International
Management
MGT 480/680
Spring 2010
Dr. Yvonne Stedham
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
• Management concepts and skills needed for
businesses to succeed in an international
environment
• External Environment - Globalization, Democracy,
Free Markets, Cultural Differencs, and the Bottom
Line
5
Website Location
http://www.business.unr.edu/faculty/stedham/
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 2nd
• Global Update – Web/Handout
• Questions to be handed out in class – next week
8
Student Group
International Business Student Chapter (IBSC)
– President: Marc Bristol
Email: marcdbristol@hotmail.com
Cell phone: 530 613 2377
– Extra Credit
– Meeting dates: Every two weeks on Tuesday from noon to 12:50. In AB 402.
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”?
4.
What is the GDP/capita in the U.S.? What is a
typical GDP growth rate for the U.S.?
5.
Which three countries have the highest
GDP/capita?
6.
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?
1. Five largest countries
1. China 1.3 Bill
2. India 1.16 Bill
3. U.S. 307 Mill
4. Indonesia 220 Mill
5. Brazil 190 Mill
6. Russia 140 Mill
7. Japan 127.5Mill
2. World Population
6.6 Bill
11
What do you know?
1. Five largest countries
1.
2.
3.
4.
5.
China 1.3 Bill
India 1.16 Bill
U.S. 307 Mill
Indonesia 240 Mill
Brazil 198 Mill
6.
7.
8.
9.
10.
Pakistan 176 Mill
Bangladesh 156
Nigeria 149 Mill
Russia 140 Mill
Japan 127.5Mill
Mexico 111 Mill #11
Germany 82 Mill #16
2. World Population
6.6 Bill
12
What do you know?
3. GDP/capita
GDP/capita in U.S.: ~ $46,000
Growth rate in U.S.: .4%
– Typical growth rate ~ 3%
– GDP/sector: Agriculture 1.2%; Industry 19.2%; Service 79.6%
Mexico: Population 111.2 Mill; GDP/capita: $14,300
– Current growth rate: 1.3%
– GDP/sector: Agriculture 3.8%; Industry 35.2%; Service 61%
13
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
14
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
15
What do you know?
6. Number of countries in the world
• Total number of countries: 192 -195
• Kosovo, Vatican, and Taiwan
• United Nations 192
16
Some Data (APPROX.)
Japan
Population
GDP growth
GDP/
Capita
Industry
China
Brazil
US
World
127.5 Mill
1.3Bill
190 Mill
307 Mill
6.6Bill
-.7%
10.7%
3.7%
.4%
5.3%
$34,100
$7,700
$8,800
$46,780
$10,200
?
?
?
?
NA
17
Data Sources
www.cia.gov
www.transparency.org
www.heritage.org
18
International Government Materials
International financial statistics yearbook
http://innopac.library.unr.edu/record=b1618229~S0
Trade policy review
http://innopac.library.unr.edu/search/
Patrick Ragains
Business and Government Information Librarian
ragains@unr.edu
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
20
Course Format
• Syllabus
Termpaper List February 9
Presentation
1. Ireland
Melissa, Margaret, Ashley
April 8
2. Norway
Chelsea, Brittany, Kristyn
April 13
3. Netherlands
Toni, Dominique, Philip
April 13
4. Germany
James, Jesus, Austin
April 15
5. Switzerland
Amy, Andrew, Erica
April 15
6. Spain
Lisa, Marianne, ???
April 20
7. Peru
Rossana, Ashley, Morgan
April 20
8. Brazil
Jenna, Robert, Alex
April 22
9. Chile
Veronica, Genesis, Alicia
April 22
10. Argentina
Matt, Francisco, Alberto
April 27
11. China
Nicole, Alice, Mana
April 27
12. Hong Kong
Edita (grad)
April 29
13. Japan
Kyle, Scott, Randy
April 29
14. Canada
Sogi (grad)
May 4
Reminder
•
Extra Credit
–
•
Forms
IBSC Meetings in AB 402 – February 2
–
Speaker: Brazil
23
Personal Introductions
• Students – background sheets
• Introduction
– Major
– Traveled internationally
– Speak other language
24
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
25
Framework
Organizations and Organizational Effectiveness
 What is an organization?
 Why do organizations exist?
• When is an organization effective?
• Efficiency vs effectiveness?
26
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.
27
Measurement of organizational effectiveness
Long run?
Intermediate run?
Short run?
•
28
Measurement of organizational effectiveness
• Long
-
Survival
• Intermediate -
Adaptation, Responsiveness
• Short
Productivity, Efficiency
-
29
Measurement of organizational effectiveness
A contingency approach to management
(NOT “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.
30
The Organization
The External Environment
Economy
Social
Environment
Technological
Environment
Political
Environment
The Internal Environment
People
Business
Strategy


Processes
Effectiveness
 Structure


Culture
31
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
32
Globalization
• Thomas Friedman
• Why change?
• Characteristics of the global system
– Previous system?
33
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.
34
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)
35
Characteristics of the new
system
• Separation and independence
VS
Integration and interdependence
36
Characteristics of the new system
• Free market capitalism
• Homogenization of culture – Americanization
• Defining technologies: computerization,
miniaturization, digitization, satellite
communications, fiber optics, the Internet
37
Characteristics of the new system
• Defining measurement:
Weight (missles)
VS
Speed .. Of travel, innovation, communication,
commerce
38
Characteristics of the new system
• Defining economists:
Karl Marx and Keynes
VS
Schumpeter
Capitalism and Creative Destruction
39
Characteristics of the new system
• Defining political views:
Friends and Enemies
VS
Competitors
40
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.
41
APEC Members
Australia
Brunei
Canada
Chile
People's Republic of China
Hong Kong, China
Indonesia
Japan
Republic of Korea
Malaysia
Mexico
New Zealand
Papua New Guinea
Peru
Philippines
Russia
Singapore
Chinese Taipei
Thailand
United States
Vietnam
42
APEC Business Summit
• 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 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.
43
OPEC
Organization of Petroleum Exporting Countries
Twelve members
Algeria, Ecuador, 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.
44
World Economic Forum Davos
1/27-1/31/2010
• https://www.weforum.org/
• Committed to improving the state of the world
– Participation Annual Meeting - invitation only - limited to the criteria and quota of each
stakeholder group.
– Of the 2500 participants, more than half from the business sector.
– Over 900 chief executives - Basic Industries, Consumer, Financial Institutions,
Information Technology, Electronics & Telecommunications, Mobility, Energy, Health,
Media, and Professional Services.
– Co-Chairs Josef Ackermann, Chairman of the Management Board and the Group
Executive Committee, Deutsche Bank, Germany; Member of the Foundation Board of
the World Economic Forum and Melinda French Gates, Co-Chair, Bill & Melinda Gates
Foundation, USA
– Azim H. Premji, Chairman, Wipro, India
Peter Sands, Group Chief Executive, Standard Chartered, United Kingdom
Eric Schmidt, Chairman of the Executive Committee and Chief Executive Officer,
Google, USA
Ronald A. Williams, Chairman and Chief Executive Officer, Aetna, USA
Patricia A. Woertz, Chairman, President and Chief Executive Officer, Archer Daniels
Midland (ADM), USA
45
World Economic Forum
Mission
• Independent, international Swiss not-for-profit organization
• Motto ‘entrepreneurship in the global public interest’
• Economic progress without social development is not sustainable,
while social development without economic progress is not feasible.
•
•
•
•
To be the foremost organization
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.
46
World Economic Forum
Values
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.
Strategies
•
•
•
•
•
•
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.
47
World Economic Forum
•
•
Members - 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.
48
G7 (G8) and G20
G20 (Group of 20)
Purpose (1999): Bring together systemically important industrialized and
developing economies to discuss key issues in the global economy.
Website: http://www.g20.org
Argentina, Australia, Brazil, Canada, China, France, Germany, India,
Indonesia, Italy, Japan,Mexico, Russia, Saudi Arabia, South Africa, South
Korea, Turkey, United Kingdom, United States, European Union (map)
G7 (G8) Countries
– US, Canada, Germany, France, Italy, UK, Japan, (Russia)
49
G 20 Map
G 20
Groups
• Why do organizations go international?
List at least 3 reasons
51
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
52
Reasons for becoming international
Profit = Revenue – Cost
Profit = (Volume*Price) - Cost
53
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
54
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.
55
Types of "international" organizations
Multi-domestic organization
Multinational organization
Global or transnational organization
56
Types of "international" organizations
Multi-domestic organization:
Any organization that exports
to/imports from organizations in other
countries with primarily domestic
production.
57
Types of "international" organizations
Multinational organization:
An organization with operations in
different countries but each is
viewed as a relatively separate
enterprise.
58
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.
59
Graphic Representation
Headquarters – Subsidiary Relationship
60
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
61
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
62
International Orientation
• Ethnocentric
• Polycentric
• Geocentric
• Regiocentric
63
International Orientation
• PCN – Parent Country National
• HCN – Host Country National
• TCN – Third Country National
64
The Relationship between Level of
Internationalization and Firm Performance
More international => more performance?????
65
The Relationship between Level of
Internationalization and Firm Performance
There is a strong CURVILINEAR relationship between
the degree of internationalization and organizational
performance
66
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".
67
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
Examples – Coca Cola, Colgate, Exxon, McDonald’s,
HP, Ralston, Avon
68
EMU
January 2009
Eurozone (16) Blue
Austria, Belgium, Cyprus,
Finland, France, Germany,
Greece, Ireland, Italy,
Luxembourg, Malta, the
Netherlands, Portugal,
Slovakia, Slovenia and
Spain.
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
70
Case 1
•
•
•
•
•
Corporate Social Responsibility
Colombia
Mexico
India
Stakeholders
The Multiple Responsibilities of Business
Economic
Responsibility
Legal
Responsibility
Social
Responsibility
The Social Responsibility of
MNCs
• Corporate social responsibility (CSR)
Profit is
MNCs’ only
goal
MNCs should
anticipate and
solve social
needs
74
MNC Stakeholders
Business Ethics from a Stakeholders’
Perspective – Employees
• 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
• Owners
– Stockholders
– Financial Institutions
• Non-owners
–
–
–
–
–
–
Customers/Consumers
Suppliers
Competitors
Unions
Governments
Other
Opening Profile: The Enron
Case
• Illustrates how questionable actions by a company
can be harmful to both stakeholders and the
company itself—even if the actions are profitable in
the short-term
• Enron is a symbol of an “era of management
practice” (James Post), but is it the end of the era?
Global Consensus or
Regional Variation?
• Global corporate culture
• Example of regional variation: The US focuses on
following basic business obligations, Europe focuses
on serving broader social aims
Three Approaches to International
Morality and Ethics
• Moral universalism
• Ethnocentrism
• Ethical relativism
What is the “right”
decision?
• Consult home/host country laws
• Consult International Codes of Conduct for
MNCs
• Consult the company’s code of conduct
What is the “right”
decision?
• Consult your superiors
• Fall back on your own moral code of ethics
External Environment -Theory
National Competitive Advantage
– Competitiveness
– International Competitiveness
83
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.
84
PORTER DIAMOND
Why a nation achieves success in a particular industry?
• Why Japan -- automobile, cameras
• Why CH (Switzerland) -- precision instruments,
pharmaceuticals
• Why Germany -- engineering
85
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
86
Porter Diamond
1.
Factor Endowments
• Basic Factors
• Advanced Factors
Examples: Nokia, Ericsson
2. Demand Conditions –
1. Quality
2. Innovativeness
3. Variety - customization
87
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
88
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
90
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
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
92
External Environment Theory
Trade Agreements
• Why?
• Protectionism?
Pro /Con
93
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
94
External Environment - Addendum
You need to know this about --
95
Level of International Activities
o International Investment
o International Trade
96
North America
– United States - which
industries most internationally
active? Why?
– US-Canada Free Trade
Agreement (1989) – NAFTA
….
– Mexico - wage rate;
maquiladora industry (1965)
97
Europe
• delayed differentiation
• acquisitions/alliances
• EU - 27 members …..
• EU – The Euro
98
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 (16): Austria, Belgium, Cyprus, Finland, France,
Germany, Greece, Ireland, Italy, Luxembourg, Malta, the
Netherlands, Portugal, Spain, Slovenia, Slovakia
99
European Union - continued
• The European Commission
• The Council of Ministers (counterbalance to
Commission)
• The European Parliament
• The European Court of Justice
100
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
101
Eastern Europe
•
Break-up of The Soviet Union
(Dec 1991)
•
Russia (glasnost, perestroika)
•
The Ukraine
•
Czech Republic
•
Slovakia
•
Poland
102
Russia
•
•
•
•
Gazprom – Europe (25%)
Limitations on foreign ownership
Centralization of authority
Weak infrastructure
103
External Environment
Latin America
Middle (Central) and South
Mexico, Costa Rica, El Salvador, Nicaragua
Peru, Colombia, Venezuela
Brazil
Argentina
Chile
104
External Environment
Asia
• Japan
– MITI (Ministry of International Trade and Industry)
– keiretsus
– Current economic conditions
• South Korea - chaebols
• China
– GNP growth of 10%
– low wage rates
105
External Environment
What about Australia?
106
External Environment
The Four Tigers
South Korea, Hong Kong, Singapore, Taiwan
Baby Tigers
Thailand, Malaysia, Indonesia
107
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
108
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;
109
Major economic regions
North America
Europe
Asia
110
Economic Superpowers
The Triad
1. The United States
2. The EU (dominated by Germany),
3. Japan
Dominates foreigndirect investment
and international trade
111
FDI Clusters
for the U.S.:
Latin America
for EU:
Eastern Europe
for Japan:
The Four Tigers
South Korea, Hong Kong, Singapore, Taiwan
Baby Tigers
Thailand, Malaysia, Indonesia
112
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
113
Group Dynamics
• Why groups?
114
Group Dynamics
Group performance =
Sum of individual performance PLUS group dynamics
•
Group dynamics can be positive or
negative
•
Higher quantity and quality of solutions
115
Group Dynamics
Advantages – Benefits
1. Different viewpoints
2. Differences in expertise
3. Differences in training and
experience
4. Cultural differences
5. Value differences
116
Group Dynamics
Process losses
1.
2.
3.
4.
5.
Loafing
Intra-group conflict
Miscommunication
Wrong leader
In appropriate role and task
assignments
6. Role ambiguity
7. Role conflict
8. Informal, dysfunctional norms
117
Group Dynamics
Group management
1. Roles
•
•
•
What – List of tasks
Who – Is responsible for what, based on expertise
How - Enforcement
2.Timeline
•
•
•
When – Specific deadlines
What – Effective communication
Who - Commitment
118
Group Dynamics
Group management
3.Leadership
• Formal
• Why
• Expertise and role
4.Norms
• Must be explicit
• Agreed upon by all
• Consequences of norm violations
119
National Culture
Harry and Sally
in Saudi Arabia
Lack of prep ->
????? -> Loss of contract
What went wrong? Specific examples!
120
What went wrong? Specific examples!
» Sabbath
» Flights
» Language - Taxi
» Coffee – Refusal – Rude
» Food
» Role of women
» Negotiation – Relationship-building - Time
Why did things go wrong?
121
Why did things go wrong?
Lack of preparation
» Lack of Cultural Knowledge
» Lack of Cross-Cultural sensitivity
Culture and International Management
Relevance
• Cultural Toughness – Cultural Distance
• Cross-cultural literacy and sensitivity
• Cost of doing bus in a particular culture
123
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)
124
Cultural Dimensions
All people have common life problems such as ….
Possible solutions to such problems …..
Different societies chose different solutions ….

Culture
125
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?
126
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
127
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
128
Characteristics of Culture
Values and Norms
1. Social structure
2. Religion
3. Political philosophy
4. Economic philosophy
5. Education
6. Language
129
1. Social structure
1. Social stratification
2. Class consciousness
3. Class membership is a function of ?
4. Social mobility
130
2. Religion
• www.adherents.com
• Minimal level of self-identification
• Non-religious 16%
• Christianity 2.1 bill; 33%
– Protestant work ethic
– Catholic vs Protestant/Lutheran
– Take care of your neighbor and the less fortunate
– 10 commandments
131
• Islam 1.5 bill; 21%
– 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
132
• Hinduism 900 mill; 14%
– 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)
133
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
134
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)
135
The US Culture????
Describe ….
136
Culture
•
Relevance
–
–
–
–
•
CBR Analysis
Cultural toughness
Cross-cultural literacy
Cultural sensitivity
Three aspects
1. Basic Assumptions - Six
2. Characteristics - Six
3. Measurement
•
Application of cultural dimensions
137
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.
Case 2 - Expatriate in China
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
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
140
Dimensions of culture
1. Individualism/Collectivism
2. Power Distance
3. Uncertainty Avoidance
4. Masculinity/Femininity
5. Confucian Dynamism
141
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.
142
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.
143
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.
144
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.
145
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.
146
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
147
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:
148
Applying Hofstede’s
Dimensions
• Lawyers per 100,000 population
–
–
–
–
–
–
U.S.
Germany
Great Britain
Japan
Italy
France
149
Applying Hofstede’s
Dimensions
• Lawyers per 100,000 population (1996)
–
–
–
–
–
–
U.S.
Germany
Great Britain
Japan
Italy
France
312
190
134
106
81
49
150
Applying Hofstede’s
Dimensions
• Number of people per lawyer
–
–
–
–
–
–
U.S.
Germany
Great Britain
Japan
Italy
France
151
Applying Hofstede’s
Dimensions
Country Lawyers Population People/Lawyer
• US: Lawyers: 1,143,358 Pop: 303MM P/L:265
• Brazil: Lawyers: 571,360 Pop: 186MM P/L: 326
• New Zealand: Lawyers: 10,523 Pop: 4MM P/L 391
• Spain Lawyers:114,143 Pop: 45MM P/L:395
• Italy Lawyers:121,380 Pop: 59MM P/L:488
• UK Lawyers:151,043 Pop: 61MM P/L401
• Germany Lawyers:138,679 Pop: 82MM P/L: 593
• France Lawyers:45,686 Pop: 64MM P/L: 1,403
152
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
153
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
154
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
155
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
156
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)
157
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
158
Four stages cross-cultural adaptation:
1. Honeymoon
2. Irritation and hostility
3. Gradual adjustment
4. Biculturalism
159
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
160
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
161
Training Techniques and Rigor of Training
• Area studies
• Culture assimilators
• Language training
• Sensitivity training
• Field experiences
162
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
163
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
164
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
165
Expatriate Assignment
• DVD
166
Cultural Stereotypes
• What are stereotypes?
• Why stereotypes?
• Good/bad?
• Exercise – Five jobs!
European Scholars Conference
– EU – Consumer Protection – Public Health
• Task Force – WHO
• Obesity (BMI Index: 30+) – U.S. 33%; UK 22%, G 12%,
Switzerland 8%, Italy 9%
168
Overall Attractiveness of a
Country
• Trade-off between
– Costs
– Benefits
– Risks
169
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.
170
Political Risk
– What is risk?
– What is economic risk?
– What is political risk?
171
Useful website
www.buyusa.gov/nevada
Left tab: International Trade Links
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.
173
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
174
Results of Social Unrest
Change in government and/or policy
Results of Political Change
Expropriation
Indigenization
175
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
176
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
177
Political Risk
• ONDD
• Office National Du Ducroirce
• www.ondd.be
Risk Management
1. Integrative Approach
2. Protective/Defensive Approach
179
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
180
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
181
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)
182
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
183
A Risky Country
1. unstable government
2. unstable economy
3. war/revolution/terrorism
4. unfriendly/hostile people
5. unacceptable customs/values/attitudes
184
A Risky Company
1. type of product and/or service offered
2. type of industry
3. structure of ownership
4. level of technology
185
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.
186
Integration of Course Material
Four components of the internal environment
1.
Behavior – Group and Individual
1.
2.
2.
Processes
1.
2.
3.
3.
Communication
Decision-making
HR processes
Structure
1.
2.
4.
Leadership
Motivation, Rewards, and Compensation
Hierarchical versus open
Formal versus informal
Organizational Culture
1.
Six dimensions – tight vs loose control, open vs closed etc
187
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
188
Strategy
The science
and art
of conducting military campaign
on a broad scale.
A plan or technique for achieving some end.
189
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.
190
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
191
Profit
If the price the firm can charge for its output is
greater than its costs of producing that output.
192
Profit
• To do this, a firm must produce a product that is
valued by consumers.
193
Value
• Thus the firm must engage in value
creation.
194
Value to Customer
• The price that consumers are willing to pay
indicates the value/worth of the product to the
consumer.
195
Strategy
Porter, 1985
Strategy Model
(Distinguish from Porter’s Diamond - National Competitive Advantage)
196
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).
197
•
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
198
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.
199
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
200
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.
201
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.
202
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.
203
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.
204
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.
205
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).
206
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.
207
Strategic Planning Process
– External Scanning and Internal Scanning
(SWOT)
– Opportunities/Threats Strengths/Weaknesses
– Vision, Mission, Goals, Objectives, Strategies
Strategy Implementation
208
Three Traditional Strategies
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.
209
Pressures for Local Responsiveness
1. Differences
in consumer tastes and
preferences
2. Differences in infrastructure and traditional
practices
3. Differences in distribution channels
210
Privatization
• http://www.privatizationbarometer.net/
• Register but free
• Library – ask business librarian for help
211
The Internal Environment of an
International Organization
Organizational Culture
People
Processes
Structure
212
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?
213
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.
214
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
215
Culture and Org Characteristics
Structure
Communication
Rewards
DecisionMaking
Process
Results
Job
Employee
Tight
Loose
Parochial
Professional
Open
Closed
Normative
Pragmatic
216
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?
217
Behavior
Individual Behavior
P = f (A, M)
 Motivation defined!
 Homeostasis---applied to psychological needs
 MotivationTheories -- Applicability across cultures??
218
Behavior
MotivationTheories
Content Theories
 Maslow’s Need Hierarchy
 Two Factor Theory of
Motivation
 McClelland Achievement
Motivation
219
Motivation Theories - International
Context
How applicable are the motivation
theories proposed by Maslow
and Herzberg in the international
context?
220
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.
221
Behavior - Motivation
Process Theories
 Equity Theory of Motivation
 Goal - Setting
 Expectancy Theory of Motivation
valence

Effort  Performance  Outcome

expectancy

instrumentality
222
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
223
Reinforcement Theory
• Applicability?
• Assumptions??
• Behavior is a function of its consequences
224
The External Environment
CULTURE
Multiple
Economies
Multiple
Technological
Environment
Multiple
Societies
Multiple
Political
Environment
The Internal Environment
People
Business
Strategy


Processes
Effectiveness
 Structure


Culture
225
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
226
Motivation Theories Summary
Theory
Maslow - Need
Hierarchy
Herzberg – Two
Factor Theory
McCelland – Learned
Needs
Stacy Adams –
Equity 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
Three needs
With modification –
Collectivistic vs individualistic
Social comparisons
With modification – does not
work in collectivistic culture
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
227
Reinforcement
The Meaning of Work
• Tied to economic necessity
• What else?
228
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
229
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.
230
Study results
•
•
•
•
•
•
•
Britain (lowest),
Germany,
Netherlands,
Belgium,
USA,
Israel,
Japan
231
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
232
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
233
Leadership
Which Hofstede dimension?
Types of leadership styles:
 autocratic, participative, group
 authoritarian, democratic, laissez-faire
 Theory X, Theory Y
234
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
235
 Japanese  Theory Y --- employees learn from
mistakes
 Germans  Theory X --- autocratic, stop poor
performance asap
236
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)237
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!
238
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.
239
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 
240
Benefits associated with cultural diversity:
 # of alternatives generated;
 quality of alternatives;
 creativity/divergence;
 no groupthink
241
Process Losses:
 potential for miscommunication increases;
 cohesiveness decreases;
 negative attitudes (dislike, mistrust);
 perceptual problems (stereotyping);
 stress
242
Multicultural teams have the potential to be
the most or the least effective teams
 Group development stages:
 entry, work, action
 Task: innovative or routine
243
Manage culturally diverse teams
through:
 task-related selection
 recognition of differences
 super-ordinate goals
 equal power
 mutual respect
 feedback
244
Hofstede and Internal
Environment
UNC
POW
MAS/F
IND/C
ST/LT
Motivation and
Rewards
Leadership
Decision Making
Communication
Org. Culture
Structure
245
Communication: Macro Level
• Communication Flows
– upward/downward
– formal/informal
246
Communication: Micro Level
• Micro/Interpersonal Level
Definition: Transmission of meaning through
the use of common symbols
Sender -> Message -> Receive
(Encoding) (Medium)
(Decoding)
247
Communication: Micro - Level
• Interpersonal communication Process
– encoding
– message
– decoding
248
Communication: Micro - Level
Communication barriers
– language
– perception - stereotyping
– culture
– nonverbal communication
– projected similarity
– parochialism
249
Micro -Level
• Explicit vs implicit communication
• High vs low context
• High vs low contact
250
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?
251
The Communication
Process
252
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.
253
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
254
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
255
Cultural Variables in Communication
• Attitudes
– Stereotyping
• Social organization
– e.g., United Auto Workers (UAW)
• Thought patterns
– The meaning of double lines
256
Cultural Variables in Communication
• Roles
• Language
– “Come out of the grave with Pepsi”
– When “yes” doesn’t mean “yes”
257
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)
258
Context
259
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
260
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
261
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
262
Micro -Level
Non-verbal communication
–
–
–
–
–
–
–
–
–
Body Language
Emblems
Illustrators
Affect Display
Regulators/Adaptors
Space (proxemics)
Touch
Voice
Dermal Code
263
Decision-Making
Quality of decisions
 Organizational Effectiveness
Differences across Cultures?
264
DM Process and Culture
1. Problem Recognition
2. Information Search
3. Alternative Generation
4. Choice
5. Implementation
265
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
266
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
267
The Negotiation Process
268
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
269
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…”
270
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
271
Stage Four: Persuasion
• Dirty tricks are in the eye of the beholder
–
–
–
–
–
False information
Ambiguous authority
Uncomfortable rooms
Rudeness, threats
Calculated delays
272
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
273
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
274
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
275
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
276
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
277
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
278
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
279
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
280
Cross-cultural Negotiation Variables
281
Comparative Management in Focus: Negotiating with the
Chinese
282
Comparative Management in Focus: Negotiating with the
Chinese
• Two problems
– Chinese desire for detail
– Apparent insincerity
• Saving Face
– Lien
– Mien-tzu
283
Comparative Management in Focus: Negotiating with the
Chinese
• Importance of harmony
– Guanxi
– Guanxihu networks
• Two stages of Chinese negotiation
– Technical
– Commercial
284
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
285
Managing Conflict Resolution
• Instrumental oriented
• Expressive oriented
286
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
287
The Influence of Culture on Decision Making
• Individualism vs. collectivism
• Objective vs. subjective approach
• Risk tolerance
• Comfort with unfamiliar solutions
288
Approaches to Decision Making
• Utilitarianism vs. moral idealism
• Autocratic vs. participative leadership
• Speed of decision making
289
Summary of Cultural Variables in Decision Making
290
Comparative Management in Focus: Decision-making in
Japan
• Wa
• Amae
• Shinyo
• Ringi
291
Comparative Management in Focus: Decision-making in
Japan
292
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?
293
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
294
Managing the International
1.External Environment ... Porter Diamond; Status Quo;
Organization
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;
295
296
297
298
299
Strategy – Defined
300
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.
301
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.
302
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
303
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
304
ISA Analysis – Fall 2008
Table 1: Compare African Countries
Table 2: Compare Asian Countries
305
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
306
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
307
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.
308
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
309
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
310
ISA Report
• Catholicism in Latin America – Table
• Turkey – EU Opposition
–
–
–
–
–
Kurds – Human Rights
Economic and political requirements
Religion – Islam
Culture and location
Cyprus
311
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
312