lecture 7 - to post

Administrative• Book pulled from Capen• Midterm exam results posted• Office hours tomorrow from 2-3pm instead of 1-2 pm• Group projects due:

• Written component: Nov 17th

• Group projects start on Nov 24th

MIDTERM RESULTS AND ANSWERS

(Situation A) While watching a movie at the cinema, Xavier sees Yolanda and Zack. Yolanda and Zack are both from Abbott, a town adjacent to where Xavier lives. Both Yolanda and Zack are being rude during the movie. Xavier yells to them “You people from Abbott are always disrespectful!” (Situation B) Becky is meeting Al, a salesman from the town of Balboa. Becky remembers hearing in the news that a recent survey of Balboa’s citizens shows that the majority of men in Balboa have moustaches. When she meets Al, she exclaims “I thought you would have had a moustache!” Which of the following correctly describes the research fallacies associated with these two situations? If necessary, put your answers in order with Situation A first and Situation B second. Exception fallacy; ecological fallacyEcological fallacy; exception fallacyBoth are examples of exception fallaciesBoth are examples of ecological fallacies

The considerable variation between Americans and Chinese in the use of silence during negotiations is an aspect of ________. A) proxemicsB) hapticsC) Paralanguage – not what is said but the way in which it is saidD) object language

Copyright ©2014 Pearson Education, Inc. 2-1

Chapter 2: Managing InterdependenceSocial Responsibility and Ethics

3 - 8Copyright © 2014 Pearson Education

Fight to eliminate bribery and corruption

Improve labor conditions and guard human rights

Practice fair trade to help the disadvantaged

Protect the environment and conserve resources

Corporate Social Responsibility Issues

Going beyond legal obligations to balancecommitments to investors, customers,

communities, and other companies

MNC Stakeholders v Stockholders

MNC StakeholdersHome Country Host

Society in General

2-9Copyright ©2011 Pearson Education, Inc. publishing as Prentice Hall

OwnersCustomersEmployeesUnionsSuppliersDistributorsStrategic AlliesCommunityEconomyGovernment

MNCEconomyEmployeesCommunityHost GovernmentConsumersStrategic AlliesSuppliersDistributors

Global interdependence/standard of livingGlobal environment and ecologySustainable resourcesPopulation’s standard of living

3 - 10Copyright © 2014 Pearson Education

Friedman View – https://www.youtube.com/watch?v=3vorWknUybY

Cultural/ethical Relativism

Moral universalismRighteous Moralism/ethnocentrism

Ethics and Social Responsibility

PHILOSOPHIES

Corporate Social Responsibility (pp. 97-102 textbook)

• Philosophies of Corporate Ethics: 4 views– Friedman view– Cultural relativist

• Adapt to host country’s norms– Righteous Moralist

• Corporation should maintain home country ethics– Moral universalism

• Single “best practice” no matter the location for business activities

Top Hat L7Q1

Business Ethics:Foreign Corrupt Practices Act (FCPA)

To Bribe or NOT to Bribe?

Paying mail carriers in Mexico to prevent them from “losing” mail

Paying $100 to get a computer picked up from a rainy dock by customs officials

Gift-giving to bond social ties

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Copyright ©2011 Pearson Education, Inc. publishing as Prentice Hall

Questionable Payments

Questionable payments are business payments that raise significant questions of appropriate moral behavior. Examples are political payments, extortion, bribes, sales commissions, or “grease money” (payments to expedite routine transactions). The text classifies all of these as bribery. As a more practical example, companies in Mexico make monthly payments to mail carriers or their mail gets “lost.” Another example is Control Data Corporation paying $100 to get a delivered computer off a rainy dock. In some parts of the world corruption and bribery are considered part of the culture. Also, in some cultures gift-giving is common and incurs obligation. Nonetheless, gift-giving differs from bribery in that the former usually is not covert. Despite custom or culture, the bribery of officials is prohibited by law in all countries. The dilemma is how much managers should adhere to their own cultural standards in the face of foreign custom or how much to follow local ways to be competitive.

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Managing the Corruption

Foreign Corrupt Practices Act (FCPA)The FCPA was created to help Americans distinguish

between harmless practices (e.g., gift-giving) and bribery. The FCPA prohibits illegal payments, or other gifts, or political contributions to foreign government officials for the purposes of influencing them in business transactions. Penalties include severe fines and sometimes imprisonment.

Applies both to US companies and foreign companies doing business in the US

Also applies to any company issuing equity (stock) on an exchange in the United States

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Foreign Corrupt Practices Act (FCPA)

Major complaint from US businesses affected by the regulation:Undermining ability to compete. Such payments are common in other countries, and a prohibition on such payments puts US firms at a competitive disadvantage.

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i. Foreign corrupt practices act (FCPA) of 1977:1.What does the law prohibit?

a. Giving anything of value to a government official for the purposes of influencing them in business transactions

2.What doesn’t it prohibita.Exempts questionable payments that are ancillary to

the transaction at hand and do not involve undue influence

b.“Grease money” to expedite routine transactions permissible if permissible by law in host country

3.To which businesses does this law apply?a. Both US-based and foreign businesses doing business

in the United States. This includes firms that raise capital by selling securities on US exchanges. 3 - 18

Foreign corrupt practices act (FCPA):

Top Hat L7Q2

Disclosure Requirements in the United States and the Foreign Corrupt Practices Act

• Any firm issuing equity in the United States must certify that the business has complied with the foreign corrupt practices act• FCPA: cannot give personal bribes to get

business• Aluminum producer operating in Bahrain;

channeled money to royal family to keep business

• ALCOA and the FCPA: http://www.cnbc.com/id/101323129

Is Corporate Social Responsibility good for the Bottom line?

• While stockholders have a difficult time persuading corporations to act responsibly, what about consumers?

• Video:– http://www.transfairusa.org/resource-library/media-gallery

• Starbucks and Fair Trade Coffee• Who determines what is “fair?”

– Usually non-profit organizations– TransFair USA (non-profit organization for “fair trade”)

• Prices, labor conditions, direct trade, community development, environmental sustainability

Top Hat L7Q3

Copyright ©2014 Pearson Education, Inc.

7-1

Chapter 7:Implementing

Strategy:Strategic Alliances; Small

Businesses; Emerging Economy Firms

Societal Culture Distinct from Organizational Culture

1. Exists within and interacts with societal culture

2. Varies a great deal from one organization, company, institution, or group to another

3. Represents those expectations, norms, and goals held in common by members of that group

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Copyright ©2014 Pearson Education, Inc. publishing as Prentice Hall

Societal versus Organizational Culture

“Societal culture tends to be stronger than organizational culture, so that employees working with or for a foreign company may not easily fall into the new organizational culture.” – (p 75)

Examples: IBM (hierarchical) vs. Apple (flat structure and

groups) Daimler Benz (formal; conservative) vs.

Chrysler (informal; risk-taking)

Copyright ©2014 Pearson Education, Inc. publishing as Prentice Hall 25

Organizational Culture versus Societal Culture

• Remember that organizational culture rests inside a societal culture

• Holding all else constant, societal culture tends to trump organizational culture

Global Alliances and Strategy Implementation

It is no longer an era in which a single company can dominate any technology or business by itself. The technology has become so advanced, and the markets so complex, that you simply can’t expect to be the best at the whole process any longer.

—Fumio Sato, CEO, Toshiba Electronics Co.

“Cross-border M&A’s are the main vehicle through which countries undertake foreign direct investment.” –p. 188

Spread of the corporate form and Western conception of property rights

Global Alliances and Strategy Implementation

“Scenes from a Marriage” The Daimler-Chrysler merger

“With the breakdown of national barriers, transnational mergers are becoming commonplace. And yet, they remain among the most poorly understood phenomena in the business world. On the outside, the newly merged colossi pose as robust, computer-generated giants with the market power and sales forecasts to strike fear into the hearts of the competitors they dwarf. On the inside, however, they are more like the turbulent weather formations caused by the collision of tropical and arctic air masses.”

“What Went Wrong with the Chrysler Merger?” : NPR

• http://www.npr.org/templates/story/story.php?storyId=9501407

http://www.npr.org/templates/story/story.php?storyId=9501407




• “Mergers are supposed to save costs… but this one didn’t deliver.”– Size, profitability, reach– “Could make anything from a Dodge Neon to a

Mercedes S Class”• Before the merger, how were these two

companies similar? How were they different?


• “Companies had almost nothing in common…”– Language barrier– Cultural barrier

• “Mergers are supposed to save costs… but this one didn’t deliver.”– Size, profitability, reach– “Could make anything from a Dodge Neon to a

Mercedes S Class”


• “Oil and water”– Mercedes – why worry about cost per unit of any

component?• Their customer wasn’t worried about an additional $500• Doesn’t want to give parts to GM because they were worried

about undermining their own brand. Why would I pay you more for a Mercedes?

– Licensing deals and geographic limitations– Chrysler –

• Costs; gas prices (trucks, SUVs); poor efficiency and innovation (Jeep Commander)

Global Strategic Alliances: DaimlerChrysler* Mismatched brand portfolios

Global Strategic Alliances: DaimlerChrysler

Technology and quality leader with strong

high-end

brand

European dealer network

Low- cost, innova-tive design; sub-compact cars, minvans, utility trucks

Supplier network

and

outsourcing arrangements

51% - Daimler49% - Chrysler

“wedding made in heaven”?


• “On Jan. 12, 1998, the two automobile czars, Eaton of Chrysler and Schrempp (Daimler), met…But Schrempp, the more restless and insistent of the two, rose abruptly from the sofa and broached the subject of a merger even before the other had a chance to offer him a cup of coffee.”

• What cultural values or ideals best describe the actions of Schrempp?


•Germans are strongly monochronic and low-context. Given this, should we be surprised that Schrempp acted the way he did? Why or why not?

Cultural Dimensions: Germany / US

Performance orientation / Assertiveness


* “Merger of equals”?Q: How do you pronounce DaimlerChrysler? A: Daimler. The Chrysler is silent.

"We had to go a roundabout way, but it had to be done for psychological reasons. If I had gone and said Chrysler would be a division, everybody on their side would have said, ’There is no way we’ll do a deal.’ But it’s precisely what I wanted to do.” - Jurgen Schrempp, then-CEO of DaimlerChrysler


• Culturally-sensitive product:– Cars are highly symbolic and emotionally loaded

products. When a popular carmaker changes owners and the change affects its identity, it awakens passions that no kitchen-equipment company can elicit.


• “The American public interpreted the promised ''merger of equals'' not so much from an economic point of view as from a cultural one. Despite the valuation disparity between the two partners, the public wanted to believe that the ''icon'' Chrysler would stay in the hands of the Americans.”

Top Hat L7Q4

“[T]he promised ‘merger of equals’ [was] not so much from an economic point of view as from a cultural one.” (p. 4)

If you had to choose one cultural dimension to explain the US insistence on a “merger of equals,” which would it be?

(text input)

Global Alliances and Strategy ImplementationChallenges in Implementing Global Alliances

* Integrating management systems* Distribution of power* Locus of decision-making and control* Mistrust and secrecy

Five years after Daimler-Benz acquired Chrysler to create DaimlerChrysler AG, … DaimlerChrysler has become a German company and the struggling Chrysler division is run by executives dispatched from DaimlerChrysler’s corporate headquarters in Stuttgart.- Kirk Kerkorian, November 28, 2003

Verbal Bonus:

What was strange about the newly-formed management structure of the company? [3 years]


• What was the primary responsibility of the new company’s “postmerger integration team?”

• Was the cultural training given to employees useful? Name one example of a time where reality didn’t fit with cultural expectations and one way in which it did.

• How did managers of the new company greet one another? Was this a change for the Germans or the Americans? (du v sie)

• What about eating in the cafeteria? What was different for the German managers here? Which cultural value dimension might help explain this?


• “''There was indeed a cultural problem with this merger…[f]or two years, we told ourselves that the Americans must know what they're doing and that we shouldn't step in.”

Verbal Bonus:“Scenes from a Marriage”

The Daimler-Chrysler merger

What was the cultural difference in compensation at Daimler and Chrysler?

If you had to choose one cultural dimension to explain the difference, which one would it be?

Describe the problems caused by this difference.

* Cultural mismatches:

Compensation:

Daimler-Benz

Chrysler

Lower executive salaries but higher fringe benefits and higher worker salaries

Higher executive salaries (up to 10x as much) but lower worker salaries



• What was the working language of the new Daimler-Chrysler?

• Name a situation where it would have been inconvenient to use this language.

• What were some of the problems posed by this choice of official company language? Was it always respected? Why or why not?


• ‘“When Jim Donlan, the controller, participated in a meeting in Stuttgart, there were 10 Germans in the room with him, but all 10 of us had to speak English,‘’ Fries recalls…[T]his practice led to separation anxiety among the Germans…German executives, Fries says, worried: ‘We don't understand a thing. We're being taken to the cleaners!’…[T]he Americans had the same fear, precisely because the Germans didn't speak English well enough…”


• “Europeans…are often confused by Americans’ apparent informality, which then backfires when the Europeans do not get work done as the Americans expect.”• Deresky (p. 77)

• Verbal bonus:– What was the difference in the preparation for meetings? What

about what was discussed at those meetings?– If you had to choose, which of the cultural dimensions best

explains this difference in preparation for meetings?

Global Strategic Alliances: DaimlerChrysler* Cultural mismatches continued:

Planning:

Decision-making: Daimler-Benz

ChryslerStructured, analytical; data collection, extensive reports to bosses, formal meetings, protocols established

Informal, creative; brainstorming, instantaneous decisions, empowerment

10 year plans for everything

4 month plans for some issues

Strategy: Long-term quality orientation

Promotional and discounting mindset

Global Strategic Alliances: DaimlerChrysler* Cultural mismatches continued:

Outsourcing:

Management style:

Daimler-Benz

ChryslerArrogant? Authoritarian?Overcautious?

Smaller number of suppliers; closer supplier relationships

Large number of suppliers; cost-cutting incentives for suppliers

Hierarchy: Co-determination;decentralized IT structure;seniority privileged;supervisory board influential in day-to-day operations

Exclusive parking garage and segregated cafeteria for management;centralized IT systems

Overconfident? Blame others?

Global Strategic Alliances: Fiat – Chrysler (2009) vs. DaimlerChrysler

(end 2007)

Jürgen E. Schrempp

Robert Eaton

Timothy Geithner, former Secretary of the Treasury

Sergio Marchionne, Fiat CEO

Fiat executives say there is no comparison to their alliance. “For Daimler to buy Chrysler was like Neiman Marcus merging with Home Depot,” said one Fiat executive, who insisted on anonymity because of company policy. “They are a mass carmaker, and we are a mass carmaker,” he said of Fiat and Chrysler. “We know this market better.”

Fiat and Chrysler have much to offer each other. Chrysler desperately needs Fiat’s small cars and fuel-efficient engines to balance an aging lineup of S.U.V.’s.

For Fiat, Chrysler offers an instant dealership network for its return to the United States. They can also benefit from savings on the $46 billion worth of parts and materials they would buy as a combined entity.

- New York Times, 4 May 2009

Global Strategic Alliances: Fiat – Chrysler vs. DaimlerChrysler

lecture 7 - to post

Documents

answers situation

situation b becky

pearson educationfight

pearson prentice hall3

situation b second

legal obligations

responsible businesses

town of balboa