1 Objectives Objectives 1. 1. Describe the alternatives available to Describe the alternatives available to a company that wants to a company that wants to internationalize internationalize 2. 2. Explain the factors that can make Explain the factors that can make international joint ventures international joint ventures successful. successful. 3. 3. Understand management “centrism”, i.e., Understand management “centrism”, i.e., management attitudes toward foreign management attitudes toward foreign operations. operations. 4. 4. Understand the dimensions on which Understand the dimensions on which national cultures may differ, and the national cultures may differ, and the applicability of American management applicability of American management theories in foreign cultures. theories in foreign cultures.
Transcript
11
ObjectivesObjectives
1.1. Describe the alternatives available to a Describe the alternatives available to a company that wants to internationalize company that wants to internationalize
2.2. Explain the factors that can make Explain the factors that can make international joint ventures successful.international joint ventures successful.
4.4. Understand the dimensions on which Understand the dimensions on which national cultures may differ, and the national cultures may differ, and the applicability of American management applicability of American management theories in foreign cultures.theories in foreign cultures.
22
TariffTariffA tax that government imposes on A tax that government imposes on
imported or, occasionally, exported goods.imported or, occasionally, exported goods.Intended to protect domestic industry and jobs Intended to protect domestic industry and jobs
from foreign competitionfrom foreign competitionOther countries usually retaliate their own Other countries usually retaliate their own
tariffs, actions that eventually reduce the overall tariffs, actions that eventually reduce the overall amount of trade and impedes economic growth.amount of trade and impedes economic growth.
International TradeInternational Trade
33
Free-Trade DoctrineFree-Trade DoctrineThe idea that if each country specializes in The idea that if each country specializes in
the production of the goods and services the production of the goods and services that it can produce most efficiently, this will that it can produce most efficiently, this will make the best use of global resourcesmake the best use of global resourcesIf India is more efficient in making textiles, and If India is more efficient in making textiles, and
the United States is more efficient in making the United States is more efficient in making computer software, then each country should computer software, then each country should focus on their respective strengths and trade focus on their respective strengths and trade for the other’s goods.for the other’s goods.
International TradeInternational Trade
44
North American Free Trade Agreement North American Free Trade Agreement (NAFTA)(NAFTA)Abolishes 99% of tariffs on goods traded Abolishes 99% of tariffs on goods traded
between Mexico, Canada and the United between Mexico, Canada and the United StatesStatesUnrestricted cross-border flows of resourcesUnrestricted cross-border flows of resourcesIncreased investment by U.S. firms in Mexican Increased investment by U.S. firms in Mexican
manufacturing facilities due lower wage costs in manufacturing facilities due lower wage costs in MexicoMexico
Opportunities and ThreatsOpportunities and ThreatsThe opportunity to serve more marketsThe opportunity to serve more marketsIncreased competition from NAFTA competitorsIncreased competition from NAFTA competitors
International TradeInternational Trade
55
DistanceDistanceMarkets were essentially closed because of the Markets were essentially closed because of the
slowness of communications over long distances.slowness of communications over long distances. CultureCulture
Language barriers and cultural practices made Language barriers and cultural practices made managing overseas businesses difficultmanaging overseas businesses difficult
Changes in Distance and CommunicationChanges in Distance and Communication Improvement in transportation technology and Improvement in transportation technology and
fast, secure communications have greatly reduced fast, secure communications have greatly reduced the barriers of physical and cultural distances.the barriers of physical and cultural distances.
66
International CompetitionInternational Competition
Forces Shrinking GlobeForces Shrinking GlobeAir travelAir travelModern information technologyModern information technologyCorporate GlobalismCorporate Globalism
International ManagementInternational ManagementThe pursuit of organizational objectives in The pursuit of organizational objectives in
international and intercultural settings.international and intercultural settings.
77
Global Organizations for a Global Organizations for a Global EconomyGlobal Economy
The Internationalization ProcessThe Internationalization Process Stage I: LicensingStage I: Licensing
Authorizing companies in foreign countries to produce and/or Authorizing companies in foreign countries to produce and/or market a given product within a specified territory in return for market a given product within a specified territory in return for a fee.a fee.
Stage 2: ExportingStage 2: Exporting Goods produced in one country are sold to customers in Goods produced in one country are sold to customers in
foreign countries.foreign countries.
Stage 3: Local warehousing and sellingStage 3: Local warehousing and selling Goods produced in one country are shipped to the parent Goods produced in one country are shipped to the parent
company’s storage and marketing facilities located in company’s storage and marketing facilities located in overseas countries.overseas countries.
88
Global Organizations for a Global Organizations for a Global Economy Global Economy (cont’d)(cont’d)
The Internationalization Process (cont’d)The Internationalization Process (cont’d)Stage 4: Local Assembly and PackagingStage 4: Local Assembly and Packaging
Components, rather than finished products, are Components, rather than finished products, are shipped to company-owned foreign facilities for final shipped to company-owned foreign facilities for final assembly and sales.assembly and sales.
Stage 5: Joint Ventures (also Strategic Stage 5: Joint Ventures (also Strategic Alliances or Partnerships)Alliances or Partnerships)A company in one country pools its resources with A company in one country pools its resources with
another foreign company or companies to create another foreign company or companies to create and market products and jointly share profits and and market products and jointly share profits and losses.losses.
99
Why alliances?Why alliances?Share risks and costs, avoid irreversible Share risks and costs, avoid irreversible
resource commitments … faster fit!resource commitments … faster fit!ExploreExplore - Discover new opportunities - Discover new opportunities
(e.g., R&D-joint research) (e.g., R&D-joint research) ExploitExploit - Increase productivity of current - Increase productivity of current
Facilitate entry into Facilitate entry into foreign markets.foreign markets.
Enable partners to Enable partners to share fixed costs and share fixed costs and risks associated with risks associated with new products and new products and processes.processes.
Facilitate transfer of Facilitate transfer of complementary skills complementary skills between companies.between companies.
Help establish Help establish technological technological standards.standards.
DisadvantagesDisadvantages Risk of giving away Risk of giving away
technological know-technological know-how.how.
Risk of opening local Risk of opening local market access to market access to foreign alliance foreign alliance partner.partner.
Risk of not getting Risk of not getting anything in return.anything in return.
1111
Recommendations for Achieving SuccessRecommendations for Achieving Success1.1. Be very clear about the alliance’s purposeBe very clear about the alliance’s purpose
2.2. Select partners to minimize risk:Select partners to minimize risk:1.1. partner capabilitypartner capability
2.2. trust/reputationtrust/reputation
3.3. you & partner’s current/future competitive positionyou & partner’s current/future competitive position
3.3. Agree on ground rules about the rights and Agree on ground rules about the rights and responsibilities of all parties at the outsetresponsibilities of all parties at the outset
4.4. Structure the alliance based on alliance Structure the alliance based on alliance purpose and risk purpose and risk
Strategic Alliances Strategic Alliances (Joint Ventures and (Joint Ventures and
Strategic Partnerships)Strategic Partnerships)
1212
Structure Alliances to Reduce Structure Alliances to Reduce RiskRisk
“Walling off”
1313
Global Organizations for a Global Organizations for a Global Economy Global Economy (cont’d)(cont’d)
The Internationalization Process (cont’d)The Internationalization Process (cont’d)Stage 6: Direct Foreign InvestmentStage 6: Direct Foreign Investment
The production and marketing of products through The production and marketing of products through a wholly owned subsidiary in a foreign country.a wholly owned subsidiary in a foreign country.
1414
From Global Companies to From Global Companies to Transnational CompaniesTransnational Companies
Global CompanyGlobal CompanyA multinational venture centrally managed from A multinational venture centrally managed from
one country.one country.Has global strategies for product design, financing, Has global strategies for product design, financing,
purchasing, manufacturing, and marketing.purchasing, manufacturing, and marketing.
Transnational CompanyTransnational CompanyA global network of productive units with a A global network of productive units with a
decentralized authority structure and no distinct decentralized authority structure and no distinct national identity.national identity.Relies on a blend of global and local strategies.Relies on a blend of global and local strategies.
1515
Toward Greater Global Awareness Toward Greater Global Awareness and Cross-Cultural Competenceand Cross-Cultural Competence
Travelers:Travelers: Engage in short-term Engage in short-term
visits to foreign visits to foreign countries.countries.
Have limited knowledge Have limited knowledge of local history, culture, of local history, culture, and customs.and customs.
Have limited local Have limited local language skills.language skills.
Don’t attempt to adapt Don’t attempt to adapt to the local to the local environment.environment.
SettlersSettlers Take assignments Take assignments
lasting up to five years.lasting up to five years. Have in-depth insights Have in-depth insights
into the host country’s into the host country’s history, customs, and history, customs, and culture.culture.
Speak the local Speak the local language well or language well or fluently.fluently.
Are culturally-trained to Are culturally-trained to “go native.”“go native.”
1616
Contrasting Attitudes Toward Contrasting Attitudes Toward International OperationsInternational Operations
EthnocentricEthnocentricThe view that assumes the home country’s The view that assumes the home country’s
personnel and ways of doing things are best.personnel and ways of doing things are best. Polycentric Polycentric
The view that assumes local managers in host The view that assumes local managers in host countries know best how to run their own countries know best how to run their own operations.operations.
GeocentricGeocentricA world-oriented view that draws upon the best A world-oriented view that draws upon the best
talent from around the world.talent from around the world.
1717
The Cultural ImperativeThe Cultural Imperative
CultureCultureA population’s taken-for-granted assumptions, A population’s taken-for-granted assumptions,
values, beliefs, and symbols that foster values, beliefs, and symbols that foster patterned behavior.patterned behavior.
Cultural Profile of American ManagersCultural Profile of American ManagersPositive: Informal, creative, open-mindedPositive: Informal, creative, open-mindedNegative: Educationally and professionally Negative: Educationally and professionally
narrownarrow
1818
The 3 levels of Culture The 3 levels of Culture (Schein)(Schein)
1.1. Artefacts and creationsArtefacts and creations - - the things one can the things one can see, hear and observe. see, hear and observe.
The 3 levels of Culture The 3 levels of Culture (Schein)(Schein)
2. V2. Values and Beliefsalues and Beliefs – –can be identified from stories can be identified from stories
language language
symbols symbols
how people explain justify what they dohow people explain justify what they do
2020
The 3 levels of Culture The 3 levels of Culture (Schein)(Schein)
33. Basic assumptions . Basic assumptions – – beliefs so deeply beliefs so deeply embedded in a culture that members are no longer embedded in a culture that members are no longer consciously aware of them. consciously aware of them.
SOURCES OF ORGANIZATIONAL SOURCES OF ORGANIZATIONAL CULTURECULTURE
the national culture the national culture (Hofstede, 1991)(Hofstede, 1991)
the vision, management style and the vision, management style and personality of the founder or other personality of the founder or other significant dominant managers significant dominant managers (Schein, (Schein, 1985)1985)
the nature of the business, the type of the nature of the business, the type of products and the environment within products and the environment within which the organisation operates which the organisation operates (Gordon, (Gordon, 1991)1991)
2323
National cultures National cultures (Hofstede)(Hofstede) Hofstede researched 40 countries in Hofstede researched 40 countries in
terms of national cultures in workterms of national cultures in workHe determined 4 dimensions of He determined 4 dimensions of
difference in national culturesdifference in national culturesPower distancePower distanceUncertainty avoidanceUncertainty avoidance individualismindividualismMasculinityMasculinity
2424
POWER DISTANCEPOWER DISTANCE Dependence relationships in a countryDependence relationships in a country Small power distanceSmall power distance
Limited dependency of subordinates on bossesLimited dependency of subordinates on bossesConsultative style of decision makingConsultative style of decision making
High Power Distance countries:High Power Distance countries:Latin countries (France, Spain, Latin America), Asian and Latin countries (France, Spain, Latin America), Asian and
African countriesAfrican countries Low Power Distance countries: Low Power Distance countries:
USA, UK, Netherlands, Scandinavian countriesUSA, UK, Netherlands, Scandinavian countries
2525
Power Distance in OrganizationsPower Distance in Organizations
LOWLOW
Decentralization Decentralization popularpopular
Narrow salary Narrow salary rangerange
Consultative Consultative decision makingdecision making
CentralizationCentralization Wide salary rangeWide salary range Subordinates Subordinates
expect rulesexpect rules
2626
Uncertainty avoidanceUncertainty avoidance This is a measure of the degree to which This is a measure of the degree to which
people are willing to accept change and work people are willing to accept change and work in uncertain circumstances. in uncertain circumstances.
The higher the degree of uncertainty The higher the degree of uncertainty avoidance the more structured people like avoidance the more structured people like things to be.things to be.
Examples: Low= Sweden, High = FranceExamples: Low= Sweden, High = France
2727
Individualism and collectivismIndividualism and collectivismThis refers to degree to which people This refers to degree to which people
see themselves as being part of a group see themselves as being part of a group or as individuals.or as individuals.
Examples include for individualistic= Examples include for individualistic= USA, UK, AustraliaUSA, UK, Australia
Examples for Collectivist= Norway, Examples for Collectivist= Norway, JapanJapan
2828
Masculinity/ femininityMasculinity/ femininityMasculine cultures place a high value Masculine cultures place a high value
on things like Heroism, success, on things like Heroism, success, achievement, Leading.achievement, Leading.
Feminine cultures place a high value on Feminine cultures place a high value on groups, quality of life, caring.groups, quality of life, caring.
Examples- Masculine= Germany, USA Examples- Masculine= Germany, USA Feminine= Sweden, Denmark, FinlandFeminine= Sweden, Denmark, Finland
Cultures in which nonverbal and situational Cultures in which nonverbal and situational messages convey primary meaning (e.g. Japan).messages convey primary meaning (e.g. Japan).Status of an individual is important in determining Status of an individual is important in determining
relationships.relationships.
Low-Context CulturesLow-Context CulturesCultures in which words convey primary meaning Cultures in which words convey primary meaning
(e.g., UK).(e.g., UK).Nonverbal messages are secondary to spoken words.Nonverbal messages are secondary to spoken words.The terms of the deal are more important building a The terms of the deal are more important building a
business relationship.business relationship.
3030
Culture Culture (cont’d)(cont’d)
Other Sources of Cultural Diversity Other Sources of Cultural Diversity (cont’d)(cont’d)TimeTime
Monochronic time: a perception of time as a Monochronic time: a perception of time as a straight line broken into standard units.straight line broken into standard units.
Timely arrivals and keeping appointments is considered Timely arrivals and keeping appointments is considered important.important.
Polychronic time: a perception of time as flexible, Polychronic time: a perception of time as flexible, elastic, and multidimensional.elastic, and multidimensional.
Appointment schedules are considered approximations Appointment schedules are considered approximations and are not kept precisely.and are not kept precisely.
3131
Culture Culture (cont’d)(cont’d)
Other Sources of Cultural Diversity (cont’d)Other Sources of Cultural Diversity (cont’d) Interpersonal spaceInterpersonal space
Some cultures prefer a close rather than wide Some cultures prefer a close rather than wide distance between conversing individuals.distance between conversing individuals.
Language skillsLanguage skillsLanguage fluency opens insights into another culture.Language fluency opens insights into another culture.
ReligionReligionReligion has many effects on personal and Religion has many effects on personal and
professional activities in many cultures.professional activities in many cultures.
3232
Ouchi’s Theory Z: The Marriage of Ouchi’s Theory Z: The Marriage of American and Japanese ManagementAmerican and Japanese Management
Theory Z OrganizationsTheory Z Organizations Organizations that successfully combine the traits of Organizations that successfully combine the traits of
typical American and Japanese companies.typical American and Japanese companies. Successful geocentric managers are not prisoners of Successful geocentric managers are not prisoners of
their own culture.their own culture. Japanese-like qualities– Long-term employment– Slower promotions– Cross-functional career paths– Emphasis on self-control– Participative decision making– Concern for employees
American qualities– Emphasis on individual
responsibility
3333
A Cross-Cultural Study A Cross-Cultural Study of Work Goalsof Work Goals
Findings’ implicationsFindings’ implicationsManagers need to adapt the motivation Managers need to adapt the motivation
programs to local preferences.programs to local preferences.An international contingency approach to An international contingency approach to
motivation is called for.motivation is called for.
3434
An International Contingency An International Contingency Model of LeadershipModel of Leadership
Model’s Assumptions/GuidelinesModel’s Assumptions/GuidelinesLeadership must be adapted to the local Leadership must be adapted to the local
culture.culture.Participative leadership is the most applicable Participative leadership is the most applicable
style where workers trust their leader.style where workers trust their leader.Directive leadership is considered the least Directive leadership is considered the least
appropriate style of leadership.appropriate style of leadership.
Why Is the U.S. Expatriate Failure Rate So Why Is the U.S. Expatriate Failure Rate So High?High?Sink-or-swim approach taken by companies in Sink-or-swim approach taken by companies in
not preparing managers for foreign not preparing managers for foreign assignments.assignments.
Family and personal adjustment problems that Family and personal adjustment problems that arose after arriving in the foreign assignment.arose after arriving in the foreign assignment.
3636
Cross-Cultural TrainingCross-Cultural Training
Cross-Cultural TrainingCross-Cultural TrainingA guided experience that helps people live and A guided experience that helps people live and
work in foreign cultures.work in foreign cultures. Specific Training TechniquesSpecific Training Techniques
Documentary programsDocumentary programs to familiarize expatriate to familiarize expatriate with assignment destination.with assignment destination.
Culture assimilatorCulture assimilator exposed expatriate to exposed expatriate to simulated intercultural incident and situations.simulated intercultural incident and situations.
Language instructionLanguage instruction builds the expatriate’s builds the expatriate’s conversational skills in a foreign language.conversational skills in a foreign language.
3737
Cross-Cultural Training Cross-Cultural Training (cont’d)(cont’d)
Specific Training Techniques (cont’d)Specific Training Techniques (cont’d)Sensitivity trainingSensitivity training provides experiential provides experiential
exercises to teach expatriates to be aware of exercises to teach expatriates to be aware of the impact of their actions on others in the impact of their actions on others in another culture.another culture.
Field experiencesField experiences provide firsthand exposure provide firsthand exposure to ethnic subcultures that heightens to ethnic subcultures that heightens expatriates’ cultural awareness.expatriates’ cultural awareness.
3838
Cross-Cultural Training Cross-Cultural Training (cont’d)(cont’d)
ConclusionsConclusionsA combination of documentary and A combination of documentary and
interpersonal training is the best combination interpersonal training is the best combination for expatriates.for expatriates.
Provide orientation for both expatriate and Provide orientation for both expatriate and family.family.
Have family sponsors or assigned mentors Have family sponsors or assigned mentors available at the foreign assignment.available at the foreign assignment.
Repatriation is an importance part of the entire Repatriation is an importance part of the entire foreign assignment experience.foreign assignment experience.
3939
North American Women North American Women on Foreign Assignmentson Foreign Assignments
Women are above-average in being Women are above-average in being successful in foreign assignments.successful in foreign assignments.
Strongest barriers to foreign assignments Strongest barriers to foreign assignments has been self-disqualification and the has been self-disqualification and the prejudice of home country managers.prejudice of home country managers.
Culture is a bigger hurdle than gender: Culture is a bigger hurdle than gender: women on foreign assignments are seen women on foreign assignments are seen as North Americans first, then women.as North Americans first, then women.
4040
Relying on Local ManagementRelying on Local Management
Advantages of Using Foreign NationalsAdvantages of Using Foreign NationalsThey know the language and culture.They know the language and culture.They do not require huge location expenses.They do not require huge location expenses.Host governments favor more local control.Host governments favor more local control.
DisadvantageDisadvantageLocal managers may not be attuned to home-Local managers may not be attuned to home-
office goals and procedures.office goals and procedures.
