MODULE I

GLOBALIZATION
Introduction

International Commerce has long history in the evolution of the world’s economy,
dating back to biblical times more than three thousand years ago and extending through
the Roman Empire, the Dark Ages, the Middle Ages, and the post-Industrial Revolution
era (see McCormick 2001, Findlay and O’Rourke 2007, and Helpman 2011, Chapter.1).
Despite this long history, imports plus exports as a share of the value of output were
very small until the beginning of the nineteenth century.

The drivers of globalization changed overtime. According to Baldwin (2016), in

the first phase, referred to as the “first unbundling,” declining costs of shipping drove the
process. In the second phase, which Baldwin called the “second unbundling,” the costs
of situating parts of the manufacturing process in different geographical areas declined;
and this encouraged the fragmentation of the production process across international
borders. AS a result, global supply chains emerged. The third phase, or the “third
unbundling,” still in its infancy, is dominated by declining costs of face-to-face interaction
between individuals in different parts of the world. Although the first and second phases
of globalization were characterized by a rapid expansion of merchandise trade, the
second phase was also marked by a rapid expansion of trade in services, especially
business services.

Globalization has been blamed for rising inequality in both rich and poor
countries, and antiglobalization demonstrations have become a common feature at
international meetings, be they of the World Bank, the International Monetary Fund, the
G7 countries, or the G20 countries. A heated debate about the merits and faults of
globalization has arisen in recent decades. Yet the view of many protagonists in this
debate are not based on evidence. Moreover, many political activists espouse as
caricature of the economic arguments in favor of free trade.

Indeed many professional economists, such as Bhagwati (1988,2002), do

emphasize the aggregate gains from trade as a central tenet in the design of
international institutions whose goal is to benefit all. But at the same time, economists
understand that the aggregate benefits may not be equitably distributed among the
world’s citizens (Helpman, 2011). Scholars have studied the costs and benefits of
globalization, and the policies for promoting or taming it, in order to form an educated
viewpoint. These types of studies require extensive knowledge of economics, including
theoretical and empirical methods. Forming a reliable opinion on these matters is really
not feasible without such research. Once the findings of these studies are
comprehended, however, it is possible to draw dependable conclusions about desirable
policies and outcomes. Of course, not everyone is like to draw the same conclusions,
mostly because different individuals may place distinct weights on various costs and
benefits.
Learning Objectives
At the end of this module, the student shall be able to:
1. Assess and explain the implications of globalization in industries, firms and
business communication.

2. Identify concepts of International Relations and International Business

Environment

3. Identify major global changes in technology.

Lesson 1

Concepts of Globalization

An Official Definition of Globalization by the World Health Organization (WHO)

According to WHO, globalization can be defined as “the increased
interconnectedness and interdependence of people and countries. It is generally
understood to include two inter-related elements: the opening of international borders to
increasing fast flows of goods, services, finance, people and ideas; and the changes in
institutions and policies at national and international levels that facilitate or promote
such flows.”

What Is Globalization in the Economy?

According to the Committee for Development Policy (a subsidiary body of the

United Nations), from an economic point of view, globalization can be defined as:
“(…) the increasing interdependence of world economies as a result of the growing
scale of cross-border trade of commodities and services, the flow of international capital
and the wide and rapid spread of technologies. It reflects the continuing expansion and
mutual integration of market frontiers (…) and the rapid growing significance of
information in all types of productive activities and marketization are the two major
driving forces for economic globalization.”

What Is Globalization in Geography?

In geography, globalization is defined as the set of processes (economic, social,

cultural, technological, and institutional) that contribute to the relationship between
societies and individuals around the world. It is a progressive process by which
exchanges and flows between different parts of the world are intensified.

Globalization and the G20: What is the G20?

The G20 (Group of Twenty) is a global bloc composed by the governments and
central bank governors from 19 countries and the European Union (EU). Established in
1999, the G20 gathers the most important industrialized and developing economies to
discuss international economic and financial stability. Together, the nations of the
G20 account for around 80% of global economic output, nearly 75 percent of all global
trade, and about two-thirds of the world’s population.

G20 leaders get together in an annual summit to discuss and coordinate pressing
global issues of mutual interest. Though economics and trade are usually the
centerpieces of each summit’s agenda, issues like climate change, migration policies,
terrorism, the future of work, or global wealth are recurring focuses too.  Since the G20
leaders represent the “political backbone of the global financial architecture that
secures open markets, orderly capital flows, and a safety net for countries in
difficulty”, it is often thanks to bilateral meetings during summits that major international
agreements are achieved and that globalization is able to move forward.

The joint action of G20 leaders has unquestionably been useful to save the
global financial system in the 2008/2009 crisis, thanks to trade barriers removal and the
implementation of huge financial reforms. Nonetheless, the G20 was been struggling to
be successful at coordinating monetary and fiscal policies and unable to root out tax
evasion and corruption, among other downsides of globalization. As a result of this and
other failures from the G20 in coordinating globalization, popular, nationalist movements
across the world have been defending countries should pursue their interests alone or
form fruitful coalitions.

How Do We Make Globalization More Just?

The ability of countries to rise above narrow self-interest has brought

unprecedented economic wealth and plenty of applicable scientific progress. However,
for different reasons, not everyone has been benefiting the same from globalization and
technological change: wealth is unfairly distributed and economic growth came at huge
environmental costs. How can countries rise above narrow self-interest and act together
or designing fairer societies and a healthier planet? How do we make globalization more
just?

According to Christine Lagarde, former President of the International Monetary

Fund, “debates about trade and access to foreign goods are as old as society itself” and
history tells us that closing borders or protectionism policies are not the way to go, as
many countries doing it have failed.

Lagarde defends we should pursue globalization policies that extend the benefits
of openness and integration while alleviating their side effects. How to make
globalization more just is a very complex question that involves redesigning economic
systems. But how? That’s the question.

Globalization is deeply connected with economic systems and markets, which,

on their turn, impact and are impacted by social issues, cultural factors that are hard to
overcome, regional specificities, timings of action and collaborative networks. All of this
requires, on one hand, global consensus and cooperation, and on the other, country-
specific solutions, apart from a good definition of the adjective “just”.

When Did Globalization Begin? The History of Globalization

 For some people, this global phenomenon is inherent to human nature. Because
of this, some say globalization begun about 60,000 years ago, at the beginning of
human history. Throughout time, human societies’ exchanging trade has been growing.
Since the old times, different civilizations have developed commercial trade routes and
experienced cultural exchanges. And as well, the migratory phenomenon has also been
contributing to these population exchanges. Especially nowadays, since traveling
became quicker, more comfortable, and more affordable.

This phenomenon has continued throughout history, notably through military

conquests and exploration expeditions. But it wasn’t until technological advances in
transportation and communication that globalization speeded up. It was particularly after
the second half of the 20th century that world trades accelerated in such a dimension
and speed that the term “globalization” started to be commonly used.

Examples of Globalization (Concept Map)

Because of trade developments and financial exchanges, we often think of

globalization as an economic and financial phenomenon. Nonetheless, it includes a
much wider field than just flowing of goods, services or capital. Often referred to as
the globalization concept map, some examples of globalization are:

1. Economic globalization: is the development of trade systems within

transnational actors such as corporations or NGOs;

2. Financial globalization: can be linked with the rise of a global financial system
with international financial exchanges and monetary exchanges. Stock markets,
for instance, are a great example of the financially connected global world since
when one stock market has a decline, it affects other markets negatively as well
as the economy as a whole.
 3. Cultural globalization: refers to the interpenetration of cultures which, as a
consequence, means nations adopt principles, beliefs, and costumes of other
nations, losing their unique culture to a unique, globalized supra-culture;

4. Political globalization: the development and growing influence of international

organizations such as the UN or WHO means governmental action takes place at
an international level. There are other bodies operating a global level such as
NGOs like Doctors without borders or Oxfam;

5. Sociological globalization: information moves almost in real-time, together with

the interconnection and interdependence of events (global events) and their
consequences. People move all the time too, mixing and integrating different
societies;

6. Technological globalization: the phenomenon by which millions of people are

interconnected thanks to the power of the digital world via platforms such as
Facebook, Instagram, Skype or Youtube.

7. Geographic globalization: is the new organization and hierarchy of different

regions of the world that is constantly changing. Moreover, with transportation
and flying made so easy and affordable, apart from a few countries with
demanding visas, it is possible to travel the world without barely any restrictions;

8. Ecological globalization: accounts for the idea of considering planet Earth as a

single global entity – a common good all societies should protect since the
weather affects everyone and we are all protected by the same atmosphere. To
this regard, it is often said that the poorest countries that have been polluting
the least will suffer the most from climate change.

The Benefits of Globalization

Globalization has benefits that cover many different areas. It reciprocally

developed economies all over the world and increased cultural exchanges. It also
allowed financial exchanges between companies, changing the paradigm of work. Many
people are nowadays citizens of the world. The origin of goods became secondary and
geographic distance is no longer a barrier for many services to happen. Let’s dig
deeper.

The Engine of Globalization – An Economic Example

The most visible impacts of globalization are definitely the ones affecting the
economic world. Globalization has led to a sharp increase in trade and economic
exchanges, but also to a multiplication of financial exchanges.
 In the 1970s world economies opened up and the development of free trade
policies accelerated the globalization phenomenon. Between 1950 and 2010, world
exports increased 33-fold. This significantly contributed to increasing the interactions
between different regions of the world.

This acceleration of economic exchanges has led to strong global economic

growth. It fostered as well a rapid global industrial development that allowed the rapid
development of many of the technologies and commodities we have available
nowadays.

Knowledge became easily shared and international cooperation among the

brightest minds speeded things up. According to some analysts, globalization has also
contributed to improving global economic conditions, creating much economic wealth
(this was, nevertheless, unequally distributed – more information ahead).

Globalization Benefits – A Financial Example

At the same time, finance also became globalized. From the 1980s, driven by
neo-liberal policies, the world of finance gradually opened. Many states, particularly the
US under Ronald Reagan and the UK under Margaret Thatcher introduced the famous
“3D Policy”: Disintermediation, Decommissioning, Deregulation.

 Disintermediation. In economics, this is the removal of intermediaries in a

supply chain, or “cutting out the middleman”. Instead of going through
traditional distribution channels, which had some type of intermediate (such as
distributor, wholesaler, broker, or agent), companies may now deal with every
customer directly, for example via Internet. One important factor is a drop in
the cost of servicing customers directly. This can also happen in other
industries where distributors or resellers operate and the manufacturer wants to
increase profit margins, therefore missing out intermediaries to increase their
margins.

Disintermediation initiated by consumers is often the result of high market

transparency, in that buyers are aware of supply prices direct from the
manufacturer. Buyers bypass the middlemen (wholesalers and retailers) to buy
directly from the manufacturer, and pay less. Buyers can alternatively elect the
purchase from wholesalers. Often, a business-to-consumer electronic
commerce (B2C) company functions as the bridge between buyer and
manufacturer.

To illustrate, a typical B2C (Business-to-Customer)supply chain is

compose of four or five entities (in order):
1. Supplier
2. Manufacturer
3. Wholesaler
4. Retailer
 5. Buyer

It has been argued that the Internet modifies the supply due to
market transparency:
1. Supplier
2. Manufacturer
3. Buyer
Source: Disintermediation-ProEducate
https://www.proeducate.com/courses/Finance/Disintermediation.pdf

 Decommissioning. To decommission as well is to permanently fill it in

and seal it so it cannot be used anymore. When a facility such as an oil well is
authorized by the government, the license normally includes a legal obligation for
the entity to decommission the facility at the end of its useful life. After its useful
life, a well will be decommissioned. To decommission a well is to permanently
fill it in and seal it so it cannot be used anymore.
Source:Collins:decommissionhttps://www.collinsdictionary.com/dictionary/english/
decommission
 Deregulation. Economic deregulation occurs when the government removes
or reduces the restrictions in a particular industry to improve business
operations and increase competition. The government removes certain
regulations when businesses complain about how the regulation impedes their
ability to compete. This is usually the case when there is global competition in a
particular industry.

During the 1970s in the United States, there were many banking
regulations and restrictions on interest rates, from the lending end as well as from
the deposit end. Banks were also limited geographically; they were not allowed to
have branches in more than one state. Today these regulations are no longer in
place; there are no longer ceilings on interest rates and deposits, and banks can
operate not just across state lines, but globally.

Because of this deregulation, the banking industry is now more

competitive, benefiting both the consumer and the organizations. Some other
industries in which deregulation often occur are utilities, telephone, the airline
industries, and transportation in general.

Benefits of Deregulation

Deregulation has many advantages, which vary by industry. Some of the

main advantages are:

 It generally lowers barriers to entry into industries, which assists with improving
innovation, entrepreneurship, competition, and efficiency; this leads to lower
prices for customers and improved quality.
  Producers have less control over competitors and this can encourage market
entry.
 It benefits the economy because taxpayers no longer have to pay for the
expenses of operating regulatory agencies. This means that consumers have
more discretionary income, and therefore more money to spend on other items.
 It helps to increase choices and lower prices for consumers.
 Businesses can formulate their own strategies and processes, without
government interference.
 It allows market forces to control the industry; the customer is king in a market
economy.
Source:Study.com.https://study.com/academy/lesson/economic-deregulation-definition-
benefits-example.html

The idea was to simplify finance regulations, eliminate mediators and break down
the barriers between the world’s financial centers. And the goal was to make it easier to
exchange capital between the world’s financial players. This financial globalization has
contributed to the rise of a global financial market in which contracts and capital
exchanges have multiplied.

Globalization – A Cultural Example

Source: GraphicMama-https://www.google.com

Together with economic and financial globalization, there has obviously also
been cultural globalization. Indeed, the multiplication of economic and financial
exchanges has been followed by an increase in human exchanges such as migration,
expatriation or traveling. These human exchanges have contributed to the development
of cultural exchanges. This means that different customs and habits shared among local
communities have been shared among communities that (used to) have different
procedures and even different beliefs.

Good examples of cultural globalization are, for instance, the trading of

commodities such as coffee or avocados. Coffee is said to be originally from Ethiopia
and consumed in the Arabic Region. Nonetheless, due to commercial trades after the
11th century, it is nowadays known as a globally consumed commodity. Avocados, for
instance, grown mostly under the tropical temperatures of Mexico, the Dominican
Republic or Peru. They started by being produced in small quantities to supply the local
populations but today guacamole or avocado toasts are common in meals all over the
world.

At the same time, books, movies, and music are now instantaneously available
all around the world thanks to the development of the digital world and the power of the
internet. These are perhaps the greatest contributors to the speed at which cultural
exchanges and globalization are happening. There are also other examples of
globalization regarding traditions like Black Friday in the US, the Brazilian Carnival or
the Indian Holi Festival. They all were originally created following their countries’ local
traditions and beliefs but as the world got to know them, they are now common
traditions in other countries too.

Why Is Globalization Bad? The Negative Effects of Globalization

Globalization is a complex phenomenon. As such, it has a considerable influence

on several areas of contemporary societies. Let’s take a look at some of the main
negative effects globalization has had so far.

The Negative Effects of Globalization on Cultural Loss

Apart from all the benefits globalization has had on allowing cultural exchanges it
also homogenized the world’s cultures. That’s why specific cultural characteristics from
some countries are disappearing. From languages to traditions or even specific
industries. That’s why according to UNESCO, the mix between the benefits of
globalization and the protection of local culture’s uniqueness requires a careful
approach.

The Economic Negative Effects of Globalization

Despite its benefits, the economic growth driven by globalization has not been
done without awakening criticism. The consequences of globalization are far from
homogeneous: income inequalities, disproportional wealth and trades that benefit
parties differently. In the end, one of the criticisms is that some actors (countries,
companies, individuals) benefit more from the phenomena of globalization, while others
are sometimes perceived as the “losers” of globalization. As a matter of fact, a recent
report from Oxfam (global movement of people who are fighting inequality to end
poverty and injustice) says that 82% of the world’s generated wealth goes to 1% of the
population.
SON
The Negative Effects of Globalization on the Environment
 Many critics have also pointed out that globalization has negative effects on the
environment. Thus, the massive development of transport that has been the basis of
globalization is also responsible for serious environmental problems such as
greenhouse gas emissions, global warming or air pollution.

At the same time, global economic growth and industrial productivity are both the
driving force and the major consequences of globalization. They also have big
environmental consequences as they contribute to the depletion of natural
resources, deforestation and the destruction of ecosystems and loss of biodiversity
(biological variety and variability of life on Earth, measure of variation at the genetic,
species, and ecosystem level). The worldwide distribution of goods is also creating a big
garbage problem, especially on what concerns plastic pollution.

Globalization, Sustainable Development, and CSR

Globalization affects all sectors of activity to a greater or lesser extent. By doing

so, its gap with issues that have to do with sustainable development and corporate
social responsibility is short.

By promoting large-scale industrial production and the globalized circulation of

goods, globalization is sometimes opposed to concepts such as resource savings,
energy savings or the limitation of greenhouse gases. As a result, critics of
globalization often argue that it contributes to accelerating climate change and that it
does not respect the principles of ecology. At the same time, big companies that don’t
give local jobs and choose instead to use the manpower of countries with low wages (to
have lower costs) or pay taxes in countries with more favorable regulations is also
opposed to the criteria of a CSR approach.

Moreover, the ideologies of economic growth and the constant pursuit of

productivity that come along with globalization, also make it difficult to design a
sustainable economy based on resilience.

On the other hand, globalization is also needed for the transitioning to a more
sustainable world, since only a global synergy would really be able to allow a real
ecological transition. Issues such as global warming indeed require a coordinated
response from all global players: fight against CO2 emissions, reduction of waste, a
transition to renewable energies. The same goes for ocean or air pollution, or ocean
acidification, problems that can’t be solved without global action. The dissemination of
green ideas also depends on the ability of committed actors to make them heard
globally.

The Road From Globalization to

Regionalization
 From a globalization perspective, regionalization means a world that is less
interconnected and has a stronger regional focus.

Regionalization can also be analyzed from a corporate perspective. For instance,

businesses such as McDonald’s or Starbucks don’t sell exactly the same products
everywhere. In some specific stores, they consider people’s regional habits. That’s why
the McChicken isn’t sold in India, whereas in Portugal there’s a steak sandwich menu
like the ones you can get in a typical Portuguese restaurant.

Politically speaking, when left-wing parties are in power they tend to focus on
their country’s people, goods and services. Exchanges with the outside world aren’t
seen as very valuable and importations are often left aside.

Lesson 2

International Relations

Source: Master & More- https://www.google.com

What is International Relations?

International relations is the study of the interaction of nation-states and non-

governmental organizations in fields such as politics, economics, and security.
Professionals work in academia, government, and non-profits to understand and
develop cooperative exchanges between nations that benefit commerce, security,
quality of life, and the environment.
 Our richly connected, complex world demands professionals skilled in
international relations, an exciting field of study that presents a globally oriented
perspective on issues that transcend national boundaries.

The study and practice of international relations is interdisciplinary in nature,

blending the fields of economics, history, and political science to examine topics such
as human rights, global poverty, the environment, economics, globalization, security,
global ethics, and the political environment.

Exceptional economic integration, unprecedented threats to peace and security,

and an international focus on human rights and environmental protection all speak to
the complexity of international relations in the twenty-first century. This means the study
of international relations must focus on interdisciplinary research that addresses,
anticipates, and ultimately solves public policy problems.

International relations (often referred to international affairs) has a broad purpose

in contemporary society, as it seeks to understand:

 The origins of war and the maintenance of peace

 The nature and exercise of power within the global system
 The changing character of state and non-state actors who participate in
international decision-making
For example, some institutions may study the psychological and social-
psychological reasoning behind the actions of foreign policymakers, while others may
focus their international studies on the institutional processes that contribute to the
goals and behaviors of states. Ultimately, the area of international relations studied
depends on the goals or objectives of the organization.

The Value of International Relations in a Globalized Society

Although international relations has taken on a new significance because of our

increasingly interconnected world, it is certainly not a new concept. Historically, the
establishment of treaties between nations served as the earliest form of international
relations.

The study and practice of international relations in today’s world is valuable for
many reasons:

 International relations promotes successful trade policies between nations.

 International relations encourages travel related to business, tourism, and
immigration, providing people with opportunities to enhance their lives.
 International relations allows nations to cooperate with one another, pool
resources, and share information as a way to face global issues that go beyond
any particular country or region. Contemporary global issues include pandemics,
terrorism, and the environment.
  International relations advances human culture through cultural exchanges,
diplomacy and policy development.

The practice of international relations is valuable in a wide array of

settings. Some examples include:

1. Humanitarian organizations
 Action Against Hunger is a global humanitarian organization which
originated in France and is committed to ending world hunger. The
organization helps malnourished children and provides communities with
access to safe water and sustainable solutions to hunger

 Oxfam International is a global movement of people, working together to

end the injustice of poverty. That means they tackle the inequality that
keeps people poor. Together they save, protect, and rebuild lives when
disaster strikes. They help people build better lives for themselves, and
for others. They take on issues like land rights, climate change, and
discrimination against women And they won’t stop until every person on
the planet can enjoy life free from poverty

2. World Food Programme is the food-assistance branch of the United Nations. It

is the world's largest humanitarian organization focused on hunger and food
security, and the largest provider of school meals.

 Government agencies
 Department of State
 Department of Homeland Security
 Department of Commerce
 
3. International corporations
 General Electric
 Toyota
 Nestle
 Siemens

4. Media outlets
 Cable News Network (CNN) is a multinational news-based pay television
channel headquartered in Atlanta, United States.)

 New York Times is an American daily newspaper based in New York City
with a worldwide readership.

 Forbes is an American business magazine owned by Integrated Whale

Media Investments and the Forbes family. Published eight times a year, it
features articles on finance, industry, investing, and marketing topics.
 Forbes also reports on related subjects such as technology,
communications, science, politics, and law.
 
5. Intergovernmental organizations

 World Trade Organization is an intergovernmental organization that

regulates and facilitates international trade between nations. Governments
use the organization to establish, revise, and enforce the rules that govern
international trade

 United Nations is an intergovernmental organization aiming to maintain

international peace and security, develop friendly relations among nations,
achieve international cooperation, and be a centre for harmonizing the
actions of nations. It is the world's largest and most familiar international
organization.

 NATO (North Atlantic Treaty Organization)military alliance between 27

European countries
 
6. International communications
 Amnesty International is a global movement of more than 10 million
people in over 150 countries and territories who campaign to end abuses of
human rights.

 Freedom House is a non-profit, majority U.S. government funded

organization in Washington, D.C., that conducts research and advocacy on
democracy, political freedom, and human rights. 

 Human Rights Watch is an international non-governmental organization,

headquartered in New York City, that conducts research and advocacy on
human rights. 

7. Reporters Without Borders

 
Research centers/Think tanks (promotes, and defends the freedom to be
informed and to inform others throughout the world)
 Brookings Institution not-for-profit research organization based in
Washington, D.C., founded in 1916 as the Institute for Government
Research by the merchant, manufacturer, and philanthropist Robert S.
Brookings and other reformers.

 Center for International Policy (CIP), privately funded nongovernmental

organization dedicated to promoting a U.S. foreign policy that is based on
demilitarization, international cooperation, and respect for human rights.
Headquarters are in Washington, D.C.
  Council on Foreign Relations (CFR) is an independent, nonpartisan
membership organization, think tank, and publisher dedicated to being a
resource for its members , government officials , business
executives, journalists , educators and students , civic and religious
leaders, and other interested citizens in order to help them better
understand the world and the foreign policy choices facing the United
States and other countries. 

 Global Public Policy Institute (GPPi) is an independent non-profit think

tank based in Berlin. Our mission is to improve global governance through
research, policy advice and debate.

The Theories and Principles of International Relations

International relations may be an offshoot of political science, but this field of
study is exceptionally in-depth in its own right. As our global society evolves and
expands, international relations will evolve and expand along with it as we continue to
explore new and exciting way to link our complex world.
For example, traditional dimensions of international relations related to
international peace and prosperity include topics such as international diplomacy, arms
control, and alliance politics. Contemporary studies in international relations, on other
hand, include topics such as international political economics, environmental politics,
refugee and migration issues, and human rights.
Examining the Levels of State Behavior
Professionals studying international relations often determine the level at which
they will analyze a state’s behavior:
 System Level Analysis: System level analysis looks at the international system;
more specifically, how the international system affects the behavior of nation
states, with the key variable being that the international system includes the
power of each state rather than being independent of them.

 State Level Analysis: State level analysis examines how a state’s

characteristics determine its foreign policy behavior. This type of analysis often
views states as having cultural characteristics based on their religious or social
traditions, and their historical legacy, and includes an analysis of economic and
geographic factors.

 Organizational Level Analysis: Organizational level analysis examines how

organizations within a state influence the state’s foreign policy behavior. In other
words, organizational level analysis views that organizations—not states—make
the decisions that create a state’s foreign policy.

 Individual Level Analysis: Individual level analysis views the leaders of states
as being the largest influencers of foreign policy.
Concepts in International Relations

International relations is an academic discipline that focuses on the study of the

interaction of the actors in international politics, including states and non-state actors,
such as the United Nations (UN), the International Monetary Fund (IMF), the World
Bank, and Amnesty International. One of the key features of the international system is
that it's a state of anarchy - each state in the system is sovereign and does not have to
answer to a higher authority.

Imagine living in a confined space with a group of other people with limited
resources. Further imagine that there is no law enforcement and that the only 'law' is
agreements between individuals and self-help is the only means of enforcement. In
short, every person can do whatever he or she wants only subject to what the others in
the space will do as a result. This situation gives you an idea of the world in which
states live.

International relations involves the study of such things as foreign policy,

international conflict and negotiation, war, nuclear proliferation, terrorism, international
trade and economics, and international development, among other subjects. As you
may expect, international relations' broad scope requires an interdisciplinary approach,
drawing upon the fields of economics, law, political science, sociology, game theory,
and even psychology.

How can we begin to study this multifaceted phenomenon called international

relations? How can we begin to think theoretically about what appear to be
disconnected events? How can we begin to answer the foundational questions of
international relations: What are the characteristics of human nature and the state?
What is the relationship between the individual and society? How is the international
system organized?

Ethical Problems

International ethics is a set of universal values that governs the actions and
behaviors of nation-states. These include protection of human rights, prohibition of
genocide (deliberate killing of a large number of people), and prohibition of attack on
civilians during the war.

International Relations, the state is called an Actor. Hence,

 All decisions should protect and further the national interests of the State,
but
 It should also be seen as ethical.

Examples where International Ethics Played a Role

 Sri Lanka objected to Nuclear Plant at Kudankulam as it is situated very close to

the coast. India took their concerns into notice. 
 o India and China were initially against any quota on them in Climate
Change negotiations. But, later they accepted the quota for the sake of
whole humanity and people living in Small Island nations.
o However, world powers try to mold International Governance in a way that
their interests are protected. For instance, the US at World Bank, World
Trade Organization etc. 

Three Perspectives of Ethics in International Relations

1. Realistic Perspective.
 There is anarchy in International Relations with no world government. Hence,
the state is the most important actor. 
 Ethics is PROMOTION OF NATIONAL INTEREST. 
 Peace is created by DETERRENCE (the action of discouraging an action or
event). For instance, Proponents of the Realistic Perspective are of the view
that the third world war hasn’t happened because of Nuclear Weapons).

2. Liberal Perspective
 There is no world government.  
 The state is an important actor but cooperation between states is
possible. For instance, Mutual Cooperation in form of WTO, UN, IMF, World
Bank, UNSC etc.
 Peace & Stability is established via Cooperation.

3. Ideal/Cosmopolitan Perspective
 They see the world as a single entity. 
 Rather than citizens, all are humans. Hence, they are proponents of Universal
Brotherhood.

Principles which should guide International Relations

In the international forums, countries negotiate based on their perception of

what is good – economically or strategically. This approach ignores the larger
ethical framework to make decisions that may be good in the long term for all and
short term good for a few. A broad ethical framework that can ensure this includes:
  Equity, Justice and Human Dignity should form the bedrock of international
negotiations.
 Equally important is transparency, making decisions more acceptable. 
 The international community is responsible for assisting the state to fulfil
its primary responsibility of protecting its citizens (as envisaged in
the Responsibility to Protect (R2P) in UN resolution).  

Ethical Guidance Principles in India’s Foreign Policy

 Non-Violence i.e. solving International Issues peacefully. 

 Mutual Respect for each other’s sovereignty. 
 Non-interference in each other’s internal affairs.
 Universal Brotherhood  
 Protecting Human Rights 
 Equality at all International forums & break the hegemony of few

Some Ethical Issues at International Level

1. Human Rights Violations

 Political interventions frequently lead to Human Rights Violations.
 Terrorism: States use Terrorism as a tool of foreign policy and indulge in
human rights violation. (eg: Pakistan (supporting LeT, JeM), Iran (supporting
Hezbollah)). 
 Refugee Issue: European nations are closing their borders to refugees fleeing
war-torn areas.

2. Climate Change
 International Equity Concerns: Countries that are least responsible for climate
change and have the least economic capacity to fight the effects of climate
change are the most affected ones. For example Marshall Islands.
 Issue of Common but Differentiated Responsibilities: There are issues in
defining and differentiating the responsibilities between present and future
generations as well as developed and developing countries.
 Climate Sceptics don’t consider climate change to be real.

3. Disarmament (the process of equipping military forces of war)

 Cause of disarmament at the international stage is being promoted by those
states, which have massive reserves of nuclear armaments, missiles etc.
 Countries like the USA impose economic and other sanctions on countries
like Iran to prevent them from developing nuclear weapons. How it is ethical
for a country to impose sanctions on others without discarding their own
weapons?

4. IPRs (Intellectual Property Rights)

 The developed countries are depriving the poor countries of accessing the
new technologies (even life-saving drugs) by the restrictive clauses of IPRs. It
 is essential to determine whether it is justifiable for a country to defend its
IPRs on commercial grounds, or it should share technology for the greater
interest of humanity.

Global Commons

Global commons are defined as those parts of the planet that fall outside national
jurisdictions and to which all nations have access. International law identifies four global
commons, namely the High Seas, the Atmosphere, Antarctica and the Outer Space.
Some of the issues with global commons are as follows:-

1. Zoonotic diseases like Covid-19 

2. Greenhouse gas emission
3. Governance and conservation of Arctic 
4. Overfishing  
5. Accumulation of plastic waste
6. Accumulation of Space debris

Global Poverty

 Rise in insensitivity: Global poverty as Kaushik Basu argues largely remains

out of sight for those who are not living it. This enhances insensitivity amongst
the well-off nations.  
 Whom to prioritize?: The states being a stakeholder in the global fight against
poverty, face an inherent dilemma, that whether they should prioritize citizens or
non-citizens for the allocation of the resources.  

Genocide (deliberate killing/destruction of large number of people)

Genocide is a crime against humanity and the world has signed the ‘UN
Convention on Genocide’ to end this. Even after that, Genocide does happen in the
present world. Some of the notorious genocides include the Jewish Holocaust in Nazi
Germany (1933 to 1945), Armenian Genocide by the Ottoman Empire (1915 to 1923)
Rape of Nanking by the Japanese Empire (1937), Rwandan Genocide (1994), Tamil
Genocide in Sri Lanka, Rohingya Genocide in Myanmar etc. Ethical aspects related to
this include:

 Right to Protect is vague. As a result, either the international community acts

very late or doesn’t at all against the genocides carried out by the states.

 The international community also faces a dilemma that whether it should

intervene on its own or arm the group so that persecuted section can protect
itself.
  The narrow definition of Genocide: The definition excludes targeted political
and social groups. It also excludes indirect acts against an environment that
sustains people and their cultural distinctiveness. 

Terrorism

Most of the countries of the world are affected by terrorism. But there are some
ethical issues in this, such as:

 Good Terrorist vs Bad terrorist: States differentiate between Good Terrorists

and Bad Terrorists based on their interests. This reveals selective and self-
serving nature. For example, Pakistan differentiates between ‘Good Taliban’ and
‘Bad Taliban’. 

 Conduct of states during the anti-terrorist operations: States such as the

USA and Australia, which present themselves as the ‘the saviors of the human
rights are often alleged to violate human rights and mass killings. For examples,
(in 2021) Australian soldiers were found guilty of killing innocent Afghans during
their operations to eliminate the Taliban in Afghanistan. Apart from that, during
Vietnam War, US soldiers were alleged to have committed war crimes
epitomized by the My Lai Massacre (1968).

Why Funding of Countries is done

1. Philosophical Explanation
 Humanitarian Concern: We might have drawn artificial boundaries to create a
nation-state but we belong to the Human race.  

 Historical Burden: Past Colonial nations like the UK, France etc. developed by
exploitation of other nations in Asia, Africa, South America etc. To compensate
for that, they give grants and soft loans to their earlier colonies 

 Principle of Sacrifice: It is the duty of well off to sacrifice some of their wealth to
protect those who can’t protect themselves. 
 2. Economical Explanation
 Export of Capital: Western Countries have an excess of capital that need
investment in lucrative developing countries.

Types of Aids

1. Military Aid
 It is the worst form of aid as it can destabilize the whole region.
 The objective of this kind of aid is to garner new military allies or to strengthen
the military capability of their respective allies. 
 Eg: the US used to give huge Military Assistance to Pakistan.

2. Technical Assistance
 It aims at providing technical know-how instead of equipment and helps in
capacity building.
 It is the least expensive with big benefits. 
 Eg: Pan African e-Network Project by India in Africa.

3. Economic Aid
 These are economic loans given at very nominal interest rates which are to be
repaid over a long time. 
 Such loans can help in the economic development of a nation by setting up the
infrastructure.

4. Humanitarian Assistance
 Humanitarian aids are the actions designed to save lives, alleviate suffering and
maintain and protect human dignity during and in the aftermath of emergencies.

Lesson 3

International Business

The term international business refers to any business that takes place across

international borders. At its most basic, it includes the sale of goods and services
between countries.

Yet, other forms of international business do exist. For example, a business that
produces components or products overseas but sells them domestically can be
considered an international business, as can an organization that outsources services,
such as customer service, to locations where labor expenses are cheaper.

For most organizations, decisions around building, producing, and selling

products or services are informed by many factors. Cost is an important one because
businesses that primarily operate in developed markets, like the United States and
Europe, can often source cheaper labor abroad.
 Other factors play a role in decision-making, too. For example, an organization
that makes a conscious effort to become more sustainable may produce its product as
close as possible to the end user to reduce greenhouse gas emissions related to
transportation, even if it might result in higher labor costs. Likewise, a business may
take pride in sourcing local labor to create jobs and support the economy.

Although international business can benefit the global economy, it also carries
inherent risks. The fact that each country has its own government, regulations, inflation
rates, and currency can complicate business models and must be weighed against the
perceived benefits of operating internationally. Some of the most common challenges of
international businesses include language and cultural barriers, currency exchange
rates, and foreign politics and policies.

Because of these challenges, those who have a successful career in

international business need various skills and expertise, such as strong communication
skills, emotional intelligence, an understanding of other cultures, and thorough
knowledge of finance, accounting, entrepreneurship, and global economics. Acquiring
these combined skills, along with international business experience, can lead to career
success.

Examples:
1. The beverages you drink might be produced in India, but with the collaboration of
a USA company.
2. The tea you drink is prepared from the tea powder produced in Sri Lanka.
3. The spares and hard-disk of the computer you operate might have been
produced in the United States of America.
4. The perfume you apply might have been produced in France.
5. The television you watch might have been produced with the Japanese
technology.
6. The shoes you wear might have been produced in Taiwan, but remarketed by
an Italian company.
7. Your air-travel services might have been provided to you by Air-France and so
on so forth.

Most of you have the experience of browsing internet and visiting different web
sites, knowing the products and services offered by various companies across the
globe. Some of you might have the experience of even ordering and buying the
products through internet. This process gives you the opportunity of transacting in the
international business arena without visiting or knowing the various countries and
companies across the globe.

You get all these even without visiting or knowing the country of the company
where they are produced. All these activities have become a reality due to the
operations and activities of international business.
 Thus, international business is the process of focusing on the resources of the
globe and objectives of the organizations on global business opportunities and threats,
in order to produce, buy, sell or exchange of goods/services world-wide.

Evolution of International Business

The origin of international business goes back to human civilization. Historically

periods of greater openness to trade have been characterized by stronger but lopsided
global growth. The concept of international business-a broader concept relating to the
integration of economies and societies, dates back to the 19th century.
 The first phase of globalization began around 1870 and ended with the World
War I (1914) driven by the industrial revolution in UK, Germany and USA. The
import of raw material by colonial empires from their colonies and exporting
finished goods to their overseas possessions was the main reason for the sharp
increase in the trade during this phase.

In fact, the term international business was not popular before two decades. The
term international business has emerged from the term international marketing, which,
in turn, emerged from the term international trade.

International
International International
marketing
Trade Business

Figure 1. Evolution of International Business

International Trade to International Marketing: Originally, the producers used
to export their products to the nearby countries and gradually extended the exports to
far-off countries. Gradually, the companies extended the operations beyond trade. For
example, India used to export raw cotton, raw jute and iron ore during the early 1900s.
The massive industrialization in the country enabled us to export jute products, cotton
garments and steel during 1960s.

Jute fiber

Raw jute
Photos
taken
from

Google.com
 (for recitation: Give examples of international business and what aspect is being
done internationally)

International Marketing to International Business

The multinational companies which were producing the products in their home
countries and marketing them in various foreign countries before 1980s, started locating
their plants and other manufacturing facilities in foreign/host countries. Later, they
started producing in one foreign country and marketing in other foreign countries. For
example, Uni Lever established its subsidiary company in India, i.e., Hindustan Lever
Limited (HLL). HLL produces its products in India and markets them in Bangladesh, Sri
Lanka, Nepal etc. Thus, the scope of the international trade is expanded into
international marketing and international marketing is expanded into international
business.

The 1990s and the new millennium clearly indicated rapid internationalization
and globalization. The entire globe is passing at a dramatic pace through the transition
period. Today, the international trader is in a position to analyze and interpret the global,
social, technical, economic, political and natural environmental factors more clearly.

Stages of International Marketing

1. Domestic marketing. This involves the company manipulating a series of

controllable variables, such as price, advertising, distribution, and the product, in
a largely uncontrollable external environment that is made up of different
economic structures, competitors, cultural values, and legal infrastructure within
specific political or geographic country boundaries.

2. International marketing. This involves the company operating across several

markets in which not only do the uncontrollable variables differ significantly
between one market and another, but the controllable factor in the form of cost
and price structures, opportunities for advertising, and distributive infrastructure
are also likely to differ significantly.

3. Export marketing. In this case the firm markets its goods and/or services across
national/political boundaries. In general, exporting is a simple and low risk-
approach to entering foreign markets. Firms may choose to export products for
several reasons.

 First, products in the maturity stage of their domestic life cycle may find
new growth opportunities overseas,
 Second, some firms find it less risky and more profitable to expand by
exporting current products instead of developing new products.
 Third, firms who face seasonal domestic demand may choose to sell their
products to foreign markets when those products are “in season” there.
  Finally, some firms may elect to export products because there is less
competition overseas.

A firm can export its products in one of three ways:

 Indirect exporting is a common practice among firms that are just
beginning their exporting. Sales, whether foreign or domestic, are treated
as domestic sales. All sales are made through the firm’s domestic sales
department, as there is no export department. Indirect exporting involves
very little investment, as no overseas sales force or other types of
contacts need to be developed. Indirect exporting also involves little risk,
as international marketing intermediaries have knowledge of markets and
will make fewer mistakes than sellers.

 In semi-direct exporting, an American exporter usually initiates the contact

through agents, merchant middlemen, or other manufacturers. Such semi-
direct exporting can be handled in a variety of ways:

a. a combination of export manager and a domestic agent

intermediary that acts as an exporting department (instrument that
carries out all the tasks generated by the international marketing
policies of the company. The export department has concrete
goals: to perform all the tasks related to the international sales) for
several noncompeting firms;
b. the manufacturer’s export agent (MEA- an agent middleman firm
providing a selling service for manufacturers) operates very much
like a manufacturer’s agent in domestic marketing settings;
c. a Webb-Pomerene Export Association (a law passed in 1918
that exempted certain exporters' associations from certain antitrust
regulations.) may choose to limit cooperation to advertising, or it
may handle the exporting of the products of the association’s
members and;
d. piggyback exporting, in which one manufacturer (carrier) that has
export facilities and overseas channels of distribution handles the
exporting of another firm (rider) noncompeting but complementary
products.

 When direct exporting is the means of entry into a foreign market, the
manufacturer establishes an export department to sell directly to a foreign
firm. The exporting manufacturer conducts market research, establishes
physical distribution, and obtains all necessary export documentation.
Direct exporting requires greater investment and also carries a greater
risk. However, it also provides greater potential return and greater control
of its marketing program.

4. Multinational marketing. Here the marketing activities of an organization

include activities, interests, or operations in more than one country, and where
 there is some kind of influence or control of marketing activities from outside the
country in which the goods or services will actually be sold. Each of these
markets is typically perceived to be independent and a profit center in its own
right.

5. Global marketing. The entire organization focuses on the selection and

exploration of global marketing opportunities and marshals resources around the
globe with the objective of achieving a global competitive advantage. The primary
objective of the company is to achieve synergy in the overall operation, so that by
taking advantage of different exchange rates, tax rates, labor rates, skill levels,
and market opportunities, the organization as a whole will be greater than the
sum of its parts.

Thus Toyota Motors started out as a domestic marketer, eventually

exported its cars to a few regional markets, grew to become a multinational
marketer, and today is a true global marketer, building manufacturing plants in
the foreign country as well as hiring local labor, using local ad agencies, and
complying to that country’s cultural mores. As it moved from one level to the next,
it also revised attitudes toward marketing and the underlying philosophy of
business.

Ultimately, the successful marketer is the one who is best able to manipulate
the controllable tools of the marketing mix within the uncontrollable environment.
The principal reason for failure in international marketing results from a company not
conducting the necessary research, and as a consequence, misunderstanding the
differences and nuances of the marketing environment within the country that has
been targeted.

Characteristic Features of International Business

Conducting and managing international business operations is a crucial venture

due to variations in political, social, cultural and economic factors, from one country to
another country. For example, most of the African consumers prefer less costly
products due to their poor economic conditions, whereas the German consumers prefer
high quality and high priced products due to their higher ability to buy.

Therefore, the international businessman should produce and export less costly
products to most of the African countries and vice versa to most of the European and
North American countries. High priced and high quality Palmolive soaps are marketed in
European countries and the economy priced Palmolive soaps are exported and
marketed in developing countries like Ethiopia, Pakistan, Kenya, India, Cambodia etc.

 Accurate Information: International business houses need accurate information

to make an appropriate decision. Europe was the most opportunistic market for
leather goods and particularly for shoes. Based on accurate data could make
appropriate decision to enter various European countries.
  Timely Information: International business houses need not only accurate but
timely information. Coca-Cola could enter the European market based on the
timely information, whereas Pepsi entered later. Another example is the timely
entrance of Indian software companies into the US market compared to those of
other countries. Indian software companies also made timely decision in the case
of Europe.

 Size of the Business: The size of the international business should be large in
order to have impact on the foreign economies. Most of the multinational
companies are significantly large in size. In fact, the capital of some of the MNCs
is greater than our annual budget and GDPs of the some of the African countries.

 Market Segmentation: Most of the international business houses segment their

markets based on the geographic market segmentation. Daewoo segmented its
market as North America, Europe, Africa, Indian subcontinent and Pacific
markets.

Potentiality of Markets

International markets present more potentials than the domestic markets. This is
due to the fact that international markets are wide in scope, varied in consumer tastes,
preferences and purchasing abilities, size of the population etc. For example, the IBMs
sales are more in foreign countries than in USA. Similarly, Coca-Colas sales, Procter
and Gambles sales and Satyam Computers sales are more in foreign countries than in
their respective home countries.

The size of the population, sometimes, may not determine the size of the market.
This is due to the backwardness of the economy and low purchasing power of the
people. In fact, the size of Eritrea, an African country is roughly equal to that of the
United Kingdom in terms of land area and size of the population. But, in terms of per
capita income it is one of the poorest countries in the world with an estimated per capita
income of US $ 150 per annum. Therefore, the international business houses should
consider the consumers’ willingness to buy and also ability to buy the products.

In fact, most of the multinational companies, which entered Indian market after
1991, failed in this respect. They viewed that almost the entire Indian population would
be the customers. Therefore, they estimated that the demand for consumer durable
goods would be increasing in India after globalization. And they entered the Indian
market. The heavy inflow of these goods and decline in the size of Indian middle class
resulted in a slump in the demand for consumer durable goods.

Therefore, the international business houses should accurately estimate the size
of the customers who are willing and able to buy the products/services rather than just
the size of the population of the foreign countries.
Differences in Government Policies, Laws and Regulations

Sovereign governments enact and implement the laws, and formulate and
implement policies and regulations. The international business houses should follow
these laws, policies and regulations. MNCs operating in India follow our labor laws,
business laws and policies and regulations formulated by the Indian Government. For
example, international business is required to enter into joint venture with the domestic
company to enter Malaysia. Important among them include:

Host Countries’ Monetary System: Countries regulate the price level, flow of money,
production levels etc. through their monetary systems. In addition, they regulate foreign
exchange rates also through the monetary system. The tools of monetary system
include bank rate, cash reserve ratio, statutory liquidity ratio etc. Governments also
regulate remittance of the profit of international business houses to other countries.
International companies should obey these regulations. The Indian Government
introduced full convertibility on current account; in fact, many Governments introduced
full convertibility on current account as a part of economic liberalization.

National Security Policies of the Host Countries: Every country formulates the
policies for its national security. Multinational companies should abide by these national
security policies. For example, USA is a free economy as far as carrying out the
business compared to many other countries in the world. However, USA also imposes
restrictions regarding the business operations, which affect the national security.

Cultural Factors: Cultural and custom factors vary widely from one country to another.
These factors include dressing habits, eating habits; religious factors and the like.
Multinational companies should consider these factors of the host country while
operating in that country. For example, the culture of the Fiji people is that they attend to
the family activities at least three times a day. Therefore, the companies operating in
that country allow their workers to go home three times a day.

Language: Language is an important factor in international business. Even though

English language is a major language in business operations in the world, there are still
a large number of non-English speaking countries. Therefore, international business
houses should train their employees in the local language of the host country. Added to
this, there would be many languages in use in many countries like ours. Therefore, the
business houses should train their employees in the local languages also.

Nationalism and Business Policy: Nationalism is a dominating factor of the social life
of the people of the host countries. In fact, nationalism also affects the business
operations of the multinational corporations dramatically and drastically. The US people
used the slogan, Be American and Buy American Made, when the US automobile
industry failed to meet the competition of Japanese automobile companies operating in
USA. Similar incidents are also observed in developing countries. Therefore,
international business houses should be cautious of nationalism and its after effects.
Changing Scenario of International Business

The scenario of international business has been changing at a fast rate after
1990s. Many factors contributed to the changing scenario of international business.
These factors include:

 Globalization of various economies including the former communist countries and

socialist pattern of societies,
 Establishment of World Trade Organization on 1st January 1995 in the place of
General Agreements on Trade and Tariffs,
 Information technology revolution and its wider applications to business across
the globe,
 Higher growth rate of transport technology and consequent reduction in cost ,
increase in speed and efficiency,
 Enlargement of European Union from 15 members to 25 members Higher growth
rate of GDP of China, India, South Korea, Singapore, Malaysia, Thailand, Brazil
and Mexico.
 Spread of production activities of multinational companies in the newly globalized
economies in addition to the developed economies,
 Increase in business alliances in degree and variety like alliances, joint ventures,
mergers, amalgamations and takeovers,
 Increased globalization of culture
 Increase in educational opportunities and career-orientation among the people
of developing countries particularly China and India. These factors resulted in
enhancement of opportunities for higher value addition in developing countries.
Consequently developing countries started attracting multinational companies to
establish their manufacturing facilities in their countries.

These variations in the scenarios generally categorized into five stages viz.,
domestic company, international company, multinational company, global company and
transnational company. Now, we study each scenario in detail.

Scenario - 1: Domestic Company

Domestic company limits its operations, mission and vision to the national
political boundaries. This company focuses its view on the domestic market
opportunities, domestic suppliers, domestic financial companies, domestic customers
etc. These companies analyze the national environment of the country, formulate the
strategies to exploit the opportunities offered by the environment. The domestic
companies’ unconscious motto is that, if it is not happening in the home country, it is not
happening. The domestic company never thinks of growing globally. If it grows, beyond
its present capacity, the company selects the diversification strategy of entering into
new domestic markets, new products, technology etc. The domestic company does not
select the strategy of expansion/penetrating into the international markets.

Scenario - 2: International Company

Some of the domestic companies, which grow beyond their production and/or
domestic marketing capacities, think of internationalizing their operations. Those
companies who decide to exploit the opportunities outside the domestic country are the
stage two companies. These companies remain ethnocentric or domestic country
oriented. These companies believe that the practices adopted in domestic business, the
people and products of domestic business are superior to those of other countries. The
focus of these companies is domestic but extends the wings to the foreign countries.
These companies select the strategy of locating a branch in the foreign markets and
extend the same domestic operations into foreign markets. In other words, these
companies extend the domestic product, domestic price, promotion and other business
practices to the foreign markets. Normally internationalization process of most of the
global companies starts with this stage two process. Most of the companies follow this
strategy due to limited resources and also to learn from the foreign markets gradually
before becoming a global company without much risk. The international company holds
the marketing mix constantly and extends the operations to new countries. Thus, the
international company extends the domestic country marketing mix and business model
and practices to foreign countries.

Scenario - 3: Multinational Company

Sooner or later, the international companies learn that the extension strategy
(i.e., extending the domestic product, price and promotion to foreign markets) will not
work. The best example is that Toyota exported Toyopet cars produced for Japan in
Japan to USA in 1957. Toyopet was not successful in the USA. Toyota could not sell
these cars in the USA as they were overpriced, underpowered and built like tanks.
Thus, these cars were not suitable for the US markets. The unsold cars were shipped
back to Japan.

Toyota took this failure as a rich learning experience and as a source of

invaluable intelligence but not as failure. Toyota based on this experience designed new
models of cars suitable for the US market. The international companies turn into
multinational companies when they start responding to the specific needs of the
different country markets regarding product, price and promotion.

This stage of multinational company is also referred to as multidomestic.

Multidomestic company formulates different strategies for different markets; thus, the
orientation shifts from ethnocentric to polycentric. Under polycentric orientation the
offices/branches/subsidiaries of a multinational company work like domestic company in
each country where they operate with distinct policies and strategies suitable to the
country concerned. Thus, they operate like a domestic company of the country
concerned in each of their markets.
 Philips of Netherlands was a multidomestic company of this stage during 1960s.
It used to have autonomous national organizations and formulate the strategies
separately for each country. Its strategy did work effectively until the Japanese
companies and Matsushita started competing with this company based on global
strategy. Global strategy was based on focusing the company resources to serve the
world market.

Philips strategy was to work like a domestic company, and produce a number of
models of the product. Consequently, it increased the cost of production and price of
the product. But the Matsushitas strategy was to give the value, quality, design and low
price to the customer. Philips lost its market share as Matsushita offered more value to
the customer.

Consequently, Philips changed its strategy and created industry main groups in
Netherlands which are responsible for formulating a global strategy for producing,
marketing and R & D.

Scenario - 4: Global Company

A global company is the one, which has either global marketing strategy or a
global strategy. Global company either produces in home country or in a single country
and focuses on marketing these products globally, or produces the products globally
and focuses on marketing these products domestically.

 Harley designs and produces super heavy weight motorcycles in the USA and
markets in the global market. Harley Davidson designs and produces in the
USA and gains competitive advantage as Mercedes in Germany.
 Dr. Reddy’s Lab designs and produces drugs in India and markets globally.
Thus, Harley and Dr. Reddy’s Lab are examples of global marketing focus.
 Gap procures products in the global countries and markets the products through
its retail organization in the USA. Thus, Gap is an example for global sourcing
company. The Gap understands the US consumer and gets competitive
advantage.

Scenario - 5: Transnational Company

Transnational company produces, markets, invests and operates across the

world. It is an integrated global enterprise that links global resources with global markets
at profit. There is no pure transnational corporation. However, most of the transnational
companies satisfy many of the characteristics of a global corporation.

Scenarios of International Business

Stage 1 2 3 4 5
and Domestic Internationa Multidomesti Global Transnationa
Company l c l
 Strategy Domestic International Multidomestic Global Global
Model N.A. Co-ordinated Decentralized Centralize Integrated
Federation Federation d Hub Network

View of Extension or National Global

World Home Resources Resources markets Global
Markets Country markets
Markets Ethnocentric Polycentric Mixed
Orientatio Ethnocentri
n c Core Decentralized All in Geocentric
centralized, and self- home Dispersed
Key Located in others sufficient country Interdepende
Assets Home dispersed except nt and
Country marketing specialized
or
sourcing
Exploiting
Single Adapting local Marketing
Role of Country and opportunities or Contributions
Country leveraging sourcing to company
Units competencie worldwide
Home s Retained
country within Marketing All functions
Knowledg Created at operating developed developed
e center and units jointly and jointly and
transferred shared shared.

Source: Warren, Keegen, op.cit., p.52

Units of the transnational corporation in different countries create and develop

the knowledge in all functions and share among them. Thus, knowledge and experience
are shared jointly. Transnational gains power and competitive advantage by developing
and sharing knowledge and experience. Development of dishwashing by using video
camera by the French subsidiary of Colgate and sharing of the knowledge among all
Colgate operating companies across globe is an example here.

The changing scenarios of international business also resulted in adopting

various approaches in doing the business by the multinational companies. Now, we
study the approaches to international business.

International business approaches are similar to the stages of internationalization

or globalization. Douglas Wind and Pelmutter advocated four approaches of
international business. They are:

1. Ethnocentric Approach. The domestic normally formulate their strategies, their

product design and their operations towards the national markets, customers and
competitors. But, the excessive production more than the demand for the product, either
due to competition or due to changes in customer preferences push the company to
export the excessive production to foreign countries.

The domestic company continues the exports to the foreign countries and views
the foreign markets as an extension to the domestic markets just like a new region. The
executives at the head office of the company make the decisions relating to exports
and, the marketing personnel of the domestic company monitor the export operations
with the help of an export department.

The company exports the same product designed for domestic markets to foreign
countries under this approach. Thus, maintenance of domestic approach towards
international business is called ethnocentric approach. This approach is suitable to the
companies during the early days of internationalization and also to the smaller
companies.

Managing
Director

Manager
Manager R R & Manager Manager Manager
Human
D Finance Production Marketing
Resources

Assistant Assistant Assistant

Manager North Manager South Manager
India India Exports

Figure 2. Organization Structure of Ethnocentric Company

2. Polycentric Approach. The domestic companies which are exporting to foreign
countries using the ethnocentric approach find at the latter stage that the foreign
markets need an altogether different approach.

Then, the company establishes a foreign subsidiary company and decentralizes

all the operations and delegates’ decision-making and policy making authority to its
executives. In fact, the company appoints executives and personnel including a chief
executive who reports directly to the Managing Director of the company. Company
appoints the key personnel from the home country and all other vacancies are filled by
the people of the host country.

Managing Director

CEO
Foreign Subsidiary
(Uganda)

Manager Manager
Manager Manager Manager
R&D Finance Production Human Marketing
Figure 3. Organization Structure of Polycentric
Resources Company

The executives of the subsidiary formulate the policies and strategies, design the
product based on the host country’s environment (culture, customs, laws, government
policies etc.) and the preferences of the local customers. Thus, the polycentric approach
mostly focusses on the conditions of the host country in policy formulation, strategy
implementation and operations.

3. Regiocentric Approach. The company after operating successfully in a foreign

country, thinks of exporting to the neighboring countries of the host country. At this
stage, the foreign subsidiary considers the regional environment.(For example, Asian
environment like laws, culture, policies etc.) for formulating policies and strategies.
However, it markets more or less the same product designed under polycentric
approach in other countries of the region, but with different market strategies.
 Managing
Director

CEO, Subsidiary
South Africa

Marketing Marketing
Marketing
(Lesotho) (Botswana)
(Namibia)

Manager ManagerStructure
R & 4. Organization Manager
Figure Manager
of Regiocentric CompanyManager
D Finance Human Marketing
Production
Resources
5. Geocentric Approach. Under this approach, the entire world is just like a single
country for the company. They select the employees from the entire globe and
operate with a number of subsidiaries. The headquarters coordinate the activities
of the subsidiaries. Each subsidiary functions like an independent and
autonomous company in formulating policies, strategies, product design, human
resource policies, operations etc.

Managing Director
Headquarters
India

Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary

India Namibia Kenya Lesotho South Africa
Figure 5. Organization Structure of Geocentric Company

Factors affecting International Business

1. Higher Rate of Profits : When the domestic markets do not promise a higher rate
of profits, business firms search for foreign markets that hold promise for higher
rate of profits. Thus the objective of profit affects and motivates the business to
expand its operations to foreign countries. For example, Hewlett Packard earned
85.4% of its profits from the foreign markets compared to that of domestic
markets in 1994. Apple earned US $ 390 million as net profit from the foreign
markets and only US $ 310 millions as net profit from its domestic market in
1994.
2. Expanding the Production Capacities beyond the Demand of the Domestic
Country: Some of the domestic companies expanded their production capacities
more than the demand for the product in the domestic countries. These
companies, in such cases, are forced to sell their excess production in foreign
developed countries. Toyota of is an example.

3. Severe Competition in the Home Country: The countries oriented towards market
economies since 1960s experienced severe competition from other business
firms in the home countries. The weak companies which could not meet the
competition of the strong companies in the domestic country started entering the
markets of the developing countries.

4. Limited Home Market: When the size of the home market is limited either due to
the smaller size of the population or due to lower purchasing power of the people
or both, the companies internationalize their operations. For example, most of the
Japanese automobile and electronic firms entered US, Europe and even African
markets due to the smaller size of the home market. ITC entered the European
market due to the lower purchasing power of the Indians with regard to high
quality cigarettes.

Similarly, the mere six million population of Switzerland is the reason for
Ciba-Geigy to internationalize its operations. In fact, this company was forced to
concentrate on global market and establish manufacturing facilities in foreign
countries.

5. Political Stability vs Political Instability: Political stability does not simply mean
that continuation of the same party in power, but it does mean that continuation
of the same policies of the Government for a quite longer period. It is viewed that
USA is a politically stable country. Similarly, UK, France, Germany, Italy and
Japan are also politically stable countries.

Most of the African countries and some of the Asian countries are
politically instable countries.

Business firms prefer to enter the politically stable countries and are
restrained from locating their business operations in politically instable countries.
In fact, business firms shift their operations from politically instable countries into
politically stable countries.

6. Availability of Technology and Competent Human Resources: Availability of

advanced technology and competent human resource in some countries act as
pulling factors for business firms from the home country. The developed
countries due to these reasons attract companies from the developing world. In
fact, American and European companies, in recent years, depended on Indian
 companies for software products and services through their business process
outsourcing.

7. High Cost of Transportation: Initially companies enter foreign countries through

their marketing operations. At this stage, the companies realize the challenge
from the domestic companies. Added to this, the home companies enjoy higher
profit margins whereas the foreign firms suffer from lower profit margins. The
major factor for this situation is the cost of transportation of the products. Under
such conditions, the foreign companies are inclined to increase their profit margin
by locating their manufacturing facilities in foreign countries where there is
enough demand either in one country or in a group of neighboring countries.

For example, Mobil which was supplying the petroleum products to

Ethiopia, Kenya, Eritrea, Sudan etc., from its refineries in Saudi Arabia,
established its refinery facilities in Eritrea in order to reduce the cost of
transportation. Similarly, Caterpillar located its manufacturing facilities at different
centers in order to reduce the cost of transportation. This company produces
high-value-added parts in limited locations and less valued and non-critical
components and assembles the final products in a number of foreign countries.

8. Nearness to Raw Materials: The source of highly qualitative raw materials and
bulk raw materials is a major factor for attracting the companies from various
foreign countries. Most of the US based and European based companies located
their manufacturing facilities in Saudi-Arabia, Bahrain, Qatar, Oman, Iran and
other Middle East countries due to the availability of petroleum. These
companies, thus, reduced the cost of transportation.

9. Availability of Quality Human Resources at Less Cost: This is a major factor, in

recent times, for software, high technology and telecommunication companies to
locate their operations in India. India is a major source for high quality and low
cost human resources unlike USA, developed European countries and Japan.
Importing human resources from India by these firms is costly rather than
locating their operations in India. Hence, these companies started their
operations in India, China and Thailand.

10. Liberalization (the loosening of government controls) and Globalization: Most of

the countries in the globe liberalized their economies and opened their countries
to the rest of the globe. These changed policies attracted the multinational
companies to extend their operations to these countries.

11. To Increase Market Share: Some of the large-scale business firms would like to
enhance their market share in the global market by expanding and intensifying
their operations in various foreign countries. Companies that expand internally
tend to be oligopolistic. Smaller companies expand internationally for survival
while the larger companies expand to increase the market share. For example,
 Ball Corporation, the third largest beverage cans manufacturer in USA, bought
the European packaging operations of Continental Can Company. Then it
expanded its operations to Europe and met the Europe demand which is 200 per
cent more than that of USA. Thus, it increased its global market share of soft
drink cans.

12. To Achieve Higher Rate of Economic Development: International business helps

the governments to achieve higher growth rate of the economy, increase the total
and per capita GDP, industrial growth, employment and income levels.

13. Tariffs and Import Quotas: It was quite common before globalization that
governments imposed tariffs or duty on imports to protect the domestic company.
Sometimes Government also fixes import quotas in order to reduce the
competition to the domestic companies from the competent foreign companies.
These practices are prevalent not only in developing countries but also in
advanced countries.

EXAMPLES OF INTERNATIONAL BUSINESSES

1. Apple. Apple Inc. was founded by Steve Jobs, Steve Wozniak, and Ronald Wayne in
the 1970s and is now considered one of the most influential international companies.
Headquartered in the United States, Apple designs, develops, and sells electronics,
software, streaming, and online services worldwide.

Apple opened its first international location in Tokyo, Japan, in 2003 after

saturating the American market. Under Jobs, Apple touted ease-of-use, innovative
design, and customer loyalty with the marketing slogan, “Think Different,” and it
continues to use visionary strategic marketing and a tight ecosystem to overcome
competition and attract creative audiences around the globe.

Apple not only sells products internationally but has supply chains from 43
countries that ship supplies to China for final production and assembly. By keeping a
tight-knit and strong relationship with suppliers, strategic inventory, and a focus on
sustainability, Apple stands as one of the world’s most successful companies.

2. Financial Times. The Financial Times is a formerly British daily newspaper that’s now
owned by Japanese holding company Nikkei. The Financial Times’ mission is to deliver
unbiased, informed investment and economic information to empower individuals and
companies to make secure investment decisions.

The Financial Times had a rocky start trying to break into the international

market. Andrew Gilchrist, former managing director of the Financial Times, describes
his experience at the publication in the online course Global Business.
 During his tenure, the Financial Times prioritized entering the international
market in India. Despite a large English-speaking population and strong government
support, domestic journalism was considered culturally and legally suspect. In fact,
the Financial Times was eventually tied up in legal knots because the local newspaper
barons were able to challenge every move through the courts.

Eventually, the Financial Times’ attempt to go international in India led to an

economic slowdown and sluggish company growth.

3. McDonald’s. Two brothers, Maurice and Richard McDonald, converted their drive-
through barbecue restaurant in San Bernardino, California, into a burger and milkshake
restaurant—now known as McDonald’s—in 1948.

The McDonald brothers focused on creating a better business system geared

toward self-service and efficient and repeatable processes that relied on heating lamps
instead of waiters. This model, known as “Speedee,” led to lower costs, cheaper
products, and faster growth, and it became the epitome of “fast food.”

Soon after, Ray Croc took McDonald’s a step further by bringing in franchisees
and suppliers, leading to the creation of restaurants across the United States.
McDonald’s model continued to expand, and, in 1967, the company opened locations
in Canada and Puerto Rico.

McDonald’s has been internationally successful, thanks in large part to the

consistency its business model allows. The fact that a Big Mac tastes the same
regardless of which country you order it in is a testament to the company’s long history.
Today, there are 38,000 restaurants in over 120 countries.

4. Coca-Cola. Coca-Cola was created by pharmacist John Pemberton in 1886 at a soda

fountain in Atlanta, Georgia. It was used as a tonic for common ailments due, in part, to
the addition of cocaine and caffeine derived from the kola nut, which was a major
ingredient at the time. (This was later removed from the recipe in 1903.)

Although popular at its inception, Coca-Cola became the company it is today

because of the marketing and business leadership of Asa Griggs Candler and future
investors, who dramatically increased sales and expanded syrup factory production into
Canada.

Eventually, an independent bottle company licensed the rights to Coca-Cola’s

syrup production and distribution, streamlining production and generating massive
profits. Coca-Cola later remarketed for Germany, China, and India, and it’s now sold
everywhere except Cuba and North Korea. Coca-Cola currently has over 900 bottling
and manufacturing facilities worldwide, many of which are in North America, Asia, and
Africa.
5. H-E-B. H-E-B is a popular American grocery company with more than 340 stores in
Texas and northeast Mexico. It was founded by Florence Butt in 1905 and expanded
into Mexico in 1997.

The primary driver of international expansion wasn’t a desire to capture greater

market share, but rather, a desire to gain access to foreign produce markets in warmer
climates, from which the company could source produce during its domestic suppliers’
off-season in the northeastern United States.

Craig Boyan, president of H-E-B, explains in Global Business that, upon

becoming an international business, H-E-B bought blueberries from Chile and Peru to
sell year-round. Despite it being expensive to ship blueberry crates to Texas, this
enabled the company to continue meeting its customers’ needs. Since then, production
has increased with demand, especially in Mexico, which has an ideal climate to produce
blueberries year-round. H-E-B now sources blueberries mostly from Mexico, making
them more available and affordable for customers.

Points to Remember
 International business is evolved from international trade and
international marketing.

 International business is a crucial venture due to the influence of

varied social, cultural, political, economic, natural factors, and
government policies and laws.

 Business firms go globally to maximize benefits and minimize risks.

 The five stages of internationalisation are domestic company,

international company, multinational company, global company and
transnational company.

 International business approaches include ethnocentric approach,

polycentric approach, regiocentric approach and geocentric
approach.

 The advantages of international business include: wider markets,

high living standards, optimum utilization of resources etc.

 Problems of international business include: political factors, foreign

exchange, tariffs, cost etc.

 The firms get the competitive advantages like economies of scale,

latest technology, expert human resources, etc., by going global
Lesson 4

International Business Environment

A global company has to formulate strategies based on its missions, objectives

and goals. Strategy formulation is a must for a global company to make decisions
regarding the markets to enter, product/service range to introduce in the foreign
countries and the like. Further, the severe and intensified competition in the global
market makes the strategy formulation a challenging task.

The fundamental basis for strategy formulation is the environmental analysis.

Environment provides the opportunities to the business to produce and sell a particular
product. For example, the present day business environment provides wide opportunity
for Internet. Similarly, environment in India provides opportunity for production and
selling of fuel saving motor bicycles. European climatic condition provides an
opportunity for woolen and leather garments.

Environment, sometimes possess threats and challenges to business. Business

should enhance its strengths in order to face the challenges posed by the environment.
For example, China dumped steel at cheap prices in the Indian market and posed a
threat to the Indian steel industry i.e. Consequently, Indian steel industry improved its
technology in order to meet the challenges and dumped its steel in US markets.

Study of environment helps the business to formulate strategies and run the
business efficiently in the competitive global market. We understand that environment
has significant and crucial impact on the business. Thus, business depends on
environmental dynamics.

Environment means surrounding. International business environment means the

factors/activities those surround/encircle the international business. In other words,
business environment means the factors that affect or influence the MNCs
(Multinational Corporations) and transactional companies.

Factors that affect International Business include: (STEPIN)

 Social and Cultural factors (S),
 Technological factors (T),
 Economic factors (E),
 Political/Governmental factors (P),
 International factors (I) and
 Natural factors (N).
William F. Glueck defined the term environmental analysis as, the process by
which strategists monitor the economic, governmental / legal, market/competitive,
supplier / technological, geographic and social settings to determine opportunities and
threats to their firms.
 “Environmental diagnosis consists of managerial decisions made by analyzing
the significance of data (opportunities and threats) of the environmental analysis.”

International Business Environmental Factors

Business environmental factors are broadly divided into internal environmental

factors and external environmental factors.

A. Internal environmental factors influence/affect the business from within. They

include: human resource management, trade unions, organization structure,
financial management, marketing management and production management,
management/leadership style etc.

B. External environmental factors are further divided into micro external factors
and macro external environmental factors.

 Micro external environmental factors include: competitors, customers,

market intermediaries, suppliers of raw materials, bankers and other
suppliers of finance, shareholders, and other stakeholders of the
business firm.

 External macro environmental factors include: social and cultural

factors, technological factors, economic factors, political and
governmental factors, international factors and natural factors.
Environmental protection received greater attention in order to protect the
lives of the people, animals, plants and to maintain ecological balance.

The analysis of internal environmental factors indicates the strengths and

weaknesses of the business firm while the analysis of micro external and macro
external environmental factors indicate the opportunities provided by the
environment to the business. The strengths, weaknesses, opportunities and threats
(SWOT) analysis helps to formulate strategies for the business firm.
 Figure 6. The International Business Environment

Social and Cultural Environment

Social and cultural factors in various countries of the globe affect the
international business. These factors include attitude of the people to work, attitude
to wealth, family, marriage, religion, education, ethics, human relations, social
responsibilities etc.

Culture is, the thought and behavior patterns that member of a society learns
through language and other forms of symbolic interaction of their customs, habits,
beliefs and values, the common view points which bind them together as a social
entity.... Cultures change gradually picking up new ideas and dropping old ones, but
many of the cultures of the past have been so persistent and self-contained that the
impact of such sudden change has torn them apart, uprooting their people
psychologically.

Characteristics of Culture

1. Socially Shared: Culture is based on social interaction and creation. In fact, it is

out of necessity. For example, child marriages in India during the 18th and 19th
centuries were meant to protect the teenaged girls. Chinese parents, at one time
preferred their female children to have small feet. The practice of the Sikhs
wearing turbans and keeping a knife was originally out of the necessity of
protecting themselves from the invaders from other countries.

2. Learned: Culture is acquired through learning but not inherited genetically. If a

person absorbs or learns the culture of the society where he is raised, that
learning is called socialization or enculturation. However, some people learn
the culture of the society other than the one in which they are raised. Such
 learning is called acculturation. The societies of Asian and African countries
complain that their cultures are being contaminated by the Western influences.

3. Subjective: Culture is subjective in the sense that people of different cultures

have different ideas about the same object. Regarding the object of marriage the
parents of the bridegrooms in many countries offer money (dowry) to the parents
of the bride whereas the situation in India is quite opposite. This is because, the
parents of bridegrooms in other countries pay dowry as a compensation for
raising the bride while the parents of bride in India pay dowry to the bridegroom
to meet the expenses of establishing a new family. Japanese human resource
management culture is based on employee loyalty to the organization and life-
time employment.

4. Cumulative: Uncertainty of rains, crop and thereby income in developing

countries over the years resulted in the culture of saving for to the next year.
Thus, culture is based on the accumulated circumstances over the hundreds or
even thousands of years.

5. Dynamic: Culture is not immune to change. It goes on changing. New ideas are
added and old ideas are dropped. The present generation youth want to become
slim. Therefore, they reduced fat contents in all the food items unlike the previous
generations. Further, the present generation youth would like to work smart but
not hard unlike their parents. Japanese tastes have been changing from rice and
fish to meat and dairy products. Indian housewife never allowed her family
members to eat in hotels/restaurants 25 years back. But the present day
housewife prefers to eat outside along with the entire family at least once in a
week.
Culture is:
 derived mostly from the climatic conditions of the geographical region and
economic conditions of the country

 a set of traditional beliefs and values which are transmitted and shared in a given
society

 a total way of life and thinking patterns that are passed from generation to
generation

 norms, customs, art, values etc.

 Prescriptive: It prescribes the kinds of behaviour considered acceptable in the

society. It limits product choices to those which are socially acceptable. For
example, consumption of alcoholic drinks is acceptable in the West, but it is not
socially acceptable in India and it is socially and legally unacceptable in Saudi
Arabia. Similarly, smoking is medically unacceptable even in the USA or in the
recent times.

Cultural Attitude and International Business

Dressing habits, living styles, eating habits and other consumption patterns,
priority of needs are dictated/influenced by culture. Some Chinese and most of the
Indians do not consume beef. Thailand & Chinese believe that consumption of beef is
improper and Indians (particularly Hindus) believe that eating beef is a sin as they
believe cow is sacred (Kamadhenuvu).

The eating habits vary widely. Chinese eat fish stomachs, and birds nest soup,
Japanese eat uncooked sea food, Iraqis eat dried, salted locusts and snakes while
drinking. The French eat snails, Americans and Europeans eat mostly non-vegetarian
food. Indians eat mostly vegetarian food. It was surprising to the rest of the world to
know that there were pure vegetarians in India.
 However, the foreign culture regarding food has been adapted, Masala dosa and
Hyderabadi Biryani have become popular in Europe and the USA whereas Pizzas have
become popular in India.

Image taken from Google.com

 Similarly, dressing habits also vary from country to country based on their
culture. We observe different dress styles of the West, Middle East, India, Pacific etc.
Wearing saree by Indian women is influenced by the culture. Similarly, wearing burka/
parda by the women of the Middle East is another example for the influence of culture
on the dressing habit.

Saree- India
Burka-Middle East
Photos taken from Google.com

The international businessmen should eliminate the social, religion and cultural
effect in order to understand the foreign cultures as they have to carry on business
under the existing cultures. Most of the businessmen of the USA react to the methods in
ethnocentric terms and prefer to conduct business on Western lines though they know
the cultures of Asia and Africa. The businessman should eliminate the influence of
social, religion and cultural as it helps to prevent a transfer of personal culture to the
overseas market. This awareness helps the manager to formulate customer-oriented
strategies and avoid the possible failures.
 Guidelines for the businessman when they launch business in foreign
countries:
(a) resist the tendency to conduct business immediately on landing, and at all
times,
(b) offer favors as a business tool to generate allies,
(c) contact, cultivate and conduct field work among at least one sample clientele
to serve as an initial testing center for the firm’s product,
(d) introduce the product line into the sample group by local firms of cause-
related marketing and
(e) extend product acceptance beyond the sample clientele into related market
segments. Businessmen should follow these guidelines in order to prevent possible
failures

Source: Adopted from Charles W.L. Hill, International Business: New Delhi, 2003,
pp.119-12

Questions for Discussion

1. How is international business broader in scope compared to international trade

and international market?
2. Explain the nature of international business.
3. Why is international business a crucial venture?
 4. Why do business firms of a country go to other countries? Give your answer with
suitable examples.
5. Explain stages of internationalisation.
6. State the different approaches to international business.
7. What are the competitive advantages of international business?
8. Why is international business not a bed of roses? Elucidate your answer with
suitable examples.

MODULE 2
Lesson 1

Culture, Cultural Awareness and Cultural Diversity

“An understanding of different cultures may well be our own most important asset in
meeting the challenges of our time, both abroad and at home.”-Hall and Hall (1990)

Grant and Lei (2001:10-11) states that cultural differences are the main issues in cross-
cultural understanding. Concerning to the communication as the main goal of
understanding cross-culture, without recognizing the differences in traditions and habits
among people of different ethics, religions, localities, regions, and countries or nations,
the confusion and misunderstanding will continually recur. Then we may conclude the
ability to recognize the differences make correct interpretation, and react properly to
people or situations in the communications within the communities is the essence of
cross cultural understanding. Consequently, cross-cultural understanding is required in
the communication not only by people of different nationalities such Indonesians and
English or Americans and Filipinos, but also between Filipinos coming from different
localities and cultures.

Based on the academic viewpoints, scholars divide the term culture into two types.
The first with big C “Culture” is defined as the achievement culture. It covers
geography, history and achievements in science and arts (Tomalin & Stemleski, 1993)
Culture with the small c letter “culture” refers to the behavior culture that includes
culturally influenced beliefs and perceptions that expressed through language as well
thought cultural behaviors created by the society convention.
 Culture also considered as “design of living”, which means that covers the way and the
form of habits considered appropriate and acceptable within a certain community.
Linton (in Mesthrie, et al., 2009:28) defines culture as the way of life of its members; the
collection of ideas, habits which they learn, share and transmit from generation to
generation.

In the wider scope, Taylor (in Peoples & Bailey, 2009:22) states that culture is the
complex whole which includes knowledge, belief, art, morals, law, customs, and any
other capabilities and habits acquired by as a member of society.

Cultural Categories propounded by Shaules and Abe (1997)

1. Hidden culture is invisible and we do not notice them consciously, but we feel
them intuitively.

2. Deep Culture is related to the most fundamental sets of beliefs and values
entailed by a group of people and it represents of the right or wrong doings.

3. Time oriented-culture is divided into monochromic and polychromic cultures.

People in monochromic culture generally do things one at a time, whereas in
polychromic they will do things simultaneously. For example, we can notice to the shop
assistants behaviordue in serving the customers. In Indonesia, France and America
with polychromic culture, people usually do not have to make queue, then the shop
assistants will serve customers simultaneously. On the contrary, if we go overseas
visiting a monochromic culture-in this case, Germany for example, they are making
queue tradition-the shop assistant will serve the customers based on the queue order.

4. Gender-oriented culture is the categorization of culture based on the

masculinity and femininity. People in masculine culture value traits such as
assertiveness, competition, and material success. Italy, Great Britain, and Japan
are some countries quoted as highly male-oriented cultures. Feminine-oriented
culture values traits such as quality of life, interpersonal relationship, and
concern for the weak. Indonesian tribes like Batak and Bali are some of the
maleoriented culture, whereas Minangkabau is highly female-dominated culture.

5. Involvement culture is measured to the intensity of the related-culture

expressiveness when interacting with others. It is divided into two: high
involvement and low involvement culture. In the high involvement culture,
people prefer to be highly emotional and expressive. Sometime it also indicated
by the body language or gestures are involved in the interaction. Countries in the
Middle East and Latin America usually have high emotional intensity as the
opposite of Japan and Java, in instance. Japan and Java is more familiar with
low expressiveness and the people are employing less gesture in the
interaction.
 6. Context culture is divided into high context culture and low context culture.
In high context culture, people give emphasize to the appreciation of context
and respect the ability to understand without relying on words. As the contrary to
the high context culture, the low context culture is relaying the use of words to
carry the bulk meaning.

Elements of Culture
Different from Shaules and Abe, Brown (1995) as cited in Surgirin (2009) summarizes
the elements/categorizes of culture as follows:
1. Artifacts are the physical Image taken from Google.com things that
are found have
particular symbolism for a culture. In
some occasion the artifacts is
believed be endowed with the
mystical properties. It can be the first
products of a company; can be the
everyday object like bunch of flowers
in the reception and other. In
essence, the thing is considered as
the artifacts since it has special
meaning at the very least of the people in the culture. The
purpose of artifacts is as the reminders.

2. Stories, histories, myths, legends, and jokes are often represent the
culture as it contains the certain theme and usually are intended as
learning devices.

The picture of Underwater Panther. In Native American mythologies of the

Great Lakes, underwater
panthers are described as water
monster
live in opposition to the
Thunderbirds, masters of the powers
of the air. It is called as the “Great Lynx”
(Penney, 2004). Some tradition
America believed that
the
underwater panther is very helpful, and protective creatures, but other beliefs
consider the underwater panther as the beasts that brought death and
misfortune.
 Image
source: Wikipedia-google.com

3. Rituals, rites, ceremonies, celebrations possess the sets of actions in which

are repeated in specific circumstances and they often convey some specific
meaning.

in 4. Heroes a culture often related to the named people who act as

idealized example. prototypes or

Problems Caused by Cultural Differences

• You greet your Austrian client. This is the sixth time you have met over the last 4
months. He calls you Herr Smith. You think of him as a standoffish sort of guy
who doesn't want to get really friendly. That might be true in America, where
calling someone Mr. Smith after the 6th meeting would probably mean something
-- it is marked usage of language -- like "we're not hitting it off". But in Austria, it is
normal.

• A Canadian conducting business in Kuwait is surprised when his meeting with a

high-ranking official is not held in a closed office and is constantly interrupted. He
starts wondering if the official is as important as he had been led to believe, and
he starts to doubt how seriously his business is being taken.

• A British boss asked a new, young American employee if he would like to have
an early lunch at 11 am each day. The employee said 'Yeah, that would be
great!' The boss immediately said "With that kind of attitude, you may as well
forget about lunch!" The employee and the boss were both baffled by what went
wrong. In England, saying "yeah" in that context is seen as rude and
disrespectful.

• A Japanese businessman wants to tell his Norwegian client that he is

uninterested in a particular sale. So he says "That will be very difficult." The
Norwegian eagerly asks how he can help. The Japanese is mystified. To him,
saying that something is difficult is a polite way of saying "No way in hell!". Dave
Barry tells the story of being on a trip to Japan and working with a Japanese
airline clerk on taking a flight from one city to another. On being asked about it,
the clerk said "Perhaps you would prefer to take the train." So he said "NO, I
want to fly." So she said "There are many other ways to go." He said "yes, but I
think it would be best to fly." She said "It would very difficult". Eventually, it came
out that there were no flights between those cities.
Some Perceptions of Americans

• Europe & especially England. "Americans are stupid and unsubtle. And they are
fat and bad dressers."
• Finland. "Americans always want to say your name: 'That's a nice tie, Mikko. Hi
Mikko, how are you Mikko'
• Indian. "Americans are always in a hurry. Just watch the way they walk down the
street."
• Kenyan. "Americans are distant. They are not really close to other people -- even
other Americans."
• Turkey. "Once we were out in a rural area in the middle of nowhere and saw an
American come to a stop sign. Though he could see in both directions for miles,
and there was no traffic, he still stopped!"
• Colombia. "In the United States, they think that life is only work."
• Indonesia. "In the United States everything has to be talked about and analyzed.
Even the littlest thing has to be 'Why, why why?'."
• Ethiopia. "The American is very explicit. He wants a 'yes' or 'no'. If someone tries
to speak figuratively, the American is confused."
• Iran. "The first time my American professor told me 'I don't know, I will have to
look it up', I was shocked. I asked myself 'Why is he teaching me?'"

Philippine Culture: What Makes the Filipinos Different From the Rest of the
World?

Each country is different from the rest of the world but what is it really about the
Philippines that makes it stand out among others? For one thing, it’s the Philippine
culture.

1. Language. For more than 300 years, Spanish was the official language in the
country under Spanish rule. 60% of the population spoke Spanish as either a
first, second or third language in the early 20th century. But after the American
occupation in the early 1900’s, the use of Spanish began to decline. In 1935, the
Constitution of the Philippines named English
and Spanish the official languages. In 1939, the . It was renamed
Tagalog language was named the national The present Constitution names
language “Pilipino” in 1959 and finally “Filipino” in
1973.
Filipino and English as joint official languages.

2. Food. The food culture in the Philippines is very different from that of the
Western’s culture. Filipinos are big eaters and love to eat rice. Rice is a food
staple in every Filipino’s meal every day. It’s quite impossible to see a Filipino
 who doesn’t eat rice, unless that person is on a strict diet. In fact, there are many
restaurants who even offer “unlimited rice”. That’s how huge Filipinos’ love for
rice is.

Filipinos also have a regular eating schedule: morning (breakfast), midmorning

(snacks), noon (lunch), afternoon (snacks), and evening (dinner). So if you’re a
certified foodie, you will be delighted by the food culture in the Philippines as there
are so many foods, both original and adapted from other countries that you can
enjoy. The best way to make the most of food Filipino culture is to be adventurous
(with caution) when it comes to dishes.

The foreign influences also played a huge role in the food culture in the Philippines.
Some popular Filipino foods influenced by other nations are paella, morcon, burgers,
pies, noodles, samgyupsal, and more. While the proudly-Pinoy food you can try are
adobo, sinigang na baboy, lechon, and halo-halo.

3. Culture. The Filipino culture has varied influences from previous colonizations,
deriving mainly from the culture of Spain and America. You can easily notice it
from the architecture to the cultural beliefs in the Philippines. Despite all of these
foreign influences, the old Asian Filipino culture has been retained and are clearly
seen in their way of life, cultural beliefs in the Philippines, Filipino customs and
traditions. Wherever you go, the Filipino culture and values are very evident and
have largely been appreciated and even applauded in many parts of the world.

4. Values. The Filipino culture and values are just among the good things that are
appreciated by many people from across the world. In the Philippines, family is
valued so much. Children live with their parents until they are married. The
Filipino family culture is something that many people applaud because the locals
value family time so much.

5. Music, Arts and Literature. Music, arts, and literature play a big role in the
Philippine culture and arts because Filipinos are very creative. When it comes to
music, they use materials, usually raw, to create sound. This is just one of the
many examples of indigenous practices in the Philippines.

Filipinos are also fond of folklore, which was influenced by the early church
and Spanish literature. Myths are very famous in the Philippines culture, especially
in the provinces. And when it comes to literature, the Filipino culture never
disappoints. Even Dr. Jose Rizal, the Philippines national hero, is famous for his
literature and novels about Philippine independence. As for the Philippine Pop
Culture, many artists are world-renowned such as Sarah Geronimo, Regine
Velasquez, and Julie Anne San Jose among others.
 6. Religion. We can’t deny the fact that religion plays a big role in shaping not just
the Philippine culture but also other cultures. Some 80% of the population is
Catholic, Spain’s lasting legacy. About 15% are Muslim and these people can be
found in Mindanao. Christianity was introduced as early as the 16th century with
the coming of Ferdinand Magellan in 1521. Protestantism was introduced by the
first Presbyterian and Methodist missionaries who arrived with the American
soldiers in 1899. The rest of the population is made up mostly of smaller
Christian denominations and Buddhists.

7. Clothing. Before, the cultural practices in the Philippines when it comes to

clothing is wearing baro’t saya for women and barong tagalog for men. Baro’t
saya is composed of a blouse and a long skirt with a “panuelo”. Barong Tagalog
was an almost see-through polo but throughout the centuries, the Barong
Tagalog has evolved. Buttons and collars were added, as well as intricate
designs on its pina fabric and laces. Underneath the transparent Barong Tagalog
is the Camisa de Chino, a type of shirt, usually in white that is said to have
originated from the Chinese.

Throughout the years, with the popularity of the hippie and Philippine pop culture,
the Filipino clothing has evolved, turned into more comfortable and laidback wear.
Thus the change in the Philippine culture when it comes to clothing.

8. Celebrations. Another great thing to know about the Philippine culture is that
Filipinos love celebrations! May it be a simple event like a grade school moving
up, birthdays, job promotions, or celebration for a patron saint, no occasion is too
small not to celebrate.

For example in the culture and tradition of Philippines, the country is known to have
the longest Christmas in the world because as early as September, the people are
already preparing for the season. This Philippine culture and tradition has been
known worldwide and is one of the main reasons foreigners love spending the
holidays in the country.

Philippine Festivals are also among the most remarkable cultural practices in
the Philippines where Filipinos give all-out to celebrate the province or town’s
fiesta.

Cultural Diversity
Businesses are going global but why are they failing? Technology and globalization
have made global expansion far more accessible for businesses around the world over
the past decade. However, just because a business has the resources to go global,
whether or not they can stay global is the question we should all be asking ourselves.

In order for the latter to happen, businesses must learn to traverse the complex waters
of cultural differences. Unfortunately, many companies often choose to dive headfirst
into these waters without first developing the skills needed to keep them afloat. This
short-sightedness can have costly results.

Cultural risks for global businesses

In a constantly evolving world, the act of going global must be accompanied by the
ability to conduct business in a manner that is efficient, but also sensitive and respectful
to the unique differences that are weaved into the fabric of intercultural communication.

Here are five common practices that businesses often overlook:

1. Adapting global business models to the local market: Lacking in

understanding of the local culture and its influence on consumer demand and
decision-making can result in failure and significant costs to your business.
Therefore, keeping the people you serve at the top of your mind is one of the
most important considerations when entering a new market.

While various brands and products are universally prevalent, certain changes must
still be made for variables such as product offerings, marketing strategy, and brand
messaging to reflect the local culture and value system.

These decisions often coalesce into a market adaptation strategy that can strongly
influence a foreign business’ performance and competitive position in their new
market.

An adaptation strategy might involve something as simple as tweaking the tagline of

a brand to developing a new range of menu items that is more befitting to the local
palate.

A term that has been gaining momentum as international business expansion grows
is glocalization. A combination of the words ‘globalization’ and ‘localization’,
glocalization is a concept which involves adapting globally marketed processes,
products and services to fit in with local needs.

Glocalization simply involves recognizing the unique differences between various

markets and modifying your business model to create better products, services and
customer experiences for each one.

The bottom line is that businesses exist to provide solutions to their customers. By
paying attention to your customers’ needs, wants and problems, you can better
adapt your products and services to be more meaningful and valuable to them.

2. Studying local business and managerial practices: The influence of local

culture is extensive. It impacts everything from how employees are managed to
the pace at which business is conducted, how negotiations are handled, and how
risk management is enforced.

Thus, an in-depth understanding of local business practices is crucial to international

business success. Unfortunately, many businesses enter new markets without
familiarizing themselves with the business customs of their host country and quickly
find themselves struggling to win over their new stakeholders and employees.

For example, culture has a strong influence over how employees respond towards
management roles. In countries such as Japan where social hierarchies are valued
and respect towards seniority is held in high regard, older employees or those in
senior management roles typically expect a certain level of formality in
communication and deference from their junior colleagues.
In response to this, junior employees in Japan often look to their superiors for
approval when making decisions and expect them to delegate responsibilities.

All Japanese employees abide by a mantra called Ho-Ren-So, a mnemonic

acronym that is an abbreviation of the worlds Hōkoku (report), Renraku (contact) and
"Sōdan (consult). This simply means that when a problem occurs, it must be
immediately reported and all decisions made must pass through the appropriate
chain of command prior to its approval by a superior.

It is rare, if not non-existent for a Japanese employee to take matters into their own
hands and make a decision prior to getting management’s approval.

On the flipside, Western countries such as the United States have a comparatively
flat organizational structure. Managers are on hand to guide and provide structure
but for the most part, workers are encouraged to make decisions independently.

In many cases, employees are also expected to define their own career pathway
within the organization. Communication also tends to be more informal and
employees across all levels are regarded as equals.

A big part of embarking on cross-border business ventures is recognizing that

organizational theory is steeped in culture-specific practices. Yet, the cultural
assumptions that precede international business practices continue to be a recurring
issue. It is when these practices are transferred across cultural settings without
consideration of local customs, can it lead to potential failure.

3. Implementing diversity management: Workplace diversity is a powerful tool for

enhancing creativity and inclusion. When it is successfully integrated into a
company’s business model, it can be a major draw for high-quality global talent.
A diverse workforce also fosters an environment that promotes fresh
perspectives and approaches to problem-solving.

However, if it is poorly managed, all of this can go awry. Diverse teams are made up
of individuals with various backgrounds, values, opinions, and business customs.
Unless these factors are thoughtfully managed, the likelihood of interpersonal
conflicts between team members can arise. Adversely affecting trust,
communication, and productivity.

While workplaces are becoming less homogenous day by day, there still exists
various tensions such as bias, discrimination and clashing sociopolitical belief
systems. All of these can hinder team development and cooperation when culturally
diverse employees are grouped together to achieve a common goal. Companies that
do not effectively manage and resolve these conflicts will lose out on the ability to
leverage on the positive aspects of a diverse workforce.

4. Adapting HR procedures to local market needs: Globalization is essential to

business expansion and for companies that enter foreign markets and hire local
employees, their human resource policies and practices must be adapted so that
they are beneficial to their foreign employees and subsidiaries.

Cultural values within a society affect how individuals feel about their jobs and often
define their workplace expectations. Human resource teams must be mindful of
these cultural differences in order to successfully recruit, retain, support, and
communicate with foreign employees. Especially those with a workforce that is
dispersed across several locations with varying cultural profiles.

Taxation and employment laws can also affect international expansion. HR

departments must be prepared to manage different compensation and benefit
requirements, tax rates as well as labor regulations that can sometimes be in conflict
with a company’s existing corporate policies.

Failure to do exposes a company to compliance risks that can result in legal

penalties, reputation damage and material loss.

5. Identifying regional and subcultural differences: Not everyone within a

country or society engage in the same behavioral patterns or share the values
that belong to the dominant culture.

Subcultural differences such as socioeconomic status, language, belief systems and

social institutions can vary greatly within a single region. These in turn, influence
peoples’ perceptions, their consumption patterns and the values they place on
numerous product attributes.

Each subcultural group within a market has its own distinct set of values and beliefs
that businesses must understand. However, these differences are nuanced and can
very easily lead to stereotypical assumptions about a particular subculture due to
premature or limited knowledge.

Businesses should take the time to educate themselves thoroughly on the various
attributes that form the cultural make-up on within a national context as cultural
 barriers can and do exist on an intra-national level. Companies that are unable
identify the diversity that exists within their host country run the risk of alienating
potential customers.

What happens when global businesses lack cultural awareness?

Adapting a product or service to a new market requires an in-depth and comprehensive

study of various cultural components. The infographic below highlights some of the
most memorable cultural blunders from international companies.
How to overcome cultural barriers in international business

1. Create space for other cultural requirements: Be accommodating to the

various cultural requirements of your employees and co-workers in your host
country. Take note of factors such religious or cultural holidays, prayer times,
dietary needs and work them into your workplace policies so that everyone feels
included. Cultural awareness in the workplace is about establishing common
ground so that everyone is able to understand and respect one another's
differences.

2. Ensure clear and polite communication: In scenarios where language

differences come into play such as addressing employees who speak a foreign or
multiple languages other than your own, use concise and simple communication
to reduce any miscommunication. Also be sure to apply to any internal and
external communication material you draft.

Using visual accompaniments and avoiding slang words and complex jargon can
help ensure that communication remains as clear as possible.

3. Employ diversity training: Making sure that people with different cultural
backgrounds feel included and safe is an important step in overcoming cultural
barriers in the workplace.

Diversity training can be a useful tool in helping employees become more aware
of any unconscious biases and other barriers may get in the way fully embracing
diversity and inclusion. Creating an environment that fosters teamwork, creates
new opportunities and motivates positive interdepartmental attitudes - all of
which are essential towards creating and maintaining a healthy work
environment. Global diversity programs should be able to adapt its program
content, language and approach to account for variations in cultural, political,
legal and social contexts of employees.

4. Do your homework: Prior to entering your host country, be sure to take the time
to do your research about its customs, practices, history and political landscape.
Even learning a few key phrases and using them in conversation can go a long
way to make them feel comfortable.

While there are plenty of resources available online. Don't underestimate your
partners and clients as helpful sources of information. In most cases, your
interest in their culture will be warmly welcome and they will be more than happy
to help you along the way. In fact, them seeing your effort in educating yourself
about their culture will be appreciated and increase the likelihood of a continued
business relationship.
 5. Be aware of how others may perceive your culture: When entering into
foreign ground, we often get caught up in figuring out how to best make sense of
all that is new to us and forget to consider how and why people response to us in
the way that we do.

Try to take a step back and think about how your own belief systems, norms and
values come across to your foreign employees and partners. This can put a lot of
things into perspective and can help you identify what to adjust and how to best
adapt to the situation at hand.

6. Focus on local integration: Instead of getting caught up in inciting "positive

change" and revolutionizing business processes and practices in a new market,
focus on understanding the foundations that make up local business practices
and consumer behaviors first.

Start out by adopting a more localized approach as you gain more insight into
how and why things work the way they do, then can you incrementally implement
changes down the line.

7. Assimilate to the cultural voice of your host country: As important as it is to

establish your brand's voice and message, make sure that you do so in a
language that won't end up alienating your new audience.

Working with local branding and language experts who are familiar with the local
dialects and communication styles can help you find the balance between
showcasing your own unique voice and localizing your marketing efforts to your
targeted customer segments. As you c ommunicate your brand, make sure you
speak to your target audience in their own language accurately and effectively.
Work with language experts, preferably native speakers, who are familiar with
local dialects and slang in order to properly localize your brand’s marketing
efforts to the target audience.

Why Diversity Is Important

Multiculturalism is the key to achieving a high degree of cultural diversity. Diversity

occurs when people of different races, nationalities, religions, ethnicities, and
philosophies come together to form a community. A truly diverse society is one that
recognizes and values the cultural differences in its people.

Proponents of cultural diversity argue that it makes humanity stronger and may, in fact,
be vital to its long-term survival. In 2001, the General Conference of UNESCO took this
position when it asserted in its Universal Declaration on Cultural Diversity that “...cultural
diversity is as necessary for humankind as biodiversity is for nature.”

Today, entire countries, workplaces, and schools are increasingly made up of various
cultural, racial, and ethnic groups. By recognizing and learning about these various
groups, communities build trust, respect, and understanding across all cultures.

Communities and organizations in all settings benefit from the different backgrounds,
skills, experiences, and new ways of thinking that come with cultural diversity.
Lesson 2

Cross-Cultural Similarities and Differences

Cross-Cultural Communication Process and Negotiations

In some countries like the USA, Canada, Germany and Switzerland the
messages that the people convey are explicit and clear. They use the actual words to
convey the information. These cultures are called low-context cultures.

In countries like India, Japan, Saudi Arabia, and other middle-eastern Arab
countries, communication is mostly indirect and the expressive manner in which the
message is delivered becomes critical. Much of the information is transmitted through
non-verbal communication. These messages can be understood only with reference to
the context. Such cultures are referred to as, high-context cultures.

According to Hall, cultures also vary based on the manner of information

processing. Cultures which handle information in a direct, linear fashion are called,
monochromic. Americans are more monochromic. Americans fast tempo and demand
for instant responses are viewed as pushy and impatient. The other type of culture is
polychromic. In this culture people work on several forms simultaneously instead of
pursuing a single task. Japanese and Indians belong to polychromic culture.

American businessmen consider the failure of the Japanese to make eye to eye
contact as a sign of rudeness whereas, the Japanese do not want to look each other in
the eye as eye to eye contact is an act of confrontation and aggression.

Examples of low context, high context cultures and monochromic and

polychromic are:

Germany: Monochromic and low context culture.

 France: Polychromic and high context culture.

The possible confrontation would be a low context German may insult a high
context French counterpart by giving too much information. In contrast, a German (low
context) becomes upset when he feels that he does not get enough data and details
from the Frenchman.

Cultural Universals

Irrespective of the religion, race, region, caste etc. all of us have more or less the
same needs. These common needs are referred to as Cultural Universals. Murdock has
identified Cultural Universals like athletic, sports, bodily adornment, cooking, dancing,
singing, education, joking, kin groups, status differentiation and dream interpretation.

The cultural universals enable the businessmen to market the products in many
foreign countries with modifications. For example, TVs, cars, video games. Culture is
not a barrier to computer software.

As such, computer software industry of the USA, Europe and Australia has been
attracting most of the Indian computer software engineers. Other examples include
diamonds, gold ornaments, flowers which have worldwide demand. Many managers felt
that Japanese would not eat “black food”, when Yamazaki-Nabisco thought of
introducing Oreo Cookies in Japan. But the Oreo Cookies became number one cookies
in Japan. Cultural universals do not mean that two cultures are not very much close to
each other.

Communication through Languages

Language is the basic medium of communication. There are more than 5,000
spoken languages in the world. The same words in the same language may mean
different things in the different regions of the country.

Safe rules in international communication are:

• Over punctuate, when you are in doubt.
• Keep ideas separate, making only one point at a time.
• Confirm discussion in writing.
• Write down all figures using the style of the person you are talking to.
• Adjust your language to the level of your foreign counterpart.
• Use visual aids whenever, possible.
• Avoid technical, sports and business jargon.
 In other words, speak to the rest of the world as if you were answering a slightly
deaf, very sick old auntie, who just asked you how much to leave for you in her will.

Non-Verbal Communication

People also communicate through non-verbal medium. Non-verbal

communication means differently in different cultures.

“As stated earlier, prolonged eye to eye contact is polite in the USA and rude in Japan,
Indian and Lino cultures.”

Some other non-verbal communication clues include:

• Sitting at a table around a corner signals cooperation and active listening.

• Sitting straight across from one another signals confrontation.
• Sitting side by side makes conversation awkward.
• Standing in presence of the elders and superiors signals respecting them in
India.
• Indians offer food or beverages to the guests first.
• They start eating only after the guests start eating.
• Americans or Europeans generally do not offer food or beverages or even water.
They eat in the presence of guests without offering them.
• Indians respect the guests. In fact, they treat the guest equal to God (Athithi
Devo Bhava). Similarly, they respect the teacher also. They greet the guests,
elders and teachers with the folded hands (i.e., giving the treatment equal to
God).
• “Indonesians are polite people. A business guest will often be served something
to drink and should not reach for his drink until the host gestures to do so.
• It is polite to at least taste the drink or any food offered.
• Indonesians are not known for their punctuality, so one should not get offended,
if functions do not start on time or if your guest arrives late.
• Indonesians avoid the use of the left hand when offering food and other objects
as it is regarded as the unclean hand.
• It is also considered rude to point with a finger.”

Most of these are applicable in India, and other Asian countries. It is always
appropriate to appreciate the cultural differences in language (both verbal and
nonverbal).

Time and Culture

 • Time has different meanings in different cultures. Asians do not need
appointment to meet someone and vice versa. But Americans, Europeans and
Africans need prior appointment to meet someone and vice versa.
• Friday in the Middle East is just like Sunday in the West.
• Time is money for Americans both for work and leisure and enjoyment. Time
takes a more leisurely walk and there is no urgent work in most of the
nonWestern societies.
• In general, there is a lack of punctuality in Asian and African cultures. Swedish
people are very prompt. Chinese are very much punctual for social occasions
and appointments.
• In Asian countries, particularly in India, auspicious time is most important for
business deal, admission in a college, travel, starting a new project/work etc.

Space and Culture

• Space between one person and another person plays significant role in
communication. But culture determines the distance/space between one person
and another person.
• Latin Americans are comfortable with a few inches of distance.
• Asians need substantial conversational distance and no physical contact. This is
followed strictly in case of people of opposite sex.
• Americans need more distance from a third person for privacy. This is
unimportant for Indians.

Culture and Agreement

• The United States of America is a very legalistic society and Americans are very
specific and explicit in their terms of agreement. The opposite is true in case of
Asian countries. Asians never pick up face to face confrontation. They keep quiet
in case of disagreement.

• A South Korean or an Indian businessman considers a contract as loosely

structured consensus statement that allows flexibility and adjustment.

• In Silicon Valley area of California, the culture is characterized by multiculturalism

and diversity. There, American cultures are characterized by straightforward
approach, while Asian cultures do not teach workers to argue point-blank with
immediate superiors.

Culture of Friendship
 • Americans develop friendship even in a short time. In fact, they don’t develop
deep personal ties. Sometimes, people in the US complete the business and
then develop friendship.
• People in Japan and China first develop friendship through several means
including eating together presenting gifts and then transact business. General
Motor Corporation has learnt this culture.
• In Turkey, Let us make friends first and then see, if we can conduct business.
Once a business meeting between an American and an Italian was conducted
over dinner. The Italian client appeared next morning with the signed contract.
The US company, although pleased, was surprised.
• Americans use the first name but the French people and most northern
Europeans feel it offensive.
• In Germany, only relatives and close friends call by the first name. “In Australia
and Venezuela, the proper waiting time could be five minutes, in Argentina,
Germany and France one year, in Switzerland three years, and in Japan a
decade.”

Culture and Negotiation

• Americans are straightforward.

• Chinese negotiations are generally tough-minded and well prepared and use
various tactics to secure the best deal.

Culture and Superstition

 • Superstitious beliefs like fortune telling, palm reading, dream analysis, phases of
the sun and the moon, birth date and time analysis, vaastu are more prominent in
Asian countries and also in some of the African countries.
• Americans knock on wood, cross their fingers and feel uneasy when a black cat
crosses their path.
• Even Indians feel uneasy when a cat crosses their path.

Culture and Gifts

• Culture attitudes concerning the presentation of gifts vary widely across the
world.
• In Japan and India gifts are given first, but in Europe only after a personal
relationship is developed.
• The international businessman should study the customs of the society in offering
gifts.
• Clocks are a poor choice of gifts in China and Taiwan,
• Knife is poor choice in France, Russia, Germany and Thailand and
Handkerchiefs in Thailand, Italy, Brazil and Venezuela.

Social Environment

• Social environment consists of religious aspects, language, customs, traditions,

beliefs, tastes and preferences, social institutes, living habits, eating habits,
dressing habits etc. Social environment influences the level of consumption.
• For example, though the economic position of Germans and French people is
more or less the same culturally they are different.
• Consumption level of French people is more than that of Germans. Hence, the
study of social environment helps in deciding on the type of product, market, and
the like.

Aspects of Social Environment

1. Religion: Religion is one of the important social institutions influencing business.

A few religions have spread over a large areas in the world. The Protestants
influence is dominant in the USA, Canada and Australia with regard the
production and distribution. Roman Catholics dominate in Latin America, and
Southern European Countries. Islam dominates northern Africa, Middle East,
Malaysia, Brunei, Indonesia etc. These religions have enforced prohibition of
liquor. Buddhism and Hinduism dominate in most part of Asia. It has an effect on
 high spiritual values, low value of material goods and more emphasis on ethics
and moral values.

Religions play significant role in normal and ethical standards in

production and marketing of goods and services. Most of the religions indicate in
providing truthful and honest information. But most of the marketing practices
deviate from these standards.

2. Family System: In addition to religion, family system has its impact on

international business.
• In most of the Islamic countries, women play less significant role in the
economy and also in the family with limited rights.
• In Latin American countries, though the role of women is better compared
to that in Islamic countries, women’s role is limited in economics and in
families.
• But, women play a dominant role in European and North American
countries.

Lesson 3
Organizational/Corporate Cultures

Understanding Organizational Culture

Would you act the same way at a rock concert as you would while watching a
symphony orchestra perform? Although there are no written rules that dictate the
acceptable way to act at either type of performance, the concert audience will try to
make it very clear to you if your behavior does not conform to what they consider to be
appropriate.

Would you dress the same way to attend a golf tournament as you would to
attend a football game? Although both are sporting events, there are a set of unwritten
rules that dictate what is considered to be the acceptable way to dress for each type of
event, and the people in attendance will send you signals as to whether or not they think
you are dressed appropriately.

At concerts, sporting events, and just about everywhere that people get together,
group members convey social expectations by how they dress and act. Newcomers to
the group are expected to learn what is acceptable to the group by observing the
behavior and dress code of the group members and adapting to the situation
accordingly.

Types of Organizational Culture

A strong company culture will attract the right candidates for the job and keep
them engaged as employees. According to a Glassdoor study, 77 percent of adults
would evaluate a company’s culture before applying to an open position. Perhaps more
impactful, 56 percent rank an organization’s organizational culture as more important
than compensation.

Creating a winning organizational culture takes a lot of time and effort — your
culture must accurately reflect your values and align with your overall mission. It’s a big
to-do, but don’t get discouraged: your efforts will pay off in the long run.

Robert E. Quinn and Kim S. Cameron of the University of Michigan at Ann Arbor
investigated the qualities that make businesses effective. From a list of 39 attributes, the
researchers identified two key polarities:
(1) internal focus and integration vs. external focus and differentiation, and
 (2) flexibility and discretion vs. stability and control.

These qualities are visually represented within the Competing Values

Framework, which is part of the validated and widely-used Organizational Cultural
Assessment Instrument. A quick Google search might pull up articles that mention
anywhere from five to eight types of corporate cultures. However, Quinn and Cameron’s
four types are generally accepted and appear to influence any variations.

TYPE 1: CLAN CULTURE

Primary Focus: Mentorship and teamwork

Defining Qualities: Flexibility and discretion; internal focus and integration Motto:
“We’re all in this together.”

About Clan Culture: A clan culture is people-focused in the sense that the company
feels family-like. This is a highly collaborative work environment where every individual
is valued and communication is a top priority. Clan culture is often paired with a
horizontal structure, which helps to break down barriers between the C-suite and
employees, and it encourages mentorship opportunities. These companies are
actionoriented and embrace change, a testament to their highly flexible nature.

Benefits: Clan cultures boost high rates of employee engagement, and happy
employees make for happy customers. Because of its highly adaptable environment,
there’s a great possibility for market growth within a clan culture.

Drawbacks: A family-style corporate culture is difficult to maintain as the company

grows. Plus, with a horizontal leadership structure, day-to-day operations can seem
cluttered and lacking direction.

Where You’ll Find Clan Culture: Adaptable, team-oriented with a horizontal structure?
It’s no surprise that clan cultures are often seen in startups and smaller companies.
Young organizations that are just starting out put a heavy emphasis on collaboration
and communication, leadership looks to employees for feedback and ideas and
companies prioritize team-building.
 For companies with a large percentage of employees working remotely like HR
tech provider Hireology, creating an empathetic and communicative organizational
culture is key to success. “When you have a blended team, your local staff can help
bridge gaps and build empathy,” said Joel Schlundt, vice president of engineering at
Hireology. The team coordinated job swaps to help employees better understand and
appreciate their peers’ roles.

How to Create This Culture Within Your Organization: To cultivate a clan culture
within your company, your first step is to turn to your employees. Communication is vital
to a successful clan culture, so let your team know that you’re open to feedback. Find
out what they value, what they’d like to see change, what ideas they have to help push
the company further. Step two: take their thoughts into account and put them into
action.

TYPE 2: ADHOCRACY CULTURE

Primary Focus: Risk-taking and innovation

Defining Qualities: Flexibility and discretion; external focus and differentiation Motto:
“Risk it to get the biscuit.”

About Adhocracy Culture: Adhocracy cultures are rooted in innovation and

adaptability. These are the companies that are on the cutting-edge of their industry —
they’re looking to develop the next big thing before anyone else has even started asking
the right questions. To do so, they need to take risks. Adhocracy cultures value
individuality in the sense that employees are encouraged to think creatively and bring
their ideas to the table. Because this type of organizational culture falls within the
external focus and differentiation category, new ideas need to be tied to market growth
and company success.

Benefits: An adhocracy culture contributes to high profit margins and notoriety.

Employees stay motivated with the goal of breaking the mold. Plus, with a focus on
creativity and new ideas, professional development opportunities are easy to justify.

Drawbacks: Risk is risk, so there’s always a chance that a new venture won’t pan out
and may even hurt your business. Adhocracy cultures can also foster competition
between employees as the pressure to come up with new ideas mounts.
Where You’ll Find Adhocracy Culture: Think of Google or Apple — these are
companies
that embody the external focus and risk-taking nature of adhocracy culture. They
run
Adhocrac
on creative energy and doing what hasn’t been done before. y cultures
commonplace within the ever-changing tech industry where new products areare
being
developed and released on a regular basis.

How to Create This Culture Within Your Organization: Depending on your industry, it
may be hard to develop an authentic adhocracy culture that includes a high-risk
business strategy. However, implementing strategy and brainstorming sessions
provides employees with the opportunity to share big ideas that can help to propel the
company further. Rewarding successful ideas encourages teams to think outside of the
box, too.

TYPE 3: MARKET CULTURE

Primary Focus: Competition and growth

Defining Qualities: Stability and control; external focus and differentiation
Motto: “We’re in it to win it.”

About Market Culture: Market culture prioritizes profitability. Everything is evaluated

with the bottom line in mind; each position has an objective that aligns with the
company’s larger goal, and there are often several degrees of separation between
employees and leadership roles. These are results-oriented organizations that focus on
external success rather than internal satisfaction. A market culture stresses the
importance of meeting quotas, reaching targets and getting results.

Benefits: Companies that boast market cultures are profitable and successful. Because
the entire organization is externally focused, there’s a key objective employees can get
behind and work toward.
Drawbacks: On the other hand, because there’s a number tied to every decision,
project and position within the company, it can be difficult for employees to meaningfully
engage with their work and live out their professional purpose. There is also risk for
burnout in this aggressive and fast-paced environment.

Where You’ll Find Market Culture: The goal of a market culture company is to be the
best in its industry. Because of that, these are often larger companies that are already
leaders of the pack. They’re looking to compete and beat out anyone else that may
compare.

For an industry leader like Blue core, a retail marketing platform that utilizes AI
technology, providing employees with clear objectives helps the team provide all-star
customer service. “Our team is clear on its goals, and we are incentivized through
compensation structure and recognition,” said Kim Surko vice president of customer
success. “With that foundation, we can apply our personality and values to define how
we will accomplish those goals.”

How to Create This Culture Within Your Organization: Because every aspect of a
market culture is tied to the company’s bottom line, start by evaluating each position
within your organization. Calculate the ROI of every role and ascribe reasonable
benchmarks for production. Consider rewarding top performers to encourage similar
work.

TYPE 4: HIERARCHY CULTURE

Primary Focus: Structure and stability

Defining Qualities: Stability and control; internal focus and integration
Motto: “Get it done right.”

About Hierarchy Culture: Companies with hierarchy cultures adhere to the traditional
corporate structure. These are companies focused on internal organization by way of a
clear chain of command and multiple management tiers that separate employees and
leadership. In addition to a rigid structure, there’s often a dress code for employees to
follow. Hierarchy cultures have a set way of doing things, which makes them stable and
risk-averse.
Benefits: With internal organization as a priority, hierarchy cultures have clear direction.
There are well-defined processes that cater to the company’s main objectives.

Drawbacks: The rigidity of hierarchy cultures leaves little room for creativity, making
these companies relatively slow to adapt to the changing marketplace. The company
takes precedence over the individual, which doesn’t necessarily encourage employee
feedback.

Where You’ll Find Hierarchy Culture: Hierarchy cultures can be found at both ends of
the corporate spectrum, from old-school organizations to those of the customer service
industry, such as fast food restaurants. These are companies that are hyper-focused on
how day-to-day operations are carried out and aren’t interested in changing things up
anytime soon.

How to Create This Culture Within Your Organization: The first step to establishing a
hierarchy culture is to button up your processes. If the chain of command has some
gaps, fill them. Consider every team and department to ensure they have clear long-
and short-term goals.

Your organizational culture says a lot about your team and what you value, and
job seekers can pick up on that almost immediately. Evaluate your existing
organizational culture and take stock of what truly matters to your organization — where
are you aligned, and what are your areas for improvement? While you can exert control
over your organizational culture, keep in mind that the office dynamic will shift as you
onboard new team members, so hire for culture add, not fit.

Organizational culture has the power that is determined in living the core values,
clarity of regulation, and the breadth of dissemination among school organizations. The
greater the number of members who accept and live the core values, the greater the
commitment of the members of the organization to the strength of the organizational
culture.

There are several strengths of organizational culture, such as: a mature

organizational culture (having a stable membership, being able to cooperate and
instilling deep values), and a strong organizational culture that provides clarity about the
behavior that must be taken or implemented.
 A strong organizational culture will have a greater effect on members or teachers
than a weak culture. If the culture is strong it will support high ethical standards. An
important point of the strength of organizational culture is related to performance that is
able to adapt to changing environmental conditions. Therefore, organizational culture is
designed to determine the behaviors that lead to performance outcomes. The
organization is considered strong because a leader has the same beliefs and values
with concern for the teacher who runs the organization and in management also
considers that employees are more important than the rules in the organization.

A strong culture is seen as a strong medium to provide information to

organizational groups about desired behavior. A strong culture is associated with high
organizational performance. That a strong culture should be emphasized and
transferred to new members and it will be implemented as soon as possible.
Organizational culture in schools is important to run because it is the habits that occur in
organizations that represent the norms of behavior that are followed by members of the
organization. A productive culture is a culture that can make the organization strong and
the goals of the institution can be implemented well

There are several functions of organizational culture, namely: giving members an

identity to show distinctive features that differentiate them from other organizations,
increasing cooperation that the work environment is comfortable and family ties are very
strong, and shaping behavior by helping members become aware of their environment.
By interacting between members of the organization and other members, making an
organization look pleasant with the results of communication that is mutual respect and
helps each other at work. So, the function of organizational culture is to produce what
the organization wants to achieve in carrying out its duties and responsibilities in a
group to achieve the goals and objectives agreed upon from the start. The function of
organizational culture has many benefits if members actually carry out the values and
norms that have been made and will produce habits for members themselves.

Characteristics of organizational culture as a process that is obtained through

interactions with individuals and characteristics of organizational culture is a
humanitarian process in which humans are considered as the main source of
conducting culture and understanding the meaning of occupied culture. The
characteristics of organizational culture also provide values, principles, traditions, and
attitudes that influence the way members of the organization behave towards other
members.
 The characteristics of organizational culture in schools such as: First, the use of
language is done when members of the organization interact with each other, they use
polite language, terms, and general rituals related to respect and ways of behaving so
that they can differentiate within the organizational culture environment. Both norms,
such as the standard of behavior that exists in an organization or community and the
activities that must be done are not too much and not too little, can result in activities not
being carried out. The third rule, the demands for new workers to work must follow
activities and rules to get used to the organizational culture. The four organizational
climate, atmosphere and organizational condition must be seen comfortably because
the organizational climate makes members more comfortable at work.
Lesson 4

Managing Multiculturalism: The Asian Experience

Source: Google.com

Culture is an integral part of immigration studies. Culture can prove a powerful aspect
in forming and shaping immigrants’ experiences. Although culture facilities for the
formation of identity, it can also have negative effects due to the clash of the host
society’s culture and the immigrant group’s culture. The meaning of multiculturalism is
much debated as some hold the term as universalistic. It refers, for the most part, to
the minority. Therefore, this impinges on its true value, instead of being laden with a
struggle against “the centers of power’.

Multiculturalism tends to be ideology of emancipation from any pervasive system of

cultural oppression and domination. However, some axiological dilemmas are inherent
in this ideology. When a certain cultural minority demands an agreement on the
implementation of principles that are at variance with human rights, its members must
not ignore the fact that this claim is not expressed in any legislative vacuum, but
impinges on a judicial system that has been in force in the country where this group
resides, so it undermines the efficacy of national law enforcement and thereby
threatens those who abide by human rights with the domination of a tradition that they
condemn.

• Multiculturalism is the way in which a society deals with cultural diversity, both at
the national and at the community level.
• Sociologically, multiculturalism assume that society as a whole benefits from
increased diversity through the harmonious coexistence of different cultures.
• Multiculturalism typically develops according to one of two theories: the “melting
pot” theory or the “salad bowl” theory.

Multiculturalism can take place on a nationwide scale or within a nation’s communities.

It may occur either naturally through immigration, or artificially when jurisdictions of
different cultures are combined through legislative decree.

Multiculturalism Theories

The two primary theories or models of multiculturalism as the manner in which different
cultures are integrated into a single society are best defined by the metaphors
commonly used to describe them—the “melting pot” and the “salad bowl” theories.

1. The Melting Pot Theory. The melting pot theory of multiculturalism assumes
that various immigrant groups will tend to “melt together,” abandoning their
individual cultures and eventually becoming fully assimilated into the
predominant society. Typically used to describe the assimilation of immigrants
into the United States, the melting pot theory is often illustrated by the metaphor
of a foundry’s smelting pots in which the elements iron and carbon are melted
together to create a single, stronger metal—steel. In 1782, French-American
immigrant J. Hector St. John de Crevecoeur wrote that in America, “individuals of
all nations are melted into a new race of men, whose labors and posterity will
one day cause great changes in the world.”

The melting pot model has been criticized for reducing diversity, causing
people to lose their traditions, and for having to be enforced through
governmental policy. For example, the U.S. Indian Reorganization Act of 1934
forced the assimilation of nearly 350,000 Indigenous peoples into American
society without any regard for the diversity of their heritages and lifestyles.

2. The Salad Bowl Theory. A more liberal theory of multiculturalism than the
melting pot, the salad bowl theory describes a heterogeneous society in which
 people coexist but retain at least some of the unique characteristics of their
traditional culture. Like a salad’s ingredients, different cultures are brought
together, but rather than coalescing into a single homogeneous culture, retain
their own distinct flavors. In the United States, New York City, with its many
unique ethnic communities like “Little India,” “Little Odessa,” and “Chinatown” is
considered an example of a salad bowl society.

The salad bowl theory asserts that it is not necessary for people to give up their
cultural heritage in order to be considered members of the dominant society. For
example, African Americans do not need to stop observing Kwanzaa rather than
Christmas in order to be considered “Americans.”

On the negative side, the cultural differences encouraged by the salad bowl
model can divide a society resulting in prejudice and discrimination. In addition,
critics point to a 2007 study conducted by American political scientist Robert
Putnam showing that people living in salad bowl multicultural communities were
less likely to vote or volunteer for community improvement projects.

Characteristics of a Multicultural Society

Multicultural societies are characterized by people of different races, ethnicities, and

nationalities living together in the same community. In multicultural communities,
people retain, pass down, celebrate, and share their unique cultural ways of life,
languages, art, traditions, and behaviors.

The characteristics of multiculturalism often spread into the community’s public schools,
where curricula are crafted to introduce young people to the qualities and benefits of
cultural diversity. Though sometimes criticized as a form of “political correctness,”
educational systems in multicultural societies stress the histories and traditions of
minorities in classrooms and textbooks. A 2018 study conducted by the Pew Research
Center found that the “post-millennial” generation of people ages 6 to 21 are the most
diverse generation in American society.

Far from an exclusively American phenomenon, examples of multiculturalism are found

worldwide. In Argentina, for example, newspaper articles, and radio and television
programs are commonly presented in English, German, Italian, French, or Portuguese,
as well as the country’s native Spanish. Indeed, Argentina’s constitution promotes
immigration by recognizing the right of individuals to retain multiple citizenships from
other countries.
As a key element of the country’s society, Canada adopted multiculturalism as official
policy during the premiership of Pierre Trudeau in the 1970s and 1980s. In addition, the
Canadian constitution, along with laws such as the Canadian Multiculturalism Act and
the Broadcasting Act of 1991, recognize the importance of multicultural diversity.
According to the Canadian Library and Archives, over 200,000 people—representing at
least 26 different ethnocultural groups—immigrate to Canada every year.

What Makes You “Multicultural”?

You’ve heard about multicultural societies and groups, but have your thought about
multicultural individuals and what they bring to organizations? Multicultural individuals
— such as Chinese-Canadians, Turkish-Germans, or Arab-Americans — commonly
think, perceive, behave, and respond to global workplace issues in more complex ways
than monocultural individuals.

Some multicultural individuals translate these differences into career success.

For example, a study of 100 Israeli managers working in Silicon Valley found that
Israeli-
American managers thought in more complex ways than managers who saw
themselves as belonging to only Israeli or only American cultures. As a result, peers
rated them as more competent managers and they were promoted faster.

Many people are confused about whether they are multicultural. Does having immigrant
parents or grandparents, working internationally, or living in a multicultural city mean
that you are multicultural?

It’s a question that even experts find hard to answer, because multiculturalism
is defined in so many different ways. For example, some researchers argue that
residents of Hong Kong are multicultural because of its colonial history. In contrast,
others define multicultural individuals by their ability to function effectively in more than
one culture, such as knowing multiple languages or having “multicultural minds,”

meaning they can think in ways that reflect multiple cultures.

As a six-person international team representing 16 cultures, we decided to

resolve this confusion by consolidating the best parts of all previous definitions. In
doin
g

so, we recognized that people can be multicultural to varying degrees.

How much knowledge do you have about each of your cultures?

Does your knowledge of your cultures go beyond “book learning”? How much do
you know about their values, underlying cultural assumptions, beliefs, and typical
behaviors? How familiar are you with their histories, heroes, traditions, customs, and
social institutions? How fluent are you in their languages? If asked about these
cultures, how many unique, culture-specific points can you come up with in a few
minutes? Use your answers to place yourself on this dimension, using the spectrum of
possibilities listed below.
• Monocultural: High level of knowledge of one culture
• Slightly multicultural: High level of knowledge about one culture and moderate
knowledge about another culture
• Moderately multicultural: High level of knowledge of more than one culture 
Highly multicultural: high level of knowledge of more than two cultures

Your level of multicultural knowledge is particularly useful for accomplishing cross-

cultural tasks. For example, consider Hidé, a Japanese-American employee in a U.S.
subsidiary of a Japanese firm. Hidé knew that head office messages might confuse
their American customers, because they used a structure common in Japan, starting
with peripheral information and only eventually getting to the main issue. Instead of
passing the translated messages on verbatim, Hidé used his multicultural knowledge to
rewrite them more directly, resulting in a better reception among customers. So if you
have in-depth knowledge of more than one culture, you can use it to enable
crosscultural understanding in your firm.

How much do you identify with more than one culture?

People who identify with more than one culture often find it difficult to answer the
question: “Where are you from?” How many cultures come to mind when you respond?
Do you say “we” (as opposed to “they”) when talking about these groups?
When someone criticizes these groups, do you feel personally offended? Use your
answers to place yourself on this identification dimension.

• Monocultural: Identify with one cultural group

• Slightly multicultural: Identify primarily with one culture, and to a lesser extent
with another culture
• Moderately multicultural: Identify strongly with more than one culture
• Highly multicultural: Identify with more than two cultures

Identification with more than one culture can help facilitate connections with others,
including relationships across firms. For example, compared to British employees of a
U.K.-based pharmaceutical firm, the firm’s Chinese-British employees used their dual
cultural identities to develop better trust with employees at new Chinese partner firms.
The trusting relationships Chinese-British employees created with employees from both
their British employer and the Chinese partner firm ultimately helped them build
successful alliances between their firms.

If you identify with more than one cultural group, you can draw on your network to
connect people across your cultures.

How much have you internalized more than one culture?

To answer this question, examine your values, beliefs, and assumptions. This is hard;
we are often not aware of how culture shapes these deepest parts of ourselves. To
what extent do different cultures influence your value systems? Do you think about
issues from the perspective of more than one culture? Do they influence how you feel?
How much do you use values, beliefs, and assumptions from more than one culture
when making decisions? Do you find yourself unconsciously engaging in different
cultural behaviors depending on the situation? Use your answers to place yourself on
this internalization dimension.

• Monocultural: Internalized one culture

• Slightly multicultural: Internalized one primary culture and a second culture to
a lesser extent
• Moderately multicultural: Fully internalized more than one culture  Highly
multicultural: Fully internalized more than two cultures

When you’ve internalized more than one culture, it can help you develop more complex
thinking skills and innovative solutions to problems. When people intimately understand
more than one cultural system, they see new ways to combine them, leading to
innovations.

For example, a French-Irish-Cambodian L’Oréal employee was tasked with developing

skin-care products for the French market. He understood better than his French
colleagues that the French product development process was hampered by its sharp
category definitions. While his French colleagues saw makeup and skincare as
separate categories, this employee saw the opportunity to combine these categories,
as is done in Asia. He therefore introduced a tinted and lifting cream to the French
market, where it quickly became popular. Even such a seemingly simple change is
often difficult because our cultural beliefs frame the categories we see in the world.
If you have internalized more than one culture, you can try to use it to help you create
innovative solutions to your international workplace dilemmas.

MODULE 3

Lesson 1

Human Career Resource Pools

There's strength in numbers—even if you're on the small side in the business

world, you may be able to deploy the leverage of a much larger organization by pooling
resources with other small businesses.

Although the life of a business owner can seemingly revolve around competition,
cooperating with other firms by pooling resources can open the door to bulk discounts
on materials and supplies; access to otherwise unaffordable tools and equipment; and
help from professionals whose experience and skills match those of the talent at global
enterprises.

Businesses absolutely can and do pool and share resources as stated by Gene
Homicki, CEO of myTurn, a Berkeley, California-based company that makes a software
platform for sharing tools and other assets. Tools and equipment are often only used for
certain times of the day, month or even year and are gathering dust the rest of the time.

Resource Pooling can be described as grouping of resources, assets,

machinery and numbers, finances, ways and means, data, persons, vehicles etc., to
derive maximum benefit out of the pool that is combined, joined and gathered than what
each of them achieves individually. Resource pooling helps in maximizing advantage or
minimizing risk.
 Thus, Human Resources Pooling can be defined as “an activity that combines
and ensures a perfect mix of different people from various backgrounds having
diversified skill sets to derive the maximum or optimum productivity of a given task”.

Resource Pooling is considered to be the innovative and cost-effective way of

handling resources. Budget and financial constraints and restraints force the top level
management to find innovative and cost-effective ways to deliver the services and their
programs. Further, significant savings can be realized through innovative ways, which
will be helpful to deliver the support functions at minimal cost.

Resource pooling is a combination of different people with an opportunity to bring

every quality that it brings to the table. There would be different backgrounds of people
who represent different cultures, speak various languages, practices different customs
etc., which are essential for any work place to ensure overarching system. Resource
pooling also presents the organization, a combined effort with diversified skill sets. It
actually disrupts the existing monotony in any organization that suffers lack of creativity.
The resource pool is a group of individuals who can take new challenges that include a
pool of talent from diverse backgrounds, multi-skills and varied experiences. This group
consists of full time employers, part timers and even freelancers.

Resource pool provides a mechanism to organize supply of resources in a

meaningful way to support human resource planning and can be grouped in such a way
to optimize the operations. Resource pooling can be done to suit the organizational
needs taking the assistance of Human Resource Department. However, pooling and
categorization of resources can vary from organization to organization, and pools are
static and new pools can be added in some cases. The staffing workbench also a type
of resource pooling and can be placeholders for future capacity 

Common Resource Pool Model of Human Capital Management

Human Capital Management is defined as a process that ensures the right

candidate is hired for the right job, trained from time to time, managed well and also
retained in the organization.

Human Capital management makes the best possible use of skills and
experiences of employees and motivates them to deliver their level best. Human Capital
management helps in extracting the best out of individuals, eventually benefitting the
organization and yielding higher profits.

Common Resource Pool Model

Human Capital Management helps human resource professionals to hire the best
available talent. Common resource pool constitutes group of individuals ready to take
up new opportunities. Common resource pool includes a pool of talent from diverse
backgrounds, multi skills and varied experiences.
 In simpler words, Common resource Pool is a group of people from which
human resource professionals hire employees for an organization. It is the
responsibility of human resource professionals to recruit employees as per the
requirement in the organization from the common resource pool often abbreviated as
CRP. Common resource pool helps in the staffing of teams.

According to common resource pool model,

 human resource representatives are assigned the responsibility of hiring the right
talent from common resource pool
 find out who would be the best fit among the available resources for your
organization. Job responsibilities should be clearly defined.
 Analyze the background, past experience, educational qualification, interests,
before hiring an individual.
 check his/her credibility in the past organizations
 Human resource professionals must discuss with the senior management to
understand as to what they expect from their team members. Try to read their
minds.
 Do not hire just for the sake of it. It will land you in trouble later on. You are the
one who would be held responsible.
 minimizes the chances of duplication thus making the work of individuals
representing human resource vertical much easier
 help human resource professionals in identifying resources or skills that are in
less numbers and for which supply must increase
 not only include full time employees but also employees who are on contracts,
part timers, freelancers and so on. Whether a full-time employee or a freelancer
should be hired, depends on the project and the size of organization.

Full Time Employees - Full time employees are individuals who work for a minimum
number of hours as defined by the policies of the organization.
A full-time employee enjoys the following benefits:
 Annual leaves-paid number of days each year that an employee is allowed to be
away from work
 Casual leaves-granted to an eligible employee if they cannot report to work due to
an unforeseen situation
 Medical Leaves-category when employees take an absent to face medical
conditions that reduce their physical and/or mental health to the point that they can
no longer perform key job responsibilities.
 Insurance policies-contract between the insurer and the policy holder, which
determine the claims which the insurer is legally required to pay.

Part timers - Part timers are individuals who work for only few hours less than the
standard time.

Freelancers - A freelancer is an individual who has the liberty to choose his working
hours as per his/her own convenience. He is not committed to a particular organization.
 Common resource pool model makes, managers more efficient as compared to
team members. Common resource pool model highlights the importance of skills,
knowledge and background of human capital who are the key drivers of projects.

Hybrid Model of Human Capital Management

As the name suggests, hybrid model of human capital management is a mix

of common resource pool model and unique skill set model. In hybrid model, employees
are multiskilled and have diverse set of experiences and backgrounds. Hybrid model
employees come from varied backgrounds (high profile activity) and have a generalist
profile. In a layman’s language hybrid model of human capital management includes
diversified human capital.

 Hybrid model includes front office staff, customer care representatives,

sales representatives and so on. This model does not include employees with
unique skills set but employees who have a generalist profile and are
multitalented. Such employees can perform various functions at a single time and
thus come up with innovative ideas for the organization.

 Hybrid model employees do not require extensive training. Light trainings

can solve the purpose. Employees under hybrid model do not have to perform
specialized tasks and thus do not require specialized training programs.

A customer care executive does not have to perform complex duties in his/her
day to day operations. In the same way a front office executive does not need to
develop specialized skillsets. Lighter trainings are useful for them and can make them
more efficient for them to contribute towards the functioning of organization.

 Hybrid model of human capital management lacks staff members with

specialized experiences or unique skills and knowledge. One can find
employees who are generalists and thus lack in - depth business knowledge.
Such employees would not be able to participate in critical business decisions
due to the lack of thorough work knowledge.

Talent acquisition is much simpler in hybrid model of human capital

management. Interview processes and formalities are not critical as in unique skill set
model. Human resource professionals need to hire individuals with a generalist’s profile,
who do not have much say in the organization’s major decisions, policy formulations or
goal and objective setting. Hybrid model staff can be hired in just one or two discussions
only. You do not need an elaborate questionnaire to hire a customer care executive or a
front office staff.

 Hybrid model of human capital management reduces the need of trainings.

Such a model also lacks good talented resource who can take up the
responsibility of guiding his/her team members. In this model there is hardly any
qualified, high ranked staff member who can set an example for other team
 members or lead them. You would hardly find someone who is capable of being
a leader or a team member. This is one of the major drawbacks of hybrid model
of human capital management.

Following steps should be followed in hybrid model:

1. Identify the skills, knowledge your organization has and identify the areas where
there is lack of skill portfolio.
2. Identify the human capital with skills and knowledge for which there is a high
demand but the supply is low.
3. Find out the expertise of employees. Talk to them and find out in which all areas
they can contribute maximum.
A human resource professional ought to forecast knowledge, skills or expertise
his/her organization will need say five years or ten years down the line. Try to
analyze the projects in the pipeline.
4. Prepare recruitment models and refill strategies.
5. Try to design training programs to mentor the employees and upgrade their
existing knowledge.

Key Benefits of Hybrid Model

 Easy to train the employees
 Effective communication between team members and team managers
 Flexibility is more in hybrid model of human capital management
 Centralization of processes and functions
 Hybrid model achieves significant operational improvements

Talent Acquisition

Talent acquisition deals with the strategies, tactics and processes for identifying,
recruiting and retaining the human resources a company needs. It includes developing,
implementing and evaluating programs for sourcing, recruiting, hiring and orienting

WORKFORCE PLANNING. An important step in a talent acquisition strategy is to

assess the current and future workforce needs. Factors considered in workforce
planning include:
 Government influence
 Economic conditions
 Business competition
 Workforce demographics

RECRUITING. Sourcing and recruiting are the meat and potatoes of talent acquisition.
Practices include external and internal recruiting and employee referrals. The hiring
process includes numerous tasks, including:
 Candidate sourcing
 Screening candidates
 Interviewing
 Pre-employment testing
  Writing employment offers
 Onboarding new hires

LEGAL ISSUES. Talent acquisition requires thorough knowledge and practical

application of a variety of federal, state and local laws and regulations such as:
 Equal employment opportunity (EEO) laws prohibiting discrimination based on
factors such as race, color, gender, pregnancy, age, religion, national origin,
disability and veteran status. Many states and municipalities have EEO laws that
provide greater protection than federal law.
 Immigration and visa requirements for foreign workers to be employed. There are
several types of visas available under a variety of circumstances.
 Employment eligibility verification through the completion of the. Civil and
criminal penalties can be imposed on employers that do not comply.
 The Fair Credit Reporting Act (FCRA) that applies to background investigations,
such as criminal history or consumer credit reports, in some circumstances.

TECHNOLOGY. Technology is frequently utilized within talent management. Some of

the more common areas in which technology is employed to assist in talent acquisition
are the following:
 Affirmative action tracking
 Applicant tracking
 Background checking
 Candidate communications
 Job analysis 
 Job descriptions
 Job postings
 Legal compliance
 Orientation/onboarding 
 Recruiting

Here 1. Be involved. Get hiring managers involved in the sourcing are five
tips for and teach them how to identify and reach out to referrals and
leads.

2. Cultural Fit. Understand the teams you are hiring for by

interacting with the and learning how team members engage
with each other to better identify candidates who fit the tam
culture.

3. Communicate. Provide feedback to hiring managers

regarding their candidate assessments based on your
expertise of the role being filled and the team.

4. Don’t settle. Speak up and don’t be afraid to advise hiring

managers to wait for a great candidate when they may be
willing to settle for a mediocre candidate.

5. Leverage Strategy. Be strategic and bring workforce planning

information to the table that can assist leaders with making
better talent decisions.
becoming a true talent acquisition partner:

Lesson 2

Entry Strategies and Organizational Structures

There are recommendations for international business engagements from the

ownership-location-internationalization (OLI) advantage categories. The OLI paradigm
suggests that MNEs that have merely ownership-specific advantages, and neither
internationalization nor location-specific advantages, should deal with their foreign
business in the form of international contracts.

However, the greater the ownership and internationalization advantages

possessed by firms and the more the location advantages creating, acquiring and
exploiting these advantages from a location outside its home country, the higher the
probability that foreign direct investment activities will be undertaken. Where forms
possess substantial ownerships internalization advantages but location advantages
favor the home country, then domestic investment will be preferred to foreign direct
investment; and foreign markets will be supplied by exports.

Initially addressed as a static model, Dunning further developed the electric

paradigm several times over a period of more than 20 years, paying more attention over
time to dynamic competitiveness and the strategic aspects of the firm. Changes in the
global markets witnessed since the 1990s, the deepening integration of global capital
and logistics, the liberalization of cross-border markets, and the emergence of several
new countries as important players in the global economic arena caused by Dunning to
modify and enlarge each of the OLI categories with dynamic components.

Resources and capabilities, such as the ability to internally produce and organize
proprietary assets that match existing market needs at any given moment in time (static
ownership advantages) were enlarged by context-specific issues to increase income-
generating assets over time (dynamic ownership advantages). Dynamic means, for
example, that the trade-off of resources that can be internally developed with those
externally acquired (through bilateral relationships with other market actors) becomes
more crucial then the resources themselves.

Location-specific advantages have been traditionally expressed by the availability

of a country’s unique immobile natural resources, which the MNE may make use of.
This category was enlarged by distinctive and non-imitable, location-bound created
assets, such as the presence of firms that have specific local market knowledge (access
to local customers because of suitable and efficient marketing communications). MNEs
might form relationships to complement their own core competencies (advanced
production technology) with the specific knowledge (marketing) of local firms in the
foreign target markets, for example through international joint ventures.

Geographic locations that used to be regarded as targets for the supply of raw
materials (static location advantages) are also becoming recognized as possible
sources of learning and innovative capabilities (dynamic location advantages). The
need for the firm’s efficiency improvement through rationalization highlights the
importance of management’s strategic capabilities through developing dynamic
capabilities.

International Market Entry Strategies

Market entry strategies allow companies to offer their products in international

markets. Since there are many methods companies can use to sell their goods globally,
they can choose a suitable approach based on their goals and target market.
Understanding the different market entry strategies can help you decide which one
offers the most benefits to your company.
Why are market entry strategies important?

Market entry strategies are methods companies use to plan, distribute and
deliver goods to international markets. The cost and level of a company's control over
distribution can vary depending on the strategy it chooses. Companies usually choose a
strategy based on the type of product they sell, the value of the product and whether
shipping it requires special handling procedures. Companies may also consider their
current competition and consumer needs.

To select an effective strategy, companies align their budgets with their product
considerations, which often improves their chances of increasing revenue. The three
primary factors that affect a company's choice of international market entry strategy are:

 Marketing: Companies consider which countries contain their target market and

how they would market their product to this segment.

 Sourcing: Companies choose whether to produce the products, buy them or

work with a manufacturer overseas.

 Control: Companies decide whether to enter the market independently or

partner with other businesses when presenting their products to international
markets.
Why are market entry strategies important?

Market entry strategies are important because selling a product in an

international market requires precise planning and maintenance processes. These
strategies enable companies to stay organized before, during and after entering new
markets. Since every company has its own goals for entering an international market,
having the option to choose from various types of strategies can give a company the
opportunity to find one that fits its needs.

10 Market Entry Strategies for International Markets

Here are 10 market entry strategies you can use to sell your product
internationally:

1. Exporting. Exporting involves marketing the products you produce in the

countries in which you intend to sell them. Some companies use direct exporting,
in which they sell the product they manufacture in international markets without
third-party involvement. Companies that sell luxury products or have sold their
goods in global markets in the past often choose this method. Alternatively, a
company may export indirectly by using the services of agents, such as
international distributors. Businesses often choose indirect exporting if they're
just beginning to distribute internationally. While companies pay agents for their
services, indirect exporting often results in a return on investment (ROI) because
the agents know what it takes to succeed in the markets in which they work.
2. Piggybacking. If your company has contacts who work for organizations that
currently sell products overseas, you may want to consider piggybacking. This
market entry strategy involves asking other businesses whether you can add
your product to their overseas inventory. If your company and an international
company agree to this arrangement, both parties share the profit for each sale.
Your company can also manage the risk of selling overseas by allowing its
partner to handle international marketing while your company focuses on
domestic retail.

3. Countertrade. Countertrade is a common form of indirect international marketing.

Countertrading functions as a barter system in which companies trade each
other's goods instead of offering their products for purchase. While legal, the
system does not have specific legal regulations like other forms of market entry
do. This means companies may solve problems like ensuring other companies
understand the value of their products and attempting to acquire goods at a
similar level of quality. Countertrading is a cost-effective choice for many
businesses because the practice may exempt them from import quotas.

4. Licensing. Licensing occurs when one company transfers the right to use or sell
a product to another company. A company may choose this method if it has a
product that's in demand and the company to which it plans to license the
product has a large market. For example, a movie production company may sell
a school supply company the right to use images of movie characters on
backpacks, lunchboxes and notebooks.

5. Joint ventures. Some companies attempt to minimize the risk of entering an

international market by creating joint ventures with other companies that plan to
sell in the global marketplace. Since joint ventures often function like large,
independent companies rather than a combination of two smaller companies,
they have the potential to earn more revenue than individual companies. This
market entry strategy carries the risk of an imbalance in company involvement,
but both parties can work together to establish fair processes and help prevent
this issue.

6. Company ownership. If your company plans to sell a product internationally

without managing the shipment and distribution of the goods you produce, you
might consider purchasing an existing company in the country in which you want
to do business. Owning a company established in your international market gives
your organization credibility as a local business, which can help boost sales.
Company ownership costs more than most market entry strategies, but it has the
potential to lead to a high ROI.

7. Franchising. A franchise is a chain retail company in which an individual or group

buyer pays for the right to manage company branches on the company's behalf.
Franchises occur most commonly in North America, but they exist globally and
 offer businesses the opportunity to expand overseas. Franchising typically
requires strong brand recognition, as consumers in your target market should
know what you offer and have a desire to purchase it. For well-known brands,
franchising offers companies a way to earn a profit while taking an indirect
management approach.

8. Outsourcing. Outsourcing involves hiring another company to manage certain

aspects of business operations for your company. As a market entry strategy, it
refers to making an agreement with another company to handle international
product sales on your company's behalf. Companies that choose to outsource
may relinquish a certain amount of control over the sale of their products, but
they may justify this risk with the revenue they save on employment costs.

9. Greenfield investments. Greenfield investments are complex market entry

strategies that some companies choose to use. These investments involve
buying the land and resources to build a facility internationally and hiring a staff
to run it. Greenfield investments may subject a company to high risks and
significant costs, but they can also help companies comply with government
regulations in a new market. These investments typically benefit large,
established organizations as opposed to new enterprises.

10. Turnkey projects. Turnkey projects apply specifically to companies that plan,
develop and construct new buildings for their clients. The term "turnkey" refers to
the idea that the client can simply turn a key in a lock and enter a fully
operational facility. You might consider this market entry strategy if your clients
comprise foreign government agencies. International financial agencies usually
manage arrangements between companies and their overseas clients to ensure
the companies provide high-quality service and the client pays the full amount
due.

International Organizational Structures

Type 1: Expo-documents against acceptance Department: Exports are often looked
after by a company’s marketing or sales department in the initial stages when the
volume of exports sales is low. However, with increase in exports turnover, an
independent exports department is often setup and separated from domestic marketing,
as shown.

Exports Department

Exports activities are controlled by a company’s home-based office through a

designated head of export department, i.e. Vice President, Director, or Manager
(Exports). The role of the HR department is primarily confined to planning and recruiting
staff for exports, training and development, and compensation. Sometimes, some HR
activities, such as recruiting foreign sales or agency personnel are carried out by the
exports or marketing department with or without consultation with the HR department.

Type 2: International division structure: As the foreign operations of a company

grow, businesses often realize the overseas growth opportunities and an independent
international division is created which handles all of a company’s international
operations. The head of international division, who directly reports to the chief executive
officer, coordinates and monitors all foreign activities.
 The in-charge of subsidiaries reports to the head of the international division.
Some parallel but less formal reporting also takes place directly to various functional
heads at the corporate headquarters.

The corporate human resource department coordinates and implements staffing,

expatriate management, and training and development at the corporate level for
international assignments. Further, it also interacts with the HR divisions of individual
subsidiaries.

The international structure ensures the attention of the top management towards
developing a holistic and unified approach to international operations. Such a structure
facilitates cross-product and cross-geographic co-ordination, and reduces resource
duplication.

Although an international structure provides much greater autonomy in decision-

making, it is often used during the early stages of internationalization with relatively low
ratio of foreign to domestic sales, and limited foreign product and geographic diversity.

Type 3: Global Organizational Structures: Rise in a company’s overseas operations

necessitates integration of its activities across the world and building up a worldwide
organizational structure.

While conceptualizing organizational structure, the internationalizing firm

often has to resolve the following conflicting issues:
i. Extent or type of control exerted by the parent company headquarters over
subsidiaries
ii. Extent of autonomy in making key decisions to be provided by the parent
company headquarters to subsidiaries (centralization vs. decentralization)

Depending upon the firm strategy and demands of the external business
environment, it may further be graduated to a global matrix or trans-national network
structure.

a. Global functional division structure: It aims to focus the attention of key

functions of a firm, as shown, wherein each functional department or division is
responsible for its activities around the world. For instance, the operations
department controls and monitors all production and operational activities;
similarly, marketing, finance, and human resource divisions co-ordinate and
control their respective activities across the world.
 Such an organizational structure takes advantage of the expertise of each
functional division and facilitates centralized control. MNEs with narrow and
integrated product lines, such as Caterpillar, usually adopt the functional
organizational structure.

Such organizational structures were also adopted by automobile MNEs

but have now been replaced by geographic and product structures during recent
years due to their global expansion.

Major advantages
i. Greater emphasis on functional expertise
ii. Relatively lean managerial staff
iii. High level of centralized control
iv. Higher international orientation of all functional managers

Disadvantages
i. Difficulty in cross-functional coordination
ii. Challenge in managing multiple product lines due to separation of operations
and marketing in different departments
iii. Since only the chief executive officer is responsible for profits, such a structure
is favored only when centralized coordination and control of various activities
is required.

b. Global product structure: Under global product structure, the corporate

product division is given worldwide responsibility for the product growth. The
heads of product divisions do receive internal functional support associated with
the product from all other divisions, such as operations, finance, marketing, and
human resources. They also enjoy considerable autonomy with authority to take
important decisions and operate as profit centers.
 The global product structure is effective in managing diversified product
lines. Such a structure is extremely effective in carrying out product modifications
so as to meet rapidly changing customer needs in diverse markets. It enables
close coordination between the technological and marketing aspects of various
markets in view of the differences in product life cycles in these markets, for
instance, in case of consumer electronics, such as TV, music players, etc.
However, creating exclusive product divisions tends to replicate various
functional activities and multiplicity of staff. Besides, little attention is paid to
worldwide market demand and strategy. Lack of cooperation among various
product lines may also result into sales loss. Product managers often pursue
currently attractive markets neglecting those with better long-term potential.

c. Global geographic structure: Under the global geographic structure, a firm’s

global operations are organized on the basis of geographic regions, as depicted.
It is generally used by companies with mature businesses and narrow product
lines. It allows the independent heads of various geographical subsidiaries to
focus on the local market requirements, monitor environmental changes, and
respond quickly and effectively.
 The corporate headquarter is responsible for transferring excess
resources from one country to another, as and when required. The corporate
human resource division also coordinates and provides synergy to achieve
company’s overall strategic goals between various subsidiaries based in different
countries.

Such structure is effective when the product lines are not too diverse and
resources can be shared. Under such organizational structure, subsidiaries in
each country are deeply embedded with nationalistic biases that prohibit them
from cooperating among each other.

d. Global matrix structure: It is an integrated organizational structure, which

super-imposes on each other more than one dimension. The global matrix
structure might consist of product divisions intersecting with various geographical
areas or functional divisions. Unlike functional, geographical, or product division
structures, the matrix structure shares joint control over firm’s various functional
activities.
 Such an integrated organizational structure facilitates greater interaction
and flow of information throughout the organization. Since the matrix structure
has an in-built concept of interaction between intersecting perspectives, it tends
to balance the MNE’s prospective, taking cross-functional aspects into
consideration.

It facilitates ease of technology transfer to foreign operations and of new

products to different markets leading to higher economies of scale and better
foreign sales performance. Matrix structure is used successfully by a large
number of MNEs, such as Royal Dutch/Shell, Dow Chemical, etc. In an effort to
bring together divergent perspectives within the organization, the matrix structure
may also lead to conflicting situations. It inhibits a firm’s ability to respond quickly
to environmental changes in case an effective conflict resolution mechanism is
not in place.

Since the structure requires most managers to report to two or multiple

bosses, Fayol’s basic principle of unity of command is violated and conflicting
directives from multiple authorities may compel employees to compromise with
sub-optimal alternatives so as to avoid conflict which may not be the most
appropriate strategy for an organization as a whole.

e. Transnational network structure: Such a globally integrated structure

represents the ultimate form of an earth-spanning organization, which eliminates
the meaning of two or three matrix dimensions. It encompasses elements of
 function, product, and geographic designs while relying upon a network
arrangement to link worldwide subsidiaries.

This form of organization is not defined by its formal structure but by how its
processes are linked with each other, which may be characterized by an overall
integrated system of various inter-related sub-systems.

The trans-national network structure is designed around ‘nodes’, which are the
units responsible for coordinating with product, functional and geographic aspects of an
MNE. Thus, trans-national network structures build-up multidimensional organizations
which are fully networked.

The conceptual framework of a transnational network structure primarily

consists of three components:

 Disperse sub-units: These are subsidiaries located anywhere in the world

where they can benefit the organization either to take advantage of low-factor
costs or provide information on new technologies or market trends

 Specialized operations: These are the activities carried out by sub-units

focusing upon particular product lines, research areas, and marketing areas
design to tap specialized expertise or other resources in the company’s
worldwide subsidiaries.

 Inter-dependent relationships: It is used to share information and resources

throughout the dispersed and specialized subsidiaries.

Organizational structure of N.V. Philips which operates in more than 50 countries

with diverse range of product lines provides a good illustration of a trans-national
network structure.
Type 4: Evolution of Global Organizational Structures: Organizational structures
often exhibit evolutionary patterns, as shown, depending upon their strategic
globalization. The historical evolution of organizational patterns indicates that in the
early phase of internationalization, most firms separate their exports departments from
domestic marketing or have separate international divisions.

Companies with emphasis on global business strategies move towards global

product structures whereas those with emphasis on location base strategies move
towards global geographic structures.

Subsequently, a large number of companies graduate to a matrix or trans-

national network structure due to dual demands of local adaptations pressures and
globalization. In practice, most companies hardly adopt either pure matrix or trans-
national structures; rather they opt for hybrid structures incorporating both.

Lesson 3

Human Resource Selection and Development

The challenges of the international context have encouraged international companies

to develop new ways of doing business or to transfer their established practices
between their home and host countries. While some companies have adopted
ethnocentric approaches, choosing to transfer their home-country practices to their
international operations, others have diversified or localized their business practices to
the specific conditions of the host countries. At the operational level these strategic
choices are translated into choices for functional areas in business, including human
resource management.

Defining Human Resource Management

 In its contemporary form, human resource management can be defined as a range
of management activities which aim to achieve organizational objectives through
effective use of employees. Recognizing human resources as one of the main
organizational resources, on a par with or even more significant than financial,
technological and physical resources, marks a radical departure from earlier
approaches and definitions of people management which considered it as secondary
business concern to management of other resources of organizations.

A Framework of Key Aspects of IHRM

Although there is lack of consensus on demarcations of the professional scope and

academic study of IHRM, the framework identifies and focuses on eight areas of
research and practice as distinct and fundamental. These aspects are: the global
workforce; the international context; the national context; strategic issues;
operational aspects of IHRM; careers; professional competencies; and future
issues.

These eight key aspects of IHRM are illustrated as an eight-point star. The
significance of this visual representation is that these aspects are inextricably
interlinked to form the main body of research and practices in this area, and therefore a
true understanding of IHRM requires insights into all rather than some of these
aspects.

Eight-point stat of IHRM: a framework of key aspects

International Human Resource Management

International human resource management is the process of employing, training

and developing and compensating the employees in international and global
organizations. An international company is one which has subsidiaries outside the
home-county which rely on the business expertise or manufacturing capabilities of the
parent company. Generally, an MNC is considered to have a number of businesses in
different countries but managed as a whole from the headquarters, located in one
country.

According to Pigors and Myers, “International or domestic human resource

management is a method of developing the potentialities of employees, so that they get
maximum out of their work and give best efforts to the business organization”.

In the words of Edwin B. Flippo, “International or domestic HRM involves the planning,
organizing, directing and controlling of the procurement, development, compensation,
integration and maintenance of people for the purpose of contributing to organizational,
individual and social goals.”

Concept of International Human Resource Management

The concept of HRM as we are familiar with today began to evolve from the early 19th
century. But the concept of International HRM is of a recent origin. Increased
international trade and widespread globalization over the past few decades have given
rise to a contemporary branch of HRM, i.e., international HRM, also known as global
HRM.
It deals with the typical HRM functions like recruitment, selection, training and
development, performance appraisal, etc., at the international level. According to
Hugh Scullion, International HRM (IHRM) involves the HRM issues and problems
arising from the internationalization of business, and the HRM strategies, policies and
practices which firms pursue in response to the internationalization of business.

IHRM is concerned with the management of all the human resource activities in global
organizations without regard to geographic boundaries. It is the process of
procurement, allocation and effective utilization of human resources in international
business. It is the interplay among the three dimensions human resource activities,
types of employees and countries of operation.
 In other words, the basic human resource processes such as HR planning,
procurement, training and development, induction, compensation, performance
management and industrial relations are influenced by two other groups of
variables. First group of variables consists of types of employees; these may be host
country nationals, parent country nationals and third country nationals.

Second group of variables consists of countries involved in the host

country where a subsidiary may be located, the home country where the
company has its headquarters and the other countries that may be the source of
finance or labor.

Objectives of International Human Resource Management

Within present business scenario, there are larger number of organizations conduct
business beyond national boundaries. The differences in organizational environment
across nations have encouraged to determine and develop international HR staffing
and practices. At global scenario, it is needful to study about HR hiring, staffing
developing, compensating and appraising HR for better utilization of people.

International Human Resource Management is the process of managing people in

international ventures and involves activities in at least two nations.
It is fact that the success of business and trades are depends on the skills and quality
of human resources and how effectively these resources are managed and utilized at
international level.

1. It enhances to develop managerial skills, organizational knowledge and

technical abilities of HR managers and employees;
2. To develop more and better handle of global business operations;
3. To manage and secure the performance, compensation and career path of
employees;
4. To manage and organize cross cultural counselling and language training
program;

5. To develop more feasible understanding of work practices at global levels;

6. To raise and develop better and new performance management of human
resources;
7. To get more and more opportunities within global HR scenario;
8. To develop better and competitive HR strategies in global competitive scenario;
9. To reduce the cultural differences as amicable for cultural environment.
Activities and Cultural Dimensions of International Human Resource Management

Managing human capital is undoubtedly the most challenging task for any manager
and for the human resource department. The knowledge-based economy and
knowledge workers have meant that a lot is at stake when it comes to managing
people. The internationalization puts additional challenges and issues in managing
employees.

The complexity is far greater and issues are many times delicate since expatriation
often means relocation of the employee’s family as well. The focal areas of priority of
HR also changes with the stage of internationalization.

There are three major international HRM activities – Procure, Allocate and Utilize.
In effect these three major activities of IHRM covet all the six activities of domestics
HRM i.e. HR planning, Employees Hiring, Training and Development, Remuneration,
Performance Management and Industrial Relations.

International HRM involves employees of three countries – parent country or the home
country (where a company’s headquarters might be located), host country (where
company’s subsidiary may be located) and third country (Other countries that may be
sources of labor or finance).

1. International Staffing: Staffing is a challenging function. Finding the right set

of people has never been easy. However, when it comes to international
operations, the complexity of staffing increases many folds. Deciding on the mix
of local employees to expats is not an easy decision to make. Several factors
may impact the same.

Then cost is another major consideration. Cost of finding an international employee

and hiring that person if often very high. Such cost aspects demand even more
careful consideration and selection. Errors in selection could be tremendously
costly for the firm. Expat (expatriate) compensation and tax laws are huge
consideration in international staffing. Tax treaties between certain countries ease
income tax obligations of an expat.

Such treaties may make it easier to hire from certain countries, while it may difficult
to hire from others since the compensation may not work out in the favor of the
expat. Environmental factors may also affect international staffing. Political
environment may change with government regimes and may favor or disfavor expat
movement.
 2. Cultural Challenge: Difference in national cultures of expats poses a challenge
in hiring and assimilating international staff. A lot of pre-departure training for the
expats is focused on cross cultural training. Cultural fitment of the expats plays
an important role in the success of the projects and international assignments.
Multi-national companies often develop hiring strategy and training interventions
to cope up with this cultural challenge.

Geert Hofstede work on cultural dimensions is an authoritative repository on

national cultures and how cultures differ across countries. Hofstede defines six
cultural dimensions to qualify a national culture (Hofstede, Cultural Dimensions). A
comparison across these dimensions also helps distinguish one national culture
from the other.

The cultural dimensions according to Hofstede are:

1. Power Distance Index (PDI) – The degree to which the less powerful members
of a society accept and expect that power is distributed unequally.

2. Individualism versus Collectivism (IDV) – Preference for a loosely- knit social

framework in which individuals are expected to take care of only themselves and
their immediate families. The opposite of individualism is collectivism.

3. Masculinity versus Femininity (MAS) – Masculinity side of this dimension

represents a preference in society for achievement, heroism, assertiveness and
material rewards for success, whereas femininity, stands for a preference for
cooperation, modesty, caring for the weak and quality of life.

4. Uncertainty Avoidance Index (UAI) – The degree to which the members of a

society feel uncomfortable with uncertainty and ambiguity.

5. Long-term Orientation versus Short-term Normative Orientation (LTO) –

Cultures low on these dimensions, for example, prefer to maintain time-honored
traditions and norms while viewing societal change with suspicion. Contrastingly,
those high on this dimension have a more pragmatic approach: they encourage
thrift and efforts in modern education as a way to prepare for the future.

6. Indulgence versus Restraint (IND) – Indulgence stands for a society that allows
relatively free gratification of basic and natural human drives related to enjoying
life and having fun. Opposite of indulgence is restraint.

The Hofstede center helps to understand how each nation features on these six
dimensions and hence can give a very definitive picture of its national culture. It
also lets users compare two national cultures. Hofstede’s work established a
 major research tradition in cross-cultural psychology and has also been drawn
upon by researchers and consultants in many fields relating to international
business and communication.

It continues to be a major resource in cross-cultural fields. It has inspired a

number of other major cross-cultural studies of values, as well as research on
other aspects of culture, such as social beliefs.

Selection Process of Employees in International Human Resource Management

International postings are complex and carry a lot of in-built pressures along with them.
It would be erroneous to assume that the job requires the same set of skills in different
locations. The local dynamics might be different; the cultural and social pressures
might be too complex.

If the spouse and children join the expatriate, there are additional issues to be resolved
– from learning a new language to shopping in new environs, to children finding new
friends and attending new schools.

For an expat to succeed, therefore, the selection process must be rigorous and
must invariably include criteria such as:

1. General and Technical Criteria: Research findings consistently indicate that

MNCs place heavy reliance on relevant technical skills during the expatriate
selection process. In addition, the expatriate manager should be a good
communicator, and possess management talent, maturity, emotional stability in
ample measure.

2. Language Skills: Most researchers argue that knowledge of the host-country’s

language is an important factor affecting the performance of an expatriate.
Where the expatriate is expected to communicate with host country subjects
frequently, language skills come to occupy the center-stage.

Tung and Anderson’s study indicated that the respondents (mostly Americans)
greatly valued the ability to speak local language, regardless of how different the
culture was from their home country.

3. Cross-Cultural Suitability: Expatriate managers must be able to adapt to

change. They must have the ability to translate their technical or managerial
skills into meaningful action plans in a foreign environment. They should get
 along with local people easily without upsetting host country customs, traditions
and other cultural niceties.

The expatriate managers should as a rule, have good interpersonal skills and
extra-cultural openness — including a variety of outside interests, tolerance for
ambiguity and non-judgmental behavior.

4. Motivation for a Foreign Assignment: The candidate for foreign assignment

must believe in the importance of the job and possess a certain amount of
idealism or a sense of mission. Applicants, who are not happy with their current
situation at home and are looking to get away, rarely succeed as overseas
managers.

5. Family Situation: Several items including the adaptability of spouse and family,
spouse’s positive opinion, willingness of spouse to live abroad, stable marriage
comprises this factor. This factor was found to be the most important of the
above list, contributing to the expat’s success or failure on a foreign locale.

Selection Process

The selection process varies widely from country to country. Asian companies use
extensive testing procedures and screening techniques. Europeans do not test as
much as Asians, but considerably more than Americans. Testing in the US is not
favored because of its negative impact on equal employment and affirmative action
efforts. In most global corporations, however, adaptability screening is usually followed.

The screening, carried out by a professional psychologist or psychiatrist, tries to assess

the family’s probable success in handling the foreign transfer, and to alert the couple to
personal problems (impact on children’s education, etc.) the foreign move may involve.
Many companies more or less have realized the importance of preparing managers to
work in foreign cultures. In fact, several companies try to give future managers
exposure to foreign cultures early in their careers.

American Express Company’s Travel related services unit gives American business-
school students summer jobs in which they work outside the United States for up to 10
weeks. Colgate-Palmolive selects 15 recent graduates each year and then offers up to
24 months of training prior to multiple overseas job stints. The overall US selection and
training practices, however, continue to lag behind those of Japan and Germany.
In Japan, for example, expatriates are selected a year or more prior to their posting so
that they and their families receive extensive cultural and language training. Not
surprisingly, the overseas success rate for the Japanese is significantly higher than that
for Americans.

Training and Development

Careful selection is only the first step in ensuring the foreign assignee’s success. The
expatriate may then require proper orientation, cross-cultural training, assistance in
career planning and development, etc., in order to handle the assigned jobs in a
competent way.

A. Orientation: International positions require an extensive orientation to familiarize

the employee with culture, language and other unique aspects of the assignment.
Familiarization trips could also be arranged for the prospective expatriates so
that they can actually visit the country of their posting and live like natives there
for a while.

The orientation programs, generally cover areas such as:

Pre-Arrival Orientation
• Cultural Briefing- Explaining the traditions, customs, living conditions, clothing
and housing requirements, health stipulations, etc.
• Assignment Briefing- Throwing light on length of assignment, vacations,
compensation package, tax implications, repatriation policy etc.
• Shipping Requirements- Shipping, packing, storage, housing facility in the new
location etc.
• Cross-Cultural Training- Differences in culture, language and laws may make
it difficult for the global employees to be on track quickly. In order to lead a
normal life, they need cross- cultural as well as language training. The failure to
provide such training may create adjustment problems for the expatriate
manager and the resultant culture shock (the inability to adjust to a different
cultural setting) may compel the expatriate to quit the field altogether.

2. Post-Arrival Orientation. Once global employees arrive in the host country,

they will require further assistance in ‘settling in’. Someone should receive them
and help them in obtaining housing accommodation, establishing bank
accounts, getting driving licenses, arranging admissions to school for dependent
children etc.
 Firms can help employees avoid culture shock, of course, by using selection tools
to choose the employees with the highest degree of cultural sensitivity. An
important part of an expatriate manager’s training, further, should be an overview of
the legal and ethical issues that are likely to be encountered on the overseas
assignment.

3. Career Development. The expatriate’s motivation to do well on an

international assignment is primarily dependent on the following things:

• Whether the present assignment would help the expatriate to learn new things,
expand his knowledge, create a unique position for himself in the organization
ladder, and grow vertically within the firm — once the job is successfully
completed.
• Whether the expatriate is enjoying continued support from the headquarters or
not.

One of the important deterrents to accepting foreign assignments is the expatriates’

concern that they will be ‘out of sight, out of mind’. If they do not have direct and
regular contact with their bosses and colleagues at headquarters, they feel isolated and
thrown out of the system. To reduce their anxiety levels therefore, global companies
must project foreign assignments as stimulating growth opportunities leading to
continued career progression.

A monitoring system would certainly solve such issues. In this system, an expatriate is
guided by a senior executive in the headquarters. This executive talk with the
expatriate regularly, ensures that the expatriate’s name is submitted during promotion
and development discussions at headquarters and resolves any headquartersrelated
problems faced by the expatriate.

Another approach has the expatriate coming back to the home office occasionally to
foster a sense of belonging to the organization. Alternatively, mini-sabbaticals could be
offered to the expatriate and his family so that he or she can be in touch with current
happenings in the headquarters.

Practices of International Human Resource Management

An organization needs to consider the purpose for which it needs to send the
employees for international assignments. For example, an organization may send its
employees aboard to set up or explore a new market, or prepare them for top
management positions. After the purpose of the international assignment is specified,
the organization can initiate the process of selecting the best employees for the
international project.

The following are the aspects of concern in IHRM:

1. International staffing
2. Pre-departure training for international assignments
3. Repatriation
4. Performance management in international assignments
5. Compensation issues in international assignments.
International Staffing: International staffing refers to the selection of the most
appropriate employees for international operations of an MNC.

The selection of the most appropriate employees can be done by using the
following three sources:

1. Home Country or Parent Country Nationals (PCNs): Refer to the citizen of the
country in which the headquarters of the MNCs is located. PCNs are not the
citizens of the country in which they are working. For instance, an Indian citizen
who is posted to an overseas subsidiary of an organization that has its
headquarters in India is a PCN. In addition, PCNs are termed as expatriates.

Generally, PCNs are hired to occupy key and top-level management positions
because they possess sound knowledge about the operations of parent
organization. The knowledge about parent organization helps the PCNs in ensuring
proper linkage between foreign subsidiaries and the headquarters. However, hiring
PCNs is a costly affair for an organization as it has to bear the relocation cost for
them.

2. Host Country Nationals (HCNs): Refer to the employees of an organization, who

are citizens of the country in which the foreign subsidiary is located. An Indian
manager working in an Indian subsidiary of a US organization is an HCN. For
example, IBM normally hires HCNs. In addition, HCNs generally occupy middle
and lower management level positions. The recruitment of HCNs is not a costly
affair for an organization because it does not need to incur extra cost in cross-
cultural training of employees.

3. Third Country Nationals (TCNs): Refer to the citizens of a country, other than the
country where the organization is headquartered and the country that is hosting
the subsidiary. Staffing is done on the basis of ability and not on the basis of
nationalism. For example, a British citizen working in the Indian subsidiary of an
organization whose headquarters is located in the US, is termed as a TCN. You
 should note that a TCN has substantial international experience and exposure that
is quite advantageous for an organization.

Challenges and Emerging Issues in International Human Resource Management

There are certain problems and challenges as arising within the process and methods
of global HR scenario.

Some of the challenges and emerging issues in IHRM are:

1. Ethics and Corporate Social Responsibilities: Ethics and corporate social
responsibilities in the international business environment are always debatable.
MNCs have been accused of being indifferent to the problems of host countries as
they are more concerned about the profitability of their companies. MNCs have to
balance the ethics and moral of their country and host country.

• Ethical Relativist: An ethical relativist believes that there is no right or wrong.

What is right in a particular situation in one place may not be so in another.
Relativism offers flexibility but may prove to be disastrous in the long-run for an
MNC.

• Ethical Absolutist: An MNC which believes in this approach is strongly

influenced by the practices and policies of its home country. They do not give
much importance to the culture and values of the host country. Ethical
absolutists have been criticized for their arrogance and for showing little respect
to the traditions and culture of the host countries.

• Ethical Universalist: An ethical universalist believes that there are fundamental

rules which help us differentiate between right and wrong. These rules need to
be adhered to in any country and in any situation. An ethical universalist
believes that cultural variations between countries should not lead to any
wrongdoing on the part of the MNCs. There is a distinction between practices
which are culturally different and ones which are morally wrong. MNCs should
understand this difference and work towards achieving high ethical standards.

2. Bribery: According to a survey conducted by J. Macken, developed countries give

around $85 billion to underdeveloped countries in the form of bribes. MNCs from
developed countries have been accused of bribing Government officials. Hence,
countries should frame laws to prevent corruption. For example, in the US, there is
a law called Foreign Corrupt Practices Act (FCPA), which prohibits US- based
firms from bribing officials in other countries.

3. Code of Conduct for International Business: The first step in framing a code of
conduct for international business players came in the form of the Caux
 Roundtable Conference on ‘Principles for Business Conduct’ held in 1994. It was a
conference on international business ethics, held at Caux in Switzerland and was
attended by the business leaders from all countries.

The focus was to formulate a set of rules and ethical codes which would be used
for benchmarking global business practices. Major work on this issue was done at
Minnesota center for corporate responsibility in the US. The main aim of Caux
conference as given in the charter is, “to further the twin value of living and working
together and human dignity by promoting free trade, environmental and cultural
integrity and prevention of bribery and corruption.”

Suggestive Measures in International Human Resource Management

Within global scenario, in order to make a perspective viewpoints about international

human resource management, the suggestive viewpoints are as given here:

Measure 1. Significance of Individualism:

It is necessary to beware of the customs in which the people interact with each other.
Some societies encourage individualism. Their belief is that if everybody takes care of
himself. Then it would not be necessary to take care of anybody else. There are other
societies which are characterized by a tight social framework where in exchange for
loyalty, people expect to be taken care of.

The HR managers and organizations must recognize this trait. In America, as another
type of example, people shake hands with each other when they meet, while in the
Middle East, they embrace each other, and in Japan they bow their heads to each
other.

Measure 2. Overcome the Ethical and Legal Conflicts:

It is required to develop an understanding of how ethical and legal conflicts relate to
managerial and organizational effectiveness, as well as how managers can work and
manage their ethical and social responsibilities.

Measure 3. Establish One-to-One Relationship towards Build Trust:

It may seem obvious, but an organizational relationship is built on many one-to-one
relationships between members of each organization. People who will be working
together and taking risks together will need to get to know each other and establish
trusting relationship. It may be possible by different ways. Some of the managers and
employees can meet for informal discussions, recreation events, retreats, social events
or other informal gatherings.
Measure 4. Develop Basic Knowledge:
It is needful to develop a basic knowledge of how different culture work, what makes
them unique, and how managers can work successfully across such environment. If
culture and cultural differences can play an important role in managerial success in the
global arena, it is logical to develop a greater understanding of how cultures differ and
how they influence attitudes and behaviors across the globe.

Measure 5. Involve the Stake Holders:

Within determine and implement the plans, programs, process and strategies
concerning of HR practices, it is needful to involve all the stakeholders. The
stakeholders are group leaders, HR managers, staff, employees and other people who
can help directly or indirectly the issues of HR scenario.

Measure 6. Develop a Learning Strategy:

For better growth and career-oriented HR practices there is need to develop training
programs, cooperative tendencies, motivational aspects, innovative ideas, new
methods of techniques etc.

Measure 7. Develop Effective Cross-Cultural Communication Skills:

It is often said that communication is the glue that holds organizations and
interorganizational relationships for best HR management together. It is also said that
perceptions and patterns of what is being said is in the eye of the beholder. Here we
discuss the relationship between language, logic and communication, as well as the
challenge of working with colleagues who think and speak in a different language.

Measure 8. Develop the Geocentric Approach:

At international level, the parent and host organizations must focus on skills,
competencies, abilities and efficiencies of the people who are involved in the working at
global assignments. In this approach, the concept of nationality have a little attention
within HR staffing.

Measure 9. Managing the Pre-Departure Training Programs:

International companies should develop the pre-departure training program to provide
various knowledge and skills for performing the foreign assignments.

Measure 10. Motivational Compensation Package:

It is required to design motivational compensation packages for employees. By and
large some of the important components of this package are cost of living adjustment,
incentive benefits, travel allowance, home leave, relocation allowance, currency
differential payments and hardship posting allowances etc.

Plan, Find or Create Long-Term International Jobs

International careers don’t just happen. They're carefully planned and built up over a
period of time. International employers insist that you have international experience
before sending you to work abroad. The key to gaining experience abroad is to dive
into all things international while you are at university, traveling outside of your home
country as much and as long as possible, engaging in internships outside of your home
country, and by taking a gap year. You need to build up a host of overseas experiences
of all kinds before you are ready to start applying for professional jobs abroad. And the
great thing about building up your international resume is that you can have a blast
doing it! — Jean-Marc Hachey

How to Build an International Employment Profile

International Careers Don't Happen Without Planning: Imagine that one day
you will work as a professional in Paris or Singapore. You will earn a competitive salary,
allowing you to live in a great apartment, drive a car, and take short vacations to nearby
travel destinations. Your life will be full of interesting conversations with friends from
around the world. This life is attainable—if you plan ahead.

International careers don't just happen. They are carefully planned and built up over a
period of time. International employers insist that you have international experience
before sending you to work abroad. The key to gaining international experience is to
dive into all things international while you are at university and by taking a gap year off.
You need to build up a host of international experiences before you are ready to start
applying for professional international jobs. And the great thing about building these
experiences is that you can have a blast doing it!

Getting Started

International careers are built on experience in various areas. Here is what you should
be doing during your time as a university student to improve your odds of getting a full-
time, professional international job after you graduate:
Academic Studies
• An MA is a prerequisite for most international positions. This is especially
true in the social sciences, pure sciences, and business. It may be less
important in health careers, engineering, and computer science. No matter what
your field, include an international component, directly by your choice of
courses, or, indirectly in the subjects you choose for major research projects.

• A BA in any field with outside electives broadens your skills inventory. For
example, a science student should have four internationally focused social
science courses; a history major should have four finance or management
courses. Include language skills with all types of disciplines.

• Other academic experience is important. Attend or help organize a

conference; participate in a professor-led research project; work as a teaching
assistant; write a book review for an academic journal; apply for merit-based
scholarships and awards; participate in academic competitions; become a tutor;
make public presentations; actively seek to work on team projects and
preferably team up with foreign students.

Networking and Cross-Cultural Experience

• Network with at least three international experts in your field of interest. For
example, write essays that require you to speak directly to someone working
internationally in your field of interest.

• Guide foreigners who are new to your country. You can act as a tour guide for
visiting professors; assist with foreign student orientation; work with refugees; or
teach English as a second language.

• Befriend foreign students on your campus. Join foreign student social circles on
campus; visit with them in their homes; become familiar with their food and
social behavior; try to pay a visit to them and their families in their home country;
actively participate in foreign student associations.

• Become socially active and knowledgeable in a culture other than your own.
Hang out at ethnic social clubs; learn to dance to African or South American
music; become knowledgeable in one or more fields of ethnic music; focus on
the writing or history from one region or country; learn ethnic cooking; join an
Internet club with foreign members.

Overseas Experience
 • Work internationally for 2—6 months. As an intern, co-op student or
volunteer, preferably in your field of expertise. Try for two professional
internships over the course of your six years of study. Strongly consider taking a
gap year to gain any manner of international experience. There are thousands
of international internships positions available each year, and many of them are
paid positions allowing you to live and work in all parts of the world.

• Study abroad for one or more semesters. Study abroad in your field and
learn a new language. Almost every university has exchange programs that help
you study abroad for credit, and everyone should consider studying for at least
one semester, often in your third year, while getting a degree.

• Travel for 2—6 months. Do not underestimate the value of backpacking for six
months. Interact closely with people from other countries in order to learn the
skills required by international employers. One way to extend your stay abroad
is to study, volunteer, or intern. Add onto your experience with a short trip at the
end of your placement. Always consider traveling in Africa, Asia, the Middle
East, Eastern Europe, South and Central America rather than the traditional
choices of Western Europe, Australia, or New Zealand.

• Be creative. Extend the value of all your international travel by combining two or
more objectives while abroad. For example, take four months off and study
Spanish full-time in Guatemala while living with a local family and having a
fulltime one-on-one instructor for less than the cost of going to school in the U.S.
or Canada. Extend your stay there by giving computer courses to local charity
groups or volunteering to write English language brochures for ecotourism
groups. Travel in the region and practice your new Spanish while visiting with
professionals in your field of work who are looking for short-term interns.

Hard Skills
• Proficiency in a new language. Be able to speak and read a language other
than your mother tongue. First consider learning Spanish since it is accessible
and useful in North America. In all cases, be an active listener and learn to pick
up at least 20 or 30 words in any country you visit, however briefly.

• Economic and geographic knowledge of the world. Gain a solid knowledge

of the political and social forces shaping the planet. Start by regularly reading
news magazines such as The Economist.

• Writing and analytical skills. Demonstrate these skills outside of course work
by participating in a research project, writing a brochure, publishing an article in
a magazine, or writing for a website.
 • Computer skills. Acquire strong word processing skills (can you produce a
table of contents, section breaks, footnotes, or use styles?); be comfortable
using spreadsheets (can you produce a budget or sort a table of data?); be
familiar with databases (can you explain the difference between a flat file and a
relational database?); try to develop exceptional Internet research skills (can
you find the phone number of a cheap Paris hotel in five minutes? What about
the CIA country profile for Bhutan?).
• Business skills. The most sought-after employees are those with
multidisciplinary backgrounds, especially business backgrounds that include
strong people skills. Employers seek scientists who can understand market
research, engineers who can manage research teams and help commercialize
products, and political scientists who can work in trade promotion. There is a
need to assess the business aspect of almost every field, such as strategic
planning, financial management, and systems analysis.

• Other management skills. These include project management, accounting,

training, research, report writing, evaluating.

Soft Skills
• Organizing, people, and leadership skills. Demonstrate these through work
and volunteer experience, preferably with an international group, organizing an
event, or as an executive member of a committee.

• Intercultural communications abilities. Demonstrate these by being

conversant in describing patterns of behavior in cross-cultural work and social
environments. Learn to professionally describe these real-life experiences.

• Coping and adapting abilities. Demonstrate these with examples of how you
coped when living away from your support structure of family and friends.

International Job-Hunting Skills

• Essentials for finding international work. Experience has shown that those who
are successful at finding international work have all done something
extraordinary to land their first job. They have gone out on a limb, acted boldly
(but politely), have been entrepreneurial, have sacrificed certainty and taken
risks to gain international experience and land that first job. International
employers are looking for individuals who are fully committed to international
work and living, and your job-hunting methods should reflect this.
 Make the Commitment

International jobs require a long-term commitment—you need to invest in yourself to

build an international IQ. This process eventually becomes a lifestyle, an outlook on
life, a commitment to internationalism and cross-cultural learning. It is an interesting
and creative process. Go forth—the world is your teacher. And have fun with the
exploration!

Lesson 4

Labor Relations and Industry Democracy

The Three Levels of Labor Relations

This framework argues that various factors—the economic context and the actions of
governments, NGOs, and international agencies—shape the context in which labor
relations occurs. The framework also argues that there are three tiers (or levels) at
which labor relations takes place.

The top tier of labor relations, the strategic level, includes the strategies and
structures that have long-term influences on employment levels and work conditions.
Business strategies are critical factors because they influence investment and product
strategies, which in turn shape employment systems and workplace outcomes.
Businesses also influence the strategic direction of labor relations through their
interactions with unions, governments, international agencies, and NGOs. Unions also
take strategic actions related to their representation strategies and their interactions with
governments, international agencies, and NGOs. Governments are also critical strategic
actors in their direct role as employers in the public sector and by shaping the laws and
public policies that influence labor relations in both the private and public sectors. In
recent years a number of NGOs and international agencies also have come to play
critical roles in labor relations in emerging economies.

The middle tier of labor relations activity, the functional level, involves the process
and outcomes of collective negotiations. Strikes, bargaining power, bargaining structure,
and wage determination processes all feature prominently at this level.

The bottom tier of labor relations activity, the workplace level, involves activities
through which workers, their supervisors, and their representatives relate to one another
on a daily basis. At the workplace level, adjustment to changing circumstances and new
problems occurs regularly. A typical question at this level, for example, is what form of
conflict resolution is used to deal with disputes that arise between workers and
managers.

It is through the joint effects of the environment and the actions of the parties in this
three-tiered structure that a labor relations system either meets the goals of the parties
and society or comes up short.

1. THE STRATEGIC (TOP) TIER: At the top tier are the strategies and structures
that guide the long-run direction of labor relations.

a. Management Strategies: The strategies of management are critically

important in shaping the evolution of labor relations. For instance, is a
company’s top management willing to negotiate with employee
representatives over the long term or is it fundamentally committed to
exercising unilateral authority? Does management see the advantage of the
internal flexibility that can be achieved by working with employee
representatives to promote flexible work organizations and adaptive training?
Is management interested in investing in the skills of its current employees,
or is it attracted more by outsourcing strategies and other approaches that
rely on low pay?

For multinational companies (MNCs) that purchase goods and services

that go into their final products from multiple countries, additional strategic
questions come into play. How much discretion and variation should be
allowed in their operations in different countries? Should the MNC have a
global labor strategy and if so, what should it include? How much
responsibility should the MNC take for the labor practices and outcomes in
companies and contractors in its global supply chain?
 b. Labor Strategies: Labor’s strategies also have a critical influence on the
course of labor relations. For example, is there a labor party that tries to
promote workers’ interests in the political arena or is the labor movement
aligned with particular political parties? Is labor focused on forming unions at
the workplace level or does labor prefer to emphasize sector-, industry-, or
company-level bargaining? Is a given union leadership committed to
maintaining a distanced and adversarial posture in negotiations or is it
interested in exchanging new forms of flexible work organization for greater
control over the design of the production process? Or does the labor
movement put primary emphasis on social protests and political leverage and
in improving work conditions through government regulation or public
legislation? Where the latter strategy prevails, there may be low levels of
union representation but extensive coverage of collectively negotiated
employment terms through legislative extension of those terms.

c. Government Strategies: Governments also matter, particularly in the long

run, through the economic development strategies they promote. For
example, the location of a nation’s industries in global supply chains is
heavily influenced by the skill and education levels of a country’s work force.
These in turn are strongly influenced by public policies, including public
investments in education.

2. THE FUNCTIONAL (MIDDLE) TIER analyzes the various employment systems

that exist in emerging countries. Employment and work practices typically
cluster into distinct patterns and are not randomly associated. Pay practices
tend to link with and reinforce particular employment security, work organization,
and complaint procedures. The parties must thus choose between a set of
distinct work patterns. The informal employment pattern prevails among self-
employed people who sell their wares on street corners or those who are
involved in manufacturing garments and other goods through homework.
Generally, the informal sector is unregulated or is characterized by weak
enforcement of public laws and policies.

The bureaucratic pattern includes more structured forms of determining pay

and procedures for processing complaints. There are “low-end” and
“highend” versions of some of the employment patterns. For example, the
bureaucratic pattern exists in a low-end form in the supply firms that are
used in the apparel sector and in industries where the outsourcing of core
production work has spread. In contrast, in the public sector, where
bureaucratic practices prevail, the work conditions, including pay and safety
conditions, are more advantageous to workers. Unionized variants of the
bureaucratic employment pattern are often found in firms that make use of the
high-end versions of that pattern.
 In the human resources management pattern, professional and technical
employees commonly gain the benefit of work practices that are shaped to fit
individual needs and are tailored to ensure that highly skilled employees will be
recruited and retained. Many multinational firms use a human resources
management approach, and some use a Japanese variant of this pattern that is
oriented more to the needs and goals of an organization, as opposed to those of
individuals.

a. The Negotiations Process: At the heart of union-management relations

is the negotiation of a collective agreement. If a union or unions represent a
group of workers, a critical phase in their relationship is the bargaining
process used to negotiate a collective agreement. The negotiations process
is a complicated affair that involves the use of tactics, strategies, and
counterstrategies by both labor and management. Given the mixed-motive
nature of collective bargaining, the parties are often torn during negotiations
between their “distributive” and “integrative” impulses.

Analysis of the process of negotiation in chapter 6 considers the

following issues:
• How can the dynamics of the negotiations process be described and
explained?
• What causes strikes to occur in some negotiations and not in others and to
vary in frequency and intensity over time and across industries?
• What roles do union and business strategies play in shaping the
negotiation process?
• How can the parties increase the joint gains that could benefit both labor
and management?

3. THE WORK PLACE (BOTTOM) TIER: The management of conflict and the
delivery of due process are two of the key activities that occur on a continuous
basis at the workplace level of labor relations activity.

Wage, employment security, and health and safety outcomes are also
shaped by interactions between labor and management that occur at the
workplace level. For example, how large is the impact of unions on wages? Does
this vary by industry or type of employee or over time?

a. Public Sector Labor Relations: The public sector employs employees at a

variety of national, regional, and local levels.

Public employees include public school teachers, police, fire fighters,

and the office staffs of various governments. In the past, in the public
 sector in many emerging countries also included a number of stateowned
enterprises that existed as monopoly providers in sectors such as
telecommunications, mail, oil, and water. Public employees are often covered
by separate laws and are often subject to different conflict resolution
procedures, and in a number of countries they have more limited negotiation
and union representation rights.

b. International Unions, NGOs, and Multinational Corporations:

International trade and competitiveness have moved to the forefront of public
attention. At the center of these developments is the increasing influence of
MNCs through their greater investments in emerging countries and the
expanded role global supply chains play. How MNCs shape their labor
relations policies and practices and whether decision-making authority
regarding labor relations is left in the hands of local or country managers or is
put under the control of regional or global managers.

Concern about the effects of globalization and the increasing influence of

MNCs has spurred unions to act regionally and globally in a more coordinated
manner. This has led to various cross-national union- and worker-led
campaigns and, in a few industries, international collective negotiations.

c. Economic Development Strategies and Policies assesses economic

development strategies and policies and their long-term effects on the
evolution of labor relations. The key question addressed here is whether
particular approaches to economic development can provide superior
economic performance while also promoting workers’ rights and well-being.
MODULE 4
Lesson 1

Ethics and Social Responsibility around the World

International Business Ethics: Changes and Challenges

The rise of globalization since World War II has created moral dilemmas for businesses
in five specific areas: labor standards, environmental standards, human rights,
cultural diversity, and corruption.

1. Labor Standards. That core labor standards may have only modest effects on
trade does not imply that standards should be made part of trade agreements,
either through addition of a social clause to the WTO or in some other way.
Perhaps trade policy is an ineffective mechanism for promoting core labor
standards worldwide.

Government Enforcement of Standards. Given that most countries accept core labor
standards and that many have signed various (International Labor Organizations) ILO
conventions, enforcement rather than enactment is often the bottleneck to achieving
acceptable standards. For example, India prohibits bonded and forced labor, bans
employment of children under age 14 in hazardous work, and has appropriate
regulations for health and safety. It is signatory to many ILO conventions. But scarcity
of government resources and lack of political initiative, combined with incentives by
private parties to avoid some standards, renders some of the legislation ineffectual.

In general, less developed countries do not adequately enforce their labor laws,
particularly in small firms (World Bank, World Development Report 1995). Ministries of
labor do not generally carry great weight in national deliberations, nor can they obtain
the resources needed to carry out their responsibilities. At the ground level, government
inspectors may be so low-paid as to neglect violations of law in return for modest bribes
and may be too insufficiently trained to be effective. Some officials may also decide that
enforcement is socially undesirable.

Some officials may also decide that enforcement is socially undesirable. In 1984 I
visited Sri Lankan brick factories where 6-8-year-olds worked. But this is against the
law. While government officials cannot readily say so, some discretion with enforcement
can be better than perfect regulation (Freeman 1992; Squire and Suthiwart-Narueput
1995). The labor supplemental agreement to NAFTA, the North American
Agreement on Labor Cooperation (NAALC), recognized the enforcement bottleneck in
Mexico and required the parties to ‘‘promote compliance with and effectively enforce its
labor laws through appropriate govern- ment action’’ (NAALC, Article 3, 14 September
1993). It also included a dispute resolution system and potential penalties to support the
accord. Problems with enforcing labor laws are not unique to
developing countries.

There are three ways to improve developing-country standards via

increased efficiency of government regulation of markets:
• Raise the competence of the relevant ministries through technical assistance.
The ILO has been the major international organization involved in this activity.
• Raise the incentive for developing-country governments to enforce standards by
putting international pressure on them. The ILO has a well-developed system for
treating problems with the freedom of association. Even though the ILO cannot
penalize countries found guilty of violating conventions, it can create sufficient
publicity and pressure to produce some changes. In addition, the NAALC
dispute/enforcement mechanism raises the costs of nonenforcement to Mexico
and should increase the weight the Mexican government gives to enforcement of
labor laws.
• Strengthen the competence of nongovernmental organizations concerned with
workplace regulations. In the 1995 World Development
Report, the World Bank praised the role of trade unions in monitoring employers’
compliance with government regulations and called for a greater union presence
in developing countries (much to the surprise of the world labor community).
Effective trade union movements in developing countries would go a long way to
alleviating world concerns over standards. If employees have freedom of
association, they ought to be able to gain other standards as well, and
increase compliance in their countries. This strategy makes freedom of
association central to any effort to rely on private parties to improve
enforcement of standards.
Government Protection of Low Standards. There is another more troublesome
obstacle to high standards: the conscious policies of some governments to suppress
standards, either in particular areas, such as export processing zones (EPZs), or
nationwide. In 1995 there were approximately 500 EPZs located in 73 countries (OECD
1996, 43). Much of Asian growth in exports is linked to EPZs. They would appear to be
the most natural place to apply and enforce international labor standards, given that it is
relatively easy to monitor labor conditions in these sites, that the producers are
subcontractors to multinationals if not multinationals themselves, and that the sole
purpose of EPZ business is to produce for the world market. EPZs should be leaders in
labor standards, but in many countries, they are not (though pay and benefits may be
above national averages). The US Department of Labor reports that in several of the
EPZs it investigated labor rights were more restricted than in other sectors.

When labor rights are restricted in EPZs relative to the rest of a country, this restriction
smacks of an illegal trade subsidy (Charnovitz 1992). Since EPZs live on trade, the
labor conditions in these areas are, in some sense, the responsibility of the world
trading community. If there is a case for linking labor standards with trade, and a place
where trade pressures might prove effective, that place is with the EPZs.
Permitting countries to deny core standards in EPZs is unconscionable if something can
be done about it with little effect on developing-country comparative advantage. The
second area of suppression of standards occurs in dictatorial regimes, most of which
outlaw independent trade unions for fear of the pressure unions bring for
democratization.

The big fish here is China, where one-fifth of the world’s population resides.
China has a poor record of enforcing standards on forced labor, among other violations
of core standards, just as it has a poor record of enforcing other trade regulations, such
as those to curb piracy of intellectual property rights. But its policies on unions are not a
matter of poor enforcement: the Chinese government is committed to preventing the
development of free trade unions.

What, if anything, can be done about Chinese violations of standards? Each year
or so, the United States threatens China with the loss of most-favored nation trade
status for its human rights violations and/or its failure to control piracy of intellectual
property rights. There have been agreements to (reduce in extent or quantity) curtail
sales of goods made by prison labor. Given the growing size of the Chinese market and
the expansion of the market economy in China, it is unlikely that the United States will
actually act on trade threats, leastways without cooperation from other advanced
countries, unless it blunders. The right strategy for increasing standards in China may
be to increase contacts, make protests, educate the next generation of Chinese leaders,
and watch democratic practices expand with economic growth rather than to engage in
a trade war over standards. Perhaps this is a case where consumer pressures have
greater potential than government actions for raising standards.

The Chinese example suggests that government pressures through trade may have
greater potential for success on the policies of smaller economies with more democratic
regimes, as opposed to large dictatorships. Trade union complaints to the US
government or to the ILO about violation of worker rights against Thailand or Guatemala
are more likely to improve labor standards in those countries than complaints against
China, even though many in the US Congress worry about Chinese violation of human
rights. As Srinivasan (1994, 36) notes, ‘‘The potential costs of business interests in the
United States of withholding (most-favored nation status from China) are substantial
enough for them to lobby against it.’’

The strongest case against making labor standards part of trade agreements is a simple
one: that trade pressures may have only a limited effect in inducing countries to change
their policies. Absent experimentation with a social clause in the WTO to observe how it
would work, our best assessment of what trade pressures might accomplish comes from
examining the effectiveness of past government economic sanctions with respect to
labor standards and other issues.

2. Environmental Standards: Fragmentation of Environmental Law

At present there is no consistent body of environmental law at national, international

or supranational level; in Germany, for example, there are more than 2,000
environmental regulations in force. It is true that the Single European Act of 1987
made the protection of the environment an objective enshrined in primary
Community law by inserting Articles 130r into the EEC Treaty, but these provisions
only create a framework for concrete secondary Community law and especially for
national regulations, which must or should fill the gaps in Community law
notwithstanding the very weak formal basis for environmental protection, a
consensus is beginning to form that there is a fundamental right to a clean
environment, particularly in the interests of future generations. From this derives the
need to preserve eco- systems and resources in the sense of ensuring sustainable
development. Environmental considerations must therefore become an integral part
of legislation in other spheres, but above all they must be compatible with
international law. This applies equally to foreign policy and international trade
relations.
 International environmental law is not only patchy, it is also "soft", in other words it
does not operate directly at the level of concrete action and is not equipped with
sanctions to punish violations. This can only occur once the legislation has been
incorporated into national law. National environmental law, in turn, can
legitimately develop only within the confines of what is permitted at international or
supranational levels. It is therefore constrained in many respects, as will be
demonstrated below. The result is a hotchpotch of environmental protection law.

Attempts at Harmonization. Attempts to develop uniform general procedural principles

and standards for the interface between trade and the environment have been
intensified in order to coordinate both the form and content of environmental law at the
various levels and at the same time to avoid and eliminate contradictions with
international trade law. The OECD's "Recommendations on guiding principles
concerning the international aspect of environmental policies" were published as long
ago as 1972. These include principle that the polluter should pay, nondiscrimination
and national treatment. In mid-1993 the OECD unveiled its "Procedural guidelines on
integrating trade and environment policies", which build upon the 1972 guidelines and
take account of UNCED agenda and the Rio Declaration.

The new set of guidelines relate, inter alia, to the transparency of standards, the
obligation to consult and to co-operate internationally, and arbitration to resolve
disputes. After a long period of abstinence, the GAI-F has also now begun to tackle
environmental issues more actively. It would therefore be sensible if the various
activities being undertaken in parallel were at least made mutually compatible by laying
down common principles. The ultimate objective, however, should be to establish a
consistent body of binding international law.
The development of principles and procedural standards also facilitates the mutual
recognition of existing national law, especially within the EC9 or the OECD or in
regionally integrated areas generally (NAFTA, AFTA, EEA, etc.). This does not imply
identical regulations covering such matters as product and process standards,
packaging or labelling requirements, but it does reduce the likelihood of erratic
deviations. It is much more difficult to harmonize the content and specific provisions of
legislation, as there is so little agreement about the optimum or desirable solutions.

Participation of the Parties. Involved Environmental standards can be set unilaterally

or negotiated. In principle, the states affected should be involved in the development of
standards, but in certain circumstances, which I shall describe later, there may be good
reasons for deviating from this rule. If national standards apply only to the country's own
territory, this is of no relevance in the context under discussion here. "Bilateral
standardization" takes place between only two partners (the USA and Canada, for
example) or two groups of countries (e.g. the EU and EFTA), while "multilateral
standardization" relates to more than two contracting parties or groups, and
"global" relates to the attempt to include as many countries as possible. The
internal agreement reached within groups of countries acting as a single negotiating
partner, such as the EU, may in turn be bilateral or multilateral."

3. Environmental Protection

If environmental standards are applied outside the territory of the legislating country or
group of countries without the third countries having been involved in the decision-
making process, as with the application of product standards to imports, there will be
spill-over effects. The unilateral setting of standards that affect nonparticipating third
countries may therefore stem from national legislation or from bilateral or multilateral
environmental agreements. It is generally considered a poor solution and is often illegal
under international law; however, exceptions may be necessary.

Multilateral or global environmental agreements are preferable to bilateral agreements

because of the wider acceptance they enjoy and may be granted a waiver under Article
XXV of the GA-I. With all non-global standards, the question arises as to whether and to
what extent third countries are involved in the decision-making process. For example, a
common fear is that the standards devised by industrial countries will pay insufficient
heed to the specific problems and needs of developing countries and, more recently,
the Eastern European countries? There are two possible scenarios:
a. The parties setting the standards negotiate only among themselves (e.g.
within the EU or the OECD) and at most attempt to take account of external
interests, so to speak "thinking for" other countries (the authoritarian solution).
The resulting standards may apply only internally, or they may also be applied to
third countries. It may be possible for third countries to accede to the agreement
at a later stage. Whether and to what extent the various internal interests are
taken into consideration at the preparatory stage, by means
of hearings with industry, commerce, consumers, administrators, academics, etc.,
cannot be discussed here. Attention should only be drawn to the danger of
administrative authorities developing standards that may lead to avoidable
problems when applied at the practical business level?

b. Representatives of external interests (e.g. developing countries, Eastern

European countries, NGOs or international organizations in the case of the
OECD) are consulted during the standard-setting process in order to
smooth off the "corners and edges" (participational approach). For example,
the OECD is discussing the development of internal standards offering a relatively
high level of protection and their global application on a non-discriminatory basis,
 it is therefore not so much a question of developing environmental guidelines for
trade within the OECD area as for international trade as a whole. All those
affected or only a limited number may be given the chance to express their views,
and they may participate in the entire process ("seat at the table but no vote") or
only in certain aspects (limited participational approach). Even when setting
purely internal standards, it is often useful to gather external opinions.

Strengths and Weaknesses. As a rule, the larger the number of decision-makers

involved, the more complicated the decision-making process. It is difficult enough to set
environmental standards at national level, let alone multilaterally. Past experience with
international environmental agreements shows that there are fundamental weaknesses
in their effectiveness. There is a tendency to water down environmental standards, as
agreement can be reached only on uncontentious and often purely theoretical formulae
("Environmental protection shall be improved"), or on very low standards. If participants
attempt to achieve a higher level of environmental protection, the negotiating process
can become extremely protracted or may collapse altogether. Consequently, special
provisions are commonly used to take account of the needs and possibilities of
individual countries. In this way, the exception can easily become the rule, so that it is
always necessary to weigh the relative advantages of consensus on a minimum
standard against those of setting a higher level of protection subject to exceptions.

The lack of legal teeth is often a further weakness. International agreements not
infrequently remain non-binding because they are not ratified, or ratification is delayed,
or there is no obligation to incorporate their provisions into national law, or the agreed
deadline for incorporation is so long that the agreements have no immediate impact.
Several of these factors often apply simultaneously.

The main advantage of multilateral agreements lies in the transparency of decision-

making for those involved, and hence in the greater acceptance of the results. However,
this depends partly on the negotiating strategy; those who formulate the draft tend to
leave their indelible stamp on the final version. Countries that are not party to the
agreement but are affected by it tend to express reservations, raise objections or refuse
to accept the outcome. The better the match between those involved in drafting the
agreement and those affected by it, the more legitimate it will be to impose sanctions on
"free-riding" outsiders.

International human rights Law. International human rights law refers to the body of
international law designed to promote and protect human rights at the
international, regional and domestic levels. International human rights law primarily
consists of treaties and customary international law. Other international human rights
instruments, while not legally binding, contribute to the implementation, understanding,
and development of international human rights law.
 Treaties are written agreements between two or more States, whether
embodied in a single instrument, or in two or more related instruments. Every treaty in
force is binding upon the signatories and as such must be executed in a manner
consistent with the treaty. After a treaty is signed, it does not go into effect
immediately if it requires ratification by the legislative branch of a State’s government.

Additionally, States are permitted to make declarations, understandings, or reservations

that limit the application of a particular treaty and may also indicate that they accept the
treaty with reservations regarding certain provisions. A treaty may be either self-
executing or non-self-executing, depending upon whether domestic legislation must
be enacted in order for the treaty to be judicially enforceable. Selfexecuting treaties
are effective immediately without the need for ancillary (necessary
support to the primary activities or operation of an organization) legislation. Non-self-
executing treaties are also effective immediately as a matter of internal law, but
require implementing legislation to be enforceable by a private party in court.
Treaties go by a variety of names, including convention, protocol, covenant and accord.
The various designations generally indicate a difference in procedure, or a greater or a
lesser degree of formality. You should keep in mind that all of these documents,
regardless of their formal designation, are considered treaties that are binding under
international law.

CORE INTERNATIONAL HUMAN RIGHTS

The International Bill of Rights

When a State becomes a party to an international human rights treaty, it assumes
obligations and duties under international law to respect and protect human rights and
to refrain from certain acts. Three of the most important international instruments
pertaining to human rights are collectively known as the International Bill of
Human Rights:

• The Universal Declaration of Human Rights (UDHR)

• International Covenant on Civil and Political Rights (ICCPR)
• International Covenant on Economic, Social and Cultural Rights (ICESCR)

There are differences among States in how categories of rights are weighed, based on
the domestic balance between state, community, and individual rights. Culture and
religion also affect States’ view of these categories of rights. However, the international
community has agreed that there are certain human rights and freedoms so
fundamental to human dignity that States have entered into agreements to ensure non-
derogation of those rights.
The specific rights enumerated in various human rights instruments can be divided into
several categories:

1. Individual security rights: protects individuals against crimes such as murder,

massacre, torture, and rape.

2. Due process rights (5th and 14th Amendment to the United States Constitution):
protects individuals against abuse of the legal system, such as imprisonment
without trial, trial with a jury, and excessive punishment

3. Liberty rights (1st and 4th Amendment to the United States Constitution): protects
freedom of belief, freedom of religion, freedom of movement, freedom to
assemble, and freedom of association

4. Political rights: protects an individual’s liberty to participate in politics, including

activities such as communicating, protesting, voting, and serving in political office
5. Equality rights: protects equal citizenship, equality before the law, and
nondiscrimination.
6. Social rights: protects the right to access education for all citizens and
prevents severe poverty or starvation.
7. Declaration of Human Rights. Some States have adopted instruments at the
regional level reflecting human rights concerns specific to that region.

Many States have also adopted constitutions and other laws which formally protect
basic human rights and incorporate some of the categories listed above. In the
International Human Rights Matrix, below, further examples are provided that correlate
to the International Bill of Rights.
International Human Rights Matrix Core Rights
Cultural diversity

Humanity has inhabited every corner of the world, except Antarctica, for centuries. As
groups of people worked and lived together, they developed distinctive cultures.
Together the cultures of the world create a rich and varied tapestry. The resulting
cultural diversity expands choices, nurtures a variety of skills, human values and
worldviews and provides wisdom from the past to inform the future. Cultural diversity
is a mainspring for sustainable development for individuals, communities and
countries. Thus, building an effective global approach to sustainable development and
ESD (Enterprise Supplier Development) needs to address respecting, protecting and
maintaining the cultural diversity of the world now and in the future.

Cultural diversity exerts strong influence on ESD in that:

• All ESD must be locally relevant and culturally appropriate;
• Culture influences what this generation chooses to teach the next generation
including what knowledge is valued, skills, ethics, languages and worldviews;
• ESD requires intercultural understanding if people are to live together peacefully,
tolerating and accepting differences amongst cultural and ethnic groups.

Indigenous Knowledge

ESD aims at promoting teaching which respects indigenous and traditional knowledge
and encourages the use of indigenous languages in education. Indigenous worldviews
and perspectives on sustainability should be integrated into education programs at all
levels whenever relevant.
Local knowledge and languages are repositories of diversity and key resources in
understanding the environment and in using it to the best advantage. They foster and
promote local cultural specificities, customs and values. The preservation of cultures is
linked to economic development. However, tourism and cultural industries can run the
risk of commodifying culture for outsiders. Cultures must be respected as the living and
dynamic contexts within which human beings find their values and identity.

ESD and Cultural Diversity at UNESCO

Within the framework of the DESD and UNESCO’s work on protecting and promoting
cultural diversity, the Heritage Education for Sustainable Development project aims
at strengthening the linkage between culture and education for sustainable
development. The purpose of this project is to prepare inventories of communities’
tangible and intangible heritage. Communities engaged in a dialogue on the
significance and role of their heritage for ESD, documenting the insights gained and
making some proposals for future action.

ESD and Indigenous Knowledge at UNESCO

In 2005, following the request of Mayangna leaders in Central America, UNESCO’s
Local and Indigenous Knowledge Systems (LINKS) program launched a project to
record and safeguard Mayangna knowledge and worldviews. The communities chose to
focus the first phase of work on fish and turtles, which are their primary source of protein
and a vital part of the Mayangna way of life.

After extensive community-level consultations, the LINKS Program launched the

Spanish-language edition of the book Conocimientos del Pueblo Mayangna sobre la
Convivencia del Hombre y la Naturaleza: Peces y Tortugas in 2009. A Mayangna
language edition is in preparation.

The publication captures in meticulous detail the breadth and depth of indigenous
knowledge about the aquatic world, weaving together empirical observations on
behaviour, habitat, reproduction and migration patterns, with social commentaries on
sharing, learning and harvesting, as well as cosmological reflections on human-animal
relations and local spirits. It provides a foundation for enhancing biodiversity
management by bringing indigenous knowledge on board alongside science.

Corruption: International Efforts

Corruption is an international problem that requires international solutions. Much

corruption occurs in international business, including international government
procurement, where the Bank has a special interest. To be successful, efforts to reduce
this kind of corruption must deal with it at its source in capital-exporting countries as well
as in developing countries. Work along these lines is being carried out by international
organizations, particularly regional organizations, and by international business groups.
Acts of internal corruption often have international ramifications, as is the case when
their authors flee to another country to avoid detection or prosecution or try to launder
the proceeds abroad. Bank secrecy laws in some countries may hinder efforts of
national investigators to trace the proceeds of bribery or other corrupt actions. Efforts
are under way to improve international cooperation in the detection and prosecution of
corruption and money laundering. Governments that are starting to deal with corruption
have much to learn from those that have already mounted successful campaigns
against it. Here too international organizations have started to collect the experiences of
their members and to organize training and other programs aimed at sharing these
experiences and developing the skills of the officials charged with dealing with
corruption in their member countries.

Most of the efforts of international organizations are directed at the criminalization of

corruption. Only to the extent that bribery is punished as a crime can the full government
machinery, including police and the judiciary, be mobilized to fight it. Most common
forms of corruption, such as bribery of public officials, are a criminal offense in most
countries. Only the United States has enacted a statute specifically to criminalize
international bribery. Regional international organizations, such as the Organization of
American States and the Council of Europe, are drafting international conventions to
establish minimum standards in defining corruption as a criminal offense. In addition,
the OECD is drafting an international convention whose signatories would criminalize
international bribery of foreign public officials.

This year’s Corruption Perceptions Index (CPI) reveals that corruption levels are at a
worldwide standstill.

The CPI ranks 180 countries and territories around the world by their perceived levels
of public sector corruption. The results are given on a scale of 0 (highly corrupt) to 100
(very clean).

This year, the global average remains unchanged for the tenth year in a

row, at just 43 out of a possible 100 points. Despite multiple commitments, 131
countries have made no significant progress against. Trouble at the top, COVID-
19 and human rights.

As anti-corruption efforts stagnate worldwide, human rights and democracy are also
under assault. This is no coincidence. Our latest analysis shows that protecting human
rights is crucial in the fight against corruption: countries with well-protected civil liberties
generally score higher on the CPI, while countries who violate civil liberties tend to score
lower. The global COVID-19 pandemic has also been used in many countries as an
excuse to curtail basic freedoms and side -step important checks and balances
corruption in the last decade. Two-thirds of countries score below 50, indicating that
they have serious corruption problems, while 27 countries are at their lowest score ever.
What’s happening around the world?

While corruption takes vastly different forms from country to country, this year’s scores
reveal that all regions of the globe are at a standstill when it comes to fighting public
sector corruption.

At the top of the CPI, countries in Western Europe and the European Union continue to
wrestle with transparency and accountability in their response to COVID19, threatening
the region’s clean image. In parts of Asia Pacific, the Americas, Eastern Europe and
Central Asia, increasing restrictions on accountability measures and basic civil freedoms
allow corruption to go unchecked. Even historically high-performing countries are
showing signs of decline.

In the Middle East and North Africa, the interests of a powerful few continue to dominate
the political and private sphere, and the limitations placed on civil and political freedoms
are blocking any significant progress. In Sub-Saharan Africa, armed conflict, violent
transitions of power and increasing terrorist threats combined with poor enforcement of
anti-corruption commitments rob citizens of their basic rights and services.

The Rise of Globalization

Globalization, deregulation, and technological change supported the rapid expansion of

multinational corporations (MNCs), which took advantage of regulatory arbitrage and
relocated to low-tax jurisdictions and areas with loose labor and environment
regulations. Overseas operations commonly meant the MNCs would operate in regions
with subpar regulatory frameworks and lax enforcement mechanisms, creating
opportunities for engaging in unethical behavior. Additionally, global value chains were
structured in a way that made purchasing, sales, support, and product development
more efficient.

The Moral Dilemmas of Globalization

A big moral dilemma concerns labor standards, something that cropped up due to
overseas sweatshop outsourcing and concerns over poor overseas working conditions
and child labor. Countries with poor environmental regulations may also have such
conditions exacerbated by MNCs. Additionally, MNCs may face pressure to stop doing
business with countries whose governments violate human rights. Another concern is a
lack of respect for cultural diversity, despite international laws requiring respect be given
to a country’s culture and customs. Finally, some countries allow bribery in foreign
operations, creating another moral stress.

The Three Types of Ethics Codes

To govern their actions, companies may create ethics codes in various forms. In
addition, they may choose to follow regulations set forth by industry organizations.

Ethics codes manifest in various forms. There’s compliance certificates, which are
documents requiring contractors, agents, or suppliers to agree with to comply with a
company’s stated standards. Another form is purchase orders or letters of credit, which
are written documents requiring compliance with a company’s policy on the part of the
suppliers or other contractors. A third form, special documents, are written codes of
conduct summarizing company guidelines, principles, or standards. Finally, companies
can produce circulated letters, which are letters addressed to stakeholders stating
company policies on a specific issue.

1. The first type of global corporate code of conduct is the corporate-based code
of conduct, which typically feature ethics training, whistle-blowing channels, and
ethics reviews along with codes of conduct. These function by guiding corporate
actions and helping the company differentiate itself from the competition. An
example of this in action is Mattel, who allows a third party to post independent
reviews of its practices on a public website.

2. A second type, industry-based corporate codes, includes codes of conduct,

ethics programs, ethics offers, and ethics training. This type functions as a
regulatory group that may offer independent monitoring and verification to ensure
industry-wide compliance. An example of this is the Defense Industry Initiative on
Business Ethics and Conduct, created by the U.S. defense industry to promote
common interests through self-regulation.

3. The third type is global codes of international organizations, which typically

include guidelines for multinational organizations like faith-based groups and
nongovernmental organizations. The functionality varies depending on the
issuing organization and if the code is created on a singular, industry, or global
basis.

How and Why Leaders Should Model Ethical Behavior

Employees look to their leaders to model ethical behavior and provide guidance in areas
of uncertainty. To serve that need, leaders must understand their responsibilities and
have impeccable character.

The 7 Habits and Characteristics of Ethical Leaders

1. It’s important for an ethical leader to have a strong personal character, as a

leader’s failure to earn their employees’ respect will create the perception that
they don’t care about company ethics or ethics requirements.
2. They must also act as role models for an organization’s value and act with
transparency.
3. It’s also important for ethical leaders to be proactive to prevent ethical problems.
4. Additionally, ethical leaders must exhibit a passion for acting in the company’s
best interest without bending the rules and considering all stakeholders’
interests.
5. Finally, they need to view their firm’s ethical culture holistically.

The Duties of Every Ethical Leader

1. All ethical leaders must create a review process to identify ethical issues.
2. They must also detect ethical risk areas by analyzing the company’s weakness.
3. Additionally, they must be able to answer stakeholder concerns as soon as an
ethical issue is revealed.
4. Fourthly, they must avoid misconduct by ensuring all employees are trained to
follow ethics guidelines.
5. Finally, ethical leaders must recover from a misconduct disaster by addressing
weaknesses in the company’s ethics program.

There are several potential benefits to deploying ethical leadership. These include;
• building stronger company relationships with external stakeholders, •
building higher employee satisfaction and employee commitment, and
• seeing higher firm valuation on the stock market.

The Importance of Doing What’s Right

Though ethical behavior is not necessarily a legal requirement, companies and leaders
who adhere to a strong code of ethics will not only enjoy better relationships with local
communities but also serve as admirable examples.
Lesson 2
Ethical Problems and Concerns

“An ethically defensible decision is one that you can live with and for which you are
able to provide a reasonable, ethics-based rationale to observers.”

An ethical decision is one that we can defend with justification, that is, being
able to explain how we reach the decision (i.e., the process) and why it is the most
optimal decision (i.e., the principles). In public relations, ethics is a precursor to
longterm organization-public relationships that ultimately contribute to organizational
effectiveness. But the increasingly global, interdisciplinary and collaborative
environment increases the unknowns associated with the ethical practice of public
relations.

In a 2008 Bloomberg article written by Professor Bill George of Harvard

University, he argued that “To build a truly great, global business, business leaders
need to adopt a global standard of ethical practices.” As globalization expands the
challenge of ethical conflicts, the adoption of one global standard of ethical practices
could help organizations justify the decisions they make without having to attend to the
differences among various markets. On the other hand, there are problems associated
with adopting one standard when there are “multiple and competing constructions of the
good.” There could be ethical problems associated with the construction of a global
standard of ethical decisions. For example, what principles and processes do we
construct this standard?

Ethics are commonly known as “rules or principles that can be used to solve
problems in which morals and values are in question.” Ethics guides us in
determining what is right and wrong (i.e., morals) and helps us decide what is important
(i.e., values). Because public relations practitioners are the boundary spanners between
organizations and their publics, they are entrusted with the authority to make decisions
about how to go about co-orienting between organizations and their publics to best build
and maintain mutually beneficial relationships between the two. Yet, when practicing
public relations in a global context, our understanding and application of ethics also
ought to be put in the global context. “Public relations practice has globalized; it is time
that we globalize our conceptualizations and reflect on the evidence and use our
knowledge to ensure that public relations practice contributes even more toward the
development of the world.”

Challenges for Ethics in a Global Context

While public relations ethics are closely linked to the cultural and social
environments, conceptualizing ethics in a global context could be challenging for the
following reasons:
• Polarizations between local and global: The adoption of universal frameworks
in conceptualizing global ethics is often resisted. Western imperialism is criticized
for using international principles to rationalize the use of universal frameworks.
Advocating for the global is considered another attempt to reproduce the
imperialistic normative framework as a model for enhancing global and moral
acceptance for Western imperialism. On the other hand, its counter-force
advocates the use of cultural relativism. But this is also criticized for not
addressing the problem that the interconnectedness of people and thus, the
interconnectedness of problems, requires ethics to be applied transnationally.

• Power in the development of global ethics: In spite of the polarization, there is

a need to recognize the capacity to build universal or common understanding and
logical reasoning to solve transnationally connected problems. It is true that
ethics, as a study of moral values of human conduct, of rules and principles that
govern it, can be influenced by social, religious, civic and cultural factors.
Because the development of global ethics is also largely driven by the political,
social and economic trends of globalization, one must acknowledge that power
could come into play when conceptualizing ethics in a global context.

• Defining global ethics: The increasing global interconnectedness and

interdependence has given rise to the discussion on global ethics. The focus of
conceptualizing ethics in a global context should center on “seeking reasonable
and responsible agreement on global problems, agreement based on possibly
diverse moral grounds.” Yet, one major challenge is to determine what the
boundaries are and what should be included and excluded. It is not just about
adopting universal values applicable to all, but acknowledging globally connected
obligations and responsibilities.

• Defining global publics: In addition to acknowledging global

interconnectedness, the approach to global ethics must also acknowledge how
this interconnection could cause global problems that require practitioners to
consider how to go about solving the problems, why and by whom. Equal
consideration should be given to all global publics concerned. The adoption of a
global ethical framework is not justifiable if the values of only a few global publics
are considered. Global inclusivity (i.e., considering everyone’s values and moral
thinking) and global solidarity (i.e., showing equal concern for everyone’s well-
being) should be considered when approaching ethics in a global context.

• Unequally shared global risk: Risk is shared in the global society – a future
challenge is to connect political decisions with morality and connect rights with
responsibilities. The approach to global ethics should respond to both nations’
self-interests and universal moral values. But in this respect, there is a hierarchy
of values because global ethical principles contradict each other. Universal
values are often brought in to justify worldwide responsibility for individual and
institutional actions. Yet, it is a challenge to create a shared set of values
 accepted by actors around the world when the risk of their actions is not equally
shared.

Building a culturally sensitive universal framework of global ethics?

Whether it is possible to accommodate a diversity of practices within a culturally
sensitive universal framework is questioned. “A global ethicist, or someone who
does global ethics, explores and usually assumes and defends a particular global
normative framework which she then applies generally or to particular areas of
concern.” Because entities make actions for the sake of others elsewhere in the world
which could harm them, the approach to global ethics should acknowledge the relations
individuals have with other individuals in the world. This question should be raised: is
the approach to global ethics developed based on some entities’ or groups’ norms and
values in respect to the world or based on shared norms widely and universally held
around the globe?

There are fundamental concerns associated with the definitions of global

ethics (e.g., can a consensus ever be made?) and the principles of global ethics (e.g.,
what are the most important values?). It has been discussed over and over again that a
rational basis for a universal standard of global ethics which attends to cultural
differences should be developed based on dialogue, but how to go about doing it
remains a holy grail. In a global world, decisions at any level could result in globally
impactful outcomes, but the globalization of ethics requires incorporating how people
understand their relations to the world and the shared norms supported by individuals
and groups from diverse backgrounds.

Role of Societal Factors

When practicing global public relations, practitioners are advised to pay attention
to societal factors including political, cultural, economic and media conditions to
understand how the public relations environment differs from each other. In response to
calls for more cross-cultural studies in public relations, a survey was administered to
compare practitioners’ understanding of ethics on social media in Israel and New
Zealand respectively. These findings were made:
• Control over distribution of messages: More practitioners in Israel (59
percent) than New Zealand (46 percent) agreed that social media gave them
more control over the distribution of messages.
• Influencing management decisions: Practitioners in both Israel (57 percent)
and New Zealand (58 percent) agreed that social media presented public
relations with an opportunity to influence management toward making ethical
decisions because of public scrutiny.
• Ghost-writing: More practitioners in New Zealand (29 percent) than Israel (21
percent) expressed reservations toward writing blogs on behalf of others.
 • Writing fake comments: More practitioners in New Zealand (60 percent) than
Israel (48 percent) disagreed with writing comments on social media without
disclosing their real identity.
• Disclaimer about sponsor: More New Zealand (76 percent) than Israeli (57
percent) practitioners disagreed with writing comments on social media without a
disclaimer about the sponsor.
• Paying bloggers: More practitioners in New Zealand (66 percent) disagreed with
making payments to bloggers than Israel (40 percent).
• Paying for negative messages: 96 percent of New Zealand practitioners and 78
percent Israeli practitioners disagreed to paying for social media experts to
spread negative messages about a competitor.
• Paying activist groups: 79 percent of New Zealand practitioners disagreed to
creating activist groups to support their clients on social media (vs. 51 percent
Israeli practitioners).
• Ethical training: Only 27 percent Israeli practitioners reported that they have
received ethical training in communication on social media (vs. 53 percent).

The significantly lower scores that Israeli practitioners gave to the ethical
statements in the study showed that they had lower levels of knowledge and
commitment to ethical practices on social media. It is recommended that international
indices be used to identify the similarities and differences in local and universal
practices on ethics. The study proposes that in countries which enjoy more freedom,
practitioners would be more conscious about ethics and would be less willing to accept
unethical practices.

The above study indicates significant differences not only in terms of their
approaches to ethical practices in public relations, but also their definitions of
public relations (or how they have been going about practicing public relations).
To some extent, the ethical standard in global public relations could also be challenged
by the problems listed above, such as:
(a) assuming the utility of a universal standard,
(b) disregarding specific societal factors driving the different principles and practices
used, and
(c) defining ethics as what should be done rather than what is accepted by the
global community.

Approaches to Conceptualizations of Ethics in a Global Context

Although being ethical refers to making decisions that practitioners could justify,
there could be multiple and contradictory sources of information which guide
decisionmaking. And this could be even more complicated in the global context. Public
relations practitioners have been asked to be internal activists in the organizations in
which they work—that is, they should advocate for the interests of publics to influence
organizational decision-making. They have been asked to be aware of the problems of
the Western approach to ethics and to engage with local publics because Western
practices might not be applicable to non-Western conditions (and vice versa).

A study conducted on a global-local hand-washing campaign was designed

based on the following assumptions:
• Multinational corporations’ use of local-global integration: Multinational
corporations would use global standardized worldwide development of best
practices together with local responsiveness to customize practices to the local
environment, organizational culture and people to achieve balanced public
relations.

• Understanding culture: Understanding global publics requires knowing (a) the

principles that guide what is valued in a culture, (b) the unwritten rules and
guidelines that regulate conduct, and (c) the communication practices of the
culture. Without understanding cultures, practitioners could not build emotional
links with the local people who are affected by their practice.

• Culture-centered approach: It should begin with listening to subaltern global

publics and using them as an agency to construct narratives which are useful to
them.

The thematic analysis of the global-local hand-washing campaign run by the

Global Public-Private Partnership made these findings:
 • "Glocalization": The campaign ought to achieve consistency across all
messages, goals and research methods worldwide. But they also tailored their
media, strategies and tactics to different local publics.

• Understanding the marginalized: The campaigners gathered knowledge from

those who lived in the communities, such as mothers and teachers through
research. The researchers valued the indigenous knowledge from them although
women remained under-valued in those communities. Also, the researchers hired
were fluent in their local language, came from the same gender and spent time
observing their domestic behaviors before conducting interviews about personal
matters.
• Showing care is ethical: As a result of this research-driven campaign, the
campaigners were informed by the real conditions facing the communities whose
hand-washing behaviors needed to be altered. They’re actively seeking to
understand the communities and privileging local knowledge and experiences
over their own assumptions was described as the portrayal of care and
attentiveness which drives the ethical and effective dissemination of messages to
the diverse global publics.

Levels of Ethical Behaviors

Donaldson and Dunfee have argued that either adopting host countries’ ethical
standards or exporting the values from the home countries to the host countries is
equally problematic—photocopying values shows disrespect for local cultures.
Therefore, they proposed a classification system to show different categories of global
norms:
• Hypernorms: Norms which are accepted by all cultures and organizations.
• Consistent norms: Norms which are culturally specific, but consistent with
hypernorms and other legitimate norms, such as organizational cultures.
• Moral free space: Norms which could be in tension with hypernorms, but are
unique cultural beliefs.
• Illegitimate norms: Norms which are incompatible with hypernorms.

While public relations is commonly known for its unethical conduct, unethical
behaviors should be understood at three levels: individual, organizational and national.
“The question of ethical behaviour, from the level of the individual, through the totality of
organizational manifestations to the level of national and international bodies, has
become the number one issue on the global agenda.”

At the same time, the model of ethical responsibility should also be

understood at three levels:
1. The causation of negative effects through human or organizational actions 2.
The presence of subjective factors held by individuals, and
 3. The set of values attributed to society.

While what society expects of organizations could affect the ethical norms that
organizations impose on individual employees, organizational structures could also
prevent individuals from taking responsibility for unethical actions. This is especially the
case when individuals’ actions are not attributed to their conscience but their
perceptions of what is societally, professionally and organizationally accepted. As public
relations practices transform to adapt to changes in economic, social, business and
cultural conditions, the ethical values of the practice could also change that the work it
does could change the complexity of the dynamics of interrelationships in the global
context.

Tsetsura and Valentini produced a model which incorporated the significance of

personal, professional and environmental values in affecting ethical judgements. They
proposed a similar model of ethical judgement based on three levels:
• Micro-level: At the personal level, human values, including their preferable
modes of behaviors and outcomes, would affect their views on how and what
should be achieved through his or her behaviors.

• Meso-level: At the professional level, judgements could be affected by what

guides their values in terms of what is seen as being accepted by the
organizations and the professions they are in.

• Macro-level: At the societal/environmental level, one’s personal networks,

including family, friends and community would affect the extent to which practices
are considered ethical or unethical. And such predispositions could be reinforced
over time. In particular, country-specific factors, including changing political,
economic and socio-cultural conditions, could influence the way public relations
is practiced.
 Based on these assumptions, a model is proposed to show that an
individual’s value system is made up of personal values, professional values and
environmental values. At the same time, personal factors, including education,
experiences, gender and background, and country-specific factors, including political
system, economic system, and social-cultural system, are the external factors which
could affect the values. There could be variations from one individual to another as
individuals emphasize values from one level more than another.

There is no one single approach to the ethical practice of global public relations
which will not receive criticisms—there are pros and cons with each of them. However,
understanding how ethics are formed and expressed requires practitioners to
understand how norms and values are formed at the individual, organizational and
societal levels. It is easy to make an ethical decision when the norms in a foreign
market happen to be the same as the norms in the domestic market. But when the two
conflict, practitioners are likely to approach the ethical questions by considering what is
ethically acceptable at the individual level, organizational level, societal level and global
level (in that order).
Lesson 3

Corporate Governance
Transnational Issues from Different Theoretical Perspectives

The very core propositions of realist theory—the primacy of the state, the clear
separation between domestic and international politics, and the emphasis on
state security— are made problematic by transnational issues.

Issues of health and disease, the environment, human rights, drug and human
trafficking, transnational terrorism, and international crime are problems that no single
state can effectively address alone. These issues have broken down the divide between
the international and the domestic. They may threaten state security, but have no
traditional military solution, even for a great power or superpower.

Responding to transnational issues, realists have generally adopted a nuanced

argument consonant with realist precepts. Although most realists admit that other actors
have gained power relative to the state, they contend that state primacy is not in
jeopardy. Competitive centers of power at the local, transnational, or international level
do not necessarily or automatically lead to the erosion or elimination of state power.
Most significant, the fundamentals of state security are no less important in this age of
globalization than they were in the past. What has changed is that the decreasing
salience of interstate and nuclear war as challenges to state and interstate security has
forced a broadening of security discourse to encompass numerous aspects of human
security.

For humans to be secure, not only must state security be ensured, but economic
security, environmental security, human rights security, and health and well-being
must be secured as well. One form of security does not replace another; each
augments the rest. Thus, although transnational issues have forced realists to add
qualifications to their theory, they have preserved it and enhanced its theoretical
usefulness. Transnational issues can be more easily integrated into the liberal
theoretical picture. After all, at the outset, liberals asserted the importance of individuals
and the possibility of both cooperative and conflictual interests. They introduced the
notion that many other issues may be as important as physical security. They see
power as a multidimensional concept.

Later versions of liberal thinking, such as neoliberal institutionalism, recognized

the need for international institutions to facilitate state interactions, to ensure
transparency, and to add new issues to the international agenda. Though not
denying the importance of state security, they quickly embraced the notion of other
forms of security compatible with health, environmental, and human rights issues.
Radicals have never been comfortable with the primacy of the state or the international
system that the dominant coalition of states created. For them, a shift in power away
from the state and that international system is a desired transition.
 Marxists, for example, imagined a transnational revolution that would sweep
away the state because the state’s only function was the use of violence to
maintain the power of capital over labor. With their pronounced emphasis on
economics over security, radicals may be able to accommodate such transnational
issues as communicable diseases, the environment, human rights, and transnational
crime. A prominent radical interpretation of both communicable disease and the
environment is that economic deprivation and perceived relative economic deprivation
are the root causes of disparities in health care and environmental degradation.

Human rights violations, according to radical thought, are caused by elites and
privileged groups trying to maintain their edge over the less fortunate.
Constructivists have presented a different approach for analyzing transnational issues.
They have alerted us to the nuances of the changing discourse embedded in
discussions of health, the environment, and human rights. They have illustrated how
both material factors and ideas shape debates over these issues. They have called
attention to the importance of norms in influencing and changing individual and state
behavior. More directly than other theorists, constructivists have begun to explore the
varying impacts of these issues on the traditional concepts of the state, national identity,
and sovereignty.

Some feminist international relations theorists make a similar but different

argument: like constructivists, they interrogate the origins and content of terms
like threat. But feminists go on to ask whether greater participation of women in
scientific, academic, and policy-making processes might not lead to a more
productive understanding not only of threats but also of solutions to
transnational challenges.

• Why, for example, do “we” tend to respond to threats that are acute and direct
but ignore those that are chronic and indirect, irrespective of the magnitude of
potential harm?
• Why privilege harm that results in death as opposed to harm that abridges the
quality of an affected person’s life?
• Why speak of “threats” at all?

As transnational issues assume greater salience in the twenty-first century, all

international relations theories will need modification and reformulation.

Will Transnational Issues Lead to Global Governance?

Recognition of transnational issues and their effects has led some scholars and
pundits to conclude that we need to conceptualize governance processes differently
than we have in the past. The processes of interaction among the various actors in
international politics are now more frequent and intense, ranging from conventional ad
hoc cooperation and formal organizational collaboration to nongovernmental and
network. Transnational Issues collaboration and even virtual communal interaction on
the Internet. These changes imply an increasing role for the regulatory capacity of
norms.

Global governance implies that through various structures and processes, actors can
coordinate interests and needs in the absence of a unifying political authority. The core
nature of international relations has changed over time. Perhaps the most important
component of that change has been variation in the demand for governance and, in
addition, a widening variety in the forms that global governance can take. Perhaps the
key example of the problem and potential of global governance is the Internet.

As noted earlier, the Internet had its origins in U.S. state security as a way to
increase the resilience of communications after a nuclear attack. Yet by the late
1980s, it had evolved into a way for researchers to share information across national
and disciplinary boundaries. As the capacity of the Internet to carry information
expanded, the types of information that could be exchanged—images, and in particular
video—expanded as well. Yet the Internet remained almost entirely ungoverned. For
many, this characteristic was its chief virtue. But the economic and political implications
of the unregulated exchange of information proved too much to remain independent of
governance or the depredations of commerce. States and private corporations began to
weigh in, particularly states whose governments depended for their very survival on
control of public access to information (for example, China, Saudi Arabia, Russia,
Iran, North Korea), and corporations whose technology had facilitated the
Internet’s growth and capacity (Google, Apple, Cisco).

The Internet proved a double-edged sword. On the one hand, it had the potential
to bring its users closer together and to dramatically facilitate international
collaboration in solving tough problems. On the other hand, that same openness
created vulnerabilities, which prompted states to attempt to capture and regulate that
openness. What makes the Internet so important as an example of a transnational issue
is that it incorporates both a horizontal component (geographic space) and vertical
components (local to global and interest heterogeneity). In a way, the complexity of the
Internet stands as a perfect metaphor for the complexity, and positive potential, of
global governance. The European Commission, for example, defines “Internet
governance” as “the development and application by governments, the private
sector and civil society, in their respective roles, of shared principles, norms,
rules, decision-making procedures, and programmes that shape the evolution
and use of the Internet.”
 The implications of the Internet example for global governance are crucial. Global
governance, in its idealized form, presupposes a global civil society. The political
scientist Ronnie Lipschutz describes the essential component of global civil society:
While global civil society must interact with states, the code of global civil society
denies the primacy of states or their sovereign rights. This civil society is “global”
not only because of those connections that cross national boundaries and operate
within the “global, nonterritorial region,” but also as a result of a growing element of
global consciousness in the way the members of global civil society act. Some liberals
would find this a desirable direction in which to be moving—a goal to be attained—
whereas others fear that global governance might undermine democratic values: as the
focus of governance moves further from individuals, democracy becomes more
problematic. Others worry that a global civil society implies cultural convergence. If
convergence is to happen, in other words, some cultures may become extinct and
others dominant.

Who is to say which cultures should be favored? In December 2012, for example, 89
of the UN’s 193 members at an International Telecommunications Union
conference in Dubai voted to approve a treaty giving states new powers to close off
Internet access to their countries. While countries like France and the United Kingdom
were disappointed, others such as Iran and the Russian Federation were delighted.
Each has argued that a perfectly open Internet fundamentally abridges state
sovereignty, or each state’s right to manage its own domestic affairs as it sees fit.

Many of the 89 states who voted for the treaty see an open Internet as a proxy for the
imposition of “Western” values on their own, different values. Skeptics of global
governance do not believe that anything approaching it, however defined, is possible or
desirable. For realists, there can never be global governance because the more closely
it is approached, the more dangerous it is perceived, and the more likely a
countervailing authority or alliance is to halt or reverse the process of convergence.
Outcomes are determined by relative power positions rather than by law or other
regulatory devices, however decentralized and diffuse those devices might be.

For Kenneth Waltz, the quintessential neorealist, the anarchic structure of the
international system is the core dynamic. For other realists, such as Hans Morgenthau,
there is space for both international law and international organization. Few realists
would talk in global governance terms. Radicals are also uncomfortable with global
governance discourse. Rather than seeing global governance as a multiple-actor,
multiple-process, decentralized framework, radicals fear domination by hegemons that
would structure global governance processes to their own advantage. Skepticism
about the possibility of global governance does not diminish the fact that there may be a
need for it in the age of globalization.
Transnational Issues In Sum: Changing You

We have explored the historical development of international relations, from the

development of the state system to notions of an international system and community
and global governance. We have introduced different theories— realism, liberalism,
radicalism, and constructivism—that help us organize our perspectives about the role
of the international system, the state, the individual, and intergovernmental and
nongovernmental organizations in international relations. From these perspectives, we
have examined the major issues of the day and analyzed how these issues affect
interstate bargaining, conflict, sovereignty, and even the study of international politics.
A citizenry able to articulate these arguments is better able to explain the whys and
hows of events that affect our lives. A citizen who can understand these events is
better able to make and support informed policy choices.

In the transnational era of the twenty-first century, as economic, political, social, and
environmental forces both above the state and within the state assume greater saliency,
the role of individuals becomes all the more demanding—and all the more important.