FIB

UNIT III –
Product and Branding Decisions
Approaches to International Pricing
 What is marketing?

• Marketing is “analyzing, organizing, planning & controlling of

the firm’s customers- impinging resources, policies, activities
with a view to satisfying the needs and wants of a chosen
customer group at a profit”.

• “Marketing is a social and managerial process by which

individuals and groups obtain what they need and want
through creating, offering, and exchanging products of value
with others.” (Kotler)

Process, exchange, value

Marketing Mix
Marketing and other functions
American Marketing Association (AMA) defines
International Marketing as:

• The multinational process of

▫ planning and executing the conception,
▫ pricing, promotion and distribution of ideas,
▫ goods, and services to create exchanges that
satisfy individual and organizational objectives
 What is International Marketing?
“International marketing is the process of planning and conducting transactions
across national borders to create exchanges that satisfy the objectives of individuals
and organizations” (Czinkota and Ronkainen)

“International marketing focuses its resources on global market opportunities and

threats” (Keegan and Green)

“International marketing is the motor of the internationalization process of the firm”

(Usunier)

“ The definition of International Marketing is different from the general definition of

Marketing only in that goods and services are marketed across political
boundaries”.(Albaum)

“International Marketing is the performance of business activities that direct the

flow of a company’s goods and services to consumers or users in more than one
nation for profit”. (Cateora)
International Marketing Decisions

Deciding whether to go abroad

Deciding which markets to enter

Deciding how to enter the market

Deciding on the marketing program

Deciding on the marketing organization

International Marketing- Benefits
International Market Assessment

–Assess alternative foreign market

» 1. The number, size, and financial strength of the
competitors.
» 2. Their market shares.
» 3. Their apparent marketing strategies.
» 4. The apparent effectiveness of their promotional
programmes.
» 5. The quality levels of their product lines.
» 6. The source of their products—imported or locally
produced.
» 7. Their pricing policies.
» 8. The levels of their after-sales services.
» 9. Their distribution channels.
» 10. Their coverage of the market.
International Market Assessment
– Cost-benefits analysis
– Select markets for entry or expansion
 What is International Marketing
International marketing is defined as the
performance of business activities designed to plan,
price, promote, and direct the flow of a company’s
goods and services to consumers or users in more
than one nation for a profit
Marketing
concepts,
It is an approach of a company processes, and
with truly global outlook, seeking principles are
its profit impartially around the universally
world, on a planned and applicable all
systematic basis. over the world
IM - OVERVIEW
 Why go International?

Domestic Market
Profit Motive
constraint

Government Policies Spin off benefits

Monopoly Power Competition

Factors Influencing Global Business

• North American free

Rapid growth of world trade trade area
organization
• European Union

Trend towards acceptance • Asia

of free market system
among developing countries • Europe

Impact of Internet, Mobile • Global channels

phones and other global
media • Global customers

Bindumadhavi P 14
 Factors affecting International
Marketing

Trade
Facilities Distance
practices

Culture Economy Law

 Domestic v/s International
Similarities Differences
• Political Entities
• Legal systems
• Understanding buyers • Cultural differences
needs • Different monetary systems
• Building Goodwill • Marketing infrastructure
• Research Development • Trade Restrictions
• Procedures and
documentations
• Highly unpredictable
 PROCESS OF INTERNATIONALIZATION/STAGES OF
INTERNATIONAL MARKETING

DOMESTIC MARKETING COMPANY

Focusing solely on domestic consumers and economy

EXPORTING MARKETING COMPANY

begins with unsolicited orders from abroad
tend to engage in indirect exporting
Eg:Birla Tyres

INTERNATIONAL /MULTINATIONAL MARKETING COMPANY

Focus on consumer needs and requirements in more than one country and
accordingly devises product, price and promotion strategies
Eg: Samsung, LG Electronics

GLOBAL /WORLDWIDE MARKETING COMPANY

Global product with local variations
Eg: Ranbaxy
 Strategic Orientations
EPRG Schema Orientation

Ethnocentric Domestic Marketing

Extension

Multidomestic
Polycentric
Marketing

Global Marketing
Regio/Geocentric
 EPRG Model - Characteristics
Ethnocentric Polycentric Geocentric
Approach International Each country is The world is one
operations are relatively common market
secondary independent
Vision Centered on the Each market is Global vision of
domestic market unique the world

Priority Searching for Taking into Unifying

identical consideration differences in the
segments in differences in world market
foreign markets foreign markets
Planning center National Subsidiary in World
headquarters each country headquarters
Structure International Division for Matrix structure
division each zone
 EPRG Model - Characteristics
Ethnocentric Polycentric Geocentric

Staff Citizens from the Citizens from each Most qualified

domestic market market

Marketing strategy Extension Adaptation Extension, Adaptation,

Creation

Management style Centralized Decentralized Integrated and

interactive

Production Domestic Local Low-cost sources of

supply

Partnerships Agent, licensing Joint-ventures Strategic alliances

Performance Domestic market share Local market share World market share
measures
 Progression to Global Marketing

EPRG FRAMEWORK
Ethnocentric
Polycentrism Regiocentrism Geocentrism
- Home
- Host country - A regional - A world
country
orientation orientation orientation
orientation
 EPRG FRAMEWORK
Ethnocentric Domestic techniques and
Personnel are considered
- Self superior
Reference
Criterion
 Ethnocentric
• Overseas operations are viewed as secondary to
domestic operations
• Considered as a means to dispose of surplus
domestic production
• Plans for overseas market are developed in the
home office, utilizing policies and procedures
identical to those employed in the domestic
market
• Overseas marketing is looked after by home
country nationals
 Ethnocentric continued
• No systematic research is conducted overseas
• No major modifications are made to products
sold in overseas markets
• Prices are calculated on the same basis as in the
home market with the addition of overseas
distribution costs
• Promotion and distribution strategies are similar
to that employed in the home country
• Strong reliance on export agents
 Surf – Super washout in Japan
Unilever enters Japan Detergent Market

• It releases Surf Super concentrate washing powder in

Japan
• Measured sachets for Convenience
• Fresh Smell

WHAT WENT WRONG??

Un explored market
• Washing powder did not dissolve completely
due to weather conditions
• Low agitation washing machines were more
popular in Japan, in which the super
concentrate surf washing powder did not
wash completely
• Fresh smell was not very significant
EPRG FRAMEWORK
Polycentrism Local Personnel and
Techniques are best
- Host
suited to deal with local
country
orientation market conditions
 Polycentric orientation
• Subsidiaries are established in overseas market
• Each subsidiary operates independently with its own
marketing objectives and plans
• Marketing activities are organized on country by
country basis
• Marketing research is conducted independently in each
country
• Separate product lines are developed in each country
• Home country products are modified to meet local
needs.
 Polycentric continued
• Each subsidiary will have its own pricing and
promotion policy
• Sales personnel from those countries
• Traditional channels of distribution of those
countries
Eg. McDonalds – Veg
burgers in India

McDonald’s does not use multiple 4’s in

advertising prices in China; four sounds like the
word death.
EPRG FRAMEWORK
Recognizes
Regiocentrism regional
commonalities
- A regional and leads to
the design of
orientation
regional
strategies
EPRG FRAMEWORK
Best man for
the job Geocentrism
irrespective
- A world
of national orientation
origin
 Regiocentric and
Geocentric
• Region or entire world as potential market
• Firm develops policies and organizes activities
on a regional or worldwide basis
• Marketing personnel from the region or from
any country
• Standardized product lines for regional or
worldwide markets
• Regional or Global channels of distribution are
also developed
 MAJOR DECISIONS IN IM
LOOK AT
GLOBAL
ENVIRONMENT

GLOBAL
DECIDE – TO
MARKETING IN
GO OR NOT
ORIENTATION

GLOBAL WHICH
MARKETING MARKETS TO
PROGRAM? ENTER FIRST
 Conclusion
The globalisation of Markets has necessitated
all managers to pay attention to International
marketing.
Other than Environmental factors, self
reference criterion are considered obstacles to
International Marketing.
Global awareness and sensitivity are the best
solutions challenges faced in International
marketing
 Pricing Issues & Decisions

Global pricing is one of the most critical and

complex issues in international marketing.
Price is the only marketing mix instrument that
creates revenues. All other elements entail
costs.
A company’s global pricing policy may make or
break its overseas expansion efforts.
Multinationals also face the challenges of how to
coordinate their pricing across different
countries.
 Pricing Policy
• Pricing of the product is one of the most
important functions to do as a marketer.
• Pricing can be affected by:

– The country in which business is being conducted

– The type of product
– Competitive market conditions
– Other environmental factors

37
 Pricing Policies
• International Firms adopt one of the three
pricing policies:
– Standard Price Policy( followed by geocentric
companies)
– Two tiered pricing(followed by ethnocentric
companies)
– Market pricing( followed by polycentric
companies)
 Dumping
• Dumping is when the products imported are
lower than there cost of production plus
transaction costs.
• Another definition of dumping is when you
sell a product in a foreign country below the
cost of the same good in that country.
• Dumping is illegal in many countries.
• According to WTO, dumping occurs when
imports cause injury to domestic industry as a
result of a specific unfair trade practice by an
MNC. 39
 Types of Dumping
• Sporadic Dumping
• Predatory Dumping
• Persistent Dumping
• Reverse Dumping
FOREIGN CHANNEL AND
LOGISTICAL DECISIONS

UNIT III
 INTRODUCTION
• Operations Management is the set of
activities that an organization uses to
transform different kinds of inputs (labor,
capital, raw material and so on) into final
goods and services.

• International Operations Management refers

to the transformation-related activities of an
investment firm
 Advantages
• Location Economies – Locating subsidiaries in any
part of the world where cost of production is
lowest
• Benefits of Experience Curve –
• Producing the product in high volumes and reducing the cost
of value addition in every unit of output.
• The product must meet customer’s needs
• Coke sells to more than 160 countries
• Creating new values – consolidating manufacturing for
several European Countries to take advantages of
economies of scale and reduce shipping costs and tariffs.
• Shifting production among plants in different countries in
response to exchange fluctuating exchange rates
Where does the Business get
its Competitive Advantage?

The technological
specification of its Product /
product / service? Service
Technology

The way it The way it

positions itself Marketing Operations produces its
in its market? goods and
services?

46
Source : Slack et al Operations Mgmt Pearson 2001
International Operations Management
– Strategic Issues
1. International sourcing & vertical integration
2. Standardization of production facilities
3. International Facilities location
4. Contract manufacturing
5. Supply Chain Management
6. Managing service operations
7. International Quality standards
8. Internationalization of R & D
9. Managing Technology transfers
 1. International sourcing/procuring & vertical integration

• Sourcing
• Series of steps and processes a firm uses to
acquire the different components it needs to
produce its own goods and services. Another
name for sourcing is procuring.
• Vertical integration When company decides to
make all components in house.
• Example: Ford of Europe – 45% of the value
of Fiesta in its own plants and the remaining
55% mainly components come from
independent suppliers
 SOURCING

INTRA-FIRM OUTSOURCING

DOMESTIC
OFFSHORE
DOMESTIC INTERNATIONAL PURCHASING
OUTSOURCING
AGREEMENT

PROCURING BUYING MAJOR

BUYING MAJOR
COMPONENTS PROCURING MAJOR COMPONENTS FROM
COMPONENTS FROM
INHOUSE BY COMPONENTS FROM INDEPENDENT
INDEPENDENT
PROCURING THEM FOREIGN SUBSIDIARY SUPPLIERS
SUPPLIERS AT HOME
DOMESTICALLY INTERNATIONALLY
 Global Sourcing- Need
• As international demand grows for more and
better products and services, competition
becomes more intense.
• Firms must keep up with
– rapidly changing technology
– lowering their cost
– Increasing quality
– accelerating the speed to market
– and hence improving customer service at all
stages of the value chain
 What is global sourcing
• It is the process of sourcing goods and services from
the international market across geopolitical
boundaries.
• It aims to exploit global efficiencies such as lower
cost skilled labor, cheaper raw materials and other
economic factors like tax breaks and low trade tariffs.
• Examples are call centers in the Philippines, clothing
and shoes manufactured in China and Thailand.
• A few countries, notably India and China are often
targeted as the ones that are displacing American
workers by offering cheap labor.
 Costs of Global Sourcing

• The costs of global sourcing include some of the

same costs found in domestic sourcing; there are
also costs that are different.

• These costs are grouped into the following

categories: administrative, foreign, and common.

• Exclusively foreign costs are those that would not

be incurred if a domestic source were found.

• Examples of these costs are duty charges, customs

fees, import fees, and currency exchange costs.
 Common Costs
• Direct labor and materials costs, lead-time
costs, transportation costs, and inventory costs
are a part of both domestic and offshore
sourcing.

• Transportation costs, inventory costs, and lead-

time costs tend to be higher when sourcing
globally.

• On the other hand, labor and materials costs

are often lower for firms in developing
countries.
 Currency Exchange Rates
• One of the most important variables to consider is the
exchange rate of currencies.
• Since predicting the fluctuation in currency markets is
extremely difficult, foreign purchases may actually cost more or
less than expected depending on the length of the contract.
GLOBAL SOURCING: ON THE RISE

• There is no disputing that global sourcing is on

the rise
the U.S. alone imported more than $1.8 trillion
worth of goods and services in 2015
• Most companies report a 10% to 35% cost savings
by sourcing from low-cost-country suppliers.
 But what exactly does global
sourcing entail?
• Global sourcing entails identifying, evaluating,
negotiating and configuring supply across multiple
geographies to reduce costs, maximize performance
and mitigate risks.
• Sourcing is also a cornerstone of total cost
management (TCM), a technological and process
framework for the optimal alignment, management
and control of the total cost of ownership (TCO) of
supply relationships.
 But what exactly does global
sourcing entail?
• Every sourcing decision requires companies to
balance the tradeoffs of cost, performance, and risk.
• However, these factors are heightened when
sourcing globally because of the
– variability of non-price or "hidden" cost factors
such as cross-border freight and handling fees,
– complex inventory stocking and handling
requirements,
– a multitude of documentation and
– regulatory compliance requirements.
 Decision to Make
Vertical integration
CONTROLLING ALL THE SUPPLY SOURCES (Backward Integration)
or CONTROLLING ALL DISTRIBUTION CHANNELS (Forward Integration)

Reasons to make

Lower cost

Greater control
 Decision to Buy

Outsourcing Reasons to buy

Buying from another Lower risk

company a good or
service that is not Greater flexibility
central to a company’s
competitive advantage Market power
Make-or-Buy Decision
Many questions to answer:

Raw materials

Intermediate components

Facility availability

Cost considerations
 MAKE OR BUY DECISION AT BOEING
• World’s largest manufacturer of Commercial Jet
• Company’s two-fold problems
– Dog Fight: Aggressive Competition from Europe’s Airbus
industry
– High Production Cost & High Lead Time
• Boeing decided not to outsource the production of wings
because it believed that by doing so it might give away valuable
technology to potential customers.
• To reduce dependency also, it decided to outsource certain
activities to suppliers in a country where it can also supply
aircrafts. Therefore,
• Boeing outsourced the production of some components in CHINA;
decision influenced by the forecast of China to buy over $100
billion worth of Commercial Jets
• By this decision, Boeing could gain larger market share
than Airbus
 CONT...
• Boeing used to make Insulation Blankets in-house,
then it decided to outsource its production in Mexico
• Production of Insulation blankets when outsourced
to Mexican Supplier, Boeing was able to save $50
million per year.
• This outsourcing helped Boeing to cut its cost
structure from 52% to 48%
Labor costs dominate IT budgets; offshoring is a way to
reduce these costs
Europeans Offshoring Everything
Low-Cost Service Delivery Drives
Firms’ Decisions To Go Offshore
Europeans Cut Back on Internal
and Contractor Staff
Offshore Providers Meet European
Firms’ Expectations
UNIT IV
 INTRODUCTION

Human resource management (HRM) refers to the

activities an organization carries out to utilize its
human resources effectively.
These activities include:
• determining the firm's human resource strategy
• staffing
• performance evaluation
• management development
• compensation
• labor relations
 International Human Resource
Management
IHRM
• International Business must procure, motivate, retain and
effectively utilize services of people both at the corporate
office and at the foreign plant.
• The process of procuring, allocation, effectively utilizing
human resources in an international business is called
International Human Resources Management.

– IHRM can be defined as set of activities aimed at

• managing organizational human resources at
international level
• to achieve organizational objectives international level
• achieve competitive advantage over competitors at national
and international level.
 OBJECTIVES OF IHRM
• Create a local appeal without compromising
upon the global identity.
• Generating awareness of cross cultural
sensitivities among managers globally and
hiring of staff across geographic boundaries.
• Training upon cultures and sensitivities of the
host country.
 Nature of IHRM
3 broad activities of IHRM
• Procurement, Allocating & Utilizing
• Covers six functions – Human Resource Planning, Employee Hiring, T&D,
Remuneration, Performance Management and IR

3 National/ Country Categories in IHRM

• Host Country – Where subsidiary is located
• Home Country – Where company is headquartered
• Third Country – Source of labour/finance
Three Types of Employees
• Parent Country Nationals
• Host Country Nationals
• Third Country Nationals
Model of IHRM
 Types of Employees
PCN HCN TCN

• Are citizens of the • Citizens of the country • People who are citizens
country where the MNC where subsidiary or neither the home
is headquartered but affiliate is located country or the host
live and work elsewhere • Workers from the local country
• Employee’s nationality population • The employee’s native
is the same as the • HCNs make up the country and the country
organization’s largest proportion of where he works are
• Such a person is also employees that the firm often in the same
referred to as hires abroad. geographic area.
EXPATRIATE • Employees hired in Mc • A Chinese employed by
• Example: German Donalds outlets an American company
citizen working for a working in Singapore
German Company in
India
• IBM employs
Australian citizens in its
Australian operations
 NEED FOR IHRM
• Managing expatriates

• Globalization has forced HRM to have

international orientation

• Effectively utilise services of people at both

the corporate office and at the foreign plants
 Characteristics of IHRM
More HR Activities

Need for broader perspective

More involvement in employee personal life

Changes in emphasis as the workforce mix of expatriates and

locals vary

Risk Exposure

More external influences

 More HR Activities
HR • Difficulty in implementing HR in host countries
• Developmental opportunities for international managers.
Planning
Employee • Ability to mix with organisation’s culture
• EPRG staffing approach
• Selection of expatriates
Hiring • Managing repatriation process

• Emphasis on cultural training

T&D • Language training
• Training in manners & mannerisms
 More HR Activities
• Devising an appropriate strategy to compensate expatriates

Compensation • Minimising difference in pay between parent, host & third country
nationals
• Issues relating to the re-entry of expatriates into the home country

Performance • Constraints while operating in host countries need to be considered.

• Physical distance, time differences & cost of reporting system add to
Management the complexity.

Industrial • Handling industrial relations problems in a subsidiary.

• Attitude of parent company towards unions in a subsidiary
Relations
 Need for Broader Perspective
Pay Issues
• Different Countries, different currencies
• Gender based pay in Korea, Japan and Indonesia

Health insurance for employees and their families

Nepotism
• Nepotism – Hong Kong & Singapore prefer to manage non-relatives ___ Indonesians,
Malaysians feel that becoming romantically involved with co-workers is inappropriate.

Overtime working
• When work load increases, Australians and Singaporeans add staff
• Korean & Japanese firms insist existing staff work longer hours

Promotion based on seniority or merit

• Length of Service
• Australia – 4%; Hong Kong – 10%; Singapore – 22%; Japan – 31%; Koreans – 40%
 CONT....
• More involvement for both parent-country & third-country
More nationals
Involvement in • Housing arrangements
• Health care
Employee’s • Remuneration packages
Personal Lives • Assist children left behind in boarding schools

Changes in
emphasis as the • Need for parent-country & third-country nationals
decrease as more trained locals become available.
workforce mix of • Resources reallocated to selection, training & management
expatriates and development

locals vary
 CONT....

Risk • Physical safety of employees

• Failure of expatriates to perform well
Exposure Financial losses to the firm

External • Dealing with ministers, political figures,

economic & social interest groups
• Hiring procedures dictated by host country
Influence • Catch up with local ways of doing business
Globalization of Business Effective HRM –
determinant of success in
Multiculturalism IB

Growing
interest in
IHRM

Shift from traditional Underperformance or

hierarchy towards failure in international
networked organizations assignments proves to be
(MNC) quite expensive
 Key Issues in IHRM
i. How to staff key management posts in the
Co.?
ii. How to develop managers, who can do
business in different countries?
iii. How to compensate people in different
nations?
iv. How to evaluate the performance of
managers in different countries?
v. Expatriate managers
MANAGING IHRM
HUMAN RESOURCE PLANNING

RECRUITMENT AND SELECTION

TRAINING AND DEVELOPMENT

PERFORMANCE MANAGEMENT

REMUNERATION

REPATRIATION

EMPLOYEE RELATION

MULTICULTURAL MANAGEMENT

ORGANIZATIONAL EFFECTIVENESS
 HR planning – key issues
1. Worldwide Human Resources Planning
– Recruiting and Selection
– Expatriate orientation & induction
– Training(to improve job skills)
– Development( Educating people beyond requirements of their
present position)
– Remuneration & rewards
– Performance appraisal
2. Compensation
– Dealing with inflation and unexpected changes in exchange rates
– Providing sufficient pay to keep individuals
– Dissatisfaction with cost of living allowances
3. International Labour Relations
 CONT….
4. Benefits Planning
– Developing equity among employees
– Several plans necessary for different categories of personnel
5. Taxation (Proliferation of new laws)
6. Communication of HR Policies and Programs Worldwide
– Treat communication as a continuous process
– Face-to-Face contact frequently
– Make policy manuals brief and simple
– Be sensitive to needs of receiver
– Send regular written explanations of policy changes
– Periodic rotation of overseas HR managers desirable
– Security
 Expatriate Managers
• Of the all staffing policies, Ethno & Geo rely on
extensive use of Expatriates.
• Expatriates are citizens of one country, who are
working in another country.
• Impatriates (transfer of subsidiary managers to
HQ for a specific period of time) is a subset of
expatriates who are citizens of a foreign
country, working in the home country of their
multinational employer. (e.g., citizen of India,
who moves to U.S to work for Microsoft, who
was employed in India for Indian operations)
 Expatriate selection
Four dimensions that predict success in a foreign posting:
• Self orientation – self esteem, self confidence, mental well being, adapt
their interest in food, sports, music and hobbies.
• Others orientation – ability to interact with host country’s nationals,
relationship development and willingness to communicate by learning
local language.
• Perceptual ability – to understand the particular behaviour of people in
host countries, empathise.
• Cultural toughness – relationship between country of assignment and
how well an expatriate adjusts
 Training & Development
• Refers to the acquisition of knowledge , skills
& behavior pertaining to job.
• Training(to improve job skills)
• Development( Educating people beyond
requirements of their present position)
 Training for Expatriates
i. Cultural training – understanding the culture of
host country, enhance effectiveness, familiarization
trip before formal transfer.
ii. Language training – manager’s ability to interact,
help build rapport and improve manager’s
effectiveness.
iii. Practical training – adjust to day to day life in host
country, establish a routine, successful adaptation,
support network of friends
 Pre- departure training inputs-
• Provide cross culture and language orientation to make the
unfamiliar become a little less strange.
• Authorise pre-assignment visits for the expatriate and spouse so
that they can find appropriate accommodation, explore the host
city and surrounding environs, and investigate schools and
shopping. Encourage the family to involve the children in the
discussion on educational options.
• Provide local contact information so that the family will be
welcomed on arrival. A combination of company expatriates and
new local colleagues can be very beneficial, along with the advice of
a destination service provider. MNCs generally provide destination
services to their employees who are locating to another country.
• Assign home-country mentors who are familiar with the challenges
of expatriation to help guide the employee during the assignment.
Have the two meet before the relocation happens.
• Provide EAP (Employee Assistance Programme) at the host location.
 Expatriate Failure
Premature return

Reasons
• Inability to adjust to host country culture leads to
Culture Shock
• Personal/Emotional problems – Inability to spouse
to adjust
• Inability to cope with larger international
operations
 Compensation
• The compensation program of a TNC focuses
on attracting & retaining qualified employees
• facilitation of transfers between the head
office & its affiliates
• creation of consistency and equity in
compensation & maintaining competitiveness.
 Objectives of expat compensation
• Attract employees who are qualified and interested in
international assignments;
• Facilitate the movement of expatriates from one
subsidiary to another, from home to subsidiaries, and
from subsidiaries back home;
• Provide a consistent and reasonable relationship
between the pay levels of employees at headquarters,
domestic affiliates, and foreign subsidiaries; and
• Be cost effective by reducing unnecessary expenses.
• Design pay systems that are aligned with desired
outcomes and specific measurable results.
 Problems faced in deciding
remuneration package
• Discrepancies in pay between parent, host &
third country nationals
• Vary compensation based on family situation
of expat
• Remuneration when re-entering parent-
country organisation
• Must accommodate changes in international
business environment
Approaches to expat compensation

Home Host Based

Based Policy
Policy

Headquarter
based
Compensation
Policy
 Home Based Policy Compensation/
Balanced Sheet Approach
• The home-based, or balance sheet approach, is the most popular of
these approaches and used by more than 85% of U.S. multinational
companies.
• The balance sheet approach provides international employees with
a compensation package that equalizes cost differences between
the international assignment and the same assignment in the
home country of the individual or the organization.
• The balance sheet approach is based on some key assumptions and
is designed to protect expatriations from cost differences between
their home and host countries.
• Research suggests that more than 85 percent of US organizations
employing expatriates use the balance sheet approach (Overman,
2000; Wentland, 2003).
 Host- Based Compensation Method
• Sometimes called destination pricing & localization.
• Matching the compensation of expatriates with the local nationals.
• This approach to expatriate compensation takes into account what
– competitors are paying and, more importantly,
– how expatriate compensation compares with the compensation levels
of local employees in comparable jobs
• This method bases an expatriates base salary to the salary
structure of the host country.
• Supplementary allowances for cost of living, housing, schooling etc
are linked to the home-based salary structure.
• This policy used when international assignments are of an
indefinite duration in a location.
 Headquarters/ Hybrid-Based Method
• The international assignment be viewed as continuous, All
assignees are on the equivalent compensation scale, regardless of
their home country.
• Under the international headquarters approach, also referred to as
the “regional approach”, expatriates are compensated as if all
expatriate employees originated from the same geographic
headquarters and are being paid on the same balance sheet
program. The goal is equity in a geographic location.
• For example,
– If an organization has expatriates from three or four different
nationalities working together in Beijing,
– An international headquarters approach would ensure that these
expatriates are not working under different compensation packages,
thus promoting perceptions of equity.
 Expats Compensation Approaches –
Adv. & DISAdv.
Advantages Disadvantages
HOME COUNTRY Approach Equity Can result in great disparities
– B/W Assignments - B/W expats of different
- B/W Expatriates of the nationalities
same nationality - B/W Expats and Locals

HOST COUNTRY Approach Equality with local nationals Variation b/w expats of same
Equity among expats from nationalities in different
different nationalities countries due to different
currencies
INT. HQ Approach Equity This packages attracts younger
- B/w Expats of different expats. As these younger
nationalities expatriates gain more
experience, they begin to
negotiate more traditional
expatriate compensation
packages – namely the home-
based balance sheet approach
 Multiculturalism
• Multiculturalism is another reality that affects companies, especially those in developed
countries.
• Globalization has reduced barriers for immigration, making countries like England, Germany,
the United States and Canada go through profound changes in their population profile.
• Managing greater workforce diversity is becoming another challenge for IHR Managers
• An expat working in any country needs to imbibe local culture.
• Expat needs to acquire cross cultural competence while working in different host counrries
• Canada is a typical case due to the big contingent of people who immigrated recently from
Hong Kong, Vietnam, Pakistan and countries from the Near East. These immigrants are
making Canada’s population more diversified and its manpower more heterogeneous.
• To understand culture, Hofstede’s 6 D Model is widely used by International Managers to
compare cultures and cultivate cosmopolitan outlook and attitudes.
CROSS CULTURAL
MANAGEMENT

Unit III
 Concept of Culture
• Culture is the configuration of learned
behavior and result of behavior whose
component elements are shared and
transmitted among the members of a
particular society.
• Culture: ‘Shared values, understanding, assumptions
and goals
• learnt from earlier generations,
• imposed by present members
• and passed on to succeeding generations.
Culture is Relative that guide the behavior of people in a society / community and that
are passed on from one generation to the next.
Levels of culture in Multinational Management

Dominant culture within political boundaries -

The set of norms, behaviors, beliefs and
National Culture customs that exist within the population of a
sovereign nation.

Differences in everyday business interactions –

Business Culture how to use business cards, embrace, shake
hands

TATA is different from that of INFOSYS while

Organizational that of INFOSIS is not the same as that of
WIPRO.

An Accountant for example speaks the same

Occupational
financial language whether he or she is an
Indian or an American.
 Elements of Culture

Education Aesthetics

Language Attitudes

Customs
Determinants
Religion of Culture
and
Manners
 Edward T. Hall Study
• Hall’s Study in 1987 provided another basis for cross
cultural classification. They divided the world into two
cultures:

A) Low context Culture

B) High context Culture

• Context qualities include such factors as:

• The physical location of a meeting
• The way participants are dressed
• The general mood or ambiance of a meeting
• The status of the individuals presenting information.
 Edward T. Hall Study
High Context Low Context
• More Verbal Message • Less Verbal Message
• Language – Implicit (Indirect) • Language – Explicit (Direct)
• The social context or social
environment is more • Words are more important
important • Written agreement can be
• More emphasis on Trust factor taken at face-value
– (References)
• Signing a contract is the end
• Building relationship
point
– Japan and other countries
located in Asia – Germany, Norway, Denmark,
– Brazil and other countries Sweden, Finland, Canada, and
located in South America the United States.
 High-context cultures
• High-context cultures represent relational,
collectivist, intuitive cultures, meaning that
people are part of these cultures have their
primary focus on the relationship between
people
• Creating confidence is one of the most important
steps to achieve any successful communication,
or to have a success in the case of the business
world
• High-context cultures, according to Hall, require
 Low-context cultures
• Low-context cultures give priority to individuality, readiness for
action, continuity and logics
• This means that representatives of these cultures prefer facts,
logic and directness
• Resolving problems in low-context cultures is done through
exposure of facts and evaluation. Decisions in these cultures
are based on facts, not on arbitrary piling of "facts"
• In low-context cultures all communicative interactions end with
a completed work and the participants in the conversation are
direct and precise, their discourse is not rich with linguistic
redundancies
• Business circles prefer this kind of communication because
documents contain no excessive meaning and linguistic
labyrinths that "blur" the meaning of the content.
• According to the Hall’s theory, in the event of a
conflict between high-context and low-context
cultures, representatives of high-context cultures do
not confront, they use a vague language that is not
direct, and it is assumed that participants in the
conversation should understand the importance
from context itself.
• On the other hand, representatives of low-context
cultures are direct; they use logics and rationality in
the discussion, or use objective truth as a way to get
to the truth in a linear way. In contrast, high-context
cultures neglect rationality and rely on non-linear
processes in order to get to the truth.
 Geert Hofstede’s theory
• Geert Hofstede in 1980 offered an alternative to the Hall’s
theory of high- and low-context cultures
• He proposed the theory of "collectivist and individualist
cultures," which is largely compatible with Hall’s theory
• The essence of this theory is this: high-context cultures are
collectivist cultures, while low-context cultures are
individualistic
• The attitude towards people in high-context cultures is often
determined by societies’ opinion of the subject’s family, while
personal achievements play a smaller role
• Low-context cultures are individualistic, appreciate the
achievements of the individual, society expects them to be
independent, to take care of themselves and not depend on
the help of others
 Web pages, business and
culture – Hall’s
• Because high-context cultures deal mostly with context, we can
say that the use of images, sounds, animations will be
represented to a greater extent than in a low-context cultures
• Opposite from high-context cultures, low-context cultures are
expected to produce websites that contain more text and less
animations, pictures and effects, sites that puts greater
emphasis on practical delivering of any information.
• High-context cultures are expected to use aesthetics in the
creation of websites, while low-context cultures endorse
practicality.
 Web pages, business and
culture – Hofstede’s
• Because high-context cultures direct their emphasis
on collectivistic values - family and morality, we can
expect the contents of web pages, which are created
in these countries, to have more images of families,
children, groups etc.

• On the other hand, low-context culture are

individualistic by nature, so we expect these cultures
to create websites that are simplified, sites that
display situations that are characteristic of the
individual (the display of daily situations that are not
burdened by family groups or areas).
Displayed selection of web pages
from five countries in the field of
tourism
USA, Germany, Czech Republic,
Russia and Macedonia
 OBJECTIVE
• To notice the differences in the
– appearances
– characteristics
for high-context and low-context cultures
• Theories of Edward Hall and Hofstede confirm the
hypothesis that culture affects the way certain countries
use language and create web pages
• This study considered web pages that offer services only
to citizens of the respective countries; the number of
languages in which a certain web page is translated was
not considered
 Web pages, business and
•
culture
In order to present the differences between the high-context
and low-context cultures and their impact on the creation of
websites, we will compare the websites of several countries,
including
• USA – LC
• Germany – LC
• Czech Republic – Medium Context
• Macedonia – HC
• Russia - HC
Web pages from USA
Web pages from USA
 Web pages from USA
• Websites "Atlas Cruises & Tours" and "Liberty Travel" from the US are beautiful
examples that reflect the low-context culture of this country
• Design
– simple,
– No animations
– Have a display of photographs of the destinations they offer with almost no or
some people on them, which underlines the individualist nature of the LC
culture
• Most of the information on these two websites from USA is directly contained on
their main pages,
• Any additional links on them lead to more detailed information about the offers
provided on the main website
• Another feature of these pages is "enjoyment" and "dream" - as the main message
of the websites.
• Comparing LC and HC cultures, LC cultures are prone to show individual enjoyment
and present the joys in life. "Enjoy your dream vacation in Europe" and "Do not just
dream it, live it" is a classic example for that
Web pages from Germany
Web pages from Germany
 Web pages from Germany
• Web pages from Germany present a similar approach as the web pages in the
United States
• Besides the simplicity of the messages and the offers,
• There is no excessive graphic load,
• All information is contained in the boxes with pictures and explanations for each
destination, and clicking on any of them leads to more detailed information on
each destination.
• There is no noticeable presence of animations.
• The photos on the web pages underline the individuality and hedonism, which
are traits of low-context cultures.
Web pages from the Czech Republic
 Web pages from the Czech
Republic
• Unlike the websites of the previous two countries, the US and Germany,
the websites from the Czech Republic contain animations, although, not
too much as to create a "burdened experience"

• In addition, there is a greater presence of sliding windows that can be used

to search suitable travel arrangements. As with websites in Germany and
the United States, we can see only one or two people on the pictures

• Czech Republic is classified as middle-context culture, and these webpages

beautifully illustrate that fact
Web pages from Russia
Web pages from Russia
 Web pages from Russia
• Web pages of tour operators from Russia present a stark contrast from the
previous examples

• One can immediately notice that

– searching and simple orientation in the contents
of the web page is much more complicated;
– there is a different approach in search of desired
destinations and arrangements;
– small amount of information is contained on the
main page,
– there are number of flash animations, and even
online help in a different window.
• Russian pages have a number of fields for detailed search, which hampers
with the experience on the web page and increases the spent time on
them
Web pages from Macedonia
Web pages from Macedonia
Web pages from Macedonia
• Web pages of travel agencies from Macedonia show features
that can be found in high-context cultures
• Almost all web pages in Macedonia contain Flash animations
and numerous multimedia and photos
• Information is not always available on the main page – it is
necessary to click on the contents of the main page in order to
get the required information
• As it can be seen on the web pages, there are numerous
examples where a group of people is shown on the pictures (a
feature of high-context cultures).
• There is very little amounts of text on the main web pages, but
that rapidly changes once the web user goes deeper in the
content.
 Conclusion
• Through the displayed selection of web pages from five countries (USA,
Germany, Czech Republic, Russia and Macedonia) in the field of tourism, one
can notice the difference in the appearance, characteristic for high-context and
low-context cultures
• Theories of Edward Hall and Hofstede confirm the hypothesis that culture
affects the way certain countries use language and create web pages
• This study considered web pages that offer services only to citizens of the
respective countries; the number of languages in which a certain web page is
translated was not considered
• This review demonstrates that web pages from US and Germany have far
simpler structure, they are not burdened with multimedia effects, information
is generally visible on the main page; pages from the Czech Republic showed
increased presence of animations and windows with additional parameters,
while pages from Russia and Macedonia offer a completely different approach,
typical of high-context cultures (multimedia animations, groups of people and a
small amounts of text).
MULTICULTURALISM
• Multiculturalism is another reality that affects companies, especially those in developed
countries.
• According to Robbins (2002), an important factor related to the cultural diversity is the
multiculturalism.
• Globalization has reduced barriers for immigration, making countries like England,
Germany, the United States and Canada go through profound changes in their
population profile.
• When relating to migratory movements, nowadays 175 million people, or 3 percent of
the world population, cross frontiers to live for over a year in other countries.
• Canada is a typical case due to the big contingent of people who immigrated recently
from Hong Kong, Vietnam, Pakistan and countries from the Near East. These immigrants
are making Canada’s population more diversified and its manpower more
heterogeneous.
• As a result, it is increasing the number of people from different cultural origins, working
in the same organization. The difficulty in accepting and dealing with different cultures is
also reflected in international political decisions.
• The decision to accept the entrance of Turkey in the European Union faces opposition
of some European countries for being a country with a Muslim majority and of having
a different culture from the countries in Western Europe. France’s ex-president, Valery
Giscard d’Estaing even stated that he was against the entrance of Turkey in the
European Union because it is “a different culture, a different approach and a different
life style” (THE ECONOMIST, 2005, p. 3).
 An American family on assignment in
Indonesia went to restaurant with their Pet
dog. The restaurant manager politely
greeted then at the door, took their dog and
, 30 Minutes later-family was shocked

They had SERVED IT TO THEM

The consumption of dog meat is associated with

their culture, where dog meat is considered a
festive dish usually reserved for occasions such as
weddings and Christmas.
Cross Cultural Theories & Hoftede
Study
 Cross cultural Theories
Organizational culture varies one from
another based on 4 factors:
• Organizational objectives and Goals.
• Competitive Challenge
• National variables and
• Socio cultural variables like different
religion, language, education etc.

Cultural Diversity or Multi-Culturism

 Hofstede’s framework for Assessing
culture
• Professor Geert Hofstede, Dutch Scientist,
conducted one of the most comprehensive
studies of how values in the workplace are
influenced by culture.
• He analyzed cultural dimension in IBM
Employees (1,16,000) in 70 countries and in 3
regions like E. Africa, W .Africa and Saudi Arabia.
 CONT….
• He defines culture as “the collective programming of the
mind distinguishing the members of one group or category
of people from others”.
• Therefore, he developed six dimensions of national culture
• Power Distance Index (PDI)
• Individualism versus Collectivism (IDV)
• Masculinity versus Femininity (MAS)
• Uncertainty Avoidance Index (UAI)
• Long Term Orientation versus Short Term Normative
Orientation (LTO)*
• Indulgence versus Restraint (IND)
 Power Distance:
unequal power of distribution.
ItHigh
is thePower
distance
distance
between individuals at different levels
Low power
of hierarchy.
distance

Hofstede
Countriesobserved
in whichtwo types
people of distance:
blindly obey the Countries which people (supervisors and sub
1.orders
High power
of theirdistance
superior, employees ordinates) are apt to regard one another
2.acknowledge
Low power distance
the boss’s authority simply by equal in
respecting that individual’s formal position in power.
the hierarchy, and they seldom bypass the
chain of command
Results
• Less Harmony and less cooperation • More harmony and cooperation.
• Centralized order • Decentralized structure
• Autocratic Leadership • Democratic leadership
• Taller Organization structure • Flatter organization structure

Mexico, South Korea and India. Austria, Esrael, USA, UK, Denmark
 Individual and collectivism
Individual collectivism

Interest of Self and Family Interest of Group

‘I’ consciousness ‘We’ consciousness
Independence of Individual from Dependency on organization
organization. Less Individual initiatives
Grater Individual Initiatives Promotions are seniority based
Promotions are based on Merit and
performance

USA, UK, Australia Japan, Taiwan and Pakistan

 Masculinity v/s Femininity
Traditionally, ‘masculine’ values – assertiveness, materialism, aggressiveness and a
lack of concern for others that prevail in society, femininity emphasizes feminine values – a
concern for others, for relationships, nurturing, care for weak and for quality of life. The
degree of masculinity affects in the following characteristics way:
High Masculinity Low Masculinity

• Career is considered as most • Importance is placed on cooperation

important and friendly atmosphere.
• Work needs take precedence • Employee security gets precedence.
• Individual decision-making is • Group decision – making is
emphasized emphasized
• Achievement is given importance and • Achievement is defined in terms of
is defined in terms of money and human contacts and living
recognition environment

Countries with high masculinity – India, Japan, Countries with low masculinity – Denmark,
USA, UK etc. Norway, Sweden etc.
 Low Uncertainty Vs High
Uncertainity
The extent to which the members of a culture feel threatened by ambiguous or unknown
situations and have created beliefs and institutions that try to avoid these. The degree to
which the members of a society feel comfortable with uncertainty and ambiguity:
Low High
• Flexibility, more willing to take risks • Strict Laws
whether it pertains to technology, business • Less Tolerance to Ambiguity
practices or foodstuffs • Strong sense of nationalism
• Conflicts Acceptance, more tolerance to • Formal rules and procedures
ambiguity •Highly resistant to change
• Less rules and laws • perceive uncertainty and conflict as
• Lower stress levels threatening
• Less anxious, aggressive
• More tolerance for variety and
experimentation

Countries with LAI – China, Singapore, Countries with HAI – Japan, Germany,
India, Hong Kong, USA, etc. Denmark, Norway, Sweden etc.
Long Term Orientation versus Short
Term Normative Orientation (LTO)
Long Term Short Term
• Truth depends on situation, • Establishing the absolute truth
context and time • Great respect for traditions
• Show ability to adapt • Small propensity to save for
traditions to changed future
conditions • Focus on achieving quick
• Strong propensity to save and results.
invest • Values personal stability or
• Perseverance in achieving happiness and living for the
results/ goals present.
• Eg: China, Hong Kong, Taiwan, • Do not place a high priority on
Japan and South Korea status
• Try to postpone age
• Eg: UK, US, Germany, Canada
 Indulgence Vs Restraint
Indulgence Restrained
Birth Rate Higher Lower
Happiness Higher Percentage Lesser Percentage
Attitude Optimistic Pessimistic
Leisure Higher Percentage of Lesser percentage
leisure
Social Norms Enjoying Life Stricter Norms/Norms
COUNTRY TOOL ANALYSIS

JAPAN USA VENEZUEL

A
 Venezuela US Japan

Power Distance individuals in societies Least Inequalities Lesser Inequalties

are not equal
Individualism ‘We’ Approach Highest ‘I’ Approach collectivistic society

Masculinity Driven by competition, “winner” or “best-in-the- Driven by competition,

achievement and success field” achievement and success

Uncertainty Avoidance Seeks mechanism to fair degree of acceptance most uncertainty

avoid ambiguity for new ideas, innovative avoiding countries on
products and a earth
willingness to try
something new or
different

Long Term Orientation Normative in nature Normative in nature LTO

_STO _STO

Indulgence higher degree of Work hard and play hard. Restrained by social
importance on leisure norms - how people
time, act as they please should behave are
and spend money as they prescribed in great detail
wish. in etiquette books
COUNTRY TOOL ANALYSIS

CHINA INDIA SINGAPOR

E
THANK YOU
EXAMPLES
 Flag

UAE
United Arab Emirates
Dressing
Food Culture
 Food Culture – No No
• Pork
Muslims are prohibited from eating pork so it is not included in Arab
menus. There are substitutes for the same.

• Alcohol
Alcohol is generally only served in hotel restaurants and bars. Exceptions
are some clubs (e.g. golf clubs) and associations.
Doing Business in the UAE

Working Companies Working

Practice Structure Relation

Business Social Customs

Practices
 Working Practice

• Saturday – Wednesday (Traditional Working Week)

• Meetings should be scheduled advanced with extra time

allocation

• Attitude to time is comparatively relaxed

Structure & Hierarchy of Companies

• Strong vertical Hierarchy

• Age Money & Family – Determining factors of Personal Status

• Status is important & must be recognized

Titles : Shaikh – Chief, Ustadh – Professor

 Working Relation

• Prefer to do Business in Person

• Prefer to do Business with those who they know

• Family & Friends come before anything else

 Business Practice
• Customary greeting is “As-salam alikum” with reply “Wa alaikum as-salam”

• Initial business meeting – Way to become acquainted with your

counterparts

• Business Cards are common but not essential. If intended ensure English
and Arabic printed information.
 Social Custom

• Gifts • Left Hand

– Sign of Generosity – Do not use or offer item
• Dining with your left hand
– Sign of respect – starts • Shoes
eating last – Follow the lead of your
– Host pays for it host
 Business Etiquette

Don’t
Do’s • Expect a one-on-one meeting to only
 Address Emirati counterpart with include yourself and the other person.
appropriate titles • Assume that the person who asks the most
 Dress Conservatively questions in meetings holds the most
 Accept Invitation to a meal or social Responsibility.
events
• DON’T ask about a person’s wife or
 Politeness and courtesy daughters.

• Don’t speak Loud and with laughter

 Tips for effective communication
• Be clear and concise
• Speak more slowly
• Reinforce your message
• Make presentations effective
• Double-check understanding
• Be open-minded
Doing Business in Latin America

• Few people rush into business

• Men and women congregate into separate
groups at social functions
• Latin Americans stand more closely to
each other than North Americans when in
conversation
• Men may embrace
(Cont.)
• Guests are expected to arrive late, with
exception of American guests
• Little concern about deadlines
• Machismo - expectation that businessmen
will display forcefulness, self-confidence,
leadership with flourish
• Fatalism
 Doing
Business in
East Asia

• Japan, Korea, China

• Meetings devoted to pleasantries; serving
tea, engaging in chitchat
• Seniors and elders command respect
• Consciously use slow down techniques as
bargaining ploys
• Business cards should be bilingual
 Doing
Business in
Russia

• Protocol-conscious
• Do business only with highest ranking executives
• Appear stiff and dull
• More expressive in private than in public
• Hard to draw up contracts due to language barriers
• Have little advertising experience
 Doing Business
in the
Middle East

• Prefer to act through trusted third parties

• Personal honor given high premium
• Fatalism
• Emotionally expressive
• Intense eye contact
• Guests should avoid discussing politics, religion, host’s
family and personal professions
DOING BUSINESS IN
GERMANY
 Differences between Indian Culture & Western Culture

Basis Indian Culture Western Culture

Belief in Faith & Luck Strong believers Believe in hard work & efforts

Belief in Spiritualism Strong believers Believe in Materialism

Public Appearance No body exposures. Fashionable clothes the in thing
Considered obscene.

Care of Old People Sons are expected to take Old parents are not cared for.
care of their Parents.

Respect for Women No religious ceremony is Relegated to Old Homes

held without wife. Women Women looked as objects of
given respect in traditional pleasure. Women are free
sense in every aspect
 Business Culture - India
Showing hospitality is part of the negotiation
process. Often meetings start by offering
tea/coffee and snacks. It is courteous to
accept the offer.

Relationships and feelings play a larger role in decisions in India. In

general, Indians tend to take larger risks with a person whose
intentions they trust. Thus, one's credibility and trustworthiness
are critical in negotiating a deal.
 Business Culture - India
Indians are 'polychronic' people, i.e., they tend to deal with
more than one task at the same time. So be prepared for
some distractions/ disturbances during the meeting, e.g., a
secretary walking in to get some papers signed, or the
conversation sometimes digressing into unrelated topics.
One must appreciate that such behavior/occurrences do not
show a lack of interest or attention.

Indians are inductive in their approach to understanding things. In the Indian

psyche, reality can be understood only in its overall context. Knowing the
personal, social and historical contexts [of people, events, ideas, etc.] are a
precondition to comprehending them accurately. Therefore, one should be
prepared for questions and enquiries, which may not seem to be directly
related to the subject. To people coming from more deductive cultures, this
behavior often appears to indicate a lack of focus and digression.
 Business Culture - India
PowerPoint presentations are generally accepted to
start the discussion. It is necessary, however, to
send a more detailed proposal in advance. Often,
the details of the proposal are vetted by some
middle-level executive, who will then brief the
superior about them.

In general, Indians are cautious in accepting a new idea or proposal.

Openness to a new idea depends not only on its quality, but also on its
source and endorsement. That is, information about who else has
implemented it or who has proposed it has a major influence on the
decision about a new idea. In making a proposal, you must include such
details accordingly.
 Business Culture - India
Indians usually do not express their disagreements
openly and directly; doing so would be considered
discourteous. Instead, when differences arise, they
may circumvent them by statements such as 'we will
discuss this later' or 'I will have to check with others
about this.

Bargaining for the price or additional concessions is normal in India.

Indian negotiators expect and value flexibility in negotiation. Therefore,
sometimes a straightforward offer may be perceived as a rigid stand. It
is always advisable to build some buffers in one's initial offer, which
allow for bargaining later.
 Business Culture - India

Do not insist on commitment in the first meeting. Making a decision, in

Indian organizations, is often a long-drawn out process. This is not only
because of the bureaucratic nature of many Indian organizations, but
also because a decision may have to be ratified by people who may not
be present at the negotiating table.
 Gifts

• Box of Sweets
• Chocolates
• Bouquet of Flowers
• Household Items
• Liquor, but . . . .
 Topics of Conversation

• Families
• Tradition
• Foreign Countries Poverty
• Cricket Personal Matters
• Politics & Religion
Military Spending
 Doing Business in India

If there ever was an example of what a

heterogeneous society looks like, it is India.
The differences between people due to
region, religion, language and caste make it
very difficult for anyone to impart general
observations on the country. Behavior,
etiquette and approach are all modified
depending on whom you are addressing and
the context in which you are doing business
in India.
 Hierarchy
One of the most significant cultural influences on Indian
culture is that of hierarchy. You will see this manifest in many
ways when doing business in India. For example, only the
owner or the most superior person of a company will make
business decisions. Even if you are dealing with a manager,
they will always go to the boss for a final decision.

• You may often find that, as a sign of respect, subordinates stand up

when the boss enters a room. If you are unsure whether to rise or
not, err on the side of caution and do so.
• Women in business, especially in senior positions, executives, are a
relatively new development. If you are a woman doing business in
India, you will normally find people respectful and courteous, but not
very comfortable in working with you for business deals. You may
have to make extra efforts to get them to discuss business with you.
 Meeting and Greeting

• Handshakes are exchanged on meeting. Indians themselves use

the namaste. This is where the palms are brought together at chest
level with a slight bow of the head. However as a foreigner doing
business in India you would not be expected to use it.
• When addressing an Indian try and use the appropriate
formal title, whether it is Professor, Doctor, Mr, Mrs followed by the
family name.
• Names speak volumes about an Indian’s background. For
example, a Singh will usually (but not always) be a Sikh. The suffix
“-jee” ( as in Banerjee) is a sign of a high caste. Arabic sounding
names such as ‘Abdul’ will be used by Muslims.
• When doing business in India, business cards should be
exchanged at the first meeting. English is the language of
business so there is no need to translate your cards. Be sure to
receive and give with your right hand. Make sure the card is put
away respectfully and not simply pushed into a trouser pocket.
 Building Trust

Doing business in India involves building

relationships and establishing trust. It is
vital that a good relationship is founded
on two foundations.
1) on a business level, i.e. demonstrating strong
business acumen, professionalism and
qualifications and
2) at a personal level, i.e. relating to your
partner and exhibiting the positive traits of
trustworthiness and honour.
 Meetings and Negotiations
• Punctuality for meetings is expected, although being 10
minutes late will not have disastrous consequences.
Flexibility is part of life!
• When entering a meeting room you must always
approach and greet the most senior figure first. Never
get ‘down to business’. Meetings should always commence
with some conversation – good topics of conversation
include cricket, politics and film.
• If your doing business in India involves negotiations,
always bear in mind that they can be slow. If trust has
not yet been established then concentrate efforts on building
a rapport.
• Indians do not base business decisions solely on
statistics, empirical data and flashy PowerPoint
presentations. They use intuition, feeling and faith to guide
them. Always exercise patience, show good character and
never exhibit frustration or anger.
 Language

Different states in India each have

different official languages. Central
government only recognizes Hindi
as the official language of India.
However, when doing business in
India, English is the language of
international commerce.
 Cultural
Sensitivity

Knowing that cultural differences as well as

similarities exist, without assigning values (i.e.
better or worse, right or wrong) to those cultural
differences.
 Cultural Sensitivity

Therefore, every international manager need to know about cultural differences among nations
in order to be able to:

• Communicate effectively with customers, suppliers, business associates and partners in

other countries and foreign employees (expatriates).
• Conduct negotiations and understand the nuances of the beginning postures of the other
parties into a negotiation.
• Predict trends in social behavior likely to affect the firm’s foreign operations.
• Understand the ethical standards and concepts of social responsibility in various countries.
• Build Foster relationships between union confederations and employee associations require
cultural empathy.
• Understand local Government policies and influences it for business promotion.
• Conduct efficient meetings in different countries and encourage employees participation in
management.
• Understand how people interpret market research an other information.
Dealing with risks in IB
1. Cross-cultural risk: a situation or event
where a cultural miscommunication puts
some human value at stake
2. Country risk: potentially adverse effects on
company operations and profitability holes
by developments in the political, legal, and
economic environment in a foreign country
3. Currency risk: risk of adverse unexpected
fluctuations in exchange rates
4. Commercial risk: firms potential loss or
failure from poorly developed or executed
business strategies, tactics, or procedures
 1. Cross-Cultural Risk
 Differences in language, lifestyles, attitudes,
customs, and religion, where a cultural
miscommunication jeopardizes a culturally-valued
mindset or behavior.
 Cultural blunders- hinder the effectiveness of
foreign managers.
 Language- critical dimension of culture- a window
to people’s values
 Language differences impede effective
communication.
 Cultural differences may lead to suboptimal
business strategies.
 What is Country (Political) Risk?

 Exposure to potential loss or adverse effects on company

operations and profitability caused by developments in a
country’s political and/or legal environments.
 Every country is characterized by diverse political and legal
systems that pose significant challenges for company strategy
and performance, as managers must adhere to business laws
and regulations.
 Preferential subsidies, government incentives, and protection
from competition reduce business costs and influence
strategic decision making.
 Governments encourage domestic investment from foreign
MNEs by offering tax holidays and cash incentives to employ
local workers.
 Key Concepts
 Protectionism refers to national economic policies
designed to restrict free trade and protect domestic
industries from foreign competition.
 Government intervention arises typically in the form of
tariffs (duty), nontariff trade barriers (e.g. quota), and
investment barriers (target FDI).
 Tariff is a tax imposed on imports, effectively increasing
the cost to the buyer.
 A nontariff trade barrier refers to a government policy,
regulation, or procedure that impedes trade.
 Quota is a quantitative restriction placed on imports of a
specific product over a specified period of time.
Currency risk -arises from
changes in the price of one currency relative to
another→ complicates cross-border
transactions → impacts firms with foreign
currency obligations (one of the four types of
risks in international business
– If supplier’s currency appreciates; you may need to hand
over a larger amount of your currency to pay for your
purchase.
– If buyer’s currency depreciates; you may receive a smaller
payment amount in your currency (sales price was
expressed in the customer’s currency).
 Currency Risk (Financial Risk)
Risk of adverse exchange rate
fluctuations, inflation and other harmful
economic conditions create uncertainty
of returns.
When currencies fluctuate significantly,
the value of the firm’s assets, liabilities
and/or operating income may be
substantially reduced.
 4. Commercial Risk
• Less than optimal formulation and/or
implementation of strategies, tactics or
procedures, e.g. partnering selections,
market entry timing, pricing, product
features, and promotional themes
• Failures in international markets are far
more costly than domestic business
blunders.
Barriers to Entry in International
Markets
 Barriers to IB
• Domestic Barriers
• International Barriers
• Tariff Barriers
– Non-Tariff Barriers
– Political Barriers
• Business Barriers
• Cultural Barriers
 ACC. TO KOTLER (1986)
• Barriers in international markets may include
– Discriminatory Legal Requirements
– Political Favoritism
– Social and Cultural Biases
– Unfriendly distribution channels
– Refusal to cooperate by business executives and foreign
govt.
Furthermore, many foreign Govt. may require joint ownership,
with the majority of shares owned by domestic partners;
transfer of technological trade secret to foreign countries; and
limits on profits that can be taken out of the host country
 Yang, Leona and Alden (1992)
• Cite the following
– External Barriers
• Tariff and non-tarriff barriers
• Foreign Exchange Fluctuations – Concept of Pegging
Introduced (Fixing exchange rates– done by gulf
countries – lack of confidence on political and
economic str.)
• Competition in Foreign Markets
• Govt Policies – FP & MP
• Foreign Business Practices
• Product and Consumer standards in foreign makets
 Cont...
– Operational Barriers
• Problems in receiving payments from foreign customers
• Locating potential buyers
• Tiny and tight markets
• Making arrangements for transportation and shipments
• Clearing Customs
• Getting representation in international markets
 CONT...
– Internal Barriers
• Past experience in foreign markets
• Levels of Higher Education
• Corruption and Bureaucracy
• Lack of Managerial Commitment
• Lack of Human and Capital Resources
• Language and Cultural Barriers
• Openness to new products
• Capacity of Markets – Labour, Capital, Goods and
Services
• Infrastructural Development
• Political Structure
 Acc. To Karakaya & Stahl 1991
 Cultural Barriers (i.e. Social system)
 Language
 Access to Distribution Channels
 Customer switching costs
 Govt. Policy ( taxes, licensing requirements, controls, import
quotas and export restrictions
 Product Adaption
 Stability of currency exchange rate
 Expected local and global competition
 Changes in required in promotional activities
 Nationalism
 Cont....
• Political Environment
• Economic Environment
• Corruption
• Cost advantages by local companies

• For detailed information, visit

https://www.researchgate.net/publication/233059871_Barrie
rs_to_Entry_in_International_Markets
THANK YOU