chapter

1. chapter 17 MANAGING GLOBAL ORGANIZATIONS

2. 2 Globalization Concepts • Global Organization: An organization that produces or sells goods or services in more than one country. • National Culture: The particular set of economic, political, and social values that exist in a particular nation.

3. 3 Reasons for Global Expansion • To gain access to valuable resources that are found throughout the world. • To obtain inputs from foreign suppliers who possess certain skills that allow them to make high-quality inputs. • To attract more customers.

4. 4 National Culture • National culture is the product of the values and norms that people use to guide and control their behavior. • Members of a particular national culture are socialized into these values and norms as they grow up. • Norms and social guidelines prescribe the way people in a given culture should behave toward one another and, often, toward people of different cultures.

5. 5 Hofstede’s Dimensionsof National Culture • Individualism versus Collectivism • Power Distance • Achievement versus Nurturing Orientation • Uncertainty Avoidance • Long-Term versus Short-Term Orientation

6. 6 Individualism vs. Collectivism • Individualism: The extent to which a culture values individual achievement, freedom, and competition. • Collectivism: The extent to which a culture values group harmony, cohesiveness, and consensus. • Cooperation and agreement are stressed • The group is more important than the individual

7. 7 Power Distance • The degree to which a country accepts that differences in its citizens’ physical and intellectual capabilities give rise to inequalities in their well-being. • How easily do people accept differences in economic and social differences in wealth and status? • High power distance countries are comfortable with class and status differences. • Low power distance countries are uncomfortable with class and status differences.

8. 8 Achievement vs. Nurturing Orientation • Achievement Orientation: The extent to which a country values assertiveness, performance, success, and competition. • Nurturing Orientation:The extent to which a country values quality of life, warm personal relationships, and service and care for the weak.

9. 9 Uncertainty Avoidance • The extent to which a country is able to tolerate uncertainty and is willing to take risks. • Low uncertainty avoidance countries are easygoing, value diversity, and are tolerant of differences in what people believe and do. • High uncertainty avoidance countries tend to be rigid and intolerant. • Conformity to values of the social and work groups to which individuals belong is the norm • Structured situations are preferred because they provide a sense of security

10. 10 Long-Term vs. Short-Term Orientation • Long-Term Orientation: The extent to which a country values thrift in saving and persistence in achieving goals. • Short-Term Orientation: The extent to which a country values personal stability or happiness and living for the present.

11. Achievement Orientation Uncertainty Avoidance Power Distance Long-Term Orientation Individualism United States Germany Japan France Netherlands Hong Kong Indonesia West Africa Russia China L L M H L H H H H H H H M H H L L L M L H H H M L H M M L M L M H H M L L M H M L M H L M H L L L H 11 Cultural Dimension Scores Note: H = top third M = medium third L = bottom third among 53 countries and regions for the first four dimensions; among 23 countries for the fifth Source: Adapted from G. Hofstede, “Cultural Constraints in Management Theories.” Academy of Management, 7 (1993): 91.

12. 12 Cultural Differences • Expressions of cultural values include • Rites, ceremonies, and symbols • Stories and language • Body language • Culture shock occurs when people who move to a foreign country find themselves confused and bewildered by the meaning and significance of objects and events taken for granted in that country. • To successfully manage the global environment, organizations and their managers have to learn to deal with the different values, norms, and attitudes that characterize different national cultures.

13. 13 Advice to Managers • If you become an expatriate manager, spend considerable time learning about the national culture of the country in which you are located. Involve your family in this process. • Analyze the economic, political, and social values of the country, particularly the way the country does business. • Use Hofstede’s model to analyze the country’s cultural values, and contrast these values with U.S. values to isolate major differences. • Spend considerable time talking with other expatriate managers in your host country and with its citizens to identify the norms and etiquette of the country that you should be aware of when dealing with residents on both a business and a social level. • Be adaptable, and embrace the opportunity to use your experiences in foreign countries to learn more about your own national culture and its cultural values.

14. 1514 Insert Figure 17.2 here

15. 15 Managing Resources • Many organizations reduce the uncertainty surrounding the supply of raw materials by expanding to other countries to obtain them. • Organizations often expand into other countries to find low-cost locations for intermediate manufacturing and assembly. • The more customer needs for a particular product differ from one country to another, the more an organization has to alter, modify, or adapt its products to suit the needs of customers in each country. This process can be very complicated and expensive.

16. 16 ManagingManufacturing and Distribution • Exporting: Shipping goods and services made at home or at the lowest-cost global location to customers in different countries. • Licensing: Formally granting to a company located in a foreign country the right to make and distribute the organization’s product. • Joint venture: A strategic alliance in which organizations agree to pool their skills and resources and produce a distribute a product together. • Wholly-owned foreign subsidiaries: Organizations owned by a company that manufacture and distribute its products in a foreign country.

17. 17 Global Learning • Global learning: Learning how to manage suppliers and distributors and to respond to the needs of customers all over the world. • Expatriate managers can learn about the sources of low-cost inputs and the best places to assemble their products throughout the world. • Expatriate managers in functions such as research and development, manufacturing, and sales can take advantage of their presence in a foreign country to learn the skills and techniques that companies in that country use.

18. 18 Global Strategy and Structure • One of the main challenges facing global organizations is the tension between globalization (the need to view the world as a single market) and customization (the need to be responsive to consumer tastes in individual countries). • Strategies organizations have adopted to address this challenge include • International Strategy • Multidomestic Strategy • Transnational Strategy

19. 19 International Strategy • A strategy in which a company retains important functional activities at home to protect its competitive advantage and establishes wholly owned subsidiaries abroad to manufacture and distribute its products in foreign markets. • Organizations with an international strategy are likely to adopt an international divisional structure.

20. 20 Insert Figure 17.3 here

21. 21 Multidomestic Strategy • A strategy in which a company decentralizes to managers in each foreign subsidiary the authority for making all significant product decisions so that they can develop the range of products that best appeal to the tastes of local customers. • Organizations with a multidomestic strategy are likely to adopt a global geographic structure.

22. 22 Insert Figure 17.4 here

23. 23 Transnational Strategy • A strategy in which a company locates foreign subsidiaries both in low-cost countries to produce inputs and assemble products and in a few select countries to customize and manufacture products to meet the needs of customers in a particular region. • Organizations with a transnational strategy are likely to adopt a global matrix structure.

24. 24 Insert Figure 17.5 here

25. 25 Comparing Global Strategies Strategy International Multidomestic Transnational Advantages Ability to protect important functional skills at home, such as R&D knowledge Relatively low operating costs Ability to customize pro- ducts to suit needs of local market Ability to locate operations where costs are lowest Ability to customize products Disadvantages Limited ability to customize products to suit needs of local market High operating costs Very high operating costs Problems of coordinating global activities

26. 27 Integrating the Global Organization • Global teleconferencing, global intranets, e-mail, and conference calls are all used by organizations to speed global communication, learning, and decision making. • Global organizations are increasingly moving their managers from one foreign subsidiary to another to help them develop a global outlook and build up a global network of contacts. • Global teams are groups of managers from foreign subsidiaries and domestic divisions who go from subsidiary to subsidiary to facilitate global learning and to integrate global organizations.

27. 28 Global Organizational Culture • If differences in values between countries cause differences in attitudes and behaviors between workers in different subsidiaries, an organization will find it difficult to obtain the benefits of global learning. • To prevent the emergence of different national subcultures within a global organization, an organization must take steps to create a global organizational culture that is stronger than the cultures within its various subsidiaries. • Global information technology, global networks, and global teams can be used to transmit values to the organization’s divisions and subsidiaries.

28. 28 Advice to Managers • To exploit and manage global resources effectively, choose the best method to manage manufacturing and distribution. Recognize that creating foreign subsidiaries is expensive and that joint ventures and network organizations can avoid the costs of global expansion while providing the benefits. • Be open to the opportunities presented by global learning, and develop a global rather than a national orientation. • When you plan the path of your company’s expansion abroad, choose an appropriate strategy for expansion. • Match your strategy to the appropriate organizational structure. Increase your use of electronic information media, and rotate managers to develop a global network to encourage global learning and increase your level of integration. • When you require a high level of communication and integration between foreign subsidiaries, take steps to develop a strong global organizational culture. A strong global culture can smooth over differences between people from different national cultures.

29. 29 ManagingGlobal Human Resources • Personality and ability • Values and attitudes • Perception and learning • Motivation • Groups and teams • Leadership • Communication and decision making