Administrative

Book pulled from Capen

Midterm exam results posted
Office hours tomorrow from 2-3pm instead
of 1-2 pm
Group projects due:
Written component: Nov 17th
Group projects start on Nov 24th

QUIZ

MIDTERM RESULTS AND

ANSWERS

(Situation A) While watching a movie at the cinema, Xavier sees Yolanda

and Zack. Yolanda and Zack are both from Abbott, a town adjacent to where
Xavier lives. Both Yolanda and Zack are being rude during the movie. Xavier
yells to them You people from Abbott are always disrespectful!

(Situation B) Becky is meeting Al, a salesman from the town of Balboa.

Becky remembers hearing in the news that a recent survey of Balboas
citizens shows that the majority of men in Balboa have moustaches. When
she meets Al, she exclaims I thought you would have had a moustache!

Which of the following correctly describes the research fallacies associated

with these two situations? If necessary, put your answers in order with
Situation A first and Situation B second.

Exception fallacy; ecological fallacy

Ecological fallacy; exception fallacy
Both are examples of exception fallacies
Both are examples of ecological fallacies

The considerable variation between

Americans and Chinese in the use of
silence during negotiations is an aspect
of ________.

A) proxemics
B) haptics
C) Paralanguage not what is said
but the way in which it is said
D) object language

Chapter 2: Managing
Interdependence
Social Responsibility and Ethics

Copyright 2014 Pearson Education,

Inc.

2-1

Corporate Social Responsibility

Issues
Going beyond legal obligations to balance
commitments to investors, customers,
communities, and other companies

Fight to eliminate bribery and corruption

Improve labor conditions and guard human rights
Practice fair trade to help the disadvantaged
Protect the environment and conserve resources

Copyright 2014 Pearson Education

3-8

MNC Stakeholders v
Stockholders
MNC Stakeholders
Home Country
Owners
Customers
Employees
Unions
Suppliers
Distributors
Strategic
Allies
Community
Economy
Governmen
t

Host

MN
C

Economy
Employees
Community
Host
Government
Consumers
Strategic
Allies
Suppliers
Distributors

Society in General

Global interdependence/standard of
living
Global environment and ecology
Sustainable resources
Populations
standard
Copyright 2011
Pearsonof living
Education, Inc. publishing as
Prentice Hall

2-9

Ethics and Social

Responsibility
PHILOSOPHIES
Friedman View

https://www.youtube.com/watch?v=3vorWknUybY

Righteous Moralism/

ethnocentrism
Copyright 2014 Pearson Education

Cultural/ethical
Relativism

Moral universalism

3 - 10

Corporate Social Responsibility (pp.

97-102 textbook)
Philosophies of Corporate Ethics: 4 views
Friedman view
Cultural relativist
Adapt to host countrys norms

Righteous Moralist
Corporation should maintain home country ethics

Moral universalism
Single best practice no matter the location for
business activities

Top Hat L7Q1

Business Ethics:
Foreign Corrupt Practices Act (FCPA)

To Bribe or NOT to Bribe?

Questionable
Payments
Paying mail carriers in Mexico to prevent

them from losing mail

Paying $100 to get a computer picked up
from a rainy dock by customs officials
Gift-giving to bond social ties

2-14

Copyright 2011 Pearson Education, Inc.

publishing as Prentice Hall

Questionable payments are business

15

payments that raise significant questions

of appropriate moral behavior. Examples are
political payments, extortion, bribes, sales
commissions, or grease money (payments to
expedite routine transactions). The text
classifies all of these as bribery. As a more
practical example, companies in Mexico make
monthly payments to mail carriers or their mail
gets lost. Another example is Control Data
Corporation paying $100 to get a delivered
computer off a rainy dock. In some parts of the
world corruption and bribery are considered part
of the culture. Also, in some cultures gift-giving
is common and incurs obligation. Nonetheless,
gift-giving differs from bribery in that the former

Managing the Corruption

Foreign Corrupt Practices Act (FCPA)
The FCPA was created to help Americans distinguish
between harmless practices (e.g., gift-giving) and
bribery. The FCPA prohibits illegal payments, or other
gifts, or political contributions to foreign government
officials for the purposes of influencing them in
business transactions. Penalties include severe fines
and sometimes imprisonment.
Applies both to US companies and foreign

companies doing business in the US

Also applies to any company issuing equity

(stock) on an exchange in the United States

2-16

Foreign Corrupt Practices Act (FCPA)

Major complaint from US businesses

affected by the regulation:

Undermining ability to compete.
Such payments are common in
other countries, and a prohibition
on such payments puts US firms at
a competitive disadvantage.

2-17

Foreign corrupt practices act

(FCPA):
i. Foreign corrupt practices act (FCPA) of 1977:
1.What does the law prohibit?
a. Giving anything of value to a government official for
the purposes of influencing them in business
transactions
2.What doesnt it prohibit
a.Exempts questionable payments that are ancillary to
the transaction at hand and do not involve undue
influence
b.Grease money to expedite routine transactions
permissible if permissible by law in host country
3.To which businesses does this law apply?
a. Both US-based and foreign businesses doing business
in the United States. This includes firms that raise
3 - 18
capital by selling securities on US exchanges.

Top Hat L7Q2

Disclosure Requirements in the

United States and the Foreign
Corrupt Practices Act

Any firm issuing equity in the United States

must certify that the business has
complied with the foreign corrupt practices
act
FCPA: cannot give personal bribes to get
business
Aluminum producer operating in
Bahrain; channeled money to royal
family to keep business
ALCOA and the FCPA:
http://www.cnbc.com/id/101323129

Is Corporate Social Responsibility

good for the Bottom line?
While stockholders have a difficult time persuading
corporations to act responsibly, what about
consumers?
Video:
http://www.transfairusa.org/resource-library/media-gallery

Starbucks and Fair Trade Coffee

Who determines what is fair?
Usually non-profit organizations
TransFair USA (non-profit organization for fair trade)
Prices, labor conditions, direct trade, community development,
environmental sustainability

Top Hat L7Q3

Chapter 7:
Implementing
Strategy:
Strategic Alliances; Small
Businesses; Emerging Economy
Firms

7-1

Copyright 2014 Pearson

Education, Inc.

Societal Culture Distinct from

Organizational Culture
1. Exists within and interacts with

societal culture
2. Varies a great deal from one
organization, company, institution,
or group to another
3. Represents those expectations,
norms, and goals held in common
by members of that group

3-24

Copyright 2014 Pearson Education, Inc.

publishing as Prentice Hall

Societal versus
Organizational Culture
Societal culture tends to be stronger than
organizational culture, so that employees
working with or for a foreign company may
not easily fall into the new organizational
culture. (p 75)
Examples:
IBM (hierarchical) vs. Apple (flat structure and
groups)
Daimler Benz (formal; conservative) vs.
Chrysler (informal; risk-taking)
25

Copyright 2014 Pearson Education, Inc.

publishing as Prentice Hall

Organizational Culture versus

Societal Culture
Remember that organizational culture
rests inside a societal culture
Holding all else constant, societal culture
tends to trump organizational culture

Global Alliances and Strategy

Implementation

It is no longer an era in which a single company

can dominate any technology or business by
itself. The technology has become so advanced,
and the markets so complex, that you simply
cant expect to be the best at the whole process
any longer.
Fumio Sato, CEO, Toshiba Electronics Co.

Spread of the corporate form and Western

conception of property rights

Cross-border M&As
are the main vehicle
through which countries
undertake foreign direct
investment. p. 188

Global Alliances and Strategy

Implementation

Scenes from a Marriage

The Daimler-Chrysler merger
With the breakdown of national barriers,
transnational mergers are becoming
commonplace. And yet, they remain among the
most poorly understood phenomena in the
business world. On the outside, the newly merged
colossi pose as robust, computer-generated giants
with the market power and sales forecasts to strike
fear into the hearts of the competitors they dwarf.
On the inside, however, they are more like the
turbulent weather formations caused by the
collision of tropical and arctic air masses.

What Went Wrong with the

Chrysler Merger? : NPR

http://
www.npr.org/templates/story/story.php?storyId=
9501407

What Went Wrong with the

Chrysler Merger? : NPR

Mergers are supposed to save costs but this

one didnt deliver.
Size, profitability, reach
Could make anything from a Dodge Neon to a
Mercedes S Class

Before the merger, how were these two

companies similar? How were they different?

What Went Wrong with the

Chrysler Merger? : NPR
Companies had almost nothing in common
Language barrier
Cultural barrier

Mergers are supposed to save costs but this

one didnt deliver.
Size, profitability, reach
Could make anything from a Dodge Neon to a
Mercedes S Class

What Went Wrong with the

Chrysler Merger? : NPR
Oil and water
Mercedes why worry about cost per unit of any
component?
Their customer wasnt worried about an additional $500
Doesnt want to give parts to GM because they were worried
about undermining their own brand. Why would I pay you
more for a Mercedes?
Licensing deals and geographic limitations

Chrysler
Costs; gas prices (trucks, SUVs); poor efficiency and
innovation (Jeep Commander)

Global Strategic Alliances:

DaimlerChrysler
* Mismatched brand portfolios

Global Strategic Alliances:

DaimlerChrysler
* Mismatched brand portfolios

Global Strategic Alliances:

DaimlerChrysler
wedding made in
heaven?
Lowcost,
innovative design; sub-compact
cars,
minvans,
utility
trucks

Supplier network

Technology and quality

leader with strong
highend
brand

European dealer
network

and
outsourcing
arrangements

49% Chrysler

51% Daimler

Scenes from a Marriage

The Daimler-Chrysler merger
On Jan. 12, 1998, the two automobile czars,
Eaton of Chrysler and Schrempp (Daimler),
metBut Schrempp, the more restless and
insistent of the two, rose abruptly from the sofa
and broached the subject of a merger even
before the other had a chance to offer him a cup
of coffee.
What cultural values or ideals best describe the
actions of Schrempp?

Scenes from a Marriage

The Daimler-Chrysler merger

Germans are strongly

monochronic and lowcontext. Given this, should
we be surprised that
Schrempp acted the way
he did? Why or why not?

Cultural Dimensions:
Germany / US

Performance orientation /
Assertiveness

Global Strategic Alliances:

DaimlerChrysler
* Merger of equals?
Q: How do you pronounce DaimlerChrysler?
A: Daimler. The Chrysler is silent.

"We had to go a roundabout way, but it had to

be done for psychological reasons. If I had gone
and said Chrysler would be a division,
everybody on their side would have said, There
is no way well do a deal. But its precisely what
I wanted to do.
- Jurgen Schrempp, then-CEO of DaimlerChrysler

Scenes from a Marriage

The Daimler-Chrysler merger
Culturally-sensitive product:
Cars are highly symbolic and emotionally loaded
products. When a popular carmaker changes owners
and the change affects its identity, it awakens
passions that no kitchen-equipment company can
elicit.

Scenes from a Marriage

The Daimler-Chrysler merger
The American public interpreted the promised
''merger of equals'' not so much from an
economic point of view as from a cultural one.
Despite the valuation disparity between the two
partners, the public wanted to believe that the
''icon'' Chrysler would stay in the hands of the
Americans.

Top Hat L7Q4

[T]he promised merger of equals [was] not
so much from an economic point of view as
from a cultural one. (p. 4)
If you had to choose one cultural dimension
to explain the US insistence on a merger of
equals, which would it be?
(text input)

Cultural Dimensions:
Germany / US

Performance orientation /
Assertiveness

Global Alliances and Strategy

Implementation
Challenges in Implementing Global Alliances
Five years after Daimler-Benz
acquired Chrysler to create
DaimlerChrysler AG,
DaimlerChrysler has become
a German company and the
struggling Chrysler division is
run by executives dispatched
from DaimlerChryslers
corporate headquarters in
Stuttgart.

Verbal Bonus:
What was strange
about the newlyformed
management
structure of the
company? [3 years]

- Kirk Kerkorian, November 28, 2003

* Integrating management systems

* Distribution of power
* Locus of decision-making and control
* Mistrust and secrecy

Scenes from a Marriage

The Daimler-Chrysler merger
What was the primary responsibility of the new
companys postmerger integration team?
Was the cultural training given to employees
useful? Name one example of a time where
reality didnt fit with cultural expectations and
one way in which it did.
How did managers of the new company greet
one another? Was this a change for the
Germans or the Americans? (du v sie)
What about eating in the cafeteria? What was
different for the German managers here? Which
cultural value dimension might help explain this?

Scenes from a Marriage

The Daimler-Chrysler merger
''There was indeed a cultural problem with this
merger[f]or two years, we told ourselves that
the Americans must know what they're doing
and that we shouldn't step in.

Verbal Bonus:
Scenes from a Marriage
The Daimler-Chrysler merger
What was the cultural difference in
compensation at Daimler and Chrysler?
If you had to choose one cultural dimension to
explain the difference, which one would it be?
Describe the problems caused by this difference.

Global Strategic Alliances:

DaimlerChrysler
* Cultural mismatches:

Compensation:

Daimler-Benz

Chrysler

Lower executive
salaries but
higher fringe
benefits and
higher worker
salaries

Higher executive
salaries (up to
10x as much)
but lower
worker salaries

Scenes from a Marriage

The Daimler-Chrysler merger
What was the working language of the
new Daimler-Chrysler?
Name a situation where it would have
been inconvenient to use this language.
What were some of the problems posed
by this choice of official company
language? Was it always respected? Why
or why not?

Scenes from a Marriage

The Daimler-Chrysler merger
When Jim Donlan, the controller, participated in
a meeting in Stuttgart, there were 10 Germans
in the room with him, but all 10 of us had to
speak English, Fries recalls[T]his practice led
to separation anxiety among the Germans
German executives, Fries says, worried: We
don't understand a thing. We're being taken to
the cleaners![T]he Americans had the same
fear, precisely because the Germans didn't
speak English well enough

Cultural Dimensions:
Germany / US

Performance orientation /
Assertiveness

Scenes from a Marriage

The Daimler-Chrysler merger
Europeansare often confused by Americans apparent
informality, which then backfires when the Europeans do
not get work done as the Americans expect.
Deresky (p. 77)

Verbal bonus:
What was the difference in the preparation for meetings? What
about what was discussed at those meetings?
If you had to choose, which of the cultural dimensions best
explains this difference in preparation for meetings?

Global Strategic Alliances:

DaimlerChrysler
* Cultural mismatches continued:

Decision-making:

Planning:
Strategy:

Daimler-Benz

Chrysler

Structured, analytical;
data collection, extensive
reports to bosses, formal
meetings, protocols
established

Informal, creative;
brainstorming,
instantaneous
decisions,
empowerment

10 year plans for

everything

4 month plans for

some issues

Long-term quality
orientation

Promotional and
discounting mindset

Global Strategic Alliances:

DaimlerChrysler
* Cultural mismatches continued:
Daimler-Benz
Management style:

Hierarchy:

Outsourcing:

Chrysler

Arrogant?
Authoritarian?
Overcautious?

Overconfident?
Blame others?

Co-determination;
decentralized IT
structure;
seniority privileged;
supervisory board
influential in day-today operations

Exclusive parking
garage and
segregated
cafeteria for
management;
centralized IT
systems

Smaller number
of suppliers;
closer supplier
relationships

Large number of
suppliers; costcutting incentives
for suppliers

Global Strategic Alliances:

Fiat Chrysler (2009) vs. DaimlerChrysler

(end 2007)
Robert Eaton
Sergio Marchionne,
Fiat CEO

Jrgen E. Schrempp

Timothy Geithner,
former Secretary
of the Treasury

Global Strategic Alliances:

Fiat Chrysler vs. DaimlerChrysler
Fiat executives say there is no comparison to their
alliance. For Daimler to buy Chrysler was like Neiman
Marcus merging with Home Depot, said one Fiat
executive, who insisted on anonymity because of company
policy. They are a mass carmaker, and we are a mass
carmaker, he said of Fiat and Chrysler. We know this
market better.
Fiat and Chrysler have much to offer each other. Chrysler
desperately needs Fiats small cars and fuel-efficient
engines to balance an aging lineup of S.U.V.s.
For Fiat, Chrysler offers an instant dealership network for
its return to the United States. They can also benefit from
savings on the $46 billion worth of parts and materials
they would buy as a combined entity.
- New York Times, 4 May 2009