Managing in a Global Environment

Dimensions of CultureCulture:- the collective programming of the mindCulture shock- a person is exposed to a new culture with different norms, customs, expectations, has difficulty in adjustingDimensions

Power DistanceIndividualismUncertainty avoidanceMasculinity/femininityLong-term/short term orientationwww.geert-hofstede.com

Hoffstede Dimensions of CulturePower distance – the extent to which individuals expect a hierarchical structure that emphasizes status differences between subordinates and superiorsIndividualism – the degree to which a society values personal goals, autonomy, and privacy over group loyalty, norms, cohesiveness, and socialization.Uncertainty avoidance – the extent to which a society places value on reducing risk and instabilityMasculinity/femininity – the degree to which a society views assertive or masculine behavior as importantLong/short term orientation – the extent to which values are oriented toward the future (saving) vs. past or present (tradition, social obligation)

Why does this car Cost $20,000?

6000- assembly3000- sophisticated parts- engine etc800- small parts500- Advertising1000- data processing8700- legal, banking, insurance fees

6000- South Korea

3000- Japan

800- Taiwan Singapore and Japan

500- Great Britain

1000- Ireland

8700- United States.

Change in world Business

Global Shift: The effects of changes in the competitive landscape prompted by worldwide competition.

What are the ways in which world output and world trade have changed?

How International Business has changedLowered trade barriersGeneral Agreement on Tariffs and Trade (GATT)World Trade Organization (WTO)

Integrated Economic MarketsThe European Union (EU)

The North American Free Trade Act (NAFTA)

Central American-Dominican Republic Free Trade Agreement (CAFTA)

The Association of Southeast Asian Nations (ASEAN)

The Asia Pacific Economic Cooperation (APEC)

So what is changing?

1. Global consumer preferencesTastes and preferences are converging

Presence of mass media, exposure to goods from various countries, and standardized products

2. Globalized productionCost efficiency – Outsourcing,

So what is changing?(cont.)

3. Technological innovations Advances in communications, information

processing, and transportation technology

Fiber optics, wireless technology, the Internet and World Wide Web, and satellite technology

4. Management across cultures Adaptation to business strategies, structures,

operational policies, and human resource programs

Changing Environments

1. Business2. Legal

Common lawCivil lawMuslim Law

3. Cultural

Foreign expansion- Questions firms need to ask.

1. WhereLarge domestic marketWealth of customers high likely to growAvailable resourcesFirms offerings are suitable to the market( coals to New Castle)

A positive business environment exists

2. When?1. Timing is key2. First mover advantage3. Pioneering costs

Questions firms need to ask.How much?

Lowest if the firm simply decides to export its products to the foreign locationHighest if the firm decides to

have a wholly owned subsidiary in the foreign country

4. Which way?

Modes of Entry

Exporting – entering new markets by sending products to other countries, still maintaining production facilities within the domestic borders

Turnkey projects – specialized type of exporting, where the firm handles the startup of the company and a local client is then handed the key

Licensing – entering new markets by transferring the rights to produce and sell products overseas to a foreign firm

Modes of Entry

Franchising – entering new markets in which the franchise pays a fee for using the brand name and agrees to follow the standards and rules

Joint venture – means of entering new markets where two or more independent firms agree to establish a separate firm

Strategic alliance – cooperative arrangements between competitors or potential competitors from different countries

Wholly owned subsidiary – entering new markets in which a firm fully owns its subsidiary in foreign countries

Examples of Strategic AlliancesGeneral Electric – Snecma of FranceToshiba – IBMMitsui – General ElectricGM – DaewooTexas Instrument – Compel CommunicationsCanon – Hewlett-PackardMitsubishi – Caterpillar

Basic Approaches to Managing an International Subsidiary

Ethnocentric Approach- top management and key positions filled with people from the home country (expatriates)Polycentric Approach- staffed by nationals of the host countryGeocentric Approach- staffed by qualified people from other countriesThird Country Nationals- citizens from other countries.Can you give examples of these.

Why International Assignments End in Failure

Career blockage – the feeling that working abroad has gotten their career sidetracked, while people back home are climbing the corporate ladder

Culture shock – the inability to adjust to a different cultural environment

Lack of pre-departure cross-cultural training – little if any is offered to expatriates before going to a different country.

Why International Assignments End in Failure( Contd.)

Overemphasis on technical qualifications – the expatriate may lack cultural adaptability, even though they have the technical skills

Getting rid of a troublesome employee – provides the ability to solve interpersonal conflict, but at a huge expense to the company

Family problems – inability or unwillingness of the expatriate’s family to adapt to life in another country

Key HR Management Factors for Global Firms

SelectionSelection criterion should include cultural

sensitivity

TrainingLength of assignment determines depth of

trainingCross-cultural training is critical to success

Career DevelopmentInternational assignments should be part of

career advancement plan

Compensation and BenefitsIncentives and quality-of-life concerns

Cross-cultural Training

Impression Management – High intensity. Assessment center, field experiences, simulations, sensitivity trainingAffective Approach- Language training, role-playing, critical incidents, cases, stress-reduction training, moderate language trainingInformation-Giving Approach- area briefing, cultural briefing, films/ books/ interpreters, survival-level language

Ethics and Social Responsibility

Globalization greatly increases the possibility that managers will face an ethical dilemma.

Different cultures have different notions of right and wrong.

U.S. Foreign Corrupt Practice Act (1977).

Many firms and industry groups have developed their own codes of conduct for foreign operations.