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Ch 1 Expanding Abroad: Motivations, Means, and Mentalities

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Title: Ch 1 Expanding Abroad: Motivations, Means, and Mentalities


1
Ch 1 Expanding Abroad Motivations, Means, and
Mentalities
  • Reading 1.1
  • The Tortuous Evolution of the Multinational
    Corporation

2
International Mindsets
  • Specific pressures will affect competition in
    industries and firms that cross national
    boundaries causing
  • a global orientation that relies on
    coordination of worldwide activities to maximize
    the collective organization, and
  • a multidomestic orientation that responds to
    individual country opportunities and constraints.
  • Increasingly, there are pressures for
    international companies to be both globally
    efficient and locally responsive.
  • These pressures derive from environmental
    changes such as new technologies, unanticipated
    competition, and the convergence of industry
    boundaries.
  • In such situations, firms exhibit a
    transnational mindset to simultaneously gain
    efficiency and local market benefits.

3
International Mindsets
Multidomestic Systems
International Systems
Businesses that follow an international strategy
tend to have distributed GIS in which systems in
the central headquarters are connected to those
in the foreign operations.
Businesses that follow a multinational strategy
tend to have decentralized, or independent,
information systems for their central
headquarters and different foreign operations.
Transnational Systems
Global Systems
Business that follow the transnational strategy
require complex, integrated GIS in which the
central headquarters and all the foreign
operations participate equally
Businesses that follow a global strategy ten to
have highly centralized GIS determined by the
central headquarters.
4-3
4-3
4
Formulate Competitive Strategies
  • In the international market companies confront
    two opposing forces
  • Reduction of costs
  • Adaptation to local markets
  • Type of corporate-level strategies address these
    pressures, and impact the selection and
    implementation of the business-level strategies
  • Some corporate-level strategies provide
    individual country units with flexibility to
    choose their own strategies
  • Others dictate bus.-level strategies from the
    home office coordinate resource sharing across
    units
  • Home Replication
  • Multidomestic
  • Regional
  • Global
  • Transnational

5
International Business Terminology, contd.
  • International Company
  • A Multidomestic or Global company
  • Multidomestic Company
  • An organization with multicountry affiliates
  • Each formulates its own business strategy on
    perceived market differences
  • Global Company
  • An organization that attempts to standardize and
    integrate operations worldwide in most of all
    functional areas

6
International Business Strategies
  • Multidomestic strategy
  • Global strategy
  • Transnational strategy

4-6
7
Four Basic Strategies
Cost and adaptation pressures have implications
for international strategies
8
Multidomestic Strategy Definition
  • An international organization with multi-country
    affiliates (subsidiaries), each of which
    formulates its own business strategy, based on
    perceived market differences and consideration
    for local conditions.

9
Multidomestic Strategy
Assets, responsibilities decentralized
Formal control systems
HQ
International mentality
4-9
10
Multidomestic Strategy
  • A multidomestic strategy tends to be used when
    there is strong pressure to adapt products or
    services to local markets
  • Assumes markets differ by country or regions
  • Focus on competition in each market
  • Units operating in different countries are almost
    completely independent
  • Strategy and decision making is more
    decentralized in each country to allow the
    company to modify its products and to respond to
    changes in local competition and demand
  • The company will have to invest in additional
    local capabilities and knowledge.
  • Products and services are tailored to respond to
    local market needs to build a strong presence in
    the host country
  • By tailoring products for specific markets, the
    company may be able to charge higher prices.
  • Local adaptation usually will increase cost
    structure.
  • Adapting products too much may also take away the
    distinctiveness of a companys products.
  • The extent of local adaptation may change over
    time.
  • The cost and complexity of coordinating a range
    of different strategies and product offerings
    across national and regional markets can be
    substantial.
  • The central unit performs financial control
  • Prominent strategy among European firms due to
    broad variety of cultures markets in Europe
  • Example is Schneider Electric

11
Multidomestic Affiliates
  • In multidomestic affiliates, local CEOs report to
    area presidents, manage a wide array of the
    parent companys product lines, but have
    considerable leeway in making production,
    marketing, and servicing decisions.
  • Host countries have long used the term miniature
    replica to describe the traditional multidomestic
    affiliate.
  • Multidomestic affiliates are typically evaluated
    by profit center criteria keyed to results rather
    than adherence to head office policies.
  • Usually, local nationals are appointed as country
    managers and management turnover is relatively
    slow.
  • Each affiliate often takes on a character and
    personality of its own, and formulates its own
    internal strategy.

12
Problems with Multidomestic Affiliates
  • Communications between home country product
    divisions and distant overseas affiliates are
    often more complex and risk breaking down.
  • Corporate policies and standards may not be
    effectively communicated to or adopted by the
    affiliates.  
  • Affiliate autonomy is not conducive to global MNC
    learning.
  • As affiliates develop self-sufficiency, the power
    of home country managers may be challenged.  

13
Multidomestic Strategy
Loose controls strategic decisions remote
HQ
Financial reporting flows
14
Multidomestic Strategy Example
15
International Management Strategies
Global Management focuses activities on the
cost benefits either scale or scope economies
Multidomestic Management manages each market
individually Transnational Management
simultaneously gains cost efficiencies and as
well as seeking local market benefits
16
Multidomestic Strategy
  • A multidomestic strategic mentality develops as
    managers begin to recognize and emphasize the
    differences among national markets and operating
    environments
  • Companies adopt a more flexible approach to their
    intl operations by modifying their products,
    strategies, and even management practices country
    by country
  • As they develop national companies that are
    increasingly sensitive and responsive to their
    local environments, these companies undertake a
    strategic approach that is literally
    multinational Their worldwide strategy is built
    on a foundation of the multiple, nationally
    responsive strategies of the companys worldwide
    subsidiaries.
  • Managers tend to be highly independent
    entrepreneurs, often nationals of the host
    country
  • Using their local market knowledge and the parent
    companys willingness to invest in these growing
    opportunities, these entrepreneurial country
    managers often can build significant local growth
    and considerable independence from headquarters
  • Results in a very responsive marketing approaches
    in the different national markets, it also gives
    rise to an inefficient manufacturing
    infrastructure within the company
  • Plants are built more to provide local marketing
    advantages or improve political relations than to
    maximize production efficiency
  • Similarly, the proliferation of products designed
    to meet local needs contributes to a general loss
    of efficiency in design, production, logistics,
    distribution, and other functional tasks

17
An Multidomestic Strategy
Multidomestic Strategy
Multidomestic Diagram
Central home base decentralized production,
sales, marketing in other countries. The business
allows its foreign operations to function largely
independently.
Multidomestic Strategy
GIS Deployment Strategy
Businesses that follow a multinational strategy
tend to have decentralized, or independent,
information systems for their central
headquarters and different foreign operations.
18
Multidomestic Strategy
19
A MNE Business Strategy Deploying Global
Business Systems
All use global information systems (GISs) in
various ways …
Global Strategy
  • The central headquarters coordinates the
    activities of the foreign operations closely.

Transnational Strategy
GIS Deployment Strategy
Business that follow the transnational strategy
require complex, integrated GIS in which the
central headquarters and all the foreign
operations participate equally
4-19
4-19
20
Global Strategy
  • Used when companies typically centralize product
    development functions in their home country
  • Then transferred to foreign markets in order to
    capture additional value
  • Microsoft, McDonalds

21
Global Strategy
  • Main role is to support the domestic parent
    company in different ways, such as contributing
    incremental sales to domestic manufacturing
    operations
  • Products developed for domestic market sold
    abroad
  • Technology and other knowledge are transferred
    from parent company to overseas operators
  • Offshore manufacturing represents a means to
    protect companys home market
  • Companies with this mentality regard themselves
    fundamentally as domestic with some foreign
    appendages
  • Managers assigned to overseas operations are
    often domestic misfits who happen to know a
    foreign language or have previously lived abroad
  • Decisions related to foreign operations tend to
    be made in an opportunistic or ad hoc manner

4-21
22
An Global Business Strategy
International Strategy
International Diagram
Assets, responsibilities decentralized
Involves transferring knowledge and skills from
the central headquarters to the foreign
operations.
Formal control systems
International mentality
International Strategy
GIS Deployment Strategy
Businesses that follow an international strategy
tend to have distributed GIS in which systems in
the central headquarters are connected to those
in the foreign operations.
4-22
4-22
23
Global vs. Multidomestic
24
Global Strategy
  • Used when a company faces strong pressure to
    reduce costs and limited pressure to adapt
    products for local markets
  • The world is viewed as single market
  • Products are standardized across national markets
  • Emphasize on economies of scale and scope
  • Strategy and decision making centralized in the
    home office
  • Company offers standardized products and services
  • Strategic business units (SBU) are assumed to be
    interdependent
  • Value chain activities in only one or a few areas
  • Results in limited ability to adjust to meet
    customer needs in local markets and results in
    higher transportation costs
  • Requires resource sharing coordination across
    borders (which also makes it
    difficult to manage)
  • Examples are Intel and Boeing

25
Global Strategy Definition
  • A global strategy is a firms plan for maximizing
    its chosen objectives through geographical
    allocation of its limited resources, taking into
    account both (1) global competition and (2)
    geographical opportunities.
  • To build a global strategy, the decision maker
    must be free of any national blinders and
    consider world markets and world resource
    locations and not simply the markets or resources
    of a particular country in isolation.
  • A global strategy aims to maximize results on a
    multinational basis rather than treat
    international activities as a portfolio of
    separate country businesses.
  • (Adapted from International Business and
    Multinational Enterprises by Robock and Simmonds,
    4th Edition)

26
Global Business Strategies
Multinational Strategy
International Strategy
Transnational Strategy
27
Global Business Strategies
  • In an operating environment of improving
    transportation and communication facilities and
    falling trade barriers, some companies adopt a
    very different strategic approach for their intl
    operations
  • These companies think in terms of creating
    products for a world market and manufacturing
    them on a global scale in a few highly efficient
    plants, often at the corporate center
  • Subscribe to Professor Levitts to make and sell
    the same thing, the same way, everywhere
  • In an operating environment of improving
    transportation and communication facilities and
    falling trade barriers, some companies adopt a
    very different strategic approach for their intl
    operations
  • These companies think in terms of creating
    products for a world market and manufacturing
    them on a global scale in a few highly efficient
    plants, often at the corporate center
  • The underlying assumption is that national tastes
    and preferences are more similar than different
    or that they can be made similar by providing
    customers with standardized products at adequate
    cost and with quality advantages over those
    national varieties they know
  • Strategic approach requires considerably more
    central coordination and control than the others
    and is typically associated with an
    organizational structure in which various product
    or business managers have worldwide
    responsibility
  • RD and manufacturing activities are typically
    managed from headquarters, and most strategic
    decisions also take place at the center

28
Global Strategy
Tight controls centrally driven strategy
HQ
One-way flows, goods, information, and resources
4-28
29
Global Strategy Example
30
Transnational Strategy
  • Used when a company confronts pressures for both
    global cost effectiveness and local
    responsiveness and adaptation
  • Seeks to achieve both global efficiency and local
    responsiveness
  • Standardized products, yet with flexibility
  • Integration of several dimensions in which each
    of the components is empowered
  • Specialized innovation
  • Achieving an optimal balance is difficult and
    challenging to achieve because of simultaneous
    requirements for strong central control and
    coordination to achieve efficiency as well as
    local flexibility and decentralization to achieve
    local market responsiveness

31
Transnational Strategy (cont.)
  • Used when a company confronts pressures for both
    global cost effectiveness and local
    responsiveness and adaptation
  • Company locations based on where most beneficial
    for each activity
  • Upstream value chain activities will be more
    centralized
  • Downstream activities will be more decentralized
  • Must pursue organizational learning to achieve
    competitive advantage
  • Strategic decisions, structures and systems will
    be complex
  • Greatest promise
  • Network organizational structure
  • Strategic alliances with customers, suppliers,
    and business partners
  • Saving Capital by forming an alliance
  • Specialization

32
Transnational Structures
  • Represents an attempt to concurrently capture all
    of the advantages of area and global product
    division structures.
  • In transnational structures
  • Configuration and coordination of activities are
    mixed affiliates play leadership roles for some
    activities and supporting roles for others.
  • Decisions are based on maximizing the use of
    company skills and competencies, irrespective of
    activity location or affiliate nationality.
  • Company acts essentially as a network of
    activities with multiple headquarters spread
    across different countries.
  • Affiliate roles shift over time and learning and
    sharing are emphasized.
  • Emphasis on extensive horizontal linkages,
    effective communication and extreme flexibility.

33
Transnational Strategy
Complex controls high coordination skills,
coordinated strategic decision process
Heavy flows materials, people information,
technology
Distributed capabilities, resources decision
making

4-33
34
Transnational Strategy
35
Transnational Strategy
  • The emerging requirement is for companies to
    become more responsive to local markets and
    political needs and pressures to develop
    global-scale competitive efficiency
  • Key activities and resources are neither
    centralized in the parent company nor so
    decentralized that each subsidiary can carry out
    its own tasks on a local-for-local basis
  • Instead, the resources and activities are
    dispersed but specialized, to achieve efficiency
    and flexibility at the same time
  • These dispersed resources are integrated into an
    interdependent network of worldwide operations
  • Transnational mentality recognizes the importance
    of flexible and responsive country-level
    operations hence a return of national into
    the terminology
  • Compared to multinational approach, it provides
    for means to link and coordinate those operations
    to retain competitive efficetiveness and economic
    efficiency, as is indicated by the prefix trans
  • The resulting need for intensive,
    organization-wide coordination and shared
    decision-making implies that this is a much more
    sophisticated and subtle approach to MNE
    management

36
A Transnational Business Strategy Deploying
Global Business Systems
All use global information systems (GISs) in
various ways …
Transnational Strategy
Transnational Diagram
  • Truly global firm no national headquarters
    value-added activities managed from global
    perspective optimizes supply demand, taking
    advantage of local competitive strengths

Transnational Strategy
GIS Deployment Strategy
Business that follow the transnational strategy
require complex, integrated GIS in which the
central headquarters and all the foreign
operations participate equally
4-36
4-36
37
Global Chess Between Large MNEs
  • Customers demand differentiation along with the
    level of cost quality typical of global
    products
  • Host governments have more aggressive development
    tax agendas
  • MNEs fight for flexibility to continuously change
    product designs, sourcing, and pricing

38
The Goals for Global Capabilities
  • Global Efficiency
  • Scale Economies
  • Scope Economies
  • Shorter Product Life Cycles
  • Global Integration/National Responsiveness
  • Multinational Flexibility
  • Management Technological
  • Financial Political
  • Worldwide Learning
  • Extracts Additional Revenues From Internal
  • Capabilities
  • Creates Mechanisms And Systems To Stimulate
    Learning

39
(No Transcript)
40
International HRM Approaches
  • Ethnocentric
  • Hiring and promoting employees on the basis of
    parent companys home country frame of reference
  • Polycentric
  • Hiring and promoting employees on the basis of
    specific local context of the subsidiary

41
International HRM Approaches
  • Regiocentric
  • Hiring and promoting employees on the basis of
    the specific regional context of the subsidiary
  • Geocentric
  • Hiring and promoting employees on the basis of
    ability and experience without considering race
    or citizenship

42
Strategic Approach, Organizational Concerns
Intl Human Resource Management Approach to Be
Used
43
3 Types HQ Orientation Toward Subsidiaries in
Intl Enterprise
44
Intl Executives View of Forces Obstacles
toward Geocentrism in their Firms
45
(No Transcript)
46
Business Case Analysis The Tortuous Evolution
MNC
  • Reading 1-1
  • Ch 1
  • Jan 16, 2008

47
Outline
  • Statement of existing situation, issue, or
    problem
  • Critical Issues
  • Analytical Methods or Analysis
  • Assumptions (Optional)
  • Possible Solutions (Pros and Cons)
  • Recommended Solutions
  • Implementation Issues (If any)

48
Statement of existing situation, issue, or
problem
  • It is difficult to overcome our ethnocentric bias
  • It is difficult for multinational firms to move
    from ethnocentric staffing policies to a
    geocentric enterprise, where the product line is
    industrial products.
  • Few international companies have transitioned
    from ethnocentric (international) to polycentric
    (multi-domestic), or geocentric (transnational)

49
Critical Issues
  • Two hypotheses
  • The degree of multinationality of an enterprise
    is positively related to the firms long-term
    viability (quality of decision-making, which
    leads to survival, growth and profitability in
    evolving world economy).
  • The multinational corporation is a new kind of
    institution a new type of industrial social
    architecture particularly suitable for creating
    world order, and conceivably exercise a
    constructive impact on the host and home
    nation-state and other institutions.

50
Analytical Methods or Analysis
  • The orientation toward foreign people, ideas,
    resources, in HQ and subsidiaries, and in host
    and home environments, becomes crucial in
    estimating the multinationality of the firm.
  • Ethnocentric (home-country oriented)
  • Polycentric (host-country oriented)
  • Geocentric (world-oriented)

51
Assumptions (Optional)
52
Possible Solutions (Pros and Cons)
53
Recommended Solutions
54
Implementation Issues (If any)
55
(No Transcript)
56
Common Types of Key Success Factors
57
(No Transcript)
58
The Impact of Globalization on the
Organization of Activities
Key Points International Division Structures Area
Division Structures Global Product Division
Structures Transnational Structures Affiliates
59
International Division Structure
CEO
VP Product C
VP Product A
VP Product B
VP International
Domestic Market
Domestic Market
International Market
Domestic Market
60
Area Division Structure
VP International
General Manager (Far East)
General Manager (Europe)
General Manager (Latin America)
Country Manager (Germany)
Country Manager (France)
Country Manager (Italy, etc.)
61
Global Product Division Structure
CEO
VP Product A Worldwide
VP Product B Worldwide
VP Product C Worldwide
---RD ---Production ---Marketing ---Accounting --
-Service
---RD ---Production ---Marketing ---Accounting --
-Service
---RD ---Production ---Marketing ---Accounting --
-Service
62
Global Affiliates
  • Affiliates
  • Do not operate with a great deal of autonomy.
  • Become an integrated part of a global
    organization and often play no independent
    strategic role at all.
  • Are evaluated as cost centers. The profit center
    concept just does not fit the strategy.
  • Largely treated as a source of supply or as sales
    offices.

63
Contrasting Structures
  Global
Multidomestic
Product Structure Area
Structure Product-Line
Specialized Duplicated Market
Emphasis International
National Transfers
Product/Technology Technology/Skills Affiliate
Evaluation Cost Center Profit
Center Affiliate Role Implement
Strategy Develop Implement
strategy Affiliate Autonomy Low
High Affiliate Management
Expatriates, Local,
Short-Term Long-Term  
 

64
Affiliate Competence Affiliate Initiative
 
 
This diagram is adapted from a diagram in
Bartlett and Ghoshal's "Tap Your Affiliates for
Global Reach".
65
Seamless Organizations
  • A driving goal of an increasing number of
    companies is the development of a seamless
    organization.
  • Barriers prevent learning, produce
    inefficiencies, and blunt responsiveness.
  • Seamlessness comes only through destroying
    barriers inside and outside the organization.
  • Teams are the primary unit of analysis in the
    seamless organization.  
  • Seamless organizations are also pre-occupied with
    erasing boundaries inside the company.  
  • The growth of Internet exchanges now enables
    companies of all sizes to access global suppliers
    and buyers without necessarily having a global
    presence.

66
Aspirations
  • To lead people, walk beside them...
  • As for the best leaders, the people do not notice
    their existence.
  • The next best, the people honor and praise.
  • The next, the people fear, and
  • The next, the people hate ...
  • When the best leaders work is done, the people
    say We did it ourselves
  • Lao Tsu, 6th Century BC

67
(No Transcript)
68
Global Human Resource Management
  • Organizational Structure And Strategy

69
Global Competitive Advantage
  • Adapt to local market differences
  • Exploit global economies of scale
  • Exploit global economies of scope
  • Tap into the best locations for activities and
    resources
  • Maximize knowledge and experience transfer
    between locations

70
Foreign Market Entry Modes
  • Exporting
  • Countertrade
  • Contract manufacturing
  • Licensing
  • Franchising
  • Turnkey projects
  • Non-equity strategic alliances
  • Equity-based ventures such as wholly-owned
    subsidiaries and equity joint ventures

71
Motives to Go International
Market-Seeking Motives
The Historically Indigenous Firm
Cost-Reduction Motives
Strategic Motives
72
Evolutionary Stages
  • Stage 1 Foreign Inquiry
  • Stage 2 Export Manager
  • Stage 3 Export Department and Direct Sales
  • Stage 4 Sales Branches and Subsidiaries
  • Stage 5 Assembly Abroad
  • Stage 6 Production Abroad
  • Stage 7 Integration of Foreign Affiliates

73
Factors Determining MNE Organizational Structure
  • The firms forms and stages of international
    development
  • The amount of cross-border coordination required
    by a firms strategy (integration versus
    decentralization
  • The nature of host governments activity in the
    economic process
  • The diversity and complexity of the MNEs
    business operations

74
Development Form of the Multinational
  • The subsidiary or pattern could be a start-up
  • Once established, the subsidiary or alliance can
    put in place the firms international strategy
  • When the firm reaches a level of having a high
    proportion of assets/sales employees outside the
    home country

75
The Pre-International Division Structure
Chief Executive Officer
etc.
Production
Finance
Marketing
Personnel
RD
Export Manager Or Export Department
76
The International Division Structure
CORPORATE STAFF
Chief Executive Officer
etc.
Production
Finance
Marketing
Personnel
RD
LINE MANAGEMENT
etc.
Product A Domestic
Product B Domestic
Product C Domestic
International Division (All Products)
77
The Global Product Division Structure
CORPORATE STAFF
Chief Executive Officer
etc.
Production
Finance
Marketing
Personnel
RD
LINE MANAGEMENT
etc.
Product A
Product B.
Product C
Product D
North Asia Europe
Latin America
America
78
The Global Area Division Structure
CORPORATE STAFF
Chief Executive Officer
etc.
Production
Finance
Marketing
Personnel
RD
LINE MANAGEMENT
etc.
Europe
North Amer.
Asia
Latin Amer.
United Kingdom Italy France Etc.
79
The International Matrix Structure
CORPORATE STAFF
Chief Executive Officer
etc.
Production
Finance
Marketing
Personnel
RD
LINE MANAGEMENT
Other Area and Product Divisions
Europe
Tractors
Asia
GM Tractors Europe
GM Tractors Asia
80
(No Transcript)
81
Organizational Configuration-Decentralized
Federation
  • Typical European
  • Local production to defend markets
  • Adaptation to local markets
  • Management culture emphasized personal
    relationships

Mainly financial flows
Loose, simple controls
82
Organizational Configuration-Coordinated
Federation
  • Typical U.S. firm
  • Strength in technology and management systems
  • Delegate responsibility while maintaining control
  • Core attitudes
  • Offshore operation is appendage

Mainly knowledge flows
Formal system controls
83
Organizational Configuration -Centralized Hub
  • Typical Japanese
  • new, efficient, scale-intensive plants
  • declining trade barriers
  • Competitive strategy
  • Cost advantage
  • quality assurance
  • fit with culture (Zaibatsu)

Mainly goods flows
Simple, tight controls, decision making
centralized
84
Transnational Development
Decentralized Federation
Coordinated Federation
Centralized Hub
Strategic Approach
Multinational
International
Global
Worldwide transfers of home country innovation
Key Strategic Capability
National responsiveness
Global scale efficiencies
Config,. Of Assets and Capabilities
Decentralization and nationally self sufficient
Sources of core competencies centralized
Centralized and globally scaled
Roles of Overseas Operations
Sensing and exploiting
Adapting and leveraging
Implementing parent company strategies
Development and diffusion of knowledge
Knowledge developed and retained in each unit
Knowledge developed at center and diffused
Knowledge developed and retained at center
85
Transnational Corporation
  • Builds diverse internal perspectives able to
    sense complex environmental demands
  • Physical assets and management capabilities are
    distributed internationally but are independent
  • Develops a robust and flexible integrative process

86
Multidimensional Perspectives
  • Broad sensory capabilities
  • Strong subsidiary management
  • Capable global business management
  • Influential functional management

87
Distributed, Independent Capabilities
  • Assumes need to centralize activities for which
    global scale is needed
  • National units achieve global scale by making
    them responsible as world source for a given
    product or service
  • Optimize technology and marketing developments

88
Result
Distributed specialized resources, flows of
components, products, resources, people, and
information
  • Interdependence of units increases
  • Integrated network form

Complex process of coordination in an environment
of shared decision making
89
Flexible Integrative Process
  • Supportive, but allows intervention directly in
    certain decision-making--centralization
  • Structure roles and supportive systems to
    influence specific decision-making
    needs--formalization
  • Self-regulatory capability through cultural set
    of relationships that provide organizational
    context and for delegated decisions--socialization

90
Building Transnational Organizations
  • Organizational Anatomy (formal structure of
    assets, resources, responsibilities)
  • Organizational Physiology (systems and processes)
  • Organizational Psychology (culture and management
    mentality)

91
Structure- Organizational Anatomy
  • Define character of dominant line organization
  • Design and develop surrounding structure to check
    lines potential myopia
  • Staff access to information and subsequent
    influence in the management process (micro
    structure tools such as task groups or committees)

92
Processes and Systems- Organizational Physiology
  • Influence communication channels (administrative
    systems, hierarchical channels, informal
    relationships
  • Shape the nature and quality of communication

93
Culture and Mgmt. Mentality- Organizational
Psychology
  • Corporate values and shared beliefs
  • Organizational Imperative
  • Key Tools
  • Clear, shared understanding of mission and
    objectives
  • Visible behavior and public actions of top
    management
  • Personnel policies, practices and systems
    appropriate

94
Management of the Change Process
U.S. Model (Industrial Age)
Change the formal structure and responsibilities
Change in interpersonal relationships and
processes
Change in individual attitudes and mentalities
95
Management of the Change Process
European and Japanese Model (New Economy)
Change individual attitudes and mentalities
Change in interpersonal relationships and
processes
Change in formal structure and responsibilities
96
Organizational Imperative
  • Organizations take on value systems of their own,
  • Independent of the value systems of members of
    the organization and
  • the organizations value system takes precedence
    over individual values systems
  • in influencing organizational members behaviors
    as members of the organization

97
TRANSNATIONAL MANAGEMENT
LECTURE SUMMARY X
  • MANAGING A GEOGRAPHIC SUBSIDIARY

98
NATIONAL SUBSIDIARY MANAGER
GLOBAL EFFICIENCY AND COMPETITIVENESS
NATIONAL RESPONSIVENESS AND FLEXIBILITY
WORLDWIDE INNOVATION AND LEARNING
99
PRESSURES AND CONSTRAINTS ON COUNTRY MANAGERS
INTERNAL NORMS VALUES
ORGANIZATION STRUCTURE SYSTEMS
MNCS INTERNAL MOTIVATIONS
CORPORATE STRATEGY
COUNTRY MANAGER PERSONAL VALUES
HOST GOVERNMENTS OBJECTIVES, POLICIES
HOST COUNTRY INTERESTS
GLOBAL COMPETITIVE ENVIRONMENT
NATIONAL COMPETITORS ACTIONS
NATIONAL CONSTITUENT INTERESTS (EMPLOYEES,
CONSUMERS, UNIONS)
GLOBAL COMPETITIVE ACTIVITY
LOCAL MARKET AND INDUSTRY STRUCTURE
LOCAL NORMS VALUES
  • IT IS THE CM WHO MUST -
  • NEGOTIATE WITH THE HOST GOVERNMENT.
  • FACE THE GLOBAL AND NATIONAL COMPETITORS
  • INTERPETS AND IMPLEMENTS THE CORPORATIONS
    STRATEGY AND
  • RESPONDS TO ITS STRUCTURES, SYSTEMS AND
    POLICIES

100
CMs DETERMINANTS OF MANAGEMENT ACTION
  • ENVIRONMENTAL ANALYSIS
  • WHAT THE COMPANY MIGHT DO
  • - HOST COUNTRY DEMANDS, PRESSURES
  • - HOME COUNRTY CONSTRAINTS
  • - INDUSTRY STRUCTURE, COMPETITIVE PRESSURE
  • STRATEGIC DETERMINATION
  • WHAT THE COMPANY WANTS TO DO
  • - CORPORATE OBJECTIVES, PRIORITIES
  • - AVAILABLE RESOURCES
  • - COMPANYS DISTINCTIVE COMPETENCE
  • ORGANIZATIONAL DIAGNOSIS
  • WHAT THE COMPANY CAN DO
  • - ORGANIZATION STRUCTURE, SYSTEMS
  • - CORPORATE POLICIES, PROCEDURES
  • - MANAGEMENT STYLE, EXPECTATIONS

101
NATIONAL SUBSIDIARY MANAGER
  • TRADITIONAL ROLE IMPLEMENTING UNITS
  • SOURCE OF SALES AND PROFITS
  • ACCESS TO LOCAL FACTORS
  • LEVERAGING PARENT COMPANY ASSETS AND RESOURCES

102
NATIONAL SUBSIDIARY MANAGER
  • EMERGING ROLE STRATEGIC ASSET
  • BI-CULTURAL INTERPRETER
  • NATIONAL DEFENDER AND ADVOCATE
  • CONTRIBUTING TO GLOBAL CAPABILITIES

103
COUNTRY MANAGER RESPONSIBILITIES. . . ……AND
SOURCES OF FAILURE
1) CM AS BI-CULTURAL INTERPRETER
  • INTERPRETS HOST COUNTRY ENVIRONMENT TO CORPORATE
    MANAGEMENT
  • INTERPRETS CORPORATE STRATEGIES AND PRIORITIES TO
    THE NATIONAL ORGANIZATION
  • CAUSES OF FAILURE
  • UPWARD COMMUNICATION

HQ
POOR RECEPTIVITY OF HQ MANAGEMENT
BLOCKED HQ/SUB. CHANNELS OF COMMUNICATION
SUB.
CM
LIMITED SENSITIVITY OR UNDERSTANDING AT THE SUB.
  • DOWNWARD COMMUNICATION

HQ
CMs WEAK CONNECTIONS OR SUPPRORT AT HQ
CMs LIMITED UNDERSTANDING OF CORPORATE STRATEGY,
PRIORTIES
SUB.
CM
CMs LACK OF CREDIBILITY WITHIN THE SUB.
104
CM RESPONSIBILITIES . . . (CONT.)
  • 2) CM AS SUBs DEFENDER AND ADVOCATE
  • DEFENDS THE NEED FOR NATIONAL RESPONSIVENESS
    STRATEGICALLY, AND DIFFERENTIATION
    ORGANIZATIONALLY
  • ADVOCATES FOR THE ROLE OF THE SUB WITHIN THE
    GLOBAL OPERATIONS
  • (VIS A VIS BUSINESS AND FUNCTIONAL
    MANAGEMENT)
  • CAUSE OF FAILURE
  • - CM UNWILLING OR UNABLE TO ACT AS A
    STRONG ADVOCATE OR DEFENDER OF SUB INTERESTS.
  • - STRUCTURAL OR CULTURAL BLOCKS THAT
    PREVENT CM FROM GAINING ACCESS AND INFLUENCE
  • IN CORPORATE DECISION MAKING
    PROCESS.

HQ
FUNCTIONAL PERSPECTIVE
BUSINESS PERSPECTIVE
B
F
SUB
G
GEOGRAPHIC PERSPECTIVE
TRANSNATIONAL DECISION PROCESS
REQUIRES MULTIDEMINESIONAL PERSPECTIVES

- IMPLIES CM ACCESS AND

INFLUENCE IN PROCESS
105
CM RESPONSIBILITIES …(CONT.)
  • 3) CM AS IMPLEMENTER OF CORPORATE STRATEGIES
  • PLAYS DIVERSE STRATEGIC ROLES (LEADER,
    CONTRIBUTOR, IMPLEMENTER) DEPENDING ON SUB
    CAPABILITY AND ENVIRONMENT.
  • CONVERTS BROAD STRATEGIES INTO RESULTS-ORIENTED
    OPERATING PLANS FOR THE SUB.
  • ACCEPTS RESPONSIBLITIES AND IMPLEMENTS ACTIONS IN
    THE CORPORATE INTEREST THAT MAY RUN COUNTER TO
    LOCAL SUB INTEREST
  • CAUSE OF FAILURE
  • - ORGANIZATIONAL OR
    MANAGERIAL INFLEXIBILITY PREVENTS
    DIVERSITY AND CHANGEABILITY OF SUB ROLES.
  • - CM UNABLE TO MAKE THE
    COMPLEX TRADE-OFFS AND COMPROMISES REQUIRED BY
    THE SUBs MULTIPLE CONFLICTING DEMANDS.
  • - PAROCHIALISM IN SUBS
    DUE TO INAPPROPRIATE SYSTEMS OR INFLEXIBLE
    MANAGERS

106
BI-CULTURAL INTERPRETER
  • THE BRIDGE BETWEEN NATIONAL AND CORPORATE
    CULTURES
  • ACTING AS A BUFFER AND SHOCK ABSORBER

107
NATIONAL DEFENDER AND ADVOCATE
  • ADAPTING PRODUCTS AND STRATEGIES TO LOCAL CONTEXT
  • CHAMPIONING NEEDS OF LOCAL STAKEHOLDERS

108
CONTRIBUTING TO GLOBAL CAPABILITIES
  • SENSOR OF STRATEGIC STIMULI
  • SOURCE OF SCARCE SKILLS AND
  • CAPABILITIES
  • GENERATOR OF INNOVATIVE RESPONSES

109
CONTRIBUTIING TO GLOBAL CAPABILITIES
HIGH
LEADER
BLACK HOLE
CORPORATE HEADQUATERS
STRATEGIC IMPORTANCE OF LOCAL ENVIRONMENT
LOW
CONTRIBUTOR
IMPLEMENTOR
HIGH
LOW
LEVEL OF LOCAL RESOURCES AND CAPABILITIES
110
MULTIPLE ROLES OF THE CM
  • PIONEER ROLE
  • DEFINE THE TERRITORY
  • - MARKET STRUCTURE
  • - CUSTOMER NEEDS
  • ESTABLISH THE BASE CAMP
  • - MAKE CONTACTS
  • - DEVELOP RELATIONSHIPS
  • INTELLIGENCE ROLE
  • ANALYZE THE ENVIRONMENT
  • - INTELLIGENCE ON COMPETITORS, TECHNOLGY,
    MARKET TRENDS
  • DEVELOP INNOVATIVE IDEAS,
  • - CAPABILITIES
  • - INPUT TO STRATEGY
  • QUARTERBACK ROLE
  • CONFER WITH HQ COACHES
  • - DEFEND, ADVOCATE FIELD VIEW
  • MOTIVATE AND LEAD TEAM TO ACHIEVE RESULTS
  • - MAINTAIN ENTERPRENEURSHIP, CREATIVITY AND
    DRIVE.
  • TRADER ROLE
  • BUILD PROFITABLE OPERATIONS
  • - BASE CAMP TRADING POST
  • - CONTROL EXPENSES, MANAGE PRICING
  • DEVELOP LOCAL RESOURCES
  • - CONTRIBUTE TO OVERALL STRATEGY

111
SKILLS AND QUALIFICATIOSN OF THE CM
STRATEGIC SKILLS
ENTREPRENEURIAL SKILLS
  • INNOVATOR AND OPPORTUNIST
  • CREATIVE ANALYST

COUNTRY MANAGER
ADMINISTRATIVE SKILLS
EXECUTIVE SKILLS
  • CONTROLLER AND MANAGER
  • ORGANIZATIONAL LEADER

PERSONNEL IMPLICATIONS - NEED FOR CMs
WITH DIFFERENT STRENGTH AS AT VARIOUS STAGES OF
DEVELOPMENT - IN A MATURE SUB, CM MUST HAVE
ALL THESE CHARACTERISTICS. ( IMPLICATIONS FOR
PERSONNEL AVAVLABILITY
112
TRANSNATIONAL MANAGEMENT
LECTURE SUMMARY IV
  • GLOBALIZATION OF INDUSTRY AND COMPETITION

113
CHANGING INDUSTRY STRUCTURE
REGIONAL NATIONAL GLOBAL
LATE 19TH/EARLY 20TH CENTURY- RAILROADS/
TELEGRAPH MASS PRODUCTION MASS MEDIA NEW MARKET
CHANNELS
O.
RESULTED IN A RESTRUCTURING OF MANY INDUSTRIES
REGIONAL NATIONAL
POST WW 11 (PARTICULARY IN 60S AND
70S) LOWERED TARIFFS SHIPPING ECONOMIES
COMMUNICATIONS ACCESS NEW SCALE ECONOMIES
HOMGENIZATION OF NEEDS RATE AND COST OF
TECHNOLGICAL CHANGE
O.
RESULTED IN EQUALLY WIDESPREAD (BUT NOT
UNIVERSAL) RESTRUCTURING
NATIONAL GLOBAL
GLOBAL AND NATIONAL INDUSTRY
CLASSIFICATIONS ARE OVERSIMPLIFICATIONS
- FEW INDUSTRIES ARE PURELY ONE OR THE OTHER
- MOST HAVE CHARCTERISTICS OF EACH
O.
NATIONAL INDUSTRY - INDIVIDUAL MARKETS - CLEARLY
SEPARATED
GLOBAL INDUSTRY - WORLDWIDE STRUCTURE - CLOSE
LINKAGE INTER- DEPENDANCY OF
MARKETS
CEMENT VAST
SEMICONDUCTOR METAL
FABRICATION MAJORITY OF
AIRFRAME ETHINC FOODS
INDUSTRIES CONSUMER ELECTRONICS
114
FORCES OF GLOBALIZATION
FACILITATING FORCES
IMPEDING FORCES
  • - GLOBAL ECONOMIES
  • MANUFACT. SCALE, EXPERIENCE
  • TECH, SCALE, DIVERSITY
  • DISTRIBUTION, SERVICE
  • - GLOBAL SOURCING
  • LABOR
  • MATERIALS
  • FINANCE
  • - GLOBAL SCANNING
  • - GLOBAL CUSTOMER NEEDS
  • - GLOBAL COMPETITOR ADVANTAGES
  • GLOBAL CHESS

- DIFFERENCE IN TASTE, PREFERENCE,
USAGE - TRANSPORT LOGISTICS COSTS - GOVERNMENT
INTERVENTION, BARRIERS - NEEDS FOR TIMELY
DELIVERY NEEDS FOR INTENSIVE LOCAL
SERVICE - ACCESS TO DISTRIBUTION
CHANNELS - ORGANIZATIONAL COSTS OF COORDINATION
NOTE THAT - MOST INDUSTRIES WILL HAVE
ELEMENTS OF BOTH SETS OF FORCES. - THE
INDUSTRY CHARACTERISTICS WILL SHIFT OVER TIME.
115
FORCES OF GLOBAL INTEGRATION
FORCES OF NATIONAL RESPONSIVENESS
116
  • SOME INDUSTRIES ARE BORN GLOBAL
  • SOME ARE MADE GLOBAL
  • OTHERS HAVE GLOBALNESS THRUST UPON THEM

117
DIFFERENT VALUE CREATING ACTIVITIES MAY HAVE VERY
DIFERENT CHARACTERSITCS . . . .
BENEFITS OF GLOBAL INTEGRATION
NEED FOR NATIONAL DIFFERNTIATION
. . . . AND THOSE CHARACTERISTICS MAY CHANGE
OVER TIME
118
INDUSTRY ANALYSIS MANAGEMENT TASKS
  • TO UNDERSTAND , RATHER THAN CLASSIFY, INDUSTRY
    CHANGE
  • TO UNDERSTAND THE IMPLICATIONS OF THOSE CHANGES
    FOR COMPETITIVE STRATEGY AND RESOURCE ALLOCATION
  • AND TO INTERPRET THEIR EFFECT ON THE
    APPROPRIATENESS OF EXISTING MANAGEMENT SYSTEMS
    AND DECISION MAKING PROCESSES

119
COMPETITIVE STRATEGY CHOICES INTEGRATION OR
RESPONSIVENESS
DIFFERENT STRATEGIC POSTITIONS EXIST (BY CHOICE
OR CIRCUMSTANCE) WITHIN ANY INDUSTRY . . . .
MAINFRAME COMPUTER INDUSTRY
IBM MAINTAIN CONTROL OF
TECHNOLGY LEVRAGE GLOBAL SCALE
GLOBAL INTEGRATION NEED/ BENEFIT
HONEYWELL STRIVE FOR MINIMUM
EFFICIENT SCALE COMPROMISE GLOBAL
CONSISTENCY FOR SHARE
C21 MEET NATIONAL POLICY
OBJECTIVES RELY ON GOVT. SUPPORT TO REMAIN
VIABLE
NATIONAL RESPONSIVENESS NEED/BENEFIT
120
A CHANGING GAME . . . .
GLOBAL COMPETITION (CONTD)
  • OLD GAME
    NEW GAME
  • HOME COUNTRY TECHNOLOGICAL TECHNOLGY
    SPREAD
  • LEADERSHIP/DOMINATION
    NO HEGEMONY
  • MARKET-BY-MARKET BATTLES
    WOLRD-WIDE WELFARE
  • AGAINST LOCAL COMPETITORS
    AGAINST GLOBAL COMPETITORS
  • NATIONAL DIFFERENTIATION
    HOMEGENZATION OF MARKETS -
  • LOCAL MARKET PREFERENCES WORLD AS
    THE STRATEGIC UNIT
  • NEED COUNTRY-BASED STRATEGY
  • LONG PLC -
    PLC SHORT
  • MANAGED DIFFUSION OF PRODUCTS DIFFUSION
    LAG SHORTENING

  • SIMULTANEOUS
    EXPLOITATION

  • WORLD-WIDE
  • HOME MARKET ADVANTAGES KEY ACCESS TO
    WORLD-WIDE

  • RESOURCES KEY
  • TECHNOLOGY
    TECHNOLOGY

121
. . . WITH DIFFERENT RULES . . .
GLOBAL COMPETITION (CONTD)
GLOBAL CHESS
  • DIFFERENT PIECES
  • - LEAD MARKETS
  • - PROFIT SANCTUARIES
  • DIFFERENT RULES
  • - CROSS- SUBSIDY
  • - HOSTAGES
  • - EXCHANGE OF THREATS
  • - CHINKS IN THE ARMOUR
  • SEQUENTIAL BATTLE
  • - BUILDING CAPABILITIES
  • - GETTING PIECES OUT

    OF THE GAME

122
GLOBAL COMPETITION (CONTD)
. . . AND DIVERSE PLAYERS . . .
  • GLOBAL COMPETITORS, REGIONAL PLAYERS, NATIONAL
    CHAMPIONS
  • APPROXIMATE THEIR GLOBAL ADVANTAGE
  • - CONSORTIA, ALLIANCES
  • - SHARING OF RISKS, COSTS, RESOURCES
  • - POOLING OF CAPABILITIES
  • DEFEND AGAINST GLOBAL ADVANTAGE
  • - TIE-UP- CHANNELS
  • - PRE-EMPT CRITICAL SUPPLIES
  • OFFSET GLOBAL ADVANTAGE
  • - NATIONAL CHAMPION STRATEGY

123
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124
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125
Categorizing Objectives and Strategies of
Competitors
126
Common Types of Key Success Factors
127
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128
Learning Objectives
  • Explain the significance of leadership in
    international management.
  • Understand why some of the US theories are
    applicable in other countries, and why some are
    not.
  • Identify the factors that affect the quality of
    leadership in different countries and the
    significance of non-Western theories of
    leadership in the global context.
  • Understand the role of effective global
    leadership.
  • Explain the significance of reckless and
    unethical leadership.

129
Chapter Topics
  • What is Leadership?
  • Perspectives on Leadership
  • Leadership Across Cultures and Borders
  • Non-Western Styles of Leadership
  • Leading in an Increasingly Interconnected World
  • Implications for the Practice of Global Leadership

130
Leadership
… is defined as the process of influencing people
and providing a work environment so that they can
accomplish their group or organizational
objectives
131
Ex. 15-1 Perspectives of Leadership
TRAIT PERSPECTIVE
TRANSFORMATIONAL PERSPECTIVES
LEADERSHIP PERSPECTIVES
IMPLICIT PERSPECTIVES
BEHAVIORAL PERSPECTIVES
CONTINGENCY PERSPECTIVES
132
Leadership Traits
133
Clusters of Leadership Behaviors
  • Consideration a cluster that reflected
    people-oriented behaviors, such as showing mutual
    trust, respect, and a concern for their
    well-being
  • Initiation of Structure a cluster which focused
    on behaviors that define and structure work roles

134
Transformational Perspective
Transformational theories focus on the process
where a leader uses his or her charisma to
inspire followers to go beyond their immediate
self-interests for the good of the work group and
the organization. Charisma is a special quality
of interpersonal influence that some leaders
possess and that enables their followers to
develop respect and trust for the leader.
135
Ex. 15-3 Definitions of Various Aspects of the
Concept of Culture and Sample Questionnaire Items
from the GLOBE Project
136
Ex. 15-3 (contd.)
137
Some Findings from the GLOBE Project
  • Americans like two kinds of leaders. Leaders
    should provide workers with empowerment,
    autonomy, and authority. They also respect bold,
    forceful, confident, and risk-taking leaders
  • Malaysians expect their leaders to be humble,
    modest, dignified, and group oriented
  • Arabs treat their leaders as heroes and worship
    them as long as they remain in power
  • Iranians expect their leaders to exhibit power
    and strength
  • The French expect their leaders to appreciate the
    finer aspects of French culture and arts,
    including a good knowledge of mathematics
  • The Dutch place high value on equality and are
    not sure about the importance of leadership.
    Terms like leaders and managers often carry a
    social stigma

138
Ex. 15-4 Subordinateship for Three Levels of
Power Distance
139
Ex. 15-5 A Comparison of Willingness to Delegate
Authority and Managerial Initiative By Leaders
(Top Ten)
Managerial Initiative, Managers Sense of
Drive/Responsibility
Extent to Which Leaders Delegate Authority
0 Low 100 High
0 Low 100 High
140
Ex. 15-6 A Comparison of Middle Eastern Versus
Western Management Functions
141
Ex. 15-6 (contd.)
142
Ex. 15-7 An Integrative Model of Leadership
Effectiveness Across Nations and Cultures
(adapted)
Leader-Follower Interaction
Second Level Outcomes
Content Factors
First Level Outcomes
Environmental Factors
External in Origin Political Economic Technologic
al Social Cultural
Specific to Leaders Ability Experience, etc.
Acts of Leadership Autocratic vs.
Participative Task vs. People Orientation Transact
ional vs. Transformative
Accomplishment of individual, group, and org.
goals Org. effectiveness High morale Creativity
innovation
Specific to Followers Beliefs Attitudes, etc.
Amount of effort Group performance Satisfaction
of followers, etc.
Level of Convergence Divergence
Specific to Wkgroups Values Norms, etc.
Internal in Origin Organizational
Structure, Culture Climate Availability of
resources Management systems
Follower Behavior Desire for achievement vs.
affiliation Value of rewards, etc.
Substitutes for Leadership
Arrows indicate possible causal influence
143
Nurturant Leadership
Taking a personal interest in the well-being of
each subordinate
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