1. Managing in a Global Environment

2. Dimensions of Culture Culture:- the collective programming of the mind Culture shock- a person is exposed to a new culture with different norms, customs, expectations, has difficulty in adjusting Dimensions Power Distance Individualism Uncertainty avoidance Masculinity/femininity Long-term/short term orientation www.geert-hofstede.com

3. Hoffstede Dimensions of Culture Power distance – the extent to which individuals expect a hierarchical structure that emphasizes status differences between subordinates and superiors Individualism – the degree to which a society values personal goals, autonomy, and privacy over group loyalty, norms, cohesiveness, and socialization. Uncertainty avoidance – the extent to which a society places value on reducing risk and instability Masculinity/femininity – the degree to which a society views assertive or masculine behavior as important Long/short term orientation – the extent to which values are oriented toward the future (saving) vs. past or present (tradition, social obligation)

4. Why does this car Cost $20,000? 6000- assembly 3000- sophisticated parts- engine etc 800- small parts 500- Advertising 1000- data processing 8700- legal, banking, insurance fees 6000- South Korea 3000- Japan 800- Taiwan Singapore and Japan 500- Great Britain 1000- Ireland 8700- United States.

5. Change in world Business Global Shift: The effects of changes in the competitive landscape prompted by worldwide competition. What are the ways in which world output and world trade have changed?

6. How International Business has changed Lowered trade barriers  General Agreement on Tariffs and Trade (GATT)  World Trade Organization (WTO) Integrated Economic Markets  The European Union (EU)  The North American Free Trade Act (NAFTA)  Central American-Dominican Republic Free Trade Agreement (CAFTA)  The Association of Southeast Asian Nations (ASEAN)  The Asia Pacific Economic Cooperation (APEC)

7. So what is changing? 1. Global consumer preferences  Tastes and preferences are converging  Presence of mass media, exposure to goods from various countries, and standardized products 2. Globalized production  Cost efficiency – Outsourcing,

8. So what is changing?(cont.) 3. Technological innovations  Advances in communications, information processing, and transportation technology  Fiber optics, wireless technology, the Internet and World Wide Web, and satellite technology 4. Management across cultures  Adaptation to business strategies, structures, operational policies, and human resource programs

9. Changing Environments 1. Business 2. Legal Common law Civil law Muslim Law 3. Cultural

10. Foreign expansion- Questions firms need to ask. 1. Where Large domestic market Wealth of customers high likely to grow Available resources Firms offerings are suitable to the market( coals to New Castle) A positive business environment exists 2. When? 1. Timing is key 2. First mover advantage 3. Pioneering costs

11. Questions firms need to ask. How much? Lowest if the firm simply decides to export its products to the foreign location Highest if the firm decides to have a wholly owned subsidiary in the foreign country 4. Which way?

12. Modes of Entry Exporting – entering new markets by sending products to other countries, still maintaining production facilities within the domestic borders Turnkey projects – specialized type of exporting, where the firm handles the startup of the company and a local client is then handed the key Licensing – entering new markets by transferring the rights to produce and sell products overseas to a foreign firm

13. Modes of Entry Franchising – entering new markets in which the franchise pays a fee for using the brand name and agrees to follow the standards and rules Joint venture – means of entering new markets where two or more independent firms agree to establish a separate firm Strategic alliance – cooperative arrangements between competitors or potential competitors from different countries Wholly owned subsidiary – entering new markets in which a firm fully owns its subsidiary in foreign countries

14. Examples of Strategic Alliances General Electric – Snecma of France Toshiba – IBM Mitsui – General Electric GM – Daewoo Texas Instrument – Compel Communications Canon – Hewlett-Packard Mitsubishi – Caterpillar

15. Basic Approaches to Managing an International Subsidiary Ethnocentric Approach- top management and key positions filled with people from the home country (expatriates) Polycentric Approach- staffed by nationals of the host country Geocentric Approach- staffed by qualified people from other countries Third Country Nationals- citizens from other countries. Can you give examples of these.

16. Why International Assignments End in Failure Career blockage – the feeling that working abroad has gotten their career sidetracked, while people back home are climbing the corporate ladder Culture shock – the inability to adjust to a different cultural environment Lack of pre-departure cross-cultural training – little if any is offered to expatriates before going to a different country.

17. Why International Assignments End in Failure( Contd.) Overemphasis on technical qualifications – the expatriate may lack cultural adaptability, even though they have the technical skills Getting rid of a troublesome employee – provides the ability to solve interpersonal conflict, but at a huge expense to the company Family problems – inability or unwillingness of the expatriate’s family to adapt to life in another country

18. Key HR Management Factors for Global Firms Selection  Selection criterion should include cultural sensitivity Training  Length of assignment determines depth of training  Cross-cultural training is critical to success Career Development  International assignments should be part of career advancement plan Compensation and Benefits  Incentives and quality-of-life concerns

19. Cross-cultural Training Impression Management – High intensity. Assessment center, field experiences, simulations, sensitivity training Affective Approach- Language training, role- playing, critical incidents, cases, stress- reduction training, moderate language training Information-Giving Approach- area briefing, cultural briefing, films/ books/ interpreters, survival-level language

20. Ethics and Social Responsibility Globalization greatly increases the possibility that managers will face an ethical dilemma. Different cultures have different notions of right and wrong. U.S. Foreign Corrupt Practice Act (1977). Many firms and industry groups have developed their own codes of conduct for foreign operations.