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Managing Cultural Diversity in International Business

This chapter explores the challenges and opportunities of managing cultural diversity in the global marketplace. It discusses trade agreements, cultural sensitivity, challenges facing global managers, methods of entry into world markets, and the benefits and potential problems of diversity. It also highlights organizational practices that encourage diversity.

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Managing Cultural Diversity in International Business

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  1. Chapter 2 International Management and Cultural Diversity

  2. The Multinational Corporation • Has units in two or more countries plus its own • Most of best-known companies are MNCs • Transnational corporation is an MNC that operates worldwide without one national headquarters (operates round the clock through different time zones)

  3. Trade Agreements Among Countries • NAFTA (U.S., Canada, and Mexico) • CAFTA (U.S. plus Central America) • EU (25-European nation alliance) • WTO (liberalizes free trade throughout world) • Trade agreements have facilitated global outsourcing and offshoring.

  4. Sensitivity to Cultural Differences • Cultural sensitivity (awareness of customs; adapting behavior) • Multicultural worker (believes all cultures are good) • Minimize cultural mistakes (e.g., rushing a deal in Mexico)

  5. Challenges Facing Global Managerial Worker • Developing global leadership skills • Currency fluctuations • Balance of trade problems • Human rights violation and corruption • Culture shock (“I can’t take this place.”) • Piracy of property rights and merchandise, including “knock-offs”

  6. Methods of Entry into World Markets • Exporting • Licensing and franchising • Local assembly and packaging • Strategic alliances and joint ventures • Direct foreign investment • Global start-up

  7. Success Factors in the Global Marketplace • Think globally, act locally. • Recruit and select talented nationals and domestic workers. • Hire and develop multicultural workers. • Research and assess potential markets.

  8. Competitive Advantage of Diversity • Marketing advantage including more sales and profits • Reduced costs (less turnover) • Recruit additional talent • Useful ideas for publicity/advertising • Fewer cultural bloopers • Creativity advantage (diverse ideas)

  9. Potential Problems with Diversity • Diverse group members may not work harmoniously with each other. • Potential for conflict is high if group members a. do not support each other, b. do not share knowledge. • Groups may be less cohesive.

  10. Organizational Practicesto Encourage Diversity • Corporate policies favoring diversity (e.g., monitor promotions) • Employee network groups (e.g., Latino Employee Network at Frito-Lay ) • Diversity training (encourages harmony by developing empathy for differences)

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