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International Business Strategy, Performance,and Management

Bryan Christiansen, Senior InstructorPRYMARKE BUSINESS ACADEMY(Istanbul, Turkey)

Academic Background

B.S. in Marketing, University of the State of New York

M.B.A. in General Business, Capella University

Ph.D. in Economics, University of Sunderland (Pending)

Expertise

2014-Present: PryMarke Business Academy (Istanbul, Turkey); Senior Instructor

2004-2014: PryMarke, LLC (Michigan, USA); Chairman and President

2012-2013: Gumushane University (Turkey); Senior Lecturer / Special Advisor to Rector

Miscellaneous

Fluent in Chinese, Japanese, Spanish

Experience in Start-up & Turnaround Operations

Travel to 40 Countries; Long-term Residence in China, Costa Rica, Japan, Panama, Russia, and Turkey

Member of Academy of Management

International Business Strategy, Performance,and Management Lesson 1: What is Human Performance Technology?

Lesson 1: Theory of Cultural Dimensions

Module 1: What are Cultural Dimensions?

Bryan Christiansen, Senior Instructor

What are Cultural Dimensions?• The foundation of a significant portion of

comparative cross-cultural business research

• Provide guide posts as to where and how cultures might differ significantly in a globally-connected world

• Focus on values and attitudes to conceptualize the similarities and differences between cultures to overcome stereotypes

Major Theorists• Geert Hofstede (59%)

• Clyde Kluckhohn

• Edward Hall

• Fons Tropenaars

• Ronald Inglehart

• Harry C. Triandis

Hofstede Model• Hofstede is a Dutch-born social

psychologist who published “Culture’s Consequences” in 1980 based on the extensive surveys he conducted with IBM employees during the 1970s

• His six cultural dimensions include:▫ Uncertainty avoidance index▫ Individualism vs. collectivism▫ Masculinity vs. femininity▫ Long-term vs. short-term

orientation▫ Indulgence vs. restraint▫ Power distance index

The GLOBE Project (2004)• Stands for Global Leadership and Organizational Behavior Effectiveness (GLOBE)

• Conceived in 1991 by Robert J. House of the Wharton School of Business at the University of Pennsylvania

• Based on results from 17,300 middle managers in 951 organizations in 62 countries

• Study identified nine cultural dimensions

•First study published in 2004. Second expanded study included 25 countries published in 2007

The GLOBE Project (Continued)• Performance orientation• Institutional collectivism• Gender egalitarianism• Uncertainty avoidance• In-group collectivism• Future orientation• Human orientation• Assertiveness• Power distance

For consideration….Dividing cultures into a set of dimensions makes them comparable….

Theory of cultural dimensions remains the only coherent framework for cross-cultural comparisons.

….but does not provide a holistic picture.

GLOBE study (2004) considered the current state-of-the-art with regards to studying cultural dimensions.

Usefulness of Cultural Dimensions in International Business Research

(Christiansen, 2012, p. 16)

Summary: Cultural Dimensions• Ask questions and seek

answers in an orderly and prescribed manner regarding cross-cultural management

• Provide guide posts regarding what to do in cross-cultural situations

• Only coherent framework for cross-cultural comparisons

Module 2: Intercultural Competence

What is Intercultural Competence?

• Enacted capability developed through social interaction and experience with dominant local and minority cultures

• Using a knowing-as-practice perspective, the study of intercultural experts can develop this area of knowledge

• Highly connected to the concept of Cultural Intelligence (CI)

Two Main Sources of CompetenceNew Immigrants Third Culture Individuals

• Connection with host country and country of origin

• Equipped with language skills and contacts usually beyond the native population of host country

• Can provide the missing link to hard-to-penetrate markets

• People born in one country but raised largely or entirely during their formative years in another country usually with a different language involved

• Typical examples include children of diplomats, military personnel, missionaries, and international school teachers

• Often have high cultural intelligence (CI)

Other Sources of Competence • Extensive international

travel from early age

• Foreign language training

• Employment overseas

• Study overseas

• Interaction with local ethnic communities

What is Cultural Intelligence (CQ)?

• CQ is the ability to function effectively in culturally diverse situations

• Includes four dimensions: behavioral, cognitive, megacognitive, and motivational

• Motivational CQ has definite impact on the corporate bottom line (Chen, Liu, & Portnoy, 2012)

• Still an emerging field (Gelfand et al., 2012)

Recap: Intercultural Competence

Intercultural competence is the

enacted capability developed

through social interaction and

experience with dominant local

and minority cultures. It is highly

related to cultural intelligence

which is the ability to interact

effectively in a variety of

culturally diverse situations.

Module 3: Bicultural Managers

Bicultural Individuals

• Strictly defined as those persons who have internalized two cultures which guide their thoughts, feelings, and behavior

• Capable of combining cultural norms of both groups and switching between them in response to cultural stimulus (Hong et al., 2000)

Biculturalism and CQ• Biculturalism may contribute to cultural

intelligence, but CQ does not necessarily require biculturalism.

• CQ focuses on one’s ability to work in foreign cultures

• Biculturalism refers to the presence within a person of two cultural systems

• Bicultural competence can have a bigger impact than CQ on the cognitive, behaviorial, and emotional flexibility within the individual’s first and second culture (Friedman & Liu, 2009)

Bicultural Managers• Often highly capable of understanding different

(business) cultural viewpoints for negotiations, etc.

• Usually the mediator in international business conflicts and other situations

• Biculturalism does not automatically include conflict solution / translation skills

• Can usually build ties with others easily• Dual language proficiency generally provides

competitive advantage in the global job market

Bicultural (and TCI) Managers• Both groups should receive special consideration

in Global Human Resource Management (GHRM) due to their unique qualities and backgrounds

• More of these individuals should be promoted through the managerial and executive ranks in an era of global hypercompetition

• Development of the Transcultural Organization in which those of diverse backgrounds operate efficiently as an integrated team for sustainable, competitive advantage

Lesson 1 Recap

Lesson 2: Business Performance

Module 1: Organizational Culture and Effectiveness

What is Organizational Culture?

• The underlying values, beliefs, and principles that serve as a foundation for an organization’s management system (Denison, 1996)

• Shared basic assumptions learned while solving problems of external adaptation and internal integration (Schein, 1992)

What is Organizational Effectiveness?• An organization that

effectively converts differences in work values and beliefs into a sustainable, competitive advantage in an era of global hypercompetition (Christiansen, 2015)

• Examples can include Cargill, Coca-Cola, McDonald’s, Siemens, and Walmart

• Denison (1990), Fisher (1997)

Denison Model• Measures four business culture

traits:▫ Mission

▫ Involvement

▫ Adaptability

▫ Consistency

Denison Model (Continued)• Mission refers to the degree to which an organization

has clear goals and vision over the long-term

• Involvement refers to the degree in which a firm is interested in persuading its employees to share the same direction with the company

• Adaptability refers to the company’s ability to respond quickly to external stimuli and customer demands

• Consistency refers to the firm’s systems and processes that are engaged in achieving corporate goals

Recap: Organizational Culture / Effectiveness

Module 2: Firm Performance

What is Firm Performance?• Measured in many ways:

• Profitability• Sales per Input• Total Factor Productivity• Return on Assets (ROA)• Lerner Index• Amoroso-Robinson

Relation• Herfindal Index• Economic Profit (EP)• Leverage• Market Capitalization

(Size)• Others (Net Asset Values)

Fundamental Research QuestionHow do changes in international competition affect the performance of firms, industries, and ultimately the overall welfare of countries or regions?

Some Typical Questions…• What is the company’s Break-Even Point? How

does this compare to your industry standard? Is this sustainable over the next 2 to 3 years?

• Which product / service lines have the highest and lowest profit margins? Why is this the case?

• How are the company’s product life and business cycles being affected by competitive pressures brought on by contemporary globalism?

• How are technological advances in your industry potentially affecting future revenues in your current markets?

Market Capitalization (Size)• Research indicates size is consistently the most

significant measurement of a firm’s true value at a specific point in time (Sharma & Kesner, 1996; Mitchell, 1994)

• Firm size is a basis of competitive advantage due to efficiency (especially in larger companies due in part to economies of scale)

Essential Components of Performance Analysis

(Rossett, 2009, p. 34)

Rummler’s Anatomy of Performance(9 Variable Framework)

(http://www.rummler-brache.com/the-nine-boxes-model)

Module 3: Regionalization vs. Globalization

What is Regionalization?There are two parts to this concept:1)Micro-component which includes the regionalization of the Multinational Enterprise (MNE)2)Macro-component which includes the regionalization of countries into trading blocks such as BRIC, CAFTA, CIVETS, or MENA

Regionalization of the MNE•Rise in Regional Headquarters (RHQs)

•Can be considered an optimal strategy between a multi-domestic strategy and a global strategy to balance responsiveness to local markets with the integration benefits of central control

Regionalization of Countries

•BRIC (Brazil, Russia, India, China)

•CAFTA (Central American Free Trade Agreement)

•CIVETS (Colombia, Indonesia, Vietnam, Egypt, Turkey, South Africa)

•MENA (Middle East and North Africa)

What is Globalization (today)? • Has always existed (Nye,

• More correct term to use today is CONTEMPORARY globalization

• Main difference exists in the speed of development and use of technology worldwide that drives global markets

Major Effects of Globalization• Business and Product Life Cycles drastically altered• Corporate capital and liquidity buffers must be increased

for unexpected developments in global markets• Industry uncertainty due to technological advancements• Global inflation• Era of Knowledge Worker and Global Labor Pool• Global hypercompetition and demographics have caused

an increasing shortage of critical skills worldwide• Demands higher levels of education and continued

training never experienced or required in past years

Peter Drucker’s Five Certainties•Global competitiveness

•Redefinition of corporate performance

•Collapsing birthrates in developed economies•Growing incongruence between global

economic and political realities

•Shifts in the distribution of disposable income

Lesson 2 Recap

Lesson 3: Foreign Business Environments

Module 1: Internationalization of Emerging Markets

Some Emerging Markets

•Baltic Corner (Estonia, Latvia, Lithuania)

•BRIC (Brazil, Russia, India, China)

•CIVETS (Colombia, Indonesia, Vietnam,

Egypt, Turkey, South Africa)

•MENA (Middle East & North Africa)

•MIST (Mexico, Indonesia, South Africa,

Turkey)

Important Fact--Emerging Markets•The first half of the 21st century will be

the first time in 200 years when emerging

market nations will contibute more to

growth than the developed economies

(McKinsey Global Institute, 2012)

Definitions of Internationalization•The process of increasing involvement of

enterprises in international markets

•The process of planning and

implementing products and services so

they can be easily adapted to specific

cultures and languages

Country-of-origin Effect

•The influence that cultural values exert

over management practices and

organizational behavior

Internationalization Theories

•Divided into traditional approaches, trade

theories, and further theories

•Trade theories include 10 aspects

•Traditional approaches include nine

aspects

•Further theories include eight aspects

Trade Theories•Absolute cost advantage (Adam Smith,

1776)•Comparative cost advantage (1817)•Gravity model of trade (1954)•Leontief paradox (1954)•Linder hypothesis (1961)•Heckscher-Ohlin model (1966)•Location theory•Market imperfection theory•New trade theory

Traditional Approaches•Diamond Model (Michael Porter)•Diffusion of Innovations (Everett Rogers)•Foreign Direct Investment (FDI) and

Portfolio Investment Theory (Stephen Hymer)

•Eclectic Paradigm (John Dunning) •Monopolistic Advantage theory (Stephen

Hymer)•Non-availability Approach (Irving Kravis)•Technology Gap Theory of Trade (Posner)•Uppsala Model

Further Theories•Behavioral theory of the firm•Contingency theory•Contract theory•Economy of scale•Internationalization theory•Product life cycle theory•Transaction cost theory•Theory of the growth of the firm

Market Frictions •Includes various types:

• Financial• Labor (Growing global skills gap)• Employment• Trade• Frictionless Markets: Financial markets

without transaction costs

Search Theory•Studies buyers and sellers who cannot

instantly find a trading partner (Microeconomic)

•Macroeconomists have extended the studies above to include “Matching theory”

Recap: Emerging Markets

Internationalization

Theories: Tradition, Trade, Further

Market & Search Frictions

Country-of-origin Effect

Module 2: Entry Mode Choice

Entry Mode Choice• Defines what activities are internalized in the

firm and how the firm interacts with external environment in different host countries

• Considered one of the core aspects of International Business (IB) research (Oortwijn, 2011)

• At least four different choices:• Partnership• Trade• Joint Venture (JV)• Wholly-owned Enterprise (WOE)

Firm Experience

•A major obstacle to the development of international operations is a lack of knowledge of foreign markets and uncertainty for business performance (Johanson & Vahlne, 1977)

•Differences between home and host countries magnify difficulties in collecting, interpreting, and organizing information for decision-making (Meyer, 2001; Henisz, 2005)

Primary Issues of Entry Mode Choice •Characterized by varying degrees of:

• Resource Committment• Managerial Control• Risk Exposure• Profit Return• Involvement of Local Parties

•Organizational modes listed below manage international business activities differently which ultimately impacts performance and the cultural distance paradox

Major Entry Mode ChoicesPartnership Joint Venture (JV) WOE

Pros• Shared resources such as distribution channels, manufacturing capacity, or capital• Agreed upon set of goals between the two entities

Pros• Founding firm partners remain indepenent legal entities• New entity has resources and equity contributed by both partners• Risks and costs shared

Pros• Owned 100% by the foreign parent compamy• Managed directly by the foreign company• Return-on-Investment (ROI) usually higher in the long-term

Cons• No separate legal entity• Some loss of control• Occasional coordination issues

Cons• Loss of hierarchial control• Organizational flexibility decreases while costs increase• Joint decision-making more complicated across country borders

Cons• Does require additional investments in terms of equity, human resources, and time• Knowledge and access to local market must be acquired

Cultural Distance and Mode Choice

•Entry mode choice highly influences in what manner a company is exposed to cultural differences when conducting business abroad

•Difficulties often encountered when managing a cultural distance labor force within the firm

•Relationships with suppliers, buyers, and government institutions external to the firm become more complicated (Agarwal, 1994)

Module 3: Corporate Social Responsibility: China and Japan

China and Japan Facts

•China is now second largest economy in the world with 1.6 billion people in this vast emerging market (CIA Factbook, 2015)

• Japan is an advanced economy which has one of the fastest growing aging populations in the world (CIA Factbook, 2015)

• Japan has been an extremely active investor in China since 1989 and is the second largest source of Foreign Direct Investment in China

China and Japan Facts (Continued)

•The two countries share a complex and thorny past: the two are often referred to as ‘Cold in politics but hot in economics’

•Fairly recent political issues surrounding the Senkaku Islands in the South China Sea have not significantly altered their economic ties that include extensive technology transfer (Toyota)

•Major question is what will occur if China does not continue its economic growth in the future?

Corporate Social Responsibility (CSR)•Definition of corporate social responsibility

is a company’s sense of responsibility towards the community and environment (both ecological and social) in which it operates

•Practiced in a variety of countries as a source of competitive advantage

• Coca-Cola• IBM• Siemens• Toyota

Corporate Social Responsibility: China•Part of China’s ‘Harmonious Society’

policy •Increasing in the country due to:

• Rate of Chinese products in Western nations has increased dramatically, a fact which has subjected China to Western standards of production

• China’s entry into the World Trade Organization (WTO) has subjected Chinese firms to various rules and regulations governing international trade and investment

Corporate Social Responsibility: Japan•Country has long engaged in CSR within Japan

due largely to its collectivist society•Operating in China has posed some

challenges:• Anti-Japanese demonstrations in 2005 showed

Japanese firms did not recognize the growing importance of business-society relations in the Chinese marketplace

• Difficulty in hiring and retaining skilled personnel• Roadblocks to understanding the full power and

role of the Chinese media on local consumers

Lesson 3 Recap

Lesson 4: Miscellaneous

Module 1: Social Capital

Social Capital• Defined as the networks together with shared

values, and and understandings in society which facilitate cooperation within or among groups (OECD, 2014)

• Social capital has earned an increasingly important place in economic development over the past 20 years (Cartwright & Singh, 2014)

• Sobel (2002) states that social capital is an attribute of an individual in a social context which can be transformed into conventional economic gains.

• Social capital varies from country to country, and can also act as a conduit for non-economic benefits (Woolcock, 1998).

Social Capital Assets and Liability of Foreignness

Module 2: Workplace Conflict

Workplace Conflict

•A specific type of conflict that occurs in workplaces due to personality clash or differences of opinion about tasks

Workplace Conflict (2)

•Recent research shows that managers typically spend about 30% of their time contending with workplace conflict (Ross, 2010)

•There are five common responses to conflict (Rahim, 1983):

• Integration• Domination• Compromise• Submission• Avoidance

Workplace Conflict (3)

•Hofstede’s work on cultural dimensions provides managers involved in international operations a frame of reference for understanding the adaptations required to succeed in cross-border relationships

•The degree of such adaptive response required depends on the degree of divergence between the two cultures (Giacobbe-Miller, Miller, Zhang, & Victorov, 2003)

Module 3: Global Human Resource Management

Global Human Resource Management• A function in organizations designed to

maximize employee performance of an employer’s global strategic objectives

• HRM is primarily concerned with the management of people within organizations, focusing on policies and systems

• HR departments and units in organizations typically undertake a number of activities, including employee recruitment, training and development, performance appraisal, and rewards

Global Facts on Human Resources• Growing global competition for talent

• Australia: Over 51% of 2,000 respondents said middle-managers had the largest skills gap

• Canada: Approximately 44% of businesses reported finding qualified labor

• China: Fewer than 10% of job candidates are suitable to work in a foreign company

• India: Shortage of 500,000 professionals to fill available positions

• USA: American universities will graduate only 198,000 students to replace 2 million Baby-boomers who will retire by 2018

Lesson 4 Recap

Video Presentation in ReviewCultural Variations

Business Performance

Foreign Business Environments

Misc. Topics

• Theory of Cultural Dimensions

• Intercultural Competence

• Bicultural Managers

• Organization Culture and Effectiveness

• Firm Performance

• Regionalization vs. Globalization

• InternationalizeEmerging Markets

• Entry Mode Choice

• China and Japan – CSR

• Social Capital

• Workplace Conflict

• Human Resource Management (HRM)

• The world has become increasingly complex in an age of global hypercompetition

• The major determinant of long-term national growth (especially today): productivity

As organizations are confronted with the need to engage with stakeholders from a variety of different cultural backgrounds, the need to understand the ways in which cultural imperatives play into individual and collective performances becomes increasingly paramount. This need ultimately provides the ability for organizations to sustain a competitive advantage and to remain profitable over time.

The seven “intangibles” (Anderson & Wong, 2013): •radical innovation and first mover advantages•firm strategy and positioning•intangible resources and competencies•relational optimality•network effects and externalities•organizational ambidexterity•transaction cost efficiency

Bryan Christiansen, Senior InstructorPRYMARKE BUSINESS ACADEMY(Istanbul, Turkey)

THANK YOU!

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