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Managing Organizations in a Global Economy BADM 728. Spring 2010 Dr. Yvonne Stedham. Managing Organizations in a Global Economy. BADM 720? First, second, third year MBA? Other? Undergraduate degree from UNR? Business? International business background?

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managing organizations in a global economy

Managing Organizations in a Global Economy

BADM 720?

First, second, third year MBA? Other?

Undergraduate degree from UNR? Business?

International business background?

Travelled to other countries? USAC?

Lived in country other than U.S.?

Speak other languages?

2

2

managing organizations in a global economy1

Managing Organizations in a Global Economy

Why this course?

What do you expect to learn?

3

3

today
today

Purpose of this course

What do you know?

Introduction

Course

Content

Format - Syllabus

Personal

Instructor

Students – Background Sheet

4

4

purpose
Purpose

Management concepts and skills needed for

businesses to succeed in an

international environment

5

5

purpose1
Purpose

External Environment

PESTEL – Political, Economic, Social, Technological, Environmental, Legal

Globalization, Democracy, Free Markets, Culture, and the Bottom Line

6

6

website location
Website Location

http://www.business.unr.edu/faculty/stedham/

7

7

current developments
Current Developments

National Public Radio (NPR)

FM 88.7 - KUNR

FM 90.5 – Cap Radio

The Economist

https://www.economistacademic.com/subscribe_single.cfm - Student Subscription 12 weeks $19.95

Faculty ID: 4430

Wall Street Journal

Sign-up sheet

8

8

for february 1
For February 1

ISA Global Update – Web/Handout with Questions

Answers due February 1, 2010

9

9

student group
Student Group

International Business Student Chapter (IBSC)

President: Marc Bristol

Email: marcdbristol@hotmail.com

Cell phone: 530 613 2377

Meeting dates: Every two weeks on Tuesday from noon to 12:50. In AB 402.February 2 – Brazil; February 16 - Microsoft

NEWTRAC

Nevada World Trade Council

www.newtrac.net

February 11th event

10

10

what do you know
What do you know?

List the five largest countries based on population.

What is the world population?

What is “GDP”?

What is the GDP/capita in the U.S.? What is a typical GDP growth rate for the U.S.?

Which three countries have the highest GDP/capita?

Which countries are culturally most similar to the U.S, which ones most dissimilar?

How many countries are there in the world?

11

11

what do you know1
What do you know?

1. Five largest countries

China 1.3 Bill

India 1.16 Bill

U.S. 307 Mill

Indonesia 240 Mill

Brazil 198 Mill

Pakistan 176 Mill

Bangladesh 156

Nigeria 149 Mill

Russia 140 Mill Mexico 111 Mill #11

Japan 127.5Mill Germany 82 Mill #16

2. World Population

6.6 Bill

12

12

what do you know2
What do you know?

3. GDP/capita

GDP/capita in U.S.: ~ $46,000

Growth rate in U.S.: .4%

Typical growth rate ~ 3%

GDP/sector: Agriculture 1.2%; Industry 19.2%; Service 79.6%

Mexico: Population 111.2 Mill; GDP/capita: $14,300

Current growth rate: 1.3%

GDP/sector: Agriculture 3.8%;Industry 35.2%; Service 61%

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13

what do you know3
What do you know?

4. Which 5 countries have the highest GDP/capita

Luxembourg $102,284

Norway $ 79, 154

Qatar $ 70,754

Iceland $ 62, 976

Ireland $ 58,883

Denmark $ 57,035

Switzerland $ 56,711

UK $ 47,300

US $ 46, 780

Netherlands $ 45,429

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14

what do you know4
What do you know?

5. Which countries are culturally most similar to the U.S.

Anglo Countries

Canada

Australia

New Zealand

U.K.

Ireland

South Africa

15

15

what do you know5
What do you know?

6. Number of countries in the world

Total number of countries: 192 -194

Vatican, and Taiwan

United Nations 192

16

16

data sources
Data Sources

www.cia.gov

www.transparency.org

www.heritage.org

18

18

economic freedom
Economic Freedom

Index of Economic Freedom 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.

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19

international government materials
International Government Materials

International financial statistics yearbook

http://innopac.library.unr.edu/record=b1618229~S0

Trade policy review

http://innopac.library.unr.edu/search/

Patrick Ragains

Business and Government Information Librarian

ragains@unr.edu

managing organizations in a global economy2
Managing Organizations in a Global Economy

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

21

21

personal introductions
Personal Introductions

Instructor

Students (Background Sheets)

Introduction

Current position/company

International experience – Travel, work, study abroad, class/education

Speak other language

For CBRA – interested in which country

23

23

managing organizations in a global economy3
Managing Organizations in a Global Economy

Introduction

Course

Content – Culture, Globalization, Cost-Benefits-Risk

Format - Syllabus

Personal

Framework of an international organization

Globalization

Reasons for going international

Types of international organizations

24

24

cbra project presentation dates 2 22 10 written papers are due during class the week before
CBRA Project – Presentation Dates 2/22/10Written Papers are due during class the week before!
framework organizations and organizational effectiveness
Framework Organizations and Organizational Effectiveness

What is an organization?

Why do organizations exist?

When is an organization effective?

Efficiency vs effectiveness?

26

26

organizations and organizational effectiveness
Organizations and Organizational Effectiveness

What is an organization? Why do organizations exist?

Organizations = People

Mission, goals, objectives

When is an organization effective?

Distinguish between efficiency

and effectiveness.

Distinguish effectiveness measures

for the short, intermediate,

and long run.

27

27

measurement of organizational effectiveness
Measurement of organizational effectiveness

Long run?

Intermediate run?

Short run?

A contingency approach to management

28

28

measurement of organizational effectiveness1
Measurement of organizational effectiveness

Long run: Survival

Intermediate run: Adaptation, Responsiveness

Short run: Productivity, Efficiency

A contingency approach to management

(opposed to “administrative theory” of management)

It is management’s task to create

the best possible fit between

the external and internal environments

of the organization and must ensure

internal consistency between

the organization’s elements.

29

29

globalization
Globalization

International business environment

Global Economy

Thomas Friedman

Why change?

Characteristics of the global system

Previous system?

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32

globalization1
Globalization

Thomas Friedman (NY Times)

NY Times January 31st – report on World Economic Forum

The Lexus and the Olive Tree

The World is Flat

Hot, Flat, and Crowded

The World Is Flat - understand globalization in a new way. Hot, Flat, and

Crowded explains how America can lead the green revolution in the 21st

century.

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globalization2
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)

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34

characteristics of the new system
Characteristics of the new system

Separation and independence

VS

Integration and interdependence

35

35

characteristics of the new system1
Characteristics of the new system

Free market capitalism

Homogenization of culture – Americanization

Defining technologies: computerization, miniaturization, digitization, satellite communications, fiber optics, the Internet

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36

characteristics of the new system2
Characteristics of the new system

Defining measurement:

Weight (missles)

VS

Speed .. Of travel, innovation, communication, commerce

37

37

characteristics of the new system3
Characteristics of the new system

Defining economists:

Karl Marx and Keynes

VS

Schumpeter

Capitalism and Creative Destruction

38

38

characteristics of the new system4
Characteristics of the new system

Defining political views:

Friends and Enemies

VS

Competitors

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39

international institutions
International Institutions

Don’t confuse

APEC

OPEC

40

40

apec a sia p acific e conomic c ooperation
APECAsia Pacific Economic Cooperation

Premier forum for facilitating

economic growth, cooperation, trade and investment in the Asia-Pacific region.

It is one of the world's most important regional groupings,

encompassing 21 member economies

who collectively represent over 2.6 billion people and

account for approximately half of global GDP and trade.

The primary focus of APEC is

promoting trade and investment liberalization and

business facilitation in the Asia-Pacific region.

41

41

apec members
APEC Members

AustraliaBruneiCanadaChilePeople's Republic of ChinaHong Kong, ChinaIndonesiaJapanRepublic of KoreaMalaysiaMexico

New ZealandPapua New GuineaPeruPhilippinesRussiaSingaporeChinese TaipeiThailandUnited StatesVietnam

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42

apec business summit
APEC Business Summit

Invitation-only, annual meeting that provides unparalleled opportunities for strategic engagement and networking with prominent business leaders, international opinion setters, policy makers and leaders of Asia-Pacific Economic Cooperation (APEC) Member Economies.

The Business Summit, formerly the CEO Summit, has been held each year since 1996. It was instituted to enable business leaders to interact with APEC leaders.

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43

opec o rganization of p etroleum e xporting c ountries
OPECOrganization of Petroleum Exporting Countries

Twelve members

Algeria, Ecuador, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, UAE, Venezuela (Hugo Chavez)

OPEC’s Mission is

to coordinate & unify the petroleum policies of member countries &

ensure the stabilization of oil prices

in order to secure an efficient, economic & regular supply of petroleum to consumers,

a steady income to producers &

a fair return on capital to those investing in the petroleum industry.

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44

world economic forum davos 1 27 1 31 2010
World Economic Forum Davos 1/27-1/31/2010

https://www.weforum.org/

Committed to improving the state of the world

Participation Annual Meeting - invitation only - limited to the criteria and quota of each stakeholder group.

Of the 2500 participants, more than half from the business sector.

Over 900 chief executives - Basic Industries, Consumer, Financial Institutions, Information Technology, Electronics & Telecommunications, Mobility, Energy, Health, Media, and Professional Services.

Co-Chairs Josef Ackermann, Chairman of the Management Board and the Group Executive Committee, Deutsche Bank, Germany; Member of the Foundation Board of the World Economic Forum and Melinda French Gates, Co-Chair, Bill & Melinda Gates Foundation, USA

Azim H. Premji, Chairman, Wipro, IndiaPeter Sands, Group Chief Executive, Standard Chartered, United KingdomEric Schmidt, Chairman of the Executive Committee and Chief Executive Officer, Google, USARonald A. Williams, Chairman and Chief Executive Officer, Aetna, USAPatricia A. Woertz, Chairman, President and Chief Executive Officer, Archer Daniels Midland (ADM), USA

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45

world economic forum
World Economic Forum

Mission

Independent, international Swiss not-for-profit organization

Motto ‘entrepreneurship in the global public interest’

Economic progress without social development is not sustainable, while social development without economic progress is not feasible.

To be the foremost organization

builds and energizes leading global communities;

the creative force shaping global, regional and industry strategies;

the catalyst of choice for its communities when undertaking global initiatives

to improve the state the world.

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46

world economic forum1
World Economic Forum

Values

The world’s key challenges cannot be met by governments, business or civil society alone

In a world characterized by complexity, fragility and ever greater synchronicity, strategic insights cannot be passively acquired. They are best developed through continuous interaction with peers and with the most knowledgeable people in the field.

Strategies

To carry out its mission,

the World Economic Forum has developed

an integrated value chain

by involving world leaders in communities,

inspiring them with strategic insights and

enabling them through initiatives.

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47

world economic forum2
World Economic Forum

Members - foremost 1,000 global enterprises.

Characteristics of Members include:· Their rank among the top companies within their industry and/or country· The global dimension of their activities· A leading role in shaping the future of their industry and/or region

Every year, more than 100 of the world’s most influential companies partner with the World Economic Forum to tackle the most complex challenges facing humanity.Recognizing that each company’s business needs are unique, the Forum offers the possibility for partners to engage in a specific community, project or event.

48

48

g7 g8 and g20
G7 (G8) and G20

G20 (Group of 20)

Purpose (1999): Bring together systemically important industrialized and developing economies to discuss key issues in the global economy. Website: http://www.g20.org

Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan,Mexico, Russia, Saudi Arabia, South Africa, South Korea, Turkey, United Kingdom, United States, European Union (map)

G7 (G8) Countries

US, Canada, Germany, France, Italy, UK, Japan, (Russia)

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49

groups
Groups

Why do businesses choose to operate internationally?

List at least 3 reasons

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51

r easons for becoming international
Reasons for becoming international

A desire for continued growth.

Domestic market saturation

The potential to now exploit a new technological advantage

Preferable suppliers (quality, cost)

Labor market (supply, quality, cost)

Government involvement/restrictions

Reducing distance to customers (cost)

Tariff barriers

Increased foreign competition in home country

Reduce general business risk by diversifying into other countries

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52

reasons for becoming international
Reasons for becoming international

Profit = Revenue – Cost

Profit = (Volume*Price) - Cost

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53

reasons for becoming international1
Reasons for becoming international

Profit = Revenue – Cost = (Volume*Price) – Cost

A desire for continued growth. VOLUME

Domestic market saturation VOLUME

The potential to now exploit a new technological advantage V

Preferable suppliers (quality, cost) PRICE, COST

Labor market (supply, quality, cost) PRICE, COST

Government involvement/restrictions COST

Reducing distance to customers COST

Tariff barriers COST

Increased foreign competition in home country VOLUME, PRICE

Reduce general business risk by diversifying into other countries

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54

global economy

Macro Level

Global Economy

Macro-Micro Interface

Capitalism, Free Market Systems

Creative Destruction

Micro level

Businesses decide

to internationalize

need to increase and maintain profit

Global Economy
cbr analysis
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

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56

the multiple responsibilities of business
The Multiple Responsibilities of Business

Economic

Responsibility

Legal

Responsibility

Social

Responsibility

the social responsibility of mncs
The Social Responsibility of MNCs
  • Corporate social responsibility (CSR)

MNCs should anticipate and solve social needs

Profit is MNCs’ only goal

business ethics from a stakeholders perspective employees
Business Ethics from a Stakeholders’ Perspective – Employees
  • Relationship of the firm to its employees:
    • Hiring, promotion and other employee-related decisions.
    • Fair wages.
    • Respect for employee’s beliefs.
    • Accountability.
    • Right to privacy.
  • Relationship of employees to the firm:
    • Conflicts of interest.
    • Secrecy.
relationship of the firm to other stakeholders csr
Relationship of the firm to Other Stakeholders - CSR
  • Owners
    • Stockholders
    • Financial Institutions
  • Non-owners
    • Customers/Consumers
    • Suppliers
    • Competitors
    • Unions
    • Governments
    • Other
opening profile the enron case
Opening Profile: The Enron Case
  • Illustrates how questionable actions by a company can be harmful to both stakeholders and the company itself—even if the actions are profitable in the short-term
  • Enron is a symbol of an “era of management practice” (James Post), but is it the end of the era?
global consensus or regional variation
Global Consensus or Regional Variation?
  • Global corporate culture
  • Example of regional variation: The US focuses on following basic business obligations, Europe focuses on serving broader social aims
three approaches to international morality and ethics
Three Approaches to International Morality and Ethics
  • Moral universalism
  • Ethnocentrism
  • Ethical relativism
what is the right decision
What is the “right” decision?
  • Consult home/host country laws
  • Consult International Codes of Conduct for MNCs
  • Consult the company’s code of conduct
what is the right decision1
What is the “right” decision?
  • Consult your superiors
  • Fall back on your own moral code of ethics
an international organization
An International Organization

Operates in multiple environments,

home country and one or more host countries

Has foreign sales, and

A nationality mix of managers, employees, and owners.

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68

types of international firms
Types of "international" firms

Multi-domestic

Multinational

Global or Transnational

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69

types of international firms1
Types of "international" firms

Multi-domestic

Any organization that exports to/imports from organizations in other countries with primarily domestic production.

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70

types of international firms2
Types of "international" firms

Multinational

An organization with operations in different countries but each is viewed as a relatively separate enterprise.

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types of international firms3
Types of "international" firms

Global or transnational

An enterprise structured so that national boundaries become blurred. The best people are hired irrespective of national origin.

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transnational global
Transnational/Global

Examples – operate in more that 100 countries

  • ABB
  • Honda
  • BP
  • Siemens
  • Tata
slide74
Graphic Representation

Headquarters – Subsidiary Relationship

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74

stages model of internationalization
Stages Model of Internationalization

Outward looking perspective - activities/issues related to the other countries (e.g., exporting)

Inward looking perspective – activities/issues related to own country (e.g., importing)

Descriptive

Reflects the commonly observed pattern of increased commitment to international business

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four stages of internationalization
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

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international orientation
International Orientation

Ethnocentric

Polycentric

Geocentric

Regiocentric

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77

international orientation1
International Orientation

PCN – Parent Country National

HCN – Host Country National

TCN – Third Country National

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t he relationship between level of internationalization and firm performance
The Relationship between Level of Internationalization and Firm Performance

More international => more performance?????

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the relationship between level of internationalization and firm performance
The Relationship between Level of Internationalization and Firm Performance

There is a strong CURVILINEAR relationship between the degree of internationalization and organizational performance

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80

the relationship between level of internationalization and firm performance1
The Relationship between Level of Internationalization and Firm Performance

Variables and Measures

1. Degree of internationalization

"sales generated by foreign affiliates"

2. MNE (multinational enterprise) performance:

"profit to sales" or "profit to assets".

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the relationship between level of internationalization and firm performance2
The Relationship between Level of Internationalization and Firm Performance

Performance is at a max.

at a level of internationalization of

60 to 80% and then decreases with

continuing internationalization

Examples – Coca Cola; Colgate

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managing organizations in a global economy4
Managing Organizations in a Global Economy

So far –

Introduction

Framework of an international organization

Globalization

Reasons for going international

Types of international organizations

CBRA, Business Ethics and Corporate Social Responsibility

The International PESTEL Environment of a Firm

Theory – Porter’s Diamond and Trade Agreements

You need to know this about … PESTEL in N America, Europa, Asia, Africa, Australia

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83

external environment theory
External Environment -Theory

National Competitive Advantage

Competitiveness

International Competitiveness

84

84

csr introduction
CSR – Introduction
  • Short Case #1 – Colgate pg 78
  • Asia – Hong Kong – Hawley and Hazel
  • Darkie
  • Colgate – Background
  • Case Facts
  • Dilemma – Why? Conflict?
  • CBRA – External/internal factors?

Discussion Leaders - Bryan, Peter, Luke, Rae

external environment
External Environment

Theory – Competitive Advantage

Competitiveness

International Competitiveness

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86

external environment1
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.

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87

porter diamond
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

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porter diamond1
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

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89

porter diamond2
Porter Diamond

Factor Endowments or Conditions–

Basic

Advanced

Examples: Nokia, Ericsson

2. Demand Conditions –

1. Quality

2. Innovativeness

3. Variety - customization

90

90

porter diamond3
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

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91

references for porter
References for Porter

Michael Porter, 1990. The Competitive Advantage of Nations. Free Press

M. Grant, 1991. The Competitive Advantage of Nations: An Assessment. Strategic Management Journal, 12, 535-548

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porter diamond4
Porter Diamond

Additional Thoughts and Examples

  • Japan – high priced land – JIT inventory technique
  • Sweden – short building season – pre-fabricated houses
  • Clustering – Related and Supporting Industries
    • Silicon Valley
    • Detroit
    • Italy – leather/shoes
review
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

National Competitive Advantage

Porter Diamond

Trade Agreements

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95

external environment theory1
External Environment - Theory

2. Trade Agreements

Why?

Protectionism?

Pro /Con

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96

types of trade agreements
Types of Trade Agreements

Trade Area

Common tariffs among members -- individual tariffs with non-members.

NAFTA, ASEAN (Brunei, Indonesia, Malaysia, Philippines, Singapore, Thailand, Vietnam - 420 Mill)

Customs Union

Common tariffs for non-members.

ANDEAN (Bolivia, Ecuador, Peru, Columbia, Venezuela)

Common Market

Free flow of goods and labor.

Mercosur (Brazil, Paraguay, Uruguay, Argentina, Chile)

Economic Union

Common currency, common overseeing institutions

European Union -- 15 Members; Euro; European Parliament; Court of Justice

Political Union

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97

external environment2
External Environment

You need to know this about --

98

98

slide99
Level of International Activities

International Investment

InternationalTrade

99

99

slide100
North America

United States

which industries most internationally active? Why?

US-Canada Free Trade Agreement (1989) – NAFTA ….

Mexico

Wage rate; maquiladora industry (1965)

100

100

slide101
Europe

delayed differentiation

acquisitions/alliances

EU - 27 members …..

EU – The Euro

101

101

european union
European Union
  • Brussels, Luxembourg,Strasbourg
  • Official languages23
  • Members 27
  • Establishment - Paris Treaty 1951  - Rome Treaty 1957 - Maastricht Treaty 1992  - Lisbon Treaty 2007
  • Population - 2010 estimate 501,259,840
  • Per capita GDP $36,812 
  • Gini (2009) 30.7
  • CurrencyEuro + 11
european union1
European Union

EU (27): Austria, Belgium, Cyprus, Czech Republic, Denmark, Estonia, Finland, Iceland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Poland, Portugal, Slovakia, Slovenia, Spain, Sweden, UK, France, Germany, Ireland, Greece, Romania (07), Bulgaria (07)

EMU (16): Austria, Belgium, Cyprus, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Malta, the Netherlands, Portugal, Spain, Slovenia, Slovakia

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103

european union2
European Union

The European Commission

The Council of Ministers (counterbalance to Commission)

The European Parliament

The European Court of Justice

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104

european union3
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

105

105

slide106
EMU

Eurozone map, updated January 2009    Eurozone (16) Blue

Austria, Belgium, Cyprus, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Malta, the Netherlands, Portugal, Slovakia, Slovenia and Spain.

EU states obliged to join the Eurozone (9) Green

EU state with an opt-out on Eurozone participation (1) UK

EU state planning to hold a referendum on the euro and with an opt-out on Eurozone participation (1) Denmark

slide107
Eastern Europe

Break-up of The Soviet Union

(Dec 1991)

Russia (glasnost, perestroika)

The Ukraine

Czech Republic

Slovakia

Poland

107

107

global economy1
Global Economy

Macro Level

Global Economy

Macro-Micro Interface

Capitalism, Free Market Systems

Creative Destruction

Micro level

Businesses decide

to internationalize

need to increase and maintain profit

international management
International Management
  • Types of International Organizations
  • Level of Internationalization and Performance
  • CSR and Ethics
    • Tension: Profit, legal, social responsibilities
    • Stakeholder map
    • Colgate; Nike
    • Pharma Industry in Africa .. IPR?
      • Jeff, Jessica, Jennifer, Danielle
legal and regulatory environment
Legal and Regulatory Environment

Challenge for the MNC - different laws and regulations in global business operations

MNCs must carefully evaluate legal framework in each market before doing business

Implications for CBRA

four global foundations of law
Four Global Foundations of Law

Culture and Legal Foundation

Islamic

Socialist

Common

Civil or code

four global foundations of law islamic law
Four Global Foundations of Law: Islamic Law

Derived from interpretation of Qur’an and teachings of Prophet Muhammad

Islamic countries: Middle East and Central Asia

four global foundations of law socialist law
Four Global Foundations of Law: Socialist Law

Origins in Marxist socialist system

Requires most property to be owned by state or state enterprises

Continues to influence regulations in former communist countries:

Members of former Soviet Union

Peoples’ Republic of China

Vietnam

North Korea

Cuba

four global foundations of law common law
Four Global Foundations of Law:Common Law

Origins in English law

Foundation of legal system for:

United States

Canada

England

Australia

New Zealand

four global foundations of law civil or code law
Four Global Foundations of Law:Civil or Code Law

Derived from Roman law

Found in non-Islamic and non-socialist countries:

France

Germany

Some Latin American countries

Louisiana in the U.S.

basic jurisdictional principles of international law
Basic Jurisdictional Principles of International Law:

Sovereignty and Sovereign Immunity:

Governments have the right to rule themselves as they see fit.

basic principles of international law
Basic Principles of International Law:

International Jurisdiction:

Every country has jurisdiction over its citizens no matter where they are located

Nationality principle

Territoriality principle

Protective principle

basic principles of international law1
Basic Principles of International Law:

Doctrine of Comity:

Mutual respect for the laws, institutions, and government of other countries in the matter of jurisdiction over their own citizens.

basic principles of international law2
Basic Principles ofInternational Law:

Act of State Doctrine:

All acts of other governments are considered to be valid by U.S. courts, even if such acts are illegal or inappropriate under U.S. law.

basic principles of international law3
Basic Principles of International Law:

Treatment and Rights of Aliens:

Countries have the legal right to refuse admission of foreign citizens and to impose special restrictions on their conduct, right of travel, where they can stay, and what business they may conduct.

Nations can also deport aliens.

legal and regulatory issues
Legal and Regulatory Issues

Foreign Corrupt Practices Act

Illegal to influence foreign officials through:

personal payment

political contribution

global economy2
Global Economy
  • Porter’s Diamond
  • Trade Agreements
  • In addition, you need to know ….
russia
Russia

Gazprom – Europe (25%)

Limitations on foreign ownership

Centralization of authority

Weak infrastructure

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124

latin america
Latin America

Middle (Central) and South

Mexico, Costa Rica, El Salvador, Nicaragua

Peru, Colombia, Venezuela

Brazil

Argentina

Chile

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Asia

Japan

MITI (Ministry of International Trade and Industry)

keiretsus

Current economic conditions

South Korea - chaebols

China

GNP growth of 10%

low wage rates

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126

external environment3
External Environment

What about Australia?

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127

external environment4
External Environment

The Four Tigers

South Korea, Hong Kong, Singapore, Taiwan

Baby Tigers

Thailand, Malaysia, Indonesia, (Vietnam)

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128

less developed countries
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

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129

africa
Africa
  • Considerable natural resources
  • International trade is not a major source of income
  • Populace divided into 3,000 tribes that speak 1,000 languages and dialects
  • Major political instability
  • Poverty, starvation, illiteracy, corruption, overcrowding - social problems negatively affecting economic sector
kenya and tanzania
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; $46,000;

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major economic regions
Major economic regions

North America

Europe

Asia

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economic superpowers
Economic Superpowers

The Triad

The United States

The EU (dominated by Germany),

Japan

Dominates

foreign direct investment and

international trade

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fdi clusters
FDI Clusters

for the U.S.:Latin America

for EU:Eastern Europe

for Japan:The Four Tigers

South Korea, Hong Kong, Singapore, Taiwan

Baby Tigers

Thailand, Malaysia, Indonesia

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group dynamics
Group Dynamics

Why groups?

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136

group dynamics1
Group Dynamics

Group performance =

Sum of individual performance PLUS group dynamics

Group dynamics can be positive or negative

Higher quantity and quality of solutions

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137

group dynamics2
Group Dynamics

Advantages – Benefits

Different viewpoints

Differences in expertise

Differences in training and experience

Cultural differences

Value differences

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group dynamics3
Group Dynamics

Process losses

Loafing

Intra-group conflict

Miscommunication

Wrong leader

In appropriate role and task assignments

Role ambiguity

Role conflict

Informal, dysfunctional norms

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group dynamics4
Group Dynamics

Group management

Roles

What – List of tasks

Who – Is responsible for what, based on expertise

How - Enforcement

Timeline

When – Specific deadlines

What – Effective communication

Who - Commitment

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group dynamics5
Group Dynamics

Group management

Leadership

Formal

Why

Expertise and role

Norms

Must be explicit

Agreed upon by all

Consequences of norm violations

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141

progress report 2
Progress Report #2

Questions?

142

national culture
National Culture

Harry and Sally in Saudi Arabia

Lack of prep → ?? → Loss of contract

What went wrong?

Specific examples!

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143

what went wrong specific examples
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

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saudi arabian culture1
Saudi Arabian Culture
  • The intersection of culture and business
    • Saks Fifth Avenue, Pizza Hut
    • Are women allowed to work?
  • Role of women
saudi arabian culture2
Saudi Arabian Culture
  • The intersection of culture and business
    • Saks Fifth Avenue, Pizza Hut
    • Are women allowed to work?
  • Role of women
    • Women outnumber men in universities, own 20% of all businesses, but account for only 7% of the workforce
    • Work separately from men
    • Not engineering, law firms, architectural firms
    • Abayas
    • 60% of workforce is foreign
culture and international management
Culture and International Management

Relevance

Cultural Toughness – Cultural Distance

Cross-cultural literacy

Cross-Cultural sensitivity

Cost of doing bus in a particular culture

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internationalization decision
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)

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149

cultural dimensions
Cultural Dimensions

All people have common life problems such as ….

Possible solutions to such problems …..

Different people choose different solutions ….

 Culture

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cultural dimensions1
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?

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151

cultural dimensions2
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

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152

cultural dimensions3
Cultural dimensions

Six basic dimensions describe the cultural orientations of societies

What is the primary mode of activity?

Doing/being

What is the conception of space?

Private/public

6. What is the temporal orientation? Future/present/past

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153

characteristics of culture values and norms
Characteristics of CultureValues and Norms

Social structure

Religion

Political philosophy

Economic philosophy

Education

Language

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154

1 social structure
1. Social structure

Social stratification

Class consciousness

Class membership is a function of ?

Social mobility

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155

2 religion
2. Religion

www.adherents.com

Minimal level of self-identification

Non-religious 16%

Christianity 2.1 bill; 33%

Protestant work ethic

Catholic vs Protestant/Lutheran

Take care of your neighbor and the less fortunate

10 commandments

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Islam1.5 bill; 21%

Sunni and Shi’ite – best known branches

all embracing way of life, governing the totality of a Muslim being;

prayer five times a day;

free enterprise/hostile to socialist ideals - earning a legitimate profit through commerce and trade;

Koran;

contractual obligations, keeping one's word

role of women and men

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slide158
Hinduism900 mill; 14%

spiritual achievement;

Nirvana;

Samsara – birth, death, re-birth;

Buddhism 360 mill; 6%

Central and Southeast Asia, China, Korea, Japan;

"life is suffering; misery is everywhere and originates in people's desire for pleasure;

Noble Eightfold Path: right views, right intention, right speech, right action, right livelihood, right effort, right awareness, right concentration

Japan – Temples, Shrines (Shinto)

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characteristics of culture cont d
Characteristics of Culture (Cont’d)

3.Political philosophy

Political freedom – dominant political orientation

4. Economic philosophy

Free Market – to what extent

Economic freedom - www.heritage.org/research/features/index/

5. Education

Importance

Access

Type

6. Language(verbal/spoken; non-verbal) Communication; word equivalency

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ignoring culture
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)

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160

the us culture
The US Culture????

Describe ….

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culture
Culture

Relevance

CBR Analysis

Cultural toughness

Cross-cultural literacy

Cultural sensitivity

Three aspects

Basic Assumptions - Six

Characteristics - Six

Measurement

Application of cultural dimensions

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measurement of culture
Measurement of Culture

Purpose ????

Geert Hofstede – 1970’s

IBM employees

100,000 across 30+ countries

Survey – typical work situations

Identify systematic differences – Factor Analysis

Four independent factors

Follow up research: Culture’s consequences (2001)

Culture: Collective programming of the mind

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dimensions of culture
Dimensions of culture

Individualism/Collectivism

Power Distance

Uncertainty Avoidance

Masculinity/Femininity

Confucian Dynamism

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individualism collectivism
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.

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power distance
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.

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uncertainty avoidance
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.

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masculinity femininity
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.

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confucian dynamism or long term orientation 1993
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.

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sources for international research
Sources for International Research

Hofstede, Geert (1980): Culture’s Consequences

Hofstede, Geert (1991): Cultures and Organizations

Hofstede, Geert (1984): Culture’s Consequences: International Differences in Work-Related Values

Hofstede, Geert and Michael Harris Bond (1984): The Confucius Connection: from cultural roots to economic growth. Organizational Dynamics, 16, 4, 4-21

websites

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U.S. Japan Germany

Individualism: 91 46 67

Power distance: 40 54 35

Uncertainty

avoidance:46 92 65

Masculinity: 62 95 66

ST/LT: 29 80 25

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hofstede s dimensions
Hofstede’s Dimensions

Handout

  • Power distance
    • Low: Denmark, Israel, Austria
    • High: Malaysia, Arab countries, Mexico
  • Uncertainty avoidance
    • Low: India, Denmark, Singapore
    • High: Greece, Japan, France
hofstede s dimensions1
Hofstede’s Dimensions
  • Individualism vs. collectivism
    • Individual: Australia, US, UK
    • Collective: Italy, Korea, Singapore
  • Masculinity vs. femininity
    • Masculine: Japan, Mexico, Germany
    • Feminine: Denmark, Sweden, France
hofstede s dimensions2
Hofstede’s Dimensions
  • Long-term/short-term orientation
    • Long-term: China, Japan, Taiwan
    • Short-term: US, Canada, UK
cases
Cases
  • Provide examples of the relationship between CULTURE

and

  • Business and Management Practices

Analysis

  • What do we know about the company?
  • What do we know about the relevant countries?
  • What challenges/opportunities (CBR) do we expect?
cases1
Cases
  • Ethics and CSR: Pharma Industry – Last time
  • International Business and Culture:
    • WalMart in Japan – Last time – Additional Comments
      • WalMart – Stratgey; SW – Internal Environment
      • Japan – Culture - CBR
      • Entry Strategy??? Acquisition/Merger
      • Management – Cultural Issues – Training: ADDIE
    • Corning in Mexico
      • Vitro
      • Mexico – Culture Hofstede Dimensions – CBR
      • Entry Strategy??? JV – What/purpose – Economic Freedom
      • Partnership – Cultural Issues
    • Disney in France
      • France – Culture - CBR
      • Entry Strategy??? Fully Owned; Choice of location
      • Operations – Cultural Issues – Hofstede dimensions
applying hofstede s dimensions
Applying Hofstede’s Dimensions

Lawyers per 100,000 population

U.S.

Germany

Great Britain

Japan

Italy

France

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applying hofstede s dimensions1
Applying Hofstede’s Dimensions

Lawyers per 100,000 population (1996)

U.S. 312

Germany 190

Great Britain 134

Japan 106

Italy 81

France 49

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applying hofstede s dimensions2
Applying Hofstede’s Dimensions

Number of people per lawyer

U.S.

Germany

Great Britain

Japan

Italy

France

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applying hofstede s dimensions3
Applying Hofstede’s Dimensions

Country Lawyers Population People/Lawyer

US: Lawyers: 1,143,358 Pop: 303MMP/L:265

Brazil: Lawyers: 571,360 Pop: 186MMP/L: 326

New Zealand: Lawyers: 10,523 Pop: 4MMP/L 391

Spain Lawyers:114,143 Pop: 45MMP/L:395

Italy Lawyers:121,380 Pop: 59MMP/L:488

UK Lawyers:151,043 Pop: 61MMP/L401

Germany Lawyers:138,679 Pop: 82MMP/L: 593

France Lawyers:45,686 Pop: 64MMP/L: 1,403

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laurent s research see adler
Laurent’s Research-See Adler

9 Western countries, US, 2 Asian countries

More than sixty common work situation (yes/no)

The main reason for hierarchical structure is so that everybody knows who has authority over whom

In order to have efficient work relationships, it is often necessary to bypass hierarchical lines

It is important for a manager to have at hand precise answers to most of the questions that his subordinates may raise about their work

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laurent s research
Laurent’s Research

The main reason for hierarchical structure is so that everybody knows who has authority over whom

US 18% agree, Germany 24%, Italy 50% France 45%, Japan 52%

Power Distance

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laurent s research1
Laurent’s Research

In order to have efficient work relationships, it is often necessary to bypass hierarchical lines

US 68% agree, Germany 54%, Italy 25%

Uncertainty Avoidance

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laurent s research2
Laurent’s Research

It is important for a manager to have at hand precise answers to most of the questions that his subordinates may raise about their work

US 18% agree, Germany 46%, Italy 66%,

Japan 78%

Uncertainty Avoidance

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fons trompenaars
Fons Trompenaars

Riding the Waves of Culture (1998; 2nd edition)

Dimensions (see textbook):

Universalistic–Particularistic (Obligation)

Neutral-Affective (Emotional Orientation in Relationships)

Specific-Diffuse (Involvement in Relationships)

Achievement-Ascription (Legitimization of Power)

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expatriate assignment
Expatriate Assignment

Why to use expatriates?

Ethnocentric, polycentric, regiocentric, geocentric

Culture Shock

Selection

KSA Requirements

KSA Assessment

Training

Type and rigor of training

Failure Rates

Reasons

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186

four stages cross cultural adaptation
Four stages cross-cultural adaptation

Honeymoon

Irritation and hostility – Culture Shock

Gradual adjustment

Biculturalism

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187

the expatriate assignment
The Expatriate Assignment

Experience of uncertainty

Anticipatory and in-country adjustment

Expatriate Selection

Relevant KSA’s?

Technical, Managerial

Adaptiveness

Measurement

SMILE: Speciality; management ability; international flexibility; language facility; endeavor (Matsushita)

Spouse and Family - Failurerates

40% on average; lower for European and Japanese

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188

the expatriate assignment failure rates
The Expatriate Assignment Failure rates

Rosalie Tung: Reasons

Selection is based on headquarter criteria

Lack of training, preparation, orientation

Alienation/lack of support from headquarters

Inability to adapt to local culture/work enviro

Problems with spouse, family

Compensation

Poor programs for career support/repatriation

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189

training techniques and rigor of training
Training Techniques and Rigor of Training

Area studies

Culture assimilators

Language training

Sensitivity training

Field experiences

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the expatriate assignment1
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 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

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the expatriate assignment2
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-culturaltraining

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the expatriate assignment3
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

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cultural stereotypes
Cultural Stereotypes
  • What are stereotypes?
  • Why stereotypes?
  • Good/bad?
  • Exercise – Five jobs!
tata josh brett kiley theresa
Tata – Josh, Brett, Kiley, Theresa
  • What do we know about the company?
  • What do we know about the country – India and target countries?
european scholars conference
European Scholars Conference

EU – Consumer Protection – Public Health

Task Force – WHO

Obesity (BMI Index: 30+) – U.S. 33%; UK 22%, G 12%, Switzerland 8%, Italy 9%

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197

overall attractiveness of a country
Overall Attractiveness of a Country

Trade-off between

Costs

Benefits

Risks

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198

overall attractiveness of a country1
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.

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political risk
Political Risk

Risk?

What is economic risk?

What is political risk?

200

200

political risk definition
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.

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201

political risk1
Political Risk

Characteristics of countries

with a higher likelihood for political risk:

Social unrest* (see below)

Demonstrations

Terrorism

*Social Unrest

More than one ethnic nationality

Competing ideologies battle for political control

High inflation and falling living standards

Strikes

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slide203
Results of Social Unrest

Change in government and/or policy

Results of Political Change

Expropriation

Indigenization

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risk assessment
Risk Assessment

Euromoney Magazine’s CountryRisk 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

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political risk data
Political Risk Data

Dun & Bradstreet’s Guide to Doing Business around the World

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

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political risk2
Political Risk

ONDD

Office National Du Ducroirce

www.ondd.be

risk management
Risk Management

Integrative Approach

Protective/Defensive Approach

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integrative approach
Integrative Approach

Become part of the host country’s infrastructure

Good relationship with host government

Produce locally … in-country suppliers

Joint ventures

Local R&D

Effective in long-run

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208

protective defensive approach
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

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contingency approach
Contingency Approach

Overall risk for an international company depends on the

polit. risk and characteristics of the firm.

Three primary factors to be considered

Political risk type - Transfer risk/Operational Risk/Ownership risk

General investment type - Conglomerate/Vertical/ Horizontal

Specific Investment (1=most risky) - Sector (primary=1 /industrial=3/service=2) Technology (science=2/non-science=1) Ownership (wholly=1/partially owned=2)

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political risk insurance
Political Risk Insurance

covers the loss of firm’s assets, not the loss of revenue

Overseas Private Investment Corp (OPIC)

inability to repatriate profits, expropriation, nationalization, damage from war, terrorism

Foreign Credit Insurance Association

war, revolution, currency inconvertibility, cancellation of import or export licenses

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slide212
A Risky Country

unstable economy

war/revolution/terrorism

unfriendly/hostile people

unacceptable customs/values/attitudes

212

212

slide213
A Risky Company

type of product and/or service offered

type of industry

structure of ownership

level of technology

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213

privatization
Privatization

http://www.privatizationbarometer.net/

Register but free

Library – ask business librarian for help

214

214

useful website
Useful website

www.buyusa.gov/nevada

Left tab: International Trade Links

strategy
Strategy

The science

and art

of conducting military campaign

on a broad scale.

A plan or technique for achieving some end.

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reasons for going international
Reasons for Going International
  • Reactive (defensive) reasons
    • Globalization of competitors
    • Trade barriers
    • Regulations and restrictions
    • Customer demands
reasons for going international1
Reasons for Going International
  • Proactive (aggressive) reasons
    • Economies of scale
    • Growth opportunities
    • Resource access and cost savings
    • Incentives
strategic management
Strategic management

Decisions and

subsequent actions

to implement strategies that will

optimize the fit between the organization and its environment

in an effort to achieve organizational effectiveness.

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strategy and the firm some theory
Strategy and the Firm: Some Theory

Purpose of a firms is to provide products /services that are desired by society. To sustain this in the LT through creative destruction, the firms need to make profit to invest in R&D

Profit = Revenue - Cost

Profit = Volume * Price - Cost

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slide223
Profit

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

To do this, a firm must produce a product that is valuedby consumers.

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value
Value

Thus the firm must engage in value creation.

The pricethat consumers are willing to pay indicates the value/worth of the product to the consumer.

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224

value to customer
Value to Customer

The pricethat consumers are willing to pay indicates the value/worth of the product to the consumer.

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225

strategy1
Strategy

Porter, 1985

Strategy Model

(Distinguish from Porter’s Diamond - National Competitive Advantage)

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strategy2
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).

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slide228
The firm is a value chain

composed of a series of distinct

value creation activities

Value creation activities

Primary activities

Production and marketing

2. Support activities

Materials management, R&D, Human resource management

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strategy michael porter
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.

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229

strategy and global expansion
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

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230

strategy and global expansion1
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.

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231

strategy and global expansion2
Strategy and Global Expansion

Firms that expand to international markets

will gain greater returns from their

core competencies

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strategy and global expansion3
Strategy and Global Expansion

Core Competencies

Skills within the firm that competitors cannot easily match or imitate. Examples.

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strategy of an international organization
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.

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entry strategy alternatives
Entry Strategy Alternatives
  • Exporting
    • As a relatively low-risk alternative, many small firms seldom go beyond exporting; export department or hire an export management company.
    • When setting up an export system, particular care must be given to choosing a distributor, as many countries have regulations that make it difficult to remove an inefficient distributor.
  • Licensing
    • Licensing grants the rights to a firm in the host country to either produce or sell a product, or both - transfer of rights to patents, trademarks, or technology for a specified period of time in return for a fee paid by the licensee.
    • Anheuser-Busch has licensees in England, Japan, Australia, and Israel.
    • Licensing is relatively low risk because it requires little investment - for products in the mature phase of the life-cycle—when competition is intense, margins decline, and production is relatively standardized. It also is useful for firms with rapidly changing technologies, diverse product lines, and small firms with few financial and managerial resources for direct investment abroad.
    • Anheuser-Busch
  • Franchising
    • With franchising, a franchisor licenses a company’s trademark, products and services, and operating principles to the franchisee for an initial fee and ongoing royalties. Franchising also is relatively low risk and is ideal for small businesses.
    • Holiday Inn
entry strategy alternatives1
Entry Strategy Alternatives
  • Contract manufacturing
    • contracting for the production of finished goods or component parts. These goods are then imported to the home or other countries for assembly or sale, or they are sold in the host country
    • Nike
  • Offshoring
    • Offshoring is when a company moves one or all of its factories to another country. Offshoring provides access to foreign markets and lower production costs, while avoiding trade barriers.
    • Toyota in the US
  • Service sector outsourcing
    • Service sector outsourcing is outsourcing “white-collar” jobs. India has been a primary location for IT outsourcing - wages in India are beginning to rise, many companies are beginning to outsource to the Philippines, South Africa, Hungary, and the Czech Republic.
    • GE, Accenture, Oracle, Conseco
entry strategy alternatives2
Entry Strategy Alternatives
  • International joint ventures
    • Agreements between two or more companies to produce a product or service together.
    • more risky; facilitate rapid entry into new markets, are a means to overcome trade barriers, help achieve economies of scale, can help secure access to additional raw materials, help acquire managerial and technological skills, and can spread the risk associated with operating in a foreign environment.
    • Mittal Steel of India and Arcelor of France
  • Wholly owned subsidiaries
    • Starting a product or service from scratch or acquiring an existing firm in the host country.
    • Acquisitions allow for rapid entry in markets with established products and distribution networks.
    • Wholly owned subsidiaries represent the highest risk entry strategy, but the company has full control over the operation.
    • Philip Morris and Jacob Suchard
the internal environment of an international organization
The Internal Environment of an International Organization

Organizational Culture

People

Processes

Structure

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organizational culture
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?

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organizational culture1
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.

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Last Case

Aron

Chelsea

Lina

Guillaume

Expatriate in China

Selection

Training

Compensation

Specific Cultural Issues

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Strategic Management

  • Purpose
  • Porter
  • Firm as a value chain
  • Value creation activities
  • Cost of value creation
  • Implications for internationalization
  • Core competencies
  • Market Entry Strategies
  • Less to more risky
internal environment organizational culture
Internal Environment – Organizational Culture

Process ↔ Results oriented

Tight ↔ Loose Control

Job ↔ Employee oriented

Parochial ↔ Professional oriented

Closed system ↔ Open system

Normative ↔ Pragmatic

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organizational culture2
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?

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behavior
Behavior

Individual Behavior

P = f (A, M)

Motivation defined!

Homeostasis---applied to psychological needs

MotivationTheories ---

Applicability across cultures??

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behavior motivationtheories
Behavior - MotivationTheories

Content Theories

Maslow’s Need Hierarchy

Two Factor Theory of Motivation

McClelland Achievement Motivation

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motivation theories international context
Motivation Theories - International Context

How applicable are the motivation theories proposed by

Maslow and Herzberg in the international context?

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motivation theories in the international context
Motivation Theories in the International Context

Maslow’s needs, in particular the upper-level ones, are important at the managerial level

Ronen concluded that need clusters are constant across nationalities and that Maslow’s need hierarchy is confirmed by these clusters.

Also, Herzberg’s categories are confirmed by the cross-national need clusters.

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behavior motivation
Behavior - Motivation

Process Theories

Equity Theory of Motivation

Goal - Setting

Expectancy Theory of Motivation

valence 

Effort  Performance  Outcome



expectancy instrumentality

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motivation and hofstede
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

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reinforcement theory
Reinforcement Theory

Applicability?

Assumptions??

Behavior is a function of its consequences

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the meaning of work
The Meaning of Work

Tied to economic necessity

What else?

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six functions of work
Six functions of work

needed income,

interesting & satisfying,

contact with others,

serve society,

keeps one occupied,

status and prestige

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mow work centrality
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.

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study results
Study results

Britain (lowest),

Germany,

Netherlands,

Belgium,

USA,

Israel,

Japan

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work centrality
Work Centrality

Mean work

centrality score

8.0

7.78

N = 3144

Japan

7.75

7.5

7.30

(former) Yugoslavia

N = 521

Work is

more

important

and more

central in

life

7.25

7.10

Israel

N = 893

N = 996

N = 446

7.0

6.94

USA

6.81

Belgium

6.75

6.69

Netherlands

Germany

N = 976

N = 1276

6.67

6.5

6.36

Britain

N = 409

6.25

6.0

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group behavior
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

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leadership
Leadership

Which Hofstede dimension?

Types of leadership styles:

autocratic, participative, group

authoritarian, democratic, laissez-faire

Theory X, Theory Y

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project globe dimensions
Project GLOBE Dimensions
  • Assertiveness
    • Low: Sweden, New Zealand, Switzerland
    • High: Greece, Austria, Germany
  • Performance orientation
    • Low: Russia, Argentina, Greece
    • High: New Zealand, Hong Kong, Singapore
project globe dimensions1
Project GLOBE Dimensions
  • Future orientation
    • Low: Russia, Argentina, Poland
    • High: Netherlands, Switzerland, Singapore
  • Humane orientation
    • Low: Germany, Spain, France
    • High: Malaysia, Ireland, Philippines
leadership research
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

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Japanese  Theory Y --- employees learn from mistakes

Germans  Theory X --- autocratic, stop poor performance asap

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culturally contingent beliefs regarding effective leadership styles
Culturally-Contingent Beliefs Regarding Effective Leadership Styles

Country N Charisma Team Self- Part. Humane Auton.

Protective

Austria 169 6.03 5.74 3.07 6.00 4.93 4.47

Brazil 264 6.01 6.17* 3.50 6.06* 4.84 2.27

China 160 5.57 5.57 3.80 5.05 5.18 4.07

Denmark 327 6.01 5.70 2.82 5.80 4.23 3.79

England 168 6.01 5.71 3.04 5.57 4.90 3.92

India 231 5.85 5.72 3.78 4.99 5.26* 3.85

Japan 197 5.49 5.56 3.61 5.08 4.68 3.67

Mexico 327 5.66 5.75 3.86* 4.64 4.71 3.86

Russia 301 5.66 5.63 3.69 4.67 4.08 4.63*

USA 399 6.12* 5.80 3.16 5.93 5.21 3.75

Scale 1 to 7 in order of how important those behaviors

are considered for effective leadership (7 = highest)

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culturally contingent beliefs effective leadership style
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 Dutchplace 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!

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culturally contingent beliefs regarding effective leadership styles contd
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.

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g roup composition multicultural teams
Group Composition --- Multicultural Teams

Impact of cultural diversity on group performance?

group productivity = f(task, resources, process)

actual productivity = potential productivity - losses due to faulty process

actual productivity  or  =

potential productivity  or  - losses  or 

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Benefits associated with cultural diversity:

# of alternatives generated;

quality of alternatives;

creativity/divergence;

no groupthink

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Process Losses:

potential for miscommunication increases;

cohesiveness decreases;

negative attitudes (dislike, mistrust);

perceptual problems (stereotyping);

stress

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Multicultural teams have the potential to be the most or the least effective teams

Group development stages:

entry, work, action

Task: innovative or routine

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manage culturally diverse teams through
Manage culturally diverse teams through:

task-related selection

recognition of differences

super-ordinate goals

equal power

mutual respect

feedback

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communication macro level
Communication: Macro - Level

Communication Flows

upward/downward

formal/informal

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communication micro level
Communication: Micro - Level

Micro/Interpersonal Level

Definition: Transmission of meaning through the use of common symbols

Sender -> Message -> Receive

(Encoding) (Medium) (Decoding)

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communication micro level1
Communication: Micro - Level

Interpersonal communication Process

encoding

message

decoding

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communication micro level2
Communication: Micro - Level

Communication barriers

language

perception - stereotyping

culture

nonverbal communication

projected similarity

parochialism

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micro level
Micro -Level

Explicit vs implicit communication

High vs low context

High vs low contact

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opening profile keeping your foot out of your mouth
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?

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trust in communication
Trust in Communication

Business transactions based on long-standing vs. arm’s length relationships

High propensity to trust: Nordic countries, China, Canada, US, Britain

Low propensity to trust: Brazil, Turkey, Romania, Slovenia, Latvia

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the globe project and communication
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

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cultural variables in communication
Cultural Variables in Communication

Attitudes

Stereotyping

Social organization

e.g., United Auto Workers (UAW)

Thought patterns

The meaning of double lines

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cultural variables in communication1
Cultural Variables in Communication

Roles

Language

“Come out of the grave with Pepsi”

When “yes” doesn’t mean “yes”

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cultural variables in communication2
Cultural Variables in Communication

Nonverbal communication

Kinesic behavior

Proxemics (e.g., closeness when talking)

Paralanguage (e.g., the sound of silence)

Object language (e.g., monochronic vs. polychronic)

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communicating with arabs
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

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managing cross cultural communication
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

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managing cross cultural communication1
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

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micro level communication
Micro –Level Communication

Non-verbal

Body Language

Emblems

Illustrators

Affect Display

Regulators/Adaptors

Space (proxemics)

Touch

Voice

Dermal Code

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decision making
Decision-Making

Quality of decisions

Organizational Effectiveness

Differences across Cultures?

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dm process and culture
DM Process and Culture

Problem Recognition

Information Search

Alternative Generation

Choice

Implementation

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project groups
Project Groups
  • Due Date for Written Group Papers
  • Sample Papers and Handouts
  • Country Groups
country groups
Country Groups

The purpose of your paper is to report the cost-benefits-risk associated with internationalizing into “your” country and to provide a recommendation to an American company. What are the two most critical cost, benefits, and risk associated with “your” country? CBR – Economy (including work force), Political System, Culture, Other?

What is the population size of “your” country? What is the GDP/capita and Sector?

Is “your” country culturally tough for Americans? Hofstede dimensions? Other cultural issues?

What would be a primary reason for an American company’s interest in “your” country?

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questions for me
Questions for me
  • Country specific questions?
  • General questions concerning CBRA content?
  • Format and process questions?
  • Meeting with me?
international negotiations
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

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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

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stage one preparation
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

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stage two relationship building
Stage Two: Relationship Building

Getting to know one’s contacts and building mutual trust

Nontask sounding (nemawashi)

Use an intermediary

“I have come as a mediator…”

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stage three exchanging task related information
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

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stage four persuasion
Stage Four: Persuasion

Dirty tricks are in the eye of the beholder

False information

Ambiguous authority

Uncomfortable rooms

Rudeness, threats

Calculated delays

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stage five concessions and agreement
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

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successful negotiators americans
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

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successful negotiators indians
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

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successful negotiators arabs
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

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successful negotiators swedes
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

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successful negotiators italians
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

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managing negotiation
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

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comparative management in focus negotiating with the chinese1
Comparative Management in Focus: Negotiating with the Chinese

Two problems

Chinese desire for detail

Apparent insincerity

Saving Face

Lien

Mien-tzu

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comparative management in focus negotiating with the chinese2
Comparative Management in Focus: Negotiating with the Chinese

Importance of harmony

Guanxi

Guanxihu networks

Two stages of Chinese negotiation

Technical

Commercial

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comparative management in focus negotiating with the chinese3
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

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managing conflict resolution
Managing Conflict Resolution

Instrumental oriented

Expressive oriented

322

the influence of culture on decision making
The Influence of Culture on Decision Making

Individualism vs. collectivism

Objective vs. subjective approach

Risk tolerance

Comfort with unfamiliar solutions

324

approaches to decision making
Approaches to Decision Making

Utilitarianism vs. moral idealism

Autocratic vs. participative leadership

Speed of decision making

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