LAGOS CITY POLYTECHNIC E-LEARNINGSCHOOL OF MANAGEMENT AND BUSINESS STUDIES

DEPARTMENT OF BUSINESS ADMINISTRATION PROGRAMME: Higher National Diploma in Business Administration and

Management

COURSE TITLE: Comparative Management

COURSE CODE: BAM 326

CREDIT HOURS: 3 HOURS A WEEK

LECTURER: OBADIPE A.J.

PROGRAMME GOAL: This course is intended to provide students with understanding of analysis of management practices

in various environmental settings in order to identify the causes of differences and similarities in organizational results or performance.

OBJECTIVES:

At the end of this course, the students should be able to:

Understand the general overview of comparative management Understand the historical background and evolution of school of

management thoughts Understand various models/theories of comparative management Understand the concept of Globalization Understand the concept of competitive advantage and its various strategies.

COURSE OUTLINESChapter 1: OVERVIEW OF COMPARATIVE MANAGEMENT1.1 Comparative Management

1.2 Managerial Practices

1.3 Environmental Setting

1.4 Management Functions and Comparative Management

1.5 Business Functions and Relevance to Comparative Management

1.6 The Entrepreneur

1.7 International Business

1.8 Factors That Encourage A Company to Go Multinational

1.9 Types and Forms of The Multinational Company

1.10 Factors to Be Considered Before Starting An MNC

1.11 Problems Faced by MNC Mangers

1.12 Assignments

1.13 Quizzes

Chapter 2: DEVELOPMENT OF MANAGEMENT THOUGHT OR

SCHOOL OF THOUGHT

2.1 Classical School of Thought

2.2 The Behavioural School (1960s)

2.3 The Quantitative and Systems School

2.4 The Contingency Approach

2.5 Comparative Management (CPM) And Its Relationship to Schools of Thought

2.6 Assignments

2.7 Quizzes

Chapter 3: COMPARATIVE MANAGEMENT THEORIES AND MODELS

3.1 Introduction

3.2 Major Approaches In The Study Of Cpm

3.2.1 Socio-Economic Approach

3.2.2 The Ecological Approach

3.2.3 Koontz Model

3.2.4 The Behavioral Approach

3.2.5 The Eclectic Empirical Approach

3.3 Assignments

3.4 Quizzes

Chapter 4: INTERNATIONAL/COMPARATIVE MANAGEMENT IN

SELECTED COUNTRIES

4.1 Introduction

4.2 Japan

4.3 The United States of America

4.4 Germany

4.5 India

4.6 Saudi Arabia

4.7 Assignments

4.8 Quizzes

Chapter 5: GLOBALIZATION

5.1 What Is Globalization?

5.2 Positive Effect

5.3 Negative Effect

5.4 Assignment

5.5 Quizzes

Chapter 6: COMPETITIVE ADVANTAGE

6.1 Introduction

6.2 Strategic Competitive Advantage

6.3 Sustainable Competitive Advantage

6.4 Gains of Competitive Advantage

6.5 Other Strategies for Competitive Advantage

6.6 How Do You Create A Competitive Advantage?

6.7 Assignments

6.8 Quizzes

CHAPTER ONEOVERVIEW OF COMPARATIVE MANAGEMENT

1.1 COMPARATIVE MANAGEMENTin the main, comparative management provides a forum in which managerial practices in various environmental settings are analyzed with the objective of identifying the causes of differences and similarities in managerial behaviour and the attendant similarities and differences in organizational results or performances. From the above description, two terms need further explanation, namely, managerial practices and environmental setting.

1.2 MANAGERIAL PRACTICESManagerial practices refer to the way and manner managers perform their functional activities of planning, organizing, coordinating, motivating and controlling. Involves identifying the degree of efficiency and effectiveness with which these activities are performed in the dynamic business environment of various countries the world over.

1.3 ENVIRONMENTAL SETTINGThe environmental setting of a business organization refers to factors or forces (political, cultural, socio-economic, technological, educational etc.) that affect the growth and development of business in a locality. These factors become significant, in the sense that they affect business results and the business has little or no control over such factors. As a business grows, it takes wider areas and boundaries or a nation. At this point, the extent of management required to run the affairs is domestic, however, as the business grows beyond a point and extends to other countries the nature of the management changes too. The area of operation becomes international environment and the nature of administration then is described as international management. The elements of environment remain, political, technological, economic, cultural and social but the development, complexity assumes greater degrees and dimes

1.4 MANAGEMENT FUNCTIONS AND COMPARATIVE MANAGEMENTFunctions are what occupiers of posts are expected to do. Comparative management (CPM)- functions are usually "pressed through the analysis of activities that are expected to be performed during the international operations by managers. Such activities including decision making, staffing, planning, organizing, controlling etc., which are performed in special ways apparently different from that at the domestic level.

DECISION MAKINGManagers operating in an international environment have to choose a course of action from given alternatives in- order to achieve the goals of the organization. In the process, conscious recognition is given to the effects of political differences or diplomatic agreements, disparity in natural endowments, supply of. skilled manpower for technological progress, cultural and

religious constraints and others that make joint venture, business integration and management possible, but complex, in different countries.

STAFFINGStaffing is the process by which international managers select train and promote both indigenous and expatriate employees. Unique differences in cost of jiving, salary scales, languages and currencies, quality and level of education can create problems in the employment processes in the different countries.ORGANISINGOrganizing is the arrangement of men equipment and materials so that jobs are allocated, and structure determined. It usually involves creating international structures that make domestic activities merge with- that of international, practices. It may require the division of organization by product, by grid or matrix and by geographical location.PLANNINGPlanning involves anticipation of the future of men and women and the organization and identifying the courses of action. It involves choosing countries out of several zones that have profitable opportunities for expansion and whose needs and development plans are compatible with the requirements of the host country. Plans also include forecasts of risks, such as political instability, foreign exchange and currency fluctuations, permanent nature and type of incentives provided for attracting foreign investment and taking adequate coverage of them. Plans in international operation may require reducing, rear of domination of the host country by foreign nationals. There may be plans to ensure the recruitment of adequate proportion to top management positions. It is necessary to allay the fear of exploitation of host's resources (raw materials, minerals etc.) and repatriation of profits without participating in local community development programmes.DIRECTING OR LEADINGDirecting involves the function of getting the members of the organization both foreign and domestic to perform in ways to achieve the established goals. Care is required to choose the appropriate leadership styles which differ from country to country. In some countries autocratic rather than subordinate centered styles have been found effective. In others, the class, position act the charisma of the leader are considered a prerequisite to effective leadership.COMMUNICATINGCommunicating is the process through which information is circulated in the organization. At the international operation it may involve knowledge of more than two or three languages. A manager fluent in many languages has • more impact in influencing his workers, psychologically. It has also been found that non-verbal communication might have more impact than written or spoken, during negotiations, in certain cultures. The technology affects the rate, form and efficiency and the rate of transmitting business messages within or outside the organization and this may involve crossing •international boundaries of developed and

developing countries. The use of telephone, telex and fax and fast hand delivered messages are in vogue. The choice of which to employ depends on the urgency of the message, the • cost, and level of development of the countries involved.

CONTROLLINGControlling involves establishing standard of performance, knowing the current- performance level and comparing it with the standard and accounting for the variance. Practicalizing this at the international level, will require using some units of measure or units that can be converted to measure lengths or distances, currency, or weights. Such conversion may include changes from yards to metres, pounds to grammes, and changes in the purchasing powers of dollars, pounds sterling, and local currencies, naira and yen etc. In effect the measurement of the standard of performance, productivity, variance and .corrective actions must, as much as possible, be equally understood in the same way by individuals in the different countries. Issues concerning centralization or decentralization of control are important and may be determined by the constraints or opportunities of the environments in different countries

1.5 BUSINESS FUNCTIONS AND RELEVANCE TO COMPARATIVE MANAGEMENT. Business Functions are the functional areas into which a business operation is divided, namely, production, personnel or human resources management, finance, and marketing, for effective management. Each unit must be planned, organized, controlled, coordinated and its workers motivated to achieve effective performance: For a good and complete analysis of the practices of managers in their attempts to achieve competitive advantage in foreign markets, each of these units must be scrutinized and well known. In order to do this, the application of elements of Strategic Management namely, environmental scanning, diagnosis of the business, choice of strategy and the implementation in each business functional area, is compulsory. This is because each unit forms a practicing field for the application of management fundamentals, skills, and technology.The analysis of differences in skills required for performing each functional managerial duty becomes clearer and easier when treated separately for instance difference between the salesmanship and accounting skills become obvious. Similarly, the modifications required in both technology and management fundamentals needed for operation in different environments become more easily identifiable and comparable. Also, the equipment and inventory control required to work in the labour intensive assembly plants of say the Mexican cluster might be quite different from the Japanese technology intensive affiliates assembly plants that practice J.I.T techniques to avoid inventory cost in the United States. In effect, using the functions of business approach, enables one to appreciate how; for example, the concept of "controlling" can be differently interpreted to mean quality control in production, budgetary control in accounting, financial control in finance, sales and inventory control in marketing, and discipline in personnel administration. Each control is associated with the area of practical application and hence comparative analysis is easily affected. It becomes

dearer how the additive results of the effectiveness and efficiency of the individual units sum up to the effectiveness and efficiency of the businesses individually, nationally or across political boundaries in the case of MNCs.But before then, it is important to discuss the role of the entrepreneur and the application of strategic management elements in each functional unit

1.6 THE ENTREPRENEURThe entrepreneurs are people who have the ability to identify and evaluate business opportunities or constraints; to gather the necessary resources, to take advantage of them, and to initiate appropriate action to ensure success - Meredith, C.G.R.E. Nelson and P. A, Neck (1991).The entrepreneurs-referred to above are individual business people. However, when their functions are performed in large organizations, corporate bodies, firms, companies and governments, they are formed by Strategic Managers, and process through which they performed the functions is described as strategic management.In other words, in big organizations, the role of the entrepreneur is performed by Strategic Business Unit (SBC)). The group is composed of Strategic Business Unit—managers, Corporate partners:

FIGURE 1

ELEMENTS OF STRATEGIC MANAGEMENT

To discover opportunities or threats

To discover strength or weakness of Business functions

To consider alternative action to take

Execution of decision

From the definition and Figure 1 above, it would appear that entrepreneurs and hence SBU teams are engaged in performing the following activities:

1. Analysis of the business environment in order to identify "business opportunities or threats and discover the weaknesses and strengths of the business functions (Production, Marketing, Finance and Personnel)

2. Evaluation of the extents of the opportunities, threats, strengths and weaknesses in order to determine' how to exploit the opportunities and meet the threats;

3. Gathering data, human and materi.al resources for decisions that would enable the utilization of the opportunities/ threats build up sustainable competitive advantage over competitors; and

4. Planning and taking actions that would ensure success i.e. that would guarantee the achievement of the set business, goals.

1.7 INTERNATIONAL BUSINESS

ENVIRONMENT

Searching or Scanning

DIAGNOSIS OF

Company or Business

CHOICE OF STRATEGY

IMPLEMENTATION

International business is the business involving activities that cross national boundaries. It is unique and different from domestic business, because it involves foreign transactions in different environments. It is subject to different laws and subjects to different monetary systems. Companies which engage in this type of business are those which because of high technology or natural endowment are able to produce a surplus and use large quantities of (raw) materials they can obtain from other nations to produce goods and services. They usually take advantage of international economics, principles such as comparative advantage, which require producers to specialize in producing goods that they can produce more cheaply than other and refrain from producing those items they can buy more cheaply elsewhere. They also take advantage of foreign exchange mechanism that provide rate at which the currency of a country is exchanged for another country", or of how balance of payments is determined etc. From this emerges international investment and finance. Later, the subsidiaries of some large firm; grow to act as export agents to the parent company. The development of international business goes through the formation of international companies and finally the evolution of global comp. (MNC) in which overseas operations have departments in finance personnel, and production in the foreign countries.

1.8 FACTORS THAT ENCOURAGE A COMPANY TO GO MULTINATIONAL

Companies go multinational as a result of a number of factors:

1) The heavy accumulation of capital and technology and technical know-how in the developed countries;

2) The rapid rate of communication and transportation;3) The rapid growth of markets in the countries where a company is chartered; and the

organization of economic communities that favor regional markets and free trade agreements.

All the points mentioned above have encouraged the overgarment of the MNC, but do not explain why they are in existence. MNC's are in existence to meet the need for direct foreign investment foreign operations. This means the home country transfers funds to other host countries, to acquire plants, warehouse offices etc., and maintain managerial control over the operations in the host country.

A MNC may come into being as a result of a desire to source for raw materials e.g. palm kernel, petroleum, palm produces or ores, at a cheap rate and reasonable quantity. may also be because of a wish to expand existing markets or find new markets for a Company’s goods.

Another reason may come as a result of desire of the MNC to beat its competitors in sales race, to first utilize opportunities in the new culture or environment.

A government sponsored company may go multinational to gain political advantages over other competitors.

1.9 TYPES AND FORMS OF THE MULTINATIONAL COMPANY

FORMS

There are a number of forms in which a MNC can involve itself in foreign operations. The mode of involvement can be one of the following:

JOINT VENTURE

Joint Venture involves the sharing or ownership with others. T nis type of venture interests developing countries. A company may join a multinational company with foreign ownership and control, but which needs a local identification. The advantage lies in its adaptability am flexibility to local or foreign needs. Ownership is always shared at agreed percentages."

EXPORT OF HOME COUNTRY PRODUCTS

The country producing the goods engages experts to negotiate with foreign companies and only trades internationally. This method is employed by a company that is inadequately experienced in international operations. The advantage is that it minimizes risks and cost of exporting and marketing.

MANAGEMENT CONTRACT

Management Contract is a service contract requiring no capital. A MNC provides a country (e.g. Saudi Arabia where managerial skill is scarce) with only that service and nothing else. The M NC is rewarded accordingly.

FRANCHISING

This is an involvement in which an individually owned (franchised) business or company operated as though it were a part of a multinational company or group of business (franchise) employing uniform operating procedures trademarks, patents,

names or other valuable intangible assets. It is used more in hotels, e.g. Holiday Inn and Hilton, Fast food - McDonald and Kentucky Fried chickens.

LICENSING

This is an arrangement under international licensing agreement in which a firm license or grants right to a foreign firm (Licensee). The firm granting the right provides technical information and assistance to the foreign firm which then compensates the granting firm for the services. For example, a drug company may license foreign companies to sell its patented products in another country, or an author grants his copy rights to foreign publisher.

FOREIGN SUBSIDIARY

A subsidiary company is one whose controlling interest is owned by another company. A subsidiary is almost 100 per cent owned by MNC. The MNC takes all the risks of the foreign business operations but also has maximum managerial. control.

1.10 FACTORS TO BE CONSIDERED BEFORE STARTING A MNC

With the above forms of operation, factors to be considered before« the choice, would include the following factors:

Risks, legal restrictions, competition and markets, foreign expertise and experience, and the degree of managerial control.

RISKS

If the reason for the choice is to. avoid risks, then licensing and franchise are preferred.

Since the risks are assumed by licensee and franchise respectively, Joint venture shares the risk. In management contract and exporting, capital is not required outside

the home country and thus risks are reduced. Most companies with little or no foreign experience find less risky forms of operation attractive.

LEGAL RESTRICTION

All MNC's operate within legal structures of both home and host countries. Hence, the

MNC may have to face in home countries tax restrictions, foreign exchange control and structural adjustment problems, while the host country may limit the amount of profit

that can be repatriated. The host country may also prohibit private ownership of business in critical industries, and restrict operation of foreign companies. The host country may be operating religion-based laws (e.g. Sharia in Saudi} that is unknown in-home country

COMPETITION AND MARKET

The market size, potential and the intensity of competition from local companies and other MNCs are crucial factors to be considered in the choice of operations of a MNC, particularly regarding risks.

FOREIGN EXPERTISE AND EXPERIENCE

Foreign expertise and experience will likely dictate the choice between investing in foreign subsidiary or mere export, licensing or franchise agreements.

MANAGERIAL CONTROL

The degree of managerial control desired by a MNC will influence the choice it will make between a subsidiary having 100 per cent ownership and another with limited managerial control.

1.11 PROBLEMS FACED BY MNC MANGERS

Problems of international managers are many but the major ones can be grouped into cultural differences, lack of education and skills, currency and accounting differences, laws and regulations, scarcity of raw materials, gender-role, custom duties, diplomatic and political pressures.

CULTURE

The capacity to understand social and religious beliefs may pose serious problems in countries e.g. • (Nigeria) where the belief is strong that elders are the wise ones and should be so respected even when it concerns managerial decisions. Religious beliefs that prohibit collection of interest on loans may not be comprehended by Western MNCs in a Moslem state, like Saudi Arabia. MNCs may also not understand why women in Puddah may not be allowed to work with men.

LACK OF EDUCATION AND SKILLS

In some developing countries where economy is labour intensive where technical skills are -lacking, MNC managers may see productivity as low. In few cases where equipment and machinery are available there may not be technical people to maintain the equipment leading to poor capacity utilization and low production level.

CURRENCY AND ACCOUNTING SYSTEM

The currency that is used may be different and the purchasing power too, leading to different foreign exchange rates and associated risks. Also, differences in accounting system may lead to difficulties in comparing operations in the different countries.

LAWS AND REGULATIONS

Laws and regulations differ among cultures, governments, and political set-ups. The Sharia laws that are used in Muslim states may be strange to the home country (government of MNCs). Regulatory laws may be protective to the host country but harsh to home countries of MNC managers.

SCARCITY OF RAW MATERIALS

Communication devices and other infrastructural inadequacies may make business less profitable and to be at level MNC managers may find impossible to operate.

Political disturbances and diplomatic decisions may not favour the operations of MNC managers.

General business practices, customs duties, and tariff imposed by government may make national operations difficult in certain countries, in spite of Genera! Agreement on Tariff and Trade (GAIT)

1.12 Assignments

1. Explain the relationship between management functions and comparative management2. Explain the relevance of business functions to comparative management3. What are the factors that encourage a company to go multinational?

1.13 Quizzes

1. Explain briefly, the environmental setting of a business organization2. What are the elements of strategic management?

CHAPTER TWO

DEVELOPMENT OF MANAGEMENT THOUGHT OR SCHOOL OF THOUGHT

2.1 CLASSICAL SCHOOL OF THOUGHT

The classical school has two branches (scientific management and classical organization theory).

Scientific management was concerned with improving/increasing productivity of the shop and individual worker. Taylor the acclaimed father of scientific management provided four principles for improving productivity by determining.

1) One best way of performing a task,2) The one best way of selecting the workers that are best suited for a job;3) The best way of educating and developing the worker,4) The one best way of encouraging cooperation between labour and management.

Other contributors are H. Gantt, Frank and Lilian Gilbreth etc. The other branch of the classical universal school is the classical organization theory founded by Henri Fayol. This branch of the school believes that there exist principles that can be generally applied to determine what managers do. Fayol's approach looks at:

i The functional activities in all organizationsii What managers do at work using his 30 years’ experience as Managing Director

(MD) as a basis for his expertise? Fayol grouped business operation into six

activities.

1. TECHNICAL Producing goods and services

2. COMMERCIAL Buying, selling and exchanging of goods and services

3. FINANCIAL Acquiring and using capital

4. SECURTTY Protection of workers' and company's Property

5. ACCOUNTING Taking statistics of costs, profits and Loss and records

6. MANAGERIAL Planning, organizing, staffing and coordination.

The above group of activities to Fayol, are present in ail organizations whether, big or

small, political, educational or economic, cultural or religious.

PRINCIPLES OF MANAGEMENT

What activities managers engage in at work are, according to Fayol, based on fourteen

principles.

1. DIVISION OF LABOUR: Specification

2. AUTHORITY: Position and personnel right to order and compel obedience

3. DISCIPLINE: Respect for rules and agreement

4. UNITY OF DIRECTION: one channel for directing related operations.

5. UNITY OF COMMAND: Receiving of orders from only one boss.

6. SUBORDINATION: Of Individual to general interest.

7. REMUNERATION: Fairness of compensation to workers and employers.

8. CENTRALIZATION: Extent of concentration of authority.

9. SCALAR CHAIN: Lines of authority in organization chart.

10. ORDER: Giving places for everything and everybody.

11. EQUITY: Fairness and justice to subordinates

12. STABILITY OF TENURE: Control of labour turnover

13. INITIATIVE: Ability to conceive and carry out plans

14. ESPRIT DE CORPS: Is to develop the spirit of team work or concept of "in union

there is strength".

Other members of the school are Frederick Taylor (1919) Galic and) Urwich (1937),

Koontz and Cyril O. Donnel (1968) etc.

Critics: Mintzberg (1975) one of the strong critics of the school claimed, "Fayol's

elements of management tell little about what managers do at the best they indicate

some vague objectives manager have when they work.

He further claimed the work of manager is:

"Great pace unrelenting, varied, fragmented and brief.

The manager concentrates on current specific, and adhoc issues and relies on verbal

forms of communication".

These characteristics are at variance with Fayol’s management elements (planning,

organizing controlling etc.). Other critics are Herbert Simon (1945) Ernest Dale (1959).

George Terry (1968) etc.

The classical organization theory and the principles of classical organization have been

described as more appropriate for the past than the present. They have been also

criticized as being too general for today's needs.

CONTRIBUTIONS: Irrespective of what critics say, the school has provided:

1. A body of management principles,

2. What managers do at work, and

3. Has identified management as skills that can be taught

2.2 THE BEHAVIOURAL SCHOOL (1960s)

The school was concerned with ways to improve working morale in order to increase

productivity. Major contributors of the school are

Elton Mayo (1953) Kurt Lewin (1951) Chris Argyris (1964), Rensis Likert (1967)

Douglas McGregor (1960) and Frederic Hertzberg (1996) etc.

Elton Mayo and the Hawthorne experiment tailed to explain productivity as a function

of illumination but discovered the importance of the informal group and the adequate

communication between the worker and management as the central issues in industrial

relations.

Kurt-Lewin's force field theory says, human behaviour (B) is a function of a person (P)

and his environment (E) or the behaviour environment (E) or the behaviour is a result of

equilibrium-l between DRIVING and RESTRAINING forces of the environment. Chris

Argyris theorized that an effective leader will help move people from a state of

immaturity (dependence) towards a state of maturity (independence).

Rensis Ukert developed a model of four systems of management which he described in

systems one through four, as:

1. Exploitive authoritatively autocratic managers

2. Benevolent authoritative by managers with little confidence in subordinates,

3. Consultive, by managers with substantial but not full, confidence in subordinates,

and

4. Participative, by managers with complete trust in subordinates.

Douglas McGregor examined the assumption about human behaviour which underlie

managerial action in his "Theory x" and "Theory Y" The traditional concept of

administration by Fayol is based on direction by management/ Douglas suggested,

Theory Y assumption in "integration" to replace direction and control.

Frederick Herzberg developed the two-factor theory to explain mo ovation at work. The

conclusion had been that job content must be enriched to increase job performance.

Contribution: The school stressed the importance of human and social factors in

industrial relations. It also identified sources of motivation and leadership

Criticism: The school over emphasized the role of leadership, and underplayed the role

of technological structure and task nature in influencing productivity.

2.3 THE QUANTITATIVE AND SYSTEMS SCHOOL

The quantitative group employed mathematical models or operations Research (OR) to

solve decisional problems. The systems approach emphasized that the activities of one

part of the organization affects the activities of every other part. The importance of

feedback in quality control and computer memory in aiding managerial decisions are

sure bits or evidence of systems contribution to management.

Contribution: The use of O.R. and the computer have increased the capacity of

managers to cope with complexity or problems and environmental influences

Criticism: The Chief limitation lies in the fact that there still are many behavioral

problems that cannot be solved using mathematical approaches

2.4 THE CONTIGENCY APPROACH

This approach was developed by researchers and consultants who tried to apply the

concepts of the main schools of thought to real life situations. They found there is not a

single design that is best for all situations. Solutions to problems depend on the

particular situation of environment. Contributors include:

(i) Joan Woodword (1965) who showed that organizational structure and human

relationship were a function of the existing technology.

(ii) Fiedler (1967) who theorized that leadership situation is contingent upon the

position power, the task structure and leadership member relation,

(iii) Lawrence and torch (1967) who showed that the degree of differentiation may

be contingent upon the variability of the environment.

(iv)Rosemary Stewart (1982) who found that similar Jobs may be undertaken very

differently by individual, managers not just in terms of styles but in the kind of

tasks they initiate emphasize, or neglect. Her argument has been that managerial

effectiveness is contingent upon choices managers have and the recognition of

demands and constraints implicit in the jobs.

Contributions: The approach is a product and the best amalgam of all the. other

schools. Members of the school (also called the situationalists) recommend the rejection

of "the one best way to organize under all conditions" and emphasize the consideration

of organizational members and the external pressures facing them in reaching decisions.

2.5 COMPARATIVE MANAGEMENT (CPM) AND ITS RELATIONSHIP

TO SCHOOLS OF THOUGHT

The essence of CPM is to explain how managerial activity, effectiveness and efficiency,

vary divergently between different periods of management evolution. In the 1960s,

many management practitioners and theorists produced volumes of ideas, principles,

theories and concepts in management that were unrelated, different, uncoordinated and

even controversial that some writers like Luthans 1 975) and Koontz (1961) described

the situation as “A jungle of management theories”. This can be demonstrated by the

one best way to organize as suggested by the scientific management school and the

varied bureaucratic principles of the classic organization theorists and the barrage of

theories from exponents of behavioral science

Major reasons for such confusion- originated from the fact that most of the writers were

from different locations. Fayol from France, Havard study from the US and Woodward

from Britain, were writing independently of each other’s work, and at different times.

A major function of CPM is to explain why management Practitioners think in a certain

way at a particular time and place and differently at other times. CPM noted that the

industrial revolution provided the industrial climate that required labour intensive

machinery to cope with productivity. Hence the concern of scientific management

school was with the best way to achieve productivity. Soon the employees of the young

industries were over worked with only little time for rest and recreation.

Workers complained and the Human relations and the behavioral schools expressed

more concern for people than for the cask. They provided the barrage of theories and the

confusion that followed. For each emerging school, CPM provided criticisms that led to

corrective actions for management improvement. The system schools noted the need for

the inter-relatedness of units rather than the departmentalization of organization of the

universal school, while the situationalist attached conditions to achieving best designs

for best results, contrary to the one best way approach advocated by management

scientists.

With regard to the time element and planning, there was nothing systematized

procedure and process. At times there were lags between a discovery and its application

or usefulness. Fayol had identified management functions as planning, organizing

controlling as early as 1916 but the idea did not get to management mainstream in the

US until about the 1950s. He even had said "there is nothing rigid about management

before the contingency school. Part of the effect of time has been shown in the

usefulness of concepts at one time and not at another. Fayol's bureaucratic

organizational approach was good at his time when business environment was

systematic appropriate unlike what since 1960 has been the case a state of dynamic and

unpredictable business environment, where only the contingency approach management.

Hence the situationalist concept seems the latest and the accepted approach presented as

an amalgam and product of the other schools.

Finally, CPM shows the varying limitations of knowledge, skill availability and

technology, and their infrastructures on the practice of management.

Globally sponsored researchers have enhanced business schools' knowledge of

management. Technology has provided quality goods at unprecedented rates, while

communication and television have brought marketing and promotion of goods to most

house-holds in the nooks and corners of the globe.

CPM has also noted, as major flaws in the contigency approach, that the concept

covering all situations is so broad that it tells little that People do not know. It also tends

to eliminate possible existence of absolutes. See Ernest Dale (1959)

It discourages moves to discover courses of environmental difference of universal

principles because the concept relies too much on judgement of managers for the

application, of principles.

2.6 Assignments1. Explain in full the propositions of the classical school of thought.2. What are the contributions of the behavioural school of thought to management?3. What is the relationship of comparative management to management school of thoughts?

2.7 Quizzes

1. Highlight the 14 principles of management as propounded by Henry Fayol.

2. Highlight the contributions of the quantitative and systems school of thought to

management

CHAPTER THREECOMPARATIVE MANAGEMENT THEORIES AND MODELS

3.1 INTRODUCTION

This chapter provides the major models and summary of the orientations on theoretical frameworks which in the past three decades have been employed to advance the theory of comparative or international management.

In the 1960s there was proliferation of different conceptual approaches to comparative

management theories. Models were designed to explain these CPM theories. A model

being a standard set for imitation or comparison provides simpler description of an

otherwise complex system. It hence became handy for use in the identification,

detection and evaluation of uniformities and differences of these theories. Because

theories are systematic groupings of interpedently concepts together significant

knowledge, they became attractive knowledge to researchers for use in conjunction with

models in the study of CPM.

GROWTH: The study of management as a discipline is a recent event. CPM's stud is

even more recent, starting about the 1960s.

3.2 MAJOR APPROACHES IN THE STUDY OF CPM

Just like there were different schools of thoughts on the study of management, so are

different conceptual approaches to the study of CPM. The different orientations and

classifications to the study of CPM are those that had been identified some twenty-five

years ago. Hans Scholl Hammer (1969) wrote about the Comparative Management.

Theory jungle and identified four different conceptual approaches namely: Socio -

economic, Ecological, Behavioural, and Eclectic-Empirical approaches.

3.2.1 SOCIO-ECONOMIC APPROACH

The starting point can be traced to the works of Harbison and Meyers (1959). They

identified the manager as a critical factor in achieving economic success. The manager

is to them, a catalyst to the interaction existing between economic and social

environments to bring about economic change. Their major hypothesis have been that

economic progress and industrialization depend on managers. They argued since it is the

manager who takes risks, handles uncertainties, plans, leads and coordinates and also

controls economic resources, exercises authority and power and leads or takes decision

for the organization, then the relative level of economic activity and achievement,

depends on the intensity of utilization of the manager, the degree of exercise of his

authority and the level of the use of the power as group members of the elite. Other

members of this school are David McClelland (1961), Everett Hageh (1962).

MERIT

The school provides analytical instruments for the study of the sociological and

economic factors that influence managerial behaviour

DEMERIT

i) The results have been found ambiguous ana incapable of supporting predictions,

ii) The approach does not pay equal attention to individual differences in

managerial behaviour and interfirm differences in a given culture.

iii) Discussion of environmental differences is restricted to sociological and

anthropological aspects.

3.2.2 THE ECOLOGICAL APPROACH

Determine

The pioneers of this approach are Professors Richard Farmer and Barry Kichman (1965). The approach emphasizes the interaction between a business organization and its environment and the opportunities and constraints this has on managerial effectiveness. The main concepts are shown in the model

The basic hypotheses of the authors have been that:

1) The external constraints of the environment (educational, sociological, legal-political and economic factors) affect both managerial effectiveness and elements of management process.

2) Elements of management process defined as planning, organizing, staffing,

directing etc. will also affect managerial effectiveness.

3) Managerial effectiveness will in turn determine a firm's efficiency and

consequently the efficiency of the country or nation. The last point assumes that

Affect

SYSTEM EFFICIENCY

the aggregate efficiency of a nation is a summation of the individual economic

units;

3.2.3 KOONTZ MODEL

Koontz (1965) employed a more complex model to achieve more accurate results from analyzing the universally and transferability of management fundamentals.

Koontz hypotheses have been that:

1) Organizational activities can be grouped into two; managerial or non-managerial practices which affect each other.

2) Lither or both practices can cause enterprise effectiveness 3) Non-managerial activities will be affected by enterprise function science.

a. Managerial activities will be affected by management science.4) Managerial and non-managerial practices will be affected by human and material

resources and the constraints of environment.

MERIT

Koontz model unlike other ecological models has been successfully used to explain the universality and transferability of management practice. It identifies both constraints and opportunities in the environment, and other factors that contribute to organizational effectiveness.

DEMERIT

The ecological approach ignores that manages (or management) could have active influence on the environmental constraints, instead regards an enterprise as a passive creature of the environment.

The approach has failed to explain and define the inter-relatedness of environmental

conditions in its analysis and thus renders it empirically impossible to evaluate precisely

the impact of constraint of management practice.

3.2.4 THE BEHAVIORAL APPROACH

The scholars of this school were concerned with the study of typical behaviour pattens

and the attitudes of managers in different cultures and the manager’s interaction with

individuals and groups in their environment.

Anant Neghandi and Bernnard Estafen (1965) in their study of American Know-How in

different cultures have employed three factors;

1. Management philosophy, defined as the expressed attitude and relationship with

consumers, suppliers, distributors, government union, leaders, community, etc.

2. Managerial effectiveness expressed in terms of profitability or change in profit and

sales, employee’s morale, public image of company, etc. and

3. Managerial functions, meaning (planning, organizing, controlling, staffing,

etc.)

The main hypothesis has been that management effectiveness depends on managerial

practices and behaviour while executing management policies and practicalising its

philosophies across nation; boundaries.

Other writers are Mason, Haire Edwin Ghiselli and Lyman Porter

1969) who looked at managerial behaviour, attitudes and satisfaction in 14 countries and

concluded that there is high degree of similarities but at the same time, exist substantial

national and culture differences.

Also, Howard Perimutter (1965) and Hans ThoreIli 1966) identify three management

philosophies of MNCs. An ethnocentric management philosophy attempts to implement

the same values policies, sentiments, etc. as adopted by parent company. It hence

exhibits attitudes of superiority that are regulatory to host country.

A polycentric philosophy, exhibits attitudes that recognize environmental differences

and hence shows a rather permissive attitude when in Rome, do as the Romans type of

attitude. A. Geocentric philosophy accepts that differences in culture are a reality and

that culture is not superior to each other but is just different. They exhibit co-operative

behavior.

The author's conclusion has been that both polycentric and ethnocentric management

philosophies give rise to conflict situations whereas geocentric philosophy will lead to

more desirable result

WEAKNESS

The concepts of the Behavioural approach are not comprehensive enough (e.g.

Neghandi-Estafen) and the variable/factors are arbitrarily selected. There is the danger

of over-emphasis on socio-psychological relationships.

MERIT

The variables are controllable and hence can be used for empirical investigation, to

achieve a large body of knowledge.

3.2.5 THE ECLECTIC EMPIRICAL APPROACH

The contributors using this approach are many. They employ empirical investigation in

looking at managerial attitudes and practices in various countries. The attempts are

eclectic since they have been concerned with practical the broad field of CPM and have

not come up with comprehensive CPM concept.

3.3 Assignments1. Explain in full, the socio-economic approach in the study of comparative management

highlighting the Merits and Demerits2. What are the basic hypotheses of the authors of the ecological approach to the study of

comparative management?

3.4 Quizzes

1. Explain briefly, the eclectic empirical approach to study of comparative

management

2. What are the major hypotheses of the Koontz model to the study of comparative

management? Highlight the merits and demerits also

CHAPTER FOURINTERNATIONAL/COMPARATIVE MANAGEMENT IN

SELECTED COUNTRIES

4.1 INTRODUCTION

Since Business environment is dynamic the enterprise and the analysis of its

management cannot remain static, changes therefore do occur over time in societies all

over the world. A practice that is traditional in one country today may be shared or

copied by more than four or five countries during a decade, especially if it is conducive

to profitable business.

4.2 JAPAN

The geographical and historical back grounds of Japan have not been favorable to the

business success of Japan.

Japan with a small area of about (145.870 square miles or 377,801 square kilometers)

has very poor natural and mineral endowments has restricted space area for its huge

industries.

With regard to its-historical development it has the unique expends of being the only

nation whose largest industrial cities (Hiroshima and Nagasaki) experienced the

annihilation of modern atomic bomb, of the 2nd world war. The country was militarily

and physically occupied. The post war government and business were disorganized and

messy.

Japan resumed its business activities in 1951. It was not until mid-1980s that a real'

surge in Japanese business occurred. Between 1985 and 1989, Watanabe, Susumu

(1993) claimed that Japanese overseas direct investment (ODI) increased more than

400% of the world. Its business success was a feat that attracted focus of intense

scrutiny of its business strategy, operation and management at home and abroad. Even

America countries felt compelled to be grossly involved in such studies.

A REVIEW

How the Japanese managed their business is better considered through the

administration of functions of business, namely:

(1)Production (2) Personnel (3) Marketing and (4) Finance.

PRODUCTION

Importation of technology: The major factor responsible for the growth of

the Japanese industries is technical catch-up.

Inchkawa (1983) claimed the Japanese imported technology from the

highly developed countries and applied this to their production system and

process and improved upon them. This stimulated investment had promoted

rapid economic growth. They also employ quality circle.

QUALITY CIRCLE (QC)

QC is an arrangement whereby the collective wisdom of employees are pooled together in order to achieve quality goods, at low cost and in great volume. Japanese management is very enthusiastic about quality control. They ensure sectional managers, fore-men and regular workers meet regularly to plan quality into their design, build quality into the production and inspect for quality in the products. Their product are reliable and durable. Japanese firms try to achieve “no defect production” and attempt to eliminate waste in all the business activities through the Just-in-Time (JIT) production system.

JUST-IN-TIME (JIT) PRODUCTION SYSTEM

This system is employed in the manufacturing process and its suppliers deliver their raw

materials or components and parts to the production line just-in-time to be used or

assembled. It avoids storage and its cost, for the raw materials and assembled goods. It

also reduces production and delivery time. In general, the JIT is an attempt to eliminate

waste in all the business activities. According to Watanabee (1983) in order to make JIT

work the Japanese ensure:

i) The quality of the parts is very high and they employ team work based on flexible

task sharing

ii) Product design and production process are simplified to enlarge the scope of low-

cost automation

iii) Also, the suppliers are reliable and have dependable relationship with the producers

and

iv) In general, they are both located near the producers or steady transportation is

assured to ensure zero inventory.

PERSONNEL

Recruitment and Employment

The Japanese, employ lifelong Employment technique.

In this technique the Japanese employ their workers from new graduates and are given

employment in one enterprise till they retire while they are employed, they will have job

security, and would not be sacked even during depression. Watanabee ( 1993) claimed

Japanese firms may stick to their no-lay-off rule more firmly in developing countries.

Even at the expense of profitability, they sometimes try to maintain their work force. In

order for this to work well, emphasis is placed on training and retraining programmes to

develop the skills of the workers.

PROMOTION AND WAGE SYSTEM

In Japanese industries wage systems are based largely on seniority. Promotion takes

place at regular intervals and the basic criteria being mainly the length of time spent in

the service of the company.

The security system provides privileges for long service older employees. Executive

positions are occupied by the older serving employees. However, there is a mandatory

retirement age system most employees are retired at the age of 55 years. The wage

system is becoming a controversial issue, particularly in their subsidiaries abroad. Host

countries prefer that promotion be based on merit.

DECISION MAKING PROCESS

In Japanese companies, joint decision-making approach, ‘the Ringi System’ is

employed. It is also called “the Bottom-up approach” because it is an approval seeking

process where a proposal (ringisho) prepared by a lower functionary works itself up

through an organization hierarchy in a snail-paced manner (Akpala 1987). At each level,

it is examined by proper official who may if necessary, send the proposal to the initiator

for more information, then make suggestions, and indicate his approval by fixing a seal.

The proposal then passed up until it gets to the desk of the top executive. If the proposal

is approved, it is returned to the initiator for implementation. The implementation is

swift since approval of proposal is based general consensus at every level.

PETERNALISTIC MANAGEMENT

This system of management is one in which the managers express concern and takes

cognizance of workers needs. It is believed showing concern for employee’s wellbeing

and providing them their needs is essential to attaining productivity and high standard,

in the practice of this concept, Trade unions are seen as friends and not as enemies.

Managers view themselves and members of unions as members of one big family.

Hence strikes are very rare in japans enterprises.

4.3 THE UNITED STATES OF AMERICA

The United States (US) is composed of 52 states forming a Federal Republic. US is the

fourth largest country in the world. It occupies an area of about (3,679,192) square miles

or (9,529,063) square kilometers in North America. It is bounded in the North by

Canada, on the East by Atlantic Ocean, on the West by the Pacific Ocean and on the

South by Mexico and the Gulf of Mexico.

U.S is one of three super powers of the world. It is rich in nature resources, has

enormous agricultural output and highly developed industry. It is the world's second

largest petroleum producing nation with its major oil fields located in Alaska,

California, the Gulf of Mexico, Louisiana and Oklahoma. It has large iron ore deposits

in Minnesota and Michigan. Its major industry is in transportation; motor vehicles,

ships, aircraft and space equipments.

PRODUCTION

U.S. is endowed with abundant natural resources and industrious work force. The

Americans are hard working. They belief that hard work is a virtue and that persistent,

purposeful effort is necessary to achieve high goals. The American use their technology

to produce for the comfort of their people.

An emphasis is hence placed on production, in large quantity but sometimes to the

neglect of high quality. Such mass production though is accompanied by social benefits

like increased standard of living is also according to Nowotony (1964), leading to

excessive standardization and over stifling individual initiative.

QUALITY CONTROL

Although quality control is claimed to originate form U. S. It has not been perfected

there as in Japan. The Americans do not provide adequate service support system to

their products Hence their products suffer at international competition.

PERSONNEL

There are two areas that show the characteristics of personnel administration of US

organizations namely training and staffing.

Great importance is placed on training of workers. However, US companies abdicate the

training of new workers to the public and Rational School system. Management tends to

avoid technical training because of the cost and fear of losing graduates of such training

institutions to other companies. U.S. companies therefore experience severe shortage of

the most skilled workers.

STAFFING

The Americans believe that job applicants should be employed only because they are

the best qualified persons available. Family connections, friendship and sponsorship of

an influential person, are never considered in selection. The workers feel if you don't

like a job you can always quit. The employer also has a right to fire the non performing

employee without any guilt feeling. However, while on job the American remain loyal,

committed and dependable.

MANAGEMENT

The American tradition holds that all men are born equal. Neither noble birth, nor

advanced age, gives an individual the right to tell others what to do.

In U.S., authority is equated with hierarchical position. Top managers formulate

company policies, set objectives and issue orders. Decisions are made from the top by a

few people and passed down. Communication is mainly in writing and is top-down.

Decision making is swift but the implementation is slow since they are affected by those

who did not partake of the initial decision.

Another outstanding feature of the American administration is importance attached to

use of time for effective business. There should be an effective use of one’s own time.

Activities are scheduled with precision, unlike in Muslim culture where lateness’s. A

business activity may be ascribed to the will of Allah.

INDUSTRIAL RELATIONS

Trade unionism is strong in U.S. because employers care more about the productivity

and profit level than for employees. For them, the objective of an enterprise is

‘Maximum of Profits’.

PROMOTION

It uses the merit system as a method of advancing their workers. Length of employment

is less of importance. The merit system is based on rational appraisal of individual

performance. It is done yearly.

Even though the above, are traditional and customary with U. S changes have occurred

with great modification of these practices.

4.4 GERMANY

It was rebuilt almost from scratch after the World War Il that ended 1945. Today

Germany is one of the most industrialized nations of the world, and certainly the leader

of the European economic immunity. It has become a major economic power of the

world. economy.

Contemporary writers, looking for the qualities, traits and values of Germans which earn

them the miracle transformation, have described them as neat and meticulous [Hayes

and Limprecht (1982) and hardworking, thrift and obedient to authority. Hodgetts and

Luthans (1994): Others noted that German leadership is worker centered and

authoritarian and link their prowess to attitudes of "we are in it together" imbibed during

the post-world war Il occupation.

The truth is German success is the result of their outstanding managerial capabilities

shown in the functional areas of business production, marketing and personnel (training,

development, staff and industrial relations).

PRODUCTION AND MARKETING

The German managers and manufacturers believe that the essence of production is to

provide goods and services of high quality. and value that will satisfy their consumer

wants They therefore ensure that their goods are well engineered, solid and provided

with superb after sales service. They also ensure that the goods are delivered on time.

They employ crafty management strategy that would bear their competitors in the

scramble for market share. They achieve competitive position by offering their products

for sale at low profit margin with a long span guarantee.

Another issue distinct from those mentioned is that the German possess technical

competence at all levels of the organizational hierarchy.

Workers at managerial levels must have had a masters degree in their disciplines while

their tradesmen must have attended vocational school for 3 years and passed state-set

trade exams. In effect, the German production system is manned by competent works at

all levels.

In discussing the German way of doing things Limpretchand Hayes (1982) focused on

the German attitude to work. They claimed German managers and workers insist that

"what goes out of the door of their factories be as dose to perfect as possible’. Such an

attitude had encouraged improved productivity and superior goods manufacturing that

have earned Germans worldwide reputation for quality. In effect in-built quality is the

chief tool that advertises German products.

PERSONNEL

Training and development: German managers are aware of the need to support good

quality production system with real technical competent workers who are homemade

tailored to their technical requirements through their apprenticeship programmes.

The apprenticeship programme: is a training-employment arrangement that receive

support from Government, unions and the industry. Under the system young people who

are 16+ years old, leave full-time school to start a three-year apprenticeship programme

While on the course they spend an average of four days a week the industry doing the

practical aspect of the job. Once a week the apprentices attend theoretical courses in a

vocation school whose curriculum is jointly planned by management, trade union

association and the state. e programme is a continuation of the basic schooling with an

emphasis on technical knowledge and job skills. It provides an adequate qualification

for youth employment. The programme has to be supplemented with additional

education to form a base for employment as a supervisor or a first line manager in

Germany. The vocational academy programme is being experimented to meet this need

by teaching managerial skills.

They significance of the apprenticeship system lies in its ability to build a work force

that is young, highly skilled, technically proficient and versed in the theoretical

principles of their professions that they can adapt easily to new technological processes.

The programme has made youth unemployment of Germans the least in the

industrialized world.

INDUSTRIAL RELATIONS

The codetermination process is a provision by law that compels that workers should be

represented in the supervisory boards and executive committees that are responsible for

decision making in large organizations in Germany. By the 1951 and 1976 acts

managers are required to negotiate at the plant level with work council/ majority of

whom are workers such deliberations are further submitted for scrutiny by supervisory

boards (Boards of directors) fifty percent of whose members are workers-elected

representatives. At least one of the employee-seats is held by an "executive" who is

expected to vote with the stock holder representatives. The Act also prescribed the

procedure for dispute settlement.

The objective is to reach decisions by consensus and avoid conflict and thus achieve

industrial peace in which workers can adapt their skills to changing technologies and

circumstances.

COLLECTIVE BARGAINING

In Germany collective bargaining takes place at the industry level. Wages, hours and

working conditions are negotiated by trade unions and employers’ organizations.

According to the Works Constitution act of 1952, agreements between works council

and management must not deal with wages or other matters normally included in

collective bargaining agreements. Strikes a e rare and may only be conducted by unions

in collective bargaining. Disputes are settled by conciliation boards. However, disputes

on the interpretation of a collective bargaining agreement are resolved by the labour

courts.

ADMINISTRATION

The leadership style in Germany is still extensively patriotic and authoritarian. Workers’

rights are established by statutory provision. There is a general lack of delegation of

authority and work centered behaviour designed to ensure task accomplishment. Even

though changing, there is a general attitude that one can obtain most of the knowledge,

necessary for managing the enterprise only through experience. (Fassbendei, 1972).

4.5 INDIA

India is a densely populated country located in Southern Asia. It has a population of

about 875 million people and an area of 1.27 million square miles. Over 80% are Hindus

speaking Hindi language. The country was formerly a British colony but became

independent in 1947. It has a large number of educated people and English is the

official and international language of business.

Economic Development: At independence in 1947, India had an industrial base of about

700 textile mills and one iron and steel plant. The government was the key regulator,

investor and innovator employing import substitution and export promotion as strategy

to economic growth. By 1977, India became the 10 th largest industrial producer and

fourth in world food production and had $4 billion in foreign reserve. (Nambudiri and

Sayadain (1978)).

Thirteen years after, the story had changed. The government's socialistic approach -to.

economic development has not worked. The government took loan from World Bank

and aid from IMF. By 1989, the country was in a serious balance of payment problem

and a high fiscal deficit. By 1990 the foreign exchange reserve was almost totally

depleted; to worsen the situation the political situation was not stable. Two general

elections were held within three years.

BUSINESS IN INDIA

In the past, (1970s-80s), doing business in India was quite difficult. In the 1970s, lots of

red-tape barriers were created for those applying to enter India market, e.g. the U.S.

Razor blade company’s approval took 8 years [Hodgetts and Luthans 1995], the

government also required that MNCs could not hold more than 40% of ownership of

any business. In consequence, many MNCs including Coca-Cola and IBM left India.

[Adit Jain 1995].

A TURN AROUND

Prime Minister Rao administration came into office in June 1991 abolished the licensing

requirements and removed the limitation set on buiness ownership for MNCs. A fringe

investment promotion board was established in the prime minister’s office to review and

speedily approve foreign investments, applications. The new trade policy liberalized

import and export trade.

IMPACT

The effects of the change has been tremendous. There has been an in-rush of investment

into the country. IBM and Coke who left India in 1977, returned together with a host of

multinational corporations from different sectors. Foreign investment inflows exceeded

US $4 to 5 billion per year, Addit Jain (1995).

PRODUCTION AND MARKETING AND FINANCE

From the 1970s, the Government strongly pursued the self reliance objective in

manufacturing in almost every sector of industry. Foreign investment was rarely

allowed and even importing of foreign technology for manufacturing was carefully

scrutinized. Everything that you could see around-refrigerator, television, bulbs, cars,

kitchen, appliances, cement, plants etc. are crafted with pride in India, (Adit Jain 1995).

A market from such a production suggested absence of competition in sale, and lack of

competition for quality.

However, with the new change, investment is created that brings profit and employment

and eventual economic growth.

PRODUCTIVITY

In order to achieve economic growth productivity has to be encouraged and reward

system may also have to be adjusted. The output -input ratio with due consideration for

quality and time has long been neglected in India because wages paid to workers are

low. Low productivity and absenteeism were considered as facts of life in India.

However, in the new dispensation, changes are occurring to increase the workers output

by, modifying the recruitment system that was focused on the caste system, retraining

workers and by introducing profit sharing and other incentives.

HUMAN RESOURCE MANAGEMENT

The cast system is practiced in India. It is a joint family system that encourages team

work and submissive attitude towards authority. It has been found very useful in human

resources management.

GAIN

(1) India social system

(2) Rao’s administration

(3) Weaknesses of the Indian management system

Workers are generally more recruited from the member of the same caste owning a

business. The major reason has been to have around people who could be trusted

especially in times of crisis. However, caste recruitment has been criticized as providing

a pool of people who depend on others for decision making and people who lack

initiative. Another problem related to personnel management concerns the reluctance of

women to work over-time and the fact that by constitution women use barred from night

shifts. These are possible sources of embarrassment to MNC managers who ate

liberated from such cultural practices.

LESSONS

The lessons from the India experience show:

a) That insulated economies cannot row i.e. countries who refuse and do not

attract foreign investment would have their business strangulated.

b) That investors need the comfort of political stability, i.e. foreign investment

wills nor goes to countries with unstable government.

c) That investor's look for markets where their business can grow.

d) Business needs minimal restrictions in the flow of service goods and capital.

e) That MNCs do not necessarily have the same ambition as Host country

governments for economic growth and can-shirt foreign investment to other

countries.

4.6 SAUDI ARABIA

INTRODUCTION

Saudi Arabia covers an area of about 86,500 sq. miles in the Middle East close to the

Arabian Desert. The weather is hot with daily temperature ranging from 1000F to 1200F.

The Kingdom is divided into three major regions, Western, Central and Eastern

provinces. In the Western province is located-the-city of Jedda as the heart of

commercial activities. In the central province, is Riyadh the capital and the seat of

Government and the embassies of foreign countries. In the eastern province lie large

numbers of expatriates, who work in the Arabian American oil company and at

YARAMCO facilities and Jubail Industrial Complex.

About 114 million Moslem Arabs, who are mainly herdsmen and peasant farmers live

there, ironically, the per capital income is about $10,000. The country is the largest

exporter of oil in the world. It has the second largest supply of foreign exchanges and

the largest oil reserve in the world. Saudi is an Islamic State ruled by a Monarch who

combines the role of the religious leadership with that

CONSUMPTION OR EXPORT BASED ON CULTURE

All goods produced for export or consumption (import) in Saudi Arabia must meet

certain adaptation requirements that would make the goods meet the wants of the

people.

Major factors considered are the culture and climatic conditions, culture relate here to

the religious beliefs, values, norms, attitude and styles of life

Saudi Moslems do not eat pork or drink alcohol. Any business dealing in alcohol or

pork cannot be allowed to operate in Saudi. In addition, any imported products having

traces of alcohol or pork cannot sell in the kingdom. Ingredients labels or imported food

products are scrutinized to catch items that do not conform to this cardinal rule (Secil

Tuncalp 1988).

All meat products imported to Saudi must have come from animal slaughtered

according to Moslem rules. Perhaps for the same season the Saudis prefer fresh meat to

imported frozen meat. Fresh meat from New Zealand, Australia and Turkey dominate

the market. Other traits of Saudi consumer are reflected in their clothing and choice of

colour. Men prefer white for clothes, red or black for caps while women use long black

robes with veiled tops.

PRODUCT INNOVATION

The weather in Saudi Arabia is very hot and humid. So, clothing whether black or white

must have thin texture. White colour is the preferred choice for cars since white colour

reflects heat.

The Kingdom has one of the largest markets for air conditioning equipments in the

world. The Japanese have adapted their export cars to the kingdom to have large cooling

systems to prevent overheating of engines as innovation to catch the competitive market.

Japanese have manufactured compass that points to Mecca, the direction for Muslims to

turn to at Prayer. Japanese have also been marketing special clocks that remind

Moslems of the five prayer times, Japanese computers now use Arabic language, British

MNCs are also marketing non-alcoholic beer.

PRICE

Because of the large market and many producers competing for market share prices of

goods are low, in addition a strong factor for the low price is that Saudi Arabia is tax

free i.e., no taxes are charged for the sale or purchase of goods conducted within the

country. Tuncal S. (1988) suggested that Japanese electronic equipment bought in Saudi

Arabia could be as much as 40% cheaper in Europe

MORALE AND VALUES

Advertisement of Tobacco smoking is prohibited, advertisement would be worded that

it does not clash with social values and believes, so allusion to sex, nudity and

propaganda of other religions are not allowed.

SAUDI PERSONNEL ADMINISTRATION

With big business in hand and large market to cater for, Saudi faces a need for a strong

work force. However, 'skilled and educated managerial Personnel are in short supply,

hence Saudi business and MNCs make use of large number in their work force.

The Saudi business men in small companies base their recruitment (of indigenes) on

affiliation friendship and right of birth. As a result of this approach to recruitment, a

manager in most cases is unable to terminate workers who are not performing well in

their positions. Companies often carry employees on their payroll who perform poorly

on their jobs.

LESSONS FROM SAUDI ARABIAN EXPERIENCE

1) Culture and in particular religious belief, is an important factor influencing the

management of business in Saudi Arabia.

2) Integration of political and religious leadership is required to rule the Saudis

successfully.

3) Liberal trade policy encourages competitive market, create values needed for quick

economic growth.

4) Some degree of government control through legal process is needed to guide foreign

investment needed for economic growth.

4.7 Assignments1. Write in full about Japan’s business management styles under the following headings:

Production Quality Cycle Just-in-time production system Personnel Promotion and wage system Decision making process Paternalistic management

2. Compare management styles of United States companies with Germany

4.8 Quizzes

1. Compare the personnel management of companies in these two countries

Japan and United States of America

2. What are the lessons from India’s experience in comparative management?

CHAPTER FIVEGLOBALIZATION

5.1 What is Globalization?

Globalization is the process of extending social relations across world space. Such

extension arises from the movement of people, things and ideas.

Globalization describes the interplay across cultures of macro social forces. These

forces include religion, politics and economics. Globalization can erode and universalize

the characteristics of a local group. Advance in transportation and telecommunication,

infrastructure, including the rise of the internet are major factors in globalization

generating further independence of economic and cultural activities.

Since the beginning of the 20th century, the pace of globalization has intensified at a

rapid rate.

Globalization process affect and are affected by business and work organization,

economic, social-cultural resources and the natural environment.

Furthermore, the tremendous growth of population over the past several decades has

been both a primary and official globalization.

The volume of goods produced has increased twenty-seven-fold from $296 billion in

1950 to more than $8 trillion in 12.2 percent in 2009. The steepest decline since world

war II trade is again on the upswing.

As a result of efficient production, customers around the world enjoy a broader selection

of products.

Productivity and the quality of goods have increased across the globe which results in

raising incomes, creating more jobs, reducing prices and increasing worker’s earning

power. Trade can also bring about economic, political and social disruption.

Since the global economy is interconnected when large economics suffer recessions,

the effect are felt around the world, even inefficient production is the quality of goods

produces. When producing and trade decreases, jobs and business are lost.

According to Amir Z. an observer economics MS on the implementation of world

trade which is very complicated and complex. The complexity in productivity and

quality of goods is partly due to political and state boundaries trade, for example,

cultural difference, languages, currency exchange rate, estimates, ranges and

commercial law.

The positive effect of globalization in productive are positive and negative

5.2 POSITIVE EFFECT

1. World production could be improved

2. It increases the standard of living of the citizens

3. It creates job opportunities

4. It makes the world a global village where everything is integrated7More profit

can be made due to enhanced technology

5.3 NEGATIVE EFFECT

1. Because of the development of the foreign trade becomes freer which can inhibit

the growth of the industry

2. It can worsen the balance of payment

3. The financial sector is increasingly unstable

4. Exacerbate the process of long-term economic growth.

In conclusion, the central operating principle of production is that commercial interest

should supersede all others, we now communicate with one another through travels and

trade, transporting products around the world in hours or days. We are in a huge global

economy where something that happens in one area can have knock-on effects

worldwide. This process is called globalization.

5.4 Assignment

1. What are the challenges to Globalization for productivity and quality of goods?

5.5 Quizzes

1. Highlight the positive and negative effects of Globalization in production.

CHAPTER SIX

COMPETITIVE ADVANTAGE6.1 INTRODUCTION

Competitive advantage is a condition or circumstance that puts a company in a favorable or

superior business position. Expansion is vital to maintaining a competitive advantage.

Competitive advantage is a superiority gained by an organization when it can provide the

same value as its competitors but at a lower price or can charge high prices by providing

greater value through differentiation.

Competitive advantage results from matching core competencies to opportunities

6.2 STRATEGIC COMPETITIVE ADVANTAGE

When a firm sustains profits that exceed the average for the industry, the firm is said to have

a competitive advantage over its rivals. The goal of business strategy is to achieve a

sustainable competitive advantage.

Competitive advantage can be gained by offering the consumers a greater value than

competitors such as, by offering lower prices, or providing quality services or other benefits

that justify a higher price.

Competitive advantage is the leverage that a business has over its competitors. This can be

gained by offering clients better and greater value.

Micheal Porter defined the two ways in which an organization can achieve competitive

advantage over its rivals.

1. Cost: The company seeks to be the lowest producer relative to competition. Cost

advantage results from efficiency. Efficiency is the value of input to output. Efficiency is

enhanced if holding output constant, inputs are reduced or holding input constant, output

are increased. Output can be increased by increasing units of production, decreasing

down time, etc. Economy of scale by large organization also results in greater efficiency

by reducing costs.

2. Differentiation strategy: These are responses that the firm possesses. A non-price

attribute that distinguishes the firm are superiors to its peers. It means offering a valued

variation of the physical product. However, some products do not lend itself to much

differentiation e.g. beer, notebook, paper. Some products on the other hand can be highly

differentiated e.g. appliances, restaurants, automobiles, etc.

Product differentiation can be done by manipulating many characteristics e.g. features,

performance, style, design consistency, durability, reliability, etc. Additional service after

sales can also help to differentiate a product. E.g. Mary Kay cosmetics offer skin care and

glamour cosmetics similar to those offered by many other cosmetics companies but

products are accompanied by informational, instructional training session provided by the

consultant. Dell and Gateway claim to provide excellent technical support services to

handle any glitches in their products

Focus: This directs attention, narrow product lines, buyers’ segment or geographical

market. Focus will use cost and differentiation to gain advantage but only within narrow

target market.

The strongest competitive advantage is a strategy that cannot be imitated by other

companies.

6.3 SUSTAINABLE COMPETITIVE ADVANTAGE

Sustainable competitive advantage involves ensuring that the advantage is permanent as other

firms will try to catch up with the company. Sustainability occurs when the competitors are

not able to catch up or duplicate the benefits of the firm strategy. For sustainability, firm’s

generic strategy must be grounded in an attribute that meets the following criteria.

1. Valuable: Must provide value to customers

2. Rare: It is not commonplace or easily obtained

3. Inimitable: Product cannot be easily imitated or copied by competitors.

4. Non-substitutable: Consumers cannot or will not substitute with another product.

6.4 GAINS OF COMPETITIVE ADVANTAGE

1. Positioning is better than prospecting

2. Plans fail but movement don’t fail.

3. Stand on the shoulders of giants

4. Becomes a people developer

5. Creates raving fans and advocates

6.5 OTHER STRATEGIES FOR COMPETITIVE ADVANTAGE

1. Defensive strategy: It involves skipping those advantages in place and defending what

he has by keeping the advantages away from competitors.

2. Alliances: This involves entering into strategic alliance with other businesses. This

however should not lead to collision.

6.6 HOW DO YOU CREATE A COMPETITIVE ADVANTAGE?

1. Review your core strengths

2. Reduce costs

3. Focus on service

4. Focus on product or service quality

5. Differentiate your product and service

6. Form an alliance with another company.

6.7 Assignments

1. Compare, strategic competitive advantage with sustainable competitive advantage

2. Explain the main strategies that a company can employ to gain competitive advantage

6.8 Quizzes

1. What are the gains of competitive advantage to a company?

2. How does a company create competitive advantage?

REVIEW QUESTIONS1. Managerial practices refer to the way and manner managers perform their functional

activities of planning, organizing, coordinating, motivating and controlling and involves

identifying the degree of efficiency and effectiveness with which these activities are

performed in the dynamic business environment of various countries. Discuss.

2. How does a strategic business unit (SBU) apply strategic management concept to

effectively run a business for success (Profit)?

3. Explain the concept of international business. What factors encourage a company to go

global?

4. There are a number of forms in which a multinational company can involve itself in

foreign operations. What are the various modes of this involvement?

5. Explain in full the factors to be considered before starting a multinational company.

6. What are the major groups that the problems faced by multinational managers can be

classified into?

7. The classical school of management thoughts has two branches. Discuss these two

branches in full.

8. The behavioural school of management thought was concerned with ways to improve

working morale in order to increase productivity. Discuss this fully.

9. The quantitative school of management thought employed mathematical model and

operational research to solve decision problems while the system approach emphasized

that the activities of one part of the organization affect activities of every other part. What

are the contributions and criticisms of this school of thought?

10. Explain the relationship of comparative management to schools of thought.

11. The socio-economic approach to the study of comparative management can be traced to

the works of Harbison and Mayer (1959), who identified manager as a crucial factor in

achieving economic success. Discuss this and highlight the merits and demerits of this

approach.

12. The ecological approach emphasizes the interaction between a business organization and

its environment and the opportunities and constraints that it has on managerial

effectiveness. Discuss the main concept of this approach and highlight the basic

hypotheses of the authors (Professor Richard Farmer and Barry Kishman)

13. Highlight the hypotheses of Koontz model and also the merits and demerits

14. Explain the behavioral approach to the study of comparative management.

15. Compare the management styles in two selected countries of the world.

16. What are the challenges to Globalization for productivity and quality of goods?

17. Micheal Porter defined the two ways in which an organization can achieve competitive

advantage over its rivals. What are these two ways?