Chapter 12 International management © 2006 McGraw-Hill Australia Pty Ltd. PowerPoint Slides t/a Management Foundations: A Pacific Rim Focus 1e by Bartol et al.

Lecture outline The nature of international management Assessing the international environment Gauging international strategic issues Organising international business Adapting to cultural differences Handling social responsibility and ethical issues Page 430 © 2006 McGraw-Hill Australia Pty Ltd. PowerPoint Slides t/a Management Foundations: A Pacific Rim Focus 1e by Bartol et al.

The nature of international management MULTINATIONAL CORPORATION (MNC) Organisations engaging in international management vary in size and the extent that their business activities cross international boundaries. It is argued that organisations must adopt a global view of planning and other activities. By viewing the whole world as their operating area, managers can tap into world-wide markets and be active where conditions support organisational goals. This means managers must grasp international management issues firmly. Further discussion can be found on pages 432-3. © 2006 McGraw-Hill Australia Pty Ltd. PowerPoint Slides t/a Management Foundations: A Pacific Rim Focus 1e by Bartol et al.

The nature of international management International business Profit-related activities conducted across international boundaries International management Process of planning, leading, organising and controlling in organisations engaged in international business Page 432 © 2006 McGraw-Hill Australia Pty Ltd. PowerPoint Slides t/a Management Foundations: A Pacific Rim Focus 1e by Bartol et al.

The nature of international management Organisations engaging in international management – Multinational corporation (MNC) Orientations to international management Ethnocentric Polycentric Regiocentric Geocentric Organisations engaging in international management vary in size and the extent that their business activities cross national boundaries. Multinational corporations (MNC) engage in production or service activities through affiliates in other countries, controlling their policies and managing from a global perspective. With this perspective, top managers allocate resources and coordinate activities to take the best advantage of business conditions. Further discussion can be found on pages 432-5. © 2006 McGraw-Hill Australia Pty Ltd. PowerPoint Slides t/a Management Foundations: A Pacific Rim Focus 1e by Bartol et al.

Orientations to international management Ethnocentric (home-country) orientation Polycentric (host-country) orientation Regiocentric (regional) orientation Geocentric (world) orientation Top-level managers in firms expanding internationally (particularly in MNCs) take one of four orientations about how much operating methods are influenced by headquarters or by members in other parts of the world. The home country is where an organisation’s headquarters are located and a host country is a foreign country that the home country does business in. Further discussion can be found on pages 433-5. © 2006 McGraw-Hill Australia Pty Ltd. PowerPoint Slides t/a Management Foundations: A Pacific Rim Focus 1e by Bartol et al.

Assessing the international environment Environmental elements Economic Legal-political Sociocultural Technological While international management opens great opportunities, the challenge becomes trying to understand a broader set of environmental factors than met in a strictly domestic business. The idea of a general environment helps us to understand the nature of international management. Further discussion can be found on page 435. © 2006 McGraw-Hill Australia Pty Ltd. PowerPoint Slides t/a Management Foundations: A Pacific Rim Focus 1e by Bartol et al.

Assessing the international environment Economic element Developed countries High economic, industrial development Less developed countries (LDCs) Low economic, industrial development Newly industrialised countries (NICs) - emerging LDCs Balance of payments and balance of trade Exchange rate MNCs do not necessarily operate across the world. In fact, about 95% of MNCs are based in developed countries, with about 75% of foreign investment channelled back to developed countries. However, the rising prosperity of LDCs has great potential for market expansion. Further discussion can be found on pages 435-6. © 2006 McGraw-Hill Australia Pty Ltd. PowerPoint Slides t/a Management Foundations: A Pacific Rim Focus 1e by Bartol et al.

Assessing the international environment Less developed countries (LDCs) Developed countries Newly industrialised countries (NICs) Exchange rate Economic element Pages 435-6 Infrastructure Balance of trade Balance of payments © 2006 McGraw-Hill Australia Pty Ltd. PowerPoint Slides t/a Management Foundations: A Pacific Rim Focus 1e by Bartol et al.

Assessing the international environment Legal-political element Political risk Expropriation Indigenisation laws Tariffs Import quotas Administrative protections Both legal and political conditions affect a firm’s ability to conduct business in other countries. Considerations include the level of political risk of operating in a country, and governmental trade barriers. Therefore corporations must assess the political risk of setting up in a given country. Further discussion can be found on page 436. © 2006 McGraw-Hill Australia Pty Ltd. PowerPoint Slides t/a Management Foundations: A Pacific Rim Focus 1e by Bartol et al.

Assessing the international environment Expropriation Political risk Legal-political element Indigenisation laws Page 436 Tariffs Administrative protections Import quotas © 2006 McGraw-Hill Australia Pty Ltd. PowerPoint Slides t/a Management Foundations: A Pacific Rim Focus 1e by Bartol et al.

Assessing the international environment Sociocultural element Power distance Uncertainty avoidance Individualism-collectivism Achievement-nurturing orientation Long-term orientation Short-term orientation The sociocultural element includes attitudes, values, norms, beliefs, behaviours and associated demographic trends characteristic of a geographic area. Comparing people in different nations, it is common to speak of cultural differences. Further discussion can be found on pages 436-7. © 2006 McGraw-Hill Australia Pty Ltd. PowerPoint Slides t/a Management Foundations: A Pacific Rim Focus 1e by Bartol et al.

Assessing the international environment Cultural differences Power distance Sociocultural element Individualism- collectivism Achievement- nurturing orientation Pages 436-7 Short-term orientation Long-term orientation © 2006 McGraw-Hill Australia Pty Ltd. PowerPoint Slides t/a Management Foundations: A Pacific Rim Focus 1e by Bartol et al.

Assessing the international environment Technological element Technological transfer - Transmission of technology from those who possess it to those who do not The technological element is important in the international environment as technology levels in various countries affect market nature and companies’ ability to do business. In fact, much technology transfer takes place during international business. Technology can be goods or processes such as components or machinery, or intangible know-how, such as advanced road-building techniques. Further discussion can be found on page 437. © 2006 McGraw-Hill Australia Pty Ltd. PowerPoint Slides t/a Management Foundations: A Pacific Rim Focus 1e by Bartol et al.

Assessing the international environment Technological element Technological transfer Page 437 © 2006 McGraw-Hill Australia Pty Ltd. PowerPoint Slides t/a Management Foundations: A Pacific Rim Focus 1e by Bartol et al.

The competitive advantage of nations Concept that environmental elements within a nation can foster innovation in certain industries, thereby increasing prospects for the success of home-based companies operating internationally. In considering the impact of environmental forces on organisations, Michael E. Porter developed the idea of the competitive advantage of nations. Firms that gain a competitive edge provide positive national prosperity consequences as well. Also, innovation’s incidence among companies in particular industries is influenced by national characteristics of the country where they are based. Further discussion can be found on page 438. © 2006 McGraw-Hill Australia Pty Ltd. PowerPoint Slides t/a Management Foundations: A Pacific Rim Focus 1e by Bartol et al.

The competitive advantage of nations The diamond of national advantage 4 national attributes (Porter): Factor conditions Demand conditions Related and supporting industries Firm strategy, structure and rivalry To explain why some firms consistently innovate, Porter identifies four national attributes which alone and together set the diamond of national advantage. Further discussion can be found on pages 438-9. © 2006 McGraw-Hill Australia Pty Ltd. PowerPoint Slides t/a Management Foundations: A Pacific Rim Focus 1e by Bartol et al.

The competitive advantage of nations Firm strategy, structure and rivalry Factor conditions Demand conditions See Figure 12.1 on page 439. Related and supporting industries © 2006 McGraw-Hill Australia Pty Ltd. PowerPoint Slides t/a Management Foundations: A Pacific Rim Focus 1e by Bartol et al.

Gauging international strategic issues Methods of international entry Exporting Licensing Strategic alliances Wholly-owned subsidiaries Multinational corporation strategies Worldwide integration National responsiveness Regional responsiveness Multifocal emphasis While most international business firms use long-range planning, initial efforts at operating in other countries focus on narrower goals than becoming a fully-fledged MNC. To match these initial efforts, a variety of methods of international entry are utilised. Further discussion can be found on pages 440-2. As firms expand internationally they must develop suitable strategies. MNC’s, and to a lesser extent other companies operating internationally, must weigh two factors: the need to make optimum global economic decisions, and the need to be responsive to host-country differences. Thus MNC’s have four strategy options. Further discussion can be found on page 627 of text. © 2006 McGraw-Hill Australia Pty Ltd. PowerPoint Slides t/a Management Foundations: A Pacific Rim Focus 1e by Bartol et al.

Gauging international strategic issues Globalisation Exporting National responsiveness Licensing Methods of international entry Multinational corporation strategies Strategic alliance Regional responsiveness Pages 440-2 Wholly- owned subsidiary Multifocal emphasis © 2006 McGraw-Hill Australia Pty Ltd. PowerPoint Slides t/a Management Foundations: A Pacific Rim Focus 1e by Bartol et al.

Organising international business Worldwide functional divisions Worldwide product divisions International division Geographic regions Global matrix Networked structure As well as strategic issues, managers in international business must choose an organisation structure appropriate to the firm’s global pursuits. The tendency is to adopt one of five structure types. Further discussion can be found on pages 442-5. © 2006 McGraw-Hill Australia Pty Ltd. PowerPoint Slides t/a Management Foundations: A Pacific Rim Focus 1e by Bartol et al.

Adapting to cultural differences Managing international HRM Assignment policies Recruitment Selection and training Repatriation Adjusting leadership styles To fit cultural factors in other countries Power-distance differences Structural issues are important; however, another effective international management element is adapting to different cultures. Issues include international HRM and leadership adjustment. Researchers in international management argue that firms operating internationally must emphasise strategic HRM for a competitive international edge. Further discussion can be found on pages 446-452. © 2006 McGraw-Hill Australia Pty Ltd. PowerPoint Slides t/a Management Foundations: A Pacific Rim Focus 1e by Bartol et al.

Adapting to cultural differences Assignment policies Managing international human resources Recruitment Repatriation Adjusting leadership styles Pages 446-452 Selection and training © 2006 McGraw-Hill Australia Pty Ltd. PowerPoint Slides t/a Management Foundations: A Pacific Rim Focus 1e by Bartol et al.

Social responsibility and ethical issues International social responsibility Benefit versus harm of MNCs in LDCs Questionable payments issue Business payments raising significant ethical questions of right and wrong either in the host country or in other nations Many social responsibility issues compound when a company has much international business. This is because of increased social stakeholders (customers and communities in different countries) especially if a business uses subsidiaries in other countries. A pervasive international ethical issue involves questionable payments. These may take the form of political payments, extortion, commissions or bribes. Further discussion can be found on pages 452-3. © 2006 McGraw-Hill Australia Pty Ltd. PowerPoint Slides t/a Management Foundations: A Pacific Rim Focus 1e by Bartol et al.

Social responsibility and ethical issues political payments Questionable payment issues bribes extortion International social responsibility sales commissions Page 453 expediting payments © 2006 McGraw-Hill Australia Pty Ltd. PowerPoint Slides t/a Management Foundations: A Pacific Rim Focus 1e by Bartol et al.

Lecture summary Nature of international management Orientations: ethnocentric, polycentric, geocentric, regiocentric Assessing the international environment Environmental elements Competitive advantage of nations Gauging strategic issues Methods of international entry Multinational corporation strategies Page 456 © 2006 McGraw-Hill Australia Pty Ltd. PowerPoint Slides t/a Management Foundations: A Pacific Rim Focus 1e by Bartol et al.

Lecture summary Organising international business Divisions: functional, product, international, geographic, global matrix, network structure Adapting to cultural differences International human resources Adjusting leadership styles Social responsibility and ethical issues International social responsibility Questionable payments Page 456 © 2006 McGraw-Hill Australia Pty Ltd. PowerPoint Slides t/a Management Foundations: A Pacific Rim Focus 1e by Bartol et al.