MNC culture

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Final semester presentation - MNCs in India for MBA

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MNC culture

  1. 1. MNC STRATEGIES Shabnam hassan & Akbar rastan 4 th semester. BIMS, Mysore-06 BIMS, Mysore 1
  2. 2. Ethical Issues in International BusinessArise when a manager makes decisions consistent with differing national environments Political systems Legal systems Economic development levels CultureWhat is ethical and “normal” in one environment may not be so in another BIMS, Mysore 2
  3. 3. Cont..Arise most often in the context of: Employment practices Human rights Environmental policy Corruption An MNC’s perceived moral obligations to society BIMS, Mysore 3
  4. 4. Learning Objectives Understand the benefits MNCs can achieve using global integration or local adaptation Understand the conflicting pressures of the global–local dilemma faced by international managers in MNCs Know the content of the basic multinational strategies: transnational, international, multidomestic, and regional Choose a multinational strategy by using the diagnostic questions that help MNCs to cope with the global–local dilemma BIMS, Mysore 4
  5. 5. Strategic Choices for MNCs Companies engaged in international business, like all businesses, face pressures to respond to the unique needs of their customers However, when your customers come from different countries and regions of the world, they often have different needs and desires for products and services When a company decides to focus on meeting customer needs based on national and regional differences, they adopt a local responsiveness strategy Alternatively, when a company decides to de-emphasize local differences and locate their operations anywhere in the world where it is advantageous, they adopt what is known as a global integration strategy BIMS, Mysore 5
  6. 6.  Companies that adopt a local responsiveness strategy stress customizing their organizations and products to accommodate country or regional differences Multinational companies that lean toward a global integration strategy reduce their costs by using standardized products, promotional strategies, and distribution channels in every country Multinational firms must choose carefully for each product or business how globally or locally they orient their strategies The problem of which strategic orientation to choose is called the global–local dilemma BIMS, Mysore 6
  7. 7. There are four distinct strategic predispositions toward doing things in a particular way  Ethnocentric  Polycentric  Regiocentric  Geocentric BIMS, Mysore 7
  8. 8. Ethnocentric predispositionA nationalistic philosophy of management whereby the values and interests of the parent company guide strategic decisions. BIMS, Mysore 8
  9. 9. Polycentric predisposition A philosophy of management whereby strategicdecisions are tailored to suit the cultures of thecountries where the MNC operates. BIMS, Mysore 9
  10. 10. Regiocentric predispositionA philosophy of management whereby the firmtries to blend its own interests with those of itssubsidiaries on a regional basis. BIMS, Mysore 10
  11. 11. Geocentric predispositionA philosophy of management whereby thecompany tries to integrate a global systemsapproach to decision making. BIMS, Mysore 11
  12. 12. Orientation of an MNC Under Different Profiles BIMS, Mysore 12
  13. 13. Organizational Culture in MNCsAspects in determining MNC organizational culture:  The relationship between the employees and their organization  The hierarchical system of authority that defines the roles of managers and subordinates  The general views that employees hold about the MNC’s purpose, destiny, goals, and their places in themThere are four steps in the integration of organizational cultures in international expansions that result from mergers or acquisition  The two groups have to establish the purpose, goal, and focus of their merger  They have to develop mechanisms to identify the most important organizational structures and management roles  They have to determine who has authority over the resources needed for getting things done  They have to identify the expectations of all involved parties and facilitate communication between both departments and individuals in the structure BIMS, Mysore 13
  14. 14. Locations of Cross-Cultural Interaction BIMS, Mysore 14
  15. 15. Types of MulticulturalismDomestic multiculturalism • Multicultural and diverse workforce that operates in the MNC’s home countryGroup multiculturalism • Homogeneous groups • Token groups • Bicultural groups • Multicultural groups BIMS, Mysore 15
  16. 16. Potential Problems Associated with Diversity Attitudinal problems • May cause a lack of cohesion that results in the unit’s inability to take concerted action or to be productive Perceptual problems • When culturally diverse groups come together, they often bring preconceived, erroneous stereotypes with them Inaccurate biases. Inaccurate communication BIMS, Mysore 16
  17. 17. Advantages of Diversity Can enhance creativity, lead to better decisions, and result in more effective and productive performance Can prevent groupthink • Social conformity and pressures on individual members of a group to conform and reach consensus Can be very effective team under right conditions • Tasks requiring innovativeness • Activities must be determined by the stage of team development BIMS, Mysore 17
  18. 18. Understanding the Conditions for Effectiveness Highly Average Highly ineffective effectiveness effective BIMS, Mysore 18
  19. 19. BIMS, Mysore 19
  20. 20. Differences in Culture Societies’ differ along cultural dimensions Social structure, religion, language are few cultural differences The other difference in culture is the corporate culture Culture changes over time. Reason may be globalisation, education and economic reforms. Implications for business managers. BIMS, Mysore 20
  21. 21. BIMS, Mysore 21
  22. 22. Cultural Appreciation Values CustomsAspects of culture Symbols Language BIMS, Mysore 22
  23. 23. What is Culture?Culture: a society’s (group’s) system of shared, learned values and norms; these are the society’s (group’s) design for living Values: abstract ideas about the good, the right, the desirable Norms: social rules and guidelines; guide appropriate behavior for specific situations  Folkways: norms of little moral significance dress code; table manners; timeliness  Mores: norms central to functioning of social life – bring serious retribution: thievery, adultery, alcohol BIMS, Mysore 23
  24. 24. Cultural DiversityValues represent personal or socially preferable modes of conduct or states of existence that are enduring. Why doesn’t McDonald’s sell hamburgers in India? BIMS, Mysore 24
  25. 25. Customs are norms and expectations about the way people do things in a specific country. Why were 3M executives perplexed concerning lukewarm sales of Scotch-Brite floor cleaner in the Philippines? BIMS, Mysore 25
  26. 26. What is Culture?“the collective programming of the mind which distinguishes the members of one human group over another… Culture, in this sense, includes systems of values; and values are among the building blocks of culture” BIMS, Mysore 26
  27. 27. National Culture“Nation” is a useful:  Definition of society • similarity among people a cause -- and effect -- of national boundaries  Way to bound and measure culture for conduct of business • culture is a key characteristic of society • can differ significantly across national borders also within national borders • laws are established along national lines Culture is both a cause and an effect of economic and political factors that vary across national borders BIMS, Mysore 27
  28. 28. Social Structure and CultureUnit of social organization: individual or group?Society may be stratified into classes or castes High-low stratification High-low mobility between strataThe individual: building block of many Western societies Entrepreneurship, Social, geographical and inter- organizational mobilityThe group: Two or more associated individuals with a shared identity Interact with each-other in specific ways on the basis of a common set of expectations. BIMS, Mysore 28
  29. 29. Individual vs Group Societal Characteristics Individual  Group • Managerial mobility • Loyalty and commitment to between companies company • Economic dynamism, • In-depth knowledge of company innovation • Specialist skills • Good general skills • Easy to build teams, • Team work difficult, collaboration non-collaborative • Emotional identification with Exposure to different ways group or company of doing business • e.g., Japanese companies • e.g., U.S. companies BIMS, Mysore 29
  30. 30. Religion, Ethics and Culture Religion: system of shared beliefs about the sacred Ethical systems: moral principles or values that shape and guide behavior; often products of religion Major religious groups and some economic implications • Christianity protestant work ethic • Islam Islamic economic principles • Hinduism anti-materialistic, socially stratified, conceptual • Buddhism anti-materialistic, social equality • Confucianism hierarchy, loyalty, honesty BIMS, Mysore 30
  31. 31. Language: Culture BoundLanguage, spoken • “private” does not exist as a word in many languages • Eskimos: 24 words for snow • Words which describe moral concepts can be unique to countries or areas • Spoken language precision important in low- context culturesLanguage, unspoken • Context... more important than spoken word in high context cultures BIMS, Mysore 31
  32. 32. Non-Verbal Gestures BIMS, Mysore 32
  33. 33. BIMS, Mysore 33
  34. 34. Cultural Diversity – “Chevy Nova Award”These are the nominees for the Chevy Nova Award. This is given out in honor of the GMs fiasco in trying to market this car in Central and South America. "No va" means, of course, in Spanish, "it doesnt go". Dairy Association’s huge success with the campaign “Got Milk?” prompted them to expand advertising to Mexico, It was brought to their attention the Spanish translation read, “Are you lactating?” Clairol introduced the “Mist Stick”, a curling iron into Germany Only to find out that “mist” is German slang for manure. Colgate introduced a toothpaste in France called Cue, the name of a notorious porno magazine. BIMS, Mysore 34
  35. 35.  When Gerber started selling baby food in Africa, they used US packaging with the smiling baby on the label. In Africa, companies routinely put pictures on labels of what’s inside, since many people can’t read. Frank Perdues chicken slogan, "It takes a strong man to make a tender chicken" was translated into Spanish as "it takes an aroused man to make a chicken affectionate. “An American T-shirt maker in Miami printed shirts for the Spanish market which promoted the Popes visit. Instead of "I saw the Pope" (el Papa), the shirts read "I Saw the Potato" (la papa). Scandinavian vacuum manufacturer Electrolux used the following in an American campaign: "Nothing sucks like an Electrolux.“ BIMS, Mysore 35
  36. 36. Pepsi’s “Come Alive With the Pepsi Generation” in Chinesetranslated into“Pepsi Brings Your Ancestors Back From the Grave”Coca-Cola’s name in China was first read as “Kekoukela”,meaning “Bite the wax tadpole” or “female horse stuffed withwax”, depending on the dialect. Coke then researched 40,000 characters to find a phoneticequivalent “kokou kole”, translating into “happiness in themouth.” BIMS, Mysore 36
  37. 37. Cultural StereotypesCultural stereotypes: values and behaviors considered typical of a culture Are they valuable? Yes, if they reduce uncertainty about what expatriate can expect. No, if used to label an individual unlike the stereotype BIMS, Mysore 37
  38. 38. High/Low Context Cultures BIMS, Mysore 38
  39. 39. Cultural Change Over TimeChange is slow and often painfulShifts away from “traditional values” towards “secular values”Changes with shift from “survival values” to “self-expression values” BIMS, Mysore 39
  40. 40. BIMS, Mysore 40
  41. 41. Cultural DistanceGeographic and cultural (or pshychic) distance among countries may not be the sameKey concept which can affect IB strategy and conduct BIMS, Mysore 41
  42. 42. REVIEWBeyond the traditional strategic questions facing all managers, the international manager, in both large and small companies, must confront the cultural dilemmaAs the world becomes more globalized, we are seeing more companies choosing transnational or international strategies to compete with low cost and high qualityHowever, cultural and other national differences remain, and these will continue to provide opportunities to companies with more local or regional orientationsThere are benefits to favoring local responsiveness, a form of differentiation BIMS, Mysore 42
  43. 43.  Either through the multidomestic or regional strategy, the multinational company meets the unique needs of customers in a country or region International and transnational strategists see the world as one market In a globalizing world, the complexities of choosing multinational strategies represent significant challenges to international managers Multinational strategy is executed in a dynamic global context related to relationships among governments, patterns of trade and investments, foreign exchange markets, and global capital markets BIMS, Mysore 43
  44. 44. Thank you BIMS, Mysore 44

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