Module 5: Managing Cultures and Decisions 1. Managing Across Cultures One major problem facing many global companies is that they sometimes attempt to manage across cultures in ways similar to those of their home country. As an international manager, you will need to know how to make decisions that are appropriate for the culture in which you are expanding. You will also need to know how to best manage employees in that culture. Click through these cards to learn about the four main philosophies of managing across cultures (Luthans & Doh, 2018): (I could not load them due to Tech issue) Doing business in various parts of the world requires the recognition and understanding of cultural differences and diversity. Some of these differences revolve around the importance the society assigns to time, status, and control of decision-making, personal accomplishment, and work itself. These types of cultural differences help to explain why effective managers in China or Russia often are quite different from those in France, and why a successful style in the United States will not be ideal in Arab countries. Managers across cultures may find that cultures can be quite similar in many ways, but they can also be direct opposites. When working in an MNC, it is important to recognize the similarities and differences and then to find effective ways to manage both. International managers should be familiar with these two terms (Luthans & Doh, 2018): Parochialism • • • This is the tendency to view the world through one’s own eyes and perspectives. This can be a strong pull for managers, as people often have a desire to use what they know and are comfortable with. For example, if a manager from a developed country with state-of-the-art technology moves to a less developed country, it is critical to know how to address the challenges which come with less developed resources or employees with inadequate skill sets. Simplification • This is the process of exhibiting the same orientation toward different cultural groups. • For example, the way a U.S. manager interacts with a French manager is the same way in which he or she behaves with a Chinese manager. Watch this video to learn more about the experience of a manager working with employees from a variety of cultures: https://youtu.be/QIoAkFpN8wQ This video explores the challenges of managing people from different cultures. Different approaches shape how companies adapt and adjust to cultural pressures around the world. Being culturally aware and understanding the culture of employees can increase the effectiveness of managers. 2. Cross-Cultural Differences Understanding cultural differences requires the understanding of two important terms (Luthans & Doh, 2018): Cultural Intelligence (or Cultural Quotient) • A measure of how well a person can adapt and manage effectively in culturally diverse settings Cultural Sensitivity (or Cultural Empathy) • A sense of awareness and honest caring about another individual’s culture These components of cultural awareness enable managers to develop appropriate policies and to determine how to plan, organize, lead, and control differently in a specific international setting. Demonstrating a lack of cultural sensitivity can cost businesses money and opportunities. Another resource for managers to use when learning about cultural differences is the Cultural Mapping Tool. This was developed by Erin Meyer, a professor at INSEAD, a leading international business school. The Culture Map illustrates eight scales that make a difference when managing across cultures. Meyer (2016) developed a set of scales that, when mapped, represent how dozens of business situations arise in the global business world for various cultures. Click through these tabs to learn more about each scale: Communicating: • • • • What is interpreted as “good” communication can vary between cultures. Cultures can be compared along the Communicating scale by measuring the degree to which they are high- or low-context, a metric developed by the American anthropologist Edward Hall. In low-context cultures, good communication is precise, simple, explicit, and clear. Messages are understood at face value. Repetition is appreciated for purposes of clarification, as is putting messages in writing. In high-context cultures, communication is sophisticated, nuanced, and layered. Messages are often implied but not plainly stated. Less is put in writing, more is left open to interpretation, and understanding may depend on reading between the lines (Meyer, 2016). Evaluating: • • • The definition of “constructive criticism” varies greatly between cultures. This scale measures a preference for frank versus diplomatic negative feedback. The French, for example, are high-context (implicit) communicators relative to Americans, yet they are more direct in their criticism. Spaniards and Mexicans are at the same context level, but the Spanish are much more frank when providing negative feedback (Meyer, 2016). Persuading: • • • • How you persuade others and the kinds of arguments you find convincing are deeply rooted in your culture’s philosophical, religious, and educational assumptions and attitudes. The traditional way to compare countries along this scale is to assess how they balance holistic and specific thought patterns. Typically, a Western executive will break down an argument into a sequence of distinct components (specific thinking), while Asian managers tend to show how the components all fit together (holistic thinking). Beyond that, people from southern European and Germanic cultures tend to find deductive arguments (principles-first arguments) most persuasive. In contrast, American and British managers are more likely to be influenced by inductive logic or an applications-first logic (Meyer, 2016). Leading: • This scale measures the degree of respect and deference shown to authority figures, placing countries on a spectrum from egalitarian to hierarchical. • • The Leading scale is based partly on the concept of power distance, first researched by the Dutch social psychologist Geert Hofstede, who conducted 100,000 management surveys at IBM in the 1970s. It also draws on the work of Wharton School professor Robert House and his colleagues in their GLOBE (global leadership and organizational behavior effectiveness) study of 62 societies (Meyer, 2016). Deciding: • • • This scale measures the degree to which a culture is consensus-minded. We often assume that the most egalitarian cultures will also be the most democratic, while the most hierarchical ones will allow the boss to make unilateral decisions. This isn’t always the case. Germans are more hierarchical than Americans but more likely than their U.S. colleagues to build group agreement before making decisions. The Japanese are both strongly hierarchical and strongly consensus-minded (Meyer, 2016). Trusting: • • • • Cognitive trust (from the head) can be contrasted with affective trust (from the heart). In task-based cultures, trust is built cognitively through work. If we collaborate well, prove ourselves reliable, and respect one another’s contributions, we come to feel mutual trust. In a relationship-based society, trust is a result of weaving a strong affective connection. If we spend time laughing and relaxing together, get to know one another on a personal level, and feel a mutual liking, then we establish trust. Many people have researched this topic; Roy Chua and Michael Morris, for example, wrote a landmark paper on the different approaches to trust in the United States and China. Meyers has drawn on this work in developing this metric (Meyer, 2016). Disagreeing: • • Different cultures have very different ideas about how productive confrontation is for a team or an organization. This scale measures tolerance for open disagreement and inclination to see it as either helpful or harmful to collegial relationships (Meyer, 2016). Scheduling: • • • All businesses follow agendas and timetables, but in some cultures, people strictly adhere to the schedule, whereas in others, they treat it as a suggestion rather than as an expectation. This scale assesses how much value is placed on operating in a structured, linear fashion versus being flexible and reactive. It is based on the “monochronic” and “polychronic” distinction formalized by Edward Hall. Visit Dr. Meyer’s website to learn more about the Cultural Mapping Tool and other resources. 3. Challenges of Bias and Perception Screen in the Decision-Making Process The concept of how we perceive something can have a direct impact on all leadership behaviors, decision-making, and the decision-making process as we turn our attention toward issues of bias and decision-making. When focusing on cultural differences, it is normal for some type of bias or perception to be noted. For better or for worse, biases can influence the way managers and leaders make decisions within the organization. However, such biases should not always be seen in a negative light. Biases can certainly assist the leader if they are in alignment with an appropriate decision that is made. Such bias does not necessarily produce negative outcomes if a leader does not allow such personal biases to interfere with proper judgment. For instance, in a court case, a judge may not agree with a verdict that is handed down by a jury. They may not even be in agreement with certain aspects of established law. In fact, a judge may be extremely biased when issuing a ruling. Nevertheless, court justices are required to logically and systematically apply the law to the facts regardless of personal preferences or personal bias. Likewise, a leader who may have personal biases does not necessarily have to allow such biases to negatively affect the decision-making process or decide based on an irrational approach. Watch this video to learn more about engagement and bias in the decision-making process: https://youtu.be/jpLC6P08F-A This video addresses how bias impacts decision-making. A leader who can effectively regulate such biases can prevent negative outcomes of a decision being made. On the other hand, if a leader allows personal bias to negatively affect decision-making within the organization, such biases can certainly be counterproductive and create undesirable outcomes. Sometimes leaders can allow cognitive bias to decide or act within an organization in an illogical or irrational matter. Such a phenomenon is not isolated to individuals only but can also be evident in groups and teams. Key decision-makers must ask the hard questions, even if it appears to be counterintuitive or is opposed to personal or group bias. Exploring alternatives and gathering correct information before deciding is critical to eliminating flawed assumptions. This is especially important if success has been obtained by decisions made in the past but may not be appropriate for the current decision being made. Flawed decisions made through personal bias can be, and often are, a product of overconfidence. Successful managers or leaders need to be careful not to place too much faith in their own knowledge, skills, abilities, or opinions. Receiving objective input from others within the organization or decision-making team can help leaders curb bias tendencies and provide a more objective view before making a strategic decision. 4. Challenges of Cultural Differences on DecisionMaking As a managerial decision-maker or organizational leader, there are specific competencies which will have a direct impact on decision outcomes. As noted, the complexity of leading within a cross-cultural context differs greatly from leading at a local level. Leaders of multinational organizations need to have a solid understanding of how other cultures conduct business, observe laws, and engage in ethical practices that are conducive to a society that may be foreign to the organizational leader. Decision-makers may be required to work simultaneously with a wide array of people who have distinct differences, perspectives, preferences, and norms. Such requirements will demand that the decisionmaker learn to relate to people from other cultures in a diplomatic way. Being able to interact with individuals from varying cultures can most certainly create a challenge for the organizational leader. Decision-makers must have a proper understanding of such cultures to effectively interact in a business environment that can be quite different than their norm. Due to the rapid evolution of the global marketplace, leading within a cross-cultural environment has become necessary to better ensure sustainable competitive advantage. Furthermore, leading within a cross-cultural environment calls for both tasks- and peopleoriented skills. While research is still relatively unclear on which leadership style is most effective at leading multinational organizations, it is generally believed that cross-cultural leadership skills can be of great benefit to the organizational leaders seeking to increase their effectiveness across multinational territories. Over the years, multinational leaders have been required to effectively communicate on many levels and rapidly adapt to the living environment of followers to effectively lead. Also, leading within a cross-cultural environment requires a leader to proactively adjust the leadership approach to effectively accommodate followers, to influence their organizations in the right direction. This requires the leader to respect differences, embrace the diversity of followers, and harness the strength of the contribution that such a diverse environment presents. Review this chart to learn more about components necessary to promote the success of cultural decision-making. Multinational Organizations • • • Different Cultures • • • Effective Leadership • • • These organizations have gone to great lengths to train mana personnel, so they can effectively lead in the environment of Companies can have a strong advantage if they are able to ef constituents or customers by having a thorough mastery of cu ability to accommodate them respectfully. Key decision-makers, especially those who represent the orga should be thoroughly knowledgeable of the culture or society Failing to understand what is expected in a different culture c Multinational organizations that invest in training programs ab position themselves to avoid the pitfalls of offending partnerin meet the needs of organizational constituents. Several studies have been conducted to provide resources for a broader and richer understanding of cultural integration wh multinational organization’s goals, objectives, and overall miss Although there has not been the selection of a single leadersh be effective in multinational organizations, researchers agree leadership characteristics that can be effective within the cros As noted by Northouse (2018), certain leadership behaviors h success. Such leaders are generally considered a bit more charismatic leadership. Because of this, they can effectively inspire and m broad spectrum of cross-cultural environments. Global Leaders • Moreover, they can effectively motivate and encourage follow of productivity and performance based on strongly held core v entire organization. • Global leaders appear to take a stronger team-oriented leade been established as highly effective. Because of this, the global leader can emphasize team buildin among team members who, in turn, affect the organization a As noted by Northouse (2018), there is also a strong indicatio participative leadership practices. By doing so, global leaders and implementing decisions and thereby creating a sense of c This is considered a very important approach to creating an e and a sense of ownership across the organization. Northouse (2018) also recognized that global leaders emphas is considerate, compassionate, generous, and respectful. • • • • (Cited from material within the module) Information about culture and leadership has also been applied in very practical ways. It has been used to build culturally sensitive websites, design new employee orientation programs, conduct programs in relocation training, improve global team effectiveness, and facilitate multinational merger implementation, to name a few. These examples clearly indicate the wide range of applications for research on culture and leadership in the workplace (Northouse, 2018). References Bazerman, M. H., & Moore, D. A. (2013). Judgment in managerial decision making (8th ed.). Hoboken, NJ: John Wiley and Sons. Luthans, F., & Doh, J. P. (2018). International management: Culture, strategy, and behavior (10th ed.). McGraw-Hill Education, New York, NY. Meyer, E. (2016). The culture map.New York: Public Affairs. Northouse, P. (2018). Leadership: Theory and practice (8th ed.). Thousand Oaks, CA: Sage Publishing. © 2018 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part. Chapter 5 Managing across Cultures © 2018 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part. Learning Objectives • Examine the strategic dispositions that characterize responses to different cultures • Discuss cross-cultural differences and similarities • Review cultural differences in select countries and regions, and note some of the important strategic guidelines for doing business in each © 2018 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part. Strategic Predispositions Ethnocentric • Firm allows values and interests of the parent company to guide strategic decisions Polycentric • Company makes strategic decisions tailored to suit the cultures of the countries where the MNC operates Regiocentric • Firm blends its own interests with those of its subsidiaries on a regional basis Geocentric • Company integrates a global systems approach to decision making © 2018 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part. Table 5.1 – Orientation of an MNC under Different Profiles Source: From Balaji S. Chakravarthy and Howard V. Perlmutter, “Strategic Planning for a Global Business,” Columbia Journal of World Business, Summer 1985, pp. 5–6. © 2018 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part. Table 5.1 – Orientation of an MNC under Different Profiles (continued 1) Source: From Balaji S. Chakravarthy and Howard V. Perlmutter, “Strategic Planning for a Global Business,” Columbia Journal of World Business, Summer 1985, pp. 5–6. © 2018 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part. Table 5.1 – Orientation of an MNC under Different Profiles (continued 2) Source: From Balaji S. Chakravarthy and Howard V. Perlmutter, “Strategic Planning for a Global Business,” Columbia Journal of World Business, Summer 1985, pp. 5–6. © 2018 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part. Globalization Imperative • Belief that one worldwide approach to doing business is key to efficiency and effectiveness • Effective multinational companies (MNCs) should make efforts to address local needs – Regional strategies can be used effectively to capture and maintain worldwide market niches © 2018 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part. Need for Unique Strategies for Different Cultures • Diversity of worldwide industry standards • Continual demand by local customers for differentiated and locally-sourced products • Difficulty of managing global organizations • Local units should be allowed to use their own abilities and talents unconstrained by headquarters © 2018 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part. Delivery of Marketing Message Nationality Nature of advertising Germans • Factual and rational • Spots feature a standard family of two parents, two children, and grandmother French • Avoidance of reasoning or logic • Emotional, dramatic, and symbolic • Spots are viewed as cultural events and reviewed as if they were literature or films British • Laughter is valued • Typical broad, self-deprecating commercial mocks both the advertiser and consumer © 2018 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part. Challenges Faced by MNCs • Staying abreast of local market conditions and not assuming that all markets are same • Knowing the strengths and weaknesses of its subsidiaries and assisting them in addressing local demands • Giving more autonomy to the subsidiary © 2018 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part. Barriers to Cross-Cultural Management Parochialism • Tendency to view the world through one’s own eyes and perspectives Simplification • Process of exhibiting the same orientation toward different cultural groups © 2018 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part. Table 5.2 – Six Basic Cultural Variations Note: *Indicates the dominant U.S. orientation. Source: Adapted from the work of Florence Rockwood Kluckhohn and Fred L. Stodtbeck. © 2018 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part. Table 5.2 – Six Basic Cultural Variations (continued) Note: *Indicates the dominant U.S. orientation. Source: Adapted from the work of Florence Rockwood Kluckhohn and Fred L. Stodtbeck. © 2018 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part. Cross-Cultural Similarities • Russia and U.S. – Traditional management, communication, human resources, and networking activities – Organizational behavior modification interventions © 2018 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part. Cross-Cultural Similarities (continued) • Korea and U.S. – Organizational commitment relates to employees’ position in the hierarchy, tenure in their current position, and age – Commitment increases with positive perceptions of organizational climate © 2018 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part. Cross-Cultural Differences Examples Human resource management differences Mexico • Concept of an hourly wage plays a minor role Austria and Brazil • Employees with one year of service are automatically given 30 days of paid vacation Some jurisdictions in Canada • Legislated pay equity between male- and femaleintensive jobs Japan • Compensation levels are determined by age, length of service, and educational background United Kingdom • Employees are allowed up to 40 weeks of maternity leave, and employers must provide a governmentmandated amount of pay for 18 of those weeks Majority of large Swedish companies • Head of human resources is on the board of directors © 2018 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part. Approaches for Formulating Effective Compensation Strategies in Different Clusters Examples Strategies Pacific Rim countries • Incentive plans should be group-based Japan, Hong Kong, Malaysia, the Philippines, and Singapore • High salaries should be paid to senior-level managers Italy and Belgium • Higher salaries should be paid to local seniorlevel managers Portugal and Greece • Profit-sharing plans are effective Denmark, the Netherlands, and • Personal-incentive plans are useful Germany Great Britain, Ireland, and the United States • Compensation plans should provide opportunity for earnings, recognition, advancement, and challenge © 2018 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part. GLOBE Project • Provides an extensive breakdown of: – How managers behave – How different cultures can affect the perspectives of managers © 2018 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part. Business in China • Primary criterion – Technical competence • Value is placed on punctuality, patience, guanxi networking, and reciprocity – Guanxi: Good connections © 2018 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part. Business in Russia • Building personal relationships with partners is important • Working with local consultants can be valuable • Gift-giving is considered ethical when engaging in business transactions © 2018 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part. Business in India • India has become a desirable market because of unsaturated consumer markets with cheap labor and production locations • Bureaucratic restrictions have been lifted to attract foreign investment and raise economic growth rate © 2018 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part. Business in France • Social interactions are affected by class stereotypes • French organizations tend to be highly centralized and have rigid structures • Management is autocratic in nature © 2018 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part. Business in Brazil • Brazilian businesspeople tend to have a relaxed work ethic • Face-to-face interaction is preferred • Patience is key when managing business © 2018 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part. Business in Arab Countries • Arab businesspeople: – Follow a fatalistic approach to time – Tend to attach a great deal of importance to status and rank • Business-related discussions may not occur until the third or fourth meeting © 2018 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part. Review and Discuss 1. Define the four basic predispositions MNCs have toward their international operations 2. If a locally based manufacturing firm with sales of $350 million decided to enter the EU market by setting up operations in France, which orientation would be the most effective: ethnocentric, polycentric, regiocentric, or geocentric? Why? – Explain your choice © 2018 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part. Review and Discuss (continued 1) 3. In what ways are parochialism and simplification barriers to effective crosscultural management? – Give an example for each case © 2018 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part. Review and Discuss (continued 2) 4. Many MNCs would like to do business overseas in the same way that they do business domestically – Do research findings show that any approaches that work well in the U.S. also work well in other cultures? • If so, identify and describe two © 2018 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part. Discussion ( 1 ) Understanding the environments in which multinational enterprises (MNEs) operate is a major topic of interest in international business. The institutional, cultural, political and economic characteristics of different countries and their impact on business activity have received substantial attention in the research (Brouthers,2013). There are two key influences that provide incentives for MNEs to demonstrate their commitment to working with as a strategic objective when operating in migration origin countries and other countries like Saudi Arabia. The level of stakeholder pressure experienced by the firm, and the extent of the firm’s embeddedness in local social networks. These two influences result in four distinct MNE adoption profiles, ranging from firms that have no incentive to adopt peacebuilding as a strategic objective to firms that are likely to have a strong incentive to do so. Leaders of multinational enterprises should take into account the cultural contexts of their foreign business operations, and seek to align their operations to their foreign business home culture so as to avoid multiple cultural challenges that can cripple and destroy their entire business operations and create a state of entropy. Managing operations abroad is costly because of language barriers, legal structures, differences in time zones, long-distance communication, the cost of shipping goods abroad, and the extra payments for expatriate personnel. MNEs must take decisions to weigh these costs with the benefits in order to decide whether operating across countries is profitable. MNEs must have an ownership advantage, location advantage, or internalization advantage in order to reap the benefits of multinational production. In order to have an ownership advantage, a firm leaders must decide to own some asset (either tangible or intangible) that is valuable abroad. Additionally, being a multinational enterprises allows firms to access markets abroad that they otherwise would not be able to (Bücker et al,.2014) Additionally, MNEs can access cheaper production costs by producing in other countries. Finally, some organizations may be hesitant to outsource their work to third-party companies. Instead, by internalizing their production they can protect their “secret formulas” and avoid licensing production to other companies. Behavioural economics, allied with recent psychological discoveries provides relevant insight into the nature of business decisions, with particular relevance for international business. For instance, behavioural scholars argue that cognitive biases and judgement heuristics often influence economic decision making, and they tend to be stronger in circumstances where decision-makers are faced with a specific threat, e.g. the uncertainty associated with entering unstable and distant international markets (Dovidio et al,2012). References: Brouthers, K.D. (2013), “A retrospective on: institutional, cultural and transaction cost influences on entry mode choice and performance”, Journal of International Business Studies, Vol. 44 No. 1, pp. 14-22. Bücker, J. J., Furrer, O., Poutsma, E., & Buyens, D. (2014). The impact of cultural intelligence on communication effectiveness, job satisfaction and anxiety for Chinese host country managers working for foreign multinationals. The International Journal of Human Resource Management, 25(14), 2068-2087. Dovidio, J. F., & Fiske, S. T. (2012). Under the radar: how unexamined biases in decision-making processes in clinical interactions can contribute to health care disparities. American journal of public health, 102(5), 945-952. Discussion ( 2 ) Coca-cola faced difficulty in the state of Kerala as it was accused of using water that contained pesticide in its production plant and was banned in that state. Coca-Cola has to shut down its Palakkad plant and had been asked to pay $47 million in damages caused due to damage to the environment. Coca-Cola surfed 12% decline of its Pepsi faced similar challenges at it was too accused of the high amount of pesticide levels in its products. It was found by the Center for Science and Environment that from sample some bottles contain harmful level of pesticides even though British labs rejected their harmful effects on the body. The subsidiary of coca-cola HCBPL was found guilty of depleting the underground water and dumping harmful waste to nearby places. Coca-Cola ran numerous ads to build its brand image again but failed to satisfy ministers of health and environmental groups. Coca-cola also fought legal battles which produced mixed results. Even though the ban was lifted, they were asked to pay a huge sum for polluting the environment. The company opened “The energy and research institute “(TERI) to study specifically the allegations of water contamination and exploitation in India. It undertook various initiatives to show its support for water conservation and issues in various countries. For example, improving energy efficiency, renewing and returning one-third of underground water. Coca-cola took various rainwater harvesting initiatives to enhance its brand image. It formed a partnership with the world wildlife fund to reduce its water usage and recycle almost all of the water used in its production. To summarize Coca-Cola ran many CSR initiatives to turn around its tarnished image and regain customer trust. Pepsi decided to run celebrity brand ads to retain its popularity and brand recognition. They also continued to invest in corporate social responsibility to take the moral high ground and retain its brand image. Some of these CSR efforts were directly related to teaching better farming methods, water conservation techniques to villagers. Before doing business in any country, Coca-Cola should thoroughly do a PESTEL analysis. Here coca- cola failed to properly assess the political environment of India. They were very late in responding to allegations and therefore should hire an experienced and effective risk management team. They need a public relations department too, who would respond and communicate effectively during periods of crisis and maintain trustworthy relationships with consumers during its normal operations. All the CSR activities should make an actual difference rather than just seen as damage control by consumers. A genuine commitment or a promise could help a long way in building a positive image. • • References: Karam, Asaad. (2013). Cultural Impact on Brand: A Case Study on Coca Cola’s Cultural Issues in India. Cultural Impact on Brand: A Case Study on Coca Cola’s Cultural Issues in India. AAFP, “Coca-Cola Grant Launches AAFP Consumer Alliance Program,” October 6, 2009, https://ift.tt/lVz4d9I (accessed February 25, 2011).

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