MANA 3319 A PANDEY Managing in a Global Environment September 5, 2007

Dimensions of Culture  Culture:- the collective programming of the mind  Culture shock- a person is exposed to a new culture with different norms, customs, expectations, has difficulty in adjusting  Dimensions Power Distance Individualism Uncertainty avoidance Masculinity/feminity Long-term/short term orientation www.

Why does this car Cost $20,000?  assembly  sophisticated parts- engine etc  800- small parts  500- Advertising  data processing  legal, banking, insurance fees  South Korea  Japan  800- Taiwan Singapore and Japan  500- Great Britain  Ireland  United States.

Change in world Business  Global Shift: The effects of changes in the competitive landscape prompted by worldwide competition. What are the ways in which world output and world trade have changed?

How International Business has changed  Lowered trade barriers  General Agreement on Tariffs and Trade (GATT)  World Trade Organization (WTO)  Integrated Economic Markets  The European Union (EU)  The North American Free Trade Act (NAFTA)  Central American-Dominican Republic Free Trade Agreement (CAFTA)  The Association of Southeast Asian Nations (ASEAN)  The Asia Pacific Economic Cooperation (APEC)

So what is changing?  Global consumer preferences  Tastes and preferences are converging  Presence of mass media, exposure to goods from various countries, and standardized products  Globalized production  Cost efficiency – Outsourcing,

So what is changing?(cont.)  Technological innovations  Advances in communications, information processing, and transportation technology  Fiber optics, wireless technology, the Internet and World Wide Web, and satellite technology  Management across cultures  Adaptation to business strategies, structures, operational policies, and human resource programs

Changing Environments  1. Business  2. Legal Common law Civil law Muslim Law  3. Cultural

Foreign expansion- Questions firms need to ask. 1. Where  Large domestic market  Wealth of customers high likely to grow  Available resources  Firms offerings are suitable to the market( coals to New Castle)  A positive business environment exists 2. When? 1.Timing is key 2.First mover advantage 3.Pioneering costs

Questions firms need to ask. How much? Lowest if the firm simply decides to export its products to the foreign location Highest if the firm decides to have a wholly owned subsidiary in the foreign country 4. Which way?

Modes of Entry  Exporting – entering new markets by sending products to other countries, still maintaining production facilities within the domestic borders  Turnkey projects – specialized type of exporting, where the firm handles the startup of the company and a local client is then handed the key  Licensing – entering new markets by transferring the rights to produce and sell products overseas to a foreign firm

Modes of Entry  Franchising – entering new markets in which the franchise pays a fee for using the brand name and agrees to follow the standards and rules  Joint venture – means of entering new markets where two or more independent firms agree to establish a separate firm  Strategic alliance – cooperative arrangements between competitors or potential competitors from different countries  Wholly owned subsidiary – entering new markets in which a firm fully owns its subsidiary in foreign countries

Examples of Strategic Alliances  General Electric – Snecma of France  Toshiba – IBM  Mitsui – General Electric  GM – Daewoo  Texas Instrument – Compel Communications  Canon – Hewlett-Packard  Mitsubishi – Caterpillar

Basic Approaches to Managing an International Subsidiary  Ethnocentric Approach- top management and key positions filled with people from the home country (expatriates)  Polycentric Approach- staffed by nationals of the host country  Geocentric Approach- staffed by qualified people from other countries  Third Country Nationals- citizens from other countries.  Can you give examples of these.

Why International Assignments End in Failure  Career blockage – the feeling that working abroad has gotten their career sidetracked, while people back home are climbing the corporate ladder  Culture shock – the inability to adjust to a different cultural environment  Lack of pre-departure cross-cultural training – little if any is offered to expatriates before going to a different country.

Why International Assignments End in Failure( Contd.)  Overemphasis on technical qualifications – the expatriate may lack cultural adaptability, even though they have the technical skills  Getting rid of a troublesome employee – provides the ability to solve interpersonal conflict, but at a huge expense to the company  Family problems – inability or unwillingness of the expatriate’s family to adapt to life in another country

Key HR Management Factors for Global Firms  Selection  Selection criterion should include cultural sensitivity  Training  Length of assignment determines depth of training  Cross-cultural training is critical to success  Career Development  International assignments should be part of career advancement plan  Compensation and Benefits  Incentives and quality-of-life concerns

Cross-cultural Training  Impression Management – High intensity. Assessment center, field experiences, simulations, sensitivity training  Affective Approach- Language training, role-playing, critical incidents, cases, stress-reduction training, moderate language training  Information-Giving Approach- area briefing, cultural briefing, films/ books/ interpreters, survival-level language

Ethics and Social Responsibility  Globalization greatly increases the possibility that managers will face an ethical dilemma.  Different cultures have different notions of right and wrong.  U.S. Foreign Corrupt Practice Act (1977).  Many firms and industry groups have developed their own codes of conduct for foreign operations.