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CHAPTER-02

INTERNATIONAL MANAGEMENT AND CULTURAL DIVERSITY

Dr. Gehan Shanmuganathan, (DBA)

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CHAPTER OBJECTIVES Describe the importance of multinational

corporations and outsourcing in international business

Importance of sensitivity to cultural differences Identify major challenges facing global managerial

worker Various methods of entry into world markets Success factors in the global market place and

positives and negatives of globalization Scope of diversity, competitive advantage, and

potential problems of culturally diverse workforce

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INTERNATIONAL MANAGEMENT

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INTERNATIONAL MANAGEMENT Global integration influences the manager’s job Approximately 10% to 20% of all jobs in the United

States are dependent upon trade with other countries National identity of the product is vague in today’s

context due to outsourcing certain parts in the value chain

Critical aspects to manage in international business are, Cultural diversity Time factor in business operations (local and international) Outsourcing

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CULTURAL DIVERSITY IN THE US

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THE MULTINATIONAL CORPORATIONS

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MULTINATIONAL CORPORATIONS (MNC) A firm with operating units in two or more

countries in addition to its own Headquarters in one country and subsidiaries

in other countries Some times hire people from its own country

of origin (expatriates) for key positions in facilities in other countries

Other times, MNC will hire citizens of the country in which the division is located (host-country nationals)

Some MNCs are PepsiCo, IBM, Microsoft

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TRANSNATIONAL CORPORATIONS A special type of MNC that operates worldwide

without having a single national headquarters Units of the company located in different parts of

the world Eg- Tokyo based Trend Micro is a specialist in

combating computer viruses Key challenges in international business are,

Government agreements about trade Outsourcing

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TRADE AGREEMENT The North American Free Trade Agreement (NAFTA)

Relationships among United States, Canada, and Mexico Central American Free Trade Agreement (CAFTA)

United States, Dominican Republic, and Central America The European Union (EU)

27-nation alliance in Europe The World Trade Organization (WTO)

The only international agency overseeing the rules of international trade and settle disputes among countries

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GLOBAL OUTSOURCING AS PART OF INTERNATIONAL BUSINESS

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GLOBAL OUTSOURCING AS PART OF INTERNATIONAL BUSINESS

The practice of hiring an individual or another company outside the organization to perform work

Global outsourcing

Outsourcing Offshoring

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GLOBAL OUTSOURCING AS PART OF INTERNATIONAL BUSINESS

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GLOBAL OUTSOURCING

Lower-Priced goods

Create new jobs

Around the clock

service

Permanent loss of jobs

Slow job creation Low wages to local

employees threatening offshoring

Cases for ….. Cases against……

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PROBLEMS WITH OUTSOURCING

Language barrier

Customer handling issues

Currency value When relatively weak- begins on-shoring and

re-shoring

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SENSITIVITY TO CULTURAL DIFFERENCE

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CULTURAL SENSITIVITY

Awareness and use of local and

national customs and their

importance in effective interpersonal

relationships

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MULTICULTURAL WORKER

An individual who is

aware of and values

other cultures Ethnocentrism discuss……

CULTURAL MISTAKES TO AVOIDCountry

Great Britain

Spain

ScandinaviaAll Asian countries

Japan

India

Cultural Mistake

Asking personal questions. The British protect their privacy.Expecting punctuality. Your appointments will usually arrive 20-30 minutes late.Being overly rank conscious in these countries. Little attention is paid to a person’s place in the hierarchy.Pressuring an Asian employee to brag about his or her accomplishments. They prefer to let the record speak for itself.Shaking hands or hugging in public. Japanese consider the practices to be offensive.Telling Indians you prefer not to eat with your hands. If they are not using cutlery when eating, they expect you to do likewise.

Mexico

Brazil

Latin America

Flying into a Mexican city in the morning, expecting to close a deal by lunch. They build business relationships slowly.Attempting to impress them by speaking a few words of Spanish. Portuguese is the official language.Wearing elegant jewelry during a business meeting. They feel people should appear conservative during business meetings.

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CHALLENGES FACED THE GLOBAL MANAGERIAL WORKER

CHALLENGES FACING THEGLOBAL MANAGERIAL WORKER

Economic crises in

other countries

Balance of trade

problems

Collecting money

Liability of being a foreigner

Differences in

negotiating style

Human rights

violations

Culture shock

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Global leadership skills

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DEVELOPING GLOBAL LEADERSHIP SKILLS The ability to effectively lead people of

other cultures This is a combination of cultural sensitivity

and general leadership skills A welcoming attitude towards other cultures

is the most important in becoming an effective global leader

Their main roles are, Inspiring Envisioning Culturally sensitive

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HOFSTEDE CULTURAL DIMENSIONS

UncertaintyAvoidance

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APPLICATION OF HOFSTEDE CULTURAL DIMENSIONS

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CURRENCY FLUCTUATIONS If the currency gains in value, difficult for

exports but easy for imports If the currency weakens in value, difficult for

imports, but easy for exports These affect marketing and production in MNCs

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BALANCE OF TRADE PROBLEMS The difference between exports and imports

in both goods and services Deficit and surplus effects

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HUMAN RIGHTS VIOLATIONS, CORRUPTIONS, AND VIOLENCE

Should the manager use, Child labor

Free labor from political prisoners

Undocumented employees

Unfair treatments for indigenous people

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CULTURE SHOCK A group of physical and psychological

symptoms that may develop when a person is abruptly placed in a foreign culture

Understanding of, Values, beliefs, attitudes, ideas, religious beliefs,

myths, colors, education, symbols, and so on Time zones

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DIFFERENCES IN NEGOTIATING STYLE Negotiation is a process where each party

involved in bargaining, tries to gain an advantage for themselves by the end of the process. Negotiation is intended to aim at compromise.

American managers will have to be; Patient Use team approach Avoid being too informal

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PIRACY OF INTELLECTUAL PROPERTY RIGHTS AND OTHER MERCHANDISE

Intellectual property rights – software

Copy rights – publications

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METHODS OF ENTRY INTO WORLD MARKETS

Exporting Licensing

Local warehousing & selling

Local assembly & packaging

Strategic Alliance(joint venture)

Direct foreign

investment

Global startup

Global merger

Methods of Entry into

World Markets

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INTERNATIONAL BUSINESS ENTRY STRATEGIES Licensing- A contractual agreement in which one firm

permits another to produce and market its products and use its brand name in return for royalty or other compensation

Exporting- organization manufactures in the home country to export to other countries

Joint venture- a partnership between two entities for a business operation in a country (guest country)

Totally owned facility- with total ownership of the business Strategic Alliance- partnership formed to create

competitive advantage on a worldwide business

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INTERNATIONAL BUSINESS ENTRY STRATEGIES Trading company- These companies

provide a link between the international buyer and the seller

Counter Trade- International barter transactions

Multinational Firms- A firm that operates on a worldwide scale without ties to any specific nation or region

Global startup- a small firm that comes into existence by serving an international market

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SUCCESS FACTORS IN THE GLOBAL MARKETPLACE

HOW TO SUCCEED IN THE GLOBAL MARKETPLACE Think globally, act locally Diversify into similar product markets• Be familiar with local business concepts, laws,

and customs Recruit talented nationals Research and assess potential markets Hire or develop multicultural workers Adopt Environmentally Friendly Policies Understand your

CompetitorsPotential partnersMembers of the management team

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THE SCOPE, COMPETITIVE ADVANTAGE, AND POTENTIAL PROBLEMS OF MANAGING DIVERSITY

THE COMPETITIVE ADVANTAGES OF DIVERSITYLeads to better

rapport with culturally diverse

customers

Improves productivity and profits

Improves customer service

Reduces possible cultural bloopers

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Facilitates recruiting and

retaining talented

individuals

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COMPETITIVE ADVANTAGE OF DIVERSITY

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COMPETITIVE ADVANTAGE OF DIVERSITY

The advantage an organization has as an advantage

of managing diversity over rivals Product – Apple

Price- Wal-Mart

Advertising – insurance companies

Distribution or delivery – fast food

People or service- Banks

Process - travel and leisure

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BENEFITS OF CULTURAL DIVERSITY Marketing advantage in terms of sales and

profits Reduces costs (lost customer and efficiency) Recruiting talented employees Provide useful ideas for advertising and

publicity Reduces cultural bloopers (blunders) Create corporate creativity

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PROBLEMS ASSOCIATE WITH DIVERSITY

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PROBLEMS ASSOCIATE WITH DIVERSITY

Heterogeneous groups could create potential

conflicts among groups

ORGANIZATIONAL PRACTICES FOR IMPROVINGTHE MANAGEMENT OF DIVERSITY

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Establish corporate policies favoring

diversityEncourage employees

to form network groupsConduct “valuing diversity” training

programs English Language as a Force

For Unity

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QUESTIONS…….

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WEEKLY ASSIGNMENT- 02

What steps can you take,

starting this week, to ready

yourself to become a

multicultural worker?