Paradoxes of Culture and GlobalizationChapter 10

Brynn Cauffman, Spencer Cox, Taryn Crews, Michael Grizzle, Hannah Ives, Tina Roren, Yesenia Saldivar

ICI Corporation1996 case study at London Business

SchoolNot doing well in EuropeMoving from geographic-centered structure

to product-based structure

Old SystemGeographic managers prime elementManagement within each nation operated

independentlyCompensation based on sales within

respective countries

New SystemEncouraged cooperation between national

managementCompensation based on total sales in

Europe and adjacent nationsLanguage was an issueAdaptation to new system was essential

This ChapterParadoxes in area of business strategyParadoxes in business functions Paradoxes within international human

resource management (IHRM)

Is there an ideal mode for entering the global marketplace? No mode of entry is ideaDifferent strategies recommended for

different levels of market development

Modes of Entry Exporting

Little risk, high cost, low control Licensing

Reasonable cost and risk, low profit and controlBlack & Decker

Strategic alliancesShared cost, resources, and risk, problems integrating

two cultures

Modes of EntryAcquisitions

Quick access to market, high costs, complex, issues merging companies

Greenfield venture (wholly owned subsidiary)Above-average returns and maximum

control, complex, high-risk, costly, time-consuming

Globalizing

Early stages of market developmentExporting, licensing, strategic alliances

Later stages of market developmentAcquisitions, greenfield ventures

Regionalize then globalize Requires additional time, effort, and

resources

Globalization from InceptionBorn globalRareRely almost exclusively on the Internet

Paradox 10.2Is there an ideal structure for the

global firm?- Corporation’s structure should always be

consistent with its strategy - Multidomestic strategy: tends to institute

geographic-centered structure • Problems of competition among geographic

national managers • Products tend to be geared to the taste of the

region

Paradox 10.2Transnational strategy: allows a sensitive

balancing of the multidomestic and global strategies

Requires a matrix organizational structure No choice but to pursue a transnational

strategy & employ the matrix structure if a firm wants to continue to grow (Caterpillar)

No ideal organizational structure for the global firm

Paradox 10.3

Are Organizations worldwide becoming more similar?

AssumptionsIdeas tend to spreadNumber of choices about strategy and

structure are limited Increased interactions throughout cultures

Reality Inconsistent research

Organizational similaritiesResearch outdated

Paradox 10.4

Is China a very large or a very small market?

EMBA ProgramBetween Smith School of Business,

University Maryland at College park, and University for International Business and Economics in Beijing, China

Potential MarketMarket can be very large or very small

depending on the product or service being offered

200,000 managersLimitation occurred because of high costs

Issues Companies Face When Going GlobalPersonnel and IHRM issues that require

attentionDeveloping criteria for success Selecting candidates Integrating organizational culturesGaining language fluency

Example: Wal-MartRegionalized successful, focusing on

Mexico and CanadaWithdrawn from Korea and Germany Focus on trading with China

Major issues to confront

Paradox 10.5Can accounting and financial systems of

companies and financial institutions be standardized throughout the world?Companies only face this issue when operating

domestically Geographic regions tend to use different

operating procedures, reporting requirements, and etc.

It is possible to create a standardized accounting systems and financial system (UPS)

Paradox 10.5A problem that this paradox presents is

that standardizing in major stock markets throughout the world Country Laws, Government procedures, etc

The movement between global standardization is occurring but it is slow

Experts believe that this movement will accelerate in the near future

Paradox 10.6Should global advertising and marketing

be tailored to each national and ethnic culture?Marketing of a particular image with global

customers WPP, the worlds largest advertising firm, has

recently moved away from global standardizationThe move is cost effective in the short run

Coca-Cola is now catering to each national culture with their advertisements

Paradox 10.6MTV entered the global market place by

standardizing its product globally Channel V, MTV’s main competitor, is the

inspiration for this Cost are considered, especially when each

brand is being catered to each national culture

Companies are adopting a compromise strategy

Paradox 10.7Is it possible to create and operate an

airplane-based metropolis for efficient global logistics and transportation?

Aerotropolis= an airplane-based metropolitan area or city.

John KasardaAerotropoli already exist.Global gross national product.

Paradox 10.7Alternate shipmentResistance to the growth of aerotropoli.

Environmentally detrimentalGlobal logistics

Paradox 10.8How can IHRM be both central and

peripheral when going global?HRM is essential to a company.Staff activities subordinate to

line/operation activities.

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

Paradox 10.9How should the conflict between internal

pay equity and the forces of the external labor market be resolved?

The “Iron Rice Bowl”Moving to a Western-adapted model. Internal pay equity and external labor market.

EMBA Managers Performance-oriented compensation system

example.

Paradox 10.9No simple answer.Education and communication programs.

Paradox 10.10Should multinational corporations

impose their values when going global?The Kyocera Corporation is one of Japan’s

most successful multinational companies.The Kyocera Experiment

Shinto Ritual - has the power to accept foreign culture and transform it into something Japanese.

Paradox 10.10What if a multinational corporation imposes

cultural values that are not so compatible with those of employees in the host nation?U.S. companies offered higher compensation

packages and better fringe benefits than their Taiwanese competitors did.

International Human Resource Management (IHRM) – in place to minimize the inevitable conflicts and strains that will occur when home-culture and host-culture values require reconciliation.

Paradox 10.11Which works best in a global firm,

individual-based or group-based reward systems?

Over many decades, seemingly innumerable studies have addressed this issue, but until recently they focused primarily on domestic-only firms.

Paradox 10.11Victor Vroom (1961) – summarized

decades of research comparing individual-based and group-based reward systems among factory workers in the United States. The general conclusion is that, at least within the United States, individual-based reward systems lead to significantly higher productivity than do group-based systems

Paradox 10.11The popularity of pay-for-performance

systems, among both managers and employees, reflects the logic of this finding.

Under some circumstances it seems preferable to institute a compensation package that is primarily individually focused, while under other conditions a group-focused package encouraging cooperation works best.

Paradox 10.11When a company globalizes, it appears

advisable to examine the prevailing cultural values and to at least attempt to tailor the compensation system to it.

There will rarely if ever be a perfect matching, but at least some problems and issues can be avoided by such tailoring.

Paradox 10.12

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

HRM and IHRM“Human Resource Management is a

general term used to describe a variety of functions aimed at effectively managing an organization’s employees or “human resources”

“International Human Resource Management is the procurement, allocation, utilization, and motivation of human resources in the international context”

SimilaritiesEnhancing competitive advantage

Continuous innovationHarnessing diversityDeveloping leadership capability

Managing the employees Basic functions like hiring and career

development

Differences HRM: national level IHRM: international level IHRM more complex:

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

Paradox 10.13

Are HRM requirements similar throughout the globalizing world?

GermanyAsking people to participate in a survey may

be against local labor lawsSalary increases not mandated but often

included in collective agreements No minimum wage are required by lawFirms of more than 2000 employees must

gain the consent of work elected councils before, for example, set working hours or change the price of lunches in the cafeteria

SingaporeAn employee may not be required to work

more than six consecutive hours without a break, more than eight hours a day or more than 44 hours a week.

NorwayFathers are required by law to take 8

weeks of “maternity” leave within a certain amount of time after the child is born

Mothers get paid maternity leaveMinimum wage required by law

EuropeDenmark: Extensive worker benefitsFrance: Large and complex body of laws

and regulations regarding employment