1 International Management MGT 480/680 Spring 2009 Dr. Yvonne Stedham 1.

1 International Management MGT 480/680 Spring 2009 Dr. Yvonne Stedham 1

2 International Management Seniors, Juniors, Majors??? Travelled to other countries? USAC? Speak other languages? 2

3 International Management Why this course? What do you expect to learn? 3

4 This week Purpose of this course What do you know? Introduction Course Content Format - Syllabus Personal Instructor Students Background Sheet 4

5 Purpose What new management/business knowledge could you possibly learn in this class? Globalization, Democracy, Free Markets, and the Bottom Line 5

6 Website Location http://wolfweb.unr.edu/homepage/ystedham 6

7 Current Developments National Public Radio (NPR) FM 88.7 - KUNR FM 90.5 Cap Radio The Economist https://www.economistacademic.com/subscribe_single.cfmhttps://www.economistacademic.com/subscribe_single.cfm - Student Subscription 12 weeks $19.95 Faculty ID: 4430 Wall Street Journal Sign-up sheet 7

8 For February 5 Global Update Web/Handout Questions to be handed out in class next week 8

9 Student Group International Business Student Chapter (IBSC) [email protected] or Adam Cole [[email protected]][email protected] NEWTRAC Nevada World Trade Council www.newtrac.orgwww.newtrac.org 9

10 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

11 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

12 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

13 New Internet Sources Index of Economic Freedom www.heritage.org/research/features/index/countries 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

14 Some Data (APPROX.) JapanChinaBrazilUSWorld Population127.5 Mill1.3Bill190 Mill301 Mill6.6Bill GDP growth2.2%10.7%3.7%3.2%5.3% GDP/ Capita $33,100$7,700$8,800$46,780$10,200 Industry ???? 14

15 What do you know? 4. Which 5 countries have the highest GDP/capita 1.Luxembourg$102,284 2.Norway$ 79, 154 3.Qatar$ 70,754 4.Iceland$ 62, 976 5.Ireland$ 58,883 6.Denmark$ 57,035 7.Switzerland$ 56,711 8.UK$ 47,300 9.US$ 46, 780 10.Netherlands$ 45,429 15

16 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

17 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

18 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

20 World Economic Forum Davos 1/28-2/1 Committed to improving the state of the world https://members.weforum.org/ 20

21 World Economic Forum is an independent, international organization incorporated as a Swiss not-for- profit 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

22 World Economic Forum We enjoy a unique global standing by recognizing and responding to two new developments: 1.The worlds 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

23 World Economic Forum Members represent the worlds 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 worlds most influential companies partner with the World Economic Forum to tackle the most complex challenges facing humanity. Recognizing that each companys business needs are unique, the Forum offers the possibility for partners to engage in a specific community, project or event. 23

24 Cost Benefit Risk Analysis www.cia.gov www.transparency.org www.heritage.org 24

25 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 dont own a duplicate paper copy). Patrick Ragains Business and Government Information Librarian [email protected]

27 Dont confuse APEC OPEC 27

28 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

29 APEC Members Australia Brunei Darussalam Canada Chile People's Republic of China Hong Kong, China Indonesia Japan Republic of Korea Malaysia Mexico 29

30 APEC Members New Zealand Papua New Guinea Peru Philippines Russia Singapore Chinese Taipei Thailand United States Viet Nam 30

31 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

32 OPEC Organization of Petroleum Exporting Countries Eleven members Algeria, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, UAE, Venezuela (Hugo Chavez) OPECs 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

33 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

35 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

36 Framework Organizations and Organizational Effectiveness What is an organization? Why do organizations exist? When is an organization effective? Efficiency vs effectiveness? 36

37 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

38 Measurement of organizational effectiveness Long run? Intermediate run? Short run? A contingency approach to management 38

39 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 managements task to create the best possible fit between the external and internal environments of the organization and must ensure internal consistency between the organizations elements. 39

40 The Organization 40

41 The International Organization 41

42 Globalization Thomas Friedman Why change? Characteristics of the global system Previous system? 42

43 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

44 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

45 Characteristics of the new system Separation and independence VS Integration and interdependence 45

46 Characteristics of the new system Free market capitalism Homogenization of culture Americanization Defining technologies: computerization, miniaturization, digitization, satellite communications, fiber optics, the Internet 46

47 Characteristics of the new system Defining measurement: Weight (missles) VS Speed.. Of travel, innovation, communication, commerce 47

48 Characteristics of the new system Defining economists: Karl Marx and Keynes VS Schumpeter Capitalism and Creative Destruction 48

49 Characteristics of the new system Defining political views: Friends and Enemies VS Competitors 49

50 Reminder Extra Credit IBSC Meeting AB 107 February 10 - 12:15pm 50

51 Termpaper List DRAFT 2/10/09 2:30 COUNTRYSTUDENT NAMES Comment 1.Italy EChristian, Blake, Tony 2.Norway EJosh, Andrew, Enrique 3.AustraliaSteven, James, Gabe 4.Argentina LA Amy, Valerie, Shawna 5.Ireland EAmanda, Addie, Greg 6.Thailand AJace, Chris, Chanut 7.Germany EKatie, Andrea, Chad, Stephan 8.Uruguay LAMichael, Iris, Raymond 9.China AEmily, Lia, Brian 10.AfghanistanJennifer, Josh, Breann 11.Brazil or Chile LA Sandra, Russell, Brittany, Brian, (Stephan) 5 students 12.ChileSandra, Russell, Brittany

Termpaper List 2/12/09 2:30 COUNTRYSTUDENT NAMESPRESENTATION Ireland Amanda Mack, Addie Munson, Greg Welch April 14 Norway Enrique Ramos, Andrew Herr, Josh Sells April 16 Germany Katie Schwarzrock, Andrea Avent, Chad Grayot, Stephan Graves April 21 Italy Blake William, Anthony Gallian, Christian Reviglio April 21 Afghanistan Jennifer Noel, Josh Orolofo, Breann Boustang April 23 Uruguay Mihael Sperry, Iris Figuera, Raymond Gurries April 23 Argentina Amy Beaupre, Valerie Lear, Shawna Hankins April 28 Chile Sandra Vasquez, Russell Elder, Brittany Warner April 28 Thailand Jace OMallan, Chris Gerace, Chanut Sriphyak April 30 China Lia Shim, Emily Kao (Chiung-Tzu), Brian Bausinger April 30 Australia Steven Wear, James Furman, Gabe Scheel May 5

53 Termpaper List DRAFT 2/5/09 4:00 COUNTRYSTUDENT NAMES Comment 1.TurkeySteven, Lauren, Alyssa 3.EgyptAshley, Jenna, Lacy 4.Czech RepublicMatt, Jack, Brett1 spot 5.South KoreaVanessa, Tyler, Kelsey1 spot 6.GermanyBen, ChrisGraduate 2 person group 7.ItalyMeghan, Kevin, Amber 8.JapanJeanette, Marion, Matt 9.FranceBen, Erika, Jason, Lucas1 spot 10.NorwayKatelyn, Drew, Chris 11.PolandJill, Janenne, Katherine 12.IrelandJared, Seamus, Phil

Termpaper List 2/12/09 4:00pm CountryStudent NamesPresentation Ireland Jared Becher, Seamus Murphy, Phil Bowman April 14 Norway Katelyn Zuppan, Drew Haitt,Chris Thompkins April 16 Germany Ben Larson, Chris Hofman April 21 Poland Jill Collins, Janenne Johnson, Katherine Tooker April 21 Czech Republic Matt Smith, Jack Darlington, Lucas Draeger April 23 France Ben David, Erika Ibaibarriaga, Jason Shurtleff, Kelsey Poentis April 23 Italy 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 Japan Jeanette Dory, Marion Dillon, Matt Ruggiero May 5

55 Groups Why do organizations go international? List at least 3 reasons 55

56 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

57 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

58 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

59 Types of "international" organizations Multi-domestic organization Multinational organization Global or transnational organization 59

60 Types of "international" organizations Multi-domestic organization: Any organization that exports to/imports from organizations in other countries with primarily domestic production. 60

61 Types of "international" organizations Multinational organization: An organization with operations in different countries but each is viewed as a relatively separate enterprise. 61

62 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

63 Graphic Representation Headquarters Subsidiary Relationship 63

64 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

65 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

66 International Orientation Ethnocentric Polycentric Geocentric Regiocentric 66

67 International Orientation PCN Parent Country National HCN Host Country National TCN Third Country National 67

68 The Relationship between Level of Internationalization and Firm Performance More international => more performance????? 68

69 The Relationship between Level of Internationalization and Firm Performance There is a strong CURVILINEAR relationship between the degree of internationalization and organizational performance 69

70 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

71 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

72 Reasons for becoming international Profit = Revenue Cost Profit = (Volume*Price) - Cost 72

73 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

74 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

77 2005, Dr. Rafik Beekun, MGRS /28, University of Nevada, Reno, NV 89557 USA

Business Ethics from a Stakeholders Perspective Relationship of the firm to its employees: Hiring, promotion and other employee-related decisions. Fair wages. Respect for employees beliefs. Accountability. Right to privacy. Relationship of employees to the firm: Conflicts of interest. Secrecy. Relationship of the firm to other stakeholders - CSR

79 External Environment Theory Competitive Advantage Competitiveness International Competitiveness 79

80 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

81 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

82 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

83 Porter Diamond 1.Factor Endowments or Conditions Basic Advanced Examples: Nokia, Ericsson 2. Demand Conditions 1. Quality 2. Innovativeness 3. Variety - customization 83

84 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

Porters Diamond

86 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

88 Review Types of international organizations Criterion -- Level of Global Participation International/Multi-Domestic Multinational Transnational/Global Stages of Development to an International O. 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

89 External Environment - Theory 2. Trade Agreements Why? Protectionism? Pro /Con 89

90 Types of Trade Agreements 1.Trade Area Common tariffs among members -- individual tariffs with non-members. NAFTA, ASEAN (Brunei, Indonesia, Malaysia, Philippines, Singapore, Thailand, Vietnam - 420 Mill) 2.Customs Union Common tariffs for non-members. ANDEAN (Bolivia, Ecuador, Peru, Columbia, Venezuela) 3.Common Market Free flow of goods and labor. Mercosur (Brazil, Paraguay, Uruguay, Argentina, Chile) 4.Economic Union Common currency, common overseeing institutions European Union -- 15 Members; Euro; European Parliament; Court of Justice 5.Political Union 90

91 External Environment - Addendum You need to know this about -- 91

92 Level of International Activities International Investment International Trade 92

93 North America United States - which industries most internationally active? Why? US-Canada Free Trade Agreement (1989) NAFTA . Mexico - wage rate; maquiladora industry (1965) 93

94 Europe delayed differentiation acquisitions/alliances EU - 27 members .. EU The Euro 94

95 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

96 European Union - continued The European Commission The Council of Ministers (counterbalance to Commission) The European Parliament The European Court of Justice 96

97 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

98 Eastern Europe Break-up of The Soviet Union (Dec 1991) Russia (glasnost, perestroika) The Ukraine Czech Republic Slovakia Poland 98

99 New Internet Sources Emerging markets/ economies in transition http://ddcn.prowebis.com/ 99

100 Russia Gazprom Europe (25%) Limitations on foreign ownership Centralization of authority Weak infrastructure 100

101 External Environment Latin America Middle (Central) and South Mexico, Costa Rica, El Salvador, Nicaragua Peru, Colombia, Venezuela Brazil Argentina Chile 101

102 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

103 External Environment What about Australia? 103

104 External Environment The Four Tigers South Korea, Hong Kong, Singapore, Taiwan Baby Tigers Thailand, Malaysia, Indonesia 104

105 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

106 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

107 Major economic regions North America Europe Asia 107

108 Economic Superpowers The Triad 1.The United States 2.The EU (dominated by Germany), 3.Japan Dominates foreign direct investment and international trade 108

109 FDI Clusters For the U.S. Latin America For EU Eastern Europe 109

110 FDI Clusters - For Japan The Four Tigers South Korea, Hong Kong, Singapore, Taiwan Baby Tigers Thailand, Malaysia, Indonesia 110

111 Data USJapanGermany Population 301 Mill127.5 Mill82.5 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) 19 111

112 Group Dynamics Why groups? 112

113 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

114 Group Dynamics Advantages Benefits Different viewpoints Differences in expertise Differences in training and experience Cultural differences Value differences 114

115 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

116 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

117 Group Dynamics Group management Leadership Formal Why Expertise and role Norms Must be explicit Agreed upon by all Consequences of norm violations 117

118 External Environment National Culture Harry and Sally in Saudi Arabia Lack of prep -> ????? -> Loss of contract What went wrong? Specific examples! 118

119 What went wrong? Specific examples! Sabbath Flights Language - Taxi Coffee Refusal Rude Food Role of women Negotiation Relationship- building Why did things go wrong? Lack of preparation Cultural knowledge Cross-Cultural sensitivity 119

120 Culture and International Management Relevance Cultural Toughness Cultural Distance Cross-cultural literacy Cost of doing bus in a particular culture 120

121 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

122 Cultural Dimensions All people have common life problems such as . Possible solutions to such problems .. Different people choose different solutions . Culture 122

123 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

124 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

125 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

126 Characteristics of Culture - Values and Norms 1)Social structure 2)Religion 3)Political philosophy 4)Economic philosophy 5)Education 6)Language 126

127 1) Social structure 1.Social stratification 2.Class consciousness 3.Class membership is a function of ? 4. Social mobility 127

128 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

129 Islam 1.3 bill; 22% Sunni and Shiite 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

130 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

131 Characteristics of Culture (Contd) 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

132 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

133 The US Culture???? Describe . 133

134 Culture Relevance CBR Analysis Cultural toughness Cross-cultural literacy Cultural sensitivity Three aspects 1.Basic Assumptions 2.Characteristics 3.Measurement Application of cultural dimensions

135 Measurement of Culture Purpose ???? Geert Hofstede 1970s IBM employees 100,000 across 30+ countries Survey typical work situations Identify systematic differences Factor Analysis Four independent factors Follow up research: Cultures consequences (2001) Culture: Collective programming of the mind 135

136 Dimensions of culture 1.Individualism/Collectivism 2.Power Distance 3.Uncertainty Avoidance 4.Masculinity/Femininity 5.Confucian Dynamism 136

137 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

138 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

139 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

140 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

141 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

142 Sources for International Research Hofstede, Geert (1980): Cultures Consequences Hofstede, Geert (1991): Cultures and Organizations Hofstede, Geert (1984): Cultures 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

143 U.S. Japan Germany Individualism:91 4667 Power distance: 40 5435 Uncertainty avoidance: 46 92 65 Masculinity: 62 95 66 ST/LT: 29 8025 143

144 Applying Hofstedes Dimensions Lawyers per 100,000 population U.S. Germany Great Britain Japan Italy France 144

145 Applying Hofstedes Dimensions Lawyers per 100,000 population (1996) U.S.312 Germany190 Great Britain134 Japan106 Italy81 France49 145

146 Laurents Research-See Adler 9 Western countries, US, 2 Asian countries More than sixty common work situation (yes/no) 1.The main reason for hierarchical structure is so that everybody knows who has authority over whom 2.In order to have efficient work relationships, it is often necessary to bypass hierarchical lines 3.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

147 Laurents 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

148 Laurents 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

149 Laurents 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

150 Fons Trompenaars Riding the Waves of Culture (1998; 2 nd edition) Dimensions (see textbook): 1.UniversalisticParticularistic (Obligation) 2.Neutral-Affective (Emotional Orientation in Relationships) 3.Specific-Diffuse (Involvement in Relationships) 4.Achievement-Ascription (Legitimization of Power) 150

151 Expatriate Assignment Why to use expatriates?Why to use expatriates? Ethnocentric, polycentric, regiocentric, geocentric Culture ShockCulture Shock SelectionSelection KSA Requirements KSA Assessment TrainingTraining Type and rigor of training Failure RatesFailure Rates Reasons 151

152 Four stages cross-cultural adaptation: 1.Honeymoon 2.Irritation and hostility 3.Gradual adjustment 4.Biculturalism 152

153 The Expatriate Assignment Experience of uncertainty Anticipatory and in-country adjustment Expatriate Selection Relevant KSAs? 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

154 The Expatriate Assignment Failure rates Rosalie Tung: Reasons 1.Selection is based on headquarter criteria 2.Lack of training, preparation, orientation 3.Alienation/lack of support from headquarters 4.Inability to adapt to local culture/work enviro 5.Problems with spouse, family 6.Compensation 7.Poor programs for career support/repatriation 154

155 Training Techniques and Rigor of Training Area studies Culture assimilators Language training Sensitivity training Field experiences 155

156 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

157 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

158 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

159 Expatriate Assignment DVD

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 employees 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!

162 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

163 Overall Attractiveness of a Country Trade-off between Costs Benefits Risks 163

164 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

165 Political Risk What is risk? What is economic risk? What is political risk? 165

166 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

167 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

168 Results of Social Unrest: Change in government and/or policy Results of Political Change: Expropriation Indigenization 168

169 Risk Assessment Euromoney Magazines 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

170 Political Risk Data - Example Dun & Bradstreets 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

171 Risk Management Management 1.Integrative 2.Protective/Defensive 171

172 Integrative Approach Become part of the host countrys infrastructure Good relationship with host government Produce locally in-country suppliers Joint ventures Local R&D Effective in long-run 172

173 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

174 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/non- science=1) Ownership (wholly=1/partially owned=2) 174

175 Political Risk Insurance -covers the loss of firms 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

176 A Risky Country: 1.unstable government 2.unstable economy 3.war/revolution/terrorism 4.unfriendly/hostile people 5.unacceptable customs/values/attitudes 176

177 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

179 Progress Report #2 Questions?

180 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

181 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

182 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

183 Strategy The science and art of conducting military campaign on a broad scale. A plan or technique for achieving some end. 183

184 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

185 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

186 Profit If the price the firm can charge for its output is greater than its costs of producing that output. 186

187 Profit To do this, a firm must produce a product that is valued by consumers. 187

188 Value Thus the firm must engage in value creation. 188

189 Value to Customer The price that consumers are willing to pay indicates the value/worth of the product to the consumer. 189

190 Strategy Porter, 1985 Strategy Model (Distinguish from Porters Diamond - National Competitive Advantage) 190

191 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

192 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

193 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

194 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

195 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

196 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

197 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

198 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

199 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

200 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

201 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

202 Strategic Planning Process External Scanning and Internal Scanning (SWOT) Opportunities/Threats Strengths/Weaknesses Vision, Mission, Goals, Objectives, Strategies Strategy Implementation 202

203 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

204 Pressures for Local Responsiveness 1. Differences in consumer tastes and preferences 2. Differences in infrastructure and traditional practices 3. Differences in distribution channels 204

205 Privatization http://www.privatizationbarometer.net/ Register but free Library ask business librarian for help 205

206 The Internal Environment of an International Organization Organizational Culture People Processes Structure 206

207 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

208 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

209 D imensions 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

210 Culture and Org Characteristics StructureCommunicationRewardsDecision- Making Process Results Job Employee Tight Loose Parochial Professional Open Closed Normative Pragmatic 210

211 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

212 Behavior Individual Behavior P = f (A, M) Motivation defined! Homeostasis---applied to psychological needs MotivationTheories --- Applicability across cultures?? 212

213 Behavior MotivationTheories Content Theories Maslows Need Hierarchy Two Factor Theory of Motivation McClelland Achievement Motivation 213

214 Motivation Theories - International Context How applicable are the motivation theories proposed by Maslow and Herzberg in the international context? 214

215 Motivation Theories in the International Context Maslows needs, in particular the upper-level ones, are important at the managerial level Ronen concluded that need clusters are constant across nationalities and that Maslows need hierarchy is confirmed by these clusters. Also, Herzbergs categories are confirmed by the cross-national need clusters. 215

216 Behavior - Motivation Process Theories Equity Theory of Motivation Goal - Setting Expectancy Theory of Motivation valence Effort Performance Outcome expectancy instrumentality 216

217 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

218 Hofstede and Internal Environment UNCPOWMAS/FIND/CST/LT Motivation and Rewards Leadership Decision Making Communication Org. Culture Structure

219 Reinforcement Theory Applicability? Assumptions?? Behavior is a function of its consequences 219

221 Motivation Theories - Summary TheoryMain AttributesInternational Applicability Maslow Need Hierarchy Herzberg Two Factor Theory McCelland Learned Needs Stacy Adams Equity Theory House Goal Setting Vroom Expectancy Reinforcement

222 Motivation Theories - Summary TheoryMain AttributesInternational Applicability Maslow - Need Hierarchy Five needsWith modification order of needs Herzberg Two Factor Theory Hygiene factors work context and Motivators work content With modification best in individualistic environment McCelland Learned Needs Three needsWith modification Collectivistic vs individualistic Stacy Adams Equity Theory Social comparisonsWith modification does not work in collectivistic culture House Goal SettingGoal commitment, difficulty, MBO With modification best in ST environment Vroom ExpectancyEffort, performance, outcome, expectancies, instrumentalities, valence Applicable all factors are explicit and can be determined based on culture ReinforcementBehavior is a function of its consequences Applicable very BASIC model

223 The Meaning of Work Tied to economic necessity What else? 223

224 The Meaning of Work Six functions of work: 1.needed income, 2.interesting & satisfying, 3.contact with others, 4.serve society, 5.keeps one occupied, 6.status and prestige These may be satisfied through other aspects of life 224

225 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

226 Study results Britain (lowest), Germany, Netherlands, Belgium, USA, Israel, Japan 226

227 Work Centrality 8.0 7.75 7.5 7.25 7.0 6.75 6.5 6.25 6.0 Japan (former) Yugoslavia Israel USA Belgium Netherlands Germany Britain 7.78 7.30 7.10 6.94 6.81 6.69 6.67 6.36 N = 3144 N = 521 N = 893 N = 996 N = 446 N = 976 N = 1276 N = 409 Work is more important and more central in life Mean work centrality score 227

228 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

229 Leadership Which Hofstede dimension? Types of leadership styles: autocratic, participative, group authoritarian, democratic, laissez-faire Theory X, Theory Y 229

230 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

231 Japanese Theory Y --- employees learn from mistakes Germans Theory X --- autocratic, stop poor performance asap 231

232 Culturally-Contingent Beliefs Regarding Effective Leadership Styles CountryN CharismaTeamSelf-Part.HumaneAuton. Protective Austria1696.035.743.076.004.934.47 Brazil2646.016.17*3.506.06*4.842.27 China1605.575.573.805.055.184.07 Denmark 3276.015.702.825.804.233.79 England1686.015.713.045.574.903.92 India2315.855.723.784.995.26*3.85 Japan1975.495.563.615.084.683.67 Mexico3275.665.753.86*4.644.713.86 Russia3015.665.633.694.674.084.63* USA3996.12*5.803.165.935.213.75 Scale 1 to 7 in order of how important those behaviors are considered for effective leadership (7 = highest) 232

233 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 risk- taking 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

234 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

235 G roup 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

236 Benefits associated with cultural diversity: # of alternatives generated; quality of alternatives; creativity/divergence; no groupthink 236

237 Process Losses: potential for miscommunication increases; cohesiveness decreases; negative attitudes (dislike, mistrust); perceptual problems (stereotyping); stress 237

238 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

239 Manage culturally diverse teams through: task-related selection recognition of differences super-ordinate goals equal power mutual respect feedback 239

240 Communication: Macro - Level Communication Flows upward/downward formal/informal 240

241 Communication: Micro - Level Micro/Interpersonal Level Definition: Transmission of meaning through the use of common symbols Sender -> Message -> Receive ( Encoding)(Medium) (Decoding) 241

242 Communication: Micro - Level Interpersonal communication Process encoding message decoding 242

243 Communication: Micro - Level Communication barriers language perception - stereotyping culture nonverbal communication projected similarity parochialism 243

244 Micro -Level Explicit vs implicit communication High vs low context High vs low contact 244

245 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?

246 The Communication Process

247 Cultural Noise BehaviorAttribution American: How long will it take to finish this report? American: I asked him to participate. Greek: He is the boss. Why doesnt he tell me? Greek: I dont know. How long should it take? American: He refuses to take responsibility. Greek: I asked for an order.

248 Trust in Communication Business transactions based on long-standing vs. arms length relationships High propensity to trust: Nordic countries, China, Canada, US, Britain Low propensity to trust: Brazil, Turkey, Romania, Slovenia, Latvia

249 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

250 Cultural Variables in Communication Attitudes Stereotyping Social organization e.g., United Auto Workers (UAW) Thought patterns The meaning of double lines

251 Cultural Variables in Communication Roles Language Come out of the grave with Pepsi When yes doesnt mean yes

252 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)

253 Context

254 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

255 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

256 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

257 Micro -Level Non-verbal communication Body Language Emblems Illustrators Affect Display Regulators/Adaptors Space (proxemics) Touch Voice Dermal Code 257

258 Decision-Making Quality of decisions Organizational Effectiveness Differences across Cultures? 258

259 DM Process and Culture 1.Problem Recognition 2.Information Search 3.Alternative Generation 4.Choice 5.Implementation 259

260 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

261 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

262 The Negotiation Process

263 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

264 Stage Two: Relationship Building Getting to know ones contacts and building mutual trust Nontask sounding (nemawashi) Use an intermediary I have come as a mediator

265 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

266 Stage Four: Persuasion Dirty tricks are in the eye of the beholder False information Ambiguous authority Uncomfortable rooms Rudeness, threats Calculated delays

267 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

268 Comparison of Negotiation Styles JapaneseNorth AmericanLatin American Hide emotionsDeal impersonally Emotionally passionate Subtle power plays Litigation, not conciliation Great power plays Step-by-step approach Methodical organization Impulsive, spontaneous Group good is aimProfit is aim Group/individ-ual good is aim

269 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

270 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

271 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

272 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

273 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

274 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

275 Cross-cultural Negotiation Variables

276 Comparative Management in Focus: Negotiating with the Chinese

277 Comparative Management in Focus: Negotiating with the Chinese Two problems Chinese desire for detail Apparent insincerity Saving Face Lien Mien-tzu

278 Comparative Management in Focus: Negotiating with the Chinese Importance of harmony Guanxi Guanxihu networks Two stages of Chinese negotiation Technical Commercial

279 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

280 Managing Conflict Resolution Instrumental oriented Expressive oriented

281 Low-context, High-context Sources of Conflict Low-contextHigh-context Why Analytic, linear logicSynthetic, spiral logic When Individualistic oriented violations Group oriented violations What Revealment, confrontationalConcealment, non- confrontational How Explicit, open, directImplicit, ambiguous, indirect

282 The Influence of Culture on Decision Making Individualism vs. collectivism Objective vs. subjective approach Risk tolerance Comfort with unfamiliar solutions

283 Approaches to Decision Making Utilitarianism vs. moral idealism Autocratic vs. participative leadership Speed of decision making

284 Summary of Cultural Variables in Decision Making

285 Comparative Management in Focus: Decision-making in Japan Wa Amae Shinyo Ringi

286 Comparative Management in Focus: Decision-making in Japan

287 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

289 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

294 Strategy Defined

295 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

296 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

297 ISA Analysis Fall 2008 1.The Global Update report provides a useful overview of current political and economic issues. a)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 b)Vietnam - Summarize the challenges and the predictions for Vietnams 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

298 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

299 ISA Analysis Fall 2008 Table 1: Compare African Countries Table 2: Compare Asian Countries 299

300 ISA Analysis Fall 2008 2. Venezuela, Colombia, and Bolivia. Summarize current activities related to Americas 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

301 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

302 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).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

303 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

304 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

305 ISA Report Catholicism in Latin America Table Turkey EU Opposition Kurds Human Rights Economic and political requirements Religion Islam Culture and location Cyprus 305

306 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

1 International Management MGT 480/680 Spring 2009 Dr. Yvonne Stedham 1.

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