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Sample Report On

MANAGEMENT THEORIES AND PHILOSOPHIES

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Table of Contents

Introduction .......................................................................................................................... 1

Four main debates in the field of global strategy ....................................................................... 1

Critically evaluate whether their approach fully captures the complexity of the influence of

globalization on global strategy ............................................................................................... 6

References ............................................................................................................................ 8

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INTRODUCTION

The concept of global strategy has become prominent in the international business and

management from past several years. Global strategy has emerged as one of the frontier disciplines

in business studies; thus it is considered as an intersection between strategic management and

international business (Alvesson and Willmott, 2000). The development of global strategy field has

gone through from relevant progress and also from number of bulge and turns. International firms

must know and aware about the formal and informal rules that govern the countries and that also

manages global strategic aspects. There are four major dimensions covered under this aspect which

are discussed in the below mentioned study. The researcher has critically analyzed all these four

approaches to global strategy and along with the same; discussion has also been made regarding the

impact of global strategy on complex business aspects.

The debate between cultural and institutional distance engages both the formal and informal

components of the institutional environment and this directly connects to the roots of institution

based view. The debate between global and regional geographic diversification is a political and

cultural environment related debate (Glickman, Gordon and Ross-Gordon, 2001). Further, the

debate between convergence and divergence in corporate governance addresses wide range of

governing systems that can be placed globally. Hence, as a formal process legal legislation needs to

be followed so that the process of globalization can be managed adequately. On the other hand, in

order to connect the debate between domestic and overseas CSR, it can be said that there is an

element that assists the firms to cope with environmental aspects. Business entities have been

actively engaging themselves in CSR aspects due to increasing pressure from policies of

multinational enterprises.

FOUR MAIN DEBATES IN THE FIELD OF GLOBAL STRATEGY

Cultural vs. institutional distance

Culture is considered as imperative part of international business management and it

underpins the global strategy of any business because culture tends to be more micro whereas

strategy is typically concerned with macro aspects. A new approach (institutional based view) of

global strategy has emerged and this argues that global strategy needs to be properly shaped by the

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formal and informal institutions (McDermott, 2000). The dimension of this debate thus emphasizes

on role of cultural aspects in an institution based view of global strategy. The approach of Hofstede

can be considered here which a classification of national culture is and which also specifies the role

of culture within the global environment. This also defines culture an aspect which is cumulative of

societal values, beliefs, norms and behavioral patterns. International business transactions involve

interaction between different societal values; thus this is the reason culture is considered as vital

part for every business transaction (Miller, and Tsang, 2011). In such respect, Wilkinson addresses

that both national culture and institutional heritage have been used as variables that impact major

business activities. This also includes capital structure, entrepreneurial founding and

internationalization aspects.

The debate also laid emphasis on culture distance vs. institution distance which is another

dimension for better measurement (Norton, 2005). Cultural distance involves the study of primary

differences in national culture between home countries of multinational enterprises and the host

countries of their operations. Institution distance embraces cultural difference as well as additional

factors such as regulatory difference, cognitive identification and normative pressure. Many of

these influences attributed to culture can also be explained through comprehending the stage of

institutional development and sociopolitical market forces. Studies of different authors examine the

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role of cultural distance which speculates that cultural difference between the home country and

host country of multinational enterprise is increasing. This also underlines the ability of

multinational enterprises as how effectively they operate the entity in host market. When culture

distance is high, multinational enterprise faces more difficulties in achieving efficacy in current

operations. Therefore, cultural distance may lead to higher levels of complexity and it can also

impact the managerial decision making process (Glickman, Gordon and Ross-Gordon, 2001).

There are several critics and inconsistent findings related to cultural distance and MNE

performance; however most of the studies showcase a negative relationship among both the facets.

Cultural distance is significant initially; however its importance comes to decreasing stage when it

is reviewed on the basis of institutional view approach (Donaldson and Dunfee, 1994). The critics

on this approach include dimensions towards an institutional construct that can be complemented

by institutional distance. It entirely embraces cultural differences through incorporating regulative,

normative and cognitive aspects of institutional environment. In order to determine the relationship

between culture and institutions, it is suggested that institutions are the crystallization of culture and

culture is further the substratum of institutional arrangements. Hence, the authors also claim that

causality is linked to institutions and cultures is useless until it is properly managed in the business

entities. The real issue is that each measure is appropriate because it includes institutional and

cultural explanation that also provides comprehensive aspects about firm's performance (Davis,

Schoorman and Donaldson, 1997).

Global vs. regional geographic diversification

The geographic scope of the firm is considered an important dimension in global strategy

because it determines all the global aspects of a firm which is yet difficult to ascertain. Thus,

Perlmutter has confronted that being multinational can be seen as a prestigious aspect that enhances

global power of the business (Ferraro, Pfeffer and Sutton, 2005). The author laid emphasis on three

major aspects such as ethnocentric, polycentric and geocentric. It includes internal attributes of a

firm that may contribute to classification of multinational dimensions in business operations.

Having established the regional multinational enterprise, it can be said that global empirical

evidence for regionalization suggests two chief facets. First, is about international activity of

multinational enterprise which is conducted at intra- regional level rather than inter-regional level

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(Goulding, 2002). Secondly, many multinational enterprise operations are organized at the regional

level as opposed to the global level. The reason of observing more activities at intra regional level

is due to lower liability of foreignness within a region and then between regions. Additionally, one

of the major reasons for which international operations continue to organize things regionally is that

it creates more difficulty in managing internal network spanning (Locke, 2001). Supporting this

view, a recent study on regional diversification and firm performance suggests that firms need to be

regionally focused so that their performance level can be increased.

Ho

However, despite of these findings, some authors have argued that regional concentration of

multinational enterprise activity is more reflective for GDP and trade aspects. Thus, the main

criticism seems to be one of the measurement and hierarchy aspects. Most of the multinational

enterprises should be more correctly labeled as regional so that the value of relative measure can be

found out. There are multiple ways to define a region and several authors have defined cultural and

institutional similarities (Partington, 2000). In order to discuss the global economy, several recent

researches suggest a trend towards different forms of inter-regionalism. The authors have also

undertaken the approach towards bilateralism which takes place across the globe. Focusing on the

political realities of the world, it is believable that multinational enterprises have to compete with

different multiplex of regions where in most of them are not integrated to each other. There is an



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issue regarding the definition of the region since that includes economical aspects. In such case, it

can be articulated that multinational enterprise are able to take advantage of political resources

which rests between home and host country (Williams, 2008). Instead of having large cultural and

institutional distance, political resources can be utilized for these facets. Therefore, the regions

defined politically may have to provide varied explanation to comprehend the geographical patterns

of variegation of multinational enterprise.

Convergence vs. divergence in corporate governance

As per the viewpoints of Mike W. Peng1 and Erin G. Pleggenkuhle-Miles, people those who

believe that economic philosophy motivates values tend to follow convergence perspective while

on the other hand, people those who argue that national culture initiates values often follow the

divergence perspective (Willmott, 1992). However, this debate has been around for long time but

still researchers and authors are unable to identify any answer. However, it always seems to be an

increasing gap between thoughts and philosophies of two different schools.

In this regard, there is always a lively debate in corporate governance whether it is covering

or diverging globally (Alvesson, and Willmott, 2000). However, in this context, people who follow

convergence argue that globalisation is the process that unleashes the survival of fittest and finest

corporate players. Constantly, companies are being forced to follow the practices which are suitable

and reliable to sustain globally i.e. Anglo-American practices. There are mammoth governance

codes that are enacted around the globe through the concept of Anglo-American practices.

Furthermore, global investors these days are interested in paying premium to those companies only

which are following the base of Anglo-American style of governance procedures (Davis,

Schoorman and Donaldson, 1997). This trend is increasing rapidly which indeed affecting the

course of companies who are not abiding with these concepts and owing to this trend towards

conformity, shareholder activism an unheard-of phenomenon in many parts of the world is

becoming more visible.

Apart from all, the biggest argument driving in this side of the debate is that market forces

are enhancing their operations with cross national convergence to get established on the

international standards (Donaldson and Dunfee, 1994). However, enactment of diverse set of

pressures which consist of market, nation-state and foreign state has led the firms to increasingly

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adopt the international standards so as to enhance their business functioning and to sustain in the

international market for a long period. But later, it was identified that, these set of pressures were

not the major drivers but the risk of foreign market closure to non-compliant firms was the major

driver that was identified by the nation-state regularity authorities. Thus, it was identified that

intended adoption of major international standards were arrived from the characteristic threat of

market agreement pressures.

In US and UK, firms are promoting more concentrated ownership and control is often

recommended as a solution to combat principal–agent conflicts. In this regard, divergence followers

determine the two major points of concern in case of cross listed firm i.e. as compared to

companies of US; multinational firms have larger boards, integral directors and focuses on more

concentrated ownership style (Easterby-Smith, Thorpe and Jackson, 2012). Thus, it is not necessary

that cross listed firms operating in US abide by its governance before or after listing. Along with

this, despite of several rules and regulations related to cross listed foreign firms in UK and US,

these laws rarely affect the course of functioning of cross listed foreign firm.

While on the other hand, convergence followers determine that corporate governance rules

and regulations are being applied around the globe (Erin. And et.al, 2009). But contradicting to this,

divergence clearly defines that it is feasible to export the formal US and UK style regulations

around the globe but it is difficult to implant foreign rules and regulations within these countries

because companies operating in it have larger boards, integral directors and focuses on more

concentrated ownership style. Therefore, it can be said that considering the global economic

perspective, following complete divergence is probably the unrealistic approach. In particular, firms

that operate at a large level and are always in search of capital from global investors cannot

undertake the concepts and standards of divergence in corporate governance (Ferraro, Pfeffer and

Sutton, 2005).

Domestic vs. Overseas Corporate Social Responsibility

In general terms, corporate social responsibility is one of the major aspects of a business

enterprise irrespective of operating in domestic or overseas marketplace (Glickman, Gordon and

Ross-Gordon, 2001). However, it has been one of the biggest and continuous sources of debate

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among different scholars and policy makers. Considering from the global perspective, it is

important for the firms to maintain balance between domestic and overseas CSR activities. Herein,

practitioners always focus on the fact that in case if there are limited corporate resources than

companies have to define their priorities either domestic market or international market. Along with

this, according to the top level management of a firm whose interests are more important in terms

of future sustainability, it is difficult to focus on domestic employees and communities as compared

to the overseas employees and communities. However, there are several authors who simply

illustrate that for a multinational company, it is important to be socially responsible for all

communities where it operates (Goulding, 2002).

According to the viewpoints of Mike W. Peng1 and Erin G. Pleggenkuhle-Miles, two

primary stakeholders of a firm are employees and communities. In order to expand overseas to

emerging economies, companies tend to avoid the domestic employees and communities. But

expanding in foreign market not only increases the corporate profits and shareholders return but

also provides employment to the host countries (Grant, Shani and Krishnan, 1994). But this can be

achieved at the expense of domestic stakeholders for the future expansion and growth.

However, when companies have adequate amount of resources, they tend to carry out their

corporate social responsibilities for both domestic and overseas communities. But with the

increasing competition, pressure of cost cutting and restructuring managers have to prioritize their

focus which at times lead to disturbing results for domestic stakeholders. Unexpectedly, due to rise

in CSR because of globalization, migration of jobs from developed economies is increasing at a

rapid pace (Hofstede, 1993). Contradicting to this, CSR is important aspect of the business

enterprise irrespective to its level of operations because it helps in benefiting company itself while

benefiting the society it operates in. However, it is one of the major footholds for the companies to

expand their business operations to the international boundaries and attain desired growth and

sustainability. In the public affairs forum in Atlanta 2006, argument on emerging tension as a

perfect storm, a major threat of globalization to the American workers which mainly focuses on the

responsibilities of multinational enterprises towards its domestic employees and communities. But

due to lack of clear solution this politically explosive debate is likely to heat up in coming years.

However, there multinational organizations that are involving themselves to overseas CSR but not

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interested in reformulating tactics to work with NGOs in their base of pyramid (Locke, 2001).

CRITICALLY EVALUATE WHETHER THEIR APPROACH FULLY CAPTURES THE

COMPLEXITY OF THE INFLUENCE OF GLOBALIZATION ON GLOBAL STRATEGY

This debate arose due to the increased pace of globalization in current scenario and it has

also reopened the debate on globalization along with the perception it includes in comprehensive

aspects. Hence, it generates scope to other debates which are related to convergence and divergence

in corporate governance. The large corporations have provided very different strategic responses to

multiple changes in their external environment (McDermott, 2000). As the need for global

efficiency has become strong in every business, many corporations have started to treat the world

market as an integrated whole. The timeliness and unsolved nature of the four debates suggests a

number of avenues for future research. Hence, articulating the first debate, it can be said that

cultural distance may be hard to change rapidly especially in formal part. Emerging economies

continue to develop because that adopts formal western style regulations that govern multinational

enterprise and their corporate governance aspects. Hence, both the informal institutions embodied

with cultural values and norms showcases correlation at one point and it also includes regulatory

change factor. In terms of second debate, it can be said that it addresses regional and global

diversification issue that shed light on different levels and aspects of regional strategies (Miller and

Tsang, 2011). While a dynamic approach may also be considered as significant aspect for

increasing the level of rationality.



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Geographical diversification strategy is already complicated and most of the multinational

enterprise combines some elements of both product and geographic diversification when entering

into international market place (Norton, 2005). Overall discussion has been made so as to review

the field of strategy which is dependent on international strategic management. From the discussion

dependent on corporate social responsibility, it has been found a continuous source of debate

because all the scholars have different point of view regarding cultural and institutional aspects.

When companies have enough resources, it would be preferable to manage both domestic and

overseas employees as well as communities. It can be confronted with relentless pressure for cost

cutting and restructuring and there in managers have to prioritize things. In the age of globalization,

CSR activities have been increasing and people are migrating from one place to developed

economies (Partington, 2000). This ratio has been accelerating as when people and countries at

BOP manage such migration, domestic employees and communities’ faces more political

dimensions. Most of the multinational enterprises are not involving themselves in overseas CSR

practices; however to manage the business internationally, companies have been reformulating their

strategic aspects and they are working with NGOs.

Further, developed markets are fairly saturated; thus nonprofit organization may provide

avenue for growth for both emerging and developed market (Williams, 2008). Additionally, the

timeliness and unsolved nature of four debates suggest a number of avenues that can be considered

for future research as well. Change in the informal institutions are well associated with cultural

aspects; however in order to connect this with corporate governance, finance convergence needs to

be managed properly as per the cultural values. The last decade of domestic vs. overseas CSR can

be appropriately addressed as a dynamic approach. The debates focuses more on informal norms,

values and social responsibilities which home and host countries of multinational enterprise can

impose on these global trotting companies. In the global strategy research, the institution based

view has recently been advocated by Peng (2006) as one of the three leading perspectives; however

the other hand, two being the more established industry focuses more on resource management. To

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a great extent, much international business research incorporates institutional elements so as to

create a broader sense of cultural views and aspects (Willmott, 1992).



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REFERENCES

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Hofstede, G., 1993. Cultural constraints in management theories. The Academy of Management

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Locke, K., 2001. Grounded theory in management research. Sage.

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Miller, K. D., & Tsang, E. W., 2011. Testing management theories: critical realist philosophy and

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Norton, B. G., 2005. Sustainability: A philosophy of adaptive ecosystem management. University of

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Partington, D., 2000. Building grounded theories of management action. British Journal of

management, 11. pp.91-102.

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