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Environmental Factors that affect SBMP
S. Sredharran – M.C.A, M.B.A, M.Phil, M.Sc(Psychology)
What is a culture?
Culture is the "lens" through which you view the world.
It is central to what you see, How you make sense of what you see, How you express yourself.
"Culture is the arts elevated to a set of beliefs." – Tom Wolfe
What is different?
1. Communication Styles
2. Attitudes toward conflicts
3. Decision making style
4. Approaches to knowing
What is hidden below the surface?
1. Beliefs
2. Values3. Expectations
4. Attitudes
Four Fundamental Patterns of Cultural Difference
Cross – Cultural Understanding
The interaction of people from different backgrounds in the business world. Cross culture is a vital issues in international Business, as the success of international trade depends upon the smooth interaction of employees from different cultures and regions.
A growing number of companies are consequently devoting substantial resources toward training their employees to interact effectively with those of companies in other cultures in an effort to foment a postive cross-cultural experience.
Cross-culturalism is distinct from multiculturalism. Whereas multiculturalism deals with cultural diversity within a particular nation or social group, cross-culturalism is concerned with exchange beyond the boundaries of the nation or cultural group.
Cross Cultural Understanding
Cross culture can be experienced by an employee who is transferred to a location in another country. The employee must learn the language and culture of those around him, and vice-versa.
This can be more difficult if this person is acting in a managerial capacity; someone in this position who cannot effectively communicate with or understand their employees' actions can lose their credibility. In an ever-expanding global economy, cross culture and adaptability will continue to be important factors in the business world.
Cross Cultural Understanding
National culture has always been a complex and difficult construct to define. All cultures are more nuanced than we might ever imagine. In today’s globalizing world where cultures increasingly connect and collide, the art of finding distinctive or even unique characteristics of any national culture is becoming harder.
Greater access to knowledge, data and multiple opinions adds complexity rather than simplifies our ability to capture and distil the essence of a nations’ culture accurately.
Cross Cultural Considerations
There are many considerations that might help one assess the level of emphasis that one should place on cultural awareness before specifying what type of cultural learning is appropriate for your international managers. Here are some:
Priorities – The relative importance of a country / market in relation to your international strategy.
Economics – The alignment of favourable national economic conditions at a macro and market level.
Politics – The relative compatibility of national political intentions and prevailing ideology.
Legal – The consistency of legal infrastructure and the fit of ethical codes with company requirements.
Linguistic Compatibility – The ease of linguistic clarity between key people operating in different languages.
Engagement – The degree of success dependent or reliant on high levels of local workforce performance.
The greater the lack of compatibility...the greater the need to enhance your organization’s cross cultural capability.
Cross Cultural HR Differences
Percentage of people who agreed with this statement: It is important for a manager to have, at hand,
precise answers to most of the questions that his or her subordinates may raise about their work
High percentage countries Japan 77% Indonesia 67% Italy and France 59%
Low percentage countries USA and Sweden 13% Netherlands 18% Denmark 27% Great Britain 30%
Cross Cultural Communication
Verbal CommunicationWordsVoiceNon-Verbal CommunicationGesturesPosturesFacial ExpressionsEye ContactVocal CharacteristicsPersonal AppearanceTouch
High Context and Low Context Cultures
High Context Culture:- Cultures that rely heavily on non-verbal and subtle situational cues in communication.
Low Context Culture:- Cultures that rely heavily on words to convey meaning in communication
Cross Culture Communication
Intercultural Communication is the process of sending and receiving messages between people whose cultural background could lead them to interpret verbal and non-verbal signs differently.
Why Cross Culture communication ?
Globalization: Cross border movement of people, goods and data brings more and more cultures into contact with one another and increases the potential of cross culture communication.
◦ Business Opportunities◦ Job Opportunities◦ Improves the contribution of employees in a
diverse workforce◦ Sharing of views and ideas◦ Talent improvisation◦ An understanding of diverse market
Blocks to Cross Cultural Communication
Ethnocentrism : Inability to accept another culture's world view; "my way is the best."
Discrimination : Differential treatment of an individual due to minority status; actual and perceived; e.g., "we just aren't equipped to serve people like that."
Stereotyping : Generalizing about a person while ignoring presence of individual difference; e.g., "she's like that because she's Asian – all Asians are nonverbal."
Cultural Blindness: Differences are ignored and one proceeds as though differences did not exist; e.g., "there's no need to worry about a person's culture
Blocks to Cross culture communication
Cultural Imposition: Belief that everyone should conform to the majority; e.g., "we know what's best for you, if you don't like it you can go
elsewhere." Tone Difference : Formal tone change becomes embarrassing and off-putting in some cultures.
Welcome topics during a conversation
Welcome Topics of Conversation:
Indonesia: Family, travel/tourism, sports, praising the local cuisine, future plans and success of the group or organization
Germany: Sports--particularly soccer, tennis, current events, politics, among those who imbibe, beer is often a good topic of conversation
Topics to avoid during a conversation
Indonesia: Politics, corruption, criticism of Indonesian ways, commenting on Indonesian customs that you find peculiar, religion
Saudi Arabia: Middle Eastern politics and International oil politics, Israel, criticizing or questioning Islamic beliefs, women/ inquiries or complimentary remarks about the female family members of your Saudi associates
South Korea: Korean politics/local politics, The Korean War, Socialism and Communism, Japan and your contacts in Japan, your host's wife, Personal family matters
Germany: World War II, personal questions
Precautions in Cross Cultural Communication
1. Slow Down2. Separate Questions3. Avoid Negative Questions4. Take Turns5. Write it down6. Be Supportive7. Check Meanings8. Avoid Slangs9. Watch the humour10. Maintain Etiquette
Boundary Spanning Roles
Boundary Spanning Lateral relationships that help to
integrate and coordinate the activities of the organization.
Examples include: Liaisons, committees, task forces,
integrating positions, and interfunctional work teams.
Locus of Decision Making
Locus of Decision Making The degree to which decision making is centralized
versus decentralized. Centralized decision making
AdvantageGives top-level management maximum
control.Disadvantage
Limits the organization’s ability to respond quickly and effectively to changes in the environment.
Locus of Decision Making
Locus of Decision Making Decentralized decision making
AdvantageOrganizations can respond to environmental change more rapidly and effectively because the decision makers are the people closest to the situation.
DisadvantageTop-level managers lose some control.
Mechanistic versus Organic Systems
Mechanistic Systems Highly centralized organizations in which
decision-making authority rests with top-level management.
Organic Systems Decentralized organizations that push
decision making to the lowest levels of the organization in an effort to respond more effectively to environmental change.
Management of Foreign Subsidiary
Three levels of subsidiary responsibility Local Implementation
Very well defined roles to play Very little independence
Specialized Contribution An interdependent network of subsidiaries,
with each subsidiary making a unique contribution
Often in a production role Global Mandate
Have responsibility for and entire global business
Activities integrated by the subsidiary itself, not the corporate office
Industrial Relations – Cross Cultural
We need to consider some general points about the field of international industrial relations. First, it is important to realize that it is difficult to compare industrial relations systems and behavior across national boundaries; an industrial relations concept may change considerably when translated from one industrial relations context to another.
Cross-national differences also emerge as to the objectives of the collective bargaining process and the enforceability of collective agreements.
Industrial Relations - CC
Because national differences in economic, political and legal systems produce markedly different industrial relations systems across countries, multinationals generally delegate the management of industrial relations to their foreign subsidiaries. However, a policy of decentralization does not keep corporate headquarters from exercising some coordination over industrial relations strategy.Generally, corporate headquarters will become involved in or oversee labor agreements made by foreign subsidiaries because these agreements may affect the international plans of the firm and/or create precedents for negotiations in other countries.Multinational headquarters involvement in industrial relations is influenced by several factors, as detailed in the next slide :
Industrial Relations - CC
The degree of inter-subsidiary production integration. High degree of integration was found to be the most
important factor leading to the centralization of the industrial relations function within the firms studied.
Industrial relations throughout a system become of direct importance to corporate headquarters when transnational sourcing patterns have been developed, that is, when a subsidiary in one country relies on another foreign subsidiary as a source of components or as a user of its output.
In this context, a coordinated industrial relations policy is one of the key factors in a successful global production strategy.
Company Domicile
A domicile of choice is a domicile acquired, through the exercise of his own will, by a person who is legally capable of changing his domicile.
To acquire a domicile of choice, a person must establish a dwelling-place with the intention of making it his home.
The fact of physical presence at a dwelling-place and the intention to make it a home must concur; if they do so, even for a moment, the change of domicile takes place.
A question of domicile as between the state of the forum and another state is determined by the law of the forum.
Role of Headquarters
Providing direction and Purpose Leveraging Corporate Performance Ensuring Continual Renewal Problems in international management
mostly arise from control-related issues (headquarters-subsidiary relationships)
Head Quarters & Subsidiary Relations
Cosmopolitan liaison personnel Project teams Cross-border teams Informal integration and structural
integration International job rotations
Head quarters – Subsidiary Relations
1920-1950 Multidomestic –
strategic decisions decentralized
Loose, simple controls
Little coordination Subsidiaries are
managed as portfolios
Mainly financial flow – capital out, dividends back (Market approach)
1950-1980 International
companies Control through
budgets, structural mechanisms
Formal system controls – output controls Subsidiaries are managed as portfoliosRules approach predominatePlanning Budgeting, Replicating HQ’s administrative system
Headquarters – Subsidiary Relations
1980-1990 Efficiency-driven
global companies Centralized
control on strategic decisions (product decisions –cost, quality emphasis)
Local autonomy on operational decisions What control approach predominates?
1990-Present Transnational Complex process of
coordination and cooperation in an environment of shared decision making (emphasis on worldwide innovation)
Control mechanisms from previous periods, but with increased reliance on integrative techniques and socialization (international job rotation, cross-border teams,…etc.,)
Nationality of Ownership of Subsidiary
US firms tend to exercise greater centralized control over labor relations than do British or other European firms.
US firms tend to place greater emphasis on formal management controls and a close reporting system (particularly within the area of financial control) to ensure that planning targets are met.
Foreign-owned multinationals in Britain prefer single-employer bargaining (rather than involving an employer association), and are more likely than British firms to assert managerial prerogative on matters of labor utilization.
US-owned subsidiaries are much more centralized in labor relations decision making than the British-owned, attributed to: More integrated nature of US firms Greater divergence between British and US labor relations
systems than between British and other European systems, and More ethnocentric managerial style of US firms
Subsidiary Characteristics
Subsidiaries formed through acquisition of well-established indigenous firms tend to be given much more autonomy over industrial relations than are greenfield sites.
Greater intervention would be expected when the subsidiary is of key strategic importance to the firm and the subsidiary is young.
Where the parent firm is a significant source of operating or investment funds for the subsidiary – a subsidiary is more dependent on headquarters for resources – there will tend to be increased corporate involvement in industrial relations and human resource management.
Poor subsidiary performance tends to be accompanied by increased corporate involvement in industrial relations.
Strategic Control Options
Input Control – A control system that emphasizes employee selection, training and socialization fo these employees within the organization and its values, vision and objectives.
Behavior Control - A control system that emphasizes top-down control in the form of articulated operating processes and procedures
Output Control - A control system that sets and measures actual targets, such as financial results and productivity
Orgn Attributes that support Behaviour Control
The degree to which a firm weighs evaluations based on behavior
Whether an employee is held accountable regardless of the outcome
The degree to which there is concern for procedures or methods
The degree to which performance programs are imposed from the top down
The frequency in which employees receive feedback or performance information
Dimensions of Output Control
The degree to which a firm uses evaluations with significant weightings on results
Pay based on performance Pre-established targets used for
evaluating personnel Numerical records as indices of
effectiveness Performance linked to concrete results Appraisals based on goal achievement
Host Country Cultural Distance from Home Country
Control System “Fit” Knowledge of
Input- Output Transformation
> Output Measurability
Subsidiary Operating Strategies (e.g.; Inventory Levels, Profit Repatriation)
Control System Selection
- Input - Behavior - Output
Host CountryPolitical RestrictionsAnd Risk
Host CountryEconomic and ForeignExchange Instability
Control Selection
Developing Performance Measurement and Control Systems: Host Country Factors
The cultural distance between the headquarters home country and the country hosting the international firm’s subsidiary
The degree of host country political risk as reflected in host government restrictions on the international firm’s operations
Economic factors such as the volatility of a host country’s foreign exchange rates and host country inflationary pressures that are linked to foreign exchange movements
Core Values - CSR
Integrity
Safety and health
Quality of work
Treatment of people
Accountability
Profitability
Inclusiveness & Diversity
• Supplier Diversity
• Design
• Innovation
• The Environment
• Operational Excellence
• Technology
Enterprise Level – Strategic Thinking
Establishment of committees: Public policy/issues Ethics Governance Social audit Corporate philanthropy Corporate citizenship Ad hoc committees
Public affairs office
Identification/analysis of social or public issues
Corporate Public Policy
Ethical Issues
Ethics Accepted principles of right or wrong
governing the behavior of a person, the profession’s members, or an organization
Business ethics Accepted principles of right or wrong
governing the conduct of business people Ethical strategy
A strategy that doesn’t violate the accepted principles
Ethical Issues in International Business
Arise most often in the context of:
Employment practices
Employment practices
CorruptionCorruption
Human rightsHuman rights
Moral obligations• Social responsibility
Moral obligations• Social responsibility
Environmental pollution
Environmental pollution
Ethical Issues in Employment Practices
When work conditions in a host nation are clearly inferior to those in a multinational’s home nation, what standards could be applied? Host nation’s standards Home nation’s standards Both or other’s standards
Rights (e.g. freedom of association, speech, assembly & movement) granted in the developed world are by no means
universally accepted Example: No specific human rights in South Africa,
Nigeria & Myanmar Examples
Royal Dutch/Shell: Human Rights in Nigeria Child Labour in China
Ethical Issues
Corruption (e.g. hoarding, smuggling, & side payments to government bureaucrats) occurs when preexisting political structures limit the
workings of the market mechanism can speed up approval for business investments
Conflicting viewpoints of economists towards corruption Stimulates economic growth Reduces the returns on business investment & leads
to low economic growth Example:
Corruption fears over China ventures
CSR
Social Responsibility Business decisions should be made after consideration of
social consequences of economic actions Corporate Social Responsibility
Firms make contributions to society by engaging in social activities
Example: Environmental protection 3M company in US
develops biodegradable products which cause less pollution collects the waste paper for recycling
Example: Hiring and Promotion
Ethical Decision Making:Hiring & Promotion
Ethical issues
Fair compensationReasonable working hours
Equal pay for work of equal value
Prohibition of forced / prison labor
Prohibition of child labor
Prohibition of discrimination & disciplinary actions
Ethical Decision Making
Step 1 Identifying a decision which would affect stakeholders &
in what ways Internal stakeholders
People who work for or who own the business such as employees, the board of directors, & stockholders
External stakeholders Individuals or groups who have some claims on a firm such as
customers, suppliers, & unions Step 2
Judging the ethics of the proposed strategic decision i.e. whether a proposed decision would violate the
fundamental rights of any stakeholders Step 3
Managers establish moral intent to resolve moral concerns where the fundamental rights of stakeholders or key moral principles
have been violated
Ethical Decision Making
Step 4 Requiring the company to engage in ethical behavior
Step 5 Companies need to audit its decisions & ensure that they
are consistent with ethical principles
Environmental Issues
Pesticides often harm or kill fish and birds and can cause illness in children. Too much pesticide is dangerous to adults, so only safe levels are allowed keeping adults in mind, but such levels are still probably too dangerous for children. A 2011 study by UC Berkeley has shown that prenatal exposure of pesticides in pregnant women can also lower the IQ of their children.
Air pollution contaminates the air, despoils vegetation and crops, corrodes construction materials, and threatens our lives and health. We generally assume we get sick from allergies, bacteria, or viruses; but pollution is a very common cause of illness as well.
Environmental Issues
Nuclear power plants require minding, processing, and transporting of nuclear materials that causes cancer in many people, and it’s unclear that our methods of disposing of nuclear waste are entirely safe.
Toxins — Chlorofluorocarbons, Endocrine disruptors, Dioxin, Toxic heavy metals, Environmental impact of the coal industry, Herbicides, Pesticides, Toxic waste
Waste — Electronic waste, Litter, Waste disposal incidents, Marine debris, Medical waste, Landfill Environmental impact of the coal industry, Incineration, Great Pacific Garbage Patch, Exporting of hazardous waste
Stakeholder Management
Stakeholder Management is an important discipline that successful people use to win support from others. It helps them ensure that their projects succeed where others fail
Remember that although stakeholders may be both organizations and people, ultimately an organisation can only communicate with individual people. An organisation has to make sure that they identify the correct individual stakeholders within a stakeholder organization.
An organization may have a long list of people and organizations that are affected by their work. Some of these may have the power either to block or advance it. Some may be interested in what the organizations are doing, others may not care.
An organization has to map out their stakeholders on a Power/Interest Grid and classify them by their power over their work work and by their interest in an organization’s work.
HighLow
Low
High
Power
Interest
Stakeholder Interests
Stakeholder Interests
High power, interested people: these are the people you must fully engage with, and make the greatest efforts to satisfy.
High power, less interested people: put enough work in with these people to keep them satisfied, but not so much that they become bored with your message.
Low power, interested people: keep these people adequately informed, and talk to them to ensure that no major issues are arising. These people can often be very helpful with the detail of your project.
Low power, less interested people: again, monitor these people, but do not bore them with excessive communication.
Keep Satisfied Manage Closely
Monitor Keep informed
Low
Low
High
Power
Interest High
Stakeholder Interests
Institutional Differences Across Countries
Emergingeconomies:
Brazil, Russia,India, China, South Africa
Group-centered
economies:Korea
Family-centeredeconomies:
Sweden,France, Italy
Bank-centeredeconomies:
Japan, Germany
Market-centered
economies:U.S., U.K.
Less-developed
economic andtransaction
environments
Well developed
economic andtransaction
environments
BRICS
BRICS originally "BRIC" before the inclusion of South Africa in 2010, is the title of an association of emerging national economies: Brazil, Russia, India, China and South Africa.
With the possible exception of Russia, the BRICS members are all developing or newly industrialised countries, but they are distinguished by their large, fast-growing economies and significant influence on regional and global affairs.
As of 2013, the five BRICS countries represent almost 3 billion people, with a combined nominal GDP of US$14.9 trillion, and an estimated US$4 trillion in combined foreign exchange reserves.
Presently, India holds the chair of the BRICS group.
Reasons behind BRIC
The BRIC grouping's first formal summit commenced in Yekaterinburg on June 16, 2009, with Luiz Inacio Lula da Silva, Dmitry Medvedev, Manmohan Singh, and Hu Jintao, the respective leaders of Brazil, Russia, India and China, all attending.
The summit's focus was on means of improving the global economic situation and reforming financial institutions, and discussed how the four countries could better co-operate in the future. There was further discussion of ways that developing countries, such as the BRIC members, could become more involved in global affairs.
In the aftermath of the Yekaterinburg summit, the BRIC nations announced the need for a new global reserve currency, which would have to be 'diversified, stable and predictable'. Although the statement that was released did not directly criticise the perceived 'dominance' of the US dollar – something which Russia had attacked in the past – it did spark a fall in the value of the dollar against other major currencies.
South Africa joined the group in December 2010 and the forum became BRICS.