International Business Management Strategies - Research Paper Example

Running Head: GLOBAL BUSINESS MANAGEMENT Global business management (Name) (Course) (University) Date of presentation: Lecturer: Introduction The future of international businesses’ success and competitiveness is dependent upon the ability to change management strategies and adapt their resources to market changes. The kind of strategies that multinational corporations adopt to maintain global market competitiveness is usually developed in conjunction with their human resource management practices (Westney & Zaheer, 2003). To be effective, these practices need to be concordant with the organization’s strategic business objectives. Given that they are primarily the people in organizations who design, develop and sell products, majority of transnational organizations have realized that effective management of human resources is vital to success and growth in international markets. Moreover, sensitivity to the host country’s culture and respect for local rules and political regulations are essential for success of international business management in the long run. Accordingly, international business managers are faced with a host of challenges: they must maintain focus with the overall strategic plans for their organizations while balancing the political, social, cultural and legal constraints of the host countries. This research paper examines various international management strategies that have been proposed in several theoretical literatures. The paper also addresses various constraints and opportunities that impact on the success on international business management efforts. International Business Management Strategies Strategies employed to manage businesses at the international level will vary greatly and so are the processes, structures, systems and practices employed to develop those strategies. The process of developing the right strategies for effective international business management can be challenging, given the complexity of demands that the international market environment places upon international businesses (Tallman & Yip, 2003). These complexities often arise as multinational corporations struggle to integrate their resources and abilities to effectively respond to the market needs of the host countries (local responsiveness). Generally, international business management strategies have been conceptualized in terms of Multinational Corporation’s life cycle. This conceptualization is consistent with product generations and marketing phases of developing multinational corporations. According to the lifecycle model, international business management strategies encompass the interplay between local market responsiveness and global integration. According to Westney and Zaheer (2003), four such important strategies are ethnocentric, polycentric, region-centric and geocentric strategies. The ethnocentric strategy of international management is applied to consolidate the parent company’s control of subsidiaries as it embarks on international expansion efforts. Ethnocentric multinational corporations staff their subsidiaries with expatriates (usually drawn from the mother country) in majority of key management positions. Moreover, in these organizations, the parent company plays a key role in decision making. Helen (2006) has noted that ethnocentric international business strategy is commonly applied in start-up businesses or when special technical skills that cannot be found in the host country are required. Nevertheless, legal and financial limitations are quite high for companies that use this management strategy (usually expatriates are very expensive and foreign employment laws may be unfavorable). For this management strategy to be effective, ethnocentric multinational strategies encourage their expatriate managers to transfer the parent company’s corporate culture and philosophy to host countries. It, however, becomes the case that expatriates working in ethnocentric multinational corporations end up adopting the host country’s culture (Tallman & Yip, 2003). An obvious reason for this is that the business values and culture of foreign subsidiaries are more influenced by the host country’s business culture than that of the parent company. In polycentric management, multinational corporations employ host countries’ nationals to manage subsidiaries although this is usually done with some degree of coordination from the headquarters. For companies that use the polycentric management strategy, host nationals manage most of the foreign subsidiaries and expatriates are rarely used. An important advantage of this international management strategy is that host country nationals are not bound by cultural or language barriers and are less expensive that expatriates. The disadvantage is that parent company employees do not get a chance to gain the valuable management perspective of working abroad. Similarly, host country nationals do not get a chance to be acquainted to the parent company’s organizational culture and philosophy (Helen, 2006). An international management strategy that is closely related to polycentric culture is region-centric strategy. In this international management strategy, nationals from the host country and third countries are recruited and developed regionally. Usually, regions are consistent with political boundaries such as the Middle East or the European Economic Community. In multinational corporations that employ region-centric strategy, integration and communication systems are highly sophisticated such that the parent company cannot exercise effective control over all the regions (Begley & Boyd, 2003). As the case with the polycentric perspective, there is a high likelihood of host nationals advancing their careers at the regional level since they are given the opportunity to manage subsidiaries independently. In the geocentric international management strategy, companies desire a total integration of all their foreign subsidiaries. In this case, managers of foreign subsidiaries are expected to promote a global corporate culture (Phatak, Bhagat & Kashlak, 2004). Multinational corporations that use the geocentric strategy to manage their international businesses usually staff positions across the world with no regard for the recruited employees’ nationalities. One of the most important features of geocentric management strategy is that it promotes cultural diversity on the global level, which is essential for successful international organizational management. Geocentric multinational corporations usually view themselves as integrated parts of a global organization and operate under a unified corporate culture. These organizations are the most complex and often difficult to manage, at least as far as international organizational management is concerned (Songhua, 2006). One reason for this complexity is that these organizations require a lot of communication and integration across cultural and national boundaries. In managing these organizations, the mother company’s cultural values are socialized across cultures and used as a control strategy since flexibility is allowed to accommodate differences in national cultures (Begley & Boyd, 2003). Managers and employees in foreign subsidiaries quickly learn and internalize the values, norms ad expectations of the parent company. This is done through frequent contacts with the parent company as well as other foreign subsidiaries, which are necessitated through visits and transfers to various foreign locations (Phatak, Bhagat & Kashlak, 2004). Through training from both the parent company and subsidiaries, the geocentric strategy of international management permits the greatest level of decentralization and local discretion while at the same time maintaining global integration. The strategy enables multinational corporations to develop a strategic socialization process through which employees gain increased understanding of the company’s global networks. In the process, employees learn to de-emphasize national cultures by replacing them with integrated corporate cultures (Shapiro, 2002). From the perspective of human resource management, geocentric multinational corporations enjoy a highly diversified talent pool because they select and recruit employees from several cultural and national backgrounds (Mike, 2004). This human resource management approach is very strategic and an important source of competitive advantages for geocentric enterprises. Despite these advantages, geocentric multinationals have many political, legal and cultural constraints which may prevent them from realizing the perceived economies of scale (Alan & Hodgetts, 2006). As such, it is the responsibility of managers in host countries to develop business practices which are consistent with the cultural, political and legal constraints of the host countries. It is also important to involve employees in decision making when formulating and implementing strategic plans. Involvement of employees can be an important source of recommendations for effective global business management (McFarlin & Sweeney, 2006). Personal Challenges Facing Managers in Global Perspectives Managing organizations in a foreign country is quite challenging. Managers working in foreign countries are often faced with tremendous personal difficulties and are required to be sensitive to cultural, legal and political subtleties. International managers have to ensure that they provide effective leadership, good motivation for employees and effective control mechanisms. Research studies (Charles, 2007; Helen, 2006) have shown that cultural contexts, personal traits of managers and managing styles adopted by organizations are directly related to success of organizations in the global perspective. When managing organizations in a foreign country, the need for personal learning and growth is crucial. According to Ball and Geringer (2006), managers can be more effective in foreign assignments if they are not only culturally flexible but also able to adapt easily to new situations as well as ways of doing business. Although the tendency to be ethnocentric (the belief that one’s country’s culture is superior) is a normal human condition, research studies indicate that the most successful managers come from countries where people have learnt to value cultural diversity (Begley & Boyd, 2003). For instance, English and Chinese are consistently spoken side by side in Singapore. As such, an American managing a firm in Singapore will have to interact with Chinese speakers more frequently and this requires familiarity with the Chinese language. In another example, Dutch managers have to learn French, English and Germany in addition to Germany so as to effectively manage businesses in their economically developed neighbors. Charles (2007) has noted that people who have grown up without exposure to this kind of diversity have little chances of becoming effective global managers. According to Alan and Hodgetts (2006), majority of managers who work in foreign countries experience feelings of disorientation, confusion and anxiety, which result from being immersed in unfamiliar cultures. This becomes worse when the foreign culture has a completely different language, foods, religious beliefs and ways of doing business, all of which result in culture shocks. Culture shocks can be avoided by giving managers exposure to foreign countries early in their careers. This can be through foreign trips and holidays. Moreover, managers need to be able to correctly interpret the culture of the foreign country in which they work and develop necessary cultural sensitivity so as to be effective in managing international organizations (McFarlin & Sweeney, 2006). Another important challenge facing management of international organizations is the difficulties of building and sustaining strong workforces. International managers not only have to adjust to shifting workforce structures and demographics but must also add new workforce capabilities to revitalize their organizations while investing in new technologies to contend with competitors (Ball & Geringer, 2006). In addition, managers in foreign countries have to cope with political pressures, threats of violence, government corruption and other contextual issues that cannot be solved in the absence of support systems available in the home countries. For instance, government censorship and other forms of political pressures forced Google to close its business in China a few years ago. Conclusion One of the major aims of effective international business management is to promote practices which are consistent with the organization’s global business strategy. This enables companies to be effective in resource utilization and hence able to gain economies of scale associated with global business operations. For this to be realized, managers in international enterprises should develop strategies for responding to the local conditions of the host country’s business environment. This means showing respect and valuing the host country’s cultural, legal and political systems. Most multinationals rapidly integrate into the host country’s host countries cultures by employing local nationals. This strategy brings diversity which enables the business to quickly learn the local ways of doing business. Accordingly, it is important that recruitment is conducted worldwide so as to widen the talent pool and to increase the company’s global orientation, flexibility and adaptability. Despite the cultural differences across countries, it is important that management practices by subsidiaries are constituent with the parent company’s overall strategic plan. Rather than focusing merely on economic success, international management efforts should focus more on local responsiveness and global integrations as the two variables have a direct impact on organizational success and growth in the long run. References Alan M. and Hodgetts, M. (2006). International Business: A Strategic Management Approach, 4th Edition, Prentice Hall. Ball, M and Geringer, M., (2006). International Business, 11th Edn. McGraw-Hill Companies, Inc. Begley, T. M. & Boyd D. (2003). “The Need for a Corporate Global Mind-Set”, MIT Sloan Management Review; 44(2), p. 25-32. Charles, E. (2007). International Business: Competing in the Global Marketplace, 6th ed. Helen D. (2006). International Management, 5th edn, New York: Prentice-Hall. McFarlin, S. & Sweeney, P. (2006). International Management. Strategic Opportunities and Cultural Challenges. Houghton: Mifflin Company. Mike W. P. 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