you will apply decision-making to the process of international human resource management as you determine which of the four final applicants to hi

International Management

Culture, Strategy, and Behavior

Fred Luthans | Jonathan P. Doh

T E

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H E

D IT

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International Management Culture, Strategy, and Behavior

Tenth Edition

Jonathan P. Doh Villanova University

Fred Luthans University of Nebraska–Lincoln

INTERNATIONAL MANAGEMENT: CULTURE, STRATEGY, AND BEHAVIOR, TENTH EDITION

Published by McGraw-Hill Education, 2 Penn Plaza, New York, NY 10121. Copyright © 2018 by McGraw- Hill Education. All rights reserved. Printed in the United States of America. Previous editions © 2015, 2012, and 2009. No part of this publication may be reproduced or distributed in any form or by any means, or stored in a database or retrieval system, without the prior written consent of McGraw-Hill Education, including, but not limited to, in any network or other electronic storage or transmission, or broadcast for distance learning.

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Library of Congress Cataloging-in-Publication Data

Names: Luthans, Fred, author. | Doh, Jonathan P., author. Title: International management : culture, strategy, and behavior / Fred Luthans, University of Nebraska-Lincoln, Jonathan P. Doh, Villanova University. Description: Tenth Edition. | Dubuque: McGraw-Hill Education, [2018] | Revised edition of the authors’ International management, [2015] Identifiers: LCCN 2016055609| ISBN 9781259705076 (alk. paper) | ISBN 1259705072 (alk. paper) Subjects: LCSH: International business enterprises—Management. | International business enterprises—Management—Case studies. Classification: LCC HD62.4 .H63 2018 | DDC 658/.049—dc23 LC record available at https://lccn.loc.gov/2016055609

The Internet addresses listed in the text were accurate at the time of publication. The inclusion of a website does not indicate an endorsement by the authors or McGraw-Hill Education, and McGraw-Hill Education does not guarantee the accuracy of the information presented at these sites.

mheducation.com/highered

iii

Dedicated in Memory of Rafael Lucea, A Passionate Advocate for Global Business Education and Experience.

v

Preface

C hanges in the global business environment continue unabated and at an accelerated pace. Many surprising and difficult-to-predict developments have rocked global peace and economic security. Terrorism, mass migration, the United Kingdom’s exit from the European Union, and the rise of anti-immigration political movements in Europe, the United States, and elsewhere have called into question assumptions about the direction of the global political economy. In addition, rapid advances in social media have not only accelerated globalization but also provided a means for those who seek political and economic changes to organize and influence their leaders for more responsible gover- nance, or, in some cases, advance a more narrow ideological agenda (see opening articles in Chapters 1 and 2). In addition, concerns about climate change and other environmen- tal issues have prompted companies, in conjunction with governments and nongovern- mental organizations, to consider alternate approaches to business and governance (see Chapter 3 opening article). Some of these developments have challenged longstanding beliefs about the power and benefits of globalization and economic integration, but they also underscore the interconnected nature of global economies. Although many countries and regions around the world are closely linked, important differences in institutional and cultural environ- ments persist, and some of these differences have become even more pronounced in recent years. The challenges for international management reflect this dynamism and the increasing unpredictability of global economic and political events. Continued growth of the emerging markets is reshaping the global balance of economic power, even though differences exist between and among regions and countries. Although many emerging markets continued to experience growth during a period when developed countries’ economies stagnated or declined, others, like Russia and Brazil, have faced major set- backs. Further, some developed economies, such as Greece, Italy, Spain, and Portugal, continue to face formidable challenges that stem from the European debt crisis that began in 2009. Low or negative interest rates reflect a “new normal” of slower-than-average growth among many global economies. The global political and security environment remains unpredictable and volatile, with ongoing conflicts in the Middle East and Africa and continuing tensions in Iran, North Korea, Iraq, and Afghanistan and elsewhere. Another crisis stemming from con- flict in Syria and elsewhere has resulted in mass migration—and broad dislocations— across North Africa and Southern, even Northern, Europe (see Chapters 1 and 2 for further discussion). On the economic front, the global trade and integration agenda seems stalled, largely due to domestic political pressures in Europe and North America. Although the Trans-Pacific Partnership (TPP), a proposed free-trade agreement including 12 coun- tries in the Americas and Asia, was concluded, its ratification in the United States is uncertain. Similarly, the fate of the Transatlantic Trade and Investment Partnership, which was still under negotiation at the time of this writing, is also unclear.   As noted above, the advent of social networking has transformed the way citizens interact; how businesses market, promote, and distribute their products globally; and how civil society expresses its concerns that governments provide greater freedoms and accountability. Concurrently, companies, individuals, and even students can now engage in broad “mass” collaboration through digital, online technology for the development of new and innovative systems, products, and ideas. Both social networking and mass col- laboration bring new power and influence to individuals across borders and transform

vi Preface

the nature of their relationships with global organizations. Although globalization and technology continue to link nations, businesses, and individuals, these linkages also high- light the importance of understanding different cultures, national systems, and corporate management practices around the world. The world is now interconnected geographically, but also electronically and psychologically; as such, nearly all businesses have been touched in some way by globalization. Yet, as cultural, political, and economic differ- ences persist, astute international managers must be in a position to adapt and adjust to the vagaries of different contexts and environments. In this new tenth edition of International Management, we have retained the strong and effective foundations gained from research and practice over the past decades while incorporating the important latest research and contemporary insights that have changed the context and environment for international management. Several trends have emerged that pose both challenges and opportunities for international managers. First, more nationalistically oriented governments and/or political movements have emerged in many regions of the world, challenging previous assumptions about the benefits and inevitability of globalization and integration. Second, while emerging markets continue to rise in importance, some—such as China and India—have fared much better economically than others—such as Brazil and Russia. Third, aging popu- lations and concerns about migration have challenged many developed country govern- ments as they wrestle with these dual pressures. Fourth, social media and other forms of electronic connectivity continue to facilitate international business of all sorts; how- ever, these connection go only so far, with many barriers and limitations imposed by governments.  Although we have extensive new, evidence-based material in this edition, we continue to strive to make the book even more user-friendly and applicable to prac- tice. We continue to take a balanced approach in the tenth edition of International Management: Culture, Strategy, and Behavior. Whereas other texts stress culture, strategy, or behavior, our emphasis on all three critical dimensions—and the interac- tions among them—has been a primary reason why the previous editions have been the market-leading international management text. Specifically, this edition has the following chapter distribution: environment (three chapters), culture (four chapters), strategy (four chapters), and organizational behavior/human resource management (three chapters). Because the context of international management changes rapidly, all the chapters have been updated and improved. New real-world examples and research results are integrated throughout the book, accentuating the experiential relevance of the straightforward content. As always, we emphasize a balance of research and application. For the new tenth edition we have incorporated important new content in the areas of the emergence and role of social media as a means of transacting business and mobi- lizing social movements, the global pressures around migration, the role of the “sharing” economy as represented by companies such as Uber, and other important global themes. We have incorporated the latest research and practical insights on pressure for MNCs to adopt more sustainable practices, and the strategies many companies are using to dif- ferentiate their products through such “green” management practices. We have updated discussion of a range of contemporary topics, including continued exploration of the role of the comprehensive GLOBE study on cross-cultural leadership. A continuing and relevant end-of-chapter feature in this edition is the “Internet Exercise.” The purpose of each exercise is to encourage students to use the Internet to find information from the websites of prominent MNCs to answer relevant ques- tions about the chapter topic. An end-of-book feature is a series of Skill-Building and Experiential Exercises for aspiring international managers. These in-class exercises represent the various parts of the text (culture, strategy, and behavior) and provide hands-on experience.

Preface vii

We have extended from the ninth edition of International Management the chap- ter-opening discussions called “The World of International Management” (WIM), based on very recent, relevant news stories to grab readers’ interest and attention. Many of these opening articles are new to this edition and all have been updated. These timely opening discussions transition the reader into the chapter topic. At the end of each chapter, there is a pedagogical feature that revisits the chapter’s subject matter: “The World of International Management—Revisited.” Here we pose several discussion questions based on the topic of the opening feature in light of the student’s entire reading of the chapter. Answering these questions requires readers to reconsider and to draw from the chapter material. Suggested answers to these “WIM—Revisited” discussion questions appear in the completely updated Instructor’s Manual, where we also provide some multiple-choice and true-false questions that draw directly from the chapters’ World of International Management topic matter for instructors who want to include this material in their tests. The use and application of cases are further enhanced in this edition. All cases have been updated and several new ones have been added. The short within-chapter country case illustrations—“In the International Spotlight”—can be read and dis- cussed in class. These have all been revised and three have been added—Cuba, Greece, and Nigeria. In addition, we have added an additional exercise, “You Be the Interna- tional Management Consultant,” that presents a challenge or dilemma facing a com- pany in the subject country of the “Spotlight.” Students are invited to respond to a question related to this challenge. The revised or newly added “Integrative Cases” positioned at the end of each main part of the text were created exclusively for this edition and provide opportunities for reading and analysis outside of class. Review questions provided for each case are intended to facilitate lively and productive writ- ten analysis or in-class discussion. Our “Brief Integrative Cases” typically explore a specific situation or challenge facing an individual or team. Our longer and more detailed “In-Depth Integrative Cases” provide a broader discussion of the challenges facing a company. These two formats allow maximum flexibility so that instructors can use the cases in a tailored and customized fashion. Accompanying many of the in-depth cases are short exercises that can be used in class to reinforce both the sub- stantive topic and students’ skills in negotiation, presentation, and analysis. The cases have been extensively updated and several are new to this edition. Cases concerning the controversies over drug pricing, TOMS shoes, Russell Athletics/Fruit of the Loom, Euro Disneyland and Disney Asia, Google in China, IKEA, HSBC, Nike, Walmart, Tata, Danone, Chiquita, Coca-Cola, and others are unique to this book and specific to this edition. Of course, instructors also have access to Create (www.mcgraw-hill- create.com), McGraw-Hill’s extensive content database, which includes thousands of cases from major sources such as Harvard Business School, Ivey, Darden, and NACRA case databases. Along with the new or updated “International Management in Action” boxed appli- cation examples within each chapter and other pedagogical features at the end of each chapter (i.e., “Key Terms,” “Review and Discussion Questions,” “The World of Interna- tional Management—Revisited,” and “Internet Exercise”), the end-of-part brief and in- depth cases and the end-of-book skill-building exercises and simulations in the Connect resources complete the package. International Management is generally recognized to be the first “mainstream” text of its kind. Strategy casebooks and specialized books in organizational behavior, human resources, and, of course, international business, finance, marketing, and eco- nomics preceded it, but there were no international management texts before this one, and it remains the market leader. We have had sustainability because of the effort and care put into the revisions. We hope you agree that this tenth edition continues the tradition and remains the “world-class” text for the study of interna- tional management.

viii Preface

McGraw-Hill Connect®: connect.mheducation.com

Continually evolving, McGraw-Hill Connect® has been redesigned to provide the only true adaptive learning experience delivered within a simple and easy-to-navigate environ- ment, placing students at the very center.

∙ Performance Analytics—Now available for both instructors and students, easy-to-decipher data illuminate course performance. Students always know how they’re doing in class, while instructors can view student and section performance at a glance.

∙ Personalized Learning—Squeezing the most out of study time, the adaptive engine within Connect creates a highly personalized learning path for each student by identifying areas of weakness and providing learning resources to assist in the moment of need.

This seamless integration of reading, practice, and assessment ensures that the focus is on the most important content for that individual.

Instructor Library The Connect Management Instructor Library is your repository for additional resources to improve student engagement in and out of class. You can select and use any asset that enhances your lecture. To help instructors teach international management, this text is accompanied by a revised and expanded Instructor’s Resource Manual, Test Bank, and PowerPoint slides, all of which are in  the  Connect  Library.

Acknowledgments

We would like to acknowledge those who have helped to make this book a reality. We will never forget the legacy of international management education in general and for this text in particular provided by our departed colleague Richard M. Hodgetts. Special thanks also go to our growing number of colleagues throughout the world who have given us many ideas and inspired us to think internationally. Closer to home, Jonathan Doh would like to thank the Villanova School of Business and its leadership, especially Provost Pat Maggitti, Interim Dean Daniel Wright, Dean Joyce Russell, Interim Vice Dean Wen Mao, and Herb Rammrath, who generously endowed the Chair in International Business Jonathan now holds. Also, for this new tenth edition we would like to thank Ben Littell, who did comprehensive research, graphical design, and writing to update chapter material and cases. Specifically, Ben researched and drafted chapter opening World of International Management features, developed a number of original graphics, and provided extensive research assistance for other revisions to the book. Allison Meade researched and drafted the Chapter 4 World of International Management feature on “Culture Clashes in Cross- Border Mergers and Acquisitions.” Fred Luthans would like to give special recognition to two international management scholars: Henry H. Albers, former Chair of the Manage- ment Department at the University of Nebraska and former Dean at the University of Petroleum and Minerals, Saudi Arabia, to whom previous editions of this book were dedicated; and Sang M. Lee, former Chair of the Management Department at Nebraska, founding and current president of the Pan Pacific Business Association, and close col- league on many ventures around the world over the past 30 years.  In addition, we would like to acknowledge the help that we received from the many reviewers from around the globe, whose feedback guided us in preparing the tenth edition of the text. These include

Joseph S. Anderson,  Northern Arizona University Chi Anyansi-Archibong,  North Carolina A&T State University Koren Borges,  University of North Florida

Lauryn De George,  University of Central Florida Jae Jung, University of Missouri at Kansas City Manjula S. Salimath,  University of North Texas

Preface ix

Thomas M. Abbott, Post University Yohannan T. Abraham, Southwest Missouri State University Janet S. Adams, Kennesaw State University Irfan Ahmed, Sam Houston State University Chi Anyansi-Archibong, North Carolina A&T State University Kibok Baik, James Madison University R. B. Barton, Murray State University Lawrence A. Beer, Arizona State University Koren Borges, University of North Florida Tope A. Bello, East Carolina University Mauritz Blonder, Hofstra University Gunther S. Boroschek, University of Massachusetts–Boston Charles M. Byles, Virginia Commonwealth University Constance Campbell, Georgia Southern University Scott Kenneth Campbell, Georgia College & State University M. Suzanne Clinton, University of Central Oklahoma Helen Deresky, SUNY Plattsburgh Dr. Dharma deSilva, Center for International Business Advancement (CIBA) David Elloy, Gonzaga University Val Finnigan, Leeds Metropolitan University David M. Flynn, Hofstra University Jan Flynn, Georgia College and State University Joseph Richard Goldman, University of Minnesota James Gran, Buena Vista University Robert T. Green, University of Texas at Austin Annette Gunter, University of Central Oklahoma Jerry Haar, Florida International University–Miami Jean M. Hanebury, Salisbury State University Richard C. Hoffman, Salisbury State University Johan Hough, University of South Africa Julie Huang, Rio Hondo College Mohd Nazari Ismail, University of Malaya Steve Jenner, California State University–Dominguez Hills James P. Johnson, Rollins College Marjorie Jones, Nova Southeastern University Jae C. Jung, University of Missouri–Kansas City

Ann Langlois, Palm Beach Atlantic University Robert Kuhne, Hofstra University Christine Lentz, Rider University Ben Lever III, College of Charleston Robert C. Maddox, University of Tennessee Curtis Matherne III, East Tennessee State University Douglas M. McCabe, Georgetown University Jeanne M. McNett, Assumption College Lauryn Migenes, University of Central Florida Alan N. Miller, University of Nevada, Las Vegas Ray Montagno, Ball State University Rebecca J. Morris, University of Nebraska–Omaha Ernst W. Neuland, University of Pretoria William Newburry, Rutgers Business School Yongsun Paik, Loyola Marymount University Valerie S. Perotti, Rochester Institute of Technology Richard B. Peterson, University of Washington Suzanne J. Peterson, University of Nebraska–Lincoln Joseph A. Petrick, Wright State University Juan F. Ramirez, Nova Southeastern University Richard David Ramsey, Southeastern Louisiana University Owen Sevier, University of Central Oklahoma Mansour Sharif-Zadeh, California State Polytechnic University–Pomona Emeric Solymossy, Western Illinois University. Jane H. Standford, Texas A&M University–Kingsville Dale V. Steinmann, San Francisco State University Randall Stross, San Jose State University George Sutija, Florida International University Deanna Teel, Houston Community College David Turnipseed, University of South Alabama–Mobile Katheryn H. Ward, Chicago State University Li Weixing, University of Nebraska–Lincoln Aimee Wheaton, Regis College Marion M. White, James Madison University Timothy Wilkinson, University of Akron George Yacus, Old Dominion University Corinne Young, University of Tampa Zhe Zhang, University of Central Florida–Orlando Anatoly Zhuplev, Loyola Marymount University

Our thanks, too, to the reviewers of previous editions of the text:

Finally, thanks to the team at McGraw-Hill who worked on this book: Susan Gouijnstook, Managing Director; Anke Weekes, Executive Brand Manager; Laura Hurst Spell, Senior Product Developer; Erin Guendelsberger, Development Editor; Michael Gedatus, Market- ing Manager; and Danielle Clement, Content Project Manager. Last but by no means least, we greatly appreciate the love and support provided by our families.

Fred Luthans and Jonathan P. Doh

New and Enhanced Themes

∙ Thoroughly revised and updated chapters to reflect the most critical issues for international managers.

∙ Greater attention to demographic trends and human mobility, underscoring the importance of aging work forces, migration, culture, and global talent management.

∙ Focus on global sustainability and sustainable management practices and their impact on international management.

∙ New or revised opening World of International Management (WIM) features written by the authors on current international management challenges; these mini-cases were prepared expressly for this edition and are not available elsewhere.

∙ Discussions of the rise of global terrorism, the migrant crisis, the growing role of social media in international transactions, and many other contemporary topics presented in the opening chapter and throughout the book.

∙ New and updated discussions of major issues in global ethics, sustainability, and insights from project GLOBE and other cutting-edge research.

∙ Greater emphasis on major emerging regions, economic challenges in major countries such as Brazil and Russia, and specific case illustrations on how companies are managing these challenges.

Thoroughly Revised and Updated Chapter Content

∙ New or revised opening WIM discussions on topics including the global influences of social media using the case of Snap- chat; the role of social networking in political change in the Middle East; sustainability as a  global competitive advantage using examples of Patagonia, Tesla, and Nestlé; and cultural challenges in global mergers and ac

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