Impact of LG Expatriate Managers

By

Shashank S H,

Prasidha & Sachin

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BEFORE WE START

I. Who are Expatriates?

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E. Cohen (1977) defines Expatriate Manager as someone managing

others ( including host country nationals ) on assignment in a foreign

country for a period of at least 6 months

II. Why does a company need Expatriates?

• Needed by companies expanding to new markets

(market share, Business performance etc.)

• Help Transfer Knowledge ,Skills & Technology

• To fill temporary shortages

• To create the “corporate glue” that binds an international

organisation together

CASESTUDY

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OBJECTIVE

I. Rapid buildup and rapid termination of Expats

at LG.

II. Gain and lose of LG through their 3 years of

experimentation.

III. Study the Impact of Expats at LG.

IV. Lesson’s learnt from LG experience.

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FLASHBACK• Started in the year 1947 as ‘Lucky Goldstar’ in

South Korea.

• Grew under Confucian Culture.

• In the year 2007, Mr.Nam Yong took over as

the CEO of LG electronics.

• 60% of its manufacturing done outside Korea

and 4/5th of its revenue came from overseas.

• Ranked 5th globally and had market share of

6.8%.

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• Mr.Nam Yong wanted to bring LG to #1

position and to be the trendsetter in the

market.

• To pool in new talents and expertise across

the globe with different cultural background.

• To study the culture of different countries

and prepare a strategy to approach niche

markets.

REQUIREMENT OF EXPATS

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• Dermot Boden - (Irish), CMO of LG electronics

- decided to give more sophisticated image,

( with high-end products such as cellphone co-branded with fashion house

PRADA and washing machine costing over $1500 or more )

- had organized approach & hired a single advertising agency in London

• Tom Linton – Chief Procurement Officer

- Reshaped the purchasing system, that save the company hundreds of

millions of dollars.

• Didier Chenneveau (Swiss) – Chief Supply Chain Officer

- Streamlined the Supply Chain that was quite chaotic.

- His Goal was to merge everything into a single global system

EFFECTS OF EXPATS

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Reasons

• Korean Culture

• Confucianism

• Geert Hofstede’s model of national culture

• Culture Shock

• Expected surge did not materialise (Revenue)

Termination of Expats

Korean Confucian Culture

• Confucianism also known as Ruism is an Ethical Philosophical

system developed from the teachings of the Chinese Philosopher

Confucius

• Korean Confucianism derived from the Chinese and probably

more influenced by it than the Chinese in way they do

business.

• Emphasis on :

1. Value of Collective Group Harmony

2. Respect for authority &

3. The all important nature of Networking and Relationships

" Make friends first and Client second"

• Though this precisely what is required in Global Business ,

Koreans find it hard to practice the same values in a Multi-

Cultural environment within their organizations as seen in this

case. 9

LG Management Philosophy

“Jeong-do Management”

• LG company follows the “Jeong-do

Management” derived from

Confucianism that emphasises on

- people oriented management

- constantly developing their

business skills & exploring new

business practices

However studies have shown & as seen in this case

Koreans are poor at cultural Integration particularly when it comes to

incorporating westerners in their corporate hierarchies (Weisbart, 2010)10

Cultural Dimensions

Geert Hofstede’s Model of National Culture

• High Power Distance

• Strict stratification as a norm

• Employees rely on instructions

from superiors

• Status Mixing is not

Encouraged

• Collectivism

• Difficulty in speaking to the boss

• Songsil- Sacrifice personal

interest

• Group Bonding- over look

mistakes

• Uncertainty Avoidance

• Inquisitive about personal life

• New ideas and Innovations

need time

• “Subtle and effective negotiator”11

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Cultural Dimensions

• Long Term Orientation

• Decisions and Negotiations

take Longer Time

• Strategies - Long Term Profit

and Growth

• Establishing a Relationship

prior to Conducting Business

• Nurturing Orientation

• Ethnocentric approach

• Expressing ones Real

Feeling is Not Encouraged

DHR International Seoul, Special Survey on Diversity in Korea, July 2013.

Results of Survey carried on Expats in Korea

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Expected Surge Did Not Materialise

Total Worldwide Revenue of LG Electronics from 2009 to 2014

(in billion U.S. dollars)*

http://www.statista.com/statistics/220847/revenues-of-lg-electronics-since-2005/

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What would have LG probably lost during

& after 3 Yrs Experience with Expats ?

DURING

AFTER

• Culture Devastation

• Conflicts

• Teams Disruption

• The Secret is out

• Negative Impression

• Loss of Competitive Advantage

Lessons Learnt from LG Experience for Other Mangers

Managerial Implications

1.) Why do to think LG did not renew the contract of Expats & pursued a different

executive strategy using Korean executives or Why did the Experiment Fail ?

2.) What Skills do you believe Managers need to develop before entering into expatriate

experience?

3.) What do you think, LG - the company and the expatriate managers could have done

differently to enhance the likelihood of being successful in this venture ?

Result of “Global Management Myopia” – Global, Regional & Technological

Build “Multicultural” or Global Competencies or the ability to ADAPT

The DMIS & MBI Model – To Achieve Higher Performance

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Global Management Myopia

• Global Myopia - EXPATS like Boden ( Irish ) & Didier (Swiss) tried to impose Globally

accepted norms that they felt would improve business. Lost sight of local challenges &

opportunities upon which LG Company’s success was built

• Regional Myopia - “Ethnocentrism" a belief that one's culture is superior. Koreans felt their

management practices were superior losing sight of bigger opportunities facing the firm

globally

• Technological Myopia – Mangers also run the risk of getting carried away with advanced

technology - overlook, ignore & often offend the organizations most precious resource – “It’s

People”

Eliminating this Short sightedness can improve the efficacy of Mangers

entering into a Expatriate Experience

“Short Sightedness" - LG Expats as well as the Korean

counterparts failed to see one or more aspects of the

company’s larger objectives

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Developing the Right Skills

• Expatriate Mangers need to develop the right competence and Understand what works

• What differentiates Effective Global Managers is a not as much their managerial skills

alone but a Combination of Managerial + Multicultural competence

Managerial Competence

Planning, organizing,

coordinating, controlling

Multicultural Competence

Understanding and working

effectively across cultures

Global Management

Skills

Integration and application of

management and cross-cultural

skills

.Multicultural Competence – (“Cultural Intelligence” or “Global Mindset”)

• Multicultural component is more than just being polite or empathetic to people from other

cultures - it’s getting things done through people by capitalizing on cultural diversity

• The Effective Cross-Cultural Manager, needs to have an open-minded and active

learning approach to engage with the other cultures & break any Communication

Barrier that exists 18

Multicultural Competence

Cognitive

Motivational

Behavioural

• Ability to motivate self &

people across cultures - Efficacy,

Perseverance. Goals & Effort

• Ability understand values,

beliefs, patterns & Harness it

into a team effort to achieve

the Overall GOAL

• How a Person understands &

acts in the world - Brain based

skills to carry out tasks

• Procedural Knowledge & Meta

Strategies

• People who are Cognitively

Strong are effective Risks Takers

& Inspires others Creativity

Facets Of Cultural Intelligence – (Earley,2002)

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Make ethical decisions

Span

Boundaries

Build community

through change

Mindful

communication

Creating and building

trust

Interpersonal skills

Attitudes and Orientations

Global Mindset

Cognitive complexity Cosmopolitanism

Integrity Humility Inquisitiveness Hardiness

Threshold traits

System

skills

Foundation Global knowledge

Level 1:

Traits

Level 2:

Attitudes &

Orientations

Level 3:

Interpersonal skills

Level 4: Systems skills

Building Blocks of Global Competencies

(Bird & Osland, 2004)

Provide a Picture of How

combination of the Skills,

Attitudes & traits helps in

Cross Cultural

Management

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MAP

Understand the

Differences

- Cultural Orientations

Framework

BRIDGE

Communicate across

the Differences

- Prepare

- Decenter

- Recenter

INTEGRATE

Manage the

Differences

- Build Participation

- Resolve Conflicts

- Build on Ideas

Value &

Utilise the

Differences to

achieve High

Performance

DMIS & MBI Model – To Achieve Higher Performance

Experience of Difference

Denial Defense Minimisation Acceptance Adaptation Integration

Ethnocentric Stages Ethnorelative Stages

Bennett’s DMIS (Development Model of Inter Cultural Sensitivity)

MBI Model - From Lane, Distefano & Maznevski (2000)

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What would you Recommend ?

(ii) Right Selection Criteria - Choosing the Right

candidates having the Knowledge and Experience

as well as the Right Competencies and Skill Set

( for example Korean American or Korean

Europeans to start out with, then bring in needed

expertise )

(iii) Invest in Extensive Cross Cultural &

Language Training

Investment made in trying to learn why things

happen the way they do eventually pays

dividends.

Education and Cross Cultural training prior to

taking up an expatriate post would prevent

bottlenecks & speed up the process. Also lead to

Competitive Advantage

(i) Identifying the Right type of

Orientation

A Geocentric Approach or Regiocentric

Approach ?

Global view / orientation that is applied

across the globe might not be best

approach as seen in this case where a

more “Regio-centric approach (if

operations are in Korea) and Polycentric

Approach in subsidiary units spread

across the globe

To LG the Company

To Mangers entering into Expatriate

Experience

• Build Global Competencies – Global Knowledge, Right Attitude & Orientations (Global

Mindset), Cross Cultural Interpersonal Skills & Systems Skills22

Lessons Learnt from LG Experience for Other Mangers

What are the

Ethical Implications ?

When two or more cultures meet to conduct business it is Imperative

that each representative needs to be well informed about the social

mores, folkways and values of the business partner prior to any face-

to-face meeting

Inability to Adapt or Adjust can result in cultural conflicts which have

devastating effects on the company and its performance as seen in this case

Koreans as well as the Westerners should respect & understand each other

values & beliefs & work cohesively to achieve the overall objectives

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Conclusion

• The Korean Business Culture are at significant crossroads with a great need to find

the Right Balance between Traditional Values and Modern Management practice.

• Role of an expatriate is to maintain the organizational structure and philosophy of

the MNC however they need to follow the rules and regulations of work within the

host country.

• Global business leaders need to have Global Mindset or Cultural Intelligence.

• Managers who can cohesively work and adapt to cross cultural environments is

valuable asset to a company that is expanding globally.

• Need to have a Holistic view of Cross Cultural Management Performance

Understanding , Managing & Exploiting the Cultural Differences could

spell the difference between Success and Failure of a Global Businesses24

Group Discussion Feedback

Please jot down bullet points for the

Discussion Questions & Hand it over

THANK YOU !!25

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Findings - Group Discussion

References

• Richard M.Steers, Luciara Nardon, Carlos J.Sanchez-Runde (2013). Management

Across Cultures, Developing Global Competencies, Cambridge University Press

• Earley, P. C. (2002). A Theory of Cultural Intelligence in Organisations. Research in

Organizational Behavior. B. M. Staw and R. Kramer. Greenwich, CT, JAI Press. 24:

271-299.

• Bird, A. and J. S. Osland (2004). Global Competencies: An Introduction. The Blackwell

Handbook of Global Management: A Guide to Managing Complexity. H. W. Lane, M. L.

Mazneveski, M. E. Mendenhall and J. McNett. Malden, MA, Blackwell: 57-80.

• Evan Sinar, Ph.D. (2013). Cognitive Skills in Senior Leaders : Focused Influence Critical

Consequences. White Paper, DDI - Development Dimension International

• Lane,H.W.,DeStefano,J.J.,&Mazneveski,M.L. (2000). International Management

Behavior 4th Edition Oxford : Blackwell

• Bennett, M.J.,(1986). Towards Ethnorelativism: A Development Model of Intercultural

Sensitivity. In R.M. Paige (Ed.), Cross – cultural Orientation: New Conceptualisations

and Applications (pp 27-69) New York: University Press of America.

• Camille Percheron, (2013), Special Survey on Diversity in Korea, DHR International,

Seoul

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