Chase Lucero, Chandler Anderson, Katherine Orgill, John Ternieden, Tyler Hatton, Carson McKinlay, Lizzie Ostler Larry

Macfarlane September 11, 2012 International Management and Globalization Group Case Assignment Globalization Globalization is the flow of goods and services, capital, and knowledge across country borders. In essence this is a trade of something between different countries, which enhances the economic interdependence among countries and organizations across countries. Thomas Friedman claims that we are in the third stage of globalization. The first stage started when people started to move internationally into countries, the second commenced once companies started to move internationally, and now we are in the third, which involves persons who work together and against each other on a global basis. The third involves people, not just companies and organizations due to the fact that it is no longer a fact that only companies are going global. Individuals have begun to disperse and collaborate on a global basis. There are many causes for the increase of globalization. One of the biggest factors is that workers can do quality work for less money. This phenomenon is also referred to as "outsourcing" or "production sharing". Recent trade liberalizations, coupled with the removal of restrictions on capital flows and technological change, have enabled firms to "outsource" some stages of production to cost minimizing locations abroad, either through arm's length imports of intermediate inputs or by setting up their own production facilities in a host country. Two of the areas that have received most traffic are China and India. For example, many U.S. companies

sent their employees to India for surgery because India can provide the same amount of quality care given for a smaller cost. India and China are expected to be big assets of the global economy over the next 30-40 years. Some have argued that by the year 2040, the combined economies of Brazil, China, India, and Russia are likely to outdo the economies of the six largest economies as of now: Canada, France, Germany, Japan, the United Kingdom, and the United States. Globalization provides both positive and negative effects. Technology has allowed for a person in a small country to became an international icon through the use of several different technological mediums i.e. Facebook, Twitter. For both individuals and companies, globalization allows for the ability to expand and grow by entering into a foreign market. This can also improve a countrys economic development. The downside of globalization is that incoming competition can harm local companies. This creates the need for government to weigh the benefits of globalization against the costs. Usually these officials are under great pressure to institute trade barriers that make it more difficult for foreign firms to effectively contend in their markets. Importance of Environment Understanding institutions of a countrys environment is important for managers. The book defines institutional environment as, the countrys rules, policies, and enforcement processes that influence individuals and organizations behaviors that operate within the country boundaries. These kinds of institutions include economic development, political-legal, and physical infrastructure. They are often complex, but when they interact with one another they create unique effects in each country they operate in.

Economic developments vary from country to country. This affects the citizens living standards and health care and is important to local and foreign firms and can open greater market opportunities. Developed economies, like the US and Japan, are often larger than those that are less-developed, and have more effective capital markets. This means the people in those markets can easily borrow money from banks or raise it through the selling shares in the stock market. The weakest economies are in developing countries like Sudan and El Salvador. Political-legal institutions pertain to a countrys political risks, regulations, laws and how they enforce those laws. Governments around the world put laws into place to govern the behavior of their citizens and organizations that operate within their boundaries. These regulations can be tied to entrepreneurship and that in turn, has a strong influence on a countys economic growth. The regulations that affect businesses most are related to the way foreign firms operate and deal with things like imposed tariffs and quotas on imported goods. They can also outline how workers are treated and how publicly traded firms on major stock exchanges must behave. An example that the book provides is China and how they required all foreign firms entering the country to form joint ventures with the Chinese firms. This was a way that ensured success for Chinese businesses to a degree and got them involved with other world powers. This also evened the playing field out a bit for Chinese firms that lacked some resources and had a hard time competing. Laws and rules are put in place on an international level to prevent scandals like the ones at Enron and WorldCom and above all to make the management of public firms more transparent. Where some may get into trouble is when the rules get excessive and discourage investment from abroad, but most are a necessity. Some laws, like intellectual property rights, can encourage companies to enter foreign markets when they would initially be wary with their unprotected, valuable technology. Joint ventures can be borne out of protective

laws thanks to some of these laws. Local partners in emerging markets often try to get technological and managerial capability from their better-equipped foreign partners. Institutional infrastructure is critical as it controls the flow of goods from the source to the consumer. This includes things like highway and road conditions, telephone lines, and airports. Countries that want to get involved internationally have to have stable institutional infrastructure to attract foreign investment to keep the investors costs down. Without it, distribution gets impacted and firms can be forced to sell to smaller markets. The biggest profits come to firms that have well-developed infrastructure. It is crucial to understand cultural norms and traditions among people because they have a strong impact on how managers operate in the workplace. When we are able to recognize cultural traits; we can predict managerial responses, leadership delegations, and basic methods of communication. Cultural patterns must be studied and understood in order to understand and effectively respond to managers, as well as establish a specific company in a designated market. Culture can be defined as a specific group of people, who have either subconsciously or consciously adapted behaviors and beliefs which result in specific behaviors and actions that fit a cultural norm. Cultures can incorporate various standards of living determined largely by their economy. Cultures where market opportunities are on the increase attract investors and entrepreneurs enabling the progression of economic growth. While economic growth is a positive thing in most cultures, countries must be sure to regulate the number of corporations being created in order to reduce pressure and unmanageable growth on law enforcement and other government officials. Culture dramatically affects individual opinion influencing whether a situation is viewed as positive or negative. Depending on personal circumstances and cultural background, people

view situations differently. For example, different religious beliefs, lifestyle practices and even clothing styles can vary widely in different cultures. Another area of focus that differs among geographical regions and cultures is the idea of power distance. Power distance translates to how well people accept power and differences within their culture. Cultures differ in the way clear norms are established and controlled. In some cases, clear norms need to be established in order for rules to be clear. This is exhibited throughout stricter societies. On the contrary, many cultures like to have low uncertainty avoidance as it means they will foster fewer rules and function more effectively in ambiguous settings. In the United States, most communities deal a lot with uncertainty, as there are many cultural norms that people can subjectively deem as appropriate. As a culture, Americans tend to follow many varied norms but live similar lives based on their geographical culture Americans are typically very individualistic. In many cases, Americans act in selforiented ways and are motivated by personal reward. We feel a cultural responsibility to provide for ourselves and our families. Americans feel rewarded by achieving things individually and in small groups. For example, in the workplace, an employee feels glorified when they make complete a key sale or triumph in a lawsuit. In our country when an individuals decision is deemed appropriate or lucrative, one feels a sense of personal accomplishment that cannot usually be met in a group setting. While Americans typically act in individualistic ways, they also have a sense of collectivism that has been ingrained. When working in a group setting, teams are expected to look after fellow team members, and contribute as much as they can in the way best suited to their skills. The last cultural focus touches on the ways various cultures deal with the importance of gender in society and in the workplace. Since the United States is typically a male dominant

society, the traits typically viewed as successful masculine traits include success, money, and focus on personal possessions. Among societies with a more feminine dominance, cultural norms see more focus on the overall quality of life or the care for one another. Gender is one of the most universal factors contributing to cultural differences in every country, and area. There are exceptions to these cultural norms in many circumstances based on individuals, groups, laws and rules of countries and nations. Our cultural beliefs and practices affect many issues in the workplace, in the community and in our own private homes. International Market Entry Strategies Managing International Operations After a firm has successfully entered an international market and established stable subsidiaries, the issue of how to actually manage this new limb of the global corporate body becomes a serious concern. Because of the nature of a global market with its diverse cultures and economies, each subsidiary and company can be different. There are so many factors which are involved in choosing the method of managing a multinational business including the desired flow of resources and information between home office and subsidiaries, and the level of autonomy a company wants grant subsidiaries. To explain different methods and their advantages and disadvantages, a comparison of a school is helpful. One method for a school to be managed would be for the principal to directly educate and control each classroom. The class would be taught from a TV monitor that broadcasts the same lecture from the principal to each class. This way, the Principal would be able to directly control the curriculum taught and would provide a mass of school supplies for every classroom to share. These classrooms are like the subsidiaries in different countries. Each classroom is different but can be controlled by one central entity.

This system of management in a business world would be called a globally focused organization. The firm's home office would have direct authority over all the subsidiaries in the firm. They would make strategic decisions and subsidiaries would follow a similar strategy. This system does make it easy to implement technology and ideas from the home office. A standardized product or service results which, after having been refined will increase profits. Subsidiaries would share resources which would also cut down on cost. A disadvantage to this system is that it does not grant subsidiaries the flexibility to make decisions or change. This can be a problem where cultures and specific economic situations differ from other subsidiaries or the home office of a firm. The more complicated the service or company, the more difficult to manage it globally. An example of an effective globally focused organization is CEMEX, which provides a ready cement mix from Mexico to countries and subsidiaries all over the world. But were the product more complicated, these companies subsidiaries would need more power to make decisions and changes with the differing culture and economy. Returning to the comparison of a school, another method of management would be for the principal to hire teachers to control each classroom. Because of the differences in classrooms and the different needs of supplies and curriculum, this method is very effective. However, it is costly to hire teachers and the education each child receives is not standardized because of different teachers styles. An organization using a region-country focus would operate in a similar way to this school example. The power to determine strategy defending against competitors and specific cultural and economic issues is given to a regional authority. This way, a subsidiary can tailor their methods, designs and products to what the regional manager believes will be the most effective.

This is a very decentralized management and the home office has much less control over the subsidiaries but often regional managers are able to respond more quickly to arising issues in the subsidiary than a global management system would. This approach can be more expensive because resources are not centralized and it cannot achieve economies of scale. European multinational firms successfully use region-country focus to manage subsidiaries because the different countries they deal with have varying environments, to complicated for global management. Some firms attempt a combination of regional and global management which is referred to as transnational focus. In these systems, the strategic decisions are decentralized like int eh regional-country focus system, but resources are shared among subsidiaries like in a global focus. In many cases, this system is better than either of the other management methods. Regardless of the method used, keeping a multinational business healthy depends on so many factors and issues but can a done successfully. Managing Across Cultures In an ever increasingly competitive global economy it is essential that businesses become multicultural organizations. Many companies are founded and make their sales uniquely in a specific country or culture. These businesses soon realize that the global market offers a much greater profit than the market of their native country alone. As a business begins to reach out and sell to other nations and cultures, it is of vital importance that they hire managers who are culturally knowledgeable with a global mindset. While a multicultural team has more potential for creativity and productivity, a lack of cultural intelligence can create tension and do more harm than good to ones business. That is why it is so important for a company to know how to effectively manage across cultures.

One of the most important elements of managing across cultures is developing trust. Because a global business is so expansive, it is costly and sometimes unreasonable that a team gets together face to face to discuss projects and strategies. Most multinational groups use technologies, such as Skype, and form virtual teams to have meetings. With limited physical interaction and a translator, it can be difficult for virtual team members to really get to know one another and develop sufficient trust needed to accomplish the goals of the company. Most of the actual work will happen outside of the meetings and video chats. Managers must have trust in others that they will effectively carry out the plans that were made at those meetings. One of the best ways to gain the trust of others is leading by example. Set objectives during the meetings and then accomplish them in a timely manner. Another attribute that is essential for any international manager is having a global mindset. Fostering a global mindset is all about becoming knowledgeable of other cultures and the appropriateness of actions under specific contexts. For example, a hilarious action amidst a comedic situation in England might be very offensive if it occurs in China. The book of management that we study from explains the difference between high-context cultures and low context cultures. High-context cultures are much more aware of their surroundings and have a heightened perception of what is and is not appropriate at any given moment. A list of highcontext cultures includes the Japanese, Chinese, Korean and Arab cultures. Low-context cultures tend not to let contextual variables determine appropriate behaviors as strictly, but there are certainly still times when something would be considered inappropriate. American, German, Swiss and English cultures are some examples of low-context cultures. A multicultural manager must be culturally aware of, at minimum, the cultures of those who work for him/her. Being

culturally ignorant is a quick way to offend a team member and lose not only their trust, but perhaps their business. The key to successful relations is being culturally intelligent. Multicultural organizations have greater potential for creativity and productivity than a single-cultured organization ever could. With more cultures come more ways of thinking and more resources to utilize. It is important that the greater abilities are managed and controlled. Although some think that cross-cultured businesses will create strife among nations, a wellknown scholar and consultant on international trends, Jagdish Sheth, believes that increased global interaction will not stir up a clash of cultures, but will lead to a more culturally integrated world. The Japanese will learn of African cultures. Americans will find ways to incorporate Chinese culture. In order It is time to make use of our different ways of thinking and accomplish our goals for the well-being of the global economy.