Fundamentals of International Management

COMPILED BY
DR. M.VENKATESAN
 Globalization Defined

Globalization: the ongoing social, economic,

and political process that deepens and
broadens the relationships and inter-
dependencies amongst nations—their people,
their firms, their organizations, and their
governments
International business facilitates the
globalization process.
 International Business Defined

International business: all commercial

transactions between parties in two or more
countries
– Private firms are profit-oriented.
– Government organizations may or may not
be profit-oriented.
The international business environment
is more complex and diverse than the
domestic business environment.
WTO and India’s Stand on Food Security July 2014
International Management Definition
• The management of business operations for an organization
that conducts business in more than one country. International
management requires knowledge and skills above and beyond
normal business expertise, such as familiarity with the business
regulations of the nations in which the organization operates,
understanding of local customs and laws, and the capability to
conduct transactions that may involve multiple currencies.
Cambridge Dictionary Definition on International Management

• The control and organization of a business

that operates in two or more countries :

• The group of people who are responsible for

controlling and organizing a company in two
or more countries :
 Definition of Management: its Nature and
Purpose
• Management is the process of designing and
maintaining an environment in which individuals,
working together in groups, efficiently accomplish
selected aims.
 The Functions of Management

• Planning
• Organizing
• Staffing
• Leading
• Controlling
External elements that affect operations

• Economic factors
• Technological factors
• Social factors
• Ecological factors
• Political/legal factors
• Ethical factors
 Enterprise

• A business, government agency, hospital,

university, or any other type of organization.
 Managerial Functions at Different
Organizational Levels
• All managers carry out managerial functions,
but the time spent for each function may
differ.
Time spent in carrying out Managerial
Functions
Four skills required for Administrators

• Technical
• Human
• Conceptual
• Design
Skills and Management Levels
 The Goals of All Managers and
Organizations
• The aim of all managers should be to create a
surplus. Thus, managers must establish an
environment in which people can accomplish
group goals with the least amount of time,
money, materials, and personal
dissatisfaction.
Characteristics of Excellent Companies
(Peters & Waterman)
• Oriented towards action
• Learned about the needs of their customers
• Promoted managerial autonomy and entrepreneurship
• Achieved productivity by paying close attention to the needs
of their people
• Driven by a company philosophy often based on the values of
their leaders
• Focused on the business they knew best
• Had a simple organization structure with a lean staff
• Were centralized as well as decentralized, depending on
appropriateness
Asia Business Week Ranking of the Top 50
Companies
• Among the Standard & Poor’s Compustat
rankings of 50 Asian companies, ten are Indian
and five are Chinese companies.
Adapting to Changes in the 21st Century

• To be successful in the 21st Century,

companies must take advantage of the new
information technology—especially the
Internet—and globalization.
 Technology
• Technology, and especially information technology (IT)
has a pervasive impact on both organizations and
individuals.

• Electronic commerce (e-commerce) is increasingly used

for transactions between individuals and companies
(B2C) as well as between businesses (B2B).

• M-commerce - mobile or wireless commerce for

buying and selling goods using, for example, cellular
telephones or personal digital assistants.
 Globalization
• Most major corporations have an international
presence.

• The World Trade Organization (WTO), was

established in 1995 to govern international trade.

• The gains from globalization not only benefit

Western corporations but also result in higher
incomes for people in rapidly developing
countries.
 Entrepreneurship

• Entrepreneurship is a creative process that is

centered in the notion of identifying market
opportunities and unmet needs.

• It is building solutions that meet these needs

and bring value to customers.
Fortune’s top ten fastest growing companies,
August 2009
1. Research in Motion (Canada)
2. Sigma Designs (U.S.)
3. Sohu.com (China)
4. Ebix (U.S.)
5. DG Fastchannel (U.S.)
6. CF Industries (U.S.)
7. Shanda Interactive Entertainment (China)
8. Arena Resources (U.S.)
9. Bruker (U.S.)
10. Potash (Canada)
 Productivity

• The output-input ratio within a time period

with due consideration for quality.
 Definitions of Effectiveness
and Efficiency
• Effectiveness is the achievement of objectives.
• Efficiency is the achievement of the ends with
the least amount of resources (time, money,
etc.).
 MANAGING: SCIENCE OR ART?

• Managing as practice is an art; the organized

knowledge underlying the practice may be
referred to as a science.
The Evolution of Management Thought &
Patterns of Management Analysis
• Frederick Taylor and Scientific Management
• Fayol, the Father of Modern Operational
Management Theory
• Elton Mayo and F. Roethlisberger and the
Hawthorne Studies
• Recent Contributors to Management Thought
 Taylor's Principles of Scientific
Management
• Replacing rules of thumb with science (organized
knowledge).
• Obtaining harmony, rather than discord, in group
action.
• Achieving cooperation of human beings, rather than
chaotic individualism.
• Working for maximum output, rather than restricted
output.
• Developing all workers to the fullest extent possible
for their own and their company’s highest prosperity.
 Fayol, Father of Modern Management
Theory
• Authority and responsibility
• Unity of Command
• Scalar Chain
• Esprit de Corps
Elton Mayo and F. Roethlisberger and the
Hawthorne Studies
• In general, the improvement in productivity was due
to such social factors as morale, satisfactory
interrelationships between members of a work group
(a "sense of belonging"), and effective
management—a kind of managing that would
understand human behavior, especially group
behavior, and serve it through such interpersonal
skills as motivating, counseling, leading, and
communicating.
 Recent Contributors to Management
Thought
• Peter F. Drucker
• Keith Davis
• W. Edwards Deming
• Joseph M. Juran
• Laurence Peter
• William Ouchi
• Thomas Peters and Robert Waterman
 Patterns of Management Analysis: A
Management Theory Jungle?
1. The empirical, or case, approach
2. The managerial roles approach
3. The contingency, or situational, approach
4. The mathematical, or "management
science," approach
5. The decision theory approach
6. The reengineering approach
7. The systems approach
Patterns of Management Analysis — cont.

8. The sociotechnical systems approach

9. The cooperative social systems approach
10. The group behavior approach
11. The interpersonal behavior approach
12. McKinsey's 7-S framework
13. The total quality management approach
14. The management process, or operational,
approach
 The Managerial Roles Approach
Interpersonal roles
• 1. The figurehead role
• 2. The leader role
• 3. The liaison role

Informational roles
• 4. The recipient role
• 5. The disseminator role
• 6. The spokesperson role

Decision roles
• 7. The entrepreneurial role
• 8. The disturbance-handler role
• 9. The resource-allocator role
• 10. The negotiator role
The Management Process, or Operational
Approach
The Management Process, or Operational,
Approach
• This approach draws together the pertinent
knowledge of management by relating it to
the managerial job—what managers do.

• It tries to integrate the concepts, principles,

and techniques that underlie the task of
managing.
Input-Output Model
 The Five Managerial Functions

• Planning
• Organizing
• Staffing
• Leading
• Controlling
 Planning

• Selecting missions and objectives and the

actions to achieve them, which requires
decision making.
 Organizing

• Organizing involves establishing an intentional

structure of roles for people to fill in an
organization.
 Staffing

• Staffing involves filling, and keeping filled, the

positions in the organization structure.
 Leading

• Leading is influencing people so that they will

contribute to organization and group goals.
 Controlling

• Controlling is measuring and correcting

individual and organizational performance to
ensure that events conform to plans.
Coordination, the Essence of Managership

• Each of the managerial functions is an exercise

contributing to coordination.

• It is the central task of the manager to

reconcile differences in approach, timing,
effort, or interest and to harmonize individual
goals to contribute to organizational goals.
Systems approach to Management
Key Ideas and Concepts for Review
• Management
• Managerial functions
• Managerial skills in the
organizational hierarchy
• The goal of all managers
• Characteristics of excellent and
most admired companies
• Three major trends: Advances in
technology, globalization, and
entrepreneurship
• Productivity, effectiveness, and
efficiency
• Managing: science or art?
• Major contributors to
management thought
• Contributors to scientific
management
• Fayol’s operational management
theory
• Mayo and Roethlisberger
• Recent contributors to
management thought
• Management theory jungle
• Managerial roles approach
• Management process, or
operational, approach
• Systems approach to the
management process
• Five managerial functions
 Scientific Management Theory

• Evolution of Modern Management

– Began in the industrial revolution in the late 19th
century as:
• Managers of organizations began seeking ways to
better satisfy customer needs.
• Large-scale mechanized manufacturing began to
supplanting small-scale craft production in the ways in
which goods were produced.
• Social problems developed in the large groups of
workers employed under the factory system.
• Managers began to focus on increasing the efficiency of
the worker-task mix.
The Evolution of Management Theory
 Job Specialization and
the Division of Labor
• Adam Smith (18th century economist)
– Observed that firms manufactured pins in one
of two different ways:
• Craft-style—each worker did all steps.
• Production—each worker specialized in one step.
– Realized that job specialization resulted in
much higher efficiency and productivity
• Breaking down the total job allowed for the division
of labor in which workers became very skilled at
their specific tasks.
F.W. Taylor and Scientific Management

• Scientific Management
– The systematic study of the relationships between
people and tasks for the purpose of redesigning
the work process for higher efficiency.
• Defined by Frederick Taylor in the late 1800’s to replace
informal rule of thumb knowledge.
• Taylor sought to reduce the time a worker spent on
each task by optimizing the way the task was done.
 Four Principles of Scientific
Management
• Principles to increase efficiency:
1. Study the ways jobs are performed now and determine
new ways to do them.
• Gather detailed time and motion information.
• Try different methods to see which is best.
2. Codify the new methods into rules.
• Teach to all workers the new method.
3. Select workers whose skills match the rules.
4. Establish fair levels of performance and pay a premium for
higher performance.
• Workers should benefit from higher output
Problems with Scientific Management

• Managers frequently implemented only the

increased output side of Taylor’s plan.
– Workers did not share in the increased output.
• Specialized jobs became very boring, dull.
– Workers ended up distrusting the Scientific
Management method.
• Workers could purposely “under-perform.”
– Management responded with increased use of
machines and conveyors belts.
 Frank and Lillian Gilbreth

• Refined Taylor’s work and made many

improvements to the methodologies of time
and motion studies.
– Time and motion studies
• Breaking up each job action into its components.
• Finding better ways to perform the action.
• Reorganizing each job action to be more efficient.
• Also studied worker-related fatigue problems
caused by lighting, heating, and the design of
tools and machines.
Administrative Management Theory

• Administrative Management
– The study of how to create an organizational
structure that leads to high efficiency and
effectiveness.
• Max Weber
– Developed the concept of bureaucracy as a formal
system of organization and administration
designed to ensure efficiency and effectiveness.
 Weber’s
Principles of
Bureaucracy
Weber’s Five Principles of Bureaucracy
• Authority is the power to hold people
accountable for their actions.
• Positions in the firm should be held based on
performance, not social contacts.
• Position duties are clearly identified so that
people know what is expected of them.
• Lines of authority should be clearly identified
such that workers know who reports to who.
• Rules, standard operating procedures (SOPs), and
norms guide the firm’s operations.
 Fayol’s Principles of Management

• Division of Labor: allows for job specialization.

– Fayol noted jobs can have too much specialization
leading to poor quality and worker dissatisfaction.
• Authority and Responsibility
– Fayol included both formal and informal authority
resulting from special expertise.
• Unity of Command
– Employees should have only one boss.
 Fayol’s Principles of Management (cont’d)

• Line of Authority
– A clear chain of command from top to bottom of
the firm.
• Centralization
– The degree to which authority rests at the top of
the organization.
• Unity of Direction
– A single plan of action to guide the organization.
 Fayol’s Principles of Management (cont’d)

• Equity
– The provision of justice and the fair and impartial
treatment of all employees.
• Order
– The arrangement of employees where they will be of the
most value to the organization and to provide career
opportunities.
• Initiative
– The fostering of creativity and innovation by encouraging
employees to act on their own.
 Fayol’s Principles of Management (cont’d)

• Discipline
– Obedient, applied, respectful employees are
necessary for the organization to function.
• Remuneration of Personnel
– An equitable uniform payment system that
motivates contributes to organizational success.
• Stability of Tenure of Personnel
– Long-term employment is important for the
development of skills that improve the
organization’s performance.
 Fayol’s Principles of Management (cont’d)

• Subordination of Individual Interest to the

Common Interest
– The interest of the organization takes precedence
over that of the individual employee.
• Esprit de corps
– Comradeship, shared enthusiasm foster devotion
to the common cause (organization).
 Behavioral Management Theory

• Behavioral Management
– The study of how managers should behave to
motivate employees and encourage them to
perform at high levels and be committed to the
achievement of organizational goals.
– Focuses on the way a manager should personally
manage to motivate employees.
 Behavioral Management

• Mary Parker Follett

– An influential leader in early managerial theory
– Held a horizontal view of power and authority in
organizations
• Suggested workers help in analyzing their jobs for
improvements—the worker knows the best way to
improve the job.
• If workers have relevant knowledge of the task, then
they should control the task.
 Theory X and Theory Y

• Douglas McGregor proposed the two different

sets of assumptions about workers.
– Theory X assumes the average worker is lazy,
dislikes work and will do as little as possible.
• Managers must closely supervise and control through
reward and punishment.
– Theory Y assumes workers are not lazy, want to do
a good job and the job itself will determine if the
worker likes the work.
• Managers should allow workers greater latitude, and
create an organization to stimulate the workers.
Theory X versus Theory Y
 Management Science Theory

• An approach to management that uses rigorous

quantitative techniques to maximize the use of
organizational resources.
– Quantitative management—utilizes linear programming,
modeling, simulation systems.
– Operations management—techniques to analyze all
aspects of the production system.
– Total Quality Management (TQM)—focuses on improving
quality throughout an organization.
– Management Information Systems (MIS)—provides
information about the organization.
Organizational Environment Theory

• Organizational Environment
– The set of forces and conditions that operate
beyond an organization’s boundaries but affect a
manager’s ability to acquire and utilize resources.
 The Open-Systems View

• Open System
– A system that takes resources for its external
environment and converts them into goods and
services that are then sent back to that
environment for purchase by customers.
– Inputs: the acquisition of external resources.
– Conversion: the processing of inputs into goods
and services.
– Output: the release of finished goods into the
environment.
The Organization as an Open System
 Other System Considerations

• Closed system
– A system that is self-contained and thus not affected by
changes occurring in its external environment.
– Often undergoes entropy and loses its ability to control
itself, and fails.
• Synergy
– Performance that results when individuals and
departments coordinate their actions
• Performance gains of the whole surpass the sum of the
performance of the individual components.
 Contingency Theory

• Contingency Theory
– The idea that the organizational structures and control
systems manager choose depend on—are contingent on—
characteristics of the external environment in which the
organization operates.
– Assumes there is no one best way to manage.
• The environment impacts the firm and managers must be flexible
to react to environmental changes.
– In rapidly changing organizational environments, managers
must find ways to coordinate different departments to
respond quickly and effectively.
Contingency Theory of Organizational Design
Mechanistic and Organic Structures

• Mechanistic Structure
– Authority is centralized at the top. (Theory X)
– Employees are closely monitored and managed.
– Can be very efficient in a stable environment.
• Organic structure
– Authority is decentralized throughout the
organization. (Theory Y)
– Tasks and roles are left ambiguous to encourage
employees to react quickly to changing
environment.