Assignment paper - Week 3 - 7020

Reference:

Hitt, M. A., Miller, C. C., & Colella, A. (2015). Organizational behavior. Hoboken, NJ: John Wiley.

· Read Chapter 3 below, "Organizational Behavior in a Global Context," pages 72–101.

Organizational Behavior in a Global Context

Knowledge Objectives

After reading this chapter, you should be able to:

1. Define globalization and discuss the forces that influence this phenomenon.

2. Discuss three types of international involvement by associates and managers and describe problems that can arise with each.

3. Explain how international involvement by associates and managers varies across firms.

4. Describe high-involvement management in the international arena, emphasizing the adaptation of this management approach to different cultures.

5. Identify and explain the key ethical issues in international business.

Exploring Behavior in Action McDonald's Thinks Globally and Acts Locally

In 1948, brothers Richard and Maurice McDonald opened the first McDonald's restaurant in San Bernardino, California. Over the next decade, hundreds of McDonald's restaurants were built alongside the new interstate highway systems in the United States. McDonald's was one of the first restaurants to make fast food available to the newly mobile American population. In 1967, McDonald's decided to go international and opened its first restaurant outside the United States in Richmond, British Columbia. Today there are more than 34,000 McDonald's restaurants in 119 countries. And, its international operations have become highly important to McDonald's financial performance. For example, its restaurants in Europe now produce more revenues than its restaurants in the United States, despite the fact that McDonald's has more units in the United States. McDonald's success in international operations is partially because it has adapted to the unique cultural norms in each of its various foreign locations.

Trying to maintain a global brand is difficult because of the different cultural expectations experienced across different countries. It is important to ensure a positive reputation for the company and also maintain the quality of its products. So, McDonald's had to build and sustain a reputation for quality products and efficient service globally while simultaneously meeting consumer expectations across different cultures. McDonald's developed a competitive advantage because the company has taken steps to know, understand, and service customers' needs without compromising its core strengths (fast, easy, clean meals for families to enjoy). McDonald's has developed global packaging that promotes its brand but also provides nutritional information, and does so in the local language showing sensitivity to the local culture. And, the colors of the packaging and promotions are different across countries. For example, the familiar McDonald's red background was changed to green in Europe communicating an environment friendly image to communicate effectively with the environmentally sensitive customers in Europe.

One analyst referred to McDonald's as the “master of local adaptation.” While maintaining a standardization of the “brand” and clean efficient restaurants, the firm also adapts its menu items to local tastes. For example, McDonald's recently introduced Spicy Pork McBites in its Chinese restaurants to go along with its offerings of chicken and beef rice wraps, taro pies, and tapioca pudding, as well as its traditional Big Mac. China is the largest consumer of pork in the world, with an average of 80 pounds for each citizen annually. McDonald's also offers a Prosperity Burger for the celebration of the Chinese New Year to go along with a new rice-based menu in this country.

Examples of other localized menu items include the McCamembert, a hamburger with French Camembert cheese (offered in France), the Mcharaja Mac with lamb or chicken (offered in India), the Ebi Filet-O which is a shrimp burger (offered in Japan), a Bacon Roll composed of bacon and ketchup on a hard roll (offered in England), and McSpaghetti, which is a dinner meal offered in Indonesia and the Philippines.

McDonald's takes other actions to respond locally. For example, it changed the name of 13 of its 900 restaurants in Australia to Macca to celebrate Australia Day. Macca is the nickname used by Australians to refer to McDonald's restaurants.

It is equally important to develop a culturally appropriate strategy for a new international location. Innovation is successful when it is culturally appropriate. In Brazil, McDonald's promotes an afternoon meal rather than a lunch meal. This change was made because Brazilians prefer their main meal at midday, often eating at a leisurely pace with business associates. McDonald's also displays a commitment to important local social concerns. For example, McDonald's supports Conservation International's efforts to protect wild pandas, a threatened species. Taking this further, McDonald's announced a local treasures program in China to encourage children to learn about their country's special environment and rare animals. Another example is McDonald's major donation to the Dubai Autism Center as a part of McDonald's World Children's Day campaign.

© Megapress / Alamy

McDonald's is regularly adapting its restaurants and marketing tactics to reflect cultural, architectural, and regional differences within each country. Even in the United States, McDonald's adapts to local communities. In Maine, for example, McDonald's offers lobster rolls. Thus, McDonald's is a prime example of a company that thinks globally and acts locally.

Sources: T. Stone, “I'm Loving It: Going global by Going Local,” TAG Archives (2014).  http://tiffanystone.com/tag/mcdonalds ; A. Qin, “Would You Like Fries with Those Spicy Pork McBites?” New York Times (2013).  http://nytimes.com ; A. Broderick, “Think Global Act Local-What Does It Mean?” IMS Marketing (2013).  http://www.imsmarketing.ie.news ; M. Lousada, McDonald's: Think Global Act Local” (2013),  http://martalousada.wordress.com ; J. Borzik, “McDonald's Think Global Act Local,” Point Park Journalism (2013). http://imcpointpoark journalism.com/Corporate/news-stories; “McDonalds Launches New Global Packaging,” McDonald's website(2013),  http://news.mcdonalds.com ; E. Ganley, “McDonald's to Become Mona Lisa's New Neighbor,” BusinessWeek (Oct. 5, 2009),.  www.businessweek.com ; S.E.D.K. Capell . “A Golden Recipe for McDonald's Europe,” BusinessWeek (July 17, 2008)  http://www.businessweek.com ; “McDonald's and Conservation International Team Up to Protect China's Panda Habitats”, McDonald's, (June 10, 2008), at  http://www.crmcdonalds.com ; Conrad P. Kottak, “McDonald's in Brazil: Culturally Appropriate Marketing,” Ethnographic Solutions, (2003), at  http://www.ethnographic-solutions.com .

The Strategic Importance of Organizational Behavior in a Global Context

The Exploring Behavior in Action discussion of McDonald's shows how one firm operates on the world stage and emphasizes the importance of cross-cultural knowledge and skills. Because of substantial competition and differing cultural expectations across the many countries in which McDonald's has restaurants, the company has strong needs for flexibility and for efficiency in resource use. McDonald's has developed a global reputation for providing clean restaurants and fast and easy meals for value-conscious families. From strategic locations, the firm develops, produces, sells, and supports its products for the world marketplace. To be successful, however, this firm must be especially attentive to local cultural values and desired foods. McDonald's always provides some consistent products on its menu regardless of location (e.g., the Big Mac) but it also provides menu items adapted to the local cultural tastes (such as pork and rice meals in China and lamb and chicken meals in India). McDonald's has trained its managers to be sensitive to local culture and yet to take advantage of global efficiencies. McDonald's global focus has led to higher overall corporate performance. 1

To create cost advantages, to pursue growth, or to spread risk across different markets, many firms have adopted strategies that call for investment in foreign countries. Such involvement can take many forms, including the creation of company-owned manufacturing or back-office facilities, company-owned marketing and sales units, and/or alliances with companies based in a particular foreign country. In all cases, effectively handling cross-country cultural differences is crucial. Executing competitive strategies would be impossible without an understanding of how these differences affect day-to-day relationships among associates and managers, as well as relationships with external parties (such as suppliers and customers). 2

One of the most famous examples of a corporate failure to recognize cultural differences is Walt Disney Company's attempt to execute a strategy involving efficient operations and exceptional customer service in its theme park located close to Paris. 3  American leaders of the Euro Disney project failed to understand some European workplace norms, and this produced a less friendly approach to guests in the park. Disney leaders also failed to anticipate the uproar over grooming and dress requirements for associates, including “appropriate undergarments,” and they did not recognize the potential for conflict between individuals of different nationalities.

One of the 1,000 associates and lower-level managers who departed in the first nine weeks of Euro Disney's operation commented, “I don't think [non-European supervisors] realized what Europeans were like.” Concerning the park, a critic expressed the feelings of the French elite: “A horror made of cardboard, plastic, and appalling colors; a construction of hardened chewing gum and idiotic folklore taken straight out of comic books written for obese Americans.” 4  Failure to fully appreciate and respond to cultural differences contributed to a disastrous early period for Euro Disney. However, having learned several hard lessons, the company improved its practices in the park and increased its performance as well.

Because of the importance of globalization and the related diversity and ethical issues it poses, we present examples and applications involving firms operating in multiple countries throughout the book. In this chapter, we discuss these issues in depth. We open the chapter with a discussion of globalization and institutions, addressing the opportunities and challenges that they present for nations and firms. Next, we discuss the ways in which associates and managers learn new capabilities to take advantage of international opportunities and to deal with the international challenges. A discussion of high-involvement management follows, with a focus on how this management approach can be tailored to different countries and regions of the world. Finally, we describe ethical issues frequently confronted by firms with substantial international involvement.

Globalization and Institutions

In a global economy, products, services, people, technologies, and financial capital move relatively freely across national borders. 5  Tariffs, currency laws, travel restrictions, immigration restrictions, and other barriers to these international flows become less difficult to manage. Essentially, a global economy provides firms with a unified world market in which to sell products and services, as well as a unified world market for acquiring the resources needed to create those products and services.

Globalization

Globalization , the trend toward a more global economy, has gained a strong impetus with the development of the emerging economies in China, India, and Brazil, along with others. Direct foreign investment by firms based in developed countries has also increased. Although the global economic recession led to a reduction in the total amount of direct foreign investments in 2008 and 2009, they have improved since that time. These investments represent increased interest in producing goods and services in foreign countries.

globalization

The trend toward a unified global economy where national borders mean relatively little.

Exporting goods and services into other countries increased over the same time period. Exports have grown at a high rate in recent years after the major global recession. 6  Significant amounts of foreign investment have been focused on emerging-economy countries such as China and India. Furthermore, these emerging economies have been making major foreign investments in other countries. Their growing economic power is evident in the projections that within the next few decades, China and India are expected to have the largest and third largest economies, respectively, in the world. 7  The impact of globalization is evident as major multinational firms obtain almost 55 percent of their sales from outside their home country and almost 50 percent of their assets and associates reside outside of their home country. 8  Clearly, goods and services are flowing across borders in record amounts in the twenty-first century, and projections suggest a healthy economic outlook over the next several years. 9

Many national leaders promote globalization as a means for economic growth inside their countries as well as in the world as a whole. Most economists agree that a global economy is beneficial for most countries. Goods, services, and the resources needed to produce them freely flowing across borders likely reduce the costs of doing business, resulting in economic stimulation. 10  Important emerging economies include Argentina, Brazil, China, India, Indonesia, Mexico, Russia, South Africa, Thailand, and Turkey, where standards of living are improving in conjunction with increased global trade. There are now more than 1,000 multinational firms with home bases in an emerging economy with more than $1 billion in annual sales. 11

Despite the potential economic benefits, officials in a number of nations have expressed concerns about globalization's long-term effects on societal culture. 12   Culture  involves shared values and taken-for-granted assumptions about how to act and think. 13  Many fear that unique cultures around the world will disappear over time if the world becomes one unified market for goods and services. They argue that cultural distinctiveness—indeed, what makes a country special—will disappear as similar products and services are sold worldwide. 14  In developing nations, there are also concerns over labor exploitation and natural resource depletion. In wealthy nations, there are concerns over the export of jobs to low-wage countries and the possibility that wealthy nations ultimately will need to lower their wage structures in order to compete in a truly global economy. 15

culture

Shared values and taken-for-granted assumptions that govern acceptable behavior and thought patterns in a country and give a country much of its uniqueness.

From the perspective of an individual company, there are many reasons to consider substantial international involvement (see  Exhibit 3-1 ). First, a firm may want to expand sales efforts across borders in order to sustain growth. Opportunities for growth may have been exhausted in the home country (e.g., if the market is saturated), but owners, business analysts, and the media often demand continuing sales and profit growth. 16  Second, a firm may be able to reduce its business risk by selling its products and services in a number of different countries. By diversifying its sales across a number of regions of the world, a company may be able to offset bad economic times when they occur in one part of the world with good economic times in other parts of the world. Third, a firm may enjoy greater economies of scale by expanding its markets internationally. This applies most often to manufacturing firms. Hyundai, for example, could not develop operations with efficient scale by serving only the domestic South Korean automobile market. 17  To achieve a reasonable cost structure, the firm needed to build and sell more automobiles than the South Korean market could handle. The larger volume of automobiles manufactured and sold allows them to obtain quantity discounts on raw materials purchased and to spread their fixed costs across more autos, thereby reducing their cost per unit (increasing their profit margins). Fourth, when locating units internationally, a firm may enjoy location advantages such as low labor costs, specialized expertise, or other valuable resources. 18

Exhibit 3-1  Opportunities and Challenges for Firms with International Involvement

Managerial Advice Multinational Corporations Achieving Glocalization

Globalization has greatly increased the interactions among countries and cultures. The vast improvements in communication technologies (and transportation as well) have affected much of what we do across the world. The world's financial markets have become tightly integrated, as shown by the world recession in 2008–2009 and economic events since that time. The political actions of opening country markets and the entry into those markets by multinational corporations (MNCs) have jointly increased the amount and speed of globalization. And, MNCs have played a major role in the economic development in important regions of the world such as China, India, and emerging economy countries.

The impact of MNCs in emerging economy countries is exemplified by General Motor's (GM) investment in Indonesia and Intel‘s major operations in Vietnam. GM has invested approximately $150 million in Indonesia and has about 700 employees at a plant near Jakarta to produce the Chevrolet Spin auto for the Indonesian market. Timing is good for the introduction of this auto to the Indonesian market; auto sales increased more than 17 percent in 2013. Indonesia is Southeast Asia's biggest economy, with 251 million people.

ROMEO GACAD/AFP/Getty Images

Intel built and operates a $1 billion plant near Ho Chi Minh City in Vietnam. And, it has invested resources in making it environmentally friendly, beyond the national requirements in Vietnam.

However, MNCs now face a number of challenges, including significant competition from major companies in emerging markets such as Tata, Cemex, and Lenova, among others. These companies are not only competing effectively in their home markets, but they are also developing capabilities (ability to successfully enter new foreign markets, building global resource bases) to become major forces in global markets. Thus, MNCs must not only develop major global capabilities but also must learn the local markets well and acquire knowledge from these countries/markets that can be diffused throughout the company to enhance their ability to compete in global markets. This is sometimes called glocalization.

When Kellogg first entered India's markets, its stated intent was to “change India's breakfast eating habits.” However, it learned that trying to force Western products on the local markets in India was not a good strategy; it has changed its products. Kellogg now offers corn flakes flavored with mango and other varieties to suit the Indian tastes. Yet, even with such changes, Western MNCs are struggling to a degree with competition from emerging economy MNCs. For example, in 2000, 85 percent of the autos were manufactured and sold in developed economy countries. However, today, only about 50 percent are in such economies. Very few of the largest Western MNCs have multicultural top management teams. In fact, few of these MNCs have people from emerging economies among the top 200 professionals in their companies (only about 2 percent are from emerging economies). Frankly, they have trouble recruiting the top talent from these countries, as most of these people choose to work for major MNCs based in their home country.

Emerging economies now account for approximately 36 percent of the global GDP but are projected to provide 70 percent of the GDP growth through 2025. Emerging economy companies are capturing an increasing amount of their home markets and are entering and competing effectively in developed economy markets as well. For example, Huawei has become the second largest competitor in the global telecommunications (Ericsson is number one).

It is predicted that the Asian region, led by a strong China, will be the most influential geographic region for the global economy by 2020. And this means that Asian MNCs are also likely to be even more highly influential by this time. Thus, Western MNCs will experience increasing competitive challenges from this region of the world. They can only remain competitive by glocalizing.

Sources: R. Jagannathan, “Are Kellogg's, HUL victim of multinational ego in India?” Moneycontrol,  http://www.moneycontrol.com , accessed January 19, 2014; M. Ives, “Slowly, Asia's Factories Begin to Turn Green,” New York Times (January 7, 2014),  http://www.nytimes.com ; K. Chu, “In China, Foreign Firms Battle Locals for Top Workers.” Wall Street Journal,  http://online.wsj.com  (December 12, 2013); P. Gjemawat. “Multinational Corporations from Advanced Countries Still Dominate the Fortune Global 500 List, but That Will Soon Change,” CNNMoney (October 18, 2013),  http://finance.fortune.cnn.com ; J. Cochrane, “Multinationals hasten to invest in Indonesia,” New York Times,  http://www.nytimes.com  (April 23, 2013); “Asian Multinational Corporations Poised for Global Success and Asian Region May Be World's Most Influential Economy by 2020,” Fleishman-Hillard Point of View (Sept. 10, 2009), at  http://pov.fleishman.com ; D. Patel, “Multinational Corporations in an Increasingly Globalized World,” Prospect (Feb. 3, 2009). at  http://www.prospectjournal.ucsd.edu .

Institutions

The institutional environments of countries are important for firms operating in the country (domestic and foreign) and for those considering to enter the country. 19   Formal institutions  such as the laws, regulations, and economic policies essentially dictate the rules that firms must follow to do business in that country. 20  Trying to navigate these environments is challenging because institutional environments are often complex with an array of laws, regulations, and policies that are enacted by national, state/province, and local (e.g., city) levels. 21  In countries where the formal institutions are weak, informal institutions (e.g., culture) often are used as a substitute for them. 22  Weak formal institutions sometimes exist in emerging economies that are trying to make changes. 23  For example, while China has been trying to enhance its formal institutions, it still suffers from a relatively weak legal system to support contracts and to provide intellectual property protection. Thus, managers depend on relationships (strong communitarian culture) to ensure cooperation and agreements between firms. These types of relationships in China are often called guanxi. 24

formal institutions

the laws, regulations and economic policies that dictate the rules firms must follow to do business in that country.

Clearly, globalization and the value to be gained from participating in international markets are changing the competitive landscape for many firms, regardless of their home base. 25  Even many smaller and younger firms are now participating in international markets. The openness of markets and advancing technology (and lower costs of this technology) provide opportunities for young and small firms as well as for older, larger, and established firms. 26

These opportunities in international markets have been prompted by changes in many countries' institutional environments. For example, several emerging-economy countries have reduced regulations that restricted entrance to allow more foreign firms to enter their markets (e.g., China and India). In this way, their economies have grown larger and their firms have learned new capabilities, allowing them to compete more effectively in their home markets and abroad. Thus, the countries' institutional environments affect home and foreign country firms' strategies. 27  Institutional environments contribute to the opportunities and challenges depicted in  Exhibit 3-1 .

These powerful forces encourage many firms to expand into international markets, but there are substantial risks. These risks can be classified as political, economic, and managerial: 28

· Political risks relate to instability in national governments, the threat of civil or international war, and the threat of state-sponsored terrorism. These risks create uncertainty, and they can result in the destruction of assets and disruption of resource flows. 29  One of the most difficult situations occurs when a government nationalizes an industry, meaning that it takes over the assets of private companies, often with little or no compensation provided to the firms.

· Economic risks relate to fluctuations in the value of foreign currencies and the possibility of sudden economic contraction in some countries. 30  When a foreign country's currency declines in value relative to the home country's currency, assets and earnings in that foreign country are worth less, and exporting to that country becomes more difficult, as exported goods cost more there.

· Managerial risks relate to the difficulties inherent in managing the complex resource flows required by most international firms. 31  Tariffs, logistics, and language issues can become a significant challenge as a firm does business in an increasing number of countries. Radically new marketing programs and distribution networks may be needed as firms enter new countries. Additionally, the cultural differences strongly influence the manner in which associates need to be managed and customers served. 32  Some executives and managers are better at managing these complexities than are others.

The Managerial Advice segment explains how managers develop their firm's capabilities to compete effectively in global markets. They must develop a global mindset but also understand local market requirements. The most effective firms such as Intel enter markets with the intent to learn. Firms can gain valuable ideas in foreign markets that they can then use in business units competing in other regions of the world. 33  Multinational firms based in Western (developed) countries have a number of advantages. However, companies from Asia, particularly China and India, are building their resources and capabilities. They will be formidable competitors in the coming decade.

The Globalization Experience for Associates and Managers

For individual associates and managers, international exposure or experience can occur in several ways, which we discuss next. In each case, opportunities for personal learning, growth, and advancement are substantial. Several pitfalls, however, must be avoided.

Internationally Focused Jobs

An individual may work directly on international issues as part of her day-to-day job. Although dealing with finance issues, accounting concerns, information technology tasks, and so on can be challenging in a purely domestic context, adding an international dimension usually creates situations with significant complexity. Individuals who thrive on challenge are well suited to these environments. At McDonald's, for example, international finance activities are often demanding because of the firm's exposure to fluctuations in the value of many different countries' currencies. With restaurants in dozens of countries and sales in well over 100 countries, McDonald's faces substantial currency risk.

Associates and managers who hold internationally focused jobs are often members of geographically dispersed teams. Many of these teams complete work related to new marketing programs, new-product-development projects, and other nonroutine initiatives. 34  Other teams focus on routine issues, such as product flow from central manufacturing facilities. In many cases, associates and managers working on geographically dispersed teams have different working and decision styles because of cultural differences requiring effective leadership for the teams to be effective. 35  Some prefer starting meetings with social rather than business topics, others prefer an autocratic rather than an egalitarian team leader, and still others prefer indirect to direct confrontations. To facilitate their work, team members use a complex set of tools to communicate, including electronic mail, Internet chat rooms, company intranets, teleconferencing, videoconferencing, and perhaps occasional face-to-face meetings. 36  Individuals complete team-related tasks around the clock as they live and work in different time zones, creating additional coordination challenges.

Because international teams largely rely on electronically mediated communication to coordinate and accomplish their work, they are often referred to as  virtual electronic teams. 37  Although virtual teams are efficient, a virtual world with little face-to-face communication, combined with substantial cross-cultural differences, sets the stage for misperceptions and misunderstandings. Small disagreements can escalate quickly, and trust can be strained. One study showed that virtual teams with substantial cross-cultural differences often exhibit lower trust than virtual teams with more cross-cultural similarities. 38 Low trust, suggesting little confidence that others will maintain their promises, be honest, and not engage in negative politics, is harmful to the team's efforts. 39  Researchers have discovered several potential negative outcomes for virtual teams with low trust, including unwillingness to cooperate, poor conflict resolution, few or no goals established, poor risk mitigation, and lack of adjustment to the virtual format for work. 40  Although trust is important for any group, it is particularly important for virtual teams because of the propensity for misunderstanding as well as the absence of traditional direct supervision. 41

virtual electronic teams

Teams that rely heavily on electronically mediated communication rather than face-to-face meetings as the means to coordinate work.

The initial communications of a virtual cross-cultural team may be particularly important in the development of trust. When early communication is task-focused, positive, and reciprocated (i.e., questions and inputs do not go unanswered), a phenomenon known as swift trust can occur. 42   Swift trust  occurs when individuals who have little or no history of working together, but who have a clear task to accomplish, quickly develop trust in one another based on interpersonal communication. Although social communication (i.e., friendly, non-task-related) can help to maintain this trust, task-related exchanges that facilitate the team's progress are critical. 43  In the face of possible trust issues, it is important for managers to help team members identify with the team. According to identity theory, individuals who identify with a team feel connected to it, and they take very seriously their role as a team member. Failure to identify with the team often results in withholding of effort on team projects, a common problem. 44

swift trust

A phenomenon where trust develops rapidly based on positive, reciprocated task-related communications.

Steps can be taken to increase the chances that an individual will identify with the international team. First, it is important to provide training in international negotiating and conflict resolution. Techniques that are sensitive to cultural differences and focused on collaborative outcomes work best.  Exhibit 3-2 provides specific ideas on how managers can be sensitive to cultural differences. Second, it is important to have team members jointly develop a unified vision. 45  The shared experience of discussing the future of the team, its goals and aspirations, can draw people together. Finally, it is helpful for team members to spend some time in face-to-face meetings, especially early in a team's life. 46  Face-to-face meetings increase the chances that team members will identify personal similarities, and these similarities contribute to understanding and cooperation. 47  Absent face-to-face interactions, videoconferencing provides richer communication than Internet chat rooms and teleconferencing because of the value of seeing each other. In one study, members of international teams reported that it was even helpful to have photographs of teammates posted in the workplace. 48

Exhibit 3-2  Learning about a Counterpart's Culture

· Don't attempt to identify another's culture too quickly. Common cues (name, physical appearance, language, accent, and location) may be unreliable. In a global economy and multicultural societies, some people are shaped by more than one culture. Don't make assumptions regarding cultural values and expected behaviors based on the published dimensions of a person's national culture.

· Beware of the Western bias toward taking actions. In some cultures, thinking and talking affect relationships more than actions do.

· Try to avoid the tendency to formulate simple perceptions of others' cultural values. Most cultures are highly complex, involving many dimensions.

· Don't assume that your values are the best for the organization. For example, US culture is individualistic, and this is often assumed to be productive. While individual competition and pride can be positive to some degree, cultural values in India and China emphasize the importance of family, friends, and social relationships, making associates in these countries highly loyal to the organizations for which they work, and this is positive as well. Loyalty to the organization is less common among US associates.

· Recognize that norms for interactions involving outsiders may differ from those for interactions between compatriots. Trust is especially important in some cultures and greatly affects interactions with others. If you sense that your counterpart has little experience in cross-cultural exchanges, it might be helpful to enlist an advisor from your counterpart's culture.

· Pay close attention to unfolding dynamics. Listen carefully. If you are unsure or unhappy with how the conversation is going, ask for clarification.

Source: Based on work in M. Javidan & R.J. House, Cultural Acumen for the Global Manager, Organizational Dynamics, 29(4)(2001): 289–305; C.J. Robertson, J.A. Al-Khatib, M. Al-Habib, & D. Lanoue. “Beliefs about Work in the Middle East and the Convergence versus Divergence of Values,” Journal of World Business, 36(3)(2001): 223–244; S.E. Weiss. Negotiating with “Romans”—Part 2. MIT Sloan Management Review, 35 (3)(1994): 85–99; Pon staff, “Overcoming Cultural Barriers,” Progress in Negotiation, Harvard Law School (Sept. 6, 2010),  http://www.pon.harvard.edu/daily/business-negotiations/overcoming-cultural-barriers/ .

Although research on the role of personal characteristics is not conclusive, several characteristics appear to play important roles in the success of cross-cultural virtual teams. 49  Individuals who value diversity, flexibility, and autonomy may offer more positive contributions to both the task and social aspects of the team. A general disposition to trust, a significant degree of trustworthiness, relational skills (involving the ability to work with others who possess different knowledge), and skills for communicating through electronic means are also important to success in virtual teams.

Foreign Job Assignments

Individuals may accept foreign job assignments that entail dealing directly with the complexities of operating in a foreign culture. These people are referred to as  expatriates , or “expats” for short. 50  Foreign experience can be exciting because of the new and different work situations that are encountered. The opportunity outside of work to learn about and live in a different culture can also be valuable. Many companies indicate that international experience results in faster promotions and makes associates more attractive to other companies because of the enhanced knowledge and capabilities they develop. In addition to the knowledge gained by expatriates, they also provide a means of transferring knowledge from the home company to foreign subsidiaries. In other words, expatriates carry with them the knowledge of the industry, technology, and firm. 51  Using expatriate managers also can facilitate coordination between the home office and foreign subsidiaries. 52

expatriate

An individual who leaves his or her home country to live and work in a foreign land.

Petroleum engineers, management consultants, operations managers, sales managers, and information technology project managers are among the common candidates for international assignments. According to recent relocation trends, international assignments are commonly made to fill skill gaps in foreign units, to launch new units, to facilitate technology transfer to another country, and to help build management expertise in a foreign unit. 53

International assignments, however, should be treated with caution. Many things can go wrong, resulting in poor job performance and an early return to the home country. 54   Culture shock  is a key factor in failure. This stress reaction can affect an individual who faces changes in and uncertainty over what is acceptable behavior. 55  Some behaviors that are acceptable in the home country may not be acceptable in the new country, and vice versa. In addition, simple limitations such as an inability to acquire favorite foods, read road signs, and communicate easily often cause stress.

culture shock

A stress reaction involving difficulties coping with the requirements of life in a new country.

Beyond the associate's or manager's experience of culture shock, a spouse may also experience stress. Research suggests that spousal inability to adjust to the new setting is a significant cause of premature departure from a foreign assignment. 56  One study suggested that spousal adjustment occurs on three dimensions: (1) effectiveness in building relationships with individuals from the host country, (2) effectiveness in adjusting to local culture in general, and (3) effectiveness in developing a feeling of being at home in the foreign country. 57  This same study showed that spouses who spoke the language of the host country adjusted much more effectively. Spouses with very young children also fared better because that spouse will likely spend a great deal of time engaged in the same activities as before the move—child care in the home. Familiar activities make the adjustment easier. In short, the family plays an important role in the ability of the associate or manager to adjust to and be effective in foreign assignments. 58

Individuals exposed to  ethnocentrism  in foreign assignments can also experience stress. Ethnocentrism is the belief that one's culture is superior to others, and it can lead to discrimination and even hostility. 59  In some cases, discrimination is subtle and even unintentional. It nonetheless can harm an expatriate's ability to adjust.

ethnocentrism

The belief that one's culture is better than others.

A number of remedies have been proposed to reduce or eliminate expatriate stress. In most cases, these remedies include screening and training before departure, training and social support after arrival in the country, and support for the individual returning to the home country.

Predeparture activities set the stage for success. Such activities include favoring for selection those individuals who have personal characteristics associated with success in foreign assignments. Although there are no simple relationships between personal characteristics and success in foreign posts, associates and managers who possess strong interpersonal skills, are flexible, and are emotionally stable often adapt effectively as expatriates. 60  Even so, predeparture training often plays a more important role than do personal characteristics.

Training can take many forms; a firm may provide books and CDs or arrange for role playing and language training, for example. 61  An expert on training for expatriates has offered the following advice. 62

· Train the entire family, if there is one. If the spouse or children are unhappy, the expatriate assignment is more likely to be unsuccessful.

· Conduct the predeparture orientation one to two months prior to departure. The associate or manager and the family can forget information provided earlier than that, and if the orientation occurs too close to departure, the individuals may be too preoccupied to retain training information. Activities such as packing and closing up a home must be handled and will occupy family members in the days immediately prior to moving.

· Include in the training key cultural information. The Aperian Global consulting firm provides training for associates selected for expatriate assignments and their families. The firm recommends providing cultural comparisons of the home and host cultures, an explanation of the challenges that will likely be faced and when, lifestyle information, and personal job plans for the jobholder, with an emphasis on cultural issues that help the expatriate to thrive in the new environment. It focuses on helping the associate develop a global mindset and the tools to perform well in the assignment. 63

· Concentrate on conversational language training. The ability to converse with individuals is more important than the ability to read and write the foreign language. Knowledge of the language is important because it will help understand the culture and conveys status to the expatriate. 64

· Be prepared to convince busy families of the need for training. Families with little foreign experience may not recognize the value of predeparture training.

After arrival, additional training may be useful, especially if little training was provided before departure. Language training may continue, and initial cultural exposure may bring new questions and issues. Host-country social support is also important, particularly in the early months. Individuals familiar with the country may assist in showing newcomers the area, running errands, identifying appropriate schools, and establishing local bank accounts. 65

Finally, reintegration into the home country should be carefully managed following an international assignment. And companies should be especially mindful to take advantage of the knowledge these individuals have gained through the expatriate assignment. In fact, if managed effectively, the learning by associates and managers can provide them with additional capabilities and thereby increase their motivation and job performance after they return. 66 Such actions by the firm are even more important because research suggests that many associates and managers returning from foreign assignments leave their companies in the first year or two. 67  Old social and political networks may not be intact; information technology may have changed; and key leaders with whom important relationships existed may have departed. Each of these factors can influence the decision to leave. Career planning and sponsors inside the company can help in understanding the new landscape.

Experiencing Organizational Behavior The Glass Ceiling, the Glass Floor, and the Glass Border: The Global Business Environment for Women

Many women experience barriers preventing them from reaching career aspirations. For international women, these barriers may be even stronger. For example, women in Asian and Middle Eastern countries often experience these barriers because of cultural values and traditions. For many women, marriage and male chauvinism are primary reasons they are unable to reach their career potential. All countries should be concerned about this problem because of the need for more human capital, which is especially troubling when they are not fully utilizing the human capital available.

With the population rapidly aging and the need for more capable human capital critical, companies throughout the world need more women associates and managers. They need to develop and effectively utilize all of the organization's human capital.

Interestingly, this is a global phenomenon. While there are some high-profile women executives in the United States, such as Indra Nooyi (CEO of Pepsico), Ursula Burns (CEO of Xerox), Meg Whitman (CEO of Hewlett-Packard) and Ellen Kullman (CEO of DuPont), the percentage of women in top executive positions has not increased in recent years. For example, a global study by Grant Thornton International found that only 23 percent of senior executive positions in Latin American companies were held by women (a decline from 28 percent in 2010). There were a few bright spots, however. In the Asia Pacific region, 29 percent of senior management positions are held by women, and in Europe, 25 percent of the senior management positions were held by women, an increase from 20 percent in 2009. The Economist created a glass-ceiling index rating 26 countries on five criteria. Those scoring high on the index included New Zealand, Norway, Sweden, Canada, Australia, Spain and Finland. Japan and South Korea had the worst scores on the index. The United States was ranked twelfth.

Despite the major appointments of Mary Barra as CEO of GM, Marilyn Hewson to be the CEO of Lockheed Martin and Janet Yellen to take control of the US Federal Reserve, only 4.8 percent of the CEOs of both the Fortune 1000 and Fortune 500 companies are women. And, 16.6% of the Fortune 500 directors are women. Yet, according to GMI Ratings, women hold only 11 percent of the board seats globally. Italy and France have experienced increases in female representation on boards after passing laws on board diversity. However, in Japan, only 1 percent of the board members are women. In total, these data suggest that the glass ceiling continues to exist in most countries.

There also appears to be a glass floor. The glass floor hinders even lateral movement into other positions at the basic level. The glass floor barriers include short-term job contracts, child-care tasks, labor markets divided along gender lines, caring for elderly family members, etc. Many of these are the result of culture- and gender-based biases.

The third concern is the glass border. A glass border is discounting women as candidates for international assignments. For example, it remains problematic in many Asian cultures to have a woman in charge. Even though women have been a part of the workforce for a long time, for the most part their roles have been limited to staff entry-level positions and lower-level positions in manufacturing; rarely are they found in managerial or executive positions. A glass border then often blocks women from assignment to managerial and executive-level positions in MNC Asian operations. In addition, Asian companies often are unwilling to support having the female as the expatriate while her husband remains at his job in the home country. Finally, patriarchal attitudes are difficult to change, especially at the office. Many clients still ask to replace women representatives or consultants with men.

© EdStock/iStockphoto

There is some light beginning to shine in some parts of the world. For example, a woman was recently appointed as the first female CEO of a Korean bank. And, the resident of South Korea is currently a woman. There are now 19 countries that are run by a woman. It is not many, but it is a start.

To overcome the problems noted, companies must promote on the basis of merit and emphasize the value of gender diversity in the workplace. Women must continue to work hard to break these barriers and overcome the glass ceilings, floors, and borders. Given the demographics around the world, the most successful companies will have a healthy number of women leaders. They will be successful because they are taking advantage of the total human capital available. Nancy McKinstry, the first female CEO of Dutch publisher Wolters Kluwer, said, “We've been able to attract female talent because they see women leading different parts of the company. Diversity helps; it is a self-fulfilling prophecy.”

Sources: Grant Thornton International Business Report 2013, © 2013 Grant Thornton International,  http://www.gti.org/files/ibr2013_wib_report_final.pdf ; “Women CEOs of the Fortune 1000,” Catalyst (January 15, 2014),  http://www.catalyst.org/knowledge/women-ceos-fortune-1000 ; “Glass Ceiling: Survey Shows Little Improvement for Women in Senior Roles.” The Gobal Recruiter, http://www.theglobal recruiter.com (January 19, 2014); B. Covert, “Janet Yellen Smashes the Glass Ceiling,” The Sisterhood (January 7: 2013),  http://blogs.forward.com ,. “Despite 2013 Gains, Women Aren't Breaking Glass Ceiling,” MoneyWeb(December 22, 2013,  http://www.moneyweb.co.za ; P. Sellers, “Is the Boardroom the Last Glass Ceiling?” CnnMoney, (October 10; 2013),  http://money.cnn.com ,. “The Glass Border, Does It Really Exist?” Leverage HR (May 23, 2013),  http://leveragehr.com ; “The Glass-Ceiling Index,” The Economist, (May 7, 2013),  http://www.economist.com ; K. Da-ye, “Women's Network Helps Break Glass Ceiling,” Korea Times (Jan.17, 2013),  http://www.koreatimes.co.kr , 2013.

Although participation by women appears to be increasing, 68  women historically have not had as many opportunities for expatriate assignments as men. Managers must be sensitive to this deficit because they need to develop and effectively utilize all of the organization's human capital. As explained in the Experiencing Organizational Behavior feature, there are several reasons for the development of this  glass border . By not providing women with international assignments, they are failing to develop women's knowledge and capabilities for higher-level jobs. As a result, these organizations may not be able to exploit strategic opportunities in international markets because of a shortage of human capital. And interestingly, some research suggests that women are often more effective in expatriate roles because they tend to be flexible and develop a more empowering identity in order to be effective in a variety of situations. 69  The plight of women executives is largely a global phenomenon, as the segment suggests. Women professionals in many countries must contend with glass ceilings, glass borders, and even glass floors. The human capital represented by these women is a significant opportunity for businesses. Companies that utilize all of their human capital effectively are more likely to gain a competitive advantage.

glass border

The unseen but strong discriminatory barrier that blocks many women from opportunities for international assignments.

Foreign Nationals as Colleagues

Beyond gaining international exposure and experience through a job focused on international work or through a foreign assignment, an associate or manager can gain international experience in other ways. For example, associates and managers may work in a domestic unit with people from other countries or may report to a manager/executive who has relocated from another country. In the United States, H-1B visas allow skilled foreign professionals to live and work in the country for up to six years. L1 visas allow workers in foreign-based multinational companies to be transferred to the United States. Finally, J1 visas allow foreign students to fill seasonal jobs in US resort areas, including jobs as waiters, lifeguards, fast-food cooks, and supermarket clerks. In fact, in recent years the demand for foreign skilled workers has been growing in many countries, including the United States. 70

With hundreds of thousands of visas approved each year, an individual born in the United States and working in a domestic company may therefore work alongside a foreign national. US-based associates and managers at Microsoft, for example, often work with foreign nationals. An associate there observed, “I am surrounded every day by people from many diverse cultural and ethnic backgrounds, each contributing their unique ideas and talents so that people around the world can realize their full potential.” 71  Multicultural associates and managers can provide significant value to a company. 72

Working side by side with individuals from other countries can indeed be a rich and rewarding experience, but problems sometimes develop. As already noted, individuals from different countries often have different values and different ways of thinking—and even different norms for behavior in business meetings.73 Although differences in values and thought patterns can be a source of creativity and insight, they also can create friction. Preferences for different working styles and decision styles can be particularly troublesome.74

A key aspect of the cultural effects on international working relationships is high versus low context cultural values.75 In  high-context cultures , such as Japan and South Korea, individuals value personal relationships, prefer to develop agreements on the basis of trust, and prefer slow, ritualistic negotiations.76 Understanding others and understanding particular messages depend in large part on contextual cues, such as the other person's job, schooling, and nationality. Being familiar with a person's background and current station in life is crucial, and likely important in establishing trust-based relationships in international exchange relationships.77 In  low-context cultures , such as the United States and Germany, individuals value performance and expertise, prefer to develop agreements that are formal and perhaps legalistic, and engage in efficient negotiations.78 Understanding others in general and understanding particular messages depend on targeted questioning. Written and spoken words are crucial; contextual cues tend to carry less meaning.

high-context cultures

A type of culture where individuals use contextual cues to understand people and their communications and where individuals value trust and personal relationships.

low-context cultures

A type of culture where individuals rely on direct questioning to understand people and their communications and where individuals value efficiency and performance.

Understandably, individuals from high-context cultures can have difficulty working with people from low-context cultures. A high-context individual may not understand or appreciate the direct questioning and task orientation of a low-context individual. As a result, the high-context individual can experience hurt feelings, causing him or her discomfort in a low-context culture. In the same way, a low-context person can be frustrated with the pace and focus of a high-context culture. To alleviate these cross-cultural difficulties, training in cultural differences is crucial in order to build managers'  cultural intelligence .Cultural intelligence helps people understand others' behavior, with the ability to separate those aspects that are universally human from those that are unique to the person and those that are based in culture. It allows managers to understand and respond effectively to people from different cultures.79Cultural intelligence is important for managers, as they need to be sensitive to these differences when they evaluate the performance of associates and assign rewards based on these evaluations.80 People with understanding of more than one culture tend to be more effective leaders.81

cultural intelligence

The ability to separate the aspects of behavior that are based in culture from those unique to the individual or all humans in general.

Opportunities for International Participation

Associates' and managers' opportunities for international experiences differ across firms. Purely domestic firms offer few opportunities beyond perhaps working with foreign nationals who have been hired or trying to compete with foreign firms operating in the local markets where they sell their goods. Firms that export their goods into foreign markets offer more opportunities, because some individuals are needed for internationally focused work, such as international accounting, and a few are needed to staff foreign sales offices. Firms that have more substantial commitments to foreign operations usually provide even greater opportunities for international work, but the amount and type of opportunities vary with the type of strategy. Furthermore, the different approaches to markets in separate countries used by firms affect associates' and managers' behavior and job satisfaction.82 As shown in Exhibit 3-3, we can classify firms with substantial commitments to foreign operations as multidomestic, global, or transnational.

EXHIBIT 3-3 International Approaches and Related Organizational Characteristics

Source: Information in this exhibit is based on A.-W. Harzing. 2000. “An Empirical Analysis and Extension of the Bartlett and Ghoshal Typology of Multinational Companies,” Journal of International Business Studies, 31: 101–120.

	Multidomestic	Global	Transnational
Local responsiveness
Local production	High	Low	Medium
Local R&D	High	Low	Medium
Local product modification	High	Low	Medium/High
Local adaptation of marketing	High	Low/Medium	Medium/High
Organizational design
Delegation of power to local units	High	Low	Medium/Low
Interunit resource flows between and among local units	Low	Low/Medium	High
International resource flows from and/or controlled by corporate headquarters	Low	High	Low/Medium
International participation
Opportunities for associates and managers	Low	High	High

Multidomestic Firms

Firms that use a  multidomestic strategy  tailor their products and services for various countries or regions of the world.83 When customer tastes and requirements vary substantially across countries, a firm must be responsive to these differences. Tastes often vary, for example, in consumer packaged goods. Unilever, the British/Dutch provider of detergents, soaps, shampoos, and other consumer products, is a prime example by offering different versions of its products in various parts of the world.84 It produces, for example, approximately 20 brands of black tea in order to meet the unique tastes of individuals in different countries.

multidomestic strategy

A strategy by which a firm tailors its products and services to the needs of each country or region in which it operates and gives a great deal of power to the managers and associates in those countries or regions.

Firms such as Unilever often transfer power from the corporate headquarters to units based in various countries or homogeneous regions of the world (i.e., local units).85 These units typically are self-contained—they conduct their own research and development, produce their own products and services, and individually market and distribute their goods. This approach is expensive because geographically based units do not share resources or help one another as much as in firms using other international strategies. Yet, it may be important to allow autonomy when the subsidiary is a long distance from the home office, especially when that distance entails major differences in culture and institutional environments. In these cases, the subsidiary needs to develop a strategy that fits its competitive environment, and the home office is less likely to be of help in doing so.86

Among firms with substantial foreign commitments, multidomestic firms provide fewer opportunities for associates, lower-level managers, and mid-level managers to participate in international activities. Individuals tend to work within their home countries and have little interaction with people located in other geographical locations. Individuals in each unit are focused on their unit's country or homogeneous set of countries (region). Interunit learning, interunit transfers of people, and interunit coordination are rare in firms using a multidomestic strategy.

Global Firms

Firms following a  global strategy  offer standardized products and services in the countries in which they are active.87 When cost pressures demand efficient use of resources and when tailoring to local tastes is not necessary, a firm must do all it can to manage its resources efficiently. It is costly to develop, produce, and market substantially different versions of the same basic product or service across different countries. For example, Microsoft does not significantly tailor the functionality of Windows for different countries. Nor does Cemex, the world's third-largest cement company, tailor its cement for different countries. The firm is one of the largest producers of cement in the world selling millions tons of cement annually across four major regions of the world.

global strategy

A strategy by which a firm provides standard products and services to all parts of the world while maintaining a strong degree of central control in the home country.

Cemex exhibits many features typical of global firms.88 First, key decisions related to: (1) products and services, (2) research and development, and (3) methods for serving each country are often made at corporate headquarters in Monterrey, Mexico. (In contrast, firms using the multidomestic strategy make key decisions locally.) Second, country- and region-based units do not have a full complement of resources covering all of the major functions (production, marketing, sales, finance, research and development, human resources). For example, Cemex has operations in 50 countries but only has manufacturing operations in select parts of the world. A great deal of manufacturing also takes place in the home country of Mexico, and the product is then exported to other countries. By not having manufacturing plants located in and dedicated to each country or even each region, and by having large-scale manufacturing facilities in select locations, Cemex efficiently uses its resources. Cemex also focuses significant attention on global coordination. With units depending on decisions and resources controlled by the home country as well as resources from other countries, coordinating a global flow of information and resources is crucial. One means of growth for Cemex has been by acquisition. Fortunately, the strong global coordination used by the firm helps to rapidly integrate major acquisitions.

Compared with firms following a multidomestic strategy, firms using the global strategy provide more opportunities for associates and managers to participate in international activities. For example, many individuals in the home country and in foreign units must coordinate effectively to ensure a smooth flow of worldwide resources. Thus, many jobs are internationally oriented. In addition, there are often a large number of expatriate assignments. Global firms treat the world as a unified market and frequently transfer people across borders. Thus, in any given unit, there may be a significant number of foreign nationals. As noted earlier, expatriates learn and transfer knowledge across borders. Yet, to achieve the most learning at the team level requires the firm to consciously manage the flow of knowledge across the organization.89

Transnational Firms

Firms using a transnational strategy attempt to achieve both local responsiveness and global efficiency.90 In industries where both of these criteria are important for success, a careful integration of multidomestic and global approaches is necessary. Thus, a transnational strategy calls for more tailoring to individual countries than is typically found in global firms but generally less tailoring than in multidomestic firms.

Such an approach also requires the deployment of more resources in a given country than is typical in the global firm but fewer resources in each country than is typical in the multidomestic firm. Finally, the approach calls for less central direction from the corporate headquarters than the global strategy but more central coordination than the multidomestic strategy. In a transnational firm, interdependent geographical units must work closely together to facilitate interunit resource flows and learning. In the multidomestic firm, these flows are trivial. In the global firm, they are largely controlled by corporate headquarters.

Ogilvy & Mather Worldwide, a US-based advertising subsidiary of WPP, a worldwide marketing communications group, uses a transnational strategy. 91  At one time, the firm used a strategy that most closely resembled a multidomestic approach. Ogilvy & Mather tailored the advertising it produced to different areas of the world based on local customs, expressions, sensibilities, and norms for humor. To support this strategy, it had strong, self-contained local units. Clients, however, began to object to costs, and because many of these clients were becoming global firms, they wanted a more unified message spread around the world through advertising. Ogilvy & Mather began to pursue global efficiency and local responsiveness simultaneously. It refers to itself as “the most local of internationals and the most international of the locals.” It has more than 500 offices in 126 countries across the globe. 92

To prevent local units from reinventing largely the same advertising campaign (in other words, unnecessarily tailoring campaigns to the local market), Ogilvy & Mather implemented international teams that were assigned to service major accounts. 93  These teams create ad campaigns and send them to local units for implementation. One team is called OgilvyAction, designed to provide a full range of brand activation services to customers on a global basis. 94  Local units pursue local accounts and have complete control over them but are constrained in their ability to pursue and oversee international work.

Overall, individual associates and managers have many opportunities for international exposure and experiences in firms using a transnational approach. Geographically based units are highly interdependent because they must exchange resources, and they often must coordinate these resource exchanges for their benefit as well. Rich personal networks and formal coordination mechanisms such as international work teams are developed to handle the interdependence. International meetings and travel are very important, and foreign assignments are common. Interestingly, the location of the headquarters for these firms is less important and some move their headquarters unit from their traditional home country when they adopt the transnational strategy. Normally, these moves are designed to respond to external stakeholders such as shareholders and financial markets. 95

High-Involvement Management in the International Context

High-involvement management provides associates with decision power and the information they need to use that power effectively. As discussed in  Chapter 1 , firms that adopt this approach often perform better than other firms. Although most evidence supporting the effectiveness of the high-involvement approach has been collected from domestic units of North American firms, 96  supporting evidence has come from other countries as well. Studies, for example, have been conducted in automobile plants worldwide, 97  in a variety of firms in New Zealand, 98  and in firms in a number of different countries. 99  A study in China suggested that such practices enhanced short-term associates' feelings of competence and increased their commitment to the organization. 100

Although available evidence is supportive of high-involvement management, care must be taken when implementing this approach in different cultures. Modifying the approach to fit local circumstances is crucial. 101  In this section, we discuss several dimensions of national culture that should be considered. The dimensions are drawn from the GLOBE (Global Leadership and Organizational Behavior Effectiveness) research program, in which a number of researchers studied issues regarding organizational behavior in 61 countries. 102

Dimensions of National Culture

As shown in  Exhibit 3-4 , the GLOBE project uses nine dimensions of national culture. Four of these dimensions have been used by many other researchers over the years. These four dimensions were originally developed by the Dutch social scientist Geert Hofstede, 103  and they are listed first:

1. Uncertainty avoidance is the degree to which members of a society wish to avoid unpredictable lives. It is focused on a society's desire for orderliness through formal procedures and rules as well as through strong norms that govern behavior. Countries with high scores do not value free spirits (e.g., Austria and Germany). Countries with lower scores include Russia and Hungary. The United States has a midrange score.

2. Power distance is the degree to which members of a society expect power to be unequally distributed. This dimension corresponds to expectations for strong autocratic leadership rather than more egalitarian leadership. Strong central governments and centralized decision structures in work organizations are frequently found in countries with high scores. For example, Russia scores high on this dimension. Alternatively, Denmark and the Netherlands have low scores on power distance.

3. Individualism is the degree to which members of society are comfortable focusing on personal goals and being rewarded for personal efforts and outcomes. In individualistic cultures, personal outcomes are valued. Countries scoring high on individualism include Italy and Germany. Countries scoring low on this dimension include Japan, Singapore, and South Korea. 104

4. Assertiveness is the degree to which members of society are aggressive and confrontational. In his original work, Hofstede labeled this aspect of culture “masculinity.” Examples of countries with high scores on this dimension are the United States, Austria, and Germany. Examples of countries with low scores are Sweden and Kuwait.

5. In-group collectivism indicates how much members of society take pride in the groups and organizations to which they belong, including the family. China and India have high scores on this dimension in the GLOBE research.

6. Gender egalitarianism refers to equal opportunities for women and men. Sweden and Denmark score high on this dimension.

7. Future orientation is the degree to which members of the society value long-term planning and investing in the future. Denmark and the Netherlands are among those scoring high on this dimension.

8. Performance orientation is the degree to which members of society appreciate and reward improvement and excellence in schoolwork, athletics, and work life. The United States, Taiwan, Hong Kong, and Singapore have high performance orientations.

9. Humane orientation is the degree to which members of society value generous, caring, altruistic behavior. Countries scoring high on this dimension include the Philippines and Malaysia.

Exhibit 3-4  Dimensions of National Culture

Exhibit 3-5  compares India, Germany, and the United States on all nine culture dimensions.

EXHIBIT 3-5 National Culture in India, Germany, and the United States

Source: Based on the GLOBE Project.

Culture Dimension	India	Germany	United States
Uncertainty avoidance	Medium	High	Medium
Power distance	Medium/High	Medium	Medium/Low
Individualism	Medium	High	Medium
Assertiveness	Low/Medium	High	High
In-group collectivism	High	Low/Medium	Medium/Low
Gender egalitarianism	Low	Medium/Low	Medium
Future orientation	Medium	Medium	Medium
Performance orientation	Medium	Medium	High
Humane orientation	High/Medium	Low	Medium

Research has shown that national culture affects major business practices. 105  For example, decisions to enter particular international markets are affected by the cultural dimensions of the targeted country. 106  And, recent research has shown that culture influences the type of formal institutions developed (e.g., laws, regulations and economic policies), which, in turn, affect the decision to invest in particular countries. 107  In particular, the cultural distance between a firm's home country and the country targeted for entry has a major impact. Cultural distance refers to the extent of the differences in culture between countries. 108  Therefore, managers must pay careful attention to culture in designing and implementing management practices in each country.

In the Experiencing Organizational Behavior feature, we learn of the pioneering work of Geert Hofstede to identify the universal dimensions of national culture. He also discovered that national culture had a stronger effect on the behavior of managers and associates than did organizational culture. Hofstede's work suggested the need to understand and manage diverse cultures. This need is highlighted by the actions of such firms as Nike, Procter & Gamble (P&G), and Siemens as explained in the feature. For example, Siemens uses its global networks to encourage collaboration across cultures and its diversity ambassadors program.  ABB has a highly diverse board of directors, and P&G promotes diversity because it will provide the company with a competitive advantage. With increasing globalization, understanding and managing diverse cultures has become a critical managerial attribute for competitive success in international markets.

Experiencing Organizational Behavior Managing Diverse Cultures

Geert Hofstede pioneered the study of culture in the workplace and conducted research to examine global variations in the psychology of work and of organizations, which affected international human resource management. While working at IBM in 1968, he noticed that although the company had a strong company culture, there were variations in cultural values among the employees of IBM subsidiaries around the world. Between 1968 and 1972, he surveyed over 116,000 employees. His survey responses from over 40 countries showed general similarities within cultural groups, even when their social and economic histories were profoundly different. For example, Hong Kong and mainland China have more in common with each other but are quite different from Sweden and the United States. Hofstede found that values we observe in the workplace reflect much deeper cultural attributes, suggesting that the impact of national culture on the workplace is much greater than that of the organization's culture. His work has profound meaning for managers employed by multinational organizations.

Managers and top executives of companies seeking to expand globally need to recognize the complexities of cross-border collaboration. Difficulty in managing people is magnified when even small differences in perceptions and expectations occur. For example, Asians operate in and expect a more paternalistic structure in the workplace, whereas US cultural norms include expectations of more autonomy at work. Piyush Gupta, chief executive and director of DBS Group, a financial services company headquartered in Singapore, suggests that because of the cultures, it is easier to empower employees in the United States. In Asia, he says that “…it is not so much about giving power but a lot more about accepting the power.” He also says that the cultures of some companies are able to “override” national culture because even with the paternalistic expectations in Asia, associates at companies like Citibank in Singapore are willing to speak their minds and offer ideas. This approach is important to gain the most value from global diversity. Antonio Perez, chairman and chief executive officer of Kodak, states, “When we gather people with diverse backgrounds, we invite different viewpoints and ideas. This triggers creativity, innovation, and growth.”

Managers need to be aware of the local cultures' values, social ideals, and their workplace behavior and attitudes. Multinational companies engaging in cross-border mergers can be successful when they have managers who possess “cultural intelligence,” the ability to understand and effectively manage different values and expectations existing in different parts of the world. Several firms have promoted diversity in their workforce as a means of managing and taking advantage of many cultures in the world. For example, Siemens believes that a diverse workforce can be a competitive advantage because it helps the company to understand and better serve its customers across the world. It promotes what Siemens refers to as collective intelligence developing ideas without borders. Siemens currently employs more than 362,000 managers and associates representing 140 different nationalities in its top 10 markets. To encourage collaboration and communication among its workforce members, it has launched several networks such as the Global Leadership Organization of Women (GLOW Network) and the diversity ambassadors program. The diversity ambassadors are 100 specially selected managers and associates who are profiled and share their success stories while serving as role models and mentors for others in the company. Nike's Global Women's Leadership Council (GWLC) is similar in nature to Siemens' GLOW Network. The GWLC is a network with the purpose of promoting cultural understanding and awareness.

© PacoRomero/iStockphoto

Other companies are also promoting diversity as a way to take advantage of culturally diverse knowledge and ways of thinking. For example, ABB has a highly diverse board of directors with members from Belgium, Finland, France, Germany, India, Scotland, Sweden, Switzerland, and the United States. Procter & Gamble (P&G) also promotes a diverse workforce. The firm does so to understand and maintain a good relationship with its customers around the world, and its global suppliers as well. P&G's CEO stated, “Diverse organizations will out-think, out-innovate and out-perform a homogeneous organization. …”

Sources: “About Siemens” at http://www.siemens.com, accessed January 31, 2014; Global diversity, Kodak (January 22, 2014), http://www.kodak.com; S. Kolesnikov-Jessop, “Managing a Company with a Helicopter Vision,” New York Times (Sept. 1, 2013.), http://www.nytimes.com; G. Schoech, “Diversity to Strengthen Siemens leadership—Catching Up or Taking the Lead?” Gehson Lehrman Group, (March 17, 2009), at http://www.glgroup.com; H. Brown, “Diversity Does Matter,” Forbes (July 21, 2009)., at http://www.forbes.com; “No. 14: Procter & Gamble,” Diversity Inc. (May 2007), at http://www.diversityinc.com; Morgan Witzel, “Geert Hofstede: The Quantifier of Culture,” Financial Times (Aug. 25, 2003), at http://www.ft.com.

National Culture and High-Involvement Management

High-involvement management must be implemented in accordance with a country's cultural characteristics. Although not every individual from a country possesses all of the cultural characteristics associated with that country, many people will share these traits. In the next section, we discuss how information sharing and decision power can be adapted to different levels of power distance, uncertainty avoidance, individualism, and assertiveness.109

Information Sharing

A firm's leaders must share tactical and strategic information if empowered individuals and teams are to make high-quality decisions. In cultures high in uncertainty avoidance, associates must have information to clarify issues and provide basic direction. If they lack such information, anxiety and poor performance can result. Where uncertainty avoidance is low, associates need less information of this kind. Rather, increasing information that encourages new ideas and ways of thinking can be useful. In cultures where assertiveness is high, associates want information that clearly and directly informs them what is needed for effective performance. In addition, they desire continuous information on how well they are performing. In cultures with low assertiveness, associates do not want information that is exclusively focused on performance and bottom-line business goals. Instead, they desire information on improving soft processes such as teamwork. Similarly, associates in individualistic cultures desire information regarding their individual jobs and responsibilities; they are less interested in information on team, department, and company issues. Associates in collectivistic cultures tend to have the opposite needs. Finally, associates in high-power-distance cultures do not expect to receive a great deal of information and may not pay much attention to it if they receive it. For these individuals, careful training in information use is often required. In low-power-distance cultures, associates expect information and put it to use when it is received. Thus, cultural attributes affect the type and amount of information shared and the knowledge learned in organizations.110

Decision Power and Individual Autonomy

Some high-involvement systems give a great deal of decision power to individual associates rather than to teams. In cultures characterized by high uncertainty avoidance, such autonomy can cause stress because it is associated with less direction from above as well as less support from peers. To avoid stress, clear boundaries must be set for how the autonomy is used, and managers must be readily available to provide direction. In cultures with low uncertainty avoidance, associates do not need direction and are generally able to tolerate uncertainty regarding the boundaries to their authority. In high-assertiveness cultures, associates are likely to use autonomy creatively to achieve task success. In low-assertiveness cultures, associates may channel too much of their autonomy into work on soft issues such as relationships and social networks. Managers must guard against any such excesses. In countries characterized by an individualistic culture, associates appreciate autonomy provided to individuals rather than to teams, and emphasize individual goals. Because of this focus, managers may need to explicitly channel associates' attention to any required group or team tasks. In countries characterized by a collectivistic culture, associates are unlikely to be motivated by individual autonomy.111 Managers may wish to emphasize autonomy at the team level in such cultures. Finally, in cultures characterized by high power distance, autonomy may be difficult to implement. Associates expect a great deal of direction from managers. In this situation, managers may want to provide small increases in autonomy over time, allowing associates to become accustomed to having discretion. Managers may want to maintain a fairly strong role even in the long run. In cultures characterized by low power distance, associates welcome autonomy from managers and can channel their efforts to be more innovative.112

Decision Power and Self-Managing Teams

In cultures with high uncertainty avoidance, associates need clear boundaries for self-managing teams, and managers must be readily available for mentoring and coaching. 113  In cultures with low uncertainty avoidance, teams can define their own roles. In countries characterized by high assertiveness, teams often are task-focused. For low-assertiveness cultures, associates frequently devote a great deal of time to soft issues, such as team dynamics, requiring managers to monitor the time focused on such issues. In cultures characterized by individualism, managers must pay particular attention to team training for associates and to the design of team-based reward systems. Alternatively, in cultures characterized by collectivism, managers have a more favorable situation because associates prefer teamwork. Finally, in cultures characterized by high power distance, associates may have difficulties using their decision power if their manager is too visible. Managers must be less visible and resist the temptation to offer a great deal of assistance to the team. Where power distance is low, associates work comfortably with the manager as an equal or as a coach rather than a supervisor.

AES, a US-based power-generation company, is known for its high-involvement management system. Associates enjoy tremendous freedom to make decisions individually and in teams. Firing vendors for safety violations, expending funds from capital budgets, and making key decisions about important day-to-day work are common for associates. With careful selection and training, and with access to key information, AES associates typically use their freedom wisely.

As AES began to grow and establish operations in several countries, many analysts and reporters questioned whether its high-involvement system and underlying values could be applied in an international context. Although AES leaders remained committed to the system, they realized that some modifications might be needed for a particular country. Therefore, while the core of the approach was preserved, some aspects were altered to fit each local culture.

When entering Nigeria, for example, AES responded appropriately to the prevailing culture. Norman Bell, the lead on the Nigerian project, and his AES colleagues encountered high power distance and high individualism among the associates. These prominent cultural values initially forced Bell to adopt a more autocratic management system. Bell needed time to delegate decision power to associates, and teams required training and team-based reward systems.

AES used the same basic approach in its operations across 29 countries and 25,000 managers and associates: high-involvement management built on the company's core values with sensitivity to local cultural differences. 114  Thus, executives and managers at AES effectively used the high-involvement approach on a global basis while modifying the approach to fit local cultures. The high-involvement approach facilitated the global strategy used by AES. Therefore, it helped top managers to implement the firm's strategy.

Ethics in the International Context

A critically important issue in globalization and international business is ethics. The American Heritage Dictionary defines ethics as “principle[s] of right or good conduct; a system of moral principles and values.” Implicit in this definition is the idea that ethical conduct can be different in different cultures. What one society deems “appropriate conduct” may be unacceptable to another. For example, nepotism that is unacceptable in many Western cultures is often more acceptable in more collectivistic (relationship-oriented) cultures. Alternatively, the use of formal contracts and lawsuits is highly acceptable in many Western cultures but are perceived negatively in other cultures. 115  Thus, international ethics are complex.

Corruption is often considered to be the misuse of power for private gain. 116  And, it is partially influenced by culture. 117  Three issues are prominent in discussions of proper conduct in developed nations: (1) corruption, (2) exploitation of labor, and (3) environmental impact. 118  For corruption, the chief issue involves bribing foreign public officials in order to win business. Asking for payment of bribes is based partially on culture and partly on economic needs and institutional weaknesses in a country. 119  Many developed nations have taken steps to fight corruption because it creates uncertainty and results in a reduction of merit-based decision making. The United States, for example, passed the Foreign Corrupt Practices Act in 1977 to prevent US managers from bribing foreign officials. (See  Exhibit 3-6  for a recent ranking of countries based on corruption.) Exploitation of labor involves the employment of children, the forced use of prison labor, unreasonably low wages, and poor working conditions. Finally, environmental impact relates to pollution and overuse of scarce resources. From global warming to clear cutting of forests, the concerns are many. In the United States and globally, many people have become more sensitive to the environment because of the obvious effects of global warming.

EXHIBIT 3-6 Absence of Corruption in Select Countries

Source: Rankings are drawn from Transparency International's Corruption Perception's Index 2013 for 177 countries ( http://www.transparency.org ). Scores are based on the perceptions of the degree of corruption as seen by businesspeople and country analysts. The score ranges from 100 (highly clean) to 0 (highly corrupt).

Rank	Country	Rank	Country
1	Denmark	157	Burundi
1	New Zealand	157	Myanmar
3	Finland	157	Zimbabwe
3	Sweden	160	Cambodia
5	Norway	160	Eritrea
5	Singapore	160	Venezuela
7	Switzerland	163	Guinea-Bissau
8	Netherlands	163	Equatorial Guinea
9	Canada	163	Haiti
9	Australia	167	Yemen
11	Luxembourg	168	Syria
12	Germany	168	Turkmenistan
12	Iceland	168	Uzbekistan
14	United Kingdom	171	Iraq
15	Barbados/Ireland	172	Libya
15	Belgium	173	South Sudan
15	Hong Kong	174	Sudan
18	Japan	175	Afghanistan
19	United States	175	North Korea
19	Uruguay	175	Somalia

The economic development of countries with higher levels of corruption tends to suffer. For example, countries with high corruption index scores as shown in  Exhibit 3-6  often receive less direct investment from foreign firms. In addition, the foreign investment in these countries more commonly comes from firms based in other countries with greater corruption. 120  Thus, corruption harms the country and its citizens.

The United Nations, the World Bank, the International Labor Organization, the World Trade Organization, and the Organization for Economic Co-operation and Development are among many organizations that advocate a unified set of global ethical standards to govern labor practices and general issues related to international business. As shown in the  Exhibit 3-7 , business leaders from Japan, Europe, and North America in the Caux Round Table have developed a list of expectations for companies engaging in international business. These ethical standards are intended to govern what strategies managers select and how they implement those strategies in dealings with others, both within and outside their organizations.

EXHIBIT 3-7 Caux Round Table Principles for Business

Sources: Caux Round Table, “Principles for Business” (2013), at  http://www.cauxroundtable.org/index.cfm?menuid=8 ; P. Carlson and M.S. Blodget, “International Ethics Standards for Business: NAFTA, CAUX Principles and Corporate Code of Ethics,” Review of Business, 18, no. 3 (1997.): 20–23.

Business leaders from Japan, Europe, and North America formed the Caux Round Table in 1986 to promote moral values in business. The principles they developed are based on two ideals: kyosei and human dignity. Kyosei, a Japanese concept, means “living and working together for the common good, enabling cooperation and mutual prosperity to exist with healthy and fair competition.” The executives promote seven specific principles: 1. The Responsibilities of Business. The value of a business to society is the wealth and employment it creates and the marketable products and services it provides to consumers at a reasonable price commensurate with quality. To create such value, a business must maintain its economic health and viability, but survival is not a sufficient goal. Businesses have a role to play in improving the lives of all of their customers, associates, and shareholders by sharing with them the wealth they have created. Suppliers and competitors as well should expect businesses to honor their obligations in a spirit of honesty and fairness. As responsible citizens of the local, national, regional, and global communities in which they operate, businesses have a part in shaping the future of those communities. 2. The Economic and Social Impact of Business. Businesses established in foreign countries to develop, produce, or sell should also contribute to the social advancement of those countries by creating productive employment and helping to raise the purchasing power of their citizens. Businesses also should contribute to human rights, education, welfare, and vitalization of the countries in which they operate. Businesses should contribute to economic and social development not only in the countries in which they operate but also in the world community at large, through effective and prudent use of resources, free and fair competition, and emphasis on innovation in technology, production methods, marketing, and communications. 3. Business Behavior. While accepting the legitimacy of trade secrets, businesses should recognize that sincerity, candor, truthfulness, the keeping of promises, and transparency contribute not only to their own credibility and stability but also to the smoothness and efficiency of business transactions, particularly on the international level. 4. Respect for Rules. To avoid trade frictions and to promote freer trade, equal conditions for competition, and fair and equitable treatment for all participants, businesses should respect international and domestic rules. In addition, they should recognize that some behavior, although legal, can still have adverse consequences. 5. Support for Multilateral Trade. Businesses should support the multilateral trade systems of the General Agreement in Tariffs and Trade (GATT) World Trade Organization (WTO), and similar international agreements. They should cooperate in efforts to promote the progressive and judicious liberalization of trade and to relax those domestic measures that unreasonably hinder global commerce, while giving respect to national policy objectives. 6. Respect for the Environment. A business should protect and, where possible, improve the environment, promote sustainable development, and prevent the wasteful use of natural resources. 7. Avoidance of Illicit Operations. A business should not participate in or condone bribery, money laundering, or other corrupt practices: indeed, it should seek cooperation with others to eliminate these practices. It should not trade in arms or other materials used for terrorist activities, drug traffic, or other organized crime.

The Strategic Lens

Organizations large and small must develop strategies to compete in the global economy. For some organizations, strategies leading to direct investment in foreign operations are valuable for growth, lower costs, and better management of the organization's risk. For other organizations, only exporting goods and services for selling in other countries is sufficient to meet their goals. For still other firms, particularly small ones, participation in international markets may be limited, but competition from foreign firms in their local domestic markets may require that they respond with competitive actions. In all cases, understanding other cultures and effectively managing cross-cultural activities and contexts are crucial. Without insight and sensitivity to other cultures, senior managers are unlikely to formulate effective strategies. Without appreciation for other cultures, associates and midlevel and lower-level managers can also fail in their efforts to implement carefully developed strategic plans. Furthermore, managers must prepare associates to work in international environments. This preparation often requires training and international assignments. Managers must also develop and use all of the organization's human capital—including women, who often have not had as many opportunities for expatriate assignments as men—and must ensure that the organization has the capabilities to take advantage of and exploit opportunities in international markets when they are identified. Cultural diversity among the firm's human capital can be an advantage if managers use it effectively.121 Many organizations operate or sell their products in foreign markets. Thus, managers and associates must understand cultural diversity and use this knowledge to their advantage in managing it.

Critical Thinking Questions

1. Given the complexity and challenges in operating in foreign countries, why do organizations enter international markets?

2. How can understanding and managing cultural diversity among associates contribute positively to an organization's performance?

3. How can being knowledgeable of diverse cultures enhance an individual's professional career?

Back to the Knowledge Objectives

1. What is globalization?

2. What are the three types of international involvement available to associates and managers? What problems can be encountered with each type?

3. How do opportunities for international involvement differ in firms emphasizing multidomestic, global, and transnational strategies? Which type of firm would you prefer to join and why?

4. What are the key dimensions of national culture that influence the success of high-involvement management? How should high-involvement management be adapted to differences in culture?

5. What are several international standards for ethical behavior by businesses (refer to the Caux Round Table Principles)? Briefly discuss each one.

What This Chapter Adds to Your Knowledge Portfolio

In this chapter, we have defined globalization and discussed the forces that influence it. We have also discussed three types of international involvement on the part of associates and managers: internationally focused jobs, foreign job assignments, and working with foreign nationals in the home country. After describing differing opportunities for international involvement, we explored dimensions of culture from the GLOBE project and examined the implications of cultural differences for high-involvement management. Finally, we examined issues regarding ethics in international settings. More specifically, we covered the following points:

· Globalization is the trend toward a global economy whereby products, services, people, technologies, and financial capital move relatively freely across national borders. Globalization increased dramatically in the last 20 years of the twentieth century and into the twenty-first century.

· Globalization presents opportunities and challenges for nations. The principal opportunity is for economic growth. Challenges include the possible loss of a nation's cultural uniqueness as uniform goods and services become commonplace throughout the world. For developing nations, additional challenges include the protection of labor from exploitation and natural resources from depletion. For wealthy nations, additional challenges include prevention of job loss to lower-wage countries and preservation of high-level wage structures at home.

· Globalization presents opportunities and challenges for organizations. Opportunities include growth, risk reduction through diversification, greater economies of scale, and location advantages (e.g., moving into an area with a particularly talented labor pool).

· Challenges often are derived from countries' institutional environments. The institutional environments of countries are important for firms operating in the country (domestic and foreign) and for those considering entering the country. Formal institutions such as the laws, regulations, and economic policies essentially dictate the rules firms must follow to do business in that country. Trying to navigate these environments is challenging because institutional environments are often complex with an array of laws, regulations, and policies that are enacted by national, state/province and local (e.g., city) levels. Challenges include political risk (instability of national governments, threat of war, and threat of state-sponsored terrorism), economic risk (fluctuation in the value of foreign currencies and the possibility of sudden economic contraction in some countries), and managerial risk (difficulties inherent in managing the complex resource flows required in a global or transnational firm).

· Individuals can be involved in the international domain through internationally focused jobs. Such individuals work from their home countries but focus on international issues as part of their day-to-day work. Membership in one or more virtual teams is often part of the job. Members of a virtual team coordinate their activities mainly through videoconferencing, teleconferencing, chat rooms, and e-mail. Having some face-to-face meetings and taking steps to ensure that individuals identify with the team facilitate team success.

· Individuals can also be involved in the international domain through foreign job assignments. These individuals are known as expatriates, and they often are on a fast track for advancement. In their new countries, expatriates may experience culture shock, a stress reaction caused by the foreign context. Failure of a spouse to adjust and strong ethnocentrism in the host country are two additional factors leading to stress for expats. Careful screening of candidates for foreign assignments and rich cultural training can reduce stress and improve chances for success.

· Individuals can be involved in the international domain by working alongside foreign nationals. This is often exciting and rewarding, but cultural differences must be appreciated and accommodated, particularly those differences related to low- versus high-context values.

· Some executives and managers choose a multidomestic strategy for their firm's international activities. This strategy, involving tailoring products and services for different countries or regions, tends to be used when preferences vary substantially across local markets where the firm has subsidiary operations. Because country-based or regionally based units are focused on their own local domains, associates and managers have limited opportunities for international exposure and experience.

· Some executives and managers choose a global strategy for their firm's international activities. This strategy, involving standardized products and services for world markets, tends to be emphasized when needs for global efficiency are strong. Country- or region-based units are not self-contained, independent, or exclusively focused on local markets. Instead, at a minimum, each unit interacts frequently and intensively with the home country, and probably with some units located in other countries. Global firms offer associates and managers many more opportunities for international involvement than do multidomestic firms.

· Some executives and managers choose a transnational strategy for their firm's international activities. This strategy balances needs for local responsiveness and global efficiency through a complex network of highly interdependent local units. Associates and managers enjoy many opportunities for international involvement in transnational firms.

· National cultures differ in many ways. Four dimensions have proven to be particularly useful in understanding these differences: uncertainty avoidance, power distance, individualism, and assertiveness. Organizational behavior researchers have proposed five other dimensions: in-group collectivism, gender egalitarianism, future orientation, performance orientation, and humane orientation.

· High-involvement management must be adapted to differences in national culture. Two aspects of this management approach, information sharing and decision power, are particularly important for adaptation.

· Many groups, including the World Trade Organization and the Caux Round Table, have developed guidelines for ethics in the international context. Key issues for developed countries include: (1) corruption, (2) exploitation of children, and (3) environmental impact.

Thinking about Ethics

1. Some have argued that globalization is a negative process because it can destroy national cultures. Do senior managers in global firms have a responsibility to prevent such damage? Or is their primary responsibility to maximize profits for their shareholders?

2. The members of cross-cultural virtual teams are prone to misperceptions and misunderstandings due to the lack of rich face-to-face communication. Under these circumstances, should a manager terminate an individual who has been a source of interpersonal problems in the context of such a team? Explain your answer.

3. A hard-working and generally effective associate has shown little appreciation for the cultural diversity in his unit. In fact, he has expressed some minor hostility toward several foreign nationals in the workplace. Also, he has not taken cross-cultural training seriously. How should the manager respond?

4. An experienced expatriate has hired underage labor at a cheap rate in order to save money. How should her firm respond to this situation?

Key Terms

1. globalization

2. culture

3. formal institutions

4. virtual electronic teams

5. swift trust

6. expatriate

7. culture shock

8. ethnocentrism

9. glass border

10. high-context cultures

11. low-context cultures

12. cultural intelligence

13. multidomestic strategy

14. global strategy

Human Resource Management Applications

The human resource management (HRM) function plays a key role in a firm's capability to manage international operations and to compete effectively in global markets. Following are several activities in which they facilitate management in the firm.

The HRM unit is often responsible for establishing the policies related to expatriate assignments. For example, there are often important compensationissues that must be handled for expatriates. Questions must be answered, such as: (1) Should they receive extra pay while on assignment away from home? (Commonly, they retain their current home and must have living quarters in the foreign location as well.) (2) How are the tax differences in the different countries to be handled? (3) Do they need additional or different benefits (e.g., health care) in the foreign location?

Training (an HRM responsibility) plays a key role in expatriate assignments and in building managerial capabilities. For example, associates and managers undertaking expatriate assignments often receive cultural training to prepare them to live and work in the new cultural environment. Training may also be used to help managers learn how to more effectively manage in a global market environment. Frequently, such training will emphasize the value of cultural diversity and effectively using all of the organization's available human capital. Career planning (an HRM responsibility) is important for identifying when to give associates and managers expatriate assignments based on the knowledge and skills needed for the future positions in positions projected for their careers in the organization.

Building Your Human Capital Assessment of Openness for International Work

In this age of globalization, it is important to clearly understand your own feelings about international teams and assignments. In the following installment of Building Your Human Capital, we present an assessment of openness for international work. The assessment measures specific attitudes and behaviors thought to be associated with this type of openness.

Instructions

In the following assessment, you will read 24 statements. After carefully reading each statement, use the accompanying rating scale to indicate how the statement applies to you. Rate yourself as honestly as possible.

		Never				Often
1.	I eat at a variety of ethnic restaurants.	1	2	3	4	5
2.	I attend foreign films.	1	2	3	4	5
3.	I read magazines that address world events.	1	2	3	4	5
4.	I follow world news on television or the Internet.	1	2	3	4	5
5.	I attend ethnic festivals.	1	2	3	4	5
6.	I visit art galleries and/or museums.	1	2	3	4	5
7.	I attend the theater, concerts, ballet, etc.	1	2	3	4	5
8.	I travel widely within my own country.	1	2	3	4	5
		Strongly Agree				Strongly Agree
9.	I would host a foreign exchange student.	1	2	3	4	5
10.	I have extensively studied a foreign language.	1	2	3	4	5
11.	I am fluent in another language.	1	2	3	4	5
12.	I have spent substantial time in another part of the world.	1	2	3	4	5
13.	I visited another part of the world by the age of 18.	1	2	3	4	5
14.	My friends' career goals, interests, and education are diverse.	1	2	3	4	5
15.	My friends' ethnic backgrounds are diverse.	1	2	3	4	5
16.	My friends' religious affiliations are diverse.	1	2	3	4	5
17.	My friends' first languages are diverse.	1	2	3	4	5
18.	I have moved or been relocated substantial distances.	1	2	3	4	5
19.	I hope the company I work for (or will work for) will send me on an assignment to another part of the world.	1	2	3	4	5
20.	Foreign-language skills should be taught in elementary school.	1	2	3	4	5
21.	Traveling the world is a priority in my life.	1	2	3	4	5
22.	A year-long assignment in another part of the world would be a fantastic opportunity for me and my family.	1	2	3	4	5
23.	Other cultures fascinate me.	1	2	3	4	5
24.	If I took a vacation in another part of the world, I would prefer to stay in a small, locally owned hotel rather than a global chain.	1	2	3	4	5

Scoring Key for Openness to International Work

Four aspects of openness to international work have been assessed. To create scores for each of the four, combine your responses as follows:

Extent of participation in cross-cultural activities:	Item 1 + Item 2 + Item 3 + Item 4 + Item 5 + Item 6 + Item 7 + Item 8
	Participation scores can range from 8 to 40. Scores of 32 and above may be considered high, while scores of 16 and below may be considered low.
Extent to which international attitudes are held:	Item 9 + Item 19 + Item 20 + Item 21 + Item 22 + Item 23 + Item 24
	Attitude scores can range from 7 to 35. Scores of 28 and above may be considered high, while scores of 14 and below may be considered low.
Extent of international activities:	Item 10 + Item 11 + Item 12 + Item 13 + Item 18
	Activity scores can range from 5 to 25. Scores of 20 and above may be considered high, while scores of 10 and below may be considered low.
Degree of comfort with cross-cultural diversity:	Item 14 + Item 15 + Item 16 + Item 17
	Diversity scores can range from 4 to 20. Scores of 16 and above may be considered high, while scores of 8 and below may be considered low.

High scores on two or more aspects of openness, with no low scores on any aspects, suggest strong interest in and aptitude for international work.

Source: Based on P.M. Caligiuri, R.R. Jacobs, & J.L. Farr, “The Attitudinal and Behavioral Openness Scale: Scale Development and Construct Validation,” International Journal of Intercultural Relations, 24 (2000): 27–46.

An Organizational Behavior Moment Managing in a Foreign Land

Spumonti, Inc., is a small manufacturer of furniture. The company was founded in 1990 by Joe Spumonti, who had been employed as a cabinetmaker in a large firm before he decided to open his own shop in the town of Colorado Springs. He soon found that some of his customers were interested in special furniture that could be built to complement their cabinets. Joe found their requests easy to accommodate. In fact, it wasn't long before their requests for custom furniture increased to the point that Joe no longer had time to build cabinets.

Joe visited a banker, obtained a loan, and opened a larger shop. He hired several craftspeople, purchased more equipment, and obtained exclusive rights to manufacture a special line of furniture. By 2000, the business had grown considerably. He then expanded the shop by purchasing adjoining buildings and converting them into production facilities. Because of the high noise level, he also opened a sales and administrative office several blocks away, in the more exclusive downtown business district.

Morale was very good among all associates. The workers often commented on Joe Spumonti's dynamic enthusiasm, as he shared his dreams and aspirations with them and made them feel like members of a big but close-knit family. Associates viewed the future with optimism and anticipated the growth of the company along with associated growth in their own responsibilities. Although their pay was competitive with that provided by other local businesses, it was not exceptional. Still, associates and others in the community viewed jobs with Spumonti as prestigious and desirable. The training, open sharing of information, and individual autonomy were noteworthy.

By 2013, business volume had grown to the extent that Joe found it necessary to hire a chief operating officer (COO) and to incorporate the business. Although incorporation posed no problem, the COO did. Joe wanted someone well acquainted with modern management techniques who could monitor internal operations and help computerize many of the procedures. Although he preferred to promote one of his loyal associates, none of them seemed interested in management at that time. Ultimately, he hired Wolfgang Schmidt, a visa holder from Germany who had recently completed his MBA at a German university. Joe thought Wolfgang was the most qualified among the applicants, especially with his experience in his family's furniture company in Germany.

Almost immediately after Wolfgang was hired, Joe began to spend most of his time on strategic planning and building external relationships with key constituents. Joe had neglected these functions for a long time and felt they demanded his immediate attention. Wolfgang did not object to being left on his own because he was enthusiastic about his duties. It was his first leadership opportunity.

Wolfgang was more conservative in his approach than Joe had been. He did not like to leave things to chance or to the gut feel of the associates, so he tried to intervene in many decisions the associates previously had been making for themselves. It wasn't that Wolfgang didn't trust the associates; rather, he simply felt the need to be in control. Nonetheless, his approach was not popular.

Dissatisfaction soon spread to most associates in the shop, who began to complain about lack of opportunity, noise, and low pay. Morale was now poor, and productivity was low among all associates. Absenteeism increased, and several longtime associates expressed their intention to find other jobs. Wolfgang's approach had not been successful, but he attributed its failure to the lack of employee openness to new management methods. He suggested to Joe that they give a pay raise to all associates “across the board” to improve their morale and reestablish their commitment. The pay raise would cost the company $120,000 annually, but Joe approved it as a necessary expense.

Morale and satisfaction did not improve, however. Shortly after the pay raise was announced, two of Spumonti's senior associates accepted jobs at other companies and announced their resignations. Wolfgang was bewildered and was considering recommending a second pay increase.

Discussion Questions

1. What weaknesses do you see in Joe's handling of Wolfgang?

2. Could Joe have anticipated Wolfgang's approach?

3. Can Wolfgang's career at Spumonti be saved?

Team Exercise International Etiquette

A business traveler or expatriate must be aware of local customs governing punctuality, greetings, introductions, gift-giving, dining behavior, and gestures. Customs vary dramatically around the world, and what is accepted or even valued in one culture may be highly insulting in another. Many business deals and relationships have been harmed by a lack of awareness. In the exercise that follows, your team will compete with other teams in a test of international etiquette.

Steps

1. As an individual, complete the following quiz by selecting T (True) or F (False) for each item.

a.	In Japan, slurping soup is considered bad manners.	T	F
b.	In Italy, giving chrysanthemums is appropriate for a festive event.	T	F
c.	In Ecuador, it is generally acceptable to be a few minutes late for a business meeting.	T	F
d.	In England, the “V” sign formed with two fingers means victory when the palm faces outward but is an ugly gesture if the palm is facing inward.	T	F
e.	In China, a person's surname is often given or written first with the given name appearing after.	T	F
f.	In Japan, shoes are generally not worn past the doorway of a home.	T	F
g.	In Brazil, hugs among business associates are considered inappropriate.	T	F
h.	In Germany, use of formal titles when addressing another person is very common.	T	F
i.	In Saudi Arabia, crossing one's legs in the typical style of US men may cause problems.	T	F
j.	In China, green hats are a symbol of achievement for men.	T	F
k.	In China, a gift wrapped in red paper or enclosed in a red box is appropriate for celebrating a successful negotiation.	T	F
l.	In Kuwait, an invitation to a pig roast would be warmly received.	T	F
m.	In India, a leather organizer would be warmly received as a gift.	T	F
n.	In Japan, it is most appropriate to give a gift with two hands.	T	F
o.	In Iraq, passing a bowl or plate with the left hand is appropriate.	T	F
p.	In Saudi Arabia, ignoring a woman encountered in a public place is insulting to the woman's family.	T	F

2. Assemble into groups of four to five, using the assignments or guidelines provided by the instructor.

3. Discuss the quiz as a group, and develop a set of answers for the group as a whole.

4. Complete the scoring form that follows using the answer key provided by your instructor.

Number of answers that I had correct: ________

Average number of answers that individuals in the group had correct: ________

Number of answers that the group had correct following its discussion: ________

international mastery:	13–15 correct
international competence:	9–12 correct
international deficiency:	5–8 correct
international danger:	1–4 correct

5. Designate a spokesperson to report your group's overall score and to explain the logic or information used by the group in arriving at wrong answers.