Cross Cultural Management

Globalization

Global competition characterized by networks of international linkages that bind countries, institutions, and people in an interdependent global economy.

Five Key Global Trends

Changing balance of growth towards emerging markets, need for increased productivity and consumption in developed countries, increasing global interconnectivity, increasing gap between supply and demand of natural resources, challenge for governments to develop policies for economic growth and financial stability.

Globalization 3 pillars

Political, Social, Economic.

The main types of FDI

Acquisition of a subsidiary, Joint Ventures, Licensing, Investing in New Facilities or Expansion.

Challenges to Globalism

Backlash against capitalism and rekindling of nationalism, increased protectionism of high-demand resources, need to develop top managers with international understanding and experience, increasing pressure and publicity for companies to consider the social responsibility of their actions.

Effects of Globalization on Corporations

Global companies are becoming less tied to specific locations, companies that desire to remain competitive will have to develop a cadre of experienced international managers, small companies are also affected by and in turn affect globalism.

The globalization of Human Capital

While firms still offshore manufacturing jobs, some are reshoring jobs to lower shipping costs, firms are outsourcing white-collar jobs to India, for global firms, winning the war for talent is a pressing issue.

Regional Trading Blocs

Much of today’s world trade is grouped around three dominant currencies:Euro, Yen, and the dollar, these trade blocs are continually expanding their borders to include neighboring countries, much of today’s world trade takes place within these three regional free-trade blocs:Western Europe, Asia, and the Americas.

The Political and Economic Environment

Sustainability- Economic, Political, Social, and environmental has become a significant worldwide issue, ethnicity- a driving force behind political instability around the world, religion- religious disputes lie at the heart of regional instabilities, political risk- any governmental action or politically motivated event that could adversely affect the long-term profitability or value of a firm.

Typical Political Risks

Expropriation and confiscation, nationalization, terrorism, discriminatory treatment, barriers to repatriation of funds, interference in managerial decision making, dishonesty by government officials.

Political Risk Assessment

Helps companies manage exposure to risk and minimize financial loss, two forms:consultation with experts, development of internal staff capabilities- increasingly common.

Managing Political Risk

Avoidance and Adaptation, equity sharing, participating management, localization of the operation, development assistance, dependency and hedging, input control, technology control, expatriate position control, distribution control, political risk insurance (OPIC and FCIA), local debt financing.

Managing Terrorism Risk

Develop a benevolent image, maintain a low profile and minimize publicity, using teams to monitor terrorist activities, hiring counterterrorism consultants.

Economic Risk

Closely related to political risk, determined by a country’s ability or intention to meet its financial obligations, historically, most industrialized nations have posed little risk of economic instability, however, the level of economic risk in Europe is of concern in the eurozone due to debt problems in Greece.

The Legal Environment

Types of Legal systems:Common Law, Civil Law, Islamic Law, approaches to contract Law:Common Law:Details must be written in the contract to be enforced, Civil Law:Assumes promises will be enforced without specifying the details, in Asia the contract may be in the relationship, not on the paper.

Stakeholder

anyone who is impacted by the company.

Stockholder

People who invest into the company (Owners).

MNC Stakeholders

Home country, Owners, Customers, Employees, Unions, Suppliers, Distributors, Strategic Allies, Community, Economy, Government, Society In General.

Global Interdependence/ standard of living

MNC Stakeholders, Global Environment and ecology, Sustainable resources, Host, Economy, Employees, Community, Host, Government, Consumers, Strategic Allies, Suppliers, Distributors.

Benefits of CSR

Improved access to capital, secured license to operate, revenue increase and cost and risk reduction, improved brand value and reputation with customer attraction and retention, improved employee recruitment, motivation, and retention.

Global Consensus of Regional Variation

Global Corporate Culture:An integration of the business environments in which firms currently operate, the United States and Europe adopt strikingly different positions that can be traced largely to history and culture.

Dealing with Confusion About Cross-Cultural Dilemmas

Engaging stakeholders (and Sometimes NGOs) in a dialog, establishing principles and procedures for addressing difficult issues such as labor standards for suppliers, environmental reporting, and human rights, adjusting reward systems to reflect the company’s commitment to CSR.

Moral Universalism

Addressing the need for a moral standard that is accepted by all cultures.

Ethnocentric Approach

Applying the morality used in the home country- regardless of the host country’s system of ethics.

Ethical Relativism

Adopting the local moral code of whatever country in which a firm is operating.

International Codes of Conduct

The Sweatshop Code of Conduct, The Electronic Industry Code of Conduct (EICC), Social Accountability 8000 (SA 8000), guidelines for MNCs developed by the International Chamber of Commerce, Organization for economic Cooperation and Development, International Labor Organization, United Nations Commission on Transnational Corporations.

Ethics in Global management

International Business Ethics, the business conduct or morals on MNCs in their relationship with individuals and entities, ethics vary based on the cultural value system in each country or society.

Ethical use of Technology

Varied expectations about the use of technological devices/ programs as they intersect with people’s lives.

Managing the Corruption

Foreign Corrupt Practices Act (FCPA), Organization for Economic Cooperation and development convention on bribery.

Three Tests of Ethical Corporate Actions

Is it Legal? Does it work in the long run? Can it be talked about?

Policies to Help MNCs to Confront Concerns About Ethical Behavior and Social Responsibility

Develop worldwide code of ethics, build ethical policies into strategy, plan regular assessment of the company’s ethical posture, if ethical problems cannot be resolved, withdraw from that market.

The Process for companies to combat Corruption and to Minimize the Risk of Prosecution

Having a Global compliance system which shows that employees have understood, and signed off on, the legal obligations regarding bribery and corruption in the countries where they do business, making employees aware of the penalties and ramification for lone actions, such as criminal sanctions, having a system in place to investigate any foreign agents and overseas partners who will be negotiating contracts, keeping an effective whistle-blowing system in place.

Managing Subsidiary- Host country interdependence

Common criticism of MNC Subsidiary activities, MNCs locally raise their needed capital, contributing to a rise in interest rates in host countries, the majority of the stock of subsidiaries is owned by the parent company. Host-Country people have little control over the operations within their borders, MNCs reserve the key managerial and technical positions for expatriates, instead of developing host-country personnel, MNCs do not adapt technology to the conditions in host countries, MNCs concentrate

Subcultures

Diverse groups within a country that may not conform to the national character.

Religion and the Workplace

The influence of shared beliefs and values on moral and economic norms in business transactions and behaviors.

Cultural Value Dimensions

Society's ideas about what is good or bad, right or wrong, which determine how individuals respond in different circumstances.

Hofstede's Value Dimensions

Power Distance, Individualism, Uncertainty Avoidance, Collectivism, Indulgence, Masculinity.

Critical Operational Value Differences

Differences in temporal values, control and pace of change, material factors, and individualism.

Developing Cultural Profiles

Gathering information on cultural variables, developing profiles of various countries, and anticipating differences.

The Impact of Social Media on Global Business

Managers grappling with how to benefit from social media networks as potential sources of rich information.

The Culture-Communication Link

Trust in communication varies across societies, and guidelines can be followed to improve communication.

Cultural Variables in Communication

Attitudes, social organization, thought patterns, roles, language, and nonverbal communication.

How Feng Shui Affects Business

The use of energy patterns and design elements to influence positive results in business.

Object Language/Material Culture

Communication through material artifacts, such as clothing, cosmetics, and architecture.

Context

Differences between high context and low context cultures in expressing feelings and thoughts.

Information Systems

Differences in information flow and communication based on organizational structures and cultural contexts.

Speed of Information

Differences in expectations and channels of information exchange between cultures.

Relationship Communication vs

Differences in communication styles focusing on relationships or tasks.

Group Orientation vs

Differences in cultural preferences for group or individual decision-making.

Information Technology

Going Global and Acting Local:The need for cultural sensitivity in global online strategies.

Developing Cultural Sensitivity

Tips for avoiding cultural mistakes, such as familiarizing oneself with local geography and avoiding slang.

Managing Cross-Cultural Communication

Strategies for effective communication, including careful encoding and decoding, selective transmission, and building relationships.

Facilitating Intercultural Communication

Openness, resilience, and the importance of cultural localization on the internet.