Leadership and Employee Behavior in International Business > 217

CHAPTER 15
Leadership and Employee Behavior in
International Business
Chapter Objectives PP 15-2

After studying this chapter, students should be able to:

 Identify and discuss the basic perspectives on individual differences in

different cultures.
 Evaluate basic views of employee motivation in international business.
 Identify basic views of managerial leadership in international business.
 PP 15-3 Discuss the nature of managerial decision making in
international business.
 Describe group dynamics and discuss how teams are managed across
cultures.

LECTURE OUTLINE

OPENING CASE: Making Risky Decisions at Porsche

The opening case discusses the leadership style of Wendelin Wiedeking, Porsche’s
CEO. He has increased Porsche’s profits each of the last 9 years, and has made a
number of difficult and daring decisions along the way.

Key Points

 Wiedeking turned down $97.5 million in German government incentives because he

didn’t want Porsche customers criticized for having the government support their
expensive habits.

 Porsche executives cannot receive stock options or own company stock. Wiedeking
wants to avoid decisions being driven by stock reactions and avoid subjecting
managers to accusations of trading based on insider information.

 Wiedeking introduced the Porsche Boxster, as well as the Cayenne – a Porsche

SUV!

 According to one subordinate, “Wiedeking goes against the stream and is obstinate
about keeping his direction. He is fast, impatient, and stubborn.” And, he is an
218 > Chapter 15

exceptional leader.

CHAPTER SUMMARY

Chapter Fifteen examines the behavior of managers and employees in different cultures,
and the impact of managerial behavior on international business. The chapter begins
with a discussion of Hofstede’s work concerning individual behavioral differences, and
then relates his ideas to motivation, leadership, and decision making. Finally, issues
related to creating and managing cross-cultural teams are discussed.

INDIVIDUAL BEHAVIOR IN INTERNATIONAL BUSINESS

PP 15-4 Individual differences are reflected in personality traits. Attitudes, perception,

creativity, and stress also are factors in influencing individual behavior.

Personality Differences across Cultures

 PP 15-5 Personality is the relatively stable set of psychological attributes that

distinguish one person from another. PP 15-6 Both biological factors and
environmental factors are believed to be important influences on personality. It is
important for international managers to recognize the existence of these differences
and how they affect individual behavior.
 Five personality traits are especially important in organizations. PP 15-7 The “big
five” personality traits are agreeableness PP 15-8 (the ability of a person to get
along with others); conscientiousness PP 15-9 (the order and precision a person
imposes on activities); emotional stability PP 15-10 (the tendency of an individual
to be poised, calm, resilient, and secure); extroversion PP 15-11 (a person’s
comfort level with relationships); and openness PP 15-12 (a person’s rigidity of
beliefs and interests). The texts provide several examples of how these traits differ
across cultures. Discuss Figure 15.1 here.
 PP 15-13 Other personality traits that also influence behavior include the locus of
control PP 15-14 (the extent to which people believe that their behavior has a real
effect on what happens to them); self-efficacy PP 15-15 (a person’s beliefs about
his or her capabilities to perform a task); authoritarianism PP 15-16 (the extent to
which an individual believes that power and status differences are appropriate within
hierarchical social systems like business organizations); and self-esteem PP 15-17
(the extent to which a person believes that she is a worthwhile and deserving
individual).

Attitudes across Cultures PP 15-18

 Attitudes are complexes of beliefs and feelings that people have about specific ideas,
situations, and other people.
 Job satisfaction or dissatisfaction is an attitude that reflects the extent to which an
individual is gratified by or fulfilled in his or her work. The text notes that research on
job satisfaction indicates that expatriates who are satisfied with their assignments
and jobs are more likely to be loyal to their employer. The text also provides the
results of a study indicating that Japanese workers are generally less satisfied than
their American counterparts (see Table 15.1 here). PP 15-19
 Leadership and Employee Behavior in International Business > 219

 Organizational commitment, which reflects an individual’s identification with and

loyalty to the organization, is another important job-related attitude. The text
provides several examples of organizational commitment attitudes across cultures.

Perception across Cultures

 PP 15-20 Perception, the set of processes by which an individual becomes aware of

and interprets information about the environment, is an important attitude
determinant. An individual’s perceptions may result in stereotyping. Perceptions
also influence an individual’s attitude toward risk. The "Bringing the World into
Focus" box describes a variety of stereotypes held by some Chinese about
Americans.

The U.S. Is Crowded with Liars Who Prefer Pets to Kids

Recent findings in the Chinese press included claims that three out of ten people
killed by police in the U.S. threw themselves into the line of fire to commit suicide;
that many Americans are addicted to lying; that bosses never want lasting relations
with staff; and that Americans like to leave inheritances to their pets, instead of their
children.

Stress across Cultures

 PP 15-21 Stress is an individual’s response to a strong stimulus. The stimulus is

known as a stressor. It is important for international managers to consider the stress
involved in managing international assignments, and also to recognize that people
from different cultures may experience and handle stress in different ways.

MOTIVATION IN INTERNATIONAL BUSINESS PP 15-22

Motivation is the overall set of forces that cause people to choose certain behaviors
from a set of available behaviors.

Mixing and Matching in a New Joint Venture

This box describes obstacles faced by a joint venture among IBM (U.S.), Siemens
(Germany), and Toshiba (Japan). A team of scientists from the three firms was to
develop an advanced type of computer chip. Though the chip was developed
eventually, the team had to overcome many difficulties created by the different
perspectives and attitudes of scientists from different cultures.

Needs and Values across Cultures

 Understanding needs (the things an individual must have or wants to have) and
values are a starting point in understanding motivation. Primary needs are things
people need for survival, while secondary needs are more psychological and
220 > Chapter 15

learned.
 Values are what people believe to be important. Values are learned and developed
as people grow and mature. Values are influenced by one’s family, peers,
experiences, and culture.

Motivational Processes across Cultures PP 15-23

 There are three basic categories of motivation: need-based models attempt to

identify the specific needs or set of needs that result in motivated behavior; process-
based models focus on the conscious thought processes people use to select one
behavior from among several; and the reinforcement model deals with how people
assess the consequences of their behavioral choices and how that assessment
affects the future choice of behaviors and incorporates the roles of rewards and
punishment in maintaining or altering existing behavioral patterns.

Need-Based Models across Cultures

 Hofstede’s work can help international businesses understand differences in

motivation across cultures. The text notes, for example, that individualistic societies
are motivated by individually based needs and rewards. The text also provides
examples of how motivation is affected by Hofstede’s other dimensions.
 Other motivation theories that have been tested in cross-cultural settings include
Maslow’s hierarchy of five basic needs PP 15-24, McClelland’s learned needs
framework PP 15-25, and Herzberg’s two factor theory PP 15-26.

Process-Based Models across Cultures

 PP 15-27 Expectancy theory suggests that people are motivated to behave in certain
ways to the extent that they perceive that such behaviors will lead to outcomes they
find personally attractive.
 Little empirical research has been done on expectancy theory, but it appears that it
could have wide applicability, except when explaining behavior in collectivistic
cultures. The text notes that the theory helps to explain Sony’s success.

The Reinforcement Model across Cultures PP 15-28

 The reinforcement model, which states that behavior that results in a positive
outcome will probably be repeated under the same circumstances in the future, has
not been extensively tested in different cultures, but may be a useful tool for
managers as they try to understand motivation across cultures.

LEADERSHIP IN INTERNATIONAL BUSINESS PP 15-29

 Leadership is the use of noncoercive influence to shape the goals of a group or

organization, to motivate behavior toward reaching those goals, and to help
determine the group or organizational culture. Management and leadership are often
mistakenly equated, but there are actually important differences between the two.
Table 15.2 PP 15-30 demonstrates the differences between management and
leadership.
 Culture affects appropriate leader behavior. For example, the text notes that in
 Leadership and Employee Behavior in International Business > 221

individualistic cultures leaders must focus on individuals, while in collectivistic

cultures, leaders must focus on groups. Discuss Figure 15.2 here. PP 15-31
 Similarly, differences in power orientation, uncertainty orientation, and goal
orientation across cultures will impact a leader’s behavior. The text provides
examples of how a leader might act in different situations.
 Cultural factors can be difficult and complex to assess, yet critical in determining
leader effectiveness. Leadership behavior must fit the situation if it is to be
successful.

DECISION MAKING IN INTERNATIONAL BUSINESS

Decision making is the process of choosing one alternative from among a set of
alternatives in order to promote the decision makers’ objectives.

Models of Decision Making PP 15-32

 Managers may make decisions in two very different ways. The normative model of
decision making suggests that managers apply logic and rationality in making the
best decisions. In contrast, the descriptive model argues that behavioral processes
limit a manager’s ability to always be logical and rational. Show Figure 15.3 here.
PP 15-33
 PP 15-34 The normative model suggests that managers make decisions by initially
recognizing that a problem exists and a decision has to be made. Second, they
identify potential solutions. Third, they evaluate each alternative in light of the
original problem. Fourth, they select the best alternative. Fifth, they implement the
chosen alternative. Finally, they follow up and evaluate. The text provides an
example of the process by examining a recent decision made by Shell.
 The descriptive model suggests that in reality managers are affected by two
behavioral processes. First, the model suggests that individuals are limited by
bounded rationality, that they are constrained in their ability to be objective and
rational by limitations of the human mind. Second, the model suggests that
managers satisfice, that they sometimes adopt the first minimally acceptable
alternative they identify, even though there may be a better alternative.

The Normative Model across Cultures

 Step 1: Problem Recognition. Culture may influence the way in which an individual
recognizes and defines a problem. The text provides examples of differences in the
way that problems might be recognized depending on individuals’ social orientation
and uncertainty orientation.
 Step 2: Identifying Alternatives. Alternatives may also be identified in different
ways depending on a manager’s culture. The text provides an example of how
alternatives might be identified depending on a manager’s power orientation and
social orientation. The text notes, for example, that in Japan’s ringi system
decisions cannot be made unilaterally because that would be too individualistic and
could destroy group harmony.
 Step 3: Evaluating Alternatives. Culture can also affect how managers evaluate
alternatives. The text provides examples of how goal orientation and uncertainty
orientation affect the evaluation of alternatives.
222 > Chapter 15

 Step 4: Selecting the Best Alternative. The actual selection of an alternative may
also be affected by culture. The text notes, for example, that an individualistic
manager would probably select the alternative that has the most positive impact on
him or her personally. How problems are solved and decisions are made can be
troublesome in cross-cultural joint ventures and strategic alliances.
 Step 5: Implementation. A culture’s power orientation and uncertainty orientation
will impact the implementation of an alternative.
 Step 6: Follow-Up and Evaluation. Power orientation is most likely to affect the
follow-up and evaluation process.

The Descriptive Model across Cultures

 At this point, there is little research exploring the behavioral process of bounded
rationality and satisficing across different cultures. However, all managers need to
understand that different modes of decision making may not be effective in other
cultures.

GROUPS AND TEAMS IN INTERNATIONAL BUSINESS

It is important that international managers understand the behavioral processes

associated with groups and teams since much of an MNC’s work is accomplished by
people working together.

The Nature of Group Dynamics

 The use of teams is attractive to companies because theory suggests that people
working together should accomplish more than they can working alone.
 PP 15-35 A mature team generally has certain characteristics: it develops a well-
defined role structure; it establishes norms for its members; it is cohesive; and some
teams identify informal leaders among their members who can lead and direct the
team.
 If a team has these characteristics, then it will be effective from the firm’s point of
view. The text provides an example of an effective team, Sony’s computer
development group.

Managing Cross-Cultural Teams

 A homogeneous team is generally considered to have less conflict, better

communication, less creativity, more uniform norms, higher cohesiveness, and clear
informal leadership when compared to its heterogeneous counterpart. The text
provides an example of Japan's teams.
 Managers who are creating teams should try to match the composition of the team to
the nature of the task at hand.
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They May Speak the Language, But …

This box describes tensions between the New York and London offices of Citigroup.
The relations between the two offices deteriorated enough that a psychologist was
called in to help resolve the issues. Her conclusion? Citigroup needed to work on
teamwork skills. Once the working climate improved, revenues increased by 64
percent over the previous year.

 Teams may also be affected by other cultural factors including members’ social
orientation, power orientation, uncertainty orientation, and goal orientation.

CHAPTER REVIEW

1. Define personality and explain how personality differences affect individual behavior.

Personality is the relatively stable set of psychological attributes that distinguish one person
from another. Five fundamental personality differences (agreeableness, conscientiousness,
emotional stability, extroversion, and openness) affect individual behavior. In addition, locus
of control, self-efficacy, authoritarianism, and self-esteem are important influences in an
individual’s personality.

2. Explain how attitudes vary across cultures.

Attitudes, the complexes of beliefs and feelings that people have about specific ideas,
situations, or other people, are important because they are the mechanism through which
people express their feelings. Attitudes can vary greatly across cultures; for example, the
text provides the results of a study that shows that Japanese workers are less satisfied than
their American counterparts. Students may also bring out points from the opening case in
their response to this question.

3. Discuss the basic perceptual process and note how it differs in different cultures.

Perception is the set of processes by which an individual becomes aware of and interprets
information about the environment. Stereotyping is one common perceptual process that
occurs when an individual makes inferences about someone because of one or more
characteristics he or she possesses. Perceptions also influence how an individual feels
about political or other forms of risk. The text provides numerous examples of how
perceptions differ across cultures, and students will probably be able to generate additional
examples.

4. Explain how attitudes and perception can affect each other.

Perception, the set of processes by which an individual becomes aware of and interprets
information about the environment, is an important attitude determinant. An individual’s
perceptions may result in stereotyping. Perceptions also influence an individual’s attitude
toward risk.
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5. Discuss stress and how it varies across cultures.

Stress is an individual’s response to a strong stimulus. The stimulus is known as a stressor.

It is important for international managers to consider the stress involved in managing
international assignments, and also to recognize that people from different cultures may
experience and handle stress in different ways. The text notes, for example, that Swedish
executives experienced lower stress as compared to their British, U.S., and West German
counterparts.

6. Identify some of the basic issues managers must confront when attempting to motivate
employees in different cultures.

Motivation refers to the overall set of forces that encourage people to select certain
behaviors from a set of available behaviors. Managers attempting to motivate employees in
different cultures face a complex task because the factors that motivate individuals in one
culture may be very different from the factors that motivate individuals in another culture.
Managers must determine whether employees are individualistic or collectivistic, what their
beliefs are about power and uncertainty orientation, and whether they demonstrate
aggressive or passive goal behaviors before motivation techniques can be implemented.

7. How do needs and values differ in different cultures?

Understanding needs (the things an individual must have or wants to have) and values (the
things that people believe to be important) are a starting point in understanding motivation.
Primary needs are things people need for survival, while secondary needs are more
psychological and learned. Values are influenced by family, peers, experiences, and culture.
Consequently, both needs and values will reflect local social and cultural norms.

8. Summarize the steps in the normative model of decision making and relate each to
international business.

The normative model of decision making implies that managers make logical and rational
decisions. The model starts with the identification of a problem and the realization that a
decision needs to be made, then possible alternatives to address the problem are identified
and evaluated, and finally, the best alternative is selected. Students may relate the model to
the example given in the text or to some other situation.

9. Why are teams so important? What are the basic implications of teams for an international
business?

Companies consider teams to be important because, at least in theory, people working

together can accomplish more than people working independently. Teams have several
implications for international business. Teams serve to develop role structures, establish
norms of behavior for team members, and promote cohesiveness among employees. In
addition, informal leaders typically emerge from teams, and efficiency may emerge from the
role structure of the team. Teams may be homogeneous or heterogeneous. The former
generally have less conflict, better communication, less creativity, more uniform norms,
higher cohesiveness, and clear informal leadership when compared to the latter.
 Leadership and Employee Behavior in International Business > 225

QUESTIONS FOR DISCUSSION

1. Which do you think is a more powerful determinant of human behavior, cultural factors or
individual differences?

Students will naturally respond to this question in one of two ways. Some students will
probably argue that individual differences are at the root of human behavior, and are
therefore a more powerful determinant of how an individual will act. Other students,
however, may suggest that an individual’s differences will be influenced by and reflect the
local culture. Students taking this perspective will argue that cultural factors are a more
powerful predictor of human behavior.

Teaching Note:
Instructors may want to ask students to identify traits within themselves
that are clearly a reflection of their local culture, as well as traits that they
feel are a result of their own individual differences. Students can then discuss their analyses
with others, and look for similarities and differences in interpretations of culture and
behavior.

2. Think of two or three personality traits that you believe are especially strong in your culture,
and two or three that are especially weak. Relate these to Hofstede’s cultural dimensions.

Most U.S. students will probably identify individualism and personal achievement as
particularly strong traits in the U.S. culture. Responses by foreign students are likely to be
different.

3. Assume you have just been transferred by your company to a new facility in a foreign
location. Which of your own personal dimensions do you think will be most effective in
helping you deal with this new situation? Does your answer depend on which country you
are sent to?

Most students will probably suggest that the best way to assess the foreign country’s culture
is through either direct or indirect research. Depending on which country students analyze,
most will propose that depending on their findings, their behavior should be modified when
negotiating, leading, motivating, and so forth, to adapt to the new culture. Students may
also note that being transferred to a fairly similar culture will require less adaptation than
being sent to a very different culture.

Teaching Note:
Instructors may want to rephrase this question to identify a specific
country or countries so that students can actually assess another
country’s culture along Hofstede’s dimensions.

4. How might perception affect motivation in different cultures?

Perception is the set of processes by which an individual becomes aware of and interprets
information about the environment. An individual’s cultural background will play a role in
how a person interprets their environment. Thus, for example, while an American may see
money as a clear way to motivate employees, people from other cultures that do not value
money in the same way an American does, may see a raise as a poor way to motivate
226 > Chapter 15

workers.

5. How might organizations in different cultures go about trying to enhance leadership

capabilities?

Good leadership skills will vary by culture. In collectivistic cultures, the group is important,
therefore an organization trying to enhance leadership capabilities might emphasize the
development of skills that preserve group harmony. In contrast, in a culture that is
individualistic, organizations might focus on developing leaders that are skilled in allowing
employees to set their own goals. Similarly, in power oriented cultures, organizations may
identify individuals that show direct, structured behaviors and place a lesser value on the
development of caring and interpersonally oriented behaviors.

6. Do you think it will ever be possible to develop a motivation framework that is applicable to
all cultures? Why or why not?

Most students will probably agree that it would be difficult to develop a motivation framework
that is applicable to all cultures simply because cultures place different values on different
things. Americans, for example, are usually motivated by money; consequently, companies
will frequently use pay raises as a means of motivating employees. However, this type of
motivating factor would not succeed in a culture that does not place a high value on money.

7. How do motivation and leadership affect corporate culture?

Corporate culture refers to the idea of “the way we do things around here.” Two critical
dimensions of corporate culture are motivation and leadership. To fully understand the role
of these two dimensions, students may want to develop a chart depicting different types of
cultures (individualistic versus collectivistic, and so on), and then identify what types of
motivation and leadership one would find in an organization in each type of culture.

Teaching Note:
The following two questions can generate a fair amount of interesting
discussion (and usually laughter) if they are acted out in class rather than
simply discussed. For example, instructors can ask students to play the roles of the
Japanese, Australian, and Italian managers who are being transferred to the U.S.

8. What advice would you give to a Japanese, an Australian, and an Italian manager just
transferred to the United States?

Most students will probably focus on identifying the differences that Hofstede has suggested
exist among the Japanese, Australian, Italian, and U.S. cultures. Students will probably use
these differences to make specific suggestions relating to leadership, negotiating,
motivating, and so forth.

9. Assume you are leading a team composed of representatives from British, Mexican,
Brazilian, and Egyptian subsidiaries of your firm. The team must make a number of major
decisions.

a. What guidelines might you develop for yourself for leading the team through its decision-
making process?
Most students will probably focus on the idea that if they can learn as much as possible
 Leadership and Employee Behavior in International Business > 227

about the other cultures, they will be better prepared to handle each individual in the
appropriate manner. Thus, many students will in effect suggest treating the foreign
managers individually rather than as a group so that the leader can modify his/her behavior
according to each situation. However, other students will probably point out that these
individuals are meant to be part of a team, and that the idea of teamwork should be
stressed.

b. What steps might you take to enhance the team’s cohesiveness? How successful do you
think such an effort would be?
Most students will probably recognize that a team made up of British, Mexican, Brazilian,
and Egyptian members will be a heterogeneous one, and one that may have conflict, poor
communication, and so forth. Students may suggest that making team members aware of
the cultural differences that may impact their behavior would be a start to enhancing the
team’s cohesiveness, but will probably conclude that such an effort will be difficult to
manage.

BUILDING GLOBAL SKILLS

Essence of the exercise

This exercise is designed to show students the process of learning about another culture, and
incorporating aspects of that culture into one’s own behavior. Students working in teams of two
are asked to research a culture of their choice and, assuming the role of an individual from the
other culture, negotiate a contract for the sale of a product.

Answers to the follow-up questions:

1. How easy or difficult was it to model the behavior of someone from another country?

Most students will probably agree that it is not easy to model the behavior of someone from
another country. Students will probably find that they forget certain aspects of the other
culture, and without thinking about it, revert to their own culture or self-reference criterion.

2. What other forms of advance preparation might a manager need to undertake before
negotiating with someone from another country?

Students will probably have various suggestions for how a manager could prepare for a
meeting with someone from another country. Typically, suggestions include complementing
library research with advice from someone from the other country, meeting with a consultant
specializing in the other culture, and obtaining advice from a colleague who has experience
negotiating in the other country.

Other Applications
This exercise deals with differences in cultural behavior that can affect international
business. It asks students to identify another culture and model that culture’s behavior. An
interesting exercise to complement this one is to ask students, working in groups of four or
five, to research a culture of their choice and then develop a skit to perform for the rest of
the class. The rest of the class can then attempt to identify the particular culture being
shown. In this manner, students can appreciate the difficulties an individual might have
when confronted with a completely unknown culture.
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CLOSING CASE

A Leadership Firestorm at Firestone

The closing case reviews the crisis at Firestone when its Wilderness tires (standard equipment
on the popular Ford Explorer) were found to be defective. The case describes differences in
crisis management styles between U.S. (Ford) and Japanese (Firestone) managers.

Key Points

 A Japanese firm, Bridgestone Corporation, acquired Firestone in 1988. Firestone’s

CEO, John Nevin (an American), stayed on as head of the acquired firm.

 Differences in management styles led Nevin to resign in 1989, and he was replaced
by Masatoshi Ono, a Japanese executive from the home office.

 Ono's quiet and reserved style helped Firestone build revenues and market share
throughout the 1990s.

 When the crisis occurred in 2000, Ono's reserved and quiet management style
(typical in Japan) was perceived as aloofness and indifference by Westerners.

 Ono was replaced by John Lampe, an American senior executive at Firestone, who
immediately held a news conference, apologized on behalf of the company, and
promised aggressive action to get Firestone's problems fixed.

 Lampe went beyond apologies and followed through on his pledges. Thanks to his
efforts Firestone is on the brink of profitability and has even approached Ford about
becoming a supplier again.

Case Questions

1. What role did leadership play in both the decline and the recovery at Firestone?

At the plant level, a lack of leadership by Ford managers allowed the manufacturing
problems to persist. Once the crisis occurred, the quiet Japanese leadership style did
not resonate well with the outraged American public and allowed the crisis to
escalate. Lampe’s style better addressed the concerns of the American public and
has significantly aided Firestone in its attempts to overcome this setback.

2. Contrast Firestone’s response to the tire crisis in relation to the response by Ford.
Which approach do you think was most successful, and why?

The case itself does not provide the students with a lot of information on Ford’s
response. Some students may remember Ford’s finger-pointing from the media
coverage at the time. Though Firestone and Ford entered the crisis as partners,
their partnership quickly degenerated as each tried to blame the other for the
accidents. Ford went to great lengths to try to define the problem as a “tire problem,”
and therefore place the blame for the accidents entirely on Firestone. Many
 Leadership and Employee Behavior in International Business > 229

perceived Ford’s efforts as attempts to avoid any responsibility at any cost. Lampe,
on the other hand came across as willing to accept responsibility and doing all he
could to correct the problem. It is hard to know which approach was financially more
successful. Ford definitely suffered a public relations setback by appearing to be
“passing the buck.”

3. How do you think the crisis at Firestone affected other key employee behaviors such
as motivation and stress?

The crisis was both demoralizing and stressful to Firestone workers. They were
criticized for lack of quality and care in their craftsmanship. Managers were derided
as detached and indifferent to quality control. Further, as demand for Firestone tires
plummeted in the wake of the crisis many Firestone employees faced the stress of
impending layoffs.

PART THREE CLOSING CASES

CASE 1:
Ben & Jerry's -- Japan

This closing case describes alternative approaches being considered

by Ben & Jerry's in entering the Japanese market. Essentially, three
options are being considered: (1) enter using an agreement with 7-
Eleven whereby 7-Eleven stores would be the first outlet where Ben & Jerry's would be
available in Japan, (2) enter Japan through a licensing agreement with Mr. Ken Yamada
(who ran a Domino's Pizza's franchise in Japan), or (3) delay entry into Japan until
Japanese economic conditions improved.

Key Points

 Ben & Jerry's needed increased foreign sales to improve their revenue figures.

 An agreement with 7-Eleven would make their product immediately available at

7,000 outlets in Japan, but might end up making Ben & Jerry's a "store brand" for 7-
Eleven.

 An agreement with Mr. Yamada would allow greater flexibility in market access in
Japan, but such an agreement required that Ben & Jerry's give up control of how its
ice cream was marketed in Japan. Mr. Yamada would call all the shots in Japan.

 Ben & Jerry's would only export to Japan, using excess capacity in their U.S. plant.
This approach made them particularly vulnerable to drops in the value of the yen.
Continued weakness in the yen might erode any profit on the sale of a product
exported from the U.S.
230 > Chapter 15

 Entering the Japanese market would require redesigned packaging and the
development of a new container size (120 ml). These would add to the cost and
complexity of production in their Vermont plant.

 Japan's economy was performing poorly and currency values were falling throughout
Southeast Asia. Perhaps it would be better to defer entry until the economic picture
for the region improved.

Case Questions

1. Analyze the Japanese ice cream market. What does Ben & Jerry's have to do to
succeed there?

In order to succeed in Japan, Ben & Jerry's needs to make its product at least as
convenient as its main competitors' product (Haagen Dazs). Achieving that entails
using appropriate package size and premium quality. Further, it needs a large-scale
entry coupled with convenient distribution arrangements (such as what 7-Eleven is
able to provide). Finally, it needs to protect its high-quality, premium brand image
(something threatened by the 7-Eleven option).

2. Discuss the advantages and disadvantages of relying on 7-Eleven to distribute Ben

& Jerry's in the Japanese market.

As noted above, the advantages include:

 Quick access to 7,000 stores
 Distribution network in place
 Experienced partner already experienced in ice cream product sales
The disadvantages include:
 Availability (at least initially) only at 7-Eleven stores
 Jeopardizing their independent, premium brand image
 Reliance on 7-Eleven to generate sufficient sales volume

3. Discuss the advantages and disadvantages of distributing Ben & Jerry's products
through a licensing agreement with Ken Yamada.

Advantages:
 Instant expertise contributed by Mr. Yamada
 Relief from devising detailed product strategies for the Japanese market
 Proven expertise at their disposal
Disadvantages:
 Loss of control over product marketing and distribution
 Royalty payments
 Lack of detailed plan from Yamada

4. Some Ben & Jerry's managers believe that the company should delay entering the
Japanese market because of Japan's short-term economic problems. Do you
agree? Defend your answer.

Students will take different perspectives. Ultimately the issue resolves around how
urgently Ben & Jerry's needs to boost its revenue figures. The company seems to
 Leadership and Employee Behavior in International Business > 231

be in a hurry to show investors growing revenues, something that entry into the
Japanese market can accomplish. While conditions for entering Japan may not be
perfect, perfect conditions rarely ever exist. Given the size and affluence of the
Japanese market, Ben & Jerry's will eventually have to approach it. Delays may only
make entering more difficult. On the other hand, given the decision to export from
the U.S., the value of the yen vis-a-vis the dollar is critical to the success of Ben &
Jerry's in Japan. A strong case could be made that the firm should wait until the yen
stabilizes before making an entry decision. Without knowing when the yen will
stabilize, it is impossible to predict the profitability of selling in Japan. Given the
manufacturing upgrades necessary to serve the Japanese market, one could argue
that there is currently too much uncertainty to make an informed decision.
232 > Chapter 15

CASE TWO:
Reinventing Nissan

This case describes plans introduced by Carlos Ghosn to improve

Nissan's performance. Ghosn was appointed by Renault (a French
automobile manufacturer), which purchased a 37 percent stake in
Nissan in 1999. Many of Ghosn's recommendations are drastic and go
against the typical way of doing business in Japan.

Key Points:

 Nissan's performance in the 1990s fell significantly below its performance in the
1980s. The high value of the yen in the early 1990s (among other factors) made it
difficult for the company to export its way out of its difficulties.

 In May of 1999 Nissan was taken over by France's Renault SA. Renault purchased
37 percent of Nissan's common stock, effectively transferring control of Japan's
second largest auto manufacturer to the French firm.

 Carlos Ghosn, appointed by Renault to head up Nissan, announced a plan to

restructure Nissan which included eliminating 16,000 jobs in Japan, abandoning the
keiretsu system, and reducing the number of Nissan's suppliers.

 Ghosn made English, not Japanese, Nissan's official language.

Case Questions:

1. What benefits will Nissan gain if its procurement of parts is combined with Renault's
parts procurement on a global basis? Are there any costs to this change? What
problems does Nissan create if it abandons the keiretsu system for purchasing
parts? In what ways might the Internet facilitate this change?

Combination of procurement procedures would lead to greater power over suppliers

as well as economies of scale in purchasing and increased efficiency in the
procurement process. The tradeoff would be a decrease in procurement flexibility
and a possible reduction in supply alternatives. Abandoning the keiretsu system
would be a huge breach of trust within the Japanese business system, perhaps
making it difficult for Nissan in the future, should they need to forge alliances with
Japanese suppliers. On the other hand, the Internet could serve as a mechanism to
broaden their supplier alternatives efficiently and enable efficient, real-time
comparisons of multiple supplier products and prices.

2. Suppose natural attrition fails to allow Nissan to reach its goal of reducing its
workforce by 21,000 people. If this occurs, what would you advise Carlos Ghosn to
do? Should he abandon the planned job cuts? Or should he begin to fire workers
and risk violating one of Japan's strongest cultural norms?

This question allows students to explore and defend alternatives of their own.
 Leadership and Employee Behavior in International Business > 233

Different students will provide different suggestions and there is no clear "one best
way" of handling the situation. Students should address, however, the Japanese
cultural opposition to layoffs (at least of permanent employees of large established
firms such as Nissan) and what the ramifications of violating Japan's cultural norms
would be. This is also a good place to discuss the traditional collaborative
relationship between business and government in Japan. Nissan would be
undermining that relationship by firing workers in order to meet a strict workforce
reduction target.

3. Given Japan's culture, will the introduction of performance-based compensation

schemes create any problems for Nissan in Japan? If so, what is the nature of these
problems? Do you have any suggestions for overcoming these problems?

Performance-based compensation is making inroads in Japan, but the seniority-

based system is still very strongly entrenched. Given Japanese respect for elders
and team-based work systems, compensation based strictly on individual
performance would likely be awkward both for younger and older workers. It would
require young workers to put their individual compensation interests ahead of those
of the group, and it would appear to be disrespectful of the loyalty demonstrated to
the firm by long-term (senior) employees. Students are likely to suggest some sort of
hybrid system (based part on seniority, part on team, and part on individual
performance) as a means of overcoming some of these problems.

4. Prime Minister Obuchi's comments send a clear signal that Japanese politicians will
resist any restructuring of Nissan's operations that lead to significant losses of
domestic jobs. How important is this political threat to Ghosn's plans? What advice
would you give Carlos Ghosn to overcome or address Obuchi's concerns?

As mentioned above, the relationship between business and government in Japan

differs significantly from the relationship in the U.S. The Japanese government,
through MITI, is considerably more actively involved in the business environment.
Prime Minister Obushi's comments should be taken very seriously. A contentious
relationship with the Japanese government will be a significant hindrance to Nissan's
future activities. Ghosn should probably take a longer-term view of achieving
operational objectives.

5. As it turned out, Ghosn’s strategies paid off. In 2002 Nissan made a record $6.1
billion in profits; its 11 percent operating margin was one of the highest in the auto
industry. Some observers are now arguing that only a foreigner (a non-Japanese)
could have turned Nissan around so quickly. Do you agree?

It is difficult to come to any solid conclusion based on one year’s performance. The
safest answer is to take a wait-and-see attitude. To the extent that Nissan’s
improved performance was due to a solid year for the auto industry overall, someone
other than a foreigner may have achieved similar results. However, it is clear that
Nissan took important steps that were culturally difficult to pursue. It is probably safe
to say that it would have been very difficult for a Japanese manager to have
achieved what Ghosn did – but not impossible.