MNGT 414 CH. 3 – Flashcards
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Institutional Context
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includes other elements of society besides national culture such as: -Education -The govt. -The legal system --Can affect important business-related differences among societies. ---May encourage adoption of values inconsistent with national cultures. ---Understanding the institutional context is critical to effective multinational management ---At a basic level, a manager cannot completely understand any society without examining its national culture and institutional context.
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National Context
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The national context is composed of the respective national culture and social institutions of a society. -Intertwined w/ national cultural forces are social institutions such as: ---The economic system, religion, education.
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Social Institutions
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-a complex of positions, roles, norms, and values lodged in particular types of social structures, and -organizing stable patterns of human resources regarding fundamental problems in sustaining viable societal structures within a given environment. ----Social institutions have profound effects on people's life conditions, and provide context for psychological differences among people.
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3 Key social institutions that influence business environment:
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-The economic system -Level of industrialization -Types of religions --Education --Level of social inequality
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Economic systems
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network of system of beliefs, activities, organizations and relationships that provide the goods and services of a society. --Typified by extremes of capitalism, socialism, and a mix of both --Important implications based on ------Dominant marktet type ------Market transitions
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Capitalist/Market Economy
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production is decentralized to private property rights owners who act to make profits in competitive market
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Socialist/Command Economy
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Production resources are owned by the state, and production decisions are centrally coordinated
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Mixed Economy
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Combines aspects of capitalist and socialist economies (Sweden, France, Denmark, Italy, and India)
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Economic systems have 2 major implications for strategic multinational management:
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-Dominant market type -Market Transitions
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Dominant Market Type
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whether the market and economic system of a country are predominantly capitalist, socialist or mixed. -decision whether to operate in another country may depend on the dominant market type (China)
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Multinational managers may want to consider the:
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Index of Economic Freedom
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Index of Economic Freedom
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Defines economic freedom as: --The absence of govt. coercion or constraint on the production, distribution, or consumption of goods and services beyond the extent necessary for citizens to protect and maintain liberty itself. -The index includes 10 indicators ranging from trade and taxation policies, to property rights and regulation, including govt. intervention in the economy.
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Market Transitions
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Changes societies experience as they move from socialism to a market based economy
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Multinational Implications
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-Need to turn around inefficient formerly state-owned companies to become cost effective -Motivational issues with workers -Interpersonal trust, teams, meritocracy
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Industrialization
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Cultural and economic changes that occur because of how production is organized and distributed in society
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Stages of industrialization
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-Pre-industrial -Industrial -Postindustrial
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Pre-Industrial Society
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-Agriculture dominates the economic environment -Religious norms, tradition emphasized
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Industrial Society
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-Dominance of manufacturing or secondary sector -Technological development
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Postindustrial Society
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-emphasis on the service sectors -Need highly skilled workers with specialized skills
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Managerial Implications: Industrialization
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-Direct correspondence between industrialization and economic development -Pre-industrial countries provide cheap labor and untapped markets ---But poor infrastructure for business ---Traditional and communal values -Industrial societies favor innovation and individualism ---Govt. provide favorable environment ---Educated labor force
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Managerial Implications: Industrialization ---- Postindustrial Societies
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-Dominance of service sector; knowledge based -Almost complete demise of agricultural sector -Significant decline in manufacturing sector -Increasing emphasis on quality-of-life -Non economic incentives favored -Post-materialist values, individual expression, and movement toward more a humane society
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Religion
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-shared set of beliefs, activities, and institutions based on faith in supernatural forces -an important aspect of most societies -Together, Christianity, Islam, Hinduism, and Buddhism are followed by almost 71% of the world's population. -20% of world's populations are nonreligious -Different religions shape how people do business in different paths of the world.
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Christianity
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A religion based on the teachings of Jesus -The most practiced religion around the world -Protestantism emphasizes wealth and hard work -Ten commandments-basis for ethical behaviors -Dignity of human life, labor and happiness. Implications for multinationals: -Business environment conducive to these values -Sunday holiday for prayer
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Islam
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Based on submission to the will of Allah (God) -The Prophet Muhammad was a messenger of Allah. -The second largest of the world's religions and growing -Islamic laws or Shari'ah, based on the Five Pillars -Muslims pray five times a day, fast during Ramadan. Implications for multinationals: -Islam prohibits profiting by exploiting others -Islam prohibits the payment or receipt or interest -Limited role for women in some Islamic societies.
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Hinduism
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-broad and inclusive religion with no single founder -Based on the Vedic scriptures -Oldest, embodied in the ancient traditions of India -----Currently 760 million Hindus worldwide ------Quest for ultimate reality and truth -----Hindus live life according to the principles of Dharma ------Belief in Karma and reincarnation Implications for multinationals: -Spiritual achievement is an important value -Respect for elders, age and wisdom -Hinduism has clear guidelines for ethical behavior -Inequality in casts system, social structure of India
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Buddhism
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-religious tradition that focuses on the reality of world suffering and the ways one can be freed from suffering -Craving and desires produce suffering -Dominant religion in Asia Implications for multinationals: -Encourage hard work; laziness seen as negative -Emphasis on teamwork; all beings are interconnected
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Education
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organized networks of socialization experiences which prepare individuals to act in society -Central element in organization of society -Helps construct competencies, professions, and professionals
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Managerial Implications: Education
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-Gives an idea of the skill level of workers in any society -The more educated, the more skills workers have -Multinationals can look at educational attainment scores to determine the nature of the workforce -Other scores relevant: ----Math & Science ----R&D expenditure
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Social Inequality
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-Refers to the degree to which people have privileged across to resources and positions within societies -In societies that have high social inequality, a few individuals have the ability to control and use important resources -These select few use access to resources to acquire more power, thereby perpetuating inequality -Social inequality negatively impacts the degree to which people are attached to work.
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Managerial Implications: Social Inequality
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-Many MNCs are facing significant criticisms for their operations in countries with high social inequalities ---Criticized for paying low wages, using child labor. ----Realizing social responsibility is also in their own interests Implications for Management: -Many key ethical issues arise in such countries -Consider the GINI Index on the degree of social inequality -Recognize that social inequality yields more demoralized workers, suspicious of management -South Africa, Denmark
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SUMMARY
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-to understand a society, it is essential to understand both its national culture and institutional context -Social institutions affect individuals and organizations -Differing economic systems have major implications for multinational strategic management -The degree of industrialization of a society is linked to its economic development -Religion, education & social inequality also impact multinational management strategy.
