UNIVERSITY OF SOUTH AFRICA (UNISA)

DEPARTMENT OF ECONOMIC AND MANAGEMENT

SCIENCES

BACHELOR OF COMMERCE HONOURS IN BUSINESS

MANAGEMENT

Name: Maseehullah

Surname: Ebrahim

Student number: 67031609

Module: INT4801

Assignment: 03

Unique number: 839717

Due date: 08 October 2019

Open Rubric
Table of Contents
INTRODUCTION .......................................................................................................1
Question 01: Critically analyse the important factors that a company that is
involved in global production and supply chain management should consider.
Refer specifically to innovation in dealing with international operations............2

Question 02: You are appointed as an advisor to a marketing director of a

cosmetic company involved in international business in India. The marketing
director believes that the promotional and advertising strategies and policies
that have been proven successful in South Africa will be appropriate for the
Indian market and that these strategies and policies therefore need not be
adapted, which would also result in substantial cost savings. What would you
advise him to do? ....................................................................................................3

Question 03: Taking into account the dynamics of foreign operations, critically
discuss expatriate training and development. .......................................................5

CONCLUSION .........................................................................................................10
REFERENCE LIST ..................................................................................................11
Introduction

A global marketing strategy that views the world's consumers as similar in their tastes
and preferences is consistent with the mass production of a standardized output. By
mass-producing a standardized output, the firm can realize substantial unit cost
reductions from experience curve and other economies of scale. This is basically the
strategy that Levi Strauss adopted until the late 1990s, but as the opening case makes
clear, by then it was no longer working. Ignoring country differences in consumer
tastes and preferences can lead to failure. Thus, an international business's marketing
function must determine when product standardization is appropriate and when it is
not and adjust the marketing strategy accordingly. Moreover, even if product
standardization is appropriate, the way in which a product is positioned in a market,
and the promotions and messages used to sell that product, may still have to be
customized to resonate with local consumers. Human resource management refers to
the activities an organization carries out to use its human resources effectively.2
These activities include determining the firm's human resource strategy, staffing,
performance evaluation, management development, compensation, and labour
relations. None of these activities is performed in a vacuum; all are related to the
strategy of the firm. As we will see, HRM has an important strategic component.

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Question 01: Critically analyse the important factors that a company that is
involved in global production and supply chain management should consider.
Refer specifically to innovation in dealing with international operations.

Globalization refers to the shift toward a more integrated and interdependent world
economy. Globalization has several facets including the globalization of markets and
the globalization of production. The globalization of markets refers to the merging of
historically distinct and separate natural markets into one huge global marketplace.
Falling barriers to cross border trade have made it easier to sell internationally. It has
been argued for some time that the tastes preferences of consumers in different
nations are beginning to converge on some global norm, thereby helping to create a
global market.

In many global markets, the same firms frequently confront each other as competitors
in nation after nation for example Walmart entering African markets. As firms follow
each other around the world, they bring with them many of the assets that served them
well in other national markets, their products, operational strategies, marketing
strategies and brand names, creating some homogeneity across markets. The two
macro factors that underlie the trend toward greater globalization are the decline in
barriers to the free flow of goods, services and capital that has occurred since the end
of World War 2 and technological change, particularly the dramatic developments in
recent decades in communication, information processing and transformation
technologies.

A critical element of a firm's marketing mix is its distribution strategy: the means it
chooses for delivering the product to the consumer. The four main differences between
distribution systems are retail concentration, channel length, channel exclusivity, and
channel quality. In some countries, the retail system is very concentrated, but it is
fragmented in others. In a concentrated retail system, a few retailers supply most of
the market. A fragmented retail system is one in which there are many retailers, no
one of which has a major share of the market. Many of the differences in concentration
are rooted in history and tradition. There is a tendency for greater retail concentration
in developed countries. Three factors that contribute to this are the increases in car
ownership, number of households with refrigerators and freezers, and number of two-

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income households. All these factors have changed shopping habits and facilitated
the growth of large retail establishments sited away from traditional shopping areas.

Channel length refers to the number of intermediaries between the producer (or
manufacturer) and the consumer. If the producer sells directly to the consumer, the
channel is very short. If the producer sells through an import agent, a wholesaler, and
a retailer, a long channel exists. The choice of a short or long channel is in part a
strategic decision for the producing firm. However, some countries have longer
distribution channels than others. The most important determinant of channel length
is the degree to which the retail system is fragmented. Fragmented retail systems tend
to promote the growth of wholesalers to serve retailers, which lengthens channels.
The more fragmented the retail system, the more expensive it is for a firm to make
contact with each individual retailer. But suppose a few hundred wholesalers in the
country supply retailers not only with toothpaste but also with all other personal care
and household products. Because these wholesalers carry a wide range of products,
they get bigger orders with each sales call, making it worthwhile for them to deal
directly with the retailers. Accordingly, it makes economic sense for the firm to sell to
the wholesalers and the wholesalers to deal with the retailers. Because of such factors,
countries with fragmented retail systems also tend to have long channels of
distribution, sometimes with multiple layers.

The rapid development of the Internet in recent years has helped to shorten channel
length. An exclusive distribution channel is one that is difficult for outsiders to access.
Channel quality refers to the expertise, competencies, and skills of established
retailers in a nation, and their ability to sell and support the products of international
businesses. The lack of a high-quality channel may impede market entry, particularly
in the case of new or sophisticated products that require significant point of sale
assistance and after-sales services and support. When channel quality is poor, an
international business may have to devote considerable attention to upgrading the
channel, for example, by providing extensive education and support to existing
retailers and, in extreme cases, by establishing its own channel.

Question 02: You are appointed as an advisor to a marketing director of a

cosmetic company involved in international business in India. The marketing
director believes that the promotional and advertising strategies and policies

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that have been proven successful in South Africa will be appropriate for the
Indian market and that these strategies and policies therefore need not be
adapted, which would also result in substantial cost savings. What would you
advise him to do?

Market segmentation refers to identifying distinct groups of consumers whose

purchasing behaviour differs from others in important ways. Markets can be
segmented in numerous ways: by geography, demography (sex, age, income, race,
education level, etc.), sociocultural factors (social class, values, religion, lifestyle
choices), and psychological factors (personality). Because different segments exhibit
different patterns of purchasing behaviour, firms often adjust their marketing mix from
segment to segment. They may vary the precise design of a product, the pricing
strategy, the distribution channels used, and the choice of communication strategy
from segment to segment. The goal is to optimize the fit between the purchasing
behaviour of consumers in a given segment and the marketing mix, thereby
maximizing sales to that segment.

In a now-classic Harvard Business Review article, Theodore Levitt wrote lyrically about
the globalization of world markets. Levitt's arguments have become something of a
lightning rod in the debate about the extent of globalization. According to Levitt:

• A powerful force drives the world toward a converging commonalty, and that
force is technology. It has proletarianized communication, transport, and travel.
The result is a new commercial reality—the emergence of global markets for
standardized consumer products on a previously unimagined scale of
magnitude.
• Gone are accustomed differences in national or regional preferences. The
globalization of markets is at hand. With that, the multinational commercial
world nears its end, and so does the multinational corporation. The
multinational corporation operates in a number of countries and adjusts its
products and practices to each—at high relative costs. The global corporation
operates with resolute consistency—at low relative cost—as if the entire world
were a single entity; it sells the same thing in the same way everywhere.
• Commercially, nothing confirms this as much as the success of McDonald's
from the Champs Élysées to the Ginza, of Coca-Cola in Bahrain and Pepsi-

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 Cola in Moscow, and of rock music, Greek salad, Hollywood movies, Revlon
cosmetics, Sony television, and Levi's jeans everywhere.
• Ancient differences in national tastes or modes of doing business disappear.
The commonalty of preference leads inescapably to the standardization of
products, manufacturing, and the institutions of trade and commerce.

A product can be viewed as a bundle of attributes. Product attributes must be varied

from country to country to satisfy different consumer tastes and preferences. Country
differences in consumer tastes and preferences are due to differences in culture and
economic development. In addition, differences in product and technical standards
may require the firm to customize product attributes from country to country. A
distribution strategy decision is an attempt to define the optimal channel for delivering
a product to the consumer. A critical element in the marketing mix is communication
strategy, which defines the process the firm will use in communicating the attributes
of its product to prospective customers. A communication strategy is either a push
strategy or a pull strategy. A push strategy emphasizes personal selling, and a pull
strategy emphasizes mass media advertising. Whether a push strategy or a pull
strategy is optimal depends on the type of product, consumer sophistication, channel
length, and media availability.

Question 03: Taking into account the dynamics of foreign operations, critically
discuss expatriate training and development.

Staffing policy is concerned with the selection of employees for particular jobs. This
involves selecting individuals who have the skills required for a particular job. Staffing
policy can be a tool for developing and promoting the desired corporate culture of the
firm. Corporate culture is the organizations norms and value systems. A strong
corporate culture can help a firm implement its strategy.

An expatriate manager is a citizen of one country who is working abroad in one of the
firm's subsidiaries. The HRM function, through its staffing, training, compensation, and
performance appraisal activities, has a critical impact upon the people, culture,
incentive, and control system elements of the firm's organization architecture
(performance appraisal systems are part of the control systems in an enterprise). HRM
professionals have a critically important strategic role. It is incumbent upon them to
shape these elements of a firm's organization architecture in a manner that is

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consistent with the strategy of the enterprise, so that the firm can effectively implement
its strategy. In short, superior human resource management can be a sustained
source of high productivity and competitive advantage in the global economy. At the
same time, research suggests that many international businesses have room for
improving the effectiveness of their HRM function.

Research has identified three types of staffing policies in international businesses: the
ethnocentric approach, the polycentric approach, and the geocentric approach. An
ethnocentric staffing policy is one in which parent-country nationals fill all key
management positions. This practice was widespread at one time. Firms pursue an
ethnocentric staffing policy for three reasons. First, the firm may believe the host
country lacks qualified individuals to fill senior management positions. This argument
is heard most often when the firm has operations in less-developed countries. Second,
the firm may see an ethnocentric staffing policy as the best way to maintain a unified
corporate culture. Many Japanese firms, for example, prefer expatriate Japanese
managers to head their foreign operations because these managers have been
socialized into the firm's culture while employed in Japan. Third, if the firm is trying to
create value by transferring core competencies to a foreign operation, as firms
pursuing an international strategy are, it may believe that the best way to accomplish
this goal is to transfer parent-country nationals who have knowledge of that
competency to the foreign operation.

The need to transfer managers overseas arises because the knowledge that underlies
the firm's core competency resides in the heads of its domestic managers and was
acquired through years of experience, not by reading a handbook. Thus, if a firm is to
transfer a core competency to a foreign subsidiary, it must also transfer the appropriate
managers. Despite this rationale for pursuing an ethnocentric staffing policy, the policy
is now on the wane in most international businesses for two reasons. First, an
ethnocentric staffing policy limits advancement opportunity for host-country nationals.
This can lead to resentment, lower productivity, and increased turnover among that
group. Resentment can be greater still if, as often occurs, expatriate managers are
paid significantly more than home-country nationals. Second, an ethnocentric policy
can lead to cultural myopia, the firm's failure to understand host-country cultural
differences that require different approaches to marketing and management. The
adaptation of expatriate managers can take a long time, during which they may make

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major mistakes. expatriate managers may fail to appreciate how product attributes,
distribution strategy, communications strategy, and pricing strategy should be adapted
to host-country conditions. The result may be costly blunders. They may also make
decisions that are ethically suspect simply because they do not understand the culture
in which they are managing.

A polycentric staffing policy requires host-country nationals to be recruited to manage

subsidiaries, while parent-country nationals occupy key positions at corporate
headquarters. In many respects, a polycentric approach is a response to the
shortcomings of an ethnocentric approach. One advantage of adopting a polycentric
approach is that the firm is less likely to suffer from cultural myopia. Host-country
managers are unlikely to make the mistakes arising from cultural misunderstandings
to which expatriate managers are vulnerable. A second advantage is that a polycentric
approach may be less expensive to implement, reducing the costs of value creation.
Expatriate managers can be expensive to maintain.

A polycentric approach also has its drawbacks. Host-country nationals have limited
opportunities to gain experience outside their own country and thus cannot progress
beyond senior positions in their own subsidiary. As in the case of an ethnocentric
policy, this may cause resentment. Perhaps the major drawback with a polycentric
approach, however, is the gap that can form between host-country managers and
parent-country managers. Language barriers, national loyalties, and a range of cultural
differences may isolate the corporate headquarters staff from the various foreign
subsidiaries. The lack of management transfers from home to host countries, and vice
versa, can exacerbate this isolation and lead to a lack of integration between corporate
headquarters and foreign subsidiaries. The result can be a “federation” of largely
independent national units with only nominal links to the corporate headquarters.
Within such a federation, the coordination required to transfer core competencies or
to pursue experience curve and location economies may be difficult to achieve. Thus,
although a polycentric approach may be effective for firms pursuing a localization
strategy, it is inappropriate for other strategies.

A geocentric staffing policy seeks the best people for key jobs throughout the
organization, regardless of nationality. Lenovo has adopted this staffing policy. This
policy has a number of advantages. First, it enables the firm to make the best use of

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its human resources. Second, and perhaps more important, a geocentric policy
enables the firm to build a cadre of international executives who feel at home working
in a number of cultures. Creation of such a cadre may be a critical first step toward
building a strong unifying corporate culture and an informal management network,
both of which are required for global standardization and transnational strategies.
Firms pursuing a geocentric staffing policy may be better able to create value from the
pursuit of experience curve and location economies and from the multidirectional
transfer of core competencies than firms pursuing other staffing policies. In addition,
the multinational composition of the management team that results from geocentric
staffing tends to reduce cultural myopia and to enhance local responsiveness. A
number of problems limit the firm's ability to pursue a geocentric policy. Many countries
want foreign subsidiaries to employ their citizens. To achieve this goal, they use
immigration laws to require the employment of host-country nationals if they are
available in adequate numbers and have the necessary skills.

Two of the three staffing policies, the ethnocentric and the geocentric, rely on
extensive use of expatriate managers. With an ethnocentric policy, the expatriates are
all home-country nationals who are transferred abroad. With a geocentric approach,
the expatriates need not be home-country nationals; the firm does not base transfer
decisions on nationality. A prominent issue in the international staffing literature is
expatriate failure—the premature return of an expatriate manager to his or her home
country. Expatriate failure represents a failure of the firm's selection policies to identify
individuals who will not thrive abroad.

Mendenhall and Oddou identified four dimensions that seem to predict success in a
foreign posting: self-orientation, others-orientation, perceptual ability, and cultural
toughness. Self-Orientation. The attributes of this dimension strengthen the
expatriate's self-esteem, self-confidence, and mental well-being. Expatriates with high
self-esteem, self-confidence, and mental well-being were more likely to succeed in
foreign postings. Mendenhall and Oddou concluded that such individuals were able to
adapt their interests in food, sport, and music; had interests outside of work that could
be pursued (e.g., hobbies); and were technically competent. Others-Orientation. The
attributes of this dimension enhance the expatriate's ability to interact effectively with
host-country nationals. The more effectively the expatriate interacts with host-country
nationals, the more likely he or she is to succeed. Two factors seem to be particularly

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important here: relationship development and willingness to communicate.
Relationship development refers to the ability to develop long-lasting friendships with
host country nationals. Willingness to communicate refers to the expatriate's
willingness to use the host-country language. Although language fluency helps, an
expatriate need not be fluent to show willingness to communicate. Making the effort to
use the language is what is important. Such gestures tend to be rewarded with greater
cooperation by host-country nationals.

Training can help the manager and spouse cope with both these problems. Cultural
training, language training, and practical training all seem to reduce expatriate failure.
Cultural training seeks to foster an appreciation for the host country's culture. The
belief is that understanding a host country's culture will help the manager empathize
with the culture, which will enhance his or her effectiveness in dealing with host-
country nationals. It has been suggested that expatriates should receive training in the
host country's culture, history, politics, economy, religion, and social and business
practices. English is the language of world business; it is quite possible to conduct
business all over the world using only. Notwithstanding the prevalence of English,
however, an exclusive reliance on English diminishes an expatriate manager's ability
to interact with host-country nationals. As noted earlier, a willingness to communicate
in the language of the host country, even if the expatriate is far from fluent, can help
build rapport with local employees and improve the manager's effectiveness. Those
firms that did offer foreign language training for expatriates believed it improved their
employees' effectiveness and enabled them to relate more easily to a foreign culture,
which fostered a better image of the firm in the host country. Practical training is aimed
at helping the expatriate manager and family ease themselves into day-to-day life in
the host country. The sooner a routine is established, the better are the prospects that
the expatriate and his or her family will adapt successfully. One critical need is for a
support network of friends for the expatriate. Where an expatriate community exists,
firms often devote considerable effort to ensuring the new expatriate family is quickly
integrated into that group. The expatriate community can be a useful source of support
and information and can be invaluable in helping the family adapt to a foreign culture.

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Conclusion

Management development programs are designed to increase managers' overall skill

levels through a mix of ongoing management education and rotation through a number
of jobs within the firm to give them varied experiences. They are attempts to improve
the overall productivity and quality of the firm's management resources. International
businesses increasingly are using management development as a strategic tool. This
is particularly true in firms pursuing a transnational strategy, as increasing numbers
are. Such firms need a strong unifying corporate culture and informal management
networks to assist in coordination and control. In addition, transnational firm managers
need to be able to detect pressures for local responsiveness, and that requires them
to understand the culture of a host country. Management development programs help
build a unifying corporate culture by socializing new managers into the norms and
value systems of the firm. In-house company training programs and intense interaction
during off-site training can foster esprit de corps—shared experiences, informal
networks, perhaps a company language or jargon—as well as develop technical
competencies. These training events often include songs, picnics, and sporting events
that promote feelings of togetherness. These rites of integration may include “initiation
rites” wherein personal culture is stripped, company uniforms are donned (e.g., T-
shirts bearing the company logo), and humiliation is inflicted (e.g., a pie in the face).
All these activities aim to strengthen a manager's identification with the company.

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REFERENCE LIST

Hill, CWL. 2017. International Business: competing in the global marketplace. 11th
edition. Boston: McGraw-Hill Irwin

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