Management Requirements through International Cooperation

Table of contents

Table of figures

1. The relevence of international management in the context of globalization

2. Basics of international cooperations and factors of influence in international relationships
2.1 Definitions and forms of international cooperations
2.2 Cultural influences on international cooperations: Definition of culture and classification by Hofstede
2.3 The importance of trust and communication between cooperation partners

3. Management requirements regarding the central management processes of international cooperations
3.1 The role of global managers: Skills and competencies
3.2 Planning, negotiating and controlling in an international business context
3.3 The Integration-Responsiveness-Framework of Bartlett/ Goshal as an organizational strategy
3.4 Global leadership behavior in international cooperations

4. The importance of cultural awareness in the management of international cooperations

Bibliography

Table of figures

Figure 1: Classification of international cooperation forms

Figure 2: Influence of culture on behavior and vice versa

Figure 3: Influence of culture, trust and communication on management processes

Figure 4: Planning and controlling in international cooperations

Figure 5: The Integration-Responsiveness-Framework

1. The relevence of international management in the context of globalization

Internationalization is an omnipresent phenomenon in our world today. No one thinks explicitly about internationalization when one buys a book at Amazon or goes to Mc Donald’s for lunch. These are only two examples for big multinational companies which are doing business worldwide. International trade and cross-border business connections have quite a long history. The first large trade network was the Hanseatic League in the Middle Ages which was located in North and Middle Europe. Now there are even bigger communities like the EU or the NAFTA.^[1] Beside these there are also political institutions like the OECD^[2], the World Bank or the World Trade Organisation (WTO) which influence and support worldwide business activities. But what does the term “international management” mean and why becomes it more and more important for us?

Management characterize the control and coordination activities concerning goal-oriented organizations.^[3] These activities occur in the first place in the domestic business of companies. But much more complex is the management in international business which is defined as “ the study of transactions taking place across national borders for the purpose of satisfying the needs of individuals and organizations.”^[4]

Very similar to the term “international management” is the term “globalization”. “Globalization is the worldwide trend of businesses expanding beyond their domestic boundaries.”^[5] Responsible for this trend is the growing together of the world. One reason therefor is that every single local economy has competitive advantages concerning the cost for the access to land, raw materials, capital and labor. Companies use this phenomenon to realize cost advantages all over the world. For example, producing labor intensive goods in China is cheaper than doing so in the United States because the cost of labor is different among the two countries. Another reason is the change in consumer behavior. In the last decades a homogeneous or global customer evolved with similar needs worldwide. That means for global enterprises that they can sell their products everywhere to anyone without a regard to national boundaries.^[6] The technological progress by the internet and enhanced transportation possibilities enforces the global distribution of products and services. Besides these economic and socio-economic reasons for globalization the enduring changes on the political world map have an influence on the world economy. Less Developed Countries and former formally centrally planned economies are nowadays integrated into the international economy.^[7]

After these brief introduction about the relevance of international management I will continue with the two central topics of my paper: international cooperations and manage-ment requirements in these cooperations. The second chapter will give attention to different forms, goals and risks of international cooperations. Furthermore I want to describe in which way “soft factors” like culture, trust and communication influence the management in international cooperations. In the third chapter these factors will be linked to the requirements that international managers must apply in the different management processes. This paper will end up with a conclusion and an outlook to the future of international cooperation management.

2. Basics of international cooperations and factors of influence in international relationships

2.1 Definition and forms of international cooperations

The term “cooperation” is very broad and unspecified in literature. Balling speaks of an “interfirm collaboration as a preliminary stage of concentration between companies.”^[8] The idea of international cooperations in the Anglo-American literature is very similar to the term “international management”. It can be defined consequentially as an interfirm collaboration across national borders.

When a company decides to extend their activities from the domestic market to inter-national markets it has to think about the different modes to enter the host market. There are many different opinions in the international business literature how to classify these entry modes and in which order they should be structured. As one can see in figure 1 I arranged the various entry modes concerning their degree of internationalization. I agree with Cullen who distinguishes between foreign direct investment (FDI) and cooperation. FDI is the highest stage of internationalization and means that a multinational company owns partly or wholly an operation in another country.^[9] The difference to a Joint Venture (JV) as one very important cooperation form is that there is not a new firm created by parent companies. But there are also other opinions, for example by Rugman/ Hodgetts who integrate JVs into the entry mode FDI.^[10] The cooperation forms itself can differ regarding the number, activity and involvement of the partners within the collaboration, the affilation to branches or industries or the number of areas in which the companies cooperate. The most wide-spreaded distinction is made between horizontal and vertical cooperations. Horizontal cooperations relate to the collaboration of partners belonging to the same market stage while in vertical cooperations companies belong to different stages.^[11]

illustration not visible in this excerpt

Figure 1: Classification of international cooperation forms

Source: Own illustration adapted from Woods (2001), p.195

If a domestic company wants to go international it has to consider the advantages and dis-advantages of an international cooperation or any other entry mode. I would like to elaborate on JVs and licensing as two very important cooperation forms and their benefits and risks more detailed in the following.

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^[1] North American Free Trade Agreement, foundet in 1994 by Canada, Mexiko and the USA

^[2] Organisation for Economic Co-operation and Development

^[3] Thomae (2002), p.17

^[4] Rugman/ Hodgetts (1995), p.4

^[5] Cullen (1999), p.3

^[6] Cullen (1999), p.19

^[7] Woods (2001), p.18

^[8] Balling (1997), p.13

^[9] Cullen (1999), p.159

^[10] Rugman/ Hodgetts (1995), p.64

^[11] Balling (1997), pp.39-42