International
Management
MGT 480/680
Spring 2009
Dr. Yvonne Stedham
1
International Management
• Seniors, Juniors, Majors???
• Travelled to other countries? USAC?
• Speak other languages?
2
International Management
• Why this course?
• What do you expect to learn?
3
This week
• Purpose of this course
• What do you know?
• Introduction
– Course
• Content
• Format - Syllabus
– Personal
• Instructor
• Students – Background Sheet
4
Purpose
• What new management/business knowledge
could you possibly learn in this class?
• Globalization, Democracy, Free Markets, and the
Bottom Line
5
Website Location
http://wolfweb.unr.edu/homepage/ystedham
6
Current Developments
• National Public Radio (NPR)
FM 88.7 - KUNR
FM 90.5 – Cap Radio
• The Economist
https://www.economistacademic.com/subscribe_single.cfm Student Subscription 12 weeks $19.95
Faculty ID: 4430
• Wall Street Journal
– Sign-up sheet
7
For February 5
• Global Update – Web/Handout
• Questions to be handed out in class – next week
8
Student Group
International Business Student Chapter (IBSC)
– [email protected] or Adam Cole
[[email protected]]
NEWTRAC
– Nevada World Trade Council
– www.newtrac.org
9
What do you know?
1.
List the five largest countries based on population.
2.
What is the world population?
3.
What is “GDP”? What is the GDP/capita in the
U.S.? What is a typical GDP growth rate for the
U.S.?
4.
Which three countries have the highest
GDP/capita?
5.
Which countries are culturally most
similar to the U.S, which ones
most dissimilar?
6.
How many countries are there in
the world?
10
What do you know?
I. Five largest countries
•
•
China 1.3 Bill
India 1Bill
•
U.S. 301Mill
•
Indonesia 220Mill
•
Brazil 190Mill
• Japan 127.5Mill
II. World Population
World 6.6 Bill
11
What do you know?
III. GDP/capita
GDP/capita in U.S.: ~ $46,000
Growth rate in U.S.: less than 3%
Mexico: Population ~110 Mill; $10,700
12
New Internet Sources
Index of Economic Freedom
www.heritage.org/research/features/index/countries
What is economic freedom?
Economic freedom is defined as the absence of government coercion or
constraint on the production, distribution, or consumption of goods and
services beyond the extent necessary for citizens to protect and
maintain liberty itself. In other words, people are free to work, produce,
consume, and invest in the ways they feel are most productive.
How do you measure economic freedom?
To measure economic freedom and rate each country, the authors of the
Index study 50 independent economic variables. These variables fall
into 10 broad categories, or factors, of economic freedom:
• Trade policy , Fiscal burden of government, Government intervention in
the economy, Monetary policy, Capital flows and foreign investment,
Banking and finance, Wages and prices, Property rights, Regulation,
Informal market activity.
13
Some Data (APPROX.)
Japan
Population
GDP growth
GDP/
Capita
Industry
China
Brazil
US
World
127.5 Mill
1.3Bill
190 Mill
301 Mill
6.6Bill
2.2%
10.7%
3.7%
3.2%
5.3%
$33,100
$7,700
$8,800
$46,780
$10,200
?
?
?
?
14
What do you know?
4. Which 5 countries have the highest
GDP/capita
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
Luxembourg
Norway
Qatar
Iceland
Ireland
Denmark
Switzerland
UK
US
Netherlands
$102,284
$ 79, 154
$ 70,754
$ 62, 976
$ 58,883
$ 57,035
$ 56,711
$ 47,300
$ 46, 780
$ 45,429
15
What do you know?
5. Which countries are culturally most similar
to the U.S.
Anglo Countries
– Canada
– Australia
– New Zealand
– U.K.
– Ireland
– South Africa
16
What do you know?
6. Number of countries in the world
• Total number of countries: 192 -195
• Kosovo, Vatican, and Taiwan
• United Nations 192
17
Quiz #1 – January 29th
• Deresky
– Chapter 1
– Chapter 2
• Adler
– Chapter 1: pp 1-16
18
Class on February 3rd
• Attend COBA Business Summit: Navigating the
Ethics Maze
• Details and Syllabus
World Economic Forum Davos 1/28-2/1
• Committed to improving the state of the world
• https://members.weforum.org/
20
World Economic Forum
•
is an independent, international organization incorporated as a Swiss not-forprofit foundation. Our motto is ‘entrepreneurship in the global public interest’.
We believe that economic progress without social development is not
sustainable, while social development without economic progress is not
feasible.
•
•
•
•
•
•
It aims to be: the foremost organization which builds
and energizes leading global communities;
the creative force shaping global, regional and industry strategies;
the catalyst of choice for its communities
when undertaking global initiatives
to improve the state the world.
21
World Economic Forum
We enjoy a unique global standing by recognizing and responding to two new
developments:
1. The world’s key challenges cannot be met by governments, business or civil
society alone
2. In a world characterized by complexity, fragility and ever greater synchronicity,
strategic insights cannot be passively acquired. They are best developed
through continuous interaction with peers and with the most knowledgeable
people in the field.
•
•
•
•
•
•
To carry out its mission,
the World Economic Forum has developed
an integrated value chain
by involving world leaders in communities,
inspiring them with strategic insights and
enabling them through initiatives.
22
World Economic Forum
•
Members represent the world’s 1,000 leading companies. Partners are
select member companies who are actively involved in the
organization's activities and contribute their expertise and resources.
•
Members comprise in principle the foremost 1,000 global enterprises.
Characteristics of Members include:
· Their rank among the top companies within their industry and/or
country
· The global dimension of their activities
· A leading role in shaping the future of their industry and/or region
•
Every year, more than 100 of the world’s most influential companies
partner with the World Economic Forum to tackle the most complex
challenges facing humanity.
Recognizing that each company’s business needs are unique, the
Forum offers the possibility for partners to engage in a specific
community, project or event.
23
Cost – Benefit – Risk Analysis
www.cia.gov
www.transparency.org
www.heritage.org
24
Personal Introductions
• Students – background sheets
• Introduction
– Major
– Traveled internationally
– Speak other language
25
International Government Materials
International financial statistics yearbook
http://innopac.library.unr.edu/record=b1618229~S0
Trade policy review. [country name]
http://innopac.library.unr.edu/search/a?searchtype=t&searcharg=trade+po
licy+review
We also have extensive holdings of international government publications
on microfiche, with most titles searchable in the catalog. In many
cases this is the only format we own (that is, we don’t own a duplicate
paper copy).
Patrick Ragains
Business and Government Information Librarian
[email protected]
Don’t confuse
• APEC
• OPEC
27
APEC - Asia Pacific Economic Cooperation
– Premier forum for facilitating economic growth,
cooperation, trade and investment in the Asia-Pacific
region.
– It is one of the world's most important regional
groupings, encompassing 21 member economies who
collectively represent over 2.6 billion people and
account for approximately half of global GDP and trade.
– The primary focus of APEC is promoting trade and
investment liberalization and business facilitation in the
Asia-Pacific region.
28
APEC Members
Australia
Brunei Darussalam
Canada
Chile
People's Republic of China
Hong Kong, China
Indonesia
Japan
Republic of Korea
Malaysia
Mexico
29
APEC Members
New Zealand
Papua New Guinea
Peru
Philippines
Russia
Singapore
Chinese Taipei
Thailand
United States
Viet Nam
30
APEC Australia 2007™ Business Summit
•
The is a significant, invitation-only, annual meeting that provides
unparalleled opportunities for strategic engagement and
networking with prominent business leaders, international opinion
setters, policy makers and leaders of Asia-Pacific Economic
Cooperation (APEC) Member Economies.
•
The two-day forum was part of the APEC meetings hosted by the
Australian Government in 2007, which culminated in APEC
Leaders Week and the Business Summit in September in Sydney.
•
The Business Summit, formerly the CEO Summit, has been held
each year since 1996. It was instituted to enable business leaders
to interact with APEC leaders during Leaders Week.
•
The APEC Australia 2007™ Business Summit will play a key role
in supporting APEC's work by bringing together a select group of
influential business and government leaders with opinion setters
and policy makers at a single event to examine some of the key
issues facing the region.
31
OPEC – Organization of Petroleum Exporting Countries
– Eleven members – Algeria, Iran, Iraq, Kuwait, Libya, Nigeria,
Qatar, Saudi Arabia, UAE, Venezuela (Hugo Chavez)
– OPEC’s mission is to coordinate & unify the petroleum
policies of Member Countries & ensure the stabilization of oil
prices in order to secure an efficient, economic & regular
supply of petroleum to consumers, a steady income to
producers & a fair return on capital to those investing in the
petroleum industry.
32
Women World Leaders
• G7 (G8) Countries
– US, Canada, Germany, France, Italy, UK, Japan,
(Russia)
• Never a female leader: US, Italy, Japan
• Female leaders: First UK, then France, Canada,
Germany
• Other countries with female leaders: Finland,
Ireland, India, Indonesia, Chile
33
World Economic Forum
• Update
• Program
International Management
•
Introduction
–
Course
•
•
–
•
•
•
•
Content – Culture, Globalization, Cost-Benefits-Risk
Format - Syllabus
Personal – Background Sheet
Framework of an international organization
Globalization
Reasons for going international
Types of international
organizations
35
Framework
Organizations and Organizational Effectiveness
 What is an organization?
 Why do organizations exist?
• When is an organization effective?
• Efficiency vs effectiveness?
36
Organizations and Organizational Effectiveness
 What is an organization? Why do organizations exist?
– Organizations = People
– Mission, goals, objectives
• When is an organization effective?
– Distinguish between efficiency
– and effectiveness.
– Distinguish effectiveness measures
– for the short, intermediate,
– and long run.
37
Measurement of organizational effectiveness
– Long run?
– Intermediate run?
– Short run?
•
A contingency approach to
management
38
Measurement of organizational
effectiveness
– Long run: Survival
– Intermediate run: Adaptation, Responsiveness
– Short run: Productivity, Efficiency
 A contingency approach to management (as opposed to
“administrative theory” of management)
 It is management’s task to create
 the best possible fit between
 the external and internal environments
of the organization and must ensure
 internal consistency between
 the organization’s elements.
39
The Organization
The External Environment
Economy
Social
Environment
Technological
Environment
Political
Environment
The Internal Environment
People
Business
Strategy


Processes
Effectiveness
 Structure


Culture
40
The International Organization
The External Environment
CULTURE
Multiple
Economies
Multiple
Technological
Environment
Multiple
Societies
Multiple
Political
Environment
The Internal Environment
People
Business
Strategy


Processes
Effectiveness
 Structure


Culture
41
Globalization
• Thomas Friedman
• Why change?
• Characteristics of the global system
– Previous system?
42
Globalization
Thomas Friedman (NY Times)
– The Lexus and the Olive Tree
– The World is Flat
– Hot, Flat, and Crowded
With the #1 bestseller The World Is Flat, he helped millions of readers see
and understand globalization in a new way. Now Thomas L. Friedman
explains how America can lead the green revolution in the 21st century.
43
Globalization
• Globalization is not just an economic fad and
it is not just a passing trend. It is an
international system that replaced the Cold
War System after the fall of the Berlin wall
• The World is ten years old (1999)
44
Characteristics of the new system
• Separation and independence
VS
Integration and interdependence
45
Characteristics of the new system
• Free market capitalism
• Homogenization of culture – Americanization
• Defining technologies: computerization,
miniaturization, digitization, satellite
communications, fiber optics, the Internet
46
Characteristics of the new system
• Defining measurement:
Weight (missles)
VS
Speed .. Of travel, innovation, communication,
commerce
47
Characteristics of the new system
• Defining economists:
Karl Marx and Keynes
VS
Schumpeter
Capitalism and Creative Destruction
48
Characteristics of the new system
• Defining political views:
Friends and Enemies
VS
Competitors
49
Reminder
•
Extra Credit
•
IBSC Meeting AB 107 – February 10 - 12:15pm
50
Termpaper List – DRAFT 2/10/09 – 2:30
COUNTRY
STUDENT NAMES
1.
Italy E
Christian, Blake, Tony
2.
Norway E
Josh, Andrew, Enrique
3.
Australia
Steven, James, Gabe
4.
Argentina
LA
Amy, Valerie, Shawna
5.
Ireland E
Amanda, Addie, Greg
6.
Thailand A
Jace, Chris, Chanut
7.
Germany E
Katie, Andrea, Chad, Stephan
8.
Uruguay LA
Michael, Iris, Raymond
9.
China A
Emily, Lia, Brian
10. Afghanistan
Jennifer, Josh, Breann
11. Brazil or
Chile LA
12. Chile
Sandra, Russell, Brittany, Brian,
(Stephan)
Comment
5 students
Sandra, Russell, Brittany
51
Termpaper List – 2/12/09 – 2:30
COUNTRY
STUDENT NAMES
Ireland
Amanda Mack, Addie Munson, Greg Welch
Norway
Enrique Ramos, Andrew Herr, Josh Sells
Germany
Katie Schwarzrock, Andrea Avent, Chad
Grayot, Stephan Graves
Italy
PRESENTATION
April 14
April 16
April 21
Blake William, Anthony Gallian, Christian
Reviglio
April 21
Afghanistan
Jennifer Noel, Josh Orolofo, Breann Boustang
April 23
Uruguay
Mihael Sperry, Iris Figuera, Raymond Gurries
Argentina
Amy Beaupre, Valerie Lear, Shawna Hankins
April 23
April 28
April 28
April 30
Chile
Sandra Vasquez, Russell Elder, Brittany Warner
Thailand
Jace O’Mallan, Chris Gerace, Chanut Sriphyak
China
Lia Shim, Emily Kao (Chiung-Tzu), Brian
Bausinger
April 30
Australia
Steven Wear, James Furman, Gabe Scheel
May 5
Termpaper List – DRAFT 2/5/09 – 4:00
COUNTRY
STUDENT NAMES
1.
Turkey
Steven, Lauren, Alyssa
3.
Egypt
Ashley, Jenna, Lacy
4.
Czech Republic
5.
South Korea
6.
Germany
7.
Italy
Meghan, Kevin, Amber
8.
Japan
Jeanette, Marion, Matt
9.
France
Ben, Erika, Jason, Lucas
Comment
Matt, Jack, Brett
1 spot
Vanessa, Tyler, Kelsey
1 spot
Ben, Chris
10. Norway
Katelyn, Drew, Chris
11. Poland
Jill, Janenne, Katherine
12. Ireland
Jared, Seamus, Phil
Graduate – 2
person group
1 spot
53
Termpaper List – 2/12/09 – 4:00pm
Country
Student Names
Presentation
Ireland
Jared Becher, Seamus Murphy, Phil Bowman
April 14
Norway
Katelyn Zuppan, Drew Haitt,Chris Thompkins
April 16
Ben Larson, Chris Hofman
April 21
Jill Collins, Janenne Johnson, Katherine Tooker
April 21
Matt Smith, Jack Darlington, Lucas Draeger
April 23
Ben David, Erika Ibaibarriaga, Jason Shurtleff,
Kelsey Poentis
April 23
Meghan Bartley, Kevin Lynch, Amber Wadginski
April 28
Turkey
Steven Schnell, Lauren Rosensteel, Alyssa
Durham
April 28
Egypt
Ahsley Cray, Jenna Henning, Lacey Sourkup
April 30
South Korea
Vanessa Briones, Tyler Schafer, Brett Kishkis
April 30
Germany
Poland
Czech
Republic
France
Italy
Japan
Jeanette Dory, Marion Dillon, Matt Ruggiero
May 5
Groups
• Why do organizations go international?
List at least 3 reasons
55
Reasons for becoming international
1. A desire for continued growth.
2. Domestic market saturation
3. The potential to now exploit a new technological
advantage
4. Preferable suppliers (quality, cost)
5. Labor market (supply, quality, cost)
6. Government involvement/restrictions
7. Reducing distance to customers (cost)
8. Tariff barriers
9. Increased foreign competition in home country
10. Reduce general business risk by diversifying into
other countries
56
Internationalization
• Process by which firms
1. increase their awareness
2. of the influence of international activities on
their future
3. and establish
4. and conduct
5. transactions with firms from other countries.
57
•
An International Organization
1. operates in multiple environments,
2. home country and one or more host countries,
3. has foreign sales,
4. and a nationality mix of managers and owners.
58
Types of "international" organizations
Multi-domestic organization
Multinational organization
Global or transnational organization
59
Types of "international" organizations
Multi-domestic organization:
Any organization that exports
to/imports from organizations in other
countries with primarily domestic
production.
60
Types of "international" organizations
Multinational organization:
An organization with operations in
different countries but each is
viewed as a relatively separate
enterprise.
61
Types of "international" organizations
Global or transnational organization:
An enterprise structured so that
national boundaries become
blurred. The best people are hired
irrespective of national origin.
62
Graphic Representation
Headquarters – Subsidiary Relationship
63
Stages Model of Internationalization
Outward looking perspective: activities/issues
related to the other countries (e.g., exporting) vs
an inward perspective (e.g., importing)
Descriptive
Reflects the commonly observed pattern of
increased commitment to international business
64
Four stages of internationalization
Stage 1:
Indirect/ad hoc exporting - perhaps from unsolicited export
orders
Stage 2:
Active exporting and/or licensing
Stage 3:
Active exporting, licensing, and joint equity investments in
foreign manufacture
Stage 4:
Full-scale multinational marketing and production
See also: Adler Chapter 1 pages 8 and 9
65
International Orientation
• Ethnocentric
• Polycentric
• Geocentric
• Regiocentric
66
International Orientation
• PCN – Parent Country National
• HCN – Host Country National
• TCN – Third Country National
67
The Relationship between Level of Internationalization
and Firm Performance
More international => more performance?????
68
The Relationship between Level of Internationalization and Firm
Performance
There is a strong CURVILINEAR relationship between
the degree of internationalization and organizational
performance
69
The Relationship between Level of Internationalization and Firm
Performance
Degree of internationalization:
"sales generated by foreign
affiliates"
MNE (multinational enterprise)
performance:
"profit to sales" or "profit to
assets".
70
The Relationship between Level of
Internationalization and Firm Performance
Performance is at a max.
at a level of
internationalization of
60 to 80% and then
decreases with continuing
internationalization
71
Reasons for becoming international
Profit = Revenue – Cost
Profit = (Volume*Price) - Cost
72
Reasons for becoming international
Profit = Revenue – Cost = (Volume*Price) – Cost
1.
A desire for continued growth. VOLUME
2.
Domestic market saturation VOLUME
3.
The potential to now exploit a new technological advantage V
4.
Preferable suppliers (quality, cost) PRICE, COST
5.
Labor market (supply, quality, cost) PRICE, COST
6.
Government involvement/restrictions COST
7.
Reducing distance to customers COST
8.
Tariff barriers COST
9.
Increased foreign competition in home country VOLUME, PRICE
10. Reduce general business risk by diversifying into other countries
73
CBR Analysis
• Cost
–
–
–
–
Cultural differences
Lack of infrastructure
Taxes
Resources
• Benefits (= reasons for “going” international)
–
–
–
–
Larger volume
Lower cost
Higher quality
Less competition => Higher price
• Risk
– Political, Economic, Operational
74
Case 1
•
•
•
•
•
Corporate Social Responsibility
Colombia
Mexico
India
Stakeholders
The Multiple Responsibilities of Business
Economic
Responsibility
Legal
Responsibility
Social
Responsibility
©2005, Dr. Rafik Beekun, MGRS /28, University of Nevada, Reno, NV 89557 USA
77
Business Ethics from a Stakeholders’ Perspective
• Relationship of the firm to its employees:
–
–
–
–
–
Hiring, promotion and other employee-related decisions.
Fair wages.
Respect for employee’s beliefs.
Accountability.
Right to privacy.
• Relationship of employees to the firm:
– Conflicts of interest.
– Secrecy.
• Relationship of the firm to
other stakeholders - CSR
External Environment
Theory – Competitive Advantage
– Competitiveness
– International Competitiveness
79
External Environment
Porter Diamond
The major determinants of national
competitive advantage –
why some nations succeed and
others fail in international
competition.
Porter's research is based on
studying 100 industries in 10
nations.
80
PORTER DIAMOND
• National Competitive Advantage
• Why a nation achieves success in a particular
industry?
• Why Japan -- automobile, cameras
• Why CH (Switzerland) -- precision
instruments, pharmaceuticals
• Why Germany -- engineering
81
Porter Diamond
Four broad attributes of a nation
• that shape the environment in which local firms
compete, and
• these attributes promote or impede
• the creation of competitive advantage
• Diamond of four mutually reinforcing factors
82
Porter Diamond
1. Factor Endowments or Conditions–
Basic
Advanced
Examples: Nokia, Ericsson
2. Demand Conditions –
1. Quality
2. Innovativeness
3. Variety - customization
83
Porter Diamond
3. Related and Supporting Industries –
Suppliers (U.S. - semiconductor/comp)
4. Firm Strategy, Structure, Rivalry –
Executive background
<=>
Domestic environment encourages the development of
characteristics that make company internationally
competitive
84
Porter’s Diamond
References for Porter
• 1. Michael Porter, 1990. The Competitive
Advantage of Nations. Free Press
• 2. M. Grant, 1991. The Competitive Advantage of
Nations: An Assessment. Strategic Management
Journal, 12, 535-548
86
Final Comments
Additional Thoughts and Examples
• Japan – high priced land – JIT inventory technique
• Sweden – short building season – pre-fabricated
houses
• Clustering – Related and Supporting Industries
– Silicon Valley
– Detroit
– Italy – leather/shoes
• S. Korea Example
Review
–
Types of international organizations
•
•
•
•
–
Stages of Development to an International O.
•
–
Criterion -- Level of Global Participation
International/Multi-Domestic
Multinational
Transnational/Global
Descriptive Model
Effectiveness of Internationalization
•
Relationship between extent of internationalization and
performance
External Enviro – Theory
1. National Competitive Advantage
Porter Diamond
2. Trade Agreements
88
External Environment - Theory
2. Trade Agreements
• Why?
• Protectionism?
Pro /Con
89
Types of Trade Agreements
1.
Trade Area
–
–
2.
Customs Union
–
–
3.
Common tariffs for non-members.
ANDEAN (Bolivia, Ecuador, Peru, Columbia, Venezuela)
Common Market
–
–
4.
5.
Common tariffs among members -- individual tariffs with non-members.
NAFTA, ASEAN (Brunei, Indonesia, Malaysia, Philippines, Singapore,
Thailand, Vietnam - 420 Mill)
Free flow of goods and labor.
Mercosur (Brazil, Paraguay, Uruguay, Argentina, Chile)
Economic Union
–
Common currency, common overseeing institutions
–
European Union -- 15 Members; Euro; European Parliament; Court of
Justice
Political Union
90
External Environment - Addendum
You need to know this about --
91
Level of International Activities
– International Investment
– International Trade
92
North America
– United States - which
industries most
internationally active? Why?
– US-Canada Free Trade
Agreement (1989) – NAFTA
….
– Mexico - wage rate;
maquiladora industry (1965)
93
Europe
• delayed differentiation
• acquisitions/alliances
• EU - 27 members …..
• EU – The Euro
94
European Union
• EU (27): Austria, Belgium, Cyprus, Czech Republic,
Denmark, Estonia, Finland, Iceland, Italy, Latvia,
Lithuania, Luxembourg, Malta, Netherlands, Poland,
Portugal, Slovakia, Slovenia, Spain, Sweden, UK,
France, Germany, Ireland, Greece, Romania (07),
Bulgaria (07)
• EMU (13): Austria, Belgium, Finland, France,
Germany, Greece, Ireland, Italy, Luxembourg, the
Netherlands, Portugal, Spain, Slovenia
95
European Union - continued
• The European Commission
• The Council of Ministers (counterbalance to
Commission)
• The European Parliament
• The European Court of Justice
96
European Union
The European Commission
 proposes policies and legislation
 responsible for the administration of the EU
 ensures - provisions of the EU treaties+the
decisions of the other institutions are properly
implemented
 one rep per country (two for the 5 larger
countries)
 represent, protect, further the European interest
+ its members do not represent or take orders
from their national governments
97
Eastern Europe
•
Break-up of The Soviet Union
(Dec 1991)
•
Russia (glasnost, perestroika)
•
The Ukraine
•
Czech Republic
•
Slovakia
•
Poland
98
New Internet Sources
• Emerging markets/ economies in transition
http://ddcn.prowebis.com/
99
Russia
•
•
•
•
Gazprom – Europe (25%)
Limitations on foreign ownership
Centralization of authority
Weak infrastructure
100
External Environment
Latin America
–
–
–
–
–
–
Middle (Central) and South
Mexico, Costa Rica, El Salvador, Nicaragua
Peru, Colombia, Venezuela
Brazil
Argentina
Chile
101
External Environment
Asia
• Japan
– MITI (Ministry of International Trade and Industry)
– keiretsus
– Current economic conditions
• South Korea - chaebols
• China
– GNP growth of 10% (80s)
– low wage rates
102
External Environment
What about Australia?
103
External Environment
The Four Tigers
South Korea, Hong Kong,
Singapore, Taiwan
Baby Tigers
Thailand, Malaysia, Indonesia
104
Less developed countries
• Large population, high
unemployment, inflation,
low or negative economic
growth, low literacy rate
• India, African countries,
Central and South
American countries,
Middle East
105
Kenya and Tanzania
• Kenya
– 34 Mill; 6.7% HIV; 85% literacy; $1,200
GDP/capita; growth 5%; UE 40%
• Tanzania
– 37 Mill; 8.8% HIV; 78% literacy; $700
GDP/capita; growth 6%
• USA
– 301 Mill; .6% HIV; 95% literacy; $48,600; 3.2%
106
Major economic regions
North America
Europe
Asia
107
Economic Superpowers
The Triad
1. The United States
2. The EU (dominated by Germany),
3. Japan
Dominates foreign
direct investment and
international trade
108
FDI Clusters
–For the U.S.
»Latin America
–For EU
»Eastern Europe
109
FDI Clusters
- For
Japan
The Four Tigers
South Korea, Hong Kong,
Singapore, Taiwan
Baby Tigers
Thailand, Malaysia, Indonesia
110
Data
US
Japan
Germany
301 Mill
127.5 Mill
82.5 Mill.
GDP
growth
3.2%
2.2%
2.7%
GDP/
Capita
$44,800
$33,100
$31,900
CPI
ECF
7.3 (20)
5
7.6 (17)
18
8.0 (16)
19
Population
111
Group Dynamics
• Why groups?
112
Group Dynamics
Group performance =
Sum of individual performance PLUS group dynamics
•
Group dynamics can be positive or
negative
•
Higher quantity and
quality of solutions
113
Group Dynamics
Advantages – Benefits
– Different viewpoints
– Differences in expertise
– Differences in training and
experience
– Cultural differences
– Value differences
114
Group Dynamics
Process losses
– Loafing
– Intra-group conflict
– Miscommunication
– Wrong leader
– In appropriate role and task
assignments
– Role ambiguity
– Role conflict
– Informal, dysfunctional norms
115
Group Dynamics
Group management - Handout
– Roles
• What – List of tasks
• Who – Is responsible for what, based
on expertise
• How - Enforcement
– Timeline
• When – Specific deadlines
• What – Effective communication
• Who - Commitment
116
Group Dynamics
Group management
– Leadership
• Formal
• Why
• Expertise and role
– Norms
• Must be explicit
• Agreed upon by all
• Consequences of norm violations
117
External Environment
National Culture
Harry and Sally in Saudi Arabia
????? -> Loss of contract
•
Lack of prep ->
•
What went wrong?
•
Specific examples!
118
What went wrong? Specific examples!
» Sabbath
» Flights
» Language - Taxi
» Coffee – Refusal – Rude
» Food
» Role of women
» Negotiation – Relationshipbuilding
Why did things go wrong?
– Lack of preparation – Cultural
knowledge
– Cross-Cultural sensitivity
119
Culture and International Management
Relevance
• Cultural Toughness – Cultural Distance
• Cross-cultural literacy
• Cost of doing bus in a particular culture
120
Internationalization Decision
• Benefits from internationalization into a specific country
• Cost associated with internationalization into a specific
country
• Risk associated with internationalization into a specific
country.
Decision = f (benefit-cost-risk tradeoff)
121
Cultural Dimensions
All people have common life problems such as ….
Possible solutions to such problems …..
Different people choose different solutions ….
 Culture
122
Cultural Dimensions
• Six basic dimensions describe the cultural
orientations of societies
•
•
•
•
•
•
What is the nature of people?
What is a person's relationship to nature?
What is a person's relationship to other people?
What is the primary mode of activity?
What is the conception of space?
What is the temporal orientation?
123
Cultural dimensions
Six basic dimensions describe the cultural orientations of
societies
1. What is the nature of people? Good/evil/change
2. What is a person's relationship to nature?
Dominant/harmony –subjugation
3. What is a person's relationship to other people?
Individualistic/group – hierarchical/lateral
124
Cultural dimensions
Six basic dimensions describe the cultural orientations of
societies
4. What is the primary mode of activity?
Doing/being
5. What is the conception of space?
Private/public
6. What is the temporal orientation?
Future/present/past
125
Characteristics of Culture - Values and Norms
1) Social structure
2) Religion
3) Political philosophy
4) Economic philosophy
5) Education
6) Language
126
1) Social structure
1. Social stratification
2. Class consciousness
3. Class membership is a function of ?
4. Social mobility
127
2) Religion
• www.adherents.com
• Minimal level of self-identification
• Non-religious 14%
• Christianity 2 bill; 33%
– Protestant work ethic
– Catholic vs Protestant/Lutheran
– Take care of your neighbor and the less fortunate
– 10 commandments
128
• Islam 1.3 bill; 22%
– Sunni and Shi’ite – best known branches
– all embracing way of life, governing the totality of a
Muslim being;
– prayer five times a day;
– free enterprise/hostile to socialist ideals - earning a
legitimate profit through commerce and trade;
– Koran;
– contractual obligations, keeping one's word
– role of women and men
129
• Hinduism 900 mill; 15%
– spiritual achievement;
– Nirvana;
– Samsara – birth, death, re-birth;
• Buddhism 360 mill; 6%
– Central and Southeast Asia, China, Korea, Japan;
– "life is suffering; misery is everywhere and originates in
people's desire for pleasure;
– Noble Eightfold Path: right views, right intention, right
speech, right action, right livelihood, right effort, right
awareness, right concentration
– Japan – Temples, Shrines (Shinto)
130
Characteristics of Culture (Cont’d)
3) Political philosophy
• Political freedom – dominant political orientation
4) Economic philosophy
• Free Market – to what extent
• Economic freedom www.heritage.org/research/features/index/
5) Education
• Importance
• Access
• Type
6) Language (verbal/spoken; non-verbal) Communication; word
equivalency
131
Ignoring Culture
• Religion
– Ads for refrigerator, airlines (Middle East)
• Language
–
–
–
–
Baby Food in Africa,
English candy “Zit”,
Finnish product unfreezes car locks “Super Piss”
Electrolux sucks (Sweden)
132
The US Culture????
Describe ….
133
Culture
•
Relevance
–
–
–
–
•
CBR Analysis
Cultural toughness
Cross-cultural literacy
Cultural sensitivity
Three aspects
1. Basic Assumptions
2. Characteristics
3. Measurement
•
Application of cultural dimensions
134
Measurement of Culture
• Purpose ????
• Geert Hofstede – 1970’s
–
–
–
–
–
IBM employees
100,000 across 30+ countries
Survey – typical work situations
Identify systematic differences – Factor Analysis
Four independent factors
• Follow up research: Culture’s consequences
(2001)
• Culture: Collective programming of the mind
135
Dimensions of culture
1. Individualism/Collectivism
2. Power Distance
3. Uncertainty Avoidance
4. Masculinity/Femininity
5. Confucian Dynamism
136
Individualism/Collectivism
• Individualism exists when people define
themselves as individuals. It implies loosely
knit social frameworks in which people are
supposed to take care only of themselves and
their immediate families.
• Collectivism is characterized by tight social
frameworks in which people distinguish
between their own groups, "in-groups",
(relatives, clans, organizations) and other
groups. People expect in-groups to look after
their members, protect them, and give
security in exchange for members' loyalty.
137
Power distance
• Indicates how a society deals with the
inequality among people's physical and
intellectual capabilities.
• A culture with high power distance allows
inequality to grow to inequality in power and
wealth, one low in power distance aims at
removing such inequalities.
• Indicates to what extent the unequal distribution
of power is accepted.
138
Uncertainty avoidance
 The extent to which people in a society feel
threatened by ambiguous situations and
 the extent to which they try to avoid these
situations
 by providing greater career stability,
establishing more formal rules, and rejecting
deviant ideas and behavior.
 Lifetime employment is more common in
countries with high uncertainty avoidance the reverse is true for job mobility.
139
Masculinity/Femininity
 Masculinity is defined as the extent to which
the dominant values of society emphasize
assertiveness and acquisition of money and
things (materialism).
 Femininity is defined as the extent to which the
dominant values in society emphasize
relationships among people, concern for
others, and the overall quality of life.
140
Confucian dynamism or
Long-term orientation (1993)
• Refers to the time perspective in a society for the
gratification of people's needs.
• A high CD or long-term oriented society is one
which emphasizes thrift and perseverance.
• A low CD or short-term oriented society focuses
on gratifying needs here and now.
141
Sources for International Research
• Hofstede, Geert (1980): Culture’s Consequences
• Hofstede, Geert (1991): Cultures and Organizations
• Hofstede, Geert (1984): Culture’s Consequences:
International Differences in Work-Related Values
• Hofstede, Geert and Michael Harris Bond (1984): The
Confucius Connection: from cultural roots to economic
growth. Organizational Dynamics, 16, 4, 4-21
• websites
142
U.S.
Japan
Germany
Individualism:
91
46
67
Power distance:
40
54
35
46
92
65
Masculinity:
62
95
66
ST/LT:
29
80
25
Uncertainty
avoidance:
143
Applying Hofstede’s Dimensions
• Lawyers per 100,000 population
–
–
–
–
–
–
U.S.
Germany
Great Britain
Japan
Italy
France
144
Applying Hofstede’s Dimensions
• Lawyers per 100,000 population (1996)
–
–
–
–
–
–
U.S.
Germany
Great Britain 134
Japan
Italy
France
312
190
106
81
49
145
Laurent’s Research-See Adler
•
•
9 Western countries, US, 2 Asian countries
More than sixty common work situation
(yes/no)
1.
2.
3.
The main reason for hierarchical structure is so that
everybody knows who has authority over whom
In order to have efficient work relationships, it is
often necessary to bypass hierarchical lines
It is important for a manager to have at hand
precise answers to most of the questions that his
subordinates may raise about their work
146
Laurent’s Research
The main reason for hierarchical structure is so
that everybody knows who has authority
over whom
US 18% agree, Germany 24%, Italy 50%
France 45%, Japan 52%
Power Distance
147
Laurent’s Research
In order to have efficient work relationships, it is often
necessary to bypass hierarchical lines
US 68% agree, Germany 54%, Italy 25%
Uncertainty Avoidance
148
Laurent’s Research
It is important for a manager to have at
hand precise answers to most of the
questions that his subordinates may
raise about their work
US 18% agree, Germany 46%,
Italy 66%,
Japan 78%
Uncertainty Avoidance
149
Fons Trompenaars
•
Riding the Waves of Culture (1998; 2nd
edition)
•
Dimensions (see textbook):
1.
2.
3.
4.
Universalistic–Particularistic (Obligation)
Neutral-Affective (Emotional Orientation
in Relationships)
Specific-Diffuse (Involvement in
Relationships)
Achievement-Ascription (Legitimization
of Power)
150
Expatriate Assignment
• Why to use expatriates?
– Ethnocentric, polycentric, regiocentric, geocentric
• Culture Shock
• Selection
– KSA Requirements
– KSA Assessment
• Training
– Type and rigor of training
• Failure Rates
– Reasons
151
Four stages cross-cultural adaptation:
1. Honeymoon
2. Irritation and hostility
3. Gradual adjustment
4. Biculturalism
152
The Expatriate Assignment
• Experience of uncertainty
– Anticipatory and in-country adjustment
• Expatriate Selection
– Relevant KSA’s?
• Technical, Managerial
• Adaptiveness
– Measurement
• SMILE: Speciality; management ability;
international flexibility; language facility;
endeavor (Matsushita)
– Spouse and Family - Failure rates
• 40% on average; lower for European and
Japanese
153
The Expatriate Assignment
Failure rates
Rosalie Tung: Reasons
1.
2.
3.
4.
5.
6.
7.
Selection is based on headquarter criteria
Lack of training, preparation, orientation
Alienation/lack of support from headquarters
Inability to adapt to local culture/work enviro
Problems with spouse, family
Compensation
Poor programs for career support/repatriation
154
Training Techniques and Rigor of Training
• Area studies
• Culture assimilators
• Language training
• Sensitivity training
• Field experiences
155
The Expatriate Assignment
Training
– Cultural toughness – China, Brazil, India, Japan,
Russia, Mexico, Saudi Arabia, South Korea, France
– Less than 1/3 of expatriates receive training
– Pre-departure training, post-arrival training, reentry
training
– Culture, language, everyday matters
– Cross-cultural training to ease the adjustment to the
new environment by reducing “culture shock”: a
state of disorientation and anxiety about not knowing
how to behave in an unfamiliar culture
156
The Expatriate Assignment
• Training – Examples
– ABB (Asea Brown Bovari) rotates 500
managers around the world .. Every two to
three years
– PesiCo orientation program for foreign
managers … one year at U.S. bottling
division plants
– Honda of America Japanese language,
culture, lifestyle training .. Tokyo up to 3
years
– GE engineers and managers must have
global perspective .. Regular language and
cross-cultural training
157
The Expatriate Assignment
Compensation
– $100,000 manager in U.S. -> $300,000 in London, $1mill in
Tokyo or Stockholm
– Equity and goodwill
– Purchasing power and standard of living
– Tax differentials and tax equalization
– Balance sheet approach
– Allowances – Cost of living, housing, education, home
leave, shipping and storage
Repatriation – Reverse Culture Shock
158
Expatriate Assignment
• DVD
159
Case 2 - Expatriate in China
What other concerns do you have about Controls’ HRM Strategy?
•
Selection of employees for expatriate assignments not very well structured.
•
Orientation well planned but not carefully implemented – checklist not completed in a timely manner
•
Language training was not completed
•
Preparatory training should have included details on the specific plant where James would be working, including
physical aspects of the plant and management aspects as well as interaction with the government and unions.
•
Sudden, unexpected termination of the assignment is a main issue. What will James position be back in the U.S.?
What changes would you recommend to Controls’ Management? Or its parent?
•
In addition to the general orientation and preparatory training for the assignment in China, Controls needs to provide an
orientation to the specific situation the expatriate will face.
•
Also, the expatriate needs to be fully aware of the relationship between and the respective roles of the parent company
and Controls. The expatriate assignment should be planned thoroughly from beginning to end.
Was James Randolf a good choice for this position? Justify your arguments.
•
Yes, he had the appropriate technical skills as well as the ability to adjust and adapt to another culture.
•
Positive was as well that his wife was very supportive and interested in the assignment.
What were some aspects of the Chinese business environment (including culture) that James had to deal with?
•
Concept of face and time
•
Chinese think about thinking and relationships
•
Importance of gift-giving
•
Concept of “privacy” does not exist
•
Guanxi
•
Strict Human Resource Management rules applying to Joint Ventures in the Special Economic Zones
•
Personnel files
•
Effect of type of work done and where worked on employee’s reputation
•
Rank
•
Quality control
•
Lack of infrastructure
•
Mostly young female employees
•
Terrible conditions in the factory
•
Ongoing negotiations
•
James’ role relative to the role of the managing director
•
Huge difference between managers’ education and workers’ education
•
Importance of being a “role model” as a manager
Cultural Stereotypes
• What are stereotypes?
• Why stereotypes?
• Good/bad?
• Exercise – Five jobs!
European Scholars Conference
– EU – Economic Restructuring Funds – Geography
– Globalization – Manageable/Unmanageable
•
•
•
•
•
East – West Divide v North-South Divide
Hungary – hi capital , hi skill
Bulgaria – hi capital, low skill (Mining)
Slovakia – low capital, hi skill (high Tech)
Romania – low capital, low skill (Textile)
– EU – Consumer Protection – Public Health
• Task Force – WHO
• Obesity (BMI Index: 30+) – U.S. 33%; UK 22%, G 12%,
Switzerland 8%, Italy 9%
– Europe – Migration
• World Competitiveness Yearbook
162
Overall Attractiveness of a Country
• Trade-off between
– Costs
– Benefits
– Risks
163
Overall Attractiveness of a Country
Trade-off between
– Costs: legal requirements, availability of resources,
infrastructure, level of economic development, free
market?
– Benefits: market size, wealth (purchasing power), future
wealth, resources (quality and cost)
– Risks: the likelihood that political, economic, legal forces
will cause drastic changes in a country's business
environment that adversely affects the profit and other
goals of a particular business enterprise.
164
Political Risk
– What is risk?
– What is economic risk?
– What is political risk?
165
Political Risk
Definition
– the likelihood
– that political forces
– will cause drastic changes
– in a country's business environment
– that adversely affect the profit and other
goals of a particular business enterprise.
166
Political Risk
Characteristics of countries
with a higher likelihood for political risk:
1. Social unrest* (see below)
2. Demonstrations
3. Terrorism
*Social Unrest
1. More than one ethnic nationality
2. Competing ideologies battle for political control
3. High inflation and falling living standards
4. Strikes
167
Results of Social Unrest:
Change in government and/or
policy
Results of Political Change:
Expropriation
Indigenization
168
Risk Assessment
• Euromoney Magazine’s Country Risk Ratings
Analytical Indicators:
• political risk (20%) - measures stability and potential fall
out from instability
• economic indicators and risk(20%)
Credit Indicators
Market Indicators
• Political Risk Yearbook
169
Political Risk Data - Example
Dun & Bradstreet’s Guide to Doing Business around the World (textbook)
• Comparative Country Risk Rankings
• Overall Ratings:
• Political Risk,
• GDP Growth, Per Capita Income,
• Trade Flow with the US,
• Monetary Policy,
• Trade Policy,
• Protection of Property Rights,
• Foreign Investment Climate
170
Risk Management
Management
1. Integrative
2. Protective/Defensive
171
Integrative Approach
• Become part of the host country’s infrastructure
• Good relationship with host government
• Produce locally … in-country suppliers
• Joint ventures
• Local R&D
• Effective in long-run
172
Protective/Defensive Approach
• Discourage host government from interfering
• As little as possible local manufacturing and R&D
• Capital from local banks and outside
• Diversify production among several countries
173
Contingency Approach
Overall risk for an international company depends on the
polit. risk and characteristics of the firm.
Three primary factors to be considered:
1.Political risk type - Transfer risk/Operational
Risk/Ownership risk
2.General investment type - Conglomerate/Vertical/
Horizontal
3. Specific Investment (1=most risky) - Sector (primary=1
/industrial=3/service=2) Technology (science=2/nonscience=1) Ownership (wholly=1/partially owned=2)
174
Political Risk Insurance
- covers the loss of firm’s assets, not the loss of
revenue
- Overseas Private Investment Corp (OPIC)
• inability to repatriate profits, expropriation,
nationalization, damage from war, terrorism
– Foreign Credit Insurance Association
• war, revolution, currency inconvertibility,
cancellation of import or export licenses
175
•
A Risky Country:
1. unstable government
2. unstable economy
3. war/revolution/terrorism
4. unfriendly/hostile people
5. unacceptable customs/values/attitudes
176
•
A Risky Company:
1. type of product and/or service offered
2. type of industry
3. structure of ownership
4. level of technology
177
Political Risk
• ONDD
• Office National Du Ducroirce
• www.ondd.be
Progress Report #2
Questions?
179
Termpaper – Integration of course material
1.
The purpose of your paper is to report the cost-benefits-risk associated
with internationalizing into “your” country. What do you know about the
cost, benefits, risk associated with “your” country?
2.
The first section in your country analysis is an assessment of the external
environment to determine cost-benefits-risk. What aspects of the
environment will you review? What of the material that we have covered in
class will you be using for that assessment?
3.
What is the population size of “your” country? What is the GDP/capita?
4.
How will you address the cultural aspects of “your” country? Is
“your” country culturally tough for Americans?
5.
We started a review of the internal environment of an international
organization. You will be reporting on the components of the internal
environment in businesses in your country and determine the associated
cost-benefits-risk. Give examples of the issues that will have to be
addressed in this section of the report.
180
Integration of Course Material
–
Strategic Management
–
Four components of the internal environment
1. Behavior – Group and Individual
1. Leadership
2. Motivation, Rewards, and Compensation
2. Processes
1. Communication
2. Decision-making
3. HR processes
3. Structure
1. Hierarchical versus open
2. Formal versus informal
4. Organizational Culture
1. Six dimensions – tight vs loose control, open vs closed
etc
181
Self-Assessment (Group) for Termpaper and Peer Evaluation
• Rubric provided to students
• Completed self-assessment - submitted when the
termpaper is handed in
• Each group member evaluates each group
member Peer Evaluation - Completed form to be
submitted with the termpaper
182
Strategy
– The science
– and art
– of conducting military campaign
– on a broad scale.
– A plan or technique for achieving some end.
183
Strategic management
– set of decisions and
– subsequent actions
– used to formulate and
– implement strategies that will
– optimize the fit between the organization and its
environment
– in an effort to achieve organizational effectiveness.
184
Strategy and the Firm
Purpose of any business:
Provide products or services that are desired
by society and, hence, to make a profit
Profit = Revenue - Cost
Profit = Volume * Price - Cost
185
Profit
If the price the firm can charge for its output is
greater than its costs of producing that output.
186
Profit
• To do this, a firm must produce a product that is
valued by consumers.
187
Value
• Thus the firm must engage in value
creation.
188
Value to Customer
• The price that consumers are willing to pay
indicates the value/worth of the product to the
consumer.
189
Strategy
Porter, 1985
Strategy Model
(Distinguish from Porter’s Diamond - National Competitive
Advantage)
190
Strategy
• Firms can increase profit in two ways:
1. adding value to a product so that
consumers are willing to pay more for it (improve
quality, provide service, customize product to
consumer needs)
2. by lowering the costs of value creation
(perform value creation activities more
economically).
191
•
The firm is a value chain
•
composed of a series of distinct
•
value creation activities
Value creation activities
1. Primary activities
Production and marketing
2. Support activities
Materials management, R&D, Human resource management
192
Strategy - Michael Porter
The
• steps a firm takes
• to ensure that the cost of value creation are
reduced and
• that value creation activities are performed in
such a way that consumers are willing to pay
more for the product than it costs to produce it.
193
Strategy and Global Expansion
Performing certain value creation activities
may have two benefits for the value chain
1. Lower the cost of value creation
2. Improve the quality of the product - create
more value
 Perform value creation in “best”
location
194
Strategy and Global Expansion

Firms realize location economies by
dispersing particular value creation activities to
those locations where they can be performed
most efficiently and effectively.
195
Location economies and/or experience
economies:
– Basing each value creation activity that the firm performs
– at the location where economic, political, and cultural
conditions,
– including relative factor costs,
– are more conducive to the performance of that activity.
– Consider transportation costs (weight-to-value ratio) and
trade barriers.
196
Strategy and Global Expansion
• Firms that expand to international markets will gain greater
returns from their distinctive skills or core
competencies.
• Core Competencies - Skills within the firm that
competitors cannot easily match or imitate. Examples.
197
Strategy and Global Expansion
Constrains on transferring core competencies result
from the need for local responsiveness
Need for local responsiveness results from national
differences in consumer tastes and preferences,
business practices, distribution channels, competitive
conditions, and government policies - these
constrain the firm's ability to transfer core
competencies and realize location economies.
198
Strategy of an international
organization
• concerns identifying and
• taking actions that will
• reduce the cost of value creation and/or
• will add value
• by better serving the consumer needs
• through transferring core competencies and
• realizing location economies taking
• into account national differences.
199
Strategic Predispositions
Ethnocentric:
strategic decisions are made at headquarters,
key jobs at both domestic and foreign operations
are held by headquarters management personnel (PCN's).
200
Polycentric:
the MNC's subsidiaries are
treated as distinct national entities
with extensive decision-making autonomy (HCN's mane
the foreign operations).
Geocentric:
tries to worldwide integrate business strategy and
decision-making.
Regiocentric:
reflects the geographic structure of the MNC.
201
Strategic Planning Process
– External Scanning and Internal Scanning
(SWOT)
– Opportunities/Threats
Strengths/Weaknesses
– Vision, Mission, Goals, Objectives, Strategies
Strategy Implementation
202
Three Traditional Strategies (Bartlett/Goshal,
1989)
Multinational Strategy:
focus on cost reduction and product standardization
that is marketed worldwide.
International Strategy:
limited local responsiveness, focus on transfer of
valuable skills and products where indigenous
competitors lack those skills and products.
Multidomestic Strategy:
like international but extensive local responsiveness.
203
Pressures for Local Responsiveness
1. Differences
in consumer tastes and
preferences
2. Differences in infrastructure and traditional
practices
3. Differences in distribution channels
204
Privatization
• http://www.privatizationbarometer.net/
• Register but free
• Library – ask business librarian for help
205
The Internal Environment of an International
Organization
Organizational Culture
People
Processes
Structure
206
Organizational Culture
•
•
•
•
What is it?
Relevance? Why is it important?
Where does it come from?
What happens when two companies merge?
Boeing-McDonnel Douglas; GE and Bently NV
• What happens when two companies from different
countries merge?
207
Organizational Culture
• What is organizational culture?
The shared values, beliefs, norms, and patterns of behavior in
an organization.
• Schein's Three Layer Model:
Artifacts, Values, Basic Assumptions
• Measurement of organizational culture
In the workplace cultural differences are accounted for by
work practices.
208
Dimensions of Organizational Culture
1. Process ↔ Results oriented
2. Tight ↔ Loose Control
3. Job ↔ Employee oriented
4. Parochial ↔ Professional oriented
5. Closed system ↔ Open system
6. Normative ↔ Pragmatic
209
Culture and Org Characteristics
Structure
Communication
Rewards
DecisionMaking
Process
Results
Job
Employee
Tight
Loose
Parochial
Professional
Open
Closed
Normative
Pragmatic
210
Organizational Culture
• Creating and changing the culture of an
organization?
• National and Organizational Culture
– Organizations in Japan, Germany, the U.S. are likely to
have which org. culture characteristics?
– Hofstede
• The Organizational Culture of a MNC
– A universal org. culture?
211
Behavior
Individual Behavior
P = f (A, M)
 Motivation defined!
 Homeostasis---applied to psychological needs
 MotivationTheories -- Applicability across cultures??
212
Behavior
MotivationTheories
Content Theories
 Maslow’s Need Hierarchy
 Two Factor Theory of
Motivation
 McClelland Achievement
Motivation
213
Motivation Theories - International Context
How applicable are the motivation
theories proposed by Maslow
and Herzberg in the
international context?
214
Motivation Theories in the International Context
• Maslow’s needs, in particular the upper-level
ones, are important at the managerial level
• Ronen concluded that need clusters are
constant across nationalities and that
Maslow’s need hierarchy is confirmed by
these clusters.
• Also, Herzberg’s categories are confirmed by
the cross-national need clusters.
215
Behavior - Motivation
Process Theories
 Equity Theory of Motivation
 Goal - Setting
 Expectancy Theory of Motivation
valence

Effort  Performance  Outcome

expectancy

instrumentality
216
Motivation and Hofstede
• High UNC - job security
• Low UNC - fast-track, more risky opportunities
• Low POW - motivation through teamwork and peers
• High POW - motivation depends on boss
• High IND - motivation through opportunities for individual
advancement
• Low IND - motivation through appeals to group goals and support
• High MASC - comfortable with traditional division of work roles
• Feminine - looser definition of roles, more flexible
217
Hofstede and Internal Environment
UNC
POW
MAS/F
IND/C
ST/LT
Motivation and
Rewards
Leadership
Decision Making
Communication
Org. Culture
Structure
218
Reinforcement Theory
• Applicability?
• Assumptions??
• Behavior is a function of its consequences
219
The International Organization
The External Environment
CULTURE
Multiple
Economies
Multiple
Technological
Environment
Multiple
Societies
Multiple
Political
Environment
The Internal Environment
People
Business
Strategy


Processes
Effectiveness
 Structure


Culture
220
Motivation Theories - Summary
Theory
Main Attributes
International
Applicability
Maslow – Need
Hierarchy
Herzberg – Two Factor
Theory
McCelland – Learned
Needs
Stacy Adams – Equity
Theory
House – Goal Setting
Vroom – Expectancy
Reinforcement
221
Motivation Theories - Summary
Theory
Maslow - Need
Hierarchy
Herzberg – Two
Factor Theory
Main Attributes
Five needs
Hygiene factors – work
context and Motivators –
work content
International Applicability
With modification – order of
needs
With modification – best in
individualistic environment
McCelland – Learned
Needs
Three needs
Stacy Adams – Equity
Theory
Social comparisons
House – Goal Setting
Goal commitment, difficulty,
MBO
With modification – best in ST
environment
Vroom – Expectancy
Effort, performance,
outcome, expectancies,
instrumentalities, valence
Applicable – all factors are
explicit and can be determined
based on culture
Behavior is a function of its
consequences
Applicable – very BASIC model
Reinforcement
With modification – Collectivistic
vs individualistic
With modification – does not
work in collectivistic culture
222
The Meaning of Work
• Tied to economic necessity
• What else?
223
The Meaning of Work
• Six functions of work:
1.
2.
3.
4.
5.
6.
needed income,
interesting & satisfying,
contact with others,
serve society,
keeps one occupied,
status and prestige
These may be satisfied through other aspects of life
224
MOW - Work Centrality
“the degree of general importance
that working has in the life of an
individual at any given point in
time.”

As the mean work centrality score
increases,
the more motivated and committed the
workers would be.
225
Study results
•
•
•
•
•
•
•
Britain (lowest),
Germany,
Netherlands,
Belgium,
USA,
Israel,
Japan
226
Work Centrality
Mean work
centrality score
8.0
7.75
7.78 Japan
N = 3144
7.5
Work is
more
important
and more
central in
life
7.25
7.0
6.75
6.5
7.30 (former) Yugoslavia
7.10
Israel
6.94 USA
6.81 Belgium
6.69 Netherlands
6.67
6.36
N = 521
N = 893
N = 996
N = 446
Germany
N = 976
N = 1276
Britain
N = 409
6.25
6.0
227
Group Behavior
 Group effectiveness =  individual behavior + 
 Mature group = effective group
 Stages of development (F, S, N, P)
Two main characteristics for the analysis of
groups
 Leadership
 Composition
228
Leadership
Which Hofstede dimension?
Types of leadership styles:
 autocratic, participative, group
 authoritarian, democratic, laissez-faire
 Theory X, Theory Y
229
Leadership Research
 Traits, Behaviors, Contingency approach
 Kouzes and Posner: Challenging the process,
inspiring shared vision, enabling to act, modeling the
way, encouraging the heart
Across cultures: Haire, Ghiselli, Porter
 South-European and Nordic-European --- more
autocratic, more Theory X
 South-European give a little more autonomy to
employees in working out details
230
 Japanese  Theory Y --- employees learn
from mistakes
 Germans  Theory X --- autocratic, stop
poor performance asap
231
Culturally-Contingent Beliefs Regarding Effective Leadership Styles
Country N
Charisma Team
SelfPart.
Protective
Humane Auton.
Austria 169
Brazil 264
China 160
Denmark 327
England 168
India
231
6.03
6.01
5.57
6.01
6.01
5.85
5.74
6.17*
5.57
5.70
5.71
5.72
3.07
3.50
3.80
2.82
3.04
3.78
6.00
6.06*
5.05
5.80
5.57
4.99
4.93
4.84
5.18
4.23
4.90
5.26*
4.47
2.27
4.07
3.79
3.92
3.85
Japan
Mexico
Russia
USA
5.49
5.66
5.66
6.12*
5.56
5.75
5.63
5.80
3.61
3.86*
3.69
3.16
5.08
4.64
4.67
5.93
4.68
4.71
4.08
5.21
3.67
3.86
4.63*
3.75
197
327
301
399
Scale 1 to 7 in order of how important those behaviors
are considered for effective leadership (7 = highest)
232
Culturally-Contingent Beliefs - Effective Leadership Style
• Americans appreciate two kinds of leaders.
– They seek empowerment from leaders who grant
autonomy and delegate authority to subordinates.
– They also respect the bold, forceful, confident, and risktaking leader, as personified by John Wayne.
• The Dutch place emphasis on egalitarianism and are skeptical
about the value of leadership.
– Terms like leader and manager carry a stigma. If a father
is employed as a manager, Dutch children will not admit it
to their schoolmates.
• Arabs worship their leaders – as long as they are in power!
233
Culturally-Contingent Beliefs Regarding Effective Leadership Styles
(contd.)
• Iranians seek power and strength in their leaders.
• Malaysians expect their leaders to behave in a manner that
is humble, modest, and dignified.
• The French expect their leaders to be “cultivated” –
highly educated in the arts and in mathematics.
R. House, et al.
234
Group Composition --- Multicultural Teams
Impact of cultural diversity on group performance?
 group productivity = f(task, resources, process)
 actual productivity = potential productivity - losses due
to faulty process
 actual productivity  or  =
 potential productivity  or  - losses  or 
235
Benefits associated with cultural diversity:
 # of alternatives generated;
 quality of alternatives;
 creativity/divergence;
 no groupthink
236
Process Losses:
 potential for miscommunication increases;
 cohesiveness decreases;
 negative attitudes (dislike, mistrust);
 perceptual problems (stereotyping);
 stress
237
Multicultural teams have the potential to
be the most or the least effective teams
 Group development stages:
 entry, work, action
 Task: innovative or routine
238
Manage culturally diverse teams through:
 task-related selection
 recognition of differences
 super-ordinate goals
 equal power
 mutual respect
 feedback
239
Communication: Macro - Level
• Communication Flows
– upward/downward
– formal/informal
240
Communication: Micro - Level
• Micro/Interpersonal Level
Definition: Transmission of meaning through
the use of common symbols
Sender -> Message -> Receive
(Encoding) (Medium)
(Decoding)
241
Communication: Micro - Level
• Interpersonal communication Process
– encoding
– message
– decoding
242
Communication: Micro - Level
Communication barriers
– language
– perception - stereotyping
– culture
– nonverbal communication
– projected similarity
– parochialism
243
Micro -Level
• Explicit vs implicit communication
• High vs low context
• High vs low contact
244
Opening Profile:
Keeping Your Foot out of Your Mouth
• Small slips can be big errors:
“Hello, wife of the boss”
“Thank you for your hostility”
Patting someone on the head
Do you shake hands, bow, hug, or kiss when meeting
someone?
245
The Communication Process
246
Cultural Noise
Behavior
Attribution
American: “How long will
it take to finish this
report?”
American: I asked him to
participate.
Greek: He is the boss. Why
doesn’t he tell me?
Greek: “I don’t know. How
long should it take?”
American: He refuses to take
responsibility.
Greek: I asked for an order.
247
Trust in Communication
• Business transactions based on long-standing vs.
arm’s length relationships
• High propensity to trust: Nordic countries, China,
Canada, US, Britain
• Low propensity to trust: Brazil, Turkey, Romania,
Slovenia, Latvia
248
The GLOBE Project and Communication
• High performance orientation (e.g., US)  present
objective information directly and explicitly
• Low assertiveness (e.g., Sweden)  two-way
discourse and friendly relationships
• High humane orientation (e.g., Ireland)  avoid
conflict, be supportive
249
Cultural Variables in Communication
• Attitudes
– Stereotyping
• Social organization
– e.g., United Auto Workers (UAW)
• Thought patterns
– The meaning of double lines
250
Cultural Variables in Communication
• Roles
• Language
– “Come out of the grave with Pepsi”
– When “yes” doesn’t mean “yes”
251
Cultural Variables in Communication
• Nonverbal communication
– Kinesic behavior (e.g., sticking out the tongue in China)
– Proxemics (e.g., the corner office, closeness when
talking)
– Paralanguage (e.g., the sound of silence)
– Object language (e.g., monochronic vs. polychronic)
252
Context
253
Comparative Management in Focus: Communicating with Arabs
• Arabs are quick to “sound off”
• Communication is built on friendship, honor,
hospitality
• Arabs are high-contact communicators
• Time is key in communication process
254
Managing Cross-cultural Communication
• Develop cultural sensitivity
– Anticipate the meaning the receiver will get
• Careful encoding
– Use words, pictures, and gestures
– Avoid slang, idioms, regional sayings
255
Managing Cross-cultural Communication
• Selective transmission
– Build relationships face-to-face if possible
• Careful decoding of feedback
– Get feedback from multiple parties
– Improve listening and observation skills
• Follow-up actions
256
Micro -Level
Non-verbal communication
–
–
–
–
–
–
–
–
–
Body Language
Emblems
Illustrators
Affect Display
Regulators/Adaptors
Space (proxemics)
Touch
Voice
Dermal Code
257
Decision-Making
Quality of decisions
 Organizational Effectiveness
Differences across Cultures?
258
DM Process and Culture
1. Problem Recognition
2. Information Search
3. Alternative Generation
4. Choice
5. Implementation
259
International Negotiations
Definition:
The process in which at least two partners with
different needs and viewpoints try to reach an
agreement that is acceptable to all on matters
of mutual interest
-> International managers spend more than 50% of their
time negotiating
260
Recommendations
(Fisher and Ury "Getting to Yes"):
1. Separate the people from the problem
2. Focus on interest, not position
3. Insist on objective criteria
4. Invent options for mutual gain
261
The Negotiation Process
262
Stage One: Preparation
• Develop profiles of counterparts
• Find out likely demands, team composition, and
counterpart authority
– Uzbekistan had to learn from scratch
• Choose a negotiation site
– British/French Chunnel negotiations
263
Stage Two: Relationship Building
• Getting to know one’s contacts and building
mutual trust
• Nontask sounding (nemawashi)
• Use an intermediary
• “I have come as a mediator…”
264
Stage Three: Exchanging Task-related Information
• Cultural differences remain an issue
– Mexicans can be suspicious and indirect
– The French enjoy debate and conflict
– The Chinese ask many questions, but provide
ambiguous information in return
• Show understanding of the other viewpoint
265
Stage Four: Persuasion
• Dirty tricks are in the eye of the beholder
–
–
–
–
–
False information
Ambiguous authority
Uncomfortable rooms
Rudeness, threats
Calculated delays
266
Stage Five: Concessions and Agreement
• Russians and the Chinese start with extreme
positions
• Swedes start with what they will accept
• Starting with extremes may be most effective
267
Comparison of Negotiation Styles
Japanese
North American
Latin American
Hide emotions
Deal impersonally
Emotionally
passionate
Subtle power plays
Litigation, not
conciliation
Great power plays
Step-by-step
approach
Methodical
organization
Impulsive,
spontaneous
Group good is aim
Profit is aim
Group/individ-ual
good is aim
268
Successful Negotiators: Americans
• Know when to compromise, but stand firm at
beginning
• Refuse to make concessions beforehand
• Keep cards close to chest, but make other party
reveal his/her position
• Keep maximum options open, operate in good
faith
269
Successful Negotiators: Indians
• Look for and say the truth, not afraid to speak up
• Exercise self-control
• Respect other party, look for solutions acceptable
to all parties
• Will change their minds, even at risk of seeming
inconsistent and unpredictable
270
Successful Negotiators: Arabs
• Protect honor, self-respect, dignity and, thus, are
trusted and respected
• Avoid direct confrontation
• Come up with creative, honorable solutions
• Are impartial and can resist pressure
271
Successful Negotiators: Swedes
• Quiet, thoughtful, polite, straightforward
• Overcautious, but flexible
• Slow to react to new proposals, but eager to be
productive and efficient
• Able to hide emotions, afraid of confrontation
272
Successful Negotiators: Italians
• Have a sense of drama, do not hide emotions
• Good at reading facial expressions and gestures
• Want to make a good impression and use flattery,
but are distrusting
• Handle confrontation with subtlety and tact
273
Managing Negotiation
• Avoid person-related conflict
• Examples
– Low-context Americans appear impatient, cold, and
blunt to Mexicans.
– Americans must approach negotiations with Mexicans
with patience and tolerance; refrain from attacking ideas
274
Cross-cultural Negotiation Variables
275
Comparative Management in Focus: Negotiating with the Chinese
276
Comparative Management in Focus: Negotiating with the Chinese
• Two problems
– Chinese desire for detail
– Apparent insincerity
• Saving Face
– Lien
– Mien-tzu
277
Comparative Management in Focus: Negotiating with the Chinese
• Importance of harmony
– Guanxi
– Guanxihu networks
• Two stages of Chinese negotiation
– Technical
– Commercial
278
Comparative Management in Focus: Negotiating with the Chinese
• Some recommendations:
–
–
–
–
–
–
Practice patience
Accept prolonged stalemate
Refrain from exaggerated expectations
Expect shaming
Resist blaming for difficulties
Understand Chinese cultural traits
279
Managing Conflict Resolution
• Instrumental oriented
• Expressive oriented
280
Low-context, High-context Sources of Conflict
Low-context
High-context
Analytic, linear logic
Synthetic, spiral logic
Individualistic oriented
violations
Group oriented violations
Revealment, confrontational
Concealment, nonconfrontational
Explicit, open, direct
Implicit, ambiguous, indirect
Why
When
What
How
281
The Influence of Culture on Decision Making
• Individualism vs. collectivism
• Objective vs. subjective approach
• Risk tolerance
• Comfort with unfamiliar solutions
282
Approaches to Decision Making
• Utilitarianism vs. moral idealism
• Autocratic vs. participative leadership
• Speed of decision making
283
Summary of Cultural Variables in Decision Making
284
Comparative Management in Focus: Decision-making in Japan
• Wa
• Amae
• Shinyo
• Ringi
285
Comparative Management in Focus: Decision-making in Japan
286
Course Summary
Global Economic System – MACRO
–
When and what
–
Institutions
Companies make decisions with respect to specific countries MICRO
==> Europe? Asia? Latin America? Australia?
•
Specific countries?
Internationalization Strategy: Generalizations??
–
Cost … Management - cultural differences ...
•
religion, education; Hofstede
–
Benefits …. Market growth (pop size; income) and Value
creation activities (labor cost, exp.)
–
Risk .... South America? Asia? Europe?
287
The International Organization
The External Environment
CULTURE
Multiple
Economies
Multiple
Technological
Environment
Multiple
Societies
Multiple
Political
Environment
The Internal Environment
People
Business
Strategy


Processes
Effectiveness
 Structure


Culture
288
Managing the International Organization
1.External Environment ... Porter Diamond; Status Quo;
Culture (Hofstede)
2.Strategy ... Value creation activities; Location
economies; Market entry
3.Internal Environment ...
Behavior: Individual (Motivation) and Group
(Leadership; Multicultural Teams)
Processes: Communication -- Macro (communication
flow); Micro (communication process); Nonverbal
communication; Decision Making; Negotiation; HR
Processes (The Expatriate Assignment).
Organizational Culture – six dimensions;
Structure – Macro and Micro – power distance;
289
290
291
292
293
Strategy – Defined
294
India
Where India has the edge (in comparison to China):
LANGUAGE - English gives India a big edge in IT Services and Back-Office work.
CAPITAL MARKETS - Private firms have readier access to funding. China favors
state sector
LEGAL SYSTEMS - Contract law and copyright protection are more developed
than in China.
DEMOGRAPHICS - Some 53% of India's population in under age 25, vs. 45% in
China.
295
External Environment
 Relevant variables: GDP GDP/capita GDP
growth and factor endowments; demand
conditions
 The GDP (gross domestic product): The value of
the final output of goods and services produced
by the residents of an economy (World Bank).
There are several methods to calculate the GDP.
The PPP (purchasing power parity) method
reflects the cost of a basket of goods in two
countries in their local currencies.
296
ISA Analysis – Fall 2008
1.
The Global Update report provides a useful overview of current political and
economic issues.
a)
–
–
–
–
–
–
–
b)
–
–
–
Zimbabwe - summarize the current political and economic challenges in
Zimbabwe.
Robert Mugabe, President, only ruler since 1980
Pseudo-Democracy, contested election in Spring 2008 – No clear winner
Mugabe self-proclaimed winner -> violence
White population 1% but owns 70% of land -> Mugabe took away land
African Union leaders do NOT put enough pressure on Mugabe
Agricultural production and inflation are severe economic issues
Solutions: stay in office, share power with opponentTsvangirai, foreign military
will intervene
Vietnam - Summarize the challenges and the predictions for Vietnam’s economy.
GDP growth 8.5% to 6.5% AND 20% inflation
Domestic market; foreign markets (exports)
Long term good – low cost manufacturing, hi-tech programs, relatively stable
government
297
ISA Analysis – Fall 2008
1.
The Global Update report provides a useful overview of current political and
economic issues.
c) African countries tend to not be part of the “new” global economy. What do you think
are a couple of primary reasons for that? Nigeria, South Africa, Kenya, and
Zimbabwe – compare.
–
Lack of democratic political system and free-market economic system.
–
Lack of infrastructure
–
Corruption
–
AIDS and other health issues
–
Lack of education
–
Culture?Religion?
d) Asian countries such as Thailand, Vietnam, and the Philippines What do you think do
these countries have to offer to foreign investors that China is lacking? Compare.
–
All have (except Vietnam) have more economic freedom than China
–
All have high corruption BUT also high GDP growth
–
Cultural differences – see religion
–
Attitude towards U.S. companies
298
ISA Analysis – Fall 2008
Table 1: Compare African Countries
Table 2: Compare Asian Countries
299
ISA Analysis – Fall 2008
2. Venezuela, Colombia, and Bolivia. Summarize current activities
related to America’s conflict with these countries. What do these
countries have to offer that may be of interest to U.S. businesses?
•
•
•
What is the CPI ranking for each country?
Colombia – Drugs, FARC,
Bolivia – Drugs – coca, natural gas, nationalization
Venezuela -Hugo Chavez
–
Farmers, Colombia, Constitution, Bolivia
–
U.S. – oil 15%
–
Nationalization electricity and telephone
–
UN Speech 2006
–
CPI – 162 - Venezuela, 68 - Colombia, 105 - Bolivia
300
ISA Analysis – Fall 2008
3. a) Which countries belong to the EU? Only some of the 27 EU members are also
members of the EMU (European Monetary Union). Which countries belong to the
EMU?
European Union (EU): Austria, Belgium, Bulgaria, Cyprus, Czech Republic, Denmark,
Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania,
Luxembourg, Malta, The Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia,
Spain, Sweden, and United Kingdom. European Monetary Union (EMU) Ireland,
Belgium, France, Spain, Portugal, Finland, The Netherlands, Germany, Luxembourg,
Austria, and Italy.
b) Italy has the worst CPI ranking of the Western EU countries. What is the
current issue related to that reported in the ISA Global Update? Berlusconi,
immunity from law for government officials;
c) Russia is not a member of the EU but is of critical importance to the economies of the
European countries. Why? Oil and natural gas; Gazprom
301
ISA Analysis – Fall 2008
4. OPEC - Organization of Petroleum Exporting Countries. Algeria, Iran, Iraq, Kuwait, Libya,
Nigeria, Qatar, Saudi Arabia, United Arab Emirates (UAE), Indonesia, Ecuador,
Angola, and Venezuela (http://www.opec.org/aboutus/index.htm). The OPEC
Countries coordinate their oil production policies in order to help stabilize the oil
market and help oil producers achieve a reasonable rate of return on their
investments. It is also designed to ensure that oil consumers continue to receive
stable supplies of oil (http://www.opec.org/aboutus/functions/functions.htm).
5.
The World Economic Forum (WEF) has a 3-fold vision aiming to be the foremost
organization which builds and energizes leading global communities; the creative
force shaping global, regional, and industry strategies; the catalyst of choice for its
communities when undertaking global initiatives to improve the state of the world.
WEF is a Geneva-based non-profit foundation best known for its annual meetings
bringing together top business leaders, international political leaders, selected
intellectuals and journalists to discuss the most pressing issues facing the world
(http://www.weforum.org/en/about/Our%20Organization/index.htm). Forum Members
are companies that are driving the world economy forward. The typical Member
Company is a global enterprise with more than 5 billion dollars in turnover, although
the latter varies by industry and region. The Forum has 1,000 member companies
Group of Seven (G7) consists of Canada, France, Germany, Italy, Japan, United
Kingdom, and the United States of America (Russia). G7 is an international forum for
governments.
302
ISA Analysis – Spring 2008
• U.S. Economic Slowdown
– Indicators
•
•
•
•
Housing Market
Lowering of interest rates
GDP growth
Unemployment
– Developed Countries
• Same effect
– Less Developed Countries
• Export dependence – Central and Eastern Europe; Mexico
• NOT – India and China – strong domestic demand
303
ISA Analysis
• Venezuela – Recent events – Hugo Chavez
–
–
–
–
–
–
–
–
–
Farmers
Colombia
Constitution
Government restructuring
Bolivia
U.S. – oil 15%
Nationalization electricity and telephone
Television station
UN Speech 2006
304
ISA Report
• Catholicism in Latin America – Table
• Turkey – EU Opposition
–
–
–
–
–
Kurds – Human Rights
Economic and political requirements
Religion – Islam
Culture and location
Cyprus
305
ISA Report
• Kenya – Table
• Tata Motors
– $7.6 bill revenue and 22,000 employees
– Commercial vehicles
– 18% international – Africa, Middle East, Europe, Australia, S and
SE Asia
• Japan
– Declining domestic car market
– Oil prices
– Eco growth
306
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