Chapter 7Implementing Strategy Continuing on from Chapter .docx

Chapter 7:
Implementing Strategy: Continuing
on from Chapter Six
Strategic Alliances; Small Businesses; Emerging Economy
Firms
1
© 2010 Pearson Prentice Hall
Chapter Learning Goals
Realize that much of international business is conducted
through strategic alliances.
Understand the reasons that firms seek international business
allies and the benefits they bring.
Become familiar with the ways that SMEs can expand through
alliances with MNCs
Recognize the changing factors, opportunities, and threats
involved in joint ventures in the Russian Federation.
7-2
2
7-3

Focus on how emerging economy firms can implement
expansion strategies
Understand the complexities involved in managing international
joint ventures.
Appreciate the governmental and cultural factors that influence
strategic implementation; as well as the impact of e-commerce.
7-4
Realize that much of international business is conducted
through strategic alliances.
7-6
Understand the reasons that firms seek international business
allies and the benefits they bring.
Strategic Alliances
(Cooperative Strategies)
7-6

6
Strategic Alliances
Partnerships between two or more firms that combine financial,
managerial, and technological resources and their distinctive
competitive advantages to pursue mutual goals
Strategic Alliances
(Cooperative Strategies)
7-7
Alliances are transition mechanisms that propel the partners’
strategies forward faster than would be possible for each
company alone allowing organizations to respond to the
globalization of the marketplace and the opportunities presented
by technological advances.
7
7-8

Become familiar with the ways that SMEs can expand through
alliances with MNCs.
Categories of Strategic Alliances
7-9
Joint ventures (JVs) are independent entities jointly created and
owned by two or more parent companies.
An international joint venture (IJV) is a joint venture among
companies in different countries.
An example of a 50-50 IJV is between France’s PSA Peugeot-
Citroen Group and Japan’s Toyota in the Czech Republic. From
this IJV Toyota gains knowledge of suppliers and their
capabilities from one of Europe’s biggest indigenous car
makers. Peugeot-Citroen gains experience from Toyota’s
manufacturing system .
9
7-10
In equity strategic alliances two or more partners have different
relative ownership shares in the new venture.
An example is TCL-Thompson Electronics. France’s Thompson

owns 33% of the combined company and China’s TCL owns
67%.
Most global manufactures have equity alliances with suppliers,
sub assemblers, and distributors.
10
7-11
In non-equity strategic alliances, agreements are carried out
through contract rather than ownership sharing.
Such contracts are often with suppliers, distributors, or
manufacturers, but they also may be for the purposes of
marketing and information sharing.
An example is UPS, which has a non-equity alliance with Nike.
Nike contracts with UPS to manage its entire supply chain from
factory, to warehouse, to customer, to repair.

11
7-12
Global strategic alliances are working partnerships between two
or more companies across national boundaries and/or industries.
Alliances also can be formed between companies and
government .
Alliances may comprise full global partnerships (e.g., joint
ventures in which two or more companies retain their national
identities but develop a common, long-term strategy).
Alliances may be more narrow and specific (e.g., aimed at
production, marketing, or research and development).
12
Global and Cross-Border Alliances: Motivations and Benefits
7-13
13
To avoid import barriers , licensing requirements, and

protectionist legislation
To reduce political risk while making inroads into a new market
To share the costs of research and development of new products
and processes
7-14
For Example
In the semi-conductor industry each new generation of memory
chips is estimated to cost more than $1 billion to develop and
technological evolution is rapid.
In this and similar industries, such endeavors usually require
the resources of more than one firm.
For example, Toshiba has more than two dozen major joint
ventures and strategic alliances around the world .
14
7-15
Alliances can also reduce political risks while making inroads
into a new market .

Hong Kong Disneyland is jointly owned by the Chinese
government , which owns a 57% stake.
Beijing is interested in promoting tourism through the venture
and in the employment of 5,000 Disney workers and 18,000
workers in related services.
15
7-16
16
To gain access to specific markets where regulations favor
domestic companies; China, Russia
To gain rapid entry into a new or consolidating industry, to take
advantage of synergies, and overcome strong competition.

7-17
Challenges in Implementing Global Alliances
Alliances: faster and less risky route to globalization
Problems with
Shared ownership
differences in national cultures
Integration of vastly different
Conflicts in decision making and control
Challenges in Implementing Global Alliances
Many alliances fail or end up in takeover
Choosing the right form of governance: depends on the desire to
control information about proprietary technology.
joint ventures provide greater control and coordination in high-
technology industries.
Often cross-border partnerships become a “race to learn,” with
the faster learner later dominating the alliance.
Partners also often have problems with mistrust and secrecy
when it comes to competitively sensitive areas.
7-18

18
Guidelines for Successful Alliances
7-19
19
Choose a partner with compatible strategic goals and objectives.
Seek comple-mentary skills, products, and markets
Work out how each partner will deal with propritary knowledge
or competitively sensitive information
Recognize that most alliances only last a few years
7-20
Recognize the changing factors, opportunities, and threats
involved in joint ventures in the Russian Federation.

Comparative Management in Focus:
JVs in Russian Federation
7-21
Russia can be an attractive market for foreign companies. The
ruble is now convertible and more stable, there is unexploited
natural resource potential, and it has a skilled, educated
population of 145 million.
At the same time, though, Russia poses many risks and, at the
very least, confusion for potential investors. For instance,
President Putin has sought to take control of key industries
(e.g., banks, newspapers, and oil).
The state-controlled oil giants, Gazprom and Rosneft can only
have foreign investors if those investments are in the minority .
A survey of investors found many think doing business in
Russia is more risky and less profitable than doing business in
China, India, or Southeast Asia.
21
Comparative Management in Focus: Guidelines for Establishing
7-22
More

22
Investigate whether a joint venture is the best strategy—
acquiring a Russian business may be better.
Set up meeting with appropriate authorities well in advance.
Be above board in paying taxes .
Set up stricter controls and accountability systems.
Comparative Management in Focus: Guidelines for Establishing
7-23
23
Make it clear your firm does not pay bribes
Assign the firm’s best managers and given them enough
authority

Take advantage of local knowledge by hiring Russian managers
Designate considerable funds for promotion and advertising to
establish an image
7-24
Focus on how emerging economy firms can implement
expansion strategies.
Strategic Implementation
7-25
25
Involves putting decisions about global alliances and entry

strategies into action
Successful implementation requires creating a “system of fits”
Resources must be allocated: Budget, Facilities, Equipment,
People, Etc.
Leadership is the key
In equity alliances, roles of decision makers must be clearly
understood.
7-26
26

Implementation McDonald’s Style
Form paradigm-busting arrangements with suppliers.
Hire locals whenever possible.
Know a country’s culture before you hit the beach.
Tweak the standard menu only slightly from place to place.
Keep pricing low to build market share. Profits will follow
when economies of scale kick in.
Maximize autonomy .
Implementing a Global
Outsourcing Strategy
7-27
outsourcing abroad is often in the news because of concerns
about jobs being “lost” to others overseas .
However, the strategic view of outsourcing is that it can
produce gains in efficiency, productivity, quality, and
profitability by fully leveraging talent around the world. For
example, Proctor & Gamble (P&G) outsources IT infrastructure

and Human resources around the world.
27
Implementing a Global
Outsourcing Strategy
7-28
28
Examine your reasons for sourcing .
Evaluate the best outsourcing model.
Gain the co-operation of manage-ment and staff.

Consult your alliance partners.
In in the alliance.
7-26
Global Supply Chain Risks: The Japanese Disaster
Supply chains have become larger and far more complex to
manage
disrupted supply chains
Auto industry particularly hard hit
Control/risk became issues
7-30
Challenges in Implementing Strategies in Emerging Markets
“Foreign” firms are often surprised they have trouble competing
successfully with local firms
Challenges:
Poor infrastructure
Supply chains/distribution networks
Personal challenges
7-31
Understand the complexities involved in managing international
joint ventures.

Managing Performance in
International Joint Ventures
7-32
32
IJV Control
Ensures that the way a joint venture is managed conforms to the
parent company’s interests
Choice of Partner
Choice of partner is the most important single factor
determining IJV success or failure .
Orgznal. Design
The strategic freedom in choosing suppliers, product lines,
customers, and so on

Even so, many firms rush the partner selection process because
they are anxious to make inroads into an attractive market.
Three Complementary Dimensions
of IJV Control
7-33
Let’s Look
33
IJV Control
Contractual links with parents
IJV General Manager
Autonomy of IJV
Three Complementary Dimensions
of IJV Control
7-34

The extent of control is primarily determined by the decision-
making autonomy granted to the IJV management, which is
dependent upon how much confidence the partners have in the
top IJV managers .
Mechanisms for control include the parent organizational and
reporting structure, staffing policies, and close coordination
with the IJV general manager. Monitoring the general manager
includes bonuses and career opportunities and requiring
executive committee approval for specific decisions and
budgets.
34
7-35
Knowledge Management in IJVs
Managing the performance of an IJV for the long term, as well
as adding value to the parent companies, necessitates managing
the knowledge flows within the IJV network .
Managers must recognize that it is critical to overcome cultural
and system differences in managing knowledge flows in order to
gain advantage for the alliance.
Knowledge management is the active management of creating,
disseminating, evolving, and applying knowledge to strategic
ends.

35
7-36
Knowledge Management in IJVs
Transfer : managing the flow of existing knowledge between
parents and from the parents to the IJV.
transformation : managing the Transformation and creation of
knowledge within the IJV through its independent activities
Harvest : managing the flow of transformed and newly created
knowledge from the IJV back to the parents
36
7-37
Appreciate the governmental and cultural factors that influence
strategic implementation; as well as the impact of e-commerce.
Government Influences on
Profitability impacted by taxation and restrictions on
repatriation

Unpredictable changes in governmental regulations
China’s new restrictions on foreign investors prolonging the
time to decision approval .
$2.5 billion tax bill for Vodaphone in India
7-38
38
Cultural Influence on Strategic Implementation: Western ex-
pats vs. Hungarian managersWesternHungarianTeam
OrientationIndividual OrientationConsensual Management
StyleAutocratic StyleFuture planning mentalitySurvival
Mentality
7-39
39
Dimensions of National and Corporate Culture Affecting
Alliances: U.K. vs. Europe
7-40
Organizational formality
Participation in decision making
Attitudes toward risk

systemization of decision making
Managerial self-reliance
Attitudes toward funding and gearing (financial leveraging)
40
7-41
French Managers Comment on the U.S.
Americans have difficulty accepting foreign managers
Americans have difficulty developing a world perspective
Americans are very U.S.-oriented; the least international of all
people
7-40
E-Commerce on Strategy Implementation
Outsourcing necessary tasks to e-commerce
Help companies sort through the maze of difficult taxes, duties,
language translations, etc.
Next-Linx: applies technology for strategic implementation
7-43
Conclusion

Cross-border strategic alliances are formed for many reasons:
market expansion, cost/technology-sharing, avoiding
protectionism, synergies
SMEs can leverage network relationships to accelerate the
internationalization process
Alliances take many forms, but can fail in the strategic
implementation phase
Emerging economy firms have to move quickly
Successful alliances require compatible partners and the
creation of a system of fits
Differences in national culture and changes in the political
arena can affect implementation
6-1
Chapter 6:
Formulating Strategy
1
Understand why companies engage in international business.
Learn the steps in global strategic planning and the models
available to direct the analysis and decision making involved.
Appreciate the techniques of environmental assessment, internal

and competitive analysis, and how those results can be used to
judge the relative opportunities and threats to be considered in
international strategic plans.
6-2
2
Profile the types of strategies available to international
managers—both on a global level and on the level of specific
entry strategies for different markets.
Gain insight into the issues managers face when strategic
planning for the emerging market.
6-3
3
Opening Profile: Global Companies Take Advantage of
Opportunities in South Africa
Businesses are taking advantage of opportunities because of the
legal protection of property, labor productivity, low tax rates,
reasonable regulation, a low-level of corruption and good access
to credit, as factors contributing to the country’s investment
climate.

threats include the low level of skills and education of workers,
labor regulation, exchange rate instability, and crime.
Nevertheless, the business climate is favorable.
6-4
4
Opening Profile: Global Companies Take Advantage of
Opportunities in South Africa
global companies with a presence in South Africa all cite
numerous advantages for setting up shop in the country, from
low labor costs to excellent infrastructure – and a base to export
products internatioally .
According to South Africa’s Chamber of Commerce, nearly 50%
of the chamber’s members are Fortune 500 companies, and that
over 90% operate beyond South Africa’s borders into southern
Africa, sub-Saharan Africa and across the continent.
6-5
5
6-6

Understand why companies engage in international business.
Strategic Planning and Strategy
6-7
7
Strategic Planning
More complex than domestic strategic planning because of more
complex variables
Strategy
The basic means by which the firm competes
Reasons for Going International
Reactive/Defensive

Proactive/Aggressive
6-8
Globalization of competitors
Trade barriers
Regulations and restrictions
customer demands
Economies of scale
Growth opportunities
Resource access and cost savings
incentives
8
Management in Action: Mexico’s Cemex
Until 2009, aggressively grew through acquisitions; Rinker
Group in Australia, RMC in Britain
-cutting and retrenchment
Selling assets, negotiating with creditors, cutting workforce
As of August 2011, Cemex had secured a $15 billion
restructuring deal and cut 11% of its workforce worldwide
6-9
9
Strategic Management Process

6-10
The global formulation process parallels the domestic process,
but it is more complex because of the greater difficulty in
gaining accurate and timely information, the diversity of
geographic locations, and the differences in political, legal,
cultural, market, and financial processes.
The strategic planning process identifies potential opportunities
for (1) appropriate market expansion, (2) increased profitability,
and (3) new ventures for exploiting strategic advantages .
10
Strategic Management Process
6-11
EXHIBIT 6-1 The Strategic Management Process
This figure demonstrates the process is comprised of two
primary phases: planning and implementation .
In reality, the stages depicted in this slide are rarely so linear.
Instead, the process in continuous and intertwined .
11

Steps in Developing International
and Global Strategies
6-12
Let’s Look
12
Mission and Objectives
Environmental Assessment and Scanning
Internal and Competitive Analysis
Global Integrative and Entry Strategy Alternatives
Strategic Choice, Implementation, Feedback, and Control
Step 1: Establish Mission and Objectives
6-13
The mission for an organization defines the company’s function
in society. It determines the company’s direction and provides a

basis for strategic decision making. Objectives flow from the
mission .
13
Marketing
Worldwide, regional, national market share
Production
Production volume
Finance
Tax burden
Economies of scale
Capital structure
Step 1: Establish Mission and Objectives
6-14

14
profitability
ROA
R & D
Global patents
ROE
ROI
6-15
Step 2: Assess External Environment
There are multiple variables and multiple levels to assess.
15

Environmental Scanning Variables
6-16
scanning should cover these major variables. Perhaps the most
important of these is conducting an international competitor
analysis, which entails answering questions such as: Will the
infrastructure support new companies in that industry? Is there
room for additional competition? What is the relative supply
and demand for the proposed product or service? What are your
competitors’ positions, their goals and strategies, and their
strengths and weaknesses, relative to those of our firm?
16
International Competition
Nationalism
Technological, Legal, Physical Restraints

Political and Economic Risk
Institutional Effects on
6-17
17
Attractiveness of Overseas Markets
The extent to which countries have institutions to promote the
rule of law to outside investors
Entry Barriers and Industry Attractiveness
Creating barriers to entry in certain industries and making those
industries more attractive (profitable) for incumbent firms
Institutional Effects on

6-18
18
Antidumping as an Entry Barrier
The current U.S. antidumping laws place a foreign entrant at a
disadvantage if accused of “dumping ”.
Step 3: Analyze Internal Factors
Internal Analysis
6-19
Key Success Factors:
Technological capability: Apple
Distribution channels: Wal-Mart
Promotion capabilities: Disney
Internal analysis involves weighing the company’s options
relative to its strengths and weaknesses .
Company’s must identify their key success factors and
determine how they can help the firm exploit foreign
opportunities.

19
Step 3: Analyze Internal Factors
Competitive Analysis
6-20
Distinctive competencies
SWOT analysis
Comparative advantage
E-Business
Executives assess the firm’s capabilities and key success factors
compared to those of its competitors .
This process enables strategic planners to determine where the
firm has distinctive competencies that might lead to sustainable
competitive advantage.
Most companies develop their strategies around these
distinctive competencies, or key strengths. They are usually
difficult for competitors to imitate .
20
Strategic Decision-Making Models
6-21
global, regional, and country factors and risks are part of the
considerations in an institution-based theory of existing and
potential risks and influences on the host area.
The firm’s competitive position in its industry can be reviewed
using Porter’s industry-based five-forces model. The five forces

are (1) the level of competition already in the industry, (2) ease
of entry into the field, (3) how much power suppliers in the
industry have, (4) how much power buyers in the industry have,
and (5) the extent of substitute products available.
21
Strategic Decision-Making Models
6-22
EXHIBIT 6-6 A Hierarchical Model of Strategic Decision
Making
This resource based-view entails considering the unique value
of the firm’s competencies and that of its products or services.
22
Step 4: Evaluate Global and International Strategic Alternatives
6-23
The strategic planning process involves considering the
advantages (and disadvantages) of strategic alternatives.
While weighing alternatives, managers take into account the

goals of their firms and the competitive status of other firms in
the industry .
23
Alternative Strategies
Global
Regionalization/Localization
Global Integrative
Pressures to Globalize
Increasing competitive clout resulting from regional trading
blocs
Declining tariffs
Information technology explosion
Companies work to increase global economies of scale by
standardizing products, offshoring manufacturing, and
international cash flows.
6-24

24
Regionalization/Localization
When competitiveness is determined on a country-by-country
basis rather than on a global basis, regional strategies are more
appropriate than globalization.
Local markets are linked together within a region, allowing
local responsiveness.
The impetus:
Unique consumer preferences
Domestic subsidies
New production technologies
6-25
25
6-26
Cage Distances Between Countries
cultural Distance
Administrative Distance
Geographical distance

Economic Distance
Global Integrative Strategies
Many MNCs have developed their global operations to the point
of full integration, including suppliers, productive facilities,
marketing and distribution outlets, and contractors around the
world .
Example: Dell
Factories in Ireland, Brazil, China, and so on
Assembly and delivery system from 47 locations around the
world
Little inventory, ability to change operations quickly
6-27
27
E-Business for Global Expansion
Can facilitate rapid expansion.
6-28
See EXHIBIT 6-7 Benefits of B2B
However, it also is a strategy with several challenges, including
cultural differences, varying business models, and questions
over which country has jurisdiction and responsibility for cross-
border electronic transactions.
E-business is really a new industry, with a different pool of

competitors and new sets of environmental issues.
28
E-Global or E-Local?
E-Global When:
E-Local When:
6-29
Trade is global in scope.
Business does not involve delivering orders.
When the business model can be easily hijacked by local
competitors .
Production and consumption are regional in scope.
customer behavior and market structures differ across regions,
but are similar within a region .
Supply-chain management is very important to success.
29
Step 5: Evaluate Entry Strategy Alternatives
6-30
Let’s Look

30
Exporting
Licensing
Franchising
Contract Manufacturing
Offshoring
Service Sector Outsourcing
Turnkey Operations
Management Contracts
International Joint Ventures
Fully Owned Subsidiaries

9-31
Foreign Market Options: Entry without Ownership
Exporting
direct
Sales directly to customers
Indirect
Sales through agent or distributor
intercorporate transfer
Sales to affiliated unit
31
9-32
Exporting
Pluses
Fairly inexpensive
Easy foreign access
No ownership risks
Minuses
Missed location economics
logistical difficulties
Transportation
Communication

32
9-33
Foreign Market Options: Entry without Ownership (cont’d)
licensing
Selling the rights to use brand names, technology, or other
intellectual property
franchising
Contractual right to use methods, procedures, trademarks,
market strategies
management contracts
Specific services for established fee
turnkey projects
Contract to design and build facility
9-34
Licensing
Pluses
Fairly inexpensive
Useful where trade barriers/tariffs preclude exporting
Leverages local economics without ownership risk
Minuses
Risky where intellectual property protection weak
Control ceded to licensee may inhibit coordination
May create new competitors

34
9-35
Franchising
Pluses
low cost, low risk
Offers more control than licensing
Builds presence fast
Minuses
Control still an issue
franchise may not be motivated to adhere to franchiser's
standards
9-36
Management Contracts
Pluses
Very inexpensive
Low-risk revenue
Minuses
No long-term presence
May create competitors
9-37
Turnkey Projects
Pluses
An option if direct investment is out

Lowers risk if long-term instability exists
Minuses
No long-term presence
May create competitors
Vulnerable to political and legislative changes
9-38
Foreign Market Options: Entry with Ownership (cont’d)
Greenfield Approach
wholly owned subsidiary starting from scratch
Acquisition Approach
Wholly owned subsidiary through purchase
Joint ventures
Joint creation of separate legal entity (split varies)
Other Strategic Alliances
Production, research and development, financial, marketing
9-39
Greenfield Subsidiaries
Pluses
Allows high control
Offers location economics
Can pick own site, workers, technology
Minuses
Very expensive
Time-consuming setup
Requires international expertise
Ownership risk

9-40
Acquired Subsidiaries
Pluses
Allows high control
rapid market entry
Offers location economics
Minuses
Risky due to ownership
cultural differences may be formidable
Potential buying problems
9-41
Joint Ventures
Pluses
Less financial risk than subsidiary
Leverages partner’s resources , know-how
Minuses
Risks giving some control or technology to partner
Still some ownership risk
41

Comparative Management in Focus: Strategic Planning for
Emerging Markets
Increasing business opportunities for companies wanting to set
up operations in or export to emerging markets
Different countries are at different levels of development and
have different risk/return profiles
Usually entails higher risk
6-42
42
Emerging Market Attractiveness for Retail Strategies
Brazil 1 5
Uruguay 2 8
Chile 3 6
India 4 3
Kuwait 5 2
China 6 1
Saudi Arabia 7 4
Peru 8 9
U.A.E. 9 7
Turkey 10 18
Russia 14 10
6-43
Country 2011Rank 2010 Rank

43
Comparative Management in Focus: Strategic Planning for
Emerging Markets
One size does not fit all: different infrastructure, socio-
economic and regulatory challenges, different environmental
and geographic constraints
Potential for innoation , not just new customers
6-44
44
6-34
Top Three Strategic Objectives
6-37
Operating Model for Emerging Markets

The Influence of Culture on
Strategic Choice and Timing Entry
China and Japan have longer-term time horizons than the United
States.
High uncertainty avoidance cultures (e.g., Latin American,
African countries) prefer non-equity modes of entry.
High power distance cultures (e.g., Arab countries and Japan)
tend to use more equity modes of entry abroad .
6-47
47
6-40
Conclusion
Proactive and reactive reasons for going international
Rational planning; mission and objectives; threats and
opportunities; internal strengths and weaknesses; entry
strategies
Competitive analysis
Globalization vs. regionalization
E-business

5-1
Chapter 5:
Cross-Cultural Negotiation
and Decision Making
1
Learn how to prepare for cross-cultural business negotiations.
Recognize the need to build trusting relationships as a
prerequisite for successful negotiations and long-term
commitments.
Be aware of culturally-based behavioral differences, values, and
agendas of the negotiating parties.
Learn the complexities of negotiating with the Chinese
5-2
2
Appreciate the variables in the decision-making process and

understand the influence of culture on decision making.
Become familiar with the Japanese decision-making process and
how it is influenced by their cultural norms.
5-3
3
Negotiations by Global Managers
Specific plans for strategies and for continuing operations
May also be faced with negotiating with government-owned
companies
Managers must prepare; operational details must be negotiated:
staffing, raw materials, profits, etc.
Decision-making processes are key
5-4
4
Negotiation

5-5
The process of discussion by which two or more parties aim for
mutually acceptable agreement
5
5-8
Important Differences
Amount and type of preparation
Tasks vs. interpersonal relationships
General principles vs. specific issues
Number of people present and their influence
Stakeholders in
Cross-Cultural Negotiation
5-7

7
Negotiation becomes complex and challenging when it takes
place between people of different cultural values, lifestyles,
expectations, languages, and problem-solving techniques.
Cultural differences include the extent to which parties
emphasize the task over relationships, spend time in
preparation, rely on general principles rather than specific
issues, engage many or few people in the process, etc.
8
Negotiation
5-9
Recognize the need to build trusting relationships as a
prerequisite for successful negotiations and long-term
commitments.
The Negotiation Process
5-10
Let’s Look

10
Stage One: Preparation
5-11
Develop profile of counterparts.
Find out likely demands, team composition, and counterpart
authority.
Choose a negotiation site.
11
Stage Two: Relationship Building

5-12
Getting to know one’s contacts
and building mutual trust
Non-task sounding: Polite/Informal communication before the
meeting.
Use an intermediary.
“I have come as a mediator…”
12
Using an Intermediary
It usually is recommended that managers new to a given
scenario use an intermediary—someone who already has the
trust of the foreign managers and, thus, acts as a “relationship
bridge.”
5-13
13

Stage Three: Exchanging
Task-Related Information
Each side typically makes a presentation and states its position.
Then a Q&A and alternatives are discussed.
To Americans, this phase is straightforward, objective,
efficient, and understandable. Negotiators from other countries,
however, may continue to be indirect during this stage.
Adler suggests the most effective negotiators practice role
reversal to show understanding of their counterpart’s viewpoint.
Doing so may open up a wider range of alternative solutions.
5-14
14
Stage Three: Exchanging
Task-Related Information
5-15
Cultural differences remain an issue.
The French enjoy debate and conflict.
Mexicans can be suspicious and indirect.
The Chinese ask many questions, but provide ambiguous

information in return.
Show understanding of the
other viewpoint.
15
Stage Four: Persuasion
5-16
Dirty tricks are in the eye of the beholder
False information
Ambiguous authority
Non-verbal messages
Individualism vs. Collectivism

16
Stage Five: Concessions
and Agreement
5-17
Russians and the Chinese start with extreme positions
Swedes start with what they will accept
Starting with extremes may be most effective
Linear vs. holistic
Importance of contracts
Well-prepared negotiators are aware of various concession
strategies across cultures and have decided ahead of time what
their own strategy will be.
17

Management Focus: Cultural Misunderstanding—Joint Venture
in China
Good example of when negotiations were not complete prior to
entering into a business relationship.
Sino-French joint venture was formed in March 1996 by Group
Danone and Hangzhou Wahaha Group Co.
Between 1996 and 2009, a number of issues and disputes took
place within the JV.
Both kept on blaming each other for breach of contract.
The Danone–WHH case became so much embroiled that Chinese
and French governments asked the companies to negotiate an
“amicable” resolution.
5-18
18
Management Focus: Joint Venture in China
A Few Lessons We Learn
Cross-cultural misunderstandings and unfamiliarity with the JV
partners were at the heart of the dispute.
Both companies used media and PR companies instead of having
open negotiations.
Relationship building and exchange of information is critical in
any JV.
There was lack of open communication in day-to-day
management of the JV.
In JVs, relationship building takes time and a good amount of

interaction between the partners.
5-19
19
Comparison of Negotiation StylesJapaneseNorth AmericanLatin
AmericanHide emotionsDeal impersonallyEmotionally
passionateSubtle power playsLitigation, not conciliationGreat
power playsStep-by-step approachMethodological
organizationImpulsive, spontaneousGroup good is the aim
Profit is the aimGroup/
individual good is aim
5-20
20
Successful Negotiators
See next five slides to see some of the attributes of successful
negotiators.
21

Successful Negotiators: Americans
Knows when to compromise, but stands firm at the beginning.
Accept compromises only when there is a deadlock.
Refuses to make concessions beforehand and keeps his/hers
cards close to chest.
Keeps a maximum of options open before negotiation, operate
in good faith.
States his/her position as clearly as possible, respects the
“opponents”.
Is fully briefed about the negotiated issues, has a good sense of
timing and is consistent.
5-22
22
Successful Negotiators: Indians
Look for and say the truth, not afraid to speak up.
Exercise self-control.
Respect other party, look for solutions acceptable to all parties.
Will change their minds, even at risk of seeming inconsistent
and unpredictable.
Humble and trusts the opponent

5-23
23
Successful Negotiators: Arabs
Protect honor, self-respect, dignity, and, thus, are trusted and
respected.
Avoid direct confrontation.
Come up with creative, honorable solutions.
Are impartial and can resist pressure.
Can keep secrets
Controls temper and emotions
Arabs use mediators to settle disputes as is part of Islamic
tradition.
5-24
24

Successful Negotiators: Swedes
Quiet, thoughtful, polite, straightforward
Overcautious, but flexible
Slow to react to new proposals, but eager to be productive and
efficient
Able to hide emotions, afraid of confrontation
5-25
25
Successful Negotiators: Italians
Have a sense of drama, do not hide emotions
Good at reading facial expressions and gestures
Want to make a good impression and use flattery, but are
distrusting
Handle confrontation with subtlety and tact
5-26
26
Managing Negotiation

Examples
5-27
Avoid person-related conflicts. That invite negative responses.
Happens often when context is not understood.
Low-context Americans appear impatient, cold, and blunt to
Mexicans.
Americans must approach negotiations with Mexicans with
patience; refrain from attacking ideas.
27
5-28
Be aware of culturally-based behavioral differences, values, and
agendas of the negotiating parties.
Cross-Cultural Negotiation Variables
5-29

EXHIBIT 5-5 Cross-cultural Negotiation Variables
29
5-28
Successful management of negotiation requires the negotiator to
go beyond the general issues and variables involved.
Rather, he or she must gain specific knowledge of the parties,
prepare accordingly to adjust to and control the situation, and
be innovative.
5-28
Consider a wider range of options and pay greater attention to
areas of common ground
Tend to make twice as many comments regarding long-term
issues
More likely to set upper and lower limits regarding specific
points
Make fewer irritating comments: “We’re making you a generous
offer”
Make counter proposals less frequently and use fewer reasons to
back up arguments

Actively listen
Using the Internet to
Support Negotiations
Negotiation Support System (NSS)
Web Application
5-32
Increase likelihood of agreement
Decrease direct and indirect costs
Maximize optimal outcomes
E.g. INSPIRE
Provide support for phases and dimensions such as:
Multiple-issue, multiple-party business transactions of a buy-
sell nature
International dispute resolution
Internal company negotiations and communications
32
E-Negotiations
Advantages
Disadvantages

5-33
Speed
Less travel
Laying out much objective information over time
Not being able to build trust and interpersonal relationships
Nonverbal nuances are lost
Video conferencing may be a good compromise
33
5-34
Learn the complexities of negotiating with the Chinese
Comparative Management in Focus: Negotiating with Chinese
5-35
The process of negotiation used by the Chinese is often
mystifying to Westerners.
For example, the Chinese tend to put more emphasis on respect,
friendship, saving face, and group goals.
Chinese appear impersonal and aloof to Americans.

Americans appear erratic and somewhat frivolous to the
Chinese.
35
5-36
Two problems:
Chinese desire for details
Apparent insincerity
Saving face:
Lien
Mien-tzu
Importance of harmony
Guanxi
Guanxihu networks
Two stages of Chinese negotiation
Technical
Commercial
Let’s Look

36
5-37
Two major areas of conflict with the Chinese are their desire for
a large amount of detail about product characteristics and their
apparent insincerity about reaching an agreement.
Regarding the latter, the Chinese often have little authority to
close a deal.
They must report to the government trade corporations, which
often have a representative on the negotiation team.
As such, Chinese negotiators are constrained within the
framework of state planning and political ideals.
37
5-38
When confronted with aggressive and emotional attempts at
persuasion, the Chinese often respond with negative strategies,
such as discontinuing or withdrawing from negotiation. The
concept of “face” is at the heart of such responses.

There are two components of face. Lien refers to a person’s
moral character, and it is considered the most important thing
defining a person.
Mien-tzu refers to one’s reputation or prestige, earned through
bureaucratic or political power. In negotiations, it is important
not to act as though you have “won” because that implies the
other party has “lost” and they will lose face.
38
Negotiating with Chinese
5-39
Strong social obligations and the need for harmony (i.e., in
terms of personal relationships, trust, and ritual) underlie
Chinese negotiations.
Guanxi refers to the intricate, pervasive network of personal
relations that every Chinese personally cultivates.
Guanxi establishes obligations to exchange favors in future
business activities.
Firms that have special guanxi connections and give preferential
treatment to one another are known as members of guanxihu
networks.
The Chinese also expect corporate goals and profit to be
subordinate to friendship, national development, and mutual
benefit.

39
5-40
Americans often experience two stages of negotiation with the
Chinese.
During the technical stage, every detail of the proposed product
specifications and technology is hammered out.
The commercial stage deals with aspects of production,
marketing, and pricing.
40
Some recommendations:
Practice patience.
Accept prolonged stalemate.
Refrain from exaggerated expectations.

Establish a contact in China
Remember to save ‘face’ for everyone
5-41
41
Managing the Conflict Resolution
Instrumental Oriented Conflict
5-42
42
To negotiate on the basis of factual information and logical
analysis.
Instrumental oriented conflict resolution often is used by
Americans and in other low-context cultures.

Addresses conflict directly and explicitly, and conceptually
separating the conflict from the person doing the negotiation.
This type of conflict resolution is often based on factual
information and logical analysis.
Managing the Conflict Resolution
Expressive Oriented Conflict
5-43
43
To handle a situation indirectly and implicitly, without clear
delineation of the situation by the person handling it.
High-context cultures tend to use expressive oriented conflict
resolution. In this case, conflict is treated indirectly and
implicitly. Negotiators want to avoid confrontation because it
is viewed as insulting and can cause loss of face. As an
alternative, they rely on evasion and avoidance.
5-44
Negotiation Conflicts Between Low Context and High Context

Cultures
Low Context Conflict Area
High Context Conflict Area
Explicit and direct, linear presentation of facts
Individualistic, short-term oriented
Task-oriented, up-front, impatient
Implicit, circular logic
Collective, decisions by consensus; long-term oriented
“Face” and relationship-oriented; non-confrontational, patient
44
5-45
Appreciate the variables in the decision-making process and
understand the influence of culture on decision making.
5-46
Become familiar with the Japanese decision-making process and
how it is influenced by their cultural norms.

Comparative Management in Focus: Decision Making in
Japanese Companies
5-47
Let’s Look
47
Wa
Amae
Shinyo
Ringi
Japanese Companies
5-48
Amae is the Japanese concept of “indulgent love,” and was is
one aspect of amae.

Wa means “peace and harmony,” and it is the building block of
Japanese management—as indicated by the emphasis on
cooperation, participative management, consensus problem
solving, and long-term decision making.
Amae results in shinyo, which refers to the mutual confidence,
faith, and honor required for successful business relationships.
48
Japanese Companies
5-49
These elements generally result in a devotion to work, a
collective responsibility for decisions and actions, and a high
degree of employee productivity.
This culture and shared responsibility underlie the ringi system
of decision making.
49

Japanese Companies
5-50
EXHIBIT 5-8 Decision Making Procedure in Japanese
Companies
End Chapter 5
50
5-44
Conclusion
Managers need working knowledge of decision-making
processes and negotiating tactics used by managers in different
countries
It is important to understand the cultural variables that
influence negotiations and decision making, and how they
influence these activities
Managers should prepare for, and conduct negotiations with
cultural sensitivity
4-1
Chapter 4:
Communicating Across Cultures

1
Recognize the cultural variables in the communication process
and what factors can cause “noise” in that process.
Develop an awareness of differences in non-verbal behaviors,
context, and attitudes and how they affect cross-cultural
communication.
Understand the complexities of Western-Arab communications.
Be aware of the impact of IT on cross-border communications.
Learn how to successfully manage cross-cultural
communications.
4-2
2
Opening Profile: The Impact of Social Media on Global
Business
Managers in international businesses are grappling with the
question of how to benefit from social media networks
Social media are potential sources of rich information outside
the normal chain of communication

Measuring the effectiveness of each source of social media is a
challenge
4-3
3
The Communication Process
4-4
communication is the process of sharing meaning by
transmitting messages through media such as words, behavior,
or material artifacts.
There are several stages in this process in which meaning can be
distorted. Anything that undermines the communication of an
intended message is referred to as noise.
noise exists because people filter, or selectively understand,
messages consistent with their own expectations and
perceptions of reality, and their values and norms of behavior.
The more dissimilar the cultures of those involved, the more
likely it is misinterpretation will occur.
4

The Communication Process
4-5
5
Cultural Noise in the
Communication Process
4-6
When a member of one culture sends a message to a member of
another culture, intercultural communication occurs.
The message contains the meaning intended by the encoder, but
the decoder’s culture ends up becoming part of the meaning as
he/she interprets the message.
Attribution is the process in which people look for an
explanation of another person’s behavior.
When someone does not understand another, he/she usually
blames the confusion on the other’s stupidity, deceit, or
craziness.

6
Cultural Noise in the
Communication Process
4-7Behavior Attribution German: “What can be done to make
sure this project is completed on time?”German: “I am giving
him some responsibility.”
Indian: “He is the boss, why is he asking me?”Indian: “I don’t
know. What do you suggest?”German: “Can’t he take
responsibility?”
Indian: “I asked him for instructions.”
7
The Culture-Communication Link:
Trust in Communication
The meaning of trust and how it is communicated vary across
societies
When there is trust between parties, implicit understanding
arises within communications
Similarly, some cultures have a greater propensity to be trusting
than others.
Guidelines:
Create a clear and calculated basis for natural benefit

Improve predictability
Develop mutual bonding
4-8
8
The Culture-Communication Link:
The Globe Project
4-9
9
high Performance Orientation: United States
Present objective information directly and specifically
Low Assertivenss :
Sweden
Two-way discourse and friendly relationship

High Human Orientation:
Ireland
Avoid conflict, be supportive
Cultural Variables in Communication
4-10
Let’s Look
10
Attitudes
Sterotyping
Social Organization
United Auto Workers (UAW)

Thought Patterns
The meaning of double lines
Cultural variables can affect communication via a person’s
perceptions . The effects of these variables are interdependent
and inseparable.
Attitudes underlie our behavior, communication, and
interpretation.
ethnocentric attitudes are a particular source of noise.
Stereotyping occurs when a person assumes that every member
of a society or subculture has the same characteristics. Astute
managers deal with people as individuals .
11
The kinds of social organizations we belong to can influence
our perceptions .
Examples of social organizations include one’s nation, tribe,
religious sect, or profession.
The logical progression of reasoning varies widely across
cultures. managers cannot assume others use the same reasoning
processes.
12

4-13
13
Roles
decision making and responsibility
Language
When “yes” doesn’t mean “yes”
nonverbal communication is behavior that communicates
without words—though it often may accompanied by words.
“A picture is worth a thousand words.”
Subtle messages account for between 65 to 93 percent of

interpreted communication.
Minor variations in body language, speech rhythms, and
punctuality often cause mistrust and misperception of the
situation among cross - cultural parties.
4-14
Nonverbal Communication
14
The Media for Nonverbal Communication
kinesic behavior—communication through body movements
Proxemice the influence of proximity and space on
communication—both personal space and office space or layout
High-contact cultures: prefer to stand close and to experience a
“close” sensory involvement
Low-contact cultures: have a “distant” style of body language
Paralanguage how something is said rather than the content
4-15
15

The Media for Nonverbal Communication
Object language/material culture—the way we communicate
through material artifacts (office, cars, cosmetics, furniture,
etc.)
monochromic cultures (Switzerland, Germany, United States):
time is experienced in a linear way
polychromic cultures (Latin Americans, Arabs): tolerate many
things happening simultaneously and may focus on several
things at once
4-16
16
4-17
Forms of Nonverbal Communication
Facial expressions ; eye contact
Body posture ; interpersonal distance
Body contact

Clothing cosmetics; hairstyles
para language: Eg. Intonation, pitch, speed, etc.
4-18
Feng shui : Asian concept impacts Western business
Directing “Qi” for positive results
Placing objects in a manner to influence one’s self or others
American businesses have made changes to influence Asian
business partners
4-17
Object Language/Material Culture
Communicates what is important to people of a culture
Open displays of wealth
Japanese meishi’ or business cards
Mexico: appreciating the architecture and family photos

Context
4-20
20
4-21
Context
Feelings and thoughts are not explicitly expressed; key
information is embedded in the context
Personal and business relationships are more compartmentalized
, communication has to be more explicit. Feelings and thoughts
are expressed in ______
High Context Cultures
Low Context Cultures
Management Focus:
Oriental Poker Face
“Oriental poker face” and “idiotic Asian smile”

American mask of confidence
4-22
Let’s Look
22
Management Focus:
Oriental Poker Face
Americans often have difficulty reading some Asian facial
expressions—especially those referred to as the “poker face”
and “idiotic smile.”
To Americans, who tend to put more emphasis on talking when
communicating, these facial expressions seem to conceal the
person’s real feelings .
Asians however, tend to put more emphasis on listening when
communicating. Because the heavier burden is placed on the
listener, the speaker feels less compunction to send clearly
discernable message cues.
The cues that are sent can be very subtle and easy for
Americans to miss.
4-23

23
Management Focus:
Oriental Poker Face
To Americans, silence represents discontinuity of
communication and creates discomfort.
To Asians, silence is an integral part of the communication
process and is used to reflect on messages previously exchanged
and for crafting thoughts before speaking them.
Just as Americans are uncomfortable with the “Oriental poker
face” and silence, Asians may find Americans overly blunt,
confident, and talkative .
4-24
24
Comparative Management in Focus: Communicating with Arabs
Arab culture is one of emotional extremes, and this
characteristic is illustrated in the language.
Arabs are quick to “sound off”
communication is built on friendship, honor, hospitality,

religion
Arabs are high-contact communicators
Time is the key in communication process: deadlines are
considered rude and pushy
4-25
25
Communication Channels
4-26
26
Information systems

Speed of information flow and use
Informal sources of information
4-24
Information Systems
In centralized organizational structures as in South America,
most information originates from top managers
In the US information flows from the staff to managers
Japan: ringi system (consensual decision making)
High context cultures: information spreads rapidly and freely
4-25
Informal Sources of Information
Employees drinking together
Communication based on long-term relationships
“Public self” vs. “Private self” (Japanese keep a strong barrier
between each.)

28
4-26
Speed of Information
Americans expect to give and receive information very quickly
and clearly
French use slower message channels of deep relationships,
culture, mediators
4-27
Japanese “Ningensei” vs. US Adversial Style
The Japanese ningensei style of communication emphasizes
saving and giving face .
Public disagreement is avoided at all costs.
Indirect verbal and non-verbal communication; non-
confrontational
Relationship communication; ambiguous
group orientation
Softer, sympathetic
Direct, confrontational communication accepted
Task communication, to-the-point
individualistic
Favors “odd” reason

4-31
Information Technology
Be aware of the impact of IT on cross-border communications.
Information Technology:
Going Global and Acting Local
Global reach does not necessarily mean global business
The Web is interpersonal, but may require greater cultural
sensitivity
Global online strategy must also be multi-local
4-32
32
4-30
For example Google “ street view ” Makes Friends in Japan but

Clashes with European Culture
March 2011 Japan earthquake: “person finder”, digital images
of the disaster zone
Switzerland, Germany: violation of privacy laws
Successfully Managing Cross-Cultural Communication
Develop cultural sensitivity
Anticipate the meaning the receiver will get.
Careful encoding
Use words, pictures, and gestures.
Avoid slang, idioms, regional sayings.
selective Transmission
Build relationships, face-to-face if possible.
Careful decoding of feedback
Get feedback from multiple parties.
Improve listening and observation skills.
Appropriate follow actions
handshake
Full legal contract
Or somewhere between the two????
4-34
34
Facilitating Intercultural Communication

4-35
There is a connection between a person’s personality traits and
the ability to adapt to the host – country’s environment—
including the ability to communicate within that environment.
35
Openness
Open mindedness, tolerance for ambiguity, and extrovertedness
Resilience
Having an internal locus of control , persistence, a tolerance for
ambiguity, and resourcefulness
4-34
Conclusion
cultural sensitivity
Awareness of potential sources of cultural noise
Culture is the foundation of communication
High-context vs. low context
Careful encoding and selective transmission
Cultural localization on the internet

3-1
Chapter 3: Understanding the Role of Culture
1
To understand how culture affects all aspects of international
management
To emphasize the need for international managers to have
cultural intelligence in order to interact successfully in host
countries
To be able to distinguish the major dimensions which define
cultural differences among societies or groups
To recognize the critical value differences which frequently
affect job behaviors
3-2
2

To understand the interaction between culture and the use of
internet
To be able to develop a working “cultural profile” typical of
many people within a certain society, as an aid to expected
attitudes toward work, negotiations, etc.
3-3
3
Opening Profile: Saudi Arabian Culture
3-4
4
The intersection of ______ and business
A land of contrasts and paradoxes
Super-modern cities and modern economic and technical
realities clashing with strict Islamic religious convictions and
ancient social ______

McDonald’s, Coty Beauty, Harvey Nichols, Saks Fifth Avenue,
Pizza Hut
3-5
5
______ :
Outnumber men in universities
Own 20 percent of all businesses
But account for only 7 percent of the workforce
60 percent of the workforce is ______
3-6
6
These examples illustrate how understanding the local culture
and business environment can provide competitive advantage.

Managers must alter their approaches according to the ______
environment.
Unfortunately, many mangers underestimate the importance of
culture—they lack cultural savvy. In many countries around the
______ .
7
Culture and its Effects on Organizations
3-8
______
A set of shared values, understandings, assumptions, and goals
that are learned from earlier generations, imposed by present
members of a society, and passed on to succeeding ______
8
______ Variables Affecting Management Functions
3-9

9
Culture and its Effects on Organizations
3-10
10
Cultural ______ or
Cultural ______ ?
An awareness of and an honest caring about another
individual’s culture
Organizational Culture
Exists within and interacts with ______ culture
Varies a great deal from one organization, company, institution,
or group to another
Represents those expectations, norms, and goals held in
common by ______ of that group

3-11
11
______ culture functions equivalently to societal culture, but
varies a great deal from one organization to another—even
within a single societal culture.
Nonetheless, organizational culture is at least partially a
function of and must respond to ______ culture.
3-12
12
Airline ______ responded to Dutch attitudes regarding families
and norms regarding relationships by extending its travel
benefits policy to any couple who formally registered as living
together—regardless of whether the couple was heterosexual or
homosexual, formally married or not.

______ provides more extensive training to employees in Russia
than to those in the US because Russians are less familiar with
working within a ______ system.
3-13
13
The Effect of Culture on
Organizational Process
3-14U.S. CultureAlternative Function Affected______
influences futureLife is preordainedPlanning, schedulingThe
environment is changeablePeople adjust to the
environmentMorale, productivityHard work leads to
successWisdom and luck are also needed______ ,
rewardsEmployment can be endedEmployment is for a ______
______ , recruitment
14
Culture’s Effects on Management
______ phenomenon of the shifting of individual management

styles to become similar to one another
Self-Reference ______ subconscious reference point of one’s
own cultural values. Many people in the world understand and
relate to others only in terms of their own cultures.
Parochialism —occurs, for example, when a Frenchman expects
those from or in another country to automatically fall into
patterns of behavior common in France
______—describes the attitude of those who operate from the
assumption that their ways of doing things are best—no matter
where or under what conditions they are applied
3-15
15
Influences on National Culture
Subcultures
Stereotyping
3-16
Many countries comprise diverse ______ whose constituents
conform only in varying degrees to the national character.
Example: Canada
A cultural profile that tends to develop some tentative
expectations—some cultural context—as a backdrop to

managing in a specific ______ setting
16
Cultural Subsystems that Influence People and Their Behavior
3-17
.
17
Kinship
Education System
Economic System
Political System

Health System
Recreation
Religion
3-18

______ is the system adopted by a given society to guide family
relationships.
In the US, this system consists primarily of the nuclear family.
In some other countries the system consists of the extended
family. In the latter case, family loyalty may be given primary
consideration in corporate activities.
The formal and informal ______ received by workers influences
the expectations placed on those workers and managers’ choices
about recruitment, staffing, training, and leadership.
18
3-19
The government imposes varying constraints on organizations
and their freedom to do business.
______ commonly underlies moral and economic norms. In
some countries, religious beliefs and practices permeate
everyday business transactions and on-the-job behaviors.
For instance, McDonald’s does not serve ______ ______ in
India out of respect for Hindus and Muslims. In Saudi Arabia,
Islamic law prohibits the charging of ______ .

19
3-20
Various ______ arise from the formal and informal groups that
make up a society.
A country’s system of health affects employee productivity,
expectations, and attitudes toward physical fitness, which in
turn affect decisions about health care benefits, insurance,
physical facilities, and sick days.
______’ attitudes about recreation can affect their work
behavior and their perception of the role of work in their lives.
20
Cultural Value Dimensions
3-21
______ dimensions and resulting cultural profiles provide only
an approximation of national character. There may be variations
in national culture—i.e., ______ may exist as well. E.G. China

21
Values
Are a society’s ideas about what is good or bad, right or wrong
Determine how individuals will probably respond in any given
circumstances
Help managers anticipate likely cultural effects
Allow for ______ management
Can vary across subcultures

GLOBE Research Project Dimensions
3-22
The ______ (Global Leadership and Organizational Behavior
Effectiveness) dimensions are based on data gathered by 170
researchers over seven years.
18,000 managers in sixty-two countries.
Nine dimensions that distinguish cultures from one another and
have implications for ______ : assertiveness, future orientation,
performance orientation, humane orientation, gender
differentiation, uncertainty avoidance, power distance,
institutional collectivism vs. individualism, and in-group
collectivism.
22
3-23
______ concerns how much people are expected to be tough,
confrontational, and competitive versus modest and tender. Low
assertiveness countries have sympathy for the weak and
emphasize loyalty and solidarity.
______ orientation concerns the importance of performance
improvement and excellence and refers to whether people are
encouraged to strive for continued improvement. ______
performance orientation countries place priority on things like
tradition, loyalty, family, and background. They associate
competition with defeat.

23
3-24
More
24
Assertiveness
Low: Sweden, Japan, Switzerland
High: Greece, Austria, Germany
Performance Orientation
Low: Russia, Argentina, Italy
High: U.S., Hong Kong, Singapore

3-25
______ orientation refers to the level of importance a society
place on future-oriented behaviors such as planning and
investing in the future.
______ orientation measures the extent to which a society
encourages and rewards people for being fair, caring and kind.
25
3-26
26

Future Orientation
Low: Russia, Argentina, Italy
High: Netherlands, Switzerland, Singapore
Humane Orientation
Low: Germany, Spain, France
High: Malaysia, Ireland, Philippines
Cultural Clusters
3-27
27

Hofstede’s Value Dimensions
116,000 people in 50 countries
3-28
28
______ Distance
The level of acceptance by a society of the unequal distribution
of power in institutions
______ Avoidance
The extent to which people in a society feel threatened by
ambiguous situations
______
The tendency of people to look after themselves and their
immediate families only and to neglect the needs of society
______
The desire for tight social frameworks, emotional dependence
on belonging to “the organization,” and a strong belief in group
decisions

3-29
Power Distance
MAL PHI MEX IND FRA ITA JPN SPA ARG
US GER UK DEN ISR AUT
Uncertainty Avoidance
GRE JPN POR KOR ARA GER AUL
CAN US UK IND DEN SIN
High Orientation Toward Authority Low
High Desire for Stability Low
3-30
______
AUL US UK CAN FRA GER SPA JPN
MEX ITA KOR SIN
______(Femininity)(IOW Relational)
JPN MEX GER UK US ARA FRA KOR
POR CHC DEN SWE
Individualism Collectivism
Assertive/Materialistic Relational

3-31
Long-term/Short-term Orientation
CHI HK JPN TAI VIE BRA IND US
CAN UK E/W AFR
High Low
Trompenaar’s Dimensions
15, 000 Managers from 28 Countries
3-32
Obligation (______ Cultures)
High Low
USGER SWE UK ITA FRA
JPN SPA SIN
______ Orientation in Relationship (______ Cultures)
High Low
JPN UK GER SWE USA FRA SPA ITA
CHI
Universalistic Particularistic
Neutral Affective

32
Trompenaar’s Dimensions
3-33
Privacy in Relationship (______ Cultures)
Compartmentalize private and work life.
High Low
UK US FRA GER ITA JPN
SWE SPA CHI
Source of Power and Status (______ Oriented)
High Low
US UK SWE GER FRA ITA
SPA JPN CHI
Specific Diffuse
Personal Society
In ______ -oriented cultures status and influence come from
class, age, gender, etc.
33
Critical Operational Value Differences
______—differences in temporal values

Change—control and pace of change
______ Factors—physical goods and status symbols versus
aesthetics and the spiritual realism
______—“me/I” versus “we”
3-34
‘More on ‘Time’
34
35
Perception of Time
Not ______ across cultures
Descriptions and values different
Commodity vs. fluid & flexible
Hall’s classifications
Monochronic
Polychronic
More on the
next slide.

36
Perception of Time (cont’d)
Monochronic
Linear & finite
______
Economic language
______ precisely
Western orientation
Polychronic
Circular, never ending
Non-economic view
Fluid and ______
______ around
37
Differences Between People Who Use Monochronic and
Polychronic TimeMonochronicPolychronicDoes one thing at a
time.
______ oriented
Comfortable with short-term relations
Sticks to plans
More internally focusedDoes many things at once
People oriented
Needs ______ relations
Often changes plans
More externally focused
The Internet and Culture

______ is changing culture in many societies—especially in
terms of associations, education, and the economy.
______ also is changing how technology is used. The US
collects a great deal of information from ______ .
3-38
Examples
38
The Internet and Culture
Over 81 percent of Korean homes have high-speed Internet
service.
Sweden requires all databases of personal information to be
registered with the Data Inspection Board, their ______
regulatory agency.
About 75 percent of the world’s Internet market lives outside
the United States: websites must reflect local markets, ______ ,
languages and currencies.
3-39

39
Developing Cultural Profiles: Developing Comparative
Management
3-40
40
______ can gather considerable information on cultural
variables from current research, personal observation, and
discussion with people.
Managers can develop cultural ______ of various countries.
Managers can use these profiles to anticipate drastic differences
that may be encountered in a given ______ .
It is difficult to pull together ______ cultural profiles in other
countries unless one has lived there and been intricately
involved with those people.

Comparative Management in Focus
______
______
3-41
“Wa”—peace and harmony
A mix of authoritarian and humanism in the workplace
Emphasis on participative management, consensus, and ______
Open expression and conflict ______
Preference for rules and order, privacy
Dislike of inefficiency and tardiness
Assertive, but not aggressive
Organizations are centralized but still favor consensus ______
making
41

Comparative Management in Focus
Latin America
3-42
Not homogenous, but common similarities
“______ -oriented” compared with “doing-oriented”
Work and private lives are more closely integrated
Very important to maintain ______ and save face
42
Developing Management Styles and Ways of Doing Business:
Saudi Arabia
3-43
______
Paternalism,
______
Close
friendships
Person-orientation,
Theory Y management (treat workers with freedom and respect)
Honor,
shame
Conflict ______ ,
positive reinforcement
This slide highlights examples from Exhibit 3-8

43
Developing Management Styles and Ways of Doing Business:
Chinese Family Business
Small, family businesses predominate
“______ ” connections: Networks of relationships of Chinese
People are put ahead of business – human centered management
style
______ has resulted in more competitive management styles: the
new generation manager in China is more individualistic, more
independent and takes more risks. Closer to a United States
management approach.
3-44
44
3-45
Under the Lens: Doing Business in Brazil
Almost everyone has a combination of European, African, and
indigenous ancestry
Individual relationships are important
Brazilians take time when ______
Brazilian business is ______ , and meetings are required
Avoid ______
Dress well and conservatively

______ cards are exchanged
Having your business card printed in Portuguese on the obverse
side is a good idea.
3-46
Summary of Key Points
Each society has its own unique culture
______ must develop ______ sensitivity
Researchers such as Hofstede and Trompenaar have created
studies which help describe cultural profiles; GLOBE study
created a body of data on cultural dimensions
Managers can use research results and personal observations to
develop cultural ______ of countries
End Ch. 3
2-1
Chapter 2: Managing Interdependence
Social Responsibility and Ethics
1

Appreciate the complexities involved in the corporation’s
obligations toward its various constituencies around the world.
Understand the changing perceptions and demands of
corporations doing business in other countries, in particular the
responsibilities toward human rights.
Acknowledge the strategic role that CSR and codes of ethics
must play in global management.
Provide guidance to managers to maintain ethical behavior amid
the varying standards and practices around the world.
2-2
2
Recognize that companies must provide benefits to the host
country in which they operate in order to maintain cooperation.
Discuss the need for corporations to consider sustainability in
their long-term plans in order to manage environmental impacts
on host locations.
Identify the challenges involved in human rights issues when
operating in around the world.
2-3

3
Opening Profile: McDonald’s CSR Experience in China
McDonald’s defined their own framework for supply chain
issues, health and nutrition issues, people issues, and
environmental _____
Strategic, pro-active CSR can save a corporation money by
producing less waste, less packaging, etc.
Partnering with third parties such as NGOs, or academics can
help a company gain credibility
Corporations need to understand what their consumers care
about
McDonald’s has contributed to the _____ economy, created
philanthropic charities and has been environmentally conscious
2-4
4
2-5
Appreciate the complexities involved in the corporation’s
obligations toward its various constituencies around the world.

The Social Responsibility of MNC’s
2-6
CSR Dilemma
6
Profit is MNC’s only goal
MNCs should anticipate and solve social needs
The Social Responsibility of MNC’s
______ social responsibility concerns the benefits versus harm
wrought by MNCs, especially in less developed countries
(LDCs).
Issues of social responsibility tend to center on poverty and lack
of equal opportunity, the environment, consumer concerns, and
employee safety and welfare.
The question is, how much should MNCs concern themselves
with the social and economic effects of their ______ ?

At one extreme, the answer to this question is that MNCs are
only responsible for earning profits. At the other extreme is the
notion that MNCs should anticipate and solve ______ needs. Of
course, firms can take a stance anywhere between these two
extremes.
7
MNC Stakeholders
MNC ______
Home Country Host
Society in General
2-8
Owners
Customers
Employees
Unions
Suppliers
Distributors
Strategic Allies
Community
Economy
Government

MNC
Economy
Employees
Community
Host Government
Consumers
Strategic Allies
Suppliers
Distributors
Global interdependence/standard of living
Global environment and ecology
Sustainable resources
Population’s standard of living
______ CSR is more complex than domestic CSR because there
are additional stakeholders in the firm’s activities. Managers
must weigh the rights of domestic stakeholders versus those of
host country stakeholders. Most decisions will involve a trade-
off between the rights of various ______ .
8
2-8
Benefits from CSR
Improved access to capitol
Secured license to operate
Revenue increase and cost and risk reduction
Better brand value and reputation with customer attraction and
retention

Improved employee recruitment, motivation, and retention
Global Consensus or
Regional Variation?
______ Corporate Culture:
An integration of the business environments in which firms
currently operate
The United States and Europe adopt strikingly ______ positions
that can be traced largely to history and culture.
2-10
10
MNC Stakeholders
Some argue consensus regarding moral and ethical behavior is
emerging because of the development of a global corporate
culture—an integration of the business environments in which
firms ______ operate.
Nonetheless, regional variations still exist. One example is the
differing approaches to CSR often taken by U.S. and European
businesses. Also, companies may face confusion about how to
behave in host countries, which may have differing expectations
and ______ .

11
2-12
International Codes of Conduct
International Chamber of Commerce
OECD Organization for Economic Cooperation and
Development
ILO International Labour ______
United Nations Commission on Transnational Corporations
Go to these www sites and review their codes of conduct.
Dealing with Confusion About
Cross-Cultural Dilemmas
Engaging stakeholders (and sometimes NGOs) in a dialog
Establishing ______ and procedures for addressing difficult
issues such as labor standards for suppliers, environmental
reporting, and ______ rights
Adjusting reward systems to reflect the company’s commitment
to ______
2-13
13

General Guidelines for Code of Morality and Ethics in
Individual Countries
2-14
More
14
Moral Universalism
Addressing the need for a moral standard that is accepted by all
______
Ethnocentric Approach
Applying the morality used in ______ country—regardless of
the host country’s system of ethics
Ethical Relativism
______ the local moral code of whatever country in which a
firm is operating

Moral ______ suggests the need for a moral standard that is
accepted by all cultures. With the ethnocentric approach, a
company applies the morality used in the home country—
regardless of the host country’s system of ethics.
With ethical relativism, the company adopts the local ______
code of the country in which it is operating.
Whereas some argue moral that ______ is preferable to the
other two approaches, it can be insensitive to the needs and
values of the ______ country.
______ relativism, on the other hand can result in conflicts
between home and host country values.
15
15
International Codes of Conduct
The Sweatshop Code of Conduct
The Electronic Industry Code of Conduct (EICC)

Social Accountability 8000 (SA 8000)
2-16
16
______ Code of Conduct, which includes a ban on forced labor,
abuse, and discrimination, requires companies to provide a
healthy and safe work environment, and requires companies to
pay at least the local prevailing minimum wage. A group has
been created to monitor compliance, but enforcement is
difficult. The Department of Labor publishes the names of those
companies that comply.
The EICC is an example of companies within an industry
uniting to form their own code of conduct. The EICC bans
forced and child labor and excessive overtime, includes basic
environmental requirements, and requires audits of ______
suppliers.
17
Code of Conduct Continued
The ______ (modeled after the quality standard ISO9000) is a
code of conduct intended to establish standards to improve the

quality of work life for workers around the world.
18
Doing Business in China
The attraction of doing business in China:
Cheap labor cost
An expanding market
A growing economy with growth in higher skilled jobs and
services
Continuing concerns
Uncertain legal environment
Protecting ______
2-19
19
Doing Business in China
Human Rights and Freedom of Information Challenges
Human Rights and Freedom of Information Issues in China
2-20
Potentially rampant violation of workers’ ______

______ of free speech
Difficulty monitoring and correcting ______ rights violations
Wal-Mart
Government limits on media and internet freedoms
Google
Microsoft
Yahoo
Perhaps the most public recent case is Google’s decision to
agree to Chinese censors’ demands. Microsoft and Yahoo have
made similar decisions. As a result, Amnesty International
accused Yahoo, Microsoft, and Google of overlooking their
human rights obligations in order to tap
into China’s online market.
20
2-21
Understand the changing perceptions and demands of
corporations doing business in other countries, in particular the
responsibilities toward human rights.

Ethics in Global Management
2-22
______ Business Ethics
The business conduct or morals of MNCs in their relationship
with individuals and entities
Ethics vary based on the cultural value system in each country
or society
Many practices and behaviors considered ______ or illegal in
some countries are accepted ways of doing ______ in others.
22
A Moral Philosophy of Cross-Cultural Societal Ethics
2-23
EXHIBIT 2-3 A Moral Philosophy of Cross-Cultural Societal
Ethics

23
Heather Hetzler (HH) - The text on this image may be difficult
to read, even on a large projector screen. Consider enlarging
this image.
Global Corruption Barometer:
2010 Corruption Perception Index (CPI)—Selected Ranks
Source: Selected data from the TI Corruption Perception index,
2010
Top 20—Least Corrupt
2-24
Denmark
Singapore
New Zealand
Finland
Canada
Australia
Hong Kong
______
Japan
UK
Chile
Belgium
______
France
Taiwan
South Korea
Poland
Greece
S. Africa
Turkey

24
2-25
Acknowledge the strategic role that CSR and codes of ethics
must play in global management.
2-26
Ethical Use of Technology
Varied expectations about the use of technological
devices/programs as they intersect with people’s private ______
EU Directive on Data P
(from unsecured wireless networks in Germany)
______ PlayStation Network (77 million users information
breached)
To Bribe or NOT to Bribe?
Paying mail carriers in Mexico to prevent them from “losing”

mail
Paying $100 to get a computer picked up from a rainy dock
Gift-giving to bond social ties
2-27
______ ______
27
28
Bribery across Countries
Common throughout history
“Word” for it in most ______
Practiced in many cultures today
Most countries have laws against it
Some countries allow payments and even ______ write-offs
Internal and external rules may differ
29
Words That Mean Bribery in a Variety of Different Countries
Country Word
Brazil jeitnho
Egypt baksheesh
France pot au vin
Germany Trink Gelt/Schmiergeld
Greece baksissi
Honduras pajada
Hong Kong hatchien

India speen money/baksheeh
Indonesia uong sogok
Iran roshveh
Italy bustarella
Source: Adapted from Jacoby, N.H., Nehemkis, P., & Eells, R.
Bribery and extortion in
world business: A study of corporate political payments abroad.
New York: McMillan.
Country Word
Japan wairo
Malaysia makan siap
Mexico mordida
Nigeria dash
Pakistan roshvat
Peru coima
Phillipines lagay
Russia vzyatha
Thailand sin bone
U.S. Grease monkey/payola
Zaire tarif de verre
30
The U.S. and Questionable Payments
U.S. companies commonly engaged in activity prior to
legislating it
Foreign Corrupt Practices Act (FCPA) passed in the 1970s
(Why?)
Made payments to foreign governments to obtain business
illegal
Distinguishes between bribery and “______ ” payments

31
Impact of FCPA on Competitiveness
Business often argues that it ______
Level playing field
Initial conclusions indicate no ______ impact: on US
companies, on subsidiaries
Some business is likely lost
Managing the Corruption
______ Corrupt Practices Act (FCPA)
Organization for Economic Cooperation and Development
convention on ______
2-32
32
Three Tests of Ethical Corporate Actions
2-33
Bribery ______ all three of these tests.

33
Is it ______ ?
Can it be talked ______ ?
Does it work in the long ______ ?
The Process for Companies to Combat Corruption
and to Minimize the Risk of Prosecution
Having a ______ 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 ramifications for
lone actions, such as criminal ______
Having a system in place to investigate any foreign agents and
overseas partners who will be negotiating contracts
Keeping an effective ______ ______ system in place

2-34
34
Policies to Help MNCs to Confront Concerns About Ethical
Behavior and Social Responsibility
Develop worldwide code of ethics.
Build ethical policies into ______ development.
Plan regular assessment of the company’s ethical posture.
If ethical problems cannot be resolved, withdraw from that
market.
Questionable behavior can be a “______ ______ .” What starts
with a small bribe or cover-up—a matter of personal ethics–
can, over time, and in the aggregate of many people covering
up, result in a situation of a truly negligent, and perhaps
criminal, stance toward ______ responsibility.
2-35
35
2-36

Recognize that companies must provide benefits to the host
country in which they operate in order to maintain cooperation.
Managing Subsidiary—Host-Country Interdependence
MNCs locally raise their needed capital, contributing to a rise
in interest rates in host countries.
The ______ (sometimes even 100 percent) of the stock of most
subsidiaries is owned by the parent company. Consequently,
host-country people do not have much control over the
operations of corporations within their ______ .
MNCs usually reserve the key managerial and technical
positions for expatriates. As a result, they do not contribute to
the development of host-country ______ .
2-37
Common Criticism of MNC Subsidiary Activities
37
Common Criticism of MNC Subsidiary Activities Cont.
MNCs do not adapt their technology to the conditions that exist
in host countries.
vconcentrate their research and development activities at home,

restricting the transfer of modern technology and know-how to
host countries.
MNCs give rise to the demand for luxury goods in host
countries at the expense of essential consumer goods.
MNCs start their foreign operations by purchasing existing
firms rather than by developing new productive facilities in host
countries.
MNCs ______ major industrial sectors, thus contributing to
inflation, by stimulating demand for scarce resources and
earning excessively high profits and fees.
MNCs are not accountable to their host nations but only respond
to home-country governments; they are not concerned with
______ ______ plans for development.
2-38
38
Heather Hetzler (HH) - Consider extending these bullet points
out to additional slides so that the text will be larger.
2-39
More
39

Require ______ to go beyond issues of CSR to deal with
specific concerns of MNC and host-country relationship.
MNCs must learn to accommodate the needs of other
organizations and ______ .
When considering the ______ of global interdependence, it is
necessary to highlight not only US subsidiaries in foreign
countries, but also foreign subsidiaries in the US.
Because FDI in the US is increasing, Americans are becoming
more sensitive to what they perceive as a lack of control over
their ______ country’s business.
The goal of managing interdependence is to create cooperation,
rather than confrontation. The goal is not to create the
dependence of an organization or ______ on another.
40

In Japan, CSR traditionally means taking care of employees. In
the US, it often means sharing responsibility for the community.
One reason for this difference is that US companies get tax
deductions for corporate ______ , whereas Japanese companies
do not.
To date, many Japanese firms in the US have not been active in
US philanthropy. Sadahei Kusumoto, CEO of Minolta
Corporation, believes that, in the long run, failure to play an
active role in the community will brand Japanese (or other)
companies as irresponsible outsiders and hurt their prospects for
the future. Kusumoto recognizes ______ in globalization and
acts accordingly.
41
2-42
Discuss the need for corporations to consider sustainability in
their long-term plans in order to manage environmental impacts
on host locations.
MNCs Benefits and Costs to Host
CountriesBenefitsCostsAccess to outside ______ Competition
for capitalForeign-exchange earningsIncreased ______

ratesAccess to ______ Inappropriate technologyInfrastructure
developmentDevelopment investment exceeds benefitsCreation
of new jobs______ skills developmentMore humane
employment standardsFew managerial jobs for locals
2-43
43
Heather Hetzler (HH) - In the slide notes, consider adding a
page number from the text where Exhibit 2-5 can be located.
Managing the Interdependence
The Risks of Interdependence
2-44
______
______
______
Under nationalism, public opinion is rallied in favor of national
goals, and against foreign influences.
Under protectionism, the host institutes a partial or complete
closing of borders to withstand competitive foreign products,
using tariff and nontariff barriers.
Under Governmentalism, the government uses its policy-setting
role to favor national interests, rather than relying on market
forces.

44
2-45
Identify the challenges involved in human rights issues when
operating in around the world.
Recommendations for MNCs Operating in and Doing Business
with Developing Countries
Do no intentional harm. This includes respect for the integrity
of the ecosystem and consumer safety.
Produce more good than harm for the host country.
Contribute by their activity to the host country’s development.
Respect the ______ rights of their employees.
To the extent that local culture does not violate ethical norms,
respect the local culture and work with and not against it.
Pay their fare share of ______ .
Cooperate with the local government in developing and
enforcing just background ______ .
2-46
End Ch2

46
1-1
Chapter 1: Assessing the Environment
Political, Economic, Legal, Technological
1
Understand the global business environment and how it affects
the strategic and operational decisions which managers must
make.
Critically assess the developments, advantages, and
disadvantages of globalization.
Discuss the complexities of the international manager’s job.
Develop an appreciation for the ways in which political,
economic, legal, and technological factors and changes impact
the opportunities that companies face.
Review the role of technology in international business.
1-2

2
Opening Profile: The Globalization of Risk
Top two risks:
Severe income _____
Chronic fiscal imbalances
Other issues: natural disasters such as 2011 earthquake in
Japan, flood in Thailand, political uncertainty in China and
Middle East
Globalization has compounded the types and level of business
risks
1-3
3
Opening Profile: Typical Challenges that Managers Face in the
21st Century
Political and cultural differences
Global competition
Terrorism
_____
Finding ways to balance their social responsibilities, their
images, and their competitive strategies
1-4
4

1-5
Understand the global business environment and how it affects
the strategic and operational decisions which managers must
make.
5
What is International Management?
1-6
The process of developing _____ , designing and operating
systems, and working with people around the world to ensure
_____ competitive advantage
6
What is Globalization?
_____ competition characterized by networks of
international linkages that bind countries, institutions, and
people in an _____ global
economy

1-7
7
_____ has also been described as the emergence of a level
playing field due to decreasing differences in regional output
growth rates, increased economic activity, and other non-
economic _____ .
Examples of international linkages:
Only 65% of the Ford Mustang’s content comes from the US or
Canada.
90% of the Toyota Sienna is made with US components, and it
is assembled in Indiana.
Example of the level playing field:
China’s recent growth (9.9% in 2005)
8
8
1-8
Global Trends
Five key global trends:
Changing balance of growth towards _____ markets

Need for increased productivity and consumption in _____
countries
Increasing global interconnectivity
Increasing gap between supply and demand of natural _____
Challenge for governments to develop policies for economic
growth and financial stability
9
1-9
Critically assess the developments, advantages, and
disadvantages of globalization.
10
Challenges to Globalism
Backlash against capitalism and rekindling of _____
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
_____ responsibility of their actions

1-11
11
Examples of (a) the backlash against capitalism/rekindling of
nationalism and (b) increased _____ of high-demand resources:
US hostility toward an attempted takeover of the British P&O
by Dubai Ports in 2006
Nationalization of energy resources in _____
Examples of the need to develop top managers with
international understanding and experience:
Coca-Cola has 80% of its sales outside of its home market
65% of Procter and Gamble’s sales are outside of its home
market
Avon hired 114,000 sales associates in China in 2006
12
12
Effects of Globalization on Corporations
Global companies are becoming less tied to specific _____
Companies that desire to remain competitive will have to
develop a cadre of experienced international _____

Small companies are also affected by and in turn affect _____
1-13
13
Greater international _____ by global companies means greater
transfer of financial, technological, and managerial resources
around the world.
The latter leads to the growth of developing economies, and can
locate their activities in the most suitable areas, the companies
have opportunities for flexibility and _____ .
SMEs (which are companies with fewer than 500 employees)
also benefit. In particular, technological developments (e.g., the
_____ ) make international trade and activities easier for
smaller companies.
14
14
Regional Trading Blocs
Much of today’s world trade takes place within these three
regional _____ blocs:

Western Europe, Asia, and the Americas
Much of today’s world trade is grouped around three dominant
currencies: AKA: The _____
euro, yen, and the dollar
These trade blocs are continually expanding their borders to
include neighboring countries
1-15
15
The European Union
“EU”
A _____ market over 500 million people living in 27 nations
Stability of the euro is in question and the ability of the “EU” to
deal with the debt crisis of some members
EU poses two challenges for global managers:
“_____ ” Europe
Dealing with multiple _____ within this unified market
1-16
16

The EU internal market is characterized by free movement of
goods and people among EU countries and the elimination of
internal _____ and customs, financial and commercial barriers.
The EU gives preference to insiders, creating challenges for
firms outside of the EU who wish to do business there.
Despite the unification associated with the EU, Europeans still
identify with their national cultures, and businesses operating
across the EU must take _____ _____ into consideration.
17
17
Asia
China
India
_____
South Asia Association of Regional Cooperation (SAARC)
Japan
Asian Tigers:
Hong Kong
Singapore
South Korea
Taiwan
1-18

Let’s Look
18
Japan and the Four Tigers (Singapore, Hong Kong, Taiwan, and
South Korea) have abundant natural resources and labor. They
have provided most of the capital and expertise for Asia’s
_____ countries.
Japan is one of the world’s largest _____ .
19
19
China, which is relatively new to the World Trade Organization,
is a major trading partner to many developed economies and has
the fastest _____ growth rate in the world.
It is negotiations with ASEAN (the Association of Southeast
Asian Nations, which is also negotiating to create the ASEAN
Free Trade Area [AFTA]). China offers a large population of
_____ workers and a large consumer market.
20

20
India
India is the fastest growing free-market _____ , and it is known
as the world’s services supplier. It is the world’s leader in
outsourced back-office and high-tech services.
21
21
SAARC
The South Asia Association of _____ Cooperation (SAARC) is a
free trade agreement between seven South Asian nations that
will lower tariffs to _____ % within three to five years and
eliminate them within seven years.
Member countries comprise 1.5 _____ people, with an estimated
one-third of them living in poverty.
22
22

The Americas
North American Free Trade Agreement (NAFTA)
Brazil
MERCOSUR
Central America Free Trade Agreement (CAFTA)
1-23
Let’s Look
NAFTA is a free trading bloc between the US, Mexico, and
Canada comprised of 421 million consumers. The goal of
NAFTA is to increase exports and trade among members.
Although NAFTA was controversial, many positive changes
have occurred in Mexico since its ratification. Mexico’s trade
with the US and Canada has tripled, and it has signed trade
agreements with 43 nations. Today, Mexico is experiencing
competition from China for offshore jobs.
DR-CAFTA, which is modeled after NAFTA, liberalizes trade
between the US and five Central American countries. It is a
stepping stone to the FTAA, which would encompass 34
economies.
23
_____ is a free trading bloc between the US, Mexico, and
Canada comprised of 421 million consumers. The goal of
NAFTA is to increase exports and trade among members.
_____, which is modeled after NAFTA, liberalizes trade
between the US and five Central American countries.

_____ : the "Common Market of the South," is an economic and
political agreement among Argentina, Brazil, Paraguay and
Uruguay to promote the free movement of goods, services and
people among member states.
24
24
Other Regions in the World
The Russian Federation
Middle East
The African Union—AU
South Africa
Less developed countries—LDCs
Low Gross National Product (GNP)
Low Gross Domestic Product (GDP)
Large, relatively unskilled workforce
High international debt
1-25
Let’s Look
25

The _____ Federation is characterized by economic growth, a
large supply of natural resources, and a large, well-educated
population—but it also is affected by _____ and government
interference.
Many countries in Central and South America, the _____ , and
Africa are considered LDCs. (Developing Countries)
Though such countries often hope to attract foreign investment,
their economic situation and often high levels of government
intervention discourages the foreign investment.
Despite these political risks, LDCs can offer considerable
opportunities for _____ businesses.
26
26
_____ helps prop up the Global Economy
The fastest growing GDP rate (over 9 % per/year) for 30 years
In March 2012 Chinese Premier Wen Jiabao announced only
7.5% growth for 2012
China is still a developing country with considerable
differences between _____ and _____ areas
State firms play a significant or _____ role

1-27
27
1-18
However:
Weakening demand for Chinese exports—due to global
recession government is targeting only 7.5% growth in 2012
Chinese labor costs increasing, energy and _____ cost rising;
appreciating Yuan
The _____ , legal, and social environments create
unpredictability for businesses
China helps prop up the Global Economy
28
1-19
Management Focus:
Tips for doing business in China
Connections are important
Negotiations will be different from the U.S. and difficult
Communication must be clear, honest, and fully prepared for
_____ matters!

29
Management Focus:
Intel Brings Changes to Vietnam’s Economy and Culture
United States opened trade relations with _____ in 2000.
Vietnam’s rapid growth can be contributed to those aspects of
globalization that attracts corporations such as Intel.
Intel is taking advantage of new markets and lower costs of
production.
Intel’s success started with awareness of the tight control of the
Vietnamese _____ .
1-30
30
1-21
Globalization of Information Technology
The speed and accuracy of information transmission are
changing the nature of international _____ jobs
Cultural barriers are being lowered gradually
_____ gets dispersed around the world by MNEs
Explosive growth of information technology is both a cause and
effect of _____

31
Globalization of Human Capital
Increasing trend in the offshoring of manufacturing jobs and
outsourcing of _____ jobs
The Indian ITES sector has 700,000 jobs worldwide and
comprises 35% of BPO market
For global firms, winning the war for talent is a _____ issue
1-32
32
The world’s _____ capital is becoming increasingly mobile as
jobs easily move around the globe.
E.g.: IBM’s India staff increased from 9,000 to 43,000 between
2004 and 2006. In 2006, Dell announced plans to double the
size of its Indian workforce to 20,000
India is an attractive location for outsourcing white collar jobs
because of its many well-educated, English-speaking workers
and its lower wage rates. A _____ in India might earn about
$20,000 a year, compared to $80,000 in the US.
China also is increasingly a choice for back-office support
_____ .

33
33
1-23
Discuss the complexities of the international manager’s job.
34
The Global Manager’s Role
1-35
35
1-25

Develop an appreciation for the ways in which political,
economic, legal, and technological factors and changes impact
the opportunities that companies face.
36
The Political and Economic Environment
_____—economic, political, social, and environmental—has
become a significant worldwide issue
_____—a driving force behind political instability around the
world
_____—religious disputes lie at the heart of regional
instabilities, for example, former Yugoslavia, Northern Island,
the Middle East…
1-37
37
Political Risk

Examples:
1-38
Any _____ action or politically motivated event that could
adversely affect the long-term profitability or value of a firm
Argentina announced plans to nationalize Repsol YPF, the
Spanish oil co., taking 51%.
In Russia, the Kremlin exploited the financial crisis to take
control of vcompanies.
38
The Political Risk Cont.
Typical Political Risks
Political Risk Assessment
Expropriation and _____
_____
Terrorism
Discriminatory treatment
Barriers to repatriation of funds
Interference in managerial decision making
_____ by government officials
Helps companies manage exposure to risk and minimize
financial loss
Two forms:
_____ with experts
Development of internal staff capabilities – increasingly
common
1-39

39
Macro and Micro Political Risk
40
_____ risk events affect all foreign firms doing business in a
country or region. An example is Iraq’s invasion of Kuwait in
1990, which halted all international business with and within
both of these countries.
_____ risk affects one industry or company or only a few
companies. These types of political risk events have become
more common than macropolitical risk events. An example of
micropolitical risk is “creeping expropriation”—a government’s
gradual and subtle action against foreign firms.
40
Managing Political Risk
Avoidance and Adaptation
Dependency and Hedging
_____ sharing
Participating management
Localization of the operation

_____ assistance
_____ control
Market control
Position control
Staged contribution
_____ risk insurance (OPIC and FCIA)
Local debt financing
1-41
American Can uses the Primary Risk Investment Screening
Matrix (PRISM), which synthesizes information from managers
and consultants on 200 variables into an index of economic
desirability and of political and economic stability. Those
countries with the most favorable PRISM ratings are considered
for investment.
Ranking entails quantifying variables into ranking systems for
countries. Staff or outside consultants consider factors such as
the political and economic environment, domestic economic
conditions, and external economic relations. One drawback of
such systems is that they rely primarily on information from
past events.
Early warning systems use lead indicators to predict possible
political dangers, such as signs of violence or riots, developing
pressure on the MNC to hire more local workers, or pending
import-export restrictions.
Avoidance refers to avoiding investment or withdrawing
investment from a risky location.

Adaptation is accommodating the risk. Use adaptation when the
risk in a given country is relatively low or when a high-risk
environment is worth the potential returns. There are four
primary forms of adaptation. Equity sharing is sharing equity
with a local partner, such as through a joint venture.
Participative management means actively involving nationals.
Localization is transforming the subsidiary into a national firm.
Development assistance refers to involvement in host country
infrastructure development.
Dependency is keeping the subsidiary and host nation dependent
on the parent firm. There are four approaches to dependency.
Input control involves keeping control of raw materials,
technology, and know how. Market control is keeping control of
the means of distribution. Position control is keeping control of
key management positions. Staged contribution involves
successively increasing contributions to the host nation.
Hedging is minimizing losses, such as through the use of
political risk insurance and/or local debt financing. Local debt
financing is borrowing money from the host nation.
41
Managing Terrorism Risk
_____ a benevolent image (IBM and Exxon).
Maintain a low profile and minimize publicity.
Using teams to monitor _____ activities
Hiring counterterrorism consultants
1-42

42
Economic Risk
Closely related to political risk
Determined by a country’s ability or intention to meet its
financial _____
Historically, most industrialized nations have posed little risk
of economic instability, however the level of economic risk in
the _____ is of great concern
1-43
43
Categories of Economic Risk
Loss of profitability due to abrupt changes in monetary and
_____ policies
Loss of profitability due to changes in foreign investment
policies
Risk of _____ exchange rate
1-44

Lets Look
44
Examples of loss of profitability due to changes in foreign
investment policies include inability to repatriate earnings,
interest rate volatility, and _____ translation exposure.
Currency translation exposure occurs when the value of one
country’s currency changes _____ to that of another. When the
balance sheet of the entire corporation is consolidated, currency
translation exposure may cause a negative cash flow from the
foreign subsidiary.
An example of currency translation exposure is the devaluation
of the Mexican Peso in the late 1990s. When this happened, a
US company’s assets in Mexico were worth less when translated
into dollars, but the company’s liabilities in Mexico were less
as well.
45
45
Managing the Economic Risk
1-46

Lets Look
The quantitative approach is statistically measuring a country’s
ability to honor its debt. A quantitative measure is arrived at by
weighting economic variables to create an index of a country’s
creditworthiness over time and to make comparisons with other
countries. A drawback of this approach is that it does not take
into account different stages of country development.
The qualitative method is a subjective assessment of a country’s
leaders and their likely policies.
The checklist approach is relying on easily measurable and
timely indicators of creditworthiness.
Because no single approach can provide a comprehensive
economic risk profile of a country, most companies use a
combination of approaches.
46
Quantitative Approach

Qualitative Approach
Checklist Approach
Combination of these Methods
The _____ approach is statistically measuring a country’s
ability to honor its debt. A quantitative measure is arrived at by
weighting economic variables to create an index of a country’s
creditworthiness over time and to make comparisons with other
countries. A drawback of this approach is that it does not take
into account different stages of country development.
The _____ method is a subjective assessment of a country’s
leaders and their likely policies.
The _____ approach is relying on easily measurable and timely
indicators of creditworthiness.
Because no single approach can provide a comprehensive
economic risk profile of a country, most companies use a
combination of approaches.

47
47
The Legal Environment
Consists of the local laws and legal systems of those countries
in which an international company operates, and of international
law, which governs relationships between _____ countries.
United Nations Convention on Contracts for the International
Sale of Goods (CISG). The CISG spells out the rights and
obligations of buyers and sellers when goods are sold between
countries adopting the _____ .
1-48
48
The Legal Environment
Types of Legal Systems
Approaches to Contract Law
Common law

Civil law
Islamic law
_____ : details must be written in the contract to be enforced
_____ : assumes promises will be enforced without specifying
the details
In Asia the contract may be in the relationship, not on the paper
1-49
Common law uses past court decisions as precedents. It is used
in the US and 26 other countries of English origin or influence.
Civil law represents a comprehensive set of laws organized into
code. It is used in about 70 countries, including Japan and many
in Europe.
Islamic law is based on religious beliefs and combines common,
civil, and indigenous laws to varying degrees.
Islamic law is used in Islamic countries, such as Saudi Arabia.
A contract is an agreement to establish the rules to govern a
business transaction.
Contract law plays a major role in international business
transactions because of the complexities arising from different
legal systems and because the host government in developing
and communist countries often is a third party in the contract.

49
Other Regulatory Issues
Protectionist policies, such as tariffs or _____
The attractiveness of the _____ system
The level of government involvement in the economic and
_____ environment
1-50
Protectionist policies give preference to a country’s own
products and industries. Japan is often criticized for its policies
that limit imports of foreign goods.
Foreign tax credits, holidays, exemptions, depreciation
allowances, and taxation of corporate profits affect the relative
level of profitability for a MNC in a given location.
Canada provides a good example of government involvement in
the economic and regulatory environment. The Canadian
government has wholly and partly owned enterprises in many
industries (e.g., transportation, petrochemicals, fishing, steel,
textiles, building materials). The government’s role, therefore,
is one of both control and competition. There is a high number
of unionized workers in Canada (30%). In Quebec official
bilingualism requires managers to be fluent in French and
English.

50
The Technological Environment
The appropriability of _____
The International Convention for the Protection of Industrial
Property (the Paris Union)
Inappropriate use of technology by JVs, _____ , licensees, and
employees
Appropriateness of technology for the local environment
1-51
Appropriability of technology refers to the ability of the
innovating firm to profit from its own technology by protecting
it from competitors. Common methods of protection include
patents, trademarks, trade names, copyrights, and trade secrets.
In developing countries, firms generally face few restrictions on
the creation and dissemination of technology. In developing
countries, however, restrictions on licensing agreements,
royalties, and patent protection often exist. For example, Egypt
will only patent production processes, and it will do so only for
15 years. LDCs often use their investment laws to acquire
needed technology, increase exports, and train local people.
The Paris Union protects patents, but only in 80 signatory
countries.
MNCs also may be exposed to risk from the inappropriate use of
technology by joint venture partners, licensees, and employees.
The introduction of technology may have cultural consequences,

especially in LDCs. The choice of technology may be capital-
intensive, labor-intensive, or intermediate, but it should suit the
level of development in the area and the needs and expectations
of the people who will use it. Sometimes, the local government
regulates the choice of technology to suit their own needs.
51
The Impact of the Information Technology
Making _____ barriers less relevant
Both cause and effect of globalization
_____ cultural barriers
Encouraging convergence of consumers’ tastes and preferences
However, China still monitors and limits electronic information
1-52
The growth of information technology is a cause and effect of
globalism.
Though technology makes more information freely available to
managers, consumers, and other decision-makers, some
information is subject to export controls by the EU.
52
Global E-Business
1-53

End Chapter 1
E-business refers to the integration of systems, processes,
organizations, value chains, and entire markets using internet-
based and related technologies and concepts.
E-commerce refers to the marketing and sales process via the
internet.
53
_____ —the integration of systems, processes, organizations,
value chains, and entire markets using Internet-based and
related technologies and concepts
_____ —marketing and sales process via the internet
_____ —Business to Business (Example: Alibaba in China,
large proportion is SMEs)
_____ —Business to Customer (Example: Amazon.com)

Intercultural Competence Project Assignment Instructions
Total Points Possible: 60
Category 1: 30 Points
Category 2: 30 Points
Due Date/Time: November 13, 2016
(Late posts cannot be accepted.)
The assignment is to address each of these category questions.
In your response, thoroughly consider the category and
question. I am looking for a detailed and supported answer. In
addition, more is better. But do not be repetitive. In terms of
page length, you should plan for approximately 1.5-2 pages for
each category. One (1) inch margins with 1.5 line spacing.
The purpose of this assignment is to get your specific
reflections on your Global Self-Awareness and Global
Knowledge as it relates to International Management.
There will be a dropbox for each Category. Prior to addressing
the first category, please do a quick search of the major topics
in the question. E.g. Category 1: Social Norms, Cultural Norms,
Personal Values, Personal Biases, Diversity in the Global
Community.
Category 1 (Global Self Awareness):
Give an example that illustrates your awareness of ways that
your social and cultural norms, values and biases might
interfere with global awareness and appreciation for the
importance of diversity in the global community.
Category 2 (Global Knowledge):
Give an example of something that you’ve learned from this
course that demonstrates your global knowledge in regards to
understanding the deeply connected nature of the world.

Chapter 7Implementing Strategy Continuing on from Chapter .docx

Chapter 7Implementing Strategy Continuing on from Chapter .docx

More Related Content

Similar to Chapter 7Implementing Strategy Continuing on from Chapter .docx (20)

More from christinemaritza (20)

Recently uploaded (20)

Chapter 7Implementing Strategy Continuing on from Chapter .docx