Objectives
1.
2.
3.
4.
Describe the alternatives available to a
company that wants to internationalize
Explain the factors that can make
international joint ventures successful.
Understand management “centrism”, i.e.,
management attitudes toward foreign
operations.
Understand the dimensions on which
national cultures may differ, and the
applicability of American management
theories in foreign cultures.
1
International Trade

Tariff

A tax that government imposes on
imported or, occasionally, exported goods.
 Intended
to protect domestic industry and jobs
from foreign competition
 Other countries usually retaliate their own
tariffs, actions that eventually reduce the overall
amount of trade and impedes economic growth.
2
International Trade

Free-Trade Doctrine

The idea that if each country specializes in
the production of the goods and services
that it can produce most efficiently, this will
make the best use of global resources
 If
India is more efficient in making textiles, and
the United States is more efficient in making
computer software, then each country should
focus on their respective strengths and trade
for the other’s goods.
3
International Trade

North American Free Trade Agreement
(NAFTA)

Abolishes 99% of tariffs on goods traded
between Mexico, Canada and the United
States
 Unrestricted
cross-border flows of resources
 Increased investment by U.S. firms in Mexican
manufacturing facilities due lower wage costs in
Mexico

Opportunities and Threats
 The
opportunity to serve more markets
 Increased competition from NAFTA competitors
4

Distance


Culture


Markets were essentially closed because of
the slowness of communications over long
distances.
Language barriers and cultural practices made
managing overseas businesses difficult
Changes in Distance and Communication

Improvement in transportation technology and
fast, secure communications have greatly
reduced the barriers of physical and cultural
distances.
5
International Competition

Forces Shrinking Globe
Air travel
 Modern information technology
 Corporate Globalism


International Management

The pursuit of organizational objectives in
international and intercultural settings.
6
Global Organizations for a
Global Economy

The Internationalization Process

Stage I: Licensing


Stage 2: Exporting


Authorizing companies in foreign countries to produce and/or
market a given product within a specified territory in return for
a fee.
Goods produced in one country are sold to customers in
foreign countries.
Stage 3: Local warehousing and selling

Goods produced in one country are shipped to the parent
company’s storage and marketing facilities located in
overseas countries.
7
Global Organizations for a
Global Economy (cont’d)

The Internationalization Process (cont’d)

Stage 4: Local Assembly and Packaging
 Components,
rather than finished products, are
shipped to company-owned foreign facilities for
final assembly and sales.

Stage 5: Joint Ventures (also Strategic
Alliances or Partnerships)
 A company
in one country pools its resources with
another foreign company or companies to create
and market products and jointly share profits and
losses.
8
Strategic Alliances
(Joint Ventures and
Strategic Partnerships)
Why alliances?
 Share risks and costs, avoid irreversible
resource commitments … faster fit!
 Explore - Discover new opportunities
(e.g., R&D-joint research)
 Exploit - Increase productivity of current
assets (e.g., Marketing-New Market Entry,
Manufacturing-Cost Sharing)
9
Strategic Alliances

Advantages




Facilitate entry into
foreign markets.
Enable partners to
share fixed costs and
risks associated with
new products and
processes.
Facilitate transfer of
complementary skills
between companies.
Help establish
technological
standards.

Disadvantages



Risk of giving away
technological knowhow.
Risk of opening local
market access to
foreign alliance
partner.
Risk of not getting
anything in return.
10
Strategic Alliances
(Joint Ventures and
Strategic Partnerships)

Recommendations for Achieving Success
1.
2.
Be very clear about the alliance’s purpose
Select partners to minimize risk:
1.
2.
3.
3.
4.
partner capability
trust/reputation
you & partner’s current/future competitive
position
Agree on ground rules about the rights and
responsibilities of all parties at the outset
Structure the alliance based on alliance
11
Structure Alliances to Reduce
Risk
“Walling off”
12
Global Organizations for a
Global Economy (cont’d)

The Internationalization Process (cont’d)

Stage 6: Direct Foreign Investment
 The
production and marketing of products through
a wholly owned subsidiary in a foreign country.
13
From Global Companies to
Transnational Companies

Global Company

A multinational venture centrally managed
from one country.
 Has
global strategies for product design, financing,
purchasing, manufacturing, and marketing.

Transnational Company

A global network of productive units with a
decentralized authority structure and no
distinct national identity.
 Relies
on a blend of global and local strategies.
14
Toward Greater Global Awareness
and Cross-Cultural Competence

Travelers:




Engage in short-term
visits to foreign
countries.
Have limited
knowledge of local
history, culture, and
customs.
Have limited local
language skills.
Don’t attempt to adapt
to the local
environment.

Settlers




Take assignments
lasting up to five
years.
Have in-depth insights
into the host country’s
history, customs, and
culture.
Speak the local
language well or
fluently.
Are culturally-trained 15
to “go native.”
Contrasting Attitudes Toward
International Operations

Ethnocentric


Polycentric


The view that assumes the home country’s
personnel and ways of doing things are best.
The view that assumes local managers in
host countries know best how to run their own
operations.
Geocentric

A world-oriented view that draws upon the
best talent from around the world.
16
The Cultural Imperative

Culture


A population’s taken-for-granted assumptions,
values, beliefs, and symbols that foster
patterned behavior.
Cultural Profile of American Managers
Positive: Informal, creative, open-minded
 Negative: Educationally and professionally
narrow

17
The 3 levels of Culture (Schein)
1.
Artefacts and creations - the things one can
see, hear and observe.





Dress codes
Patterns of behaviour,
Physical symbols
Organizational ceremonies
Office layout
18
The 3 levels of Culture (Schein)
2. Values and Beliefs –can be identified from stories

language

symbols

how people explain justify what they do
19
The 3 levels of Culture (Schein)
3. Basic assumptions – beliefs so deeply
embedded in a culture that members are no longer
consciously aware of them.
20
LEVELS OF CULTURE
Cultural artefacts
(eg. fashion, popular culture)
Language and Verbal Symbols
Nonverbal Symbols
Symbolic Meanings
Cultural Norms
Cultural Values
Cultural Beliefs
Cultural Traditions
We can
see
and hear
We cannot
see;
these are
hidden
Universal Human needs
Ting-Toomey, 1999 21
SOURCES OF ORGANIZATIONAL
CULTURE
the national culture (Hofstede, 1991)
 the vision, management style and
personality of the founder or other
significant dominant managers (Schein,

1985)

the nature of the business, the type of
products and the environment within
which the organisation operates (Gordon,
1991)
22
National cultures (Hofstede)
Hofstede researched 40 countries in
terms of national cultures in work
 He determined 4 dimensions of
difference in national cultures

Power distance
 Uncertainty avoidance
 individualism
 Masculinity

23
POWER DISTANCE
Dependence relationships in a country
 Small power distance

Limited dependency of subordinates on bosses
 Consultative style of decision making


High Power Distance countries:


Latin countries (France, Spain, Latin America),
Asian and African countries
Low Power Distance countries:

USA, UK, Netherlands, Scandinavian countries
24
Power Distance in Organizations
LOW
HIGH
Decentralization
popular
 Narrow salary
range
 Consultative
decision making


Hierarchical
organizations
 Centralization
 Wide salary range
 Subordinates
expect rules
25
Uncertainty avoidance



This is a measure of the degree to which
people are willing to accept change and work
in uncertain circumstances.
The higher the degree of uncertainty
avoidance the more structured people like
things to be.
Examples: Low= Sweden, High = France
26
Individualism and collectivism
This refers to degree to which people
see themselves as being part of a group
or as individuals.
 Examples include for individualistic=
USA, UK, Australia
 Examples for Collectivist= Norway,
Japan

27
Masculinity/ femininity
Masculine cultures place a high value
on things like Heroism, success,
achievement, Leading.
 Feminine cultures place a high value on
groups, quality of life, caring.
 Examples- Masculine= Germany, USA
Feminine= Sweden, Denmark, Finland

28
Culture (cont’d)

High-Context Cultures

Cultures in which nonverbal and situational
messages convey primary meaning (e.g.
Japan).
 Status
of an individual is important in determining
relationships.

Low-Context Cultures

Cultures in which words convey primary
meaning (e.g., UK).
 Nonverbal
messages are secondary to spoken
words.
 The terms of the deal are more important building
29
a business relationship.
Culture (cont’d)

Other Sources of Cultural Diversity
(cont’d)

Time
 Monochronic
time: a perception of time as a
straight line broken into standard units.

Timely arrivals and keeping appointments is considered
important.
 Polychronic
time: a perception of time as flexible,
elastic, and multidimensional.

Appointment schedules are considered approximations
and are not kept precisely.
30
Culture (cont’d)

Other Sources of Cultural Diversity
(cont’d)

Interpersonal space
 Some
cultures prefer a close rather than wide
distance between conversing individuals.

Language skills
 Language
fluency opens insights into another
culture.

Religion
 Religion
has many effects on personal and
professional activities in many cultures.
31
Ouchi’s Theory Z: The Marriage of
American and Japanese Management

Theory Z Organizations
 Organizations that successfully combine the traits of
typical American and Japanese companies.
 Successful geocentric managers are not prisoners of
their own culture.
 American qualities
– Emphasis on individual
responsibility
 Japanese-like qualities
–
–
–
–
–
–
Long-term employment
Slower promotions
Cross-functional career paths
Emphasis on self-control
Participative decision making
Concern for employees
32
A Cross-Cultural Study
of Work Goals

Findings’ implications
Managers need to adapt the motivation
programs to local preferences.
 An international contingency approach to
motivation is called for.

33
An International Contingency
Model of Leadership

Model’s Assumptions/Guidelines
Leadership must be adapted to the local
culture.
 Participative leadership is the most applicable
style where workers trust their leader.
 Directive leadership is considered the least
appropriate style of leadership.

34
Staffing Foreign Positions

Why Is the U.S. Expatriate Failure Rate So
High?
Sink-or-swim approach taken by companies in
not preparing managers for foreign
assignments.
 Family and personal adjustment problems
that arose after arriving in the foreign
assignment.

35
Cross-Cultural Training

Cross-Cultural Training


A guided experience that helps people live
and work in foreign cultures.
Specific Training Techniques
Documentary programs to familiarize
expatriate with assignment destination.
 Culture assimilator exposed expatriate to
simulated intercultural incident and situations.
 Language instruction builds the expatriate’s
conversational skills in a foreign language.

36
Cross-Cultural Training (cont’d)

Specific Training Techniques (cont’d)
Sensitivity training provides experiential
exercises to teach expatriates to be aware of
the impact of their actions on others in
another culture.
 Field experiences provide firsthand exposure
to ethnic subcultures that heightens
expatriates’ cultural awareness.

37
Cross-Cultural Training (cont’d)

Conclusions
A combination of documentary and
interpersonal training is the best combination
for expatriates.
 Provide orientation for both expatriate and
family.
 Have family sponsors or assigned mentors
available at the foreign assignment.
 Repatriation is an importance part of the
entire foreign assignment experience.

38
North American Women
on Foreign Assignments
Women are above-average in being
successful in foreign assignments.
 Strongest barriers to foreign assignments
has been self-disqualification and the
prejudice of home country managers.
 Culture is a bigger hurdle than gender:
women on foreign assignments are seen
as North Americans first, then women.

39
Relying on Local Management

Advantages of Using Foreign Nationals
They know the language and culture.
 They do not require huge location expenses.
 Host governments favor more local control.


Disadvantage

Local managers may not be attuned to homeoffice goals and procedures.
40