PowerPoint by Kristopher Blanchard North Central University

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1 PowerPoint by Kristopher Blanchard North Central UniversityChapter 1 Assessing the Environment – Political, Economic, Legal, Technological PowerPoint by Kristopher Blanchard North Central University © 2006 Prentice Hall

2 The Global Business EnvironmentThe Global Marketplace is complex, interdependent, and dynamic Challenges include politics, culture, and technology Managers must find a balance between social responsibility, company image, and competitive strategies More focused on Global Management Managers in the twenty-first century are being challenged to operate in an increasingly complex, interdependent, and dynamic global environment. Those involved in global business have to adjust their strategies and management styles to those regions of the world in which they want to operate, whether directly or through some form of alliance. One aspect of this global arena requiring increasing attention is that of the potential for terrorism where businesses operate, as illustrated in the opening profile.1 Other typical challenges that managers must face involve politics, culture, and the use, transfer, and protection of technology. In addition, the opportunities and risks of the global marketplace increasingly bring with them the societal obligations of operating in a global community. © 2006 Prentice Hall

3 The Global Business EnvironmentGlobal competition is characterized by networks that bind countries to one another Globalism trends A borderless world Increase in exports Increase in direct foreign investment Dominance of trading blocs © 2006 Prentice Hall

4 Regional Trading Blocs“The dominance of the United States is already over. What is emerging is a world economy of blocs represented by NAFTA, The European Union, and ASEAN. There’s no one center in this world economy.” - Peter Drucker Fortune, January 12, 2004 © 2006 Prentice Hall

6 The TRIAD Three regional free-trade blocsWestern Europe, Asia, and North America Grouped around three dominant currencies Euro, Yen, and Dollar In 2004, these trade blocs were expanding their boarders to include neighboring countries © 2006 Prentice Hall

7 Comparative Management in Focus - IndiaIndia has witnessed a change in values, habits and options during the last decade The economy, second fastest growing in the world, is expected to grow close to 7% this year Fastest growing telecom market with more than one million new mobile phone subscriptions per month Globalization effects can be seen in the country of India. Consider some of the facts on this slide. © 2006 Prentice Hall

8 Comparative Management in Focus - IndiaIndians are buying 10,000 motorcycles a day India had 192 million households in 2001 Only 31.6% have a television Only 2.5% have a car, jeep or van Foreign investors have invested $5 billion into the Indian stock market More than a decade after India began opening its economy by reducing protectionism and red tape, slowly lifting restrictions on foreign investment and reforming its financial sector, the changes are starting to show substantial results. Companies that stumbled in the face of recession and new competitive pressures in the 1990’s have increased productivity and are showing record profits. India is slowly making a name not just for software exports and service outsourcing, but also as an exporter of autos, auto parts and motorcycles. Nature has played a part as well. The seasonal monsoon that ended recently was the best this agriculture-dependent economy has seen in at least five years, with normal or excess rainfall in 33 of 36 of the country’s sub-regions. That, in turn, is putting income and credit in rural pockets, spurring a run on consumer goods that will only strengthen when the harvest comes in later this year. © 2006 Prentice Hall

9 Information TechnologyInformation Technology is transforming the international manager’s agenda more than any other item Information is no longer centrally or secretly controlled by governments Information technology is boosting productivity and electronic commerce around the world The speed and accuracy of information transmission are changing the nature of the global manager’s job by making geographic barriers less relevant. Indeed, the necessity of being able to access IT is being recognized by managers and families around the world, who are giving priority to being “plugged in” over other lifestyle accoutrements. Even cultural barriers are being lowered gradually by the role of information in educating societies about one another. Indeed, as consumers around the world become more aware, through various media, of how people in other countries live, their tastes and preferences begin to converge. © 2006 Prentice Hall

11 The Globalization of Human CapitalForrester Research predicts that 3.3 Million US jobs will move offshore by 2015 45% of the 500 US companies surveyed state that they use a global sourcing model © 2006 Prentice Hall

12 The Global Manager’s RoleWhatever your level of involvement, it is important to understand the global business environment and its influence on the manager’s role. This complex role demands a contingency approach to dynamic environments, each of which has its own unique requirements. Within the larger context of global trends and competition, the rules of the game for the global manager are set by each country (as shown on this slide): its political and economic agenda, its technological status and level of development, its regulatory environment, its comparative and competitive advantages, and its cultural norms. The astute manager will analyze the new environment, anticipate how it may affect the future of the home company, and then develop appropriate strategies and operating styles. © 2006 Prentice Hall

13 The Political and Economic EnvironmentOne important aspect is the phenomenon of ethnicity Driving force behind political instability Firms must assess political risks Government actions that could adversely affect the long-run profitability or value of a firm Proactive globally oriented firms maintain an up-to-date profile of the political and economic environment of the countries in which they maintain operations (or have plans for future investment). © 2006 Prentice Hall

14 Political Risk – 7 Typical risk eventsExpropriation of corporate assets without prompt and adequate compensation Forced sale of equity to host-country nationals, usually at or below depreciated book value Discriminatory treatment against foreign firms in the application of regulations or laws Barriers to repatriation of funds (profits or equity) © 2006 Prentice Hall

15 Political Risk – 7 Typical risk eventsLoss of technology or other intellectual property (such as patents, trademarks, or trade names) Interference in managerial decision making Dishonesty by government officials, including canceling or altering contractual agreements, extortion demands, and so forth © 2006 Prentice Hall

16 Managing Political RiskAvoidance – either the avoidance or withdrawal of investment in a particular country Adaptation – adjust to the political environment Dependency – keeping the host nation dependent on the parent corporation Hedging – minimizing the losses associated with political risk events After assessing the potential political risk of investing or maintaining current operations in a country, managers face perplexing decisions on how to manage that risk. On one level, they can decide to suspend their firm’s dealings with a certain country at a given point—either by the avoidance of investment or by the withdrawal of current investment (by selling or abandoning plants and assets). On another level, if they decide that the risk is relatively low in a particular country or that a high-risk environment is worth the potential returns, they may choose to start (or maintain) operations there and to accommodate that risk through adaptation to the political regulatory environment. © 2006 Prentice Hall

17 Economic Risk A country’s level of economic development generally determines its economic stability Economic risk falls into 2 categories Government changes its fiscal policies Government modifies its foreign-investment policies Managers are constantly reassessing economic risk Managers use four methods to assess economic risk, they are: (1) Quantitative approach, (2) Qualitative approach, (3) a combination of both of these approaches, (4) a checklist approach. The quantitative method attempts to measure statistically a country’s ability to honor its debt obligation. This measure is arrived at by assigning different weights to economic variables in order to produce a composite index used to monitor the country’s creditworthiness over time and to make comparisons with other countries. The qualitative approach evaluates a country’s economic risk by assessing the competence of its leaders and analyzing the types of policies they are likely to implement. The checklist approach relies on a few easily measurable and timely criteria believed to reflect or indicate changes in the creditworthiness of the country. . © 2006 Prentice Hall

18 The Legal Environment Manager’s will comply with the host country’s legal system Common Law – past court decisions act as precedents to the interpretation of the law Civil Law – comprehensive set of laws organized into codes, interpretation is based on reference to codes and statues Muslim law – based on religious beliefs, it dominates all aspects of life The prudent global manager consults with legal services, both locally and at headquarters, to comply with host-country regulations and to maintain cooperative long-term relationships in the local area. If the manager waits until a problem arises, little legal recourse may be available outside of local interpretation and enforcement. Although the regulatory environment for the international manager consists of the many local laws and the court systems in those countries in which he or she operates, certain other legal issues are covered by international law, which governs relationships between sovereign countries, the basic units in the world political system. One such agreement, which regulates international business by spelling out the rights and obligations of the seller and the buyer, is the United Nations Convention on Contracts for the International Sale of Goods (CISG). This convention became law on January 1, 1988, and applies to contracts for the sale of goods between countries that have adopted the convention. © 2006 Prentice Hall

19 - VANESSA CHANG, KPMG PEAT MARWICKThe Legal Environment Commenting on Contract Law “In China, the old joke goes, a contract is a pause in the negotiation.” - VANESSA CHANG, KPMG PEAT MARWICK © 2006 Prentice Hall

20 The Technological EnvironmentCorporations must consider the accelerating macro-environmental phenomenon of technoglobalism (rapid developments in information and communication technologies) Corporations must consider the appropriability of technology The effects of technology around the world are pervasive—both in business and in private lives. In many parts of the world, whole generations of technological development are being skipped over. For example, many people will go straight to a digital phone without ever having had their houses wired under the analog system. © 2006 Prentice Hall

21 Global E-Business E-business – the integration of systems, processes, organizations, value chains and entire markets using Internet-based and related technologies and concepts. E-commerce - refers directly to the marketing and sales process via the Internet The Internet has had a considerable impact on how companies buy and sell goods around the world—mostly raw materials and services going to manufacturers. Internet-based electronic trading and data exchange are changing the way companies do business, while breaking down global barriers of time, space, logistics, and culture. It has introduced a new level of global competition by providing efficiencies through reducing numbers of suppliers and slashing administration costs throughout the value chain. © 2006 Prentice Hall

22 Global E-Business Convenience in conducting business worldwide; facilitating communication across borders contributes to the shift toward globalization and a global market. An electronic meeting and trading place, which adds efficiency in conducting business sales. A corporate Intranet service, merging internal and external information for enterprises worldwide. Power to consumers as they gain access to limitless options and price differentials. A link and efficiency in distribution. The Internet and e-business provide a number of uses and advantages in global business, including the following the items listed on this slide. © 2006 Prentice Hall

24 Global Management The process of developing strategies, designing and operating systems, and working with people around the world to ensure sustained competitive advantage Return © 2006 Prentice Hall

25 European Union Comprised of 25 nations 400 million peopleElimination of tariffs has not eliminated national pride Global Managers face two major tasks Strategic – how to deal with the EU as an non-European company Cultural – How to deal with multiple sets of national cultures, traditions and customs Return © 2006 Prentice Hall

26 Asia Japan and the Four Tigers - Singapore, Hong Kong, Taiwan, and South Korea, Each has an abundance of natural resources and labor China A new east Asian economy is emerging, focused on greatly increased trade within the region and based on China rather than Japan. China has enjoyed recent success as an export powerhouse, a status built on its strengths of low costs and a constant flow of capital. Its GDP growth rate (9.01 percent in 2003) has been the fastest growth rate in the world for several consecutive years. While considerable differences are found among the country’s regions, making for quite varied markets, it is clear that China is slowly opening its doors. China seems to be stuck halfway between a command economy and a market economy, with capital allocation still largely state controlled Return © 2006 Prentice Hall

27 North America The goal of NAFTA was to bring the US, Canada, and Mexico together to create more jobs, better working conditions and a cleaner environment 421 Million Consumers Has been very beneficial to Mexico Return © 2006 Prentice Hall

28 Adaptation Equity sharing includes the initiation of joint ventures with nationals (individuals or those in firms, labor unions, or government) to reduce political risks. Participative management requires that the firm actively involve nationals, including those in labor organizations or government, in the management of the subsidiary. Localization of the operation includes the modification of the subsidiary’s name, management style, and so forth, to suit local tastes. Localization seeks to transform the subsidiary from a foreign firm to a national firm. Development assistance includes the firm’s active involvement in infrastructure development (foreign-exchange generation, local sourcing of materials or parts, management training, technology transfer, securing external debt, and so forth) Return © 2006 Prentice Hall

29 Dependency Input control means that the firm maintains control over key inputs, such as raw materials, components, technology, and know-how. Market control requires that the firm keep control of the means of distribution Position control involves keeping certain key subsidiary management positions in the hands of expatriate or home-office managers. Staged contribution strategies mean that the firm plans to increase, in each successive year, the subsidiary’s contributions to the host nation Return © 2006 Prentice Hall

30 Hedging Political risk insurance is offered by most industrialized countries. Insurance minimizes losses arising from specific risks—such as the inability to repatriate profits, expropriation, nationalization, or confiscation— and from damage as a result of war, terrorism, and so forth. The Foreign Credit Insurance Association (FCIA) also covers political risks caused by war, revolution, currency inconvertibility, and the cancellation of import or export licenses. Local debt financing (money borrowed in the host country), where available, helps a firm hedge against being forced out of operation without adequate compensation. In such instances, the firm withholds debt repayment in lieu of sufficient compensation for its business losses. Return © 2006 Prentice Hall

32 Social ResponsibilityIncludes the expectation that corporations concern themselves with the social and economic effects of their decisions The two extreme opinions related to social responsibility – Domestic firms The only responsibility of a business is to make a profit Business should anticipate and try to solve problems in society © 2006 Prentice Hall

33 Social Responsibility of Multinational CorporationsMore complex than domestic firms due to the complex issues related to global business Economic development Cultural issues Additional stakeholders Legal issues © 2006 Prentice Hall

34 Social Responsibility – Integrated ApproachOrganizations agree what should constitute moral and ethical behavior Emerging because of the development of a global corporate culture Result of socioeconomic interdependence © 2006 Prentice Hall

35 Social Responsibility – Integrated ApproachProvide a basis of judgment regarding decisions and situations Moral Universalism Unlikely to become a reality Ethnocentric Relativism © 2006 Prentice Hall

37 Codes of Conduct SA 8000’s Proposed Global StandardsDo not use child or forced labor Provide a safe working environment Respect workers’ rights to unionize Do not regularly require more than 48-hour work weeks Pay wages sufficient to meet worker’s basic needs © 2006 Prentice Hall

38 Ethics in Global ManagementGlobalization has multiplied the ethical problems facing organizations Business ethics have not yet globalized Difficult to reconcile consistent and acceptable behavior around the world © 2006 Prentice Hall

39 Ethics in Global ManagementThe term international business ethics refers to the business conduct or morals of MNCs in their relationships with individuals and entities Based on the cultural value system Based on generally accepted ways of doing business in each country or society Exhibit 2-3 © 2006 Prentice Hall

40 Ethics in Global ManagementApproaching ethical dilemmas varies among MNC’s American approach is based upon general rules Japan and Europe make decisions on shared values, social ties, and perception of their obligation 2002 Corruption Perceptions Index © 2006 Prentice Hall

41 Limits of Ethical Standards for International Activities“The laws of economically developed countries generally define the lowest common denominator of acceptable behavior for operations in those domestic markets. In an underdeveloped country or a developing country, it would be the actual degree of enforcement of the law that would, in practice, determine the lower limits of permissible behavior.” Laczniak and Naor © 2006 Prentice Hall

42 Questionable paymentsThis is a specific ethical issue for managers in the international arena payments in question are political payments, extortion, bribes, sales commissions, or “grease money” – payments to expedite routine transactions Also called: tokens of appreciation, ‘la mordida’, ‘bastarella’, and ‘pot-de-vin’ © 2006 Prentice Hall

43 The Foreign Corrupt Practices ActThe Foreign Corrupt Practices Act (FCPA), enacted in 1977, prohibits U.S. companies from making illegal payments or other gifts or political contributions to foreign government officials for the purposes of influencing them in business transactions. © 2006 Prentice Hall

45 Ethical Behavior and Social Responsibility Guidelines Developed by MNCsDevelop worldwide codes of ethics Consider ethical issues in strategy development Given major, unsolvable, ethical problems, consider withdrawal from the problem market Develop periodic “ethical impact” statements © 2006 Prentice Hall

46 Making the Right DecisionHow is a manager operating abroad to know what is the “right” decision when faced with questionable or unfamiliar circumstances of doing business? Here is a suggested sequence: Consult the laws of both the home and the host countries Consult the International Codes of Conduct for MNEs (as shown in text Exhibit 2-2) Consult the company’s code of ethics Consult your superiors Use your own moral code of ethics Follow your own conscience © 2006 Prentice Hall

47 Managing InterdependenceBecause multinational firms represent global interdependency managers must recognize that what they do has long-term implications for the socioeconomic interdependence of nations © 2006 Prentice Hall

48 Foreign Subsidiaries in the USNumber of foreign subsidiaries in the US has grown dramatically FDI in the US is in many cases far more than US investment outward One different aspect of management in the US is corporate social responsibility Companies that come to the US and do business must understand that the accepted norms for doing business here area different than in their home country. This slide points out that many more companies are investing in the US continually. One Japanese manager noted that one very different aspect of management here in the US is the concept of social responsibility. In Japan this meant companies take care of their employees, whereas in the US this means business is expected to share the responsibility for the community. Failure for foreign companies to understand this and take part in corporate philanthropy will brand these companies as irresponsible outsiders and dim their prospects for the future. © 2006 Prentice Hall

49 Host-Country InterdependenceInternational managers must go beyond general issues of social responsibility and deal with specific concerns of the MNC subsidiary Focus should be interdependence rather than independence Focus should be cooperation rather than confrontation Benefits and costs to host countries © 2006 Prentice Hall

50 Criticisms of MNC Subsidiary ActivitiesMNCs raise their needed capital locally, contributing to a rise in interest rates in host countries. The majority (sometimes even 100 percent) of the stock of most subsidiaries is owned by the parent company. Consequently, host-country people do not have much control over the operations of corporations within their borders. © 2006 Prentice Hall

51 Criticisms of MNC Subsidiary Activities (contd.)MNCs usually reserve the key managerial and technical positions for expatriates. As a result, they do not contribute to the development of host-country personnel. MNCs do not adapt their technology to the conditions that exist in host countries. MNCs concentrate their R&D activities at home, restricting the transfer of modern technology and know-how to host countries. © 2006 Prentice Hall

52 Criticisms of MNC Subsidiary Activities (contd.)MNCs give rise to the demand for luxury goods in host countries at the expense of essential consumer goods. MNCs start their foreign operations by purchasing existing firms rather than developing new productive facilities in host countries. MNCs dominate major industrial sectors, thus contributing to inflation by stimulating demand for scarce resources and earning excessively high profits and fees. MNCs are not accountable to their host nations but only respond to home-country governments; they are not concerned with host-country plans for development. © 2006 Prentice Hall

53 Recommendations for MNCs Operating in Developing Countries (Suggested by De George)Do no international harm. This includes respect for the integrity of the ecosystem and consumer safety. Produce more good than harm for the host country. Contribute by their activity to the host country’s development. Respect the human rights of their employees. To the extent that local culture does not violate ethical norms, MNCs should respect the local culture and work with and not against it. Pay their fair share of taxes. Cooperate with the local government in developing and enforcing just background (infrastructure) institutions (i.e. laws, governmental regulations, unions, consumer groups) which serve as a means of social control. © 2006 Prentice Hall

54 Comparative Management in FocusNAFTA Brought together three largely different economies Promised that it would create millions of jobs Promised that it would curb illegal immigration Promised that it would raise living standards The North American Free Trade Agreement took hold 10 years ago, after a bruising, arm-twisting debate. Today it is more than ever a politically charged symbol of the promises and perils of free trade. © 2006 Prentice Hall

55 Comparative Management in FocusNAFTA – United States Overall has enjoyed a growth in exports Companies have moved to Mexico for cheaper labor Increased unemployment in many areas NAFTA – Mexico Promised to close wage gaps and lower illegal immigration Gap in wages has increased Companies are moving to China for lower wages © 2006 Prentice Hall

56 Comparative Management in FocusNAFTA – Canada Has had mixed results Businesses are more export-oriented Created 500,000 new jobs last year We went from a Canadian company with a 30 million population market to a 300 million market. We do not treat the boarder as a boarder. - John Scarsella President and CEO Durham Furniture © 2006 Prentice Hall

57 Managing Environmental Interdependence“Now that mankind is in the process of completing the colonization of the planet, learning to manage it intelligently is an urgent imperative. [People] must accept responsibility for the stewardship of the earth. The word stewardship implies, of course, management for the sake of someone else…As we enter the global phase of human evolution, it becomes obvious that each [person] has two countries, his [or her] own and the planet earth.” – Ward and Dubois © 2006 Prentice Hall

58 Managing Environmental InterdependenceHandling exporting of hazardous waste Exporting pesticides Looking for alternative raw materials Developing new methods of recycling Expanding the use of byproducts © 2006 Prentice Hall

59 Looking Ahead Chapter 3 Understanding the Role of CultureCulture and Its Effects on Organizations Cultural Variables Cultural Value Dimensions Developing Cultural Profiles Culture and Management Styles © 2006 Prentice Hall

60 MNC Stake Holders Return © 2006 Prentice HallManagers are faced with not only considering stakeholders in the host country but also with weighing their rights against the rights of their domestic stakeholders. Most managerial decisions will have a trade-off of the rights of these stakeholders—at least in the short term. For example, a decision to discontinue using children in Pakistan to sew soccer balls means the company will pay more for adult employees and will, therefore, reduce the profitability to its owners. That same decision—while taking a stand for human rights according to the social and ethical expectations in the home country and bowing to consumers’ demands—may mean that those children and their families go hungry or are forced into worse working situations. Another decision to keep jobs at home to satisfy local employees and unions will mean higher prices for consumers and less profit for stakeholders. In addition, if competitors take their jobs to cheaper overseas factories, a company may go out of business, which will mean no jobs at all for the domestic employees and a loss for the owners. Return © 2006 Prentice Hall

62 Ethnocentric vs. RelativismCompany applies the morality used in its home country – regardless of the host country’s system of ethics Relativism Company adopts the local moral code in whatever country it is operating – companies run into value conflicts with this approach Return © 2006 Prentice Hall

63 A Moral Philosophy Model of Cross-Cultural Societal EthicsThe complexity of the combination of various national and cultural factors in a particular host environment that combine to determine ethical or unethical societal norms is illustrated in this exhibit. The authors, Robertson and Crittenden, note: “Varying legal and cultural constraints across borders have made integrating an ethical component into international strategic decisions quite challenging.” Return © 2006 Prentice Hall

64 2002 Corruption Perceptions IndexThe organization’s year 2002 Corruption Perceptions Index (above) shows results of research on the level of corruption among public officials and politicians in various countries, as perceived by businesspeople, academics, and risk analysts. Finland was rated number one, or least corrupt, followed by Iceland, Denmark, and New Zealand. The United States was number eighteen. Transparency International’s British arm noted that corruption was “worryingly high” in Greece, number fifty, and Italy, number thirty-five. Transparency International’s chairman concludes that “Rich countries must provide practical support to developing country governments that demonstrate the political will to curb corruption.” Return © 2006 Prentice Hall

67 Overview Culture and its effects on organizations Cultural variablesCultural value dimensions The Internet and culture Developing cultural profiles Culture and management styles around the world © 2006 Prentice Hall

68 Key Terms Culture Savvy A working knowledge of the cultural variables affecting management decisions Cultural Sensitivity or Cultural Empathy An awareness and an honest caring about another individual’s culture. © 2006 Prentice Hall

69 Culture The acquired knowledge that people use to interpret experience and generate social behavior Cultural knowledge forms values, creates attitudes, and influences behavior Characteristics of culture include: Learned Shared Transgenerational Symbolic Patterned Adaptive © 2006 Prentice Hall

70 Key Terms Culture of a society Comprises the shared values, understandings, assumptions, and goals that are learned from earlier generations, imposed by present members of a society, and passed on to succeeding generations. What would be occasion in Canada that you considered cultural? Canada Day? What does it mean to you, your family/society. Explain to a foreigner. © 2006 Prentice Hall

72 Key Terms Parochialism Occurs when a Frenchman, for example, expects those of French origins in another country to automatically fall into patterns of behavior common in France Ethnocentrism Describes the attitude of those who operate from the assumption that their ways of doing things are best – no matter where or under what conditions they are applied © 2006 Prentice Hall

73 Culture and Its Effects on OrganizationsA manager assigned to a foreign subsidiary, for example, must expect to find large and small differences in the behavior of individuals and groups within that organization. As depicted on this slide, these differences result from the societal, or sociocultural, variables of the culture, such as religion and language, in addition to prevailing national variables, such as economic, legal, and political factors. National and sociocultural variables thus provide the context for the development and perpetuation of cultural variables. These cultural variables, in turn, determine basic attitudes toward work, time, materialism, individualism, and change. Such attitudes affect an individual’s motivation and expectations regarding work and group relations, and they ultimately affect the outcomes that can be expected from that individual © 2006 Prentice Hall

74 Culture and Its Effects on OrganizationsOnce upon a time there was a great flood, and involved in this flood were two creatures, a monkey and a fish. The monkey, being agile and experienced, was lucky enough to scramble up a tree and escape the raging waters. As he looked down from his safe perch, he saw the poor fish struggling against the swift current. With the best of intentions, he reached down and lifted the fish from the water. The result was inevitable. What you do if you happen to see a man and a woman having a fight in a quiet street in a foreign country? The woman seems frightened and wanting to get away from the man. There are few local residents passing by, but they don’t seem disturbed by the scene. © 2006 Prentice Hall

75 Cultural Variables Never assume that a manager can transplant American, or Japanese, or any other country’s styles, practices, expectations, and processes Managers need to develop a cultural profile that identifies the specific differences found in each country Given the great variety of cultures and subcultures around the world, how can a student of cross-cultural management, or a manager wishing to be culturally savvy, develop an understanding of the specific nature of a certain people? With such an understanding, how can a manager anticipate the probable effects of an unfamiliar culture within an organizational setting and thereby manage human resources productively and control outcomes? © 2006 Prentice Hall

76 Subcultures Residents of the country only conform to the national character to a certain degree Could be from ethnic, geographic, or other variables Good managers treat people as individuals and they avoid any form of stereotyping Managers should recognize, of course, that generalizations in cultural profiles will produce only an approximation, or stereotype, of national character. Many countries comprise diverse subcultures whose constituents conform only in varying degrees to the national character. © 2006 Prentice Hall

77 Influences on National CultureKinship – guides family relationships Education – formal or informal education of workers affects workplace expectations Economy – means of production and distribution in a society influences all aspects of the resource allocation Politics – system of government imposes varying constraints on an organization To develop cultural profiles we first need to be familiar with the kinds of universal cultural variables found in most societies that make up unique clusters and provide a snapshot of the overall character of a specific group. Although there are countless individual variables, one approach to categorizing interdependent variables is given by Harris and Moran, who have identified eight categories that form the subsystems in any society. © 2006 Prentice Hall

78 Influences on National CultureReligion – spiritual beliefs of a society are so powerful that they overpower all other cultural aspects Associations – the formal and informal groups that make up a society Health – system of health care affects employee productivity Recreation – the use, attitude, and choice of how to use leisure time © 2006 Prentice Hall

80 Performance Orientation Humane OrientationProject GLOBE (Global Leadership & Org Beh. Effectiveness Cultural Dimensions- 170 researchers, 7 years data collection on 18,00 mgrs in 62 countries. Assertiveness Future Orientation Performance Orientation Humane Orientation © 2006 Prentice Hall

81 Cultural Clusters Gupta et al (2002 – GLOBE res team)9 cultural dimensions to assess cluster similarity geographically Result in 10 culture clusters: South Asia, Anglo, Arab, Germanic Europe, Latin Europe, Eastern Europe, Confucian Asia, Latin America, Sub-Sahara Africa & Nordic Europe. Exb. 3-4. -Germanic cluster: masculine, assertive, individualistic & result-oriented. -Latin America: high power distance, low performance orientation, uncertainty avoidance & collective. © 2006 Prentice Hall

82 Hofstede’s Value Dimensions: 116,000 people in 50 countriesPower Distance. The level of acceptance by a society of power inequality in institution Uncertainty Avoidance. Extent to which people in society feel threatened by ambiguous situations. Strict laws & procedures Individualism. People tend to look after themselves & their immediate families. Independence & achievement oriented. Collectivism. Group comes first. Strong sense of belongingness. Saving face culture. Which cultures dominate each of the dimensions? © 2006 Prentice Hall

83 Femininity - dominant values are caring for others and quality of lifeMasculinity - culture in which the dominant values are success, money, and things Femininity - dominant values are caring for others and quality of life © 2006 Prentice Hall

84 Trompenaar’ Value DimensionsResearch produced five cultural dimensions that are based on relationship orientations and attitudes toward both time and the environment Universalism vs. Particularism Universalism - belief that ideas and practices can be applied everywhere in the world without modification Focus on formal rules and rely on business contacts Particularism - belief that circumstances dictate how ideas and practices should be applied and something cannot be done the same everywhere Focus on relationships, working things out to suit the parties © 2006 Prentice Hall

85 Individualism vs. CommunitarianismIndividualism - people regard themselves as individuals Rely on individuals to make decisions Communitarianism - people regard themselves as part of a group Seek consultation and mutual consent before making decisions Neutral vs. Emotional Neutral - culture in which emotions are held in check People try not to show their feelings Emotional - culture in which emotions are expressed openly and naturally People smile, talk loudly, greet each other with enthusiasm © 2006 Prentice Hall

86 Specific vs. Diffuse Specific - culture in which individuals have a large public space they readily share with others and a small private space they guard closely and share with only close friends and associates People often are open and extroverted Work and private life are separate Diffuse - culture in which both public and private space are similar in size and individuals guard their public space carefully, because entry into public space affords entry into private space as well People often appear indirect and introverted, and work and private life often are closely linked © 2006 Prentice Hall

87 Achievement vs. AscriptionAchievement - culture in which people are accorded status based on how well they perform their functions Ascription - culture in which status is attributed based on who or what a person is For example, status may be accorded on the basis of age, gender, or social connections Time Sequential approach to time - people do one thing at a time, keep appointments strictly, follow plans to the letter Synchronous approach - people do more than one thing at a time, appointments are approximate © 2006 Prentice Hall

88 People believe in controlling environmental outcomes Outer-directed Inner-directed People believe in controlling environmental outcomes Outer-directed People believe in allowing things to take their natural course Cultural Patterns or Clusters Defined groups of countries that are similar to each other in terms of the five dimensions and the orientations toward time and the environment © 2006 Prentice Hall

89 Critical Operational Value DifferencesTime: the concept of time. “rubber time” Change: control: internal or external Material factors: materialistic vs non materialistic. How one values material things. How one values nature, the aesthetic & the spiritual realism. Individualism: I vs we culture. © 2006 Prentice Hall

90 Developing Cultural ProfilesWhat would be the 10 most valued values amongst your own racial/ethnic groups? See Next slide. Have u done the exercise on Wk 2:2 What be the 5 top valued values amongst your own racial/ethnic groups? You will get the handout, A Survey on Values & Cultural Dimensions © 2006 Prentice Hall

91 Cultural Dimensions Harmony (flexible, cooperative) vs Control/Mastery (firm,assertive) Relationship (accomodating) vs Task (accomplishment) Hierarchy (respect, seniority) vs Equality (merit, equal access) Shame (face saving, ext locus of control) vs Guilt (personal accountability) High Context (indirect) vs Low Contact (direct, specific) Ploychronic (multi tasking, non-linear) vs Monochronic (time bound) Group Orientation (we-ness) vs Individual (I, personal achievement) Religious (holistic, spiritual) vs Secular (religion separates from work related issues) © 2006 Prentice Hall

92 Comparative management in FocusProfiles in Culture: Japan, Germany & South Korea. Japanese entering United States. Cultural shock? See Exh. 3-8 p 104 Patience vs Action Harmony vs Freedom Hierarchy vs Equality. © 2006 Prentice Hall

93 Culture and Management StylesCultural Values & Managerial Behaviors in Saudi Arabia Family loyalty Language Islam Honor & shame An idealised self (decision making!!) Use of time-polychronic Independence Male dominance. © 2006 Prentice Hall

94 Negotiations across Cultures Americans - linear, fact driven and numbers oriented - impatient and the contract is their central focus Asians - avoid conflict - express opinions indirectly and maintain a face of surface harmony when too direct can be seen as rude French - enjoy emphasising distinctions and differences - blunt and logical approach to conflicting points of views that can seem antagonistic to people from other cultures Middle Easterners and Latinos - passionate expression of differences - save face and preserve dignity Russians a great deal of posturing and theatrics © 2006 Prentice Hall

95 Guidelines on Negotiation across Cultures Check whether they think like you Spend time on non-task sounding matters to establish personal relationships Know the differences between your opponent’s social, political and economic systems and yours Know how the above differences affect his thinking, authority and negotiating methods Know your opponent’s legal, technical and financial systems Know how the above will affect our choice of tactics Know the effects of ethical standards (right, wrong,reasonable) Know the importance of face saving © 2006 Prentice Hall

96 Guidelines on Negotiation across Cultures Recognize the role of status Understand the role of government in the affairs of your opponent Identify the levels of approval Ask questions, but don’t put pressure Ensure there is a suitable communication system with Head Office Identify the right leader for the situation Make sure when using an interpreter he is skilled in both languages and negotiation. Have a dummy run with him. Get him to translate gestures etc Avoid using jargon Confirm in writing and use words carefully to avoid ambiguity Use team approach by using experts Recognize differences in perceiving contractual differences and agreements Make concessions only after issues are discussed. © 2006 Prentice Hall

97 Behaviours of Successful NegotiatorsHave greater flexibility - wider range of influence styles Recognize that an agreement can only be reached through exchange Label their behaviors - I want to propose..... - I want to give three reasons why.. Limit their reasons to two or three strongest points and repeat them if necessary Evaluate behavior they like positively attributing it to themselves Use incentives and find alternative currencies of value to the other party Summarize and test understanding Identify areas of agreement not on areas of conflict Avoid provoking the other party Use both verbal and nonverbal techniques to support ideas e.g. Use “ I” language to convey that the speaker accepts responsibility for what he or she is saying Maintain eye contact with others as eye contact communicates sincerity, concern and involvement Show a relaxed attitude towards time and do not place unnecessary pressure on themselves by creating artificial deadlines Have persistence and see a difficult task through its completion Value organizational goals above and over their own © 2006 Prentice Hall

100 The Communication ProcessCultural communications are deeper and more complex than spoken or written messages. The essence of effective cross-cultural communication has more to do with releasing the right responses than with sending the “right” messages. —Hall and Hall © 2006 Prentice Hall

101 The Communication ProcessManagers spend between 50% and 90% of their time talking to people Managers communicate to: Coordinate activities Disseminate information Motivate people Negotiate future plans Communication is a critical factor in the cross cultural management issues discussed in this book, particularly those of an interpersonal nature, involving motivation, leadership, group interactions, and negotiation. Culture is conveyed and perpetuated through communication in one form or another. Culture and communication are so intricately intertwined that they are, essentially, synonymous. By understanding this relationship, managers can move toward constructive intercultural management. And, communication whether in the form of writing, talking, listening, or via the Internet, is an inherent part of a manager’s role and takes up the majority of a manager’s time on the job. © 2006 Prentice Hall

102 The Communication ProcessThe term communication describes the process of sharing meaning by transmitting messages through media such as words, behavior, or material artifacts. It is of vital importance, then, for a receiver to interpret the meaning of a particular communication in the way the sender intended. Unfortunately, the communication process involves stages during which meaning can be distorted. Anything that serves to undermine the communication of the intended meaning is typically referred to as noise. The primary cause of noise stems from the fact that the sender and the receiver each exist in a unique, private world thought of as her or his life space. The context of that private world, based largely on culture, experience, relations, values, and so forth, determines the interpretation of meaning in communication. After the receiver interprets the message and draws a conclusion about what the sender meant, he or she will, in most cases, encode and send back a response, making communication a circular process. © 2006 Prentice Hall

103 Cultural Noise Cultural Noise – cultural variables that undermine the communication of intended meaning Intercultural communication – when the member of one culture sends a message to a member of another culture Attribution – the process in which people look for an explanation of another person’s behavior Cultural noise occurs in intercultural communication because the message intended by the sender (encoder) was transformed by the cultural lens of the receiver (decoder). This process of transformation is do in part to attribution. © 2006 Prentice Hall

105 Trust in CommunicationEffective communication depends on informal understandings among individuals that are based upon trust When there is trust between individuals an implicit understanding in communication is present © 2006 Prentice Hall

106 Trust in CommunicationGuidelines for developing trust Create a clear and calculated basis for mutual benefit Have realistic commitments and good intentions to honor them Improve predictability: resolve conflicts and keep communication open Develop mutual bonding through socializing and friendly contact © 2006 Prentice Hall

107 Cultural Variables Attitudes – ethnocentric and stereotypical attitudes are a particular source of noise in cross-cultural communication Social Organization – nations, tribes, religious sects, or professions can influence our priorities and values Though Patterns – the logical progression of reasoning varies by culture On a different level, it is also useful to be aware of cultural variables that can affect the communication process by influencing a person’s perceptions; some of these variables have been identified by Samovar and Porter and discussed by Harris and Moran,and others. These variables are as follows: attitudes, social organization, thought patterns, roles, language (spoken or written), nonverbal communication (including kinesic behavior, proxemics, paralanguage, and object language), and time. Although these variables are presented separately, their effects are interdependent and inseparable—or, as Hecht, Andersen, and Ribeau put it, “Encoders and decoders process nonverbal cues as a conceptual, multi-channeled gestalt.”1 © 2006 Prentice Hall

108 Cultural Variables Roles – the perception of the manager’s role differs considerable around the world, consider the conversation between the American and Greek Nonverbal Communication – behavior communicated without words; even minor variations in body language, speech rhythms, and punctuality can cause mistrust People will usually believe what they see over what they hear—hence the expression “A picture is worth a thousand words.” Studies show that these subtle messages account for between 65 and 93 percent of interpreted communication. The media for such nonverbal communication can be categorized into four types: (1) kinesic behavior, (2) proxemics, (3) paralanguage, and (4) object language. The hyperlink will take you to three slides that discuss these four areas further. © 2006 Prentice Hall

109 Cultural Variables Language – an inability to speak the local language, and a poor or too literal translation are often causes for mistrust Pepsi’s slogan “Come Alive with Pepsi” translated into German as “Come out of the grave.” Rendezvous lounges on 747’s were not used on airlines because in Portuguese ‘rendezvous’ refers to prostitution © 2006 Prentice Hall

111 Cultural Variables -TimeMono-chronic Cultures – Time is experienced in a linear manner; generally mono-chronic people concentrate on one thing at a time and adhere to time commitments Poly-chronic Cultures – Many things occur simultaneously and emphasize involvement with people The way people use and regard time is another cultural variable that must be considered. For example: To Brazilians, relative punctuality communicates the level of importance of those involved. To Middle Easterners, time is something controlled by the will of Allah. To initiate effective cross-cultural business interactions, managers should know the difference between monochronic time systems and polychronic time systems and how they affect communications. Monochronic cultures like Switzerland, Germany and the United States view time as a liner event. There is a past, a present, and a future, therefore time is treated as something to be spent, saved, made up, or wasted. Classified and compartmentalized, time serves to order life. This attitude is a learned part of Western culture, probably starting with the Industrial Revolution. In Contrast Polychronic Cultures will emphasize relationship over time commitments. For example: Two Latin friends, for example, will put an important conversation ahead of being on time for a business meeting, thus communicating the priority of relationships over material systems. Polychronic people—Latin Americans, Arabs, and those from other collectivist cultures—may focus on several things at once, be highly distractible, and change plans often. © 2006 Prentice Hall

112 Context Context in which the communication takes place affects the meaning and interpretation of the interaction Cultures are either high- or low- context A major differentiating factor that is a primary cause of noise in the communication process is that of context—which actually incorporates many of the cultural variables. © 2006 Prentice Hall

114 Comparative Management Focus: Communicating with ArabsArabs are warm, emotional, and quick to explode The language aptly communicates the Arabic culture – one of emotional extremes Contains means for over expression Words that allow for exaggeration Metaphors that emphasize a position Many adjectives What is said is not as important as how it is said © 2006 Prentice Hall

115 Comparative Management Focus: Communicating with ArabsThe core of the culture is friendship, honor, religion, and traditional hospitality Family and friends take precedence over business transactions Hospitality is a way of life and is highly symbolic Women play little or no role n business or entertainment – it is a male-dominated society Arabs do business with people, not companies, and they make commitments to people, not contracts. A phone call to the right person can help to get around seemingly insurmountable obstacles. An Arab expects loyalty from friends, and it is understood that giving and receiving favors is an inherent part of the relationship; no one says no to a request for a favor. A lack of follow-through is assumed to be beyond the friend’s control. © 2006 Prentice Hall

116 Comparative Management Focus: Communicating with ArabsSociety values honor – which is brought about when conformity is achieved Shame results not just from doing something wrong but from having others find out about it High contact and High context © 2006 Prentice Hall

118 Comparative Management Focus: Communicating with ArabsBe patient. Recognize the Arab attitude toward time and hospitality—take time to develop friendship and trust, for these are prerequisites for any social or business transactions. Recognize that people and relationships matter more to Arabs than the job, company, or contract—conduct business personally, not by correspondence or telephone. © 2006 Prentice Hall

119 Comparative Management Focus: Communicating with ArabsAvoid expressing doubts or criticism when others are present—recognize the importance of honor and dignity to Arabs. Adapt to the norms of body language, flowery speech, and circuitous verbal patterns in the Middle East, and don’t be impatient to “get to the point.” Expect many interruptions in meetings, delays in schedules, and changes in plans. © 2006 Prentice Hall

120 Information Systems Communication varies according toWhere and how it originates The channels and the speed which it flows Whether it is formal or informal The nature of the organization’s information system are affected by Organizational structure Staffing policies Leadership style In short, Americans need to realize that, because most of the world exchanges information through slower message media, it is wise to schedule more time for transactions, develop patience, and learn to get at needed information in more subtle ways—after building rapport and taking time to observe the local system for exchanging information. We have seen that cross-cultural misinterpretation can result from noise in the actual transmission of the message—the choice or speed of media. Interpreting the meaning of a message can thus be as much a function of the transmission channel (or medium) as it is of examining the message itself. © 2006 Prentice Hall

121 Information TechnologyThe Internet as a global medium for communication allows companies to develop a presence in markets globally Companies must adapt their web communication to deal with local cultural variables © 2006 Prentice Hall

122 Managing Cross-Cultural CommunicationCultural Sensitivity Careful Encoding Selective Transmission Careful Decoding Appropriate Follow-up Actions As an international manager it would be wise to follow the five steps suggested on this slide to become more effective in intercultural communication. © 2006 Prentice Hall

123 Appropriate Follow-Up ActionsRespect (eye contact, posture, tone, etc) Interaction posture – ability to respond in a descriptive, non-evaluative, and non-judgmental way Orientation to knowledge – understand that your beliefs and perceptions are only valid for you and not everyone else Empathy Managers communicate through both action and inaction. Therefore, to keep open the lines of communication, feedback, and trust, managers must follow through with action on what has been discussed and then agreed upon—typically a contract, which is probably the most important formal business communication. Unfortunately, the issue of contract follow-through is a particularly sensitive one across cultures because of the different interpretations regarding what constitutes a contract (perhaps a handshake, perhaps a full legal document) and what actions should result. Trust, future communications, and future business are based on such interpretations, and it is up to managers to understand them and to follow through on them. These are the behaviors that researchers suggest are the most important when dealing with intercultural communications © 2006 Prentice Hall

124 Appropriate Follow-Up ActionsInteraction management Tolerance for ambiguity Other-oriented role behavior – capacity to be flexible and to adopt different roles for the sake of the greater group cohesion/communication © 2006 Prentice Hall

125 Looking Ahead Chapter 5 – Cross-cultural Negotiation and Decision making Negotiation The negotiation process Understanding negotiation styles Managing negotiation Decision making © 2006 Prentice Hall

126 High Context Feelings and thoughts are not explicitly expressedMeaning is found in the general understanding of the other person and their surroundings Most communication takes place within a context of extensive information networks resulting from close personal relationships Return © 2006 Prentice Hall

127 Low Context Feelings and thoughts are expressed n words, and information is more readily available Normally these cultures compartmentalize their business and personal relationships Return © 2006 Prentice Hall

128 Nonverbal CommunicationKinesic Behavior refers to communication through body movements like posture, gestures, facial expressions, and eye contact Many businesspeople and visitors react negatively to what they feel are inappropriate facial expressions, without understanding the cultural meaning behind them. In his studies of cross-cultural negotiations, Graham observed that the Japanese feel uncomfortable when faced with the Americans’ eye-to-eye posture. They are taught since childhood to bow their heads out of humility, whereas the automatic response of Americans is “look at me when I’m talking to you!” © 2006 Prentice Hall

129 Nonverbal CommunicationProxemics deals with how space influences the communication process High contact – preferring to stand close, touch, and experience a close sensory involvement Low-contact – prefer much less sensory involvement, standing farther apart and touching less Space communicates power in both Germany and the United States, evidenced by the desire for a corner office or one on the top floor. The importance of French officials, however, is made clear by a position in the middle of subordinates, communicating that they have a central position in an information network, where they can stay informed and in control. Personal space is culturally patterned, and foreign spatial cues are a common source of misinterpretation. When someone seems aloof or pushy, it often means that she or he is operating under subtly different spatial rules. © 2006 Prentice Hall

130 Nonverbal CommunicationParalanguage refers to how something is said rather than the content Rate of speech, tone, inflection, other noises, laughing, yawning, etc. Silence is a powerful communicator Object language refers to communication through material artifacts Office design, furniture, clothing ,cars, etc. Return © 2006 Prentice Hall

132 Cultural Sensitivity When sending a message make it a point to know the recipient Encode the message in a form that will most likely be understood as it is intended This means the manager must Be aware of their own culture The recipient’s culture The expectations surrounding the situation Return © 2006 Prentice Hall

133 Careful Encoding The sender must consider the receiver’s frame of reference to make the best choice regarding Words Pictures Gestures Remember that language translation is only part of the process, consider the nonverbal language as well Return © 2006 Prentice Hall

134 Selective TransmissionThe channel medium should be chosen after considering: The nature of the message Level of importance Context and expectations of the receiver Timing involved Personal interactions Return © 2006 Prentice Hall

135 Careful Decoding of FeedbackBest means for obtaining accurate feedback is face-to-face interactions Best means for avoiding miscommunication is to improve your own listening and observation skills Three types of miscommunications Receiver misinterpreted the message Receiver encoded response incorrectly Sender misinterprets the feedback Return © 2006 Prentice Hall

137 Negotiation Management’s ability to negotiate productively effects their ability to implement strategies Negotiation is the process of discussion by which two or more parties aim to reach a mutually acceptable agreement Negotiating across borders is more complex because of the number of stakeholders involved In the global arena, cultural differences produce great difficulties in the negotiation process. Ignorance of native bargaining rituals, more than any other single factor, accounts for unimpressive sales efforts. Important differences in the negotiation process from country to country include (1) the amount and type of preparation for a negotiation, (2) the relative emphasis on tasks versus interpersonal relationships, (3) the reliance on general principles rather than specific issues, and (4) the number of people present and the extent of their influence. In every instance, managers must familiarize themselves with the cultural background and underlying motivations of the negotiators—and the tactics and procedures they use—to control the process, make progress, and therefore maximize company goals. © 2006 Prentice Hall

138 The Negotiation ProcessThe negotiation process comprises five stages, the ordering of which may vary according to the cultural norms; for most people, relationship building is part of a continuous process in any event: (1) preparation, (2) relationship building, (3) the exchange of task related information, (4) persuasion, and (5) concessions and agreement. © 2006 Prentice Hall

139 Stage One – PreparationNegotiator must familiarize themselves with The entire context and background of their counterparts To the specific subjects to be negotiated Differences in culture, language, and environment Managers must have an understanding of their own negotiating style © 2006 Prentice Hall

140 Stage One - PreparationManagers should find out as much as possible about The kinds of demands that might be made The composition of the opposing team The relative authority that the members possess Develop a profile of their counterparts They consider different variables during this process as well © 2006 Prentice Hall

141 The Negotiation ProcessRelationship building – taking time to build mutual trust before starting business discussions Exchanging task related information – during this stage each side makes a presentation and states its position, normally followed by a question-and-answer session This slide highlights steps two and three in the negotiation process. During relationship building many non-task events (social events, tours, and ceremonies) take place so that the parties can get to know one another. Once stage three begins the parties begin to present their positions and discussion follow so that a mutually beneficial solution can be found. Negotiators should focus not only on presenting their situation and needs but also on showing an understanding of their opponents’ viewpoint. Focusing on the entire situation confronting each party encourages the negotiators to assess a wider range of alternatives for resolution, rather than limiting themselves to their preconceived, static positions. Researchers suggest that to be most effective, negotiators should prepare for meetings by practicing role reversal. © 2006 Prentice Hall

142 The Negotiation ProcessPersuasion – during this stage both parties try to persuade the other to accept more of their position while giving up some of their own; there are recognizable tactics for this stage Concessions and Agreements – at this point each side will make various concessions so that an agreement can be reached and signed This slide highlights the final two stages in the negotiation process. Follow the hyperlink to the persuasion tactics. Well-prepared negotiators are aware of various concession strategies and have decided ahead of time what their own concession strategy will be. Familiar with the typical initial positions that various parties are likely to take, they know that the Russians and the Chinese generally open their bargaining with extreme positions, asking for more than they hope to gain, whereas the Swedes usually start with what they are prepared to accept. Research in the United States indicates that better end results are attained by starting with extreme positions. With this approach, the process of reaching an agreement involves careful timing of the disclosure information and of concessions. Most people who have studied negotiations believe that negotiators should disclose only the information that is necessary at a given point and that they should try to obtain information piece by piece to get the whole picture gradually without giving away their goals or concession strategy. © 2006 Prentice Hall

143 Understanding Negotiation StylesGlobal managers can benefit from studying differences in negotiating behaviors (and the underlying reasons for them), which can help them recognize what is happening in the negotiating process. © 2006 Prentice Hall

144 Understanding Negotiation StylesFor North Americans, negotiations are businesslike; their factual appeals are based on what they believe is objective information, presented with the assumption that it is understood by the other side on a logical basis. Arabs use affective appeals based on emotions and subjective feelings. Russians employ axiomatic appeals – that is, their appeals are based on the ideals generally accepted in their society. © 2006 Prentice Hall

145 Profile of an American NegotiatorKnows when to compromise Takes a firm stand at the beginning of the negotiation Refuses to make concessions beforehand Keeps his or her cards close to his or her chest Accepts compromises only when the negotiation is deadlocked Sets up the general principles and delegates the detail work to associates Keeps a maximum of options open before negotiation Operates in good faith © 2006 Prentice Hall

146 Profile of an American NegotiatorRespects the “opponents” States his or her position as clearly as possible Knows when he or she wishes a negotiation to move on Is fully briefed about the negotiated issues Has a good sense of timing and is consistent Makes the other party reveal his or her position while keeping his or her own position hidden as long as possible Lets the other negotiator come forward first and looks for the best deal © 2006 Prentice Hall

147 Profile of an Indian NegotiatorLooks for and says the truth Is not afraid of speaking up and has no fears Exercises self-control Seeks solutions that will please all the parties involved Respects the other party Neither uses violence nor insults Is ready to change his or her mind and differ with himself or herself at the risk of being seen as inconsistent and unpredictable © 2006 Prentice Hall

148 Profile of an Indian NegotiatorPuts things into perspective and switches easily from the small picture to the big one Is humble and trusts the opponent Is able to withdraw, use silence, and learn from within Relies on himself or herself, his or her own resources and strengths Appeals to the other party’s spiritual identity Is tenacious, patient, and persistent Learns from the opponent and avoids the use of secrets Goes beyond logical reasoning and trusts his or her instinct as well as faith © 2006 Prentice Hall

149 Profile of an Arab NegotiatorProtects all the parties’ honor, self-respect, and dignity Avoids direct confrontation between opponents Is respected and trusted by all Does not put the parties involved in a situation where they have to show weakness or admit defeat Has the necessary prestige to be listened to Is creative enough to come up with honorable solutions for all parties Is impartial and can understand the positions of the various parties without leaning toward one or the other © 2006 Prentice Hall

150 Profile of an Arab NegotiatorIs able to resist any kind of pressure that the opponents could try to exercise on him Uses references to people who are highly respected by the opponents to persuade them to change their minds on some issues Can keep secrets and in so doing gains the confidence of the negotiating parties Controls his temper and emotions Can use conference as mediating devices Knows that the opponent will have problems in carrying out the decisions made during the negotiation Is able to cope with the Arab disregard for time © 2006 Prentice Hall

152 Managing Negotiation Successful management of intercultural negotiations requires the manager To gain specific knowledge of the parties in the upcoming meeting To prepare accordingly to adjust to and control the situation To be innovative Skillful global managers must assess many factors when managing negotiations. They must understand the position of the other parties in regard to their goals—whether national or corporate—and whether these goals are represented by principles or specific details. They should have the ability to recognize the relative importance attached to completing the task versus developing interpersonal relationships. Managers also must know the composition of the teams involved, the power allotted to the members, and the extent of the teams’ preparation. In addition, they must grasp the significance of personal trust in the relationship. © 2006 Prentice Hall

153 Using the Web to Support NegotiationsNegotiation Support Systems (NSS) can provide support for the negotiation process by: Increasing the likelihood that an agreement is reached when a zone of agreement exists (solutions that both parties would accept) Decreasing the direct and indirect costs of negotiations, such as costs caused by time delays (strikes, violence), and attorneys’ fees, among others Maximizing the chances for optimal outcomes © 2006 Prentice Hall

154 Comparative Management in Focus: Negotiating with the ChineseThe Chinese think in terms of process that has no culmination. Americans think in terms of concrete solutions to specific problems The Chinese approach is impersonal, patient and aloof . . .To Americans, Chinese leaders seem polite but aloof and condescending. To the Chinese, Americans appear erratic and somewhat frivolous. —Henry Kissinger, Newsweek, May, 2001 © 2006 Prentice Hall

155 Comparative Management in Focus: Negotiating with the ChineseBusiness people have two major areas of conflict when negotiating with the Chinese Amount of detail about product characteristics Apparent insincerity about reaching an agreement Chinese negotiation process is affected by three cultural norms Politeness and emotional restraint Emphasis on social obligations Belief in the interconnection of work, family, and friendship © 2006 Prentice Hall

156 Comparative Management in Focus: Negotiating with the ChineseTips to foreigners conducting business in China Practice patience Accept prolonged periods of stalemate Refrain from exaggerated expectations Discount Chinese rhetoric about future prospects Expect the Chinese to try to manipulate by shaming Resist the temptation to believe that difficulties are your fault Try to understand Chinese cultural traits The Chinese are among the toughest negotiators in the world. American managers must anticipate various tactics, such as their delaying techniques and their avoidance of direct, specific answers: Both ploys are used to exploit the known impatience of Americans. The Chinese frequently try to put pressure on Americans by “shaming” them, thereby implying that the Americans are trying to renege on the friendship—the basis of the implicit contract. Whereas Westerners come to negotiations with specific and segmented goals and find it easy to compromise, the Chinese are reluctant to negotiate details. They find it difficult to compromise and trade because they have entered negotiations with a broader vision of achieving development goals for China, and they are offended when Westerners don’t internalize those goals. © 2006 Prentice Hall

157 Managing Conflict © 2006 Prentice HallMuch of the negotiation process is fraught with conflict—explicit or implicit—and such conflict can often lead to a standoff, or a lose–lose situation. This is regrettable, not only because of the situation at hand, but also because it probably will shut off future opportunities for deals between the parties. Much of the cause of such conflict can be found in cultural differences between the parties—in their expectations, in their behaviors, and particularly in their communication styles. © 2006 Prentice Hall

158 Decision Making Stages in the Rational Decision Making ModelDefining the problem Gathering and analyzing relevant data Considering alternative solutions Deciding on the best solution Implementing the decision Negotiation actually represents the outcome of a series of small and large decisions. The decisions include those made by each party before actual negotiations start. The decisions include incremental decisions, made during the negotiation process, on how to react and proceed, when to concede, and on what to agree or disagree. Negotiation can thus be seen as a series of explicit and implicit decisions, and the subjects of negotiation and decision making become interdependent. Generally these decisions are made by using the rational decision making model. © 2006 Prentice Hall

159 Cultural Variables Affecting Decision MakingObjective (basing decisions on rationality) versus subjective (basing decisions on emotions) approach Risk tolerance Locus of control – internal (managers in control of events), or external (managers have little control over events) © 2006 Prentice Hall

161 Comparative Management in Focus: Decision Making in JapanHaving an understanding of the Japanese decision making process is vital for any manager that will be working within this country. This understanding will come from having an understanding that the Japan’s national culture is one that is based on relationships, and team work. It is this culture of collectivism and shared responsibility that underlies the Japanese ringi system of decision making. In the ringi system, the process works from the bottom up. Americans are used to a centralized system, where major decisions are made by upper-level managers in a top-down approach typical of individualistic societies. The Japanese process, however, is dispersed throughout the organization, relying on group consensus. The ringi system is cumbersome and very time-consuming prior to the implementation stage, although implementation is facilitated because of the widespread awareness of and support for the proposal already gained throughout the organization. However, its slow progress is problematic when decisions are time-sensitive. This process is the opposite of the Americans’ top-down decisions, which are made quite rapidly and without consultation, but which then take some time to implement because unforeseen practical or support problems often arise. © 2006 Prentice Hall

162 Negotiations across Cultures Americans - linear, fact driven and numbers oriented - impatient and the contract is their central focus Asians - avoid conflict - express opinions indirectly and maintain a face of surface harmony when too direct can be seen as rude French - enjoy emphasising distinctions and differences - blunt and logical approach to conflicting points of views that can seem antagonistic to people from other cultures Middle Easterners and Latinos - passionate expression of differences - save face and preserve dignity Russians a great deal of posturing and theatrics © 2006 Prentice Hall

163 Guidelines on Negotiation across Cultures Check whether they think like you Spend time on non-task sounding matters to establish personal relationships Know the differences between your opponent’s social, political and economic systems and yours Know how the above differences affect his thinking, authority and negotiating methods Know your opponent’s legal, technical and financial systems Know how the above will affect our choice of tactics Know the effects of ethical standards (right, wrong, reasonable) Know the importance of face saving © 2006 Prentice Hall

164 Guidelines on Negotiation across Cultures Recognize the role of status Understand the role of government in the affairs of your opponent Identify the levels of approval Ask questions, but don’t put pressure Ensure there is a suitable communication system with Head Office Identify the right leader for the situation Make sure when using an interpreter he is skilled in both languages and negotiation. Have a dummy run with him. Get him to translate gestures etc Avoid using jargon Confirm in writing and use words carefully to avoid ambiguity Use team approach by using experts Recognize differences in perceiving contractual differences and agreements Make concessions only after issues are discussed. © 2006 Prentice Hall

165 Behaviours of Successful NegotiatorsHave greater flexibility - wider range of influence styles Recognize that an agreement can only be reached through exchange Label their behaviors - I want to propose..... - I want to give three reasons why.. Limit their reasons to two or three strongest points and repeat them if necessary Evaluate behavior they like positively attributing it to themselves Use incentives and find alternative currencies of value to the other party Summarize and test understanding Identify areas of agreement not on areas of conflict Avoid provoking the other party Use both verbal and nonverbal techniques to support ideas e.g. Use “ I” language to convey that the speaker accepts responsibility for what he or she is saying Maintain eye contact with others as eye contact communicates sincerity, concern and involvement Show a relaxed attitude towards time and do not place unnecessary pressure on themselves by creating artificial deadlines Have persistence and see a difficult task through its completion Value organizational goals above and over their own © 2006 Prentice Hall

171 —Fumio Sato, CEO, Toshiba Electronics Co.Strategic Alliances 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. © 2006 Prentice Hall

172 Strategic Alliances Strategic alliances are partnerships between two or more firms which decide they can better pursue their mutual goals by combining their resources – financial, managerial, technological – as well as their existing distinctive competitive advantages © 2006 Prentice Hall

173 Global Strategic AlliancesGlobal strategic alliances are working partnerships between companies (often more than two) across national boundaries and increasingly across industries © 2006 Prentice Hall

174 Opening Profile: France’s Thomson and China’s TCL to Join TV Units “If you can’t beat them, join them.” French appliance maker Thomson has announced that it is combining its television and DVD businesses with TCL International Holdings of China. The union will create the largest maker of television sets with annual revenue of $3 billion. The unprofitable Thomson hopes to utilize cheaper Chinese labor and the union provides TCL with a steppingstone into the European and American markets. The combined company will be able to use the RCA brand in North America, the TCL brand in Asia, and the Thomson brand in Europe. Thomson will retain one factory in France to focus on new technologies such as flat and plasma screens. © 2006 Prentice Hall

175 Categories of AlliancesJoint ventures – when two or more companies create an independent company An example is the Nuumi corporation, created as a joint venture between Toyota and General Motors, which gave GM access to Toyota’s manufacturing expertise and provided Toyota with a manufacturing base in the U.S. Equity strategic alliances – in which two or more partners have different relative ownership shares (equity percentages) in the new venture —such as 25%, 25%, 50%—such as that between Chrysler and Mitsubishi Motors. Non-equity strategic alliances – when agreements are carried out through contract rather than ownership sharing © 2006 Prentice Hall

176 4. Global strategic alliances: Working partnerships were found between companies (often more than two) across national boundaries and increasingly across industries. Alliances are also sometimes formed between a company and a foreign government, or among companies and governments. © 2006 Prentice Hall

177 E-Biz: Covisint © 2006 Prentice HallCovisint is an e-business exchange developed by DaimlerChrysler AG, Ford, General Motors, Nissan, and Renault to meet the needs of the automotive industry. This is an illustration of the Covisint joint venture as it relates to the founding companies and the supplier network. It is a multimember joint venture with those companies, and Commerce One and Oracle are members. Covisint provides original equipment manufacturers (OEMs) and suppliers the ability to reduce costs and bring efficiencies to their business operations. Covisint expects to generate $300 billion in car sales and save manufacturers up to $263 per car by 2005 as well as reduce delivery periods to a few days and give buyers the opportunity for customized car orders. © 2006 Prentice Hall

178 Global and Cross-Border: Motivations and BenefitsTo avoid import barriers, licensing requirements and other protectionist legislation To share the costs and risks of the research and development of new products and processes To gain access to specific markets To reduce political risk while making inroads into a new market To gain rapid entry into a new or consolidating industry and to take advantage of synergies © 2006 Prentice Hall

179 AT&T’s Alliance StructureTechnological developments are necessitating strategic alliances across industries in order for companies to gain rapid entry into areas in which they have no expertise or manufacturing capabilities. Competition is so fierce that they cannot wait to develop those resources alone. Many of these objectives, such as access to new technology and to new markets, are evident in AT&T’s network of alliances around the world, as shown in this table. Agreements with Japan’s NEC, for example, give AT&T access to new semiconductor and chip-making technologies, helping it learn how to better integrate computers with communications. Another joint venture with Zenith Electronics will allow AT&T to co-develop the next generation of high-definition television (HDTV). © 2006 Prentice Hall

180 Challenges in Implementing Global Alliances1. In a highly competitive environment, alliances present a faster and less risky route to globalization. It is extremely complex to fashion such linkages, however, especially where many interconnecting systems are involved, forming intricate networks. Many alliances fail or end up in a takeover in which one partner swallows the other. 2. Often, form of governance chosen for multinational firm alliances greatly influences their success, particularly in technologically-intense fields—pharmaceuticals, computers, and semiconductors. Cross-border partnerships, in particular, often become a “race to learn”—with the faster learner later dominating the alliance and rewriting its terms. In a real sense, an alliance becomes a new form of competition © 2006 Prentice Hall

181 Challenges..cont… 3. All too often, cross-border allies have difficulty in collaborating effectively, especially in competitively sensitive areas, creating mistrust and secrecy, which then undermine the purpose of the alliance. The difficulty that they are dealing with is the dual nature of strategic alliances—the benefits of cooperation versus the dangers of introducing new competition through sharing their knowledge and technological skills about their mutual product or the manufacturing process. Some of the trade-offs of the duality of cross-border ventures are shown in Exhibit 7-2. © 2006 Prentice Hall

182 Challenges… 4. The enticing benefits of cross-border alliances often mask their many pitfalls. In addition to potential loss of technology and knowledge-skill base, other areas of incompatibility often arise, such as conflicting strategic goals and objectives, cultural clashes, and disputes over management and control systems. Visit © 2006 Prentice Hall

183 Challenges in Global AlliancesFive 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 Daimler is in crisis talks with Hyundai, its South Korean partner, in a move that could see the German company left with no presence in the Asian car market (having abandoned its partner in Japan, Mitsubishi Motors (MMC)), and an increasingly tattered global strategy. —Financial Times, April 27, 2004 Effective global alliances are usually tediously slow in the making but can be among the best mechanisms to implement strategies in global markets. In a highly competitive environment, alliances present a faster and less risky route to globalization. It is extremely complex to fashion such linkages, however, especially where many interconnecting systems are involved, forming intricate networks. Many alliances fail or end up in a takeover in which one partner swallows the other. McKinsey & Company, a consulting firm, surveyed 150 companies that had been in alliances and found that 75 percent of them had been taken over by Japanese partners. Problems with shared ownership, the integration of vastly different structures and systems, the distribution of power between the companies involved, and conflicts in their relative locus of decision making and control are but a few of the organizational issues that must be worked out. © 2006 Prentice Hall

184 The Dual Role © 2006 Prentice HallThe cumulative learning that a partner attains through the alliance could potentially be applied to other products or even other industries that are beyond the scope of the alliance, and therefore would hold no benefit to the partner holding the original knowledge. The enticing benefits of cross-border alliances often mask the many pitfalls involved. In addition to potential loss of technology and knowledge or skill base, other areas of incompatibility often arise, such as conflicting strategic goals and objectives, cultural clashes, and disputes over management and control systems. Sometimes it takes a while for such problems to evidence themselves, particularly if insufficient homework has been done in meetings between the two sides to work out the implementation details. © 2006 Prentice Hall

185 Guidelines for successful AlliancesChoose a partner with compatible strategic goals and objectives Seek alliances where complementary skills, products, and markets will result Work out with the partner how you will each deal with proprietary technology or competitively sensitive information Recognize that most alliances last only a few years and will probably break up one a partner feels it has incorporated the skills and information it needs to go it alone Many difficulties arise in cross-border alliances in melding the national and corporate cultures of the parties, in overcoming language and communication barriers, and in building trust between the parties over how to share proprietary assets and management processes. This slide offers suggestions to make alliances more successful. Many difficulties arise in cross-border alliances in melding the national and corporate cultures of the parties, in overcoming language and communication barriers, and in building trust between the parties over how to share proprietary assets and management processes. This slide offers suggestions to make alliances more successful. © 2006 Prentice Hall

186 Comparative Management in Focus: Russian FederationAs of 2004 Russia is a market where companies are considering joint ventures More politically stable New land, New legal system, New labor Laws Rouble is more stable Underexploited natural resources Killed and education population of 145 million © 2006 Prentice Hall

187 Comparative Management in Focus: Russian FederationThere are still roadblocks Possible repeat of the economic collapse of 1998 Lack of debt and equity capital Non-convertibility of the currency © 2006 Prentice Hall

188 Comparative Management in Focus: Russian FederationExhibit 7-3 shows the joint venture relationship between a U.S. firm and a firm in the Russian Federation,, the different goals that they bring to the venture, and the barriers caused by their different operating environments. © 2006 Prentice Hall

189 Comparative Management in Focus: Russian FederationWhat can help minimize the risk? Choose the right partner – compatible goals or strategy Find the right local general manager Choose the right location – political risk decreases from south to north and west to east Control the international joint venture – the best chance of success is to be vertically integrated to retain control of supplies and access to customers © 2006 Prentice Hall

190 The Russian oil industry has attracted Western interest including BP that developed an IJV with Russia’s TNK to form the third-largest oil producer in Russia. Some large MNCs have realized that short-term upheavals are possible in Russia and have stuck to a long-term plan. These companies include GM and Gillette. Exhibit 7-3 shows the joint venture relationship between a U.S. and Russian firm, the different goals that they bring to the venture, and the barriers caused by their different operating environments. © 2006 Prentice Hall

191 Implementation McDonald’s StyleForm paradigm-busting arrangements with suppliers Know a country’s culture before you hit the beach Maximize autonomy Tweak the standard menu only slightly from place to place Keep pricing low to build market share Successful implementation requires the orchestration of many variables into a cohesive system that complements the desired strategy—that is, a system of fits that will facilitate the actual working of the strategic plan. In this way, the structure, systems, and processes of the firm are coordinated and set into motion by a system of management by objectives (MBO), with the primary objective being the fulfillment of strategy. Managers must review the organizational structure and, if necessary, change it to facilitate the administration of the strategy and to coordinate activities in a particular location with headquarters. In addition to ensuring the strategy–structure fit, managers must allocate resources to make the strategy work, budgeting money, facilities, equipment, people, and other support. Increasingly, that support necessitates a unified technology infrastructure in order to coordinate diverse businesses around the world and to satisfy the need for current and reliable information. An efficient technology infrastructure can provide a strategic advantage in a globally competitive environment. © 2006 Prentice Hall

192 Successful implementation requires the orchestration of many variables into a cohesive system that complements the desired strategy—that is, a system of fits that will facilitate the actual working of the strategic plan. In this way, the structure, systems, and processes of the firm are coordinated and set into motion by a system of management by objectives (MBO), with the primary objective being the fulfillment of strategy. Managers must review the organizational structure and, if necessary, change it to facilitate the administration of the strategy and to coordinate activities in a particular location with headquarters. In addition to ensuring the strategy–structure fit, managers must allocate resources to make the strategy work, budgeting money, facilities, equipment, people, and other support. Increasingly, that support necessitates a unified technology infrastructure in order to coordinate diverse businesses around the world and to satisfy the need for current and reliable information. An efficient technology infrastructure can provide a strategic advantage in a globally competitive environment. © 2006 Prentice Hall

193 Managing Performance IJV Control is the process through which a parent company ensures that the way a joint venture is managed conforms to its own interest IJVs are like a marriage: the more issues that can be settled before the merger, the less likely it will be to break up Much of the world’s international business activity involves international joint ventures (IJVs), in which at least one parent is headquartered outside the venture’s country of operation. IJVs require unique controls. Ignoring these specific control requisites can limit the parent company’s ability to efficiently use its resources, coordinate its activities, and implement its strategy. © 2006 Prentice Hall

194 Managing Performance Three complementary and interdependent dimensions of IJV control Focus of IJV control – the scope of activities over which parents exercise control Extent or degree of IJV control achieved by the parents Mechanisms of IJV control used y the parents © 2006 Prentice Hall

195 Knowledge Management Knowledge Management is the conscious and active management of creating, disseminating, evolving and applying knowledge to strategic ends Knowledge management consists of 1) transferring, 2) transforming, 3) harvesting knowledge for a competitive advantage. See Exhibit 7-4. Research shows that successful IJVs encouraged joint learning and coaching. © 2006 Prentice Hall

196 Knowledge Management ProcessTransfer: managing the flow of existing knowledge between parents and from the parents to the IJV Transformation: managing the transformation and creation of knowledge within the IJV through its independent activities Harvest: Managing the flow of transformed and newly created knowledge from the IJV back to the parents © 2006 Prentice Hall

198 Cultural Influences © 2006 Prentice HallWhen managers are responsible for implementing alliances among partners from diverse institutional environments, such as transition and established market economies, they are faced with the critical challenge of reconciling conflicting values, practices, and systems. Research by Danis, published in 2003, shows those important differences among Hungarian managers and Western expatriates, which is shown on this slide. Such advance knowledge can provide expatriate managers with valuable information to help them in successful local operations. The impact of cultural differences in management style and expectations is perhaps most noticeable and important when implementing international joint ventures. The complexity of a joint venture requires that managers from each party learn to compromise to create a compatible and productive working environment, particularly when operations are integrated. Cultural impacts on strategic implementation are often even more pronounced in the service sector, because of many added variables, especially direct contact with the consumer. © 2006 Prentice Hall

199 Management Focus: Wal-Mart Hopes it Won’t be Lost in Translation in JapanThe article discusses Wal-Mart’s expansion into Japan. Wal-Mart now owns a 38% share of the Japanese retailer Seiyu and is trying to develop the Wal-Mart culture in its employees. The Japanese employees now shout the company pledge and are encouraged to speak out about possible changes and opinions and to be more goal-oriented. Wal-Mart has brought many of the Japanese employees to Arkansas for training. Wal-Mart hopes to combine its proven efficiency with Seiyu’s knowledge of the Japanese market and supplier network. © 2006 Prentice Hall

200 E-Commerce Impact Due to the complexity of global trade, many firms decide to implement their global e-commerce strategy by outsourcing the necessary tasks to companies which specialize in providing the technology to organize transactions and follow through with the regulatory requirements. These specialists are called e-commerce enablers. © 2006 Prentice Hall

201 Management Focus: Nextlinx Enables Global Strategy Implementation Nextlinx’ Trade Collaborator has everything needed to automate and manage an entire global trade operation. As a web-based environment, it enables all trading partners to collaborate in a single online location, using the same information and processes. It enables companies to calculate accurate landed costs, automate imports/exports, comply with NAFTA 2001, and gain visibility into shipments © 2006 Prentice Hall

202 Looking Ahead Chapter 8 – Organization Structure and Control SystemsOrganizational Structure Evolution and Change in MNC Organizing for Globalization Emergent Structural Forms Choice of Organizational Form Control Systems for Global Operations Managing Effective Monitoring Systems © 2006 Prentice Hall

204 Introduction To maximize long term retention and use of international cadre through career management so that the company can develop a top management team with global experience To develop effective global management teams To understand, value, and promote the role of women and minorities in international management in order to maximize those underutilized resources To maximize the benefits of an increasingly diverse workforce in various locations around the world To work with the host country labor relations system to effect strategic implementation and employee productivity. A crucial factor in global competitiveness is the ability of the firm to maximize its global human resources in the long term. To do this attention must be paid to several important areas which are noted on this slide. © 2006 Prentice Hall

205 Preparation Adaptation, and RepatriationEffective HRM ends with the successful repatriation of the executive into company headquarters Companies must prepare to minimize the potential effects of reverse culture shock Ineffective repatriation practices are clear – few managers will be willing to take international assignments © 2006 Prentice Hall

206 Preparation Adaptation, and RepatriationA mentor program to monitor the expatriate’s career path while abroad and upon repatriation As an alternative to the mentor program, the establishment of a special organizational unit for the purposes of career planning and continuing guidance for the expatriate A system of supplying information and maintaining contacts with the expatriate so that he or she may continue to feel a part of the home organization. © 2006 Prentice Hall

207 The Role of the Expatriate SpouseWe began to realize that the entire effectiveness of the assignment could be compromised by ignoring the spouse. —Steve Ford, Corporation Relocations, Hewlett-Packard Research on 321 American expatriate spouses shows effective cross-cultural adjustment is more likely When the firms seek the spouse’s opinion about the international assignment When the spouse initiates his/her own pre-departure training © 2006 Prentice Hall

208 Expatriate Career ManagementSupport services provide timely help for the manager and, therefore, are part of the effective management of an overseas assignment. The overall transition process experienced by the company’s international management cadre over time is shown in this slide. It comprises three phases of transition and adjustment that must be managed for successful socialization to a new culture and resocialization back to the old culture.These phases are (1) the exit transition from the home country, the success of which will be determined largely by the quality of preparation the expatriate has received; (2) the entry transition to the host country, in which successful acculturation (or early exit) will depend largely on monitoring and support; and (3) the entry transition back to the home country or to a new host country, in which the level of reverse culture shock and the ease of re-acculturation will depend on previous stages of preparation and support. © 2006 Prentice Hall

209 Slide 10-6, Support services provide timely help for the manager and, therefore, are part of the effective management of an overseas assignment. The overall transition process experienced by the company’s international management cadre over time. It comprises three phases of transition and adjustment that must be managed for successful socialization to a new culture and resocialization back to the old culture: (1) the exit transition from the home country, the success of which will be determined largely by the quality of preparation the expatriate has received; (2) the entry transition to the host country, in which successful acculturation (or early exit) will depend largely on monitoring and support; and (3) the entry transition back to the home country or to a new host country, in which the level of reverse culture shock and the ease of re-acculturation will depend on previous stages of preparation and support © 2006 Prentice Hall

210 In the international assignment, both the manager and the company benefit from the enhanced skills and experience gained by the expatriate. Many returning executives report an improvement in their managerial skills and self-confidence. Some of these acquired skills, as reported by Adler, include the following shown on slide 10-9. © 2006 Prentice Hall

211 Developing a Global Management CadreManagerial Skills, not Technical Skills – learning how to deal with a wide range of people Tolerance for Ambiguity Multiple Perspectives – learning to understand situations from the perspective of local employees and businesspeople Ability to Work with and Manage Others – learning patience and tolerance In the international assignment, both the manager and the company benefit from the enhanced skills and experience gained by the expatriate. Many returning executives report an improvement in their managerial skills and self-confidence. Some of these acquired skills, as reported by Adler, include the following shown on this slide. © 2006 Prentice Hall

212 Global Management Teamsdescribes collections of managers from several countries who must rely on group collaboration if each member is to experience the optimum of success and goal achievement. An example? © 2006 Prentice Hall

214 As shown slides 10-11, when a firm responds to its global environment with a global strategy and then organizes with a networked “glocal” structure, various types of cross-border teams are necessary for global integration and local differentiation. These include teams between and among headquarters and subsidiaries, transnational project teams, often operating on a “virtual” basis, and teams coordinating alliances outside the organization. In joint ventures, in particular, multicultural teams work at all levels of strategic planning and implementation, as well as on the production and assembly floor. © 2006 Prentice Hall

215 Virtual Transnational TeamsVirtual groups, whose members interact through computer-mediated communication systems, are linked together across time, space, and organizational boundaries Virtual global teams are horizontal networked structure, with people around the world conducting meetings and exchanging information via the Internet, enabling the organization to capitalize on 24 hour productivity © 2006 Prentice Hall

217 The ability to develop and lead effective transnational teams (whether they interact “virtually”, or physically, or, as is most often the case, a mixture of both) is essential in light of the increasing proliferation of foreign subsidiaries, joint ventures, and other transnational alliances. Slide highlights some suggestions to determine if the team is successful © 2006 Prentice Hall

218 Managing Transnational TeamsDo members work together with a common purpose? Is this purpose something that is spelled out and felt by all to be worth fighting for? Has the team developed a common language or procedure? Does it have a common way of doing things, a process for holding meetings? Does the team build on what works, learning to identify the positive actions before being overwhelmed by the negatives? Does the team attempt to spell out things within the limits of the cultural differences involved, delimiting the mystery level by directness and openness regardless of the cultural origins of participants? Do the members recognize the impact of their own cultural programming on individual and group behavior? Do they deal with, not avoid, their differences in order to create synergy? Does the team have fun? © 2006 Prentice Hall

219 Managing Transnational TeamsCultivate a culture of trust: One way to do this is by scheduling face-to-face meetings early on Rotating meeting locations Rotating and diffusing team leadership Linking rewards to team performance Build social networks among managers from different countries These are some general recommendations the researchers make for improving global teamwork. © 2006 Prentice Hall

220 The Role of Women in International ManagementAvoid assuming that a female executive will fail because of the way she will be received or because of problems experienced by female spouses Avoid assuming that a woman will not want to go overseas Give female managers every chance to succeed by giving them the titles, status, and recognition appropriate to the position – as well as sufficient time to be effective. © 2006 Prentice Hall

221 Management Focus: Japan’s Neglected Resource: Female WorkersWhen Yuko Suzuki, a Japanese woman, went into business for herself, she found that customers only pretended to listen to her. She was often asked by potential customers about her boss, so she hired a man to go along with her on sales calls. Having a man by her side helped Yuko increase sales. While 40 percent of Japanese women work, only about 9 percent hold managerial positions. A recent World Economic Forum report ranks Japan 69th of 75 member countries empowering women. Women in Japan are often hired only for clerical and service positions. Despite Japan’s economic troubles, women remain a neglected resource. © 2006 Prentice Hall

222 Working within Local Labor RelationsDifferences in economic, political, and legal systems result in considerable variation in labor relations systems across countries. Labor relations - the process through which managers and workers determine their workplace relationship. This process may be through verbal agreement and job descriptions, or through a union written labor contract which has been reached through negotiation in collective bargaining between workers and managers. © 2006 Prentice Hall

223 Working within Local Labor RelationsThe participation of labor in the affairs of the firm, especially as this affects performance and well-being The role and impact of unions in the relationship Specific human resource policies in terms of recruitment, training, and compensation. © 2006 Prentice Hall

224 Organized Labor Around the WorldWage levels which are set by union contracts and leave the foreign firm little flexibility to be globally competitive Limits on the ability of the foreign firm to vary employment levels when necessary Limitations on the global integration of operations of the foreign firm because of incompatibility and the potential for industrial conflict. © 2006 Prentice Hall

225 In most countries, a single dominant industrial relations system applies to almost all workers; but in both Canada and the United States there are two systems—one for the organized and one for the unorganized. 2.The traditional trade union structures in Western industrialized societies : industrial unions, representing all grades of employees in a specific industry, and craft unions, based on certain occupational skills. More recently, the structure has been conglomerate unions, representing members in several industries—for example, the Metal Workers unions in Europe, which cut across industries, and general unions, open to most employees within a country. © 2006 Prentice Hall

226 The system of union representation varies among countriesThe system of union representation varies among countries. In the United States most unions are national and represent specific groups of workers—for example, truck drivers or airline pilots—so a company may have to deal with several different national unions. A single U.S. firm—rather than an association of firms representing a worker classification—engages in its own negotiations. In Japan, on the other hand, it is common for a union to represent all workers in a company. In China, by law, any firm with over 100 employees must open a branch of the national union, however, the law is frequently ignored. © 2006 Prentice Hall

227 Industrial labor relations systems across countries can only be understood in the context of the variables in their environment and the sources of origins of unions. These include government regulation of unions, economic and unemployment factors, technological issues, and the influence of religious organizations. Any of the basic processes or concepts of labor unions, therefore, may vary across countries, depending on where and how the parties have their power and achieve their objectives, such as through parliamentary action in Sweden. For example, collective bargaining in the United States and Canada refers to negotiations between a labor union local and management; but in Europe collective bargaining takes place between the employer’s organization and a trade union at the industry level. © 2006 Prentice Hall

228 The AFL-CIO is a federation of 78 labor unions represents some 13The AFL-CIO is a federation of 78 labor unions represents some 13.6 million working men and women. Through organizing, collective bargaining and legislative/political action, the unions of the AFL-CIO work to advance and defend the rights of working people everywhere. © 2006 Prentice Hall

229 Convergence Versus Divergence in Labor SystemsConvergence in labor systems occurs as the migration of management and workplace practices around the world results in the reduction of workplace disparities from one country to another. This occurs primarily as MNCs seek consistency and coordination among their foreign subsidiaries, and as they act as catalysts for change by “exporting” new forms of work organization and industrial relations practices. Learn about world labor practices at LaborNet © 2006 Prentice Hall

231 Comparative Management in Focus: GermanyCodetermination Law (mitbestimmung) – refers to the participation of labor in the management of the firm Mandates representation for unions and salaried employees on the supervisory boards of all companies with more than 2,000 employees and work councils of employees at every work site © 2006 Prentice Hall

232 Comparative Management in Focus: GermanyUnion membership is voluntary with one union for each major industry Set the pay scale for about 90% of the country’s workforce Play an active role in hiring, firing, training, and reassignment during times of reorganization and change © 2006 Prentice Hall

233 Comparative Management in Focus: GermanyForeign companies operating in Germany also have to be aware that termination costs are very high Including severance pay, retraining costs, time to find another job © 2006 Prentice Hall

234 Management Focus: China Drafts Law to Empower Unions and End Labor AbuseChina is planning on adopting new laws that provide better protection for worker’s rights and ending the abusive practices of some employers. While the laws will apply to both domestic and international companies, the emphasis will be on foreign companies and their suppliers. The new laws are the result of an increasing government concern over the growing income disparity and civil unrest developing in the country. The laws make it more difficult to fire poorly performing employees and appear to some as a return to China’s “iron rice bowl” mentality of the 1950s and 1960s. “ © 2006 Prentice Hall

235 “This is really two steps backwards after three steps forward” states Kenneth Tung, Asia-Pacific director of legal affairs at Goodyear Tire and Rubber Company in Hong Kong who is a legal advisor to the American Chamber of Commerce in China. With costs already rising in China, the new laws worry some companies already doing business in China. They feel that the country will begin to look less attractive as a place to do business, and may cause the price of labor to rise by fifty percent or more. Some feel that if current labor laws were to be enforced, which often they are not, the problem of worker abuse would be stopped. Some migrant workers complain that they are sometimes not paid or that their pay is delayed. The new laws would impose heavy fines, and the state-controlled union will be given greater power, making it very difficult to fire an employee. While the American Chamber of Commerce is lobbying against the new laws, others, including the Global Labor Strategies group, feel that new laws are needed and represent only modest reform in Chinese labor law. © 2006 Prentice Hall

236 Looking Ahead Chapter 11 – Motivating and Leading MotivatingCross Cultural Research on Motivation Leading The Global Leader’s Role and Environment Cross-cultural Research on Leadership Contingency Leadership – The Culture Variable © 2006 Prentice Hall

238 Motivating Motivation is very much a function of the context of a person’s work and personal life. That context is greatly influenced by cultural variables, which affect the attitudes and behaviors of individuals (and groups) on the job Fujitsu Uses Pay Cuts a Motivational Tool. Cutting managers pay will help motivate employees to work hard in Japan-the spirit of kinship and team spirit. What about in other cultures? Will pay cut from bosses induce employees to work hard? See Motivation—and therefore appropriate leadership style—is affected by many powerful variables (societal, cultural, and political). © 2006 Prentice Hall

239 Cross-Cultural Research on MotivationHigh uncertainty avoidance suggests the need for job security, whereas people with low uncertainty avoidance would probably be motivated by more risky opportunities for variety and fast-track advancement. High power distance suggests motivators in the relationship between subordinates and their boss, whereas low power distance implies that people would be more motivated by teamwork and relations with their peers. In applying Hofstede’s research on the cultural dimensions of individualism—uncertainty avoidance, masculinity, and power distance, for example—we can make some generalized assumptions about motivation, such as the following. © 2006 Prentice Hall

240 Cross-Cultural Research on MotivationHigh individualism suggests people would be motivated by opportunities for individual advancement and autonomy; collectivism (low individualism) suggests that motivation will more likely work through appeals to group goals and support. High masculinity suggests that most people would be more comfortable with the traditional division of work and roles; in a more feminine culture, the boundaries could be looser, motivating people through more flexible roles and work networks. © 2006 Prentice Hall

241 For most people, the basic meaning of work is tied to economic necessity (money for food, housing, and so forth) for the individual and for society. However, the additional connotations of work are more subjective, especially about what work provides other than money—achievement, honor, social contacts, or whatever. Another way to view work, though, is through its relationship to the rest of a person’s life. © 2006 Prentice Hall

242 The Meaning of Work Work centrality is defined as “the degree of general importance that working has in the life of an individual at any given point in time.” The higher the mean work centrality score, the more motivated and committed the workers would be. Studies on the meaning of work in eight countries were carried out by George England and a group of researchers who are called the Meaning of Work (MOW) International Research Team.4 Their research sought to determine a person’s idea of the relative importance of work compared to that of leisure, community, religion, and family. They called this concept of work work centrality. The mean score on the work centrality index for the eight countries studied is shown in the next slide. The obvious general implication from these findings is that the higher the mean work centrality score, the more motivated and committed the workers will be. Of even more importance to managers (as an aid to understanding culture-based differences in motivation) are the specific reasons for valuing work.What kinds of needs does the working environment satisfy, and how does that psychological contract differ among populations? © 2006 Prentice Hall

244 The obvious general implication from these findings is that the higher the mean work centrality score, the more motivated and committed the workers would be. Of even more importance to managers (as an aid to understanding culture-based differences in motivation) are the specific reasons for valuing work. The MOW research team provided some excellent insights into this question when it asked people in the eight countries to what extent they regarded work as satisfying six different functions. The six functions were as follows: work 1) provides a needed income, 2) is interesting and satisfying, 3) provides contacts with others, 4) facilitates a way to serve society, 5) keeps one occupied, and 6) gives status and prestige. © 2006 Prentice Hall

245 The Meaning of Work Functions satisfied by workWork provides a needed income Is interesting and satisfying Provides contacts with others Facilitates a way to serve society Keeps one occupied Gives status and prestige © 2006 Prentice Hall

246 The Meaning of Work The table can help international managersAnticipate people’s attitude towards work Identify what aspects of work are meaningful Identify the approach they should take to motivate workers Table can help international managers Anticipate people’s attitude towards work What aspects of work are meaningful What approach the manger should take to motivate workers © 2006 Prentice Hall

247 The Needs Hierarchy in the International ContextHow applicable are motivation theories proposed by Maslow and Herzberg in the international context? Haire, Ghiselli and Porter’s survey concluded that Maslow’s needs, in particular the upper-level ones, are important at the managerial level, although the managers reported that the degree to which their needs were fulfilled did not live up to their expectations. Ronen concluded that need clusters are constant across nationalities and that Maslow’s need hierarchy is confirmed by these clusters. Also, Herzberg’s categories are confirmed by the cross-national need clusters.. © 2006 Prentice Hall

248 The Needs Hierarchy in the International ContextRonen’s need clusters Job goals, such as working area, work time, physical working conditions, fringe benefits, and job security; Relationships with co-workers and supervisors; and Work challenges and opportunities for using skills. Ronen concludes that need clusters are constant across nationalities and that Maslow’s need hierarchy is confirmed by those clusters. In addition, he claims that Herzberg’s categories are confirmed by the cross-national need clusters in his study. © 2006 Prentice Hall

249 The Intrinsic-Extrinsic DichotomyTwo sets of needs that motivate workers Motivational Factors (Intrinsic) Maintenance Factors (Extrinsic) Research on managers in Greece found that: People are motivated more by the nature of the work Dissatisfactions resulted from conditions surrounding the work Although, more cross-cultural research on motivation is needed, one can draw the tentative conclusion that managers around the world are motivated more by intrinsic than by extrinsic factors. Considerable doubt remains, however, about the universality of Herzberg’s or Maslow’s theories because it is not possible to take into account all of the relevant cultural variables when researching motivation. Different factors have different meanings within the entire cultural context and must be considered on a situation-by-situation basis. © 2006 Prentice Hall

250 Most Japanese companies, and some American companies, use group rallies at the beginning of the workday to stimulate and motivate employees to identify with the mission of the company. Do you they feel it can have a positive motivating effect? Would it motivate you personally? © 2006 Prentice Hall

251 Comparative Management in Focus: MexicoRanks high on power distance (acknowledgement of authority) Ranks high on uncertainty avoidance (preference for security and formality over risk) Ranks low on individualism Prefers family and country over individual achievement Family reasons” (taking care of sick relatives or elderly parents) are the most common reasons given for absenteeism and for failing to return to work. © 2006 Prentice Hall

252 Comparative Management in Focus: MexicoMost managers in Mexico find that: An authoritative and paternal management style works best Employees expect managers to be the authority- Most managers in Mexico find that the management style that works best there is authoritative and paternal. In fact, paternalism is expected; the manager is regarded as the “el patron” (pahtrone), or father figure, whose role it is to take care of the workers as an extended family. Employees expect managers to be the authority; they are the “elite”—power rests with the owner or manager and other prominent community leaders. If not told to something, workers will not do it Workers doubt their ability to personally influence the outcome of their lives (external locus of control) Corrective discipline and motivation must occur through training examples © 2006 Prentice Hall

253 Comparative Management in Focus: MexicoSuggestions on how to start self-managed work teams Foster a culture of individual responsibility among team members. Anticipate the impact of changes in power distribution. Provide leadership from the top throughout the implementation process. © 2006 Prentice Hall

254 Comparative Management in Focus: MexicoSuggestions on how to start self-managed work teams Provide adequate training to prepare workers for teamwork. Develop motivation and harmony through clear expectations. Encourage an environment of shared responsibility. A great links page of resources on Mexico can be found at The page has sub-lists on culture, the economy, trade, politics, literature and history of Mexico among others. © 2006 Prentice Hall

255 Rewards usually fall into five categoriesReward Systems Rewards usually fall into five categories Financial, social, status, job content, career, and professional Emphasis on one or more varies by country Japan reward systems are based on seniority In Taiwan recognition and affection are important In China low wage rates are compensated for by free housing, schools, and medical care Incentives and rewards are an integral part of motivation in a corporation. Recognizing and understanding different motivational patterns across cultures leads to the design of appropriate reward systems. © 2006 Prentice Hall

256 The Global Leader’s RoleA representative of the parent firm The manager of the local firm A resident of the local community A citizen of either the host country or of another country A member of a profession A member of a family The greatest competitive advantage global companies in the twenty-first century can have is effective global leaders.Yet this competitive challenge is not easy to meet. People tend to rise to leadership positions by proving themselves able to lead in their home-country corporate culture and meeting the generally accepted behaviors of that national culture. However, global leaders must broaden their horizons—both strategically and cross culturally —and develop a more flexible model of leadership that can be applied anywhere —one that is adaptable to locational situations around the world. The importance of the leadership role cannot be overemphasized because the leader’s interactions strongly influence the motivation and behavior of employees, and ultimately, the entire climate of the organization. The cumulative effects of one or more weak managers can have a significant negative impact on the ability of the organization to meet its objectives. In order to be successful managers must be able to juggle their various roles effectively. These roles are listed on this slide. © 2006 Prentice Hall

257 Factors affecting leadership abroadThe leader’s role comprises the interaction of two sets of variables—the content and the context of leadership.The content of leadership comprises the attributes of the leader and the decisions to be made; the context of leadership comprises all those variables related to the particular situation.55 The increased number of variables (political, economic, and cultural) in the context of the managerial job abroad requires astute leadership. Some of the variables in the content and context of the leader’s role in foreign settings are shown on this slide.The multicultural leader’s role thus blends leadership, communication, motivational, and other managerial skills within unique and ever changing environments. We will examine the contingent nature of such leadership throughout this section. © 2006 Prentice Hall

258 Slide The leader’s role comprises the interaction of two sets of variables—the content and the context of leadership.The content of leadership comprises the attributes of the leader and the decisions to be made; the context of leadership comprises all those variables related to the particular situation.55 The increased number of variables (political, economic, and cultural) in the context of the managerial job abroad requires astute leadership. Some of the variables in the content and context of the leader’s role in foreign settings are shown on this slide.The multicultural leader’s role thus blends leadership, communication, motivational, and other managerial skills within unique and ever changing environments. We will examine the contingent nature of such leadership throughout this section. © 2006 Prentice Hall

259 E-Business Effect on LeadershipTechnology has effected the way that managers lead and motivate employees Decisions need to be made fast Must maintain flexibility and be able to roll with the ups and downs Must focus on the vision Individual managers are realizing that the Internet is changing their leadership styles and interactions with employees, as well as their strategic leadership of their organizations. They are having to adapt to the hyperspeed environment of e-business, as well as to the need for visionary leadership in a whole new set of competitive industry dynamics. © 2006 Prentice Hall

260 Contingency Leadership – The Culture VariableModern leadership theory recognizes that no single leadership style works well in all situations As a result of culture-based norms and beliefs regarding various factors leaders should be able to choose the most appropriate style © 2006 Prentice Hall

261 The GLOBE Project Americans appreciate two kinds of leaders. They seek empowerment from leaders who grant autonomy and delegate authority to subordinates. They also respect the bold, forceful, confident, and risk-taking leader, as personified by John Wayne. The Dutch place emphasis on egalitarianism and are skeptical about the value of leadership. Terms like leader and manager carry a stigma. If a father is employed as a manager, Dutch children will not admit it to their schoolmates. Arabs worship their leaders – as long as they are in power! Global Leadership and Organizational Behavior Effectiveness (GLOBE) Research Program comprised a network of 170 social scientists and management scholars from sixty-two countries for the purpose of understanding the impact of cultural variables on leadership and organizational processes. Using both quantitative and qualitative methodologies to collect data from 18,000 managers in those countries, representing the majority of the world’s population, the researchers wanted to find out which leadership behaviors are universally accepted and which are culturally contingent. Not unexpectedly, they found that the positive leadership behaviors generally accepted anywhere are behaviors such as being trustworthy, encouraging, an effective bargainer, a skilled administrator and communicator, and a team builder; the negatively regarded traits included being uncooperative, egocentric, ruthless, and dictatorial. In another stage of this ongoing research project, interviews with managers from various countries led the researchers, headed by Robert House, to conclude that the status and influence of leaders vary a great deal across countries or regions according to the prevailing cultural forces. Both this slide and the next have some comments that were noted during this phase of the project. © 2006 Prentice Hall

262 Iranians seek power and strength in their leaders. The GLOBE Project Iranians seek power and strength in their leaders. Malaysians expect their leaders to behave in a manner that is humble, modest, and dignified. The French expect their leaders to be “cultivated” – highly educated in the arts and in mathematics. © 2006 Prentice Hall

264 Slide depicts an integrative model of the leadership process that pulls together the variables described in this book and in the research on culture, leadership, and motivation—and shows the powerful contingency of culture as it affects the leadership role. Reading from left to right, this slide presents culture from the broad environmental factors to the outcomes affected by the entire leadership situation. The broad context in which the manager operates necessitates adjustments in leadership style to all those variables relating to the work and task environment and the people involved. Cultural variables (values, work norms, the locus of control, and so forth), as they affect everyone involved—leader, subordinates, and work groups—then shape the content of the immediate leadership situation. The leader–follower interaction is then further shaped by the leader’s choice of behaviors (autocratic, participative, and so on) and by the employees’ attitudes toward the leader and the incentives. © 2006 Prentice Hall

265 Comparative Management in Focus: Leadership in the EUCan one style of leader work in all countries in the EU? At the present time it appears that there are still very different leadership styles cutting across the European Union. The EU is a very diverse group of countries with differing languages, religions, histories, educational systems, and culture. The French for example are known for being autocratic leaders, where as the Germans are known for being assertive and primarily focused on the task. Issues of the importance of human relations in leadership vary from country to country. Leaders in Europe who cut across national cultures must still consider the context and cultures of those countries and attempt to maintain a flexible leadership style. © 2006 Prentice Hall

266 Motivation effects—various levels of effort, performance, and satisfaction—result from these interactions, on an individual and a group level. These effects determine the outcomes for the company (productivity, quality) and for the employees (satisfaction, positive climate).The results and rewards from those outcomes then act as feedback (positive or negative) into the cycle of the motivation and leadership process. Clearly, then, international managers should take seriously the culture contingency in their application of the contingency theory of leadership:They must adjust their leadership behaviors according to the context, norms, attitudes, and other variables in that society. © 2006 Prentice Hall

PowerPoint by Kristopher Blanchard North Central University

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