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Commercial stake holders, e.g. Suppliers competitors, distributors, retailers. Host country stake holders e.g. local employees and their organisation,

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Presentation on theme: "Commercial stake holders, e.g. Suppliers competitors, distributors, retailers. Host country stake holders e.g. local employees and their organisation,"— Presentation transcript:

1 Commercial stake holders, e.g. Suppliers competitors, distributors, retailers. Host country stake holders e.g. local employees and their organisation, pressure country govt. host country community. Domestic country stake holders e.g. Domestic country employees, share holders. Domestic country customers, domestic govt..

2 An international business enterprise is tantamount to pressure from a triangle of stakeholders. (a) Commercial stakeholders, such as suppliers, competitors, distributors and retailers, who put commercial pressure upon the firm and stress values of commercial importance. (b) Host country stakeholders, such as local employees and their organisations, pressure groups, host country government and host country community, on the other. (c) Domestic or home country stakeholders, which are home country employees, shareholders, home country customers and the domestic government.

3 Culture, market, data, politics, government, company, economy, finance, currency. Domestic Operations (HOME COUNTRY) *Culture is predominately single *Market is more homogeneous *Data is usually available *Political risks is lower *Government gives relative freedom to operate *Company has coherent structure *Economy is stable and more Predictable *Uniformity of operations in finance. *There is single currency International Operations (HOST COUNTRY) It is multicultural. Market is fragmented and diverse Getting data is difficult and expensive to obtain high risks of political interference Government has strong influence on operations Company has highly distorted organizational structure High risk of economic instability variety of methods used for financial transactions. Currency differ in Stability and value. FACTORS OF BUSINESS OPERATIONS:


5 Distinction between INTERNATIONAL, MULTINATIONAL. GLOBAL, and TRANSNATIONAL, Corporation. MNCs is usually defined as a firm that controls operations or income generating assets in more than one country. The scholars differ from each other in charecterising multinational enterprise. Some scholar suggested that multinationality requires operation in minimum number of countries usually five or six or that farm which is active across borders should be a certain size before it can called MNCs.

6 Definition of MNC: 1. MNCs can be defined as firms having operations in more than one country, international sales and nationality mix of managers and owners. 2. The multinational company has been defined as "a national company in two or more countries operating in association, with one controlling the other in whole or part”.

7 Powers of Multinational First order power is direct, exercised through a multinational's political or financial strength. Second-order power in contrast, is indirect, derived from a multinational's organizational know-how technological progress, and status as a representative of cultural values or dominant market ideology. First Order Second Order

8 The term MNCs is not used for a farm whose sole international involvement is the exporting of goods or services from its home base The essence of the multinational concept is the firm controls income generating assets in at least two countries INVESTMENT Involves the acquisition of foreign securities by individuals or institutions without any control over the management of the foreign entity It invests management control. MNCs engaged in FDI because they both own and control assets in foreign countries. PORTFOLIOFDI

9 The impact of MNCs on individual host economies has depended on the type of investment undertaken., its quality as well as quantity. The nature of host economy including its stage of development and its culture. The history of international business in Japan has been the low level of inward FDI compared over all size of economy, while the U.K. has world's largest host economies through out the twentieth century. But it would be entirely misleading to draw the policy conclusion that Government should seek to restrict FDI in their economies if they want to Japanese economic miracle.

10 GLOBALISATION The adjective "Global" means world wide or more loosely the whole. The noun "GIobalisation" as quite developed recently. Basically "GIobalisation" refers to the compression of the world and the intensification of consciousness of the world as single place. In business "GIobalisation" is conceived exclusively by economic activities, (e.g. Global market place.)

11 Organisational Structure Transntional Multinational Global National corporation with tightly controlled foreign operations. (Ethnocentric management style.) Decentralised organizational structure diverse and perhaps on co­ordinated set of strategies world wide. (polycentric management style) It permits retaining local flexibility while achieving global integration. (Geocentric Management style)

12 MNCs can be engaged in : Manufacturing Services the export/import of natural resources. Broadly there are farms which make supply oriented investment and there are firms which engaged in market oriented investment. Transfer a package of resources across national borders. Either MNCs have wholly-own subsides, joint ventures, licensing agreements, alliances and long term contracts

13 Joint venture: When two or more companies own a foreign farm. Licensing: The contract between independent farms to transfer technologies or resources. Franchising: It is a special type of licensing under which a foreign company grants an individual or company to conduct business in a certain way. International cartels: Agreement between independent farms to maintain prices.

14 International collaborative agreements and strategic alliances: Arrangement Arrangement between firms to cooperate- facilitate in new product developments. Long-term contracts between firms. These are the important components of international business.

15 Ironically what is often called "Globalization" relates to the triad of the United states, European union and Japan. Globalisation challenges both National economics and business organisations. Government and corporations have to cope up with the new challenges. Globalisation tries for a world wide "Level playing field". It advocates liberalisation and non-discrimination.

16 FOREIGN DIRECT INVESTMENT (FD1) CLUSTERS American Cluster Argentina Colombia Venezuela Bolivia MexicoPhilippines Chile Panama Saudi Arabia United States European Union Japan Triad EU Cluster Czech RepublicRussia HungaryBrazil Poland Japanese Cluster South Korea Hong Kong Thailand

17 The definition suggests correctly that although global companies are multinational in doing business in more than one country their composition and character reflects significant uni-nationality. Typically a majority of their stock is owned by citizens of their home country; and their top management are dominated by citizen of their home country.

18 The difficulties of assessing the impact of MNCs on host economies arise from many ways in which they can make impact. They create employment, but also increase import. The new technologies which they introduce may be accompanied by a package of cultural values which may or may not be welcome.

19 But the term also includes other aspects such as environment, socio-cultural aspect etc. Economic Globalisation can be understood as the widest geographic extension possible of international economic integration. It moves beyond national boundaries. Taking the world as single place Globalization's essential criterion is (1) Equality of prices of equal goods and services. (2) Non discrimination in the treatment of goods, or mobility of goods.

20 Wages: While child labor may be deemed unethical in a developed country, and it may even be condemned by the United Nation's Chapter of Labor Laws, there may still be the ethical dilemma whether compulsory withdrawal of all child laborers from a firm is to be strictly ordered even if that inevitably leads to starvation in a developing nation. There is no super national state that controls the multinationals. Sony and Toyota in United State, G.M.and Ford in Germany, OPEC with LDCs etc.

21 Multinationals are corporations that operate extensively in more than one country, usually through branches or subsidiaries engaged in Production, Marketing or both. They pose special moral problems. Because their activity is not confined to one single nation, no one nation can effectively control them. National laws can effectively circumscribe national farms.

22 A manager of MNC has to sit above global and national markets rather than in one of them. He has to see how the product in question can be adopted to the needs and traditions of the particular society, he wishes to penetrate. This concept is called concept of EQUIDISTANCE MANAGER. For example:- Coca Cola has amazingly seventy percent of the soft drink market in Japan. This was achieved by

23 carefully establishing a sale and distribution network appropriate to the ethos and expectation of Japanese culture. So MNCs should learn how to work and within desired market and not simply forced entry by its economic power.

24 What is culture? Culture is that ''complex whole which includes. knowledge, belief, art, morals, law, custom, and any other capabilities and habits acquired by man as a member of society". E.B.Taylor.

25 Nature of culture 1. Learned: Culture is not inherited or biologically based: it is acquired by learning and experiencing. 2.Shared: People as members of a group, organization, or society share culture, it is not specific to single individuals. 3. Trans generational: Culture is cumulative, passed down from one generation to the next. 4. Symbolic: Culture is based on the human capacity to symbolize or use one thing to represent another. 5. Patterned: Culture has structure and is integrated., a change in one part will bring changes in another. 6. Adaptive: Culture is based on the human capacity to change or adapt as^opposed to the more genetically driven adaptive process of animals.

26 Cultural Diversity Centralized vs.. decentralized decision making: In some societies, all important organizational decisions are made by top managers. In others. these decisions are diffused throughout the enterprise, and middle and lower level managers actively participate in, and make, key decision. Safety vs.. Risk : In some societies, organizational decision makers are risk-aversive and have great difficulty with conditions of uncertainty. In others risk taking is encouraged, and decision making under certainty is common.

27 Individuals vs.. Group rewards: In some countries, personnel who do outstanding work are given individual rewards in the form of bonuses and commissions. In others, cultural norms require group rewards, and individual rewards are frowned on. Informal vs.. formal procedures: In some societies, much is accomplished through informal means. In others, formal procedures are set forth and followed rigidly. High vs.. low organizational loyalty: In some societies.people identify very strongly with their organization or employer. In others, people identify with their occupational group, such as engineer or mechanic. Co-operation vs.. competition: Some societies encourage co-operation between their people. Others encourage competition between their people.

28 American Culture Pragmatic(Calvinistic/ Protestant Ethics. Masculine Christianity, Reserved. Stoic) Ethics Based on Transactions and Fair Exchange Individualism Free Will/Accountability/ Choice Masculine— Uncle Sam Metaphor American Spirit Russian Culture Mystical (Russian Orthodox, Mariology Christianity. Feminine. Emotional) Ethics Based on Good Treatment Collectivism AVOS/' Wishful Thinking Feminine— Mother Russia Metaphor Russian Soul Spectrum of Cultural dimensions Impacting U.S. – Russian Business ethics



31 Applying Hofstede's model Hofstede's research findings are invaluable when applied and modified to your specific situation and needs. They provide a starting point for further analysis and research. First, review the similarities and the differences between your situation and that of Hofstede's research sample (within the same country), and decide how the differences affect your application of the model to the target workforce. In particular, look for sub cultural differences industry differences differences arising from the organizational culture-

32 The strengths of Hofstede's model However, these weaknesses are dwarfed by the strengths of Hofstede's work in comparing cultures and applying cultural analysis to practical management problems. The INFORMATION POPULATION (IBM employees) is controlled across countries, I which means comparisons can be made. This is a strength despite the difficulty of generalizing to other occupational groups within the same national culture The FOUR DIMENSIONS tap into deep cultural values and make significant comparisons between national cultures. The connotations of each dimension are highly relevant. The questions asked of the informants relate to issues of importance to the international manager. No other study compares so many other national cultures in so much detail.Simply, this is the best there is.

33 Third, there are TECHNICAL DIFFICULTIES in Hofstede's research. Intuition suggests that some of the connotations listed above overlap. For instance, we find: (Small power distance): Powerful people try to look less powerful than they are. (Feminine): Everybody is supposed to be modest (Larger power distance): Powerful people try to look as impressive as possible. (Hofstede 1991, p. 43) (Masculine) : Men are supposed to be assertive, ambitious, and tough. (Hofstede 1991, p. 96 ) Suppose that you come to a country of which you have no knowledge (and which has not contributed informants to Hofstede's study), and you observe that managers normally defer to their knowledgeable subordinates. Are you observing the effects of small power distances, or of high femininity?

34 The weaknesses of Hofstede's model Hofstede's analysis is vulnerable on a number of counts.Three problems are discussed here; First (like all national cultural studies), it assumes that NATIONAL TERRITORY and the limits of die culture correspond. But cultural homogeneity cannot be taken for granted in countries which include a range of culture groups or with socially dominant and inferior culture groups: the United States, Brazil, Switzer­land (French, German. Italian, Romansch cultures); Belgium (French, Flemish cultures); Spain (Basque, Catalan, and Castillian). The breakup of Yugoslavia during the 1990s demonstrates the futility of trying to create tight political units from disparate national cultures.

35 Defining the dimensions: e.g., individualism/collectivism The individualism/collectivism dimension is examined here by way of illustration. We have seen that Hofstede applied the Anglo concept of individualism - that is, in terms of the need to achieve and competitiveness. But other emphases are possible. Writing from a Polish perspective, Czarniawska (1986) refers to American individualism in the United States as a choice made in preference to cooperation. Brummelhuis ('1984) explains the Thai concept of individualism in terms of avoidance and distrust of authority: "The individual's preoccupation is not so much with self-realization and autonomy as with adaptation to the social or cosmological environment. If no single concept of "individualism" applies, the manager cannot assume that features associated with individualism in Anglo cultures are absent in more collectivist cultures. Similarly he/she cannot lake for granted that all cultures with high individualism scores are equally achievement motivated. Likewise, "collectivist" behavior in one context might have different connotations elsewhere. For instance. Japanese collectivism is organization based; but Chinese collectivism is family based. In Japanese terms, a Taiwanese employee who places his family interests above the interests of the Japanese-owned multinational is disloyal and cannot be fully trusted.

36 Second, Hofstede's informants worked within a SINGLE INDUSTRY (the computer industry) and a single multinational. This is misleading for two reasons. In any one country the values of IBM employees are typical only to a small group (educated, generally middle class, city-dwelling): other social groups (for instance unskilled manual workers, public sector employees, family entrepreneurs, etc.) are more or less unrepresented. (Tills problem of representation would occur whichever one company provided informants; the problems arising horn a ran^e of representations are worse.) Also, people work for IBM for different reasons in different cultures. In the United States, a lifetime career in a multinational might be generally desirable. Elsewhere, it may be less so; section 17.4 shows that Hong Kong Chinese usually aim to set up their own companies or to work for the family. A few years spent in a foreign-owned multinational might be regarded as useful training, but not as a long- term commitment.

37 Uncertainty Avoidance The extent to which people feel threatened by ambiguous situations and have created beliefs and institutions that try to avoid this Germany, Japan, and Spain Individualism vs.collectivism The tendency to look after their self-interest and their family U.S.A., CANADA, DENMARK, AUSTRALIA.

38 POWER DISTANCE : The extent to which less powerful members of institutions and organizations accept that power is distributed unequally. Countries where people blindly obey the orders of their superiors have high power distance. Example: Mexico, South Korea, and India. Masculinity: A situation in which the dominant values in society is success, money and things. JAPAN. Femininity: The dominant value in society is caring for other and the quality of life. NORWAY.

39 Creating a Map for Your Cross-Cultural Ethical Navigation It's All A Swindle Papa swindles Mama swindles Granmama's a lying thief We're perfectly shameless but we're Blameless after all its our belief Nowadays the world is rotten honesty has been forgotten fall in love but after kissing—check your purse to see what's missing Everyone swindles some my son's a mooch and so's the pooch Life's a swindle, yes, it's all a swindle so get what you can from your fellow man Girls and boys today would rather steal than play and we don't care We tell them get your share Life is short and greed's in season all mankind has lost its reason life is good, knock on wood, knock, knock Shops will swindle shoppers swindle every purchase hides a tale the price is inflated or Regulated to ensure the store will fail Wheel And deal and pull a fast one knowing you won't be the last one get the goods while they are going grab the cash while it is flowing Everyone swindles some what the heck go bounce a check Life's n swindle Politicians are magicians who make swindles Disappear The bribes they are taking the deals they are Making never reach the public's ear The left betrays the right dismays The country's broke and guess who pays But tax each swindle in the making profits will be record breaking Everyone swindles some so vote for who will steal for you Life's a swindle

40 3.3 THE CASE OF THE “SHINJINRUI" This section demonstrates the ambiguity of cultural shift in a complex society. This causes problems for the manager who has to decide on a response. The data arc drawn from Japan. The conventional Japanese office-worker or "salary man" was traditionally loyal to his boss and company to the point of Riving up evenings, weekends, and even vacations in order to serve their interests. But in the late 1980s, a new Generation of employees, called shinjinmi (new human beings) developed. They did not fit this model. A shinjinrui is more direct than the traditional Japanese. He act-s almost like a Westerner, a gaijin. He docs not live for the company and will move on if lie gets the offer of a better job. He is not keen on overtime, especially if lie has a date with a girl. He has his own plans for his free lime, and they may not include drinking or playing golf with the boss. 3

41 Not only younger managers adopt new attitudes to work. The story also discusses a survey conducted by an employers' association; only 3 percent of 250 managers still favored such traditional practices as long hours and the arbitrary transference of employees to distant posts where they might he separated from their families. If these attitudes really reflect values, then Japanese culture had shifted so that the old preferences for unconditional hard work and collective loyalty were disappearing. In Hofstedc's terms, the sliinjnmii's involvement with the company was becoming less moral and more: calculative - perhaps reflecting higher individual­ism. (Sherry and Camargo 1987, note that the individualist English pronouns "I" and "my" were increasingly borrowed l)y Japanese speakers.) Loyalty to employer appeared to be declining; did this reflect fewer needs to avoid uncertainty? Did increased respect for personal freedom and rejection of the company's interference in private life show less masculinity?

42 3.3. / Why the shinjinrui trend might not hove long-term significance These developments were noted at a time when the Japanese economy was booming. But did they reflect a fundamental shift in Japanese culture? Should a foreign company working in Japan have invested in new management systems on the assumption that the Japanese character was fundamentally altered. and that the shift would survive a down-turn in the economic situation? Or did (lie sliinjinnii reflect a short-lived trend, of no long lasting importance to management? A further newspaper story about the shinjinrui indicates why their seeming revolt against traditional practices could not be taken at face value, and also explains why cultural fundamentals often resist modification. Some scholars doubt whether this new middle class was, at heart, any less group-oriented than other Japanese. Although the shinjinnii might claim to be "individualist," at heart they still identified with the group: Thai will not change. say anthropologists such as Oxford University professor Joy Hendry. unless the current generation of sbinjiiinii departs radically from childrearing methods that have become the norm in Japan. Unlike in the US or Europe. Where children are encouraged to be independent. Japanese mothers still rear their children lo lie totally dependant on home and family by continually warning them of the dangers that link without… Ultimately, this expanded to include the '"group" and eventually the “Country." both of which offer protection from the "dangers'' that exist "out there"....'

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