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Chapter Objectives Describe the six-step internationalization process and distinguish between a global company and a transnational company. Identify at least four of the nine cross-cultural competencies of global managers, and contrast ethnocentric, polycentric, and geocentric attitudes toward foreign operations. Explain from a cross-cultural perspective the difference between high-context and low-context cultures, and identify at least four of the GLOBE cultural dimensions. Discuss Hofstede’s conclusion about the applicability of American management theories in foreign cultures, and explain what comparative management researchers have learned about management styles. Summarize the leadership lessons from the GLOBE Project. Identify the four leading reasons why U.S. expatriates fail to complete their assignments, and discuss the nature and importance of cross-cultural training in international management. Summarize the situation of North American women on foreign assignments. © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 2

Global Organizations for a Global Economy International Management The pursuit of organizational objectives in international and cross-cultural settings The Internationalization Process There are many ways to do business across borders. At one extreme, a company may merely buy goods from a foreign source, or, at the other, it may actually buy the foreign company itself. Companies may skip steps when pursuing foreign markets, so the following sequence should not be viewed as a lock step sequence. © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 3

The Internationalization Process Stage 1: Licensing Authorizing companies in foreign countries to produce and/or market a given product within a specified territory in return for a fee Stage 2: Exporting Goods produced in one country are sold to customers in foreign countries. Stage 3: Local warehousing and selling Goods produced in one country are shipped to the parent company’s storage and marketing facilities located in overseas countries. © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 4

The Internationalization Process (cont’d) Stage 4: Local Assembly and Packaging Components, rather than finished products, are shipped to company-owned foreign facilities for final assembly and sales. Stage 5: Joint Ventures (also Strategic Alliances or Strategic Partnerships) A company in one country pools its resources with another foreign company or companies to create and market products and jointly share profits and losses. Stage 6: Direct Foreign Investment The production and marketing of products through a wholly owned subsidiary in a foreign country Involves cross-border mergers © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 5

From Global Companies to Transnational Companies Global Company A multinational venture centrally managed from one country Has global strategies for product design, financing, purchasing, manufacturing, and marketing Transnational Company A global network of productive units with a decentralized authority structure and no distinct national identity Relies on a blend of global and local strategies © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 6

Needed: Global Managers with Cultural Intelligence and Cross-Cultural Competencies Cultural Intelligence (CQ) The ability of an outsider to read individual behavior, group dynamics, and situations in a foreign culture Three Components of Cultural Intelligence: Knowledge of culture The practice of mindfulness Development of cross-cultural skills CQ involves: Impression management Emotional intelligence © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 7

Table 4.3: Three Different Attitudes Toward International Operations © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 8

Understanding Cultural Diversity High-Context Cultures Cultures in which nonverbal and situational messages convey primary meaning Status of an individual is of tantamount importance in determining relationships. Low-Context Cultures Cultures in which words convey primary meaning Nonverbal messages are secondary to spoken words. The terms of the deal are more important than building a business relationship. © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 9

Table 4.4: GLOBE Project © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 10

Comparative Management Insights Comparative Management The study of how organizational behavior and management practices differ across cultures Made-in-America Management Theories Require Translation Gert Hofstede’s research led him to recommend that American management theories be adapted rather than imposed on other local cultures. © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 11

Management Styles Vary Across Countries and Cultures Managers were interviewed and rated on a list of 18 standard management practices Three broad areas: Monitoring Targets Incentives Findings: Countries with strong overall management practices are not all alike Countries have their own characteristic ways of implementing good management practices Managers working internationally need to use their cultural intelligence to detect local management preferences © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 12

Lessons in Leadership from the GLOBE Project Leadership Styles Charismatic/value-based* Team-oriented* Participative Humane-oriented Self-protective International managers need a full repertoire of leadership styles that they can use flexibly in a culturally diverse world. *Greatest cross-cultural applicability © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 13

Staffing Foreign Positions American expatriates have a higher-than-average failure rate Why Do U.S. Expatriates Fail? Job performance Job offers from other companies Factors related to culture shock: Negative feelings triggered by an expectations-reality mismatch Homesickness © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 14

Cross-Cultural Training A guided experience that helps people live and work in foreign cultures Specific Training Techniques Is One Technique Better Than Another? A combination of documentary and interpersonal training is the best combination for expatriates. An Integrated Expatriate Staffing System Provide orientation for both expatriate and family. Have family sponsors or assigned mentors available at the foreign assignment. Repatriation is an importance part of the entire foreign assignment experience. © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 15

Relying on Local Management Advantages of Using Foreign Nationals They know the language and culture. They do not require huge location expenses. Host governments favor more local control. Disadvantage Local managers may not be attuned to home-office goals and procedures. © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 16

Summary The growing global economy makes the study of international management more important than ever. Cultural intelligence (CQ) is an outsider’s ability to “read” a foreign culture as well as the locals do. The forms and meanings of communications are different in high and low context cultures. Comparative management provides insights into how organizational behavior and management practices differ across cultures. In the GLOBE study, the charismatic/value-based and team-oriented leadership styles were found to be widely applicable. The self-protective leadership style was not acceptable in any culture. Culture shock is a normal part of expatriate life. © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 17

Terms to Understand International management Global company Transnational company Cultural intelligence (CQ) Ethnocentric attitude Polycentric attitude Geocentric attitude Culture High-context cultures Low-context cultures Individualistic cultures Collectivist cultures Monochronic time Polychronic time Comparative management Culture shock Cross-cultural training © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 18