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cmm_session_4_compatibility_mode.pdf
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Session 4 – International dimensions of management
International dimensions of management
Learning objectives:
• What are the international management challenges of globalisation?
• What are the forms and opportunities of international business?
• What are multinational corporations and what do they do?
• What is culture and how does it relate to global diversity? • How do management practices and learning transfer across cultures?
International management and globalisation
• In the global economy, resources, markets and competition are worldwide in scope.
• Globalisation
– The worldwide interdependence of resource flows, product markets and business competition.
• The global economy offers great opportunities for worldwide sourcing, production and sales capabilities.
• Multinational businesses are increasingly adopting transnational or ‘global’ identities.
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International management and globalisation
• International management – Involves managing operations in more than one country.
• Global managers are culturally aware and well informed on international affairs.
• Organisations have to ensure that their people are ready, willing and able to manage in the global environment.
• Having the right people in the right place at the right time is essential to a company’s successful international growth.
Asia and the Pacific Rim
• Asia has attained superpower status in the world economy. China’s economy in particular is closely tied with the world at large.
• Notwithstanding the global financial crisis (a consequence of subprime mortgage defaults in the United States in 2008, culminating in a worldwide recession), Asian and Pacific Rim economies are soon expected to be larger than those of the European Union (EU).
• The Asia‐Pacific Economic Cooperation (APEC) has become the region’s leading forum.
© John Wiley and Sons Australia
Asia and the Pacific Rim
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© John Wiley and Sons Australia
Significance of major APEC nations to Australia and New Zealands’s trade
Europe
• The European Union (EU) – A political and economic alliance of European countries, and an institutional framework for the construction of a united Europe.
• EU members are linked through favourable trade and customs laws.
• The euro is the common European currency. • Despite uncertainties post‐GFC, expected regional benefits of an expanding EU include higher productivity, lower inflation and steady growth.
The Americas
• NAFTA is the North American Free Trade Agreement linking Canada, the United States and Mexico in a regional economic alliance.
• The United States is among Australia’s and New Zealand’s largest trading partners and sources of foreign direct investment.
• In 2005, Australia entered into a bilateral free trade agreement with the United States, known as the Australia–United States Free Trade Agreement (AUSFTA).
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Africa
• Foreign businesses is giving increased attention to stable countries in Africa. The Congo, Nigeria and Angola are especially rich in natural resources.
• The Southern Africa Development Community (SADC) links 14 countries of southern Africa in trade and economic development efforts.
• South Africa is experiencing economic recovery and attracting outside investors. The country still only ranks as Australia’s 20th largest trading partner in the world.
International business challenges
• International businesses conduct commercial transactions across national boundaries. They are the foundations of world trade.
• The reasons for international business include the search for:
– profits – customers – suppliers – capital – labour.
Competitive global business environment
• As economies move to free markets, they face problems in rising prices, unemployment, competition and privatisation.
• Privatisation
– The selling of state‐owned enterprises into private ownership.
• In the World Trade Organization (WTO), member nations agree to negotiate and resolve disputes about tariffs and trade restrictions.
• Protectionism is a call for tariffs and favourable treatments to protect domestic firms from foreign competition.
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© John Wiley and Sons Australia
Forms of international business
Market entry strategies
• In global sourcing, materials or services are purchased around the world for local use.
• In exporting, local products are sold abroad.
• Importing is the process of acquiring products abroad and selling them in domestic markets.
• A licensing agreement occurs when a firm pays a fee for the rights to make or sell another company’s products.
• Franchising provides the complete ‘package’ of support needed to open a particular business.
Direct investment strategies
• Joint ventures establish operations in a foreign country through joint ownership with local partners.
– The foreign partner gains new markets and the assistance of a knowledgeable local partner.
– The local partner gains new technology as well as opportunities for its employees to learn new skills by working in joint operations.
• A wholly owned subsidiary is a local operation completely owned by a foreign firm.
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Multinational corporations
• Multinational corporation (MNC) – A business with extensive operations in more than one foreign country. Examples include Microsoft, Rio Tinto and McDonald’s.
• Transnational corporations – MNCs that operate worldwide on a borderless basis. BHP Billiton and PricewaterhouseCoopers are good examples.
• Virtual borderless companies – MNCs that make use of the internet to conduct business worldwide on a borderless basis
© John Wiley and Sons Australia
Pros and cons of multinational corporations
Multinational corporations
• Multinational corporations may encounter difficulties in their home country:
– An identity with local and national interests means loss of local jobs is controversial
– Governments engage in corporate decisions with regard to the firm’s domestic social responsibilities
– Shifting capital investment abroad is a source of local complaints.
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Ethical issues for multinational operations
• Ethical issues for multinationals: – Corruption involves illegal practices to further one’s business interests.
– Sweatshops employ workers at very low wages, for long hours, and in poor working conditions.
– Child labour is the full‐time employment of children for work otherwise done by adults.
• Sustainable development meets the needs of the present without hurting future generations. – ISO 14000 offers a set of certification standards for responsible environmental policies.
Culture and global diversity
• Culture
– The shared set of beliefs, values and patterns of behaviour common to a group of people.
• Culture shock
– The confusion and discomfort a person experiences when in an unfamiliar culture.
• Ethnocentrism
– The tendency to consider one’s culture superior to others.
Culture and global diversity
• Stages in adjusting to a new culture:
– Confusion
– Small victories
– The honeymoon
– Irritation and anger
– Reality.
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Popular dimensions of culture
• Language is a medium of culture, providing the understanding needed to conduct business and develop relationships.
• Low‐context cultures emphasise communication via spoken or written words.
• High‐context cultures rely on non‐verbal and situational cues as well as spoken or written words in communication.
Popular dimensions of culture
• Interpersonal space is one of the important ‘silent languages’ of culture. Misunderstandings are possible if one businessperson moves back as another moves forward, for example.
• Time‐orientation is a ‘silent language’. The way people approach and deal with time varies widely.
– In monochronic cultures, people tend to do one thing at a time.
– In polychronic cultures, time is used to accomplish many different things at once.
Popular dimensions of culture
• Religion is also important as a cultural variable, with associated personal and institutional implications.
• Role of agreements. Cultures vary in their use of contracts and agreements.
– In Australia and New Zealand (low‐context cultures) a contract is viewed as a final and binding statement of agreements.
– In other parts of the world with high‐context cultures, such as China, the written contract may be viewed as more of a starting point.
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© John Wiley and Sons Australia
Hofstede’s dimensions of national culture
Understanding cultural diversity
• Trompenaars’ five ways in which people differ culturally:
1. Universalism vs particularism
2. Individualism vs collectivism
3. Neutral vs affective
4. Specific vs diffuse
5. Achievement vs prescription
Management across cultures
• Comparative management studies how management differs between countries/cultures.
• Organisations with foreign investments must factor risk into their planning. – Currency risk: currencies vary over time and not always easy to predict
– Political risk: Possible loss of investment/control over foreign asset because of political changes in host country. Political‐risk analysis forecasts how political events may affect investments.
• Global success often depends on expatriates, who live and work in a foreign country.
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© John Wiley and Sons Australia
Alternative multinational structures for global operations
Are management theories universal?
• It is argued that management theories should not be applied universally as many theories are ethnocentric and fail to take into account cultural differences.
– e.g. A keiretsu is a group of Japanese manufacturers, suppliers and finance firms with common interests.
• Global organisational learning is a timely and relevant theme.
Session 4 – International dimensions of management
Summary:
• What are the international management challenges of globalisation?
• What are the forms and opportunities of international business?
• What are multinational corporations and what do they do?
• What is culture and how does it relate to global diversity? • How do management practices and learning transfer across cultures?
