Tuesday, October 25, 2011

Risk Impact of Global Communications

            There are significant communication risks inherent to multinational corporations’ business operations, some of which include data security, logistical, legal and political issues, and the digital divide/21stCentury skills. These risks can threaten the success of the business relationships in the global business world (Wei, O’Connell, Loho-Noya, 2010).      
Digital risk, “a term describing the risks arising from increased dependency on information technology (IT) systems and digital processes,” (Digitally challenged, 2005) is today a major concern for multinational corporations. IT risk is one of the most significant threats posed to international corporations’ operations, with 48% of senior risk managers reporting it represents a high or very high threat to their businesses (digitally challenged, 2005). Many firms have reported significant financial damage due to security breaches such as hacking. Almost 60% have suffered financial losses as a result of major system failure, with many experiencing three or more outages within a year.  55% reported that the sophistication of hackers and other cyber criminals as a major difficulty in managing digital risk. The emergence of new, organized attacks on corporations combined with increasingly professionalized hackers means the cost of security breaches will continue to grow (Digitally challenged, 2005).
            In addition, mobile workforces are expanding the risks. Remote working, wireless networking, is adding significantly to their exposure to electronic threats. Traditional security solutions, such as firewalls, are becoming less effective as more employees communicate using open networks and carry sensitive data on portable devices. Outsourcing is adding to the burden as well. The risk is significant enough that 69% of chief risk officers are now involved in the selection of an outsourcing provider (Digitally challenged, 2005).
            In emerging countries, the rapid adoption of communication technology such as the internet is creating opportunities for these countries.  A good example of this is India. India is now a major player in software development. The internet played a key role in enabling this transformation by “collapsing geographic distances, allowing India’s talent to compete on the same footing as programmers in the established economies” (Fonseca, 2010). This” flattening of the world” has allowed everyone to compete globally.  Many countries are making strides to address the “21st Century skills” challenge. The Economist clearly defined the problem: “. . . as the price of telecommunications and computers go down, the real reason why the poor will not have access will be evident: They lack the skills to exploit it effectively” (as cited in Fonseca, 2010). Another example is Uruguay. They have provided each student with a laptop to support learning skills. Costa Rica has used technology-enhanced learning for over two decades. The impact is evident: Costa Rica has been able to attract important technology-related foreign direct investment. In fact, today it is one of the leaders in the export of high-tech products in Latin America. This country’s leaders were convinced that the digital divide must be bridged. Even though some countries are tackling the problem, this “digital gap” still stands as an important risk for multinational companies (Fonseca, 2010).
Of course, new opportunities offered by the use of this technology also generate new risks and vulnerabilities caused by a lack of cyber security. For example, 95% of email traffic in developing countries is spam. This level of spam discourages people from using email and reduces user confidence in any online activity. Multinational corporations that are seeking to do business in such countries, either by outsourcing or investing, have to be certain that the information and communication technology-based capabilities they require are going to be available and secure (Brechbuhl, Bruce, Dynes and Johnson, 2010).  
            Intellectual property (IP), patents, trademarks, copy-rights, and trade secrets, is another risk associated with multinational corporations. Some countries have limited IP regulations and some countries have regulations in place but court enforcement is poor. Plagiarism or copyright infringement in the US is viewed as “borrowing from the best” or “copying with pride” in some countries.  Peter Richardson, Pfizer’s general patent counsel, reported “China doesn’t have a history of patent enforcement. They’ve enacted laws that provide for patent protection, but not many cases have been litigated.” (Cherkis, Meyer, 2003). Argentina’s courts favor their own companies. Japan’s patent law required that companies provide “appropriate compensation” for discoveries made by employees and there have been several high-profile lawsuits involving this requirement.
Mitigating the risks includes focusing on the contract between the client and host country and developing an effective relationship. Being aware of issues before negotiating a contract is a key issue. Country-analysis, “the study of conditions, situations and events that might impact favorably or unfavorably on conducting business or investing in a country,” (Calhoun, 2005) has become a common analytical process to identify risks associated with the host country. Factors that are considered include but not limited to trade, monetary policy, property rights, regulation, black market, inflation, socioeconomic conditions, bureaucratic quality, political risk, economic performance, credit rating, access to bank finance, access to short-term finance, access to capital markets, discount on forfeiting, wage and price policies, corruption, law and order and ethnic tensions (Calhoun, 2005). It is clear that the due diligence process becomes a critical factor. Vigorous enforcement of the IP by both countries is extremely important. Attempts to educate a local culture can be difficult but it has to be accomplished. Patience is required as change will be a long process. Cooperation between security and business groups moving to emerging countries helps the corporation to be proactive in managing risks and threats. Effective staff loyalty-building is one way to protect intellectual property. One study showed that 97% of the businesses surveyed took measures to improve personnel loyalty. The most popular method, 84% of the companies, was the use of financial incentives. About 80% of the businesses offered their employees training opportunities or other job development related incentive. Other methods use technical protection. Some common methods include coding or scrambling the information so that it can only be decoded and read by someone who has the correct decoding key (encryption), security keys (dongles), or making program more difficult to reverse engineer (obfuscation). Technical protection can also mean incorporation of specific ID codes into software programs or other documents. Such codes can be used to prove the copyright (Paallysaho, Kuusisto, 2011).  The old adage “what gets checked gets done” should not be forgotten. Compliance checks are an integral component to risk management. Repeated third party security audits are recommended (Wei et al., 2010). Common controls to minimize risk include defining policies, responsibilities, and punishments or penalties in the contract. Consequences of non-compliance can include corporation fines up to $1,000,000, individual fines up to $250,000.  Other violations can include denied export privileges, excluded from trade and fines (Martinez, 2007). Out of necessity, corporations have adopted a wide variety of mechanisms to minimize the loss of their IP.
Another risk involves societal cultural differences. Problems that occur when firms from different countries join forces can cause alliance instability. This is evident in the way high-context and low-context cultures communicate. When communicating between cultures, it is important to understand what type of culture you are as well as what culture you are communicating with. High-context cultures use more than just words to send a message. Anthropologist Edward T. Hall described high-context cultures as relational, intuitive, collectivist, and contemplative. The Middle East, Asia, Africa, and South America are considered High-Context. Low-Context regions are North America and Western Europe, where logic, individual, linear, and action-oriented communication is valued.
A leader with a global mindset will understand that high-context cultures put great importance on harmony and trust. According to Robbins (2007) “What may appear, to an outsider, as casual and insignificant conversation is important because it reflects the desire to build a relationship and create trust” (p. 390). When relationships are built they are built around these concepts. Low-context cultures rely less on trust and more on contracts and the legal meaning of words. Low-context cultures view contracts as the logical end of a negotiation while high-context cultures may view them as a lack of trust. 
Other cultural barriers include semantics, and connotations. When communicating, a corporation must be aware of the meanings or implied meaning of words being used. An example of not knowing how to translate the meaning and just translating the words was the “Got Milk?” advertisements. When the advertising billboards were put up in Mexico, “Got Milk?’ translated into “Lactating?” The same can be said about hand signals. What Americans would use as an “OK” sign is equivalent to giving someone the middle finger in many Islamic countries (Robbins, 2007, p. 389).
Coordination and cooperation depend on communication, but communication is ineffective unless participants “share a system of meaning so that the actions each undertakes in response to discussions with others closely resembles the expectations of all the discussants” (Murray, 2000). Without this shared understanding, coordination and cooperation become impossible.  When understanding is widely shared, it is called “strong culture.” This corporate culture can be passed across ethnic and national cultures and can be developed throughout a multinational firm.  This strong culture can be achieved by participants “shared into the culture; they must be transformed from participants into colleagues” (Murray, 2000). The following  are the necessary steps to develop colleagues: Interrogation – intensive interview process prior to hiring that identifies the cultural-fit of the potential participant; instruction – business cannot select for technical skills with the same determination that they used in the cultural fit, thus, training recruits will be necessary; information – feedback. This feedback provided to participants needs to be fast and unambiguous so that the participant can understand the implications for subsequent behavior; inspection – participants must be inspected to ensure they are using the information to further enhance performance. Rewards for the participant can be tied to this element; involvement and inclusion – as the participant accrues experience and becomes effective, capitalize on that by involving him or her in increasingly important decisions that have payoffs that are broader in their organizational scope. Alan Murray forecasted in his book, “If each of these steps is completed successfully, the business will comprise a group of colleagues rather than an atomized assembly of individual contributors” (Murray, 2000).
Increasingly, the design of business organizations reflects the balance needed between the social and legal context in which the business must operate, the overcoming of technological constraints that constitutes a key competitive advantage of the business.  Social and legal constraints compel the business to be locally responsive, while overcoming technological constraints promotes the pursuit of global success.  Achieving a global presence requires sophisticated organizational and cultural knowledge. It is important to balance different aspects of risk management to capture the holistic character of managing an international corporation.

Brechbuhl, H., Bruce, R., Dynes, S., & Johnson, M. (2010). View From Practice Protecting Critical Information Infrastructure: Developing Cybersecurity Policy. Information Technology for Development . Retrieved from EBSCO.
Calhoun, M. (2005). Challenging Distinctions: Illusions of Precision Assessing risks of Doing business in Host Countries. Retrieved from EBSCO.
Cherkis, C., & Meyer, P. (2003). Sharing IP Sharing Risk. Pharmaceutical Executive .
Digitally challenged. (2005). Economist Intelligence unit business Europe .Retrieved from Business Source Premier.
Fonseca, C. (2010). The Digital Divide and the Cognitive Divide: Reflections on the Challenge of Human Development in the digital Age. Information Technologies and International Development .Retrieved from EBSCO.
Martinez, M. (2007). Risk Management in restricted Countries. Intel Technology Journal .
Murray, A. (2000). Strategic choice under Knowledge Competition. In Thunderbird on Global Business Strategy (p. Chapter 3). Retrieved from Phoenix University ebook library.
Paallysaho, S., & Kuusisto, J. (2011). Informal Ways to Protect Intellectual Property IIP) in KIBS Business. Innovation: Management, Policy and Practice .Retrieved from EBSCO.
Robbins, S., & Judge, T. (2007). Organizatinal Behavior. Upper Saddle River, NJ: Prentice Hall.
Wei, J., O'Connell, J., & Loho-Noya, M. (2010). Information Technology Offshore Outsource Security Risks and Safeguards. Journal of Information, Privacy and Security .Retrieved from EBSCO.

Monday, July 25, 2011

A Womans Place in Globalization

Globalization has made it increasingly important to be able to comprehend and assess the risk impact of events occurring in the international business environment. It is important that multinational corporations take into consideration “cultural risks” that can lead to ineffectiveness. With United States multinational corporations deriving 43% of their revenue from overseas and international investment passing the $800 billion mark, (Thiederman, 2003) knowing how to relate effectively across cultural lines has become a necessary skill for success. American multinational corporations are facing conflicting issues as they staff their international divisions. An increasing number of managers are women and many wish to attain greater status in the firm by accepting positions that will offer visibility and challenge. This interest is legally protected under the provisions of the Civil Rights Act of 1991. However, multinational corporations must still deal with local cultural mores, customs and laws. Sometimes these local traditions differ from, or can be in absolute contrast to, American practices. To reconcile these facts while meeting staffing requirements can only add to the challenges faced by multinational corporations.
In order to understand female expatriates’ reception in global business, it is necessary to understand the various cultures view of women. Millions of women live in cultures where centuries of social and religious laws, customs and traditions have established almost insurmountable barriers to education, jobs, and healthcare, as well as depriving women of their political and civil rights. American women traveling on business need to understand the situation of women in other cultures. It is often these cultural and traditional biases that American expatriates will face when conducting business in foreign countries. In their 1994 review of 21 countries spanning four continents, Researchers Nancy Adler and Dafna Izraeli report, due to changes in societal patterns, there have been significant increases in women in management in the world. Despite these advances, they also found that in most countries men continue to control the economic and political power and to dominate in professional management roles (Adler, 1994).  An article in Re:locate Magazine (2007) reported that just under 17% of expatriates are female.   This is an increase from Nancy Adler’s study (1984) where 3% were female. There is no doubt that women have made progress into the male-dominated expatriate world. However, the consulting firm The Grant Thornton International study showed that, in terms of gender balance, in fact, the world’s largest economies are not keeping up with the rest of the world; only 16% of senior executive roles in the Group of Seven (the world’s seven largest economies) were held by women, compared with a global average of 20% (O’Donnell, 2011). An American working overseas for a United States corporation enjoys the same equal employment opportunity protection as an American working within the United States. Title VII of the Civil Rights Act, however, does not apply to foreign operations that are not owned or controlled by an American employer. The overseas extension of civil rights protection is not universal or automatic. A corporation is not required to comply with title VII if compliance would cause the company to violate the law of the host country. For example, if a United States corporation has an operation in a foreign country that has statutes prohibiting the employment of women in management positions, Title VII would not apply (Feltes, Robinson, Fink, 1993). The company would be expected to follow the law of the host country, and, thus, could not be liable for sex discrimination.
Another issue for female expatriates arises when local culture creates gender barriers that are not directly stated as national law. In such instances, Title VII would ensure the female expatriate to be eligible for the position even though such an assignment was contrary to the host country’s culture. The result could cause a decline of company and host country relations. This would be most probable if transferring United States equal employment philosophies is viewed as a form of “cultural imperialism” by the host country (Feltes et al., 1993).
            It is only practical for firms and women seeking expatriate assignment to investigate the reality of the foreign work environment for a female manager. A realistic assessment of the environment means that the expatriate can be appropriately prepared, and the firm can provide the needed support to allow for success. For example, if a woman will not be admitted to clubs where business is often conducted, she will need to develop alternative venues for making business contacts, and the firm should provide the necessary funding and contacts to accomplish this. The lack of training for personnel on expatriate assignments has been emphasized by many researchers as a problem common to most firms.  Another intervention that is needed is mentoring. In a study of successful professional women in the Americas found that, across all countries in the study, mentoring was a common experience for successful women. An overwhelming proportion of the successful women studied had been mentees (Linehan & Scullion, 2008).  Establishing the woman’s credibility is paramount. Tracey Wilen, in her article “Women Establishing Credibility in International Business,” lists pointers for establishing credibility:
·         Be Visible. Attend and host meetings between your company and your international counterparts.
·         Introductions are important, particularly for women. . . .Have yourself introduced by a higher-ranking person in your company who already knows the people with whom you will be dealing.
·         Make sure your business card indicates a distinctive title such as “Manager” or “Director.”
·         If someone appears confused about your name and rank, offer him another business card. This is a subtle way of reinforcing your title and ensuring acknowledgment of your participation as an active member at the meeting.
·         Women should lead business discussions where possible.
·         A female team leader may experience a problem establishing her credibility unless team members defer to her as the authority figure on the team. American men need to be aware that their tendency to jump in and answer questions, especially when a woman is speaking, undermines her authority and the team’s effectiveness.
·         Be professional. Present yourself in a sincere, confident, professional manner, both in appearance and speech, to create a good first impression. Do not come on too strong, but don’t defer when it is appropriate for you to respond. Deferring to age and position is, however, always acceptable for both sexes.
·         Be aware of women’s roles in other countries. If you understand where women are in their own corporate environment, it will give you insight into how the culture may perceive you. (Wilen, 2011)
In addition, establishing women’s networking groups will provide an excellent opportunity for women to offer support to other women in their companies. Personal networking can influence both the social and business range of international positions.
Some multinational corporations continue to fear that women might not be successful on an overseas assignment and that foreign cultures’ prejudices against them will cause them to be ineffective. Saskia Meckman, in her article “Making the Most of Your Assignment,” reported when multinational corporations promote expatriate women as their best qualified candidate for the job, countries that do not allow women in management positions will begin to take women expatriates more seriously. Strong and continued support from senior management is critical. Senior management should present women as an expert in the field or a valuable resource. This effort will help to appease the minds of host nationals (Meckman, 2002). Adler (1994) found that expatriates actually reported numerous benefits of being female. They described the advantage of being highly visible. Both foreign and local clients were curious about them, wanted to meet them, and remembered them after the first encounter. Some expatriates reported foreigners viewed them first as representative of a company, second as a citizen from where they originate, and last as women.  Research by Sinangil and Ones (2003), surveying expatriates currently working in Turkey, addressed the concern whether female expatriates can be successful in a cultural environment that may be perceived to be unfriendly to females by Western standards. They concluded that men and women expatriates on average were rated quite similarly in terms of their job performance and that employing more women in the international workforce would enhance the quality of workforce diversity (Hutchings, Metcalfe, Cooper, 2010).  “Foreign businessmen inevitably recognize the authority of expatriate women,” said Dianna Last of the American Graduate School of International Management. “We are accepted because our company has given us the power and position, and foreigners put aside the fact that we happen to be women. We are, in effect, treated like the third sex” (Reuters News Agency, 1999). Ms. Last recalled  a meeting at which Japanese officials initially addressed their questions only to male executives of a team she headed, “until they realized if they continued it would take months to get the work done instead of a few weeks, so they began talking directly to me”(Reuters News Agency, 1999). In fact, Nancy Adler’s research in 1984 is still relevant. She stated the assumption by multinational corporations that expatriate women would not be allowed to succeed as managers in those countries where the female is not allowed to participate, was incorrect. “Expatriate women are not seen as local women. The norms which may apply to local women are not generally applied to foreign women. This is especially true in cases in which the women are visually distinct from the local population” (Adler, 1984).
It is obvious the differences in culture between groups need to be identified and consciously addressed. If left unattended, they form unnecessary risks to the success of the corporation. It is critical that firms involved in international business take into consideration “cultural risks” which, if not consciously recognized, can lead to ineffectiveness. Women preparing for overseas positions face a precarious situation, more so than their male counterpart, because of the traditional gender barriers they face in countries outside of the United States. A corporation should sponsor reality training for managers who will be stationed abroad. The training should include culture, values, and traditions of the host country and its people and how these facts may affect the manager. Preparation will mitigate barriers that expatriate women face. Power structures do not change of their own accord. Women, in coordination with the corporate leadership initiatives, must continue to strive for parity and balance in the work force. The woman expatriate has been successful and will continue to be successful, even in the countries that present “cultural risks.”



Adler, N. (1994). Competitive Frontiers: Women Managing Across Borders. Journal of Management Development .
Adler, N. (1984). Women in International Management: Where are They? California Management Review .
Felts, P., Robinson, R., & Fink, R. (1993). American female expatriates and the Civil Rights Act of 1991: balancing legal and business interests. Retrieved from Business Horizons: http://muellerr.people.cofc.edu
Hutchings, K., Metcalfe, D., & Cooper, B. (2010). Exploring Abrab Middle eastern women's perceptions of barriers to, and facilitators of, international management opportunities. The International Journal of human Resource Management .
Linehan, M., & Scullion, H. (2008). The Development of Female Global Managers: the Role of mentoring and Networking. Journal of Business ethics , DOI 1007/s10551-007-9657-0.
Meckman, S. (2002). Making the Most of Your Assignment: Maximizing the Success of Women on Overseas Assignments. Retrieved from Expatrium Magazine: http://www.expatrium.com
O'Donnell, L. (2011). What Mancession? Number of Women Senior Managers Decreases Globally. Retrieved from The Glasshammer: http://www.theglasshammer.com
Reuters News Agency. (2007). Women denied key overseas posts, studies say female executives from North America said blocked by "unconscious" prejudice by bosses. Retrieved from The Globe and Mail: Lexis Nexis database
Shortland, S. (2007). The rise and rise of female expatriates. Retrieved from Re:locate Magazine: http://www.relocatemagazine.com
Sinangil, H., & Ones, D. (2003). Gender Differences in Expatriate Job Performance. Applied Psychology, , Business Source Premier database.
Stroh, L., Verma, A., & Valy-Drubn, S. (2000). Why are Women Left at Home: are They Unwilling to go on International assignments? Journal of World Business, Retrieved from: Business Source Premier database.
Thiederman, S. P. (2003). Global Business: Overcoming Cultural barriers to International Success. Retrieved from Opening Gateways to Understanding: http://www.thiederman.com
Wilen, T. (2011). Women Establishing Credibility in International Business. Retrieved from SearchMothers.com: http://www.searchmothers.com

Tuesday, June 7, 2011

Multinational Corporations and Ethics

Multinational corporations (MNC) do business in countries all over the world and have to deal with different beliefs of what is ethical and what is not ethical. In the United States it is considered unethical to treat women differently in the workplace, but in many Arab countries women do not even have the right to drive let alone manage a man. Many Asian countries work on a system where gifts are given as a relationship builder. These gifts could be considered bribes in the United States. The problem is, how do MNC operate in an ethical and legal environment in these different countries?
            To answer this question, two very different theories on ethics must be considered. First is the belief in universal ethical standards, and then ethical relativism. A universal ethical standard would incorporate beliefs that are considered universal to all societies. Examples are ethical norms forbidding killing each other, being truthful and not stealing from each other (Velasquez, pg 20). However, consideration must also be given to ethical relativism. While it is ok to bribe in some Asian and Arab cultures, it is not all right to do so in the United States of America. The question becomes: is it ok for an American NMC doing business in an Arab country to bribe? According to ethical relativism, it is ok.
“The MNC or businessperson who operates in several different countries, then, and who encounters societies with many different moral standards is advised by the theory of ethical relativism in this way: In one’s moral reasoning, one should always follow the moral standards prevalent in whatever society one finds oneself” (Valasquez, pg 19).
The old adage “When in Rome do as the Romans” is a simplified explanation of ethical relativism.
            Consideration must also be made when the ethical norms are in contrast with laws in the home country of the MNC. As an example, factory workers between the ages of 10 and 15 may not be considered unethical or illegal in some developing nations, but is both illegal considered unethical in the United States.  According to Ethical Relativism, if it is not illegal, and it is not unethical, then it is permissible. However, in the United States there are laws that state “if it is illegal in the United States, then you can be prosecuted for doing it in other countries even if it is not illegal there”. The Foreign Corrupt Policies Act of 1977 addresses some of these issues. It states that it is illegal to bribe foreign officials regardless of the ethical or legal status of the host country.
When a MNC decides to do business in a foreign country, it needs to look not just at the applicable laws, but at the social norms and the ethical standards if the country. While following the law is important so is operating in an ethical manor. Both the ethical standard of the United States and the standard of the foreign country need to be studied and understood. The highest ethical standard needs to be the standard that is followed.

Works Cited

Boutelle, J. (2004, May 6). Understanding Organizational Stakeholders for Design Success. Retrieved May 23, 2011, from http://www.boxesandarrows.com/view/understanding_organizational_stakeholders_for_design_success
Kubasek, N. &. (2009). The legal environment of business. A critical thinking approach (5th ed). Upper Saddle River, NJ: Pearson.
Lawler, J. (2008). US firms a role model for fair hiring standards, study says. Retrieved May 23, 2011, from http://esciencenews.com/articles/2008/07/07/us.firms.a.role.model.fair.hiring.standards.study.says
Velasquez, M. (2006). Business Ethics (6th ed). Uper Saddle River, NJ: Pearson.