IBA550 - Exam 2

Culture

System of values and norms shared among a group of people as a way of living

Culture map

Communicating, negative feedback, persuading other, respecting hierarchy, making decisions, building trust, disagreeing, scheduling time

Mode of entry

form of entry a company takes to enter a new foreign market

Trade

Low risk, low control

Contractual

Licensing intellectual property

Moderate risk, moderate control

Investment

Build factory or take over existing company

Greatest risk, greatest control

Entry mode framework

Strategic, environmental, transaction-specific

Strategic entry mode

Drive control requirements

Multi-Domestic

Localization like in the fast food industry

Trends toward adaptation, strong pressure to be locally responsive, favor low control modes of entry

Global

Car companies creating different kinds of cars for different regions

Trends towards arbitration or aggregation (regions), low pressure to be locally responsive, strong integration pressures, favor high control modes of entry

Global concentration

Airline manufacturing, operating systems

Concentration of markets at a global level, HIGH control modes of entry

Country risk or political risk

High risk: low control modes of entry

Location Familiarity

Unfamiliar markets: low control

Demand uncertainty

High uncertainty: low control modes

Volatility of competition

High volatility: Low control

Impact dissemination risk

Risk that firms intellectual property could be stolen by other countries or business partners

Value of Firm-Specific Know-how

Competitive advantage based on unique processes, trainings

High value favors HIGH control

Tacit Nature of Know-How

Difficulty in articulating or transferring know-how, favors HIGH control and needs great cultural understanding

Adaptation

Adjust to differences, removes obstacles for trade in new market at the cost of economies of scale

Mini IBM

Aggregation

Overcome differences: different regions

Economies of scale through standardizatio

Arbitrage

Exploit differences, different supply chain sectors in different regions of the world

Best for vertical or functional organizationsL

Lessons from reading

Focus on one or two As, new elements of strategy have to fit organizationally, employ multiple integration mechanism, think about externalizing integration, know when not to integrate

Discussed culture map dimension

Communicating (context), Persuading (principles vs application), Evaluating (direct vs indirect)

Culture map dimensions

Communicating, evaluating, persuading, leading, deciding, trusting, disagreeing, scheduling

Map: Communicating

Low → High US, DE, MX

Long, homogenous histories (japan): high context (“read the air”)

Immigrant, diverse nations (US) : low context

Map: Persuading

Principles → Application: DE, MX, US

Principles first: start with theory then how to use it/apply it

Application first: start with examples then summarize the principles

MBA: French like professors to explain theory first, Americans want rela-world cases immediatel

Map: Evaluating

Direct Negative → Indirect Negative: DE, US, MX

Germany: Direct, believes honesty is respectful and efficient

US, Japan, UK: Sandwich method: positive, then negative, then positive

Importance of understanding the differences

Failures usually stem from cultural context not personality

Ignoring culture leads to misjudgment

Important to consider: communication, feedback, trust, and hierarchy

Strategies for overcoming cultural differences

Recognize, analyze, adapt

Clarify expectations openly

Use cultural relativity (i.e. the culture map)

Examples of cultural misunderstanding

Silent Bo: Chinese expert did not speak up during meeting because Chinese culture values hierarchy and quiet listening

Deaf Dulac: French manager in the US thought she got stellar feedback but American boss sugarcoded negative criticism

Uppsala model insights

Firms start exploring psychically close countries first (similar culture, language, systems)

Establishment chain

Internationalization = relationship building

Uppsala: Establishment chain

Export → Agent → Sales subsidiary → Foreign production, can skip steps now if they already have a network abroad in revised model