International Management
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1 International Management Strategic Opportunities and Cuitural Challenges FOURTH EDITION Dean B. McFarlin UNIVERSITY OF DAYTON Paul D. Sweeney UNIVERSITY OF DAYTON
2 Permissions xvii Preface xxi Acknowledgements xxvii PARTI On a Global Stage: The Context of International Management 1 Chapter 1 On a Global Stage: The World of International Management 3 International Challenge: Balancing Act for New Balance: Still Running with Production in the United States 3 International Business: A World of Constant Innovation and Change 4 Globalization and the World Trade Organization 5 Our Plan for this Chapter 7 Globalization and the Growth of International Business 7 The Hottest Areas for Growth and Investment 8 A Snapshot of Regional Trends 10 The Americas: Still Searching for Trade Ties 10 The Asia-Pacific: Resilience in the Storm 16 Europe: Now a Generation Past East Meets West 22 International Insights: Russia: Corruption in the Wild, Wild East 27 The Middle East and Africa: Uncertain Territory and Growing Potential 28 Key Challenges Faeing International Business 31 Technological Sophistication and International Volatility 31 International Workforce Challenges 33 Managing in a Volatile and Challenging International Environment 37 Basic Conceptual Foundations 39 Chapter Summary 41 Up to the Challenge? New Balance Makes "Made in the U.S.A." Work by Running Lean... and High Tech 42 International Development: International Management: Living at 35,000 Feet? 42 From Theory to International Practice: Hitting Home: Understanding Your Local "China Syndrome" 43 Chapter 2 Legal and Political Foundations of International Management 45 International Challenge: Making It and Faking It: Global Counterfeiting Inc. is Headquartered in China 45 VII
3 viii Contents Legal Issues in International Management 46 Types of Legal Systems 47 International Insights: Courting Trouble: American-Style Litigation and Lawyers in Japan 48 International Law 54 Political Issues and Risks in International Management 57 What Is Political Risk? 57 Types of Political Risk 58 International Insights: In Harms Way: The Danger in Doing Business Abroad 61 International Insights: The Arab League Boycott of Israel, Baxter International, and Today's Challenges 68 Managing or Dealing with Political Risk 73 Chapter Summary 76 Up to the Challenge? Crouching Tiger, Hidden Knock-offs: Counterfeiting in the Middle Kingdom 77 International Development: Culture Knowledge Quiz 78 From Theory to International Practice: Calibrating International Business Risk 81 Chapter 3 Doing Things Right: International Ethics and Social Responsibility 83 International Challenge: Competitive Intelligence: Dumpster Diving for That Extra Edge 83 Ethics and Social Responsibility in International Management 85 Philosophies and Perspectives on Ethics 85 International Insights: Beyond Rangoon: Chevron and Human Rights in Burma 89 Cross-National Differences in Ethical Perspectives 92 International Insights: Bribery as a Business Model Bavarian Baksheesh at Siemens AG 93 International Insights: Is Doing the Right Thing Wrong? An American Faces an Ethical Dilemma in Brazil 96 Ethical Behavior and Human Rights 97. Ethics Associated with Questionable Payments and Bribery 100 International Insights: Making Friends and Influencing People: The Long Arm of the FCPA Got Longer 106 Ethical Issues Emerging from Countries Converting to Capitalism 107 International Insights: A Job Seeker's Odyssey 110 Chapter Summary 111 Up to the Challenge? Competitive Intelligence: Lots of Gray Areas, No Easy Answers 112 International Development: Bribery in International Business 113 From Theory to International Practice: Analyzing Corporate Codes 115
4 ix Chapter 4 Making Distinctions across Cultures: Implications for International Management 117 International Challenge: Two Sides of the Japanese-American Cultural Divide: Is "10 People, 10 Colors" the Same as "To Each His Own?" 117 Revisiting Culture 119 Classifying Cultures around the Globe 120 Ronen and Shenkar s Country Clusters 120 International Insights: Sayonara Mr. Salaryman? A Look at Forces that May Act to Change Japanese Culture 123 International Insights: The More Things Change: Guanxi is Beginning to Look More Like Schmoozing 125 Hofstede: Clustering Countries on Work-Related Value Dimensions 126 International Insights: One American Firm's European Subsidiaries: A Cultural Mosaic 133 Trompenaarss Alternative: Another Look at Cultural Dimensions 134 Spanning the GLOBE: One Final Classification System 135 the Implications of Culture for International Management 137 Culture and What People Want from Work 137 Culture and Views about Leadership 138 How Individuals and Corporations Can Make Better Sense of Culture 141 Chapter Summary 143 Up to the Challenge? Working Together in the United States: Implications for Managing the Japanese-American Cultural Divide 144 International Development: Understanding Your Orientation toward Individualism-Collectivism 145 From Theory to International Practice: The Cultural Minefield of International Gift Giving 147 Case 1: Chiba International, Inc. 149 PART II Interacting Effectively in an International Environment 157 Chapter 5 Perception, Interpretation, and Attitudes across Cultures 159 International Challenge: Desperately Seeking Latin Culture 159 Perception, Interpretation, and Attitudes across Cultures 160 Differences in Perceptions of People and Events 161 Perception of Nonverbal Behavior 162 International Insights: Getting "Carded" in Japan: Perception and the Business Card Ritual 163 International Insights: It's a Small Park after All: Cueing Up at the House of the Mouse 164 The Effect of Context on Perception 165 Differences in the Perception of Time 167 Interpretation of Perceptions 170 Self-Attribution Effects 170
5 Attributions about Others 171 Implications of Cross-Cultural Attribution 173 International Insights: Attributions on TV 173 Attitudes 174 Attitudes toward the Self 174 International Insights: Face: How to Give It, Get It, and Keep It 175 Effects of Having Different Self-Views 176 Attitudes about Work 177 Attitudes about Others and Groups 181 International Insights: Latitudes and Attitudes: What People from Other Countries Say about Americans 184 International Insights: What Sells in Europe? Poking Fun at American Blokes 186 The Effects of Attitudes and Stereotypes 188 Chapter Summary 190 Up to the Challenge? Putting the Culture Back into Housewives 191 International Development: Measuring Your Perceptual Orientation to Time 192 From Theory to International Practice: Conducting a Cultural Audit of China 192 Chapter 6 Communicating Effectively across Cultures 195 International Challenge: Lost in Translation: Bridgestone's Communication Effort Goes Flat 195 Communicating Effectively across Cultures 196 The Value of Communications Savvy in International Business 196 Spoken and Written Communication 197 Languages of the World 197 Speaking (and Not Speaking) Other Languages 198 International Insights: The Best Care in the Air Might be Cross-Cultural: Miscommunication can be Dangerous 200 Communicating in Foreign Languages: Plenty of Room for Error 201 International Insights: Habla Usted Espanol? Microsoft Has to Brush Up 204 Compliments as Communication 205 Criticism as Communication 206 Embarrassment as Communication 206 Apology, Regret, and Forgiveness as Communication 207 International Insights: Japanese Dairy "Pours" On the Apologies 207 Monitoring Others as a Communication Tool 208 Written Communication 209 International Insights: Many Americans "Strike Out" When Communicating with Foreign Business Partners 212 Nonverbal Communication 213 Interpersonal Space and Gestures 213 Emotions and Touch 213 Vocal Qualities as Nonverbal Communication 214 Context Revisited 215 International Insights: Going Beyond Face Value and Valuing the Face-to-Face: Improving International Communication 216 Chapter Summary 217
6 xi Up to the Challenge? Bridgestone Turns the Americans Loose: Are They Just "Spinning their Wheels"? 218 International Development: Moshi, Moshi: Overcoming Cultural Barriers to Communication 219 From Theory to International Practice: We Have Ways of Making you Talk: Researching a Foreign Language 220 Chapter 7 Managing Conflict and Conducting Effective Negotiations 221 International Challenge: Two Sides of a Common Border: Negotiations between Mexicans and Americans 221 A World of Conflict 222 Cultural Causes of Conflict in International Management 223 Managing Conflict Effectively 224 International Insights: The Ties that Bind Sometimes Break: The Fan Clan and Work-Family Relations in the New China 229 Understanding International Negotiation 231 Basic Approaches to International Negotiation 231 International Insights: Getting to Yes: Negotiating Safely in a Hostage Crisis 232 Frameworks for Understanding the Process of International Negotiations 233 International Negotiation: A Four-Stage Process 236 International Insights: The Devil is in the Details: The Meaning of Compromise across Cultures 240 Chapter Summary 243 Up to the Challenge? Understanding the Mexican and American Negotiation Gap 244 International Development: An International Negotiation Scenario 245 From Theory to International Practice: Characteristic Features of Negotiation Behavior in Countries around the World 247 Case 2: Contract Negotiations in Western Africa: A Case of Mistaken Identity 249 PART III Capitalizing on International Opportunities 253 Chapter 8 Taking Stock: Developing International Strategy 255 International Challenge: Fast Food Fight: McDonald's Faces Tough Local Competitors Overseas 255 International Strategy: Deciding How to Compete Abroad 256 Basic Strategic Concepts for International Competition 258 International Insights: General Electric Upends "Glocalization" in Favor of "Reverse Innovation" 261 Corporate Strategy Options in International Business 264 Industry Pressures for Global Integration and Local Responsiveness 265 The International Strategy 266 The Multidomestic Strategy 267
7 xii Contents The Global Strategy 268 The Transnational Strategy 269 Another Alternative: The Regional Strategy 270 When Strategy Provides a Competitive Advantage 271 How Culture Can Impact Strategic Choices 272 Winning Big: Small Firms and International Strategy 273 The Strategy Challenge for Small Firms 273 Getting Help 274 Finding and Exploiting a Specialized Niche 274 The Process of Developing International Strategy 275 Step 1: The Mission Statement 275 Step 2: Conducting a SWOT Analysis 275 International Insights: Krafting Strategy for International Markets 276 Step 3: Deciding on an International Strategy and Setting Goals 280 Step 4: Developing Implementation Tactics and Plans 281 Step 5: Putting Control and Evaluation Procedures in Place 281 International Insights: Nokia Creates International Strategy by Listening... from the Ground Up 282 Organizational Requirements for Successful International Strategy 283 Designing a Fair Strategy Development Process 284 Chapter Summary 285 Up to the Challenge? How Local Competitors Respond to McDonald's... and How the Big Mac Adapts 286 International Development: Conducting a Company Situation Analysis 288 From Theory to International Practice: Making Moves on a Global Stage 289 Chapter 9 Jumping In: Foreign Market Entry and Ownership Options 291 International Challenge: General Electric Powers Up in China... but at a Technological Price 291 Taking the Plunge 292 Stages of International Development 293 Foreign Market Entry Options 298 Entry Options without Ownership 298 International Insights: Trouble Can Find American Exporters at Home 300 International Insights: McDonald's and Other U.S. Franchisors Find Foreign Growth is Golden 305 Entry Options Involving Ownership 308 International Insights: Danones Chinese Joint Venture Turns Sour 315 Other Types of Strategic Alliances 315 Chapter Summary 319 Up to the Challenge? General Electric Antes Up (Some) Technology to Tap China's Growing Power Market 320 International Development: Using the Global Practices Instrument 321 From Theory to International Practice: Mini-Cases in International Strategy 322
8 xiii Chapter 10 Making It Work: Effective International Operations 325 International Challenge: The Toyota Way: How the World's Largest Car Maker Works to Control Production across Borders 325 Making It Work: Effective International Operations 326 Factors Affecting International Market Entry Choice 326 Structuring International Business Operations 329 Challenges in Managing Strategic Alliances 336 Managing Global Supply Chains 339 International Insights: The Best of Times, the Worst of Times: A Tale of Two Factories 340 International Insights: Taking a Hike on the Global Sourcing Highway: The Laptop Computer Trail 342 The Management of Technology by Multinationals 343 International Insights: U.S. Firm Battled a Japanese Giant to Protect Its Technology 349 Chapter Summary 350 Up to the Challenge? Taking the Toyota Way on the Road: Should They Call an International Tow Truck? 351 International Development: A Detailed Look at Managing International Operations 352 From Theory to International Practice: Exporting Your Technology Products 353 Case 3: Go Global or No? 355 PART IV Managing People in the International Arena 361 Chapter 11 Motivating and Leading across Cultures 363 International Challenge: Firing Up the Bear: How Should Western Firms Motivate Russian Employees? 363 Motivating and Leading Abroad: One Size Does Not Fit All 364 Western Motivation Concepts and Their Applicability to Other Cultures 365 Maslow s Hierarchy of Needs 365 Herzberg's Two-Factor Theory 366 International Insights: Money Drives Russian Women Working for Mary Kay and Avon 368 Equity Theory: You Should Get What You Deserve 369 International Insights: Jacket Gesture Backfires in China 369 Reinforcement Theory: Connecting Behavior and Consequences 371 Expectancy Theory: Setting Goals and Tying in Rewards 372 International Insights: Global Dining's Message to its Japanese Employees: Perform or You're Chopped Liver 373 Conclusions about Motivation across Cultures 375 Effective Leadership in an International Context 375 When in Rome: Leader Behavior across Cultures 377
9 xiv Contents International Insights: Stodgy South Korean Companies Loosen Up Their Leadership 377 Transformational Leadership: Does It Work across Cultures? 382 Cross-Cultural Leadership Effectiveness: Pulling Everything Together 383 Leadership Development in Multinationals 385 Chapter Summary 388 Up to the Challenge? Motivating Russian Employees 389 International Development: How Are Your Cross-Cultural Motivation Skills? 391 From Theory to International Practice: Leadership Transitions in BRIC Countries: Understanding the New Economic Powerhouses 392 Chapter 12 Building an Effective International Workforce 393 International Challenge: Multinationals Find Recruiting and Retaining Chinese Talent a Tall Order 393 A Strategic Look at International Human Resource Management 394 International Insights: Hiring the Best from Abroad Means Going'fhe Extra Mile... or Two 397 Staffing Foreign Operations: A World of Choices 398 International Insights: "Boomerangs" Straddle Cultural Boundaries 399 Selecting and Developing International Employees 401 Developing Managers with International Skills 403 International Insights: Glamour, Grunge, or Both? In the Trenches with International Managers 404 Cultural Differences in Selection and Development Procedures 405 Managing Equal Opportunity and Organizational Diversity in an International Context 406 Expatriates: A World Away 410 Expatriates: High Risk, High Reward 410 Selecting Expatriates 411 Training, Preparation, and Adjustment of Expatriates 415 Trends in Expatriate Preparation 416 Returning Home: The Challenge of Repatriation 417 Chapter Summary 418 Up to the Challenge? Front-Line Expatriates in China: Making a Difference in Attracting and Holding Top Talent 419 International Development: What Is Your International Orientation? 421 From Theory to International Practice: International Human Resource Management in Specific Firms 422 Chapter 13 Evaluating and Rewarding Employees Worldwide 425 International Challenge: Expatriate Assignments: Are Multinationals Making It Harder to Say "Yes"? 425 Employee Performance Appraisal: The Global Challenge 426 Multinationals and Performance Evaluation for Expatriates 427
10 xv Who Should Evaluate Expatriate Performance? 429 When Should Expatriate Performance Be Evaluated? 431 Context Variables that Impact Evaluations of Expatriates 433 Some Additional Challenges with Cross-Border Performance Evaluations 434 General Guidelines for Expatriate Evaluation 434 Evaluating Foreign-Born Employees 435 International Insights: Some Advice for Providing Performance Feedback to Foreign- Born Employees 437 Compensation of International Employees 438 The Meaning of Compensation 438 Pay Levels across Countries 439 Senior Executive Compensation across Countries 439 Vacation Time: Less in the United States, More in Europe 441 Explaining Compensation Differences across Countries 443 International Insights: The Nail That Stuck Out at Toyota 444 The Challenges of Expatriate Compensation 445 Grappling with Expatriate Costs... and Employee Comparisons 445 Methods for Compensating Expatriates 447 Chapter Summary 457 Up to the Challenge? Are American Expatriates Becoming Too Expensive for Multinationals? 458 International Development: Giving Negative Performance Feedback across Cultures 459 From Theory to International Practice: Assembling an Expatriate Compensation Package 460 Chapter 14 Managing Groups across Cultures: From Small Work Teams to Large Labor Forces 461 International Challenge: SAP's Plans Hit a Cultural Barrier 461 Introduction 462 Managing Teams and Smaller Work Groups across Cultures 463 Differences in Group Behavior across Cultures 463 Group Productivity across Cultures 464 International Insights: Teamwork at 35,000 Feet 466 Diversity: When Different Cultural Groups Come into Contact 466 International Insights: Cross-Cultural Teams Open in the Catskills 468 Labor Relations in and across Cultures 470 Management and Worker Perspectives on Labor Relations 470 Labor Unions across Countries 473 Unions among EU Countries 474 International Insights: Germans Think Americans Work Too Hard 476 Unions in Asia 478 International Insights: Unions in the Middle Kingdom Not Forbidden, But Not That Useful Either 481 Central/South American Unions 482 African Unionism 482 International Employee Unions 483 Other Forms of Employee Input 484
11 xvi Contents Putting Agreements into Practice 486 Effect of Unions on Strikes 488 Chapter Summary 489 Up to the Challenge? SAP's Decision to Become Less German 490 International Development: Understanding Japanese Group Decision Making 491 From Theory to International Practice: The Blanchworth China Company 492 Case 4: The Case of the Floundering Expatriate 495 Chapter Endnotes 499 Name Index 545 Subject Index 547
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