This is an individual assessment

This is an individual assessment. This assessment represents a development of the work you will have done for your group assessment. For this individual assessment, you should select the same company that you analysed for your group presentation i.e.:

? Mondelez International;

With reference to this company you should produce a 1500 report that uses relevant theory and analytical models, in order to answer the question: If you were recommending to a senior manager in your company one market which your company should expand into, which market would you select?

In answering this question you should consider:

1. Why have you selected this market?

2. How would you enter or expand in that market?

3. What product or service would you sell in this market?

4. How would you organise this new venture?

Your report must integrate relevant company data (e.g. annual reports and other appropriate company documents) as well as secondary data from organizations such as the World Bank, UNCTAD, the OECD. You may also draw on industry and financial media reports (e.g. The Financial Times, The Economist, The Wall Street Journal) but you should use data from these sources critically. You should make references to and draw on the wider International Business Literature in order to support the statements you are making.

Submission Instructions

Electronic submission only through Blackboard You are now allowed to utilise the Turnitin Check before the assignment deadline which can be accessed via the information room.

? Use the standard Management School cover sheet

? Have the word count given on the cover sheet

? Be presented with 2.5cm margins all round

? Use Times New Roman or Arial, 12 point for the main body text

? Use 1.5 line spacing

? Have all pages numbered except the first

? Be properly spell checked

? Be made attractive with suitable use of headings, paragraphs and sections

? Be properly referenced to the Management School version of Harvard referencing

When submitting you must:

1. Include a completed cover sheet (available from Blackboard)

2. Use ‘Student Number, MGTXXX-1’ (e.g.190011001 MGT61075-2) as the document’s file name and also as the Assignment Title in Turnitin.

A 5-mark penalty will be applied for students who do not comply with this.

Introduction: Mondelez International is a multinational food production enterprise that was established in 2012 and mainly engaged in selling biscuits, confectionery, beverages, and groceries. In addition, this company has operated its business in approximately 165 countries, meanwhile, Mondelez is also focused on expanding the new markets. For instance, according to the 2018 annual report of Mondelez International (2018), nearly 35% of Mondelez’s net revenue in 2018 comes from its new markets, such as China, Russia, and Brazil. Furthermore, Dirk Van De Put, the Chief Executive Officer of Mondelez, claimed that the future strategies of Mondelez will include exploring new Asian markets, such as India (Mondelez 2020). Based on this argument, this essay will focus on analyzing the possibility of Mondelez expands its business into Thailand, which is the second-largest economy in Southeast Asia, and thus provides another alternative choice of new markets to the senior manager of Mondelez. 2. The reasons for choosing Thailand as target new market: As mentioned above, the Gross Domestic Product (GDP) of Thailand is the second largest in Southeast Asia. For instance, the GDP per capita of Thailand in 2019 is roughly eight thousand dollars, which is above the average GDP per capita in Asia (the World Bank 2019). Meanwhile, according to the data which conducted by the Tourism Authority of Thailand (2020), the total number of international tourists to Thailand has reached nearly 39 million in 2019 and the gross tourism revenue of Thailand increased approximately 3.67% in 2019. Therefore, the relatively high-income levels of Thailand’s citizens indicants that they have adequate consuming ability to purchase the majority of Mondelez International’s products. Moreover, the increasing numbers of international tourists can also be considered as the customer groups for the products of Mondelez in Thailand. Overall, a large number of potential customers is the first reason to choose Thailand as a new market. In addition, the labor cost of Thailand is relatively low. For instance, the labor force of Thailand in 2020 is nearly 40 million, which occupies approximately 58% of the total population of Thailand (the World Bank 2021). Moreover, Mounier and Charoenloet (2010) further claimed that Reference Lists: Mounier, Alain & Charoenloet, Voravidh, 2010. New Challenges for Thailand: Labour and Growth after the Crisis. Journal of contemporary Asia, 40(1), pp.123–143. Mondelez International (2018). 2018 Annual Report- Mondelez. Available from: https://www.mondelezinternational.com/-/media/Mondelez/PDFs/MPDF/0001103982-19000005.pdf (Accessed 23 April 2021) Mondelez International (2020). Our World Mondelez Int. Available from: https://careers.mondelezinternational.com/our-world/asia-middle-eastafrica/india#:~:text=Mondelez%20India%20is%20the%20largest,Induri%2C%20Baddi%20 or%20Sri%20City. (Accessed 23 April 2021) The World Bank (2019). GDP growth (annual %)- Thailand. Available from: https://data.worldbank.org/indicator/NY.GDP.MKTP.KD.ZG?locations=TH (Accessed 23 April 2021) The World Bank (2021). Labor force, total-Thailand. Available from: https://data.worldbank.org/indicator/SL.TLF.TOTL.IN?locations=TH (Accessed 23 April 2021) ClickMGT61075 to edit Master titleInternational style Business Lecture 8 Cross-cultural Management Dr Qiu Wang Click to editheader Master title style PowerPoint for front cover The consequences: Clickcultural to editheader Master title style PowerPoint for front cover Learning Objectives Click to edit Master title style PowerPoint header for front cover ? To explore the concept and dimensions of culture ? To learn models and explanations of cultural differences ? To examine how firms can anticipate and cope with cultural differences Click to edit Master title style Cross-cultural Management Session 1: what culture means? Culture (www.dictionary.com) Click to editheader Master title style PowerPoint 1. thefront quality cover in a person or society that arises for from a concern for what is regarded as excellent in arts, letters, manners, scholarly pursuits, etc. 2. that which is excellent in the arts, manners, etc. 3. a particular form or stage of civilization, as that of a certain nation or period: Greek culture. 4. development or improvement of the mind by education or training. 5. the behaviors and beliefs characteristic of a particular social, ethnic, or age group: the youth culture; the drug culture. 6. Anthropology . the sum total of ways of living built up by a group of human beings and transmitted from one generation to another. 7. Biology . a. the cultivation of microorganisms, as bacteria, or of tissues, for scientific study, medicinal use, etc. b. the product or growth resulting from such cultivation. 8. the act or practice of cultivating the soil; tillage. 9. the raising of plants or animals, especially with a view to their improvement. 10. the product or growth resulting from such cultivation. Common definitions of culture Click to edit Master title style PowerPoint header for front cover ‘The collective programming of the mind which distinguishes the members of one human group from another...culture in this sense includes systems of values; and values are among the building blocks of culture (Hofstede, 1984:21) ‘Learned pattern of perceptions, values, and behaviours, shared by a group of people, that is also dynamic and heterogeneous’ (Martin & Nakayama, 2008, p. 28). ‘the acquired knowledge people use to interpret experience and generate behavior’. (Spradley 1972) ‘The way we are doing things around here !’ What is Not title style Click culture to editheader Master PowerPoint for front cover • Not right or wrong – It is relative. There is no cultural absolute. Different nationalities simply perceive the world differently. • Not about individual behaviour – It is about groups. It is a collective phenomenon of shared values and meanings. • Not inherited – It derives from the social environment. We are not born with a shared set of values and beliefs; we acquire them as we grow up. Specific to individuals Personality Inherited Click to editheader Master title style PowerPoint Gender/class/ family role for front cover Organizational culture Specific to groups Ethnic regional - Sub-culture Learned National culture Universal Human nature Biological Figure 2.1 Three (or more!) levels of human mental programming. (Source: Adapted from Hofstede, 1991) Some key concepts from culture: Click to edit Masterderived title style PowerPoint header for front cover • Socialization: The process of learning the rules and behavioral patterns appropriate to one's society. • Acculturation: The process of adjusting and adapting to a culture other than one's own; commonly experienced by expatriate workers. • Cross-cultural risk: A situation or event where a cultural miscommunication puts some human value at stake. It arises in environments comprised of unfamiliar languages, and unique values, beliefs, and behaviors Core culture Clickdeterminants to editheader Masteroftitle style PowerPoint for front cover • • • • • • • • Values & Attitudes Language Religion Social Structure Education Law & politics Technology & material culture Aesthetics Iceberg concept of Click to editheader Master PowerPoint culture for front cover (Cavusgil et al., 2020) title style Assumptions & Beliefs Click to editheader Master title style PowerPoint for front cover • Values represent a person’s judgments about what is good or bad, acceptable or unacceptable, important or unimportant, and normal or abnormal. • Attitudes and preferences are developed based on values, and are similar to opinions, except that attitudes are often unconsciously held and may not have a rational basis. Examples Values common to Japan, North America, and Northern Europe include hard work, punctuality, and wealth acquisition. Habits Click to editheader Master title style PowerPoint for front cover • Manners and customs refer to ways of behaving and conducting oneself in public and business situations. They are present in eating habits, mealtimes, work hours and holidays, drinking and toasting, appropriate behavior at social gatherings (kissing, handshaking, bowing), gift-giving (complex), the role of women, and much more. Time Click to editheader Master title style PowerPoint for front cover Time perception dictates expectations about planning, scheduling, profit streams, and what constitutes tardiness in arriving for work and meetings. • Monochronic - A rigid orientation to time in which the individual is focused on schedules, punctuality, time as a resource, time is linear, “time is money”. For example, people in the U.S. are hurried and impatient. • Polychronic - A flexible, non-linear orientation to time in which the individual takes a long-term perspective; time is elastic, long delays are tolerated before taking action. Punctuality is relatively unimportant. Relationships are valued. Examples: Africa, Latin America, Asia. Expressions Click to editheader Master title style PowerPoint for front cover • A symbol can be letters, figures, colours, or other characters that communicate a meaning. Examples include flags, anthems, seals, monuments, and even historical myths. • Material productions are artifacts, objects, and technological systems that people construct to function within their environments. Education Literacy rate by The World Facts Book (2018) Click to editheader Master title style PowerPoint for front cover Social Click toStructure editheader Master title style PowerPoint for front cover Social structure is the pattern of social arrangements and organized relationships that characterize a society. Society is organized as: • Individuals • Family • Reference groups • Social stratification • Social mobility Language Click to editheader Master title style PowerPoint for front cover • The “mirror” or expression of culture; essential for communications; provides insights into culture. • Linguistic proficiency is a great asset in international business. • Language has both verbal and nonverbal (unspoken, facial expressions and gestures). • There are nearly 7,000 active languages, including over 2,000 in each of Africa and Asia. The of language Clickimplication to editheader Master title stylediversity PowerPoint for front cover • • • • One language is usually dominant Sometimes this is a foreign language (e.g. English) because the nation does not have a dominant local language (e.g. Nigeria, India) Each language will have a certain status (superior or inferior) Language gives a sense of identity – and therefore a sense of unity - and separateness Indo-European Language Groups Click to editheader Master title style PowerPoint for front cover Click to editheader Master title style PowerPoint for front cover Idioms Click to editheader Master title style PowerPoint for front cover Language and International Marketing Click to edit Master title style PowerPoint header for front cover Firm and Location Intended Slogan Literal Translation Parker Pen in Latin America “Use Parker Pen, avoid embarrassment” “Use Parker Pen, avoid pregnancy!” Pepsi in Germany “Come Alive with Pepsi” “Come out of the grave with Pepsi” Pepsi in Taiwan “Come Alive with Pepsi” “Pepsi brings your ancestors back from the dead” Fisher Body in Belgium (car exteriors) “Body by Fisher” “Corpse by Fisher” Salem cigarettes in Japan “Salem-feeling Free” “Smoking Salem makes your mind feel free and empty” English International Language Click to as edit Master titleBusiness style PowerPoint header for front cover Word Meaning in U.S. English Meaning in British English Redundant repetitive fired or laid off Scheme a somewhat devious plan a plan Sharp smart, clever conniving, unethical Windscreen a screen that protects against the wind automobile windshield To table to put an issue on hold to take up an issue To bomb to fail miserably to succeed grandly Nonverbal Click to editcommunications Master title style PowerPoint header for front cover Ten waystitle to offend ClickSurprising to editheader Master style people from other cultures PowerPoint for front cover https://www.youtube.com/watch?v=UTE0G9amZNk Eye and personal space Clickcontact to editheader Master title style PowerPoint for front cover Religion Click to editheader Master title style PowerPoint for front cover • A system of common beliefs or attitudes regarding a being or system of thought that people consider sacred, divine, or the highest truth; and the associated moral values, traditions, and rituals. • Influences culture, and therefore business and consumer behaviour. • Example: The “protestant work ethic” emphasizes hard work, individual achievement, and a sense that people can control their environment - the underpinnings for the development of capitalism. World Religions Click to editheader Master title style PowerPoint for front cover The of Mexico and US cultural attributes Clickcomparison to editheader Master title style PowerPoint for front cover Click to edit Master title style Cross-cultural Management Session 2: how culture can be explained ? Main approaches to study culture Click to editheader Master title style PowerPoint for front cover (from Greek words meaning ‘the study of 1. Anthropology man’) – Go and live with a cultural group and try to learn about them Evaluation Anthropology Click to editofheader Master title style PowerPoint for front cover • • • • • Live the same experience they are living Observe at first hand what happens, how people behave Stay long enough to know whether what happens is typical Ask questions about why things are done in a particular way Immersion in the culture • • • • • Be biased fail to understand fully the underlying values Only find what s/he is looking for Be deceived if people do not tell the truth Tend to generalise from a small sample Use Questionnaire Clicka to editheader Master title style PowerPoint for front cover Advantages: Can ask clear questions about values and attitudes Can collect large samples Can use statistics to demonstrate correlations Disadvantages: What questions to ask? Questionnaires tell you what not why Aspects of culture are unconscious Cultural bias in design of questionnaire Respondents misunderstand Respondents may give answer they think researcher wants Main to explain culture Click approaches to editheader Master title style PowerPoint for front cover • Cultural Metaphors refer to a distinctive tradition or institution strongly associated with a society; a guide to deciphering attitudes, values, and behaviors. • American football represents systematic planning, strategy, leadership, and struggling against rivals. • The Swedish stuga (a summer cottage) represents the love of nature and desire for individualism, in Sweden. • The Spanish bullfight reflects the importance of ritual, style, courage, and pride in Spain. E. T. Hall’s Highand Low-Context Click to edit Master title style Cultures PowerPoint header for front cover • Low-context cultures rely on explicit explanations, with emphasis on spoken words. Such cultures emphasize clear, efficient, logical delivery of verbal messages. Communication is direct. Agreements are concluded with specific, legal contracts. • High-context cultures emphasize nonverbal or indirect language. Communication aims to promote smooth, harmonious relationships. Such cultures prefer a polite, “face-saving” style that emphasizes a mutual sense of care and respect for others. Care is taken not to embarrass or offend others. Click to editheader Master title style PowerPoint for front cover Click to editheader Master title style PowerPoint for front cover Geert Hofstede Click to editheader Master title style PowerPoint for front cover Dutch expert: famous study of IBM managers in late 1970s: Quantitative study with 116,000 questionnaires – but large samples in some countries and small in others depending on IBMs presence Hofstede discerned 4 dimensions of culture: Power Distance, Individualism, Uncertainty Avoidance, Masculinity – later added LongTerm Orientations; Induggence Work published as Culture’s Consequences: International Differences in Work-related Values (1983, 2000) and Culture & Organisations: Software of the Mind (1991) See website at http://www.geert-hofstede.com/ where his results and some papers are available Click to editheader Master title style PowerPoint for front cover • Individualism versus collectivism refers to whether a person primarily functions as an individual or within a group. • In individualistic societies, each person emphasizes his or her own selfinterest; competition for resources is the norm; individuals who compete best are rewarded. Examples: Australia, Britain, Canada, and the U.S. • In collectivist societies, ties among individuals are important; business is conducted in a group context; life is a fundamentally cooperative experience; conformity and compromise help maintain harmony. Examples: China, Panama, Japan, South Korea. Click to editheader Master title style PowerPoint for front cover Click to editheader Master title style PowerPoint for front cover • Power distance describes how a society deals with inequalities in power that exist among people. • High power distance societies exhibit big gaps between the weak and powerful; in firms, top management tends to be autocratic, giving little autonomy to lower-level employees. Examples: Guatemala, Malaysia, Philippines, and several Middle East countries. • Low-power distance societies have small gaps between the weak and powerful. Firms tend toward flat organizational structures, with relatively equal relations between managers and workers. For example, Scandinavian countries instituted various systems to ensure socioeconomic equality. Click to editheader Master title style PowerPoint for front cover Click to editheader Master title style PowerPoint for front cover • Uncertainty avoidance refers to the extent to which people can tolerate risk and uncertainty in their lives. • High uncertainty avoidance societies create institutions to minimize risk and ensure security. Firms emphasize stable careers and regulate worker actions. Decisions are made slowly. Examples: Belgium, France, Japan • In low uncertainty avoidance societies, managers are relatively entrepreneurial and comfortable with risk. Firms make decisions quickly. People are comfortable changing jobs. Examples: Ireland, Jamaica, U.S. Click to editheader Master title style PowerPoint for front cover Click to editheader Master title style PowerPoint for front cover • Masculinity versus femininity refers to a society’s orientation based on traditional male and female values. • Masculine cultures value competitiveness, ambition, assertiveness, and the accumulation of wealth. Both men and women are assertive, focused on career and earning money. Examples: Australia, Japan. • Feminine cultures emphasize nurturing roles, interdependence among people, and caring for less fortunate people – for both men and women. Examples: Scandinavian countries, where welfare systems are highly developed, and education is subsidized. Click to editheader Master title style PowerPoint for front cover Click to editheader Master title style PowerPoint for front cover • Long-term vs. short-term orientation describes the degree to which people and organizations defer gratification to achieve long-term success. • Long-term orientation emphasizes the long view in planning and living, focusing on years and decades. Examples: Traditional Asian cultures, such as China, Japan, and Singapore, which base these values on the teachings of the Chinese philosopher Confucius (500 B.C.), who espoused long-term orientation, discipline, hard work, education, and emotional maturity. • Short-term orientation is typical in the United States and most other Western countries. Click to editheader Master title style PowerPoint for front cover Click to editheader Master title style PowerPoint for front cover • Indulgence versus restraint describes the degree to which people in a society attempt to control their impulses and desires. • Members of indulgent societies allow relatively free gratification of their basic and natural human desires related to having fun and generally enjoying life. • Restrained societies believe that such gratification should be curbed and regulated by strict norms. • For example, Denmark, Mexico, and the U.S. score high on indulgence. China, Iraq, and South Korea score high on restraint. Click to editheader Master title style PowerPoint for front cover Click to editheader Master title style PowerPoint for front cover https://hi.hofstede-insights.com/national-culture Compare China, India and UK Click to editheader Master title style PowerPoint for front cover Other models of national culture Click to editheader Master title style PowerPoint for front cover SCHWARTZ Cultural Dimensions: 7 values TROMPENAARS (1994): 7 scales: Universalism versus Particularism Individualism versus Collectivism Neutral versus Affective relationships Specific versus Diffuse relationships Achievement versus Ascription Attitude to time inward/outward directed GLOBE Study combines Hofstede & Trompenaars models: 9 dimensions The ‘cultural distance’ in Internationalization Process Click edit1988) Master title style PowerPoint header (Kogut andto Singh, for front cover Uncertainty (endogenous) will be high when established firms are from cultures that are high in uncertainty avoidance and when partners are culturally distant. This uncertainty may be due to: 1. the inability to perceive the potential for opportunistic behaviour by partners 2. Information asymmetry between partners. As a result of such uncertainty, established firms will shy away from aggressive commitment to growth opportunities, they will invest incrementally. The Uppsala Model (Johanson & Vahlne, Click to edit Master1977) title style PowerPoint header for front cover Guanxi: Important Business Click to edit Masterintitle style in China PowerPoint header for front cover • Refers to social connections and relationships based on mutual benefits. • Emphasizes reciprocal exchange of favors as well as mutual obligations. • Rooted in ancient Confucian philosophy, which values social hierarchy and reciprocity. • Engenders trust, thereby serving as a form of insurance in a potentially risky business environment. Critiques onheader the concept ‘cultural distance’ Click to edit Master title of style PowerPoint (Shenkar, 2001) for front cover . The illusion of symmetry . The illusion of stability . The illusion of linearity . The illusion of causality . The illusion of discordance Debates on Hofstede’s and other cultural models Click to edit Master titleframeworks style PowerPoint header (McSweeney, 2002) for front cover Cross-cultural models do not predict individual behaviour, which is due as much to personality as to culture The models only act as a guide to how cultures may differ and challenge the idea of ‘one right way’ of thinking No one model has been accepted as being ‘completely right’ – most probably have too few dimensions International managers learn quickly and accommodate their behaviour to cultures they know Click to edit Master title style Cross-cultural Management Session 3: how culture can be managed ? National, and Corporate Culture Click to Professional, editheader Master title style PowerPoint for front cover Source: Based on V. Terpstra and K. David, Cultural Environment of International Business, 3rd ed. (Cincinnati, OH: South-Western,1991). Cultural Orientations Click to edit Master title style PowerPoint header for front cover • Ethnocentric orientation: Using our own culture as the standard for judging other cultures. • Polycentric orientation: A mindset in which the manager develops a greater affinity for the country in which he or she works than for the home country. • Geocentric orientation: A global mindset in which the manager is able to understand a business or market without regard to national boundaries. Managers should strive for a geocentric orientation. Managerial Guidelines Click to edit Master PowerPoint header for front cover title style • Acquire factual and interpretive knowledge • Avoid cultural bias. • Develop cross-cultural skills • Self-reference criterion • Critical incident analysis Personal Traits for cultural proficiency Click to edit Master title style PowerPoint header for front cover • Tolerance for ambiguity: Ability to tolerate uncertainty and lack of clarity in the thinking and actions of others. • Perceptiveness: Ability to closely observe and comprehend subtle information in the speech and behavior of others. • Valuing personal relationships: Ability to appreciate personal relationships; which are often more important than achieving one-time goals or “winning” arguments. • Flexibility and adaptability: Ability to be creative in devising innovative solutions, be open-minded about outcomes, and show “grace under pressure”. Five of cultural Clickprofiles to editheader Master titleintelligence style PowerPoint (Earley & Ang, 2003) for front cover Profiles Characteristics The Local A personal works well with people from similar backgrounds but does not work effectively with people from other cultures The Analyst A person who observes and learns from others and plans interaction strategy with people of different cultures The Natural A people who relies on intuition when interacting with people from other cultures The Mimic A person who creates a comfort zone for people from different cultures by adopting their general communication style. The Chameleon A person who may be mistaken for a native of the foreign country. He/she may achieve results that natives cannot due to his/her insider’s skills and outsider’s view Handling language Click to edit Masterdifferences title style PowerPoint header (Harzing et al., 2011; Yamao & Sekiguchi, 2015) for front cover Individuals Companies Translation and Interpretation Consult with a colleague or friend Translate all official documents Hire interpreters for important meetings Ad hoc remedies Build redundancy into communication Adjust mode of communication Adopt a corporate language Include non-native speakers Provide summaries Support people - Place multilingual people in key posts Facilitate information networks Building capabilities Learning foreign languages Provide language training to employees and business partners Summary Click to editheader Master title style PowerPoint for front cover . Dimension of culture . Models and explanation of culture in International Business . Managerial implication of cultural management Additional Click to editReadings Master title style PowerPoint header for front cover Buckley, P.J. Enderwick, P and Cross, A.R. (2018). International Business Chapter 16. Hill, C. (2021) International Business Competing in the Global Marketplace (13th ed.) Chapter 4. S., Narula, R., & Rugman, A, M. (2020). International business (8th ed.). Harlow. England: Pearson. Chapter 5 Hofstede, G. (1983). “The cultural relativity of organizational practices and theories.” Journal of International Business Studies, 14 (2), 75-89. Holliday, A. (1999). “Small cultures.” Applied linguistics, 20 (2), 237-264. McSweeney, B. (2002). “Hofstede’s model of national cultural differences and their consequences: A triumph of faith-a failure of analysis.” Human Relations, 55 (1), 89-118. 20 Tirmizi, S. A. (2008). “The impact of culture in multicultural teams,” in Effective multicultural teams: Theory and practice (21-42). Springer, Dordrecht. Additional Click to editReading Master title style PowerPoint header for front cover Shenkar, O., 2001. Cultural distance revisited: Towards a more rigorous conceptualization and measurement of cultural differences. Journal of international business studies, 32(3), pp.519535. Harzing, A.W., Köster, K. and Magner, U., 2011. Babel in business: The language barrier and its solutions in the HQ-subsidiary relationship. Journal of World Business, 46(3), pp.279-287. Yamao, S. and Sekiguchi, T., 2015. Employee commitment to corporate globalization: The role of English language proficiency and human resource practices. Journal of World Business, 50(1), pp.168-179. Earley PC, Ang S. 2003 Cultural intelligence: Individual interactions across cultures. CA: Standford University Press MGT61075 International Business Lecture 7: Managing the Multinational Corporation Dr. Tom Buckley e-mail: T.Buckley@sheffield.ac.uk Office: SUMS D037a Office Hours: Monday 09:30 – 11:30 Today’s Learning Objectives 1. Introduce the organizational structures used by Multinational Corporations; 2. Examine the factors that influence how a Multinational is Organised; 3. Consider the relationship between a MNC’s organization and its Strategy; 4. Explain alternative Staffing Strategies of the MNC. 1) The MNC, its Structure and Organisation. 2) Managing Human Resources 1) The MNC, its Structure and Organisation. 2) Managing Human Resources Structure of an Exporting Firm Source: Collinson et al., 2020 A General Theory of The MNC The leading theoretical explanation for the growth and activities of multinational activity has been Dunning’s Eclectic Paradigm (Dunning: 2000). The paradigm is comprised of three sets of variables: O: Ownership Specific L: Location Specific I: Internalization Source: Collinson et al., 2020 The Content of the Eclectic Paradigm (OLI) Ownership (O) – specific advantages • Firm specific knowledge • Management, marketing, financial skills • Vertical integration: control of resources, control of markets • Scale Economies • Risk diversification Location (L) – specific advantages • National production functions • Government controls and regulations • Political risk; cultural values Internalization (I) – specific advantages • Enforce property rights • Reduce buyer uncertainty • Overcome government regulations As an organisation grows there is a need for its internal structure to respond. For both established and young companies, the organisational structure can be thought of in terms of three dimensions: 1) Vertical differentiation 2) Horizontal differentiation 3) Integration. Centralisation or Decentralisation Arguments in Favour of Centralisation Arguments in Favour of Decentralisation Facilitates coordination and integration of operations Allows greater flexibility. Helps ensure that decisions are consistent with organizational objectives Can result in better decisions. Gives top-level managers the means to bring change Gives top management time to focus on critical issues by delegating more routine issues to lower-level managers Avoids the duplication of activities Motivational research favors that occurs when similar activities are decentralization conducted by various subunits MNE Structure Multinational organizations cannot implement their strategy without an effective structure. Research initially focused on understanding corporate-level strategy and structure. This structure needs to achieve a balance between integration (among subsidiaries) and autonomy (for subsidiaries), while fostering the increasingly important tasks of learning and knowledge transfer. The International Stages Model Stopford and Wells (1972) developed a framework for understanding how MNCs shift from an international division to a global product or worldwide area structure. There then followed a move to either an area organization or a worldwide product organization or some hybrid of the two. They portrayed the most advanced structure as a matrix, which they called a grid. Source: Hill, 2021 International Division Structure Source: Collinson et al., 2020 Global Product Structure Source: Collinson et al., 2020 Global Area Structure Source: Collinson et al., 2020 Matrix Structure Source: Hill, 2021 Global Functional Structure Source: Collinson et al., 2020 Mixed Structure Source: Collinson et al., 2020 Modern Industry has established the world market…. All old national industries have been destroyed or are daily being destroyed…. In place of the old local and national seclusion and self-sufficiency, we have intercourse in every direction, universal interdependence of nations. (Marx and Engels: 1848 quoted in Kobrin: 1991) Beyond (formal) Structure To effectively manage a highly complex organisation – such as the modern MNC – managers need a much broader view of the organisation than simply its formal structure. Managers need to understand: • Administrative systems • Communication channels • Interpersonal relationships …and have a deep understanding of the organization’s Administrative Heritage Administrative Heritage Companies are to a great extent shaped by their previous actions and investments. Any organisational change must at least acknowledge where the company is coming from: its administrative heritage before establishing where it wants to get too…. Maintaining the Essence of the Organisation An organisation’s distinctive character can be sustained by a number of mechanisms, including: 1) Hiring and promotional practices 2) Reward Systems 3) Socialisation Processes 4) Methods of Communicating Communication Methods Communication is the process of sending and receiving messages; verbally and non-verbally. How this is done in organisations varies from one MNC to another. While some MNCs send direct and explicit messages, others might send indirect implicit messages. Internationally sending messages is complicated by distance. Transnational Network Structure Large flow of information; components; products & resources Head Office Complex Coordination (Strategic decision making shared) The Hierarchical and the Networked MNC Source: Collinson et al., 2020 High Pressure for Global Integration Global Functional Structure Transnational Network Global Area Structure Low Low Pressure for Local Responsiveness High Balance of centralisation & decentralisation Centralised High Pressure for Global Integration Global Functional Structure Transnational Network Global Area Structure Decentralised Low Low Pressure for Local Responsiveness High Coordinating The need for effective coordination is of vital importance for any company operating internationally. From an organisational perspective coordination can be understood as: “The integration of organisational work under conditions of task interdependence and uncertainty,” (Faraj and Xiao, 2006, 1156). To achieve this managers need to take into account decision making, organisational communication, and control. Control Systems 1) Personal Controls 2) Bureaucratic Controls 3) Output Controls 4) Cultural Controls Coordination: The role of Networks Given the complexity of doing business internationally, co-ordinating by simply relying on structures, communication methods, and control may not be sufficient. In such cases organisations may utilise more informal methods for coordinating in order to complement their more formal coordination methods. The most important of these informal methods of coordinating, are knowledge networks. A Basic Management Network Source: Hill, 2021 Centralisation & decentralisation balanced; efficient coordination Centralised High coordination High Pressure for Global Integration Global Functional Structure Global Strategy Transnational Network Transnational Strategy Global Area Structure Multi-domestic strategy Decentralised Low coordination Low Low Pressure for Local Responsiveness High 1) The MNC, its Structure and Organisation. 2) Managing Human Resources Important Distinctions There are three important categories of employee in an international company: a)Parent Country Nationals (PCNs). b)Host Country Nationals ( HCNs). c)Third Country Nationals (TCNs). Parent Country Nationals Advantages (+) Disadvantages (-) • Familiarity with home • Difficulty in adapting to office’s goals, objectives, foreign environment, policies & practices. including family adjustment • Technical and managerial competence. • Excessive cost of selecting, training and • Effective liaison & maintaining expatriate communication with managers abroad. home office personnel. • Host Government Policy • Easier exercise of (localizing operations). control over subsidiary operations. Host Country Nationals Advantages (+) Disadvantages (-) • Familiarity with host environment and business practices. • Difficulty in exercising control over subsidiary operations • Lower hiring costs (relative to PCNs & TCNs.) • Communication difficulties with Head Office. • Opportunity to advance • Limits opportunities for parent country employees and promote local to develop international/ nationals. cross country skills. • Responsive to host country. Third Country Nationals Advantages (+) • Compromise between need • for technical and managerial expertise, and ability to adapt to foreign environment • • Tendency to be career managers. • Less costly to maintain than PCNs. • More informed about but removed from host country. Disadvantages (-) Host country sensitivity toward nationals of specific countries. Limits opportunities for host country employees to upgrade their roles and assume greater responsibility in the company. Staffing International Companies In a seminal study Perlmutter (1969) identified three different approaches to MNE Staffing: 1) Ethnocentric. 2) Polycentric . 3) Geocentric. A fourth approach Regiocentric was added subsequently . The Ethnocentric Organisation Those international companies following an ethnocentric staffing policy tend to appoint parent country nationals to top positions at their subsidiaries. The key decision making positions in the domestic and foreign operations of an ethnocentric company are held by headquarters personnel; while subsidiaries are managed by staff from the home country. The Polycentric Organisation Organisations following a broadly polycentric policy would perceive each foreign subsidiary as a distinct entity, and each subsidiary would have some degree of decision making autonomy. Subsidiaries would be managed by local managers (HCNs). These local managers however, would rarely be appointed to senior positions in HQs while PCNs would seldom be transferred to overseas subsidiaries. The Geocentric Organisation Geocentric organisations take a global approach to their operations, recognising the differences between the subsidiary and headquarters and that each make their own contribution to the overall functioning of the enterprise. There are high levels of integration and ability is more important than nationality, so PCNs, TCNs and HCNs can be found in key positions throughout the company. The Regiocentric Organisation Finally, the regiocentric approach reflects the strategy and structure of the international company. Like the geocentric approach, it utilises a wider pool of managers but in a more limited way; staff may move outside their countries but only with in a limited geographic region. Regional managers may not be appointed to headquarters, but they may be allowed a degree of regional autonomy in their decision making. Different Approaches to Staffing Staffing Approach Strategic Appropriateness Advantages • Ethnocentric Global • • Overcomes lack of qualified managers in host nation Unifies culture Helps transfer core competencies Disadvantages • • • Polycentric Geocentric Multi-domestic Transnational • • Alleviates cultural myopia Inexpensive to implement • • Uses human resources efficiently Helps build strong culture and informal management networks • • • Produces resentment in host country Can lead to cultural myopia Limits career mobility Isolates headquarters from foreign subsidiaries National immigration policies may limit implementation Expensive Expatriates and Inpatriates An employee who is working and residing in a foreign nation is referred to as an “expatriate” or an “international assignee.” Both PCNs and TCNs are expatriates; as are HCNs who are transferred into parent country operations outsider their home country. In the latter case the term inpatriate may be used to signify the transfer of subsidiary staff into the parent company headquarter operations. Expatriate Roles: Direct Control. Staff are transferred to subsidiaries as a means of providing personal/cultural control in both a direct and indirect way. These employees serve to replace or complement HQ centralization of decision making and direct surveillance of subsidiaries by headquarter managers. Harzing (2001) labels this type of expatriate a bear Expatriate Roles: Socialisation Expatriates can also be used to realize control based on socialisation and the creation of informal communication networks. Expatriates thus assist in the transfer of shared values and beliefs. The role of expatriates in socialisation is likened by Harzing (2001) to a bumble-bee. Expatriate Roles: Network Builders Finally, international assignments can be viewed as a way of fostering interpersonal linkages. As employees move between various organisational units, their network of personal relationships changes. As such the expatriates fulfilling this role are described by Harzing (2001) as “spiders,” weaving an informal web. Bears = Direct Control Bumble Bees = Socialisation Spiders = Network Weavers Recap: Learning Objectives 1. Introduce the organizational structures used by Multinational Corporations (international division, global area structure, transnational network etc.). 2. Examine the factors that influence how a Multinational is Organised (issues around centralization, control, administrative heritage). 3. Consider the relationship between a MNC’s organization and its Strategy (mapped structure onto the GI-LR framework). 4. Explain alternative Staffing Strategies of the MNC (ethnocentric, polycentric, geocentric). References Bartlett, C. A., & Ghoshal, S. Managing across borders: The Transnational Solution Harvard Business School Press, Boston MA, 1989. Bartlett, C. A., & Ghoshal, S. 1990 Administrative Heritage. McKinsey Quarterly, Winter: 31-41 Dunning, J. H. 2000. The eclectic paradigm as an envelope for economic and business theories of MNE activity. International business review, 9(2), pp. 163-190. Faraj, S. and Xiao, Y., 2006. Coordination in fast-response organizations. Management science, 52(8), pp.1155-1169. Ghoshal, S. and Bartlett, C.A., 1990. The multinational corporation as an interorganizational network. Academy of management review, 15(4), pp.603-626. Harzing, A.W., 2001. Of bears, bumble-bees, and spiders: The role of expatriates in controlling foreign subsidiaries. Journal of World Business, 36(4), pp.366-379. Kobrin, S.J., 1991. An empirical analysis of the determinants of global integration. Strategic Management Journal, 12 (1), pp 17-31. Perlmutter, H. V. 1969 The Tortuous Evolution of the Multinational Corporation, Columbia Journal of World Business, 4(1), pp 9-18. Stopford, J. M. and L. T. Wells, Jr. Managing the Multinational Enterprise, Basic Books, New York, 1972 MGT61075 International Business Lecture 6: The Competitive Dynamics of International Companies. Dr. Tom Buckley e-mail: T.Buckley@sheffield.ac.uk Office: SUMS D037a Office Hours: Monday 09:30 – 11:30 Today’s Learning Objectives • Introduce the strategic perspective to international business. • Assess the relevance and applicability of analytical frameworks to understand the strategies of international companies. • Examine the key strategic issues that relate specifically to how companies compete internationally. • Consider how SMEs compete outside their home markets. Overview of Today’s Lecture • What Influences How Companies Compete Internationally? • International Strategy Formulation • The Strategic Challenges of International SMEs Overview of Today’s Lecture • What Influences How Companies Compete Internationally? • International Strategy Formulation • The Strategic Challenges of International SMEs GSK’s Strategy: To bring differentiated, high-quality and needed healthcare products to as many people as possible, with our three global businesses, scientific and technical knowhow and talented people. Foreign Sales = $41,841 Million Total Sales = $43,043 Million F/T Sales ratio = 97.21% Foreign Assets= $93,195 million Total Assets $105,232 million F/T Asset ratio = 88.5% Foreign Employment: 57,494 Total Employment: 99,437 F/T Employment Ratio = 57.8% Source: UNCTAD (2020) World Investment Report GSK R&D locations https://www.gsk.com/en-gb/research-and-development/rdlocations/ GSK’s Strategy: To bring differentiated, high-quality and needed healthcare products to as many people as possible, with our three global businesses, scientific and technical knowhow and talented people. Products a) Pharmaceutical b) Vaccines c) Consumer Healthcare Products a) Pharmaceutical = 52% Total Sales b) Vaccines = 21% Total Sales c) Consumer Healthcare = 27% Total Sales Products a) Pharmaceutical (52%) 1) 2) 3) 4) 5) Respiratory HIV Immuno-inflammation Oncology Established Pharmaceuticals 6) 7) 8) 9) Meningitis Influenza Shingles Established Vaccines b) Vaccines: c) Consumer Healthcare: 10) 11) 12) 13) Wellness Oral health Nutrition Skin health Products a) Pharmaceutical (52%) 1) 2) 3) 4) 5) Respiratory = 9% HIV = 14% Immuno-inflammation = 1% Oncology =0.6% Established Pharmaceuticals = 26% 6) 7) 8) 9) Meningitis Influenza Shingles Established Vaccines b) Vaccines: c) Consumer Healthcare: 10) 11) 12) 13) Wellness Oral health Nutrition Skin health Products a) Pharmaceutical: 1) 2) 3) 4) 5) Respiratory HIV Immuno-inflammation Oncology Established Pharmaceuticals 6) 7) 8) 9) Meningitis = 3% Influenza = 2% Shingles = 5% Established Vaccines = 11% b) Vaccines (21%) c) Consumer Healthcare: 10) 11) 12) 13) Wellness Oral health Nutrition Skin health Products a) Pharmaceutical: 1) 2) 3) 4) 5) Respiratory HIV Immuno-inflammation Oncology Established Pharmaceuticals 6) 7) 8) 9) Meningitis Influenza Shingles Established Vaccines b) Vaccines c) Consumer Healthcare (27%) 10) 11) 12) 13) Wellness =13% Oral health = 8% Nutrition = 4% Skin health =2% Activities, Resources and Assets Resources: People, Properties, Plant, Scientific Equipment, IT systems, Cash. Intangible Assets: Reputation, Brand Names, Patents, Licensing Agreements, Trademarks. Activities: R&D, Manufacturing, Sales, Support Functions (e.g legal), Supply Chain Management. Basic Strategic Questions for Companies Competing Internationally What are the core activities that need to be performed within the company? What are non-core activities and should/could they be outsourced? Where should core and non-core activities be located? How are activities to be coordinated across countries? What risks are there to operating profitably across borders? The Essence of International Strategy In order to compete outside their home nation, companies need to overcome their liability of foreignness (Zaheer: 1995) and add value in foreign markets. To add value, and reduce LoF managers and entrepreneurs need an idea of what they are going to do, how they are going to do it and where… but also what they are not going to do, and where activities are not going to be located. Competing Internationally Companies are different in their size, experience, organization, skills, capital intensity, intangible assets etc. This leads to the question: What are the specific factors that enable some companies to provide more value than other companies at any point in time? To answer this question firms have been analysed in terms of their resources and capabilities, their routines, and their bundles of knowledge (Verbeke and Kano, 2016). Internal Factors Considering a company in terms of its internal components in an international context, raises the issue of whether firms can exploit their own particular unique bundle of expertise and knowledge in international markets. Given the heterogeneity of firms, some may try to transfer their knowledge directly to host countries, while others may exploit their knowledge in transnational markets by performing externalized activities. Appraising Resources Resource Type Tangible Resources Intangible Resources Features Financial Borrowing capacity; cash flow; financial leverage Physical Machines; buildings; raw materials Technology Patents; trademarks; copyright. Reputation Brands; company “image”; product perception. Human Resources Skills and know how; motivation; ability to communicate. Measures Debt/equity ratio; current ratio etc. Location of buildings, age of equipment. R&D expenditure; number of R&D employees; number of patents Customer loyalty; brand equity. Labour turnover; average length of employment; employee qualifications Knowledge Resources Equally important to resources is knowledge. We can distinguish three types of knowledge that are particularly relevant to international companies 1) Upstream Knowledge 2) Downstream Knowledge 3) Administrative Knowledge Recombination of Resources By combining together knowledge resources with asset-based resources, firms create Firm Specific Advantages (FSAs). As there are differences between countries, different bundles of resources are necessary to compete in different places around the world. An essential FSA for international companies is therefore a recombinant capability. Activities, Resources and Assets Resources: People, Properties, Plant, Scientific Equipment, IT systems, Cash. ??? Intangible Assets: Reputation, Brand Names, Patents, Licensing Agreements, Trademarks. ??? Activities: R&D, Manufacturing, Sales, Support Functions (e.g legal), Supply Chain Management. ??? Value Chain Analysis Support activities Primary activities Source: Porter (1985) Value Chain Analysis FIRM INFRASTRUCUTRE HUMAN RESOURCE MANAGEMENT Support activities TECHNOLOGICAL DEVELOPMENT PROCUREMENT OUTBOUND MARKETING INBOUND OPERATIONS LOGISTICS & SALES LOGISTICS Primary activities Source: Porter (1985) SERVICE Value Chain Analysis FIRM INFRASTRUCUTRE: Management, finance, legal, Support activities HUMAN RESOURCE MANAGEMENT: recruiting, training etc. TECHNOLOGICAL DEVELOPMENT: R&D, Product/ Process design PROCUREMENT: Purchase of raw materials, machines, supplies INBOUND OPERATIONS OUTBOUND MARKETING LOGISTICS LOGISTICS & SALES Manufacturing; Raw material Assembly; Transport Sales force handling; Packing Warehousing Advertising WarehousingTesting Maintenance Distribution Promotion Primary activities Source: Porter (1985) SERVICE Installation Warranty Repair Parts External Factors Analysis and understanding of the external factors is a complement to an internal analysis of the company. The tools available for managers and entrepreneurs to examine the remote environment that company’s operate in range from the basic PESTLE framework, to more informative institutional frameworks. The most commonly used tools to assess the industry environment is the five forces framework (Porter: 1980) Industry Analysis: Porter’s Five Forces Potential Entrants Threat of new entrants Bargaining power of suppliers Industry Competitors Suppliers Threat of substitute products or services Rivalry among existing firms Substitutes Buyers Bargaining power of buyers The Structural Determinants of Competition THREAT OF ENTRY Capital requirements; Economies of scale; Product differentiation; Access to distribution channels; Legal/ regulatory barriers; Retaliation SUPPLIER POWER Supplier’s price sensitivity Relative bargaining power Quality/ service provision INDUSTRY RIVALRY BUYER POWER Concentration; Diversity of competitors; Product Differentiation; Excess capacity and exit barriers Cost conditions SUBSTITUTE COMPETITION Relative prices & performance of substitutes. Buyers’ propensity to substitute. Innovation benefits. Buyers’ price sensitivity Relative bargaining power Demands for improvement Porter’s Generic Strategies SOURCE OF COMPETITIVE ADVANTAGE Low cost Industry-wide (Broad) COST LEADERSHIP Differentiation DIFFERENTIATION COMPETITIVE SCOPE Single segment (narrow) Source: Porter (1980) FOCUS Porter’s Generic Strategies SOURCE OF COMPETITIVE ADVANTAGE Low cost Industry-wide (Broad) Differentiation COST LEADERSHIP DIFFERENTIATION COST FOCUS DIFFERENTIATION FOCUS COMPETITIVE SCOPE Single segment (narrow) Source: Porter (1980) Porter’s Generic Strategies: Single Industry SOURCE OF COMPETITIVE ADVANTAGE Low cost Industry-wide (Broad) Differentiation COST LEADERSHIP: Bank of America DIFFERENTIATION: Barclays; BNP Paribas; Citibank COST FOCUS: Che Banca DIFFERENTIATION FOCUS: Goldman Sachs COMPETITIVE SCOPE Single segment (narrow) Source: Porter (1980) Porter’s Generic Strategies: Across Industries SOURCE OF COMPETITIVE ADVANTAGE Low cost Industry-wide (Broad) Differentiation COST LEADERSHIP: Huawei DIFFERENTIATION: Apple COST FOCUS: Hyundai DIFFERENTIATION FOCUS: Tesla COMPETITIVE SCOPE Single segment (narrow) Source: Porter (1980) So that’s it right? Done! I’m afraid not, no…. Drivers of Industry Globalisation Source: Yip (1989) Adding Location Advantages Assets and resources that are not specific to a firm but are potentially accessible to all organisations in a specific location - and are not mobile – can be thought of as Location Advantages. • Natural Resources • Infrastructure • Industry characteristics The FSA-CSA Matrix Source: Collinson, Narula and Rugman (2020), 56 Quick Summary The Value Chain a very useful framework for analyzing how companies compete internationally (Link back to GVCs). Five Forces and generic strategies are a useful start for international strategy (link back to institutions)… but they do not directly address international strategic issues… can we do better? (Yes). The strategic options of international firms can be understood better through application of the FSA-CSA framework . • What Influences How Companies Compete Internationally? • International Strategy Formulation • The Strategic Challenges of International SMEs Global Integration – Local Responsiveness When formulating an international strategy a key issue managers need to decide is how to balance the need for global integration with the need for local responsiveness. Global integration: encourages companies to coordinate their activities across a range of countries to enhance the efficiency of their operations. Local responsiveness: requires a company adapt to local demand. Global Integration • Global integration concerns the coordination of activities across countries in an attempt to build efficient operations. • Allows companies to achieve lower cost through scale and replication. • Companies seek to take advantage of convergence of preferences and service customers with good or services that have little variation. • Highly centralised operations. • Internal logic of rationalisation and standardisation. Local Responsiveness • Recognises differences in national markets (China and U.K.) & that these differences are significant. • Local responsiveness attempts to respond to specific needs within a variety of host countries. Foreign subsidiaries need to be differentiated enough to successfully service cultures, markets, and business practices that contrast markedly with those of the home country. • The degree and nature of competition varies from country to country and it is necessary to adapt in order to address these varying pressures. • Logic of differentiation. Source: Dicken (2015, 129) Classic strategies resulting from GI-LR pressures Johnson et al. (2017, 287). Ghemewat’s CAGE Framework Cultural Distance Administrative and Political Distance Geographic Distance Distance between two countries increases with • Differences in Language, Ethnicity , Religion, social norms • Lack of connecting ethnic /social networks • Absence of shared political or monetary association • Political hostility • Weak legal and financial institutions Industries or products most affected by source of distance Industries with high linguistic content (TV, publishing) or cultural content (food, wine, music) Products with low value-to-weight Industries viewed (cement), which are by government as fragile (glass) strategically perishable (milk), or important (energy, when communication defence, telecom) vital (financial services) • Lack of common border, or transportation or communication links • Physically remote • Different climate Economic Differences • Different consumer incomes • Differences in resources • Different information or knowledge Products with income elastic demand (Cars). Also Labor intensive products (clothing) Verbeke and Asmussen (2016) Extent to which firm advantage can be exploited Location of opportunity Verbeke and Asmussen (2016) Extent to which firm advantage can be exploited Location of opportunity Verbeke and Asmussen (2016) Extent to which firm advantage can be exploited Location of opportunity Verbeke and Asmussen (2016) Distance Matters Extent to which firm advantage can be exploited Location of opportunity Verbeke and Asmussen (2016) Global Strategy Extent to which firm advantage can be exploited ? Location of opportunity Verbeke and Asmussen (2016) The AAA Triangle Aggregation Adaptation Local responsive Area Focus Efficiency and scale Product Focus Adjusting to differences Overcoming differences Exploiting differences Arbitrage Ghemawat (2008) International Specialization Function Focus Ghemawat (2007) • What Influences How Companies Compete Internationally? • International Strategy Formulation • The Strategic Challenges of International SMEs Defining Micro and Small-Medium Enterprises Employees Turnover Balance Sheet Total Micro