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Chapter 8: Global Management
Pedagogy Map
This chapter begins with the learning outcome summaries and terms covered in the chapter, followed by a
set of lesson plans for you to use to deliver the content in Chapter 8.
Learning Objectives
1 Discuss the impact of global business and the trade rules and agreements that govern it.
Today, there are more than 77,175 multinational corporations worldwide; just 3.1 percent are based in the
United States. Global business affects the United States in two ways: through direct foreign investment in
the United States by foreign companies, and through U.S. companies’ investment in business in other
countries. U.S. direct foreign investment throughout the world typically amounts to about $2 trillion per
year, whereas direct foreign investment by foreign companies in the United States amounts to $1.6 trillion
per year. Historically, tariffs and nontariff trade barriers such as quotas, voluntary export restraints,
government import standards, government subsidies, and customs classifications, have made buying
foreign goods much harder or more expensive than buying domestically produced products. In recent
years, however, worldwide trade agreements, such as GATT, along with regional trading agreements, like
the Maastricht Treaty of Europe, NAFTA, CAFTA-DR, Mercosur, SACN, ASEAN, and APEC, have
substantially reduced tariff and nontariff barriers to international trade. Companies have responded by
investing in growing markets in Asia, Eastern Europe, and Latin America. Consumers have responded by
purchasing products based on value, rather than geography.
Global business requires a balance between global consistency and local adaptation. Global consistency
means using the same rules, guidelines, policies, and procedures in each location. Managers at company
headquarters like global consistency because it simplifies decisions. Local adaptation means adapting
standard procedures to differences in markets. Local managers prefer a policy of local adaptation because
it gives them more control. Not all businesses need the same combinations of global consistency and local
adaptation. Some thrive by emphasizing global consistency and ignoring local adaptation. Others succeed
by ignoring global consistency and emphasizing local adaptation.
3 Explain the different ways that companies can organize to do business globally.
The phase model of globalization says that as companies move from a domestic to a global orientation,
they use these organizational forms in sequence: exporting, cooperative contracts (licensing and
franchising), strategic alliances, and wholly owned affiliates. Yet not all companies follow the phase
model. For example, global new ventures are global from their inception.
The first step in deciding where to take your company global is finding an attractive business climate. Be
sure to look for a growing market where consumers have strong purchasing power and foreign
competitors are weak. When locating an office or manufacturing facility, consider both qualitative and
quantitative factors. In assessing political risk, be sure to examine political uncertainty and policy
uncertainty. If the location you choose has considerable political risk, you can avoid it, try to control the
risk, or use a cooperation strategy.
National culture is the set of shared values and beliefs that affects the perceptions, decisions, and behavior
of the people from a particular country. The first step in dealing with culture is to recognize meaningful
differences, such as power distance, individualism, masculinity, uncertainty avoidance, and short-
term/long-term orientation. Cultural differences should be carefully interpreted because they are based on
averages, not individuals. Adapting managerial practices to cultural differences is difficult because
policies and practices can be perceived differently in different cultures. Another difficulty is that cultural
values may be changing in many parts of the world. Consequently, when companies try to adapt
management practices to cultural differences, they need to be sure that they are not using outdated
assumptions about a country’s culture.
Many expatriates return prematurely from international assignments because of poor performance.
However, this is much less likely to happen if employees receive language and cross-cultural training,
such as documentary training, cultural simulations, or field experiences, before going on assignment.
Adjustment of expatriates’ spouses and families, which is the most important determinant of success in
international assignments, can be improved through adaptability screening and intercultural training.
Terms
Asia-Pacific Economic Cooperation (APEC) Maastricht Treaty of Europe
Association of Southeast Asian Nations multinational corporation
(ASEAN) national culture
Central America Free Trade Agreement nontariff barriers
(CAFTA-DR) North American Free Trade Agreement
cooperative contract (NAFTA)
customs classification policy uncertainty
direct foreign investment political uncertainty
expatriate protectionism
exporting purchasing power
Franchise quota
General Agreement on Tariffs and Trade regional trading zones
(GATT) strategic alliance
global business subsidies
global consistency tariff
global new ventures trade barriers
government import standard Union of South American Nations
joint venture (UNASUR)
licensing voluntary export restraints
local adaptation wholly owned affiliates
World Trade Organization (WTO)
Warm Up Begin Chapter 8 by asking your students the following series of questions:
• “Without looking, which of you knows (or is confident that you know) where
your backpack was made? Where?” [Students can shout out answers]
• “Ok, who thinks they know where their backpack was made? Where?” [Students
can shout out answers]
• “Who cares where their backpack was made?” [For students who raise their
hands to the last question, push them to answer why.]
• Segue into lecture on global business.
Content Lecture slides: Make note of where you stop so you can pick up at the next class
Delivery meeting. Slides have teaching notes on them to help you as you lecture.
Adjust lecture to include the activities in the right column. *Some activities should be
done before introducing the concept, some after.
Special Spark a debate among your students by asking them to respond to the following
Items statement:
“If given a choice, Americans will buy American-made goods rather than foreign-
made goods.”
Content The first section of the chapter has a lot of content that you can use to spark debate
Delivery among students. For this reason, you may want to hold off lecturing on “Global
Business, Trade Rule, and Trade Agreements” until after you do the group activity
“World Trade and You.”
Segue into next section by asking students “So if we postulate that global business is
good for consumers and companies alike, what’s the best way to go global? Perhaps
before we can answer that, we should consider the choices a company has when going
global.”
Introduce the sections on culture by asking if any of your students have ever lived,
worked, or studied abroad and where. If they have, ask them what they considered the
biggest difference between the host culture and the student’s culture of origin.
If time allows, consider showing the Biz Flix clip from Lost in Translation. Teaching
notes follow.
Conclusion Assignments:
and 1. To follow up on the discussion of where and how to go global, assign students to
Preview complete the Management Decision on how a company can deal with the cultural
issues of doing business in India.
2. If you have finished covering Chapter 8, assign students to review Chapter 8 and
read the next chapter on your syllabus.
GROUPON
In the opening case, you learned that Groupon, the “daily deal” coupon company had grown from 400
subscribers and 30 daily deals in 30 cities in December 2008 to 35 million subscribers and 900 daily deals
in 550 markets today, thus getting to $1 billion in sales faster than any other company. Local companies
flock to Groupon because it helps them attract new customers in a cost effective way. Because of low
barriers to entry and an easy-to-copy web platform and business model, however, domestic and
international competitors could take much of Groupon’s business, especially in international markets,
which Groupon was just starting to enter. Let’s find out what happened at Groupon and see what steps
CEO Andrew Mason took to replicate Groupon’s amazing success in the U.S. around the world.
National culture is the set of shared values and beliefs that affects the perceptions, decisions, and
behavior of the people from a particular country. The first step in dealing with culture is to recognize
meaningful cultural differences, such as power distance, individualism, masculinity, uncertainty
avoidance, and short-term/long-term orientation.
After becoming aware of cultural differences, the second step is deciding how to adapt your company
to those differences. The biggest mistake that companies make at this point is not changing their products
or services or their management practices and procedures when they do business abroad. This is a
common mistake among global franchisors, 65% of which make absolutely no change in their business
for overseas franchisees when they first go global.
So, given that it just offers daily deals, can Groupon have a standard set of products or should they be
different in each market and culture? Not surprisingly, Groupon has found that people in different
countries and cultures don’t respond to the same offers. For example in India, the most popular daily
deals aren’t restaurants and beverages (which are popular in many global cities), but travelling, mobile
phones and wellness products. Ananya Bubna, managing director of Groupon India, said, “A beverage
deal that we thought would have huge takers didn't sell.” Furthermore, “We have realized that something
like balloon rides, which got massive response in the U.K., may not get the same reaction here. Product
deals, mobile phones and wellness products work best in India. India has a large number of travel lovers;
this is what we are looking at pursuing, aggressively.”
Finally, in a nod to the importance of culture, especially with humor, which can differ tremendously
across cultures, Groupon now realizes that its 70 Chicago-based ad writers, some of whom have comedy
backgrounds linked to Chicago’s famous Second City comedy troupe, may not be able to write persuasive
ad copy for other parts of the world. A case in point (though Groupon employed an advertising agency
here) was Groupon’s Super Bowl commercial, which featured actor Timothy Hutton proclaiming, “The
people of Tibet are in trouble … but they still whip up an amazing fish curry. And since 200 of us bought
at Groupon.com, we're each getting $30 of Tibetan food for just $15.” The commercial was criticized
roundly, not just as ineffective, but insensitive.
Similarly, who should make key decisions, managers at headquarters or managers in each country?
Likewise, should Groupon continue to use its large Chicago-based sales force to build and retain
business with merchants, and In short, should Groupon run its business the same way all around the
world?
One of the key issues in global business is determining whether the way you run your business in one
country is the right way to run that business in another. In other words, how can you strike the right
balance between global consistency and local adaptation? Global consistency means that when a
company like Groupon has offices and facilities in different countries, it will use the same rules,
guidelines, policies, and procedures to run them all. Managers at company headquarters value global
consistency because it simplifies decisions. In contrast, a company with a local adaptation policy modifies
its standard operating procedures to adapt to differences in foreign customers, governments, and
regulatory agencies. Local adaptation is typically more important to local managers who are charged with
making the international business successful in their countries.
If companies focus too much on local adaptation, they run the risk of losing the cost efficiencies and
productivity that result from using standardized rules and procedures throughout the world. However, if
companies lean too much toward global consistency, they run the risk of their business being poorly
suited to particular countries’ markets, cultures, and employees (i.e., a lack of local adaptation).
In other ways, however, Groupon is balancing consistency with local adaptation. While it has local
managers (see more below) to run its businesses in 42 different countries, it brings all of them to Chicago
to learn how to run their offices the way that it’s done in the U.S. Then, it makes sure that those
managers stay current with its client companies by using Salesforce.com’s relationship management
software to track calls and make sure that its sales force follows up to address potential issues after every
daily deal is completed.
Another part of balancing consistency with local adaptation, at least for now, is maintaining a large call
center in Chicago. Unlike Facebook and Google, which hire software engineers to automate their web
sites, Groupon relies on call center-based sales force in Chicago to sell and maintain relationships with
client companies. Every time it opens in a new city, its sales force is charged with identifying and then
approaching businesses who could be interested in using Groupon to provide discounts to customers. The
question is whether it makes sense for Groupon to have similar call centers in the other regions or
countries in which it now does business?
Joe Harrow, who manages Groupon’s Chicago call center, says that Groupon will have call centers in
Chicago and in key international locations. But, unlike many multinational companies who have moved
their call centers to lower cost locations like India, he says, “Maybe having a 1,000-person call center in
downtown Chicago is not smart. We haven't done the math yet. When we do, we'll ask how we can make
this economical without costing us our culture.”
How should Groupon expand internationally? Should it license its web services to businesses in each
area, form a strategic alliance with key foreign business partners (it rejected Google’s $6 billion offer in
the U.S.), or should it completely own and control each Groupon business throughout the world?
Determining how to organize your company for successful entry into foreign markets is a key
decision in going global. When companies produce products in their home countries and sell those
products to customers in foreign countries, they are exporting. When an organization wants to expand its
business globally without making a large financial commitment, it signs a cooperative contract with a
foreign business owner who pays the company a fee for the right to conduct that business in his or her
country. There are two kinds of cooperative contracts: licensing and franchising. Another method of
international organizing is for two companies to form a strategic alliance to combine key resources, costs,
risks, technology, and people. The most common strategic alliance is a joint venture, which occurs when
two existing companies collaborate to form a third company. Finally, one-third of multinational
companies enter foreign markets through wholly owned affiliates. Unlike licensing arrangements,
franchises, or joint ventures, wholly owned affiliates are 100 percent owned by the parent company.
As explained in the chapter, each of these methods of "going global" has specific advantages and
disadvantages. Moreover, a common method of going global is to use the phase model of international
expansion in which a company starts by exporting, and then as it grows, switches to cooperative contracts
(i.e., licensing and franchising right), followed by strategic alliances, and then wholly owned affiliates. As
the chapter makes clear, not all companies follow the steps of the phase model in this order.
Backed with several hundred million dollars in funding, Groupon used an approach in which it
combined strategic alliances and wholly-owned affiliates. In short, just as Google offered a $6 billion buy
out to Groupon, Groupon has offered to buy the market leaders that it has identified in 50 different
countries.
Groupon board member Kevin Efrusy says, “To see people copy you is difficult to adjust to. But
Groupon immediately looked at it as an opportunity. You could pick the best that's out there and save a
lot of time.” “The strategy,” he says, is to find the best local teams. Then give them the tools they need
to be successful.” One such acquisition was Berlin-based CityDeal. CityDeal, which was started by the
Samwer brothers, who, a decade before had founded eBay Europe, was just 6 months old when purchased
by Groupon. But, in that short time, it had 1 million subscribers, operated in 80 European cities, and had
600 employees. CityDeal co-founder Dan Glasner commented on being bought by Groupon, saying, “We
have exactly the same understanding of how we need to serve our end customers and partners. Thousands
of businesses out there are looking to attract new customers and are thrilled to leverage the Internet to do
that.” Groupon’s CEO Andrew Mason said, “We wanted to find entrepreneurs [like CityDeal] to work
with that were excellent operators and also understood the local culture.”
Groupon repeated this acquisition strategy, buying similar companies in Chile, Russia, Japan, China and
other locations. One year, after deciding to go global, Groupon is in 42 different countries.
Sources: L. Chao, “Taobao to Launch Local Deals on Group-Buying Website,” Wall Street Journal, 23 February
2011, http://online.wsj.com/article/SB10001424052748703775704576161340839989996.html [accessed 15 May
2011]; D. Chaudhary, “Groupon Finds Indian Tastes to be Different,” Wall Street Journal, 26 April 2011,
http://online.wsj.com/article/SB10001424052748703956904576287093251449646.html [accessed 15 May 2011];
G. Fowler, “U.S. Coupon Site Clicks on Europe --- Groupon Buys Germany's CityDeal to Expand Base of
Subscribers Who Get Daily Emails for Discounts at Local Businesses,” Wall Street Journal, 17 May 2010, B4; K.
Patel, “Groupon Primes Itself to Become Next Zappos,” Advertising Age, 28 February, 2011, 4; B. Saporito, “The
Groupon Clipper,” Time, 21 February 2011, 50-52; B. Stone & D. MacMillan, “Groupon's $6 Billion Snub,”
Bloomberg Businessweek, 13 December 2010, 6-7; B. Stone & D. MacMillan, “Are Four Words Worth $25
Billion?” Bloomberg Businessweek, 21 March 2011, 70-75; R. Underwood, “Groupon versus the World,” Inc.,
October 2010, 116-118; B. Weiss, “The Weekend Interview with Andrew Mason: Groupon's $6 Billion Gambler,”
Wall Street Journal, 18 December 2010, A15.
WORLDMINDEDNESS
In-Class Use
Have students open their books to page 312 of the text and give them 5 to 7 minutes to complete the
inventory. Use the Self-Assessment PowerPoint slides and have students raise their hands as you read off
the scoring ranges. Tell students to keep their hand up until you have counted the responses for each item
and entered the count into the spreadsheet embedded in the PowerPoint presentation. Display the
distribution to the class so students can see where they fit.
Scoring
Business majors who speak no foreign languages have the lowest worldmindedness scores,
whereas other majors who speak two or more languages have the highest worldmindedness
scores. Whatever major, speaking another language increases worldmindedness.
Male finance and accounting majors have the lowest worldmindedness scores. Female finance and
general majors have the highest worldmindedness scores. Except marketing majors, females have higher
worldmindedness scores than males.
Your worldmindedness score is not a fixed number. Several activities can help you improve your score,
but to do so, you’ll need to develop a plan, such as the one that follows.
Management Decision
Purpose
A company that is looking to do business overseas must cannot ignore cultural differences if it is to be
successful. This exercise asks students to consider how they would deal with critical differences between
cultures as their company seeks to branch out into overseas markets.
Setting It Up
You can introduce this case to students by creating a table that shows the various cultural differences
between the U.S. and a foreign country, ideally one that has been the site of much foreign investment
such as China, India, Brazil, or Russia. You can then ask students how a company should deal with these
differences in order to find success.
Questions
1. How would you, as the manager of this company, deal with the risk associated with doing
business in countries that feel threatened by American culture?
Students are likely to respond in one of two ways – either the company must learn how to do deal
with the risk, or the company should cut its losses and terminate its business. In general, students
choosing the former answer should show awareness that it is critical for a company to learn as
much as it can about the foreign culture, so that it can adapt its business practices as necessary.
This may mean that the company hires more Indian staff, who can help train the rest of the staff
Students who choose to cut losses and leave the country should cite the tremendous cost, in terms
of money and time, of doing cross-cultural training.
2. How might your company use an alliance with local companies to adapt to local concerns about
American culture?
Companies that look to do business overseas often choose strategic alliances, most commonly in
the form of joint ventures. The advantage of joint ventures is that a domestic company combines
key resources, costs, risks, technology, and most importantly for this case, people, with a foreign
company to do business in a foreign market. In essence, a global joint venture involves a marriage
of four cultures: the country and the organizational cultures of the first partner, and the country
and the organizational cultures of the second partner. In other words, a joint venture gives the
domestic company access to the cultural expertise of the foreign company. Rather than creating
something new, the domestic company can simply rely on what its foreign partner already knows
about how to do business within a particular culture.
Questions
1. What are the advantages of social entrepreneurship as a way to approach doing business in
developing economies outside the United States? What are the disadvantages?
Social entrepreneurship presents both advantages and disadvantages to organizations. First, the
advantages. By showing that they care about social issues, organizations build customer loyalty by
showing that they care about the same social issues that the customer cares about. Additionally, this
type of identification can help attract and retain new customers who are concerned with an
organization’s social stance. An organization’s social actions also help establish a positive public
image and brand identity. Rather than being known just for good products, an organization that shows
concern for social ills presents itself as a responsible global citizen, one that cares for the people it
reaches. An organization’s social stance can also help educate its consumers. Through various
marketing and publicity campaigns, the organization can help the general population realize the need
to address a certain issue, be it homelessness or child illiteracy. And perhaps most importantly, a
company’s social entrepreneurial efforts help resolve significant societal problems. Businesses have
tremendous financial and political resources which they can marshal to improve the lives of people
around the world.
While social entrepreneurship has many advantages, it also presents disadvantages to companies.
First and foremost is the issue of cost. Whether it’s giving away drugs to the poor and homeless or
working with African coffee farmers, social actions require a considerable investment of
organizational resources. What is more, the net impact of social entrepreneurship on a company’s
bottom line is not at all clear, meaning that social actions, while good for the world, may be bad for
profit. Social entrepreneurship may also lead to a public relations nightmare for companies. For
example, a company may only claim to be engaged in social actions while not doing anything
substantive. Or, a company could be accused of adopting a social action perspective simply for the
sake of improving sales and profits (e.g., greenwashing). There are also considerable cultural and
political risks in social entrepreneurship. A company that enters a foreign country with grandiose
thoughts of healing the sick and enriching the poor may find itself the target of government officials.
2. How might you combine social entrepreneurship with traditional options for going global? Can
establishing a multinational corporation or a joint venture serve the principles of social
entrepreneurship? Would some options lend themselves better to social entrepreneurship than others?
What might such a business venture look like?
Traditional methods of doing global business include exporting, cooperative contracts and strategic
alliances. Exporting occurs when companies produce products at home and sell them abroad. The key
advantage to exporting is that it makes the organization less dependent on sales in its home country,
and provides a high degree of control over research, design, and production decisions. A cooperative
contract allows an organization to enter a foreign market without a large financial commitment. Either
through licensing or franchising, a foreign company pays our organization for the right to produce
and sell products in that country. The biggest advantage of licensing is that it allows companies to
earn profits without additional investments. However, the company must also give up control over the
quality of the product that is sold in foreign markets. Franchising, meanwhile, is another way to enter
a foreign market quickly. For the price of an initial franchise fee plus royalties, franchisors provide
franchisees with training, assistance with marketing and advertising, and an exclusive right to conduct
business in a particular location. However, franchisors also risk a loss of control. Further, many
franchises cannot be generalized due to differences in lifestyle, values, and even infrastructure,
making franchises a risky proposition for going overseas.
Strategic alliances involve the combination of two organizations’ resources, costs, risks,
technology and people. A strategic alliance can take them form of a joint venture, in which two
existing companies collaborate to form a third company. The two founding companies remain intact
and unchanged, except that together they now own the newly created joint venture. Joint ventures
provide for a relatively quick way of entering a foreign market without the pressure of tariffs. Further,
they reduce the risk of entry, since both companies have to bear the costs and risks of business.
Finally, global joint ventures can be especially advantageous to smaller local partners that link up
with larger, more experienced foreign firms that can bring advanced management, resources, and
business skills to the joint venture. However, the nature of a joint venture makes it necessary for the
two companies to share profits. Also, managing global joint ventures can be difficult because they
represent a merging of four cultures: the country and the organizational cultures of the first partner,
and the country and the organizational cultures of the second partner. This can lead to power
struggles, which in turn can produce a vacuum in leadership. An alternative form of alliance is a
wholly-owned-affiliate. These are foreign businesses that are 100% owned by the parent company.
The primary advantage of wholly owned businesses is that the parent company receives all of the
profits and has complete control over the foreign facilities. The biggest disadvantage is the expense of
building new operations or buying existing businesses.
The issue of how these structures relate to social entrepreneurship depends in large part on the
type of social program that students envision for their organization. On a superficial level, an
organization does not have to establish a foreign office or branch to address social concerns; it can,
like Pfizer does, simply use some of its resources (profits) to meet a social need. In that case, any of
the traditional methods of going global would allow a company to be social entrepreneurs. On the
other hand, if a student’s desire social program involves establishing a presence in a foreign country –
in order to get involved, form relationships and empower people in the culture – then there are some
methods that are better than others. Exporting would not be ideal, since it only involves selling goods.
More beneficial are franchising, licensing and wholly-owned affiliates, since they involve both a
financial investment into a culture, as well as an investment through training and facilities. Perhaps
the most beneficial method of entry for social entrepreneurs is the joint venture, since it allows both
organizations to assume risk and realize profit. Moreover, joint ventures allow smaller local partners
to gain valuable learning and experience by doing business with larger foreign firms, which can in
turn provide an impetus for growth to other domestic industries. Finally, joint ventures, because they
HOMETOWN CULTURAL
Preparation
Students should complete Step 1 (1-2 page paper on the major cultural features of their hometown) prior
to the in-class discussion of this exercise. It is important to remind all students that their audience for
these papers is the management of a company outside their own country of origin. For example, a
student whose hometown is Fayetteville, Arkansas, might write her paper to an audience of French
managers. A student whose hometown is Sao Paulo, Brazil, might write his paper to an audience of US
managers. Students should assume that their audience has never been to their hometown, and that they
have limited knowledge of their home culture (national/regional/local).
Managers with a wealth of global experience staff most multinational firms and students may tend to
lean toward assumptions of familiarity. Reinforce that they should assume that no familiarity
whatsoever. This will help students to fully engage in the process of communicating to a foreign
newcomer. While students may include a few aspects of national and regional culture, they should make
sure that they give primary attention to their particular hometown. For some students this local “lens”
may even zoom in at the level of a neighborhood or section of a large city (e.g., the Bronx area of New
York City).
You should decide in advance how you would like to group students for the in-class exercise.
Students will discuss their “hometown” papers, and then work together to agree on some
recommendations for a multinational that plans to enter their hometowns (see Step 4—company entering
all hometowns simultaneously). One approach for forming groups is to cluster students who are likely to
represent a variety of places of origin.
In-Class Use
Students should be organized in small discussion groups (3-5 students). Each group should begin with
Step 3, taking turns to introduce themselves, identifying their hometown (and neighborhood/borough as
appropriate), and sharing some of the highlights from their “hometown” paper. Encourage students to
listen carefully for similarities and differences, ask questions, and make notes.
Once a group has completed Step 3, it should move on to Step 4 without waiting for a signal from the
instructor. Groups are likely to vary in the time required for Step 3, but none should rush through this
step.
Step 4 requires each group to make recommendations to the multinational equipment company on the
assumption that it is entering all of their hometowns simultaneously. This condition forces students to
directly consider similarities, differences, and patterns across their various hometowns.
Step 4 includes the following two questions:
1. “To what degree might the company use consistent (same) approach in entering your
hometowns?” (Exercise, Step 4)
2. “Is one of your hometowns likely to require a foreign multinational to make more particular
adaptations?” (Exercise, Step 4)
These questions should foster discussion around one of the central themes of global management—the
desire to achieve consistency across global markets (i.e., global economies of scale and scope); and the
need for adaptation to local differences (i.e., customer needs and desires that vary by location/culture).
176 Chapter 8: Global Management
When all groups have completed Step 5, you may begin the class discussion of the challenges of
entering global markets (including the consistency/adaptation issue). It is not necessary for the groups to
speak “as a group” in Step 6. The class discussion should operate at the individual level. You may want to
ask if any individual students found it particularly difficult to describe their “hometown culture.” Home
cultures may be so assumed in some cases that they become invisible to us. You may also want to see if
any groups noticed similarities across national borders—sometimes two places in different countries may
share a number of cultural similarities (e.g., rural culture among cattle ranchers in a particular area of the
US may be similar in many respects to rural culture among cattle ranchers in a particular area of
Argentina). Finally, you may explore some of the hometown cultures that students identified as requiring
extensive adaptation for successful market entry by a foreign multinational. Why do some cultures require
more adaptation than others?
Activities
1. Think of yourself as a member of a particular geographical cultural group. (In the United States, we
are conditioned to think of cultural groups based on ethnicity and race, but for this exercise, think in
terms of location.) What are the characteristics of this group?
2. Once you have an outline of your geographic culture, try to identify the group most opposite to your
own. For example, if you consider yourself a New Yorker, you may think of a Mississippian or a
Californian.
3. Research regional and local periodicals to learn about the norms in the other cultures. You might also
talk with a friend who attends college in a different region or state to get a more personal
understanding of norms in other parts of the country. List of some of the norms in the other location,
and compare them with the norms in your area of the country.
Students should attempt to explain some of the cultural differences found between the Japanese
culture and that of their country of origin. One source of misunderstanding in this clip is written
language. Students may be surprised that most of the signage in this video clip is in Japanese, with
no English translations. Another source of misunderstanding may be the traditional and
contemporary rituals displayed in this clip. Charlotte visits historical landmarks, where she observes
a traditional ritual that cannot be easily explained by a newcomer. In another scene, she ties a piece
of fabric to a small tree, though there is no explanation of what this signifies. Students may find that
they understand universal body language signals in this clip. For example, smiling and frowning
represent the same human emotions in all cultures.
2. If you were managing a company that had operations in foreign countries, how important do you
think it would be to experience new places and learn about different cultures the way Charlotte does?
An expatriate is someone who lives and works outside his or her native country. For any expatriate, it
is extremely important to experience new places and learn about different cultures, as Charlotte does
in this video. According to chapter eight, the difficulty of adjusting to language, cultural, and social
differences is the primary reason for expatriate failure in overseas assignments. Although significant
language and cross-cultural training should be done before departure to the foreign country,
expatriates should continue to immerse themselves in the new culture once they are in the new
environment. It is also important for the families of expatriates to receive similar training.
3. How might it change the way you did business in those countries if you had actually been to them?
Visiting a country before doing business in that country is important because it allows a person to
understand cultural differences that can make or break any business deal. Although language training
can take place before departure, cultural differences are best learned and understood in that
environment. For example, there are numerous cultural differences that occur in the business setting
in Japan that are different from Western traditions. In Japan, socializing outside of the business
environment is essential before closing a business deal. In contrast, American business people are
“all business” in addressing major transactions. These types of differences can best be learned by
experiencing them first hand.
National culture is the set of shared values and beliefs that affects the perceptions, decisions, and
behavior of the people from a particular country. The first step in understanding culture is to
recognize differences such as masculinity, uncertainty avoidance, power distance, individualism, and
short-term/long-term orientation. Upon experiencing a new national culture for the first time,
Charlotte is very observant of her surroundings and is curious of historic landmarks and buildings.
She does not portray any of the brash characteristics that Americans sometimes are characterized to
possess in foreign environments.
One area of significance that students may make note of in this video clip is the absence of Western
language and business. The familiar logos and signs of famous multinational companies do not
appear during the clip, and all signage is posted in Japanese with no English translations. This does
not mean that in 2003, western business was absent. Today, the business district of Tokyo likely
contains a large amount of signage that is familiar to Western visitors. For example, McDonalds can
easily be found, and much of the signage includes English translations for the benefit of Western
visitors.
Summary:
Like so many other American brands, Holden apparel is made in China. While the company would like to
manufacture in the United States, government regulations, labor costs, and high corporate tax rates are too
heavy a burden. Availability of materials is another factor, as many of the pieces that Holden needs, like
buttons, snaps, and fabrics, would still have to be brought in from Asia even if the garment was made in
the U.S. In addition, garment making requires skilled laborers, and founder Mikey LeBlanc says that the
United States lacks a manufacturing base to do the job. For any company that sources materials and labor
overseas, shipping is a vital, ongoing concern. In the early years, LeBlanc used nearly a dozen shippers to
transport garments from China to the U.S. To increase efficiency and reduce costs, LeBlanc found a way
to coordinate shipping through a single distribution hub in China, so that just two companies now handle
all of Holden’s shipping.
The four stages of globalization include the domestic stage, the international stage, the
multinational stage, and the global (stateless) stage. Answers may vary, but Oregon-based
Holden lies mostly within the international stage of corporate international development. Factors
that mark the company as presently in the international stage of development include the firm’s
outsourced China manufacturing and significant international sales to Japan, Germany, Norway,
and Canada. Holden is a small company, and it does not own factories or fabric mills. To qualify
as a multinational business, Holden needs more than one-third of sales to take place outside of the
U.S., and its marketing and advertising strategies must be standardized and uniform across all
regions. Holden cannot be characterized as a domestic company or a global (stateless) company.
The domestic stage is characteristic of companies that make and sell goods solely within their
home countries; the global (stateless) stage is characteristic of firms that have ownership,
management, and manufacturing dispersed among many nationalities.
2. Identify Holden’s primary approach to entering the international market. What are the benefits of
this entry strategy?
While the four management functions of planning, organizing, leading, and controlling are the
same whether a company operates domestically or internationally, managers experience greater
challenges and risks when performing functions in an international setting. In the video, Mikey
LeBlanc explains that to obtain the benefits of China’s low cost manufacturing, managers had to
carefully oversee 12 different shipping companies. The situation required extensive paperwork
and resources. In addition, garments with multiple components often failed to deliver together at
the same time, creating long delays. Though not discussed specifically in the video, Holden’s
managers face additional challenges in the economic, legal-political, and sociocultural
environment of business. Difficulties include political unrest, government takeovers, tariffs,
language and cultural barriers, poor infrastructure, and even globalization protests. To help
manage people, global managers should understand cultural differences, including Hofstede’s
value dimensions: power distance, uncertainty avoidance, individualism/collectivism,
masculinity/femininity, and long-term/short-term orientation.
Video Segment 1
Quiz Question 1 Which globalization hotspot has Holden selected to help produce its
Portland, Oregon-based snowboarding apparel?
Option a India
Option b Brazil
Option c China
Option d Mexico
Correct option c: China
Feedback for option a Incorrect. China is the location of Holden’s suppliers and contractors.
Feedback for option b Incorrect. China is the location of Holden’s suppliers and contractors.
Feedback for option c Correct. China is the location of Holden’s suppliers and contractors.
Feedback for option d Incorrect. China is the location of Holden’s suppliers and contractors.
Quiz Question 2 For Holden Outerwear, managing business internationally delivers all the
following advantages except:
Option a Low cost materials
Option b Culture and language differences
Option c Close contact with international fashion trends
Illustrator: Swenson
Language: English
It was about a minute later, no more, when a knock came at the door.
Simpkins called for the knocker to enter. The door opened and a man
in overalls stuck his head in. There was a grin on his face and a
smudge of grease on his nose. "Can't, Joe," he said. "You didn't leave
the door open."
"I couldn't be going to forget that?"
Peter Wright swallowed. "Going to forget?" he gasped.
"Ben," said Simpkins in a very tired tone, "through the door glass,
huh? Let's show this man what we're up against."
"Right."
Simpkins snapped the communicator. "Tony? Get a new glass for my
office ready."
"How soon?"
"Within the hour."
"Right. I'll have it cut and waiting."
Peter shook his head, and then watched Ben enter with the riveting
tool. He looked at it, and Ben, with a grin, held it up in front of Peter's
nose.
There was a regular air ram with handle. That was standard. But the
second air ram hitched in opposition alongside of the standard job
was new. It projected out, its business end projecting in a caliper arc
beyond the standard ram, and returning to buck the standard ram.
With this tool, one man could both ram the rivet and buck it with the
same tool, and, since both hammer and anvil were driven, the effort
was in opposition mechanically, and no great effort would be required
of the operator.
But the thing that stopped Peter Wright cold was the ... the—
The missing link!
Several inches of the caliper were missing.
Ben nodded.
Peter reached forward gingerly and passed his fingers through the
space. He felt of the ends. They were microscopically smooth, true
planes of cleavage. The far end, that acted as anvil for the main ram
was solid and immobile despite being separated from the framework
by six inches of—nothing.
"You see," said Ben, "we need only a small port in the item we're
building. For instance—" and Ben opened the closet door a crack, slid
the far end inside, and then closed the door. He shoved forward and
rapped the door panel with the main ram. Then pulled back and—
Rapped the inside of the door panel with the hidden end.
"If we were riveting, now, we could slip in our rivet and pull the trigger.
Follow?"
"I follow, but where's the missing piece? What holds it that way?"
"The missing piece is coming," said Ben, retrieving his instrument and
sitting down.
"I ... ah—" started Joe Simpkins, and then taking Peter Wright's arm
in a viselike grip, pointed dramatically to his office door. "The wind,"
he gasped.
Wright shook his head. It was far too much for him. He was strictly out
of his element, and struggling madly to keep up. The door, he saw,
was swinging shut, propelled by the wind. He recalled what they had
said at the portal upon entry, something about the door should be
open. With a shout and a leap, Peter raced for the door.
It slammed, and Peter grabbed for the knob.
Then the glass erupted in his face; in shards it fell to the floor, and a
metal piece came soaring through the air, through the glass, and
circled the room. Peter's jaw was slack as he watched it flying about
with no apparent plan. It poised for a minute before his chair, where
Ben had held up the blindy riveter for his inspection. In Peter's
imagination, he saw himself sitting there, passing his ghostly fingers
through the spot where that piece of steel now hung immobile. It
headed for the closet, and Ben, watching, opened the door wide. The
piece slid in, moved this way and that, rapped forward against
nothing and then rapped backwards toward the room—against
nothing, and then floated rapidly toward the riveter itself.
With precision it approached the riveter. It came to rest easily, slipping
into place with no shock, and the cleavage lines disappeared. The
blindy was complete again.
"See?" said Simpkins.
"Yeah," gulped Peter, weakly.
Laconically, a workman entered, cleaned up the glass on the floor,
and started to replace the shattered panel.
"I see—but I don't really believe it," said Peter, flopping into his chair.
The two men laughed uproariously.
Ben sat down and Simpkins started. "You see, the time field," he said
by way of explanation. "I haven't the vaguest notion of how it works or
why. I admit it. But what does happen is that during the workday, the
missing sections of all blindy tools are stored in the tool room. At the
end of the day, their respective tools are returned to the tool room
where they restore completely. About seven to eight o'clock, the
midsections emerge from the tool room and go through the motions
made by the entire tool, eventually following their ah ... owners ...
back to the tool room where they join. At this point, those tools
required for use on the following day are placed in the temporal
treater, and treated for whatever period of action is required."
"If it takes four hours for work, they're treated for four hours," put in
Ben.
"And once the day's work is finished, the work itself must be moved,
since where the tool fits across a barrier, now the missing piece
occupies that same space. If it does not find room, the man handling
the tool several hours before will not be able to set his tool."
"Which was why I couldn't enter with the riveter," added Ben.
"It acts quite normally," said Simpkins, though with some doubt. "You
couldn't bring the thing through a barrier if no time-difference exists.
Actually, there is a temporal offset in the thing. It may pass through
the same space as another time, but not at the same time."
"And you can't lick it," said Ben solemnly. "I purposely left the door
open. But if I had really left the door open, I'd have had no resistance
in the first place—I found no trouble in hooking it over the closet door
—because when the mislink appeared, I opened the door for it. It
does help, sometimes," grinned the shop foreman, "because we can
tell when a piece of work is not going to be moved. Then it impedes
the work."
"How do you know whether the impedance caused by not moving the
work is responsible for the work not having been moved?" asked
Simpkins, wonderingly.
"I don't mind being on either horn of a dilemma," said Ben. "But I've
yet to see the dilemma that I'd ride both horns simultaneously on."
"Um, a bad animal, the dilemma," laughed Simpkins. "Well, Wright, I
trust the demonstration was successful?"
"Successfully confusing," admitted the insurance adjuster. "I gather
that the injured party got in the way of a missing link?"
"Whoever it will be was in the way of a mislink from a box-car crane."
"Bad, huh?"
"Could be—we'll know in a while."
Ben lit a cigarette and said: "The box-car crane is a gadget made
possible by the temporal treating. Prior to its use they put heavy
machinery into the box car by running to the door on a crane and
then they dropped it on a dolly and slid and levered it inside and in
place. Now they have a crane with a mislink between the pulley block
and the grab hook. They hook it on, lift it up, and slide it inside the
car, suspended on the mislink that permits the roof of the car to
intervene."
"And the victim fell afoul of one of these?"
Ben nodded.
"You're absolutely certain?"
"Of course not," he said. "A number of things might have caused the
trouble. This one is a boom-type crane. The mislinks are in the
booms, and when it was swinging back from dropping a case inside,
it hit something."
"Something? Can this be identified?"
"With a minor interference, we can feel it," said Simpkins. "With a
mislink screwdriver, we can feel the interference. If it is hard, we know
that someone has—or will drop something in the way."
"And if it is soft, and moves, you can estimate it to be animal," added
Ben.
"Can't you probe with a feeler of some sort?"
"We do—and did. There was a body on the ground after the
accident."
"No identification possible?"
"None. Probing with a rod in the dark makes identification difficult.
We've tried to make some sort of study, such as wearing a magnetic
badge with a key-impression on its face—the magnetic to locate and
the key to identify, but frankly," and Simpkins frowned deeply, "it's
psychologically dangerous. The accident can not be averted. After all,
it has happened. And we tried it once, and the man who was hurt—
well, knowing he was to be hurt, he went into a mental funk far worse
than the accident."
"Why didn't you send him home or have him guarded over carefully?"
"We tried, kept him guarded closely. Aside from putting him in an air-
tight case, we did about everything. When the accident occurred—
well, he and his guards went to watch the first time that the thing
could be fooled.
"It happened, all right," said Simpkins. "First, another man caught a
mislink on his shoulder, which laid him out slightly. That, we thought,
was it! And if it was, the time-factor was all screwed up. But we all ran
forward to measure, and as we did, our man got clipped with another.
The first accident had gone unnoticed by the operator."
"How can you tell that such an accident will happen?" asked Peter.
"Seems to me that a hundred tons of crane might not notice a few
pounds of human in its way."
"We erect guard-wires that register. That is for one reason only. We
use it to summon the medicos and the hospital ambulance, and
prepare for action. That's about all we can do."
"I wonder if you could take a picture of such?" suggested Peter.
"Huh?"
"Take a picture with a camera controlled by the operator—you know,
temporal treat the camera, film, and all but the range finder and the
shutter release."
"Look, fellow, that would take a picture of the accident as it happens,
all right. It's also done. Makes excellent records. But as for pre-
accident stuff, know what happens?"
"No, of course not."
"Well," smiled Ben, "you'll see. Anyway, the camera comes roaring
out, is poised in midair, and is snapped. The timing isn't too good,
however. Well, you'll see the camera come out and snap around the
place when the accident happens. Remember this is not time travel,
and you can't go forward and take a picture and then come back."
"For what good it does, we can tell about when a piece of goods will
move by leaning a long-time mislink against it and waiting for it to
fall."
"Does electricity cross the gap?"
"Nope. Only force and motion. The television idea isn't good either,
young man."
"Um, how did you know?" asked Peter.
"We go through this regular. You're not the first that has been trying to
avert accidents."
"You understand that I represent I.I.I.?"
"Yes," said Simpkins. "As such, it is your responsibility to do as much
as possible to save your company money. That is your job."
"Right. I still say that there is some means of averting the accident,
somehow."
"Well, Ben, we've always claimed that we'd tried everything. But they
didn't try the electric light until Edison got the idea, and the airplane
was a new science when they went to work on it. Young man," said
Simpkins, to Peter Wright, "you are a young man with a bright mind
for legal intricacies. It usually makes little difference so long as the
mind is capable of handling the intricacies, just what the mind was
specialized in. You are a fresh mind and we've all seen fresh minds
enter and lick a problem that stuck the original men for months. You
think you can lick it?"
"I don't know. It just seems to me that there must be some way."
"Don't forget," said Ben, "that this is not much different from a regular
problem. In construction, I mean. We have accidents where a man is
hit by a flying grab hook that is not in any way temporal treated.
Common accidents. The real problem, Peter, is to stop accidents. Not
to try to avert them after they have happened."
"But this one—"
"So far as the temporal treatment goes, is—or has happened."
"Could you temporal treat the stuff so the mislinks pass through first?"
"Sure," laughed Ben. "Not practical. They have no forewarning then.
They just go where the tools will go when used. We can't tell when
one of the men will try to grind a mislink chisel. As it is, we can clear
the area where the tools have been."
"Just remember that this is fact: For a one-hour mislink, we treat the
tools for one hour. They are then ready for use for one hour. At the
end of that time, the mislinks start to follow, and follow for one hour, at
which time the temporal difference decreases on a fourth power
curve, and the mislink catches up with the tool and falls back into
place."
"Uh-huh. Well, I'm new at it, gentlemen, but it is my guess that this
accident you anticipate need not happen."
"You forget," corrected Ben. "It's happened."
"Then where's the body?" demanded Peter Wright.
"It ... ah—"
"Has it really happened?"
"It will with certainty."
"Thus proving the utter futility of all effort?"
"Ah—"
"See?" laughed Peter.
They left the office and proceeded into the factory. Here, where things
should have been humming, all was at a standstill. Men sat on the
benches and smoked nervously. They looked into one another's eyes
with that "Will it be me?" stare, and they worried visibly. An electrician
who tinkered hourly with lethal voltages as his day's work sat and
chewed his fingernails. A machinist, sitting on the bedplate of a
forming press large enough to stamp out an automobile body around
the place where he sat, was biting his lips and looking out through the
opened door to the shipping platform. Men outside were working
feverishly, however.
"Why?" asked Peter.
"They want to get done. They must get done so that the engine can
remove the car where the accident will happen."
"Where is this scene?" asked Peter.
It was out on the loading platform. A mislink crane shunted large
cases from the platform, swung around in an arc, and the missing
section passed through the door and the crane ran down the length of
the car, dropping the case at the far end. The mislink crane returned,
the far end reappeared, and another case was hooked to the boom.
The operation was repeated. The cases were fitted in the box car with
neatness and dispatch. The pile of cases diminished, and the box car
was sealed as the crane went to work on the next car in line. It took
time, though, to fill each car, and the men working out here sweated
visibly, partly in fear and partly from the hurried work.
They had little time to stare into one another's faces and wonder
which of them would be taking the brunt of the accident. As time wore
along, the siren of the ambulance arriving caused some nervousness.
The doctor and his corps of nurses came slowly forward, inquired as