schermerhorn - chapter 31 chapter 3 globalization and international management planning ahead what...

Schermerhorn - Chapter 3 1

Chapter 3Globalization and International

Management

Planning Ahead What are the processes of globalization? What is the environment of international business? How does culture create global diversity? How do management practices transfer across cultures?


Processes of Globalization

The New Europe European Union (EU)

grouping of European countries who agreed to support mutual economic growth

11 of these countries have agreed to adopt the Euro (common currency)



The Americas North American Free Trade

Agreement (NAFTA) Agreement for free flow of

goods and services between the U.S., Canada and Mexico

Free Trade of the Americas (FTAA) is a possibility

Other agreements MERCOSUR Andrean Pact CARICOM



Maquiladoras foreign manufacturing plants allowed to operate

in Mexicoallowed special privileges in exchange for hiring

Mexican labor import materials, components and equipment with duty paid

on “value added”



Maquiladoras advantages

increased employment and prosperity disadvantages

social costs in border townsexploitation of less expensive Mexican labor



Asia and the Pacific Rim Asia and Pacific Rim economies are expected to

be larger than those of the EU China is the world’s largest single-country

marketplace Japanese companies account for many Fortune

500 companies



Africa beckons international

business increased attention to

stable countries


Environment of International Business

Forms of International Business Global Sourcing

manufacturing and/or purchasing components worldwide and assembling them into a final product


International Managment

International management involves pursuing organizational objectives in an international setting.



Forms of International Business Exporting

selling locally made products in foreign markets

Importingbuying foreign made products and selling

them in domestic markets



Forms of International Business Licensing Agreement

pay a fee to acquire the rights to sell another company’s products

franchising is form of licensing



Forms of International Business Direct Investment Strategies

joint venturesstrategic allianceswholly owned subsidiary


Multinational Corporations

Multinational Corporation (MNC) business with extensive international operations

in more than one country



Advantages of MNCs larger tax bases increased employment opportunities technology transfers introduction of new industries development of local resources



Disadvantages of MNCs extract excessive profits dominate local economy do not respect local customs and laws fail to help domestic firms develop do not transfer most advanced technology


I.A. GLOBAL ORGANIZATIONS FOR A GLOBAL ECONOMY

Multinational company (MNC): a business that exercises strategic control over production and/or marketing facilities in two or more countries.

Global corporation: worldwide network of fully integrated design, production, and marketing operations. (This is a global MNC.)

Multi-Domestic MNC: This is a corporation that operates in various countries. Each country has nationals running most operations and there is little involvement with other parts of company outside of each country. (Insurance, real estate).


Give local examples of international business

Evans Construction Company Harmon Industries


Financial Performance of MNC’s

Two studies 1. U.S. study found that 58 MNC’s out-

performed 43 solely domestic companies. 2. British study found profitability

increased with foreign involvement. Could be just this time in history.


Pros and Cons of Global Operations

Ethical Issues in Multinational Operations Foreign Corrupt Practices Act Sweatshops Environmental protection


Culture and Global Diversity

Culture shared set of beliefs, values and patterns of

behavior common to a group of people



Ethnocentric

tendency to view one’s own culture as superior to others

Geocentric viewing all cultures with respect as required



Silent Language Culture shock

discomfort a person feels in an unfamiliar culture



Spoken Language Low-context

explicit spoken and written wordexamples: US, Germany

High-contextwords convey only part of the messageexamples: Middle East, Asia



Use of Space (Proxemics) interpersonal distance used in communication

Latin Americans tend to be closeAmericans value more space



Time Orientation Monochronic (our text calls it sequential)

time is allotted do one thing at a time Polychronic

time is allotted to do many things at once



Religion may influence business practices source of ethical and moral teaching Can affect business ethics (At times in the last l

1,500 years, it was against some religions to

loan money and get interest.



Role of Contracts some cultures view as final and binding others view as a starting point some expect contracts to be written others accept “word” as binding



Values and National Cultures (Hofstede) Power distance Uncertainty avoidance Individualism-collectivism Masculinity-femininity Short-term - long-term orientation


American management theories might not apply abroad

Hofstede’s study of 116,000 IBM employees indicates differences in Power Distance, Uncertainty Avoidance, Individualism versus Collectivism, and Masculinity/Femininity


III. A. continued. SURVEY OF HOFSTEDE’S CULTURAL

DIMENSIONS

Instructions: Rate yourself on each of the four dimensions by circling a response. Next, rate your native culture by drawing an X through the appropriate response.

Power distance: How readily do individuals accept the unequal distribution of power in organizations and institutions?Low power distance (equality) High Power distance (rank)

1----2----3----4----5----6----7----8----9----10

Add a zero after your score.


SURVEY OF HOFSTEDE’S CULTURAL DIMENSIONS

(continued)

Uncertainty avoidance: How threatening are uncertain and ambiguous situations, and how important are rules, conformity, and absolute truths?

Avoid uncertainty (rules) Accept uncertainty (chance)

1----2----3----4----5----6----7----8----9----10

To score this subtract your score from 10 and add a then add a zero after your score.



(continued)

Individualism-collectivism: Are people responsible for their own welfare within a loosely knit social framework, or does the group look out for individuals in exchange for loyalty?

Personal responsibility Collective responsibility

1----2----3----4----5----6----7----8----9----10

Add a zero after your score.



(continued)

Masculinity-femininity: How important are masculine attitudes (assertiveness, money and possessions, and performance) versus feminine attitudes (concern for people, the quality of life, and the environment)?Masculine attitudes Feminine attitudes

1----2----3----4----5----6----7----8----9----10

To score this item subtract your score from 10 and then add a zero.


U. S. RANKINGS POWER DISTANCE

15/40, 25 other countries have greater differences

UNCERTAINTY AVOIDANCE 9/40, we don’t mind uncertainty

INDIVIDUALISM 1/40

MASCULINITY 28/40, 12 countries more masculine


OTHER SOURCES OF CULTURAL DIVERSITY

Time

monochronic time(called sequential in our test): perception of time as a straight line broken into standard units. (“Time is money. It is spent, saved, or wasted.”)

polychronic time: perception of time as flexible, elastic, and multidimensional.



(continued)

For Discussion:1. Do you tend to be monochronic or polychronic?

Explain. How well do you deal with people who have the opposite orientation toward time?


For Discussion:2. How close is “too close” when you are carrying on

a business conversation with a stranger?


(continued)



(continued)

For Discussion:3. How important is it to have a mastery of the local

language when doing business in a foreign country?


U.S. is often handicapped in international trade

Little cross-country experience Low context culture Little multi-language experience Lack of confidence and overconfidence Little time spent on preparation


To teach our EXPETRIATES CROSS-CULTURAL TRAINING TECHNIQUES

Documentary programs Culture assimilator (practice in simulation) Language instruction Sensitivity training Field experience


CROSS-CULTURAL TRAINING TECHNIQUES

(continued)

For Discussion:1.If you were going on an 18-month

assignment in a country where something other than your native language is spoken, which of these training programs would you want? Why?


CROSS-CULTURAL TRAINING TECHNIQUES

(continued)

2. Could you transact a complex business negotiation

in two or more languages? How much of an advantage are your foreign-language skills in the job market today?

.



Understanding Cultural Differences Attitudes toward environment

inner-directed (individual can change things)

When people believe they can change things they are often individualistic and are those who move society and business along.

outer-directed (individual can’t change things)


Management Across Cultures

Comparative Management is the study of how management systematically differs from

one country and/or culture to the nextglobal manager

someone comfortable with cultural diversity quick to find opportunity in unfamiliar settings Some studies show all across the world, most workers can be

developed to work under participative styles of leadership.



Are Management Theories Universal? U.S. management

theories may be ethnocentric emphasis on participation

and individual performance are not applicable to some other cultures



Are Management Theories Universal? Japanese management practices

lifetime employment job rotation and broad career experience shared information collective decision-making quality emphasis

These practices are not easy to translate into US management, but Ouchi suggest how to modify Japanese for US management.


THEORY Z (Ouchi)

Theory Y, people like to work. It is natural and enjoyable.

Theory Z In U.S. it means longer termed employment, slow evaluation, cross-functional career paths, democratic decision making with individual responsibility greater than in Japan.

Theory X, people dislike work and responsibilitly



Global Organizational Learning cultural awareness facilitates more informed

transfers of management practices

schermerhorn - chapter 31 chapter 3 globalization and international management planning ahead what...

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