international management badm 729 dr. yvonne stedham

International International ManagementManagement

BADM 729BADM 729

Dr. Yvonne Dr. Yvonne StedhamStedham

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International ManagementInternational Management

Review -- Session #1 and 2Review -- Session #1 and 2– Personal IntroductionPersonal Introduction– Course IntroductionCourse Introduction

Management PrinciplesManagement Principles Content OverviewContent Overview

– QuestionsQuestions What is different about an international organization?What is different about an international organization? Can you apply what you have learned about “running or managing a business” Can you apply what you have learned about “running or managing a business”

in an international context?in an international context? Expect to learn?Expect to learn?

– FrameworkFramework

Format Overview (Syllabus) – Questions? Quiz vs Readings? Format Overview (Syllabus) – Questions? Quiz vs Readings? Termpaper Sign-upTermpaper Sign-up

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..OrganizationsOrganizations and and Organizational EffectivenessOrganizational Effectiveness

What is an organization? Why do organizations exist?What is an organization? Why do organizations exist?

– When is an organization effective? When is an organization effective?

– Efficiency vs effectiveness?Efficiency vs effectiveness?

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..OrganizationsOrganizations and and Organizational EffectivenessOrganizational Effectiveness

What is an organization? Why do organizations exist?What is an organization? Why do organizations exist?– Organizations = PeopleOrganizations = People

– Mission, goals, objectives --- concerted effort; efficiency; Mission, goals, objectives --- concerted effort; efficiency; effectiveness.effectiveness.

When is an organization effective? When is an organization effective? – Distinguish between efficiency and effectiveness. Distinguish Distinguish between efficiency and effectiveness. Distinguish

effectiveness measures for the short, intermediate, and long run.effectiveness measures for the short, intermediate, and long run.

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Measurement of organizational Measurement of organizational effectivenesseffectiveness

– Long run? Long run?

– Intermediate run?Intermediate run?

– Short run?Short run? A A contingency approachcontingency approach to to

managementmanagement

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Measurement of organizational Measurement of organizational effectivenesseffectiveness

– Long run: Long run: SurvivalSurvival

– Intermediate run: Intermediate run: Adaptation, Adaptation, ResponsivenessResponsiveness

– Short run:Short run: Productivity, Productivity, EfficiencyEfficiency

A A contingency approachcontingency approach to management (as opposed to to management (as opposed to

“administrative theory” of management): It’s management’s task to “administrative theory” of management): It’s management’s task to create the best possible fit between the external and internal create the best possible fit between the external and internal environments of the organization and must ensure internal consistency environments of the organization and must ensure internal consistency between the organization’s elements.between the organization’s elements.

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The OrganizationThe 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 OrganizationThe International OrganizationThe External Environment

Culture

MultipleEconomy

Multiple SocialEnvironment

TechnologicalEnvironment

PoliticalEnvironment


People

Processes Structure

BusinessStrategy

Culture

Effectiveness

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Current InformationCurrent Information

National Public Radio (NPR)National Public Radio (NPR) FM 88.7, 90.5FM 88.7, 90.5

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The International OrganizationThe International Organization

– What is “internationalization”?What is “internationalization”?– Reasons for going internationalReasons for going international– Types of international organizationsTypes of international organizations– Stages of Development to an International O.Stages of Development to an International O.– Effectiveness of InternationalizationEffectiveness of Internationalization

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InternationalizationInternationalization

is the process by which firms is the process by which firms

– increase their awareness increase their awareness

– of the influence of international activities on their of the influence of international activities on their future future

– and establish and establish

– and conduct and conduct

– transactions with firms from other countries.transactions with firms from other countries.

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Reasons for becoming an Reasons for becoming an international organizationinternational organization

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

– 1. A desire for continued growth. 1. A desire for continued growth.

– 2.2. Domestic market saturationDomestic market saturation

– 3.3. The potential to now exploit a new technological The potential to now exploit a new technological advantageadvantage

– 4.4. Preferable suppliers (quality, cost)Preferable suppliers (quality, cost)

– 5.5. Labor market (supply, quality, cost)Labor market (supply, quality, cost)

– 6.6. Government involvement/restrictions Government involvement/restrictions

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– 7.7. Reducing distance to customers (cost)Reducing distance to customers (cost)

– 8.8. Tariff barriersTariff barriers

– 9.9. Increased foreign competition in home countryIncreased foreign competition in home country

– 10.10. Reduce general business risk by diversifyingReduce general business risk by diversifying

into other countriesinto other countries

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Types of "international" Types of "international" organizationsorganizations

– InternationalInternational organization:Any organization that exports organization:Any organization that exports to/imports from organizations in other countries with primarily to/imports from organizations in other countries with primarily domestic production - domestic production - MMultidomestic.ultidomestic.

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

– Global Global organization: An enterprise structured so that national organization: An enterprise structured so that national boundaries become blurred. The best people are hired boundaries become blurred. The best people are hired irrespective of national origin.irrespective of national origin. Transnational Transnational

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– Graphic RepresentationGraphic Representation

Headquarters – Subsidiary RelationshipHeadquarters – Subsidiary Relationship

Level of Global ParticipationLevel of Global Participation

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The Relationship between Level of The Relationship between Level of Internationalization and Firm PerformanceInternationalization and Firm Performance

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

– Degree of internationalization is measured as "sales generated Degree of internationalization is measured as "sales generated by foreign affiliates" and MNE (multinational enterprise) by foreign affiliates" and MNE (multinational enterprise) performance is measured as "profit to sales" or "profit to performance is measured as "profit to sales" or "profit to assets".assets".

– Performance is at a max. at a level of Performance is at a max. at a level of internationalization of 60 to 80% and then decreases with internationalization of 60 to 80% and then decreases with continuing internationalizationcontinuing internationalization

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Stages Model of Stages Model of InternationalizationInternationalization

Outward looking perspective: activities/issues Outward looking perspective: activities/issues related to the other countries (e.g., exporting) vs related to the other countries (e.g., exporting) vs an inward perspective (e.g., importing)an inward perspective (e.g., importing)

DescriptiveDescriptive

Reflects the commonly observed pattern of Reflects the commonly observed pattern of increased commitment to international businessincreased commitment to international business

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Four Four stages:stages:– 1.indirect/ad hoc exporting - perhaps from 1.indirect/ad hoc exporting - perhaps from

unsolicited export ordersunsolicited export orders

– 2.active exporting and/or licensing2.active exporting and/or licensing

– 3.active exporting, licensing, and joint equity 3.active exporting, licensing, and joint equity investments in foreign manufacture investments in foreign manufacture

– 4.full-scale multinational marketing and production4.full-scale multinational marketing and production

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An International OrganizationAn International Organization– Definition:Definition:

– operates in multiple environments, home country and operates in multiple environments, home country and one or more host countries, has foreign sales, and a one or more host countries, has foreign sales, and a nationality mix of managers and owners.nationality mix of managers and owners.

– Characteristics:Characteristics:

– 1.1. centralized ownershipcentralized ownership

– 2.2. common pool of resourcescommon pool of resources

– 3.3. global, integrated strategyglobal, integrated strategy

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Review Review

– Types of international organizationsTypes of international organizations Criterion -- Level of Global ParticipationCriterion -- Level of Global Participation International/Multi-DomesticInternational/Multi-Domestic MultinationalMultinational Transnational/GlobalTransnational/Global

– Stages of Development to an International O.Stages of Development to an International O. Descriptive ModelDescriptive Model

– Effectiveness of InternationalizationEffectiveness of Internationalization Relationship between extent of internationalization and performanceRelationship between extent of internationalization and performance

– Headquarters of well-known companies (Exercise)Headquarters of well-known companies (Exercise)

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External EnvironmentExternal Environment: Theory: Theory

– CompetitivenessCompetitiveness

– International CompetitivenessInternational Competitiveness

– Porter DiamondPorter Diamond: The major : The major determinantsdeterminants of national of national competitive advantage - why some nations succeed competitive advantage - why some nations succeed and others fail in international competition. Porter's and others fail in international competition. Porter's research is based on studying 100 industries in 10 research is based on studying 100 industries in 10 nations.nations.

- Reading: Competitive Advantage of Nations, Porter- Reading: Competitive Advantage of Nations, Porter Gabbye, Lance, DanGabbye, Lance, Dan

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PORTER DIAMONDPORTER DIAMOND

National Competitive AdvantageNational Competitive Advantage Four broad attributesFour broad attributes of a nation shape the of a nation shape the

environment in which local firms compete, and these environment in which local firms compete, and these attributes promote or impede the creation of attributes promote or impede the creation of competitive advantage:competitive advantage:

– 1. Factor endowments or conditions1. Factor endowments or conditions

– 2. Demand conditions2. Demand conditions

– 3. Related and supporting industries3. Related and supporting industries

– 4. Firm strategy, structure, rivalry4. Firm strategy, structure, rivalry

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Porter’s DiamondPorter’s Diamond

– Why a nation achieves success in a particular industry?Why a nation achieves success in a particular industry? Why Japan -- automobile, camerasWhy Japan -- automobile, cameras Why SUI -- precision instruments, pharmaceuticalsWhy SUI -- precision instruments, pharmaceuticals Why Germany and U.S. -- chemicalWhy Germany and U.S. -- chemical

– Diamond of four mutually reinforcing factorsDiamond of four mutually reinforcing factors– 1. Factor Endowment -- Basic, Advanced (Nokia, Ericsson) 1. Factor Endowment -- Basic, Advanced (Nokia, Ericsson) – 2. Demand Conditions -- Quality, Innovativeness2. Demand Conditions -- Quality, Innovativeness– 3. Related Industries -- Suppliers (U.S. - semiconductor/comp)3. Related Industries -- Suppliers (U.S. - semiconductor/comp)– 4. Strategy, Structure, Rivalry -- Executive background4. Strategy, Structure, Rivalry -- Executive background– => Domestic environment encourages the development of => Domestic environment encourages the development of

characteristics that make company internationally competitivecharacteristics that make company internationally competitive

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Rugman-Verbeke Model:Rugman-Verbeke Model:

– 1. 1. Firm specificFirm specific advantages: relative to advantages: relative to competitors -- technological experience, competitors -- technological experience, salesforce, customer loyaltysalesforce, customer loyalty

– 2. 2. Country specificCountry specific advantages: source of advantages: source of advantage lies outside the firm -economic advantage lies outside the firm -economic (labor - qual., quan., cost; natural resources); - (labor - qual., quan., cost; natural resources); - non-economic (social, cultural); -governmental non-economic (social, cultural); -governmental (property rights, free enterprise)(property rights, free enterprise)

–Compare to Porter’s modelCompare to Porter’s model

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References for PorterReferences for Porter

1. Michael Porter, 1990. The Competitive 1. Michael Porter, 1990. The Competitive Advantage of Nations. Free PressAdvantage of Nations. Free Press

2. M. Grant, 1991. The Competitive 2. M. Grant, 1991. The Competitive Advantage of Nations: An Assessment. Advantage of Nations: An Assessment. Strategic Management JournalStrategic Management Journal, 12, 535-548, 12, 535-548

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External Environment: Theory - Trade External Environment: Theory - Trade AgreementsAgreements

Why? Protectionism? Pro /ConWhy? Protectionism? Pro /Con Trade AreaTrade Area

– Common tariffs among members -- individual tariffs with non-members. Common tariffs among members -- individual tariffs with non-members. NAFTA, ASEAN (Brunei, Indonesia, Malaysia, Philippines, Singapore, Thailand, NAFTA, ASEAN (Brunei, Indonesia, Malaysia, Philippines, Singapore, Thailand, Vietnam - 420 Mill)Vietnam - 420 Mill)

Customs UnionCustoms Union– Common tariffs for non-members. ANDEAN (Bolivia, Ecuador, Peru, Columbia, Common tariffs for non-members. ANDEAN (Bolivia, Ecuador, Peru, Columbia,

Venezuela)Venezuela) Common MarketCommon Market

– Free flow of goods and labor. Mercosur (Brazil, Paraguay, Uruguay, Argentina, Free flow of goods and labor. Mercosur (Brazil, Paraguay, Uruguay, Argentina, Chile) Chile)

Economic UnionEconomic Union– European Union -- 15 Members; Euro; European Parliament, Court of JusticeEuropean Union -- 15 Members; Euro; European Parliament, Court of Justice

Political UnionPolitical Union

Increasing economic integrationIncreasing economic integration

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The External EnvironmentThe External Environment

Political EnvironmentPolitical Environment• Form of governmentForm of government• Political stabilityPolitical stability• Foreign policyForeign policy• State companiesState companies• Role of militaryRole of military• Level of terrorismLevel of terrorism• Restrictions on Restrictions on

imports/exportsimports/exports

Economic EnvironmentEconomic Environment• Economic systemEconomic system• Stage of developmentStage of development• Economic stabilityEconomic stability• GNPGNP• Int’l financial standingInt’l financial standing• Monetary/fiscal policiesMonetary/fiscal policies• Foreign investmentForeign investment

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The External EnvironmentThe External Environment

Regulatory EnvironmentRegulatory Environment• Legal systemLegal system• Prevailing int’l lawsPrevailing int’l laws• Protectionist lawsProtectionist laws• Tax lawsTax laws• Role of contractsRole of contracts• Protection for Protection for

proprietary propertyproprietary property

Technological Technological EnvironmentEnvironment• Level of technologyLevel of technology• Availability of local Availability of local

technical skillstechnical skills• Technical requirements Technical requirements

of countryof country• Transfer of technologyTransfer of technology• InfrastructureInfrastructure• Environmental Environmental

protectionprotection

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External Environment: External Environment: Current Developments- OverviewCurrent Developments- Overview

Relevant variables: GDP ; GDP/capita ; GDP Relevant variables: GDP ; GDP/capita ; GDP growth; factor endowments; demand conditionsgrowth; factor endowments; demand conditions

The GDP (gross domestic product): The GDP (gross domestic product):

The value of the final output of goods and services The value of the final output of goods and services produced by the residents of an economy (World Bank). produced by the residents of an economy (World Bank). There are several methods to calculate the GDP. The There are several methods to calculate the GDP. The PPP (purchasing power parity) method reflects the cost PPP (purchasing power parity) method reflects the cost of a basket of goods in two countries in their local of a basket of goods in two countries in their local currencies.currencies.

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The top 7 economies (PPP GDP) ‘90s: The top 7 economies (PPP GDP) ‘90s:

US ($ 7.1 trillion); China ($ 3.8); Japan ($ 2.6); Germany US ($ 7.1 trillion); China ($ 3.8); Japan ($ 2.6); Germany ($ 1.6); India ($ 1.5); France ($ 1.4); Italy ($ 1.0)($ 1.6); India ($ 1.5); France ($ 1.4); Italy ($ 1.0)

The next 7 economies: UK ($ .9); Brazil ($ .85); The next 7 economies: UK ($ .9); Brazil ($ .85); Indonesia ($ .7); Russia ($ .68); Canada ($ .60); Mexico Indonesia ($ .7); Russia ($ .68); Canada ($ .60); Mexico ($ .58); Spain ($ .57)($ .58); Spain ($ .57)

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The wealthiest nations The wealthiest nations

GDP per capita: Luxembourg ($37,930); US ($26,980); GDP per capita: Luxembourg ($37,930); US ($26,980); Switzerland ($25,860); Kuwait ($23, 790); Sweden Switzerland ($25,860); Kuwait ($23, 790); Sweden ($23,630); Hong Kong ($22,950); Singapore ($ 22,770); ($23,630); Hong Kong ($22,950); Singapore ($ 22,770); Japan ($22,110); Norway ($21,940); Belgium ($21,660); Japan ($22,110); Norway ($21,940); Belgium ($21,660); Austria ($21,250); Denmark ($21,230); Canada Austria ($21,250); Denmark ($21,230); Canada ($21,130); France ($21,030); Iceland ($20,460); Germany ($21,130); France ($21,030); Iceland ($20,460); Germany ($20,070)($20,070)

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Largest cities and cost of living index:Largest cities and cost of living index:

Tokyo 26 mill (150); New York 17 mill (100); Sao Paulo Tokyo 26 mill (150); New York 17 mill (100); Sao Paulo 16 mill (100); Mexico City 15 mill (75); Shanghai 15 mill 16 mill (100); Mexico City 15 mill (75); Shanghai 15 mill (100); Bombay 15 mill (50); Los Angeles 13 mill (100)(100); Bombay 15 mill (50); Los Angeles 13 mill (100)

Largest populations: Largest populations:

China 1.2 bill; India 900 mill; US 258 mill; Indonesia 187 China 1.2 bill; India 900 mill; US 258 mill; Indonesia 187 mill; Brazil 156 mill; Russia 148 mill; Japan 124 mill; mill; Brazil 156 mill; Russia 148 mill; Japan 124 mill; Pakistan 122 mill;Pakistan 122 mill;

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External Environment: External Environment: Current Developments - RegionsCurrent Developments - Regions

International Investment International Investment

and Tradeand Trade

Level of International ActivitiesLevel of International Activities

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Major RegionsMajor Regions North AmericaNorth America

– United States -United States - which industries most internationally which industries most internationally active? Why?active? Why?

– Mexico -Mexico - wage rate maquiladora industry (1965)wage rate maquiladora industry (1965)

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– EuropeEurope delayed differentiationdelayed differentiation

acquisitions/alliances acquisitions/alliances

EU -EU -15 member countries: Belgium, Britain, 15 member countries: Belgium, Britain, Denmark, France, Germany, Greece, Ireland, Denmark, France, Germany, Greece, Ireland, Italy, Luxembourg, The Netherlands, Portugal, Italy, Luxembourg, The Netherlands, Portugal, Spain, Finland, Sweden, AustriaSpain, Finland, Sweden, Austria

EU – The Euro EU – The Euro

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European UnionEuropean Union

The European CommissionThe European Commission The Council of Ministers (counterbalance to The Council of Ministers (counterbalance to

Commission)Commission) The European ParliamentThe European Parliament The European Court of JusticeThe European Court of Justice

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European UnionEuropean Union

What kind of trade agreement? Governance?What kind of trade agreement? Governance? The European CommissionThe European Commission

– proposes policies and legislationproposes policies and legislation– responsible for the administration of the EUresponsible for the administration of the EU– ensures - provisions of the EU treaties+the decisions of ensures - provisions of the EU treaties+the decisions of

the other institutions are properly implementedthe other institutions are properly implemented– one rep per country(two for the 5 larger countries)one rep per country(two for the 5 larger countries)– represent, protect, further the European interest + its represent, protect, further the European interest + its

members do not represent or take orders from their members do not represent or take orders from their national governmentsnational governments

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– Eastern EuropeEastern Europe -- Break-up of The Soviet Union Break-up of The Soviet Union

(Dec 1991)(Dec 1991)

- - Russia (glasnost, perestroika)Russia (glasnost, perestroika)

- - The Ukraine The Ukraine

-- Czech RepublicCzech Republic

-- PolandPoland

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– AsiaAsia JapanJapan

– MITI (Ministry of International Trade and Industry)MITI (Ministry of International Trade and Industry)

– keiretsus (chaebols in South Korea)keiretsus (chaebols in South Korea)

– Current economic conditionsCurrent economic conditions

ChinaChina

– GDP growth of 10% GDP growth of 10%

– low wage rateslow wage rates

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– Newly industrialized countries: Newly industrialized countries: The FourThe Four TigersTigers

– South Korea, Hong Kong,Singapore, TaiwanSouth Korea, Hong Kong,Singapore, Taiwan

Baby TigersBaby Tigers

– Thailand, Malaysia, IndonesiaThailand, Malaysia, Indonesia

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– Less developed countriesLess developed countries Large population, high unemployment, inflation, Large population, high unemployment, inflation,

low or negative economic growth, low literacy low or negative economic growth, low literacy raterate

India, Arab Countries, Africa, Central and South AmericaIndia, Arab Countries, Africa, Central and South America

Major economic regions:Major economic regions: North America,Europe, AsiaNorth America,Europe, Asia

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Economic SuperpowersEconomic Superpowers The Triad - The Golden Triangle: The Triad - The Golden Triangle:

– The United States, the EU(dominated by Germany??), The United States, the EU(dominated by Germany??), JapanJapan

Dominates foreign direct investment and Dominates foreign direct investment and international tradeinternational trade

FDI ClustersFDI Clusters

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External Environment: National External Environment: National CultureCulture

– Harry and Sally in Saudi ArabiaHarry and Sally in Saudi Arabia What went wrong?What went wrong?

Why did things go wrong?Why did things go wrong?

What were the consequences of these What were the consequences of these mistakes?mistakes?

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Culture and International ManagementCulture and International Management

– Relevance:Relevance: Cross-cultural literacyCross-cultural literacy

Cost of doing bus in a particular cultureCost of doing bus in a particular culture

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Internationalization DecisionInternationalization Decision

Benefits from internationalization into a Benefits from internationalization into a specific countryspecific country

Cost associated with internationalization into Cost associated with internationalization into a specific countrya specific country

Risk associated with internationalization into Risk associated with internationalization into a specific country.a specific country.

Decision = f (benefit-cost-risk tradeoff)Decision = f (benefit-cost-risk tradeoff)

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Cultural dimensionsCultural dimensions

All peoples have common life problems (?) – choose different solutions All peoples have common life problems (?) – choose different solutions

Six basic dimensions Six basic dimensions describedescribe the cultural orientations of societies the cultural orientations of societies What is the nature of people?What is the nature of people? What is a person's relationship to nature?What is a person's relationship to nature? What is a person's relationship to other people?What is a person's relationship to other people? What is the primary mode of activity?What is the primary mode of activity? What is the conception of space?What is the conception of space? What is the temporal orientation?What is the temporal orientation?

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Cultural dimensionsCultural dimensions

Six basic dimensions Six basic dimensions describedescribe the cultural orientations of societies the cultural orientations of societies What is the nature of people? Good/evil/changeWhat is the nature of people? Good/evil/change What is a person's relationship to nature?What is a person's relationship to nature?

– Dominant/harmony -subjugationDominant/harmony -subjugation

What is a person's relationship to other people?What is a person's relationship to other people?– Individualistic/group – hierarchical/lateralIndividualistic/group – hierarchical/lateral

What is the primary mode of activity?What is the primary mode of activity?– Doing/beingDoing/being

What is the conception of space?What is the conception of space?– Private/publicPrivate/public

What is the temporal orientation?What is the temporal orientation?– Future/present/pastFuture/present/past

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Determinants of Culture Determinants of Culture (Values and Norms)(Values and Norms)

1.1. Social structureSocial structure– Social stratification (class consciousness)Social stratification (class consciousness)

Class membership is a function of ??Class membership is a function of ??

– Social mobilitySocial mobility

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2.2. ReligionReligion - - ChristianityChristianity 1 bill; 20%; Protestant work ethic 1 bill; 20%; Protestant work ethic

IslamIslam 750 mill; all embracing way of life, governing 750 mill; all embracing way of life, governing the totality of a Muslim being; prayer five times a the totality of a Muslim being; prayer five times a day; free enterprise/hostile to socialist ideals - day; free enterprise/hostile to socialist ideals - earning a legitimate profit through commerce and earning a legitimate profit through commerce and trade; Koran; contractual obligations, keeping one's trade; Koran; contractual obligations, keeping one's word)word)

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Hinduism Hinduism 500 mill; spiritual achievement; nirvana500 mill; spiritual achievement; nirvana

BuddhismBuddhism 250 mill; Central and Southeast Asia, 250 mill; Central and Southeast Asia, China, Korea, Japan; "life is suffering; misery is China, Korea, Japan; "life is suffering; misery is everywhere and originates in people's desire for everywhere and originates in people's desire for pleasure; Noble Eightfold Path: right views, right pleasure; Noble Eightfold Path: right views, right intention, right intention, right speech, right action, right speech, right action, right livelihood, right effort, right awareness, right livelihood, right effort, right awareness, right concentration)concentration)

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– 3.Political philosophy3.Political philosophy Political freedom – dominant political orientationPolitical freedom – dominant political orientation

– 4.Economic philosophy4.Economic philosophy Free market – to what extentFree market – to what extent

– 5.Education5.Education Importance – access - typeImportance – access - type

– 6.Language (spoken; non-verbal)6.Language (spoken; non-verbal) CommunicationCommunication

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Ignoring CultureIgnoring Culture

Religion: Religion: – Ads for refrigerator, airlines (Middle East)Ads for refrigerator, airlines (Middle East)

Language: Language: – Baby Food in Africa, English candy “Zit”, Baby Food in Africa, English candy “Zit”,

Finnish product unfreezes car locks “Super Finnish product unfreezes car locks “Super Piss”, Electrolux sucks (Sweden)Piss”, Electrolux sucks (Sweden)

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Measurement of CultureMeasurement of Culture

Four dimensions of culture Four dimensions of culture 1.1. Individualism/CollectivismIndividualism/Collectivism:Individualism exists when :Individualism exists when

people define themselves as individuals. It implies loosely knit people define themselves as individuals. It implies loosely knit social frameworks in which people are supposed to take care social frameworks in which people are supposed to take care only of themselves and their immediate families. Collectivism is only of themselves and their immediate families. Collectivism is characterized by tight social frameworks in which people characterized by tight social frameworks in which people distinguish between their own groups, "in-groups", (relatives, distinguish between their own groups, "in-groups", (relatives, clans, organizations) and other groups. People expect in-clans, organizations) and other groups. People expect in-groups to look after their members, protect them, and give groups to look after their members, protect them, and give security in exchange for members' loyalty.security in exchange for members' loyalty.

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22. . Power distancePower distance: indicates how a society deals with the : indicates how a society deals with the inequality among people's physical and intellectual inequality among people's physical and intellectual capabilities. A culture with high power distance allows capabilities. A culture with high power distance allows inequality to grow to inequality in power and wealth, one inequality to grow to inequality in power and wealth, one low in power distance aims at removing such inequalities. low in power distance aims at removing such inequalities. Indicates to what extent the unequal distribution of power is Indicates to what extent the unequal distribution of power is accepted.accepted.

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– 3. 3. Uncertainty avoidanceUncertainty avoidance: The extent to which : The extent to which people in a society feel threatened by ambiguous people in a society feel threatened by ambiguous situations and the extent to which they try to avoid situations and the extent to which they try to avoid these situations by providing greater career stability, these situations by providing greater career stability, establishing more formal rules, and rejecting deviant establishing more formal rules, and rejecting deviant ideas and behavior. Lifetime employment is more ideas and behavior. Lifetime employment is more common in countries with high uncertainty avoidance - common in countries with high uncertainty avoidance - the reverse is true for job mobility.the reverse is true for job mobility.

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– 4. 4. Masculinity/FemininityMasculinity/Femininity: Masculinity is defined : Masculinity is defined as the extent to which the dominant values of as the extent to which the dominant values of society emphasize assertiveness and acquisition of society emphasize assertiveness and acquisition of money and things (materialism). Femininity is money and things (materialism). Femininity is defined as the extent to which the dominant values defined as the extent to which the dominant values in society emphasize relationships among people, in society emphasize relationships among people, concern for others, and the overall quality of life.concern for others, and the overall quality of life.

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5. 5. Confucian dynamism/Long-term orientation (1993Confucian dynamism/Long-term orientation (1993):): refers to the time perspective in a society for the gratification of 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 people's needs. A high CD or long-term oriented society is one which emphasizes thrift and perseverance. A low CD or short-which emphasizes thrift and perseverance. A low CD or short-term oriented society focuses on gratifying needs here term oriented society focuses on gratifying needs here and and now.now.

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CultureCulture

ReviewReview– What is culture?What is culture?

– Why is it relevant? Why is it relevant?

– What are the dimensions of culture?What are the dimensions of culture?

– What are determinants and characteristics of culture?What are determinants and characteristics of culture?

– How is understanding the dominant religion in a country How is understanding the dominant religion in a country important to international management?important to international management?

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CultureCulture

ReviewReview– What is culture? Values and norms; socializationWhat is culture? Values and norms; socialization

– Why is it relevant? Cross-cultural literacy; Benefit-Cost-Why is it relevant? Cross-cultural literacy; Benefit-Cost-Trade-offTrade-off

– What are the dimensions of culture? Nature of People, What are the dimensions of culture? Nature of People, Relationship to Nature, People, Temporal, Space, Mode of Relationship to Nature, People, Temporal, Space, Mode of activityactivity

– What are determinants and characteristics of culture?What are determinants and characteristics of culture?

– How is understanding the dominant religion in a country How is understanding the dominant religion in a country important to international management?important to international management?

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Sources for International ResearchSources for International Research

Hofstede, Geert (1980): Culture’s ConsequencesHofstede, Geert (1980): Culture’s Consequences Hofstede, Geert (1991): Cultures and OrganizationsHofstede, Geert (1991): Cultures and Organizations Hofstede, Geert (1984): Culture’s Consequences: International Hofstede, Geert (1984): Culture’s Consequences: International

Differences in Work-Related ValuesDifferences in Work-Related Values Hofstede, Geert and Michael Harris Bond (1984): The Confucius Hofstede, Geert and Michael Harris Bond (1984): The Confucius

Connection: from cultural roots to economic growth. Connection: from cultural roots to economic growth. Organizational Organizational DynamicsDynamics, 16, 4, 4-21, 16, 4, 4-21

http://www.library.unr.edu/instruction/courses/mgrs470.html http://www.library.unr.edu/instruction/courses/mgrs470.html

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Measurement of CultureMeasurement of Culture

Four dimensions of culture Four dimensions of culture 1.1. Individualism/CollectivismIndividualism/Collectivism:Individualism exists when :Individualism exists when

people define themselves as individuals. It implies loosely knit people define themselves as individuals. It implies loosely knit social frameworks in which people are supposed to take care social frameworks in which people are supposed to take care only of themselves and their immediate families. Collectivism is only of themselves and their immediate families. Collectivism is characterized by tight social frameworks in which people characterized by tight social frameworks in which people distinguish between their own groups, "in-groups", (relatives, distinguish between their own groups, "in-groups", (relatives, clans, organizations) and other groups. People expect in-clans, organizations) and other groups. People expect in-groups to look after their members, protect them, and give groups to look after their members, protect them, and give security in exchange for members' loyalty.security in exchange for members' loyalty.

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22. . Power distancePower distance: indicates how a society deals with the : indicates how a society deals with the inequality among people's physical and intellectual inequality among people's physical and intellectual capabilities. A culture with high power distance allows capabilities. A culture with high power distance allows inequality to grow to inequality in power and wealth, one inequality to grow to inequality in power and wealth, one low in power distance aims at removing such inequalities. low in power distance aims at removing such inequalities. Indicates to what extent the unequal distribution of power is Indicates to what extent the unequal distribution of power is accepted.accepted.

6363

– 3. 3. Uncertainty avoidanceUncertainty avoidance: The extent to which : The extent to which people in a society feel threatened by ambiguous people in a society feel threatened by ambiguous situations and the extent to which they try to avoid situations and the extent to which they try to avoid these situations by providing greater career stability, these situations by providing greater career stability, establishing more formal rules, and rejecting deviant establishing more formal rules, and rejecting deviant ideas and behavior. Lifetime employment is more ideas and behavior. Lifetime employment is more common in countries with high uncertainty avoidance - common in countries with high uncertainty avoidance - the reverse is true for job mobility.the reverse is true for job mobility.

6464

– 4. 4. Masculinity/FemininityMasculinity/Femininity: Masculinity is defined : Masculinity is defined as the extent to which the dominant values of as the extent to which the dominant values of society emphasize assertiveness and acquisition of society emphasize assertiveness and acquisition of money and things (materialism). Femininity is money and things (materialism). Femininity is defined as the extent to which the dominant values defined as the extent to which the dominant values in society emphasize relationships among people, in society emphasize relationships among people, concern for others, and the overall quality of life.concern for others, and the overall quality of life.

6565

5. 5. Confucian dynamism/Long-term orientation (1993Confucian dynamism/Long-term orientation (1993):): refers to the time perspective in a society for the gratification of 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 people's needs. A high CD or long-term oriented society is one which emphasizes thrift and perseverance. A low CD or short-which emphasizes thrift and perseverance. A low CD or short-term oriented society focuses on gratifying needs here term oriented society focuses on gratifying needs here and and now.now.

6666

– U.S.U.S. JapanJapan Germany Germany

– Individualism:Individualism: 91 91 46 46 6767

– Power distance: 40Power distance: 40 54 54 3535

– Uncertainty Uncertainty

avoidance:avoidance: 46 46 92 92 6565

– Masculinity:Masculinity: 62 95 62 95 6666

– ST/LT:ST/LT: 29 29 80 80 2525

6767

Session #13Session #13

October 18 – First GuestspeakerOctober 18 – First Guestspeaker Review Review

– Measurement of CultureMeasurement of Culture– Application of Hofstede’s DimensionsApplication of Hofstede’s Dimensions

External Enviro: CultureExternal Enviro: Culture– Cultural StereotypesCultural Stereotypes– VideoVideoExternal Environment: Political RiskExternal Environment: Political RiskQuiz #3Quiz #3

6868

Applying Hofstede’s DimensionsApplying Hofstede’s Dimensions

Lawyers per 100,000 populationLawyers per 100,000 population– U.S.U.S.– GermanyGermany– Great BritainGreat Britain– JapanJapan– ItalyItaly– FranceFrance

6969

Applying Hofstede’s DimensionsApplying Hofstede’s Dimensions

Lawyers per 100,000 populationLawyers per 100,000 population– U.S.U.S. 312312– GermanyGermany 190190– Great BritainGreat Britain 134134– JapanJapan 106106– ItalyItaly 8181– FranceFrance 4949

7070

Laurent’s Research-See AdlerLaurent’s Research-See Adler

9 Western countries, US, 2 Asian countries9 Western countries, US, 2 Asian countries More than sixty common work situationMore than sixty common work situation

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

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

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

7171

Laurent’s ResearchLaurent’s Research

– The main reason for hierarchical structure is so that everybody The main reason for hierarchical structure is so that everybody

knows who has authority over whomknows who has authority over whom US 18% agree, Germany 24% agree, Italy 50% agreeUS 18% agree, Germany 24% agree, Italy 50% agree France, 45% agree, Japan 52% agree - POWFrance, 45% agree, Japan 52% agree - POW

– In order to have efficient work relationships, it is often necessary to In order to have efficient work relationships, it is often necessary to bypass hierarchical linesbypass hierarchical lines US 32% disagree, Germany 46% disagree, Italy 75% daUS 32% disagree, Germany 46% disagree, Italy 75% da

– It is important for a manager to have at hand precise answers to It is important for a manager to have at hand precise answers to most of the questions that his subordinates may raise about their most of the questions that his subordinates may raise about their workwork US 18% agree, Germany 46% agree, Italy 66% agree, Japan 78% US 18% agree, Germany 46% agree, Italy 66% agree, Japan 78%

agree - UNCagree - UNC

7272


Articles H-OArticles H-O Comments to Midterm Exam Comments to Midterm Exam

Review Review – External Enviro: CultureExternal Enviro: Culture

Cultural StereotypesCultural Stereotypes VideoVideo

External Environment: Political RiskExternal Environment: Political Risk

7373

Fons TrompenaarsFons Trompenaars

Riding the Waves of Culture (1998; 2Riding the Waves of Culture (1998; 2ndnd edition) edition) Dimensions (see textbook pg 119):Dimensions (see textbook pg 119):

– Universalistic–Particularistic (Obligation)Universalistic–Particularistic (Obligation)– Neutral-Affective (Emotional Orientation in Neutral-Affective (Emotional Orientation in

Relationships)Relationships)– Specific-Diffuse (Involvement in Relationships)Specific-Diffuse (Involvement in Relationships)– Achievement-Ascription (Legitimization of Power) Achievement-Ascription (Legitimization of Power)

7474

Cultural StereotypesCultural Stereotypes

What is a stereotype?What is a stereotype? Good or Bad?Good or Bad? Effect on cross-cultural adaptationEffect on cross-cultural adaptation Our researchOur research ExerciseExercise

7575

Cultural StereotypesCultural Stereotypes

Good or Bad??Good or Bad?? Exercise:Exercise:

– Countries: Germany, Italy, Switzerland, UK, Countries: Germany, Italy, Switzerland, UK, FranceFrance

– Jobs: Government, Cooks, Policemen, Jobs: Government, Cooks, Policemen, Engineers, LoversEngineers, Lovers

– Best Case and Worst Case ScenariosBest Case and Worst Case Scenarios

7676

Video - CultureVideo - Culture

Cross-cultural understandingCross-cultural understanding

7777



Culture

MultipleEconomy





People

Processes Structure

BusinessStrategy

Culture

Effectiveness

7878

Overall Attractiveness of a CountryOverall Attractiveness of a Country

Trade-off between Trade-off between – BenefitsBenefits– CostsCosts– RisksRisks

7979

Overall Attractiveness of a CountryOverall Attractiveness of a Country

Trade-off between Trade-off between – Benefits: Benefits: market size, wealth (purchasing power), future wealth, market size, wealth (purchasing power), future wealth,

resources (quality and cost)resources (quality and cost)

– Costs: Costs: legal requirements, availability of resources, legal requirements, availability of resources, infrastructure, level of economic development, free market?infrastructure, level of economic development, free market?

– Risks: Risks: the likelihood that political, economic, legal forces will the likelihood that political, economic, legal forces will cause drastic changes in a country's business environment that cause drastic changes in a country's business environment that adversely affects the profit and other goals of a particular business adversely affects the profit and other goals of a particular business enterprise.enterprise.

8080

External EnvironmentExternal Environment: : Political RiskPolitical Risk

– What is risk?What is risk?

– What is economic risk?What is economic risk?

– What is political risk?What is political risk?

8181

External EnvironmentExternal Environment: : Political RiskPolitical Risk

–DefinitionDefinition the likelihood that political forces will the likelihood that political forces will

cause drastic changes in a country's cause drastic changes in a country's business environment that adversely business environment that adversely affects the profit and other goals of a affects the profit and other goals of a particular business enterprise.particular business enterprise.

8282

Political RiskPolitical Risk

– Characteristics of countries Characteristics of countries with a with a higher likelihood higher likelihood for political risk: Social for political risk: Social unrest - Strikes, demonstrations, terrorismunrest - Strikes, demonstrations, terrorism

– Social Unrest: Social Unrest: more than one ethnic more than one ethnic nationality, competing ideologies battle for nationality, competing ideologies battle for political control, high inflation and falling political control, high inflation and falling living standardsliving standards

8383

–Results of Social Unrest:Results of Social Unrest:

– Change in gov/gov policyChange in gov/gov policy

–Results of Political Change:Results of Political Change:

–ExpropriationExpropriation

–IndigenizationIndigenization

8484

Risk AssessmentRisk Assessment

Euromoney Magazine’s Country Risk Euromoney Magazine’s Country Risk RatingsRatings– Analytical Indicators: political risk (20%) - Analytical Indicators: political risk (20%) -

measures stability and potential fall out from measures stability and potential fall out from instability, economic indicators and risk(20%)instability, economic indicators and risk(20%)

– Credit IndicatorsCredit Indicators– Market Indicators Market Indicators

Political Risk YearbookPolitical Risk Yearbook

8585

The 2001 Corruption Perceptions IndexThe 2001 Corruption Perceptions Index( top 24 countries from Exhibit 2-4)( top 24 countries from Exhibit 2-4)

Country Rank Country CPI Score

1 Finland 9.92 Denmark 9.53 New Zealand 9.44 Iceland 9.2

Singapore 9.26 Sweden 9.07 Canada 8.98 Netherlands 8.89 Luxembourg 8.7

10 Norway 8.6 11 Australia 8.5 12 Switzerland 8.4

8686

The 2001 Corruption Perceptions Index The 2001 Corruption Perceptions Index (contd.)(contd.)

Country Rank Country CPI Score 13 United Kingdom 8.3 14 Hong Kong 7.9 15 Austria 7.8 16 Israel 7.6 USA 7.6 18 Chile 7.5 Ireland 7.5 20 Germany 7.4 21 Japan 7.1 22 Spain 7.0 23 France 6.7 24 Belgium 6.6

8787

Political Risk Data - ExamplePolitical Risk Data - Example

Dun & Bradstreet’s Guide to Doing Business Dun & Bradstreet’s Guide to Doing Business around the World (pages 36 + 37)around the World (pages 36 + 37)

1997 Comparative Country Risk Rankings1997 Comparative Country Risk Rankings Overall Ratings: Political Risk, GDP Growth, Per Overall Ratings: Political Risk, GDP Growth, Per

Capita Income, Trade Flow with the US, Monetary Capita Income, Trade Flow with the US, Monetary Policy, Trade Policy, Protection of Property Rights, Policy, Trade Policy, Protection of Property Rights, Foreign Investment ClimateForeign Investment Climate

List countries low/high in political riskList countries low/high in political risk

8888

Political Risk Data - ExamplePolitical Risk Data - Example

List countries low/high in political riskList countries low/high in political risk Low (5 = best): Italy, Denmark, Netherlands, Low (5 = best): Italy, Denmark, Netherlands,

Japan, Australia, Ireland, Germany, Japan, Australia, Ireland, Germany, Sweden, France, Switzerland; USSweden, France, Switzerland; US

High (1 = worst): Mexico, Brazil, Egypt, High (1 = worst): Mexico, Brazil, Egypt, Venezuela, Peru, RussiaVenezuela, Peru, Russia

8989

Risk ManagementRisk Management::– Analysis - macro, microAnalysis - macro, micro

– Management -Management - IntegrativeIntegrative

Protective/DefensiveProtective/Defensive

9090

Integrative ApproachIntegrative Approach

Become part of the host country’s Become part of the host country’s infrastructureinfrastructure

Good relationship with host governmentGood relationship with host government Produce locally … in-country suppliersProduce locally … in-country suppliers Joint venturesJoint ventures Local R&DLocal R&D Effective in long-runEffective in long-run

9191

Protective/Defensive ApproachProtective/Defensive Approach

Discourage host government from Discourage host government from interferinginterfering

As little as possible local manufacturing and As little as possible local manufacturing and R&DR&D

Capital from local banks Capital from local banks and and outsideoutside Diversify production among several Diversify production among several

countriescountries

9292

Contingency Approach Contingency Approach Overall risk for an international company depends Overall risk for an international company depends

on the polit. risk and characteristics of the firm.on the polit. risk and characteristics of the firm.

Three primary factors to be considered:Three primary factors to be considered:– 1.Political risk type - Transfer risk/Operational Risk/Ownership 1.Political risk type - Transfer risk/Operational Risk/Ownership

riskrisk

– 2.General investment type -Conglomerate/Vertical/ Horizontal 2.General investment type -Conglomerate/Vertical/ Horizontal

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

9393

Political RiskPolitical Risk

Political Risk Insurance - covers the loss of Political Risk Insurance - covers the loss of firm’s assets, not the loss of revenuefirm’s assets, not the loss of revenue– Overseas Private Investment Corp (OPIC)Overseas Private Investment Corp (OPIC)

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

– Foreign Credit Insurance AssociationForeign Credit Insurance Association war, revolution, currency inconvertibility, cancellation war, revolution, currency inconvertibility, cancellation

of import or export licensesof import or export licenses

9494


October 25October 25thth – Articles P-ZArticles P-Z– Quiz #4Quiz #4– Midterm Exam ?Midterm Exam ?

Comments to Guestspeaker? Comments to Guestspeaker? Progress Reports – First Presentations Nov.6Progress Reports – First Presentations Nov.6 Articles: Chris, Travis, Jennifer, Steve, DeniseArticles: Chris, Travis, Jennifer, Steve, Denise Review Review

– External Enviro: Political RiskExternal Enviro: Political Risk Strategic Planning – PorterStrategic Planning – Porter Internal EnvironmentInternal Environment

9595

Quiz #4Quiz #4

Ch. 12Ch. 12 – Starbuck’s in China pp 405/407Starbuck’s in China pp 405/407– Mazda in Flint, Michigan p 431Mazda in Flint, Michigan p 431– Motivation in China p 414Motivation in China p 414– Motivation in Mexico p 417Motivation in Mexico p 417– Management - Middle East/ WestManagement - Middle East/ West

Ch. 13Ch. 13– 3 Com Illinois p 4393 Com Illinois p 439– Airbus p 443Airbus p 443– Groupe Bull p 444Groupe Bull p 444

Adler Chapter 6 Motivation and LeadershipAdler Chapter 6 Motivation and Leadership

9696

ReviewReview

Why assessing risk in internationalization Why assessing risk in internationalization decisions? decisions?

Define “risk”. What is political risk?Define “risk”. What is political risk? Social unrest is an indicator of political risk - Social unrest is an indicator of political risk -

explain.explain. What conditions precede social unrest?What conditions precede social unrest? What are the consequences of political risk?What are the consequences of political risk? Where to get info about political risk?Where to get info about political risk?

9797

A Risky Country:A Risky Country:– -unstable government-unstable government

– -- unstable economy unstable economy

– -- war/revolution/terrorismwar/revolution/terrorism

– -- unfriendly/hostile peopleunfriendly/hostile people

– -- unacceptable unacceptable customs/values/attitudescustoms/values/attitudes

9898

A Risky Company:A Risky Company:– type of product and/or service offeredtype of product and/or service offered

– type of industrytype of industry

– structure of ownershipstructure of ownership

– level of technologylevel of technology

9999


Quiz #4Quiz #4 Articles P-ZArticles P-Z Progress Reports Progress Reports Articles: Eugenia, Jed, Birgitte, ToddArticles: Eugenia, Jed, Birgitte, Todd Review Review

– Strategic Planning – PorterStrategic Planning – Porter Internal EnvironmentInternal Environment

– Organizational CultureOrganizational Culture– Behavior/PeopleBehavior/People

100100

Strategic Planning Strategic Planning

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

101101

Strategic managementStrategic management:: The The

– set of decisions and set of decisions and

– subsequent actions subsequent actions

– used to formulate and used to formulate and

– implement strategies that will implement strategies that will

– optimize the optimize the fitfit between the between the organization organization and its and its environmentenvironment in an effort to achieve organizational in an effort to achieve organizational effectiveness.effectiveness.

Strategic planStrategic plan: : The overall "blueprint" that defines The overall "blueprint" that defines how an organization will deploy its capital and human how an organization will deploy its capital and human resources in pursuit of its mission and goals.resources in pursuit of its mission and goals.

102102

Strategy and the FirmStrategy and the Firm– Purpose of any businessPurpose of any business: P: Provide products or rovide products or

services that are desired by society and, hence, to services that are desired by society and, hence, to make a make a profit profit

–Profit = Revenue - CostProfit = Revenue - Cost

–Profit = Volume * Price - CostProfit = Volume * Price - Cost

103103

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

To do this, a firm must produce a product that is To do this, a firm must produce a product that is

valuedvalued by consumers. by consumers.

Thus the firm must engage in Thus the firm must engage in value creationvalue creation. The . The price price that consumers are willing to pay indicates the that consumers are willing to pay indicates the value/worth of the product value/worth of the product to the consumer. to the consumer.

Porter, 1985 - Michael’s Model Porter, 1985 - Michael’s Model (Distinguish (Distinguish

from Michael Porter’s Diamond - National Competitive Advantage)from Michael Porter’s Diamond - National Competitive Advantage)

104104

StrategyStrategy

Firms can Firms can increase profitincrease profit in two ways: in two ways: – 1.1.adding valueadding value to a product so that consumers are to a product so that consumers are

willing to willing to pay morepay more for it (improve quality, provide for it (improve quality, provide service, customize product to consumer needs)service, customize product to consumer needs)

– 2. by 2. by lowering the costslowering the costs of value creation (perform of value creation (perform value creation activities more economically).value creation activities more economically).

105105

The firm is a The firm is a value chainvalue chain composed of a series of composed of a series of distinct value creation activities.distinct value creation activities.

Value creation activities:Value creation activities:– 1. 1. Primary activitiesPrimary activities - Production and marketing - Production and marketing

– 2. 2. Support activitiesSupport activities - Materials management, R&D, - Materials management, R&D, Human Human resource managementresource management

106106

Strategy - Michael PorterStrategy - Michael Porter

– Michael’s model - StrategyMichael’s model - Strategy: : The The

steps a firm takes steps a firm takes

to ensure that the to ensure that the cost of value creation are reducedcost of value creation are reduced and and

that value creation activities are performed in such a way that that value creation activities are performed in such a way that consumers are willing to pay moreconsumers are willing to pay more for the product than it costs for the product than it costs to produce it. to produce it.

– StrategyStrategy is about identifying and taking actions that will is about identifying and taking actions that will reduce the cost of value creation and /or will reduce the cost of value creation and /or will add valueadd value by by better serving the consumer needs.better serving the consumer needs.

107107

StrategyStrategy

Firms Firms increase their profitsincrease their profits BY BY – 1.1.adding valueadding value to a product so that consumers are to a product so that consumers are

willing to willing to pay morepay more for it (improve quality, provide for it (improve quality, provide service, customize product to consumer needs)service, customize product to consumer needs)

– 2. by 2. by lowering the costslowering the costs of value creation (perform of value creation (perform value creation activities more economically).value creation activities more economically).

108108

The firm is a The firm is a value chainvalue chain composed of a series of composed of a series of distinct value creation activities.distinct value creation activities.

Value creation activities:Value creation activities:– 1. 1. Primary activitiesPrimary activities - Production and marketing - Production and marketing

– 2. 2. Support activitiesSupport activities - Materials management, R&D, - Materials management, R&D, Human Human resource managementresource management

109109

Strategy and Global ExpansionStrategy and Global Expansion

– Performing certain value creation activities Performing certain value creation activities may have two benefits for the value chainmay have two benefits for the value chain

– 1. Lower the cost of value creation1. Lower the cost of value creation– 2. Improve the quality of the product - create more 2. Improve the quality of the product - create more

valuevalue

– = Firms realize = Firms realize location economieslocation economies by by dispersing particular value creation activities to those dispersing particular value creation activities to those locations where they can be performed most efficiently locations where they can be performed most efficiently and effectively. and effectively.

110110

– Location economiesLocation economies::

– Basing each value creation activity that the firm performs Basing each value creation activity that the firm performs at that location where economic, political, and cultural at that location where economic, political, and cultural conditions, including relative factor costs, are more conditions, including relative factor costs, are more conducive to the performance of that activity. conducive to the performance of that activity.

– Consider transportation costs (weight-to-value ratio) and Consider transportation costs (weight-to-value ratio) and trade barriers.trade barriers.

111111


Firms that expand to international markets will Firms that expand to international markets will gain greater returns from their distinctive skills gain greater returns from their distinctive skills

or or core competencies.core competencies. Core Competencies - Core Competencies - Skills within the firm Skills within the firm

that competitors cannot easily match or imitate. that competitors cannot easily match or imitate. Examples.Examples.

112112


– Constrains on transferring core competencies result Constrains on transferring core competencies result from the need for from the need for local responsivenesslocal responsiveness

– Need for Need for local responsiveness results from local responsiveness results from national differences in consumer tastes and national differences in consumer tastes and preferences, business practices, distribution preferences, business practices, distribution channels, competitive conditions, and government channels, competitive conditions, and government policies - these constrain the firm's ability to transfer policies - these constrain the firm's ability to transfer core competencies and realize location economies.core competencies and realize location economies.

113113

Strategy of an international organizationStrategy of an international organization

concerns identifying and concerns identifying and

taking actions that will taking actions that will

reduce the cost of value creation and/or reduce the cost of value creation and/or

will add value will add value

by better serving the consumer needs by better serving the consumer needs

through transferring core competencies andthrough transferring core competencies and

realizing location economies taking realizing location economies taking

into account national differences.into account national differences.

114114

– Strategic PredispositionsStrategic Predispositions

– Ethnocentric:Ethnocentric: strategic decisions are made at strategic decisions are made at headquarters, key jobs at both domestic and foreign headquarters, key jobs at both domestic and foreign operations are held by headquarters management operations are held by headquarters management personnel (PCN's).personnel (PCN's).

115115

– Polycentric: Polycentric: the MNC's subsidiaries are treated as the MNC's subsidiaries are treated as distinct national entities with extensive decision-making distinct national entities with extensive decision-making autonomy (HCN's mane the foreign operations).autonomy (HCN's mane the foreign operations).

– Geocentric:Geocentric: tries to worldwide, integrated business tries to worldwide, integrated business strategy and decision-making.strategy and decision-making.

– Regiocentric:Regiocentric: reflects the geographic structure of the reflects the geographic structure of the MNC.MNC.

116116

Strategic Predisposition’sStrategic Predisposition’s

Ethnocentric Polycentric Regiocentric Geocentric

Mission Profitability(viability)

Publicacceptance(Legitimacy)

Both Both

Strategy GlobalIntegration

Nationalresponsiveness

Regionalintegrationnationalresponsiveness

Globalintegration andnationalresponsiveness

Culture Home country Host country Regional Global

117117

– Strategic Planning ProcessStrategic Planning Process

– External Scanning and Internal Scanning (SWOT)External Scanning and Internal Scanning (SWOT)

– Opportunities/Threats Strengths/WeaknessesOpportunities/Threats Strengths/Weaknesses

– Vision, Mission, Goals, Objectives, StrategiesVision, Mission, Goals, Objectives, Strategies

– Strategy ImplementationStrategy Implementation

118118

– Three Traditional Strategies Three Traditional Strategies (Bartlett/Goshal, 1989)(Bartlett/Goshal, 1989)

– Global Global Strategy: focus on cost reduction and product Strategy: focus on cost reduction and product standardization that is marketed worldwide.standardization that is marketed worldwide.

– International International Strategy: limited local responsiveness, Strategy: limited local responsiveness, focus on transfer of valuable skills and products focus on transfer of valuable skills and products where indigenous competitors lack those skills and where indigenous competitors lack those skills and products.products.

– Multidomestic Multidomestic Strategy: like international but Strategy: like international but extensive local responsiveness.extensive local responsiveness.

119119

Pressures for Local ResponsivenessPressures for Local Responsiveness

– 1. Differences in consumer tastes and preferences1. Differences in consumer tastes and preferences

– 2. Differences in infrastructure and traditional practices2. Differences in infrastructure and traditional practices

– 3. Differences in distribution channels3. Differences in distribution channels

120120


Midterm Exam - at end of classMidterm Exam - at end of class Quiz #4 back next timeQuiz #4 back next time Articles: Articles: Review Review

– ArticlesArticles– Strategic Planning – PorterStrategic Planning – Porter– Internal EnvironmentInternal Environment

Organizational CultureOrganizational Culture

Internal EnvironmentInternal Environment– People - Behavior People - Behavior

Motivation, Leadership, Multicultural TeamsMotivation, Leadership, Multicultural Teams

121121

The Internal Environment of an The Internal Environment of an International OrganizationInternational Organization

CultureCulture PeoplePeople ProcessesProcesses StructureStructure

122122


What is it?What is it? Relevance? Why is it important?Relevance? Why is it important? Where does it come from?Where does it come from? What happens when two companies merge? What happens when two companies merge?

Boeing-McDonnel DouglasBoeing-McDonnel Douglas What happens when two companies from What happens when two companies from

different countries merge?different countries merge?

123123



Culture

MultipleEconomy





People

Processes Structure

BusinessStrategy

Culture

Effectiveness

124124


What is organizational culture?What is organizational culture?– The shared values, beliefs, norms, and patterns of The shared values, beliefs, norms, and patterns of

behavior in an organization.behavior in an organization.

Schein's Three Layer Model:Schein's Three Layer Model:– Artifacts, Values,Basic AssumptionsArtifacts, Values,Basic Assumptions

Measurement of organizational cultureMeasurement of organizational culture– In the workplace cultural differences are In the workplace cultural differences are

accounted for by accounted for by work practices.work practices.

125125

Midterm ExamMidterm Exam

Sixty percent of students have A and BSixty percent of students have A and B Mean was 79 pointsMean was 79 points The highest score was 95The highest score was 95 FrequenciesFrequencies

– 100-95100-95 11

– 94-9094-90 77 -> 8 -> 8 = 20%= 20%

– 89-8589-85 99

– 84-8084-80 77 -> 16-> 16 = 40%= 40%

– 79-7579-75 44

– 74-7074-70 22 -> 6-> 6 = 15%= 15%

– 69-6569-65 33

– 64-6064-60 44 -> 7-> 7 = 17%= 17%

– below 60 4below 60 4

126126

MidtermMidterm

Specific scoresSpecific scores– 95 * 195 * 1

– 92 * 392 * 3

– 91 * 191 * 1

– 90 * 390 * 3

– 89 * 189 * 1

– 87 * 387 * 3

– 86 * 486 * 4

– 85 * 185 * 1

Approximate letter gradesApproximate letter grades– A 91, A- 88, B+84, B 81, B- 78, C+ 74, C 71, C- 68, D+ 64, D 61, D- 58 A 91, A- 88, B+84, B 81, B- 78, C+ 74, C 71, C- 68, D+ 64, D 61, D- 58

127127

MidtermMidterm

Q#1:Q#1: – a. in detail describe -- specify, explain, relationshipsa. in detail describe -- specify, explain, relationships– b. what is the difference …b. what is the difference …

Q#2:Q#2:

– Apply Hofstede dimensions to explain .. Correct dimension 3 points; explanation Apply Hofstede dimensions to explain .. Correct dimension 3 points; explanation 2 points2 points

Q#3:Q#3:

– a. describe the differences in external enviroa. describe the differences in external enviro– b. 1) explain ..countries dominate trade and FDI .. FDI clusters; Tiger countries … b. 1) explain ..countries dominate trade and FDI .. FDI clusters; Tiger countries …

Baby TigersBaby Tigers– b.2) developing countries .. Which ones, GDP growth rateb.2) developing countries .. Which ones, GDP growth rate– b.3) criteria -- less developed country.. Examplesb.3) criteria -- less developed country.. Examples

Q#4Q#4

– a. benefits and cost .. Explain each..Pick a country for overall assessmenta. benefits and cost .. Explain each..Pick a country for overall assessment– b.1) how to assess risk .. Social unrest .. Sourcesb.1) how to assess risk .. Social unrest .. Sources– b.2) Three risky countriesb.2) Three risky countries– b.3) Firm specific charactersiticsb.3) Firm specific charactersitics– c. Integrative vs protective/defensive approachc. Integrative vs protective/defensive approach

128128

MidtermMidterm

Q#5Q#5 a.1) EU trade agreement facilitates trade for US firms .. Common a.1) EU trade agreement facilitates trade for US firms .. Common

standards; currencystandards; currency a.2) EU trade agreement hinders trade .. Specifications; Eu firms prefer a.2) EU trade agreement hinders trade .. Specifications; Eu firms prefer

Eu firms; funding advantagesEu firms; funding advantages b. b. EU one large market -- macro .. Yes; micro.. NoEU one large market -- macro .. Yes; micro.. No c. EURO .. How introduced..benefits..problemsc. EURO .. How introduced..benefits..problems Q#6Q#6 1) Describe1) Describe 2)Compare the cultures of US, Japan, Germany2)Compare the cultures of US, Japan, Germany 3)based on cultural characteristics - social stratific; religion, education, 3)based on cultural characteristics - social stratific; religion, education,

political and economic philosophy, languagepolitical and economic philosophy, language 4)based on Hofstede dimensions4)based on Hofstede dimensions 5)which is most culturally tough5)which is most culturally tough

129129


Quiz #4 back - end of classQuiz #4 back - end of class October 6: October 6: Germany and Austria; IrelandGermany and Austria; Ireland

October 8: October 8: NorwayNorway

Articles: Articles: Ryan - Swissair; Jon - Ford; Jake and Kwang Min - Ryan - Swissair; Jon - Ford; Jake and Kwang Min - Steel Industry; Bret - Internet/Terrorism; JJ - Terrorism/external Steel Industry; Bret - Internet/Terrorism; JJ - Terrorism/external enviro; Ryan - Chinaenviro; Ryan - China

Review Review – Internal EnvironmentInternal Environment


Internal EnvironmentInternal Environment– People - Behavior People - Behavior

Motivation, Leadership, Multicultural TeamsMotivation, Leadership, Multicultural Teams

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– Termpaper evaluationTermpaper evaluation

– PresentationPresentation

– 1. Evaluated by the seminar leader and the1. Evaluated by the seminar leader and the seminar seminar participants.participants.

– 2. Max. 100 points total.2. Max. 100 points total.

– 3. Criteria: 3. Criteria: ContentContent (60 points) (60 points)

ComprehensivenessComprehensiveness

RelevanceRelevance

Effectiveness with respect to generation of Effectiveness with respect to generation of understandingunderstanding

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– FormatFormat (40 points) Structure of presentation(40 points) Structure of presentation

– Appropriate (quantity, quality) presentation methods)Appropriate (quantity, quality) presentation methods)

– Stimulation of discussion and critical thinking Stimulation of discussion and critical thinking

– Written paperWritten paper– 1.Evaluated by seminar leader. Team members evaluate each other - 1.Evaluated by seminar leader. Team members evaluate each other -

after presentation.after presentation.

– 2. Max. total of 100 points.2. Max. total of 100 points.

– 3. 3. CriteriaCriteria:Content comprehensiveness, relevance, logical :Content comprehensiveness, relevance, logical integration, ANALYSIS integration, ANALYSIS

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Dimensions of Organizational CultureDimensions of Organizational Culture

– 1. 1. Process-----Results oriented Process-----Results oriented

– 2.2. Tight------- Loose ControlTight------- Loose Control

– 3.3. Job---------Employee orientedJob---------Employee oriented

– 4. 4. Parochial----Professional orientedParochial----Professional oriented

– 5.5. Closed system--Open systemClosed system--Open system

– 6. 6. Normative----PragmaticNormative----Pragmatic

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Organizational Culture, Processes, and StructureOrganizational Culture, Processes, and Structure

Structure Communication Decision Making RewardStructure Communication Decision Making Reward Process OrientedProcess Oriented Results OrientedResults Oriented Job OrientedJob Oriented Employee OrientedEmployee Oriented ParochialParochial ProfessionalProfessional Closed SystemClosed System Open SystemOpen System Tight ControlTight Control Loose ControlLoose Control NormativeNormative

PragmaticPragmatic

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CreatingCreating and and changingchanging the culture of an the culture of an organization?organization?

National and Organizational Culture National and Organizational Culture

– Organizations in Japan, Germany, the U.S. are Organizations in Japan, Germany, the U.S. are likely to have which org. culture characteristics?likely to have which org. culture characteristics?

The Organizational Culture of a MNCThe Organizational Culture of a MNC

– A universal org. culture?A universal org. culture?

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Internal Environment: BehaviorInternal Environment: Behavior

– Individual BehaviorIndividual Behavior P = f (A, M) P = f (A, M)

Motivation defined!Motivation defined!

Homeostasis --- applied to psychological needsHomeostasis --- applied to psychological needs

MotivationTheories --- MotivationTheories --- Applicability across cultures??Applicability across cultures??

Content TheoriesContent Theories

Maslow’s Need HierarchyMaslow’s Need Hierarchy

Two Factor Theory of MotivationTwo Factor Theory of Motivation

McClelland Achievement MotivationMcClelland Achievement Motivation

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Internal Environment: BehaviorInternal Environment: Behavior

Process TheoriesProcess Theories Equity Theory of MotivationEquity Theory of Motivation

Goal - SettingGoal - Setting

Expectancy Theory of MotivationExpectancy Theory of Motivation

– valencevalence

–

– Effort Effort Performance Performance Outcome Outcome

–

– expectancyexpectancy instrumentality instrumentality

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Motivation and HofstedeMotivation and Hofstede

High UNC - job securityHigh UNC - job security Low UNC - fast-track, more risky opportunitiesLow UNC - fast-track, more risky opportunities Low POW - motivation through teamwork and peersLow POW - motivation through teamwork and peers High POW - motivation depends on bossHigh POW - motivation depends on boss High IND - motivation through opportunities for individual High IND - motivation through opportunities for individual

advancementadvancement Low IND - motivation through appeals to group goals and supportLow IND - motivation through appeals to group goals and support High MASC - comfortable with traditional division of work rolesHigh MASC - comfortable with traditional division of work roles Feminine - looser definition of roles, more flexibleFeminine - looser definition of roles, more flexible

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The Meaning of WorkThe Meaning of Work

Tied to economic necessityTied to economic necessity What else?What else? Thai: work = ngan(same word as the word for play)Thai: work = ngan(same word as the word for play) Work centrality - relative importance of workWork centrality - relative importance of work

– Six functions of work: needed income, interesting & satisfying, Six functions of work: needed income, interesting & satisfying, contact with others, serve society, keeps one occupied, status contact with others, serve society, keeps one occupied, status and prestigeand prestige

– These may be satisfied through other aspects of lifeThese may be satisfied through other aspects of life

Study results: Britain (lowest), Germany, Netherlands, Study results: Britain (lowest), Germany, Netherlands, Belgium, USA, Israel, Japan (page 411)Belgium, USA, Israel, Japan (page 411)

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Group BehaviorGroup Behavior Group effectiveness = Group effectiveness = individual behavior + individual behavior +

Mature group = effective groupMature group = effective group

Stages of developmentStages of development

Two main characteristics for the analysis of GroupsTwo main characteristics for the analysis of Groups

Leadership and compositionLeadership and composition

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LeadershipLeadership

Which Hofstede dimensions?Which Hofstede dimensions?

Types of leadership styles:Types of leadership styles:

autocratic, participative, groupautocratic, participative, group

authoritarian, democratic, laissez-faireauthoritarian, democratic, laissez-faire

Theory X, Theory YTheory X, Theory Y

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Research: Research:

traits, behaviors, contingency approachtraits, behaviors, contingency approach

Vroom - YettonVroom - Yetton

Across cultures: Haire, Ghiselli, PorterAcross cultures: Haire, Ghiselli, Porter South-European and Nordic-European --- more autocratic, more Theory XSouth-European and Nordic-European --- more autocratic, more Theory X

South-European give a little more autonomy to employees in working out South-European give a little more autonomy to employees in working out detailsdetails

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Both support participative leadership practicesBoth support participative leadership practices

Smaller companies Smaller companies participative participative

Japanese Japanese Theory Y --- employees learn from mistakes Theory Y --- employees learn from mistakes

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

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Quiz #5Quiz #5

Deresky Deresky – Chapter 5 p.139, 150-152Chapter 5 p.139, 150-152– Chapter 6 p.167, 170-173, 183-185Chapter 6 p.167, 170-173, 183-185– Chapter 10 p.345, 367Chapter 10 p.345, 367

AdlerAdler– Chapter 8Chapter 8– Chapter 10Chapter 10

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Group Behavior: Group Composition --- Group Behavior: Group Composition --- Multicultural TeamsMulticultural Teams

– Impact of cultural diversity on group performanceImpact of cultural diversity on group performance?? group productivity = f(task, resources, process)group productivity = f(task, resources, process)

actual productivity = potential productivity - losses due to faulty actual productivity = potential productivity - losses due to faulty processprocess

actual productivity actual productivity or or = =

potential productivity potential productivity or or - losses - losses or or

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benefitsbenefits associated with cultural diversity: associated with cultural diversity:

# of alternatives generated; # of alternatives generated;

quality of alternatives;quality of alternatives;

creativity/divergence; creativity/divergence;

no groupthinkno groupthink

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Process LossesProcess Losses::

potential for miscommunication increases; potential for miscommunication increases;

cohesiveness decreases; cohesiveness decreases;

negative attitudes (dislike, mistrust); negative attitudes (dislike, mistrust);

perceptual problems (stereotyping); perceptual problems (stereotyping);

stressstress

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– managing team effectivenessmanaging team effectiveness:: Multicultural teams have the potential to be the most or the least Multicultural teams have the potential to be the most or the least

effective teamseffective teams

Group development stages: entry, work, actionGroup development stages: entry, work, action

Task: innovative or routineTask: innovative or routine

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Manage culturally diverse teams Manage culturally diverse teams through:through:

task-related selectiontask-related selection

recognition of differencesrecognition of differences

superordinate goalssuperordinate goals

equal powerequal power

mutual respectmutual respect

feedback feedback

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CommunicationCommunication

Macro LevelMacro Level Micro (Interpersonal) LevelMicro (Interpersonal) Level

– Definition: Transmission of meaning through the Definition: Transmission of meaning through the use of common symbolsuse of common symbols

– Sender - Message - ReceiverSender - Message - Receiver EncodingEncoding DecodingDecoding

Communication BarriersCommunication Barriers

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Macro - LevelMacro - Level

Communication FlowsCommunication Flows– upward/downwardupward/downward– cultureculture

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Session #21 and 22Session #21 and 22

Quiz #5 on Nov 9Quiz #5 on Nov 9 FranceFrance Review: Norway (Peer Evaluation) - Luis, Jeff, IlaReview: Norway (Peer Evaluation) - Luis, Jeff, Ila

– Any Questions?Any Questions?– Population Size? GDP/capita?Population Size? GDP/capita?– Employment Legislation? Labor Unions?Employment Legislation? Labor Unions?– Benefits/Cost/Risk?Benefits/Cost/Risk?– Culture - Characteristics? Hofstede Dimensions? Cultural Culture - Characteristics? Hofstede Dimensions? Cultural

Toughness?Toughness?– Management - Motivation? Leadership? Decision-Making?Management - Motivation? Leadership? Decision-Making?– Unique Features?Unique Features?

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RussiaRussia

Population: 160 MillionPopulation: 160 Million Factor Endowment: Basic -- high (natural resources … oil); Factor Endowment: Basic -- high (natural resources … oil);

Advanced -- very low.Advanced -- very low. History: 55 years of Communist rule; means of production = History: 55 years of Communist rule; means of production =

common good; classless society (?!); suppression of oppositioncommon good; classless society (?!); suppression of opposition Gorbachev - mid 80’s; perestroika (economic restructuring - Gorbachev - mid 80’s; perestroika (economic restructuring -

building the infrastructure; technological advancement); glasnost building the infrastructure; technological advancement); glasnost (openess); (openess);

Culture ?? - MASC; UNC; IND; POW; ST ???Culture ?? - MASC; UNC; IND; POW; ST ???

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Mc Donald’s in RussiaMc Donald’s in Russia

McDonald’s in Moscow: McDonald’s in Moscow: – 1. What do you find most amazing about McD’s story in the Soviet 1. What do you find most amazing about McD’s story in the Soviet

Union? Union?

– 2. Explain how McD was able to enter the Societ Market?2. Explain how McD was able to enter the Societ Market?

– 3. How long did the McD management have to negotiate with the 3. How long did the McD management have to negotiate with the Soviet government? Why did such negotiations take so long?Soviet government? Why did such negotiations take so long?

– 4. What benefits did the Soviet government expect from the 4. What benefits did the Soviet government expect from the agreement with McD?agreement with McD?

– 5. What were the main challenges for McD in opening the first 5. What were the main challenges for McD in opening the first restaurant?restaurant?

– 6. Describe a typical Russian employee as portrayed in the video.6. Describe a typical Russian employee as portrayed in the video.

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Expatriates or not?Expatriates or not?

McD chose to staff their stores in Russia McD chose to staff their stores in Russia with HCN’s. Why?with HCN’s. Why?

Exercise: How to staff -- PCN’s, HCN, Exercise: How to staff -- PCN’s, HCN, TCN’s?TCN’s?– Country groupsCountry groups– Use the info about your country for this Use the info about your country for this

exercise.exercise.

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Session #23 and 24Session #23 and 24

Presentations - Europe - ReviewPresentations - Europe - Review– GreeceGreece– SpainSpain

Additional QuestionsAdditional Questions

ReviewReview– Population Size? GDP/capita?Population Size? GDP/capita?– Employment Legislation? Labor Unions?Employment Legislation? Labor Unions?– Benefits/Cost/Risk?Benefits/Cost/Risk?– Culture - Characteristics? Hofstede Dimensions? Cultural Culture - Characteristics? Hofstede Dimensions? Cultural


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Today: Latin America - Mexico and BrazilToday: Latin America - Mexico and Brazil PresentationPresentation

– IsraelIsrael Additional Questions??Additional Questions??

ReviewReview– Population Size? GDP/capita?Population Size? GDP/capita?– Employment Legislation? Labor Unions?Employment Legislation? Labor Unions?– Benefits/Cost/Risk?Benefits/Cost/Risk?– Culture - Characteristics? Hofstede Dimensions? Cultural Culture - Characteristics? Hofstede Dimensions? Cultural


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Latin AmericaLatin America– MexicoMexico

Market - Population, GDP/capitaMarket - Population, GDP/capita Porter’s Diamond - Factor EndowmentPorter’s Diamond - Factor Endowment Culture - Cultural ToughnessCulture - Cultural Toughness Hofstede’s Dimensions and ManagementHofstede’s Dimensions and Management Specific QuestionsSpecific Questions Summary: Benefits - Cost - Risk and RecommendationsSummary: Benefits - Cost - Risk and Recommendations

– Brazil Brazil

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Sessions #28, 29, 30Sessions #28, 29, 30

Internships - Current requestsInternships - Current requests– RR Donnelly, IGT, Peppermill, Mutual Insurance, Reno Hilton, Dwyer - HR; Teal RR Donnelly, IGT, Peppermill, Mutual Insurance, Reno Hilton, Dwyer - HR; Teal

Engineering (Marketing/ Management)Engineering (Marketing/ Management)

Quizzes and Articles backQuizzes and Articles back Study Guide - End of ClassStudy Guide - End of Class ReviewReview

– South Korea:South Korea: Population, GDP, Export/Import, Porter Diamond (Factor Population, GDP, Export/Import, Porter Diamond (Factor Endowment, Demand Conditions, Suppliers, Strategy . Structure); Culture Endowment, Demand Conditions, Suppliers, Strategy . Structure); Culture (Characteristics, Hofstede Dimensions) and implications for management?! .. (Characteristics, Hofstede Dimensions) and implications for management?! .. Family-owned, chaebols, kinbun, han, “bribery”; Cost-benefits-risk? Family-owned, chaebols, kinbun, han, “bribery”; Cost-benefits-risk? ConclusionsConclusions

– India: India: Population, GDP, Export/Import, Porter Diamond (Factor Endowment, Population, GDP, Export/Import, Porter Diamond (Factor Endowment, Demand Conditions, Suppliers, Strategy . Structure); Culture (Characteristics, Demand Conditions, Suppliers, Strategy . Structure); Culture (Characteristics, Hofstede Dimensions) and implications for management?! Hofstede Dimensions) and implications for management?!

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Communication: Micro - LevelCommunication: Micro - Level

Interpersonal communicationInterpersonal communication– encodingencoding– messagemessage– decodingdecoding

Communication barriersCommunication barriers– languagelanguage– perceptionperception– cultureculture– nonverbal communicationnonverbal communication– projected similarityprojected similarity– parochialismparochialism

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Session 31Session 31

Papers backPapers back Articles backArticles back ReviewReview

– AustraliaAustralia JapanJapan CommunicationCommunication Course SummaryCourse Summary

–Final Exam: Thursday, December Final Exam: Thursday, December 14, noon - 2:00 p.m.14, noon - 2:00 p.m.

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Micro -LevelMicro -Level

StereotypingStereotyping Explicit vs Implicit CommunicationExplicit vs Implicit Communication Non-verbal communicationNon-verbal communication

– Body LanguageBody Language– EmblemsEmblems

– IllustratorsIllustrators

– Affect DisplayAffect Display

– RegulatorsRegulators

– AdaptorsAdaptors

– Space (proxemics)Space (proxemics)

– TouchTouch

– VoiceVoice

– Dermal CodeDermal Code

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Decision Making in an International Decision Making in an International OrganizationOrganization

Relevance: Quality of decisionsRelevance: Quality of decisions

– -- ->Organizational Effectiveness-- ->Organizational Effectiveness

Differences across Cultures:Differences across Cultures:

– Why/why not?Why/why not?

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– Decision-Making Process:Decision-Making Process:– 1. Setting Objectives1. Setting Objectives

– 2. Problem Recognition2. Problem Recognition

– 3. Information Search3. Information Search

– 4. Alternative Generation4. Alternative Generation

– 5. Choice5. Choice

– 6. Implementation6. Implementation

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DM Process and CultureDM Process and Culture

– 1. Setting Objectives1. Setting Objectives

– 2. Problem Recognition2. Problem Recognition

– 3. Information Search3. Information Search

– 4. Alternative Generation4. Alternative Generation

– 5. Choice5. Choice

– 6. Implementation6. Implementation

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International NegotiationsInternational Negotiations

– Definition:Definition:

– the process in which at least two partners with different the process in which at least two partners with different needs and viewpoints try to reach an agreement that is needs and viewpoints try to reach an agreement that is acceptable to all on matters of mutual interestacceptable to all on matters of mutual interest

– International managers spend more than 50% of their time International managers spend more than 50% of their time negotiatingnegotiating

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Successful negotiation depends on effectively managing

1. Individual characteristics

2. Situational contingencies

3. Strategic processes

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– Recommendations (Fisher and Ury "Getting to Yes"):Recommendations (Fisher and Ury "Getting to Yes"):

– 1. Separate the people from the 1. Separate the people from the problemproblem

– 2. Focus on interest, not position2. Focus on interest, not position

– 3. Insist on objective criteria3. Insist on objective criteria

– 4. Invent options for mutual gain4. Invent options for mutual gain

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– Apply the following models to summarize and remember the Apply the following models to summarize and remember the relevant information about the countries we discussed:relevant information about the countries we discussed:

– Porter Diamond: National competitive advantagePorter Diamond: National competitive advantage

– Existence and importance of Existence and importance of basic factorsbasic factors? Existence ? Existence and importance of and importance of advanced factorsadvanced factors??

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CourseCourse SummarySummary

– ==> Europe? Asia? Latin America? Australia? ==> Europe? Asia? Latin America? Australia? Specific countries?Specific countries?

– Internationalization Strategy: Generalizations?? Internationalization Strategy: Generalizations??

– Purpose of internationalizationPurpose of internationalization Market growth (pop size; income)Market growth (pop size; income)

Value creation activities (labor cost, exp.) Value creation activities (labor cost, exp.)

– Benefits = Location economies (transportation cost) Benefits = Location economies (transportation cost)

– Political Risk .... South America? Asia? Europe?Political Risk .... South America? Asia? Europe?

– Cost … Management - cultural differences ...Cost … Management - cultural differences ... religion, education; Hofstede and Trompenaarsreligion, education; Hofstede and Trompenaars

==> Generalizations across countries/regions??==> Generalizations across countries/regions??

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Culture

MultipleEconomy





People

Processes Structure

BusinessStrategy

Culture

Effectiveness

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– Managing the International OrganizationManaging the International Organization 1.External Environment ... Porter Diamond; Status Quo; Culture 1.External Environment ... Porter Diamond; Status Quo; Culture

(Hofstede)(Hofstede)

2.Strategy ... Value creation activities; Location economies2.Strategy ... Value creation activities; Location economies

3.Internal Environment ... Behavior: Individual (Motivation) and 3.Internal Environment ... Behavior: Individual (Motivation) and Group (Leadership; Multicultural Teams)Group (Leadership; Multicultural Teams) Processes: Processes: Communication -- Macro (communication flow); Micro Communication -- Macro (communication flow); Micro (communication(communication process); Next -- Nonverbal communication -- process); Next -- Nonverbal communication -- Decision MakingDecision Making ; Negotiation; HR Processes (The ; Negotiation; HR Processes (The Expatriate Assignment).Expatriate Assignment).

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– Market Entry ModesMarket Entry Modes

– ExportingExporting - Turnkey Projects - Licensing (mftg)- Franchising - Turnkey Projects - Licensing (mftg)- Franchising

– Joint VenturesJoint Ventures - Wholly Owned Subsidiaries - Wholly Owned Subsidiaries

– Strategic AlliancesStrategic Alliances- refers to cooperative agreements between - refers to cooperative agreements between potential or actual competitors ... formal joint ventures to short-potential or actual competitors ... formal joint ventures to short-term contractual agreements in which two companies agree to term contractual agreements in which two companies agree to cooperate on a particular task. cooperate on a particular task.

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- Examples: Boeing and a consortium of Japanesecompanies to produce the 767 wide-bodiedcommercial jet.

General Electric and Snecma of France to build afamily of low-thrust aircraft engines.

Philips and Siemens to develop newsemiconductor technology.

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Expatriate AssignmentExpatriate Assignment– Why expatriates?Why expatriates?

– Culture shock - cross-cultural adaptationCulture shock - cross-cultural adaptation

– Failure of U.S. expatsFailure of U.S. expats

– Strategic purpose/involve HRMStrategic purpose/involve HRM

– Selection: Technical skills/Adaptation skills/Family and Selection: Technical skills/Adaptation skills/Family and SpouseSpouse

– Training: When? Purpose? Type - rigor/methodsTraining: When? Purpose? Type - rigor/methods

– Repatriation: Communication and ValuationRepatriation: Communication and Valuation

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IIComparative Management

Europe

Population

GDP/capita

Culture

Unique Feat.

Polit. Risk

LocationEconomies

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Europe

Population

GDP/capita

Culture

Unique Feat.

Polit. Risk

LocationEconomies

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Europe

Population

GDP/capita

Culture

Unique Feat.

Polit. Risk

LocationEconomies

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Europe

Population

GDP/capita

Culture

Unique Feat.

Polit. Risk

LocationEconomies

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international management badm 729 dr. yvonne stedham

Documents

management slide

global organization

organization effective

multinational organization

international context

international management

transnational slide

level of internationalization