Question 1:
What are some of the reasons why the World Trade Organization and free trade are being
criticized? Do you think that free trade is helping all countries? Why or why not?
Response submitted by Jorge & Habib:
Some argue that the WTO favors the developed nations because it is difficult for poorer nations
to compete in a non-regulated world. Environmentalists note that free trade encourages large
multinational companies to move environmentally damaging production to poorer and often
environmentally sensitive countries. That is, commercial interests have priority over the
environment, health, and safety. For example, Shell Company’s oil extraction in Nigeria has
damaged environmentally sensitive areas in the delta river communities. Labor unions see free
trade leading to the migration of jobs from higher wage countries to lower wage countries.
The WTO is an evolving organization, and its goal of free trade for all is still not achieved. Not all
major world players are WTO members, and trade discussions continue over specific products.
Heidi's response and background research
What are some of the reasons why the World Trade Organization and free trade are being
criticized?
Critics argue that WTO favors the developed nations because it is more difficult for poorer
nations to compete in a non-regulated world.
Environmentalists argue that free trade encourages large multinationals to move
environmentally damaging production to poorer and often environmentally sensitive countries.
Commercial interests may have priority over the environment, health and safety.
Labor unions see free trade leading to the migration of jobs from higher wage countries to lower
wage countries.
Do you think that free trade is helping all countries? Why or why not?
I believe free trade is beneficial to all countries because it provides for global economic growth
by the reduction of trade barriers.
The case for open trade
The economic case for an open trading system based on multilaterally agreed rules is simple
enough and rests largely on commercial common sense. But it is also supported by evidence:
the experience of world trade and economic growth since the Second World War. Tariffs on
industrial products have fallen steeply and now average less than 5% in industrial countries.
During the first 25 years after the war, world economic growth averaged about 5% per year, a
high rate that was partly the result of lower trade barriers. World trade grew even faster,
averaging about 8% during the period.
The data show a definite statistical link between freer trade and economic growth. Economic
theory points to strong reasons for the link. All countries, including the poorest, have assets —
human, industrial, natural, financial — which they can employ to produce goods and services for
their domestic markets or to compete overseas. Economics tells us that we can benefit when
these goods and services are traded. Simply put, the principle of “comparative advantage” says
that countries prosper first by taking advantage of their assets in order to concentrate on what
they can produce best, and then by trading these products for products that other countries
produce best.
In other words, liberal trade policies — policies that allow the unrestricted flow of goods and
services — sharpen competition, motivate innovation and breed success. They multiply the
rewards that result from producing the best products, with the best design, at the best price.
But success in trade is not static. The ability to compete well in particular products can shift from
company to company when the market changes or new technologies make cheaper and better
products possible. Producers are encouraged to adapt gradually and in a relatively painless
way. They can focus on new products, find a new “niche” in their current area or expand into
new areas.
Experience shows that competitiveness can also shift between whole countries. A country that
may have enjoyed an advantage because of lower labor costs or because it had good supplies
of some natural resources, could also become uncompetitive in some goods or services as its
economy develops. However, with the stimulus of an open economy, the country can move on
to become competitive in some other goods or services. This is normally a gradual process.
Nevertheless, the temptation to ward off the challenge of competitive imports is always present.
And richer governments are more likely to yield to the siren call of protectionism, for short term
political gain through subsidies, complicated red tape, and hiding behind legitimate policy
objectives such as environmental preservation or consumer protection as an excuse to protect
producers.
Protection ultimately leads to bloated, inefficient producers supplying consumers with outdated,
unattractive products. In the end, factories close and jobs are lost despite the protection and
subsidies. If other governments around the world pursue the same policies, markets contract
and world economic activity is reduced. One of the objectives that governments bring to WTO
negotiations is to prevent such a self-defeating and destructive drift into protectionism.
http://www.wto.org/english/thewto_e/whatis_e/10ben_e/10b00_e.htm
http://www.wto.org/english/res_e/doload_e/10mis_e.pdf
The world is complex, but the WTO doesn’t claim that everything is perfect—otherwise there
would be no need for further negotiations and for the system to evolve and reform continually.
That’s one of the most important reasons for having the system: it’s a forum for countries to
thrash out their differences on trade issues.
The ten benefits of the WTO
1. The system helps promote peace
2. Disputes are handled constructively
3. Rules make life easier for all
4. Freer trade cuts the costs of living
5. It provides more choice of products and qualities
6. Trade raises incomes
7. Trade stimulates economic growth
8. The basic principles make life more efficient
9. Governments are shielded from lobbying
10. The system encourages good government
The WTO does not tell governments how to conduct their trade policies. Rather, it’s a member
driven organization. That means: the rules of the WTO system are agreements resulting from
negotiations among member governments
The WTO is not for free trade at any cost. It’s really a question of what countries are willing to
bargain with each other, of give and take, request and offer. The WTO’s role is to provide the
forum for negotiating liberalization. They have special provisions that take into account the
situations that developing countries face, protecting their domestic producers.
The WTO is NOT only concerned about commercial interests. This does NOT take priority over
development. The WTO agreements are full of provisions taking the interests of development
into account. Sustainable development is a principal objective
The preamble of the Marrakesh Agreement Establishing the World Trade Organization includes
among its objectives, optimal use of the world’s resources, sustainable development and
environmental protection.
This is backed up in concrete terms by a range of provisions in the WTO’s rules. Among the
most important are umbrella clauses (such as Article 20 of the General Agreement on Tariffs
and Trade) which allow countries to take actions to protect human, animal or plant life or health,
and to conserve exhaustible natural resources.
Beyond the broad principles, specific agreements on specific subjects also take environmental
concerns into account. Subsidies are permitted for environmental protection. Environmental
objectives are recognized specifically in the WTO agreements dealing with product standards,
food safety, intellectual property protection, etc.
In addition, the system and its rules can help countries allocate scarce resources more
efficiently and less wastefully. For example, negotiations have led to reductions in industrial and
agricultural subsidies, which in turn reduce wasteful over-production.
Freer-flowing and more stable trade boosts economic growth. It has the potential to create jobs,
it can help to reduce poverty, and frequently it does both.
The biggest beneficiary is the country that lowers its own trade barriers. The countries exporting
to it also gain, but not as much. In many cases, workers in export sectors enjoy higher pay and
greater job security.
However, producers and their workers who were previously protected clearly face new
competition when trade barriers are lowered. Some survive by becoming more competitive.
Others don’t. Some adapt quickly (for example by finding new employment), others take longer.
In the WTO trading system, everyone has to follow the same rules. As a result, in the WTO’s
dispute settlement procedure, developing countries have successfully challenged some actions
taken by developed countries. Without the WTO, these smaller countries would have been
powerless to act against their more powerful trading partners.
Will's Response
What are some of the reasons why the World Trade Organization and free trade are being
criticized?
DEFINITION OF WTO: A FORMAL STRUCTURE FOR CONTINUED NEGOTIATIONS TO
REDUCE TRADE BARRIERS AND A MECHANISM FOR SETTLING TRADE DISPUTES.
REASONS WTO IS CRITICIZED:
· CRITICS ARGUE THAT THE WTO FAVORS THE DEVELOPED NATIONS BECAUSE IT IS
MORE DIFFICULT FOR POORER NATIONS TO COMPETE IN A NON-REGULATED
WORLD.
· ENVIRONMENTALISTS NOTE THAT FREE TRADE ENCOURAGES LARGE
MULTINATIONAL COMPANIES TO MOVE ENVIRONMENTALLY DAMAGING
PRODUCTION TO POORER AND OFTEN ENVIRONMENTALLY SENSITIVE COUNTRIES.
o COMMERCIAL INTERESTS HAVE PRIORITY OVER THE ENVIRONMENT, HEALTH, AND
SAFETY.
· LABOR UNIONS SEE FREE TRADE LEADING TO THE MIGRATION OF JOBS FROM
HIGHER WAGE COUNTRIES TO LOWER WAGE COUNTRIES.
Do you think that free trade is helping all countries? Why or why not?
THIS QUESTION IS SUBJECTIVE: FROM MY POINT OF VIEW, THE ANSWER IS YES AND
NO, BECAUSE IT ALLOWS FREE TRADE SO SMALLER AND POORER COUNTRIES CAN
COMPETE WITH LARGER AND WEALTHY COUNTRIES, BUT I CAN SEE WHERE IT CAN
ALSO HURT BOTH. COMPANIES FROM THE LARGE AND WEALTHIER COUNTRIES CAN
DEFINITELY TAKE ADVANTAGE BY SHIPPING PRODUCTION TO THE POORER
COUNTRIES AND USING CHEAP LABOR TO PRODUCE THEIR PRODUCTS. THEY ALSO
ARE LESS INCLINED TO THINK ABOUT THE ENVIRONMENTAL EFFECTS THEY LEAVE
BEHIND BECAUSE THE GOVERNMENTS OF POORER COUNTRIES ARE PROBABLY NOT
AS STRINGENT ON ENVIRONMENTAL ISSUES AS THE WEALTHIER NATIONS. IT CAN
HURT THE LARGER COUNTRIES, BECAUSE AS THE LABOR UNIONS HAVE CRITICIZED,
LARGE INDUSTRIALIZED NATIONS LIKE THE U.S. WILL LOSE JOBS OVERSEES.
THE BOOK ALSO STATES THAT IT WILL HELP SMALLER BUSINESSES BECAUSE THE
WTO MAKES TRADE LESS COMPLEX AND REDUCES THE RESOURCE REQUIREMENTS.
Question 2:
What are some similarities between Hofstede’s culture dimensions and the 7d cultural
dimensions? Which of the 7d cultural dimensions are unique compared to Hofstede’s
model?
Response submitted by Jorge & Habib:
Hofstede’s model of national culture is based on differences in values and beliefs regarding work
goals. The 7d cultural model is based on beliefs regarding how people relate to each other, how
people manage time and how people deal with nature.
Hofstede’s culture dimensions and the 7d model include Individualism and Collectivism values.
Individualism is the relationship between the individual and the group in society; and
Collectivism is a set of cultural values that views people largely through the groups to which
they belong. In collectivist societies people are defined by their group memberships including
family, organization, and community. In individualistic societies, people are trained from
childhood to be independent, and each person assumes individual responsibility for success or
failure.
Although the 7d view of individualism is similar to Hofstede’s in its concept, the rankings of
countries do not match exactly. One explanation for this difference may be that Trompenaars’
ranking comes from more recent data. Another reason is that the 7d model uses a different
methodology from Hofstede’s model and captures subtle aspects of the individualismcollectivism range.
Both models also include orientations on how a culture manages time. Hofstede’s long-term
orientation is a basic orientation toward time that values patience. The 7d model describes a
time orientation society based on the past, present, or future or some combination of the three.
The 7d culture dimension that is unique is the “Control of” versus “accommodation with”
nature: nature viewed as something to be controlled versus something to be accepted.
Heidi's response
What are some similarities between Hofstede’s culture dimensions and the 7d cultural
dimensions?
Which of the 7d cultural dimensions are unique compared to Hofstede’s model?
Hofstede’s Model of National Culture describes five dimensions of basic cultural values.
1. Power distance: expectations regarding equality among people.
2. Uncertainty avoidance: typical reactions to situations considered different and
dangerous.
3. Individualism/Collectivism: the relationship between the individual and the group in
society.
4. Masculinity: expectations regarding gender roles.
5. Long-term orientation: a basic orientation toward time.
7d Cultural Dimensions Model:
Five dimensions deal with relationships among people
1. Universalism vs. particularism: the choice of dealing with other people based on rules or
based on personal relationships. Do we consider rules or relationships more important:
2. Collectivism vs. individualism: Do we act mostly as individuals or as groups? In collectivist
societies people are defined by their group memberships including family, organization, and
community. Responsibility, achievement, and rewards are often group-based. In individualistic
societies, people are trained from childhood to be independent, and each person assumes
individual responsibility for success or failure.
3. Neutral vs. affective: the range of feelings outwardly expressed in the society. Are we free to
express our emotions or are we restrained / controlled?
4. Diffuse vs. specific: the types of involvement people have with each other ranging from all
aspects of life to specific components.
5. Achievement vs. ascription: the assignment of status in the society bases on performance
(e.g., college graduation: vs. assignment based on heritage, gender, age, or social class).
Two dimensions deal with how a culture manages time and how it deals with nature
6. Past, present and future, or a mixture: the orientation of the society to the past, present, or
future or some combination of the three. Do we do tasks in sequence or several tasks at once?
Do we glorify the past, enjoy the moment, or plan for the future?
7. Control of vs. “accommodation with” nature: nature viewed as something to be controlled
vs. something to be accepted. Beliefs regarding whether one controls one’s own fate.
Question 3:
What is convergence? What are some of the factors causing convergence? Do you think
that companies will adopt more convergent practices in the future? Why or Why not?
Response submitted by Keith:
CONVERGENCE is the increased similarity of management practices, especially those related
to STRATEGY.
Management practices are COPIED and used by all nationalities and most apparent with
transnational organizations.
FACTORS CAUSING CONVERGENCE:
1. Similarity of customer demands and worldwide shopping.
2. Growing industrialization and economic development result in increased technical and
financial capabilities that limit design options. (?)
3. Global competition and trade raises managerial awareness of other countries. More interaction
encourages copying what works.
4. Cross-border mergers, acquisitions, and alliances combine strategies.
5. Cross-national mobility of managers with high talent. Increases mimic isomorphism.
6. Internationalization of business education. Many international students taking U.S. and
European M.B.A. programs, then return to home countries. Cooperative programs in developing
nations.
COMPANIES WILL ADOPT MORE CONVERGENT PRACTICES IN THE FUTURE
BECAUSE OF CONTINUED GLOBALIZATION:
- Managers must understand and anticipate strategies of rivals from other countries.
- Managers must understand strategies of potential business partners.
- Strategies developed in one national context might be copied and modified to fit another
national context.
(pages 241-244)
Response submitted by Jorge & Habib:
Ethical convergence refers to the growing pressures for multinational companies to follow the
same rules in managing ethical behavior and social responsibility. There are four (4) reasons for
ethical convergence:
1. The growth of international trade and trading blocs, such as NAFTA and the EU, creates
pressures to have common ethical practices that transcend national cultures and
institutional differences. Many trading partners and other international associations are
developing measures to reduce corruption.
2. Interaction between trading partners creates pressures for imitating the business
practices of other countries. The increased interaction between people of different
cultural backgrounds, exposure to ethical traditions encourages people to adjust to,
imitate, and adopt new behaviors and attitudes.
3. Companies that do business throughout the world have employees from varied cultural
backgrounds who need common standards and rules regarding how to behave.
Multinational companies rely on their corporate culture to provide consistent norms and
values that govern ethical issues.
4. An increasing number of business watchdogs, such as ethical investment companies and
nongovernmental organizations, also are encouraging multinational companies to
become more ethical.
Companies will continue adopting more ethical convergent practices because of the moral and
financial pressure to eliminate corruption. Extensive corruption costs money, makes business
less competitive internationally, and risks embarrassing scandals.
Heidi's Response
What is convergence?
The increasing similarity of management practices among different organizations.
What are some of the factors causing convergence?
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Multinational firms competing in the same industry tend to have similar structures and
strategies regardless of the location of the company’s headquarters.
They use what they see as most effective.
Because they compete in worldwide markets, MNC seek not only uniform products and
strategies but ways of organizing that need not differ by national boundaries.
MN managers often lack deep-seated national cultural or societal identification. Their
companies, not their nations, are more important to them.
Coercive, mimic, and normative isomorphic forces cause convergence.
o Coercive: Social institutions coerce organizations to adopt certain practices
(government regulations).
o Mimetic: Organizations purposefully copy the strategies of the most successful
organizations “benchmarking”.
 Global customers and products
 Global competition and global trade
 Cross-border mergers, acquisitions, and alliances
 Cross-national mobility of managers
o Normative: Organizations indirectly copy the designs, cultures, and strategies of
other organizations by conforming to professional and technical norms.
 Growing levels of industrialization and economic development

Internationalization of business education (spreads common business
techniques)
Do you think that companies will adopt more convergent practices in the future? Why of why
not?
I believe that companies will adopt more convergent practices as the world continues to become
more interdependent. Normative forces such as internationalization of business education (MBA
programs), regional trade agreements and membership in the WTO will standardize management
practices. Cross-border competition, trade, mergers, acquisitions provide more opportunities to
learn about and copy successful managerial practices from anywhere in the world.
Question 4:
Ch. 4 Provide by Dana
Compare and contrast ethical relativism and ethical universalism. What are some of the
dangers of adopting either ethical relativism or ethical universalism when making decisions?
Ethical relativism means that each society’s view of ethics must be considered legitimate
and ethical.
o If in one country a belief or action is considered to be morally wrong, then in that country it
is wrong but in another country that same belief or action is considered morally correct.
o Multinational managers need only follow local ethical conventions. For example, if bribery is
accepted in host country, manager would follow what is morally acceptable even if it is illegal at
home.
Example: In Chinese culture, guanxis (special relationships between Chinese companies that
create business networks). Companies in guanxis are bound by reciprocal obligations,
preferential treatments to other members within same network. To the Chinese, guanxis are
imperative to doing business but ethical universalism would find gaunxis to be unethical
because they violate transparency norms.
Ethical universalism holds that there are basic moral principles that transcend cultural and
national boundaries. Universalism is the opposite of ethical relativism.
o For example, all countries have rules that prohibit murder, at least of their own people
The difficulty for using moral universalism as a guide for multinational business practices is
that there is little agreement on which moral principles exist in all cultures
o Even when the same principles are used, there is no guarantee that the way the principles
are followed is the same in all societies
Example: even though two countries forbid murder, in a cultural with restricted food and
water resources, the aged may be asked to commit suicide or new born baby girls may be killed
to control population
Practical problems for following either ethical relativism or moral universalism
o Ethical relativism can become “convenient relativism.” – occurs when companies use the
logic of ethical relativism to behave any way they please using the excuse of differences in
cultures
Donaldson argues that multinational companies have a higher moral responsibility than
ethical relativism
Example: Child labor in developing countries, children as young as seven years old are
working producing products for multinational companies
o Extreme moral universalism also has it pitfalls
o The assumption that one can identify universal ethics that all people should follow can lead
to ethnocentrism and what Donaldson calls cultural imperialism
Managers who assume that they know the correct and ethical ways of behaving can easily
view the moral systems of foreign cultures as inferior or immoral, which can be dangerous due
to the money and power multinational companies can wield in developing cultures.
Do you impose your own country’s ethical system everywhere you do business or do you follow
the maxim, “When in Rome, do as Romans do”.
Heidi's Response
Compare and contrast ethical relativism and ethical universalism.
What ethical system should an organization use—your own country’s or that of the host country?
Ethical relativism: Theory that each society’s view of ethics must be considered legitimate and
ethical. This implies that when doing business I a country managers need only follow local
ethical conventions.
Ethical Universalism: Theory that there are basic moral principles that transcend cultural and
national boundaries. The difficulty in using ethical universalism as a guide for MN business
practices is that there is little agreement on which moral principles exist in all cultures, nor is
there a guarantee that all societies use the principles in the same way.
What are some of the dangers of adopting either ethical relativism or ethical universalism when
making decisions?
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Ethical relativism dictates following local ethical conventions, therefore, if a country
accepts bribery as a legitimate way of conducting business, then it is okay for a
multinational manager to follow local examples, even if it would be illegal at home.
Extreme, ethical relativism can become convenient relativism which occurs when
companies use this logic to behave anyway that they please, using the excuse of
differences in cultures (child labor practices).
Extreme moral universalism also has its pitfalls. The assumption that one can identify
universal ethics that all people should follow can lead to a type of ethnocentrism called
cultural imperialism. That is, managers who assume that they know the correct and
ethical ways of behaving can easily view the moral systems of foreign cultures as inferior
or immoral. This is particularly dangerous when the MN is a big and financially powerful
company with subsidiaries located in the developing world.
Question 5:
Ch. 5 Provided by Dana
Discuss each of Porter’s five forces model. What information can a multinational obtain from
Porter’s five forces industry analysis?
To formulate good strategies, managers must understand their industries. Understanding the
industry involves the economic characteristics, and knowing the driving forces of change and
competition in the industry.
Competition - Degree of competition among existing competitors in the industry. Competition
has significant influence on the profitability of the industry and what strategic moves the
players make.
Increased competition comes from such forces as the power of key suppliers and buyers or the
threat of potential new entries into the industry.
Threat of new entrants – companies need to consider the degree to which they may face new
competitor in their industry. Threat of new entrants is generally dependent on barriers to entry.
Bargaining power of buyers – refers to the degree to which buyers of the industry’s products
can influence the competitors within that industry. Buyers are becoming increasingly
sophisticated globally and will have an ever-growing influence on most industries. To remain
competitive, most companies will have to create innovative products and services at low prices.
Bargaining power of suppliers – suppliers tend to have high power if they can exert significant
influence on competitors within the industry. Example: DeBeers controls a significant
proportion of the supply of diamonds and has significant influence on the global diamond
market.
Threat of substitutes – the extent to which competitors are confronted with alternatives for
their products. Example: Netflix pioneered the web based DVD rentals but now Blockbuster and
Amazon.com are offering the same service. In this instance, the threat of substitution is high.
Multinational companies can determine the attractiveness of the various industries in which
they are involved and also to ascertain which forces require attention. This information would
be helpful in setting strategies. Analysis of an industry helps the manger identify the important
characteristics of companies and their products or services that lead to competitive success.
Heidi's Response
Discuss each of Porter/s five forces model.
Michael Porter’s five forces model is a popular technique that can help a multinational firm
understand the major forces at work in the industry and the degree of attractiveness of the
industry.
1. The degree of competition among existing competitors in the industry.
o There is a high degree of competition among auto manufactures globally, and
such competition has significant influence on the profitability of the industry and
what strategic moves the players make.
2. The threat of new entrants
o The threat of new entrants is generally dependent on barriers to entry such as high
start up costs.
3. The bargaining power of buyers
o The degree to which buyers of the industry’s products can influence the
competitors within that industry. Buyers are becoming increasingly sophisticated
globally and will have an ever-growing influence on most industries. To remain
competitive most companies will have to create innovative products and services
at low prices.
4. The bargaining power of suppliers
o Suppliers tend to have high power if they can exert significant influence on
competitors within an industry (scarce resources – diamonds, metals)
5. The threat of substitutes
o The extent to which competitors are confronted with alternatives for their
products (Netflix web-based DVD rental vs. Amazon.com web-based movies on
demand services).
What information can a multinational obtain from Porter’s five forces industry analysis?
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Understand the competition at the domestic and global level.
Examine their industries in which they are involved and also to ascertain which forces
require attention.
Understand industries to assess the dominant economic traits. The dominant economic
characteristics of an industry affect how strategies work. Issues that influence strategy
selection include market size, ease of entry and exit, and whether there are economies of
scale in production.
Monitor driving forces of change in an industry such as: speed of new product
innovations, technological changes, and changing societal attitudes and lifestyles.
Question 6:
Answer provided by Frank
Discuss the conditions when a transnational or international firm is likely to out-compete a
multi-domestic or regional strategist. Contrast this with the opposite situation where the
multi-domestic is most likely to be successful.
Transnational/International more competitive
If most of a company’s competitive advantages come from upstream in the value chain-as for
example, low-cost or high-quality design, engineering, or manufacturing (as with Toyota
example)-a company can often generalize these advantages worldwide. A transnational
strategy or an international strategy becomes the likely choice.
Multi-domestic more competitive
If a firm generates most of its value downstream-in marketing, sales, and service-then it is well
positioned to engage in a multi-domestic strategy, which serves each market individually.
This answer found in Chapter 6 on pages 268 and 269 of text
Heidi's Response
Discuss the conditions when a transnational or international firm is likely to out-compete a
Multidomestic or regional strategist.
Contrast this with the opposite situation where the multidomestic is the most likely to be
successful.
Transnational strategy – gives two goals top priority: seek location advantages and gaining
economic efficiencies from operating worldwide.
 Local advantage means that the transnational co. disperses or locates its value-chain activities
(e.g., manufacturing, R&D, and sales) anywhere in the world where the company can do it best
or cheapest.
 Low cost advantage, top quality
International strategies – sell global products and use similar marketing techniques worldwide.
 They choose not to locate their value-chain activities anywhere in the world. Upstream (R&D,
manufacturing, production, finance) and support activities remain concentrated at home country
headquarters. They believe that concentrated R&D / manufacturing will bring greater economies
of scale and quality. (Down-stream) sales and production may be established in foreign
locations.
Multidomestic strategy – gives top priority to local responsiveness. The Multidomestic strategy
is in many respects a form of differentiation strategy. The company attempts to offer products or
services that attract customers by closely satisfying their cultural needs and expectations.
(Advertisements, packaging, sales outlets, and pricing are adapted to local standards).
 Usually costs more to produce and sell unique products, therefore they charge higher prices.
Regional strategy – attempts to attain some of the economic efficiency and location advantages
of the more global transnational and international strategies combined with some of the local
adaptation advantages of the Multidomestic strategy.
 Manage raw-material sourcing, production, marketing, and support activities within a particular
region.
 This strategy not only allows cost savings similar to those of the transnational and international
strategists but also gives the firm flexibility for regional responsiveness.
 Similar products offered throughout a major economic region.
Question 7:
This answer was provided by Frank
Identify two or three small business barriers to internationalization. If you were a recently
hired manager of a small business facing great opportunities in a foreign market, how would
you go about overcoming these barriers?
Perceived psychic distance to foreign markets:
This represents the extent to which managers believe that foreign markets are just too different
for involvement. Small businesses find that psychic distance to be a significant constraint. When
key managers overcome this belief, a global culture is more likely to develop.
International experience
Managers with little training in foreign languages and little international travel often resist
internationalization. However, managers with previous international experiences, even just
personal travel and sightseeing, have a greater propensity to recognize global opportunities.
Often even a chance meeting during a foreign vacation can trigger an international smallbusiness venture.
Risk aversion
Managers who are unwilling to take risks have difficulty supporting internationalization of the
firm. Going international requires an entrepreneurial spirit and thus the willingness to face
risks.
Overall attitudes toward international strategies
Some managers just find the idea of international strategies too dangerous to the status quo.
Others see international opportunities as beneficial to the company and to their careers. A
global culture will develop when the owner / entrepreneur promotes company values that
support and reward looking for international opportunities.
Possible ways to overcome barriers (you can develop more):
Bring foreign language tutors into the office to help staff communicate in the language of the
target market(s) to help build confidence in the team that they can do it.
Travel to the target region and stay long enough to develop knowledge base of potential valuechain partners. Initially, without commitment to reduce stress or anxiety associated with the
effort.
Educate staff on competitors pursuing similar efforts globally to build desire to compete
globally.
The following barriers are located in Focus on Emerging Markets, page 316 of text
Small Business barriers to internationalization
Geographic distance- the strongest constraint facing small business owners in Australia was the
geographic distance from their markets in Poland and the Czech Republic. Unlike larger firms
that have more managers to send to negotiate or manage foreign operations, smaller
businesses often rely on a few individuals who have to travel more often. Having to travel
frequently to meet geographically dispersed partners can take a toll on the small business.
Virtual team development can alleviate the costs of frequent travel.
Lack of Central and Eastern European managers with decision-making authoritySmall business in Australia often had to deal with the existing Central and Eastern European
staff’s inability to make decisions. Such slow decisions can be very costly since time is critical for
smaller businesses.
Finding a person locally who originally came from the region where the business is located, and
hiring them to go temporarily to the location as an expatriate until they either qualify and
decide to take the job, or are able to develop good candidates for an interview.
Psychic Distance-
Small businesses often have a hard time understanding local market conditions and the local
culture and business etiquette. For example, they may not have access to training and other
resources to such market and cultural knowledge. This is even more significant given that most
of the interviewees in the study agreed that a small business will likely fail if no effort is made
to understand and adapt to such differences.
Business owners need to know the region first hand. They have to go to the sight and see every
inch of it first hand. It’s the only way to evaluate the region properly AND motivate staff to
participate.
Central and Eastern European middle manager’s mindsets
Although larger companies may be able to hire middle managers, train them, and wait until
they acquire modern management techniques, many smaller businesses have to contend with
middle managers who have worked under communism for many years. It is very challenging for
small businesses to do well with such managers.
Identify modern manager training workshops in the area and travel to the location for the
training, inviting the local managers to join you to possible gain additional idea that could
mutually benefit you.
Finding reliable suppliers
Small businesses often find it challenging to locate local suppliers. Decades of state-owned
enterprises have not encouraged private enterprises to flourish. These small businesses face
the challenge of having to find committed suppliers. Dealings with such suppliers and
distributors can be difficult and sometimes unethical.
Be persistent, but not desperate. Trade shows that include foreign entities could be a good place
to make contact with the desired firms.
Bureaucracy and Regulations
Small businesses also have to face the challenge of understanding and addressing governmental
regulations and bureaucracy. While larger companies may have the resources to address such
issues easily, smaller companies often have to contend with government regulations that have
not changed much to address the needs of a market-based economy.
Solution: Communicate with trade regulators in the area to learn the requirements for doing
business in the area. Alternatively, talk to existing firms and find out how their getting it done.
Heidi's Response
Ch. 7
Identify two or three small business barriers to internationalization.
Liabilities of smallness: The challenges facing small businesses in getting access to necessary
resources to internationalize.
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
They have a small staff and must rely on the same individuals to endure grueling travel.
Lack resources to invest in cross-cultural training to better understand the countries in
which they operate (local business and national culture).
Liabilities of foreignness: The disadvantages associated with competing with local firms that
are more familiar with the local context and have better local connections (to resources).
Liabilities of newness: Refers to the operational challenges associated with starting a new
business. These include issues such as financing, recruiting new employees, and marketing the
product.
If you were a recently hired manager of a small business facing great opportunities in a foreign
market, how would you go about overcoming these barriers?
Small business advantage: Fast-moving entrepreneurs can use their competitive advantage of
speed. Being first to market, they can capture significant sales before larger competitors react.
The bureaucratic procedures of larger organizations slow down decision making, often leading
to missed opportunities in the global marketplace.
Question 8:
Submitted by Arshad Abbas
Describe the use of export management as a design structure to go international. When does it become
necessary to use an international division? What are some of the problem associated with international
divisions?
Answer.
When a company first goes international it seldom changes its basic organization structure. Most
companies act first as passive importers. They simply fill orders using the same structures, procedure,
people used in domestic sales. Even with greater involvement in exporting, companies often avoid
fundamental organizational changes. Instead they use other companies to provide them with
international expertise and to run their export operations, or license oversees companies to sell their
product or services.
When exports become a significant percentage of company sales and a company wishes greater control
managers often create a separate export department.
As companies increase the size of their international sales force and setup manufacturing operation in
their countries, the export department often grows into an international division.
Responsibilities of International division:
Manage Export
Manage international sales force
Overseas foreign subsidiaries
Problems:
For multiproduct companies operating in many companies is not considered an effective multinational
structure.
Too many products often overwhelm the capacity of international division.
It is difficult to for the international division to manage as the number of location in different countries
grows.
The international division makes it more difficult to implement international strategies using
worldwide products or location advantages.
Question 9
Ch. 9 Provided by Dana
Discuss some of the key questions multinationals need to ask when picking an alliance partner. Pick
two of these questions and describe how answering these questions can help the alliance succeed.
These questions are seen as “make-or-break questions.” The interview participants advised companies
to avoid the cross-border alliance if the potential partner answers “no” to any of the questions:
Can the partner deliver as required to make the alliance successful?
Can both partners agree on clear goals and objectives for the strategic alliance?
Have there been attempts to minimize potential for competition and friction with the partner? Does
the potential partner have any alliances with your competitors?
Does the potential partner share with you a vision about how the cross-border strategic alliance
might evolve?
Is the partner willing and able to contribute the necessary skills and resources to ensure that the
alliance is successful?
Does the partner have a history of success with previous strategic alliances?
Have you compared the potential partner with other partners in the terms of value creation?
Does the cross-border alliance fit with your vision of your alliance network in the future?
Can both partners agree on clear goals and objectives for the strategic alliance?
Seek strategic complementarity: each partner should have a good understanding of the others strategic
objectives for the venture. Each should know what the other hopes to achieve from the venture, both in
the short and long term. It is not necessary for partners to have the same objectives, they may be
complementary. For instance, if a US company has advanced technology attractive to a Chinese firm,
and this Chinese firm dominates the Chinese market and could provide potential powerful sales and
distribution outlet for a partner, these objectives are complementary. The US Company desires growth
in the Chinese market share and the Chinese company desires access to the other side’s advanced
technology.
Is the partner willing and able to contribute the necessary skills and resources to ensure that the alliance
is successful?
Partners must be willing and able to provide the “right” level of mutual dependency. Companies must
rely on each partner to contribute to the relationship – partners feel a mutual need to supply their
unique resources or capabilities to the strategic alliance. Both partners see their contribution as critical
to the success of the relationship and, ultimately, to the success of the strategic alliance. The best level
of mutual dependency is balanced. With balanced dependency, both companies feel equally dependent
on the outcome of the venture. Building safeguards into the strategic-alliance agreement is a method to
guarantee balance is maintained. Safeguards might include types of “alimony” payments and
restrictions on entering the same business over a specified period. The “alimony” payments would
require payments to the partner if the relationship should break up before a specified period.
Question 10:
What are some of the major factors a company needs to take into consideration when
setting up a global e-business? Why do companies with already establish international
brick and mortar units have an advantage in setting up global e-business compared to
firms with no international presence?
Response submitted by Jorge & Habib:
1.
2.
3.
4.
5.
6.
7.
8.
Leadership: CEO should strongly believe in the benefits of an e-commerce.
Build on current business models and experiment with new e-commerce models.
Meet the challenge of developing an e-commerce organization
Allocate resources to the e-commerce business
Build a superior e-commerce infrastructure as basis of a differentiation strategy
Have an e-commerce strategy
Develop appropriate e-commerce system
Measure success
For e-businesses that also require a physical infrastructure in the countries where they operate,
large multinational firms that enter e-commerce with an existing global presence often have an
advantage. They have resources to establish a physical base in each country of operation to
maintain localized web sites. Smaller firms and firms new to the complexities of multinational
commerce face more challenges in establishing an international presence.
Question 11:
Contrast the positive and negative issues for using short term and international cadre as expatriate
managers. Consider both the organization’s perspective and the career implications for the individual
manager.
Response submitted by Jorge & Habib:
Expatriate managers are sent to explore markets, consider problem areas in the foreign subsidiary
manage projects or even help with transfer of technology.
Difference between Expatriate and Flexpatriate is the service period. For Expatriate it could last more
than a year.
Away from family for long periods of time, expensive assignment for company, some cases the
companies may end up paying the cadre’s taxes. Because of short nature of the assignment, the
expatriate manager does not fully integrate into the local work environment and does not learn how to
fully adapt locally; they may be resented for neglecting the host country culture.
The cost for the organization is high in the form of training, selection and compensation including local
market cost of living, housing, taxes, and benefits.
Bringing expatriate employees home and back into full participation in the company remains a difficult
problem. Expatriates face at least three basic cultural problems when coming home. Many of these
problems relate to the phenomenon called reverse culture shock. Second expatriates and their families
must relearn to communicate with friends and coworkers in the home and organizational cultures. Third,
many need time to adapt to the basic living environment in their home county.
Question 12:
Compare and contrast appraisal and compensation system in the US and more collective cultures.
Discuss legal and cultural problems multinational managers might fact using a collective approach to
these systems in the US and using a US approach in more collective cultures.
Response submitted by Kari:
(In the international version pages:585-595)
Appraisal systems in the US link individual rights, duties and rewards as well as the legal system, so the
system must be highly rational, logical and legal. It should include four elements: performance standards
( management goals regarding acceptable quality and quantity of work); performance measures (for
objective and comparative assessment of standards); performance feedback (one of three usual
methods: tell-and-sell;tell-and-listen; and problem-solving); and human resource decisions
(renumeration, promotion, termination). In the US everyone must be treated equally and fairly. The
advantages of who you are and who you know may cause legal issues in the US. (appraisals must relate
to job and performance; standards must be provided in writing; behaviors being evaluated must be
measurable; appraisal must be discussed openly and an appeals process must be in place.)
Compensation in the US is determined by external (national/local wage, legislation, and unions) and
internal (job importance, company’s ability to pay and employee’s worth to the company) factors. There
are formal policies to determine wages and salaries which are generally determined through
benchmarking. Advancement and higher wages are often reasons to leave a company. Raises are
generally due to merit. Benefits: pension plans, health care, insurance coverage, vacation pay, sick leave
and paid holidays.
In more collective cultures (China, Japan, Korea, Indonesia) the employer and employee accept as fair
and correct that HR decisions take into account personal background characteristics more than
achievement. How old you are and who you are count more than how you perform. Information on
performance is not communicated. In Korea the performance-appraisal is focused on evaluating and
developing the “whole man” including: loyalty, sincerity, and attitude along with job performance.
Compensation in collective cultures: Findings showed that there were no major differences among
collective and individual countries concerning compensation determinations. In Japan, positions have
education and skill requirements. As an employee gains seniority he is more eligible to move up to the
more highly paid and respected positions. Also, seniority counts more for pay raises earlier in a career
and lessens after the age of 45.
In the US, collective approach would be illegal. Only job performance based on standards and defined
expectations can be evaluated. If someone is getting raises (based on strictly age or marital status) and
performing less, discrimination is happening.
In a collective culture, the success of the whole is what is important so individual performance is not
rewarded. You are expected to perform your best so that everyone benefits.
Response submitted by Jorge & Habib:
The US performance appraisal system represents cultural values that espouse links among individual
rights, duties, and rewards, as well as legal system that promotes equal opportunity. The US
performance appraisal system is rooted in an individualistic culture.
In the US, conditions external and internal to the company affect the wages and salaries of workers and
mangers. External factors include local and national wage rates, government legislation, and collective
bargaining. Internal factors include the importance of the job to the organization, the affluence of the
organization or its ability to pay, and the employee’s relative worth to the business.
Collectivist societies are unlikely to use performance-appraisal. This suggests that performance
appraisals may not be seen as important in such societies. In collectivist cultures, age and in-group
membership provide a large component of the psychological contract with the organization; that is the
employer and employee accept as correct and fair that human resource decisions should take into
account personal background characteristics more than achievement.
A country’s economic development, cultural traditions, legal institutions, and the role of labor unions all
affect compensation. In collectivist societies, compensation is tied to seniority, age, loyalty and the less
extent performance.
Since age plays a significant role in compensation for collectivist societies; in US it may pose legal issue
due to age discrimination laws. In US performance plays a significant role in compensation. The use of
pay per performance in collectivist societies will negatively affect the long-term team orientation. Loyalty
and attitude play a stronger role in collective societies. However, this perspective has started to change
in collective societies in favor of pay per performance.
Question 13:
Ch. 13 Provided by Dana
What is the difference between a high and a low context language? Discuss some of the potential
problems a person with a low context language may face when negotiation with a high context
language people.
Edward T. Hall identified an important among the world’s languages based on whether communication
is explicit or implicit. Hall focused on how different cultures use the context or situation in which
communication takes place to understand what people are saying.
Low context (meaning explicit languages) – languages in which people state things directly and
explicitly. The words provide most of the meaning. You do not have to understand the situation in which
the words are used.
Most Northern European languages, including German, English, and the Scandinavian languages are low
context.
People use explicit words to communicate direct meaning.
Most western cultures attach a positive value to clear and direct communication. This is particularly
apparent in negotiations, where low-context languages allow clear statements concerning what a
negotiator wants out of the relationship.
High context (meaning implicit languages) – languages in which people state things indirectly and
implicitly. Communications have multiple meanings that one can interpret only by reading the situation
in which the communication occurs. Cultures can be referred to as being high or low context.
Asian and Arabic languages are among the most high-context languages in the world.
Others include: Japanese, Latin Americans and Italians
In Asian languages, often what is left unsaid is just as important as what is said. Silent periods and the
use of incomplete sentences require a person to interpret what the communicator does not say by
reading the situation.
Arabic introduces interpretation into the language with an opposite tack. Extensive imprecise verbal and
nonverbal communication produces an interaction where reading the situation is necessary for
understanding.
Some potential problems for a low-context language would be translated words that have explicit
meanings to a low-context speaker may have a multitude of meaning to a high-context speaker. When
negotiating between a low-context and high-context speakers, an understanding and acknowledgement
between parties that there may be communication errors is important. Translations may require
contextual interpretations for effective communication.
Question 14:
Summarize the major findings of the Meaning of Work Study. What are some implications
for motivation in different cultures?
P. 689, 690, 695 in text.
Meaning of Work study and the more current WVS/EVS study give us a good beginning picture
of how work values differ in national contexts. They suggest the following conclusions:
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Work is very central in some societies and absorb much of a person's life. In many
industrialized nations that have traditionally seen high work centrality, people may be
changing their views of work. In contrast, less developed societies may have a workforce
that places significant importance on the role of work in their lives.
All people hope to receive certain benefits from work. Benefits people hope to get vary
by national context.
Societies differ in degree they regard work as an obligation.
Many emerging economies that value extrinsic work values also place high value on
intrinsic work values.
First key to successful motivational strategies in multinational companies is
understanding differences among countries in the functions of work, work centrality, and
the priorities given to different job characteristics.
Work centrality = overall value of work in a person's life. Japan scored highest. Britain lower in
comparison.
Cullen and Parboteeah found that the following 5 social institutions have negative effects on
work centrality.
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Extent of socialism
Degree of industrialization
Degree of union strength
Accessibility of Education
Extent of social inequality
Cultural dimension effects on work centrality include:


Uncertainty avoidance and masculinity had negative effect
Individualism had positive effect
Traditional attachment to work typical of most industrialized societies may be changing.
Higher levels of work centrality closely related with average number of hours worked per week
in the country.
Work obligation norms = degree to which work is seen as an obligation or duty to society.
Turkey scored highest. Netherlands lowest.
What do people value in work?
Extrinsic work values = preference for security aspects of jobs such as income and job security.
S. Korea scored highest. Latvia lowest
Intrinsic work values = preference for openness to change job aspects such as autonomy, being
able to take initiative and be creative. Turkey scored highest. Latvia lowest.
Implications for motivation in different cultures:
Application of motivation theories in different cultural context become complicated since people
from different nations expect different rewards from work. The national context helps define
what behaviors at work provide legitimate ways to satisfy needs, and influences reactions to
goal-directed behaviors at work.
Question 15:
As a professional management consultant working for an new international venture you have been
asked to design the appropriate training seminars for a cadre of expatriate managers who are about
to embark on their first 5-year assignments to manage one of the subsidiaries strategically located in
Vancouver, Sao Paulo, Dublin, and Bombay. Describe the type of leadership training you would
provide to the prospective expatriates and the reason for such training. Why is the understanding of
subordinate expectations crucial to effective leadership?
There is no simple formula identifying how to lead in every national context. Following are general
recommendations:
National Context as A Contingency for Leadership Behaviors
Most experts on leadership in multinational companies argue that a contingency perspective is
required
The first step in understanding how to adjust one’s leadership to a multinational situation comes from
understanding what local managers do to lead successfully in their own country
The second step is using this knowledge to modify one’s leadership style appropriately to fit a
particular national context
Exhibit 15.4 Presents a National-Context Contingency Model of Leadership
The National Context Contingency Model of Leadership: An Overview
To be successful, leaders must modify their behaviors or develop particular leadership traits
depending on two key contingencies
The first contingency is the characteristics of their subordinates
The second contingency is the nature of their work setting
In the multinational setting, the basic components of the contingency leadership model (leader
behavior and traits, subordinate characteristics, and the work setting) are affected by the national
context
How leadership behaviors, traits, and contingencies are affected by the national context:
Leader behaviors and traits: National culture, business culture, and social institutions define the array
of preferred and acceptable leader behaviors and traits for managers
Subordinate characteristics: National and business cultures influence worker needs and levels of
achievement motivation
Work setting: Culture and social institutions affect the choices managers make in designing
organizations and subunits
Leadership Traits and Behaviors in the National Context
Different cultures have different images of what distinguishes successful leaders
However, there is also evidence that some leader behaviors and traits are cultural universals
In Germany, for example, it is the engineer and not the manager who is the cultural hero. Ph.D.s are
more important than business degrees
In France, the distinction between management and worker reflects social class distinctions between
cadres and non-cadres
In Holland, a desired leadership trait is modesty in contrast to the trait of assertiveness usually valued
in the United States
In the overseas Chinese family business, a leader is the patriarch or the oldest male head of the family
Latest research on cross-national research in leadership is called GLOBE (Global Leadership and
Organizational Behavior Effectiveness)
The GLOBE study contains insight regarding leadership that can help the multinational manager
develop a leadership style to navigate successfully through a maze of cultural settings
The GLOBE team found that numerous leader behaviors and traits are culturally endorsed in some
societies but not others
Exhibit 15.5 Shows Culture Contingent Leadership Traits and Behaviors
National Context and Subordinate Expectations
National context also affects subordinates’ expectations regarding what a leader “should” do and
what a leader may or may not do
Different leader behaviors communicate the leader’s person or task orientation
Subordinates also accept or reject certain leader behaviors as legitimate prerogatives of leadership
The cultural value of power distance has profound effects on subordinate expectations regarding
leaders
In countries with high power distance values, including many of the Latin and Asian countries,
subordinates expect autocratic leadership
In low power distance countries, such as Sweden and Norway, subordinates expect the leader to be
more like them
Exhibit 15.10 Shows Hofstede’s Ideas Regarding How Subordinates from Countries with Three
Different Levels of Power Distance Respond to Different Leadership Issues
Besides power distance, other cultural values likely affect subordinates’ expectations regarding
leadership styles and behaviors
Hofstede’s work suggests that strong masculinity norms often lead to the acceptance of more
authoritarian leadership, although perhaps this is a paternalistic authoritarianism in the case of the
Japanese

Strong uncertainty-avoidance norms may cause subordinates to expect the leader to provide
more detail in directions
The classic contingency view of leadership and the national-context contingency model of leadership
can provide multinational managers a guide as to when and how to adapt leadership styles to different
national context