6.1 Importance of International Management
- Why is it important to understand and appreciate the importance of international management in today’s world?
Any serious management student needs to understand and appreciate the importance of international management in today’s global business environment. Whether you work for a domestic company or a foreign company, you will likely need to interact with someone from another country or do business in another country. Understanding international management is therefore critical to address future challenges.
In this section, you learned about the many factors contributing to making globalization a reality: the growth of trade between countries, the growing importance of foreign direct investment, the growing competition from emerging market multinationals, and the globalization-fueling pervasiveness of the Internet. These factors all contribute to making the business world more global.
6.2 Hofstede's Cultural Framework
- What is culture, and how can culture be understood through Hofsetde’s cultural framework?
Given the importance of globalization, any serious international management students will need to be able to understand the cultural aspects of a society in which they may find themselves and will need to learn how to adapt to various cultural conditions. The most popular cultural framework, the Hofstede scheme, was developed by Geert Hofstede, a Dutch social scientist who surveyed over 88,000 employees in 72 countries in which IBM had subsidiaries. He developed this cultural model primarily on the basis of differences in values and beliefs regarding work goals. This effort resulted in four main dimensions: power distance (the degree to which societies accept power differences and authority in society), individualism (the degree to which a society focuses on the relationship of the individual to the group), uncertainty avoidance (the degree to which people in a society are comfortable with uncertainty and unpredictable situations), and masculinity (degree to which a society emphasizes traditional masculine qualities such as advancement and earnings).
6.3 The GLOBE Framework
- How are regions of the world categorized using the GLOBE framework, and how does this categorization enhance understanding of cross-cultural leadership?
The GLOBE project cultural framework is a much more recent effort that involved 170 researchers who collected data on 17,000 managers from 62 countries around the world. The focus of the GLOBE project was to understand how national cultures have preferences for different leadership styles. One of the strengths of the GLOBE project is that it clusters societies that share similar characteristics. The seven important clusters of the GLOBE project are the Anglo cluster, the Confucian Asia cluster, the Germanic Europe cluster, the Latin America cluster, the Middle East cluster, the Nordic Europe cluster, and the Sub-Saharan cluster. Each cluster rates differently the styles of leadership that the GLOBE researchers considered. The six leadership profiles are charismatic types (degree to which the leader can inspire and motivate others), participative type (degree to which leaders involve others in decision making), humane-oriented type (degree to which the leader shows compassion and generosity), autonomous (degree to which the leader reflects independent and individualistic leadership), and self-protective (degree to which the leader is self-centered and uses a face-saving approach). The various clusters show preferences for specific leadership styles that are consistent with the cultural aspects emphasized in each cluster.
6.4 Cultural Stereotyping and Social Institutions
- Why is an understanding of cultural stereotyping important, and what can students do to prepare for cultural stereotyping by looking at social institutions?
While the Hofstede and GLOBE culture frameworks are certainly useful and can provide a solid basis for understanding cultural differences, relying solely on cultural dimensions can lead to problems when managers are confronted with cultural paradoxes (when reality doesn’t coincide with expectations based on cultural dimensions) and cultural stereotyping (when it is assumed that everyone within the same culture acts and behaves similarly).
To broaden your understanding of cultural differences, you must also take into account a country’s social institutions.
While there are a large number of social institutions that can impact international business, we examined three main types of social institutions that affect how people act and behave: social stratification (degree to which social benefits are unequally distributed and those patterns are perpetuated for life), education (the socializing experiences which prepare individuals to act in society), and religion (the shared set of beliefs, activities, and institutions based on faith in supernatural forces).
6.5 Cross-Cultural Assignments
- What steps can you undertake to be better prepared for cross-cultural assignments?
While the above sections provided you with many diagnostic tools to understand how to evaluate cross-cultural differences, this section presented you with the ways to prepare for cross-cultural assignments. The goal of any training is to increase cultural intelligence, the ability to function and manage effectively in culturally diverse settings. To understand what companies can do to increase cultural intelligence, you learned about various types of training: low-rigor training (where individuals are exposed to critical information but are not necessarily actively engaged in their learning) and high-rigor training (methods of training where participants are much more actively engaged in the training process). You also learned that multinationals can also provide training before someone goes on an international assignment or while someone is already on the assignment.
6.6 Strategies for Expanding Globally
- What are the main strategies that companies can use to go international?
As companies explore expanding into international markets, they adopt one of three main strategies, each of which has its advantages and disadvantages depending on the company’s and country’s characteristics. The three strategies are 1) the global strategy, in which all operations and activities are managed fairly similarly worldwide; 2) the regional strategy, in which the multinational adapts activities and operations to regional requirements; and 3) the local strategy, in which the company’s operations are adapted to fit some specific countries.
6.7 The Necessity of Global Markets
- Why might it be necessary for a company to go international, and how might it accomplish this goal?
In the final section of the chapter, you first read about the need for companies to go international and learned that some markets present strong potential while others have floundered.
Companies can go international in many ways: exporting (an entry mode where a company sends a product to an international market and fills the order like a domestic order), licensing and franchising (a contractual agreement whereby a company is given the right to another company’s trademarks, know-how, and other intangible assets in return for a royalty or a fee), strategic alliances (where two or more companies from different countries enter into an agreement to conduct joint business activities), and foreign direct investment (which involves a company investing in another country through the construction of facilities and buildings in another country).
With each of these methods of entry, there is a trade-off between the cost of a means of entry and the amount of control a company has over its operations. For example, exporting is usually the cheapest way to go international but offers the company the least amount of control. Born globals do not have to think about how or when to go global because they are international from the day they are created.