INTERNATIONAL MANAGEMENT

INTERNATIONAL MANAGEMENT
BIB 3341 INTERNATIONAL MANAGEMENT BIB 3341 INTERNATIONAL MANAGEMENT

PART I : THE GLOBAL IMPERATIVE
BIB 3341 INTERNATIONAL MANAGEMENT

1.0 INTERNATIONAL MANAGEMENT: A GLOBAL PERSPECTIVE
1.1 INTRODUCTION Managers in the twenty-first century are being challenged to operate in an increasingly complex, interdependent, and dynamic global environment Those involved in global business have to adjust their strategies and management styles to those regions of the world in which they want to operate, whether directly or through some form of alliance BIB 3341 INTERNATIONAL MANAGEMENT

BIB 3341 INTERNATIONAL MANAGEMENT
One aspect of this global arena requiring increasing attention is that of the potential for terrorism where businesses operate Other typical challenges that managers must face involve politics, culture, and the use, transfer, and protection of technology. In addition, the opportunities and risks of the global marketplace increasingly bring with them the societal obligations of operating in a global community BIB 3341 INTERNATIONAL MANAGEMENT

Managers must find a balance between social responsibility, company image, and competitive strategies To compete aggressively, firms must make considerable investment overseas-not only capital investment but also investment in well-trained managers with the skills essential to working effectively in a multicultural environment In any foreign environment, managers need to handle a set of dynamic and fast-changing variables, including the all-pervasive variable of culture that affects every facet of daily management BIB 3341 INTERNATIONAL MANAGEMENT

Added to that “behavioral software” are the challenges of the burgeoning use of technological software and the borderless internet, which are rapidly changing the dynamics of competition and operations Global management, then, is the process of developing strategies, designing and operating systems, and working with people around the world to ensure sustained competitive advantage BIB 3341 INTERNATIONAL MANAGEMENT

2.0 THE INTERNATIONAL BUSINESS ENVIRONMENT
2.1 THE GLOBAL BUSINESS ENVIRONMENT Globalism Global competition is characterized by networks that bind countries to one another Globalism trends: A borderless world Increase in exports Increase in direct foreign investment Dominance of trading blocs BIB 3341 INTERNATIONAL MANAGEMENT

Regional Trading Blocs – The TRIAD TRIAD Market European Union Asian Market China, Japan, South Asia NAFTA CAFTA BIB 3341 INTERNATIONAL MANAGEMENT

Information Technology Information technology is transforming the international manager’s agenda more than any other item Information is no longer centrally or secretly controlled by governments Information technology is boosting productivity and electronic commerce around the world BIB 3341 INTERNATIONAL MANAGEMENT

“Globalization means we share jobs as well as goods”.
The Globalization of Human Capital “Globalization means we share jobs as well as goods”. - FINANCIAL TIMES, August 27, 2003 Major changes are occurring in the world labor force, including: Increased movement across borders for all types of workers Increased offshoring of jobs to lower wage countries Increased offshoring of white-collar jobs BIB 3341 INTERNATIONAL MANAGEMENT

The Global Manager’s Role The rules of the game for global managers are set by each country and its political and economic agenda, its technological status and level of development, its regulatory environment, its comparative and competitive advantages, and its cultural norms BIB 3341 INTERNATIONAL MANAGEMENT

2.2 THE ECONOMIC ENVIRONMENT Economic Risk A country’s level of economic development generally determines its economic stability Economic risk falls into 2 categories: Government changes its fiscal policies Government modifies its foreign-investment policies Managers are constantly reassessing economic risk BIB 3341 INTERNATIONAL MANAGEMENT

Managers use four methods to assess economic risk, they are: (1) Quantitative approach (2) Qualitative approach (3) A combination of both of these approaches (4) A checklist approach BIB 3341 INTERNATIONAL MANAGEMENT

2.3 THE LEGAL ENVIRONMENT Manager’s will comply with the host country’s legal system: Common Law – past court decisions act as precedents to the interpretation of the law Civil Law – comprehensive set of laws organized into codes, interpretation is based on reference to codes and statues Muslim Law – based on religious beliefs, it dominates all aspects of life BIB 3341 INTERNATIONAL MANAGEMENT

Contract Law A contract is an agreement by the parties concerned to establish a set of rules to govern a business transaction International managers recognize that they will be preparing a contract in a very different legal context from their own A contract in international business reflects the local legal system and political and currency risks in the country involved – legal consul in such matters is highly recommended. BIB 3341 INTERNATIONAL MANAGEMENT

Other Regulatory Issues Countries often impose protectionist policies, such as tariffs, quotas, and other trade restrictions, to give preference to their own products and industries The level of government involvement in the economic and regulatory environment varies a great deal among countries and has a varying impact on management practices. BIB 3341 INTERNATIONAL MANAGEMENT

2.4 THE TECHNOLOGICAL ENVIRONMENT Corporations must consider the accelerating macro-environmental phenomenon of technoglobalism (rapid developments in information and communication technologies) Corporations must consider the appropriability of technology BIB 3341 INTERNATIONAL MANAGEMENT

Global E-Business E-business – the integration of systems, processes, organizations, value chains and entire markets using Internet-based and related technologies and concepts. E-commerce - refers directly to the marketing and sales process via the Internet Convenience in conducting business worldwide; facilitating communication across borders contributes to the shift toward globalization and a global market An electronic meeting and trading place, which adds efficiency in conducting business sales A corporate Intranet service, merging internal and external information for enterprises worldwide Power to consumers as they gain access to limitless options and price differentials A link and efficiency in distribution BIB 3341 INTERNATIONAL MANAGEMENT

3.0 GOVERNMENT RELATIONS AND POLITICL RISK
3.1 POLITICAL RISKS Political risks are any governmental actions or politically motivated events that adversely affect the long-run profitability or value of firms doing business An important aspect of the political environment is the phenomenon of ethnicity – a driving force behind the political instability around the world BIB 3341 INTERNATIONAL MANAGEMENT

Managers must understand the ethnic and religious composition of the host country in order to anticipate situations of political and general instability Nationalization refers to the forced sale of the MNCs assets to local buyers, with some compensation to the firm Expropriation occurs when the local government seizes the foreign-owned assets of the MNC, providing inadequate compensation, if any at all BIB 3341 INTERNATIONAL MANAGEMENT

7 Typical Risk Events Expropriation of corporate assets without prompt and adequate compensation Forced sale of equity to host-country nationals, usually at or below depreciated book value Discriminatory treatment against foreign firms in the application of regulations or laws Barriers to repatriation of funds (profits or equity) Loss of technology or other intellectual property (such as patents, trademarks, or trade names) Interference in managerial decision making Dishonesty by government officials, including canceling or altering contractual agreements, extortion demands, and so forth BIB 3341 INTERNATIONAL MANAGEMENT

Managing Political Risk Avoidance – either the avoidance or withdrawal of investment in a particular country Adaptation – adjust to the political environment Dependency – keeping the host nation dependent on the parent corporation Hedging – minimizing the losses associated with political risk events BIB 3341 INTERNATIONAL MANAGEMENT

4.0 ETHICS AND SOCIAL RESONSIBILITY
Social responsibility includes the expectation that corporations concern themselves with the social and economic effects of their decisions The two extreme opinions related to social responsibility – Domestic firms The only responsibility of a business is to make a profit Business should anticipate and try to solve problems in society BIB 3341 INTERNATIONAL MANAGEMENT

4.1 SOCIAL RESPONSIBILITY OF MULTINATIONAL CORPORATIONS More complex than domestic firms due to the complex issues related to global business: Economic development Cultural issues Additional stakeholders Legal issues BIB 3341 INTERNATIONAL MANAGEMENT

MNC Responsibility Toward Human Rights What constitutes “human rights” is clouded by the perceptions and priorities of people in different countries The best chance to gain some ground on human rights around the world would be for large MNCs and governments around the world to take a unified stance A number of large image-conscious companies have established corporate codes of conduct for their buyers, suppliers and contractors, and have instituted strict procedures for auditing their imports E.g. Reebok has audited all of its suppliers in Asia. Levi announced this corporate policy: “We should not initiate or renew contractual relationships in countries where there are pervasive violations of basic human rights” BIB 3341 INTERNATIONAL MANAGEMENT

Codes of Conduct A considerable number of organizations have developed their own codes of conduct; some have gone further to group together with others around the world to establish standards to improve the quality of life for workers around the world Companies such as Avon, Sainsbury Plc., Toys ‘R’ Us and Otto Versand have joined with the Council on Economic Priorities (CEP) to establish SA8000 (Social Accountability 8000, on the lines of the manufacturing quality standard ISO9000) Their proposed global labor standards would be monitored by outside organizations to certify if plants are meeting those standards, among which are the following: Do not use child or forced labor Provide a safe working environment Respect workers’ rights to unionize Do not regularly require more than 48-hour work weeks BIB 3341 INTERNATIONAL MANAGEMENT

4.2 ETHICS IN GLOBAL MANAGEMENT Globalization has multiplied the ethical problems facing organizations Business ethics have not yet globalized Difficult to reconcile consistent and acceptable behavior around the world The term international business ethics refers to the business conduct or morals of MNCs in their relationships with individuals and entities: Based on the cultural value system Based on generally accepted ways of doing business in each country or society BIB 3341 INTERNATIONAL MANAGEMENT

Approaching ethical dilemmas varies among MNC’s: American approach is based upon general rules Japan and Europe make decisions on shared values, social ties, and perception of their obligation BIB 3341 INTERNATIONAL MANAGEMENT

Questionable Payments This is a specific ethical issue for managers in the international arena Payments in question are political payments, extortion, bribes, sales commissions, or “grease money” – payments to expedite routine transactions Also called: tokens of appreciation, ‘la mordida’, ‘bastarella’, and ‘pot-de-vin’ BIB 3341 INTERNATIONAL MANAGEMENT

Three tests of ethical corporate actions: Is it legal? Does it work (in the long run)? Can it be talked about? Ethical behavior and social responsibility guidelines developed by MNCs: Develop worldwide codes of ethics Consider ethical issues in strategy development Given major, unsolvable, ethical problems, consider withdrawal from the problem market Develop periodic “ethical impact” statements BIB 3341 INTERNATIONAL MANAGEMENT

Making the Right Decision How is a manager operating abroad to know what is the “right” decision when faced with questionable or unfamiliar circumstances of doing business? Here is a suggested sequence: Consult the laws of both the home and the host countries Consult the International Codes of Conduct for MNEs Consult the company’s code of ethics Consult your superiors Use your own moral code of ethics Follow your own conscience BIB 3341 INTERNATIONAL MANAGEMENT

4.3 MANAGING INTERDEPENDENCE Because multinational firms represent global interdependency managers must recognize that what they do has long-term implications for the socioeconomic interdependence of nations BIB 3341 INTERNATIONAL MANAGEMENT

PART II : STRATEGY AND GLOBAL ORGANIZATION

5.0 GLOBAL STRATEGIC PLANNING
Strategic Planning and Strategy The process by which a firm’s managers evaluate the future prospects of the firm and decide on appropriate strategies to achieve long-term objectives is called strategic planning The basic means by which the company competes – its choice of business or businesses in which to operate and the ways in which it differentiates itself from its competitors – is its strategy BIB 3341 INTERNATIONAL MANAGEMENT

6.0 GOING GLOBAL AND IMPLEMENTING STRATEGIES
6.1 REASONS FOR GOING INTERNATIONAL Companies decide to go global for a number of reasons: Reactive or defensive Proactive or aggressive The threat of decreased competitiveness is the overriding reason many large companies adopt a strategy of aggressive globalization BIB 3341 INTERNATIONAL MANAGEMENT

6.2 STRATEGIC FORMULATION PROCESS The Strategic Management Process BIB 3341 INTERNATIONAL MANAGEMENT

First phase is the planning phase – company establishes (or clarifies) its mission and overall objective Second part is the implementation phase – requires the establishment of the structure, systems, processes suitable to make the strategy work BIB 3341 INTERNATIONAL MANAGEMENT

6.3 STEPS IN DEVELOPING INTERNATIONAL AND GLOBAL STRATEGIES Mission and Objectives Mission of an organization is its overall raison d’etre or the function it performs in society Objectives flow from mission and guide the formulation of international strategy Environmental Assessment Gathering information and forecasting relevant trends, competitive actions and circumstances that will affect operations in a geographic area; should include: Political instability Currency instability Nationalism International competition Environmental scanning BIB 3341 INTERNATIONAL MANAGEMENT

Sources of Environmental Information The success of environmental scanning depends on the ability of managers to take an international perspective and to ensure that their sources of information and business intelligence are global Internal sources of information are usually preferable -especially alert field personnel who, with first-hand observations, can provide up-to-date and relevant information for the firm Internal Analysis Internal analysis determines which areas of the firm’s operations represent strengths or weaknesses (currently or potentially) compared to competitors, so that the firm may use that information to its strategic advantage BIB 3341 INTERNATIONAL MANAGEMENT

Competitive Analysis Assess the firm’s capabilities and key success factors compared to those of its competitors Enables strategic planners to determine where the firm has distinctive competencies that will give it an advantage Most companies develop strategies around key strengths or core competencies This stage is often called a SWOT analysis Global and International Strategic Alternatives Global Strategic Alternatives determines the overall approach to the global marketplace Entry Strategy Alternatives determine what specific entry strategy is appropriate for each country the firm plans to operate in BIB 3341 INTERNATIONAL MANAGEMENT

Approaches to World Markets Globalization is a term that refers to the establishment of worldwide operations and the development of standardized products and marketing Regionalization (or multi-local) is where local markets are linked together within a region, allowing more local responsiveness and specialization Global Integrative Strategies Multinational Corporations will develop their operations to the point of being fully integrated Some move quickly to the stage of integration through acquisition Other companies use a variety of strategies and enter the country in stages BIB 3341 INTERNATIONAL MANAGEMENT

Using E-Business to Go Global Companies of all sizes are increasingly looking to the Internet as a means to expand their global operations. The benefits of a global B2B strategy are many On the other hand, there are many challenges inherent in the B2B strategy, such as cultural differences, varying business models, governmental wrangling, and border conflicts Entry Strategy Alternatives For a multinational corporation, a more specific set of strategic alternatives focuses on different ways to enter a foreign market. It examines the various entry and ownership strategies available to firms, including exporting, licensing, franchising, contract manufacturing, turnkey operations, management contracts, joint ventures, and fully owned subsidiaries set up by the firm BIB 3341 INTERNATIONAL MANAGEMENT

E-global or E-local The e-global strategy is best for global B2B markets in steel, plastics, and electronics The e-local strategy is more suited to consumer retailing and financial services. It is best for situations in which production and consumption are regional in scope, when behavior differs across regions, and when supply-chain management is important for success Strategic Choice The strategic choice of one or more of the entry strategies will depend on: a critical evaluation of the advantages (and disadvantages of each in relation to the firm’s capabilities the critical environmental factors the contribution that each choice would make to the overall mission and objectives of the company BIB 3341 INTERNATIONAL MANAGEMENT

Timing Entry and Scheduling Expansion International strategic formulation requires a long-term perspective Entry strategies, therefore, need to be conceived as part of a well-designed, overall plan The Influence of Culture on Strategic Choice In addition, strategic choices at various levels often are influenced by cultural factors, such as a long-term versus a short-term perspective Hofstede found that most people in countries such as China and Japan generally had a longer-term horizon than those in Canada and the United States BIB 3341 INTERNATIONAL MANAGEMENT

7.0 DESIGNING EFFECTIVE INTERNATIONAL ORGANIZATIONS
Organizational structure is the way in which a company divides its activities among separate units and coordinates activities between those units. An appropriate organizational structure for a firm’s strategic plans will help it achieve its goals BIB 3341 INTERNATIONAL MANAGEMENT

7.1 ORGANIZATIONAL STRUCTURE Organizational structures must change to accommodate a firm’s evolving internationalization in response to worldwide competition Considerable research has shown that a firm’s structure must be conducive to the implementation of its strategy. In other words, the structure must “fit” the strategy, or it will not work Managers are faced with how best to attain that fit in organizing the company’s systems and tasks BIB 3341 INTERNATIONAL MANAGEMENT

7.2 EVOLUTION AND CHANGE IN MNC ORGANIZATIONAL STRUCTURES Internationalization is the process by which a firm gradually changes in response to international competition, domestic market saturation, and the desire for expansion, new markets, and diversification Structural Evolution (Stages Model) occurs when managers redesign the organizational structure to optimize the strategy’s changes to work, making changes in the firm’s tasks and relationships and designating authority, responsibility, lines of communication, geographic dispersal of units and so forth BIB 3341 INTERNATIONAL MANAGEMENT

Typical ways that firms organize international activities: Domestic structure plus export department Domestic structure plus foreign subsidiary International division Global functional structure Global product structure Global geographic structure BIB 3341 INTERNATIONAL MANAGEMENT

Integrated Global Structures To respond to increased product diversification and to maximize benefits from both domestic and foreign operations, a firm may choose to replace its international division with an integrated global structure This structure can be organized along functional, product, geographic, or matrix lines BIB 3341 INTERNATIONAL MANAGEMENT

(a) Global Functional Structure The global functional structure is designed on the basis of the company’s functions—production, marketing, finance, and so forth Foreign operations are integrated into the activities and responsibilities of each department to gain functional specialization and economies of scale This structure results in plants that are highly integrated across products and that serve single or similar markets BIB 3341 INTERNATIONAL MANAGEMENT

(b) Global Product (Divisional) Structure For firms with diversified product lines (or services) that have different technological bases and that are aimed at dissimilar or dispersed markets, a global product (divisional) structure may be more strategically advantageous than a functional structure In this structure, a separate division represents a single product (or product line) A general manager heads each division, and each is responsible for its own production and sales functions Usually, each division is a strategic business unit (SBU)—a self-contained business with its own functional departments and accounting systems BIB 3341 INTERNATIONAL MANAGEMENT

(c) Global Geographic (Area) Structure In the global geographic (area) structure - the most common form of organizing foreign operations - divisions are created to cover geographic regions Each regional manager is then responsible for the operations and performance of the countries within a given region (d) Matrix Structure Matrix Structure is a hybrid organization of overlapping responsibilities – it is used by some firms but has generally fallen into disfavor recently BIB 3341 INTERNATIONAL MANAGEMENT

7.3 ORGANIZING FOR GLOBALIZATION Two opposing forces in structural decisions: The need for differentiation (focusing on and specializing in specific markets) The need for integration (coordinating those same markets) Globalization – a specific strategy that treats the world as one market by using a standardized approach to products and markets BIB 3341 INTERNATIONAL MANAGEMENT

Organizing to facilitate a globalization strategy typically involves rationalization and the development of strategic alliances Organizing for global product standardization necessitates close coordination among the various countries involved The problem facing companies in the future is that the structurally sophisticated global networks leave the organization exposed to the risk of environmental volatility from all corners of the world BIB 3341 INTERNATIONAL MANAGEMENT

PART III :SPANNING BORDERS FOR CROSS-CULTURAL MANAGEMENT

8.0 CULTURAL DIMENSIONS OF INTERNATIONAL MANAGEMENT
8.1 CULTURE AND ITS EFFECTS ON ORGANIZATIONS Culture is set of beliefs, rules and institutions held by a specific group of people A critical skill for managing people and processes in other countries is cultural savvy; that is, a working knowledge of the cultural variables affecting management decisions Cultural sensitivity (cultural empathy) is a sense of awareness and honest caring about another individual’s culture. Such sensitivity requires the ability to understand the perspective of those living in other (and very different) societies and the willingness to put oneself in another’s shoes BIB 3341 INTERNATIONAL MANAGEMENT

Environmental variables affecting management functions BIB 3341 INTERNATIONAL MANAGEMENT

8.2 CULTURAL VARIABLES Never assume that a manager can transplant American, or Japanese, or any other country’s styles, practices, expectations, and processes Managers need to develop a cultural profile that identifies the specific differences found in each country BIB 3341 INTERNATIONAL MANAGEMENT

Subcultures Residents of the country only conform to the national character to a certain degree Could be from ethnic, geographic, or other variables Good managers treat people as individuals and they avoid any form of stereotyping BIB 3341 INTERNATIONAL MANAGEMENT

Influences on National Culture Kinship – guides family relationships Education – formal or informal education of workers affects workplace expectations Economy – means of production and distribution in a society influences all aspects of the resource allocation Politics – system of government imposes varying constraints on an organization Religion – spiritual beliefs of a society are so powerful that they overpower all other cultural aspects Associations – the formal and informal groups that make up a society Health – system of health care affects employee productivity Recreation – the use, attitude, and choice of how to use leisure time BIB 3341 INTERNATIONAL MANAGEMENT

8.3 CULTURAL VALUE DIMENSIONS Values are a society’s ideas about what is good or bad, right or wrong Project GLOBE Dimensions The GLOBE Project team is comprised of 170 researchers who have collected data over seven years on cultural values and practices and leadership attributes from 18,000 managers in 62 countries The team identified 9 cultural dimensions, which distinguish one society from another BIB 3341 INTERNATIONAL MANAGEMENT

Cultural Clusters Gupta, et al have developed a cultural typology that places cultures into clusters Hofstede’s Value Dimensions One useful framework for understanding how basic values underlie organizational behavior was proposed by Hofstede, the result of research on over 116,000 people in 50 countries Hofstede proposes four value dimensions: power distance, uncertainty avoidance, individualism, and masculinity BIB 3341 INTERNATIONAL MANAGEMENT

Trompenaar’s Findings Fons Trompenaar also researched the values dimension over a ten year period with 15,000 managers from 28 countries representing 47 national cultures Critical Operational Value Differences Some specific culturally based variables which cause frequent problems for Americans in international management are time, change, material factors, and individualism BIB 3341 INTERNATIONAL MANAGEMENT

8.4 THE INTERNET AND CULTURE The pervasive use of the Internet is affecting many social variables, including associations, education, and the economy For instance, in South Korea, the desire for technology is driving the economy as well as daily habits People surf online at Internet cafes – there are more than 20,000 in Seoul alone. Even the latest refrigerators offer Internet connections on a monitor in the door panel! BIB 3341 INTERNATIONAL MANAGEMENT

8.5 DEVELOPING CULTURAL PROFILE Managers can gather considerable information on cultural variables from current research, personal observation, and discussions with people From these sources, managers can develop cultural profiles of various countries — composite pictures of working environments, people’s attitudes, and norms of behavior BIB 3341 INTERNATIONAL MANAGEMENT

9.0 INTERCULTURAL COMMUNICATION
9.1 THE COMMUNICATION PROCESS The term communication describes the process of sharing meaning by transmitting messages through media such as words, behavior or material artifacts Managers spend between 50% and 90% of their time talking to people Managers communicate to: Coordinate activities Disseminate information Motivate people Negotiate future plans BIB 3341 INTERNATIONAL MANAGEMENT

The Communication Process BIB 3341 INTERNATIONAL MANAGEMENT

Cultural Noise in the Communication Process Cultural noise – cultural variables that undermine the communication of intended meaning Intercultural communication – when the member of one culture sends a message to a member of another culture Attribution – the process in which people look for an explanation of another person’s behavior BIB 3341 INTERNATIONAL MANAGEMENT

9.2 THE CULTURE-COMMUNICATION LINK Trust in Communication Effective communication depends on informal understandings among individuals that are based upon trust When there is trust between individuals an implicit understanding in communication is present BIB 3341 INTERNATIONAL MANAGEMENT

The GLOBE Project The GLOBE Project provides insight into culturally-appropriate communication styles and expectations for managers. Here are the key observations: People in societies ranked high on performance orientation present objective information in a direct and explicit way. However, dealing people low on performance orientation (e.g., Russia or Greece), use a more indirect approach When communicating with people low on assertiveness, use a friendly approach For those high on the humane dimension, avoid conflict and communicate in a supportive manner BIB 3341 INTERNATIONAL MANAGEMENT

Cultural Variables Attitudes – ethnocentric and stereotypical attitudes are a particular source of noise in cross-cultural communication Social Organization – nations, tribes, religious sects, or professions can influence our priorities and values Though Patterns – the logical progression of reasoning varies by culture Roles – the perception of the manager’s role differs considerable around the world BIB 3341 INTERNATIONAL MANAGEMENT

Nonverbal Communication – behavior communicated without words; even minor variations in body language, speech rhythms, and punctuality can cause mistrust Language – an inability to speak the local language, and a poor or too literal translation are often causes for mistrust Pepsi’s slogan “Come Alive with Pepsi” translated into German as “Come out of the grave” BIB 3341 INTERNATIONAL MANAGEMENT

Time - to initiate effective cross-cultural business interactions, managers should know the difference between monochronic time systems and polychronic time systems and how they affect communications. Context Context in which the communication takes place affects the meaning and interpretation of the interaction Cultures are either high or low context BIB 3341 INTERNATIONAL MANAGEMENT

Communication Channels Communication varies according to Where and how it originates The channels and the speed which it flows Whether it is formal or informal The nature of the organization’s information system are affected by Organizational structure Staffing policies Leadership style BIB 3341 INTERNATIONAL MANAGEMENT

9.3 MANAGING CROSS-CULTURAL COMMUNICATION As an international manager, it would be wise to follow the five steps suggested on this slide to become more effective in intercultural communication: Cultural sensitivity Careful encoding Selective transmission Careful decoding of feedback Appropriate follow-up actions BIB 3341 INTERNATIONAL MANAGEMENT

10.0 INTERCULTURAL NEGOTIATION
Management’s ability to negotiate productively effects their ability to implement strategies Negotiation is the process of discussion by which two or more parties aim to reach a mutually acceptable agreement Negotiating across borders is more complex because of the number of stakeholders involved BIB 3341 INTERNATIONAL MANAGEMENT

10.2 THE NEGOTIATION PROCESS BIB 3341 INTERNATIONAL MANAGEMENT

10.3 UNDERSTANDING NEGOTIATION STYLES Global managers can benefit from studying differences in negotiating behaviors (and the underlying reasons for them), which can help them recognize what is happening in the negotiating process: For North Americans, negotiations are businesslike; their factual appeals are based on what they believe is objective information, presented with the assumption that it is understood by the other side on a logical basis Arabs use affective appeals based on emotions and subjective feelings Russians employ axiomatic appeals – that is, their appeals are based on the ideals generally accepted in their society BIB 3341 INTERNATIONAL MANAGEMENT

10.4 MANAGING NEGOTIATION Skillful global managers must assess many factors when managing negotiations Successful management of intercultural negotiations requires the manager: To gain specific knowledge of the parties in the upcoming meeting To prepare accordingly to adjust to and control the situation To be innovative BIB 3341 INTERNATIONAL MANAGEMENT

PART IV :HUMAN RESOURCES IN THE GLOBAL CONTEXT

11.0 INTERNATIONAL LABOR RELATIONS
11.1 WORKING WITHIN LOCAL LABOR RELATIONS The term labor relations refers to the process through which managers and workers determine their workplace relationship This process may be through verbal agreement and job descriptions, or through a union written labor contract which has been reached through negotiation in collective bargaining between workers and managers BIB 3341 INTERNATIONAL MANAGEMENT

The participation of labor in the affairs of the firm, especially as this affects performance and well-being The role and impact of unions in the relationship Specific human resource policies in terms of recruitment, training, and compensation BIB 3341 INTERNATIONAL MANAGEMENT

Organized Labor Around the World Wage levels which are set by union contracts and leave the foreign firm little flexibility to be globally competitive Limits on the ability of the foreign firm to vary employment levels when necessary Limitations on the global integration of operations of the foreign firm because of incompatibility and the potential for industrial conflict BIB 3341 INTERNATIONAL MANAGEMENT

Convergence Versus Divergence in Labor Systems Convergence in labor systems occurs as the migration of management and workplace practices around the world results in the reduction of workplace disparities from one country to another This occurs primarily as MNCs seek consistency and coordination among their foreign subsidiaries, and as they act as catalysts for change by “exporting” new forms of work organization and industrial relations practices BIB 3341 INTERNATIONAL MANAGEMENT

Trends in Global Relations Systems BIB 3341 INTERNATIONAL MANAGEMENT

12.0 HUMAN RESOURCES: MANAGING EXPATRIATES
12.1 PREPARATION, ADAPTATION AND REPATRIATION Effective HRM ends with the successful repatriation of the executive into company headquarters Companies must prepare to minimize the potential effects of reverse culture shock Ineffective repatriation practices are clear – few managers will be willing to take international assignments BIB 3341 INTERNATIONAL MANAGEMENT

A mentor program to monitor the expatriate’s career path while abroad and upon repatriation As an alternative to the mentor program, the establishment of a special organizational unit for the purposes of career planning and continuing guidance for the expatriate A system of supplying information and maintaining contacts with the expatriate so that he or she may continue to feel a part of the home organization BIB 3341 INTERNATIONAL MANAGEMENT

The Role of the Expatriate Spouse A number of companies are beginning to recognize the importance of providing support for spouses and children Firms often use informal means, such as intercompany networking, to help find the trailing spouse a position in the same location They know that with the increasing number of dual-career couples (65% in the U.S.), if the spouse does not find a position the manager will very likely turn down the assignment BIB 3341 INTERNATIONAL MANAGEMENT

Expatriate Career Management Support services provide timely help for the manager and therefore are part of the effective management of an overseas assignment The overall transition process experienced over time comprises three phases of transition and adjustment that must be managed for successful socialization to a new culture and resocialization back to the old culture These phases are: (1) the exit transition from the home country, (2) the entry transition to the host country; and (3) the entry transition back to the home country or to a new host country BIB 3341 INTERNATIONAL MANAGEMENT

Developing a Global Management Cadre In the international assignment, both the manager and the company benefit from the enhanced skills and experience gained by the expatriate Many returning executives report an improvement in their managerial skills and self-confidence. Some of these acquired skills, as reported by Adler, include the following: Managerial skills, not technical skills – learning how to deal with a wide range of people Tolerance for ambiguity Multiple perspectives – learning to understand situations from the perspective of local employees and businesspeople Ability to work with and manage others – learning patience and tolerance BIB 3341 INTERNATIONAL MANAGEMENT

13.0 HUMAN RESOURCES: STAFFING, TRAINING AND DEVELOPMENT
13.1 STAFFING FOR GLOBAL OPERATIONS Firms using an ethnocentric staffing approach fill key managerial positions with people from headquarters – that is, parent-country nationals (PCNs) In a polycentric staffing approach, local managers – host-country managers (HCNs) – are hired to fill key positions in their own country BIB 3341 INTERNATIONAL MANAGEMENT

In the global staffing approach, the best managers are recruited from within or outside of the company, regardless of nationality In a regiocentric staffing approach, recruiting is done on a regional basis – say within Latin America for a position in Chile BIB 3341 INTERNATIONAL MANAGEMENT

13.2 GLOBAL SELECTION The initial phase of setting up criteria for global selection is to consider which overall staffing approach or approaches would most likely support the company’s strategy These are typically just starting points using idealized criteria; however, in reality, other factors creep into the process, such as host country regulations, stage of internationalization, and—most often—who is both suitable and available for the position BIB 3341 INTERNATIONAL MANAGEMENT

Problems with Expatriation Selection based on headquarters criteria rather than assignment needs Inadequate preparation, training, and orientation prior to assignment Alienation or lack of support from headquarters Inability to adapt to local culture and working environment Problems with spouse and children – poor adaptation, family unhappiness Insufficient compensation and financial support Poor programs for career support and repatriation BIB 3341 INTERNATIONAL MANAGEMENT

13.3 TRAINING AND DEVELOPMENT Challenges faced by expatriates: China: a continuing problem for expatriates; one complained that at his welcome banquet he was served duck tongue and pigeon head Brazil: expatriates stress that cell phones are essential because home phones don’t work India: returning executives complain that the pervasiveness of poverty and street children is overwhelming Indonesia: here you need to plan ahead financially because landlords typically demand rent two to three years in advance Japan: expatriates and their families remain concerned that although there is excellent medical care, the Japanese doctors reveal little to their patients. BIB 3341 INTERNATIONAL MANAGEMENT

Cross-Cultural Training: Culture Shock Culture shock is a state of disorientation and anxiety about not knowing how to behave in an unfamiliar culture The cause of culture shock is the trauma people experience in new and different cultures, where they lose the familiar signs and cues that they had used to interact in daily life and where they must learn to cope with a vast array of new cultural cues and expectations BIB 3341 INTERNATIONAL MANAGEMENT

Cross-Cultural Training: Sub-Culture Shock Subculture shock occurs when a manager is transferred to another part of the country where there are cultural differences – essentially from what she or he perceives to be a “majority” culture to a “minority” one BIB 3341 INTERNATIONAL MANAGEMENT

Training Techniques Area studies, that is, documentary programs about the country’s geography, economics, sociopolitical history, and so forth Culture assimilators, which expose trainees to the kinds of situations they are likely to encounter that are critical to successful interactions Language training Sensitivity training Field experiences – exposure to people from other cultures within the trainee’s own country BIB 3341 INTERNATIONAL MANAGEMENT

13.4 COMPENSATING EXPATRIATES Compensation is a crucial link between strategy and its successful implementation Must be a fit between compensation and the goals of the firm Maintaining an appropriate compensation package is more complex than it would seem Little variation in typical salary but there is a wide variation in net spendable income BIB 3341 INTERNATIONAL MANAGEMENT

Managing PCN compensation is a complex challenge for companies with overseas operations All components of the compensation package must be considered in light of both home- and host-country legalities and practices. Those components include: Salary – Local salary buying power and currency translation, as compared with home salary; bonuses or incentives for dislocation Taxes – Equalize any differential effects on taxes as a result of the assignment Allowances – Relocation expenses; cost-of-living adjustments; housing allowance for assignment and allowance to maintaining house at home; trips home for family; private education for children Benefits – Health insurance; stock options BIB 3341 INTERNATIONAL MANAGEMENT

PART V: MANAGING PEOPLE: THE LEADERSHIP DIMENSION

14.0 MOTIVATING PEOPLE: THE CHALLENGE OF DIVERSITY
14.1 CROSS-CULTURAL RESEARCH ON MOTIVATION Motivation is very much a function of the context of a person’s work and personal life. That context is greatly influenced by cultural variables, which affect the attitudes and behaviors of individuals (and groups) on the job High uncertainty avoidance suggests the need for job security, whereas people with low uncertainty avoidance would probably be motivated by more risky opportunities for variety and fast-track advancement BIB 3341 INTERNATIONAL MANAGEMENT

High power distance suggests motivators in the relationship between subordinates and their boss, whereas low power distance implies that people would be more motivated by teamwork and relations with their peers High individualism suggests people would be motivated by opportunities for individual advancement and autonomy; collectivism (low individualism) suggests that motivation will more likely work through appeals to group goals and support High masculinity suggests that most people would be more comfortable with the traditional division of work and roles; in a more feminine culture, the boundaries could be looser, motivating people through more flexible roles and work networks BIB 3341 INTERNATIONAL MANAGEMENT

The Meaning of Work Work centrality is defined as “the degree of general importance that working has in the life of an individual at any given point in time” The higher the mean work centrality score, the more motivated and committed the workers would be Functions satisfied by work: Work provides a needed income Is interesting and satisfying Provides contacts with others Facilitates a way to serve society Keeps one occupied Gives status and prestige BIB 3341 INTERNATIONAL MANAGEMENT

The Needs Hierarchy in the International Context How applicable are motivation theories proposed by Maslow and Herzberg in the international context? Haire, Ghiselli and Porter’s survey concluded that Maslow’s needs, in particular the upper-level ones, are important at the managerial level, although the managers reported that the degree to which their needs were fulfilled did not live up to their expectations Ronen concluded that need clusters are constant across nationalities and that Maslow’s need hierarchy is confirmed by these clusters. Also, Herzberg’s categories are confirmed by the cross-national need clusters BIB 3341 INTERNATIONAL MANAGEMENT

The Intrinsic-Extrinsic Dichotomy Two sets of needs that motivate workers: Motivational factors (Intrinsic) Maintenance factors (Extrinsic) Research on managers in Greece found that: People are motivated more by the nature of the work Dissatisfactions resulted from conditions surrounding the work BIB 3341 INTERNATIONAL MANAGEMENT

Reward Systems Rewards usually fall into five categories: Financial, social, status, job content, career, and professional Emphasis on one or more varies by country Japan reward systems are based on seniority In Taiwan recognition and affection are important In China low wage rates are compensated for by free housing, schools, and medical care BIB 3341 INTERNATIONAL MANAGEMENT

15.0 LEADERSHIP IN THE GLOBAL CONTEXT
15.1 THE GLOBAL LEADER’S ROLE AND ENVIRONMENT The task of helping employees realize their highest potential in the workplace is the essence of leadership The goal of every leader is to achieve the organization’s objectives while achieving those of each employee Today’s global managers realize that increased competition requires them to be open to change and to rethink their old, culturally conditioned modes of leadership. BIB 3341 INTERNATIONAL MANAGEMENT

In order to be successful managers must be able to juggle their various roles effectively. These roles are: A representative of the parent firm The manager of the local firm A resident of the local community A citizen of either the host country or of another country A member of a profession A member of a family BIB 3341 INTERNATIONAL MANAGEMENT

Factors affecting leadership abroad: BIB 3341 INTERNATIONAL MANAGEMENT

E-Business Effect on Leadership Technology has effected the way that managers lead and motivate employees: Decisions need to be made fast Must maintain flexibility and be able to roll with the ups and downs Must focus on the vision BIB 3341 INTERNATIONAL MANAGEMENT

15.2 CROSS-CULTURAL RESEARCH ON LEADERSHIP Numerous leadership theories variously focus on individual traits, leader behavior, interaction patterns, role relationships, follower perceptions, influence over followers, influence on task goals, and influence on organizational culture While the functions of leadership are similar across cultures, anthropological studies, such as those by Mead, indicate that leadership is a universal phenomenon and that effective leadership varies across cultures BIB 3341 INTERNATIONAL MANAGEMENT

15.3 CONTINGENCY LEADERSHIP: THE CULTURE VARIABLE Modern leadership theory recognizes that no single leadership style works well in all situations As a result of culture-based norms and beliefs regarding various factors leaders should be able to choose the most appropriate style BIB 3341 INTERNATIONAL MANAGEMENT

The GLOBE Project The GLOBE Project sought to understand the impact of cultural variables on leadership and organizational practices Using data from 18,000 managers in 62 countries, the researchers studied which leadership behaviors are universally accepted and which are culturally contingent The universal traits included being trustworthy, encouraging, effective at bargaining, being a skilled administrator, communicator, and team builder. Those traits which were found to be culturally contingent are charismatic, team-oriented, self-protective, participative, humane, and autonomous BIB 3341 INTERNATIONAL MANAGEMENT

16.0 INTERNATIONAL TEAMS: THE EMERGING MANAGEMENT CHALLENGE
16.1 GLOBAL MANAGEMENT TEAMS The term global management teams describes collections of managers from several countries who must rely on group collaboration if each member is to experience the optimum of success and goal achievement BIB 3341 INTERNATIONAL MANAGEMENT

Global Teams in the Modern Global Enterprise BIB 3341 INTERNATIONAL MANAGEMENT

Virtual Transnational Teams Virtual groups, whose members interact through computer-mediated communication systems, are linked together across time, space, and organizational boundaries Virtual global teams are horizontal networked structure, with people around the world conducting meetings and exchanging information via the Internet, enabling the organization to capitalize on 24 hour productivity BIB 3341 INTERNATIONAL MANAGEMENT

Operational Challenges for Global Virtual Teams BIB 3341 INTERNATIONAL MANAGEMENT

Managing Transnational Teams Indrei Ratiu of the Intercultural Management Association in Paris has proposed six criteria for the evaluation of intercultural work teams: Do members work together with a common purpose? Is this purpose something that is spelled out and felt by all to be worth fighting for? Has the team developed a common language or procedure? Does it have a common way of doing things, a process for holding meetings? BIB 3341 INTERNATIONAL MANAGEMENT

Does the team build on what works, learning to identify the positive actions before being overwhelmed by the negatives? Does the team attempt to spell out things within the limits of the cultural differences involved, delimiting the mystery level by directness and openness regardless of the cultural origins of participants? Do the members recognize the impact of their own cultural programming on individual and group behavior? Do they deal with, not avoid, their differences in order to create synergy? Does the team have fun? BIB 3341 INTERNATIONAL MANAGEMENT

These are some general recommendations the researchers make for improving global teamwork: Cultivate a culture of trust: One way to do this is by scheduling face-to-face meetings early on Rotating meeting locations Rotating and diffusing team leadership Linking rewards to team performance Build social networks among managers from different countries BIB 3341 INTERNATIONAL MANAGEMENT

16.2 THE ROLE OF WOMEN IN INTERNATIONAL MANAGEMENT Avoid assuming that a female executive will fail because of the way she will be received or because of problems experienced by female spouses Avoid assuming that a woman will not want to go overseas Give female managers every chance to succeed by giving them the titles, status, and recognition appropriate to the position – as well as sufficient time to be effective BIB 3341 INTERNATIONAL MANAGEMENT

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