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Key concepts and terms

Match up the words on the left with their definitions on the right.

1) cross-cultural	a) the fact, principle, or advocacy of the existence of more than one
	guiding or predominant ideological or political centre in a political
	system, alliance, etc.
2) stereotype	b) a person who has exclusive attachment to the interests of one group,
	class, etc., esp. at the expense of the community as a whole
3) particularist	c) involving or bridging the differences between cultures
4) ethnocentrism	d) the principle that the buyer must bear the risk for the quality of goods
	purchased unless they are covered by the seller’s warranty
5) polycentrism	e) a set of inaccurate, simplistic generalisations about a group that allows
	others to categorise them and treat them accordingly
6) caveat emptor	f) a method of statistical analysis under which people or objects are
	grouped homogeneously in accordance with the characteristics to be of
	interest for researchers
7) cluster analysis	g) a person who has a wide range of interests, knowledge, activities, etc.
8) universalist	h) belief in the intrinsic superiority of the nation, culture, or group to
	which one belongs, often accompanied by feelings of dislike for other
	groups

Text 2.7. Read the text and clear up the aspects of cross-cultural research.

Cross-Cultural Research

Managing a truly global multinational company would obviously be much simpler if it required only a set of corporate objectives, goals, policies, practices, products and services. But local differences often make this impossible. The conflict between globalisation and localisation has led to the invention of the word “glocalisation”. Companies that want to be successful in foreign markets have to be aware of the local cultural characteristics that affect the way business is done. A consequence of engaging in international business is that managers are immediately faced with colleagues and rivals from different cultures. Unfortunately, they are often badly prepared for these encounters because of racial and national stereotypes. What is the route to better understanding?

•To begin with, we need to examine the special features of our own culture.

•Our second task, once we realise that we too are a trifle strange, is to understand the subjective nature of our ethnic values.

•We should be cautious to make assumptions on the basis of our subjective view and, even worse, assumptions of other people’s assumptions.

These aspects are examined by cross-cultural research.

W o r t h y o f N o t e

Cross-cultural studies look for the similarities and differences between people in different cultures.

The difficulties of this research and hence the danger in placing great reliance on many of the results arise from two issues.

•Defining cultures: Differences between individuals within one culture may be greater than shown by those from different ones. Variations arise from gender, social class, education, age, religious background, and so on.

•Applications of theories: It is incorrect to assume that Western ideas and patterns can be equally appropriate for explaining the behaviour of workers in all other countries.

W o r t h y o f N o t e

Management differs to a larger or smaller extent from one country to another, and it takes considerable historical and cultural insight into local conditions to understand its processes, philosophies and problems.

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Text 2.8. Read the text and generalise various attitudes to managing multinationals.

Attitudes to Managing Multinationals

Some scholars are concerned with assessing the degree of multinationality of an enterprise. How could one decide whether a firm is “truly” multinational as opposed to the one having a few overseas operations? Howard V. Perlmutter, American researcher, for instance, concludes that the striking difference among firms lay in the state of mind of the managers. Three states of mind can be identified:

(1) ethnocentric, (2) polycentric and (3) geocentric.

They are never seen in pure form; some measure of each is present in all organisations. Their characteristics, as ideal types, are set out in the table below.*

			Orientation of headquarters (HQ)
			to subsidiaries in three types of MNE
	Organisational	Ethnocentric	Polycentric	Geocentric
	feature
	Complexity	High in HQ which	Varies among	Complex and
		makes main	subsidiaries	interdependent
		decisions; low in
		subsidiaries
	Authority	HQ	Local	Collaborative
	Monitoring and	Home standards	Local	Agreed	universal
	control	applied throughout		standards		applied
				locally
	Rewards and	High in HQ	Wide variation	Matched to
	incentives			worldwide and local
				objectives
	Communication	Downwards to HQ	Little	Many paths		among
				subsidiaries
	Identification	Home country	Host country	International		and
				national interests
	Continuity	Home-country	Local people	Best people		for key
		recruitment for	developed for	positions	throughout
		foreign postings	own-country	the world
			management

•Ethnocentric, or home-country MNE: Regarding one’s culture as superior to others is an ethnocentric attitude. Within this firm, business follows home-country practices and uses the home language. Finding it difficult to deal with foreign managers, headquarters places its own in key positions. There are many ethnocentric multinationals, perhaps the majority.

•Polycentric, or host-country MNE: Polycentric firms incorporate the notion that host-country cultures are difficult for the outsider to understand and local people know best. Therefore, the branch should be allowed as much local character as possible. Rarely are home-country managers placed in top positions in overseas subsidiaries. The polycentric MNE is, therefore, a group of companies that have a high degree of operating autonomy.

•Geocentric, or world MNE: Perlmutter argues that a geocentric attitude is beginning to emerge. Its ultimate goal is a worldwide approach both in headquarters and in the subsidiaries. Collaboration is important, creating worldwide standards for the company products with local variations. Local managers are expected to manage their operations effectively but always within the total context. Promotion of managers is done on merit, not nationality.

Many argue that the modern MNE no longer produces in one country and trades with another. For many, the international transactions are less to do with goods and more to do with transfers of advanced technology. In this view, cultural diversification of large MNEs is inevitable. Managers should learn to tolerate diversity and come to terms with conflicting loyalties.

* Naylor J. Management. Pearson Education, 2004, p. 122.

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Text 2.9. Read the text and outline nations’ attitudes to time, rules and communications.

Nations’ Attitudes to Time, Rules and Communication

Cross-cultural research has also identified many issues relevant to managers and organisations, namely, attitudes to

•time;

•rules; and

•communication.

Attitudes to Time

We can look at two aspects: the pace of life and temporal style.

1) First, we observe that the pace of life seems to vary from nation to nation. Such things as rate of working, speed of service at the post office and the accuracy of bank clocks were measured. Nations with fast, intermediate and slow pace of life are shown in the table below.

Fast	Intermediate	Slow
Switzerland	Poland	Czech Republic
Germany	France	China
Ireland	Netherlands	Greece
Japan	Singapore	Bulgaria
Italy	Taiwan	Romania
Sweden	Canada	Jordan
United Kingdom	United States	Syria
Austria	South Korea	Brazil
Hong Kong	Hungary	Mexico

The fastest pace was found in European nations along with Japan and Hong Kong. The intermediate group included some North American and European nations as well as Singapore and Taiwan. The slowest pace was observed in less economically developed countries from Latin America, Europe, Asia and the Middle East.

2) The second aspect of attitudes to time concerns separation of temporal frames into monochrome and polychrome.

•Monochrome or linear time: With this style, activities are arranged linearly. People concentrate on the job, and stress the completion of tasks, schedules and procedures. They are accustomed to short-term relationships. The style is prevalent among northern Europeans and North Americans, members of large organisations and males.

•Polychrome time: With a polychrome style, people pay attention to several things at once. They are subject to distraction and change of plan. The need for promptness depends on the significance of the relationship, each of which is potentially for life. This style is found in southern European and many Asian cultures, smaller organisations and among women.

We should remember that these explanations concern ideal types, most people displaying a mixture. Differences are found not only among nations but also among companies, departments and individuals. The juxtaposition of two incompatible assumptions leads to difficulties. Within the MNE, these include the problems of trying to get people from different backgrounds to work together on time-constrained projects.

Attitudes to Rules and Legal Agreements

Managers of MNEs frequently comment on different attitudes showing themselves in situations such as contract negotiation and enforcement. We can look at two examples.

•The buying process: Managers from Europe and North America are used to the legal notion of caveat emptor – let the buyer beware. When considering a business acquisition, a thorough investigation before completing the deal is conducted. Caveat emptor is not followed in Asia and Latin America, so detailed investigations can be seen as insulting.

•Contract enforcement: Western managers view contracts as the basis of all transactions and seek to formalise those of significant value. Their enforceability through the courts or arbitration provides security. It is contrasted with East Asia where the reputation of the individual or the organisation plays a much more important role. “Losing face” is to be avoided and the sense of personal obligation is strong.

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Communication Context

In some groups, known as high-context cultures, people are very aware of the context of communication. Social setting, social status and non-verbal behaviour are recognised and understood as part of the message. Each part of a business transaction is seen as a step in building the relationship. Trust and harmony of the group are valued. In a low-context culture, on the other hand, business correspondence and other messages will focus on the exchange of facts and data. Meaning is derived from words. Clarity and brevity are important for the transaction; relationship building takes place outside the immediate context.

Text 2.10. Read the text and outline Hofsted’s dimensions of cultural differences.

Categorising Cultures

Hofstede’s Cultural Dimensions

The Dutch scholar Geert Hofstede applied a wide-ranging questionnaire to 116, 000 IBM employees in 70 countries. He then used statistical methods, especially factor analysis, to find patterns among the data.

Such methods led Hofstede to discover four such underlying factors, or cultural dimensions, later extended to five after studies from China were included. These factors are summarised in the exhibit below, which also shows countries that score high or low on each scale. The lists pick out patterns among countries. While some may be similar on one or two dimensions, they may diverge on others.

Hofstede’s work is a touchstone for those investigating cultural differences; it marks a switch from the descriptive work to analytical methods based on surveys and statistics. But when looking at the results, we should try to avoid stereotyping statements.

Hofstede’s dimensions of cultural differences*

• Power distance

How far is unequal distribution of power, and hence distance between people, accepted?

Low power distance	High power distance
– Independence is valued	– Subordinates follow instructions
– Managers consult staff	– Control is close
– Organisations have flat pyramids	– Hierarchies have many layers
(Austria, Israel, Denmark, New	(Malaysia, Panama, Guatemala,
Zealand, Ireland, Sweden, Norway)	Philippines, Venezuela, Ecuador,
	Arab countries, West Africa)

• Uncertainty avoidance

How much do people feel threatened by ambiguity and seek to minimise or avoid it?

Weak uncertainty avoidance			Strong uncertainty avoidance
– Activities tend to be unstructured			– Dependence on rules
– Managers take risks			– Means found to avoid risks
– Dissent in acceptable			– Decisions based on consensus
– Initiative encouraged			– Security is important
(Singapore,	Jamaica,	Denmark,	(Greece,	Portugal,	Guatemala,
Sweden, Ireland, United		Kingdom,	Uruguay, Belgium, Japan)
Malaysia)

• Individualism

How far do people look after themselves and their immediate family only?

Individualist			Collectivist
– Stress on self and self-sufficiency			– Group affiliation
– Focus on initiative and leadership			– No one wants to be singled out
– Individual security			– Belongingness
(Australia,	United States,	United	(Guatemala,	Ecuador,	Panama,
Kingdom,	Netherlands,	New	Venezuela, Indonesia, Pakistan)
Zealand, Canada, Italy)

* Naylor J. Management. Pearson Education, 2004, p. 127.

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• Masculinity

How far do “masculine” values dominate society?

Masculine			Feminine
– Growth seen as important			– People and environment important
– Achievement	= wealth	and	– Cooperation is valued
recognition			– Quality of life
– Challenge important			(Sweden,	Norway,	Denmark,
(Japan, Austria, Venezuela, Mexico,			Netherlands, Costa Rica, Yugoslavia,
Ireland, Jamaica,	Germany,	United	Finland, Chile, Portugal)
Kingdom)
• Long-term orientation (Also called Confucian Dynamism.)
Do people favour a pragmatic, future-oriented perspective?

Short-term			Long-term
– Analytic – interest in “how”			– Pragmatic – interest in “what”
– Present and recent are important			– Perseverance
– Concern with stability			– Thrift
(Australia,	Canada, East	Africa,	(China, Japan, Taiwan)
Germany,	Philippines,	United
Kingdom, United States, West Africa)
Linear-Active, Multi-Active and Reactive Cultures

Interaction between different peoples involves methods of communication as well as the process of gathering information. This brings us to the question that several hundred national and regional cultures of the world can be roughly classified into three groups:

•task-oriented, highly organised planners (linear-active/data-oriented);

•people-oriented, loquacious interrelators (multi-active/dialogue-oriented);

•introvert, respect-oriented listeners (reactive/listening).

Linear-active/data-oriented people, like the Swedes, the Swiss, the Dutch and the Germans, do one thing at a time, concentrate hard on that thing and do it within a scheduled timescale. These people think that in this way they are more efficient and get more done. Thus, they belong to a culture which uses linear-active time, that is to say, they do one thing at a time in the sequence they have written down in their diary.

A data-oriented culture is one that relies on research based on gathering solid information and then acting and moving steadily forward from this database. Most of the successful economies are in dataoriented cultures using processed information.

Multi-active/dialogue-oriented cultures are very flexible. They follow a multi-active time system, that is, they do many things at once, often in an unplanned order. Multi-active people think they get more done their way; they are not very interested in schedules or punctuality. They pretend to observe them, especially if a linear-active partner insists. They consider reality to be more important than manmade appointments. Examples of dialogue-oriented cultures are Italians and other Latins, Arabs and Indians.

It should be emphasised that it is very difficult to pass over from one system to the other. When people from a linear-active culture work together with people from a multi-active culture, irritation may result on both sides. Unless one party adapts to the other, constant crises may occur. The Germans, for example, are very high on the linear-active scale, since they attach great importance to analysing a project, tackling each problem one at a time in a linear fashion, concentrating on each segment and thereby achieving a near perfect result. They are uneasy with people who do not work in this manner, such as the Arabs and those from many Mediterranean cultures.

Reactive cultures (listeners) have large reserves of energy. They are economical in movement and effort and do not waste time reinventing the wheel. Although they always give the impression of having power in reserve, they are seldom aggressive and rarely aspire to leadership (in the case of Japan, this is somewhat surprising in view of its economic might).

Reactive cultures as a rule listen carefully, establish understanding of the other’s intent, allow a period of silence in order to evaluate, query further, react in a constructive manner and try to attain perfection. Examples of listening cultures are Japan, China, Finland, Singapore and the four Asian tigers – South Korea, Taiwan, Hong Kong and Singapore.

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Text 2.11. Read the text and distinguish between universalists and particularists.

Management Policy in Different Cultures

Individualism versus Collectivism

Although countries vary widely, analysis can show that each is more similar to some and more distant from others. Cluster analysis looks for groups who tend to have similar scores on the underlying factors. There is a fairly obvious cultural divide between, on the one hand, the countries of North America and north-west Europe, where management is largely based on analysis, rationality, logic and systems, and, on the other, the Latin cultures of southern Europe and South America, where personal relations, intuition, emotion and sensitivity are of much greater importance. These cultures have different attitudes to the most important issues of management.

• Status

The largely Protestant cultures on both sides of the North Atlantic (Canada, the USA, Britain, the Netherlands, Germany, Scandinavia) are essentially individualist. In such cultures, status has to be achieved. You don’t automatically respect people just because they have been in a company for 30 years. A young, dynamic, aggressive manager with an MBA (a Master in Business Administration degree) can quickly rise in the hierarchy. In most Latin and Asian cultures, on the contrary, status is automatically accorded to the boss, who is more likely to be in his fifties or sixties than in his thirties. This is particularly true in Japan, where companies traditionally have a policy of promotion by seniority. A 50- year-old Japanese manager, or a Greek or Italian or Chilean one, would quite simply be offended by having to negotiate with an aggressive, well-educated, but inexperienced American or German 20 years his junior. A Japanese would also want to take the time to get to know the person with whom he was negotiating, and would not appreciate an assertive American who wanted to sign a deal immediately and take the next plane home.

• Pay-for-performance principle

In northern cultures, the principle of pay-for-performance often successfully motivates sales people. The more you sell, the more you get paid. But the principle might well be resisted in more collectivist cultures, and in countries where rewards and promotion are expected to come with age and experience. A Dutch researcher Fons Trompenaars gives the example that Singaporean and Indonesian managers objected that pay-for-performance caused salesmen to pressure customers into buying products they didn’t really need, which was not only bad for long term business relations, but quite simply unfair and ethically wrong.

• Matrix management

Another example of an American idea that doesn’t work well in Latin countries is matrix management. The task-oriented logic of matrix management conflicts with the principle of loyalty to the all-important line superior, the functional boss. You can’t have two bosses like you can’t have two fathers. French managers, for example, would rather see an organisation die than tolerate a system in which a few subordinates have to report to two bosses.

• Welfare and safety of staff

Many organisations espouse standard policies for issues such as the welfare and safety of staff. Scientists compared perceptions of safety at three plants of a United States MNE. They found that it was perceived differently in Argentina, France and the USA. In the last two countries, the individualist culture was reflected in the expectations for managers to take control. They were seen as responsible for finding the balance between production and safety. In the collectivist culture of Argentina, however, blue-collar workers saw production and safety as everyone’s responsibility.

Universalists versus Particularists

In discussing people’s relationships with their boss and their colleagues and friends, Trompenaars distinguishes between universalists and particularists. The former believe that rules are extremely important; the latter believe that personal relationships and friendship should take precedence. Consequently, each group thinks that the other is corrupt. Universalists say that particularists “cannot be trusted because they will always help their friends”, while the second group says of the first “you cannot trust them; they would not even help a friend”. According to Trompenaars’ data, there are many more particularists in Latin and Asian countries than in Australia, the USA, Canada, or north-west Europe.

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Text 2.12. Read the text and name two phases of a manager’s international adjustment.

Developing Global Managers

The growth of MNEs has increased the demand for international managers. Multinational managers will spend much of their time working overseas. They will, therefore, be living and working in a strange environment. They will have to deal with people who have a different language, customs, religion and business practices. They will find that they cannot do things the way they do at home and what may happen when managers do not take foreign conditions into account. Thus, there are many problems associated with taking up international managerial posts. Many report on the shortage of people with transportable skills or managers’ ineffectiveness. The scholars argue for improvements both in the skills of individuals and in the management of human resource systems and divide the adaptation process into two phases – preparatory and on-location.

• Preparatory stage

Selection is critical. The organisation must choose managers as much for their adaptability as for their technical competence. Training builds on experience to ensure accurate expectations about the job and its environment. Managers with previous overseas experience are more likely to succeed again.

Training will include substantial cross-cultural work. This is particularly relevant for managers, who spend so much time communicating. Fluency means more than language skills; it involves acknowledging cultural differences and building the capacity to send and receive messages in “otherculture” terms.

• On-location stage

Despite preparatory effort, the manager faces adjustment on arrival. This has two aspects – mode and degree. Mode refers to coping with the gap between expectations and requirements, hopefully limited by preparation. The degree of adjustment refers to three aspects: work, attitude to host-country people and the general environment outside work. The manager will succeed if there is a response to all the three.

Managers working abroad need various skills. Clearly, it is a great advantage if they know the language of the country they are working in. But this is not the most important requirement. They need, above all, human relations skills as well as understanding of the other culture and the ability to adapt.

•Human relations skills are vital because, to be effective, the manager must persuade local staff to cooperate with him. Some Asian executives described how they felt about American managers after working with them for some time. The executives were from Taiwan, the Philippines and India. They suggested that the American managers sometimes had an attitude of intellectual and cultural superiority. They seemed to be “know-it-alls”. And they tried to impose their way of life on local workers. The Americans needed to lose those attitudes. They had to be more willing to learn from their fellow workers, and to treat them as partners.

•Differences in culture are important when a manager is negotiating in a foreign country. For instance, many Europeans and Americans like to get to the point quickly when negotiating. This is not so in some countries, like Brazil, where people prefer to beat around the bush more. They take their time, trying to create a relationship of trust. In such countries, the European or American manager must be patient, or else he will come away from a deal empty-handed. In Japan, there are often long silences during negotiations – especially if things are not going smoothly. European and American executives tend to react in the wrong way when this happens. They make concessions or talk in an over-eager way, so that they lose ground in the discussions. Besides, those working abroad must remember that a deal is not always a deal. In some countries, a person may say “yes” to a proposal simply to be polite, or agreeable. Even written contracts, in some areas, may not be worth much.

Concept check

1.How would you explain the concept of “glocalisation”?

2.What do cultural studies look for? What are the difficulties of this work and what do they arise

from?

3.According to Perlmutter, there are three states of mind which are never seen in pure form. Some measure of each is present in all organisations. Fill in the table.

	Types of MNEs	General characteristics
1)	Ethnocentric
2)	…
3)	…

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4.What are other criteria according to which cultures can be classified?

5.What are two aspects of attitudes to time?

6.According to the pace of life all nations can be divided into three groups. What are they? What kind of group does your country belong to and why?

7.Characterise monochrome and polychrome temporal styles.

8.Describe how attitudes to law vary in different parts of the world in terms of the buying process and contract enforcement.

9.What is valued in highand low-context cultures?

10.Classify various countries in accordance with Hofstede’s dimensions of cultural differences. Fill in the chart.

11. Investigate different types of cultures and their peculiarities. Fill in the table. Is there any truth in national stereotypes?

Types of cultures

Peculiarities

1)Linearactive culture

2)… .

3)…

12.Contrast individualist and collectivist approaches with regard to

• status;

• pay-for-performance principle;

• matrix management; and

• welfare and safety of staff.

13.Why do universalists disapprove of particularists, and vice versa? Would you say that you personally are a particularlist or universalist?

14.What are two steps of developing global managers?

15.What skills are needed for managing multinationals? Give examples.

16.Comment on the following statement: “Managers must consider the external global environment because an organisation is an open system dependent on a continuous interchange of inputs and outputs with the outside world”.

QUICK CHECK

Can you …

•Define globalisation.

•Recall the industries in which the world’s largest corporations operate.

•List four routes to internalisation.

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•Explain the term “licensing”.

•Name other forms of international business.

•Differentiate in brief between domestic, international and multinational companies.

•Summarise key features of multinationals.

•Explain what transnationality index means.

•Outline reasons why firms become MNE’s.

•Identify the four groups of constraints against multinationals.

•State cultural constraints.

•Explain “glocalisation”.

•Name three states of managers’ mind according to Perlmutter.

•Distinguish between monochromic and polychromic time.

•Outline Hofstede’s dimensions of cultural differences.

•Show the difference between linear-active, multi-active and reactive cultures.

•Define universalists and particularists.

•Name two phases of manager’s international adjustment.

•Sketch the main qualities needed by global managers.

OVER TO YOU

1. Look through the data in the table and analyse the qualitative indicators for given countries in terms of their business environments.

		India	S. Africa	Ireland	Ireland	Israel	China	Russia
	Government	5	2	5	5	3	2	2
	Support
	Workforce	5	2	3	2	3	3	4
	Infrastructure	2	2	4	4	4	1	1
	Education	4	3	5	4	5	2	4
	Cost	5	5	4	2	3	5	5
	Political situation	1	2	3	5	1	2	2
	Cultural	2	5	5	5	4	1	3
	compatibility
	Climate	4	2	3	3	2	1	2

2. Formulate the transnationality index in English; find information about any multinational you know and analyse its TNI.

Степень транснационализации компаний можно охаракте-ризовать индексом транснациональности и вычислить его значение по следующей формуле:

Iтр = (Аз/Ао + Пз/По + Шз/Шо) : 3

где Iтр – индекс транснациональности; Аз – зарубежные активы; Ао – общие активы; Пз – объем продаж товаров и услуг зарубежными филиалами; По – общий объем продаж товаров и услуг; Шз

– зарубежный штат; Шо – общий штат работников компании.

ROUND-TABLE DISCUSSION 1. Think, find out and share

Work in groups. Read the following questions, statements and tasks, analyse and discuss them. Choose a spokesperson in the group to make a presentation to the whole class, summarising the opinions in the group. Hold a Questions & Answers (Q&A) session.

1)Make a list of the forces that are pushing the world apart or pulling it together and discuss them. What is your conclusion about the balance?

2)Study a multinational to assess the extent to which it “thinks globally and acts locally”. Use a range of sources to examine factors such as integration, location of operations, nationality of senior managers and dealing with customers. Why does it act as it does?

3)What advantages and disadvantages do you see in working for a multinational?

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4)Do you agree with the following statement? Give your reasons. “Organisations and their managers can perceive the environment as a constraint or a challenge; they can also ignore it or take advantage of it.”

5)Managers must become increasingly skilled in dealing with other nations. It is easier said than done. What are ways of developing such skills?

6)Would you like to work for a company that had a pay-for-performance policy? Do you like the idea of matrix management, or would you rather report to only one powerful boss?

7)Comment on the statement: “Managers may find it in their best interests to work more closely and cooperatively with government if society is to become more productive.”

2. For your career

National business schools have been very slow in responding to the increasing internationalisation of business. Therefore, there are some tips to develop an appreciation for international business. In small groups discuss these tips and share your findings with others.

•Even if you have no plans to work abroad, obtain some understanding of other cultures by travelling and learning a foreign language. Even one year of learning a language followed by a few weeks in a country that speaks that language will open your eyes to ideas and possibilities that those who remain ethnocentric can never imagine.

•If you are attracted by international management, take advantage of opportunities to learn a foreign language now. Facility in another language will be one of the first things international companies look for in recruiting.

•If you do get assigned overseas, be open and flexible. Question assumptions you make about people and operations based on your experience in this country. Certain principles will hold true in all countries, but their interpretations will vary. For example, reinforcement of behaviour is effective everywhere, but the kinds of reinforcers people respond to in one culture may differ from those people respond to in another culture.

CASE

Study and discuss the case paying special attention to the questions below it.

The Coca-Cola Company

The Coca-Cola Company has been in business for many years. The largest percentage of its profits comes from foreign operations. Much of the company’s growth is due to its secret formula for producing Coke; the formula is the basis for a syrup that is sold to wholesalers and bottlers. Coca-Cola also has many other products besides Coke. For example, it owns Taylor and Great Western Wines, Tab, Fresca, and Sprite. It produces orange juice and instant coffee and tea products, including the brands Minute Maid and Butter-Nut. One of its wholly owned subsidiaries is Aqua-Chem, a company that designs and manufactures equipment for desalting sea water and other related equipment.

For Coca-Cola the world is divided into three parts, with an executive vice-president in charge of each. One part involves operations in the United States and Central and South America. Another involves Europe, Africa, Southeast Asia, and the Indian subcontinent. The third involves Canada, the Pacific and the Far East.

Dealing in the multinational market requires decisions and strategies considerably different from those appropriate for organisations operating in only one country. For example, when Coca-Cola gave an Israelite firm a franchise to bottle and sell Coke in Israel in the second half of the 20th century, Coke was promptly boycotted in the Arab countries. However, Coca-Cola had technology and know-how that the Arab countries needed. Aqua-Chem, for example, was an expert in water desalination, and Saudi Arabia alone was planning to spend billions of dollars in desalting over the next few years. Coca-Cola’s foods division had expertise in agriculture, and the Arabs were interested in developing their agricultural knowhow. Consequently, the company had reasons to hope that its expertise would reopen the door to selling Coke to the Arab world.

Another multinational market decision made by Coca-Cola involved India. The Indian government insisted that all multinationals should transfer some of their knowledge and ownership to Indian nationals. Coca-Cola refused to make its secret formula known and thus lost the lucrative Indian market. Management decided that disclosure of the secret formula would be even more adverse to the company’s interests than losing India’s business.

Even if Coca-Cola had no foreign sales or production facilities, its operations would still be greatly affected by the international environment. Imports are essential for two of the company’s major products

– soft drinks and coffee. Almost all coffee must be imported, and about half the sugar used in soft drinks comes from foreign sources.

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