Indian Register of Shipping : Going Global to Greece

Indian Register of Shipping

Going Global to Greece

By

Asokendu Samanta (SMSID 104118, SID RB09035)

[Course: International Management; Faculty: Prof. Manoj Thomas]

Post Graduate Certificate in Business Management (PGCBM 15)

Centre: Powai, Mumbai February 28, 2010

Indian Register of Shipping: Going Global to Greece

Asokendu Samanta (SID RB09035, SMS ID 104118), PGCBM 15, XLRI, Center: Powai, Mumbai

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Indian Register of Shipping Going Global to Greece

[Course: International Management, Faculty: Prof. Manoj Thomas]

Asokendu Samanta

SMSID 104118, SID RB09035, PGCBM 15, XLRI, Center- Powai, Mumbai,

Email: [email protected], February 28, 2010

Abstract – Indian Register of Shipping (IRS) (Fig. 1) is an internationally recognized independent ship classification society, founded in India in 1975. It is an associate member of the International Association of Classification Societies (IACS). IRS is a non-profit making organization. It has a Committee of Management with representatives from the Ministry and from each industry segment that uses its services. Today IRS provides professionally competent, completely independent and highly efficient third party technical inspection and certification services for all types of ships, marine craft and structures. IRS has 15 offices located all over India. It has overseas offices at China, Sri Lanka, Dubai, Singapore. Recently, in April 2009 it has opened an international office in Greece. In this report, the pros and cons of opening the office in Greece is analyzed from international management point of view by collecting data by interviewing a few senior officers of IRS (full interview is given in Appendix). Strategy behind opening office in Greece, strength and weakness of IRS, possible risk, communication and cultural aspects are analyzed chapter wise by using Porter’s Diamond model, Porter’s five force analysis and Hofstede’s Cultural Value Dimensions. At the end, conclusions are drawn in analyzing all aspects. Key Words: Communication, Ethnocentrism, Expatriates. Expropriation, High-context culture, Parochialism, Risk, Strategy, SWOT analysis

Fig. 1 Indian Register of Shipping (IRS) Head Office in Mumbai



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Contents Abstract 1 Contents 2-3 Chapter 1 Profile of the Company 4-8 1.1 Introduction 4 1.2 Function of IRS 4 1.3 Policies of IRS 7 1.4 Organizational Structure 7 1.5 Culture of IRS 8 Chapter 2 Going Global and Strategy 9-16 2.1 Establishing International Offices 9 2.2 Why, Where, When and How to Enter? 10 2.2.1 Why to enter in the international market? 10 2.2.2 Where to enter in the international market? 11 2.2.3 When to enter in the international market? 11 2.2.4 How to enter in the international market? 11 2.3 Strategy: Porter’s Five Force Analysis 11 2.4 Strategy behind Opening a New Office in Greece 12 2.4.1 Greek Ship Owners 12 2.4.2 Recognition by European Union 13 2.4.3 Expanding the Business in Europe 13 2.4.4 Strategic Coalition with Foreign Society 13 2.4.5 Strategic Location 13



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2.4.6 Cost Effective and Time Saving 14 2.5 SWOT Analysis of IRS 14 2.6 Strategy: Porter’s Diamond Model 15 Chapter 3 Communication and Culture 17-26 3.1 Introduction 17 3.2 Cultural Value Dimensions 20 3.2.1 Hofstede’s Cultural Value Dimensions 21 3.2.2 Drawbacks of the Hofstede’s Model 24 3.3 Communication and Noise 25

Chapter 4 Global Human Resource Management 27-32 4.1 Introduction 27 4.2 Existing Structure of HR Department at IRS 28 4.3 Ethnocentric Approach and Expatriate Managers in IRS 29 4.3.1 Training to Expatriate Managers in IRS 29 4.3.2 Facility to Expatriate Managers in IRS 30 4.4 Motivating People Across the Boundary 30 4.4.1 Steps Taken by IRS to Motivate Expatriate Managers 32 Chapter 5 Conclusions 33-34 5.1 Summary 33 References 35 Abbreviation 35 Appendix 36-38



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Chapter ONE

PROFILE OF THE COMPANY

1.1 Introduction

ndian Register of Shipping (IRS) is an internationally recognized independent ship classification society, founded in India in 1975. Within a short span of time (sixteen years), it has become an associate member of the International Association of Classification Societies (IACS). IACS is a major international body of classification societies and admission in IACS is

granted only to the best and signifies high standards, excellent reputation and professional competence. IRS is a company limited by guarantee and not having share capital (Table 1.1). It has its registered office at Mumbai and other branch offices at major metros / port cities (Bangalore, Bhopal, Chennai, Delhi, Goa, Hyderabad, Kandla, Kochi, Kolkata, Mumbai, Portblair, Pune, Trichy, Vadodara, Visakhapatnam). Its foreign offices are located at China, Colombo, Dubai and Singapore. Recently it has opened an office in Greece. 1.2 Function of IRS IRS provides professionally competent, completely independent and highly efficient third party technical inspection and certification services for all types of marine crafts (Fig. 1.1) and structures. These services have also been expanded to cover a range of offshore and industrial projects. The services are thus designed to meet the applicable international requirements and thereby help achieve high levels of quality and reliability, while maintaining project schedules and integrity. Further, they are proven to be cost-

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effective and meet timelines efficiently. Worldwide, similar types of services are provided by American Bureau of Shipping (ABS) of United States of America, Llyod’s Register (LR) of United Kingdom, Det Norske Veritas (DNV) of Norway, Bureau Veritas (BV) of France, Nippon Kaiji Kyokai (NK) of Japan, Germanischer Lloyd (GL) of Germany and by a few other classification societies (Table 1.2).

Fig. 1.1 Marine craft, classification of these is the main job of Indian Register of Shipping (IRS)

Table 1.1 A few facts of Indian Register of Shipping (IRS) Company

Name of the Company Indian Register of Shipping

Type Public Limited Company

Service Provided Classification of marine crafts (Third party inspection)

Registered office Mumbai, India

Founded 1975

Total revenue 81.38 crore (Rs.)

Website http://www.irclass.org

To maintain its sea worthiness a ship needs to undergo constant monitoring. There are many international regulations also. The duty of these classification societies is to check the sea worthiness of the ships from various aspects (Structural, machinery, environmental etc). Having checked the condition of the ship physically by a surveyor, the reports are sent to head office. If the reports satisfy the rules laid down by the classification society, the society subsequently issues the certificates; otherwise society may ask the ship-owner to take the appropriate action (replace the faulty machinery, change the damaged component of the ship etc) to get the certificates. These certificates have certain validity (say six month or one year). Once the date of the certificate is expired, ship owner needs to renew the certificate. So a surveyors need to check the ship again. These cycles go on during the entire life span of a vessel. Generally life span of a sea going vessel is 25 years.



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For this purpose, apart from its head office in Mumbai, IRS has a lot of branch offices (called Survey Station / Outport) situated at various parts of India and abroad. These survey stations are mainly situated in port area where surveyors have easy access to ships for investigation purpose.

Table 1.2 Ship Classification Societies (IACS members and associate members)

ABS

American Bureau of Shipping United States of America

BV Bureau Veritas

France

CCS

China Classification Society China

DNV Det Norske Veritas

Norway

GL

Germanischer Lloyd Germany

IRS Indian Register of Shipping

India

KR

Korean Register Korea

LR Lloyd’s Register

United Kingdom

NK

Nippon Kaiji Kyokai Japan

RINA Registro Italiano Navale (The Italian Shipping Register)

Italy

RS

Russian Maritime Register of

Shipping

Russian Federation



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1.3 Policies of IRS Mission To enable our stakeholders manage their risks and quality Needs better by continually improving the reliability of Systems, processes and products. Vision To be the first choice of all existing & potential customers For classification and certification services and technical Solutions, globally. Values • Integrity • Innovation & creativity • Excellence in all pursuits • Professional development of employees • Respect for business associates Business policy To realise our mission & vision by providing all our services: • Based on appropriate research and development • In a cost effective manner • With ethical and transparent business practices, • Guided by an effective quality management system • Through qualified personnel, appropriate tools and work environment Quality policy: To pursue service excellence with commitment to: • Professional integrity • Meeting the applicable rules & requirements • An effective quality management system • Continually improve operational effectiveness by regularly monitoring the realization of the quality objectives • Meeting the needs of the customers & other stake holders, as appropriate 1.4 Organizational Structure IRS has the following organizational structure (Fig. 1.2). Each department has a Head. Further these departments are subdivided to Groups, which are headed by a group leader.



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Fig. 1.2 Organizational structure of Indian Register of Shipping (IRS)

1.5 Culture of IRS IRS being a public limited company, and mainly operating in India with majority of the staffs being Indian, culture of IRS is also Indian. More than 90% staff is Hindu in religion. A few Christian and Muslims are also employed. In the foreign offices of IRS a few foreign nationals are also employed (i.e., in China, Chinese staff, in Greece, Greek staffs are also part of IRS).

Conclusive Remarks

IRS is a public limited company having office in various cities in India and a few offices in foreign soils (Dubai, Singapore, China, Srilanka). Recently (April, 2009) it has opened an office in Greece. The culture of IRS is mainly Indian.



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Chapter TWO

GOING GLOBAL AND STRATEGY

2.1 Establishing International Offices

o far IRS had been doing its business based in India only. As such most of the surveys of the ships are done in India. If it is required to get the survey done in a foreign soil (i.e. sometimes ship needs some emergency services), its surveyors have to go to that particular places. However, based on the requirements it started its international offices slowly in various

countries recently as sending surveyors abroad is very costly when it is a continuous affair. As such, IRS has opened office in Dubai, Colombo, Singapore, China and recently in Greece. Though number of staffs in those international offices is not huge, in fact in many cases these are only one or two; opening an office in foreign country requires lot of activities. Some of the activities are mentioned below.

• Analysis (Justification of the requirement) • Approval from the Members of the Board • Feasibility study • Understanding the rules and regulation of the foreign country • Formulation of strategy • Human resource activities (Recruiting, transferring, training, motivating etc)

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2.2 Why, Where, When and How to Enter? 2.2.1 Why to enter in the international market? Ship classification is a specialized business and needs proper infrastructure and specialized human skills to carry out the job which can be achieved over a long period. This business also needs Government’s approval. IRS is in the business for the last 35 years and has certain experience. Utilizing these advantages, IRS wants to expand its business. There are lots of opportunities in foreign soil too. Pros: IRS has the opportunity in expanding its business in international level and increase its revenue. Cons: IRS has to compete with big societies like ABS, LR, DNV who are in the market for more than centuries. 2.2.2 Where to enter in the international market? IRS has decided to open its office in Greece (Fig. 2.1). It has already office in foreign soils (Singapore, Dubai, Colombo, China). Majority of the ship owner in the world is Greek (Fig. 2.1). Opening an office in Greece will give IRS an advantage to serve these vast amounts of customers easily. Pros: Majority of ship owners are Greeks. As such Greece is a potential market for ship classification business. Cons: Greece is a European country. As such getting permission in various aspects of business is not easy for an Indian company. Attitude of European customers to get its ships classed by an Indian company will also be tested.

Fig. 2.1 Location of Piraeus, Greece where IRS has opened its office



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2.2.3 When to enter in the international market? Though shipping business is growing every year, ship classification is dominated by a few foreign societies in international soil. Big names like ABS, DNV, LR, GL are already in operation in Greece for many years. IRS has opened its office in Greece in April 2009. IRS will neither become first mover, nor will it become second mover in Greece in the ship classification business. In fact it will become late mover. However IRS can penetrate in to the Greek market by offering its low cost service. Pros: Though IRS is late in opening its office in Greece, it can penetrate in to the market by offering low cost service which many of the Greek ship owners are looking for. Cons: Big societies (ABS, DNV, LR, BV, GL etc) are already in operation for many years in Greece. As such IRS will be late mover. 2.2.4 How to enter in the international market? IRS has decided to go ahead alone in establishing its office in Greece. However, foreign society (Cyprus Register of Shipping) has given its office building in Greece to IRS for establishing its business. Though it is neither a joint venture, nor a proper alliance with Cyprus Register of Shipping, the gesture of Cyprus Register of Shipping will be helpful for IRS. Pros: Risk will be mitigated as IRS does not have to invest huge money in renting/buying office building in Greece. Cons: As there is no alliance or joint venture, understanding local market and generating a market base in Greece will be more difficult for IRS. Many of the business activities may be affected due to inability to understand local culture and local language.

2.3 Strategy: Porter’s Five Force Analysis Porter’s five competitive forces that shape the strategy are shown in Fig. 2.2.

Fig. 2.2 The five forces that shape industry competition [Ref. 2]



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i) Threat of new entrants As the ship classification industry is specialized, there are limited companies in this segment. Due to the government policy (one country can have only one ship classification society), only ten societies (ABS, BV, CCS, DNV, GL, KR, LR, NK, RINA and RS) are the members of IACS and only one society (IRS) is the associate member of IACS. IACS is the main body of the classification societies in the world. As such threat of new entrants is minimum. ii) Bargaining power of buyers (Customers) Bargaining power of customer is predominant in this ship classification business. If a ship owner is not satisfied with the service of a society, he can switch over to a new society. IRS has to be very careful in offering its service, particularly majority of the ship owners are European in Greece. iii) Bargaining power of suppliers This may not be so much critical in ship classification business as classification society is not offering any end product, rather it issues certificates. iv) Threat of substitute products or services This is quite immense in this business. As a few number of reputed classification societies are operating in Greece, IRS has to offer its best service to stay in the competition. v) Rivalry among existing competitors Though rivalry exists between societies, this is not so intense. In fact all societies maintain some ethics. For example, if a ship is classed with some society, other societies do not interfere. If an employee of a society (Let’s say society A) applies for job in some other society (Let’s say society B), generally society B, asks society A, whether it is alright if they recruit that employee. 2.4 Strategy behind Opening a New Office in Greece 2.4.1 Greek Ship Owners Majority of the ship owner in the world is Greek (Fig. 2.3). Opening an office will give IRS an advantage to serve these vast amounts of customers easily. Greek ship-owners today possess the world's largest merchant fleet —3,065 ships totaling almost 25 million tons [Ref. 3]. As a group, they are the biggest spenders in the world's shipyards. More than 200 vessels, including 43 supertankers, are on order or being built for Greek owners. The Greeks set up shop wherever they can do business, in London, Manhattan, Lausanne or Beirut. They fly the most convenient flag —Liberian, Panamanian, Cypriot—but they remain Greek wherever they go. Their enterprise has been a major force in lifting the postwar economies of shipbuilding nations. In British shipyards alone, the Greeks now account for 25% of all orders.



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Fig. 2.3 Percentage of fleet owned by Greeks [Source: http://www.skyscrapercity.com/showthread.php?t=541070]

2.4.2 Recognition by European Union IRS wanted to get the recognition from European Union to expand its business in Europe. As Greece is a European country, its capital Athens is well connected to other European cities, having office in Greece will help IRS in getting that recognition. 2.4.3 Expanding the Business in Europe IRS wants to expand its business in Europe and wants to open an office in London. As London is the head office of IMO (International Maritime Organization) and IACS (International Association of Classification Societies), prior experience in operating in European territory will be advantageous. 2.4.4 Strategic Coalition with Foreign Society IRS will be using the existing office building of Cyprus Register of Shipping in Piraeus, Greece for its operation. IRS is getting benefited as they do not have to bear the cost of renting/buying office building. It will also reduce the risk as IRS will be list affected in case of expropriation (Seizure of assets by local Government with small compensation). 2.4.5 Strategic Location Piraeus (Fig. 2.1) is near to Athens, the capital of Greece, which is well connected to any European cities.



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2.4.6 Cost Effective and Time Saving In order to survey ships owned by Greek owner, either ships could be surveyed in other parts of the world where IRS has office, or IRS surveyor has to go to Greece. Both options are costly and time consuming. Operating from Greece, IRS will be reducing time in offering service as well as cost. This will effectively increase customer satisfaction. 2.5 SOWT Analysis of IRS Exhibit 2.1 shows the strength, weakness, opportunity and threats in opening an office in Greece.

Exhibit 2.1 SWOT Analysis in opening an office in Greece

Strength 1. IRS has prior experience in operating in international soil. 2. Human Resource of IRS is not so costly compared to European country. As such IRS can offer cost effective service. 3. Establishment cost will be less as IRS will be using the office building of Cyprus Register of Shipping in Greece. As such risk of being asset encroached is low.

Weakness

1. IRS does not have experience in operating in European country. 2. Work culture and communication in Greek are new to IRS. 3. As the head office (Mumbai) is far away, issuing certificate will take some time which ship owner may not like.

Opportunity 1. Fleet owned by Greeks is the largest in the world, as such there are lot of opportunity in business. 2. If the venture is successful, IRS would like to open office in London, where most of the shipping related activities are going on. 3. The successful operation in European country, Greece may help IRS in getting the full membership in IACS which IRS is looking for.

Threats

1. Others reputed classification societies (DNV, BV, ABS, GL, NK etc) which are operating in Greeks for years have a very strong hold. 2. European ship owners will be averse in getting their ship classed by an Indian company. 3. European Union may not allow an Indian firm to grow in European country.



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2.6 Strategy: Porter’s Diamond Model Porter’s diamond model [Ref. 14] (Fig. 2.4) is an economical model developed by Michael Porter in his book ‘The Competitive Advantage of Nations’, where he published his theory of why particular industries become competitive in particular locations. As many of the points of this model is already discussed in the previous sections, a brief discussion is given below.

Fig. 2.4 Porter’s diamond model [Source: http://en.wikipedia.org/wiki/Diamond_model]

Factor conditions: location wise Piraeus, Greece is suitable as many ships are getting surveyed at that location. As IRS will be using the existing office building of Cyprus Register of Shipping in Piraeus, Greece for its operation, IRS is getting benefited as they do not have to bear the cost of renting/buying office building. It will also reduce the risk as IRS will be list affected in case of expropriation (Seizure of assets by local Government with small compensation). However language may be an obstacle as Greek is the only official language in Greece. IRS needs to give proper training to make their managers competent and suitable in Greek cultural environment. Attitude of European customers to get its ships classed by an Indian company will also be tested. Demand condition: Majority of the ship owner in the world is Greek (Fig. 2.3). Opening an office will give IRS an advantage to serve these vast amounts of customers easily. However as the big societies (ABS, DNV, LR, BV, GL etc) are already in operation for many years in Greece, IRS has to offer its best service to stay in the competition. Related and supporting industries: As the ship classification industry is specialized, there are limited companies in this segment. Due to the government policy (one country can have only one ship classification society), only ten societies (ABS, BV, CCS, DNV, GL, KR, LR, NK, RINA and RS) are the members of IACS and only one society (IRS) is the associate member of IACS. IACS is the main body of the classification societies in the world. As such threat of new entrants is minimum.



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Conclusive Remarks

Market Penetration: Though IRS is late in opening its office in Greece, it can penetrate in to the market by offering low cost service which many of the Greek ship owners are looking for.

Customer Satisfaction: As majority of the ship owners are Greek, IRS will be able to

serve them quickly if it has an office in Greece. This will definitely increase customer satisfaction which IRS can not ignore.

Coalition and Risk Mitigation: IRS will be using the existing office building of Cyprus

Register of Shipping in Piraeus, Greece for its operation. It will reduce the risk as IRS will be list affected in case of expropriation (Seizure of assets by local Government with small compensation).

Attitude of European Union: Greece is a European country, attitude of European

customers to get its ships classed by an Indian company will also be tested.

Late Mover: Big societies (ABS, DNV, LR, BV, GL etc) are already in operation for many years in Greece. As such IRS will be late mover.

Threat of Substitute Services: This is quite immense in this business. As a few number of

reputed classification societies are operating in Greece, IRS has to offer its best service to stay in the competition.

Firm strategy, structure and rivalry: IRS wanted to get the recognition from European Union to expand its business in Europe. As Greece is a European country, its capital Athens is well connected to other European cities, having office in Greece will help IRS in getting that recognition. Though rivalry exists between societies, this is not so intense. In fact all societies maintain some ethics. For example, if a ship is classed with some society, other societies do not interfere. If an employee of a society (Let’s say society A) applies for job in some other society (Let’s say society B), generally society B, asks society A, whether it is alright if they recruit that employee. Government: IRS needs to maintain Government (Greece) policy. Such as, any communication (Public Notice/ Quotation etc) has to be made in both the languages (English/Greek). Chance: India is one of the countries, which is least affected during the down turn of global economic crisis. Business of IRS is also not greatly affected during that time. IRS needs to take this opportunity in expanding its business in foreign soil. In doing so successfully in European country, they also have a greater opportunity in getting the full membership of IACS, the highest body of ship classification.



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Chapter

THREE

CULTURE AND COMMUNICATION

3.1 Introduction

he culture of a society comprises the shared values, understandings, assumptions and goals that are learned from earlier generations, imposed by present members of a society and passed on to succeeding generations. It is clear that cultural variables – shared beliefs, values and attitudes – can greatly affect organizational processes. Some argue that the effects of

culture are more evident at the individual level of personal behavior than at the organizational level as a result of convergence. Convergence describes the phenomenon of the shifting of individual management styles to become more similar to one another. A manager assigned to a foreign subsidiary, must expect to find large and small differences in the behavior of individuals and groups within that organization. Being a European country, culture of Greece is similar to the other European countries. However, local language is mainly Greek, which may have a great impact in expanding business in Greece by an Multinational company and is discussed in the later part of this chapter. Following description will give an idea about Greece and its culture, politics, language etc.

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Geography Greece is a peninsular and a mountainous country situated in southeast Europe on the Mediterranean Sea, with a total area of 130,800 km2. The country is surrounded by the sea. The Greek islands represent one fifth of the country's surface. Greece has about 1400 Greek islands, of which only 169 are inhabited. The majority of the islands are scattered in the Aegean Sea between the Greek and Turkish coasts. The country has a population of about 11 million (2000), with 4 millions living in Athens, the country's capital. Politics The conventional names of the country are Hellas or Hellenic Republic. The democratic Greek system is working like a parliamentary republic with the President of the Hellenic Republic as the Head of the State. The actual head of the government is the Prime Minister. It is the manager’s job to understand the political system and how it affects organizational processes to negotiate positions within that system and to manage effectively the mutual concerns of the host country and guest country. Greek Culture Greece is a country of a great interests and diverse cultures [Ref. 5], influenced by its location, at the junction between the East and the West and by the many occupations endured by the Greek people throughout history. In general, the Greeks are particularly proud of their culture (Fig. 3.1) and speak of their country with an intense passion, feeling that their Greek culture is a definition of their national and ethnic belonging. Traditions, religion, music, language, food and wines are the major composites of the Greece culture and constitute the base for those who wish to visit the country.

Fig. 3.1 The architecture and purpose of the Parthenon, Acropolis in Athens epitomizes many facets of Greek culture, both ancient and modern.

[Source: http://en.wikipedia.org/wiki/Culture_of_Greece]



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Greek Economy Economy has a powerful influence on organizational process as sourcing, distribution, incentives and repatriation of capital. At this time of radically changing political systems, it appears that the drastic differences between capitalist and socialist systems will have less effect on multinational corporations (MNC) than in the past. Greece is a developed country, with a high standard of living and "very high" Human Development Index, ranking 25th in the world in 2007 and 22nd on The Economist's 2005 worldwide quality-of-life index [Ref. 10]. According to Eurostat data, GDP per inhabitant in purchasing power standards (PPS) stood at 95 per cent of the EU average in 2008. Greece's main industries are tourism, shipping, industrial products, food and tobacco processing, textiles, chemicals, metal products, mining and petroleum. Greece's GDP growth (Fig. 3.2) has also, as an average, since the early 1990s been higher than the EU average. However, the Greek economy also faces significant problems, including rising unemployment levels, an inefficient government bureaucracy and widespread corruption. In 2009, Greece had the EU's second lowest Index of Economic Freedom (after Poland), ranking 81st in the world. The country suffers from high levels of political and economic corruption and low global competitiveness relative to its EU partners. Although remaining above the euro area average, economic growth turned negative in 2009 for the first time since 1993

Fig. 3.2 GDP Growth of Greece compared to the Eurozone between 1996 and 2006 [Source: http://en.wikipedia.org/wiki/Economy_of_Greece]

Language Greek is the official language of the Hellenic Republic and has a total of 15 million speakers worldwide; it is an Indo-European language. The history of the language spans 3000 years. Greek has had enormous impact on other languages both directly on the Romance languages, and indirectly through its influence



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on the emerging Latin language during the early days of Rome. Signs of this influence, and its many developments, can be seen throughout the family of Western European languages. Though Greek is the only official language of the country, a large part of the population, mostly the people working in tourism and the younger generations, currently use English at a good level and sometimes other popular European languages. Greece Traditions & Customs Traditions in Greece and Greek Islands are either of a religious character or coming from paganism. Furthermore, most of the traditions and festivals still followed and celebrated today are religious. Many panygiria are organized in the country, which are actually religious celebrations of saints followed by traditional music and dance in the square of the village. Many Greeks are very superstitious people and believe a lot in religion as well as in supernatural or paranormal phenomenon. This impresses many visitors who travel in Greece. For example, some people believe it is bad luck to see a black car, it is 7 years bad luck to break a glass or mirror, while others knock their fingers against wood if they have a bad thought. Greece Religion The spiritual belief of a society is often so powerful that they transcend other cultural aspects. The Greek population is composed of a 97% of Christian Orthodox. The rest of the population is Muslim, Roman Catholic and Jewish. Greece (and the Greek Islands) and Russia are the only countries to have such a great proportion of people that belong to the Orthodox Church. The Orthodox Church forms the third largest branch of Christianity after the Roman Catholics and the Protestants. 3.2 Cultural Value Dimensions As a first step toward cultural sensitivity, international managers should understand their own cultures. This awareness helps to guard against adopting either a Parochial or an Ethnocentric attitude. Parochialism occurs, for example, when a Frenchman expects those from or in another country to automatically fall into patterns of behavior common in France. Ethnocentrism describes the attitude of those who operate from the assumptions that their way of doing things are best no matter where or under what conditions they are applied. Good managers treat people as individuals and they consciously avoid any form of stereotyping. Cultural value dimensions can be analyzed by three ways. i) Project GLOBE cultural dimensions ii) Hofstede’s value dimensions iii) Trompenaars’s value dimensions In project GLOBE (Global Leadership and Organizational Behavior Effectiveness), Assertiveness, Future Orientation, Performance Orientation and Humane Orientation are discussed. Geert Hofstede has analyzed cultural value dimension from the aspects of Power Distance Index, Uncertainty Avoidance Index, Individualism, Masculinity. Later, Long-Term Orientation is added in the analysis.



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Fons Trompenaars also researched value dimensions and his research work was spread over a ten year period, with 15000 managers from 28 countries, representing 47 national cultures. He main discussed on universalism versus particularism, neutral versus affective and achievement versus ascription. In the present report, only Hofstede’s cultural value dimensions are discussed from the cultural context of Greece. 3.2.1 Hofstede’s Cultural Value Dimensions National cultures can be described according to the analysis of Geert Hofstede [Ref. 6]. These ideas were first based on a large research project into national culture differences across subsidiaries of a multinational corporation (IBM) in 64 countries. These studies identified and validated four independent dimensions of national culture differences, with a fifth dimension added later.

• Power Distance Index (PDI) • Uncertainty Avoidance Index (UAI) • Individualism (IDV) • Masculinity (MAS) • Long-Term Orientation (LTO)

The ranks of various countries in Hofstede’s Cultural Value Dimensions are shown in Table 3.1 and 3.2. A comparison between Greece and India is shown in Fig. 3.7. Power Distance Index (PDI): PDI (Fig. 3.3) focuses on the degree of equality, or inequality, between people in the country's society. A High Power Distance ranking indicates that inequalities of power and wealth have been allowed to grow within the society. These societies are more likely to follow a caste system that does not allow significant upward mobility of its citizens. A Low Power Distance ranking indicates the society de-emphasizes the differences between citizen's power and wealth. In these societies equality and opportunity for everyone is stressed. PDI for Greece is 60 whereas for India it is 77.

Fig. 3.3 Hofstede’s Power Distance index [Ref. 6]



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Uncertainty Avoidance Index (UAI): It (Fig. 3.4) focuses on the level of tolerance for uncertainty and ambiguity within the society - i.e. unstructured situations. A High Uncertainty Avoidance ranking indicates the country has a low tolerance for uncertainty and ambiguity. This creates a rule-oriented society that institutes laws, rules, regulations, and controls in order to reduce the amount of uncertainty. A Low Uncertainty Avoidance ranking indicates the country has less concern about ambiguity and uncertainty and has more tolerance for a variety of opinions. This is reflected in a society that is less rule-oriented, more readily accepts change, and takes more and greater risks. A significant difference between UAI value of Greece (112) and India (40) is observed.

Fig. 3.4 Hofstede’s Uncertainty Avoidance index [Ref. 6] Individualism (IDV): Individualism (Fig. 3.5) focuses on the degree the society reinforces individual or collective, achievement and interpersonal relationships. A High Individualism ranking (USA, Australia, UK, Table 3.1) indicates that individuality and individual rights are paramount within the society. Individuals in these societies may tend to form a larger number of looser relationships. A Low Individualism ranking (Panama, Ecuador, Guatemala, Table 3.1) typifies societies of a more collectivist nature with close ties between individuals. These cultures reinforce extended families and collectives where everyone takes responsibility for fellow members of their group. These values are nearly same both for Greece and India. However, a bit high value of India (48) over Greece (35)in Individualism indicates that Indians like to be Individualistic.

Fig. 3.5 Hofstede’s Individuality index [Ref. 6]



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Masculinity (MAS): It (Fig. 3.6) focuses on the degree the society reinforces, or does not reinforce, the traditional masculine work role model of male achievement, control, and power. A High Masculinity ranking (Japan, Hungary, Austria, Table 4.1) indicates the country experiences a high degree of gender differentiation. In these cultures, males dominate a significant portion of the society and power structure, with females being controlled by male domination. A Low Masculinity ranking (Netherlands, Norway, Sweden, Table 3.4) indicates the country has a low level of differentiation and discrimination between genders. In these cultures, females are treated equally to males in all aspects of the society. The MAS index is similar for Greece and India. As such, similarity of culture from this aspect may be observed.

Fig. 3.6 Hofstede’s Masculinity index [Ref. 6]

Table 3.1 Hofstede’s high and low value dimension [Arranged by authors collecting data from Ref. 6]

Power Distance Uncertainty Avoidance

Individualism Masculinity

High Malaysia (104) Greece (112) United States (91) Japan (95) Guatemala (95) Portugal (104) Australia (90) Hungary (88) Panama (95) Guatemala (101) United Kingdom (89) Austria (79) Philippines (94) Uruguay (100) Netherlands (80) Venezuela (73) Mexico (81) Belgium (94) New Zealand (79) Italy (70)

Low Ireland (28) Hong Kong (29) Colombia (13) Costa Rica (21) New Zealand (22) Sweden (29) Venezuela (12) Denmark (16) Denmark (18) Denmark (23) Panama (11) Netherlands (14) Israel (13) Jamaica (13) Ecuador (8) Norway (8) Austria (11) Singapore (8) Guatemala (6) Sweden (5)



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Table 3.2 Hofstede’s value dimensions for major countries [Arranged by authors collecting data from Ref. 6]

Power

Distance Uncertainty Avoidance

Individualism Masculinity

Australia 36 51 90 61 Brazil 69 76 38 49 China 80 40 20 66 Greece 60 112 35 57 India 77 40 48 56 Japan 54 92 46 95

Nigeria 77 54 20 46 Norway 31 50 69 8

Singapore 74 8 20 48 South Africa 49 49 65 63

United Arab Emirates 80 68 38 52 United Kingdom 35 35 89 66

United States 40 46 91 62

Fig. 3.7 Hofstede’s Cultural Dimensions for Greece and India 3.2.2 Drawbacks of the Hofstede’s Model The Hofstede Model of Cultural Dimensions can be of great use when it comes to analyzing a country’s culture. There are however a few drawbacks. 1) The averages of a country do not relate to individuals of that country: Even though this model has proven to be quite often correct when applied to the general population, one must be aware that not all individuals or even regions with subcultures fit into the mould. It is to be used as a guide to understanding the difference in culture between countries, not as law set in stone. As always, there are exceptions to the rule.



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2) Accuracy of the Data: The data has been collected through questionnaires, which have their own limitations. Not only that, but in some cultures the context of the question asked is as important as its content. Especially in group-oriented cultures, individuals might tend to answer questions as if they were addressed to the group he/she belongs to. While on the other hand in the United States, which is an individualistic culture, the answers will most likely be answered and perceived through the eyes of that individual. 3) Is the data up to date?: How much does the culture of a country change over time, either by internal or external influences? 3.3 Communication and Noise Communication is a critical factor in the cross cultural management issues, particularly those of an interpersonal nature, involving motivation, leadership, group interactions and negotiation. Culture is conveyed and perpetuated through communication in one form or another. Culture and communication are so intricately intertwined that they are essentially synonymous [Helen, 2006]. The term communication describes the process of sharing meaning by transmitting messages through media such as words, behavior or material artifacts. Managers communicate to coordinate activities, to disseminate information to motivate people and to negotiate future plans. It is of vital importance, then for a receiver to interpret the meaning of a particular communication in the way the sender intended. Unfortunately the communication process involves stages during which meaning can be distorted. Anything that serves to undermine the communication of the intended meaning is typically referred to as Noise (Fig. 3.8). Attribution is the process in which people look for an explanation of another person’s behavior. Cultural variables in the communication process depend on many factors, Attitudes, Social organization, Thought patterns, Roles, languages, Non verbal communications and Context. Non verbal communication again can be categorized into i) Kinesic behavior, ii) Proxemics, iii) Paralanguage and iv) Object language.

Fig. 3.8 Communication process



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A major differentiating factor that is a primary cause of noise in the communication process is that of context. The context in which the communication takes place affects the meaning and interpretation of the interaction. Cultures are known to be high context culture or low context culture. In high context cultures (Asia, Middle East, Africa and Mediterranean), feelings and thoughts are not explicitly expressed, instead one has to read between the lines and interpret meaning from one’s general understanding. In low context culture (Germany, Switzerland, Scandinavia and North America) communications are more explicit. Feelings and thoughts are expressed in words and information is more readily available.

Conclusive Remarks

The Power Distance index of Greece and India are 60 and 77 respectively (Fig. 3.7). As the index value is more for India, it indicates that inequalities of power and wealth have been allowed more to grow within Indian society. A significant difference between UAI value of Greece (112) and India (40) is also observed. It indicates that Greeks are less tolerant that Indian. Individualism values are nearly same both for Greece and India. However, a bit high value of India (48) over Greece (35) indicates that Indians like to be Individualistic. An international manager needs to consider these aspects.

It is observed that culture of both Indian and Greeks are high context (Ref. 9). This

similarity will be helpful to an international manager to understand the meaning of the conversation. However, as the languages of both the countries are different (in Greece, only official language is Greek and in India, official language is mostly English), it is expected that a good amount of noise may exist. Thus a manager should be very careful in understanding the meaning of the communication and should not assume that others use the same reasoning processes. In fact during interview with the manager of the Greece office of IRS, it is understood that they are facing a huge challenge due to this language barrier.



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Chapter FOUR

GLOBAL HUMAN

RESOURCE MANAGEMENT

4.1 Introduction

vital component of implementing global strategy is international human resource management (IHRM). IHRM is increasingly being recognized as a major determinant of success or failure in international business [Helen, 2006]. Alternate philosophies of managerial staffing abroad are known as the ethnocentric, polycentric, region-centric and

global approaches. Firms using an ethnocentric staffing approach fill key managerial positions with people from headquarters – that is, parent country nationals (PCNs). Among the advantages of this approach, PCNs are familiar with company goals, products, technology, policies and procedures – and they know how to get things accomplished through headquarters. This policy is likely to be used where a company notes the inadequacy of local managerial skills and determines a high need to maintain close communication and coordination with headquarter. With a polycentric staffing approach, local managers – host country nationals (HCNs) are hired to fill key positions in their own country. In the global staffing approach, the best managers are recruited from within or outside of the company, regardless of nationality (i.e. third country nationals, TCNs). In a region-centric staffing approach, recruiting is done on a regional basis. Most MNC use a greater proportion of PCNs (also called expatriates) in top management positions, staffing middle and lower management positions with increasing proportions of HCNs (inpatriates) as one moves down the organizational hierarchy.

A



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4.2 Existing Structure of HR Department at IRS Structure of Human Resource department of IRS and its responsibility are shown in Fig. 4.1. The number of employees and number of HR personnel working in IRS are shown in Table 4.1.

CS= Chief Surveyor, DH= Divisional Head

Fig. 4.1 Structure of HR Department

Table 4.1: HR Department of Indian Register of Shipping (IRS) Company

Inception of HR department 2004

Total employee 350 (Approx)

Number of HR person 4

Having discussed with the HR manager of IRS, it is understood that HR department of IRS has the following roles. Recruitment and Selection Process: The objective of the process is to recruit appropriately qualified personnel for required positions in short period of time. Emphasis is given on optimum manpower utilization and focusing on lean organization structure, to obtain higher rate of productivity while maintaining high standards and accountability.



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Induction and Orientation Process: Induction is a process of receiving and welcoming new entrant, when he/she joins a company, giving him/her the basic information that he/she needs to settle down cheerfully and start work. Induction and Orientation aims to smoothen the adjustments at the preliminary stages when everything is likely to be strange and unfamiliar. Probation and Confirmation Process: The purpose of probation is to evaluate the employee’s suitability for the position and job for which he/she has been appointed. Transfer Process: Depending on the company’s business requirements and with a view to create career development opportunities, company may transfer its employees to other geographical locations within India or abroad. Performance Management System Process: The objective of the processes is to create accountability and performance based culture in the organization. It is an objective for evaluation of employees keeping in mind overall business objectives. Exit Process: This process is framed with a view to provide guidelines to employee who is leaving the services of the company either by Retirement, Resignation or Termination. 4.3 Ethnocentric Approach and Expatriate Managers in IRS Discussing with HR manager of IRS, it is observed that IRS mainly follow ethnocentric approach in staffing to fulfill managerial cadre position. In its office in Dubai, Colombo, Singapore, China all managerial positions are filled by parent country nationals (PCNs) or expatriates. It is also observed that in Greece office of IRS also, the manager is an Indian. IRS selects this position from the manager’s domestic track record and his ability to do challenging jobs. 4.3.1 Training to Expatriate Managers in IRS In order to make the expatriates managers efficient, IRS needs to provide sufficient training so that they can adapt to local culture and working environment. These training include Cross cultural training – to improve interaction with host country individuals. Culture shock training – to ease adjustment to the new environment. Sub-cultural shock training – this may occur due to difference in cultures in different parts of the same country. It is understood that IRS provide following techniques Area studies: IRS arranges to provide information about geography, economy etc of the foreign country where the manager is likely to be posted. Some times the manager is sent to the foreign country in advance to understand its culture and policy. Language training: Language training is needed to understand the foreign country’s local language. However, this is not so rigorously followed in IRS. One of the reasons is the paucity of time in giving sufficient language training to the managers as managers are always busy. As a result, it is understood



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that the manager in Greece is facing problem in many due to his inability to understand Greek which is the only official language in Greece. These trainings are given mainly at export stages. As such the degree of rigor is Low to Moderate. 4.3.2 Facility to Expatriate Managers in IRS IRS provides following facilities in compensating expatriation. Salary: salaries of the expatriate managers are decided based on local buying power. Allowances: IRS provides relocation expenses, housing allowances, car allowance, petrol allowance and food allowance in order to cope with the foreign environment. Children education benefit: IRS provides monetary allowance in admitting the kids in schools. Benefits: Health insurance of the managers and their families are covered by IRS. 4.4 Motivating People Across the Boundary Motivation at work place is an issue of vital concern since it is well established that a motivated workforce will achieve much better results than an unmotivated one. There are many and varied techniques used to motivate staffs at work place. The goal of using motivation techniques is usually to increase productivity but a highly motivated workforce also often equates to other improvements such as reduced absenteeism and turnover, increased innovation, employee satisfaction, and an enhanced corporate image. Many theories are evolved on motivation in the last centuries. Out of which, Maslow’s hierarchy of needs theory is well known.

Maslow’s hierarchy of needs theory consists of five needs (Fig. 4.2) – physiological, safety, social, esteem and self actualization – in which, as each need is substantially satisfied, the next need becomes dominant. Though Maslow’s needs theory has received wide recognition, particularly among practicing managers, unfortunately research does not validate the theory. Maslow provided no empirical substantiation and several studies that sought to validate the theory found no support for it (Hall and Nougaim, 1968; Rauschenberger et al. 1980). Clayton Alderfer attempted to rework Maslow’s need hierarchy to align it more closely with empirical research. His revised need hierarchy is labeled ERG theory that posits three groups of core needs: existence, relatedness and growth. Psychologist Frederick Herzberg proposed the two factor theory also known as motivation-hygiene theory. This theory relates intrinsic factors to job satisfaction and associates extrinsic factors with dissatisfaction. A relationship between these three theories are shown in Fig. 4.3.



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Fig. 4.2 An interpretation of Maslow's hierarchy of needs, represented as a pyramid [Source: wikipedia.org]

Fig. 4.3 The relationship between Alderfer’s ERG needs, Maslow’s hierchy and Herzberg’s two factor theory (Luthans, 1998)



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4.4.1 Steps Taken by IRS to Motivate Expatriate Managers Following steps are taken by IRS to motivate its managers. Performance based appraisal: Annual appraisals are determined based on the performance of the managers. As a result if a manager does well in his job, he has a chance to be promoted quickly to the next hierarchy and has a chance to get higher increment. Giving Honor on Annual day: IRS celebrates its Annual day at the end of the every year. If a manager does good job, IRS management honors the particular manager in front of all IRS employees and their family members which is quite motivating.

Conclusive Remarks

RS mainly follow ethnocentric approach in staffing to fulfill managerial cadre position. In its office in Dubai, Colombo, Singapore, China, Greece all managerial positions are filled by parent country nationals (PCNs) or expatriates.

IRS selects this position from the manager’s domestic track record and his ability to do

challenging jobs.

IRS provides various training in order to make the expatriates managers efficient whose degree of rigor is Low to Moderate. However, language training needs to be strengthen in order to avoid difficulties, which the manager of IRS in Greece office is facing presently.

In motivating managers, IRS has taken various steps, Performance based appraisal,

Giving Honor on Annual day etc.



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Chapter FIVE

CONCLUSIONS

5.1 Summary

ecision of IRS in opening a new office in Greece is analyzed from international management point of view. It is observed that though IRS has a few advantageous, it has some disadvantageous also. These points are discussed in various chapters. The biggest advantage is that IRS has an opportunity in penetrating in the market of ship classification

in Greece, which has most number of ship owners. However, it is also observed that IRS needs to strengthen its training department and arrange more training for expatriate managers to make them more efficient. The important points are discussed below. i) Increased Customer Satisfaction: As majority of the ship owners are Greek, IRS will be able to

serve them quickly if it has an office in Greece. This will definitely increase customer satisfaction which IRS can not ignore.

ii) Mitigation of Risk: IRS will be using the existing office building of Cyprus Register of Shipping

in Piraeus, Greece for its operation. IRS is getting benefit as they do not have to bear the cost of renting/buying office building. It will also reduce the risk as IRS will be list affected in case of expropriation (Seizure of assets by local Government with small compensation).

iii) Market Penetration: Though IRS is late in opening its office in Greece, it can penetrate in to the

market by offering low cost service which many of the Greek ship owners are looking for.

D



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iv) European Union: Greece is a European country. As such getting permission in various aspects of business is not easy for an Indian company. Attitude of European customers to get its ships classed by an Indian company will also be tested.

v) Late Mover: Big societies (ABS, DNV, LR, BV, GL etc) are already in operation for many years

in Greece. As such IRS will be late mover. vi) Threat of Substitute Services: This is quite immense in this business. As a few number of

reputed classification societies are operating in Greece, IRS has to offer its best service to stay in the competition.

vii) Hofstede’s Cultural Value Dimensions: A significant difference between Uncertainty

Avoidance Index (UAI) value of Greece (112) and India (40) is observed. It indicates that Greeks are less tolerant than Indian, which managers needs take care.

viii) High Context Culture: It is observed that culture of both Indian and Greeks are high context.

This similarity will be helpful to an international manager to understand the meaning of the conversation.

ix) Ethnocentric Approach: IRS mainly follow ethnocentric approach in staffing to fulfill

managerial cadre position. In its office in Dubai, Colombo, Singapore, China, Greece all managerial positions are filled by parent country nationals (PCNs) or expatriates.



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References [1] http://www.irclass.org [2] Porter, M.E., ‘How competitive forces shape strategy’, Harvard business Review, March/April

1979. [3] http://www.skyscrapercity.com/showthread.php?t=541070 [4] http://www.time.com/time/magazine/article/0,9171,901268,00.html [5] http://www.greeka.com/greece-culture.htm [6] http://www.clearlycultural.com/geert-hofstede-cultural-dimensions/ [7] http://www.cyborlink.com/besite/hofstede.htm [8] Helen Deresky, ‘International Management, Managing Across Borders and Cultures’, 5th Edition,

Pearson Education, Delhi, 2006. [9] http://en.wikipedia.org/wiki/High_context_culture [10] http://en.wikipedia.org/wiki/Economy_of_Greece [11] Class Note on International Management, by Prof. Manoj Thomas, PGCBM 15, XLRI,

Jamshedpur, 2009-10 [12] Hall D.T. and Nougaim K.E. (1968) An examination of Maslow’s need hierarchy in an

organizational setting’, Organizational Behavior and Human Performance, February, pp. 12-35. [13] Rauschenberger J, Schmitt N. and Hunter J.E. (1980). ‘A test of the need hierarchy concept by a

Markov model of change in need strength’, Administrative Science Quarterly, December, pp. 654-670.

[14] http://en.wikipedia.org/wiki/Diamond_model Abbreviation GLOBE Global Leadership and Organizational Behavior Effectiveness HCN Host Country Nationals IHRM International Human Resource Management MNC Multi-National Corporations PCN Parent Country Nationals SWOT Strength, Weakness, Opportunity, Threat



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Appendix

Interview with Manager (in Greece) of Indian Register of Shipping

[This information on setting up office in Greece by Indian Register of Shipping (IRS) is collected through telephonic interview with the Manager (Greece) of Indian Register of Shipping on 16 February 2010. Subsequently, information is also collected through face to face interview of a few senior officers of IRS, at head office of IRS, Powai, Mumbai] A. Introductory Information 1. Name of the Organization: Indian Register of Shipping 2. Year of Inception: 1975 3. Ownership of the Organization (Please tick the appropriate): i) Public Sector ii) Private Sector iii) Joint Venture (public & private) iv) Joint venture (private & private) v) Public Limited Company 4. Locations of Business: i) Single location ii) Multi location 5. Nature of Business (tick the appropriate):

i) Automobiles x) IT ii) Banking xi) ITES iii) Cement xii) Petrochemicals iv) Chemicals & Fertilizers xiii) Power v) Electronics & Telecommunications xiv) Processing vi) Engineering xv) Retail vii) Pharmaceutical xvi) Textiles viii) FMCG xvii) Classification/ Third Party Inspection ix) Hospitality xviii) Others (Pesticides) 6. Main Services: i) Surveying Ships and Issuing Certificate based on Survey to the Ship Owners



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B. Opening a New Office in International Soil 1. What is the location of new office of IRS? Piraeus, Greece 2. When is the operation started? April, 2009 3. How many staffs are there in Greece now? Presently only two. However the number may be increased depending on the business growth. 4. What are the strategies behind in opening a new office in Greece? a) Greek Ship Owner: Majority of the ship owner in the world is Greek. Opening an office will give IRS advantage to serve these vast amounts of customers easily. b) Recognition by European: As Greece is a European country, having office in Greece will help IRS in getting that recognition from European Union. c) Expanding the Business in Europe: Experience in Greece will help in opening office in strategic location like London, which is the head office of IMO (International Maritime Organization) and IACS (International Association of Classification Societies). d) Strategic Location: Piraeus is a place where lots of ships are available for survey. e) Benefit: Cyprus Register of Shipping has given their office building in Piraeus, Greece, to IRS for operation. IRS is getting benefit as they do not have to bear the cost of renting office building. f) Proper Connection: Athens is well connected to other parts of Europe. g) Cost Effective and Time Saving : In order to survey ships owned by Greek owner, either sip could be surveyed in other parts of the world where IRS has office, or IRS surveyor has to go to Greece. Both options is costly and time consuming. Operating from Greece, IRS will be reducing time in offering service as well as cost. This will effectively make more customer satisfaction. C. Regulatory Requirements 1. Are there any regulatory requirements to be followed from the local government? a) Communication: Any communication (Public Notice/ Quotation etc) has to be made in both the languages (English/Greek).



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D. Difficulties 1. What are the difficulties IRS may face during its operation in the new office in Greece? a) Communication Problem: As the local language is Greek and Indian employees do not know Geek, they are facing problem in communicating for any official work as well as non official work. b) Environment: Local environment is not similar to the environment of many of Indian major cities. In winter temperature is -200C to -150C.

T h e E n d