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MNC STRATEGIES




                     Shabnam hassan & Akbar rastan
                     4 th semester.
                     BIMS,
                     Mysore-06
     BIM'S, Mysore                             1
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

                     BIM'S, Mysore      2
Cont..
Arise most often in the context of:
  Employment practices
  Human rights
  Environmental policy
  Corruption
  An MNC’s perceived moral obligations to
   society


                    BIM'S, Mysore            3
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
                          BIM'S, Mysore                   4
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       BIM'S, Mysore                    5
 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
                            BIM'S, Mysore                      6
There are four distinct strategic predispositions
   toward doing things in a particular way

        Ethnocentric
        Polycentric
        Regiocentric
        Geocentric



                       BIM'S, Mysore                7
Ethnocentric predisposition

A nationalistic philosophy of management whereby
 the values and interests of the parent company
 guide strategic decisions.




                    BIM'S, Mysore                  8
Polycentric predisposition

 A philosophy of management whereby strategic
decisions are tailored to suit the cultures of the
countries where the MNC operates.




                     BIM'S, Mysore                   9
Regiocentric predisposition

A philosophy of management whereby the firm
tries to blend its own interests with those of its
subsidiaries on a regional basis.




                    BIM'S, Mysore                    10
Geocentric predisposition

A philosophy of management whereby the
company tries to integrate a global systems
approach to decision making.




                 BIM'S, Mysore            11
Orientation of an MNC Under
     Different Profiles




           BIM'S, Mysore      12
Organizational Culture in MNCs
Aspects 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 them

There 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
                                     BIM'S, Mysore                              13
Locations of Cross-Cultural
        Interaction




            BIM'S, Mysore     14
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

                       BIM'S, Mysore                15
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

                         BIM'S, Mysore                        16
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

                          BIM'S, Mysore                  17
Understanding the Conditions for
        Effectiveness




      Highly         Average        Highly
    ineffective   effectiveness    effective



                   BIM'S, Mysore               18
BIM'S, Mysore   19
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.
                         BIM'S, Mysore                    20
BIM'S, Mysore   21
Cultural Appreciation

                              Values




                             Customs
Aspects of
 culture


                             Symbols




                             Language

             BIM'S, Mysore              22
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
                                    BIM'S, Mysore                   23
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?


                       BIM'S, Mysore            24
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?


                        BIM'S, Mysore               25
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”


                     BIM'S, Mysore              26
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
                             BIM'S, Mysore                      27
Social Structure and Culture
Unit 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.
                                BIM'S, Mysore                   28
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
                            BIM'S, Mysore                             29
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


                                BIM'S, Mysore                                 30
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
                        BIM'S, Mysore               31
Non-Verbal Gestures




       BIM'S, Mysore   32
BIM'S, Mysore   33
Cultural Diversity – “Chevy Nova Award”
These are the nominees for the Chevy Nova Award. This is given out in honor
  of the GM's fiasco in trying to market this car in Central and South
  America. "No va" means, of course, in Spanish, "it doesn't 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.
                                  BIM'S, Mysore                        34
 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 Perdue's 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 Pope's 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.“

                                   BIM'S, Mysore                         35
Pepsi’s “Come Alive With the Pepsi Generation” in Chinese
translated 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 with
wax”, depending on the dialect.

  Coke then researched 40,000 characters to find a phonetic
equivalent “kokou kole”, translating into “happiness in the
mouth.”
                            BIM'S, Mysore                      36
Cultural Stereotypes

Cultural 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




                                   BIM'S, Mysore                        37
High/Low Context Cultures




         BIM'S, Mysore      38
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”


                     BIM'S, Mysore               39
BIM'S, Mysore   40
Cultural Distance


Geographic and cultural (or pshychic)
 distance among countries may not be the
 same
Key concept which can affect IB strategy
 and conduct


                   BIM'S, Mysore            41
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
                            BIM'S, Mysore                    42
 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
                             BIM'S, Mysore                     43
Thank you

    BIM'S, Mysore   44

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MNC culture

  • 1. MNC STRATEGIES Shabnam hassan & Akbar rastan 4 th semester. BIMS, Mysore-06 BIM'S, Mysore 1
  • 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 BIM'S, Mysore 2
  • 3. Cont.. Arise most often in the context of: Employment practices Human rights Environmental policy Corruption An MNC’s perceived moral obligations to society BIM'S, Mysore 3
  • 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 BIM'S, Mysore 4
  • 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 BIM'S, Mysore 5
  • 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 BIM'S, Mysore 6
  • 7. There are four distinct strategic predispositions toward doing things in a particular way  Ethnocentric  Polycentric  Regiocentric  Geocentric BIM'S, Mysore 7
  • 8. Ethnocentric predisposition A nationalistic philosophy of management whereby the values and interests of the parent company guide strategic decisions. BIM'S, Mysore 8
  • 9. Polycentric predisposition A philosophy of management whereby strategic decisions are tailored to suit the cultures of the countries where the MNC operates. BIM'S, Mysore 9
  • 10. Regiocentric predisposition A philosophy of management whereby the firm tries to blend its own interests with those of its subsidiaries on a regional basis. BIM'S, Mysore 10
  • 11. Geocentric predisposition A philosophy of management whereby the company tries to integrate a global systems approach to decision making. BIM'S, Mysore 11
  • 12. Orientation of an MNC Under Different Profiles BIM'S, Mysore 12
  • 13. Organizational Culture in MNCs Aspects 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 them There 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 BIM'S, Mysore 13
  • 14. Locations of Cross-Cultural Interaction BIM'S, Mysore 14
  • 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 BIM'S, Mysore 15
  • 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 BIM'S, Mysore 16
  • 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 BIM'S, Mysore 17
  • 18. Understanding the Conditions for Effectiveness Highly Average Highly ineffective effectiveness effective BIM'S, Mysore 18
  • 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. BIM'S, Mysore 20
  • 22. Cultural Appreciation Values Customs Aspects of culture Symbols Language BIM'S, Mysore 22
  • 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 BIM'S, Mysore 23
  • 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? BIM'S, Mysore 24
  • 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? BIM'S, Mysore 25
  • 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” BIM'S, Mysore 26
  • 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 BIM'S, Mysore 27
  • 28. Social Structure and Culture Unit 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. BIM'S, Mysore 28
  • 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 BIM'S, Mysore 29
  • 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 BIM'S, Mysore 30
  • 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 BIM'S, Mysore 31
  • 32. Non-Verbal Gestures BIM'S, Mysore 32
  • 34. Cultural Diversity – “Chevy Nova Award” These are the nominees for the Chevy Nova Award. This is given out in honor of the GM's fiasco in trying to market this car in Central and South America. "No va" means, of course, in Spanish, "it doesn't 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. BIM'S, Mysore 34
  • 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 Perdue's 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 Pope's 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.“ BIM'S, Mysore 35
  • 36. Pepsi’s “Come Alive With the Pepsi Generation” in Chinese translated 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 with wax”, depending on the dialect. Coke then researched 40,000 characters to find a phonetic equivalent “kokou kole”, translating into “happiness in the mouth.” BIM'S, Mysore 36
  • 37. Cultural Stereotypes Cultural 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 BIM'S, Mysore 37
  • 38. High/Low Context Cultures BIM'S, Mysore 38
  • 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” BIM'S, Mysore 39
  • 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 BIM'S, Mysore 41
  • 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 BIM'S, Mysore 42
  • 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 BIM'S, Mysore 43
  • 44. Thank you BIM'S, Mysore 44