Globalization and International Linkages

Globalization and International Linkages
chapter one Globalization and International Linkages McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All Rights Reserved.

Chapter 1: Globalization and International Linkages
The specific objectives of this chapter are: 1. ASSESS the implications of globalization for countries, industries, firms, and communities. 2. REVIEW the major trends in global and regional integration. 3. EXAMINE the changing balance of global economic power and trade and investment flows among countries. 4. ANALYZE the major economic systems and recent developments among countries that reflect those systems.

International Management
International management process: Applying management concepts and techniques in a multinational environment; Adapting management practices to different economic, political, and cultural environments. Multinational corporation (MNC): Operations in more than one country International sales Nationality mix of managers and owners

The World’s Top Nonfinancial MNCs from Developed Countries (ranked by foreign assets, 2004)

The World’s Top Nonfinancial MNCs from Developing Countries (ranked by foreign assets, 2004)

Globalization and Internationalization
Globalization: the process of integration among countries around the world with a vision of a single market entity: Social Economic Political Technological Cultural Internationalization: the process of a business crossing national and cultural borders.

Globalization: Pros and Cons
Benefits of Globalization: wealth, jobs, technology, lower prices. Criticisms of Globalization: off-shoring of business service jobs to lower-wage countries; growing trade deficits; slow wage growth; environmental and social impacts.

Global and Regional Integration:
Global Agreements: World Trade Organization (WTO) (General Agreement on Tariffs and Trade (GATT)) Regional Agreements: North American Free Trade Agreement (NAFTA) U.S.-Central American Free Trade Agreement (CAFTA) European Union (EU) Association of Southeast Asian Nations (ASEAN) Free Trade Agreement of the Americas (FTAA)

International Economic Power in the Global Economy:
Shifting landscape due to: Economic integration Economic potential of emerging markets

The World’s Largest Economies 2005 and 2020 (Projected) Measured by GDP at Market Exchange Rates:

The World’s Largest Economies 2005 and 2020 (Projected) Measured by GDP at Purchasing Power Parity (ppp)

Most Populous Countries in 1980, 2000, and 2050 (Projected):

Trends in International Investments and Trade:
80% from developed countries Foreign direct investment (FDI) Growing at healthy rate Outpacing domestic growth in most countries International Trade: Over ½ of world trade accounted for by United States, European Union and Japan Increased substantially over last two decades

Trade Flows Among World Regions, 2005 (in billions of dollars or percent)

World Foreign Direct Investment Inflows (in millions of dollars):

World Foreign Direct Investment Outflows (in millions of dollars):

Economic Systems of the World:
Market Economy Command Economy Mixed Economy

Economic Performance by Major World Region:
North America South America Europe (EU, Central and Eastern Europe) Asia (Japan, China, emerging markets of Asia) Other developing and emerging countries (India, Middle East, Central Asia, Africa)

Economic Performance: North America
Free market base economy in region Combined purchasing power of U.S., Canada and Mexico approaches $12 trillion in purchasing power Foreign MNC’s find U.S. to be a lucrative market United States: Foreign MNC’s find U.S. a lucrative expansion market Foreign firms welcomed as investors in U.S. market U.S. firms hold market dominance in many European markets; gaining market share in Asia

Economic Performance: North America (continued):
Canada: U.S.’s largest trading partner Most of the largest foreign-owned Canadian companies are totally or heavily U.S.-owned Legal and business environment in Canada is similar to that in U.S. Mexico: Strongest Latin American economy Very strong maquiladora industry Trade with both Europe and Asia has increased Now competitive with Asia for the U.S. market

Economic Performance: South America
South American countries have accumulated heavy foreign debt and experienced severe inflation Major development is inter-country trade, including free market policies among South American countries South American countries increasingly looking to do business with U.S.

Economic Performance: European Union
Privatization of traditionally nationalized industries Emergence of the EU as an operational economic union Economic linkages between the EU and newly emerging Central and Eastern European countries Challenge is to absorb former communist bloc countries Foreign MNCs gain foothold in EU by: Acquisitions, Alliances, Cooperative R&D efforts

Economic Performance: Central and Eastern Europe
Russia, Czech Republic, Hungary, Poland: Dismantling of Russian price controls Perestroika—economic and political restructuring Privatization Inflation Crime Membership in International Monetary Fund (IMF) Political uncertainty

Economic Performance: Asia
Japan Phenomenal economic success in 1970s and 1980s Ministry of International Trade and Industry (MITI) Keiretsus Vertically integrated industries Holdings provide assistance needed in providing goods and services to end users Decade long recession in 1990s Bank loans backed by real estate or projected revenues By 2000, most major banks had billions of dollars in uncollectible loans International competition has increased

China Annual real economic growth of 10 percent during the 1980’s and early 1990’s More recent growth of 8 percent or higher Healthy and growing economy GDP growth of 11.1 percent in 1st ¼ of 2007 Attractive to foreign investors despite major political risk Product pirating is a major problem Complicated and high-risk venture

The Four Tigers South Korea Chaebols (large family-held Korean conglomerates) Affected by declining economies of Southeast Asia in 1990’s Hong Kong Now part of People’s Republic of China Uncertainty about the role the Chinese government intends to play in local governance

The Four Tigers (continued) Singapore Least hurt by economic downturn of 1990’s Taiwan Progression from labor-intensive economy to one dominated by technologically sophisticated industries (banking, electricity generation, petroleum refining and computers)

Economic Performance: Southeast Asia
The Baby Tigers (Thailand, Malaysia, Indonesia): Large population base Inexpensive labor Considerable natural resources Attractive to outside investors

Economic Performance: Developing and Emerging Countries
India Low per capital GDP Recent trend of locating software and high value-added services to this country Attractive to U.S. and British investors (well educated, English speaking, technologically sophisticated workers) Middle East and Central Asia Large oil reserves Highly unstable geopolitical and religious forces Plagued by continuing economic problems

Economic Performance: Developing and Emerging Countries
Africa Considerable natural resources African nations remain very poor and undeveloped International trade is not a major sources of income Populace divided into 3,000 tribes that speak 1,000 languages and dialects Major political instability Poverty, starvation, illiteracy, corruption, overcrowding among many social problems negatively affecting economic sector

World’s Most Competitive Nations, 2006

Market Potential Indicators Ranking for Emerging Markets, 2007

Review and Discuss How has globalization affected different world regions? What are some of the benefits and costs of globalization for different sectors of society? How has NAFTA affected the economies of North America and the EU affected Europe? What importance do these economic pacts have for international managers in North America, Europe and Asia? Why would MNCs be interested in South America, India, the Middle East, Central Asia, and Africa, the less developed and emerging countries of the world?

The Political, Legal and Technological Environment
chapter two The Political, Legal and Technological Environment McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All Rights Reserved.

The Political, Legal, and Technological Environment
Chapter Objectives: INTRODUCE the basic political systems that characterize regions and countries around the world and offer brief examples of each. PRESENT an overview of the legal and regulatory environment in which MNCs operate worldwide. REVIEW key technological developments as well as their impact on MNCs now and in the future.

Political Environment:
Ideologies (ideas reflecting beliefs and values influencing behavior/culture of nations and political systems) underlie the actions of governments. Evaluate a political system along two dimensions: (1) rights of citizens based on a system of government (range democratic to totalitarian); (2) Focus of political system on individualism vs. collectivism. No pure form of government Democratic tend to emphasize individualism and totalitarian tends to emphasize collectivism.

(1) Ideologies: Individualism
People should be free to pursue economic and political endeavors without constraint. In business context, similar to capitalism and connected to free market society Private property more successful, productive, and progressive than communal property Betterment of society related to level of freedom individuals have in pursuing economic goals.

(1) Ideologies: Collectivism
Does not value individual as such Views needs/goals of society at large as more important than individual desires No rigid form of collectivism as societal goals differ greatly among cultures e.g.: Fascism: nationalism, authoritarianism, militarism, corporatism, collectivism, totalitarianism

(1) Ideologies: Socialism
Government ownership of institutions Profit is not the ultimate goal Can be viewed as moderate example of collectivism in practice Has been practiced in China, North Korea, Cuba Democratic socialism, more moderate form, practiced by Great Britain’s Labour Party, and in France, Spain, and Greece Communism is extreme form of socialist thought

(2) Political Systems: Democracy
European roots System in which government is controlled by citizens either directly or through elections. Democratic society cannot exist without at least a two-party system Once elected, representative is held accountable to electorate for actions (which limits power of government)

(2) Political System: Totalitarianism
Only one representative party which exhibits control over every facet of political and human life Power maintained by suppression of opposition Dominant ideals include media censorship, political representation, denial of rights, and civil liberties

Political Environment Regional Example: China
Emerging economic power Government attempting to open up economy: Speed up conversion of state enterprises into corporations Trade liberalization a top priority since joining WTO in 2001 Becoming a more open, democratic society Greater tolerance of individual freedoms Worker retraining, low-cost housing and other programs Seeking to unleash a more dynamic market economy

Political Environment: Regional Example: Europe
Privatization and economic liberalization reinforce EU-wide political and economic integration Political power is variable and complex Strong opposition to U.S.-led intervention in Iraq sometimes spill over into business relationships and dealings Europe is a large interwoven region economically, but contains vast cultural differences

Political Environment: Example: The Middle East
In Iran and Saudi Arabia laws and government based on Islamic principles Business conduct in Middle East similar to Western in many ways Worldwide fallout from war on terrorism have made business environment there risky and potentially dangerous

Political Environment: Example: Russia
Neglect and confusing changes in economic policy Infrastructure is weak and a political quagmire Corruption interferes with attraction of more foreign investment

Legal and Regulatory Environment
Confusion and challenge for the MNC due to many different laws and regulations in global business operations MNCs must carefully evaluate legal framework in each market before doing business

Four Global Foundations of Law:
Islamic Socialist Common Civil or code

Four Global Foundations of Law: Islamic Law
Derived from interpretation of Qur’an and teachings of Prophet Muhammad Found in Islamic countries: Middle East and Central Asia

Four Global Foundations of Law: Socialist Law
Origins in Marxist socialist system Requires most property to be owned by state or state enterprises Continues to influence regulations in former communist countries: Members of former Soviet Union Peoples’ Republic of China Vietnam North Korea Cuba

Four Global Foundations of Law: Common Law
Origins in English law Foundation of legal system for: United States Canada England Australia New Zealand

Four Global Foundations of Law: Civil or Code Law
Derived from Roman law Found in non-Islamic and non-socialist countries: France Some Latin American countries Louisiana in the U.S.

Basic Principles of International Law
Sovereignty and Sovereign Immunity International Jurisdiction Doctrine of Comity Act of State Doctrine Treatment and Rights of Aliens Forum for Hearing and Settling Disputes

Basic Principles of International Law:
Sovereignty and Sovereign Immunity: An international principle of law which holds that governments have the right to rule themselves as they see fit.

International Jurisdiction: A jurisdictional principle of international law which holds that every country has jurisdiction over its citizens no matter where they are located Nationality principle Territoriality principle Protective principle

Doctrine of Comity: A jurisdictional principle of international law which holds that there must be mutual respect for the laws, institutions, and government of other countries in the matter of jurisdiction over their own citizens.

Act of State Doctrine: A jurisdictional principle of international law which holds that all acts of other governments are considered to be valid by U.S. courts, even if such acts are illegal or inappropriate under U.S. law.

Treatment and Rights of Aliens: Countries have the legal right to refuse admission of foreign citizens and to impose special restrictions on their conduct, right of travel, where they can stay, and what business they may conduct. Nations can also deport aliens.

Forum for Hearing and Settling Disputes: U.S. courts can dismiss cases brought before them by foreigners; however, they are bound to examine issues such as: where the plaintiffs are located where the evidence must be gathered where property to be used in restitution is located

Legal and Regulatory Issues
Foreign Corrupt Practices Act Illegal to influence foreign officials through: personal payment political contribution Restrictive bureaucratization Privatization

Regulation of Trade and Investment
Individual countries use legal and regulatory policies to affect the international management environment Country is perceived to engage in unfair trade practices (WTO and similar agreements) Government support (subsidies) Require MNCs to accept local partners Response may be Retaliatory tariffs Restrictive trade regulations

Technological Environment and Global Shifts in Production
Biotechnology Nanotechnology Satellites Automatic translation telephones Artificial intelligence and embedded learning technology Advancements in computer chip technology Supercomputers

Technological Environment and Global Shifts in Production (continued):
E-business: Business to business (B2B) Business to consumer (B2C) E-tailing Financial services (e-cash) Telecommunications Technology, outsourcing and offshoring: Technology has reduced and eliminated some work in middle management and white collar Global competition has forced some MNCs to outsource jobs to offshore productions Emerging technology makes work more portable

Expected Winners/Losers in Selected Occupations

Review and Discuss In what ways do different ideologies and political systems influence the environment in which MNC’s operate? How do the following legal principles impact MNC operations: the principle of sovereignty, the nationality principle, the territoriality principle, the protective principle, and principle of comity? How will advances in technology and telecommunications affect developing countries? Give some specific examples.

Ethics and Social Responsibility
chapter three Ethics and Social Responsibility McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All Rights Reserved.

Chapter Objectives: EXAMINE ethics in international management and some of the major ethical issues and problems confronting MNCs in selected countries. DISCUSS some of the pressures on and action being taken by selected industrialized countries and companies to be more socially and environmentally responsive to world problems. EXPLAIN some of the initiatives to bring greater accountability to corporate conduct and limit the impacts of corruption around the world.

Study of morality and standards of conduct Dilemmas arising from conflicts between ethical standards between countries most evident in employment practices Inferring right vs. wrong in legal sense

Corporate Social Responsibility (CSR): Closely related to ethics Actions of a firm to benefit society beyond requirements of law and direct interests of firm CSR involves taking voluntary action CSR concerns include working conditions in factories and service centers as well as environmental impacts of corporate activities

Who’s Doing Well By Doing Good

Employment and business practices Difficult to establish a universal foundation of employment practices Difficult dilemmas in deciding working conditions, expected consecutive work hours, and labor regulations. Offshoring due to differences in labor costs

Human Rights Currently no universally adopted standard A great deal of subjectivity and culturally biased viewpoints exist Some basic rights: life, freedom from slavery or torture, freedom of opinion and expression, general ambiance of nondiscriminatory practices Human rights violations still rampant globally

Corruption Government corruption pervasive element in international business environment Scandals in Russia, China, Pakistan, Lesotho, South Africa, Costa Rica, Egypt and elsewhere

Corruption Index: Least and Most Corrupt Countries

Corporate Social Responsibility (CSR) and Sustainability
CSR: Action of a firm to benefit society beyond the requirements of the law and direct interests of the firm Sustainability: Development that meets humanity’s needs without harming future generations

NGOs, MNCs and Ethical Balance
NGO: Non-governmental organization; private, not-for-profit organization that seeks to serve society’s interests by focusing on social, political, and economic issues such as poverty, social justice, education, health and the environment. NGOs have urged MNCs to be more responsive to range of social needs in developing countries NGOs have grown in number, power, influence NGO activism has caused major changes in corporate behavior NGO leaders are the most trusted of eight leadership categories (see slide to follow)

NGOs NGOs in U.S. and globally Save the Children Oxfam CARE
World Wildlife Fund Conservation International

Rise of Civil Society and NGOs
Major criticisms Exploitation of low-wage workers Environmental abuses Intolerable workplace standards Response to social obligations: Agreements and codes of conduct Maintenance of standards in domestic and global operations Cooperation with NGOs regarding certain social issues Corporations receiving heavy criticism Nike Levi’s Chiquita

Trust in Leaders

Ethics and Social Responsibility Around the World: CHINA
Workers not well paid Often forced to work 12 hours a day, 7 days a week Piracy, counterfeiting, industrial spying Human rights violations Use of prisoner and child labor

Ethics and Social Responsibility Around the World: JAPAN
Political and business scandals: Japanese cabinet member have accepted questionable payments and favors Japanese banking system has failed to take corrective actions when dispersing loans Some Japanese firms systematically concealed customer complaints

Ethics and Social Responsibility Around the World: JAPAN
Equal opportunity issues Refusal to hire women or promote them into management positions Hostile work environment Traditional role of females and female employees Sexual harassment may not be considered a moral issue

Ethics and Social Responsibility Around the World: EUROPE
Equal employment opportunity Glass ceiling pervasive throughout the world France, Germany, Great Britain have seen increase in number of women in management, but tend to represent only lower levels

Corporate Response to Social Obligations
Agreements and codes of conduct committing MNCs to maintain certain standards Codes help offset real or perceived concern that companies move jobs to avoid higher labor or environmental standards in their home markets Contribute to raising of standard in developing world by exporting higher standard to local firms in these countries

Principles of Global Compact
Human Rights Labor Environment Anti-Corruption

Principles of Global Compact

Corporate Governance The System by which business corporations are directed and controlled: Distribution of rights and responsibilities Stakeholder management Spells out rules and procedures Makes decisions Objective setting Means of attaining objectives Monitors performance

Corporate Governance Many continental European countries are “insider” systems Ownership more concentrated Shares owned by holding companies, families or banks Rules and regulations differ among countries and regions U.K. and U.S. systems are “outsider” systems Dispersed ownership of equity Large number of outside investors

Global Initiatives to Increase Accountability and Limit Corruption
Foreign Corrupt Practices Act International Assistance Partnerships

Corruption and Foreign Corrupt Practices Act (FCPA)
Some evidence that discontinuing bribes does not reduce sales of the firm’s products or services in that country Recent formal agreement by many industrialized nations to outlaw the practice of bribing foreign government officials Illegal for U.S. firms and their managers to attempt to influence foreign officials through personal payments of political contributions, including such tactics as “Entertainment” expenses “Consulting” fees

Corruption and Foreign Corrupt Practices Act
Recent formal agreement by many industrialized nations to outlaw the practice of bribing foreign government officials Organization for Economic Cooperation and Development 29 members plus several other countries have signed on Fails to outlaw most payments to political party leaders Does indicate growing support for anti-bribery initiatives

International Assistance
Governments and corporations increase collaboration to provide assistance to communities and locales through global partnerships Best “investments” Controlling and preventing AIDS Fighting malnutrition Reducing subsidies and trade restrictions Controlling malaria

International Assistance

Millennium Development Goals

Review and Discuss What lessons can U.S. multi-nationals learn from the political and bribery scandals in Japan that can be of value to them in doing business in this country? Discuss two. How do ethical practices differ in the United States, and in European countries such as France and Germany? What implications does your answer have for U.S. multi-nationals operating in Europe? Why are MNCs getting involved in corporate social responsibility? Are they displaying a sense of social responsibility, or is this merely a matter of good business? Defend your answer.

The Meanings and Dimensions of Culture
chapter four The Meanings and Dimensions of Culture McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All Rights Reserved.

Chapter Objectives DEFINE the term culture, and discuss some of the comparative ways of differentiating cultures. DESCRIBE the concept of cultural values, and relate some of the international differences, similarities, and changes occurring in terms of both work and managerial values. IDENTIFY the major dimensions of culture relevant to work settings, and discuss their effects on behavior in an international environment. DISCUSS the value of country cluster analysis and relational orientations in developing effective international management practices.

The Nature of Culture Culture defined: Acquired knowledge that people use to interpret experience and generate social behavior. This knowledge forms values, creates attitudes, and influences behavior.

Characteristics of Culture
Learned Shared Trans-generational Symbolic Patterned Adaptive

Priorities of Cultural Values

How Culture Affects Managerial Approaches
Centralized vs. Decentralized Decision Making: In some societies, top managers make all important organizational decisions. In others, these decisions are diffused throughout the enterprise, and middle- and lower-level managers actively participate in, and make, key decisions.

Safety vs. Risk: In some societies, organizational decision makers are risk averse and have great difficulty with conditions of uncertainty. In others, risk taking is encouraged, and decision making under uncertainty is common.

Individual 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 upon.

Informal Procedures vs. Formal Procedures: In some societies, much is accomplished through informal means. In others, formal procedures are set forth and followed rigidly.

High Organizational Loyalty 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.

Cooperation vs. Competition Some societies encourage cooperation between their people. Others encourage competition between their people.

Short-term vs. Long-term Horizons Some culture focus most heavily on short-term horizons, such as short-range goals of profit and efficiency. Others are more interested in long-range goals, such as market share and technologic developments.

Stability vs. Innovation The culture of some countries encourages stability and resistance to change. The culture of others puts high value on innovation and change.

A Model of Culture

Business Customs in South Africa
Arrange meeting before discussing business over phone. Make appointments as far in advance as possible. Maintain eye contact, shake hands, provide business card Maintain a win-win situation Keep presentations short

Values in Culture Values
Learned from culture in which individual is reared Differences in cultural values may result in varying management practices Basic convictions that people have about Right and wrong Good and bad Important and unimportant

Values in Culture

Value Similarities and Differences Across Cultures
Strong relationship between level of managerial success and personal values Value patterns predict managerial success and can be used in selection/placement decisions Country differences in relationship between values and success; however, findings across U.S., Japan, Australia, India are similar Values of more successful managers favor pragmatic, dynamic, achievement-oriented and active role in interaction with others Values of less successful managers tend toward static and passive values; relatively passive roles in interacting with others

Hofstede’s Cultural Dimensions
Power distance Uncertainty avoidance Individualism/collectivism Masculinity/femininity

Power distance: Less powerful members accept that power is distributed unequally High power distance countries: people blindly obey superiors; centralized, tall structures (e.g., Mexico, South Korea, India) Low power distance countries: flatter, decentralized structures, smaller ratio of supervisor to employee (e.g., Austria, Finland, Ireland)

Uncertainty avoidance: people feel threatened by ambiguous situations; create beliefs/institutions to avoid such situations High uncertainty avoidance countries: high need for security, strong belief in experts and their knowledge; structure organizational activities, more written rules, less managerial risk taking (e.g., Germany, Japan, Spain) Low uncertainty avoidance countries: people more willing to accept risks of the unknown, less structured organizational activities, fewer written rules, more managerial risk taking, higher employee turnover, more ambitious employees (e.g., Denmark and Great Britain)

Individualism: People look after selves and immediate family only High individualism countries: wealthier, protestant work ethic, greater individual initiative, promotions based on market value (e.g., U.S., Canada, Sweden) High collectivism countries: poorer, less support of Protestant work ethic, less individual initiative, promotions based on seniority (e.g., Indonesia, Pakistan)

Masculinity: dominant social values are success, money, and things High masculine countries: stress earnings, recognition, advancement, challenge, wealth; high job stress (e.g., Germanic countries) High feminine countries: emphasize caring for others and quality of life; cooperation, friendly atmosphere., employment security, group decision making; low job stress (e.g., Norway)

Trompenaars’ Cultural Dimensions
Universalism vs. Particularism Universalism: ideas/practices can be applied everywhere High universalism countries: formal rules, close adhere to business contracts (e.g., Canada, U.S., Netherlands, Hong Kong) Particularism: circumstances dictate how ideas/practices apply; high particularism countries often modify contracts (e.g., China, South Korea)

Individualism vs. Communitarianism Individualism: people as individuals Countries with high individualism: stress personal and individual matters; assume great personal responsibility (e.g., Canada, U.S.) Communitarianism: people regard selves as part of group Value group-related issues; committee decisions; joint responsibility (e.g., Malaysia, Korea, Japan)

Neutral vs. Emotional Neutral: culture in which emotions not shown High neutral countries, people act stoically and maintain composure (e.g., Japan and U.K.) Emotional: Emotions are expressed openly and naturally High emotion cultures: people smile a lot, talk loudly, greet each other with enthusiasm (e.g., Mexico, Netherlands, Switzerland)

Specific vs. Diffuse Specific: large public space shared with others and small private space guarded closely High specific cultures: people open, extroverted; strong separation work and personal life (e.g., Austria, U.K., U.S.) Diffuse: public and private spaces similar size, public space guarded because shared with private space; people indirect and introverted, work/private life closely linked (e.g., Venezuela, China, Spain)

Achievement vs. Ascription Achievement culture: status based on how well perform functions (Austria, Switzerland, U.S.) Ascription culture: status based on who or what person is (e.g., Venezuela, China, Indonesia)

Time Sequential: only one activity at a time; appointments kept strictly, follow plans as laid out (U.S.) Synchronous: multi-task, appointments are approximate, schedules subordinate to relationships (e.g., France, Mexico) Present vs. Future: Future more important (Italy, U.S., Germany) Present more important (Venezuela, Indonesia All 3 time periods equally important (France, Belgium

The Environment Inner-directed: people believe in control of outcomes (U.S., Switzerland, Indonesia) Outer-directed: people believe in letting things take own course (China, Japan, S’pore)

Integrating Culture and Management: The GLOBE Project
GLOBE: Global Leadership and Organizational Behavior Effectiveness. Project extends and integrates previous analyses of cultural attributes and variables. Evaluates nine different cultural attributes using middle managers from 951 organizations in 62 countries. Multi-cultural team of 170 scholars from around the world worked together to survey 17,000 managers in 3 industries: financial services, food processing, and telecommunications. Covered every major geographic region of the world.

The GLOBE Project The 9 Dimensions of the GLOBE Project:
Uncertainty avoidance Power distance Collectivism I: Social collectivism Collectivism II: In-group collectivism Gender egalitarianism Assertiveness Future orientation Performance orientation Humane orientation

GLOBE Results Corresponds generally with those of Hofstede and Trompenaars. Different from Hofstede in that many more researchers with varied perspectives were involved (vs. Hofstede working alone); studied many companies vs. Hofstede’s IBM. GLOBE provides a current comprehensive overview of general stereotypes that can be further analyzed for greater insight.

GLOBE Project

GLOBE Analysis

Review and Discuss What is meant by culture? What is meant by value?
What are the dimensions of Hofstede’s model? Will cultural differences decline or intensify as roadblock to international understanding? Describe Trompenaar’s research.

Managing Across Cultures
chapter five Managing Across Cultures McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All Rights Reserved.

Chapter Objectives The specific objectives of this chapter are: EXAMINE the strategic dispositions that characterize responses to different cultures. DISCUSS cross-cultural differences and similarities. REVIEW cultural differences in select countries and regions, and note some of the important strategic guidelines for doing business in each.

Strategic Predispositions
Four distinct predispositions toward doing things in a particular way: Ethnocentric Polycentric Regio-centric Geocentric

Ethnocentric predisposition A nationalistic philosophy of management whereby the values and interests of the parent company guide strategic decisions.

Polycentric predisposition A philosophy of management whereby strategic decisions are tailored to suit the cultures of the countries where the MNC operates.

Regio-centric predisposition A philosophy of management whereby the firm tries to blend its own interests with those of its subsidiaries on a regional basis.

Geocentric predisposition A philosophy of management whereby the company tries to integrate a global systems approach to decision making.

Orientation of an MNC

Meeting the Challenge The Globalization Imperative:
Belief that one worldwide approach to doing business is key to efficiency and effectiveness. Many factors facilitate the need to develop unique strategies for different cultures: Diversity of worldwide industry standards Continual demand by local customers for differentiated products Importance of being insider as in case of customer who prefers to “buy local” Difficulty of managing global organizations Need to allow subsidiaries to use own abilities and talents unconstrained by headquarters

Globalization vs. National Responsiveness
Advertising (for example) French Avoid reasoning or logic Advertising predominantly emotional, dramatic, symbolic Spots viewed as cultural events – art for sake of money – and reviewed as if they were literatures or films British Value laughter above all else Typical broad, self-deprecating British commercial amuses by mocking both advertiser and consumer Germans Want factual and rational advertising Typical German spot features standard family of 2 parents, two children, and grandmother

Globalization vs. National Responsiveness
How to add value to marketing: Tailor advertising message to particular culture Stay abreast of local market conditions; don’t assume all markets basically same Know strengths and weaknesses of MNC subsidiaries; provide them assistance in addressing local demands Give subsidiary more autonomy; let it respond to changes in local demand

Cross-Cultural Differences and Similarities
Parochialism and Simplification Parochialism: view world through own eyes and perspectives Simplification: exhibit same orientation toward different cultural groups

Cultural Variations

Similarities across cultures: Not possible to do business same way in every global location Procedures and strategies that work well at home can’t be adopted overseas without modifications Some similarities have been found Russia and U.S. (for example) Traditional management Communication Human resources Networking activities OB Mod

Differences across cultures Far more differences than similarities found in cross-cultural research Wages, compensation, pay equity, maternity leave Importance of criteria used in evaluation of employees

Cultural Clusters

International Human Resource Management

Cultural Differences in Selected Countries and Regions
Doing Business in China The Chinese place values and principles above money and expediency. Business meetings typically start with pleasantries such as tea and general conversation about the guest’s trip to the country, local accommodations, and family. The Chinese host will give the appropriate indication for when a meeting is to begin and when the meeting is over. Once the Chinese decide who and what is best, they tend to stick with these decisions. Although slow in formulating a plan of action, once they get started, they make fairly good progress.

Cultural Differences in Selected Countries and Regions: China
In negotiations, reciprocity is important. If the Chinese give concessions, they expect some in return. Because negotiating can involve a loss of face, it is common to find Chinese carrying out the whole process through intermediaries. During negotiations, it is important not to show excessive emotion of any kind. Anger or frustration is viewed as antisocial and unseemly. Negotiations should be viewed with a long-term perspective. Those who will do best are the ones who realize they are investing in a long-term relationship.

Doing Business in Russia Build personal relationships with partners. When there are contract disputes, there is little protection for the aggrieved party because of the time and effort needed to legally enforce the agreement. Use local consultants. Because the rules of business have changed so much in recent years, it pays to have a local Russian consultant working with the company. Ethical behavior in the United States is not always the same as in Russia. For example, it is traditional in Russia to give gifts to those with whom one wants to transact business. Be patient. In order to get something done in Russia, it often takes months of waiting.

Cultural Differences in Selected Countries and Regions: Russia
Russians like exclusive arrangements and often negotiate with just one firm at a time. Russians like to do business face-to-face. So when they receive letters or faxes, they often put them on their desk but do not respond to them. Keep financial information personal. Russians wait until they know their partner well enough to feel comfortable before sharing financial data. Research the company. In dealing effectively with Russian partners, it is helpful to get information about this company, its management hierarchy, and how it typically does business.

Cultural Differences in Selected Countries and Regions: Russia
Stress mutual gain. The Western idea of “win–win” in negotiations also works well in Russia. Clarify terminology. The language of business is just getting transplanted in Russia so double-check and make sure that the other party clearly understands the proposal, knows what is expected and when, and is agreeable to the deal. Be careful about compromising or settling things too quickly because this is often seen as a sign of weakness. Russians view contracts as binding only if they continue to be mutually beneficial, so continually show them the benefits associated with sticking to the deal.

Doing business in India It is important to be on time for meetings. Personal questions should not be asked unless the other individual is a friend or close associate. Titles are important, so people who are doctors or professors should be addressed accordingly. Public displays of affection are considered to be inappropriate, so one should refrain from backslapping or touching others.

Cultural Differences in Selected Countries and Regions: India
Beckoning is done with the palm turned down; pointing often is done with the chin. When eating or accepting things, use the right hand because the left is considered to be unclean. The namaste gesture can be used to greet people; it also is used to convey other messages, including a signal that one has had enough food. Bargaining for goods and services is common; this contrasts with Western traditions, where bargaining might be considered rude or abrasive.

Doing business in France When shaking hands with a French person, use a quick shake with some pressure in the grip. It is extremely important to be on time for meetings and social occasions. Being “fashionably late” is frowned on. During a meal, it is acceptable to engage in pleasant conversation, but personal questions and the subject of money are never brought up. Visiting businesspeople should try very hard to be cultured and sophisticated.

Cultural Differences in Selected Countries and Regions: France
The French tend to be suspicious of early friendliness in the discussion and dislike first names, taking off jackets, or disclosure of personal or family details. In negotiations the French try to find out what all of the other side’s aims and demands are at the beginning, but they reveal their own hand only late in the negotiations. The French do not like being rushed into making a decision, and they rarely make important decisions inside the meeting. The French tend to be very precise and logical in their approach to things, and will often not make concessions in negotiations unless their logic has been defeated.

Doing business in Arab countries It is important never to display feelings of superiority, because this makes the other party feel inferior. Let one’s action speak for itself and not brag or put on a show of self-importance. One should not take credit for joint efforts. A great deal of what is accomplished is a result of group work, and to indicate that one accomplished something alone is a mistake. Much of what gets done is a result of going through administrative channels in the country. It often is difficult to sidestep a lot of this red tape, and efforts to do so can be regarded as disrespect for legal and governmental institutions.

Cultural Differences in Selected Countries and Regions: Arab Countries
Connections are extremely important in conducting business. Patience is critical to the success of business transactions. This time consideration should be built into all negotiations. Important decisions usually are made in person, not by correspondence or telephone. This is why an MNC’s personal presence often is a prerequisite for success in the Arab world. Additionally, while there may be many people who provide input on the final decision, the ultimate power rests with the person at the top, and this individual will rely heavily on personal impressions, trust, and rapport.

Review and Discuss Define the four basic predispositions MNCs have toward their international operations. In what way are parochialism and simplification barriers to effective cross-cultural management? In each case, give an example. Many MNCs would like to do business overseas in the same way that they do business domestically. Do research findings show that any approaches that work well in the U.S. also work well in other cultures?

Organizational Cultures and Diversity
chapter six Organizational Cultures and Diversity McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All Rights Reserved.

Chapter Objectives DEFINE what is meant by organizational culture; discuss interaction of national and MNC culture IDENTIFY four most common categories of organizational culture and discuss characteristics of each PROVIDE overview of nature and degree of multi-culturalism and diversity in today’s MNCs. DISCUSS common guidelines and principles used in building team and organizational multicultural effectiveness.

The Nature of Organizational Culture
Organizational culture: shared values and beliefs enabling members to understand their roles and the norms of the organization, including: Observed behavioral regularities, typified by common language, terminology, rituals Norms, reflected by things such as amount of work to do and degree of cooperation between management and employees Dominant values organization advocates and expected participants to share (e.g., low absenteeism, high efficiency)

Organizational Culture (continued)
Other values and beliefs: Philosophy set forth regarding how to treat employees and customers Rules dictating do’s and don’ts of employee behavior pertaining to productivity intergroup cooperation… Organizational climate as reflected by way participants interact with each other, treat customers, and feel about how treated by senior level management

Interaction between National and Organizational Culture
National cultural values of employees may significantly impact their organizational performance Cultural values employees bring to workplace are not easily changed by organization

Dimensions of Organizational Culture

European Perceptions of Cultural Dimensions of U. S
European Perceptions of Cultural Dimensions of U.S. Operations (same MNC)

European Management Characteristics

Organizational Cultures in MNCs
Shaped by numerous factors including cultural preferences of leaders and employees Some MNCs have subsidiaries that (aside from logo and reporting procedures) wouldn’t be easily recognizable as belonging to same MNC

Organizational Culture in MNCs
Four steps in integration of organizational cultures resulting from international expansion via mergers/acquisitions: Two groups establish purpose, goals, and focus of merger Develop mechanisms to identify most important structures and manager roles Determine who has authority over resources Identify expectations of all involved participates and facilitate communication between departments and individuals

Four Cultural Types

Four Cultural Types Family Culture: Strong emphasis on hierarchy and orientation to persons Power oriented, headed by leader regarded as caring parent Management takes care of employees, ensures they’re treated well, and have continued employment Catalyze and multiply energies of personnel or end up supporting leader who is ineffective and drains energy and loyalties

Four Cultural Types 2. Eiffel Tower:
Strong emphasis on hierarchy and orientation to task Jobs well defined; coordination from top Culture narrow at top; broad at base Relationships specific and status remains with job Few off-the-job relationships between manager and employee Formal hierarchy is impersonal and efficient

Four Cultural Types 3. Guided Missile:
Strong emphasis on equality in workplace and in task Culture oriented to work Work undertaken by teams or project groups All team members equal Treat each other with respect Egalitarian and task-driven organizational culture

Four Cultural Types Incubator Culture:
Strong emphasis on equality and personal orientation Organization as incubator for self- expression and self-fulfillment Little formal structure Participants confirm, criticize, develop, find resources for, or help complete development of innovative product or service

National Patterns of Corporate Culture

Managing Multiculturalism and Diversity
Both domestically and internationally, organizations lead workforces with a variety of cultures consisting of largely diverse populations: Women and Men Young and Old Black, White, Latin, Asian, Arab, Indian Many others.

Phases of Multicultural Development

Locations of Cross-Cultural Interaction

Types of Multiculturalism
Domestic Multiculturalism Multicultural and diverse workforce operating in MNC home country Group Multiculturalism Homogenous groups Token groups Bicultural groups Multicultural groups

Potential Problems Associated with Diversity
Perceptual problems When cultural diverse groups come together, often bring preconceived, erroneous stereotypes with them Inaccurate biases Inaccurate communication Attitudinal problems May cause lack of cohesion resulting in unit’s inability to take concerted action or be productive

Advantages of Diversity
Enhance creativity Lead to better decisions More effective/productive results Prevent groupthink Can facilitate highly effective teams under right conditions

Managing Multicultural Teams
Select team members for task-related abilities, not solely based on ethnicity Team members must recognize and prepare to deal with their differences Team leader must help identify/define overall goal Mutual respect among members is critical Managers must give team positive feedback on process and output

Review and Discuss In which of the four types of organizational cultures – family, Eiffel Tower, guided missile, incubator – would most people in U.S. feel comfortable? Most MNCs need not enter foreign markets to face challenges of dealing with multiculturalism. Do you agree or disagree? What are some problems to be overcome when using multiculturally diverse teams? What are some basic guidelines for helping make diverse teams more effective?

chapter seven Cross-Cultural Communication and Negotiation
McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All Rights Reserved.

Cross-Cultural Communication and Negotiation
Six Chapter Objectives: DEFINE communication; examine examples of verbal communication style; explain importance of message interpretation ANALYZE common downward and upward communication flows of international communication EXAMINE language, perception, culture of communication; nonverbal barriers to effective international communication PRESENT steps to overcome international communication problems DEVELOP approaches to international negotiations that respond to differences in culture REVIEW negotiating and bargaining behaviors that can improve negotiations and outcomes

Overall Communication Process
Communication: The process of transferring meanings from sender to receiver. On surface appears straightforward However, a great many problems can result in failure to transfer meanings correctly

Verbal Communication Styles
Context is information that surrounds a communication and helps convey the message Context plays a key role in explaining many communication differences Messages often highly coded and implicit in high-context society (e.g., Japan, many Arab countries) Messages often explicit and speaker says precisely what s/he means in low context society (e.g., U.S. and Canada)

Explicit and Implicit Communication

Major Characteristics of Verbal Styles

Indirect and Direct Styles High-context cultures: messages implicit and indirect; voice intonation, timing, facial expressions play important roles in conveying information Low-context cultures: people often meet only to accomplish objectives; tend to be direct and focused in communications

Elaborate and Succinct Styles Three degrees of communication quantity—elaborating, exacting, succinct Elaborating style most popular in high- context cultures with moderate degree of uncertainty avoidance Exacting style focuses on precision and use of right amount of words to convey message; more common in low-context, low-uncertainty-avoidance cultures Succinct style more common in high-context cultures with considerable uncertainty avoidance where people say few words and allow understatements, pauses, and silence to convey meaning.

Contextual and Personal Styles Contextual style focuses on speaker and relationship of parties; often associated with high power distance, collective, high-context cultures Personal style focuses on speaker and reduction of barriers between parties; more popular in low-power-distance, individualistic, low-context cultures

Affective and Instrumental Styles Affective style common in collective, high-context cultures; characterized by language requiring listener to note what is said/observe how message is presented; meaning often nonverbal; requires receiver to use intuitive skills to decipher message Instrumental style: goal oriented, focuses on sender who clearly lets other know what s/he wants other to know; more commonly found in individualistic, low-context cultures

Verbal Styles Used in 10 Select Countries

Communication Flows Downward Communication
Transmission of information from manager to subordinate Primary purpose of manager-initiated communication is to convey orders/information Managers use this channel for instructions and performance feedback Channel facilitates flow of information to those who need it for operational purposes

Upward Communication From subordinate to superior
Purposes: provide feedback, ask questions, obtain assistance In recent years a call for more upward communication in U.S. In Japan, Hong Kong, Singapore upward communication has long been fact of life Outside Asian countries, upward communication not as popular

Communication Epigrams

Suggestions for Communication
Use most common words with most common meanings Select words with few alternative meanings Strictly follow rules of grammar Speak with clear breaks between words Avoid using esoteric or culturally biased words Avoid use of slang Don’t use words or expressions requiring listener to form mental images Mimic cultural flavor of non-native speaker’s language Paraphrase and repeat basic ideas continually At end, test how well other understand by asking him/her to paraphrase

Communication Barriers
Language barriers Cultural barriers Be careful not to use generalized statements about benefits, compensation, pay cycles, holidays, policies in worldwide communication Most of world uses metric system so include converted weights and measures in all communications Even in English-speaking countries, words may have different meanings.

Communication Barriers (continued)
Cultural barriers (continued) Letterhead and paper sizes differ worldwide Dollars aren’t unique to U.S. Also Australian, Bermudian, Canadian, Hong Kong, Taiwanese, and New Zealand dollars. Clarify which dollar.

Perceptual Barriers Perception: a person’s view of reality
Advertising Messages: countless advertising blunders when words are misinterpreted by others How others see us: May be different than we think

Common Forms of Nonverbal Communication

Nonverbal Communication
Transfer of meaning through means such as body language and use of physical space Chromatics Use of color to communicate messages Kinesics Study of communication through body movement and facial expression Eye contact Posture Gestures

Proxemics Study of way people use physical space to convey messages Intimate distance used for very confidential communications Personal distance used for talking with family/close friends Social distance used to handle most business transactions Public distance used when calling across room or giving talk to group

Chronemics: the way time is used in a culture. two types: Monochronic time schedule: things done in linear fashion Polychronic time schedule: people do several things at same time and place higher value on personal involvement than on getting things done on time

Personal Space in U.S.

Communication Effectiveness
Improve feedback systems Language training Cultural training Flexibility and cooperation

Managing Cross Cultural Negotiations
Negotiation: Process of bargaining with one more parties to arrive at solution acceptable to all Two types of negotiation: Distributive when two parties with opposing goals compete over set value Integrative when two groups integrate interests, create value, invest in the agreement (win-win scenario)

Negotiating Styles

Negotiation Types and Characteristics

Steps of the Negotiation Process:
Planning Interpersonal relationship building Exchange of task related information Persuasion Agreement

Cultural Differences Affecting Negotiations
Don’t identify counterpart’s home culture too quickly; common cues such as accent may be unreliable. Beware of Western bias toward “doing”. Ways of being, feeling, thinking, talking can shape relationships more powerfully than doing. Counteract tendency to formulate simple, consistent, stable images. Don’t assume all aspects of culture are equally significant. Recognize norms for interactions involving outsiders may differ from those for interactions between compatriots. Don’t overestimate familiarity with counterpart’s culture.

Negotiation Tactics Location Time limits Buyer-seller relationship
Bargaining behaviors Use of extreme behaviors Promises, threats and other behaviors Nonverbal behaviors

Review and Discuss How does explicit communication differ from implicit communication? “He was laughing like hell.” “Don’t worry: It’s a piece of cake.” What are these expressions and what communication complications might they present? How is nonverbal communication a barrier to effective communication? Kinesics or proxemics? Which nonverbal communication barrier would be greatest for a U.S. company going abroad for the first time? What might a U.S. based negotiator need to know about Japanese bargaining behaviors to strike a best possible deal?

Strategy Formulation and Implementation
chapter eight Strategy Formulation and Implementation McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All Rights Reserved.

(8) Strategy Formulation and Implementation
Chapter Objectives: DISCUSS meaning, needs, benefits, approaches of strategic planning process for MNCs UNDERSTAND tension between pressures for global integration and national responsiveness; 4 basic international strategy options IDENTIFY basic steps in strategic planning DESCRIBE how MNCs implement strategic plan REVIEW three major functions of marketing, production, finance used in strategic plan implementation EXPLAIN specialized strategies for emerging markets and international new ventures

Strategic Management Strategic Management: the process of determining an organization’s basic mission and long-term objectives, then implementing a plan of action for pursuing the mission and attaining objectives Growing need for strategic management related to increasingly diversified operations in continuously changing international environment

Benefits of Strategic Planning
70 percent of 56 U.S. MNC subsidiaries had comprehensive 5 to 10-year plans according to one study Evidence for effectiveness of planning is mixed. Strategic planning does not always result in higher profitability

Approaches to Strategic Planning
Economic Imperative Administrative Coordination Political Imperative Quality Imperative

(1) Economic Imperative:
Economic imperative focused MNCs employ worldwide strategy based on cost leadership, differentiation, and segmentation Strategy also used when product is regarded as generic and therefore is not sold on name brand or support service Often sell products for which large portion of value is added in upstream activities of industry value chain Research and development Manufacturing Distribution

(2) Political Imperative
MNCs using political imperative are country-responsive; approach designed to protect local market niches These MNCs often use country-centered or multi-domestic strategy Success of product or service depends heavily on Marketing Sales Service

(3) Quality Imperative Quality imperative has 2 paths
Change in attitudes and raising of expectations for service quality Implementation of management practices designed to make quality improvement an ongoing process TQM Total Quality Management (see next slide)

Total Quality Management
Cross-train personnel to do jobs of all members in work group Process re-engineering designed to help identify/eliminate redundant tasks Reward system designed to reinforce quality performance Quality operationalized by meeting or exceeding customer expectations Quality strategy formulated at top management level and diffused through organization TQM techniques: traditional inspection and statistical quality control; cutting edge Human Resource Management techniques such as self-managing teams and empowerment

(4) Administrative Coordination Imperative
MNC makes strategic decisions based on merits of individual situation rather than predetermined economic or political strategy Least common approach to formulation and implementation of strategy Many large MNCs work to combine all 4 of the approaches to strategic planning

Global vs. Regional Strategies
Fundamental Tension: The globalization vs. national responsiveness conflict. Global integration: Production and distribution of products and services of a homogenous type and quality on a worldwide basis National responsiveness: need to understand different consumer tastes in segmented regional markets and respond to different national standards and regulations imposed by autonomous governments and agencies

Global Integration vs. National Responsiveness

Summary: Approaches to Strategic Planning
Appropriateness of each strategy depends on pressures for cost reduction and local responsiveness in each country served: Global strategy is low-cost strategy attempting to benefit from scale economies in production, distribution, marketing Transnational strategy pursued when high cost pressures and high demand for local responsiveness

Basic Elements in Strategic Planning for International Management

Elements of Strategic Planning: Environmental Scanning

Elements of Strategic Planning: Environmental Scanning
Provides management with accurate forecasts of trends relating to external changes in geographic areas where firm is doing business or considering doing business Changes relate to economy, competition, political stability, technology, demographic and consumer data

Elements of Strategic Planning: Internal Resource Analysis
Evaluate MNC’s current managerial, technical, material, and financial strengths and weaknesses Assessment then used to determine ability to take advantage of international market opportunities Match external opportunities (gained in environmental scan) with internal capabilities (gained through internal resource analysis) Key question for MNC: Do we have the people and resources that can help us develop and sustain necessary Key Success Factors, or can we acquire them?

Elements of Strategic Planning: Strategic Planning Goals
Goal formulation often precedes first two steps (environmental scanning, internal analysis) More specific goals for strategic plan come from external scan and internal analysis Goals serve as umbrella beneath which subsidiaries and other international groups operate Profitability and marketing goals almost always dominate strategic plans Once set strategic goals, MNC develops specific operational goals and controls for subsidiary or affiliate level

Elements of Strategic Planning: Implementation
Provides goods and services in accord with plan of action Plan often will have overall philosophy or guidelines to direct process Considerations in selecting country: Advanced industrialized countries offer largest markets for goods/services Amount of government control Restrictions on foreign investment Specific benefits offered by host countries

Elements of Strategic Planning: Implementation (continued)
Local issues Once country has been decided, firm must choose specific locale Important factors influence this choice: Access to markets Proximity to competitors Availability of transportation and electric power Desirability of location for employees coming in from outside

Production When exporting goods to foreign market, production has usually been handled through domestic operations More recently MNCs have found that whether they export or produce goods locally in host country, consideration of worldwide production is important Recent trend away from multi-domestic approach and toward global coordination of operations

Finance Transfer funds from once place in world to another, or borrowing funds in international money markets often less expensive than relying on local sources Issues include Reevaluation of currencies Privatization Strategic issues for base of pyramid International new ventures and “born global” firms

Strategies for “base of pyramid” (BOP) Emerging market customers People at bottom of economic pyramid Marketing at BOP forces consideration of smaller-scale strategies International new venture and “born-global” firms

International new ventures and “born-global” firms Firms that engage in significant international activity a short time after being established Successful born-global firms leverage a distinctive mix of orientations and strategies Global technological competence Unique product development Quality focus Leveraging of foreign distributor competencies

Formulation of MNC Goals

The Role of Functional Areas in Implementation
Production Traditionally handled through domestic operations Increasingly consideration of world wide production is important Recent trend away from scattered approach and toward global coordination of operations If product labor intensive, farm out product to low-cost sites (e.g., Mexico) Marketing country-by-country basis built around well-known 4 P’s (product, price, promotion, place)

The Role of Functional Areas (continued)
Finance Normally developed at home office Carried out by overseas affiliate or branch MNCs have learned that transferring funds from one place in world to other, or borrowing funds in international money markets often less expensive than reliance on local sources Major headache is reevaluation of currencies

Specialized Strategies
Some circumstances may require specialized strategies: Strategies for developing and emerging markets Strategies for international entrepreneurship and new ventures

Strategies for Emerging Markets
The big emerging markets: Mexico, Brazil Argentina, South Africa, Poland, Turkey, India, Indonesia, China, South Korea These nations have captured the bulk of investment and business interest from MNCs and their managers in recent years. Emerging markets present exceptional risks due to political and economic volatility. These risks show up in corruption, failure to enforce contracts, red tape and bureaucratic costs, and general uncertainty in legal and political environment.

Two Unique Strategies for Emerging Markets
First Mover Strategies: significant economies associated with early entry and first-mover positioning May be a narrow window of opportunity within which these opportunities can be best exploited. Strategies for Base of Pyramid (BOP): 4-5 billion potential customers around the globe heretofore ignored by global business BOP forces global business to rethink their strategies. Must consider relationships with local governments, small entrepreneurs, and nonprofits rather than depend on established partners such as central government. BOP strategies challenging to implement Represents opportunity to incubate new, leapfrog technologies Successful BOP strategies can travel profitably to higher income markets

The World Population and Income Pyramid

(2) Entrepreneurship Strategy and New Ventures
Increasingly small and medium size enterprises, often in the form of new ventures, are becoming involved in international management. The earlier in its existence an innovative firm internationalizes, the faster it is likely to grow both overall and in foreign markets. Venture performance (growth and ROE) is improved by technological learning gained from international environments.

International Entrepreneurship
Defined as “a combination of innovative proactive, and risk-seeking behavior that crosses national borders and is intended to create value in organizations”

International New Ventures and “Born Global” Firms
“Born global”: firms that engage in significant international activity a short time after being established. Most important business strategies employed by born global firms are global technological competence, unique products development, quality focus, and leveraging of foreign distributor competencies. Truly born global firms tend to survive longer than other seemingly global companies.

Review and Discuss Of the four imperatives, which is most important to IBM’s effort to enter the Pacific Rim Market? Define global integration as used in the context of international strategic management? Are globalization and national responsiveness diametrically opposed? Anheuser-Busch is attempting to enter India, where beer is hardly consumed and liquor dominates the market. What areas should be targeted for strategic goals? What are some marketing implications here? What conditions have allowed some firms to be “born global”?

Entry Strategies and Organizational Structures
chapter nine Entry Strategies and Organizational Structures McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All Rights Reserved.

Chapter Objectives Five Chapter Objectives
DESCRIBE how an MNC develops and implements entry strategies and ownership structures EXAMINE major types of entry strategies and organizational structures ANALYZE advantages and disadvantage of each type of organizational structure, including conditions making one preferable to others DESCRIBE recent, nontraditional organization arrangements coming out of mergers, joint ventures, keiretsus, and other new designs including electronic networks and product development structures EXPLAIN how organizational characteristics such as formalization, specialization, and centralization influence how organization is structured and functions

Entry Strategies and Ownership Structures
Export/import Wholly-owned subsidiary Mergers/acquisitions Alliances/joint ventures Licensing Franchising

Entry Strategies and Ownership Structures: Export/Import
Often the only available choices for small and new firms wanting to go international Also permits larger firms to begin international expansion with minimum investment Paperwork can be turned over to export management company or through firm’s export department Permits easy access to overseas markets Strategy is usually transitional in nature

Entry Strategies and Ownership Structures: Wholly Owned Subsidiary
Overseas operation is totally owned and controlled by an MNC MNC’s desire for total control and belief that managerial efficiency is better without outside partners Some host countries concerned that MNC will drive out local enterprises Home country unions sometimes view foreign subsidiaries as an attempt to “export jobs” Today many MNCs opt for merger, alliance, or joint venture than a fully owned subsidiary

Entry Strategies and Ownership Structures: Mergers and Acquisitions
The cross-border purchase or exchange of equity involving two or more companies The strategic plan of merged companies often calls for each to contribute a series of strengths toward making the firm a highly competitive operation

Entry Strategies and Ownership Structures: Alliances and Joint Ventures
Any type of cooperative relationship among different firms International joint venture (IJV) Agreement under which two or more partners from different countries own or control a business Nonequity venture Equity joint venture Advantages Improvement of efficiency Access to knowledge Political factors Collusion or restriction in competition

Strategic Alliance Recommendations
Know partner well before alliance is formed. Expect differences in alliance objectives among potential partners headquartered in different countries. Having desired resource profiles does not guarantee other has complementary to firm’s resources. Be sensitive to alliance partner needs. After identify best partner, work on developing relationship of trust.

Global Strategic Alliances

Entry Strategies and Ownership Structures: Licensing
License is an agreement that allows one party to use an industrial property right in exchange for payment to other party Licensee may avoid entry costs by licensing to a firm already there Licensor usually is a small firm lacking financial and managerial resources Companies spending large share of revenues of R&D are likely to be licensors Companies spending very little on R&D are more likely to be licensees

Entry Strategies and Ownership Structures: Franchising
Franchise: one party (the franchisor) permits another (the franchisee) to operate an enterprise using its trademark, logo, product line, and method of operation in return for a fee Widely used in fast-food and hotel/motel industries With minor adjustments for local market, can result in highly profitable international business.

Organizational Expectations of Internationalization

Basic Organizational Structures
Initial Division Structures Export arrangement Common among manufacturing firms, especially those with technologically advanced products On-site manufacturing operations In response to local governments when sales increase Need to reduce transportation cost Subsidiary Common for finance-related businesses or other operations that require onsite presence from start

Basic Organizational Structures

International Division Structure
Structural arrangement that handles all international operations out of a division created for this purpose Assures international focus receives top management attention Unified approach to international operations Often adopted by firms still in developmental states of international business operations Separates domestic from international managers (not good) May find it difficult to think and act strategically, or to allocate resources on a global basis

International Division Structure

Global Structural Arrangements
Global Product Division Structural arrangement in which domestic divisions are given worldwide responsibility for product groups Global product divisions operate as profit centers Helps manage product, technology, customer diversity Ability to cater to local needs Marketing, production and finance coordinated on product-by-product global basis Duplication of facilities and staff personnel within divisions Division manager may pursue currently attractive geographic prospects and neglect others with long-term potential Division managers may spend too much time tapping local rather than international markets

Global Product Division

Global Area Division Structure under which global operations organized on geographic basis International operations put on same level as domestic Global division mangers responsible for all business operations in designated geographic area Often used by firms in mature businesses with narrow product lines Firm is able to reduce cost per unit and price competitively by manufacturing in a region Difficult to reconcile a product emphasis with geographic orientation New R&D efforts often ignored because divisions are selling in mature market

Global Area Division Structure

Global Functional Division Structure
Structure that organizes worldwide operations primarily based on function and secondarily on product Approach not used except by extractive companies such as oil and mining Favored only by firms needing tight, centralized coordination and control of integrated production processes and firms involved in transporting products and raw materials between geographic areas Emphasizes functional expertise, centralized control, relatively lean managerial staff Coordination of manufacturing and marketing often difficult Managing multiple product lines can be very challenging because of separation of production and marketing into different deparments.

Global Functional Division Structure

Mixed Organizational Structures
Structure is a combination of global product, area, or functional arrangements Allows organization to create specific type of design that best meets its needs As matrix design’s complexity increases, coordinating personnel and getting everyone to work toward common goals often become difficult Too many groups to their own way

Multinational Matrix Structure

Transnational Network Structures
Multinational structural arrangement combining elements of function, product, geographic design, while relying on network arrangement to link worldwide subsidiaries At center of transnational network structures are nodes, units charged with coordinating product, functional, and geographic information Different product line units and geographic area units have different structures depending on what is best for their particular operation

Transnational Network Structure

Control Mechanisms

Nontraditional Organizational Arrangements
Organizational arrangements for mergers and acquisitions Organizational arrangements from joint ventures and strategic alliances Organizational arrangements from Keiretsus

Asian and Western Management Features

Emergency of Electronic Network Form of Organization
Electronic Freelancers Individuals who work on a project for a company, usually via the Internet, and move on to other employment when the assignment is done Temporary companies Serve a particular, short-term purpose and then go on to other assignments Outsourcing function (can be delivered on line) Electronic network is a version of the matrix design Many of the people in the structure are temporary contingent employees, never see each other and communicate exclusively in an electronic environment

Changing Role of Information Technology in Organizing

Organizational Characteristics of MNCs
Formalization: use of defined structures and systems in decision making, communicating, and controlling Specialization: Assign individuals to specific, well-defined tasks Centralization: Important decisions are made at the top

Managers’ Influence in U.S. and Japanese Firms in Taiwan

Review and Discuss Why are so many companies opting for the joint venture? Why are keiretsus popular? What benefits do they offer? In what way do formalization, specialization, and centralization have an impact on MNC organization structures?

Managing Political Risk, Government Relations, and Alliances
chapter ten Managing Political Risk, Government Relations, and Alliances McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All Rights Reserved.

Chapter Objectives The four specific objectives of this chapter are:
EXAMINE how MNCs evaluate political risk. PRESENT some common methods used for managing and reducing political risk. DISCUSS strategies to mitigate political risk and develop productive relations with governments. DESCRIBE challenges to and strategies for effectively managing alliances.

The Nature and Analysis of Political Risk
The likelihood that a business foreign investment will be constrained by a host government’s policy. Macro political risk analysis Analysis that reviews major political decisions likely to affect all enterprises in the country Micro political risk analysis Analysis directed toward government politics and actions that influence selected sectors of the economy or specific foreign businesses in the country

Macro Risk Factors Freezing the movement of assets out of the host country Placing limits on the remittance of profits or capital Devaluing the currency Refusing to abide by the contractual terms of agreements previously signed with MNC Industrial piracy (counterfeiters) Political turmoil Government corruption

2006 Transparency International Corruption Perceptions Index

Corruption Perceptions Index

Micro Risk Factors Some MNCs are treated differently than others
Industry regulation Taxes on specific types of business activity Restrictive local laws Impact of WTO and EU regulations on American MNCs Government policies that promote exports and discourage imports

Evaluation of Political Risk

Terrorism and Its Overseas Expansion
Terrorism: the use of force or violence against others to promote political or social views Three types of terrorism: amateur, religiously motivated, and classic MNCs disinclined to set up operations in countries with high terrorism risk MNCs must assess political risk, install modern security, compile crisis plans, and prepare employees for possible situations

Expropriation Risk Expropriation: the seizure of businesses by a host country with little, if any, compensation to owners Indigenization laws Require nations to hold a majority interest in an operation

Operational Profitability in Risk Analysis
Most MNCs are more concerned with operational profitability than expropriation They are concerned with ability to make desired return on investment Require MNCs to use domestic suppliers vs. those from other company-owned facilities or purchase in world market Restrict the amount of profit taken out of country Wages and salary that must be paid to employees

Managing Political Risk and Government Relations

Managing Political Risk and Government Relations
Transfer risks Operational risks Ownership control risks

Political Risks: Transfer Risks
Government policies that limit transfer of capital, payments, production, people, and technology in and out of country Tariffs on exports and imports Restrictions on exports Dividend remittance Capital rapatriation

Political Risks: Operational Risks
Government policies and procedures that directly constrain management and performance of local operations Price controls Financing restrictions Export commitments Taxes Local sourcing requirements

Political Risks: Ownership Control Risks
Government policies or actions that inhibit ownership or control of local operations Foreign-ownership limitations Pressure for local participation Confiscation Expropriation Abrogation of proprietary rights

General Nature of Investment
Conglomerate investment type of high-risk investment in which goods or services produced are not similar to those produced at home Vertical investment Production of raw materials or intermediate goods that are to be processed into final products Horizontal investment MNC investment in foreign operations to produce the same goods or services as those produced at home

Special Nature of Investment
Three sectors of economic activity Primary sector: agriculture, forestry, mineral exploration and extraction Industrial sector: manufacturing Service sector: transportation, finance, insurance, and related industries

Special Nature of Investment
Special nature of foreign direct investment can be categorized as one of five types (see Slide 13): Type I: highest-risk venture (type V is lowest) Risk factor is assigned based on sector, technology, and ownership Primary sector industries usually have highest risk factor, service sector industries have next highest; industrial sector industries have lowest Firms with technology not available to government should firm be taken over have lower risk than those with technology that is easily acquired Wholly owned subsidiaries have higher risk than partially owned subsidiaries

Quantifying Variables in Managing Political Risk
Each factor is given minimum or maximum score; scores tallied for overall evaluation of risk Slide 22 gives an example of a quantitative list of political risk criteria Factors typically quantified Political and economic environment Domestic economic conditions External economic conditions

Quantifying Political Risk

Techniques for Responding to Political Risk
Three related corporate political strategies Relative bargaining power analysis The MNC works to maintain a bargaining power position stronger than that of host country Integrative, protective, and defensive techniques Integrative techniques help overseas operation become part of host country’s infrastructure Developing good relations with host government and other local political groups Producing as much of product locally as possible with use of in-country suppliers and subcontractors Creating joint ventures and hiring local people to manage and run operation

Techniques for Responding to Political Risk (cont’d)
Doing as much local R&D as possible Developing effective labor-management relations Protective and defensive techniques discourage the host government from interfering in operations Doing as little local manufacturing as possible and conducting all research and development outside country Limiting responsibility of local personnel and hiring only those who are vital to operation Raising capital from local banks and host government as well as outside sources Diversifying production of product among number of countries

Techniques for Responding to Political Risk (cont’d)
Proactive political strategies Lobbying, campaign financing, advocacy and other political interventions designed to shape and influence political decisions prior to impact on firm Formal lobbying Campaign financing Seeking advocacy through embassy and consulates of home country Formal public relations and public affairs activities such as grassroots campaigning and advertising

Use of Integrative, Protective, and Defensive Techniques

Managing Alliances Alliance and joint ventures can significantly improve the success of MNC entry and operation, especially in emerging economies Preparation for likely eventual termination of alliance Faster entry and payback, economies of scale and rationalization, complementary technologies and patents, and co-opting or blocking competition Business issues (basic decision to exit, people-related issues, relations with the host government) Motivating factors

Role of Host Government in Alliances
Alliance or joint-venture partners may be advantageous to MNC entry and expansion Highly regulated industries such as banking, telecommunications, and health care Cope with emerging markets environments characterized by arbitrary and unpredictable corruption May be required by host government Host government may be unwilling to permit alliance to terminate

Review and Discuss What types of political risk would a company entering Russia face? Most firms attempt to quantify their political risk although without specific weights. Why is this approach so popular? Would assignment of weights be useful? How have terrorist attacks affected political relationshps between countries such as U.S. and Russia? What are some of the challenges associated with managing alliances? How do host governments affect these?

Management Decision and Control
chapter eleven Management Decision and Control McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All Rights Reserved.

Chapter Objectives: PROVIDE comparative examples of decision- making in different countries. PRESENT some of the major factors affecting the degree of decision-making authority given to overseas units. COMPARE and CONTRAST direct controls with indirect controls. DESCRIBE some of the major differences in the ways that MNCs control operations. DISCUSS some of the specific performance measures that are used to control international operations.

Decision-Making Processes and Challenges
Managerial decision-making processes: method of choosing a course of action among alternatives Process is often linear Looping back is common Managerial involvement in procedure depends on structure of subsidiaries and method of decision-making

Decision-Making Process

Factors Affecting Decision Making Authority

Comparative Examples of Decision Making
Decision-making philosophies and practices from country to country: Do international operations use similar decision-making norms? French and Danish managers used different approaches to decision-making; each more adept at different stages of the process. French do not value time as much as counterparts German co-determination: managers focus more on productivity and quality of goods/services than on managing subordinates.

Comparative Examples of Decision Making
Most evidence indicates overall decision-making approaches used around the world favor centralization MNCs based in U.S. Use fairly centralized decision making in managing overseas units Ensure that all units are operating according to overall strategic plan Provide necessary control for developing a worldwide strategy

Total Quality Management (TQM)
Organizational strategy and accompanying techniques resulting in delivery of high quality products or services to customers Critical to achieve world-class competitiveness Manufacturing is primary area U.S. automakers have greatly improved quality of their cars in recent years Japanese have continuously improved quality and still have the industry lead

Concurrent engineering/inter-functional teams Designers, engineers, production specialists, and customers work together to develop new products Empowerment Give individuals and teams resources, information, authority needed to develop ideas and effectively implement them Many successful TQM techniques applied to manufacturing MNCs use TQM techniques Tailor output to customer needs Require suppliers use same approach

ISO 9000 Certification Indirectly related to TQM International Standards Organization (ISO) to ensure quality products and services Areas examined include design, process control, purchasing, service, inspection and testing, and training. Ongoing Training Wide variety of forms such as statistical quality control and team meetings --designed to generate ideas Objective is to apply kaizen (Japanese term for continuous improvement)

Quality Concerns

Comparative Examples (continued)
Japanese make heavy use of ringisei (decision making by consensus) Other Japanese decision-making terms: Tatemae: “doing the right thing” according to the norm Honne: “what one really wants to do”

The Control Process MNC methods to control overseas operations
Most combine direct and indirect controls Some prefer heavily quantifiable methods; some prefer qualitative approaches Some prefer decentralized approaches; others greater centralization

Control Process Three common performance measures:
Financial performance: typically measured by profit and return on investment Quality performance: often controlled through quality circles Personnel performance: typically judged through performance evaluation techniques.

Three Models of PC Manufacturing:

Models of PC Manufacturing

The Controlling Process
MNCs may experience control problems Objectives of overseas operation and MNC may conflict Objectives of joint venture partners and corporate management may not agree Degree of experience and competence in planning vary widely among managers running overseas units Basic philosophic disagreements about objectives and polices of international operations may exist

Types of Control Two common complementary types:
Internal or external control in devising overall strategy Looking at ways organization uses direct and indirect controls

Types of Control: External/Internal:
Internal and external perspectives of control – one is often given more attention than the other. External control focus needed to find out what customers want and be prepared to respond appropriately Management wants to ensure market for goods and services exist

Types of Control: External/Internal

Types of Control: Direct Controls
Use of face-to-face personal meetings for purpose of monitoring operations Examples: top executives visit overseas affiliates to learn of problems and challenges; design structure that makes unit highly responsive to home-office requests and communications

Types of Control: Indirect
Use of reports and other written forms of communication to control operations at subsidiaries Financial statements Financial statement prepared to meet national accounting standards prescribed by host country Statement prepared to comply with accounting principles and standards required by home country Statement prepared to meet financial consolidation requirements of home country

Differences across countries: Great Britain Financial records are sophisticated and heavily emphasized Top management tends to focus on major problem areas; not involved in specific matters of control Control used for general guidance more than surveillance Operating units have large amount of marketing autonomy

The Controlling Process (continued)
France Managers employ control systems closer to that of German than British Control used more for surveillance than guidance Process centrally administered Less systematic and sophisticated than in German companies

U.S. vs. Europeans: U.S. firms rely much more on reports and other performance-related data Americans make greater use of output control; Europeans rely more heavily on behavioral control Control in U.S. MNCs focus more on quantifiable, objective aspects of foreign subsidiary; control in European MNCs used to measure more qualitative aspects.

Planning and Control

Control Techniques Financial performance
Most important part of ROI calculation is profit; often manipulated by management Amount of profit directly related to how well or poorly a unit is judged to perform

Control Techniques Financial performance (continued):
Bottom line (i.e., profit) performance of subsidiaries can be affected by a devaluation or revaluation of local currency If a country devalues its currency, subsidiary export sales will increase Price of goods will be lower for foreign buyers with currencies that have greater purchasing power If country revalues its currency, export sales will decline Price of goods for foreign buyers rises since currencies now have less purchasing power in subsidiary’s country

Control Techniques Quality performance: Why Japanese goods of higher quality than goods of many other countries: Quality control circle (QCC) Japanese firms train people carefully Staying on technological cutting edge Focus on developing and bringing to market competitively priced goods Design, engineer, and supply people to ensure product produced at prices customers can bear Fostering continuous cost-reduction efforts (kaizen) Control

U.S. vs. Japan-owned Auto Plants

Most Admired Global Companies

Review and Discuss Which cultures are more likely to focus on external controls? Which cultures would consider direct controls more important than indirect? How would you explain a company’s decision to use centralized decision-making processes and decentralized control processes, considering the two are so interconnected? Provide an industry example.

DEFINE motivation, and explain it as a psychological process.
Chapter Objectives DEFINE motivation, and explain it as a psychological process. EXAMINE the hierarchy-of-needs, two-factor, and achievement motivation theories, and assess their value to international human resource management

Motivation Across Cultures
3. DISCUSS how an understanding of employee satisfaction can be useful in human resource management throughout the world. 4. EXAMINE the value of process theories in motivating employees worldwide. 5. RELATE the importance of job design, work centrality, and rewards to understanding how to motivate employees in an international context.

The Nature of Motivation
Motivation is a psychological process through which unsatisfied wants or needs lead to drives that are aimed at goals or incentives.

Motivation’s Two Underlying Assumptions
The Universalist Assumption: Motivation process is universal; all people are motivated to pursue goals they value Process is universal Culture influences specific content and goals pursued Motivation differs across cultures

Motivation’s Two Underlying Assumptions
The Assumption of Content and Process Content Theories of Motivation: Theories that explain work motivation in terms of what arouses, energizes, or initiates employee behavior. Process Theories of Motivation: Theories that explain work motivation by how employee behavior is initiated, redirected, and halted

Three Content Theories
Maslow’s theory Rests on a number of assumptions: Lower-level needs must be satisfied before higher-level needs become motivators A need that is satisfied no longer motivates More ways to satisfy higher-level than there are ways to satisfy lower-level needs

Maslow’s Theory of Motivation

Maslow’s Motivation Theory
International findings: Haire study indicated all needs important to respondents across cultures International managers (not rank and file employees) indicated upper-level needs of particular importance to them Findings for select country clusters (Latin Europe, U.S./U.K., Nordic Europe) indicated autonomy and self-actualization were most important and least satisfied needs for respondents

Maslow’s Motivation Theory: international Evidence
Another study of East Asian managers in eight countries found autonomy and self-actualization in most cases ranked high Some researchers have suggested modification of Maslow’s Western-oriented hierarchy by re-ranking needs. Asian culture emphasizes needs of society: Chinese hierarchy of needs might have four levels ranked from lowest to highest: Belonging (social); Physiological; Safety; Self-actualization (in service of society)

Across Country Comparison

Goals Ranked by Occupation

Herzberg’s Two-Factor Theory of Motivation
A theory that identifies two sets of factors that influence job satisfaction: Motivators: Job content factors such as achievement, recognition, responsibility, advancement, and the work itself. Only when motivators are present will there be satisfaction. Hygiene Factors: Job-context factors such as salary, interpersonal relations, technical supervision, working conditions, and company policies and administration. If hygiene factors aren’t taken care of there will be dissatisfaction.

Herzberg’s Two Factor Theory

Herzberg vs. Maslow:

Herzberg’s Theory Generalized to International Context
Research tends to support Herzberg’s theory Hines: 218 middle managers and 196 salaried employees in New Zealand; found validity across occupational levels Similar study conducted among 178 Greek managers; overall theory held true

Herzberg’s Motivation Factors in Zambia

Herzberg’s Theory in Selected Countries

Cross-Cultural Comparison

Achievement Motivation Theory
Profile of high achievers: They like situations in which they take personal responsibility for finding solutions to problems Tend to be moderate risk-takers rather than high or low risk-takers Want concrete feedback on performance Often tend to be loners and not team players

Need for Achievement Theory
How to Develop High Need for Achievement: Obtain feedback on performance and use information to channel efforts into areas where success is likely Emulate people who are successful achievers Develop internal desire for success and challenges Daydream in positive terms by picturing self as successful in pursuit of important objectives

Achievement Motivation: international Findings
Polish industrialists were high achievers scoring 6.58 (U.S. managers’ scored an average 6.74) Some studies did not find high need for achievement in Central European countries (average score for Czech managers was 3.32 – considerably lower than for U.S.)

Country Comparisons

Achievement Motivation International Findings (continued)
Achievement motivation theory must be modified to meet specific needs of local culture Culture of many countries doesn’t support high achievement Anglo cultures and those rewarding entrepreneurial effort do support achievement motivation and their human resources should probably be managed accordingly.

Process Theories of Motivation
Equity Theory: When people perceive they are treated equitably, it will have a positive effect on their job satisfaction. If people believe they aren’t being treated fairly (especially relative to relevant others), they will be dissatisfied leading to negative effect on job performance; they will attempt to restore equity While considerable support for theory in Western world, support is mixed on an international basis.

Process Theories of Motivation: Equity Theory’s International Support
Israeli kibbutz production unit, everyone treated same but managers reported lower satisfaction levels than workers Managers perceived contributions greater than other groups in kibbutz and felt under-compensated for value and effort. Employees in Asia and Middle East often readily accept inequitable treatment in order to preserve group harmony Japanese men and women (and in Latin America) typically receive different pay for doing same work; due to years of cultural conditioning women may not feel treated inequitably

Process Theories: Goal Setting
Focuses on how individuals set goals and respond to them and the overall impact of this process on motivation Specific areas given attention in this theory: Level of participation in goal setting Goal difficulty Goal specificity Importance of objective Timely feedback to progress toward goals

Goal Setting Theory Goal setting theory continually refined and developed over time (unlike some of the other theories) Considerable research evidence showing employees perform extremely well when assigned specific and challenging goals in which they have a hand in setting Most studies have been conducted in US; few in other cultures

Goal Setting Theory’s International Evidence
Norwegian employees shunned participation and preferred to have union representative work with management to determine work goals Individual participation in goal setting was inconsistent with prevailing Norwegian philosophy of participation through union rep In U.S. employee participation in goal setting is motivational; no value for Norwegian employees in this study

Process Theories: Expectancy Theory
Process theory that postulates that motivation is influenced by a person’s belief that Effort will lead to performance Performance will lead to specific outcomes Outcomes will be of value to the individual High performance followed by high rewards will lead to high satisfaction

Expectancy Theory: International Generalizability?
Eden: some support for it while studying workers in an Israeli kibbutz Matsui and colleagues found it could be successfully applied in Japan Theory could be culture-bound; theory is based on employees having considerable control over their environment (which does not exist in many cultures)

Applied Motivation: Job Design, Work Centrality, Rewards
Quality of worklife (QWL) is same throughout world Assembly-line workers in Japan work at a rapid pace for hours and have little control over their work activities Assembly-line workers in Sweden work at more relaxed pace and have great deal of control over work activities U.S. assembly-line workers typically work somewhere in between – at a pace less demanding than Japan’s but more structured than Sweden’s QWL may be directly related to culture of the country

Quality of Life Across Cultures

Applied Motivation: Job Design
Socio-technical Job Designs: Objective of these designs to integrate new technology into workplace so workers accept and use it to increase overall productivity New technology often requires people learn new methods and in some cases work faster Employee resistance is common Some firms introduced sociotechnical designs for better blending of personnel and technology without sacrificing efficiency

Applied Motivation: Work Centrality
Importance of work in an individual’s life can provide important insights into how to motivate human resources in different cultures Japan has highest level of work centrality Israel has moderately high levels U.S. and Belgium have average levels Netherlands and Germany have moderately low levels Britain has low levels

Applied Motivation: Work Centrality and Value of Work
Work an important part of people’s lives in U.S. and Japan Americans and Japanese work long hours because cost of living is high Most Japanese managers expected salaried employees who aren’t paid extra to stay late at work; overtime has become a requirement of the job Recent evidence Japanese workers may do far less work in business day than outsiders would suspect

Applied Motivation: Work Centrality and Value of Work
Impact of overwork on physical condition of Japanese workers One-third of working-age population suffers from chronic fatigue Japanese prime minister’s office found majority of those surveyed complained of Chronic exhaustion Emotional stress Abusive conditions in workplace Karoshi (“overwork” or “job burnout”) is now recognized as a real social problem

Applied Motivation: Rewards
Managers everywhere use rewards to motivate personnel Significant differences exist between reward systems that work best in one country and those that are most effective in another. Many cultures base compensation on group membership Workers in many countries motivated by things other than financial rewards Financial incentive systems vary in range Individual incentive-based pay systems in which workers paid directly for output Systems in which employees earn individual bonuses based on organizational performance goals Use of financial incentives to motivate employees is very common In countries with high individualism When companies attempt to link compensation to performance

Review and Discuss Do people throughout the world have needs similar to those described in Maslow’s need hierarchy? Is Herzberg’s two-factor theory universally applicable to human resource management, or is its value limited to Anglo countries? In managing operations in Europe, which process theory– equity, goal-setting, or expectancy – would be of most value to an American manager? Why?

Chapter Objectives The specific chapter objectives are: DESCRIBE the basic philosophic foundation and styles of managerial leadership EXAMINE the attitudes of European managers toward leadership practices COMPARE and CONTRAST leadership styles in Japan with those in the United States

Specific Chapter Objectives (continued):
REVIEW leadership approaches in China, the Middle East, and developing countries. EXAMINE recent research and findings regarding leadership across cultures. DISCUSS the relationship of culture clusters and leader behavior to effective leadership practices, including increasing calls for more responsible global leadership.

Leadership Foundations

Theories X, Y and Z (philosophical background): Theory X: A manager who believes that people are basically lazy and that coercion and threats of punishment often are necessary to get them to work. Theory Y: A manager who believes that under the right conditions people not only will work hard but will seek increased responsibility and challenge. Theory Z: A manager who believes that workers seek opportunities to participate in management and are motivated by teamwork and responsibility sharing.

Managerial Beliefs about Work: Russia

Leadership Behaviors and Styles: Authoritarian: use of work-centered behavior designed to ensure task accomplishment. Paternalistic: use of work-centered behavior coupled with protective employee centered concern Participative: use of both work or task centered and people centered approaches to leading subordinates.

Leadership in the International Context
How leaders in other countries attempt to direct or influence their subordinates. International approaches to leadership Research shows there are both similarities and differences. Most international research has focused upon Europe, East Asia, the Middle East, and developing countries such as India, Peru, Chile, and Argentina.

European managers tend to use a participative approach. Researchers investigated four areas relevant to leadership: Capacity for leadership and initiative (Theory X vs. Theory Y) Sharing information and objectives: general vs. detailed, completed instructions for subordinates. Participation: leadership support for participative leadership Internal control: leader control through external vs. internal means

Country Clusters

The role of level, size, and age on European managers’ attitudes toward leadership: Higher level managers tend to express more democratic values than lower-level managers in some countries; in other countries the opposite is true. Company size tends to influence the degree of participative-autocratic attitudes Younger managers were more likely to have democratic values in leadership and initiative, information sharing and objectives

European Leadership Practices-- Conclusion Most European managers tend to reflect more participative and democratic attitudes Organizational level, company size, and age greatly influence attitudes toward leadership Many young people from the study are now middle-aged-European managers who are highly likely to be more participative than their older counterparts of the 1960s and 1970s.

Leadership in the International Context: Japanese
Japan is well known for its paternalistic approach to leadership Japanese culture promotes a high safety or security need, which is present among home country-based employees as well as MNC expatriates Japanese managers have much greater belief in the capacity of subordinates for leadership and initiative than do managers in most other countries. Only managers in Anglo-American countries had stronger feelings in this area

International Leadership: Japanese vs. American
Except for internal control, large U.S. firms tend to be more democratic than small ones; profile is quite different in Japan. Younger U.S. managers express more democratic attitudes than their older counterparts on all four leadership dimensions Japanese and U.S. managers have different philosophies of managing people. Ouchi’s Theory Z combines Japanese and U.S. assumptions and approaches.

International Leadership: Japanese vs. American
How senior managers process information and learn: Variety amplification: Japanese executives are taught and tend to use variety amplification-the creation of uncertainty and the analysis of many alternatives regarding future action. Variety reduction: U.S. executives tend to use variety reduction—limiting uncertainty and focusing action on a limited number of alternatives.

Leadership in China The “New Generation” group scored significantly higher on individualism than did the current and older generation groups They also scored significantly lower than the other two groups on collectivism and Confucianism These values appear to reflect the period of relative openness and freedom, often called the “Social Reform Era,” in which these new managers grew up They have had greater exposure to Western societal influences may result in leadership styles similar to those of Western managers

Leadership in the Middle East
There may be much greater similarity between Middle Eastern leadership styles and those of Western countries Western management practices are evident in the Arabian Gulf region due to close business ties between the West and this oil-rich area as well as the increasing educational attainment, often in Western universities, of Middle Eastern managers Organizational culture, level of technology, level of education, and management responsibility were good predictors of decision-making styles in the United Arab Emirates There is a tendency toward participative leadership styles among young Arab middle managers, as well as among highly educated managers of all ages

Leadership in Other Developing Countries
Managerial attitudes in India are similar to Anglo-Americans toward capacity for leadership and initiative, participation, and internal control, but different in sharing information and objectives Leadership styles in Peru may be much closer to those in the United States than previously assumed Developing countries may be moving toward a more participative leadership style

Recent Leadership Findings: Transformational, Transactional, Charismatic
Transformational leaders: source of charisma; enjoy admiration of followers Idealized influence: Enhance pride, loyalty, and confidence in their people; align followers by providing common purpose or vision that the latter willingly accept Inspirational motivation: Extremely effective in articulating vision, mission, beliefs in clear-cut ways Intellectual stimulation: able to get followers to question old paradigms and accept new views of world Individualized consideration: able to diagnose and elevate needs of each follower in way that furthers each one’s development

Recent Findings: Transformational, Transactional, Charismatic
Four other types of leadership are less effective than transformational: Contingent Reward: clarifies what needs to be done; provides psychic and material rewards to those who comply Active Management-by-Exception: monitors follower performance and takes corrective action when deviations from standards occur Passive Management-by-Exception: intervenes in situations only when standards are met Laissez-Faire: avoids intervening or accepting responsibility for follower actions

Middle Eastern vs. Western Management

Universal Leader Behaviors

Qualities Most Demanded in European Executives:

Culture Clusters and Leadership Effectiveness
Important attributes that form a concept of outstanding business leader Anglo mangers identify performance orientation, an inspirational style, having a vision, being a team integrator, and being decisive as being the top five attributes Nordic managers ranked these same five attributes as most important but not in same order Rankings of clusters in the North/West European region were fairly similar Substantial differences exist within and between the South/East European countries, countries from Eastern Europe, and Russia and Georgia

Rankings of Leadership Attributes

Recent Findings Leader Behavior, Leader Effectiveness, and Leading Teams: One of the keys to successful global leadership is knowing what style and behavior works best in a given culture and adapting appropriately In affective cultures, such as the United States, leaders tend to exhibit their emotions In neutral cultures, such as Japan and China, leaders do not tend to show their emotions

Doing Business in Affective and Neutral Countries: Leadership Tips

Cross-Cultural Comparison

Positive Organizational Scholarship and Leadership
Positive Organizational Scholarship (POS): Method that focuses on positive outcomes, processes, and attributes of organizations and their members. Relates to leadership in that POS recognizes positive potential that people have within. Effective leaders seem to live by POS as constantly innovate, create relationships, strive to bring organization to new heights, and work for greater global good through self improvement. Consists of three sub-units: Enablers: could be capabilities, processes or methods, and structure of the environment, which are all external factors. Motivations: focus is inward (such as unselfish or altruistic). Outcomes or effects: accentuate vitality, meaningfulness, high-quality relationships.

Authentic Leadership Authentic leaders defined by an all encompassing package of traits, styles, behaviors, and credits. 4 Distinct Characteristics: (1) do not fake actions; true to selves, do not adhere to external expectations; (2) driven from internal forces not external rewards; (3) unique and guide based on personal beliefs, not others’ orders; (4) act based on individual passion and values. Authentic leadership similar to traditional leadership, but has higher awareness; authentic leadership can create a better understanding within the organization.

Cross-Cultural Leadership: Six Insights from the GLOBE Study
Charismatic/Value Based: captures ability of leaders to inspire, motivate, encourage high performance outcomes from others based on foundation of core values Team-oriented: emphasis on effective team building and implementation of common goal among team members Participative: extent to which leaders involve others in decisions and decision implementation

Cross-Cultural Leadership: Six Insights from the GLOBE Study
Humane-oriented: comprises supportive and considerate leadership Autonomous: independent and individualistic leadership behaviors Self-protective: ensures safety and security of individual and group through status enhancement and face-saving

Ethically Responsible Global Leadership
Linking leadership and corporate responsibility through responsible global leadership Values Based Leadership Ethical Decision Making Quality Stakeholder Relationships

Review and Discuss What cultures would be the most likely to perceive differences between managerial and leadership duties? What cultures would view them as the same? Use evidence to support your answer. Is there any relationship between company size and European managers’ attitude toward participative leadership styles? What do U.S. managers need to know about leadership in the international arena? Identify and describe three important guidelines that can be of practical value.

Human Resource Selection and Development Across Cultures
chapter fourteen Human Resource Selection and Development Across Cultures McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All Rights Reserved.

Chapter Objectives IDENTIFY the three basic sources that MNCs can tap when filling management vacancies in overseas operations in addition to options of subcontracting and outsourcing. DESCRIBE the selection criteria and procedures used by the organization and individual managers when making final decisions.

Chapter Objectives (continued):
3. DISCUSS the reasons why people return from overseas assignments, and present some of the strategies used to ensure a smooth transition back into the home-market operation. 4. DESCRIBE the training process, the most common reasons for training, and the types of training that often are provided. 5. EXPLAIN how cultural assimilators work and why they are so highly regarded.

Sources of Human Resources
MNCs can use four basic sources for filling overseas positions: (1) Home-Country Nationals (Expatriates): Expatriate managers are citizens of the country where the multinational corporation is headquartered Sometimes called headquarters nationals Most common reason for using home-country nationals (expatriates) is to get the overseas operation under way

Sources for Human Resources
(2) Host-Country Nationals: Local managers hired by the MNC They are familiar with the culture They know the language They are less expensive than home-country personnel Hiring them is good public relations

(3) Third-Country Nationals: Managers who are citizens of countries other than the country in which the MNC is headquartered or the one in which the managers are assigned to work by the MNC These people have the necessary expertise for the job

(4) Inpatriates: Individuals from a host country or a third-country national who are assigned to work in the home country The use of inpatriates recognizes the need for diversity at the home office Use of inpats helps MNCs better develop their global core competencies MNCs can subcontract or outsource to take advantage of lower human resource costs and increase flexibility

Selection Criteria for International Assignments: Managers
Adaptability Independence Self-reliance Physical & emotional health Age Experience Education Knowledge of a foreign language Motivation Support of spouse & children Leadership

Selection Criteria for International Assignments
Organizations examine a number of characteristics to determine whether an individual is sufficiently adaptable. Work experiences with cultures other than one’s own Previous overseas travel Knowledge of foreign languages Recent immigration background or heritage Ability to integrate with different people, cultures, and types of business organizations

Looking Abroad for Workforce

Skills MNCs Seek Within Countries

Expatriate Selection Criteria

Those who were best able to deal with their new situation had developed coping strategies characterized by socio-cultural and psychological adjustments including: Feeling comfortable that their work challenges can be met Being able to adjust to their new living conditions Learning how to interact well with host-country nationals outside of work Feeling reasonably happy and being able to enjoy day-to-day activities

Applicants better prepare themselves for international assignments by carrying out the following three phases: Phase 1: Focus on self-evaluation and general awareness include the following questions: Is an international assignment really for me? Does my spouse and family support the decision to go international? Collect general information on available jobs

Selection Criteria for International Assignments (continued)
Phase 2: Conduct a technical skills assessment – Do I have the technical skills required for the job? Start learning the language, customs, and etiquette of the region you will be posted Develop an awareness of the culture and value systems of the geographic area Inform your superior of your interest in the international assignment

Selection Criteria for International Assignments (continued)
Phase 3: Attend training sessions provided by the company Confer with colleagues who have had experience in the assigned region Speak with expatriates and foreign nationals about the assigned country Visit the host country with your spouse before the formally scheduled departure (if possible)

International Human Resource Selection Procedures
Anticipatory Adjustment Training Previous experience In-country Adjustment Individual’s ability to adjust effectively Ability to maintain a positive outlook, interact well with host nationals, and to perceive and evaluate the host country’s cultural values and norms correctly Clarity of expatriate’s role in the host management team Expatriate’s adjustment to the organizational culture Non-work matters

The Relocation Transition Curve

Common Elements of Compensation Packages
Compensating expatriates can be difficult because there are many variables to consider Most compensation packages are designed around four common elements: Allowances Taxes Base Salary Benefits

Relative Cost of Living in Selected Cities

Allowances Cost-of-Living Allowance Payment for differences between the home country and the overseas assignment. Designed to provide the expatriate the same standard of living enjoyed in the home country May cover a variety of expenses, including relocation, housing, education, and hardship Incentives A growing number of firms have replaced the ongoing premium for overseas assignments with a one-time, lump-sum premium

Taxes Tax equalization An expatriate may have two tax bills for the same pay Host country U.S. Internal Revenue Service MNCs usually pay the extra tax burden

Tailoring the Compensation Packages
Balance-sheet approach Ensure the expatriate is does not lose money from the assignment Complementary approach Negotiate to work out an acceptable ad hoc arrangement Localization Pay the expatriate a salary comparable to local nationals Lump sum method Give expatriate a lump sum of money Cafeteria approach Compensation package that gives the individual a series of options Regional system Set a compensation system for all expatriates who are assigned to a particular region

Individual and Host Country Viewpoints
Individual desires Why do individuals accept foreign assignments? Greater demand for their talents abroad than at home Host-country desires Whom would it like to see put in managerial positions? Accommodating the wishes of HCOs can be difficult: They are highly ethnocentric in orientation They want local managers to head subsidiaries They set such high levels of expectation regarding the desired characteristics of expatriates that anyone sent by the MNC is unlikely to measure up

Repatriation of Expatriates
Reasons for returning to home country Most expatriates return home from overseas assignments when their formally agreed-on tour of duty is over Some want their children educated in a home-country school Some are not happy in their overseas assignment Some return because they failed to do a good job Readjustment problems “Out of sight, out of mind” syndrome Organizational changes Technological advances Adjusting to the new job back home

Effectiveness of Returning Expatriates

Repatriation of Expatriates
Transition strategies Repatriation Agreements Firm agrees with individual how long she or he will be posted overseas and promises to give the individual, on return, a job that is mutually acceptable Some of the main problems of repatriation include: Adjusting to life back home Facing a financial package that is not as good as that overseas Having less autonomy in the stateside job than in the overseas position Not receiving any career counseling from the company

Training in International Management
Four basic philosophic positions: (1) Ethnocentric MNC Stresses nationalism and often puts home-office people in charge of key international management positions (2) Polycentric MNC Places local nationals in key positions and allows these managers to appoint and develop their own people

(3) Regiocentric MNC Relies on local managers from a particular geographic region to handle operations in and around that area (4) Geocentric MNC Seeks to integrate diverse regions of the world through a global approach to decision making

Corporate Reasons for Training Ethnocentrism The belief that one’s own way of doing things is superior to that of others Personal reasons To train overseas managers to improve their ability to interact effectively with local people in general and with their personnel in particular Increasing numbers of training programs address social topics – these programs also focus on dispelling myths and stereotypes by replacing them with facts about the culture

Cross-Cultural Training Programs
Major types of cross-cultural training programs Environmental Briefings Provide information about things such as geography, climate, housing, and schools Cultural Orientation Familiarize the individual with cultural institutions and value systems of the host country

Cultural Assimilators Programmed learning techniques designed to expose members of one culture to some of the basic concepts, attitudes, role perceptions, customs, and values of another culture Language Training Provide information about things such as geography, climate, housing, and schools

Cross-Cultural Training
Field Experience Send participant to the country of assignment to undergo some of the emotional stress of living and working with people from a different culture Sensitivity Training Develop attitudinal flexibility

A variety of other approaches can be used to prepare managers for international assignments including: Visits to the host country Briefings by host-country managers In-house management programs Training in local negotiation techniques Analysis of behavioral practices that have proven most effective

Types of Training Programs
Global Leadership Development The Global Leadership Program (GLP) A consortium of leading U.S., European, and Japanese firms, global faculty, and participating host countries Provide an intensive international experience Develop a global mindset Instill cross-cultural competency Provide an opportunity for global networking

Review and Discuss What selection criteria are most important in choosing people for an overseas assignment? Identify and describe the four that you judge to be of most universal importance, and defend your choice. What are the major common elements in an expat’s compensation package? Besides base pay, which would be most important to you? Why? What kinds of problems do expatriates face when returning home? Identify and describe four of the most important. What can MNCs do to deal with these repatriation problems effectively?

Globalization and International Linkages

Similar presentations

Presentation on theme: "Globalization and International Linkages"— Presentation transcript:

Similar presentations

About project

Feedback

Log in

Auth with social network:

Globalization and International Linkages

Similar presentations

Presentation on theme: "Globalization and International Linkages"— Presentation transcript:

Similar presentations

About project

Feedback