Chapter Summary

14.1 Discuss the reasons for increasing business globalization.

The main reason for increasing globalization is to increase business, which is aided by the world becoming a global village where goods, ideas, services, and knowledge flow freely across national borders, creating greater demand for products. Barriers to trade have been minimized compared to historical norms, even though there is a series of trade blocs that operate in multiple countries. Barriers to transportation, communication, and culture have also lessened. But the biggest reason for globalization is to remain competitive.

14.2 Describe the five dimensions of Hofstede’s model of culture.

Power-distance is the degree to which societies accept that people will have different power because of their abilities and social status. Individualist cultures believe in the value of the individual and judge the individual, while collectivist cultures believe that the group is the unit of value in society, not the individual. Masculine (or assertive) societies value performance, winning, competition, and success, while feminine (or nurturing) societies value relationships between members and quality of life more than winning. High-uncertainty avoidance cultures will do whatever they can to minimize risks to members of the society, and low-uncertainty avoidance cultures will not try to mitigate these risks nearly as much. Finally, short-term societies focus on immediate or short-term outcomes, while long-term societies focus on saving for the future, thrift, and persistence.

14.3 Name the advantages and disadvantages of parent-country, host-country, and third-country nationals for international assignments.

Parent-country members usually know the organization better, know the strategy and structure, and communicate better. However, language, compensation issues, cultural barriers, and national laws on income may be disadvantages. Host-country nationals present advantages with respect to the language, culture, compensation issues, and local laws and regulations, but they may not have the company knowledge that is needed, may be less loyal to the firm, and could have problems communicating with the home office. Third-country nationals allow us to hire the best person for a job and may be less expensive in some cases. They may also share a language or similar culture with the host-country office. Disadvantages include host-country laws concerning third-party employees, income and other tax rules, and potential lack of knowledge of company procedures and culture.

14.4 Explain the two major types of training that you should generally provide before expatriate assignments.

The two types of training are cultural training and communication training. Cultural training shows the employee what culture shock is and how to manage it during an expatriate assignment. Inability to adapt to another culture is one of the major reasons that employees fail to complete foreign assignments. Communication training, including language training if necessary, helps employees overcome some of the problems associated with international assignments. Training in nonverbal and symbolic communication is especially important.

14.5 Define the options for compensation of expatriate workers.

The balance sheet approach is one of the most common methods. This is where the employee is paid their home salary, but allowances are provided to “balance” the different costs associated with the overseas assignment. Another option is split pay, where part of the compensation is paid based on the home-country norm and part is paid in the assignment-country currency to minimize exchange rate risk. We can also use a straight negotiation approach, where the compensation package is agreed to upfront; a localization approach, where compensation is based on the host-country standards; or a lump sum approach, where a set amount of money is given to the employee to use on unique expenses associated with an assignment to a particular country.