Ch 1 Expanding Abroad: Motivations, Means, and Mentalities

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Ch 1Expanding 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.
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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

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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

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International Business Strategies

• Multidomestic strategy
• Global strategy
• Transnational strategy

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Four Basic Strategies
Cost and adaptation pressures have implications
for international strategies
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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.

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Multidomestic Strategy
Assets, responsibilities decentralized
Formal control systems
HQ
International mentality
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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

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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.

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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.  

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Multidomestic Strategy
Loose controls strategic decisions remote
HQ
Financial reporting flows
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Multidomestic Strategy Example
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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
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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

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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.
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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
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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

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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

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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.
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Global vs. Multidomestic
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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

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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)

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Global Business Strategies
Multinational Strategy
International Strategy
Transnational Strategy
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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

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Global Strategy
Tight controls centrally driven strategy
HQ
One-way flows, goods, information, and resources
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Global Strategy Example
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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

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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

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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.

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

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Transnational Strategy
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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

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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
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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

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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

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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

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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

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Strategic Approach, Organizational Concerns
Intl Human Resource Management Approach to Be
Used
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3 Types HQ Orientation Toward Subsidiaries in
Intl Enterprise
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Intl Executives View of Forces Obstacles
toward Geocentrism in their Firms
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Business Case Analysis The Tortuous Evolution
MNC

• Reading 1-1
• Ch 1
• Jan 16, 2008

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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)

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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.

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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)

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Assumptions (Optional)
52
Possible Solutions (Pros and Cons)
53
Recommended Solutions
54
Implementation Issues (If any)
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Common Types ofKey Success Factors
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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.)
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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
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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.

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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  
 

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Affiliate Competence Affiliate Initiative
 
 
This diagram is adapted from a diagram in
Bartlett and Ghoshal's "Tap Your Affiliates for
Global Reach".
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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.

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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

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Global Human Resource Management

• Organizational Structure And Strategy

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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

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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

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Motives to Go International
Market-Seeking Motives
The Historically Indigenous Firm
Cost-Reduction Motives
Strategic Motives
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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

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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

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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

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The Pre-International Division Structure
Chief Executive Officer
etc.
Production
Finance
Marketing
Personnel
RD
Export Manager Or Export Department
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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)
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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
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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.
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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
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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
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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
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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
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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

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Multidimensional Perspectives

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

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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

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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
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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

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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

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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
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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

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TRANSNATIONAL MANAGEMENT
LECTURE SUMMARY X

• MANAGING A GEOGRAPHIC SUBSIDIARY

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NATIONAL SUBSIDIARY MANAGER
GLOBAL EFFICIENCY AND COMPETITIVENESS
NATIONAL RESPONSIVENESS AND FLEXIBILITY
WORLDWIDE INNOVATION AND LEARNING
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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
(No Transcript)
125
Categorizing Objectivesand Strategies of
Competitors
126
Common Types ofKey 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