FRIDAY International Management MGT 480/680 Spring 2010 Dr. Yvonne Stedham.
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Transcript of FRIDAY International Management MGT 480/680 Spring 2010 Dr. Yvonne Stedham.
FRIDAYInternational Management
MGT 480/680
Spring 2010
Dr. Yvonne Stedham
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International Management
• Seniors, Juniors, Majors???
• Travelled to other countries? USAC?
• Speak other languages?
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International Management
• Why this course?
• What do you expect to learn?
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This week
• Purpose of this course
• What do you know?
• Introduction Course
• Content
• Format - Syllabus
Personal• Instructor
• Students – Background Sheet
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Purpose
• Management concepts and skills needed for businesses to succeed in an international environment
• External Environment - Globalization, Democracy, Free Markets, Cultural Differencs, and the Bottom Line
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Website Location
http://www.business.unr.edu/faculty/stedham/
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Current Developments
• National Public Radio (NPR)
FM 88.7 - KUNRFM 90.5 – Cap Radio
• The Economisthttps://www.economistacademic.com/subscribe_single.cfm -
Student Subscription 12 weeks $19.95Faculty ID: 4430
• Wall Street Journal– Sign-up sheet
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For February 2nd
• Global Update – Web/Handout
• Questions to be handed out in class – next week
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Student Group
International Business Student Chapter (IBSC)– President: Marc Bristol
Email: [email protected]
Cell phone: 530 613 2377– Extra Credit– Meeting dates: Every two weeks on Tuesday from noon to 12:50. In AB 402.
NEWTRAC– Nevada World Trade Council – www.newtrac.org
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What do you know?
1. List the five largest countries based on population.
2. What is the world population?
3. What is “GDP”?
4. What is the GDP/capita in the U.S.? What is a typical GDP growth rate for the U.S.?
5. Which three countries have the highest GDP/capita?
6. Which countries are culturally most similar to the U.S, which ones most dissimilar?
6. How many countries are there in the world?
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What do you know?
1. Five largest countries
1. China 1.3 Bill2. India 1.16 Bill
3. U.S. 307 Mill
4. Indonesia 220 Mill
5. Brazil 190 Mill
6. Russia 140 Mill
7. Japan 127.5Mill
2. World Population6.6 Bill
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What do you know?
1. Five largest countries
1. China 1.3 Bill2. India 1.16 Bill3. U.S. 307 Mill4. Indonesia 240 Mill5. Brazil 198 Mill
6. Pakistan 176 Mill7. Bangladesh 1568. Nigeria 149 Mill9. Russia 140 Mill Mexico 111 Mill #1110. Japan 127.5Mill Germany 82 Mill #16
2. World Population
6.6 Bill12
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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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What do you know?
4. Which 5 countries have the highest GDP/capita
1. Luxembourg $102,2842. Norway $ 79, 1543. Qatar $ 70,7544. Iceland $ 62, 9765. Ireland $ 58,8836. Denmark $ 57,0357. Switzerland $ 56,7118. UK $ 47,3009. US $ 46, 78010. Netherlands $ 45,429
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What do you know?
5. Which countries are culturally most similar to the U.S.
Anglo Countries
CanadaAustraliaNew ZealandU.K.IrelandSouth Africa
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What do you know?
6. Number of countries in the world
• Total number of countries: 192 -195
• Kosovo, Vatican, and Taiwan
• United Nations 192
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Some Data (APPROX.)
Japan China Brazil US World
Population 127.5 Mill 1.3Bill 190 Mill 307 Mill 6.6Bill
GDP growth -.7% 10.7% 3.7% .4% 5.3%
GDP/
Capita
$34,100 $7,700 $8,800 $46,780 $10,200
Industry ? ? ? ? NA
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Data Sources
www.cia.gov
www.transparency.org
www.heritage.org
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International Government Materials
International financial statistics yearbookhttp://innopac.library.unr.edu/record=b1618229~S0
Trade policy reviewhttp://innopac.library.unr.edu/search/
Patrick Ragains
Business and Government Information Librarian
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International Management
• Introduction – Course
• Content – Culture, Globalization, Cost-Benefits-Risk• Format - Syllabus
– Personal – Background Sheet
• Framework of an international organization• Globalization• Reasons for going international• Types of international
organizations20
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Reminder
• Extra Credit – Forms
• IBSC Meetings in AB 402 – February 2– Speaker: Brazil
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Personal Introductions
• Students – background sheets
• Introduction – Major– Traveled internationally– Speak other language
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International Management
• Introduction – Course
• Content – Culture, Globalization, Cost-Benefits-Risk• Format - Syllabus
– Personal – Background Sheet
• Framework of an international organization• Globalization• Reasons for going international• Types of international organizations
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FINAL Termpaper List February 26
Countries and Presentation Dates
1. Finland Brigette, Andria, Andrew April 162. Germany Landon, Doug, Nicole April 163. Italy John Bender, Colin April 164. Spain Ermelinda, Kyle, Ben April 165. Mexico Thomas Rich, Debbie, Justin April 236. Brazil Megan, Fay, Australia, April 23
7. Peru John, Claudia, Yvonne April 238. Japan Brian, Vernon, Dani April 239. Philippines Kevin, Lewis, Kyle Aiton April 3010. Thailand Brenda, Kirk, Stephanie April 3011. China Rebecca, Brent, Robert April 3012. Australia Ray, Dustin, Jason April 30
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Framework Organizations and Organizational Effectiveness
What is an organization?
Why do organizations exist?
• When is an organization effective?
• Efficiency vs effectiveness?
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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.
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Measurement of organizational effectiveness
Long run?
Intermediate run?
Short run?
•
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Measurement of organizational effectiveness
• Long - Survival
• Intermediate - Adaptation, Responsiveness
• Short - Productivity, Efficiency
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Measurement of organizational effectiveness
A contingency approach to management (NOT “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.
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The Organization
The External Environment
Economy
Social
Environment
Technological Environment
Political Environment
The Internal Environment
People
Processes Structure
Business Strategy
Culture
Effectiveness
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The International Organization
The External Environment
CULTURE
Multiple Economies
Multiple
Societies
Multiple Technological Environment
Multiple Political
Environment
The Internal Environment
People
Processes Structure
Business Strategy
Culture
Effectiveness
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Globalization
• Thomas Friedman
• Why change?
• Characteristics of the global system– Previous system?
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Globalization
Thomas Friedman (NY Times)
– The Lexus and the Olive Tree
– The World is Flat
– Hot, Flat, and Crowded
With the #1 bestseller The World Is Flat, he helped millions of readers see and understand globalization in a new way. Now Thomas L. Friedman explains how America can lead the green revolution in the 21st century.
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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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Characteristics of the new system
• Separation and independence
VS
Integration and interdependence
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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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Characteristics of the new system
• Defining measurement:
Weight (missles)
VS
Speed .. Of travel, innovation, communication, commerce
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Characteristics of the new system
• Defining economists:
Karl Marx and Keynes
VS
Schumpeter Capitalism and Creative Destruction
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Characteristics of the new system
• Defining political views:
Friends and Enemies
VS
Competitors
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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.
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APEC Members
AustraliaBruneiCanadaChilePeople's Republic of ChinaHong Kong, ChinaIndonesiaJapanRepublic of KoreaMalaysiaMexicoNew ZealandPapua New GuineaPeruPhilippinesRussiaSingaporeChinese TaipeiThailandUnited StatesVietnam
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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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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. 44
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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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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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World Economic Forum
Values 1. The world’s key challenges cannot be met by
governments, business or civil society alone 2. In a world characterized by complexity, fragility and
ever greater synchronicity, strategic insights cannot be passively acquired. They are best developed through continuous interaction with peers and with the most knowledgeable people in the field.
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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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.
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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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Groups
• Why do organizations go international?
List at least 3 reasons
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Reasons for becoming international
1. A desire for continued growth.
2. Domestic market saturation
3. The potential to now exploit a new technological advantage
4. Preferable suppliers (quality, cost)
5. Labor market (supply, quality, cost)
6. Government involvement/restrictions
7. Reducing distance to customers (cost)
8. Tariff barriers
9. Increased foreign competition in home country
10. Reduce general business risk by diversifying into other countries
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Reasons for becoming international
Profit = Revenue – Cost
Profit = (Volume*Price) - Cost
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Reasons for becoming international
Profit = Revenue – Cost = (Volume*Price) – Cost
1. A desire for continued growth. VOLUME
2. Domestic market saturation VOLUME
3. The potential to now exploit a new technological advantage V
4. Preferable suppliers (quality, cost) PRICE, COST
5. Labor market (supply, quality, cost) PRICE, COST
6. Government involvement/restrictions COST
7. Reducing distance to customers COST
8. Tariff barriers COST
9. Increased foreign competition in home country VOLUME, PRICE
10. Reduce general business risk by diversifying into other countries
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An International Organization
1. operates in multiple environments,
2. home country and one or more host countries,
3. has foreign sales,
4. and a nationality mix of managers and owners.
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Types of "international" organizations
Multi-domestic organization
Multinational organization
Global or transnational organization
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Types of "international" organizations
Multi-domestic organization:
Any organization that exports to/imports from organizations in other countries with primarily domestic production.
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Types of "international" organizations
Multinational organization:
An organization with operations in different countries but each is viewed as a relatively separate enterprise.
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Types of "international" organizations
Global or transnational organization:
An enterprise structured so that national boundaries become blurred. The best people are hired irrespective of national origin.
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Graphic Representation
Headquarters – Subsidiary Relationship
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Stages Model of Internationalization
Outward looking perspective: activities/issues related to the other countries (e.g., exporting) vs an inward perspective (e.g., importing)
Descriptive
Reflects the commonly observed pattern of increased commitment to international business
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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 productionSee also: Adler Chapter 1 pages 8 and 9
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International Orientation
• Ethnocentric
• Polycentric
• Geocentric
• Regiocentric
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International Orientation
• PCN – Parent Country National
• HCN – Host Country National
• TCN – Third Country National
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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
There is a strong CURVILINEAR relationship between the degree of internationalization and organizational performance
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The Relationship between Level of Internationalization and Firm Performance
Degree of internationalization:
"sales generated by foreign affiliates"
MNE (multinational enterprise) performance:
"profit to sales" or "profit to assets".
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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, Exxon, McDonald’s, HP, Ralston, Avon
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EMU
January 2009
Eurozone (16) BlueAustria, Belgium, Cyprus,
Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Malta, the Netherlands, Portugal, Slovakia, Slovenia and
Spain.
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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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Case 1
• Corporate Social Responsibility• Colombia• Mexico• India• Stakeholders
The Multiple Responsibilities of Business
EconomicResponsibility
LegalResponsibility
SocialResponsibility
The Social Responsibility of MNCs
• Corporate social responsibility (CSR)
Profit is MNCs’ only
goal
MNCs should anticipate and solve social
needs
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
• Owners– Stockholders– Financial Institutions
• Non-owners– Customers/Consumers– Suppliers– Competitors– Unions– Governments– Other
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 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
• Moral universalism
• Ethnocentrism
• Ethical relativism
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” decision?
• Consult your superiors
• Fall back on your own moral code of ethics
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External Environment -Theory
National Competitive Advantage
– Competitiveness
– International Competitiveness
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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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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 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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Porter Diamond
1. Factor Endowments or Conditions– Basic
Advanced
Examples: Nokia, Ericsson
2. Demand Conditions – 1. Quality 2. Innovativeness3. Variety - customization
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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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References for Porter
• 1. Michael Porter, 1990. The Competitive Advantage of Nations. Free Press
• 2. M. Grant, 1991. The Competitive Advantage of Nations: An Assessment. Strategic Management Journal, 12, 535-548
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Final Comments
Additional Thoughts and Examples• Japan
– high priced land – JIT inventory technique
• Sweden– short building season – pre-fabricated houses
• Clustering – Related and Supporting Industries– Silicon Valley– Detroit– Italy – leather/shoes
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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 – Theory1. National Competitive Advantage
Porter Diamond
2. Trade Agreements92
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External Environment - Theory
2. Trade Agreements
• Why?
• Protectionism?
Pro /Con
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Types of Trade Agreements
1. Trade Area– Common tariffs among members -- individual tariffs with non-members. – NAFTA, ASEAN (Brunei, Indonesia, Malaysia, Philippines, Singapore, Thailand,
Vietnam - 420 Mill)
2. Customs Union– Common tariffs for non-members. – ANDEAN (Bolivia, Ecuador, Peru, Columbia, Venezuela)
3. Common Market– Free flow of goods and labor. – Mercosur (Brazil, Paraguay, Uruguay, Argentina, Chile)
4. Economic Union – Common currency, common overseeing institutions
– European Union -- 15 Members; Euro; European Parliament; Court of Justice
5. Political Union
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External Environment - Addendum
You need to know this about --
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Level of International Activities
o International Investment
o International Trade
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North America– United States - which
industries most internationally active? Why?
– US-Canada Free Trade Agreement (1989) – NAFTA ….
– Mexico - wage rate; maquiladora industry (1965)
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Europe
• delayed differentiation
• acquisitions/alliances
• EU - 27 members …..
• EU – The Euro
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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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European Union - continued
• The European Commission• The Council of Ministers (counterbalance to
Commission)• The European Parliament• The European Court of Justice
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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
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Eastern Europe
• Break-up of The Soviet Union
(Dec 1991)
• Russia (glasnost, perestroika)
• The Ukraine
• Czech Republic
• Slovakia
• Poland
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Russia
• Gazprom – Europe (25%)• Limitations on foreign ownership• Centralization of authority• Weak infrastructure
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External Environment
Latin AmericaMiddle (Central) and SouthMexico, Costa Rica, El Salvador, NicaraguaPeru, Colombia, VenezuelaBrazilArgentinaChile
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External Environment
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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External Environment
What about Australia?
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External Environment
The Four Tigers
South Korea, Hong Kong, Singapore, Taiwan
Baby Tigers
Thailand, Malaysia, Indonesia
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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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Kenya and Tanzania
• Kenya– 34 Mill; 6.7% HIV; 85% literacy; $1,200
GDP/capita; growth 5%; UE 40%
• Tanzania– 37 Mill; 8.8% HIV; 78% literacy; $700
GDP/capita; growth 6%
• USA– 301 Mill; .6% HIV; 95% literacy; $48,600;
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Major economic regions
North America
Europe
Asia
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Economic Superpowers
The Triad
1.The United States 2.The EU (dominated by Germany), 3. Japan
Dominates foreigndirect investment and international trade
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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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Data
US Japan Germany
Population 301 Mill 127.5 Mill 82.5 Mill.
GDP growth
3.2% 2.2% 2.7%
GDP/
Capita$44,800 $33,100 $31,900
CPI
ECF
7.3 (20)
5
7.6 (17)
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8.0 (16)
19113
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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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Group Dynamics
Advantages – Benefits
1. Different viewpoints
2. Differences in expertise
3. Differences in training and experience
4. Cultural differences
5. Value differences
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Group Dynamics
Process losses1. Loafing2. Intra-group conflict3. Miscommunication4. Wrong leader5. In appropriate role and task
assignments6. Role ambiguity7. Role conflict8. Informal, dysfunctional norms
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Group Dynamics
Group management1.Roles
• What – List of tasks• Who – Is responsible for what, based on expertise• How - Enforcement
2.Timeline• When – Specific deadlines• What – Effective communication• Who - Commitment
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Group Dynamics
Group management3.Leadership
• Formal• Why• Expertise and role
4.Norms• Must be explicit• Agreed upon by all• Consequences of norm violations
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FINAL Termpaper List Countries and Presentation Dates
1. Finland Brigette, Andria, Andrew April 162. Germany Landon, Doug, Nicole April 163. Italy John Bender, Colin April 164. Spain Ermelinda, Kyle, Ben April 165. Mexico Thomas Rich, Debbie, Justin April 236. Brazil Megan, Fay, Australia, April 23
7. Peru John, Claudia, Yvonne April 238. Japan Brian, Vernon, Dani April 239. Philippines Kevin, Lewis, Kyle Aiton April 3010. Thailand Brenda, Kirk, Stephanie April 3011. China Rebecca, Brent, Robert April 3012. Australia Ray, Dustin, Jason April 30
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National Culture
Harry and Sally
in Saudi Arabia
Lack of prep -> ????? -> Loss of contract
What went wrong? Specific examples!
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What went wrong? Specific examples!
» Sabbath
» Flights
» Language - Taxi
» Coffee – Refusal – Rude
» Food
» Role of women
» Negotiation – Relationship-building - Time
Why did things go wrong?
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Why did things go wrong?
Lack of preparation
» Lack of Cultural Knowledge
» Lack of Cross-Cultural sensitivity
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Culture and International Management
Relevance
• Cultural Toughness – Cultural Distance
• Cross-cultural literacy and sensitivity
• Cost of doing bus in a particular culture
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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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Cultural Dimensions
All people have common life problems such as ….
Possible solutions to such problems …..
Different societies chose different solutions ….
Culture
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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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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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Cultural dimensions
Six basic dimensions describe the cultural orientations of societies
4. What is the primary mode of activity?Doing/being
5. What is the conception of space?Private/public
6. What is the temporal orientation?Future/present/past
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Characteristics of CultureValues and Norms
1. Social structure
2. Religion
3. Political philosophy
4. Economic philosophy
5. Education
6. Language
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1. Social structure
1. Social stratification
2. Class consciousness
3. Class membership is a function of ?
4. Social mobility
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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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• Islam 1.5 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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• Hinduism 900 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)134
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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
• 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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Culture
• Relevance– CBR Analysis– Cultural toughness– Cross-cultural literacy– Cultural sensitivity
• Three aspects1. Basic Assumptions - Six
2. Characteristics - Six
3. Measurement• Application of cultural dimensions
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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
1. Individualism/Collectivism
2. Power Distance
3. Uncertainty Avoidance
4. Masculinity/Femininity
5. Confucian Dynamism140
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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
• 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
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 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)
• 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
• 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
• websites146
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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 25147
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Applying Hofstede’s Dimensions
• Lawyers per 100,000 population– U.S.– Germany– Great Britain– Japan– Italy– France
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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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Laurent’s Research-See Adler
• 9 Western countries, US, 2 Asian countries• More than sixty common work situation (yes/no)
1. The main reason for hierarchical structure is so that everybody knows who has authority over whom
2. In order to have efficient work relationships, it is often necessary to bypass hierarchical lines
3. It is important for a manager to have at hand precise answers to most of the questions that his subordinates may raise about their work
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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 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 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
• Riding the Waves of Culture (1998; 2nd edition)
• Dimensions (see textbook):
1. Universalistic–Particularistic (Obligation)
2. Neutral-Affective (Emotional Orientation in Relationships)
3. Specific-Diffuse (Involvement in Relationships)
4. Achievement-Ascription (Legitimization of Power)
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Expatriate Assignment
• Why to use expatriates?Why to use expatriates?– Ethnocentric, polycentric, regiocentric, geocentricEthnocentric, polycentric, regiocentric, geocentric
• Culture ShockCulture Shock
• Selection Selection – KSA RequirementsKSA Requirements– KSA AssessmentKSA Assessment
• TrainingTraining– Type and rigor of trainingType and rigor of training
• Failure RatesFailure Rates– ReasonsReasons
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Four stages cross-cultural adaptation:
1. Honeymoon
2. Irritation and hostility
3. Gradual adjustment
4. Biculturalism
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The Expatriate Assignment
• Experience of uncertainty– Anticipatory and in-country adjustment
• Expatriate SelectionRelevant KSA’s?
• Technical, Managerial• Adaptiveness
MeasurementSMILE: Speciality; management ability; international flexibility;
language facility; endeavor (Matsushita)Spouse and Family - Failure rates
40% on average; lower for European and Japanese
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The Expatriate Assignment
Failure rates
Rosalie Tung: Reasons1. Selection is based on headquarter criteria2. Lack of training, preparation, orientation3. Alienation/lack of support from headquarters4. Inability to adapt to local culture/work enviro5. Problems with spouse, family6. Compensation7. Poor programs for career support/repatriation
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Training Techniques and Rigor of Training
• Area studies
• Culture assimilators
• Language training
• Sensitivity training
• Field experiences
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The Expatriate Assignment
Training– Cultural toughness – China, Brazil, India, Japan,
Russia, Mexico, Saudi Arabia, South Korea, France– Less than 1/3 of expatriates receive training– Pre-departure training, post-arrival training, reentry
training – Culture, language, everyday matters– Cross-cultural training to ease the adjustment to the
new environment by reducing “culture shock”: a state of disorientation and anxiety about not knowing how to behave in an unfamiliar culture
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The Expatriate Assignment
• Training – Examples
– ABB (Asea Brown Bovari) rotates 500 managers around the world .. Every two to three years
– PesiCo orientation program for foreign managers … one year at U.S. bottling division plants
– Honda of America Japanese language, culture, lifestyle training .. Tokyo up to 3 years
– GE engineers and managers must have global perspective .. Regular language and cross-cultural training
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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
• What are stereotypes?
• Why stereotypes?
• Good/bad?
• Exercise – Five jobs!
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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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Overall Attractiveness of a Country
• Trade-off between – Costs
– Benefits
– Risks
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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
– What is risk?
– What is economic risk?
– What is political risk?
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Useful website
www.buyusa.gov/nevada
Left tab: International Trade Links
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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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Political Risk
Characteristics of countries
with a higher likelihood for political risk:
1. Social unrest* (see below)
2. Demonstrations
3. Terrorism
*Social Unrest1. More than one ethnic nationality2. Competing ideologies battle for political control
3. High inflation and falling living standards4. Strikes
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Results of Social Unrest
Change in government and/or policy
Results of Political Change
Expropriation
Indigenization
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Risk Assessment
Euromoney Magazine’s Country Risk Ratings
Analytical Indicators: • political risk (20%) - measures stability and potential fall out
from instability• economic indicators and risk (20%)
Credit IndicatorsMarket Indicators
• Political Risk Yearbook
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Political Risk Data - Example
Dun & Bradstreet’s Guide to Doing Business around the World (textbook)
• Comparative Country Risk Rankings
• Overall Ratings: • Political Risk, • GDP Growth, Per Capita Income, • Trade Flow with the US, • Monetary Policy, • Trade Policy, • Protection of Property Rights, • Foreign Investment Climate
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Political Risk
• ONDD
• Office National Du Ducroirce
• www.ondd.be
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Risk Management
1. Integrative Approach
2. Protective/Defensive Approach
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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-run178
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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
Overall risk for an international company depends on the
polit. risk and characteristics of the firm.
Three primary factors to be considered:
1.Political risk type - Transfer risk/Operational Risk/Ownership risk
2.General investment type - Conglomerate/Vertical/ Horizontal
3. Specific Investment (1=most risky) - Sector (primary=1 /industrial=3/service=2) Technology (science=2/non-science=1) Ownership (wholly=1/partially owned=2)
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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 licenses181
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A Risky Country
1. unstable government
2. unstable economy
3. war/revolution/terrorism
4. unfriendly/hostile people
5. unacceptable customs/values/attitudes
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A Risky Company
1. type of product and/or service offered
2. type of industry
3. structure of ownership
4. level of technology
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Termpaper – Integration of course material
1. The purpose of your paper is to report the cost-benefits-risk associated with internationalizing into “your” country. What do you know about the cost, benefits, risk associated with “your” country?
2. The first section in your country analysis is an assessment of the external environment to determine cost-benefits-risk. What aspects of the environment will you review? What of the material that we have covered in class will you be using for that assessment?
3. What is the population size of “your” country? What is the GDP/capita?
4. How will you address the cultural aspects of “your” country? Is “your” country culturally tough for Americans?
5. We started a review of the internal environment of an international organization. You will be reporting on the components of the internal environment in businesses in your country and determine the associated cost-benefits-risk. Give examples of the issues that will have to be addressed in this section of the report.
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Integration of Course Material
Four components of the internal environment1. Behavior – Group and Individual
1. Leadership2. Motivation, Rewards, and Compensation
2. Processes1. Communication2. Decision-making3. HR processes
3. Structure1. Hierarchical versus open2. Formal versus informal
4. Organizational Culture1. Six dimensions – tight vs loose control, open vs closed etc
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Self-Assessment (Group) for Termpaper and Peer Evaluation
• Rubric provided to students
• Completed self-assessment - submitted when the termpaper is handed in
• Each group member evaluates each group member Peer Evaluation - Completed form to be submitted with the termpaper
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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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Strategic management
set of decisions and
subsequent actions
used to formulate and
implement strategies that will
optimize the fit between the organization and its environment
in an effort to achieve organizational effectiveness.
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Strategy and the Firm
Purpose of any business:
Provide products or services that are desired by society and, hence, to make a profit
Profit = Revenue - Cost
Profit = Volume * Price - Cost
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Profit
If the price the firm can charge for its output is greater than its costs of producing that output.
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Profit
• To do this, a firm must produce a product that is
valued by consumers.
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Value
• Thus the firm must engage in value creation.
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Value to Customer
• The price that consumers are willing to pay indicates the value/worth of the product to the consumer.
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Strategy
Porter, 1985
Strategy Model (Distinguish from Porter’s Diamond - National Competitive Advantage)
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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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• The firm is a value chain
• composed of a series of distinct
• value creation activities
Value creation activities
1. Primary activities
Production and marketing
2. Support activities
Materials management, R&D, Human resource management
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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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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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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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Location economies and/or experience economies:
– Basing each value creation activity that the firm performs
– at the location where economic, political, and cultural conditions,
– including relative factor costs,
– are more conducive to the performance of that activity.
– Consider transportation costs (weight-to-value ratio) and trade barriers.
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Strategy and Global Expansion• Firms that expand to international markets will gain greater
returns from their distinctive skills or core competencies.
• Core Competencies - Skills within the firm that competitors cannot easily match or imitate. Examples.
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Strategy and Global Expansion
Constrains on transferring core competencies result from the need for local responsiveness
Need for local responsiveness results from national differences in consumer tastes and preferences, business practices, distribution channels, competitive conditions, and government policies - these constrain the firm's ability to transfer core competencies and realize location economies.
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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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Strategic Predispositions
Ethnocentric:
strategic decisions are made at headquarters,
key jobs at both domestic and foreign operations
are held by headquarters management personnel (PCN's).
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Polycentric:
the MNC's subsidiaries are
treated as distinct national entities
with extensive decision-making autonomy (HCN's mane the foreign operations).
Geocentric:
tries to worldwide integrate business strategy and decision-making.
Regiocentric:
reflects the geographic structure of the MNC.
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Strategic Planning Process
– External Scanning and Internal Scanning (SWOT)
– Opportunities/Threats Strengths/Weaknesses
– Vision, Mission, Goals, Objectives, Strategies
Strategy Implementation
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Three Traditional Strategies
Multinational Strategy:
focus on cost reduction and product standardization that is marketed worldwide.
International Strategy:
limited local responsiveness, focus on transfer of valuable skills and products where indigenous competitors lack those skills and products.
Multidomestic Strategy:
like international but extensive local responsiveness.
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Pressures for Local Responsiveness
1. Differences in consumer tastes and preferences
2. Differences in infrastructure and traditional practices
3. Differences in distribution channels
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Privatization
• http://www.privatizationbarometer.net/
• Register but free
• Library – ask business librarian for help
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The Internal Environment of an International Organization
Organizational Culture
People
Processes
Structure
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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 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 cultureIn the workplace cultural differences are accounted for by work
practices.
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Dimensions of Organizational Culture
1. Process ↔ Results oriented
2. Tight ↔ Loose Control
3. Job ↔ Employee oriented
4. Parochial ↔ Professional oriented
5. Closed system ↔ Open system
6. Normative ↔ Pragmatic
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Culture and Org Characteristics
Structure Communication Rewards Decision-Making
Process
Results
Job
Employee
Tight
Loose
Parochial
Professional
Open
Closed
Normative
Pragmatic214
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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
Individual Behavior
P = f (A, M)
Motivation defined!
Homeostasis---applied to psychological needs
MotivationTheories --- Applicability across cultures??
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Behavior
MotivationTheories
Content Theories
Maslow’s Need Hierarchy
Two Factor Theory of Motivation
McClelland Achievement Motivation
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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
• 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
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
• 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
• Applicability?• Assumptions??• Behavior is a function of its consequences
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The External Environment
CULTURE
Multiple Economies
Multiple
Societies
Multiple Technological Environment
Multiple Political
Environment
The Internal Environment
People
Processes Structure
Business Strategy
Culture
Effectiveness
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Motivation Theories - Summary
Theory Main Attributes International Applicability
Maslow – Need Hierarchy
Herzberg – Two Factor Theory
McCelland – Learned Needs
Stacy Adams – Equity Theory
House – Goal Setting
Vroom – Expectancy
Reinforcement
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Motivation Theories - Summary
Theory Main Attributes International Applicability
Maslow - Need Hierarchy
Five needs With modification – order of needs
Herzberg – Two Factor Theory
Hygiene factors – work context and Motivators – work content
With modification – best in individualistic environment
McCelland – Learned Needs
Three needs With modification – Collectivistic vs individualistic
Stacy Adams – Equity Theory
Social comparisons With modification – does not work in collectivistic culture
House – Goal Setting Goal commitment, difficulty, MBO
With modification – best in ST environment
Vroom – Expectancy Effort, performance, outcome, expectancies,
instrumentalities, valence
Applicable – all factors are explicit and can be determined based on culture
Reinforcement Behavior is a function of its consequences
Applicable – very BASIC model
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The Meaning of Work
• Tied to economic necessity
• What else?
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The Meaning of Work
• Six functions of work: 1. needed income,
2. interesting & satisfying,
3. contact with others,
4. serve society,
5. keeps one occupied,
6. status and prestige
These may be satisfied through other aspects of life
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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
• Britain (lowest), • Germany, • Netherlands, • Belgium, • USA, • Israel, • Japan
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Work Centrality
8.0
7.75
7.5
7.25
7.0
6.75
6.5
6.25
6.0
Japan
(former) Yugoslavia
Israel USA
Belgium
Netherlands Germany
Britain
7.78
7.30
7.106.94
6.816.69
6.67
6.36
N = 3144
N = 521
N = 893N = 996N = 446
N = 976N = 1276
N = 409
Work ismoreimportantand morecentral inlife
Mean workcentrality score
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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
Which Hofstede dimension?
Types of leadership styles: autocratic, participative, group
authoritarian, democratic, laissez-faire
Theory X, Theory Y
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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
Country N Charisma Team Self- Part. Humane Auton. Protective
Austria 169 6.03 5.74 3.07 6.00 4.93 4.47Brazil 264 6.01 6.17* 3.50 6.06* 4.84 2.27China 160 5.57 5.57 3.80 5.05 5.18 4.07Denmark 327 6.01 5.70 2.82 5.80 4.23 3.79England 168 6.01 5.71 3.04 5.57 4.90 3.92India 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 3.67Mexico 327 5.66 5.75 3.86* 4.64 4.71 3.86Russia 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)235
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Culturally-Contingent Beliefs - Effective Leadership Style
• Americans appreciate two kinds of leaders. – They seek empowerment from leaders who grant autonomy
and delegate authority to subordinates. – They also respect the bold, forceful, confident, and risk-
taking leader, as personified by John Wayne.
• The Dutch place emphasis on egalitarianism and are skeptical about the value of leadership. – Terms like leader and manager carry a stigma. If a father is
employed as a manager, Dutch children will not admit it to their schoolmates.
• Arabs worship their leaders – as long as they are in power!
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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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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:
task-related selection
recognition of differences
super-ordinate goals
equal power
mutual respect
feedback
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Hofstede and Internal Environment
UNC POW MAS/F IND/C ST/LT
Motivation and Rewards
Leadership
Decision Making
Communication
Org. Culture
Structure
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Communication: Macro - Level
• Communication Flows
– upward/downward
– formal/informal
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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 - Level
• Interpersonal communication Process–encoding–message–decoding
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Communication: Micro - Level
Communication barriers– language
– perception - stereotyping
– culture
– nonverbal communication
– projected similarity
– parochialism
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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
• 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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Cultural Noise
Behavior Attribution
American: “How long will it take to finish this report?”
American: I asked him to participate.
Greek: He is the boss. Why doesn’t he tell me?
Greek: “I don’t know. How long should it take?”
American: He refuses to take responsibility.
Greek: I asked for an order.
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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
• 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
• Attitudes– Stereotyping
• Social organization– e.g., United Auto Workers (UAW)
• Thought patterns– The meaning of double lines
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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 Communication
• Nonverbal communication– Kinesic behavior (e.g., sticking out the tongue in China)– Proxemics (e.g., the corner office, closeness when talking)– Paralanguage (e.g., the sound of silence)– Object language (e.g., monochronic vs. polychronic)
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Comparative Management in Focus: Communicating with
Arabs
• Arabs are quick to “sound off”
• Communication is built on friendship, honor, hospitality
• Arabs are high-contact communicators
• Time is key in communication process
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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 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
Non-verbal communication– Body Language– Emblems– Illustrators– Affect Display– Regulators/Adaptors– Space (proxemics)– Touch– Voice– Dermal Code
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Decision-Making
Quality of decisions
Organizational Effectiveness
Differences across Cultures?
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DM Process and Culture
1. Problem Recognition
2. Information Search
3. Alternative Generation
4. Choice
5. Implementation
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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
• 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
• 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
• 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
• 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
• 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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Comparison of Negotiation Styles
Japanese North American Latin American
Hide emotions Deal impersonallyEmotionally passionate
Subtle power playsLitigation, not conciliation
Great power plays
Step-by-step approachMethodical organization
Impulsive, spontaneous
Group good is aim Profit is aimGroup/individ-ual good is aim
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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• 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
• 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
• 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
• 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
• 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 Chinese
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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 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 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
• Instrumental oriented
• Expressive oriented
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Low-context, High-context Sources of Conflict
Low-context High-context
WhyAnalytic, linear logic Synthetic, spiral logic
When Individualistic oriented violations
Group oriented violations
WhatRevealment, confrontational Concealment, non-
confrontational
HowExplicit, open, direct Implicit, ambiguous, indirect
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The Influence of Culture on Decision Making
• Individualism vs. collectivism
• Objective vs. subjective approach
• Risk tolerance
• Comfort with unfamiliar solutions
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Approaches to Decision Making
• Utilitarianism vs. moral idealism
• Autocratic vs. participative leadership
• Speed of decision making
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Summary of Cultural Variables in Decision Making
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Comparative Management in Focus: Decision-making in Japan
• Wa
• Amae
• Shinyo
• Ringi
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Comparative Management in Focus: Decision-making in Japan
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Course SummaryGlobal Economic System – MACRO
– When and what
– Institutions
Companies make decisions with respect to specific countries - MICRO
==> Europe? Asia? Latin America? Australia?
• Specific countries?
Internationalization Strategy: Generalizations??
– Cost … Management - cultural differences ...
• religion, education; Hofstede
– Benefits …. Market growth (pop size; income) and Value creation activities (labor cost, exp.)
– Risk .... South America? Asia? Europe? 291
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The International Organization
The External Environment
CULTURE
Multiple Economies
Multiple
Societies
Multiple Technological Environment
Multiple Political
Environment
The Internal Environment
People
Processes Structure
Business Strategy
Culture
Effectiveness
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Managing the International Organization1.External Environment ... Porter Diamond; Status Quo;
Culture (Hofstede)
2.Strategy ... Value creation activities; Location economies; Market entry
3.Internal Environment ...
Behavior: Individual (Motivation) and Group (Leadership; Multicultural Teams)
Processes: Communication -- Macro (communication flow); Micro (communication process); Nonverbal communication; Decision Making; Negotiation; HR Processes (The Expatriate Assignment).
Organizational Culture – six dimensions;
Structure – Macro and Micro – power distance;
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India
Where India has the edge (in comparison to China):
LANGUAGE - English gives India a big edge in IT Services and Back-Office work.
CAPITAL MARKETS - Private firms have readier access to funding. China favors state sector
LEGAL SYSTEMS - Contract law and copyright protection are more developed than in China.
DEMOGRAPHICS - Some 53% of India's population in under age 25, vs. 45% in China.
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External Environment
Relevant variables: GDP GDP/capita GDP growth and factor endowments; demand conditions
The GDP (gross domestic product): The value of the final output of goods and services produced by the residents of an economy (World Bank). There are several methods to calculate the GDP. The PPP (purchasing power parity) method reflects the cost of a basket of goods in two countries in their local currencies.
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ISA Analysis – Fall 2008
1. The Global Update report provides a useful overview of current political and economic issues.
a) Zimbabwe - summarize the current political and economic challenges in Zimbabwe.– Robert Mugabe, President, only ruler since 1980– Pseudo-Democracy, contested election in Spring 2008 – No clear winner– Mugabe self-proclaimed winner -> violence– White population 1% but owns 70% of land -> Mugabe took away land– African Union leaders do NOT put enough pressure on Mugabe– Agricultural production and inflation are severe economic issues– Solutions: stay in office, share power with opponentTsvangirai, foreign military will
interveneb) Vietnam - Summarize the challenges and the predictions for Vietnam’s economy.– GDP growth 8.5% to 6.5% AND 20% inflation– Domestic market; foreign markets (exports)– Long term good – low cost manufacturing, hi-tech programs, relatively stable
government
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ISA Analysis – Fall 2008
1. The Global Update report provides a useful overview of current political and economic issues.
c) African countries tend to not be part of the “new” global economy. What do you think are a couple of primary reasons for that? Nigeria, South Africa, Kenya, and Zimbabwe – compare.
– Lack of democratic political system and free-market economic system.– Lack of infrastructure– Corruption– AIDS and other health issues– Lack of education – Culture?Religion?d) Asian countries such as Thailand, Vietnam, and the Philippines What do you think do
these countries have to offer to foreign investors that China is lacking? Compare.– All have (except Vietnam) have more economic freedom than China– All have high corruption BUT also high GDP growth – Cultural differences – see religion– Attitude towards U.S. companies
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ISA Analysis – Fall 2008
Table 1: Compare African Countries
Table 2: Compare Asian Countries
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ISA Analysis – Fall 2008
2. Venezuela, Colombia, and Bolivia. Summarize current activities related to America’s conflict with these countries. What do these countries have to offer that may be of interest to U.S. businesses? What is the
CPI ranking for each country? • Colombia – Drugs, FARC, • Bolivia – Drugs – coca, natural gas, nationalization• Venezuela -Hugo Chavez
– Farmers, Colombia, Constitution, Bolivia– U.S. – oil 15%– Nationalization electricity and telephone– UN Speech 2006
– CPI – 162 - Venezuela, 68 - Colombia, 105 - Bolivia
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ISA Analysis – Fall 2008
3. a) Which countries belong to the EU? Only some of the 27 EU members are also members of the EMU (European Monetary Union). Which countries belong to the EMU?
European Union (EU): Austria, Belgium, Bulgaria, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, The Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden, and United Kingdom. European Monetary Union (EMU) Ireland, Belgium, France, Spain, Portugal, Finland, The Netherlands, Germany, Luxembourg, Austria, and Italy.
b) Italy has the worst CPI ranking of the Western EU countries. What is the current issue related to that reported in the ISA Global Update? Berlusconi, immunity from law for government officials;
c) Russia is not a member of the EU but is of critical importance to the economies of the European countries. Why? Oil and natural gas; Gazprom
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ISA Analysis – Fall 2008
4. OPEC - Organization of Petroleum Exporting Countries. Algeria, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, United Arab Emirates (UAE), Indonesia, Ecuador, Angola, and Venezuela (http://www.opec.org/aboutus/index.htm). The OPEC Countries coordinate their oil production policies in order to help stabilize the oil market and help oil producers achieve a reasonable rate of return on their investments. It is also designed to ensure that oil consumers continue to receive stable supplies of oil (http://www.opec.org/aboutus/functions/functions.htm).
5. The World Economic Forum (WEF) has a 3-fold vision aiming to be the foremost organization which builds and energizes leading global communities; the creative force shaping global, regional, and industry strategies; the catalyst of choice for its communities when undertaking global initiatives to improve the state of the world. WEF is a Geneva-based non-profit foundation best known for its annual meetings bringing together top business leaders, international political leaders, selected intellectuals and journalists to discuss the most pressing issues facing the world (http://www.weforum.org/en/about/Our%20Organization/index.htm). Forum Members are companies that are driving the world economy forward. The typical Member Company is a global enterprise with more than 5 billion dollars in turnover, although the latter varies by industry and region. The Forum has 1,000 member companies Group of Seven (G7) consists of Canada, France, Germany, Italy, Japan, United Kingdom, and the United States of America (Russia). G7 is an international forum for governments.
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ISA Analysis – Spring 2008
• U.S. Economic Slowdown– Indicators
• Housing Market• Lowering of interest rates• GDP growth• Unemployment
– Developed Countries• Same effect
– Less Developed Countries• Export dependence – Central and Eastern Europe; Mexico• NOT – India and China – strong domestic demand
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ISA Analysis
• Venezuela – Recent events – Hugo Chavez– Farmers– Colombia– Constitution– Government restructuring– Bolivia– U.S. – oil 15%– Nationalization electricity and telephone– Television station– UN Speech 2006
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ISA Report
• Catholicism in Latin America – Table
• Turkey – EU Opposition– Kurds – Human Rights– Economic and political requirements– Religion – Islam– Culture and location– Cyprus
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ISA Report
• Kenya – Table
• Tata Motors – $7.6 bill revenue and 22,000 employees– Commercial vehicles– 18% international – Africa, Middle East, Europe, Australia, S and SE
Asia
• Japan– Declining domestic car market– Oil prices– Eco growth
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