Final semester presentation - MNCs in India for MBA

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

19. BIM'S, Mysore 19

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

21. BIM'S, Mysore 21

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

33. BIM'S, Mysore 33

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

40. BIM'S, Mysore 40

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