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International Management BADM 729 Dr. Yvonne Stedham.

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1 International Management BADM 729 Dr. Yvonne Stedham

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

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

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

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

6 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): Its managements task to create the best possible fit between the external and internal environments of the organization and must ensure internal consistency between the organizations elements. A contingency approach to management (as opposed to administrative theory of management): Its managements task to create the best possible fit between the external and internal environments of the organization and must ensure internal consistency between the organizations elements.

7 7 The Organization

8 8 The International Organization

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

10 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 11 Internationalization is the process by which firms 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 12 Reasons for becoming an international organization Reasons for becoming an international organization – Profit = Revenue – Cost = (Volume*Price) - Cost –1. 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 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 14 Types of "international" organizations 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 15 –Graphic Representation Headquarters – Subsidiary Relationship Headquarters – Subsidiary Relationship Level of Global Participation Level of Global Participation

16 16 The Relationship between Level of Internationalization and Firm Performance 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 17 Stages Model of Internationalization Stages Model of Internationalization Outward looking perspective: activities/issues related to the other countries (e.g., exporting) vs an inward perspective (e.g., importing) Outward looking perspective: activities/issues related to the other countries (e.g., exporting) vs an inward perspective (e.g., importing) Descriptive Descriptive Reflects the commonly observed pattern of increased commitment to international business Reflects the commonly observed pattern of increased commitment to international business

18 18 Four stages: 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 19 An International Organization 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 20 Review –Types of international organizations Criterion -- Level of Global Participation Criterion -- Level of Global Participation International/Multi-Domestic International/Multi-Domestic Multinational Multinational Transnational/Global Transnational/Global –Stages of Development to an International O. Descriptive Model Descriptive Model –Effectiveness of Internationalization Relationship between extent of internationalization and performance Relationship between extent of internationalization and performance –Headquarters of well-known companies (Exercise)

21 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 - Reading: Competitive Advantage of Nations, Porter Gabbye, Lance, Dan Gabbye, Lance, Dan

22 22 PORTER DIAMOND National Competitive Advantage 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: 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 23 Porters Diamond –Why a nation achieves success in a particular industry? Why Japan -- automobile, cameras Why Japan -- automobile, cameras Why SUI -- precision instruments, pharmaceuticals Why SUI -- precision instruments, pharmaceuticals Why Germany and U.S. -- chemical 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 24 Rugman-Verbeke Model: 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 Porters model

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

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

27 27 The External Environment Political Environment Political Environment Form of governmentForm of government Political stabilityPolitical stability Foreign policyForeign policy State companiesState companies Role of militaryRole of military Level of terrorismLevel of terrorism Restrictions on imports/exportsRestrictions on imports/exports Economic Environment Economic Environment Economic system Stage of development Economic stability GNP Intl financial standing Monetary/fiscal policies Foreign investment

28 28 The External Environment Regulatory Environment Regulatory Environment Legal systemLegal system Prevailing intl lawsPrevailing intl laws Protectionist lawsProtectionist laws Tax lawsTax laws Role of contractsRole of contracts Protection for proprietary propertyProtection for proprietary property Technological Environment Technological Environment Level of technology Availability of local technical skills Technical requirements of country Transfer of technology Infrastructure Environmental protection

29 29 External Environment: Current Developments- Overview Relevant variables: GDP ; GDP/capita ; GDP growth; factor endowments; demand conditions Relevant variables: GDP ; GDP/capita ; GDP growth; factor endowments; demand conditions The GDP (gross domestic product): 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. 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 30 The top 7 economies (PPP GDP) 90s: 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) 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 ($.57) The next 7 economies: UK ($.9); Brazil ($.85); Indonesia ($.7); Russia ($.68); Canada ($.60); Mexico ($.58); Spain ($.57)

31 31 The wealthiest nations 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) 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 32 Largest cities and cost of living index: 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) 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 187 mill; Brazil 156 mill; Russia 148 mill; Japan 124 mill; Pakistan 122 mill; China 1.2 bill; India 900 mill; US 258 mill; Indonesia 187 mill; Brazil 156 mill; Russia 148 mill; Japan 124 mill; Pakistan 122 mill;

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

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

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

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

37 37 European Union What kind of trade agreement? Governance? What kind of trade agreement? Governance? The European Commission 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 38 –Eastern Europe -Break-up of The Soviet Union -Break-up of The Soviet Union (Dec 1991) (Dec 1991) - Russia (glasnost, perestroika) - Russia (glasnost, perestroika) - The Ukraine - The Ukraine -Czech Republic -Czech Republic -Poland -Poland

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

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

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

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

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

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

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

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

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

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

49 49 2.Religion - 2.Religion - Christianity 1 bill; 20%; Protestant work ethic 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) 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 50 Hinduism 500 mill; spiritual achievement; nirvana 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) 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 51 –3.Political philosophy Political freedom – dominant political orientation Political freedom – dominant political orientation –4.Economic philosophy Free market – to what extent Free market – to what extent –5.Education Importance – access - type Importance – access - type –6.Language (spoken; non-verbal) Communication Communication

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

53 53 Measurement of Culture Four dimensions 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. 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 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. 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 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 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 57 5. Confucian dynamism/Long-term orientation (1993): 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. 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 58 Culture Review 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 59 Culture Review 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 60 Sources for International Research Hofstede, Geert (1980): Cultures Consequences Hofstede, Geert (1980): Cultures Consequences Hofstede, Geert (1991): Cultures and Organizations Hofstede, Geert (1991): Cultures and Organizations Hofstede, Geert (1984): Cultures Consequences: International Differences in Work-Related Values Hofstede, Geert (1984): Cultures 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 Hofstede, Geert and Michael Harris Bond (1984): The Confucius Connection: from cultural roots to economic growth. Organizational Dynamics, 16, 4,

61 61 Measurement of Culture Four dimensions 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. 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 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. 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 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 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 65 5. Confucian dynamism/Long-term orientation (1993): 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. 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 66 –U.S.Japan Germany –Individualism: –Power distance: –Uncertainty avoidance: –Masculinity: –ST/LT:

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

68 68 Applying Hofstedes Dimensions Lawyers per 100,000 population Lawyers per 100,000 population –U.S. –Germany –Great Britain –Japan –Italy –France

69 69 Applying Hofstedes Dimensions Lawyers per 100,000 population Lawyers per 100,000 population –U.S.312 –Germany190 –Great Britain134 –Japan106 –Italy81 –France49

70 70 Laurents Research-See Adler 9 Western countries, US, 2 Asian countries 9 Western countries, US, 2 Asian countries More than sixty common work situation 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 71 Laurents 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 US 18% agree, Germany 24% agree, Italy 50% agree France, 45% agree, Japan 52% agree - POW 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 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 US 18% agree, Germany 46% agree, Italy 66% agree, Japan 78% agree - UNC

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

73 73 Fons Trompenaars Riding the Waves of Culture (1998; 2 nd edition) Riding the Waves of Culture (1998; 2 nd edition) Dimensions (see textbook pg 119): 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 74 Cultural Stereotypes What is a stereotype? What is a stereotype? Good or Bad? Good or Bad? Effect on cross-cultural adaptation Effect on cross-cultural adaptation Our research Our research Exercise Exercise

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

76 76 Video - Culture Cross-cultural understanding Cross-cultural understanding

77 77 The International Organization

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

79 79 Overall Attractiveness of a Country Trade-off between 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 80 External Environment: Political Risk External Environment: Political Risk –What is risk? –What is economic risk? –What is political risk?

81 81 External Environment: Political Risk 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. 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 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 83 –Results of Social Unrest: – Change in gov/gov policy –Results of Political Change: –Expropriation –Indigenization

84 84 Risk Assessment Euromoney Magazines Country Risk Ratings Euromoney Magazines 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 Political Risk Yearbook

85 85 The 2001 Corruption Perceptions Index ( top 24 countries from Exhibit 2-4) Country RankCountryCPI Score 1Finland 9.9 2Denmark 9.5 3New Zealand 9.4 4Iceland 9.2 Singapore 9.2 6Sweden 9.0 7Canada 8.9 8Netherlands 8.8 9Luxembourg Norway Australia Switzerland 8.4

86 86 The 2001 Corruption Perceptions Index (contd.) Country RankCountryCPI Score 13United Kingdom Hong Kong Austria Israel 7.6 USA Chile 7.5 Ireland Germany Japan Spain France Belgium 6.6

87 87 Political Risk Data - Example Dun & Bradstreets Guide to Doing Business around the World (pages ) Dun & Bradstreets Guide to Doing Business around the World (pages ) 1997 Comparative Country Risk Rankings 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 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 List countries low/high in political risk

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

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

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

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

92 92 Contingency Approach Contingency Approach Overall risk for an international company depends on the polit. risk and characteristics of the firm. Overall risk for an international company depends on the polit. risk and characteristics of the firm. Three primary factors to be considered: 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 93 Political Risk Political Risk Insurance - covers the loss of firms assets, not the loss of revenue Political Risk Insurance - covers the loss of firms assets, not the loss of revenue –Overseas Private Investment Corp (OPIC) inability to repatriate profits, expropriation, nationalization, damage from war, terrorism inability to repatriate profits, expropriation, nationalization, damage from war, terrorism –Foreign Credit Insurance Association war, revolution, currency inconvertibility, cancellation of import or export licenses war, revolution, currency inconvertibility, cancellation of import or export licenses

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

95 95 Quiz #4 Ch. 12 Ch. 12 –Starbucks 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 Ch. 13 –3 Com Illinois p 439 –Airbus p 443 –Groupe Bull p 444 Adler Chapter 6 Motivation and Leadership Adler Chapter 6 Motivation and Leadership

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

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

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

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

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

101 101 Strategic management : The 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. Strategic plan : The overall "blueprint" that defines how an organization will deploy its capital and human resources in pursuit of its mission and goals.

102 102 Strategy and the Firm 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

103 103 Profit : If the price the firm can charge for its output is greater than its costs of producing that output. 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. 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. 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, Michaels Model (Distinguish from Michael Porters Diamond - National Competitive Advantage) Porter, Michaels Model (Distinguish from Michael Porters Diamond - National Competitive Advantage)

104 104 Strategy Firms can increase profit in two ways: 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).

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

106 106 Strategy - Michael Porter –Michaels model - Strategy: The steps a firm takes steps a firm takes to ensure that the cost of value creation are reduced and 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. 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.

107 107 Strategy Firms increase their profits BY 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).

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

109 109 Strategy and Global Expansion 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.

110 110 –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.

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

112 112 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.

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

114 114 –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).

115 115 –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.

116 116 Strategic Predispositions Strategic Predispositions

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

118 118 –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.

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

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

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

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

123 123 The International Organization

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

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

126 126 Midterm Specific scores Specific scores –95 * 1 –92 * 3 –91 * 1 –90 * 3 –89 * 1 –87 * 3 –86 * 4 –85 * 1 Approximate letter grades 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

127 127 Midterm Q#1: Q#1: –a. in detail describe -- specify, explain, relationships –b. what is the difference … Q#2: Q#2: –Apply Hofstede dimensions to explain.. Correct dimension 3 points; explanation 2 points Q#3: 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 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

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

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

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

131 131 –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

132 132 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

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

134 134 Organizational Culture Creating and changing the culture of an organization? Creating and changing the culture of an organization? National and Organizational Culture 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 The Organizational Culture of a MNC –A universal org. culture?

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

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

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

138 138 The Meaning of Work Tied to economic necessity Tied to economic necessity What else? What else? Thai: work = ngan(same word as the word for play) Thai: work = ngan(same word as the word for play) Work centrality - relative importance of work 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) Study results: Britain (lowest), Germany, Netherlands, Belgium, USA, Israel, Japan (page 411)

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

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

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

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

143 143 Quiz #5 Deresky Deresky –Chapter 5 p.139, –Chapter 6 p.167, , –Chapter 10 p.345, 367 Adler Adler –Chapter 8 –Chapter 10

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

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

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

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

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

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

150 150 Macro - Level Communication Flows Communication Flows –upward/downward –culture

151 151 Session #21 and 22 Quiz #5 on Nov 9 Quiz #5 on Nov 9 France France Review: Norway (Peer Evaluation) - Luis, Jeff, Ila 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?

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

153 153 Mc Donalds in Russia McDonalds in Moscow: McDonalds in Moscow: –1. What do you find most amazing about McDs 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.

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

155 155 Session #23 and 24 Presentations - Europe - Review Presentations - Europe - Review –Greece –Spain Additional Questions Additional Questions Review 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?

156 156 Session #25 Today: Latin America - Mexico and Brazil Today: Latin America - Mexico and Brazil Presentation Presentation –Israel Additional Questions?? Additional Questions?? Review 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?

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

158 158 Sessions #28, 29, 30 Internships - Current requests Internships - Current requests –RR Donnelly, IGT, Peppermill, Mutual Insurance, Reno Hilton, Dwyer - HR; Teal Engineering (Marketing/ Management) Quizzes and Articles back Quizzes and Articles back Study Guide - End of Class Study Guide - End of Class Review 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?!

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

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

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

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

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

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

165 165 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

166 166

167 167 –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

168 168 –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?

169 169 Course Summary –==> Europe? Asia? Latin America? Australia? Specific countries? Specific countries? –Internationalization Strategy: Generalizations?? –Purpose of internationalization Market growth (pop size; income) Market growth (pop size; income) Value creation activities (labor cost, exp.) 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 religion, education; Hofstede and Trompenaars ==> Generalizations across countries/regions?? ==> Generalizations across countries/regions??

170 170 The International Organization

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

172 172 –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.

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174 174 Expatriate Assignment 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

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