Working in a MNC

S.I. Lee

Hanyang University

April 7, 2005

Key Factors to consider to be a successful

• Mindset is important differentiation

• Strategy, Structure, Control systems differ

• Multiple staffing policies

• Culture a key variable for success

• Religion plays important role

Vertical Differentiation

• Centralization :

• Facilitates coordination.• Ensure decisions consistent with organization’s objectives.• Top-level managers have means to bring about organizational change.• Avoids duplication of activities.

• Decentralization :

• Overburdened top management.• Motivational research favors decentralization.• Permits greater flexibility.• Can result in better decisions.• Can increase control.

Concerned with where decisions are made.

No “right” answer - mix

Global

Centralize

Strategy and Centralization

International

Centralize for core competencies

Decentralize forOperating decisions

Transnational

Both CentralizeAnd Decentralize

Multi-domestic

Decentralize

Strategy, Structure and Control Systems

Structure and Controls

Multidomestic International Global Transnational

Centralization of operating decision

DecentralizedCore competency centralized Rest decentralized

Some centralizedMixed centralized and decentralized Informal matrix

Horizontal differentiation

Worldwide area structure

Worldwide product division

Worldwide product division

Informal matrix

Need for coordination

Low Moderate High Very high

Integrating mechanisms

None Few Many Very many

Performance Ambiguity

Low Moderate High Very high

Need for cultural controls

Low Moderate High Very high

International Strategy

The International Structural Stages Model

Foreign Product Diversity

Foreign Sales as a Percentage of Total Sales

International Division

Alternate Paths

Of Development

Global Matrix

(“Grid”)

Worldwide

Product

Division

Area

Division

A Global matrix Structure

Headquarters

ProductDivision A

ProductDivision B

ProductDivision C

Area 1 Area 2 Area 3

Manager hereBelongs toDivision BAnd area 2

Matrix Structure

Attempts to meet needs of transnational strategy.

Doesn’t work as well as theory predicts.

Conflict and power struggles.

“Flexible” matrix Structures.

Interdependence, Performance Ambiguity, and the Costs of Control for the Four International Business Strategies

StrategyInter-

Dependence

Performance

Ambiguity

Costs of

Control

Multi-domestic Low Low Low

International ModerateModerate Moderate

Global HighHigh High

Transnational Very highVery high Very high

Types of Staffing Policy

EthnocentricEthnocentric PolycentricPolycentric GeocentricGeocentric

Key management positions filled by

parent-country nationals

Key management positions filled by

parent-country nationals

Host-country nationalsManage subsidiaries,

parent Company Nationals hold key

Headquarter positions

World’s Religions

33%

18%16%

17%

6%4% 7% Christianity

Islam

Hinduism

Nonreligious

Buddhism

Primal-indigenous

Other

Religion and Economic Implications

• Christianity– “Protestant Work Ehich” and “The Spirit of Capitalism”.

• Catholicism– Salvation in next life

• Islam– Favors market-based systems.

– No payment or receipt of interest.

• Hinduism– Asceticism may have an impact.

– Caste system plays a role. -> Promotion

– Spritrial growth & development

– Weak work ethic

• Buddhism– Little emphasis on entrepreneurial behavior.

• Confucianism– Loyalty, reciprocal obligations, and honesty in dealings.

Language

• Allows people to communicate.• Structures the way the world is perceived.• Directs attention to certain features of the world rather than

others.• Helps define culture.• Creates separatist tendencies?

Nonspoken Language

• Nonverbal cues:EyebrowsFingers/thumbsHand gesturesFeetPersonal spaceBody gestures

•Dining Etiquette

Hofstede

• Study(IBM) is a general way to look at differences between cultures.

• 4 dimensions :– Power distance– Individualism versus collectivism.– Uncertainty avoidance.– Masculinity versus femininity.

• But :– Assumption of one-to-one relationship between culture and nation-

state.– Research may be culturally bound.– Respondents worked within a single company.– Work is beginning to look dated(1967-1973)

Work Related Values for Selected Countries

Power Distance

Uncertainty Avoidance

Individualism Masculinity

Argentina 49 86 46 56

Brazil 69 76 38 49

France 68 86 71 43

India 77 40 48 56

Japan 54 92 46 95

Mexico 81 82 30 69

Netherlands 38 53 80 14

U.S.A 40 46 91 62

Culture and Competitive Advantage

• The connection suggests :– Which countries are likely to be the most viable competitors.– Which countries in which to locate production facilities and

do business.– Need to develop cross-cultural literacy

• Regular rotation & transfer

– Beware of ethnocentric behavior

Determinants of Culture

EconomicPhilosophy

Education

Language

Religion

Social Structure

Political Philosophy

Social Structure

GroupTwo or more individuals

with a shared sense of identity

Individual

Mobile Managers

Group

Identity

NonmobileManagers

LifetimeEmployment

Lack of Entrepreneurship

Entrepreneurship

Western

Lack of Loyalty

Hard to Build teams

Eastern

Successful Behaviors required in international conferences

• Participate

• Be decisive

• Aggressive

• Follow up

Cultural Sensitivity

• Socialization is critical

• Eating habits

• Drinking habits – especially wine

• Get to know personal facts

• If not sure, watch!

What MNC’s Look For in Korea

• Flexibility

• Smarts

• Attitude

• Functional expertise

• Leadership

• Communication

Challenge for you

• What is your 5 and 10 year goal with regard to career?

• How will you get there?– Be specific

– Provide background

– Clearly articulate your rationale