Introduction to International Management

1. Introduction to International Management Prof. Dr. N. Koubek Chair for Business Administration Bergische Universität Wuppertal,Germany St. Petersburg – Summer School April 3 2008 Koubek

2. Overview Fundamentals. Systems Approach. International Engagement. World Competitiveness. Industrial Relations System. Value Chain Analysis. 7-S-Management and Comparative Management. International Company Policy. International Human Resource Management. Koubek

3. 1. International Corporations- Definition - • An international corporation exists when • there are constant cross-border activities within a corporate group, • when there are branches in at least two states due to direct investments and the individual corporate areas (sub-groups, companies, factories) are under standardized objectives and leadership. Koubek

4. 1. Types of International CorporationsCapital Payments and Management Performances at home and abroad 100% Export Licensing Franchising Joint Venture Capital and Management Activities at Home Branches Abroad Factory Subsidary Company Koubek Capital and Management Activities Abroad 100% Quelle: HWInt, Sp. 918

5. Efficiency / Rate of return (P/C*100) Proceeds differentiation in subventions prices sales volume currency developments Cost differentiation in labor costs/ non-wage labor costs transport costs costs for environment protection taxes / material costs / energy 1. Motives for the Internationalization of Companies (1) Koubek

6. Better risk distribution Better market closeness / client care and control Avoidance of restrictive national regulations Development of product lifecycles Know-how, technology Securing of patent rights 1. Motives for the Internationalization of Companies (2) Koubek

7. Technical System Cultural System Political System Economic System 2. Systems Approach of International Corporations - Model - International Corporation Koubek

8. 2. Systems Approach of International Corporations - Model - Economic System Relative wages, material, administration, capital, equipment, cyclic variations, predictability, rates of exchange, competition, tarifs, distribution network, communication technology Koubek

9. 2. Systems Approach of International Corporations - Model - Political System Government stability, political surveillance, legal regulations, economic law, legal system, integrity of civil servants, government, the governement‘s attitude towards economy and labor, power centers, foreign policy, investments abroad, legal operations, transaction regulations Koubek

10. 2. Systems Approach of International Corporations - Model - Technical System Products, processes, equipment, quality, investments, quality control, inventions, procurement, maintenance, productivity standards Koubek

11. 2. Systems Approach of International Corporations - Model - Cultural System Values, beliefs, traditions, relationships, motivation, status symbols, habits, social institutions, social mobility, education, stratum, alphabetization Koubek

12. 3. Leading export and import nations (2005, US-$) Koubek Source: WTO: International Trade Statistics 2006

13. 3. Foreign Direct Investment: The most attractive locations Koubek Source: United Nations: World Investment Report 2005

14. 4. World-GDP World economy cartogram. (2002). In UNEP/GRID-Arendal Maps and Graphics Library. Accessed November 5, 2007 from http://maps.grida.no/go/graphic/world_economy_cartogram. Koubek

15. 4. The World Competitiveness Scoreboard of IMD Country2007 2006 2005 2004 2003 2002 2001USA 1 1 1 1 1 1 1Finland 17 10 6 8 3 2 3Luxembourg 4 9 10 9 2 3 4Netherlands 8 15 13 15 13 4 5Singapore 2 3 3 2 4 5 2Denmark 5 5 7 7 5 6 15Switzerland 6 8 8 14 9 7 10Canada 10 7 5 3 6 8 9Hong Kong 3 2 2 6 10 9 6Austria 11 13 17 13 14 13 14Australia 12 6 9 4 7 14 11Germany 16 26 23 21 20 15 12U.K. 20 21 22 22 19 16 19New Zealand 19 22 16 18 16 19 21Taiwan 18 18 11 12 17 24 18Malaysia 23 23 28 16 21 26 29Korea 29 38 29 35 37 27 28Japan 24 17 21 23 25 30 26China 15 19 31 24 29 31 33Thailand 33 32 27 29 30 34 38Philippines 45 49 49 52 49 40 40Mexico 47 53 56 56 53 41 36Russia 43 54 54 50 54 43 45Indonesia 54 60 59 58 57 47 49

16. 4. The World Competitiveness Scoreboard 2007 (Rank 1-27) (2006 rankings in brackets) Koubek

17. 4. The World Competitiveness Scoreboard 2007 (Rank 28-55) Koubek

18. 5. Industrial Relation Systems It is a subsystem of the social system next to the economic and political system of an industrial society, which  describes  the national relations between employers, employees and country: • in the activity area • in the company • in the enterprise • sectoral and • macro-economic Koubek Koubek

19. International IRS International Organisations countryA country B Inter-nation-al trade associ-ations Intern. Unions trade association A Unions in A Trade association B Unions in B Production units A Production units B International Enterprise Country C Country D National IRS 3. level 2. level 1. level Koubek

20. 6. Value Chain Analysis of International Corporations (Porter) • According to activities • primary activities • supporting activities • According to strategy types • cost leadership • differentiation strategy • concentration strategy (niche forming) • According to value chain positioning • pre-product orientation • end product orientation • value chain indifference strategy Koubek

21. Locally concentrated value added chain Self-sufficient value added systems Value added network Produc-tion Produc-tion Produc-tion R&D R&D R&D Purchase Purchase Purchase Country 1 Country 2 Country 3 6. Fundamental Options for the Design of Value Chain Strategies Koubek Source: Ringsletter / Skrobarcyk (1994), S. 343

22. end procukt value chain Concentration on basic products / pre-products Concentration on the end produkt Distribution indifferent to value chain raw materials general 6. Value Chain Optimization via Individual Functions of Value-added Processes Koubek

23. hard variables soft variables 7. 7-S-Management by Pascale and Athos Basic features: • Strategy • Structure • Systems • Staff • Skills • Style • Superordinate Goals (company philosophy) Koubek Source: Pascale / Athos, by Macharzina (1993), p. 740 ff.

24. Strategy Structure Style Subordinate Goals Staff Systems Skills 7. 7-S-Management by Pascale and Athos Koubek

25. 7. Comparative Management • Uncover, describe and measure mutualities and differences in various management styles • Set up hypotheses and theories about the relationship between management styles, national individualities and search for transcultural features • Check management models and leadership theories for transnational general validity • Formulate aim rational performance rules for management in international companies Koubek Source: by Keller, E. in: HWInt 1989, p. 231-242

26. 7. Results of Comparative Management Research -> Transferability of Management Styles • Technocratic elements can be transferred relatively easily • Human, behavioral parts of management processes are very culture specific and therefore relatively difficult to transfer • The higher the conflict is between management styles, management techniques and own cultural norms, the higher the difficulties are during the transfer • The biggest problems occur when Western management know-how meets employees in „traditional countries on lower hierarchy levels“ • Technological restrictions and positive results of economic action increase the transferability Koubek Source: by Keller, E. in: HWInt 1989, Sp. 231-242.

27. 8. International Company Policy • Company Organization • Company Constitution • Company Management • Human Resource Management (HRM) • (Behavior Codizes) Koubek

28. International Company Policy: Company Organization Koubek

29. 8. 3 Approaches to Intercultural Management Research • Ethnocentric Approach : Transformation of the home country principles • Polycentric Approach: Research and integration of different cultural positions • Geocentric Approach: Research and acceptance of intercultural mutualities Koubek

30. 8. 3 Approaches to Intercultural Management Research • Exploration according to central points: • work motivation • contentment • attitudes • values • leadership styles • organizations Koubek

31. 8. Effects caused by multicultural team work in companies Benefits: • Market proximity in various countries with different cultures • General impulses of further company development • Higher degree of reaction to global changes • Higher qualification of the employees Koubek

32. 8. Effects caused by multicultural team work in companies Risks: • With ethnocentrics: tendency towards unification • Partial refusal • More difficult to make decisions • Inhomogeneous environmental conditions • Higher costs Koubek

33. 8. The relationship between company culture and country culture country culture A country culture C company culture country culture D country culture B Koubek

34. 8. Object of Exploration International Corporation Company culture (internal factor) Country culture (external factor) Koubek

35. 8. Country Culture „Country Culture stands for (...) specific behavioral patterns as generally shown by the members of a certain national affiliation and which are generally expected to be taken on by new members, especially children.“ Koubek Source: Kluckhohn 1962; cited from Schreyögg 1991, p. 128

36. 8. Cultural levels and their relationship Symbol System visible, but in need of interpretation language, rituals, clothes, manners Norms and Standards partly visible, partly unknowingly maxims, guidelines, prohibitions Basic Assumptions invisible, mostly unknowingly about: environmental reference, truth, people, human behavior, social relationships Source: Schein 1984, p. 4. Koubek

37. 8. Typology of Intercultural Strategies • Ethnocentric Strategy • Polycentric Strategy • Geocentric Strategy Koubek

38. E E H E E E E 8. Basic types of international corporate cultures Ethnocentric H = headquarters E = establishments in various countries Koubek

39. 8. Advantages of Ethnocentric Corporate Cultures • Communication advantage: • A unique corporate culture creates a functional cross national • communication network. • Reliability advantage: • A unique corporate culture standardizes the perception and • orientation pattern and therefore makes the system and the member`s behavior more stable and more predictable. • Identification advantage: • Signs and symbols create a cross national • identification with the basic convictions of a company. • Efficiency advantage: • A unique corporate culture accelerates the internal process and reduces • the coordination and adaption costs. Koubek Source: Schreyögg in: Koubek (1992)

40. E E H E E E E 8. Basic types of international corporate cultures Polycentric H = headquaters E = establishments in various countries Koubek

41. 8. Advantages of Polycentric Corporate Cultures • Specialization advantage: • Locally adapted corporate cultures enable a more sensitive input ofcommunication instruments and a better comprehension of the context conditions. • Flexibility advantage: • Polycentric corporate cultures are divided into several regionalized • subcultures and therefore enable a faster aquisition of - and reaction to - changes • in the individual environments. • Creativity advantage: • An incorporation of differently distinct subcultures increases the • perspective variety and stimulates creativity. • Problem solution advantage: • Heterogeneously stamped teams and the existence of different orientation • patterns broaden the basis of experience and increase the capacity • to solve problems. Koubek Source: Schreyögg in: Koubek (1992)

42. E E H E E E E 8. Basic types of international corporate cultures Geocentric H = headquaters E = establishments in various countries Koubek

43. 8. Geocentric Approach of Corporate Culture Connection between the ethno and polycentric strategy to increase the advantage potential by reducing the disadvantages of both approaches. Intercultural mutual actions are ruled uniformly, all culture specific features are ruled differently. Koubek

44. 9. International Human Resource Management

45. 9. International Human Resource Management- Definition - Human Resource Management in international companies is the totality of methods, which develops from the fulfillment of tasks by employing personnel on various hierarchy levels and in various countries. Koubek

46. 9. Personnel Economic Principles, Guidelines, Scales and Influences • General targets: Fixing of a personnel political framework for decisions at home and abroad • Principles: Orientation features for individual decisions, differentiation between decentral and central target setting • Evaluation Scales: Orientation on degrees of unity, facilitation and equal treatment • Influences: culture and behavior, employer-/employee-relationships, international institutions and codes Source: Scherm 1995, p. 105ff Koubek

47. 9. Features of International Human Resource Management (IHRM)-Selection- • higher number of functions and activities • wider perspective • higher degree of permeating the employees‘ privacy • shifting of the focal point of personnel activities depends on the maturity degree of foreign engagements • higher degree of insecurity • higher degree of external influences Koubek

48. 9. International Human Resource Management- Tasks - • Organization • Intercultural Personnel Strategies • Working Conditions • Personnel Planning • Payment/Incentives • Employer/Employee-Relationship • Personnel Information Systems/Controlling Koubek

49. 9. International Human Resource Management- Tasks - • Environmental Consideration • Integration • Unity • Flexibility • Individuality • Strategy Orientation and Internationality Koubek

50. Any questions?