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about various types of training: low-rigor training (where individuals are exposed to critical information but
are not necessarily actively engaged in their learning) and high-rigor training (methods of training where
participants are much more actively engaged in the training process). You also learned that multinationals can
also provide training before someone goes on an international assignment or while someone is already on the
assignment.
6.6 Strategies for Expanding Globally
6. What are the main strategies that companies can use to go international?
As companies explore expanding into international markets, they adopt one of three main strategies, each of
which has its advantages and disadvantages depending on the company’s and country’s characteristics. The
three strategies are 1) the global strategy, in which all operations and activities are managed fairly similarly
worldwide; 2) the regional strategy, in which the multinational adapts activities and operations to regional
requirements; and 3) the local strategy, in which the company’s operations are adapted to fit some specific
countries.
6.7 The Necessity of Global Markets
7. Why might it be necessary for a company to go international, and how might it accomplish this goal?
In the final section of the chapter, you first read about the need for companies to go international and learned
that some markets present strong potential while others have floundered.
Companies can go international in many ways: exporting (an entry mode where a company sends a product to
an international market and fills the order like a domestic order), licensing and franchising (a contractual
agreement whereby a company is given the right to another company’s trademarks, know-how, and other
intangible assets in return for a royalty or a fee), strategic alliances (where two or more companies from
different countries enter into an agreement to conduct joint business activities), and foreign direct investment
(which involves a company investing in another country through the construction of facilities and buildings in
another country).
With each of these methods of entry, there is a trade-off between the cost of a means of entry and the amount
of control a company has over its operations. For example, exporting is usually the cheapest way to go
international but offers the company the least amount of control. Born globals do not have to think about how
or when to go global because they are international from the day they are created.
Chapter Review Questions
1. Why is international management a critical area that all management students should be aware of?
2. Briefly describe the main cultural dimensions of Hofstede’s framework. Where does the U.S. stand on
each of the dimensions?
3. What is power distance? What are the implications of power distance for how management is conducted
in different societies?
4. How is the GLOBE project different from the Hofstede project of cultural dimensions? What are the main
findings of the study?
5. What are country clusters? Pick any three clusters and discuss some of the leadership preferences for
each cluster.
6. Compare and contrast low-rigor versus high-rigor cross-cultural training. Provide some examples of each
type of training.
7. What is predeparture cross-cultural training? What is postarrival cross-cultural training? Which method
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works best and why?
8. What is a global strategy? When do companies prefer a global strategy?
9. Compare and contrast a global, regional, and local strategy. Discuss some advantages and disadvantages
of each method.
10. What are the various means available to companies to go international? When is an exporting strategy
most appropriate?
Management Skills Application Exercises
1. Your manager is currently considering negotiations in China, and given your international management
knowledge, you are asked for advice. How would you approach preparing to advise her? What type of
information will you provide to her?
2. You have a new product, and you are considering exporting the product. Visit the government’s export
website at https://www.export.gov/article?id=Why-Companies-should-export. What are some of the
key issues to take into consideration when exporting?
3. You are in charge of HR in your company, and the company will soon need to send an expatriate to Japan.
You will need to design a training program to better prepare your employee. What type of training
program will you provide? What essential elements will the program include?
4. You are considering investing in Saudi Arabia and know that the business culture there is influenced by
religion. Using your knowledge of Islam, what should you expect? How can you better prepare for the
investment?
5. You have designed a new surfboard that presents significant advantages over current models. How can
you determine whether you are ready to launch your company as a born global?
Managerial Decision Exercises
1. You are the CEO of a company that produces high-end laptops for gaming. You have heard that there is
interest in your product from international customers. You need to decide how to enter the international
market. What issues do you take into consideration when deciding among the different means of entry?
Which approach do you think would work best?
2. Visit Hofstede’s cultural dimensions website at https://www.hofstede-insights.com/models/national-
culture/. Pick two countries and compare them with the United States on the cultural dimensions. How
would you manage cultural differences in these countries?
3. Your company is interesting in exploring international expansion into Africa. Visit the African Union’s
website at https://au.int/en/. What are some of the countries included in the African Union? How easy
will it be to approach entering these markets?
4. Your company is interested in exploring investments in several sectors in Zimbabwe. Because of political
instability, you are obviously very reluctant given the risks of doing business in that country. Using data
from https://www.marsh.com/us/campaigns/political-risk-map-2017.html, discuss the concept of
political risk. When can you decide that investing in Zimbabwe is a good idea?
5. You will be sending one of your employees to several new countries for short-term assignments. You
need to decide between low-rigor cross-cultural training and high-rigor cross-cultural training. Which
method would work best? How would you decide between the two, and what elements would your
training involve?
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Critical Thinking Case
SAP and the American CEO of a German Multinational
SAP is a German multinational specializing in enterprise application software. The company was founded by
five engineers, and the company is now the world’s leading business software maker. Through its software,
SAP helps its customers streamline production processes. SAP also provides forecasting services to its
customers to help them predict customer trends. It currently has over 87,000 employees in 130 countries
assisting over 335,000 customers worldwide.
For the first time in its history, the company is currently headed by an American, Bill McDermott. McDermott’s
training was in sales, and that provided him with significant expertise to become SAP’s current CEO. In 2010,
SAP was facing declining revenue worldwide and needed a turnaround. Initially, McDermott was co-CEO with
Jim Hagemann Snabe, a Danish executive who was one of the company’s cofounders. The arrangement
worked well, and when Snabe retired in 2014, McDermott became CEO.
McDermott’s success came from the many changes he instituted to better adapt to cultural differences. For
instance, he quickly discovered that sales were not very effective in the United States because the salespeople
were more interested in focusing on the engineering aspects of SAP’s products at theexpense of listening to
American customers. Such experiences led to the development of more customer-focused innovation and a
more empathetic approach to customer needs, things McDermott strongly believes in.
In visiting his German counterparts, McDermott also saw other potential sources of cross-cultural conflict. For
instance, he saw that presentations in the United States were much more effective if the presentation quickly
engaged the audience and got them excited. In contrast, a German audience preferred a more disciplined,
fact-based presentation. McDermott also discovered key differences between the way U.S. companies are
managed in comparison to German companies. For example, he found that while U.S. public companies are
pressured by quarterly results, SAP was much more interested in 30-year cycles as opposed to 90-day stock
price movements.
McDermott’s success at managing cross-cultural differences is no surprise. When he was a teenager, he
purchased a distressed deli shop in Long Island. Long Island was already a melting pot of immigrants, and he
learned how to deal with a diverse group of customers. When he was first hired at 27 to sell Xerox copy
machines, he found that American customers do not have a long time for a sales pitch. He learned to be quick
and to the point. In contrast, in Asia, he found that you had to focus on developing relationships rather than
focus on the product. At the age of 29, he was asked to turn around business in Puerto Rico. There he found
employee morale to be very low because of cost-cutting measures. Rather than blindly implementing
American management, he listened to the local employees and implemented many measures to improve
operations. For instance, he worked to improve customer service. Most importantly, he reinstated a Christmas
party that had been canceled as a cost-cutting measure. This lifted morale and led to the turnaround.
McDermott has many important lessons for aspiring cross-cultural leaders. He advises that leaders be
respectful of cross-cultural differences. Additionally, because SAP has one global vision, he can have all
employees focus on that vision. He therefore also suggests that leaders and managers adopt a compelling
vision that can be readily shared with all employees. He also believes that the customer experience is what is
critical. Finally, he recommends that the savvy manager be human and empathetic and show humility.
Critical Thinking Questions
1. What are some of the sources of McDermott’s excellence at managing cross-cultural differences? How did
his experience managing a deli store at a young age help him develop cross-cultural management skills?
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2. What are some of the cross-cultural differences he discovered? Using your knowledge of culture, explain
some of these differences.
3. What is your assessment of his lessons for cross-cultural managers? Relate these lessons to the GLOBE
findings of the effective global leader.
Sources: Geoff Colvin, “ A CEO’s plan to defy disruption,” Fortune, November 2014, pp. 36; Michal Lev-Ram,
“Inside SAP’s radical make-over,” Fortune, April 9th, 2012, Issue 5, pp. 35-38; Bill McDermott, “SAP’s CEO on
being the American head of a German multinational,” Harvard Business Review, 2016, November,
https://hbr.org/2016/11/saps-ceo-on-being-the-american-head-of-a-german-multinational; SAP Corporate
Website https://www.sap.com/index.html.
Chapter 6 International Management 205
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	Chapter 6. International Management
	Chapter Review Questions
	Management Skills Application Exercises
	Managerial Decision Exercises
	Critical Thinking Case