goods and services produced by the residents of an economy (World Bank). There are several methods to calculate the GDP. The PPP (purchasing power parity) method reflects the cost of a basket of goods in two countries in their local currencies.

30. The top 7 economies (PPP GDP) ‘90s:
US ($ 7.1 trillion); China ($ 3.8); Japan ($ 2.6); Germany ($ 1.6); India ($ 1.5); France ($ 1.4); Italy ($ 1.0)
The next 7 economies: UK ($ .9); Brazil ($ .85); Indonesia ($ .7); Russia ($ .68); Canada ($ .60); Mexico ($ .58); Spain ($ .57)

31. The wealthiest nations
GDP per capita: Luxembourg ($37,930); US ($26,980); Switzerland ($25,860); Kuwait ($23, 790); Sweden ($23,630); Hong Kong ($22,950); Singapore ($ 22,770); Japan ($22,110); Norway ($21,940); Belgium ($21,660); Austria ($21,250); Denmark ($21,230); Canada ($21,130); France ($21,030); Iceland ($20,460); Germany ($20,070)

32. Largest cities and cost of living index:
Tokyo 26 mill (150); New York 17 mill (100); Sao Paulo 16 mill (100); Mexico City 15 mill (75); Shanghai 15 mill (100); Bombay 15 mill (50); Los Angeles 13 mill (100)
Largest populations:
China 1.2 bill; India 900 mill; US 258 mill; Indonesia mill; Brazil 156 mill; Russia 148 mill; Japan 124 mill; Pakistan 122 mill;

33. External Environment: Current Developments - Regions
International Investment
and Trade 
Level of International Activities

34. Major Regions North America
United States - which industries most internationally active? Why?
Mexico - wage rate maquiladora industry (1965)

35. Europe delayed differentiation acquisitions/alliances
EU -15 member countries: Belgium, Britain, Denmark, France, Germany, Greece, Ireland, Italy, Luxembourg, The Netherlands, Portugal, Spain, Finland, Sweden, Austria
EU – The Euro

36. European Union The European Commission
The Council of Ministers (counterbalance to Commission)
The European Parliament
The European Court of Justice

37. European Union What kind of trade agreement? Governance?
The European Commission
proposes policies and legislation
responsible for the administration of the EU
ensures - provisions of the EU treaties+the decisions of the other institutions are properly implemented
one rep per country(two for the 5 larger countries)
represent, protect, further the European interest + its members do not represent or take orders from their national governments

38. Eastern Europe - Break-up of The Soviet Union
(Dec )
- Russia (glasnost, perestroika)
- The Ukraine
- Czech Republic
- Poland

39. Asia Japan China MITI (Ministry of International Trade and Industry)
keiretsus (chaebols in South Korea)
Current economic conditions
China
GDP growth of 10%
low wage rates

40. Newly industrialized countries:
The Four Tigers
South Korea, Hong Kong,Singapore, Taiwan
Baby Tigers
Thailand, Malaysia, Indonesia

41. Less developed countries
Large population, high unemployment, inflation, low or negative economic growth, low literacy rate
India, Arab Countries, Africa, Central and South America
 Major economic regions:
North America,Europe, Asia

42. Economic Superpowers The Triad - The Golden Triangle:
The United States, the EU(dominated by Germany??), Japan
Dominates foreign direct investment and international trade
FDI Clusters

43. External Environment: National Culture
Harry and Sally in Saudi Arabia
What went wrong?
Why did things go wrong?
What were the consequences of these mistakes?

44. Culture and International Management
Relevance:
Cross-cultural literacy
Cost of doing bus in a particular culture

45. Internationalization Decision
Benefits from internationalization into a specific country
Cost associated with internationalization into a specific country
Risk associated with internationalization into a specific country.
Decision = f (benefit-cost-risk tradeoff)

46. Cultural dimensions What is the nature of people?
All peoples have common life problems (?) – choose different solutions
Six basic dimensions describe the cultural orientations of societies
What is the nature of people?
What is a person's relationship to nature?
What is a person's relationship to other people?
What is the primary mode of activity?
What is the conception of space?
What is the temporal orientation?

47. Cultural dimensions What is the nature of people? Good/evil/change
Six basic dimensions describe the cultural orientations of societies
What is the nature of people? Good/evil/change
What is a person's relationship to nature?
Dominant/harmony -subjugation
What is a person's relationship to other people?
Individualistic/group – hierarchical/lateral
What is the primary mode of activity?
Doing/being
What is the conception of space?
Private/public
What is the temporal orientation?
Future/present/past

48. Determinants of Culture (Values and Norms)
1. Social structure
Social stratification (class consciousness)
Class membership is a function of ??
Social mobility

49. 2. Religion - Christianity 1 bill; 20%; Protestant work ethic
Islam 750 mill; all embracing way of life, governing the totality of a Muslim being; prayer five times a day; free enterprise/hostile to socialist ideals - earning a legitimate profit through commerce and trade; Koran; contractual obligations, keeping one's word)

50. Hinduism 500 mill; spiritual achievement; nirvana
Buddhism 250 mill; Central and Southeast Asia, China, Korea, Japan; "life is suffering; misery is everywhere and originates in people's desire for pleasure; Noble Eightfold Path: right views, right intention, right speech, right action, right livelihood, right effort, right awareness, right concentration)

51. 6.Language (spoken; non-verbal)
3.Political philosophy
Political freedom – dominant political orientation
4.Economic philosophy
Free market – to what extent
5.Education
Importance – access - type
6.Language (spoken; non-verbal)
Communication

52. Ignoring Culture Religion: Language:
Ads for refrigerator, airlines (Middle East)
Language:
Baby Food in Africa, English candy “Zit”, Finnish product unfreezes car locks “Super Piss”, Electrolux sucks (Sweden)

53. Measurement of Culture
Four dimensions of culture
1. Individualism/Collectivism:Individualism exists when people define themselves as individuals. It implies loosely knit social frameworks in which people are supposed to take care only of themselves and their immediate families. Collectivism is characterized by tight social frameworks in which people distinguish between their own groups, "in-groups", (relatives, clans, organizations) and other groups. People expect in- groups to look after their members, protect them, and give security in exchange for members' loyalty.

54. 2. Power distance: indicates how a society deals with the inequality among people's physical and intellectual capabilities. A culture with high power distance allows inequality to grow to inequality in power and wealth, one low in power distance aims at removing such inequalities. Indicates to what extent the unequal distribution of power is accepted.

55. 3. Uncertainty avoidance: The extent to which people in a society feel threatened by ambiguous situations and the extent to which they try to avoid these situations by providing greater career stability, establishing more formal rules, and rejecting deviant ideas and behavior. Lifetime employment is more common in countries with high uncertainty avoidance - the reverse is true for job mobility.

56. 4. Masculinity/Femininity: Masculinity is defined as the extent to which the dominant values of society emphasize assertiveness and acquisition of money and things (materialism). Femininity is defined as the extent to which the dominant values in society emphasize relationships among people, concern for others, and the overall quality of life.

57. 5. Confucian dynamism/Long-term orientation (1993):
refers to the time perspective in a society for the gratification of people's needs. A high CD or long-term oriented society is one which emphasizes thrift and perseverance. A low CD or short- term oriented society focuses on gratifying needs here and now.

58. Culture Review What is culture? Why is it relevant?
What are the dimensions of culture?
What are determinants and characteristics of culture?
How is understanding the dominant religion in a country important to international management?

59. Culture Review What is culture? Values and norms; socialization
Why is it relevant? Cross-cultural literacy; Benefit-Cost- Trade-off
What are the dimensions of culture? Nature of People, Relationship to Nature, People, Temporal, Space, Mode of activity
What are determinants and characteristics of culture?
How is understanding the dominant religion in a country important to international management?

60. Sources for International Research
Hofstede, Geert (1980): Culture’s Consequences
Hofstede, Geert (1991): Cultures and Organizations
Hofstede, Geert (1984): Culture’s Consequences: International Differences in Work-Related Values
Hofstede, Geert and Michael Harris Bond (1984): The Confucius Connection: from cultural roots to economic growth. Organizational Dynamics, 16, 4, 4-21

61. Measurement of Culture
Four dimensions of culture
1. Individualism/Collectivism:Individualism exists when people define themselves as individuals. It implies loosely knit social frameworks in which people are supposed to take care only of themselves and their immediate families. Collectivism is characterized by tight social frameworks in which people distinguish between their own groups, "in-groups", (relatives, clans, organizations) and other groups. People expect in- groups to look after their members, protect them, and give security in exchange for members' loyalty.

62. 2. Power distance: indicates how a society deals with the inequality among people's physical and intellectual capabilities. A culture with high power distance allows inequality to grow to inequality in power and wealth, one low in power distance aims at removing such inequalities. Indicates to what extent the unequal distribution of power is accepted.

63. 3. Uncertainty avoidance: The extent to which people in a society feel threatened by ambiguous situations and the extent to which they try to avoid these situations by providing greater career stability, establishing more formal rules, and rejecting deviant ideas and behavior. Lifetime employment is more common in countries with high uncertainty avoidance - the reverse is true for job mobility.

64. 4. Masculinity/Femininity: Masculinity is defined as the extent to which the dominant values of society emphasize assertiveness and acquisition of money and things (materialism). Femininity is defined as the extent to which the dominant values in society emphasize relationships among people, concern for others, and the overall quality of life.

65. 5. Confucian dynamism/Long-term orientation (1993):
refers to the time perspective in a society for the gratification of people's needs. A high CD or long-term oriented society is one which emphasizes thrift and perseverance. A low CD or short- term oriented society focuses on gratifying needs here and now.

66. U.S. Japan Germany
Individualism:
Power distance:
Uncertainty
avoidance:
Masculinity:
ST/LT:

67. Session #13 Review External Enviro: Culture Cultural Stereotypes Video
October 18 – First Guestspeaker
Review
Measurement of Culture
Application of Hofstede’s Dimensions
External Enviro: Culture
Cultural Stereotypes
Video
External Environment: Political Risk
Quiz #3

68. Applying Hofstede’s Dimensions
Lawyers per 100,000 population
U.S.
Germany
Great Britain
Japan
Italy
France

69. Applying Hofstede’s Dimensions
Lawyers per 100,000 population
U.S
Germany 190
Great Britain 134
Japan 106
Italy 81
France 49

70. Laurent’s Research-See Adler
9 Western countries, US, 2 Asian countries
More than sixty common work situation
The main reason for hierarchical structure is so that everybody knows who has authority over whom
In order to have efficient work relationships, it is often necessary to bypass hierarchical lines
It is important for a manager to have at hand precise answers to most of the questions that his subordinates may raise about their work

71. Laurent’s Research
The main reason for hierarchical structure is so that everybody knows who has authority over whom
US 18% agree, Germany 24% agree, Italy 50% agree
France, 45% agree, Japan 52% agree - POW
In order to have efficient work relationships, it is often necessary to bypass hierarchical lines
US 32% disagree, Germany 46% disagree, Italy 75% da
It is important for a manager to have at hand precise answers to most of the questions that his subordinates may raise about their work
US 18% agree, Germany 46% agree, Italy 66% agree, Japan 78% agree - UNC

72. Session #14 Review External Environment: Political Risk Articles H-O
Comments to Midterm Exam
Review
External Enviro: Culture
Cultural Stereotypes
Video
External Environment: Political Risk

73. Fons Trompenaars Riding the Waves of Culture (1998; 2nd edition)
Dimensions (see textbook pg 119):
Universalistic–Particularistic (Obligation)
Neutral-Affective (Emotional Orientation in Relationships)
Specific-Diffuse (Involvement in Relationships)
Achievement-Ascription (Legitimization of Power)

74. Cultural Stereotypes What is a stereotype? Good or Bad?
Effect on cross-cultural adaptation
Our research
Exercise

75. Cultural Stereotypes Good or Bad?? Exercise:
Countries: Germany, Italy, Switzerland, UK, France
Jobs: Government, Cooks, Policemen, Engineers, Lovers
Best Case and Worst Case Scenarios

76. Video - Culture
Cross-cultural understanding

77. The International Organization

78. Overall Attractiveness of a Country
Trade-off between
Benefits
Costs
Risks

79. Overall Attractiveness of a Country
Trade-off between
Benefits: market size, wealth (purchasing power), future wealth, resources (quality and cost)
Costs: legal requirements, availability of resources, infrastructure, level of economic development, free market?
Risks: the likelihood that political, economic, legal forces will cause drastic changes in a country's business environment that adversely affects the profit and other goals of a particular business enterprise.

80. External Environment: Political Risk
What is risk?
What is economic risk?
What is political risk?

81. External Environment: Political Risk
Definition
the likelihood that political forces will cause drastic changes in a country's business environment that adversely affects the profit and other goals of a particular business enterprise.

82. Political Risk
Characteristics of countries with a higher likelihood for political risk: Social unrest - Strikes, demonstrations, terrorism
Social Unrest: more than one ethnic nationality, competing ideologies battle for political control, high inflation and falling living standards

83. Results of Social Unrest:
Change in gov/gov policy
Results of Political Change:
Expropriation
Indigenization

84. Risk Assessment Euromoney Magazine’s Country Risk Ratings
Analytical Indicators: political risk (20%) - measures stability and potential fall out from instability, economic indicators and risk(20%)
Credit Indicators
Market Indicators
Political Risk Yearbook

85. The 2001 Corruption Perceptions Index ( top 24 countries from Exhibit 2-4)
Country Rank Country CPI Score
1 Finland
2 Denmark
3 New Zealand
4 Iceland
Singapore
6 Sweden
7 Canada
8 Netherlands
9 Luxembourg
10 Norway
11 Australia
12 Switzerland

86. The 2001 Corruption Perceptions Index (contd.)
Country Rank Country CPI Score
13 United Kingdom
14 Hong Kong
15 Austria
16 Israel
USA
18 Chile
Ireland
20 Germany
21 Japan
22 Spain
23 France
24 Belgium

87. Political Risk Data - Example
Dun & Bradstreet’s Guide to Doing Business around the World (pages )
1997 Comparative Country Risk Rankings
Overall Ratings: Political Risk, GDP Growth, Per Capita Income, Trade Flow with the US, Monetary Policy, Trade Policy, Protection of Property Rights, Foreign Investment Climate
List countries low/high in political risk

88. Political Risk Data - Example
List countries low/high in political risk
Low (5 = best): Italy, Denmark, Netherlands, Japan, Australia, Ireland, Germany, Sweden, France, Switzerland; US
High (1 = worst): Mexico, Brazil, Egypt, Venezuela, Peru, Russia

89. Risk Management: Analysis - macro, micro Management - Integrative
Protective/Defensive

90. Integrative Approach Become part of the host country’s infrastructure
Good relationship with host government
Produce locally … in-country suppliers
Joint ventures
Local R&D
Effective in long-run

91. Protective/Defensive Approach
Discourage host government from interfering
As little as possible local manufacturing and R&D
Capital from local banks and outside
Diversify production among several countries

92. Three primary factors to be considered:
Contingency Approach
Overall risk for an international company depends on the polit. risk and characteristics of the firm.
Three primary factors to be considered:
1.Political risk type - Transfer risk/Operational Risk/Ownership risk
2.General investment type -Conglomerate/Vertical/ Horizontal
3. Specific Investment (1=most risky) - Sector (primary=1 /industrial=3/service=2) Technology (science=2/non-science=1) Ownership (wholly=1/partially owned=2)

93. Political Risk
Political Risk Insurance - covers the loss of firm’s assets, not the loss of revenue
Overseas Private Investment Corp (OPIC)
inability to repatriate profits, expropriation, nationalization, damage from war, terrorism
Foreign Credit Insurance Association
war, revolution, currency inconvertibility, cancellation of import or export licenses

94. Session #17 October 25th Comments to Guestspeaker?
Articles P-Z
Quiz #4
Midterm Exam ?
Comments to Guestspeaker?
Progress Reports – First Presentations Nov.6
Articles: Chris, Travis, Jennifer, Steve, Denise
Review
External Enviro: Political Risk
Strategic Planning – Porter
Internal Environment

95. Quiz #4 Ch. 12 Ch. 13 Adler Chapter 6 Motivation and Leadership
Starbuck’s in China pp 405/407
Mazda in Flint, Michigan p 431
Motivation in China p 414
Motivation in Mexico p 417
Management - Middle East/ West
Ch. 13
3 Com Illinois p 439
Airbus p 443
Groupe Bull p 444
Adler Chapter 6 Motivation and Leadership

96. Review Why assessing risk in internationalization decisions?
Define “risk”. What is political risk?
Social unrest is an indicator of political risk - explain.
What conditions precede social unrest?
What are the consequences of political risk?
Where to get info about political risk?

97. A Risky Country: -unstable government - unstable economy
- war/revolution/terrorism
- unfriendly/hostile people
- unacceptable customs/values/attitudes

98. A Risky Company: type of product and/or service offered
type of industry
structure of ownership
level of technology

99. Session #18 Quiz #4 Articles P-Z Progress Reports
Articles: Eugenia, Jed, Birgitte, Todd
Review
Strategic Planning – Porter
Internal Environment
Organizational Culture
Behavior/People

100. Strategic Planning
Strategy: The science and art of conducting military campaign on a broad scale. A plan or technique for achieving some end.

101. Strategic management: The
set of decisions and
subsequent actions
used to formulate and
implement strategies that will
optimize the fit between the organization and its environment in an effort to achieve organizational effectiveness.
Strategic plan: The overall "blueprint" that defines how an organization will deploy its capital and human resources in pursuit of its mission and goals.

102. Profit = Volume * Price - Cost
Strategy and the Firm
Purpose of any business: Provide products or services that are desired by society and, hence, to make a profit
Profit = Revenue - Cost
Profit = Volume * Price - Cost

103. Profit: If the price the firm can charge for its output is greater than its costs of producing that output.
To do this, a firm must produce a product that is valued by consumers.
Thus the firm must engage in value creation. The price that consumers are willing to pay indicates the value/worth of the product to the consumer.
Porter, Michael’s Model (Distinguish from Michael Porter’s Diamond - National Competitive Advantage)

104. Strategy Firms can increase profit in two ways:
1.adding value to a product so that consumers are willing to pay more for it (improve quality, provide service, customize product to consumer needs)
2. by lowering the costs of value creation (perform value creation activities more economically).

105. Value creation activities:
The firm is a value chain composed of a series of distinct value creation activities.
Value creation activities:
1. Primary activities - Production and marketing
2. Support activities - Materials management, R&D, Human resource management

106. Strategy - Michael Porter
Michael’s model - Strategy: The
steps a firm takes
to ensure that the cost of value creation are reduced and
that value creation activities are performed in such a way that consumers are willing to pay more for the product than it costs to produce it.
Strategy is about identifying and taking actions that will reduce the cost of value creation and /or will add value by better serving the consumer needs.

107. Strategy Firms increase their profits BY
1.adding value to a product so that consumers are willing to pay more for it (improve quality, provide service, customize product to consumer needs)
2. by lowering the costs of value creation (perform value creation activities more economically).

108. Value creation activities:
The firm is a value chain composed of a series of distinct value creation activities.
Value creation activities:
1. Primary activities - Production and marketing
2. Support activities - Materials management, R&D, Human resource management

109. Strategy and Global Expansion
Performing certain value creation activities may have two benefits for the value chain
1. Lower the cost of value creation
2. Improve the quality of the product - create more value
= Firms realize location economies by dispersing particular value creation activities to those locations where they can be performed most efficiently and effectively.

110. Location economies:
Basing each value creation activity that the firm performs at that location where economic, political, and cultural conditions, including relative factor costs, are more conducive to the performance of that activity.
Consider transportation costs (weight-to-value ratio) and trade barriers.

111. Strategy and Global Expansion
Firms that expand to international markets will gain greater returns from their distinctive skills or core competencies.
Core Competencies - Skills within the firm that competitors cannot easily match or imitate. Examples.

112. Strategy and Global Expansion
Constrains on transferring core competencies result from the need for local responsiveness
Need for local responsiveness results from national differences in consumer tastes and preferences, business practices, distribution channels, competitive conditions, and government policies - these constrain the firm's ability to transfer core competencies and realize location economies.

113. Strategy of an international organization
concerns identifying and
taking actions that will
reduce the cost of value creation and/or
will add value
by better serving the consumer needs
through transferring core competencies and
realizing location economies taking
into account national differences.

114. Strategic Predispositions
Ethnocentric: strategic decisions are made at headquarters, key jobs at both domestic and foreign operations are held by headquarters management personnel (PCN's).

115. Polycentric: the MNC's subsidiaries are treated as distinct national entities with extensive decision-making autonomy (HCN's mane the foreign operations).
Geocentric: tries to worldwide, integrated business strategy and decision-making.
Regiocentric: reflects the geographic structure of the MNC.

116. Strategic Predisposition’s

117. Strategic Planning Process
External Scanning and Internal Scanning (SWOT)
Opportunities/Threats Strengths/Weaknesses
Vision, Mission, Goals, Objectives, Strategies
Strategy Implementation

118. Three Traditional Strategies (Bartlett/Goshal, 1989)
Global Strategy: focus on cost reduction and product standardization that is marketed worldwide.
International Strategy: limited local responsiveness, focus on transfer of valuable skills and products where indigenous competitors lack those skills and products.
Multidomestic Strategy: like international but extensive local responsiveness.

119. Pressures for Local Responsiveness
1. Differences in consumer tastes and preferences
2. Differences in infrastructure and traditional practices
3. Differences in distribution channels

120. Session #19 Midterm Exam - at end of class Quiz #4 back next time
Articles:
Review
Articles
Strategic Planning – Porter
Internal Environment
Organizational Culture
People - Behavior
Motivation, Leadership, Multicultural Teams

121. The Internal Environment of an International Organization
Culture
People
Processes
Structure

122. Organizational Culture
What is it?
Relevance? Why is it important?
Where does it come from?
What happens when two companies merge? Boeing-McDonnel Douglas
What happens when two companies from different countries merge?

123. The International Organization

124. Organizational Culture
What is organizational culture?
The shared values, beliefs, norms, and patterns of behavior in an organization.
Schein's Three Layer Model:
Artifacts, Values,Basic Assumptions
Measurement of organizational culture
In the workplace cultural differences are accounted for by work practices.

125. Midterm Exam Sixty percent of students have A and B Mean was 79 points
The highest score was 95
Frequencies
> 8 = 20%
> 16 = 40%
> 6 = 15%
> 7 = 17%
below 60 4

126. Midterm Specific scores Approximate letter grades 95 * 1 92 * 3 91 * 1
90 * 3
89 * 1
87 * 3
86 * 4
85 * 1
Approximate letter grades
A 91, A- 88, B+84, B 81, B- 78, C+ 74, C 71, C- 68, D+ 64, D 61, D- 58

127. Midterm a. in detail describe -- specify, explain, relationships
Q#1:
a. in detail describe -- specify, explain, relationships
b. what is the difference …
Q#2:
Apply Hofstede dimensions to explain .. Correct dimension 3 points; explanation 2 points
Q#3:
a. describe the differences in external enviro
b. 1) explain ..countries dominate trade and FDI .. FDI clusters; Tiger countries … Baby Tigers
b.2) developing countries .. Which ones, GDP growth rate
b.3) criteria -- less developed country.. Examples
Q#4
a. benefits and cost .. Explain each..Pick a country for overall assessment
b.1) how to assess risk .. Social unrest .. Sources
b.2) Three risky countries
b.3) Firm specific charactersitics
c. Integrative vs protective/defensive approach

128. Midterm b. EU one large market -- macro .. Yes; micro.. No Q#5
a.1) EU trade agreement facilitates trade for US firms .. Common standards; currency
a.2) EU trade agreement hinders trade .. Specifications; Eu firms prefer Eu firms; funding advantages
b. EU one large market -- macro .. Yes; micro.. No
c. EURO .. How introduced..benefits..problems
Q#6
1) Describe
2)Compare the cultures of US, Japan, Germany
3)based on cultural characteristics - social stratific; religion, education, political and economic philosophy, language
4)based on Hofstede dimensions
5)which is most culturally tough

129. Session #20 Quiz #4 back - end of class
October 6: Germany and Austria; Ireland
October 8: Norway
Articles: Ryan - Swissair; Jon - Ford; Jake and Kwang Min - Steel Industry; Bret - Internet/Terrorism; JJ - Terrorism/external enviro; Ryan - China
Review
Internal Environment
Organizational Culture
People - Behavior
Motivation, Leadership, Multicultural Teams

130. Termpaper evaluation Presentation
1. Evaluated by the seminar leader and the seminar participants.
2. Max. 100 points total.
3. Criteria: Content (60 points)
Comprehensiveness
Relevance
Effectiveness with respect to generation of understanding

131. Format (40 points) Structure of presentation
Appropriate (quantity, quality) presentation methods)
Stimulation of discussion and critical thinking
Written paper
1.Evaluated by seminar leader. Team members evaluate each other - after presentation.
2. Max. total of 100 points.
3. Criteria:Content comprehensiveness, relevance, logical integration, ANALYSIS

132. Dimensions of Organizational Culture
1. Process-----Results oriented
2. Tight Loose Control
3. Job Employee oriented
4. Parochial----Professional oriented
5. Closed system--Open system
6. Normative----Pragmatic

133. Organizational Culture, Processes, and Structure
Structure Communication Decision Making Reward
Process Oriented
Results Oriented
Job Oriented
Employee Oriented
Parochial
Professional
Closed System
Open System
Tight Control
Loose Control
Normative
Pragmatic

134. Organizational Culture
Creating and changing the culture of an organization?
National and Organizational Culture
Organizations in Japan, Germany, the U.S. are likely to have which org. culture characteristics?
The Organizational Culture of a MNC
A universal org. culture?

135. Internal Environment: Behavior
Individual Behavior
P = f (A, M)
Motivation defined!
Homeostasis --- applied to psychological needs
MotivationTheories ---
Applicability across cultures??
Content Theories
Maslow’s Need Hierarchy
Two Factor Theory of Motivation
McClelland Achievement Motivation

136. Internal Environment: Behavior
Process Theories
Equity Theory of Motivation
Goal - Setting
Expectancy Theory of Motivation
valence 
Effort  Performance  Outcome
 
expectancy instrumentality

137. Motivation and Hofstede
High UNC - job security
Low UNC - fast-track, more risky opportunities
Low POW - motivation through teamwork and peers
High POW - motivation depends on boss
High IND - motivation through opportunities for individual advancement
Low IND - motivation through appeals to group goals and support
High MASC - comfortable with traditional division of work roles
Feminine - looser definition of roles, more flexible

138. The Meaning of Work Tied to economic necessity What else?
Thai: work = ngan(same word as the word for play)
Work centrality - relative importance of work
Six functions of work: needed income, interesting & satisfying, contact with others, serve society, keeps one occupied, status and prestige
These may be satisfied through other aspects of life
Study results: Britain (lowest), Germany, Netherlands, Belgium, USA, Israel, Japan (page 411)

139. Group Behavior Group effectiveness =  individual behavior + 
Mature group = effective group
Stages of development
Two main characteristics for the analysis of Groups
Leadership and composition

140. Leadership Which Hofstede dimensions? Types of leadership styles:
autocratic, participative, group
authoritarian, democratic, laissez-faire
Theory X, Theory Y

141. Across cultures: Haire, Ghiselli, Porter
Research:
traits, behaviors, contingency approach
Vroom - Yetton
Across cultures: Haire, Ghiselli, Porter
South-European and Nordic-European --- more autocratic, more Theory X
South-European give a little more autonomy to employees in working out details

142. Both support participative leadership practices
Smaller companies  participative
Japanese  Theory Y --- employees learn from mistakes
Germans  Theory X --- autocratic, stop poor performance asap

143. Quiz #5 Deresky Adler Chapter 5 p.139, 150-152

144. Group Behavior: Group Composition --- Multicultural Teams
Impact of cultural diversity on group performance?
group productivity = f(task, resources, process)
actual productivity = potential productivity - losses due to faulty process
actual productivity  or  =
potential productivity  or  - losses  or 

145. benefits associated with cultural diversity:
# of alternatives generated;
quality of alternatives;
creativity/divergence;
no groupthink

146. Process Losses: potential for miscommunication increases;
cohesiveness decreases;
negative attitudes (dislike, mistrust);
perceptual problems (stereotyping);
stress

147. managing team effectiveness:
Multicultural teams have the potential to be the most or the least effective teams
Group development stages: entry, work, action
Task: innovative or routine

148. Manage culturally diverse teams through:
task-related selection
recognition of differences
superordinate goals
equal power
mutual respect
feedback

149. Communication Macro Level Micro (Interpersonal) Level
Definition: Transmission of meaning through the use of common symbols
Sender - Message - Receiver
Encoding Decoding
Communication Barriers

150. Macro - Level
Communication Flows
upward/downward
culture

151. Session #21 and 22 Quiz #5 on Nov 9 France
Review: Norway (Peer Evaluation) - Luis, Jeff, Ila
Any Questions?
Population Size? GDP/capita?
Employment Legislation? Labor Unions?
Benefits/Cost/Risk?
Culture - Characteristics? Hofstede Dimensions? Cultural Toughness?
Management - Motivation? Leadership? Decision-Making?
Unique Features?

152. Russia Population: 160 Million
Factor Endowment: Basic -- high (natural resources … oil); Advanced -- very low.
History: 55 years of Communist rule; means of production = common good; classless society (?!); suppression of opposition
Gorbachev - mid 80’s; perestroika (economic restructuring - building the infrastructure; technological advancement); glasnost (openess);
Culture ?? - MASC; UNC; IND; POW; ST ???

153. Mc Donald’s in Russia McDonald’s in Moscow:
1. What do you find most amazing about McD’s story in the Soviet Union?
2. Explain how McD was able to enter the Societ Market?
3. How long did the McD management have to negotiate with the Soviet government? Why did such negotiations take so long?
4. What benefits did the Soviet government expect from the agreement with McD?
5. What were the main challenges for McD in opening the first restaurant?
6. Describe a typical Russian employee as portrayed in the video.

154. Expatriates or not?
McD chose to staff their stores in Russia with HCN’s. Why?
Exercise: How to staff -- PCN’s, HCN, TCN’s?
Country groups
Use the info about your country for this exercise.

155. Session #23 and 24 Presentations - Europe - Review Review
Greece
Spain
Additional Questions
Review
Population Size? GDP/capita?
Employment Legislation? Labor Unions?
Benefits/Cost/Risk?
Culture - Characteristics? Hofstede Dimensions? Cultural Toughness?
Management - Motivation? Leadership? Decision-Making?
Unique Features?

156. Session #25 Today: Latin America - Mexico and Brazil Presentation
Israel
Additional Questions??
Review
Population Size? GDP/capita?
Employment Legislation? Labor Unions?
Benefits/Cost/Risk?
Culture - Characteristics? Hofstede Dimensions? Cultural Toughness?
Management - Motivation? Leadership? Decision-Making?
Unique Features?

157. Session #27 Latin America Mexico Brazil
Market - Population, GDP/capita
Porter’s Diamond - Factor Endowment
Culture - Cultural Toughness
Hofstede’s Dimensions and Management
Specific Questions
Summary: Benefits - Cost - Risk and Recommendations
Brazil

158. Sessions #28, 29, 30 Internships - Current requests
RR Donnelly, IGT, Peppermill, Mutual Insurance, Reno Hilton, Dwyer - HR; Teal Engineering (Marketing/ Management)
Quizzes and Articles back
Study Guide - End of Class
Review
South Korea: Population, GDP, Export/Import, Porter Diamond (Factor Endowment, Demand Conditions, Suppliers, Strategy . Structure); Culture (Characteristics, Hofstede Dimensions) and implications for management?! .. Family-owned, chaebols, kinbun, han, “bribery”; Cost-benefits-risk? Conclusions
India: Population, GDP, Export/Import, Porter Diamond (Factor Endowment, Demand Conditions, Suppliers, Strategy . Structure); Culture (Characteristics, Hofstede Dimensions) and implications for management?!

159. Communication: Micro - Level
Interpersonal communication
encoding
message
decoding
Communication barriers
language
perception
culture
nonverbal communication
projected similarity
parochialism

160. Final Exam: Thursday, December 14, noon - 2:00 p.m.
Session 31
Papers back
Articles back
Review
Australia
Japan
Communication
Course Summary
Final Exam: Thursday, December 14, noon - 2:00 p.m.

161. Micro -Level Body Language Stereotyping
Explicit vs Implicit Communication
Non-verbal communication
Body Language
Emblems
Illustrators
Affect Display
Regulators
Adaptors
Space (proxemics)
Touch
Voice
Dermal Code

162. Decision Making in an International Organization
Relevance: Quality of decisions
-- ->Organizational Effectiveness
Differences across Cultures:
Why/why not?

163. Decision-Making Process:
1. Setting Objectives
2. Problem Recognition
3. Information Search
4. Alternative Generation
5. Choice
6. Implementation

164. DM Process and Culture 1. Setting Objectives 2. Problem Recognition
3. Information Search
4. Alternative Generation
5. Choice
6. Implementation

165. International Negotiations
Definition:
the process in which at least two partners with different needs and viewpoints try to reach an agreement that is acceptable to all on matters of mutual interest
International managers spend more than 50% of their time negotiating

167. Recommendations (Fisher and Ury "Getting to Yes"):
1. Separate the people from the problem
2. Focus on interest, not position
3. Insist on objective criteria
4. Invent options for mutual gain

168. Apply the following models to summarize and remember the relevant information about the countries we discussed:
Porter Diamond: National competitive advantage
Existence and importance of basic factors? Existence and importance of advanced factors?

169. Course Summary ==> Europe? Asia? Latin America? Australia?
Specific countries?
Internationalization Strategy: Generalizations??
Purpose of internationalization
Market growth (pop size; income)
Value creation activities (labor cost, exp.)
Benefits = Location economies (transportation cost)
Political Risk .... South America? Asia? Europe?
Cost … Management - cultural differences ...
religion, education; Hofstede and Trompenaars
==> Generalizations across countries/regions??

170. The International Organization

171. Managing the International Organization
1.External Environment ... Porter Diamond; Status Quo; Culture (Hofstede)
2.Strategy ... Value creation activities; Location economies
3.Internal Environment ... Behavior: Individual (Motivation) and Group (Leadership; Multicultural Teams) Processes: Communication -- Macro (communication flow); Micro (communication process); Next -- Nonverbal communication Decision Making ; Negotiation; HR Processes (The Expatriate Assignment).

172. Market Entry Modes
Exporting - Turnkey Projects - Licensing (mftg)- Franchising
Joint Ventures - Wholly Owned Subsidiaries
Strategic Alliances- refers to cooperative agreements between potential or actual competitors ... formal joint ventures to short-term contractual agreements in which two companies agree to cooperate on a particular task.

174. Expatriate Assignment
Why expatriates?
Culture shock - cross-cultural adaptation
Failure of U.S. expats
Strategic purpose/involve HRM
Selection: Technical skills/Adaptation skills/Family and Spouse
Training: When? Purpose? Type - rigor/methods
Repatriation: Communication and Valuation