Managing Internationalisation
Text- Size: 690 pp. 240 illustrations
- Genre: Foreign business booksEdit
| utb 8616 |  |
Eine Arbeitsgemeinschaft der Verlage
Böhlau Verlag · Wien · Köln · Weimar
Verlag Barbara Budrich · Opladen · Toronto
facultas · Wien
Wilhelm Fink · Paderborn
A. Francke Verlag · Tübingen
Haupt Verlag · Bern
Verlag Julius Klinkhardt · Bad Heilbrunn
Mohr Siebeck · Tübingen
Nomos Verlagsgesellschaft · Baden–Baden
Ernst Reinhardt Verlag · München · Basel
Ferdinand Schöningh · Paderborn
Eugen Ulmer Verlag · Stuttgart
UVK Verlagsgesellschaft · Konstanz, mit UVK/Lucius · München
Vandenhoeck & Ruprecht · Göttingen · Bristol
Waxmann · Münster · New York
Dedication
Für alle, die Elefanten das Fliegen beibringen
For all those who teach elephants how to fly
Patricia Adam
Managing Internationalisation
UVK Verlagsgesellschaft mbH · Konstanz
mit UVK/Lucius · München
Online-Angebote oder elektronische Ausgaben sind erhältlich unter
Bibliografische Information der Deutschen Bibliothek
Die Deutsche Bibliothek verzeichnet diese Publikation in der Deutschen Nationalbibliografie; detaillierte bibliografische Daten sind im Internet über <http://dnb.ddb.de> abrufbar.
Das Werk einschließlich aller seiner Teile ist urheberrechtlich geschützt.
Jede Verwertung außerhalb der engen Grenzen des Urheberrechtsgesetzes ist ohne Zustimmung des Verlages unzulässig und strafbar. Das gilt insbesondere für Vervielfältigungen, Übersetzungen, Mikroverfilmungen und die Einspeicherung und Verarbeitung in elektronischen Systemen.
© UVK Verlagsgesellschaft mbH, Konstanz und München 2015
Einbandgestaltung: Atelier Reichert, Stuttgart
Coverbild: ©Jag-cz – Fotolia.com
UVK Verlagsgesellschaft mbH
Schützenstr. 24 ·78462 Konstanz
Tel. 07531-9053-0 ·Fax 07531-9053-98
UTB-Nr. 8616
E-Book ISBN 978-3-8463-8616-3
eBook-Herstellung und Auslieferung:
Brockhaus Commission, Kornwestheim
Preface
Despite being popular with thousands of organisations worldwide, the EFQM Excellence Model is still hardly recognised by the academic community. Unfortunately, it shares this fate with other holistic models. Textbooks about International Management usually present holistic management models as an afterthought or in a niche chapter, but hardly focus on their inner logic or unique management perspective. Although the awareness of the need for leadership guidance in the ever more complex global environment is apparent, the contribution of these models is often overlooked.
We were therefore delighted when the author, Patricia Adam, approached us and explained her intention to create a textbook that bridged the gap between management reality and academic development. By drawing on her own experience of using the EFQM Model in self-assessment and Award Assessments, this book is intended to give the reader practical insights, combined with the conscientious use of business-related research findings. Whilst this might seem like a “common sense” approach, it’s been proven all too often that “common sense ain’t that common”. This makes the book a great companion for students and management practitioners alike; a pragmatic guide that translates the theory into practical application, with relevant examples and illustrations.
We wish this unique book an excellent reception and its author many positive reviews… although (sorry Patricia) we also hope it doesn’t remain unique for too much longer. May this book support international leaders in their demanding pursuit of successful internationalisation and inspire students to put theory into practice. After all, theory without experience is only theory!
Matt Fisher
Chief Operating Officer EFQM
Acknowledgements
Table of Contents
Preface
Acknowledgements
Table of Figures
| 1 | Introduction and Overview Strategic International Management |
| 1.1 | Introduction |
| 1.1.1 | How to Use This Book |
| 1.1.2 | From Gradual Globalisation to Transnational Organisations |
| VIPs | |
| 1.2 | The Use of Holistic Management Models |
| VIPs | |
| 1.3 | The Approach of the EFQM Excellence Model |
| 1.3.1 | Background Information: The EFQM and its Model |
| 1.3.2 | The Fundamental Concepts of Excellence |
| 1.3.3 | The EFQM Excellence Model Framework 2013 |
| 1.3.4 | The EFQM RADAR Logic |
| VIPs | |
| 1.4 | Process Model “Managing Internationalisation” |
| 1.5 | Citations & Notes |
| 2 | Key Issue: Developing Cross-Cultural Competence |
| 2.1 | The Importance of Intercultural Understanding for International Business Issues |
| 2.2 | Hofstede’s Framework: Cultures and Organisations |
| 2.2.1 | Culture as a Part of Human Mental Programming |
| VIPs | |
| 2.2.2 | An Introduction to Hofstede’s Dimensions |
| 2.2.3 | Power Distance |
| 2.2.4 | Individualism/Collectivism |
| 2.2.5 | Masculinity/Femininity |
| 2.2.6 | Uncertainty Avoidance |
| 2.2.7 | Long-Term Orientation |
| 2.2.8 | Establishing Country Clusters |
| 2.2.9 | Adding a New Dimension: Indulgence versus Restraint |
| VIPs | |
| 2.3 | The Dilemma Approach of Trompenaars & Hampden-Turner |
| 2.3.1 | A View of Culture Based on Dilemmas |
| VIPs | |
| 2.3.2 | Universalism versus Particularism |
| 2.3.3 | Individualism versus Communitarianism |
| 2.3.4 | Neutrality versus Affection |
| 2.3.5 | Specificity versus Diffusion |
| 2.3.6 | Achieved versus Ascribed Status |
| 2.3.7 | The Concept of Time |
| 2.3.8 | Inner versus Outer Direction |
| 2.3.9 | Reconciling Dilemmas |
| VIPs | |
| 2.4 | Globe Study: More Issues Arising |
| VIPs | |
| 2.5 | Critical Acclaim |
| 2.5.1 | Typical Problems of Cross-Cultural Research |
| 2.5.2 | Critical Acclaim of Hofstede’s Dimensions |
| 2.5.3 | Critical Acclaim of Trompenaars & Hampden-Turner’s Dilemmas |
| 2.5.4 | Critical Acclaim of the GLOBE Study |
| 2.6 | Citations & Notes |
| 3 | Leading the Internationalisation Process |
| 3.1 | Good Leadership |
| 3.1.1 | The Coherent Leadership Approach |
| VIPs | |
| 3.1.2 | Excellent Leaders: EFQM Criterion 1 |
| 3.2 | Developing the Mission, Vision, Values and Ethics |
| 3.2.1 | Defining and Communicating the Core Purpose of an Organisation |
| VIPs | |
| 3.2.2 | Acting as Role Models for Ethical Behaviour |
| 3.2.2.1 | Corporate Ethics and Social Responsibility |
| 3.2.2.2 | Ethical Behaviour in International Business |
| VIPs | |
| 3.2.3 | Communicating Direction and Uniting the Organisation’s People |
| 3.2.5 | Developing and Reviewing Leadership Culture |
| 3.2.5.1 | Developing and Supporting a Shared Leadership Culture |
| 3.2.5.2 | Reviewing and Improving Leadership Behaviour |
| VIPs | |
| 3.3 | Driving Performance and Engaging with External Stakeholders |
| 3.4 | Reinforcing a Culture of Excellence |
| 3.4.1 | Developing an Excellent Organisational Culture |
| 3.4.2 | Promoting and Encouraging Diversity |
| VIPs | |
| 3.5 | Managing Change |
| VIPs | |
| 3.6 | Citations & Notes |
| 4 | Defining and Delivering an International Strategy |
| 4.1 | Strategy and the Strategy Management Process |
| 4.1.1 | Popular Strategy Definitions |
| 4.1.2 | Comprehensive Strategy Management Processes: EFQM Criterion 2 |
| 4.2 | Scanning the Environment |
| 4.2.1 | Understanding the Needs and Expectations of Stakeholders |
| 4.2.2 | Analysing Industry and Markets |
| 4.2.3 | Identifying and Understanding Environmental Key Trends |
| 4.2.4 | Predicting Future Developments and Changes |
| VIPs | |
| 4.3 | Analysing Internal Performance |
| 4.3.1 | Understanding Operational Performance and Capabilities |
| 4.3.2 | Determining Competencies of Partners and Potential Impacts of Changes. |
| 4.3.3 | Bringing It All Together: Portfolios |
| VIPs | |
| 4.4 | Developing the Strategy |
| 4.4.1 | Strategy Levels |
| 4.4.2 | Generating a Sustainable Business Model |
| 4.4.3 | Business Model Choices |
| 4.4.4 | Establishing a Strategy Development Process |
| VIPs | |
| 4.5 | Communicating and Implementing the Strategy |
| 4.6 | Citations & Notes |
| 5 | Deploying Strategy through People |
| 5.1 | International Human Resource Management |
| 5.1.1 | The International HRM Function |
| 5.1.2 | Managing People: EFQM Criterion 3 |
| 5.2 | Supporting the Strategy through People Plans |
| 5.2.1 | Steering Human Resource Management Strategically |
| VIPs | |
| 5.2.2 | Planning Global Mobility |
| VIPs | |
| 5.2.3 | Closing the Loop: People Feedback |
| VIPs | |
| 5.3 | Developing People and Their Performance |
| 5.3.1 | Developing People’s Skills and Competencies |
| VIPs | |
| 5.3.2 | Helping People to Improve Their Performance |
| VIPs | |
| 5.3.3 | Appraising Performance Systematically |
| 5.3.4 | Empowering and Involving People |
| VIPs | |
| 5.4 | Communicating Effectively |
| VIPs | |
| 5.5 | Recognising People |
| VIPs | |
| Citations & Notes | |
| 6 | Managing International Partners and Resources |
| 6.1 | A Broad View on Resources: EFQM Criterion 4 |
| 6.2 | Establishing International Partnerships for Mutual Benefit |
| 6.2.1 | Selecting an Appropriate Foreign Operation Mode |
| 6.2.1.1 | Cross-Border Strategic Alliances |
| VIPs | |
| 6.2.1.2 | Contractual Agreements in International Operations |
| 6.2.1.3 | International Joint Ventures |
| 6.2.1.4 | Mergers & Acquisitions across Borders and Cultures |
| 6.2.2 | Managing International Partners |
| VIPs | |
| 6.3 | Managing Finance and Governance Processes |
| 6.3.1 | Optimising Organisational Financial Management |
| VIPs | |
| 6.3.2 | Ensuring Compliance |
| VIPs | |
| 6.3.3 | Managing Risks |
| VIPs | |
| 6.4 | Managing Knowledge and Information |
| 6.4.1 | Managing Knowledge Systematically |
| VIPs | |
| 6.4.2 | Establishing Integrated (Management) Information Systems |
| 6.5 | Citations & Notes |
| 7 | Managing Processes and Products Globally |
| 7.1 | Delivering Stakeholder Value: EFQM Criterion 5 |
| 7.2 | Managing Processes |
| VIPs | |
| 7.3 | Managing Products and Services Based on ISO 9001 |
| 7.3.1 | Introducing a Certifiable Quality Management System |
| VIPs | |
| 7.3.2 | Managing Products and Services Globally |
| VIPs | |
| 7.3.3 | Enhancing Customer Relationships |
| 7.4 | Citations & Notes |
| 8 | Achieving and Monitoring Balanced Results |
| 8.1 | EFQM Results Criteria |
| 8.2 | Introducing the Balanced Scorecard Concept |
| VIPs | |
| 8.3 | Monitoring Achievements by Designing Meaningful Dashboards |
| VIPs | |
| 8.4 | Citations & Notes |
| 9 | Assessing the Organisation’s Management Model |
| 9.1 | Establishing Strategy Reviews for Continuous Improvement |
| VIPs | |
| 9.2 | Implementing Self-Assessments |
| 9.2.1 | Introducing Self-Assessment Tools |
| VIPs | |
| 9.2.2 | Conducting a Simulated Award Assessment |
| VIPs | |
| 9.3 | Achieving External Recognition and Winning Excellence Awards |
| VIPs | |
| 9.4 | Citations & Notes |
References
List of Abbreviations
Glossary
Index
Table of Figures
| Figure 1-1 | Concept Map “Introduction and Overview” |
| Figure 1-2 | Symbols Used for Special Information Employed Throughout this Book |
| Figure 1-3 | Multi-Faceted Motives for Internationalisation Processes |
| Figure 1-4 | The Global Integration/Local Responsiveness Framework |
| Figure 1-5 | Survey of the New St. Gallen Management Model |
| Figure 1-6 | Baldrige Criteria for Performance Excellence Framework 2015 |
| Figure 1-7 | EFQM Fundamental Concepts of Excellence |
| Figure 1-8 | EFQM Fundamental Concepts - Definitions and Best Practices |
| Figure 1-9 | The EFQM Excellence Model Framework 2013 |
| Figure 1-10 | Definitions of the EFQM Enabler Criteria |
| Figure 1-11 | Definitions of the EFQM Results Criteria |
| Figure 1-12 | Exemplary Levels of the EFQM Excellence Model |
| Figure 1-13 | Exemplary Red Threads Through the EFQM Excellence Model |
| Figure 1-14 | The EFQM RADAR® Logic |
| Figure 1-15 | The Internationalisation Process |
| Figure 2-1 | Concept Map “Cross-Cultural Competence” |
| Figure 2-2 | The Cultural Iceberg |
| Figure 2-3 | Developmental Model of Intercultural Sensitivity |
| Figure 2-4 | Three Levels of Uniqueness in Human Mental Programming |
| Figure 2-5 | The Hofstede Onion - Manifestations of Culture |
| Figure 2-6 | Hofstede’s Five Dimensions as a Control Panel |
| Figure 2-7 | Key Differences between Cultures with Small and Large PDI |
| Figure 2-8 | Selected PDI Country Ratings |
| Figure 2-9 | PDI Values for Six Categories of Occupations |
| Figure 2-10 | Key Differences between Cultures with Small and Large IND |
| Figure 2-11 | Selected IND Country Ratings |
| Figure 2-12 | Key Differences between Feminine and Masculine Cultures |
| Figure 2-13 | Selected Country Scores for MAS |
| Figure 2-14 | Key Differences between Cultures with Weak and Strong UAI |
| Figure 2-15 | Selected Country Scores for UAI |
| Figure 2-16 | Key Differences between Cultures with high or low LTO |
| Figure 2-17 | Selected Country Scores for LTO (WVS) |
| Figure 2-18 | Cultural Cluster of Germanic Countries |
| Figure 2-19 | Country Clusters Based on the Four Original Hofstede Dimensions |
| Figure 2-20 | Key Differences between Indulgent and Restrained Cultures |
| Figure 2-21 | Selected Country Scores for IVR |
| Figure 2-22 | Cultural differences Expressed as Normal Distributions |
| Figure 2-23 | Percentages Opting for Telling the Truth |
| Figure 2-24 | Typical Characteristics of Universalistic vs. Particularistic Cultures |
| Figure 2-25 | Percentages Opting for Individual Freedom |
| Figure 2-26 | Percentages Opting for Not Expressing Emotions Overtly |
| Figure 2-27 | Percentages Not Painting the House |
| Figure 2-28 | Percentages Opting for Getting Things Done |
| Figure 2-29 | Circle Diagrams for Past, Present and Future |
| Figure 2-30 | Differences of Past, Present and Future Orientation |
| Figure 2-31 | Average Time Horizon |
| Figure 2-32 | Percentages Agreeing to What Happens to Me is My Own Doing |
| Figure 2-33 | The Three-Step-Approach |
| Figure 2-34 | Reconciling Globalism and Localism |
| Figure 2-35 | GLOBE - Nine Cultural Dimensions |
| Figure 2-36 | GLOBE - Country Clusters |
| Figure 3-1 | Concept Map “Leading the Internationalisation Process” |
| Figure 3-2 | Aspects Influencing Leadership Success |
| Figure 3-3 | One-Dimensional Behavioural Leadership Theories Based on Participation |
| Figure 3-4 | Two-Dimensional Behavioural Leadership Theories |
| Figure 3-5 | Contingency Models |
| Figure 3-6 | Relationship-Based Leadership Approaches |
| Figure 3-7 | The Big Five Personality Factors and Their Facets |
| Figure 3-8 | EFQM Criterion 1 “Leadership” and Its Criterion Parts |
| Figure 3-9 | EFQM Criterion Part 1a and Its Guidance Points |
| Figure 3-10 | Corruption Risks Within Domains of Corporate Activities |
| Figure 3-11 | Percentages Opting for Blaming an Individual |
| Figure 3-12 | GLOBE - Six Global Leader Behaviours |
| Figure 3-13 | JOHARI Window and the Importance of Feedback |
| Figure 3-14 | 360° Feedback |
| Figure 3-15 | Trompenaars and Hampden-Turner’s Four Corporate Cultures |
| Figure 3-16 | Preferences for Corporate Cultures in Different Countries |
| Figure 3-17 | Dimensions of Diversity |
| Figure 3-18 | Lewin’s Three Steps of Change |
| Figure 3-19 | Eight Steps for Leading Change |
| Figure 4-1 | Concept Map “Defining and Delivering an International Strategy” |
| Figure 4-2 | Strategy Development and Implementation – Overview |
| Figure 4-3 | EFQM Criterion 2 “Strategy” and Its Criterion Parts |
| Figure 4-4 | Environmental Scan |
| Figure 4-5 | Generalised Stakeholder Map |
| Figure 4-6 | Industry Analysis Based on Porter’s Five Forces (Expanded Model) |
| Figure 4-7 | Overview Competitor Analysis |
| Figure 4-8 | Selected PESTEL Variables |
| Figure 4-9 | Sources for Analysing Countries and Markets |
| Figure 4-10 | The Global Competitiveness Index Framework |
| Figure 4-11 | Sample Steps of a Scenario Analysis |
| Figure 4-12 | Issues Priority Matrix for Key Driver Selection |
| Figure 4-13 | Levels of Competence Sustainability |
| Figure 4-14 | Organisational Analysis Based on Porter’s Value Chain |
| Figure 4-15 | SWOT Analysis |
| Figure 4-16 | Great Jeans’ SWOT Matrix |
| Figure 4-17 | Choice of Location and Market |
| Figure 4-18 | The Growth-Share Matrix (BCG-Matrix) |
| Figure 4-19 | Different Strategy Levels |
| Figure 4-20 | The Nine Building Blocks of the Business Model Canvas |
| Figure 4-21 | Sketch of Great Jeans Canvas (Basic Model) |
| Figure 4-22 | Epicentres of Business Model Innovation |
| Figure 4-23 | Great Jeans’ Innovative Business Model |
| Figure 4-24 | Porter’s Three Generic Strategies |
| Figure 4-25 | A Selection of Business Models |
| Figure 4-26 | Patterns of Business Models on Business Model Canvas |
| Figure 4-27 | Business Model Development Process |
| Figure 4-28 | From Purpose to Strategy Implementation |
| Figure 5-1 | Concept Map “Deploying Strategy through People” |
| Figure 5-2 | The Human Resource Management Process |
| Figure 5-3 | Labour Regulation Aspects in International HRM |
| Figure 5-4 | EFQM Criterion 3 “People” and Its Criterion Parts |
| Figure 5-5 | Four Generic HRM Strategies |
| Figure 5-6 | Internationalisation Strategies and HRM Policies |
| Figure 5-7 | The Optimal Global Assignment Process |
| Figure 5-8 | Phases in Cultural Adjustment – Customised W-Curve |
| Figure 5-9 | People Portfolios |
| Figure 5-10 | Obtaining Feedback |
| Figure 5-11 | KODE® Enhanced Atlas of Competencies |
| Figure 5-12 | KODE®X Process |
| Figure 5-13 | Levels of Hypercultural Competence |
| Figure 5-14 | Drivers of Motivation Processes |
| Figure 5-15 | Kehr’s 3K-Model of Work Motivation |
| Figure 5-16 | Job Characteristics Model |
| Figure 5-17 | Heckhausen’s Model of Achievement Motivation |
| Figure 5-18 | Attribution Characteristics and Their Influence on Motivation |
| Figure 5-19 | Reconciling the Reward Dilemma through Co-Opetition |
| Figure 5-20 | Team Empowerment Dilemma |
| Figure 5-21 | Control & Autonomy Dilemma |
| Figure 5-22 | Multiple Dimensions of Inter-Organisational Communication |
| Figure 5-23 | The Communication Tool Cube for Internal Communication |
| Figure 5-24 | Characteristics of Low and High Context Communication |
| Figure 5-25 | Work/Life Balance - Causes, Nature and Consequences |
| Figure 6-1 | Concept Map “Managing International Partners and Resources” |
| Figure 6-2 | EFQM Criterion 4 “Partnerships & Resources” and Its Criterion Parts |
| Figure 6-3 | Overview of Foreign Operation Modes |
| Figure 6-4 | Characteristics of Selected Foreign Operation Modes |
| Figure 6-5 | Relevant Fits in Strategic Alliances |
| Figure 6-6 | Pitfalls of Strategic Alliances |
| Figure 6-7 | Typical Forms of Licensing Agreements |
| Figure 6-8 | Approaches to Joint Venture Management |
| Figure 6-9 | Chosen Perspectives on M&A Strategies |
| Figure 6-10 | Synergies and Barriers of M&A Projects |
| Figure 6-11 | Varieties of Acculturation in M&A Processes |
| Figure 6-12 | Guiding Matrix for Make-or-Buy Decisions |
| Figure 6-13 | Organisational Financial Management - Overview |
| Figure 6-14 | The Three-Lines-of-Defence Model |
| Figure 6-15 | ISO High Level Structure for Management Systems |
| Figure 6-16 | Compliance Management Process Based on ISO 19600:2014 |
| Figure 6-17 | Risk Management Process Based on ISO 31000:2009 |
| Figure 6-18 | Sample Risk Map |
| Figure 6-19 | Organisational Cultures and Risk Orientation |
| Figure 6-20 | Knowledge Dimensions |
| Figure 6-21 | Organisational Learning Cultures |
| Figure 6-22 | Organisational Knowledge Management Process and Activities |
| Figure 6-23 | Pyramid of Organisational Information Systems |
| Figure 7-1 | Concept Map “Managing Processes and Products Globally” |
| Figure 7-2 | EFQM Criterion 5 “Processes, Products and Services” and Its Criterion Parts |
| Figure 7-3 | From Function Orientation to Process Orientation |
| Figure 7-4 | Aligning Process Management and Business Strategies |
| Figure 7-5 | Overview of Business Process Management |
| Figure 7-6 | Sample Process Diagrams |
| Figure 7-7 | Example of ARIS Items and Event-Driven Process Chain |
| Figure 7-8 | BPM Process Levels in a Sample Process Map |
| Figure 7-9 | The ISO 9000 Family of Quality Management Standards |
| Figure 7-10 | Mapping ISO/DIS 9001:2014 on the EFQM Model |
| Figure 7-11 | Structure of Quality Requirements for Value Creating Processes |
| Figure 7-12 | How (Not) To Conduct an Optimal Product Design Process |
| Figure 7-13 | Simple Supply Chain of Great Jeans |
| Figure 7-14 | A Global View on Great Jeans’ Supply Chain |
| Figure 7-15 | Customer Relationship Management Based on the IDIC Approach |
| Figure 8-1 | Concept Map “Monitoring and Achieving Balanced Results” |
| Figure 8-2 | EFQM Result Criteria and Their Criterion Parts |
| Figure 8-3 | The Allocation of Results |
| Figure 8-4 | Kaplan & Norton’s Balanced Scorecard |
| Figure 8-5 | Balanced Scorecards Aligned Across All Organisational Levels |
| Figure 8-6 | Mapping the BSC Concept on the EFQM Excellence Model |
| Figure 8-7 | Poorly Designed Dashboard |
| Figure 8-8 | Adequate Dashboard for Great Jeans |
| Figure 9-1 | Concept Map “Assessing the Organisation’s Management Model” |
| Figure 9-2 | Drucker’s Five Most Important Questions Asked about an Organisation |
| Figure 9-3 | Basic Self-Assessment Process |
| Figure 9-4 | Classification of Different Self-Assessment Tools |
| Figure 9-5 | Self-Assessment Matrix of ISO 9004:2009 – Sample Element |
| Figure 9-6 | Exemplary Award Simulation Process |
| Figure 9-7 | RADAR Elements for the Analysis of Enablers |
| Figure 9-8 | Composition of the Enabler Matrix |
| Figure 9-9 | RADAR Elements for the Analysis of Results |
| Figure 9-10 | Criteria Weightings of the EFQM Excellence Model 2013 |
| Figure 9-11 | EFQM Recognition Scheme |
| Figure 9-12 | Global Distribution of Awards Using the EFQM or Baldrige Model |
| Figure 9-13 | Overview of EEA and MBNQA Award Categories |
| 1 | Introduction and Overview Strategic International Management |
Welcome to the fascinating world of international organisations. This book will introduce the internationalisation process in its rich diversity and sometimes astonishing complexity. Each section is preceded by learning objectives that explain the knowledge gained in reading through the subsequent pages. The objectives for section one are presented here:
Readers are able to navigate effortlessly through the book and its supplementary information. They understand the concept of globalisation and related consequences from an organisational perspective. Readers also know how to correctly name and address motives for internationalisation processes and how to recognise their interdependencies. Forces for global integration and local responsiveness are familiar and different forms of internationally operating organisations can be distinguished. The contribution of holistic management models to supporting leadership decisions and activities is recognised. The most important international models can be classified. Readers are familiar with the general approach of the EFQM Excellence Model including its fundamental concepts and RADAR logic.
Learning objectives are always followed by a visual overview of the main issues covered in the respective section. Such a graphic is called a concept map. The map created for chapter 1 is supplied in Figure 1-1.
Figure 1-1: Concept Map “Introduction and Overview”
| 1.1 | Introduction |
| 1.1.1 | How to Use This Book |
This book is meant for everybody who seeks well-founded and practical advice on how to manage the internationalisation process of an organisation. It covers the internationalisation issue from a top management perspective and builds upon established and state-of-the-art methods, using a globally recognised holistic management model – the EFQM Excellence Model - as guidance. Therefore, it caters to the needs of different groups of readers:
Practitioners working for and with organisations that are on their way to becoming truly international,
students of business, economics and related sciences that want to prepare themselves for doing exactly that in their future career and
all people planning or conducting the implementation of a holistic management model (EFQM Excellence Model or Baldrige) in their organisations.
In order to facilitate the use of this book, supplementary information is provided for further illustrating the theoretical concepts discussed. This additional information is marked by distinct symbols, as listed in Figure 1-2.
Figure 1-2: Symbols Used for Special Information Employed Throughout this Book
The principles presented in this book are equally relevant for all kinds of organisations - companies, individual enterprises and non-profit organisations alike. Therefore, the term organisation instead of company is used consequently. However, in some parts for easier understanding the terms “business” or “business sectors” are utilised as many readers might find it easier to link the purpose of an organisation to the term “business” than to a more general description. In the sense used, non-profit organisations also have a business (or mission or duty) they pursue – which could be the business to save the environment or the business to protect people from injustice. The employment of classical management terminology should not distract from the fact that the principles and tools explained here are relevant for all imaginable international management situations.
| 1.1.2 | From Gradual Globalisation to Transnational Organisations |
Globalisation, understood as the worldwide integration of cultures, political systems, markets, industries and economies, is a determinant in the management of contemporary organisations. Whether an organisation decides to join the international competition or decides to stay out – the issue has to be raised. A google search of the term “globalisation” produces presently 12 million hits within less than one second, which clearly illustrates its current relevance.
Reasons and motives for internationalising an organisation are multi-faceted, as illustrated in Figure 1-3. For most organisations the primary motive is still the search for markets to ensure sustainable growth. Underlying reasons might be the (assumed) existence of attractive customer segments, demand for the offered products and services, a generally huge market size or an attractive market growth. Sometimes, the decision in favour of entering a new market is paired with a requirement to avoid the related tariffs or other trade barriers and to partake in public loan programmes offered by the respective government. In this case, opening new or relocating existing production sites is a logical consequence of the original market-seeking intent. Another important motive that appears individually or agglomerated is the necessity to ensure the availability of raw materials or other crucial and scarce resources. Cost-efficiency seekers try to establish production facilities in locations that provide essential resources at low cost (for example cheap labour costs), ensure a shorter time-to-market through cutting the distance to the customers or realise faster production cycles due to the immediate availability of efficient and good suppliers. Strategic asset seekers internationalise their business because they have a high need of well-trained people with special skills (for example in finding innovations) or are looking for international partners to complement their own product portfolio or research activities. Pushing internationalisation processes out of a risk diversification perspective is a motive on the rise due to an increased emphasis on risk management. Finally, many organisations feel obliged to mimic the international actions of their main competitors, which is labelled follow-the-leader motive.1
Figure 1-3: Multi-Faceted Motives for Internationalisation Processes2
When the need for internationalisation is recognised, organisations have different possibilities to start the internationalisation process. The classical Uppsala Model from Johanson and Vahlne (1977) assumed that companies build up their presence in foreign markets incrementally along typical steps. This establishment chain was discovered based on case studies of Swedish companies and considered on the one hand the continuing acquisition and use of knowledge about the foreign market and on the other hand the commitments to the foreign market. The chain starts with irregular export activities and gradually evolves to the use of independent representatives, the founding of own sales subsidiaries and finally the establishment of a manufacturing plant in the foreign country. The authors observed also that the process was usually started in markets that had many common characteristics with the home market and that the international establishment took longer in case the knowledge of the target market was very low, or in other words the market was deemed exceptionally foreign in nature. From these observations they derived the concept of “psychic distance”, defined as the sum of factors inhibiting the flow of information to and from the foreign market. These factors are supposed to be mainly based on differences in culture, language, business practices and industrial development. An organisation naturally tends to start international activities in a market with low psychic distance, for example in a neighbouring country using the same language where the organisation feels to have a good knowledge of. Gradually, market knowledge of other countries further along the psychic distance chain will be collected. If the endeavour of internationalisation was implemented successfully in the first market, the internationalisation will be extended to the next country along the psychic distance chain.3 According to this theory, a German company would be expected to start with exporting its products to Austria followed by the later establishment of a sales subsidiary there. The next internationalisation step could then be exporting its products to Denmark or the Netherlands.
The establishment chain is nowadays not deemed an appropriate view of internationalisation processes. Organisations use business contacts and partner networks to collect information and share investment risks. This enables them to develop their international presence at a jump, starting for instance directly with a manufacturing plant in China instead of gradually testing export opportunities. Also, the emergence of “born globals” demands attention, referring to organisations that directly resume their business activities on a global scale as this is a dominant part of their business model (e.g. google). The current scientific landscape is defined by many different theories of internationalisation processes, which all focus on special aspects, for example motives, risk or competition drivers or certain industries.4 Mainly the promotion of the importance of partnerships and networks could be singled out as a common denominator. Although these theories provide interesting insights into trends and patterns, they are not suitable for supporting managerial decisions. Therefore it will be desisted from further discussion.
Not every organisation that establishes routine cross-border activities is already a truly international organisation or even a “global player”. Such a classification would require the extension of the organisation’s management system and processes in a manner that laws and customs of other countries gain a considerable influence on the way the organisation acts. Terms coined for these kinds of organisations include Transnational Enterprise (TNE), Multinational Enterprise (MNE), Multinational Corporation (MNC) or Transnational Corporation (TNC), that are all basically used as synonyms. There are many different definitions mainly based on the aforementioned distinction available. The most widely accepted stems from the UNCTAD and is used for its Transnational Corporation Statistics: “A transnational corporation (TNC) is generally regarded as an enterprise comprising entities in more than one country which operate under a system of decision-making that permits coherent policies and a common strategy. The entities are so linked, by ownership or otherwise, that one or more of them may be able to exercise a significant influence over the others and, in particular, to share knowledge, resources and responsibilities with the others.”5 It is to be noted that this definition does not comprise a specific majority control, although internationally a minimum equity capital stake of 10% or any equivalent including voting power is common. Therefore an exact classification might require selecting the main parent company for a considered associate enterprise, which is usually the one with the highest percentage of ownership. The relevance of TNCs is not derived from mere transnational ownership but instead from the fact that they are considered to be organisations “with formidable knowledge, cutting-edge technology, and global reach”6. In 2009, the UNCTAD reported the existence of 82.000 TNCs, with 80 million workers employed and their foreign affiliates accounting for a share of 11% in global gross domestic product.7 Additionally, these TNCs can be classified by their transnationality index, that provides information on the relevance of the activities outside an organisation’s home country and is calculated as the average of the three ratios foreign to total sales, foreign to total assets and foreign to total employment. The German Metro AG for example reached 2011 a comparatively high transnationality index of 0,62 and reported 33 countries of operation.8