Environmental Factors that affect SBMP

1. Environmental Factors that affect SBMP S. Sredharran – M.C.A, M.B.A, M.Phil, M.Sc(Psychology)

2. What is a culture? • Culture is the "lens" through which you view the world. • It is central to what you see, • How you make sense of what you see, • How you express yourself. "Culture is the arts elevated to a set of beliefs." – Tom Wolfe

3. Four Fundamental Patterns of Cultural Difference What is different? 1. Communication Styles 2. Attitudes toward conflicts 3. Decision making style 4. Approaches to knowing What is hidden below the surface? 1. Beliefs 2. Values 3. Expectations 4. Attitudes

4. Cross – Cultural Understanding The interaction of people from different backgrounds in the business world. Cross culture is a vital issues in international Business, as the success of international trade depends upon the smooth interaction of employees from different cultures and regions. A growing number of companies are consequently devoting substantial resources toward training their employees to interact effectively with those of companies in other cultures in an effort to foment a postive cross-cultural experience. Cross-culturalismis distinct from multiculturalism. Whereas multiculturalism deals with cultural diversity within a particular nation or social group, cross-culturalism is concerned with exchange beyond the boundaries of the nation or cultural group.

5. Cross Cultural Understanding • Cross culture can be experienced by an employee who is transferred to a location in another country. The employee must learn the language and culture of those around him, and vice-versa. • This can be more difficult if this person is acting in a managerial capacity; someone in this position who cannot effectively communicate with or understand their employees' actions can lose their credibility. In an ever-expanding global economy, cross culture and adaptability will continue to be important factors in the business world.

6. Cross Cultural Understanding • National culture has always been a complex and difficult construct to define. All cultures are more nuanced than we might ever imagine. In today’s globalizing world where cultures increasingly connect and collide, the art of finding distinctive or even unique characteristics of any national culture is becoming harder. • Greater access to knowledge, data and multiple opinions adds complexity rather than simplifies our ability to capture and distil the essence of a nations’ culture accurately.  

7. Cross Cultural Considerations • There are many considerations that might help one assess the level of emphasis that one should place on cultural awareness before specifying what type of cultural learning is appropriate for your international managers. Here are some: • Priorities – The relative importance of a country / market in relation to your international strategy. • Economics – The alignment of favourable national economic conditions at a macro and market level.  • Politics– The relative compatibility of national political intentions and prevailing ideology.    • Legal – The consistency of legal infrastructure and the fit of ethical codes with company requirements.   • Linguistic Compatibility – The ease of linguistic clarity between key people operating in different languages. • Engagement – The degree of success dependent or reliant on high levels of local workforce performance. • The greater the lack of compatibility...the greater the need to enhance your organization’s cross cultural capability. 

8. Cross Cultural HR Differences • Percentage of people who agreed with this statement: • It is important for a manager to have, at hand, precise answers to most of the questions that his or her subordinates may raise about their work • High percentage countries • Japan 77% • Indonesia 67% • Italy and France 59% • Low percentage countries • USA and Sweden 13% • Netherlands 18% • Denmark 27% • Great Britain 30%

9. Cross Cultural Communication Verbal Communication Words Voice Non-Verbal Communication Gestures Postures Facial Expressions Eye Contact Vocal Characteristics Personal Appearance Touch

10. High Context and Low Context Cultures • High Context Culture:- Cultures that rely heavily on non-verbal and subtle situational cues in communication. • Low Context Culture:- Cultures that rely heavily on words to convey meaning in communication

11. Cross Culture Communication • Intercultural Communication is the process of sending and receiving messages between people whose cultural background could lead them to interpret verbal and non-verbal signs differently.

12. Why Cross Culture communication ? • Globalization: Cross border movement of people, goods and data brings more and more cultures into contact with one another and increases the potential of cross culture communication. • Business Opportunities • Job Opportunities • Improves the contribution of employees in a diverse workforce • Sharing of views and ideas • Talent improvisation • An understanding of diverse market

13. Blocks to Cross Cultural Communication Ethnocentrism : Inability to accept another culture's world view; "my way is the best." Discrimination : Differential treatment of an individual due to minority status; actual and perceived; e.g., "we just aren't equipped to serve people like that." Stereotyping : Generalizing about a person while ignoring presence of individual difference; e.g., "she's like that because she's Asian – all Asians are nonverbal." Cultural Blindness: Differences are ignored and one proceeds as though differences did not exist; e.g., "there's no need to worry about a person's culture

14. Blocks to Cross culture communication Cultural Imposition: Belief that everyone should conform to the majority; e.g., "we know what's best for you, if you don't like it you can go elsewhere." Tone Difference : Formal tone change becomes embarrassing and off-putting in some cultures.

15. Welcome topics during a conversation Welcome Topics of Conversation: • Indonesia: Family, travel/tourism, sports, praising the local cuisine, future plans and success of the group or organization • Germany: Sports--particularly soccer, tennis, current events, politics, among those who imbibe, beer is often a good topic of conversation

16. Topics to avoid during a conversation • Indonesia:Politics, corruption, criticism of Indonesian ways, commenting on Indonesian customs that you find peculiar, religion • Saudi Arabia:Middle Eastern politics and International oil politics, Israel, criticizing or questioning Islamic beliefs, women/ inquiries or complimentary remarks about the female family members of your Saudi associates • South Korea:Korean politics/local politics, The Korean War, Socialism and Communism, Japan and your contacts in Japan, your host's wife, Personal family matters • Germany:World War II, personal questions

17. Precautions in Cross Cultural Communication • Slow Down • Separate Questions • Avoid Negative Questions • Take Turns • Write it down • Be Supportive • Check Meanings • Avoid Slangs • Watch the humour • Maintain Etiquette

18. Boundary Spanning Roles • Boundary Spanning • Lateral relationships that help to integrate and coordinate the activities of the organization. • Examples include: • Liaisons, committees, task forces, integrating positions, and interfunctional work teams.

19. Locus of Decision Making • Locus of Decision Making • The degree to which decision making is centralized versus decentralized. • Centralized decision making • Advantage • Gives top-level management maximum control. • Disadvantage • Limits the organization’s ability to respond quickly and effectively to changes in the environment.

20. Locus of Decision Making • Locus of Decision Making • Decentralized decision making • Advantage Organizations can respond to environmental change more rapidly and effectively because the decision makers are the people closest to the situation. • Disadvantage Top-level managers lose some control.

21. Mechanistic versus Organic Systems • Mechanistic Systems • Highly centralized organizations in which decision-making authority rests with top-level management. • Organic Systems • Decentralized organizations that push decision making to the lowest levels of the organization in an effort to respond more effectively to environmental change.

22. Management of Foreign Subsidiary • Three levels of subsidiary responsibility • Local Implementation • Very well defined roles to play • Very little independence • Specialized Contribution • An interdependent network of subsidiaries, with each subsidiary making a unique contribution • Often in a production role • Global Mandate • Have responsibility for and entire global business • Activities integrated by the subsidiary itself, not the corporate office

23. Industrial Relations – Cross Cultural • We need to consider some general points about the field of international industrial relations. First, it is important to realize that it is difficult to compare industrial relations systems and behavior across national boundaries; an industrial relations concept may change considerably when translated from one industrial relations context to another. • Cross-national differences also emerge as to the objectives of the collective bargaining process and the enforceability of collective agreements.

24. Industrial Relations - CC Because national differences in economic, political and legal systems produce markedly different industrial relations systems across countries, multinationals generally delegate the management of industrial relations to their foreign subsidiaries. However, a policy of decentralization does not keep corporate headquarters from exercising some coordination over industrial relations strategy. Generally, corporate headquarters will become involved in or oversee labor agreements made by foreign subsidiaries because these agreements may affect the international plans of the firm and/or create precedents for negotiations in other countries. Multinational headquarters involvement in industrial relations is influenced by several factors, as detailed in the next slide :

25. Industrial Relations - CC The degree of inter-subsidiary production integration. • High degree of integration was found to be the most important factor leading to the centralization of the industrial relations function within the firms studied. • Industrial relations throughout a system become of direct importance to corporate headquarters when transnational sourcing patterns have been developed, that is, when a subsidiary in one country relies on another foreign subsidiary as a source of components or as a user of its output. • In this context, a coordinated industrial relations policy is one of the key factors in a successful global production strategy.

26. Company Domicile • A domicile of choice is a domicile acquired, through the exercise of his own will, by a person who is legally capable of changing his domicile. • To acquire a domicile of choice, a person must establish a dwelling-place with the intention of making it his home. • The fact of physical presence at a dwelling-place and the intention to make it a home must concur; if they do so, even for a moment, the change of domicile takes place. • A question of domicile as between the state of the forum and another state is determined by the law of the forum.

27. Role of Headquarters • Providing direction and Purpose • Leveraging Corporate Performance • Ensuring Continual Renewal • Problems in international management mostly arise from control-related issues (headquarters-subsidiary relationships)

28. Head Quarters & Subsidiary Relations • Cosmopolitan liaison personnel • Project teams • Cross-border teams • Informal integration and structural integration • International job rotations

29. Head quarters – Subsidiary Relations 1920-1950 • Multidomestic – strategic decisions decentralized • Loose, simple controls • Little coordination • Subsidiaries are managed as portfolios • Mainly financial flow – capital out, dividends back (Market approach) 1950-1980 • International companies • Control through budgets, structural mechanisms • Formal system controls – output controls Subsidiaries are managed as portfolios Rules approach predominate Planning Budgeting, Replicating HQ’s administrative system

30. Headquarters – Subsidiary Relations 1980-1990 • Efficiency-driven global companies • Centralized control on strategic decisions (product decisions –cost, quality emphasis) • Local autonomy on operational decisions What control approach predominates? 1990-Present • Transnational • Complex process of coordination and cooperation in an environment of shared decision making (emphasis on worldwide innovation) • Control mechanisms from previous periods, but with increased reliance on integrative techniques and socialization (international job rotation, cross-border teams,…etc.,)

31. Nationality of Ownership of Subsidiary • US firms tend to exercise greater centralized control over labor relations than do British or other European firms. • US firms tend to place greater emphasis on formal management controls and a close reporting system (particularly within the area of financial control) to ensure that planning targets are met. • Foreign-owned multinationals in Britain prefer single-employer bargaining (rather than involving an employer association), and are more likely than British firms to assert managerial prerogative on matters of labor utilization. • US-owned subsidiaries are much more centralized in labor relations decision making than the British-owned, attributed to: • More integrated nature of US firms • Greater divergence between British and US labor relations systems than between British and other European systems, and • More ethnocentric managerial style of US firms

32. Subsidiary Characteristics • Subsidiaries formed through acquisition of well-established indigenous firms tend to be given much more autonomy over industrial relations than are greenfield sites. • Greater intervention would be expected when the subsidiary is of key strategic importance to the firm and the subsidiary is young. • Where the parent firm is a significant source of operating or investment funds for the subsidiary – a subsidiary is more dependent on headquarters for resources – there will tend to be increased corporate involvement in industrial relations and human resource management. • Poor subsidiary performance tends to be accompanied by increased corporate involvement in industrial relations.

33. Strategic Control Options • Input Control – A control system that emphasizes employee selection, training and socialization fo these employees within the organization and its values, vision and objectives. • Behavior Control - A control system that emphasizes top-down control in the form of articulated operating processes and procedures • Output Control - A control system that sets and measures actual targets, such as financial results and productivity

34. Orgn Attributes that support Behaviour Control • The degree to which a firm weighs evaluations based on behavior • Whether an employee is held accountable regardless of the outcome • The degree to which there is concern for procedures or methods • The degree to which performance programs are imposed from the top down • The frequency in which employees receive feedback or performance information

35. Dimensions of Output Control • The degree to which a firm uses evaluations with significant weightings on results • Pay based on performance • Pre-established targets used for evaluating personnel • Numerical records as indices of effectiveness • Performance linked to concrete results • Appraisals based on goal achievement

36. Control Selection Host Country Cultural Distance from Home Country Control System Selection - Input - Behavior - Output • Control System “Fit” • Knowledge of Input- Output Transformation > Output Measurability Host Country Political Restrictions And Risk Host Country Economic and Foreign Exchange Instability Subsidiary Operating Strategies (e.g.; Inventory Levels, Profit Repatriation)

37. Developing Performance Measurement and Control Systems: Host Country Factors • The cultural distance between the headquarters home country and the country hosting the international firm’s subsidiary • The degree of host country political risk as reflected in host government restrictions on the international firm’s operations • Economic factors such as the volatility of a host country’s foreign exchange rates and host country inflationary pressures that are linked to foreign exchange movements

38. Core Values - CSR Integrity Safety and health Quality of work Treatment of people Accountability Profitability Inclusiveness & Diversity • Supplier Diversity • Design • Innovation • The Environment • Operational Excellence • Technology

39. Enterprise Level – Strategic Thinking • Establishment of committees: • Public policy/issues • Ethics • Governance • Social audit • Corporate philanthropy • Corporate citizenship • Ad hoc committees • Public affairs office • Identification/analysis of social or public issues

40. Corporate Public Policy

41. Ethical Issues • Ethics • Accepted principles of right or wrong governing the behavior of a person, the profession’s members, or an organization • Business ethics • Accepted principles of right or wrong governing the conduct of business people • Ethical strategy • A strategy that doesn’t violate the accepted principles

42. Ethical Issues in International Business • Arise most often in the context of: Employment practices Human rights Environmental pollution Corruption • Moral obligations • Social responsibility

43. Ethical Issues in Employment Practices • When work conditions in a host nation are clearly inferior to those in a multinational’s home nation, what standards could be applied? • Host nation’s standards • Home nation’s standards • Both or other’s standards • Rights (e.g. freedom of association, speech, assembly & movement) • granted in the developed world are by no means universally accepted • Example: No specific human rights in South Africa, Nigeria & Myanmar • Examples • Royal Dutch/Shell: Human Rights in Nigeria • Child Labour in China

44. Ethical Issues • Corruption (e.g. hoarding, smuggling, & side payments to government bureaucrats) • occurs when preexisting political structures limit the workings of the market mechanism • can speed up approval for business investments • Conflicting viewpoints of economists towards corruption • Stimulates economic growth • Reduces the returns on business investment & leads to low economic growth • Example: • Corruption fears over China ventures

45. CSR • Social Responsibility • Business decisions should be made after consideration of social consequences of economic actions • Corporate Social Responsibility • Firms make contributions to society by engaging in social activities • Example: Environmental protection • 3M company in US • develops biodegradable products which cause less pollution • collects the waste paper for recycling • Example: Hiring and Promotion

46. Ethical Decision Making:Hiring & Promotion • Ethical issues Fair compensation Reasonable working hours Prohibition of child labor Prohibition of forced / prison labor Equal pay for work of equal value Prohibition of discrimination & disciplinary actions

47. Ethical Decision Making • Step 1 • Identifying a decision which would affect stakeholders & in what ways • Internal stakeholders • People who work for or who own the business such as employees, the board of directors, & stockholders • External stakeholders • Individuals or groups who have some claims on a firm such as customers, suppliers, & unions • Step 2 • Judging the ethics of the proposed strategic decision • i.e. whether a proposed decision would violate the fundamental rights of any stakeholders • Step 3 • Managers establish moral intent to resolve moral concerns where • the fundamental rights of stakeholders or key moral principles have been violated

48. Ethical Decision Making • Step 4 • Requiring the company to engage in ethical behavior • Step 5 • Companies need to audit its decisions & ensure that they are consistent with ethical principles

49. Environmental Issues • Pesticides often harm or kill fish and birds and can cause illness in children. Too much pesticide is dangerous to adults, so only safe levels are allowed keeping adults in mind, but such levels are still probably too dangerous for children.  A 2011 study by UC Berkeley has shown that prenatal exposure of pesticides in pregnant women can also lower the IQ of their children. • Air pollution contaminates the air, despoils vegetation and crops, corrodes construction materials, and threatens our lives and health. We generally assume we get sick from allergies, bacteria, or viruses; but pollution is a very common cause of illness as well.

50. Environmental Issues • Nuclear power plants require minding, processing, and transporting of nuclear materials that causes cancer in many people, and it’s unclear that our methods of disposing of nuclear waste are entirely safe. • Toxins — Chlorofluorocarbons,  Endocrine disruptors, Dioxin, Toxic heavy metals, Environmental impact of the coal industry, Herbicides, Pesticides, Toxic waste  • Waste — Electronic waste, Litter, Waste disposal incidents, Marine debris, Medical waste, LandfillEnvironmental impact of the coal industry, Incineration, Great Pacific Garbage Patch,  Exporting of hazardous waste