07 paper 1 the international dimension of management and business

8/4/2019 07 Paper 1 the International Dimension of Management and Business

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Paper # 1

“What’s International Management”

Presented to:

Teacher Alejandro Sarmiento Galeano

By:

Laura Rodríguez Navarro

Fundación Universidad Del Norte

Business School

International Business Program

International Management

Barranquilla, August 10th Of 2011




What is International Management?

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WHAT IS INTERNATIONAL MANAGEMENT?

Mainly because of the globalization process that started few decades ago, the international

sphere of management has become a major challenge for governments, institutions and

organizations of any kind. This explains why the area of International Management is

becoming more important within the academic and business setting.

Since the beginning of the 90s, some of the most influential authors in the subject have

discussed that globalization challenges our patterns because it takes companies, citizens and

policy makers to see reality as a growing interdependent network (Bartlett and Ghoshal,

1989). These arguments are focused on the “free market” and “free trade” ideologies,

which are the base for a global economic integration (Levine and Renelt, 1992). And in this

context of economy liberation, most of the international expansion of companies of

different sectors, sizes and countries has taken place.

Defining in few words what International Management is, could limit the scope of what it

covers. For that reason, in the following lines will be presented the most relevant aspects

and concepts that academics and business men have used through the last years in the

international dimension of management.

Nowadays, there is a vast number of companies with international projection which, due to

the actual world context and market demands, have been forced to follow an

internationalization process. The decision of entering the international arena has taken them

to trace and define an international strategy, which traditionally has two main dimensions:

Pressures for cost reduction and local responsiveness (Hill, 2000).

However, International Management is not only about making decisions around these two

dimensions mentioned above. There are several areas of special interest that must be taken

into account, for example, it is very important to know the infrastructures, business

practices, and trade dynamics in each country. Additionally, international exchange rates

and the legal, political and sociocultural dimensions cannot be ignored. Firms that are able

to deal with those issues, previously mentioned, have a great potential to spread their

marketing reach, to increase their market share, to improve efficiency and profitability, to

reduce costs, and to enjoy of competitive advantages in each market (Porter, 1998).

Prospective international directors must realize that there is not a single way to go into a

foreign market. According to Tanure and González (2006), executives must choose theproper model of entrance according to the level of resources, market potential, and

experience operating internationally they have, trough export/import activities, independent

agents, licensing and franchising contracts, joint ventures, or direct investments through

acquisitions or Greenfields.

Contemporary international managers must be trained in aspects of international business

that generally do not concern domestic leaders. They must demonstrate a higher level of





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skills: being multilingual, sensitive to cultural differences and knowledgeable about current

global management theory, psychology, and their practical applications.

It is of great relevance that managers involved in international business recognize the

opportunities available in different countries. They must be great observers to recognize

potential, as well as immediate opportunities in each market where the company has

presence.

In addition to this, in the studies of International Management, there are three approaches:

ethnocentric, polycentric, and geocentric, which are parts of the EPG model developed by

Perlmutter (1969). Each has its pros and cons and none of them can be successfully

developed, unless managers understand completely what is involved in their applications.

According to the author, in the ethnocentric approach management uses the same style and

practices that work in their own headquarters or home country. This situation can cause

devastating mistakes for the firm, because what works in Brazil, may not necessarily work

in India. There are many cases in which companies made serious mistakes when they

attempted to transfer their management styles to foreign countries.

Doing a contrast to the ethnocentric management approach, Perlmutter proposes the

polycentric management theory, where the management staff and the workforce abroad are

formed with a great number of local individuals as possible. The theory states that local

people know best the host country's culture, language, and work ethic. For that reason, they

are the ideal candidates for management. This can work well in some countries, but in

others workers may not always have the necessary background to lead the business.

The third style of international management is the geocentric approach that states that the

best individuals, regardless the country origin, should be placed in management positions.

They must solve problems with logic and common sense, for that reason specific culturalknowledge is not necessary. This is the most difficult of the three approaches to be applied,

since executives must be capable to understand the local and global implications of

business.

On the other hand, we have Daniels, Radebaugh and Sullivan (2004), authors and experts in

the field that affirm companies operating internationally must determine the organizational

structure that best fits with their strategies, products and resources. These firms may

operate functionally (by task), geographically (by country or region), or by product. Or,

they just could combine organizational strategies. Again, international managers will make

those determinations based on a company analysis basis. In addition to this, Tanure and

González (2006) present some models or stages of internationalization that reflect the way

in which management thinking has been developed over time: the International, the

Multinational, the Global and the Transnational stage.

This last stage is the ideal model, where resources are dispersed in the network; subsidiaries

are specialized and each unit contributes to the global operation results. The development is

created as a whole for the world.





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Regardless of the organizational strategy, international managers must pay particular

attention to human resources issues, since there are vast cultural differences among citizens

of different countries. Those differences help to build the organizational culture and

influence business practices, explaining why the cultural dimension plays a very important

role in this subject. For that reason, Hofstede (1980) talks about the five culture

dimensions: Power Distance, Individualism, Masculinity, Uncertainty Avoidance andLong-term Orientation; which have been determinant for the decision making process in

companies with international presence.

There is an important point about all this related with International Management. If in the

last decades hundreds of companies have started their internationalization processes,

where’s the competitive advantage for them, taking into account that their competitors are

internationalized too? Where are the gains for internationalization? In the non-explored

potential of dispersed knowledge is the answer, because it is bigger than ever and it is

growing. There’s a dispersion of new knowledge that is unexplored, because most of today’s MNCs don’t have the structures and processes to explore it, they just know how to

screen to the world what they’ve learned in their markets. A multidomestic firm tends tohave a large stock of knowledge within its subsidiaries that can be leveraged to build global

gain, but few take advantage of that dispersed knowledge to create global innovations. For

that reason, we have the Metanational Challenge, concept developed by Doz, Santos and

Williamson (2001). Metanational companies don’t base their competitive advantage in their home countries, but in the exploration of potential specialized knowledge points around the

world.

The authors say: “Today, the challenge for global corporation is to innovate by learning

from the world. Tomorrow’s winners will be companies that create value by searching out

and mobilizing untapped pockets of technology and market intelligence that are scattered

across the globe”. And finish emphasizing in: “Today the main challenge is not to penetrateworld markets but to learn from the world”.





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References

Barlett, G. and Ghoshal, S. 1989. Managing Across Borders. London: Century.

Daniels, J. Radebaugh, L. and Sullivan, D., 2004. Negocios Internacionales. Translated

from English by Enrique Quintanar. México: Prentice Hall PTR.

Doz, Y. Santos, J. and Williamson, P. 2001. From Global to Metanational: How

Companies Win in the Knowledge Economy. Boston: Harvard Business Press.

Hill, C. 2007. International Business. 6th ed. New York: McGraw Hill.

Hofstede, G. 1980. Culture’s consequences. London: Sage.

.

Levine, R. and Renelt, D. 1992. A sensitivity analysis of cross-country growth regressions. American Economic Review, 82 (4), p. 942-963.

Perlmutter , H.1969. The Tortuous Evolution of the Multinational Corporation. Columbia

World Journal of Business. P. 9-18.

Porter, M. 1998. Competitive Advantage: Creating and Sustaining Superior Performance.

New York: Free Press.

Tanure, B. and Gonzalez, R. 2006. Gestão internacional. São Paulo: Editora Saraiva.

07 paper 1 the international dimension of management and business

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