480 Slides Friday Spring 2010

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					 FRIDAY
 International
  Management
  MGT 480/680


Spring 2010
Dr. Yvonne Stedham
       International
        Management



• Seniors, Juniors, Majors???
• Travelled to other countries? USAC?
• Speak other languages?




                                        2
     International
      Management




• Why this course?




• What do you expect to learn?


                                 3
This week

• Purpose of this course

• What do you know?

• Introduction
  Course
     • Content
     • Format - Syllabus

  Personal
     • Instructor
     • Students – Background Sheet
                                     4
Purpose

• Management concepts and skills needed for
  businesses to succeed in an international
  environment

• External Environment - Globalization, Democracy,
  Free Markets, Cultural Differencs, and the Bottom
  Line



                                                      5
Website Location



   http://www.business.unr.edu/faculty/stedham/




                                                  6
Current Developments

• National Public Radio (NPR)
   FM 88.7 - KUNR
   FM 90.5 – Cap Radio


• The Economist
   https://www.economistacademic.com/subscribe_single.cfm -
     Student Subscription 12 weeks $19.95
     Faculty ID: 4430

• Wall Street Journal
   – Sign-up sheet

                                                        7
For February 2nd


• Global Update – Web/Handout

• Questions to be handed out in class – next week




                                                    8
Student Group


  International Business Student Chapter (IBSC)
     – President: Marc Bristol
     Email: marcdbristol@hotmail.com
     Cell phone: 530 613 2377
     – Extra Credit
     – Meeting dates: Every two weeks on Tuesday from noon to 12:50. In AB 402.


  NEWTRAC
     – Nevada World Trade Council
     – www.newtrac.org




                                                                                  9
What do you know?

1.   List the five largest countries based on population.
2.   What is the world population?
3.   What is ―GDP‖?
4.   What is the GDP/capita in the U.S.? What is a
     typical GDP growth rate for the U.S.?
5.   Which three countries have the highest
     GDP/capita?
6.   Which countries are culturally most similar to the
     U.S, which ones most dissimilar?
6.   How many countries are there in the world?
                                                            10
What do you know?

1. Five largest countries
   1. China 1.3 Bill
   2. India 1.16 Bill
   3. U.S. 307 Mill
   4. Indonesia 220 Mill
   5. Brazil 190 Mill

   6. Russia 140 Mill
   7. Japan 127.5Mill


2. World Population
    6.6 Bill
                            11
What do you know?

   1. Five largest countries
      1.    China 1.3 Bill
      2.    India 1.16 Bill
      3.    U.S. 307 Mill
      4.    Indonesia 240 Mill
      5.    Brazil 198 Mill

      6.    Pakistan 176 Mill
      7.    Bangladesh 156
      8.    Nigeria 149 Mill
      9.    Russia 140 Mill      Mexico 111 Mill #11
      10.   Japan 127.5Mill      Germany 82 Mill #16

   2. World Population
       6.6 Bill
                                                       12
What do you know?

3. GDP/capita

GDP/capita in U.S.: ~ $46,000
Growth rate in U.S.: .4%
  – Typical growth rate ~ 3%
  – GDP/sector: Agriculture 1.2%; Industry 19.2%; Service 79.6%

Mexico: Population 111.2 Mill; GDP/capita: $14,300
  – Current growth rate: 1.3%
  – GDP/sector: Agriculture 3.8%; Industry 35.2%; Service 61%

                                                                  13
What do you know?
 4. Which 5 countries have the highest GDP/capita

 1.    Luxembourg    $102,284
 2.    Norway        $ 79, 154
 3.    Qatar         $ 70,754
 4.    Iceland       $ 62, 976
 5.    Ireland       $ 58,883
 6.    Denmark       $ 57,035
 7.    Switzerland   $ 56,711
 8.    UK            $ 47,300
 9.    US            $ 46, 780
 10.   Netherlands   $ 45,429

                                                    14
What do you know?

 5. Which countries are culturally most similar
   to the U.S.
   Anglo Countries

      Canada
      Australia
      New Zealand
      U.K.
      Ireland
      South Africa

                                                  15
What do you know?

 6. Number of countries in the world

 • Total number of countries: 192 -195

 • Kosovo, Vatican, and Taiwan

 • United Nations 192



                                         16
 Some Data (APPROX.)

             Japan        China      Brazil       US       World

Population   127.5 Mill    1.3Bill   190 Mill   307 Mill   6.6Bill


GDP growth     -.7%        10.7%      3.7%       .4%        5.3%


GDP/          $34,100      $7,700    $8,800     $46,780    $10,200
Capita

Industry         ?           ?          ?          ?        NA


                                                              17
Data Sources


                 www.cia.gov



           www.transparency.org



               www.heritage.org


                                  18
International Government Materials


 International financial statistics yearbook
      http://innopac.library.unr.edu/record=b1618229~S0


 Trade policy review
             http://innopac.library.unr.edu/search/


 Patrick Ragains
 Business and Government Information Librarian
 ragains@unr.edu
International Management

•       Introduction
    –       Course
        •     Content – Culture, Globalization, Cost-Benefits-Risk
        •     Format - Syllabus
    –       Personal – Background Sheet

•       Framework of an international organization
•       Globalization
•       Reasons for going international
•       Types of international
        organizations
                                                                     20
Course Format

• Syllabus
Reminder


•   Extra Credit
    –   Forms


•   IBSC Meetings in AB 402 – February 2
    –   Speaker: Brazil




                                           22
Personal Introductions

• Students – background sheets

• Introduction
  – Major
  – Traveled internationally
  – Speak other language




                                 23
International Management

•       Introduction
    –       Course
        •     Content – Culture, Globalization, Cost-Benefits-Risk
        •     Format - Syllabus
    –       Personal – Background Sheet

•       Framework of an international organization
•       Globalization
•       Reasons for going international
•       Types of international organizations

                                                                     24
                     FINAL Termpaper List
                           February 26
                 Countries and Presentation Dates


1. Finland                        Brigette, Andria, Andrew      April 16
2. Germany                        Landon, Doug, Nicole          April 16
3. Italy                          John Bender, Colin            April 16
4. Spain                          Ermelinda, Kyle, Ben          April 16
5. Mexico                         Thomas Rich, Debbie, Justin   April 23
6. Brazil                         Megan, Fay, Australia,        April 23
7. Peru                           John, Claudia, Yvonne         April 23
8. Japan                          Brian, Vernon, Dani           April 23
9. Philippines                    Kevin, Lewis, Kyle Aiton      April 30
10. Thailand                      Brenda, Kirk, Stephanie       April 30
11. China                         Rebecca, Brent, Robert        April 30
12. Australia                     Ray, Dustin, Jason            April 30
            Framework
Organizations and Organizational Effectiveness




 What is an organization?

 Why do organizations exist?

• When is an organization effective?

• Efficiency vs effectiveness?


                                                 26
  Organizations and Organizational Effectiveness




 What is an organization? Why do organizations exist?
  – Organizations = People
  – Mission, goals, objectives

• When is an organization effective?
  – Distinguish between efficiency
  – and effectiveness.
  – Distinguish effectiveness measures
  – for the short, intermediate,
  – and long run.
                                                         27
Measurement of organizational effectiveness




            Long run?
            Intermediate run?
            Short run?


        •

                                              28
Measurement of organizational effectiveness




 • Long            -     Survival
 • Intermediate -        Adaptation, Responsiveness
 • Short           -     Productivity, Efficiency




                                                    29
Measurement of organizational effectiveness




       A contingency approach to management
           (NOT ―administrative theory‖ of management)


           It is management‘s task to create
           the best possible fit between
           the external and internal environments
            of the organization and must ensure
           internal consistency between
           the organization‘s elements.




                                                         30
The Organization


                   The External Environment

                     Social       Technological     Political
        Economy
                   Environment    Environment     Environment


                     The Internal Environment


                             People
        Business
                                              Effectiveness
        Strategy
                   Processes      Structure

                                     
                             Culture




                                                                  31
The International Organization


                       The External Environment
                               CULTURE
                                           Multiple        Multiple
            Multiple     Multiple
                                         Technological     Political
           Economies     Societies
                                         Environment     Environment

                         The Internal Environment


                                     People
           Business
                                                     Effectiveness
           Strategy
                       Processes         Structure

                                             
                                     Culture



                                                                         32
Globalization

• Thomas Friedman

• Why change?

• Characteristics of the global system
  – Previous system?




                                         33
Globalization
Thomas Friedman (NY Times)

  – The Lexus and the Olive Tree

  – The World is Flat

  – Hot, Flat, and Crowded

  With the #1 bestseller The World Is Flat, he helped millions of readers see and
    understand globalization in a new way. Now Thomas L. Friedman explains
    how America can lead the green revolution in the 21st century.



                                                                             34
Globalization


  • Globalization is not just an economic fad and it
    is not just a passing trend. It is an international
    system that replaced the Cold War System after
    the fall of the Berlin wall

  • The World is ten years old (1999)




                                                     35
Characteristics of the new
system

• Separation and independence

  VS

  Integration and interdependence




                                    36
Characteristics of the new system

• Free market capitalism

• Homogenization of culture – Americanization

• Defining technologies: computerization,
  miniaturization, digitization, satellite
  communications, fiber optics, the Internet



                                                37
Characteristics of the new system


• Defining measurement:

                  Weight (missles)

                          VS

    Speed .. Of travel, innovation, communication,
                        commerce

                                                     38
Characteristics of the new system



• Defining economists:

               Karl Marx and Keynes

                         VS

                    Schumpeter
        Capitalism and Creative Destruction

                                              39
Characteristics of the new system


• Defining political views:

                Friends and Enemies

                          VS

                     Competitors



                                      40
APEC
Asia Pacific Economic Cooperation

  Premier forum for facilitating
     • economic growth, cooperation, trade and investment in the
       Asia-Pacific region.

  It is one of the world's most important regional groupings,
     • encompassing 21 member economies
     • who collectively represent over 2.6 billion people and
     • account for approximately half of global GDP and trade.

  The primary focus of APEC is
     • promoting trade and investment liberalization and
     • business facilitation in the Asia-Pacific region.



                                                                   41
APEC Members



    Australia
    Brunei
    Canada
    Chile
    People's Republic of China
    Hong Kong, China
    Indonesia
    Japan
    Republic of Korea
    Malaysia
    Mexico
    New Zealand
    Papua New Guinea
    Peru
    Philippines
    Russia
    Singapore
    Chinese Taipei
    Thailand
    United States
    Vietnam
                                 42
APEC Business Summit


   • Invitation-only, annual meeting that provides unparalleled
     opportunities for strategic engagement and networking with
     prominent business leaders, international opinion setters,
     policy makers and leaders of Asia-Pacific Economic
     Cooperation (APEC) Member Economies.


   • The Business Summit, formerly the CEO Summit, has been
     held each year since 1996. It was instituted to enable
     business leaders to interact with APEC leaders.




                                                                  43
OPEC
Organization of Petroleum Exporting Countries


Twelve members
  Algeria, Ecuador, Iran, Iraq, Kuwait, Libya, Nigeria,
  Qatar, Saudi Arabia, UAE, Venezuela (Hugo Chavez)


OPEC’s Mission is
        • to coordinate & unify the petroleum policies of
          member countries &
        • ensure the stabilization of oil prices
            – in order to secure an efficient, economic & regular
              supply of petroleum to consumers,
            – a steady income to producers &
            – a fair return on capital to those investing in the
              petroleum industry.                                   44
World Economic Forum Davos
1/27-1/31/2010

• https://www.weforum.org/
• Committed to improving the state of the world
    – Participation Annual Meeting - invitation only - limited to the criteria and quota of each
      stakeholder group.
    – Of the 2500 participants, more than half from the business sector.
    – Over 900 chief executives - Basic Industries, Consumer, Financial Institutions,
      Information Technology, Electronics & Telecommunications, Mobility, Energy, Health,
      Media, and Professional Services.
    – Co-Chairs Josef Ackermann, Chairman of the Management Board and the Group
      Executive Committee, Deutsche Bank, Germany; Member of the Foundation Board of
      the World Economic Forum and Melinda French Gates, Co-Chair, Bill & Melinda Gates
      Foundation, USA
    – Azim H. Premji, Chairman, Wipro, India
      Peter Sands, Group Chief Executive, Standard Chartered, United Kingdom
      Eric Schmidt, Chairman of the Executive Committee and Chief Executive Officer,
      Google, USA
      Ronald A. Williams, Chairman and Chief Executive Officer, Aetna, USA
      Patricia A. Woertz, Chairman, President and Chief Executive Officer, Archer Daniels
      Midland (ADM), USA


                                                                                           45
World Economic Forum
                               Mission
• Independent, international Swiss not-for-profit organization
• Motto ‗entrepreneurship in the global public interest‘
• Economic progress without social development is not sustainable,
  while social development without economic progress is not feasible.

• To be the foremost organization
• builds and energizes leading global communities;
• the creative force shaping global, regional and industry strategies;
• the catalyst of choice for its communities when undertaking global
  initiatives
• to improve the state the world.




                                                                         46
World Economic Forum

                               Values
     1. The world‘s key challenges cannot be met by
        governments, business or civil society alone
     2. In a world characterized by complexity, fragility and
        ever greater synchronicity, strategic insights cannot
        be passively acquired. They are best developed
        through continuous interaction with peers and with
        the most knowledgeable people in the field.

                           Strategies
     •   To carry out its mission,
     •    the World Economic Forum has developed
     •   an integrated value chain
     •   by involving world leaders in communities,
     •   inspiring them with strategic insights and
     •   enabling them through initiatives.


                                                                47
World Economic Forum

•   Members - foremost 1,000 global enterprises.
•   Characteristics of Members include:

    · Their rank among the top companies within their industry and/or country
    · The global dimension of their activities
    · A leading role in shaping the future of their industry and/or region

•   Every year, more than 100 of the world‘s most influential companies
    partner with the World Economic Forum to tackle the most complex
    challenges facing humanity.
    Recognizing that each company‘s business needs are unique, the Forum
    offers the possibility for partners to engage in a specific community,
    project or event.




                                                                         48
G7 (G8) and G20

G20 (Group of 20)
Purpose (1999): Bring together systemically important industrialized and
  developing economies to discuss key issues in the global economy.
  Website: http://www.g20.org

   Argentina, Australia, Brazil, Canada, China, France, Germany, India,
   Indonesia, Italy, Japan,Mexico, Russia, Saudi Arabia, South Africa, South
   Korea, Turkey, United Kingdom, United States, European Union (map)


G7 (G8) Countries
    – US, Canada, Germany, France, Italy, UK, Japan, (Russia)




                                                                           49
G 20 Map

G 20
Groups

• Why do organizations go international?

  List at least 3 reasons




                                           51
Reasons for becoming international

    1.   A desire for continued growth.
    2.   Domestic market saturation
    3.   The potential to now exploit a new technological advantage
    4.   Preferable suppliers (quality, cost)
    5.   Labor market (supply, quality, cost)
    6.   Government involvement/restrictions
    7.   Reducing distance to customers (cost)
    8.   Tariff barriers
    9.   Increased foreign competition in home country
    10. Reduce general business risk by diversifying into other
        countries
                                                                  52
Reasons for becoming international




            Profit = Revenue – Cost

        Profit = (Volume*Price) - Cost




                                         53
 Reasons for becoming international

Profit = Revenue – Cost = (Volume*Price) – Cost

1.   A desire for continued growth. VOLUME
2.   Domestic market saturation VOLUME
3.   The potential to now exploit a new technological advantage V
4.   Preferable suppliers (quality, cost) PRICE, COST
5.   Labor market (supply, quality, cost) PRICE, COST
6.   Government involvement/restrictions COST
7.   Reducing distance to customers COST
8.   Tariff barriers COST
9.   Increased foreign competition in home country VOLUME, PRICE
10. Reduce general business risk by diversifying into other countries
                                                                    54
An International
Organization



  1. operates in multiple environments,
  2. home country and one or more host countries,
  3. has foreign sales,
  4. and a nationality mix of managers and owners.




                                                     55
Types of "international" organizations


           Multi-domestic organization


            Multinational organization


       Global or transnational organization



                                              56
Types of "international" organizations



    Multi-domestic organization:


         Any organization that exports
         to/imports from organizations in other
         countries with primarily domestic
         production.



                                                  57
Types of "international" organizations



    Multinational organization:


        An organization with operations in
        different countries but each is
        viewed as a relatively separate
        enterprise.

                                         58
Types of "international" organizations


   Global or transnational organization:


       An enterprise structured so that
       national boundaries become
       blurred. The best people are hired
       irrespective of national origin.


                                            59
      Graphic Representation

Headquarters – Subsidiary Relationship




                                    60
    Stages Model of
   Internationalization



Outward looking perspective: activities/issues related
 to the other countries (e.g., exporting) vs an inward
 perspective (e.g., importing)


Descriptive


Reflects the commonly observed pattern of increased
 commitment to international business

                                                    61
Four stages of internationalization


Stage 1:
 Indirect/ad hoc exporting - perhaps from unsolicited export
   orders
 Stage 2:
 Active exporting and/or licensing
 Stage 3:
 Active exporting, licensing, and joint equity investments in
   foreign manufacture
 Stage 4:
 Full-scale multinational marketing and production
               See also: Adler Chapter 1 pages 8 and 9

                                                                62
International Orientation


   • Ethnocentric
   • Polycentric
   • Geocentric
   • Regiocentric

                            63
International Orientation



 • PCN – Parent Country National
 • HCN – Host Country National
 • TCN – Third Country National



                                   64
The Relationship between Level of
Internationalization and Firm Performance




     More international => more performance?????




                                              65
The Relationship between Level of
Internationalization and Firm Performance




    There is a strong CURVILINEAR relationship between
      the degree of internationalization and organizational
      performance




                                                         66
The Relationship between Level of Internationalization
and Firm Performance




      Degree of internationalization:
      "sales generated by foreign
        affiliates"


      MNE (multinational enterprise)
       performance:
      "profit to sales" or "profit to
        assets".


                                                         67
 The Relationship between Level of
Internationalization and Firm Performance




     Performance is at a max.
     at a level of internationalization of
     60 to 80% and then decreases with continuing
     internationalization
     Examples – Coca Cola, Colgate, Exxon, McDonald’s,
     HP, Ralston, Avon


                                                    68
EMU

January 2009
Eurozone (16) Blue
Austria, Belgium, Cyprus,
  Finland, France, Germany,
  Greece, Ireland, Italy,
  Luxembourg, Malta, the
  Netherlands, Portugal,
  Slovakia, Slovenia and
  Spain.
CBR Analysis
• Cost
   –   Cultural differences
   –   Lack of infrastructure
   –   Taxes
   –   Resources
• Benefits (= reasons for ―going‖ international)
   –   Larger volume
   –   Lower cost
   –   Higher quality
   –   Less competition => Higher price
• Risk
   – Political, Economic, Operational
                                                   70
Case 1

•   Corporate Social Responsibility
•   Colombia
•   Mexico
•   India
•   Stakeholders
The Multiple Responsibilities of Business




               Economic                             Legal
              Responsibility                    Responsibility




                                  Social
                               Responsibility
The Social Responsibility of
MNCs

• Corporate social responsibility (CSR)



                                   MNCs should
        Profit is
                                   anticipate and
       MNCs’ only
                                    solve social
         goal
                                       needs
74
MNC Stakeholders
Business Ethics from a Stakeholders‘
Perspective – Employees

• Relationship of the firm to its employees:
   –   Hiring, promotion and other employee-related decisions.
   –   Fair wages.
   –   Respect for employee‘s beliefs.
   –   Accountability.
   –   Right to privacy.


• Relationship of employees to the firm:
   – Conflicts of interest.
   – Secrecy.
Relationship of the firm to Other
Stakeholders - CSR

• Owners
   – Stockholders
   – Financial Institutions
• Non-owners
   –   Customers/Consumers
   –   Suppliers
   –   Competitors
   –   Unions
   –   Governments
   –   Other
Opening Profile: The Enron
Case

• Illustrates how questionable actions by a company
  can be harmful to both stakeholders and the
  company itself—even if the actions are profitable in
  the short-term

• Enron is a symbol of an ―era of management
  practice‖ (James Post), but is it the end of the era?
Global Consensus or
Regional Variation?

• Global corporate culture

• Example of regional variation: The US focuses on
  following basic business obligations, Europe focuses
  on serving broader social aims
Three Approaches to International
Morality and Ethics


• Moral universalism

• Ethnocentrism

• Ethical relativism
What is the ―right‖
decision?

• Consult home/host country laws

• Consult International Codes of Conduct for
  MNCs

• Consult the company‘s code of conduct
What is the ―right‖
decision?

• Consult your superiors

• Fall back on your own moral code of ethics
External Environment -Theory




 National Competitive Advantage

 – Competitiveness


 – International Competitiveness


                                   83
External Environment


                         Porter Diamond
    The major determinants of national competitive advantage


                    Why some nations succeed and
              others fail in international competition!


 Porter's research is based on studying 100 industries in 10 nations.



                                                                        84
PORTER DIAMOND

• National Competitive Advantage


• Why a nation achieves success in a particular
  industry?
     • Why Japan -- automobile, cameras
     • Why CH (Switzerland) -- precision instruments,
       pharmaceuticals
     • Why Germany -- engineering


                                                    85
Porter Diamond

Four broad attributes of a nation

• that shape the environment in which local firms compete,
  and

• these attributes promote or impede

• the creation of competitive advantage

• Diamond of four mutually reinforcing factors

                                                         86
Porter Diamond

  1. Factor Endowments or Conditions–
     Basic

     Advanced

     Examples: Nokia, Ericsson

  2. Demand Conditions –
      1. Quality
      2. Innovativeness
      3. Variety - customization
                                        87
Porter Diamond
  3. Related and Supporting Industries –
    Suppliers (U.S. - semiconductor/comp)

  4. Firm Strategy, Structure, Rivalry –
    Executive background


  <=>

  Domestic environment encourages the development of
   characteristics that make company internationally
   competitive
                                                   88
Porter‘s Diamond
References for Porter

• 1. Michael Porter, 1990. The Competitive Advantage
  of Nations. Free Press

• 2. M. Grant, 1991. The Competitive Advantage of
  Nations: An Assessment. Strategic Management
  Journal, 12, 535-548




                                                 90
Final Comments

Additional Thoughts and Examples
• Japan
  – high priced land – JIT inventory technique
• Sweden
  – short building season – pre-fabricated houses


• Clustering – Related and Supporting Industries
  – Silicon Valley
  – Detroit
  – Italy – leather/shoes
Review

–   Types of international organizations
    •   Criterion -- Level of Global Participation
    •   International/Multi-Domestic
    •   Multinational
    •   Transnational/Global
–   Stages of Development to an International O.
    •   Descriptive Model
–   Effectiveness of Internationalization
    •   Relationship between extent of internationalization and
        performance


    External Enviro – Theory
    1. National Competitive Advantage
        Porter Diamond
    2. Trade Agreements
                                                                  92
 External Environment -
 Theory

2. Trade Agreements

• Why?

• Protectionism?

         Pro /Con
                          93
     Types of Trade Agreements



1.       Trade Area
     –     Common tariffs among members -- individual tariffs with non-members.
     –     NAFTA, ASEAN (Brunei, Indonesia, Malaysia, Philippines, Singapore,
           Thailand, Vietnam - 420 Mill)
2.       Customs Union
     –     Common tariffs for non-members.
     –     ANDEAN (Bolivia, Ecuador, Peru, Columbia, Venezuela)
3.       Common Market
     –     Free flow of goods and labor.
     –     Mercosur (Brazil, Paraguay, Uruguay, Argentina, Chile)
4.       Economic Union
     –     Common currency, common overseeing institutions
     –     European Union -- 15 Members; Euro; European Parliament; Court of
           Justice
5.       Political Union                                                       94
External Environment - Addendum




You need to know this about --




                                  95
Level of International Activities

o International Investment


o International Trade




                                    96
North America
      – United States - which
        industries most internationally
        active? Why?
      – US-Canada Free Trade
        Agreement (1989) – NAFTA
        ….
      – Mexico - wage rate;
        maquiladora industry (1965)


                                          97
Europe

 • delayed differentiation


 • acquisitions/alliances


 • EU - 27 members …..


 • EU – The Euro
                             98
European Union


• EU (27): Austria, Belgium, Cyprus, Czech Republic,
  Denmark, Estonia, Finland, Iceland, Italy, Latvia,
  Lithuania, Luxembourg, Malta, Netherlands, Poland,
  Portugal, Slovakia, Slovenia, Spain, Sweden, UK,
  France, Germany, Ireland, Greece, Romania (07),
  Bulgaria (07)


• EMU (16): Austria, Belgium, Cyprus, Finland, France,
  Germany, Greece, Ireland, Italy, Luxembourg, Malta, the
  Netherlands, Portugal, Spain, Slovenia, Slovakia

                                                            99
European Union - continued


• The European Commission
• The Council of Ministers (counterbalance to
  Commission)
• The European Parliament
• The European Court of Justice




                                                100
European Union


The European Commission
    proposes policies and legislation
    responsible for the administration of the EU
    ensures - provisions of the EU treaties+the
     decisions of the other institutions are properly
     implemented
    one rep per country (two for the 5 larger countries)
    represent, protect, further the European interest +
     its members do not represent or take orders from
     their national governments

                                                            101
Eastern Europe

  •   Break-up of The Soviet Union
      (Dec 1991)
  •   Russia (glasnost, perestroika)
  •   The Ukraine
  •   Czech Republic
  •   Slovakia
  •   Poland
                                       102
    Russia




•    Gazprom – Europe (25%)
•    Limitations on foreign ownership
•    Centralization of authority
•    Weak infrastructure




                                        103
External Environment


Latin America
  Middle (Central) and South
  Mexico, Costa Rica, El Salvador, Nicaragua
  Peru, Colombia, Venezuela
  Brazil
  Argentina
  Chile



                                                104
External Environment

 Asia
   • Japan
        – MITI (Ministry of International Trade and Industry)
        – keiretsus
        – Current economic conditions
   • South Korea - chaebols
   • China
        – GNP growth of 10%
        – low wage rates


                                                                105
External Environment

  What about Australia?




                          106
External Environment



    The Four Tigers
      South Korea, Hong Kong, Singapore, Taiwan


      Baby Tigers
      Thailand, Malaysia, Indonesia



                                            107
Less developed countries


    • Large population,
    • high unemployment,
    • inflation,
    • low or negative economic growth,
    • low literacy rate


    India, African countries, Central and South American
      countries, Middle East

                                                      108
Kenya and Tanzania

  • Kenya
    – 34 Mill; 6.7% HIV; 85% literacy; $1,200
      GDP/capita; growth 5%; UE 40%
  • Tanzania
    – 37 Mill; 8.8% HIV; 78% literacy; $700
      GDP/capita; growth 6%
  • USA
    – 301 Mill; .6% HIV; 95% literacy; $48,600;



                                                  109
Major economic regions


      North America


      Europe


      Asia

                         110
Economic Superpowers


        The Triad
 1. The United States
 2. The EU (dominated by Germany),
 3. Japan

  Dominates foreigndirect investment
   and international trade


                                       111
FDI Clusters
   for the U.S.:   Latin America

   for EU:         Eastern Europe


   for Japan:      The Four Tigers
                   South Korea, Hong Kong, Singapore, Taiwan

                   Baby Tigers
                   Thailand, Malaysia, Indonesia




                                                        112
         Data


                US       Japan       Germany

Population   301 Mill   127.5 Mill   82.5 Mill.

GDP             3.2%      2.2%         2.7%
growth

GDP/         $44,800    $33,100      $31,900
Capita


CPI          7.3 (20)   7.6 (17)     8.0 (16)
ECF             5          18           19
                                                  113
Group Dynamics


• Why groups?




                 114
Group Dynamics

Group performance =

Sum of individual performance PLUS group dynamics


•   Group dynamics can be positive or
    negative

•   Higher quantity and quality of solutions

                                                    115
    Group Dynamics

Advantages – Benefits
  1. Different viewpoints
  2. Differences in expertise
  3. Differences in training and
     experience
  4. Cultural differences
  5. Value differences

                                   116
      Group Dynamics


Process losses
 1. Loafing
 2. Intra-group conflict
 3. Miscommunication
 4. Wrong leader
 5. In appropriate role and task
    assignments
 6. Role ambiguity
 7. Role conflict
 8. Informal, dysfunctional norms
                                    117
Group Dynamics


Group management
 1. Roles
   •   What – List of tasks
   •   Who – Is responsible for what, based on expertise
   •   How - Enforcement

 2.Timeline
   •   When – Specific deadlines
   •   What – Effective communication
   •   Who - Commitment
                                                           118
  Group Dynamics

Group management
 3.Leadership
   • Formal
   • Why
   • Expertise and role
 4.Norms
   • Must be explicit
   • Agreed upon by all
   • Consequences of norm violations
                                       119
                     FINAL Termpaper List
                 Countries and Presentation Dates


1. Finland                        Brigette, Andria, Andrew      April 16
2. Germany                        Landon, Doug, Nicole          April 16
3. Italy                          John Bender, Colin            April 16
4. Spain                          Ermelinda, Kyle, Ben          April 16
5. Mexico                         Thomas Rich, Debbie, Justin   April 23
6. Brazil                         Megan, Fay, Australia,        April 23
7. Peru                           John, Claudia, Yvonne         April 23
8. Japan                          Brian, Vernon, Dani           April 23
9. Philippines                    Kevin, Lewis, Kyle Aiton      April 30
10. Thailand                      Brenda, Kirk, Stephanie       April 30
11. China                         Rebecca, Brent, Robert        April 30
12. Australia                     Ray, Dustin, Jason            April 30
National Culture

        Harry and Sally
         in Saudi Arabia
 Lack of prep ->   ????? -> Loss of contract
   What went wrong? Specific examples!


                                               121
What went wrong? Specific examples!



            » Sabbath
            » Flights
            » Language - Taxi
            » Coffee – Refusal – Rude
            » Food
            » Role of women
            » Negotiation – Relationship-building - Time

                     Why did things go wrong?



                                                           122
Why did things go wrong?



       Lack of preparation




       » Lack of Cultural Knowledge


       » Lack of Cross-Cultural sensitivity
Culture and International Management


 Relevance


    • Cultural Toughness – Cultural Distance


    • Cross-cultural literacy and sensitivity


    • Cost of doing bus in a particular culture




                                                  124
Internationalization Decision

• Benefits from internationalization into a specific country

• Cost associated with internationalization into a specific
  country

• Risk associated with internationalization into a specific
  country.


         Decision = f (benefit-cost-risk tradeoff)



                                                               125
Cultural Dimensions



All people have common life problems such as ….

Possible solutions to such problems …..

Different societies chose different solutions ….


                      Culture

                                                   126
  Cultural Dimensions


• Six basic dimensions describe the cultural
  orientations of societies

      • What is the nature of people?
      • What is a person's relationship to nature?
      • What is a person's relationship to other people?

      • What is the primary mode of activity?
      • What is the conception of space?
      • What is the temporal orientation?



                                                           127
  Cultural dimensions



Six basic dimensions describe the cultural orientations of
     societies

      1. What is the nature of people? Good/evil/change

      2. What is a person's relationship to nature?
          Dominant/harmony –subjugation

      3. What is a person's relationship to other people?
          Individualistic/group – hierarchical/lateral


                                                             128
  Cultural dimensions


Six basic dimensions describe the cultural orientations of
     societies

      4. What is the primary mode of activity?
         Doing/being

      5. What is the conception of space?
         Private/public

      6. What is the temporal orientation?
            Future/present/past



                                                             129
Characteristics of Culture
Values and Norms




      1. Social structure
      2. Religion
      3. Political philosophy
      4. Economic philosophy
      5. Education
      6. Language

                                130
1. Social structure



          1. Social stratification
          2. Class consciousness
          3. Class membership is a function of ?
          4. Social mobility




                                                   131
2. Religion

      • www.adherents.com
      • Minimal level of self-identification
      • Non-religious 16%


      • Christianity 2.1 bill; 33%
          – Protestant work ethic

          – Catholic vs Protestant/Lutheran
          – Take care of your neighbor and the less fortunate
          – 10 commandments


                                                                132
• Islam 1.5 bill; 21%
    – Sunni and Shi‘ite – best known branches
    – all embracing way of life, governing the totality of a
      Muslim being;
    – prayer five times a day;
    – free enterprise/hostile to socialist ideals - earning a
      legitimate profit through commerce and trade;
    – Koran;
    – contractual obligations, keeping one's word
    – role of women and men


                                                                133
• Hinduism 900 mill; 14%
   – spiritual achievement;
   – Nirvana;
   – Samsara – birth, death, re-birth;
• Buddhism 360 mill; 6%
   – Central and Southeast Asia, China, Korea, Japan;
   – "life is suffering; misery is everywhere and originates in
     people's desire for pleasure;
   – Noble Eightfold Path: right views, right intention, right
     speech, right action, right livelihood, right effort, right
     awareness, right concentration
   – Japan – Temples, Shrines (Shinto)
                                                                   134
Characteristics of Culture (Cont’d)


 3. Political philosophy
     • Political freedom – dominant political orientation
 4. Economic philosophy
     • Free Market – to what extent
     • Economic freedom - www.heritage.org/research/features/index/
 5. Education
     • Importance
     • Access
     • Type
 6. Language (verbal/spoken; non-verbal) Communication; word
    equivalency

                                                                 135
Ignoring Culture


    • Religion
       – Ads for refrigerator, airlines (Middle East)


    • Language
       –   Baby Food in Africa,
       –   English candy ―Zit‖,
       –   Finnish product unfreezes car locks ―Super Piss‖
       –   Electrolux sucks (Sweden)




                                                              136
The US Culture????


  Describe ….




                     137
Culture

•    Relevance
    –   CBR Analysis
    –   Cultural toughness
    –   Cross-cultural literacy
    –   Cultural sensitivity
•    Three aspects
    1. Basic Assumptions - Six
    2. Characteristics - Six
    3. Measurement
        •   Application of cultural dimensions


                                                 138
 Measurement of Culture

• Purpose ????

• Geert Hofstede – 1970‘s
   –   IBM employees
   –   100,000 across 30+ countries
   –   Survey – typical work situations
   –   Identify systematic differences – Factor Analysis
   –   Four independent factors


• Follow up research: Culture‘s consequences (2001)

• Culture: Collective programming of the mind
                                                           139
Dimensions of culture


 1. Individualism/Collectivism
 2. Power Distance
 3. Uncertainty Avoidance
 4. Masculinity/Femininity
 5. Confucian Dynamism
                                 140
Individualism/Collectivism

     • Individualism exists when people define
       themselves as individuals. It implies loosely knit
       social frameworks in which people are
       supposed to take care only of themselves and
       their immediate families.

     • Collectivism is characterized by tight social
       frameworks in which people distinguish between
       their own groups, "in-groups", (relatives, clans,
       organizations) and other groups. People expect
       in-groups to look after their members, protect
       them, and give security in exchange for
       members' loyalty.
                                                            141
Power distance

• Indicates how a society deals with the inequality
  among people's physical and intellectual
  capabilities.

• A culture with high power distance allows
  inequality to grow to inequality in power and
  wealth, one low in power distance aims at
  removing such inequalities.

• Indicates to what extent the unequal distribution
  of power is accepted.
                                                  142
Uncertainty avoidance


    The extent to which people in a society feel
     threatened by ambiguous situations and
    the extent to which they try to avoid these
     situations
    by providing greater career stability,
     establishing more formal rules, and rejecting
     deviant ideas and behavior.
    Lifetime employment is more common in
     countries with high uncertainty avoidance - the
     reverse is true for job mobility.

                                                       143
Masculinity/Femininity


    Masculinity is defined as the extent to which
     the dominant values of society emphasize
     assertiveness and acquisition of money and
     things (materialism).


    Femininity is defined as the extent to which the
     dominant values in society emphasize
     relationships among people, concern for
     others, and the overall quality of life.


                                                        144
Confucian dynamism or
Long-term orientation (1993)




       • Refers to the time perspective in a society for the
         gratification of people's needs.


       • A high CD or long-term oriented society is one
         which emphasizes thrift and perseverance.


       • A low CD or short-term oriented society focuses on
         gratifying needs here and now.


                                                          145
Sources for International Research


• Hofstede, Geert (1980): Culture‘s Consequences

• Hofstede, Geert (1991): Cultures and Organizations

• Hofstede, Geert (1984): Culture‘s Consequences:
  International Differences in Work-Related Values

• Hofstede, Geert and Michael Harris Bond (1984): The
  Confucius Connection: from cultural roots to economic
  growth. Organizational Dynamics, 16, 4, 4-21

• websites
                                                          146
                  U.S.   Japan   Germany
Individualism:     91     46       67


Power distance:    40     54       35


Uncertainty
  avoidance:       46     92       65


Masculinity:       62     95       66

ST/LT:             29     80       25
                                           147
Applying Hofstede‘s
Dimensions


• Lawyers per 100,000 population
  –   U.S.
  –   Germany
  –   Great Britain
  –   Japan
  –   Italy
  –   France



                                   148
Applying Hofstede‘s
Dimensions

• Lawyers per 100,000 population (1996)

  –   U.S.                312
  –   Germany             190
  –   Great Britain 134
  –   Japan               106
  –   Italy               81
  –   France              49


                                          149
Laurent‘s Research-See Adler


 •    9 Western countries, US, 2 Asian countries
 •    More than sixty common work situation (yes/no)
     1.   The main reason for hierarchical structure is so that
          everybody knows who has authority over whom
     2.   In order to have efficient work relationships, it is often
          necessary to bypass hierarchical lines
     3.   It is important for a manager to have at hand precise
          answers to most of the questions that his
          subordinates may raise about their work




                                                                       150
 Laurent‘s Research



The main reason for hierarchical structure is so
   that everybody knows who has authority over
   whom


   US 18% agree, Germany 24%, Italy 50% France
     45%, Japan 52%

                  Power Distance

                                                   151
 Laurent‘s Research



In order to have efficient work relationships, it is often necessary
     to bypass hierarchical lines



    US 68% agree, Germany 54%, Italy 25%

                    Uncertainty Avoidance



                                                                152
Laurent‘s Research


  It is important for a manager to have at
         hand precise answers to most of the
         questions that his subordinates may
         raise about their work

     US 18% agree, Germany 46%,
        Italy 66%,
     Japan 78%


         Uncertainty Avoidance

                                               153
Fons Trompenaars
•    Riding the Waves of Culture (1998; 2nd
     edition)

•    Dimensions (see textbook):

    1.   Universalistic–Particularistic (Obligation)
    2.   Neutral-Affective (Emotional Orientation in
         Relationships)
    3.   Specific-Diffuse (Involvement in
         Relationships)
    4.   Achievement-Ascription (Legitimization of
         Power)

                                                       154
Expatriate Assignment

• Why to use expatriates?
   – Ethnocentric, polycentric, regiocentric, geocentric

• Culture Shock

• Selection
   – KSA Requirements
   – KSA Assessment

• Training
   – Type and rigor of training

• Failure Rates
   – Reasons
                                                           155
Four stages cross-cultural adaptation:

  1. Honeymoon

  2. Irritation and hostility

  3. Gradual adjustment

  4. Biculturalism

                                         156
The Expatriate Assignment


• Experience of uncertainty
   – Anticipatory and in-country adjustment

• Expatriate Selection
    Relevant KSA‘s?
      • Technical, Managerial
      • Adaptiveness
    Measurement
      SMILE: Speciality; management ability; international flexibility;
       language facility; endeavor (Matsushita)
    Spouse and Family - Failure rates
      40% on average; lower for European and Japanese


                                                                          157
The Expatriate Assignment

  Failure rates

    Rosalie Tung: Reasons
       1.   Selection is based on headquarter criteria
       2.   Lack of training, preparation, orientation
       3.   Alienation/lack of support from headquarters
       4.   Inability to adapt to local culture/work enviro
       5.   Problems with spouse, family
       6.   Compensation
       7.   Poor programs for career support/repatriation
                                                              158
Training Techniques and Rigor of Training



       • Area studies

       • Culture assimilators

       • Language training

       • Sensitivity training

       • Field experiences

                                            159
The Expatriate Assignment


Training
  – Cultural toughness – China, Brazil, India, Japan,
    Russia, Mexico, Saudi Arabia, South Korea, France
  – Less than 1/3 of expatriates receive training
  – Pre-departure training, post-arrival training, reentry
    training
  – Culture, language, everyday matters
  – Cross-cultural training to ease the adjustment to the
    new environment by reducing ―culture shock‖: a state
    of disorientation and anxiety about not knowing how to
    behave in an unfamiliar culture

                                                       160
The Expatriate Assignment


 • Training – Examples

   – ABB (Asea Brown Bovari) rotates 500 managers
     around the world .. Every two to three years
   – PesiCo orientation program for foreign managers
     … one year at U.S. bottling division plants
   – Honda of America Japanese language, culture,
     lifestyle training .. Tokyo up to 3 years
   – GE engineers and managers must have global
     perspective .. Regular language and cross-cultural
     training

                                                      161
The Expatriate Assignment


Compensation
  – $100,000 manager in U.S. -> $300,000 in London, $1mill in
    Tokyo or Stockholm
  – Equity and goodwill
  – Purchasing power and standard of living
  – Tax differentials and tax equalization
  – Balance sheet approach
  – Allowances – Cost of living, housing, education, home
    leave, shipping and storage

Repatriation – Reverse Culture Shock

                                                        162
Expatriate Assignment

• DVD




                        163
Cultural Stereotypes

• What are stereotypes?

• Why stereotypes?

• Good/bad?

• Exercise – Five jobs!
European Scholars Conference




  – EU – Consumer Protection – Public Health
     • Task Force – WHO
     • Obesity (BMI Index: 30+) – U.S. 33%; UK 22%, G 12%,
       Switzerland 8%, Italy 9%




                                                             165
Progress Report #2



     Questions?




                     166
Overall Attractiveness of a
Country
• Trade-off between
  – Costs



  – Benefits



  – Risks




                              167
Overall Attractiveness of a Country


Trade-off between
  – Costs: legal requirements, availability of resources,
    infrastructure, level of economic development, free market?


  – Benefits: market size, wealth (purchasing power), future
    wealth, resources (quality and cost)

  – Risks: the likelihood that political, economic, legal forces
    will cause drastic changes in a country's business
    environment that adversely affects the profit and other goals
    of a particular business enterprise.

                                                                    168
Political Risk

 – What is risk?

 – What is economic risk?

 – What is political risk?



                             169
Useful website




           www.buyusa.gov/nevada

       Left tab: International Trade Links
Political Risk


 Definition
 – the likelihood
 – that political forces
 – will cause drastic changes
 – in a country's business environment
 – that adversely affect the profit and other
   goals of a particular business enterprise.

                                                171
  Political Risk

Characteristics of countries
with a higher likelihood for political risk:
1. Social unrest* (see below)
2. Demonstrations
3. Terrorism


*Social Unrest
1. More than one ethnic nationality
2. Competing ideologies battle for political control
3. High inflation and falling living standards
4. Strikes

                                                       172
Results of Social Unrest


    Change in government and/or policy


Results of Political Change
    Expropriation
    Indigenization

                                         173
      Risk Assessment


Euromoney Magazine‘s Country Risk Ratings

  Analytical Indicators:
     • political risk (20%) - measures stability and potential fall out
       from instability
     • economic indicators and risk (20%)
  Credit Indicators
  Market Indicators

• Political Risk Yearbook


                                                                          174
Political Risk Data - Example

Dun & Bradstreet‘s Guide to Doing Business around the World (textbook)

• Comparative Country Risk Rankings

• Overall Ratings:
      • Political Risk,
      • GDP Growth, Per Capita Income,
      • Trade Flow with the US,
      • Monetary Policy,
      • Trade Policy,
      • Protection of Property Rights,
      • Foreign Investment Climate


                                                                   175
Political Risk

• ONDD

• Office National Du Ducroirce

• www.ondd.be
Risk Management




    1. Integrative Approach


    2. Protective/Defensive Approach




                                       177
Integrative Approach

• Become part of the host country‘s infrastructure
• Good relationship with host government
• Produce locally … in-country suppliers
• Joint ventures

• Local R&D

• Effective in long-run
                                                     178
Protective/Defensive
Approach

• Discourage host government from interfering

• As little as possible local manufacturing and R&D

• Capital from local banks and outside

• Diversify production among several countries


                                                  179
Contingency Approach

 Overall risk for an international company depends on the
 polit. risk and characteristics of the firm.


 Three primary factors to be considered:
     1.Political risk type - Transfer risk/Operational
       Risk/Ownership risk
     2.General investment type - Conglomerate/Vertical/
       Horizontal
     3. Specific Investment (1=most risky) - Sector (primary=1
        /industrial=3/service=2) Technology (science=2/non-
        science=1) Ownership (wholly=1/partially owned=2)

                                                                 180
Political Risk Insurance

   - covers the loss of firm‘s assets, not the loss of
     revenue

   Overseas Private Investment Corp (OPIC)
     • inability to repatriate profits, expropriation,
       nationalization, damage from war, terrorism

   Foreign Credit Insurance Association
     • war, revolution, currency inconvertibility,
       cancellation of import or export licenses
                                                     181
A Risky Country
  1. unstable government
  2. unstable economy
  3. war/revolution/terrorism
  4. unfriendly/hostile people
  5. unacceptable customs/values/attitudes



                                             182
A Risky Company

  1. type of product and/or service offered
  2. type of industry
  3. structure of ownership
  4. level of technology




                                              183
Termpaper – Integration of course material



 1.    The purpose of your paper is to report the cost-benefits-risk associated
       with internationalizing into ―your‖ country. What do you know about the
       cost, benefits, risk associated with ―your‖ country?

 2.    The first section in your country analysis is an assessment of the external
       environment to determine cost-benefits-risk. What aspects of the
       environment will you review? What of the material that we have covered in
       class will you be using for that assessment?

 3.    What is the population size of ―your‖ country? What is the GDP/capita?

 4.    How will you address the cultural aspects of ―your‖ country? Is
       ―your‖ country culturally tough for Americans?

 5.    We started a review of the internal environment of an international
       organization. You will be reporting on the components of the internal
       environment in businesses in your country and determine the associated
       cost-benefits-risk. Give examples of the issues that will have to be
       addressed in this section of the report.
                                                                                  184
Integration of Course Material



  Four components of the internal environment
      1.   Behavior – Group and Individual
           1.   Leadership
           2.   Motivation, Rewards, and Compensation
      2.   Processes
           1.   Communication
           2.   Decision-making
           3.   HR processes
      3.   Structure
           1.   Hierarchical versus open
           2.   Formal versus informal
      4.   Organizational Culture
           1.   Six dimensions – tight vs loose control, open vs closed etc


                                                                              185
Self-Assessment (Group) for Termpaper and Peer
Evaluation


• Rubric provided to students

• Completed self-assessment - submitted when the
  termpaper is handed in

• Each group member evaluates each group member
  Peer Evaluation - Completed form to be submitted
  with the termpaper


                                                 186
Strategy

  The science
  and art
  of conducting military campaign
  on a broad scale.


  A plan or technique for achieving some end.



                                                187
Strategic management


     set of decisions and
     subsequent actions
     used to formulate and
     implement strategies that will
     optimize the fit between the organization and its
      environment
     in an effort to achieve organizational effectiveness.




                                                         188
Strategy and the Firm


 Purpose of any business:
 Provide products or services that are desired
   by society and, hence, to make a profit


   Profit = Revenue - Cost
   Profit = Volume * Price - Cost


                                                 189
Profit

If the price the firm can charge for its output is
  greater than its costs of producing that output.




                                                     190
Profit

• To do this, a firm must produce a product that is
  valued by consumers.




                                                      191
Value



• Thus the firm must engage in value   creation.




                                               192
Value to Customer



• The price that consumers are willing to pay
  indicates the value/worth of the product to the
  consumer.




                                                    193
Strategy

Porter, 1985


Strategy Model
(Distinguish from Porter’s Diamond - National Competitive Advantage)




                                                                194
Strategy

• Firms can increase profit in two ways:

     1. adding value to a product so that consumers
 are willing to pay more for it (improve quality,
 provide service, customize product to consumer
 needs)

    2. by lowering the costs of value creation
 (perform value creation activities more
 economically).

                                                 195
•   The firm is a value chain
•   composed of a series of distinct
•   value creation activities


Value creation activities
    1. Primary activities
    Production and marketing
    2. Support activities
    Materials management, R&D, Human resource management

                                                           196
Strategy - Michael Porter

  The
    • steps a firm takes
    • to ensure that the cost of value creation are
      reduced and
    • that value creation activities are performed in
      such a way that consumers are willing to pay
      more for the product than it costs to produce it.



                                                    197
Strategy and Global Expansion

   Performing certain value creation activities may
    have two benefits for the value chain

   1. Lower the cost of value creation
   2. Improve the quality of the product - create
     more value



    Perform value creation in “best” location

                                                      198
Strategy and Global
Expansion
      Firms realize location economies by
      dispersing particular value creation activities to
      those locations where they can be performed
      most efficiently and effectively.




                                                      199
Location economies and/or experience economies:
– Basing each value creation activity that the firm performs
– at the location where economic, political, and cultural
  conditions,
– including relative factor costs,
– are more conducive to the performance of that activity.
– Consider transportation costs (weight-to-value ratio) and trade
  barriers.




                                                               200
Strategy and Global
Expansion
• Firms that expand to international markets will gain greater
  returns from their distinctive skills or core
  competencies.

• Core Competencies - Skills within the firm that
  competitors cannot easily match or imitate. Examples.




                                                            201
Strategy and Global
Expansion
  Constrains on transferring core competencies result from
   the need for local responsiveness


  Need for local responsiveness results from national
   differences in consumer tastes and preferences,
   business practices, distribution channels, competitive
   conditions, and government policies - these constrain
   the firm's ability to transfer core competencies and
   realize location economies.



                                                        202
Strategy of an international organization
  • concerns identifying and
  • taking actions that will
  • reduce the cost of value creation and/or
  • will add value
  • by better serving the consumer needs
  • through transferring core competencies and
  • realizing location economies taking
  • into account national differences.


                                                 203
Strategic Predispositions


Ethnocentric:
strategic decisions are made at headquarters,
key jobs at both domestic and foreign operations
are held by headquarters management personnel (PCN's).




                                                         204
Polycentric:
the MNC's subsidiaries are
treated as distinct national entities
with extensive decision-making autonomy (HCN's mane the foreign
   operations).

Geocentric:
tries to worldwide integrate business strategy and decision-making.


Regiocentric:
reflects the geographic structure of the MNC.


                                                                 205
Strategic Planning Process
– External Scanning and Internal Scanning
  (SWOT)
– Opportunities/Threats Strengths/Weaknesses

– Vision, Mission, Goals, Objectives, Strategies


Strategy Implementation

                                                   206
Three Traditional Strategies
Multinational Strategy:
focus on cost reduction and product standardization
  that is marketed worldwide.
International Strategy:
limited local responsiveness, focus on transfer of
  valuable skills and products where indigenous
  competitors lack those skills and products.
Multidomestic Strategy:
like international but extensive local responsiveness.


                                                         207
Pressures for Local Responsiveness


  1. Differences   in consumer tastes and
   preferences
  2. Differences in infrastructure and traditional
    practices
  3. Differences in distribution channels


                                               208
Privatization

• http://www.privatizationbarometer.net/

• Register but free

• Library – ask business librarian for help




                                              209
The Internal Environment of an
International Organization



                 Organizational Culture

                         People

                       Processes

                        Structure


                                          210
Organizational Culture

• What is it?
• Relevance? Why is it important?
• Where does it come from?
• What happens when two companies merge?
  Boeing-McDonnel Douglas; GE and Bently NV
• What happens when two companies from different
  countries merge?



                                              211
Organizational Culture

    • What is organizational culture?
      The shared values, beliefs, norms, and patterns of behavior in
        an organization.

    • Schein's Three Layer Model:
      Artifacts, Values, Basic Assumptions

    • Measurement of organizational culture
      In the workplace cultural differences are accounted for by work
        practices.




                                                                 212
Dimensions of Organizational
Culture



   1. Process ↔ Results oriented
   2. Tight ↔ Loose Control
   3. Job ↔ Employee oriented
   4. Parochial ↔ Professional oriented
   5. Closed system ↔ Open system
   6. Normative ↔ Pragmatic

                                          213
Culture and Org Characteristics
                  Structure   Communication   Rewards   Decision-
                                                        Making
   Process
   Results
   Job
   Employee
   Tight
   Loose
   Parochial
   Professional
   Open
   Closed
   Normative
   Pragmatic
                                                                    214
Organizational Culture

• Creating and changing the culture of an
  organization?


• National and Organizational Culture
   – Organizations in Japan, Germany, the U.S. are likely to
     have which org. culture characteristics?
   – Hofstede


• The Organizational Culture of a MNC
   – A universal org. culture?

                                                           215
Behavior

  Individual Behavior

     P = f (A, M)
      Motivation defined!


      Homeostasis---applied to psychological needs


      MotivationTheories ---
         Applicability across cultures??


                                                      216
Behavior

   MotivationTheories

     Content Theories
         Maslow‘s Need Hierarchy
         Two Factor Theory of
          Motivation
         McClelland Achievement
          Motivation



                                    217
Motivation Theories - International
Context



      How applicable are the motivation
       theories proposed by Maslow
       and Herzberg in the international
       context?




                                           218
Motivation Theories in the
International Context

   • Maslow‘s needs, in particular the upper-level
     ones, are important at the managerial level

   • Ronen concluded that need clusters are
     constant across nationalities and that Maslow‘s
     need hierarchy is confirmed by these clusters.

   • Also, Herzberg‘s categories are confirmed by
     the cross-national need clusters.

                                                     219
Behavior - Motivation
 Process Theories
     Equity Theory of Motivation
     Goal - Setting
     Expectancy Theory of Motivation


                                        valence
                                        
    Effort  Performance  Outcome
                          
        expectancy         instrumentality

                                                  220
       Motivation and Hofstede

• High UNC - job security
• Low UNC - fast-track, more risky opportunities

• Low POW - motivation through teamwork and peers
• High POW - motivation depends on boss

• High IND - motivation through opportunities for individual
  advancement
• Low IND - motivation through appeals to group goals and support

• High MASC - comfortable with traditional division of work roles
• Feminine - looser definition of roles, more flexible


                                                                    221
Reinforcement Theory


    • Applicability?
    • Assumptions??
    • Behavior is a function of its consequences




                                                   222
            The External Environment
                    CULTURE
                                Multiple        Multiple
 Multiple     Multiple
                              Technological     Political
Economies     Societies
                              Environment     Environment

              The Internal Environment


                          People
Business
                                          Effectiveness
Strategy
            Processes         Structure

                                  
                          Culture


                                                              223
Motivation Theories -
Summary
      Theory           Main Attributes   International
                                         Applicability
Maslow – Need
Hierarchy
Herzberg – Two
Factor Theory
McCelland – Learned
Needs
Stacy Adams –
Equity Theory
House – Goal Setting

Vroom – Expectancy

Reinforcement

                                                         224
Motivation Theories -
Summary
      Theory                 Main Attributes              International Applicability
Maslow - Need                  Five needs              With modification – order of
Hierarchy                                              needs
Herzberg – Two         Hygiene factors – work          With modification – best in
Factor Theory          context and Motivators –        individualistic environment
                       work content
McCelland – Learned           Three needs              With modification –
Needs                                                  Collectivistic vs individualistic
Stacy Adams –              Social comparisons          With modification – does not
Equity Theory                                          work in collectivistic culture
House – Goal Setting   Goal commitment, difficulty,    With modification – best in ST
                                MBO                    environment
Vroom – Expectancy         Effort, performance,        Applicable – all factors are
                         outcome, expectancies,        explicit and can be determined
                        instrumentalities, valence     based on culture
Reinforcement          Behavior is a function of its   Applicable – very BASIC model
                                                                               225
                            consequences
The Meaning of Work

• Tied to economic necessity

• What else?




                               226
   The Meaning of Work


• Six functions of work:
            1.   needed income,
            2.   interesting & satisfying,
            3.   contact with others,
            4.   serve society,
            5.   keeps one occupied,
            6.   status and prestige

    These may be satisfied through other aspects of life


                                                           227
MOW - Work Centrality


 ―the degree of general importance that
    working has in the life of an
    individual at any given point in time.‖



   As the mean work centrality score
increases,
the more motivated and committed the
workers would be.

                                              228
Study results



•   Britain (lowest),
•   Germany,
•   Netherlands,
•   Belgium,
•   USA,
•   Israel,
•   Japan


                        229
Work Centrality
                  Mean work
                  centrality score
                  8.0

                             7.78 Japan                   N = 3144
                  7.75

                  7.5
                               7.30 (former) Yugoslavia   N = 521
     Work is      7.25
     more
                               7.10
     important                      Israel                N = 893
     and more     7.0          6.94 USA                   N = 996
     central in                6.81 Belgium               N = 446
     life         6.75         6.69 Netherlands           N = 976
                               6.67    Germany            N = 1276
                  6.5
                                6.36   Britain            N = 409
                  6.25

                  6.0


                                                                     230
Group Behavior

   Group effectiveness =  individual behavior + 
   Mature group = effective group
   Stages of development (F, S, N, P)


  Two main characteristics for the analysis of
   groups
     Leadership
     Composition

                                                231
Leadership


Which Hofstede dimension?


Types of leadership styles:
      autocratic, participative, group
      authoritarian, democratic, laissez-faire
      Theory X, Theory Y




                                                  232
Leadership Research


   Traits, Behaviors, Contingency approach
   Kouzes and Posner: Challenging the process, inspiring
    shared vision, enabling to act, modeling the way,
    encouraging the heart


  Across cultures: Haire, Ghiselli, Porter
      South-European and Nordic-European --- more
       autocratic, more Theory X
      South-European give a little more autonomy to
       employees in working out details

                                                       233
 Japanese  Theory Y --- employees learn
  from mistakes


 Germans  Theory X --- autocratic, stop poor
  performance asap



                                            234
Culturally-Contingent Beliefs Regarding Effective
Leadership Styles


Country N        Charisma Team       Self-    Part.       Humane Auton.
                                   Protective

Austria 169       6.03     5.74      3.07      6.00       4.93       4.47
Brazil 264        6.01     6.17*     3.50      6.06*      4.84       2.27
China 160         5.57     5.57      3.80      5.05       5.18       4.07
Denmark 327       6.01     5.70      2.82      5.80       4.23       3.79
England 168       6.01     5.71      3.04      5.57       4.90       3.92
India   231       5.85     5.72      3.78      4.99       5.26*      3.85

Japan    197      5.49     5.56      3.61      5.08       4.68       3.67
Mexico   327      5.66     5.75      3.86*     4.64       4.71       3.86
Russia   301      5.66     5.63      3.69      4.67       4.08       4.63*
USA      399      6.12*    5.80      3.16      5.93       5.21       3.75

                                      Scale 1 to 7 in order of how important those behaviors
                                      are considered for effective leadership (7 = highest)
                                                                                          235
Culturally-Contingent Beliefs - Effective
Leadership Style



  • Americans appreciate two kinds of leaders.
     – They seek empowerment from leaders who grant autonomy
       and delegate authority to subordinates.
     – They also respect the bold, forceful, confident, and risk-
       taking leader, as personified by John Wayne.

  • The Dutch place emphasis on egalitarianism and are skeptical
    about the value of leadership.
     – Terms like leader and manager carry a stigma. If a father is
       employed as a manager, Dutch children will not admit it to
       their schoolmates.

  • Arabs worship their leaders – as long as they are in power!

                                                                      236
Culturally-Contingent Beliefs Regarding Effective Leadership Styles
(contd.)



• Iranians seek power and strength in their leaders.

• Malaysians expect their leaders to behave in a manner that is
  humble, modest, and dignified.

• The French expect their leaders to be “cultivated” – highly
  educated in the arts and in mathematics.

                                              R. House, et al.




                                                                      237
Group Composition --- Multicultural Teams


    Impact of cultural diversity on group performance?


     group productivity = f(task, resources, process)


     actual productivity = potential productivity - losses due to
      faulty process


     actual productivity  or  =
     potential productivity  or  - losses  or 


                                                                     238
Benefits associated with cultural diversity:
 # of alternatives generated;
 quality of alternatives;
 creativity/divergence;
 no groupthink




                                               239
Process Losses:
 potential for miscommunication increases;
 cohesiveness decreases;
 negative attitudes (dislike, mistrust);
 perceptual problems (stereotyping);
 stress



                                              240
Multicultural teams have the potential to be
 the most or the least effective teams
 Group development stages:
   entry, work, action
 Task: innovative or routine




                                               241
 Manage culturally diverse teams
through:

    task-related selection
    recognition of differences
    super-ordinate goals
    equal power
    mutual respect
    feedback


                                   242
Hofstede and Internal
Environment
                  UNC   POW   MAS/F   IND/C   ST/LT

Motivation and
Rewards

Leadership


Decision Making


Communication


Org. Culture


Structure

                                                243
Communication: Macro -
Level


 • Communication Flows

   – upward/downward

   – formal/informal


                         244
Communication: Micro -
Level

• Micro/Interpersonal Level

  Definition: Transmission of meaning through
   the use of common symbols


  Sender -> Message -> Receive
  (Encoding) (Medium)  (Decoding)


                                            245
Communication: Micro - Level


• Interpersonal communication Process
   – encoding
   – message
   – decoding




                                    246
Communication: Micro - Level


   Communication barriers
   – language
   – perception - stereotyping
   – culture
   – nonverbal communication
   – projected similarity
   – parochialism


                                 247
Micro -Level

• Explicit vs implicit communication

• High vs low context

• High vs low contact


                                       248
Opening Profile:
Keeping Your Foot out of Your Mouth



• Small slips can be big errors:

   ―Hello, wife of the boss‖

   ―Thank you for your hostility‖

   Patting someone on the head

   Do you shake hands, bow, hug, or kiss when meeting
    someone?

                                                        249
The Communication
Process




                    250
Cultural Noise

           Behavior                        Attribution
  American: ―How long will it    American: I asked him to
                                 participate.
  take to finish this report?‖
                                 Greek: He is the boss. Why doesn‘t
                                 he tell me?

  Greek: ―I don‘t know. How      American: He refuses to take
                                 responsibility.
  long should it take?‖
                                 Greek: I asked for an order.




                                                                      251
Trust in Communication

• Business transactions based on long-standing vs.
  arm‘s length relationships

• High propensity to trust: Nordic countries, China,
  Canada, US, Britain

• Low propensity to trust: Brazil, Turkey, Romania,
  Slovenia, Latvia

                                                       252
The GLOBE Project and Communication




• High performance orientation (e.g., US)  present
  objective information directly and explicitly

• Low assertiveness (e.g., Sweden)  two-way
  discourse and friendly relationships

• High humane orientation (e.g., Ireland)  avoid
  conflict, be supportive


                                                    253
Cultural Variables in Communication



       • Attitudes
          – Stereotyping


       • Social organization
          – e.g., United Auto Workers (UAW)


       • Thought patterns
          – The meaning of double lines


                                              254
Cultural Variables in Communication




        • Roles

        • Language
            – ―Come out of the grave with Pepsi‖
            – When ―yes‖ doesn‘t mean ―yes‖




                                                   255
Cultural Variables in Communication




• Nonverbal communication
   –   Kinesic behavior (e.g., sticking out the tongue in China)
   –   Proxemics (e.g., the corner office, closeness when talking)
   –   Paralanguage (e.g., the sound of silence)
   –   Object language (e.g., monochronic vs. polychronic)




                                                             256
Context




          257
Comparative Management in Focus: Communicating with
Arabs




• Arabs are quick to ―sound off‖

• Communication is built on friendship, honor,
  hospitality

• Arabs are high-contact communicators

• Time is key in communication process


                                                      258
Managing Cross-cultural
Communication


• Develop cultural sensitivity
   – Anticipate the meaning the receiver will get


• Careful encoding
   – Use words, pictures, and gestures
   – Avoid slang, idioms, regional sayings




                                                    259
Managing Cross-cultural
Communication


• Selective transmission
  – Build relationships face-to-face if possible


• Careful decoding of feedback
  – Get feedback from multiple parties
  – Improve listening and observation skills


• Follow-up actions

                                                   260
Micro -Level
 Non-verbal communication
   –   Body Language
   –   Emblems
   –   Illustrators
   –   Affect Display
   –   Regulators/Adaptors
   –   Space (proxemics)
   –   Touch
   –   Voice
   –   Dermal Code


                             261
Decision-Making




     Quality of decisions

         Organizational Effectiveness

     Differences across Cultures?




                                         262
DM Process and Culture


  1. Problem Recognition
  2. Information Search
  3. Alternative Generation
  4. Choice
  5. Implementation




                              263
International Negotiations


  Definition:
  The process in which at least two partners with
    different needs and viewpoints try to reach an
    agreement that is acceptable to all on matters of
    mutual interest


  -> International managers spend more than 50% of their
     time negotiating




                                                           264
Recommendations
(Fisher and Ury "Getting to Yes"):

1. Separate the people from the problem

2. Focus on interest, not position


3. Insist on objective criteria


4. Invent options for mutual gain


                                          265
The Negotiation Process




                          266
Stage One: Preparation

• Develop profiles of counterparts

• Find out likely demands, team composition, and
  counterpart authority
  – Uzbekistan had to learn from scratch


• Choose a negotiation site
  – British/French Chunnel negotiations


                                                   267
Stage Two: Relationship Building



• Getting to know one‘s contacts and building mutual
  trust

• Nontask sounding (nemawashi)

• Use an intermediary

• ―I have come as a mediator…‖


                                                  268
Stage Three: Exchanging Task-related
Information



• Cultural differences remain an issue
   – Mexicans can be suspicious and indirect
   – The French enjoy debate and conflict
   – The Chinese ask many questions, but provide ambiguous
     information in return


• Show understanding of the other viewpoint



                                                      269
Stage Four: Persuasion

• Dirty tricks are in the eye of the beholder
   –   False information
   –   Ambiguous authority
   –   Uncomfortable rooms
   –   Rudeness, threats
   –   Calculated delays




                                                270
Stage Five: Concessions and
Agreement


• Russians and the Chinese start with extreme
  positions

• Swedes start with what they will accept

• Starting with extremes may be most effective



                                                 271
Comparison of Negotiation Styles




           Japanese              North American      Latin American


                                                  Emotionally
      Hide emotions           Deal impersonally
                                                  passionate

                              Litigation, not
      Subtle power plays                          Great power plays
                              conciliation

                              Methodical          Impulsive,
      Step-by-step approach
                              organization        spontaneous

                                                  Group/individ-ual good
      Group good is aim       Profit is aim
                                                  is aim
                                                                      272
Successful Negotiators: Americans


• Know when to compromise, but stand firm at
  beginning

• Refuse to make concessions beforehand

• Keep cards close to chest, but make other party
  reveal his/her position

• Keep maximum options open, operate in good faith


                                                    273
Successful Negotiators:
Indians
• Look for and say the truth, not afraid to speak up

• Exercise self-control

• Respect other party, look for solutions acceptable to
  all parties

• Will change their minds, even at risk of seeming
  inconsistent and unpredictable


                                                       274
Successful Negotiators:
Arabs
• Protect honor, self-respect, dignity and, thus, are
  trusted and respected

• Avoid direct confrontation

• Come up with creative, honorable solutions

• Are impartial and can resist pressure


                                                        275
Successful Negotiators: Swedes


• Quiet, thoughtful, polite, straightforward

• Overcautious, but flexible

• Slow to react to new proposals, but eager to be
  productive and efficient

• Able to hide emotions, afraid of confrontation


                                                    276
Successful Negotiators:
Italians
• Have a sense of drama, do not hide emotions

• Good at reading facial expressions and gestures

• Want to make a good impression and use flattery,
  but are distrusting

• Handle confrontation with subtlety and tact


                                                    277
Managing Negotiation

• Avoid person-related conflict

• Examples
  – Low-context Americans appear impatient, cold, and blunt
    to Mexicans.

  – Americans must approach negotiations with Mexicans with
    patience and tolerance; refrain from attacking ideas



                                                        278
Cross-cultural Negotiation Variables




                                       279
Comparative Management in Focus: Negotiating with the
Chinese




                                                        280
Comparative Management in Focus: Negotiating with the
Chinese




• Two problems
    – Chinese desire for detail
    – Apparent insincerity


• Saving Face
    – Lien
    – Mien-tzu



                                                        281
Comparative Management in Focus: Negotiating with the
Chinese




• Importance of harmony
    – Guanxi
    – Guanxihu networks


• Two stages of Chinese negotiation
    – Technical
    – Commercial



                                                        282
Comparative Management in Focus: Negotiating with the
Chinese




• Some recommendations:
    –   Practice patience
    –   Accept prolonged stalemate
    –   Refrain from exaggerated expectations
    –   Expect shaming
    –   Resist blaming for difficulties
    –   Understand Chinese cultural traits




                                                        283
Managing Conflict Resolution



• Instrumental oriented

• Expressive oriented




                               284
Low-context, High-context Sources of Conflict




                             Low-context                   High-context

                    Analytic, linear logic        Synthetic, spiral logic
           Why

                    Individualistic oriented      Group oriented violations
          When      violations

                    Revealment, confrontational   Concealment, non-
          What                                    confrontational

                    Explicit, open, direct        Implicit, ambiguous, indirect
           How

                                                                              285
The Influence of Culture on Decision Making




• Individualism vs. collectivism

• Objective vs. subjective approach

• Risk tolerance

• Comfort with unfamiliar solutions


                                              286
Approaches to Decision Making



• Utilitarianism vs. moral idealism

• Autocratic vs. participative leadership

• Speed of decision making




                                            287
Summary of Cultural Variables in Decision Making




                                                   288
Comparative Management in Focus: Decision-making in
Japan


                     • Wa

                     • Amae

                     • Shinyo

                     • Ringi



                                                      289
Comparative Management in Focus: Decision-making in
Japan




                                                      290
Course Summary
 Global Economic System – MACRO
 –   When and what
 –   Institutions
 Companies make decisions with respect to specific countries -
    MICRO
 ==> Europe? Asia? Latin America? Australia?
     •   Specific countries?
 Internationalization Strategy: Generalizations??
 –   Cost … Management - cultural differences ...
     •   religion, education; Hofstede
 –   Benefits …. Market growth (pop size; income) and Value
     creation activities (labor cost, exp.)
 –   Risk .... South America? Asia? Europe?                   291
The International Organization


                      The External Environment
                              CULTURE
                                          Multiple        Multiple
           Multiple     Multiple
                                        Technological     Political
          Economies     Societies
                                        Environment     Environment

                        The Internal Environment


                                    People
           Business
                                                    Effectiveness
           Strategy
                      Processes         Structure

                                            
                                    Culture



                                                                        292
Managing the International
Organization Environment ... Porter Diamond; Status Quo;
    1.External
      Culture (Hofstede)
     2.Strategy ... Value creation activities; Location
       economies; Market entry
     3.Internal Environment ...
      Behavior: Individual (Motivation) and Group
      (Leadership; Multicultural Teams)
      Processes: Communication -- Macro (communication
      flow); Micro (communication process); Nonverbal
      communication; Decision Making; Negotiation; HR
      Processes (The Expatriate Assignment).
      Organizational Culture – six dimensions;
      Structure – Macro and Micro – power distance;

                                                          293
294
295
296
297
Strategy – Defined




                     298
  India

Where India has the edge (in comparison to China):
LANGUAGE - English gives India a big edge in IT Services and Back-Office work.

CAPITAL MARKETS - Private firms have readier access to funding. China favors
   state sector

LEGAL SYSTEMS - Contract law and copyright protection are more developed than
   in China.

DEMOGRAPHICS - Some 53% of India's population in under age 25, vs. 45% in
   China.




                                                                                 299
External Environment




       Relevant variables: GDP GDP/capita GDP growth
        and factor endowments; demand conditions
       The GDP (gross domestic product): The value of
        the final output of goods and services produced by
        the residents of an economy (World Bank). There
        are several methods to calculate the GDP. The
        PPP (purchasing power parity) method reflects the
        cost of a basket of goods in two countries in their
        local currencies.


                                                          300
ISA Analysis – Fall 2008
1.    The Global Update report provides a useful overview of current political and
      economic issues.
     a)   Zimbabwe - summarize the current political and economic challenges in Zimbabwe.
     –    Robert Mugabe, President, only ruler since 1980
     –    Pseudo-Democracy, contested election in Spring 2008 – No clear winner
     –    Mugabe self-proclaimed winner -> violence
     –    White population 1% but owns 70% of land -> Mugabe took away land
     –    African Union leaders do NOT put enough pressure on Mugabe
     –    Agricultural production and inflation are severe economic issues
     –     Solutions: stay in office, share power with opponentTsvangirai, foreign military will
          intervene
     b)   Vietnam - Summarize the challenges and the predictions for Vietnam‘s economy.
     –    GDP growth 8.5% to 6.5% AND 20% inflation
     –    Domestic market; foreign markets (exports)
     –    Long term good – low cost manufacturing, hi-tech programs, relatively stable
          government



                                                                                           301
ISA Analysis – Fall 2008
1.    The Global Update report provides a useful overview of current political and
      economic issues.
     c) African countries tend to not be part of the ―new‖ global economy. What do you think are
            a couple of primary reasons for that? Nigeria, South Africa, Kenya, and Zimbabwe –
            compare.
     –      Lack of democratic political system and free-market economic system.
     –      Lack of infrastructure
     –      Corruption
     –      AIDS and other health issues
     –      Lack of education
     –      Culture?Religion?
     d) Asian countries such as Thailand, Vietnam, and the Philippines What do you think do
            these countries have to offer to foreign investors that China is lacking? Compare.
     –      All have (except Vietnam) have more economic freedom than China
     –      All have high corruption BUT also high GDP growth
     –      Cultural differences – see religion
     –      Attitude towards U.S. companies


                                                                                         302
ISA Analysis – Fall 2008



    Table 1: Compare African Countries

    Table 2: Compare Asian Countries




                                         303
ISA Analysis – Fall 2008

2. Venezuela, Colombia, and Bolivia. Summarize current activities related to
        America‘s conflict with these countries. What do these countries have
        to offer that may be of interest to U.S. businesses? What is the CPI
      ranking for each country?
•     Colombia – Drugs, FARC,
•     Bolivia – Drugs – coca, natural gas, nationalization
•     Venezuela -Hugo Chavez
    –    Farmers, Colombia, Constitution, Bolivia
    –    U.S. – oil 15%
    –    Nationalization electricity and telephone
    –    UN Speech 2006

    –      CPI – 162 - Venezuela, 68 - Colombia, 105 - Bolivia

                                                                          304
ISA Analysis – Fall 2008

3. a) Which countries belong to the EU? Only some of the 27 EU members are also members of
        the EMU (European Monetary Union). Which countries belong to the EMU?
    European Union (EU): Austria, Belgium, Bulgaria, Cyprus, Czech Republic, Denmark,
        Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania,
        Luxembourg, Malta, The Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia,
        Spain, Sweden, and United Kingdom. European Monetary Union (EMU) Ireland, Belgium,
        France, Spain, Portugal, Finland, The Netherlands, Germany, Luxembourg, Austria, and
        Italy.
   b) Italy has the worst CPI ranking of the Western EU countries. What is the current
      issue related to that reported in the ISA Global Update? Berlusconi, immunity
      from law for government officials;
  c) Russia is not a member of the EU but is of critical importance to the economies of the
      European countries. Why? Oil and natural gas; Gazprom




                                                                                         305
ISA Analysis – Fall 2008
4. OPEC - Organization of Petroleum Exporting Countries. Algeria, Iran, Iraq, Kuwait, Libya,
      Nigeria, Qatar, Saudi Arabia, United Arab Emirates (UAE), Indonesia, Ecuador, Angola,
      and Venezuela (http://www.opec.org/aboutus/index.htm). The OPEC Countries
      coordinate their oil production policies in order to help stabilize the oil market and help oil
      producers achieve a reasonable rate of return on their investments. It is also designed to
      ensure that oil consumers continue to receive stable supplies of oil
      (http://www.opec.org/aboutus/functions/functions.htm).
5.    The World Economic Forum (WEF) has a 3-fold vision aiming to be the foremost
      organization which builds and energizes leading global communities; the creative force
      shaping global, regional, and industry strategies; the catalyst of choice for its
      communities when undertaking global initiatives to improve the state of the world. WEF
      is a Geneva-based non-profit foundation best known for its annual meetings bringing
      together top business leaders, international political leaders, selected intellectuals and
      journalists to discuss the most pressing issues facing the world
      (http://www.weforum.org/en/about/Our%20Organization/index.htm). Forum Members are
      companies that are driving the world economy forward. The typical Member Company is
      a global enterprise with more than 5 billion dollars in turnover, although the latter varies
      by industry and region. The Forum has 1,000 member companies
      Group of Seven (G7) consists of Canada, France, Germany, Italy, Japan, United
      Kingdom, and the United States of America (Russia). G7 is an international forum for
      governments.
                                                                                              306
ISA Analysis – Spring 2008

• U.S. Economic Slowdown
  – Indicators
     •   Housing Market
     •   Lowering of interest rates
     •   GDP growth
     •   Unemployment
  – Developed Countries
     • Same effect
  – Less Developed Countries
     • Export dependence – Central and Eastern Europe; Mexico
     • NOT – India and China – strong domestic demand


                                                                307
ISA Analysis

• Venezuela – Recent events – Hugo Chavez
  –   Farmers
  –   Colombia
  –   Constitution
  –   Government restructuring
  –   Bolivia
  –   U.S. – oil 15%
  –   Nationalization electricity and telephone
  –   Television station
  –   UN Speech 2006

                                                  308
ISA Report

• Catholicism in Latin America – Table



• Turkey – EU Opposition
  –   Kurds – Human Rights
  –   Economic and political requirements
  –   Religion – Islam
  –   Culture and location
  –   Cyprus


                                            309
ISA Report
• Kenya – Table

• Tata Motors
   – $7.6 bill revenue and 22,000 employees
   – Commercial vehicles
   – 18% international – Africa, Middle East, Europe, Australia, S and SE
     Asia

• Japan
   – Declining domestic car market
   – Oil prices
   – Eco growth


                                                                     310

				
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