MGTO 630B Managing People Globally for Competitive Advantage Instructor: Dr. Christina Sue-Chan Protecting Managerial Capabilities: Corporate and Personal Responsibility, Chapter 4 Saturday, February 22, 2003

2 By the end of today’s class, you should be able to: Discuss how localization impacts personal and corporate responsibility in protecting managerial capabilities Evaluate drivers of local responsiveness

3 Recall Culture plays a significant role in managing people globally for competitive advantage The managerial implication is that organizations need to localize its practices

4 The questions is, how far should localization go? What are some guidelines to help you make this decision? But first, let’s talk about Building Products International and see what some of the consequences of localization were for this organization.

5 One Driver of Localization: Culture Cultural values theory (e.g., Hofstede, Trompenaars)  Cultural values shape collective thought and behaviour  Duality characterizes this approach to understanding diversity across nations (e.g., polychronic vs. monochronic) (e.g., Motorola Tianjin HR manager reports to 4 bosses – typical of MNEs including BPI) versus monochronic (reporting to only one manager – typical of local firms)

6 Localization Dilemma (cultural lens) What to respect?  (≈ cultural accommodation) What to ignore?  (≈ cultural imperialism) What to re-invent  (≈ cultural synergy) Cultural Compromise

7 Understanding Cultural Differences: Cultural Dimensions Hofstede’s dimensions (1980): power distance,uncertainty avoidance, individualism, and masculinity, Long-term  Use to measure “cultural distance” between parent country and host country Smaller the distance, more easy the adaptation Values differ across nations in which business operates but practices are the same

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13 Where do you go next? How much would you localize HR practices? Suppose you were the CEO of a New Zealand-based manufacturer of whitewares (e.g., dishwashers, refrigerators, washing machines). Your brand name is well-known in NZ, where it dominates every market in which it offers a product. You believe, however, your company cannot grow unless it expands internationally. Which country would you choose as your next market? How locally adapted will your HR practices be in the next country?  Using Hofstede’s dimensions, formulate an answer to these two questions.  Would your answer be different if you were a manufacturer based in Sweden who is seeking to globalize?  What about Brazil?

14 Another View on Drivers of Localization: Institutional theory (e.g., Brewster & Larson)  Must examine interrelationship between economic, educational, financial, legal and political systems to understand business behavior  Local institutional context play a major role in shaping business / HR practices (e.g., LAWS: paternity leave policies in Sweden; works councils in Germany). Other examples from your personal experience?

15 How does Instutionalization Occur? Network theory (e.g., Arias)  Practices spread through network of which organization is a part  Often through Board membership

16 Summary: Local Responsiveness National values and business systems / practices shape both the culture of the parent company and the need for adjustment in the host environment (cultural values and institutional theory) Adjusting to local conditions is also driven by the practices of international peers (network theory) Firm can use the concept of cultural distance as a guide to incremental learning to decide where to go next, how to enter, and what practices to import Localization involves commitment at all levels to developing locals and retaining them. Excessive local responsiveness tends to inhibit collaboration across boundaries, and this may impede learning, effective performance (as illustrated by BPI case)

17 If you want more information, please consult: W. Richard Scott & John W. Meyer (1996). Institutional Environments and Organizations: Structural Complexity and Individualism. Thousand Oaks, CA: Sage. [Institutional theory] Jeanne M. Brett &Tetsushi Okumura (1998). Inter- and intracultural negotiation: U.S. and Japanese negotiators. Academy of Management Journal, 41, [Cultural values] Kenneth R Gray & Kimball P Marshall (1998). Kenyan and Korean management orientations on Hofstede's cultural values. Multinational Business Review, 6, [Cultural values] Amalya L Oliver & Mark Ebers (1998). Networking network studies: An analysis of conceptual configurations in the study of inter- organizational relationships. Organization Studies,19, [Network theory] Timothy J Rowley. (1997). Moving beyond dyadic ties: A network theory of stakeholder influences. Academy of Management Review, 22, [Network theory]