Global Organizations for a Global Economy

International Management: The pursuit of organizational objectives is 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.

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.

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.

Joint Ventures and Strategic Partnerships

Recommendations for Achieving Success

Exercise patience: Select and build trust with a partner that produces compatible but not direct competitive products.

“Race to learn”: Learn as fast and as much as possible without giving away core technologies and secrets.

Play by the book: Establish at the outset ground rules about the rights and responsibilities of all parties.

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

Corporate Giants Worldwide

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:

1.      Knowledge of culture

2.      The practice of mindfulness

3.      Development of cross-cultural skills

CQ involves:

·         Impression management

·         Emotional intelligence

Competencies Needed to Work Effectively Across Cultures

Contrasting Attitudes toward International Operations

Ethnocentric Attitude: The view of ethnocentric attitude assumes that the home country’s personnel and ways of doing things are best.

Polycentric Attitude: The view assumes that local managers in host countries know best how to run their own operations.

Geocentric Attitude: A world-oriented view draws upon the best talent from around the world.

Three Different Attitudes Toward International Operations

The Cultural Imperative

Culture: A population is taken by granted assumptions, values, beliefs, and symbols that foster patterned behavior.

Societal culture: Norms, values, attitudes, role expectations, taboos, symbols, heroes, beliefs, morals, customs, and rituals

Are U.S. Corporations Turning the World into a Single “Americanized” Culture? Cultural roots run deep, have profound effects on behavior, and  are not easily altered.

Understanding Cultural Diversity

High-Context Cultures: Cultures is which nonverbal and situational messages convey primary meaning. Status of an individual is of tantamount importance in determining relationships.

Low-Context Cultures: Cultures is which words convey primary meaning of this culture. Nonverbal messages are secondary to spoken words. The terms of the deal are more important than building a business relationship.

GLOBE Project

Other Sources of Cultural Diversity

Individualistic cultures: Cultures emphasize individual rights, roles, and achievements.

Collectivist cultures: Cultures emphasize duty and loyalty to collective goals

Time

Monochronic time: A perception of time is a straight line broken into standard units. Timely arrivals and keeping appointments considered important.

Polychronic time: A perception of time is flexible, elastic, and multidimensional. Appointment schedules considered approximations and are not kept precisely.

Interpersonal space: Some cultures prefer a close rather than wide distance between conversing individuals.

Language skills: Language fluency opens insights into another culture.

Religion: Religion has many effects on personal and professional activities in many cultures.

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.

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

Countries Place Differing Emphasis on Standard Management Practices

GLOBE Leadership Matrix

 

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

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

Specific Cross Culture Training Techniques

Cross-Cultural Training: A guided experience that helps people live and work in foreign cultures.

Documentary programs familiarize the expatriate with assignment destination. Culture assimilator exposes the expatriate to simulated intercultural incidents and situations. Language instruction builds the expatriate’s conversational skills in a foreign language. Sensitivity training provides experiential exercises to teach expatriates to be aware of the impact of their actions on others in another culture. Field experiences provide firsthand exposure to ethnic subcultures that heightens expatriates’ cultural awareness.

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.

What About North American Women on Foreign Assignments?

Women are above-average in being successful in foreign assignments. Strongest barriers to foreign assignments have been self-disqualification and the prejudice of home country managers. Culture is a bigger hurdle than gender: Women on foreign assignments are seen as North Americans first, then as women.

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.