ibm unit v notes

8/7/2019 IBM Unit V Notes

1/14

[For Private reading - among Management Studies Students of Rajalakshmi Eng. College, Chennai]

BA 9209 Conflict Management and Ethics in IBM

Unit V

Disadvantages of international business - Conflict in International Business -

Sources and types of conflict- Conflict resolutions - Negotiation - the role of

international agencies-Ethical issues in international business-Ethical decisionmaking.

----------------------------------------------------------------------------------------------------------------

----------------------------------------

Disadvantages of International Business:

1. Delayed Payment 2.Increased costs 3. Delayed Shipment.

4. Unstable Price. 5. Restrictions 6.Involvement of RTB. 7.

Business among MFNs. 8. Less Priority to LDCs 9, SuddenDiversification. 10. Unstable Economy 11. Political instability.

12. Devaluation of Money. 13. Frequent change of Govt.

Policies 14. More Dumping Activity. 15. Income in equalities.

16. Labour Disorder. 17. New market Opportunity 18.

Unstable Demand and Supply. 19. Ethics 20. Environment

[war,cyclone,quake,flood etc.,]

Control of MNEs: Control focus on means to verify and correct

actions that differ from established plans. Compliances need

to be secured from subordinates through different means of

coordinating specialised and interdependent parts of the

organisation. Within an organisation, control serves as an

integrating mechanism. Control are designed to reduce

uncertainty, increase predictability and ensure behaviour

originating in separate parts of the organisation are

compatible and in support of common organisational goals.

[IBM Unit V Texts from AU referred Books Concepts by Prof.Dr.CB.Ragothaman, DOMS Rajalakshmi

Eng. College] Page 1


2/14


Control has three aspects establishing standards and

targets, monitoring activities and comparing actual

implementing measures to remedy deficiencies.

Types of Control

1. Internal control

From an internal control standpoint, an MNC will focus

on the things that it does best. At the same time,

management wants to ensure that there is a market for

the goods and services that it is offering. Therefore, the

company first needs to find out what the customer want

and be prepared to respond appropriately. This requires

an external control focus.

2. Direct control

It involves face-to-face or personal meeting to monitor

operation

3. Indirect control

It uses reports and other written forms of

communications to control operations. E.g. Financial

statement

4. Formalised control

The elements of a bureaucratic / formalised control

system are




3/14


An internal budget and planning system

The functional reporting system

Policy manual used to direct functional

performance

5. Cultural control

Sometimes MNC emphasise corporate values and

culture, the evaluation based on the extent to which an

individual or an entity complies with the norms. Culture

controls require an extensive socialisation process to

which informal, personal interaction is central.

6. Exercising control

With in most corporation different functional areas

subjected to different guidelines because, they are

subject to different constraints. For example marketing

function.

Approaches to control

1. Control in US organisations are highly centralised

2. Control in Europe organisations are highly decentralised3. German organisations favour vertical spans or reporting

channels from the foreign subsidiary to responsible

positions in the parent.




4/14


4. Euro system is socio emotional control system where as

Americans follow task oriented objective control system

Control Mechanisms

1. Corporate culture

Maintaining organisation culture e.g. banning the use of

cell phones

2. Coordinating mechanism

i. Strengthening the corporate staff

ii. Planning international and domestic personnel in

closer

iii. Establishing liaisons among them

iv. Establishing teams from different countries to

work in special projects

v. Placing the foreign personnel on Board of directors

vi. Giving equal importance for all individual units

vii. Job rotation

viii. Bringing different people from different countries

Control Techniques

A number of performance measures are used for control

purpose. There are three most important common types are used

by the MNCs to control them. They are

1. Financial performance




5/14


Financial performance evaluation of a foreign subsidiary us

based on profit and return on investment. Profit is the

amount remaining after all expenses are deducted from total

revenues. Return on investment through dividing profit by

assets. Some firms use ratio analysis also for measuring

financial performance.

2. Quality performance

Quality is an important technique to control the MNCs. The

quality performance can be done with the help of quality

circles, which is propounded by the Japanese. A quality circle

is a group of workers who meet on a regular basis to discuss

the ways of improving the quality of work.

3. HR performance

Besides financial techniques and the emphasis on quality

another key area of control is HR performance evaluation.

The most common approaches to personnel performance

evaluation are the periodic appraisal of work performance. In

now a days people are going for 360Degree evaluation.

Control in special situations

1. Shared ownership

2. Change in strategies

3. Legal structure

4. Types of subsidiaries




6/14


Designing an International Control System

1. Establishing objectives

2. Selecting control method

3. Setting standards 4. Locate responsibility

4. Establishing communication system

5. Measuring actual performance

6. Comparison of actual and desired performance

7. Evaluating deviations 8. Taking corrective

actionsFactors influencing control

Internal factors

1. Corporate philosophy

2. Mode of operation

3. Nature of firms foreign business

4. Location of the foreign operation5. Nature of technology

6. Nature of functions

7. Size and maturity of firms

External factors

1. Nature of commercial environment 2. Political

environmentSignificance of control




7/14


It provides an insight into the efficacy and

effectiveness of the over all plan

It also enables the management to judge the

suitability of the ongoing strategies

It influences the behaviours of events and ensures

programmes are confined to plans.

It avoids inefficient intra company conflicts ranging

from corporate divisions

It ensures harmonization and coordination between

corporate and subsidiarys objectives, strategies etc.

It serves as a potent instrument for the purpose of

achieving stability and continuity on one hand and

adaptation and adjustment on the other

It helps the management in making effective use of

source and valuable resources of the organisation

Problems of the control

Language differences can distort communication

between the head office and subsidiaries

Local cultural factors may cause the failure in some

countries of motivational incentive systems that were

enormously at the expenses of the company

Host country Government might force the management

of a local subsidiary to act in the interests of the host

country




8/14


Managers in the local subsidiaries might have difficulty

in understanding the control information requirement

imposed by head office

The cost of implementing control mechanisms are

much higher than for a domestic firm

Physical distance separating countries and

management

Non availability of adequate and accurate information

may be a problem

Appointment of local nationals in the highest posts willbe a problem

Conflict

Conflict occurs whenever:

Disagreements exist in a social situation over issues of

substance

Emotional antagonisms cause frictions between individuals

or groups

Types of conflict

1. Conflict within the individuals

2. Conflict between the individuals

3. Conflict between an individual and a group

4. Conflict between groups

5. Conflict within organisation

6. Conflict between organisations




9/14


Conflict resolution

A situation in which the underlying reasons for a given

destructive conflict is eliminated. Effective solution begins with a

diagnosis of the stage to which conflict has developed and

recognition of the causes of conflict.

Managing conflict successfully

Compromise

Competition and authoritative command

Collaboration and problem solving

Negotiation

Bargaining with one or more parties for the purpose of arriving at

a solution acceptable to all

Role of Negotiation

1. Rising joint ventures

2. In getting the operation of the firm3. Different financial investment

4. Hiring practices

5. Taxes

6. Ownership control

7. Expansion of facilities

8. Additional imports and exports

9. Recapture of profit

Process

1. Planning and determination of objectives




10/14


2. Impersonal relationship building

3. Exchanging task related information

4. Persuasion

5. Agreement

Negotiation Tactics

1. Selection of location

2. Time constraints

3. Buyer seller relations

4. Bargaining style

5. Promises, threats and other behaviours6. Non verbal behaviour

Behavioural characteristics affecting Negotiations

Cultural factors

1. Ethnocentrism

Giving importance to the culture of home country and

discouraging host countrys culture

2. Polycentrism

Giving more importance for the culture of the host country.

3. Geo-centrism Giving equal importance for the cultures of both

the countries

Language Factors

It may be difficult for negotiations to find words to express

their exact meaning in another language, which may result in

occasional pause while translator resort to dictionaries.




11/14


The pauses cause negotiation to take longer than if they were

among people from the same country. More over negotiation stop

while an interpreter translator process takes more time.

Arbitration

Arbitration is the process by which parties voluntarily agree

to refer a future or a present dispute to an individual or

individuals who after hearing submissions from the parties will

issue a legally binding decision (an award) determining the

issues between the parties liability and quantum of damages or

giving other specific remedies. If fact both Exporters and

Importers, approaches WTO for arbitration in case of any

disputes.

Key elements of Arbitration

o Enforcement of awards

o Party control

o Party nominated Arbitrators

o Neutrality

o Privacy and confidentiality

o Cost effectiveness and speed

International Arbitration Agencies

1. London court of International Arbitration

The LCIA is the largest and modern and forward-looking

arbitration agency. It is based at London and provides

settlement on a genuine basis




12/14


2. Singapore International Agencies

The SIAC an independent, non-profit organisation was

established in 1991 to meet the demands of the

international business community for neutral, efficient

and reliable dispute resolution in Asia. It is funded by

Singapore.

3. International Centre for Settlement of Investment Disputes -




13/14


Ethical Issues in International Business :

1. Every Nation has its own values, history, customs andtraditions, thus it has developed own ethical principles.

2. .There is not International Ethical code of conduct, acceptedand followed by all the countries.

3. There is lack of Govts initiatives to create ethicalcooperation framework and thus to enhance ethicalbehaviour in International Business..

4. On the basis of their respective GDP Vs Corruption rankings,Piracy Vs Fair trade movement on transfer pricing. Dumpingis often seen as an ethical issue.

5. Globalization, cultural imperialism, child labour, out sourcingproduction, exploiting low wage countries, employmentPractices, Human rights and Environmental regulations..

Ethical Decision Making:

1. Management face dilemma in decision making on a courseof action.

2. Management confront a distinction between facts and values

when making ethical decision making.

3. Good and bad exist simultaneously and interlocked, badshould be minimized, but cant be eliminated.

4. Knowledge about the consequences of an action is limited,but in uncertain business environment, consequences cantbe easily predicted.

5. Antagonistic interests frequently use incompatible ethical

arguments to justify their intentions.6. Some ethical standards vary with the passage of time. Now

our Govt. accepts Donation to Political party.

7. Ethical behaviors are molded from the clay of humanimperfection.




14/14


8. Organizational loyalty Vs Loyalty to the public interest CSRCorporate Social Responsibility.

9. Moral idealism: Focus on good and bad; distinguish it ithas definite answers to ethical issues.

10. Intuition: It leaves it to the Individual Management orgroup or concerned to sense the moral gravity of thesituation.

11. Utilitarianism: Establishes the moral focus consider somedecision tactics that illuminate moral choices-predict prosand cons of situational balance sheet sort out ethicalpriorities before problem arises-commitment in public butethical perfections are illusory. No method of decision

making ends conflicts, no principle penetrates unerringly tothe good, no management achieves an ethical idea.

12. Corporate Social Responsibility, Cultural Effects andUniversalism in Ethics should be self realized.

*

Road signs are generally point in the samedirections as it should be, but some time does not

* * *



ibm unit v notes

Documents