Commercial%20stake%20holders,%20e.g.%20Suppliers%20competitors,%20distributors,%20retailers. presentation

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Title: Commercial%20stake%20holders,%20e.g.%20Suppliers%20competitors,%20distributors,%20retailers.

1
Commercial stake holders, e.g. Suppliers
competitors, distributors, retailers.
Domestic country stake holders e.g. Domestic
country employees, share holders. Domestic
country customers, domestic govt..
Host country stake holders e.g. local employees
and their organisation, pressure groups.host
country govt. host country community.
2

An international business enterprise is
tantamount to pressure from a triangle of
stakeholders.
(a) Commercial stakeholders, such as suppliers,
competitors, distributors and retailers, who put
commercial pressure upon the firm and stress
values of commercial importance.
(b) Host country stakeholders, such as local
employees and their organisations, pressure
groups, host country government and host country
community, on the other.
(c) Domestic or home country stakeholders, which
are home country employees, shareholders, home
country customers and the domestic government.

3
Culture, market, data, politics, government,
company, economy, finance currency.
FACTORS OF BUSINESS OPERATIONS

International
Operations
(HOST COUNTRY)
It is multicultural.
Market is fragmented and diverse
Getting data is difficult and expensive to obtain
high risks of political interference
Government has strong influence on operations
Company has highly distorted organizational
structure
High risk of economic instability variety of
methods used for financial transactions .
Currency differ in Stability and value.

Domestic Operations
(HOME COUNTRY)
Culture is predominately single
Market is more homogeneous
Data is usually available
Political risks is lower
Government gives relative freedom to operate
Company has coherent structure
Economy is stable and more Predictable
Uniformity of operations in finance .
There is single currency

4
CENTRAL ISSUES In each generation MNCs have
served as engines of growth in the world
economy. They have been major facilitator of
trade flow. They have transferred technologies
and organizational skills across
border. Multinational strategies have
been prominent in nearly all of the world's most
dynamic manufacturing industries since the late
nineteenth century.
5
Definitions of international, multinational
global, andtransnational, Corporation. MNCs
is usually defined as a firm that controls
operations or income generating assets in more
than one country.
Then scholars differ from each other in
characterizing multinational enterprise.
Some scholars are of the view that
multinationality requires operation in minimum
number of countries usually five or six or that
firm which is active across borders should be of
a certain size before it can be called as MNCs.

6
Definition of MNC

MNCs can be defined as firms having operations in
more than five/six countries, international sales
and nationality mix of managers and owners.
The multinational company has been defined as "a
national company in two or more countries
operating in association, with one controlling
the other in whole or part.

7
Powers of Multinational
First Order
Second Order

First order power is
direct, exercised
through a
multinational's
political or financial
strength.

Second-order power in contrast, is indirect,
derived from a multinational's organizational
know-how technological progress, and status as a
representative of cultural values or dominant
market ideology.

8
The term MNCs is not used for a farm whose sole
international involvement is the exporting of
goods or services from its home baseThe essence
of the multinational concept is the firm controls
income generating assets in at least two
countries

INVESTMENT

PORTFOLIO
FDI
Involves the acquisition of foreign securities by
individuals or institutions without any control
over the management of the foreign entity.
It involves management control. MNCs engaged in
FDI because they both own and control assets in
foreign countries.
9

The impact of MNCs on individual host economies
depends on the type of investment undertaken its
quality as well as quantity.
The nature of host economy including its stage of
development and its culture.

The history of international business in Japan
has been the low level of inward FDI compared
over all size of economy, while the U.K. has
world's largest host economies through out the
twentieth century. But it would be entirely
misleading to draw the policy conclusion that
Government should seek to restrict FDI in their
economies if they want to have Japanese economic
miracle.

11
GLOBALIZATION

The adjective "Global" means world wide or more
loosely the whole.
The noun "Globalization" has developed recently.
Basically "Globalization" refers to the
compression of the world and the intensification
of consciousness of the world as single place.
In business "Globalization" is conceived
exclusively by economic activities, (e.g. Global
market place.)

12
Organisational Structure Transnational
Multinational Global
National corporation with tightly controlled foreign operations. (Ethnocentric management style.) Decentralised organizational structure diverse and perhaps on coordinated set of strategies world wide. (Polycentric management style) It permits retaining local flexibility while achieving global integration. (Geocentric management style)
13

Ironically what is often called "Globalization"
relates to the triad of the United states,
European union and Japan.
Globalization challenges both national economies
and business organizations.
Government and corporations have to cope up with
the new challenges.
Globalization tries for a world wide "Level
playing field".
It advocates liberalisation and
non-discrimination.

The definition suggests correctly that
although global companies are multinational
in doing business in more than one country
their composition and character reflects
significant uni-nationality.
Typically a majority of their stock is owned by
citizens of their home country and their top
management are dominated by citizen of their home
country.

15
FOREIGN DIRECT INVESTMENT (FD1) CLUSTERS

American Cluster
Argentina Colombia Venezuela
Bolivia Mexico Philippines
Chile Panama Saudi Arabia

USA
Triad
European Union
Japan
EU Cluster Czech Republic Russia Hungary Brazil
Poland
Japanese Cluster South Korea Hong Kong Thailand
16

The difficulties of assessing the impact of MNCs
on host economies arise from many ways in which
they can make impact. They create employment, but
also increase import. The new technologies which
they introduce may be accompanied by a package of
cultural values which may or may not be welcomed.

17
Justice

But the term also includes other aspects such as
environment, socio-cultural aspect etc.
Economic Globalisation can be understood as the
widest geographic extension possible of
international economic integration.
It moves beyond national boundaries. Taking the
world as single place Globalization's essential
criterion is
Equality of prices of equal goods and services.
(2) Non discrimination in the treatment of goods,
or mobility of goods.

Wages While child labor may be deemed unethical
in a developed country, and it may even be
condemned by the United Nation's Chapter of Labor
Laws, there may still be the ethical dilemma
whether compulsory withdrawal of all child
laborers from a firm is to be strictly ordered
even if that inevitably leads to starvation in a
developing nation.
There is no super national state that controls
the multinationals. Sony and Toyota in United
State, G.M.and Ford in Germany , OPEC with LDCs
etc.

Multinationals are corporations that operate
extensively in more than 5/6 countries, usually
through branches or subsidiaries engaged
in Production, Marketing or both.
They pose special moral problems. Because
their activity is not confined to one single
nation, no one nation can effectively control
them. National laws can effectively circumscribe
national firms.

A manager of MNC has to sit above global and
national markets rather than in one of them. He
has to see how the product in question can be
adopted to the needs and traditions of the
particular society, he wishes to penetrate.
This concept is called concept of EQUIDISTANCE
MANAGER.
For example- Coca Cola has amazingly seventy
percent of the soft drink market in Japan. This
was achieved by carefully establishing a sale and
distribution network appropriate to the ethos and
expectation of Japanese culture. So MNCs should
learn how to work and within desired market and
not simply forced entry by its economic power.

Joint venture When two or more companies own a
foreign farm.
Licensing The contract between independent farms
to transfer technologies or resources.
Franchising It is a special type of licensing
under which a foreign company grants an
individual or company to conduct business in a
certain way.
International cartels Agreement between
independent farms to maintain prices.

International collaborative agreements and
strategic alliances Arrangement
Arrangement between firms to cooperate-facilitate
in new product developments.
Long-term contracts between firms.
These are the important components of
international business.

23
MNCs can be engaged in

Manufacturing
Services
the export/import of natural resources.
Broadly there are firms which make supply
oriented investment and there are firms which
engaged in market oriented investment.
Transfer a package of resources across national
borders.
Either MNCs have wholly-own subsides, joint
ventures, licensing agreements, alliances and
long term contracts.

24
What is culture?

Culture is that ''complex whole which includes.
knowledge, belief, art, morals, law, custom, and
any other capabilities and habits acquired by man
as a member of society" .
E.B.Taylor.

25
Nature of culture

1. Learned Culture is not inherited or
biologically based it is acquired by learning
and experiencing.
2.Shared People as members of a group,
organization, or society share culture, it is not
specific to single individuals.
3. Trans generational Culture is cumulative,
passed down from one generation to the next.
4. Symbolic Culture is based on the human
capacity to symbolize or use one thing to
represent another.
5. Patterned Culture has structure and is
integrated., a change in one part will bring
changes in another.
6. Adaptive Culture is based on the human
capacity to change or adapt asopposed to the
more genetically driven adaptive process of
animals.

26
Cultural Diversity

Centralized vs.. decentralized decision making
In some societies, all important
organizational decisions are made by top
managers. In others. these decisions are diffused
throughout the enterprise, and middle and lower
level managers actively participate in, and make,
key decision.
Safety vs.. Risk In some societies,
organizational decision makers are risk-aversive
and have great difficulty with conditions of
uncertainty. In others risk taking is encouraged,
and decision making under certainty is common.

Individuals vs.. Group rewards In some
countries, personnel who do outstanding work are
given individual rewards in the form of bonuses
and commissions. In others, cultural norms
require group rewards, and individual rewards are
frowned on.
Informal vs.. formal procedures In some
societies, much is accomplished through informal
means. In others, formal procedures are set forth
and followed rigidly.
High vs.. low organizational loyalty In some
societies.people identify very strongly with
their organization or employer. In others, people
identify with their occupational group, such as
engineer or mechanic.
Co-operation vs.. competition Some societies
encourage co-operation between their people.
Others encourage competition between their
people.

American Culture
Pragmatic(Calvinistic/
Protestant Ethics.
Masculine Christianity, Reserved. Stoic)
Ethics Based on Transactions and
Fair Exchange
Individualism
Free Will/Accountability/ Choice
Masculine Uncle Sam Metaphor
American Spirit

Indian Culture
Mystical (Strong believe in Indian Mythology,
Orthodox, Feminine. Emotional)
Ethics Based on
Good Treatment
(basudheibak Kutumbakam)
Collectivism
Mystical/' Wishful
Thinking
Feminine
Mother India Metaphor
Universal Soul
(Paramatama)

Spectrum of Cultural dimensions
29
Moral Free Space

THE TERM MORAL FREE SPACE IMPLIES THAT IT IS
RIGHT AND PROPER FOR COMMUNITIES TO SELF-DEFINE
SIGNIFICANT ASCEPTS OF THEIR BUSINESS MORALITY.
CULTURAL DIVERSITY IS EMPHASISED AND ANY SUCH
THING AS 'HUMAN ESSENCE' IS REJECTED.
HYPERNORMS ARE SECOND-ORDER MORAL CONCEPTS
BECAUSE THEY REPRESENT NORMS SUFFICIENTLY
FUNDAMENTAL TO SERVE AS A SOURCEOF EVALUATION AND
CRITICISM OF COMMUNITY-GENERETED NORMS. '

On the other side there is the cosmopolitans,who
defend the universal character of human
experience.
Our aim here is to show by recognising the
diverse communities and de- recognizing the fact
that one -size -fit-all suit of clothes ,one can
evolve a universal principles and values that is
common to all people that is based on a
reflection on the deepest sources of human
ethical experience.

31
Applying Hofstede's model

Hofstede's research findings are invaluable when
applied and modified to your specific situation
and needs. They provide a starting point for
further analysis and research.
First, review the similarities and the
differences between your situation and that of
Hofstede's research sample (within the same
country), and decide how the differences affect
your application of the model to the target
workforce. In particular, look for
(i) sub cultural differences,
(ii)industry differences,(iii)differences arising
from the organizational culture.

32
The strengths of Hofstede's model

The strengths of Hofstede's work is mainly
comparing cultures and applying cultural analysis
to practical management problems.
The INFORMATION POPULATION (IBM employees) is
controlled across countries, I which means
comparisons can be made. This is a strength
despite the difficulty of generalizing to other
occupational groups within the same national
culture (see the third point made in subsection
).
The Four Dimensions (i.e.Power Distance,
Uncertainty Avoidance, Individualism and
Masculinity) tap into deep cultural values and
make significant comparisons between national
cultures.
The connotations of each dimension are highly
relevant. The questions asked of the informants
relate to issues of importance to the
international manager.
No other study compares so many other national
cultures in so much detail.Simply, this is the
best there is.

33
Third, there are TECHNICAL DIFFICULTIES in
Hofstede's research. Intuition suggests that some
of the connotationslisted above overlap. For
instance, we find
(Larger power distance) Powerful people try to
look as impressive as possible . (Hofstede 1991,
p. 43) (Masculine) Men are supposed to be
assertive, ambitious, and tough. (Hofstede 1991,
p. 96)

(Small power distance)
Powerful people try to look less
powerful than they are.
(Feminine)
Everybody is supposed to
be modest

Suppose that you come to a country of which you
have no knowledge (and which has not contributed
informants to Hofstede's study), and you observe
that managers normally defer to their
knowledgeable subordinates. Are you observing the
effects of small power distances, or of high
femininity?
34
The weaknesses of Hofstede's model

Hofstede's analysis is vulnerable on a number of
counts.Three problems are discussed here
First (like all national cultural studies), it
assumes that NATIONAL TERRITORY and the limits of
die culture correspond. But cultural homogeneity
cannot be taken for granted in countries which
include a range of culture groups or with
socially dominant and inferior culture groups
the United States, Brazil, Switzerland (French,
German. Italian, Roman cultures) Belgium
(French, Flemish cultures) Spain (Basque,
Catalan, and Castillian). The breakup of
Yugoslavia during the 1990s demonstrates the
futility of trying to create tight political
units from disparate national cultures.

35
Defining the dimensions e.g., individualism/colle
ctivism

dimensions in terms that can be applied in
different contexts. The individualism/collectivism
dimension is examined here by way of
illustration.
We have seen that Hofstede applied the Anglo
concept of individualism - that is, in terms of
the need to achieve and competitiveness. But
other emphases are possible. Writing from a
Polish perspective, Czarniawska (1986) refers to
American individualism in the United States as a
choice made in preference to cooperation.
Brummelhuis ('1984) explains the Thai concept of
individualism in terms of avoidance and distrust
of authority "The individual's preoccupation is
not so much with self-realization and autonomy
as with adaptation to the social or cosmological
environment. If no single concept of
"individualism" applies, the manager cannot
assume that features associated with
individualism in Anglo cultures are absent in
more collectivist cultures. Similarly he/she
cannot lake for granted that all cultures with
high individualism scores are equally achievement
motivated.
Likewise, "collectivist" behavior in one context
might have different connotations elsewhere. For
instance. Japanese collectivism is organization
based but Chinese collectivism is family based.
In Japanese terms, a Taiwanese employee who
places his family interests above the interests
of the Japanese-owned multinational is disloyal
and cannot be fully trusted.

Second, Hofstede's informants worked within a
SINGLE INDUSTRY (the computer industry) and a
single multinational. This is misleading for two
reasons. In any one country the values of IBM
employees are typical only to a small group
(educated, generally middle class,
city-dwelling) other social groups (for instance
unskilled manual workers, public sector
employees, family entrepreneurs, etc.) are more
or less unrepresented. (Tills problem of
representation would occur whichever one company
provided informants the problems arising horn a
rane of representations are worse.)
Also, people work for IBM for different reasons
in different cultures. In the United States, a
lifetime career in a multinational might be
generally desirable. Elsewhere, it may be less
so section 17.4 shows that Hong Kong Chinese
usually aim to set up their own companies or to
work for the family. A few years spent in a
foreign-owned multinational might be regarded as
useful training, but not as a long-term
commitment.

37
Uncertainty Avoidance

The extent to which people feel threatened by
ambiguous situations and have created

beliefs and institutions that
try to avoid this Germany, Japan, and Spain
Individualism vs.collectivism The tendency to
look after their self-interest and their family
U.S.A., CANADA, DENMARK, AUSTRALIA. (Collective).

38
POWER DISTANCE

The extent to which less powerful members
of institutions and organizations accept that
power is distributed unequally.
Countries where people blindly obey the
orders of their superiors have high power
distance. Example Mexico, South Korea, and
India.
Masculinity
A situation in which the dominant values in
society is success, money and things. JAPAN.
Femininity
The dominant value in society is caring for
other
and the quality of life. NORWAY.

39
Creating a Map for Your Cross-Cultural Ethical
Navigation

It's All A Swindle
Papa swindles Mama swindles
Granmama's a lying thief
We're perfectly shameless but we're
Blameless after all its our belief
Nowadays the world is rotten honesty
has been forgotten fall in love but after
kissingcheck your purse to see
what's missing Everyone swindles some
my son's a mooch and so's the pooch
Life's a swindle, yes, it's all a swindle so
get what you can from your fellow man
Girls and boys today would rather steal
than play and we don't care We tell them
get your share Life is short and greed's in
season all mankind has lost its reason
life is good, knock on wood, knock, knock
Shops will swindle shoppers swindle

every purchase hides a tale the price is inflated
or Regulated to ensure the store will fail Wheel
And deal and pull a fast one knowing you won't
be the last one get the goods while they are
going grab the cash while it is flowing Everyone
swindles some what the heck go bounce a check
Life's n swindle Politicians are magicians
who make swindles Disappear The bribes they
are taking the deals they are Making never reach
the public's ear The left betrays the right
dismays
The country's broke and guess who pays But tax
each swindle in the making profits will be record
breaking Everyone swindles some so vote for
who will steal for you Life's a swindle

40
3.3 THE CASE OF THE SHINJINRUI"

This section demonstrates the ambiguity of
cultural shift in a complex
society. This causes problems for the manager who
has to decide on a
response. The data arc drawn from Japan. The
conventional Japanese
office-worker or "salary man" was traditionally
loyal to his boss and
company to the point of Riving up evenings,
weekends, and even
vacations in order to serve their interests. But
in the late 1980s, a new
Generation of employees, called shinjinmi (new
human beings)
developed. They did not fit this model. A
shinjinrui is more direct than
the traditional Japanese. He act-s almost like a
Westerner, a gaijin. He
docs not live for the company and will move on if
lie gets the offer of a
better job. He is not keen on overtime,
especially if lie has a date with
a girl. He has his own plans for his free lime,
and they may not include
drinking or playing golf with the boss.3

Not only younger managers adopt new attitudes to
work. The story also discusses a survey conducted
by an employers' association only 3 percent of
250 managers still favored such traditional
practices as long hours and the arbitrary
transference of employees to distant posts where
they might he separated from their families.
If these attitudes really reflect values, then
Japanese culture had shifted so that the old
preferences for unconditional hard work and
collective loyalty were disappearing. In
Hofstedc's terms, the sliinjnmii's involvement
with the company was becoming less moral and
more calculative - perhaps reflecting higher
individualism. (Sherry and Camargo 1987, note
that the individualist English pronouns "I" and
"my" were increasingly borrowed l)y Japanese
speakers.) Loyalty to employer appeared to be
declining did this reflect fewer needs to avoid
uncertainty? Did increased respect for personal
freedom and rejection of the company's
interference in private life show less
masculinity?

42
3.3. / Why the shinjinrui trend might not hove
long-term significance

These developments were noted at a time when the
Japanese economy was booming. But did they
reflect a fundamental shift in Japanese culture?
Should a foreign company working in Japan have
invested in new management systems on the
assumption that the Japanese character was
fundamentally altered. and that the shift would
survive a down-turn in the economic situation? Or
did (lie sliinjinnii reflect a short-lived trend,
of no long lasting importance to management?
A further newspaper story about the shinjinrui
indicates why their seeming revolt against
traditional practices could not be taken at face
value, and also explains why cultural
fundamentals often resist modification. Some
scholars doubt whether this new middle class was,
at heart, any less group-oriented than other
Japanese. Although the shinjinnii might claim to
be "individualist," at heart they still
identified with the group
Thai will not change. say anthropologists such as
Oxford University professor Joy Hendry. unless
the current generation of sbinjiiinii departs
radically from childrearing methods that have
become the norm in Japan.
Unlike in the US or Europe. Where children are
encouraged to be independent. Japanese mothers
still rear their children lo lie totally
dependant on home and family by continually
warning them of the dangers that link without
Ultimately, this expanded to include the '"group"
and eventually the Country." both of which
offer protection from the "dangers'' that exist
"out there".. . .'

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