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Managing in a Global Environment
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Dimensions of CultureCulture:- the collective programming of the mindCulture shock- a person is exposed to a new culture with different norms, customs, expectations, has difficulty in adjustingDimensions
Power DistanceIndividualismUncertainty avoidanceMasculinity/femininityLong-term/short term orientationwww.geert-hofstede.com
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Hoffstede Dimensions of CulturePower distance – the extent to which individuals expect a hierarchical structure that emphasizes status differences between subordinates and superiorsIndividualism – the degree to which a society values personal goals, autonomy, and privacy over group loyalty, norms, cohesiveness, and socialization.Uncertainty avoidance – the extent to which a society places value on reducing risk and instabilityMasculinity/femininity – the degree to which a society views assertive or masculine behavior as importantLong/short term orientation – the extent to which values are oriented toward the future (saving) vs. past or present (tradition, social obligation)
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Why does this car Cost $20,000?
6000- assembly3000- sophisticated parts- engine etc800- small parts500- Advertising1000- data processing8700- legal, banking, insurance fees
6000- South Korea
3000- Japan
800- Taiwan Singapore and Japan
500- Great Britain
1000- Ireland
8700- United States.
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Change in world Business
Global Shift: The effects of changes in the competitive landscape prompted by worldwide competition.
What are the ways in which world output and world trade have changed?
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How International Business has changedLowered trade barriersGeneral Agreement on Tariffs and Trade (GATT)World Trade Organization (WTO)
Integrated Economic MarketsThe European Union (EU)
The North American Free Trade Act (NAFTA)
Central American-Dominican Republic Free Trade Agreement (CAFTA)
The Association of Southeast Asian Nations (ASEAN)
The Asia Pacific Economic Cooperation (APEC)
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So what is changing?
1. Global consumer preferencesTastes and preferences are converging
Presence of mass media, exposure to goods from various countries, and standardized products
2. Globalized productionCost efficiency – Outsourcing,
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So what is changing?(cont.)
3. Technological innovations Advances in communications, information
processing, and transportation technology
Fiber optics, wireless technology, the Internet and World Wide Web, and satellite technology
4. Management across cultures Adaptation to business strategies, structures,
operational policies, and human resource programs
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Changing Environments
1. Business2. Legal
Common lawCivil lawMuslim Law
3. Cultural
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Foreign expansion- Questions firms need to ask.
1. WhereLarge domestic marketWealth of customers high likely to growAvailable resourcesFirms offerings are suitable to the market( coals to New Castle)
A positive business environment exists
2. When?1. Timing is key2. First mover advantage3. Pioneering costs
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Questions firms need to ask.How much?
Lowest if the firm simply decides to export its products to the foreign locationHighest if the firm decides to
have a wholly owned subsidiary in the foreign country
4. Which way?
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Modes of Entry
Exporting – entering new markets by sending products to other countries, still maintaining production facilities within the domestic borders
Turnkey projects – specialized type of exporting, where the firm handles the startup of the company and a local client is then handed the key
Licensing – entering new markets by transferring the rights to produce and sell products overseas to a foreign firm
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Modes of Entry
Franchising – entering new markets in which the franchise pays a fee for using the brand name and agrees to follow the standards and rules
Joint venture – means of entering new markets where two or more independent firms agree to establish a separate firm
Strategic alliance – cooperative arrangements between competitors or potential competitors from different countries
Wholly owned subsidiary – entering new markets in which a firm fully owns its subsidiary in foreign countries
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Examples of Strategic AlliancesGeneral Electric – Snecma of FranceToshiba – IBMMitsui – General ElectricGM – DaewooTexas Instrument – Compel CommunicationsCanon – Hewlett-PackardMitsubishi – Caterpillar
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Basic Approaches to Managing an International Subsidiary
Ethnocentric Approach- top management and key positions filled with people from the home country (expatriates)Polycentric Approach- staffed by nationals of the host countryGeocentric Approach- staffed by qualified people from other countriesThird Country Nationals- citizens from other countries.Can you give examples of these.
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Why International Assignments End in Failure
Career blockage – the feeling that working abroad has gotten their career sidetracked, while people back home are climbing the corporate ladder
Culture shock – the inability to adjust to a different cultural environment
Lack of pre-departure cross-cultural training – little if any is offered to expatriates before going to a different country.
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Why International Assignments End in Failure( Contd.)
Overemphasis on technical qualifications – the expatriate may lack cultural adaptability, even though they have the technical skills
Getting rid of a troublesome employee – provides the ability to solve interpersonal conflict, but at a huge expense to the company
Family problems – inability or unwillingness of the expatriate’s family to adapt to life in another country
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Key HR Management Factors for Global Firms
SelectionSelection criterion should include cultural
sensitivity
TrainingLength of assignment determines depth of
trainingCross-cultural training is critical to success
Career DevelopmentInternational assignments should be part of
career advancement plan
Compensation and BenefitsIncentives and quality-of-life concerns
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Cross-cultural Training
Impression Management – High intensity. Assessment center, field experiences, simulations, sensitivity trainingAffective Approach- Language training, role-playing, critical incidents, cases, stress-reduction training, moderate language trainingInformation-Giving Approach- area briefing, cultural briefing, films/ books/ interpreters, survival-level language
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Ethics and Social Responsibility
Globalization greatly increases the possibility that managers will face an ethical dilemma.
Different cultures have different notions of right and wrong.
U.S. Foreign Corrupt Practice Act (1977).
Many firms and industry groups have developed their own codes of conduct for foreign operations.