GLOBAL PENG - Pablo Agnesepabloagnese.com/PengGlobalPlainSlides1314_2.pdfforeign market entries. 5. Explain what you should do to make your entry into a foreign market successful

CHAPTER 8

© 2010 Cengage Learning. All rights reserved.

GLOBAL � PENG

Chapter 8 LEARNING OBJECTIVES

After studying this chapter, you should be able to:

1.Make the case for global integration 2.Explain the evolution of the GATT and the WTO, including current challenges.

3.Make the case for regional economic


3.Make the case for regional economic integration.

4.List the accomplishments, benefits, and costs of the European Union.



5. Identify the five organizations that organize regional trade in the Americas and describe their benefits and costs.

6. Identify the three organizations that organize


6. Identify the three organizations that organize regional trade in Asia Pacific.

7. Articulate how regional trade should influence your thinking about global business.

LO1: THE CASE FOR GLOBAL ECONOMIC INTEGRATION

Global economic integration - efforts to reduce trade and investment barriers around the globe


LO2: THE EVOLUTION OF THE GATT AND WTO

GATT (General Agreement on Tariffs and Trade; 1948-1994)

� Reduced level of tariffs through multilateral negotiations.

Three areas of concern:


� Three areas of concern:

� No protection for services or intellectual property.

� Loopholes needed reform – Multifiber Arrangement (MFA)

� Global recessions led goverments to invoke non-tariff barriers (MTBs)

LO2: THE EVOLUTION OF THE GATT AND WTO

WTO (World Trade Organization; 1995-present)

� Transformed GATT from provisional treaty to full-fledged international organization.

� New features:


� New features:

� Agreement governing trade of services (GATS)

� Agreement governing intellectual property rights (TRIPS)

� Trade dispute settlement mechanisms

� Trade policy reviews

LO2: WTO – THE DOHA ROUND (2001-2006)

� Agenda:

� Reduce agricultural subsidies in developed countries.

� Slash tariffs, especially in areas where


� Slash tariffs, especially in areas where developing countries might benefit.

� Free up trade in services.

� Strengthen intellectual property protection.

LO3: THE CASE FOR REGIONAL ECONOMIC INTEGRATION

Regional economic integration – efforts to reduce trade and investment barriers within one

region.

PROS


PROSPromotes peace;

Disputes handled constructively;Consistent rules;Raise incomes and

stimulate economic growth

LO3: THE CASE AGAINST REGIONAL ECONOMIC INTEGRATION

Regional economic integration – efforts to reduce trade and investment barriers within one

region.


CONSDiscrimination against firms

outside of region;Some loss of sovereignty

LO3: TYPES OF REGIONAL ECONOMIC INTEGRATION


LO4: BENEFITS AND COSTS OF THE EUROPEAN UNION


LO4: EVOLUTION OF THE EUROPEAN UNION

� Political origins – effort to stop cycle of hatred and violence.

� First step – European Coal and Steel Community (1951).


(1951).

� 1957 – Treaty of Rome, launches European Economic Community (EEC).

� 1993 – Treaty of Maastricht, establishing European Union, goes into effect.

LO4: ACCOMPLISHMENTS OF THE EUROPEAN UNION

� EU and predecessors delivered over 50 years of peace.

� Has 27 member countries, 500 million citizens,


� Has 27 member countries, 500 million citizens, $15 trillion GDP.

� Introduction of common currency.

� Built a single market.

LO4: BENEFITS OF THE EUROPEAN UNION


LO4: COSTS OF THE EUROPEAN UNION


LO4: CHALLENGES FOR EU

� Should it be economic and political union, or purely economic?

� Cost of enlargement


� Membership of Turkey

� EU à la carte?

LO5: FIVE ORGANIZATIONS IN THE AMERICAS

NAFTA (North American Free Trade Agreement; 1994)

� Benefits:

� In first decade, trade between US and Canada grew twice as fast before NAFTA.


� US exports to Mexico tripled, to $161 billion.

� Mexican exports to US tripled, and GDP per capital rose 24%.

� Costs:

� Real wages in Mexico have stagnated.

� Many firms shifting multinational work to China.


Andean Community (1969) and Mercosur (1991)

� Not very effective, since most of


� Not very effective, since most of members’ trade is outside of the region.


Union of South American Nations (USAN; 2005)

� Modeled after EU.


� Modeled after EU.

� Functioning union similar to EU may be possible by 2010.


United States-Dominican Republic-Central America Free Trade Agreement

(CAFTA; 2005)


� Five Central American countries represent second largest US export market in Latin America.

� CAFTA is tenth largest US export market.

LO6: THREE ORGANIZATIONS IN ASIA

Australia-New Zealand Closer Economic Relations Trade Agreement

(ANZCERTA or CER; 1983)


� Removed tariffs and NTBs.

� Allowed citizens of one country to work and live in the other.


Association of Southeast Asian Nations (ASEAN; 1967)

� Established Asian Free Trade Area (AFTA)

� Main trade partners are outside of the


� Main trade partners are outside of the region.

� Launched ASEAN-China Free Trade Agreement (ACFTA) in 2002.


ASIA-Pacific Economic Cooperation (APEC; 1989)

� Includes members of ASEAN, CER,


� Includes members of ASEAN, CER, Japan, NAFTA, Chile, Peru and Russia.

�Members in four continents; 46% of world trade; 57% of world GDP.

LO7: THE INFLUENCE OF REGIONAL TRADE ON GLOBAL BUSINESS


DEBATE: REGIONAL INTEGRATION: BUILDING BLOCK OR STUMBLING BLOCK?

Building block: Considered the next best thing in the absence of global economic integration. May present blocks for global integration.


Stumbling block: Prevents global integration because it provides preferential treatment for members and discrimination for non-members.

CHAPTER 9


GLOBAL � PENG



1.Define entrepreneurship, entrepreneurs, and entrepreneurial firms

2. Identify the institutions and resources that affect entrepreneurship.

3. Identify three characteristics of a growing


3. Identify three characteristics of a growing entrepreneurial firm.

4.Describe how international strategies for entering foreign markets are different from those for staying in domestic markets.

5.Articulate what you should do to encourage entrepreneurship on an international level.

LO1: ENTREPRENEURSHIP

Terms to know

� Entrepreneurship

� Entrepreneurs

� International


� International entrepreneurship

LO2: INSTITUTIONS, RESOURCES AND ENTREPRENEURSHIP


LO2: FORMAL INSTITUTIONS AND ENTREPRENEURSHIP

Formal institutions either help or hinder the growth of new SMEs.


LO2: INFORMAL INSTITUTIONS AND ENTREPRENEURSHIP

Individualistic, low uncertainty

avoidance societies tend to foster


avoidance societies tend to foster

more entrepreneurs than collectivistic,

high uncertainty-avoidance

societies.

LO2: RESOURCES AND ENTREPRENEURSHIP

Entrepreneurial resources must be…


Entrepreneurial resources must be…

� Valuable� Rare� Inimitable� Organized

LO3: CHARACTERISTICS OF A GROWING ENTREPRENEURIAL FIRM

� Growth


� Innovation

� Financing

LO3: FINANCING THE ENTREPRENEURIAL FIRM


LO4: INTERNATIONALIZING THE ENTREPRENEURIAL FIRM

MYTH: Only large MNEs do business abroad; SMEs operate domestically


domestically

Born global firms: start-ups that do international business from inception

LO4: ENTERING FOREIGN MARKETS


LO4: AN EXPORT-IMPORT TRANSACTION


LO4: STAGE MODEL

� Suggests that required level of complexity and resources increase as firm moves from direct export to licensing to FDI.

� But, there are many counter-examples (born


� But, there are many counter-examples (born global firms).

� The key to rapid internationalization – the international experience of the entrepreneurs.

LO4: STAYING IN DOMESTIC MARKETS


LO5: ENCOURAGING ENTREPRENEURISHIP ON AN INTERNATIONAL LEVEL


DEBATE: SLOW vs. RAPID INTERNATIONALIZATION

SLOW: According to stage model, firms need to enter culturally and institutionally close markets first, accumulate overseas experience, then move to more sophisticated strategies, such as FDI.


RAPID: Every industry has become global, and entrepreneurial firms should go after opportunities rapidly. Firms that internationalize earlier do not face obstacles of domestic orientation.

CHAPTER 10


GLOBAL � PENG



1. Identify ways in which institutions and resources affect the liability of foreignness.

2. Match the quest for location-specific advantages with strategic goals.

3. Compare and contrast first- and late-mover


3. Compare and contrast first- and late-mover advantages.

4. List the steps in the comprehensive model of foreign market entries.

5. Explain what you should do to make your entry into a foreign market successful.

LO1: LIABILITY OF FOREIGNNESS

The inherent disadvantage foreign firms experience in host countries because of

their nonnative status.


Differences in formal and informal institutionsDiscrimination against foreign firms.

LO1: OVERCOMING LIABILITY OF FOREIGNNESS


Firms need to take actions deemed legitimate by formal and informal institutions.

LO1: OVERCOMING LIABILITY OF FOREIGNNESS


Firms offset liability by deploying overwhelming resources.

LO2: LOCATION SPECIFIC ADVANTAGES

Location-specific advantages – benefits a firm reaps from features specific to a particular place.

Agglomeration – location specific advantages that come about from clustering of economic activities.


come about from clustering of economic activities.

Given that different locations offer different benefits, it is imperative that a firm match its

strategic goals with potential locations.

LO2: LOCATION SPECIFIC ADVANTAGES AND STRATEGIC GOALS


LO2: STRATEGIC GOALS

� Natural resource seeking� Firms have to go to a specific location

where particular resources are found.


� Market seeking� Firms go to countries that have strong

demand for their products and services.

LO2: LOCATION SPECIFIC ADVANTAGES AND STRATEGIC GOALS

� Efficiency seeking � Firms single out the most

efficient locations featuring combination of scale economies and low cost-factors.


� Innovation seeking � Firms target countries and regions

renowned for generating world-class innovations.

LO2: CULTURAL/INSTITUTIONAL DISTANCES

Entry location

depends on

Cultural distance -difference

between two cultures along

Institutional distance –similarity or dissimilarity between


depends oncultures along identifiable

dimensions. Ex: individualism.

between regulatory,

normative and cognitive

institutions.

LO3: FIRST- AND LATE-MOVER ADVANTAGES

Location is only one aspect of entry decisions; entry timing and entry


decisions; entry timing and entry modes are also critical.

LO3: FIRST- AND LATE-MOVER ADVANTAGES


LO3: FIRST-MOVER ADVANTAGES

� Proprietary technology � Preemptive investments � Establish entry barriers for late


� Establish entry barriers for late entrants� Relationships and connections with key stakeholders (customers, governments)

LO3: LATE-MOVER ADVANTAGES

� Free ride on pioneering investment of first movers � First movers face greater


� First movers face greater technological and market uncertainties. � First movers may be inflexible.

LO4: HOW TO ENTER?

Scale of entry – amount of resources committed to entering a foreign market.

� Large-scale entries:

� Demonstrate strategic commitment to certain markets, assuring local customers and


markets, assuring local customers and suppliers for the long haul

� deters potential entrants hard-to-reverse strategic commitments

� limit strategic flexibility elsewhere and incur huge losses if these large-scale “bets” turn out wrong

LO4: HOW TO ENTER?

Scale of entry – amount of resources committed to entering a foreign market.

� Small-scale entries:

� Less costly


� Focus on organization learning.

� Limits downside risk.

� Lack of strong commitment may lead to difficulties in building market share and capturing first mover advantages.

LO4: THE COMPREHENSIVE MODEL OF FOREIGN MARKET ENTRIES


LO4: FIRST STEP - EQUITY vs. NON-EQUITY MODES


� Equity mode – include JVs and WSOs; larger, hard to reverse commitments. Calls for the establishment of independent organizations overseas.

� Nonequity mode – includes exports and contracts; tend to be smaller commitments.

LO4: SECOND STEP - MAKING ACTUAL SELECTION


LO4: MODES OF ENTRY (1)


LO4: MODES OF ENTRY (2)


LO5: MAKING ENTRY INTO FOREIGN MARKET SUCCESSFUL


DEBATE: GLOBAL vs. REGIONAL GEOGRAPHICAL DIVERSIFICATION

The majority of the largest MNEs are not global in their geographical scope.


Should most MNEs further globalize?

CHAPTER 11


GLOBAL � PENG



1.Define alliances and acquisitions

2.Articulate how institutions and resources influence alliances and acquisitions


influence alliances and acquisitions

3.Describe how alliances are formed

4.Outline how alliances are dissolved



5. Discuss how alliances perform

6. Explain why firms make acquisitions and what performances problems they tend to encounter


encounter

7. Articulate what you can do to make global alliances and acquisitions successful

LO1: DEFINE ALLIANCES AND ACQUISITIONS

Strategic Alliances

Voluntary agreements between firms involving exchange, sharing or co-


involving exchange, sharing or co-developing products, technologies or services.

LO1: DEFINE ALLIANCES AND ACQUISITIONS


LO1: STRATEGIC ALLIANCES

Contractual alliances – associations between firms that are based on contract, with no sharing

of ownership.

� Co-marketing

� Research and development (R&D)


� Research and development (R&D)

� Contracts

� Turnkey projects

� Strategic suppliers

� Strategic distributors

� Licensing/franchising

LO1: STRATEGIC ALLIANCES

� Equity-based alliances – based on ownership or financial interest between firms.


firms.

� Strategic investment

� Cross-shareholding

� Joint ventures

LO1: MEGERS AND ACQUISITIONS

Merger – combination of operations and management of two firms to establish a

new legal entity; accounts for only 3& of all M&A’s.


Acquisition – transfer of the control of operations and management from one firm

(target) to another (acquirer)

LO1: MEGERS AND ACQUISITIONS


LO2: INFLUENCE OF INSTITUTIONS


LO2: FORMAL INSTITUTIONS

Antitrust concerns – antitrust authorities more likely to approve

alliances than acquisitions.


alliances than acquisitions.

Entry requirements – many governments place limitations on foreign

firm’s mode of entry

LO2: INFORMAL INSTITUTIONS

Normative pillar –firms copy other reputable organizations to establish


reputable organizations to establish legitimacy.

Cognitive pillar – internalized, taken-for-granted values that guide alliances and

acquisitions.

LO2: RESOURCES AND ALLIANCES

Alliances must create value.



Alliances can decrease value.



Rarity – relational (collaborative) capabilities, the ability to manage inter-

firm relationships, may be rare.



Inimitability:� Alliances may make it easier to observe

imitate firm-specific capabilities. � Learning race – a race in which


� Learning race – a race in which partners aim to learn the other’s tricks.

� Trust and understanding between allies is difficult to imitate.


Organization - some successful alliances are organized in a way that is difficult to replicate.


replicate.

LO2: RESOURCES AND ACQUISITIONS

Value: � Consider, nearly 70% of acquisitions

fail.� Only identifiable group of winners is


� Only identifiable group of winners is shareholders of target firms.

Rarity: � For acquisitions to add value, one or all

of the firms involves must supply rarity to the acquisition

LO2: RESOURCES AND ACQUISITIONS

Inimitability:

� Firms that excel in post-acquisition integration possess hard to imitate capabilities.

Organization:


Organization:

� How are merged firms organized to take advantage of benefits of acquisition while minimizing the costs.

� Strategic fit

� Organizational fit

LO3: FORMATION OF ALLIANCES


LO3: FORMATION OF ALLIANCES – STAGE ONE

� Can growth be achieved strictly through market transactions, acquisitions or alliances?


� To grow through market transactions, firm must independently confront competitive challenges. � Acquisitions have unique drawbacks.

LO3: FORMATION OF ALLIANCES – STAGE TWO

� Contract or equity approach?

� Equity relationship allows firms to learn tacit capabilities.


firms to learn tacit capabilities. � Equity relationships allow firms to have some control over joint activities. Contracts do not.

LO3: FORMATION OF ALLIANCES – STAGE THREE

� Specify a format that is either equity- or contract-based.


LO4: DISSOLUTION OF ALLIANCES


LO5: PERFORMANCE OF ALLIANCES

Four key factors:

� Equity

� Greater equity stake may mean firm is more committed, likely to result in higher


committed, likely to result in higher performance.

� Learning and experience

� Has a firm successfully learned from its partners?

� Experience often used as a proxy

LO5: PERFORMANCE OF ALLIANCES

Four key factors:

� Nationality� Dissimilarities in national culture may create

strains in alliances.


strains in alliances.

� Relational capabilities� Alliance performance may

fundamentally boil down to soft, hard-to-measure relational capabilities.

LO6: WHY MAKE ACQUISITIONS?

Add Value


Reduce Value

LO6: ACQUISITION FAILURES


LO6: CROSS-BORDER ACQUISITION FAILURES


LO7: MAKING GLOBAL ALLIANCES AND ACQUISITIONS SUCCEED


DEBATE: MAJORITY JV vs. MINORITY JV

Majority: Implementation is difficult. Partners in emerging economies often resent Western dominance. At times, 50/50 management control is granted, even though MNE has majority


granted, even though MNE has majority equity.

Minority: Valuable as real option. Becomes more valuable as conditions become more uncertain. Recommended toehold instruments.

CHAPTER 12


GLOBAL � PENG



1. Describe the relationship between multinational strategy and structure

2. Explain how institutions and resources affect structure, learning and innovation

3. Outline the challenges associated with


3. Outline the challenges associated with learning, innovation, and knowledge management

4. List three things you can do to make a multinational firm successful.

LO1: TWO PRESSURES FOR MNE

� MNEs confront two sets of pressures:

� Cost reduction – calls for global integration. Local responsiveness – calls for local


� Local responsiveness – calls for local adaptation.

These two sets of pressures are dealt with in the integration-

responsiveness framework.

LO1: MULTINATIONAL STRATEGIES AND STRUCTURES


LO1: MULTINATIONAL STRATEGIES



Home Replication Strategy – duplicates home-based competencies in foreign

countries.


� Makes sense when most customers are domestic.� Lacks local responsiveness.


Localization strategy – focuses on a number of countries/regions, each one regarded as a stand-alone market.


� Effective when differences among markets are clear and pressures for cost reduction are low. � High costs due to duplication of efforts in multiple countries.


Global standardization strategy –development and distribution of standardized products worldwide.


� Not limited to major operations at home –may designate centers of excellence.

� Best when pressure for cost reduction is high and local responsiveness is low.


Transnational strategy – endeavors to be both cost effective and locally responsive.


� Global learning and diffusion of innovations.

� Organizationally complex, difficult to implement.

LO1: FOUR ORGANIZATIONAL STRATEGIES

International division – typically used when firms expand abroad, often engaging

in home replication strategy.


�Foreign subsidiary managers often not given sufficient voice. � International division serves as silo whose activities are not coordinated with rest of the firm.


International division: Typically used when firms engage home replication strategy



Geographic Area Structure – organizes MNE according to geographic areas.


�Most appropriate for localization strategy.�Regional mangers carry great deal of weight. �Strong local responsiveness, but that also encourages fragmentation of MNE.


Geographic Area Structure: appropriate for localization strategy.



Global product division structure –supports global standardization strategy by assigning global responsibilities to each

product division.


�Highly responsive to pressure for cost efficiency.�Reduces inefficient duplication in multiple countries.�Lags in local responsiveness.


Global product division structure: Highly responsive to pressure for cost efficiency; Reduces inefficient duplication in multiple

countries.



Global matrix – sharing and coordination of responsibilities between product divisions and geographic areas in order to be both cost efficient and locally responsive.


cost efficient and locally responsive.

�Difficult to deliver in practice. �May add layers of management, slow down decision speed.


Global matrix: Designed to be both cost efficient and locally responsive; Difficult to deliver in practice.


LO1: MULTINATIONAL STRATEGIES AND STRUCTURES

The relationship between strategy and structure is reciprocal.

Neither strategy nor structure is static. It is


Neither strategy nor structure is static. It is often necessary to change one, the other,

or both.

LO2: EFFECT OF INSTITUTIONS AND RESOURCES


LO2: INSTITUTION-BASED CONSIDERATIONS


External relationships

Internal relationships

LO2: RESOURCE-BASED CONSIDERATIONS

� Does a structural change add value?

� Strategy must be rare.


� Inimitability – formal structures are easier to observe, making informal structures more popular.

� Organization of MNEs, formal and informal.

LO3: KNOWLEDGE MANAGEMENT

Knowledge management:the structures, processes, and systems


the structures, processes, and systems that actively develop, leverage, and

transfer knowledge.

LO3: CATEGORIES OF KNOWLEDGE

� Explicit knowledge – codifiable.

� Tacit knowledge – non-codifiable. Transfer requires hands-on practice.


requires hands-on practice.

LO3: KNOWLEDGE MANAGEMENT IN FOUR TYPES OF MNEs


LO3: KNOWLEDGE MANAGEMENT IN FOUR TYPES OF MNEs

Globalizing R&D

A fundamental basis for competitive advantage is innovation-based firm

heterogeneity.


heterogeneity.

Decentralized R&D in different locations virtually guarantees persistent

heterogeneity.

LO4: THREE THINGS TO DO


DEBATE: CORPORATE CONTROL vs. SUBSIDIARY INITIATIVES

Subsidiary control:Subsidiary initiatives may inject a spirit of entrepreneurship throughout the larger corporation.


Corporate control: Hard to distinguish between good-faith subsidiary initiative and opportunistic empire-building. Subsidiary initiatives are not necessarily compatible with corporate-wide goals.

CHAPTER 13


GLOBAL � PENG



1. Explain staffing decisions, with a focus on expatriates

2. Identify training and development needs for expatriates and host country nationals

3. Identify and discuss compensation and


3. Identify and discuss compensation and performance appraisal issues



4. List factors that affect labor relations in both home and host countries

5. Discuss ho the institution- and resource-based views shed additional6

6. Identify the five C’s of human resource


6. Identify the five C’s of human resource management

LO1: EXPLAIN STAFFING DECISIONS

Terms to know:

� Human resources management

� Staffing

� Host Country Nationals


� Host Country Nationals (HCNs)

� Expatriates

LO1: TYPES OF EXPATRIATES


LO1: THREE APPROACHES TO STAFFING

Ethnocentric approach:

� Emphasizes norms and practices of parent company.

� Relies on PCNs.


� Relies on PCNs. � Perceived lack of talent among HCNs often necessitates this approach.


Polycentric approach:� Focuses on norms and practices of host country.

� Relies on HCNs. � “When in Rome…”


� “When in Rome…”� HCNs have no language or cultural barriers.

� Placing HCNs in top roles may send boost-morale of other HCNs


Geocentric approach:

� Focuses on finding most suitable managers, disregarding nationality.

� For geographically dispersed MNE, this


� For geographically dispersed MNE, this approach can help create corprate-wide culture and identity.

LO1: STRATEGY AND STAFFING

Systematic link between strategic posture of an MNE and its staffing

approach


LO1: THE ROLE OF EXPATRIATES


LO1: THE ROLE OF EXPATRIATES

� Strategists - representing interests of the MNE’s headquarters

� Daily managers - run operations and build local capabilities


build local capabilities

� Ambassadors - representing headquarter’s interests, build relationship with host-country stakeholders; represent subsidiary to headquarters

� Trainers – for their replacements

LO1: FACTORS IN EXPATRIATE SELECTION

� Expatriate failure rates are high…

� premature (earlier than expected) return

� unmet business objectives

� unfulfilled career development objectives


� unfulfilled career development objectives

� Causes for failure:

� Family’s inability to adjust to culture

� Usually a combination of work-related and family-related problems

LO1: FACTORS IN EXPATRIATE SELECTION


LO2: TRAINING FOR EXPATRIATES

�Length and rigor should correspond to expected length of stay.

� Extensive language training� Sensitivity training, with immersion


� Sensitivity training, with immersion approach

LO2: DEVELOPMENT FOR EXPATRIATES/REPATRIATES

� Psychological contract � Career anxiety� Loss of status� Cultural re-adjustment


� Cultural re-adjustment

LO2: TRAINING AND DEVELOPMENT FOR HCNS

In China, for example, key factor in retaining or losing talent is which employer can offer training and development opportunities.


development opportunities.

LO3: COMPENSATION FOR EXPATRIATES


LO3: BALANCE SHEET APPROACH

Hypothetical Compensation Package Using Balance Sheet Approach


LO3: COMPENSATION FOR HCNS

� Low-level HCNs have relatively little bargaining power.


� HCNs in management and professional positions gaining more bargaining power.

LO3: PERFORMANCE APPRASIAL

Evaluation of employee performance for the purpose of promotion, retention or ending

employment.


Cultural differences may create problems in appraising HCNs.

Expatriates need to be evaluated by their own supervisors.

LO4: LABOR RELATIONS AT HOME

� Firms’ key concern – cut costs, enhance competitiveness.

� Unions’ concern – higher wages and more benefits.


more benefits.� Threat of job loss vs. threat of strike.

LO4: LABOR RELATIONS ABROAD

� MNEs prefer to deal with non-unionized labor.

� In many developing countries, governments welcome MNEs and at the


governments welcome MNEs and at the same time silence unions.

LO5: INSTITUTIONS AND HUMAN RESOURCE MANAGEMENT


LO5: FORMAL INSTITUTIONS AND HUMAN RESOURCE MANAGEMENT

Formal institutions:Every country has rules


Every country has rules and regulations governing

human resource management.

LO5: INFORMAL INSTITUTIONS AND HUMAN RESOURCE MANAGEMENT

Informal institutions: MNEs from different


MNEs from differentcountries have different

norms in staffing. Must avoid stereotyping

LO5: RESOURCES AND HUMAN RESOURCE MANAGEMENT

Are particular HR activities rare?

Does a particular HR activity add value?


Are particular HR activities rare?

How imitable are certain HR activities?

Do HR practices support organizational capabilities?

LO6: THE FIVE C’s OF HRM


DEBATE: ACROSS-THE-BOARD PAY CUT vs. REDUCTION IN FORCE

Across-the-board:� With US firms, results tend to be very

negative. � May clash with individualistic culture.


Reduction in force: � “Corporate cannibalism”� Often viewed as unethical outside the

Anglo-American world� When managed correctly, impacted

employees are able to separate with dignity.

CHAPTER 14


GLOBAL � PENG



1.Articulate a stakeholder view of the firm

2.Apply the institution- and resource-based view to analyze corporate social responsibility


view to analyze corporate social responsibility

3.Identify three ways you can manage corporate social responsibility

CORPORATE SOCIAL RESPONSIBILITY (CSR)

The consideration of, and response to, issues beyond the narrow economic, technical and legal requirements of the firm to accomplish

social benefits.


Goal: global sustainability – meet the needs of the present without compromising the ability of future generations to meet their needs.

CSR AND THE STAKEHOLDER

At the heart of CSR is the

stakeholder – “any group or


stakeholder – “any group or

individual who can affect or is

affected by the achievement of

the organization’s objectives.

LO1: STAKEHOLDER VIEW OF THE FIRM


LO1: STAKEHOLDER VIEW OF THE FIRM

� Firms should pursue a triple bottom line:

� Economic

� Social


� Social

� Environmental

LO2: INSTITUTIONS AND RESOURCES AND CORPORATE SOCIAL RESPONSIBILITY


LO2: STRATEGIES FOR CSR

Reactive strategy:

relatively little or no response to CSR causes; denial usually first line of defense.



Defensive strategy:

focuses on regulatory compliance. Firms admit responsibility but fight it.



Accommodative strategy:

some support from top managers who may increasingly view CSR as a worthwhile

endeavor


endeavor


Proactive strategy:

being responsible and endeavoring to do more than is required


LO2: CODE OF CONDUCT

Set of written policies and standards outlining the proper practices for a firm. Adopting one tangible indication of firm’s

willingness to accept CSR.


LO2: THREE VIEWS ON CSR

� Negative view – interest in CSR may be only window dressing.

� Instrumental view – CSR activities are


� Instrumental view – CSR activities are instruments for making profit.

� Positive view – some firms self-motivated to take on CSR activities.

LO2: RESOURCES AND CORPORATE SOCIAL RESPONSIBILITY

� Do CSR-relates resources and capabilities add value?

� CSR-relates resources are not always


� CSR-relates resources are not always rare.

� Are CSR resources imitable?

� Does the firm have organizational capabilities to do a good job on CSR?

LO2: VALUE

� A firm’s resources can be applied to CSR causes in what is known as social issue participation. � Research suggests that these activities


� Research suggests that these activities may reduce shareholder value.

LO2: RARITY

� Example: Home Depot and Lowe’s have similar NGOs concerning lumber sources.


LO2: IMITABILITY

� At some firms, CSR activities are embedded in idiosyncratic skills, attitudes and interpretations.


LO2: ORGANIZATION

� Does the firm have organizational capabilities to do a good job on CSR? � Is the firm organized to explit the full potential of CSR?


potential of CSR?

LO2: CSR ECONOMIC PERFORMANCE PUZZLE

The resource-based view helps solve the CSR-economic performance puzzle

According to puzzle, there is no conclusive evidence for direct, positive link between


evidence for direct, positive link between CSR and economic performance.

According to resource-based view, sine each firm is different, not every firm’s economic performance is likely to benefit from CSR.

LO3: THREE WAYS TO MANAGE CSR


DEBATE: DOMESTIC vs. OVERSEAS SOCIAL RESPONSIBILITY

MNEs increase employment in host countries and help developing economies.


However, this expansion often comes at the cost of domestic employees and communities. MNE may shirk their CSR by increasing social burdens in their home countries.

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GLOBAL PENG - Pablo Agnesepabloagnese.com/PengGlobalPlainSlides1314_2.pdfforeign market entries. 5. Explain what you should do to make your entry into a foreign market successful