Paradoxes of Culture and Globalization Chapter 10

Paradoxes of Culture and GlobalizationChapter 10 Brynn Cauffman, Spencer Cox, Taryn Crews, Michael Grizzle, Hannah Ives, Tina Roren, YeseniaSaldivar

ICI Corporation 1996 case study at London Business School Not doing well in Europe Moving from geographic-centered structure to product-based structure

Old System Geographic managers prime element Management within each nation operated independently Compensation based on sales within respective countries

New System Encouraged cooperation between national management Compensation based on total sales in Europe and adjacent nations Language was an issue Adaptation to new system was essential

This Chapter Paradoxes in area of business strategy Paradoxes in business functions Paradoxes within international human resource management (IHRM)

Is there an ideal mode for entering the global marketplace? No mode of entry is idea Different strategies recommended for different levels of market development

Modes of Entry • Exporting • Little risk, high cost, low control • Licensing • Reasonable cost and risk, low profit and control • Black & Decker • Strategic alliances • Shared cost, resources, and risk, problems integrating two cultures

Modes of Entry • Acquisitions • Quick access to market, high costs, complex, issues merging companies • Greenfield venture (wholly owned subsidiary) • Above-average returns and maximum control, complex, high-risk, costly, time-consuming

Globalizing • Early stages of market development • Exporting, licensing, strategic alliances • Later stages of market development • Acquisitions, greenfield ventures • Regionalize then globalize • Requires additional time, effort, and resources

Globalization from Inception Born global Rare Rely almost exclusively on the Internet

Paradox 10.2 Is there an ideal structure for the global firm? • Corporation’s structure should always be consistent with its strategy • Multidomestic strategy: tends to institute geographic-centered structure • Problems of competition among geographic national managers • Products tend to be geared to the taste of the region

Paradox 10.2 Transnational strategy: allows a sensitive balancing of the multidomestic and global strategies Requires a matrix organizational structure No choice but to pursue a transnational strategy & employ the matrix structure if a firm wants to continue to grow (Caterpillar) No ideal organizational structure for the global firm

Paradox 10.3 Are Organizations worldwide becoming more similar?

Assumptions Ideas tend to spread Number of choices about strategy and structure are limited Increased interactions throughout cultures

Reality • Inconsistent research • Organizational similarities • Research outdated

Paradox 10.4 Is China a very large or a very small market?

EMBA Program Between Smith School of Business, University Maryland at College park, and University for International Business and Economics in Beijing, China

Potential Market Market can be very large or very small depending on the product or service being offered 200,000 managers Limitation occurred because of high costs

Issues Companies Face When Going Global • Personnel and IHRM issues that require attention • Developing criteria for success • Selecting candidates • Integrating organizational cultures • Gaining language fluency

Example: Wal-Mart • Regionalized successful, focusing on Mexico and Canada • Withdrawn from Korea and Germany • Focus on trading with China • Major issues to confront

Paradox 10.5 • Can accounting and financial systems of companies and financial institutions be standardized throughout the world? • Companies only face this issue when operating domestically • Geographic regions tend to use different operating procedures, reporting requirements, and etc. • It is possible to create a standardized accounting systems and financial system (UPS)

Paradox 10.5 • A problem that this paradox presents is that standardizing in major stock markets throughout the world • Country Laws, Government procedures, etc • The movement between global standardization is occurring but it is slow • Experts believe that this movement will accelerate in the near future

Paradox 10.6 • Should global advertising and marketing be tailored to each national and ethnic culture? • Marketing of a particular image with global customers • WPP, the worlds largest advertising firm, has recently moved away from global standardization • The move is cost effective in the short run • Coca-Cola is now catering to each national culture with their advertisements

Paradox 10.6 • MTV entered the global market place by standardizing its product globally • Channel V, MTV’s main competitor, is the inspiration for this • Cost are considered, especially when each brand is being catered to each national culture • Companies are adopting a compromise strategy

Paradox 10.7 Is it possible to create and operate an airplane-based metropolis for efficient global logistics and transportation? • Aerotropolis= an airplane-based metropolitan area or city. • John Kasarda • Aerotropoli already exist. • Global gross national product.

Paradox 10.7 • Alternate shipment • Resistance to the growth of aerotropoli. • Environmentally detrimental • Global logistics

Paradox 10.8 How can IHRM be both central and peripheral when going global? HRM is essential to a company. Staff activities subordinate to line/operation activities.

Paradox 10.8 IHRM central to going global. Problems manifest themselves. Treated as a peripheral activity.

Paradox 10.9 How should the conflict between internal pay equity and the forces of the external labor market be resolved? • The “Iron Rice Bowl” • Moving to a Western-adapted model. • Internal pay equity and external labor market. • EMBA Managers • Performance-oriented compensation system example.

Paradox 10.9 No simple answer. Education and communication programs.

Paradox 10.10 Should multinational corporations impose their values when going global? • The Kyocera Corporation is one of Japan’s most successful multinational companies. • The Kyocera Experiment • Shinto Ritual - has the power to accept foreign culture and transform it into something Japanese.

Paradox 10.10 • What if a multinational corporation imposes cultural values that are not so compatible with those of employees in the host nation? • U.S. companies offered higher compensation packages and better fringe benefits than their Taiwanese competitors did. • International Human Resource Management (IHRM) – in place to minimize the inevitable conflicts and strains that will occur when home-culture and host-culture values require reconciliation.

Paradox 10.11 Which works best in a global firm, individual-based or group-based reward systems? • Over many decades, seemingly innumerable studies have addressed this issue, but until recently they focused primarily on domestic-only firms.

Paradox 10.11 Victor Vroom (1961) – summarized decades of research comparing individual-based and group-based reward systems among factory workers in the United States. The general conclusion is that, at least within the United States, individual-based reward systems lead to significantly higher productivity than do group-based systems

Paradox 10.11 The popularity of pay-for-performance systems, among both managers and employees, reflects the logic of this finding. Under some circumstances it seems preferable to institute a compensation package that is primarily individually focused, while under other conditions a group-focused package encouraging cooperation works best.

Paradox 10.11 When a company globalizes, it appears advisable to examine the prevailing cultural values and to at least attempt to tailor the compensation system to it. There will rarely if ever be a perfect matching, but at least some problems and issues can be avoided by such tailoring.

Paradox 10.12 Is the role of IHRM different from that of a domestic-only HRM?

HRM and IHRM “Human Resource Management is a general term used to describe a variety of functions aimed at effectively managing an organization’s employees or “human resources” “International Human Resource Management is the procurement, allocation, utilization, and motivation of human resources in the international context”

Similarities • Enhancing competitive advantage • Continuous innovation • Harnessing diversity • Developing leadership capability • Managing the employees • Basic functions like hiring and career development

Differences • HRM: national level • IHRM: international level • IHRM more complex: • Larger workforce • Diversity: religion, culture, politics, ethics • Geographical separation • Increased risk of terrorism and kidnapping • Global corporate culture • Leadership harder • Increased number of stakeholders • Global laws (each country is different) • Different HR policies and practices • More involvement employees life (expatriates etc.) • Recruitment harder; finding the right person for a global firm

Paradox 10.13 Are HRM requirements similar throughout the globalizing world?

Germany Asking people to participate in a survey may be against local labor laws Salary increases not mandated but often included in collective agreements No minimum wage are required by law Firms of more than 2000 employees must gain the consent of work elected councils before, for example, set working hours or change the price of lunches in the cafeteria

Singapore An employee may not be required to work more than six consecutive hours without a break, more than eight hours a day or more than 44 hours a week.

Norway Fathers are required by law to take 8 weeks of “maternity” leave within a certain amount of time after the child is born Mothers get paid maternity leave Minimum wage required by law

Europe Denmark: Extensive worker benefits France: Large and complex body of laws and regulations regarding employment

Paradoxes of Culture and Globalization Chapter 10