Global Business Management

A Cross-Cultural Perspective

Abel Adekola, Bruno S. Sergi

• Publisher: Routledge
• Year: 2016
• ISBN:
  9781317128106
• Edition: 1
• Topic: Business
• Subtopic: Management
• Index: Business

This book interweaves the concepts of the guidance on globalization, international management, and the intricacies of international business that many books on the market treat independently. It clarifies and explains culture, cultural misunderstandings, and cross-cultural interactions. Adekola and Sergi's text is unique in that it offers both the management perspective and the cultural perspective. It is for managers seeking to thrive in the global economy. This book focuses on managing global organizations, providing a basis for understanding the influence of culture on international management, and the key roles that international managers play. It clearly shows how to develop the cross-cultural expertise essential to succeed in a world of rapid and profound economic, political and cultural changes.

Chapter 1

International Management and Cross-cultural Perspectives

Introduction

International management has never been as significant as it is today. Many of the world’s largest firms are truly global, and even their smaller counterparts increasingly participate in cross-border activities by subcontracting—having customers and joint venture partners collaborate with them around the globe. The arena of international management has never offered so many opportunities and challenges to individual managers, businesses, governments, and the academic community alike. The expansion of the global market has created a need for managers who are familiar with the problems of international trade and finance such as culture, political structure, foreign exchange, geographical terrain, time, food, and technology. For instance, let us recall that it has been estimated that the Asia-Pacific region could produce over half of the world’s GDP by the next decade; new economic powers are an actual reality; technical countries spread production across countries; and the average GDP per capita is on the increase. In this changing scenario, which inspired Streeten (2001) to state that the world economy was more integrated at the end of the nineteenth century than it is today, there is the growing risk of amplifying misunderstanding of what is occurring worldwide, especially if one is not able to advance a proper analysis concerning the nature of economic relationships. We would need to approach this theme carefully; slogans seem to triumph over reasonable assessments (Sergi, 2005a).

There is no country in the world today, including the United States, which is economically self-sufficient without some sort of interdependence with other countries. The trend toward a single global economy is expanding markets and providing unlimited opportunities for international managers. To remain parallel and compatible to other technologies, for example, countries need to work together as more of a global economy. In addition, in order to have the greatest amount of technological expertise they need to combine their shared knowledge, which could augment this reciprocal relationship. The managerial talents within a nation are key ingredients in the economic welfare of such a nation. Being able to organize production is critically important to developing and maintaining high standards of living in any country. One can state that wise organization and governance are equal in importance to a country’s natural resources and its population.

Globalization

The process of internationalization has been a gradual evolution over time. A trend toward global interplay is not the outcome of modern times. Let us think about ancient trade routes, the Amber Road or the Silk Road, which were linking various regions of the world spreading from the Baltic Sea to the Mediterranean, Central Asia, and China. Trade routes were implying international trade and also culture and civilization linkages. Global trends have always existed, and what is occurring today is nothing different from what took place during ancient times. Over the last centuries, trade, finance, and technology flew from one side of the globe to the other. Obviously, high technology did not exist, consumers’ wealth is much higher today than it was even decades ago, consumers number more than six billion and they are increasingly demanding in terms of quality, supply availability, and so forth. Nevertheless, the market sells and purchases what is available at a given point in time; globalization is quite different in qualitative and quantitative terms today, but microeconomic principles did not fade away (Sergi, 2005a). Hence, merchants who traded internationally in the early nineteenth century saw themselves as agents of the progressive revolution. Ultimately, survival was difficult for these merchants because of the introduction of technological change, which was the latest novelty internationally. One significant reason a company decides to develop internationally is that they are unable to maximize their goals and objectives while operating in a closed economy context. More recently, domestic market saturation has also been making it difficult for companies to have profitable growth, and customers are simply demanding a broader base of products from which to choose. Globalization is the comprehensive solution that many companies are now exploring.

Nevertheless, as comprehensive as globalization is to companies, we would be remiss if we did not expound on globalization at the social level. Globalization has recently become a key concept in the social sciences, in particular its effect on the reduction of poverty. There is the claim that in recent years there has been a reduction in poverty in the global order, and that this development is a product of “globalization friendly” policies (DFID, 2000; World Bank, 2002a, 2002b). The World Bank (WB) (2002a) has argued that poverty and income inequality have fallen in the last 20 years. In 1980, there were 1.4 billion people living in absolute poverty, and by 1998, this had fallen to 1.2 billion. The WB has also argued that while the number of people living in absolute poverty remained constant from 1987 to 1998, taking into account population increases, this amounts to a fall from 28 per cent to 24 per cent of the world’s population (World Bank, 2000).

One of the main sociological advocates of the “globalization theory,” Anthony Giddens, explicitly reiterates the erroneous beliefs concerning growth and poverty reduction. In his book, Runaway World (1999), Giddens defines his view of global change in contrast to two commonly held views. The first view is believed by skeptics, who doubt the globalization process, and who argue that the global economy is nothing new, or that today trade remains regional rather than truly worldwide. The second view is that of the radicals, per se, who argue “that not only is globalization very real, but that its consequences can be felt everywhere,” and that “The global marketplace is much more developed than even in the 1960s and 1970s and is indifferent to national borders” (1999). Giddens offers the different view that “Globalization is political, technological and cultural, as well as economic. It has been influenced, above all, by developments in systems of communication, dating back only to the late 1960s” (1999). In addition, he argues that it is equally wrong to treat globalization simply as an “out there” phenomenon, as one concerning “big systems” (such as the world financial order) which are far removed from the individual. Rather, globalization is to be understood also as an “in here” phenomenon which influences the most intimate and personal aspects of our lives (1999).

Extreme poverty is measured by counting people living on an income of $1 a day. Ray Kiely, in his article “Globalization and Poverty, and the Poverty of Globalization Theory,” has concerns as to what the value of the US dollar is actually based on. Kiely states that the US dollar is actually based on purchasing power parity (PPP) exchange rates, which are adjusted to take account of the fact that the cost of living tends to be lower in poorer countries than richer ones. However, he states that claims for poverty reduction are based on two different comparative indices; the Penn World Tables, in 1985, quantified international price comparisons, in order to make its calculations, and in 1993, a new International Comparisons Project was made. Thus, because of two different measurements, there may be an unambiguously clear decline for people living in extreme poverty (Deaton, 2001; Wade, 2002)

Kiely goes on to state that he is concerned that this distortion, among others (for example, the baskets of goods and purchasing power must be comparable measures between countries to provide accurate comparisons) is likely to get worse with each successive PPP exercise, which leads to the World Bank making unjustified assertions about long-term trends in the poverty count.

Globalization does, in fact, increase trade openness, leading to economic growth; however, there are questions that examine the relationship between trade, growth and the reduction of poverty. In fact, in 1997, the trade GDP ratio for 39 of the poorest, least developed countries averaged 43 per cent, and for 22 of these 39 countries, it was approximately the same as the world average (UNCTAD, 2002a). In the period from 1980 to 1999, the share of these Less Developed Countries (LDCs) in world exports declined by 47 per cent, to a total of only 0.42 per cent of world exports in the latter year (UNCTAD, 2002).

In addition, concerning political choices, were progress on trade liberalization achieved for those countries that face rich country’s protectionism in the agriculture sector, flows of final aid would have been better allocated, meaningful national policies would have started, and current Sub-Saharan Africa countries and others that are experiencing low per capita income would have grown at higher rates. Market reforms, democracy, less corruption, and the ability to attain the opportunities of the global economy are the way forward without losing sight of the fact that no issues individually are a panacea. For example, holding partially responsible regulatory institutions amid poor economic outcomes is certainly valid, yet one cannot neglect the most basic and positive forms of causality and direction of actual events since we live in a multifaceted world system (Adekola and Sergi, 2007).

The relationship between global integration and poverty reduction is not straightforward and it would be wrong to conclude in this text without further research studies mentioned and empirical data studied. Globalization and economic growth alone do not necessarily provide income to the poor, and the last 30 years have seen a general increase in inequality within countries. The most effective strategy remains the promotion of economic growth in conjunction with attainable proposals for reducing inequality. Hanmer et al. (2000; see also UNDP, 2002) argue that in order to meet the 2015 millennium targets for reducing poverty, countries with high inequality will need growth rates twice as high as those with low inequality. This argument is based on a survey of comparative economic growth from 1985 to 1990, where countries with 10 per cent economic growth and low inequality saw a fall in poverty of 9 per cent, while those with high inequality and similar growth rates saw a fall of only 3 per cent.

Nevertheless, the overall impact from globalization can be a positive sum game for all, in spite of a negative impact which may show up for some participants in the short term, and there are long-term, positive effects for all. There is no question that globalization is the direction the world is going, and that this issue will see many dynamics in the years to come.

International Management

International management requires the understanding of crossing cultures, multinational corporations’ interactions, global perspectives, and corporate issues. Understanding individual values of a high ethical standard would be another asset we want to emphasize throughout this book. Not only does international management rely on core business competencies, but also it requires the knowledge and skills necessary to operate and succeed in an international business arena.

Noting that managers are multicultural is necessary not only when they work with people from other countries but also with people from the same country, who speak the same language, have the same national heritage and yet, have different ways of looking at the world. An economy per se is multicultural nowadays. In fact, international management involves planning, organizing, leading, and controlling of employees and other resources to achieve organizational goals across unique multicultural and multinational boundaries. An international manager is someone who must handle things, ideas, and people belonging to different cultural environments while ensuring that allocating and directing of human resources achieves the goals of the organization, while respecting the beliefs, traditions, and values of the native or host country (Pierre, 1980). This is a non-current definition but it still gives a revealing discernment of this complex subject.

Because the process of globalization is becoming highly competitive and deepens interactions worldwide, the international environment has created enormous challenges for managers. These challenges include analyzing the new environment, anticipating its effect on the home company, planning and managing to adapt to situational factors, while attempting to maintain an ethical climate. What is more important, international management demands a contingency approach to the ever-changing environment. This means the choice of management system and style depends on the nature of the country, and the people involved.

International Manager

When a company faces the decision of whether to become an international enterprise, they will be encountering many issues they have never before dealt with. This can be a confusing and difficult process for everyone involved especially the managers. Some companies hire consulting firms to deal with the issues involved. However, for those companies that want to do it themselves, they first need to gather some information. Companies encounter several major issues while going through the process of becoming international. The first major issue they have to deal with is exactly who is going to run this new operation and what qualification(s) this individual must possess. After they have determined the manager, the companies need to examine the roles of this manager and how these roles may differ from the local manager, the location of the new operational facility, and the relationships they need to have, to name only a few. Therefore, starting with finding the manager is only logical.

There are many aspects of international management including the need for flexible strategies and matching global scenarios with strategic options. International managers are responsible for developing strategies, deploying resources, and guiding their organization to compete in this global environment. To understand the notion of international management better, it is logically necessary to first define management and international independently. There are many viewpoints as to the definition of management and for this book we will define management as the collective functions of planning, organizing, leading, and controlling the resources of an organization within its national borders to efficiently achieve its objectives. We refer to an individual who is responsible for the realization of these objectives as a manager and his or her actions are termed managing. International, on the other hand, is synonymous with multi-domestic firms, international firms, global firms, and transnational firms, but for the purpose of this book, the word international will be used. It is any activity of an organization conducted beyond its national boundaries to exploit a potential expansion of emerging economies, earn greater return from their special competences, and realize location economies and greater experience curve economies. International management on the other hand is the collective functions of planning, organizing, leading, and controlling organizational resources across its national borders. The managerial approach that works in one country does not necessarily work in the same fashion or not at all in another one, this being explained by environmental differences (that is, cultural, political, legal, economic, and climatic) across countries. Because of these differences, a manager will need skills beyond those required to manage in his or her home country, and to be able to coordinate this type of manager at a level that goes beyond national boundaries is termed an international manager.

An international manager is “someone who has to handle things, ideas, and people belonging to different cultural environments.” He or she can work either in a multinational corporation, an international organization, an institution located in a foreign country or even in a local, regional, or national organization in which people do not share the same patterns of thinking, feeling, and behaving. In referring to this broad definition of an international manager, all managers within all organizations are actually multicultural. Some managers may be more involved with intercultural issues than others, but they all have to plan, organize, direct, and lead people with different cultural backgrounds characterized by various values, beliefs, and assumptions.

Without realizing it, most international managers have been multicultural in their jobs. So far, there was not a pressing need for them to be aware of the fact that they learn many of their management decisions by utilizing their staff/personnel as resources. Many managers now have to face the fact that a lone educational background will not be enough for them to be effective and efficient managers. They must also gain a deeper understanding of intercultural relations and various cultural practices and beliefs. This goes for local, regional, national, and, of course, international managers. This means that the old style of viewing management must adjust to meet the needs of the international managerial functions. Management activities related to planning, organizing, leading, and controlling must be approached from a cross-cultural perspective if public and private organizations want to keep up their productivity both inside and outside the countries and cultures to which they belong. Today, one has placed so much emphasis on what is logical and rational, that one has become preoccupied with figuring out the right answers mentally, rather than seeing, hearing and feeling what is really going on inside and around us, and responding to it according to its demands and according to what we have to do to meet our needs. With that in mind, let us now examine what it takes to be an international manager. A successful international manager should have the following skills or qualifications:

• The ability to communicate and cooperate across cultures, including being able to develop an understanding, trust, and teamwork with people of various cultural backgrounds.

• The ability to understand and appreciate numerous different cultures.

• The ability to use more than one language to communicate effectively. This may be important when traveling to different locations or simply dealing with someone who understands better in his or her native tongue.

• The ability to build and maintain relationships at work and in the family, by supporting, growing, and learning. However, to do this, one must first understand oneself, which includes being aware of one’s own assumptions and preferences.

• The ability to learn and grow from the new information just discovered by carrying out the new ideas into one’s behavior, and simultaneously, the ability to maintain the health of the organization and oneself.

• The ability to coach, guide, and educate others in the organization to develop cross-cultural skills both at work and to incorporate them into their families as well.

• The ability to observe all cultures and accomplish management changes that will be most effective for the cultural mix present.

The Roles of an International Manager

International managers face a tremendously complex environment. What worked in the role of a domestic manager does not always prove effective in the international market. Like the domestic managers, international managers must also stick to the four major roles of planning, organizing, directing, and controlling.

Planning for an international firm assures that the business organization has some idea of its purpose, where it is heading and how it will achieve its objectives. International objectives may require plans that assign to each division goals that differ from what might seem appropriate from a domestic viewpoint. In preparing short- or long-range plans to achieve those goals, international managers must take into consideration not only local conditions but also overall international operations. These considerations should focus on nearby markets, servicing of regional sales divisions, transportation costs, value-added taxes, raw materials, and the purchases of the inputs from other producing divisions (Miller, 1987). However, plans must be considered and should link operations in ways that achieve global rather than local goals. Therefore, international managers need to be aware of the extent to which local customers, employees, government officials, and suppliers are likely to accept or resist changes. These changes will affect an international manager’s responsibility.

The aspect of control in the responsibilities of an international manager includes ensuring that what is happening is what was intended to happen. Control app...

Table of contents

• Cover Page
• Title Page
• Copyright Page
• Contents
• List of Case Studies
• List of Boxes, Figures and Maps
• List of Tables
• Foreword
• Preface
• Acknowledgments
• Introduction
• 1 International Management and Cross-cultural Perspectives
• 2 Changes and Growth in the International Marketplace
• 3 An Introduction to Multinational Enterprises
• 4 The Impact of Economics and the International Monetary Framework on International Management
• 5 The Impact of Domestic Politics on International Business
• 6 Information Technology and its Impact on International Management
• 7 International Service Management
• 8 Culture Defined
• 9 The Impact of Culture on International Management
• 10 Cross-cultural Training and Expatriate Assignments
• 11 Toward New International Business Conditions and Opportunities
• Appendix – International Metaphors
• Bibliography
• Index