Comments for Deadly Sins of International Business Blog

Comment on #91 Automotive Branding Gone … Mild by Horst

Horst — Sat, 30 Mar 2013 17:58:41 +0000

The discussion about the cultural aspects of branding car series’ names and the different schemes of American and German car manufacturers may explain a part of the picture. I am not sure if the structured and technically oriented naming classification of Audi and BMW is really an expression of the cultural differences between USA and Germany in terms of UAI and IND, the both dimension where the countries indicators differ most. (http://geert-hofstede.com/germany.html). Maybe it has more to do with a known image – so A8 was known as the flagship of Audi limousines and stood for luxury cars for executives and people of a certain wealth.
And this would have been the same with Jaguar which also had a letter-number system but was originally British. And there are German manufactures like Volkswagen and Opel who use names like Touareg, Pheaton or Cascada, Ampera, Insignia etc. So what I mean is that it might be interpreted as an outcome of cultural dimension but my explanation is more that this mostly has historical reasons ( both Audi and BMW always used this system of naming) and established it – so why change. It was successful since they always were leading companies in their home markets.
So why are they also successful in US – from my point of view it has a more to do with the brand image. Like wealthy people wear certain watches (Patek Philip, Rolex, IWC,…) – Swiss watches stand for high quality and status. Many people may buy such a watch regardless how it is named. It shows something to other people. (“Want have” effect) I belief it is similar with Audis, BMW or Mercedes. So upper middle class, executives etc. drive cars that show their status. And they named cars made to a status symbol e.g. in the US. And this is nothing coming by itself – it is great brand management and high level marketing which is essential in foreign markets. Sure the clear structured naming convention (A1-2-3-4-5-6-7-8) helps to very quickly identify where on the ladder the owner stands.(A little bit strange is Mercedes: A-class is the smallest car type – A-class might better symbolize top class. But even there everybody who is a little bit interested in cars knows that S-Class at Mercedes is what A8 is at Audi). The second aspect might simply be design – the actual BMW and Audi cars seem to meet the sense of taste of American people in their target group ( better than some American cars do and better than Mercedes maybe)
And this is essential because it is also very different in different markets. (Think of some Asian car design which is really very strange for Western countries)

Comment on #96 McDonald’s Not So Flat World of Ads by Eveline Crnalic

Eveline Crnalic — Sat, 30 Mar 2013 13:42:25 +0000

We are living in one world but we are not living in a borderless world. Due to the mentioned point of views between Friedman and Ghemawat I would concur more with Ghemawat’s position that legal and administrative barriers continue in several areas – which should not to be considered as that wrong at the end of the day.
The “globalization discussion” in my opinion is too much focusing when not constricted to business areas and above-average business growth without the necessary and sufficient sense for cultural aspects. Last year the Nobel Peace Prize 2012 was awarded to the European Union (EU) “for over six decades contributed to the advancement of peace and reconciliation, democracy and human rights in Europe”. Of course, this is a welcome policy development, also because EU countries account for an ever smaller percentage of the world’s population and must therefore continue pulling together to ensure economic growth. No individual EU country is strong enough to compete on the world stage with other major economies itself. But humans have lived for centuries within boundaries. Relaxing boarders is a first step but the EU as well has seen that approaches to put all countries together in a very short time horizon failed because of all that existing cultural differences. The world changed within the past decades dramatically but changing world is not something a group of people can work out and as we see every country or group has its self centered policy which it is going to protect before thinking about anyone else.

The basic principle, which sounds hackneyed at first but continues to provide a suitable maxim for companies is: “think globally, act locally”.

McDonald’s is a very good example for respecting different local cultures. They know their core competencies and adapt them to different world markets. They are aware that a dramatic shift from domestic client bases to a multinational one has taken place but they align their products to regional customer needs instead of globalizing them. Thus, it is vital for McDonald’s to think globally and act locally. In general, companies have to undertake the study of international cultures and languages. Moreover, the ability to engage cross-culturally enables them to competition-proof their capabilities.

McDonald’s is not a political institution but it might be a model. There are many examples of failed globalization strategies in politics (recent developments in Greece and Cyprus show us the European Union collapsing before our eyes because the people of the various nations don’t want to lose their country’s national identity) as well as businesses (Starbuck failed in Austrialia, Wal-Mart in Germay…) which base on the assumption that we are all equal and living in a borderless world…

Comment on #94 Yum-my Chicken by George Fleming

George Fleming — Fri, 29 Mar 2013 05:41:05 +0000

Interesting to see that small failures regarding dishonesty, ethics & cleanliness can easily plunder an international powerhouse such as YUM. As you will see in my comment on your McDonalds post, YUM was having huge financial success in 2011.

Comment on #95 Management, Austrian-Style by George Fleming

George Fleming — Fri, 29 Mar 2013 05:34:16 +0000

I personally wish that everybody in this great world that we live in, would all thrive being individuals. There are so many closet entrepreneurs and innovators that will never have their time to shine. This is not because of lack of talent, but because of lack of confidence. Many people are too sheltered and above all too scared to let their supreme individualism reign. Obviously this differs from person to person, but in my experience a lot of Austrians (obviously Arnold Schwarzenegger’s ambitious self would differ) do not state their opinions publicly. Maybe not politically, but this is equally as bad in the USA. If everybody just said what they were thinking, this world would abundantly have less issues, but we all know that this is never going to happen. For whatever reason people think the truth hurts too much or will get them in trouble. As for myself I refuse to be a completely acceptable sheep in society and that is one quality that helps me stand out. As opposed to being one in the crowd, I love being the individual on stage!

Comment on #96 McDonald’s Not So Flat World of Ads by George Fleming

George Fleming — Fri, 29 Mar 2013 05:18:28 +0000

Both McDonalds and Yum are great when it comes to marketing and appealing to given cultures through means of the 4 Ps (Product, Price, Promotion & Place.) To truly succeed in business internationally, one must appeal to the local culture and ultimately win their approval. One must also realize that something that works in America, may not work in India or even Austria. However, McDonalds and Yum have made it so that they are very good at changing up their products in order to appeal to the local culture. I would highly advise investing in both of these companies. Both of these International powerhouses are doing amazing when it comes to marketing their product and dispensing it all over the world, and below are the financials proving their success.
Although I cannot speak for Yum due to the fact that I have never been to a Yum restaurant in Austria, I have been to McDonalds. The McDonalds in Austria are far superior to that McDonalds in the USA! In Austria McDonalds has much better quality and apparently 100% of their beef and potatoes are products of Austria. Gerhard, Do you believe that all of the beef is raised in Austria? I feel like this sounds too good to be true, and that if somebody were to test where every kilo of beef was originating some of it would not be in Austria. The prices of a McDonalds hamburger is just too cheap compared to an Austria steakhouse where the price is near 50 euros for the basic steak. However, with this claim that 100% of the beef is local, the international powerhouse is doing an excellent job of marketing to the Austrians who are used to local quality food.
McDonald’s Corporation (McDonalds) and Yum Brand, Inc. (Yum) have both been on such a rise in terms of financial success especially from 2007 to 2011 (Gerhard, I was not able to find rational numbers for 2012 and 2013 is still under way, so I just stuck with 2007-2011), that there are not too many defining differences other than they fact that they are different businesses. They both are powerhouses in the fast food industry and the only defining factors are that they are made up of different brands and have different people running their eateries. McDonalds needs no introduction to the public of the world, but for those who aren’t as familiar with Yum, Yum is a restaurant ownership that currently owns KFC, Taco Bell, and Pizza Hut. Comparing both of these corporations was very interesting because they both had such a successful year in 2011. Although both McDonalds and Yum’s financial numbers skyrocketed in the year 2011, McDonalds still pushed marginally ahead with a maximum Net Income of 1.5 Billion as opposed to Yum’s maximum Net Income of approximately 1.3 Billion. Many would look at that as a minor difference, but a couple hundred million dollars is a lot when it comes to a profit at the end of the day and that is why McDonalds was number one in the Dow 30 with 2011’s total shareholder return of 34.7%.
For McDonald’s finances, they have been on a very steady incline over the past few years, they continue to grow and establish all over the globe, and they keep growing richer. For each expansion attempt that is unsuccessful, this corporation seems to have ten in its place that easily cover their losses. What shocked us the most was McDonald’s “Franchised Sales.” The franchised sales were off the charts when it came the rise in sales each year going back as far as 2007. In 2007, the franchised sales were approximately 47 million, 54 in 2008, 57 in 2009, 61 in 2010, and 68 in 2011. McDonalds even expects the franchised sales to surpass 75 million at the end of 2013. One of the other major things McDonald’s excels in is having their assets sufficiently outweighing their debt. Over the last few years the debt has increased marginally each year, but so have their assets and the assets have constantly been about 20 million (give or take a million) as well. In 2007 McDonalds had an overall debt of $9,301 million and their total assets came in at $29,392 million; whereas in 2011 the total debt rose to $12,500 million, but the assets also rose to $32,990 million, which covered the remaining debt.
McDonalds continues to profit tremendously. Not only was McDonald’s net income so incredibly high, but also the shareholders were very excited to see 11% earnings per share growth. Even the operating income has been on the rise of nearly a billion each year. In 2009 the Operating Income was $6.8 billion, in 2010 it was $7.5 billion, in 2011 it was $8.5 billion and it seems as if it will be over nine billion when 2013 comes to an end. Today, McDonald’s is serving a record number of guests, which is averaging around 68 million people every day, or even more on some days. In the United States alone, McDonalds sales grew tremendously, as did their guest counts and market share with comparable sales up for the ninth consecutive year, rising 4.8% in 2011, while comparable guest counts rose 3.3% Not only is McDonalds touching many lives but also it seems as if their numbers in 2012 (in terms of financial numbers) will be exponentially higher this year than 2011. McDonalds is constantly rising in terms of finances, expansion, and popularity around the world and with their inexpensive food, I don’t see Yum ever taking over the McDonald’s Corporation. Especially internationally, McDonalds is much more well known.
Since I particularly focused the financial conditions of McDonalds and Yum from 2007 to 2011, I must consider the global financial crisis in 2008. McDonalds and Yum Brands both were significantly affected by the global financial crisis and in especially China, they both had to cut the price of products although the material costs were up. Regardless of how good their international business team might be, this crisis in 2008 impacted everybody.
After scrutinizing all of finances between McDonald’s Corporation and Yum! Brands, Inc., it is very tough decision based on the last couple years. Especially in 2011, both of these fortune 500-restaurant businesses skyrocket in terms of net income and on both sides the assets far outweighed their liabilities. If I had to choose between one or the other to invest in, I would say, McDonalds. Not only are the numbers higher in literally everything positive for McDonalds, but they also have tradition. This tradition exists especially here in the USA. In terms of the stock market, McDonalds has always been true to their shareholders and has brought them steady income. Not to say that YUM isn’t a wise investment (especially in 2011), but if I had to pick one or the other, it would have to be McDonalds.

Sources:

Center for Science in the Public Interest: http://www.cspinet.org/.
Corporation & Health Watch. Is McDonald’s Lovin’ the Economic Crisis? Hard times, fast food and health: http://corporationsandhealth.org/2009/01/01/is-mcdonalds-lovin-the-economic-crisis-hard-times-fast-food-and-health/
Market Watch http://www.marketwatch.com/investing/stock/mcd/financials/cash-flow
McDonalds Trend Analysis http://www.scribd.com/doc/58237188/26/TREND-ANALYSIS

Comment on #95 Management, Austrian-Style by Sabine Ilger

Sabine Ilger — Sun, 17 Mar 2013 07:09:47 +0000

Hofstede´s dimensions support your interpretation of Austrian´s behavior, they are risk-averse, don´t like authorities, are educated to be polite and to avoid confrontation through open-minded discussions, whereas I think it depends on the specific situation. Austrians don´t like authorities, but in my opinion they are aware of it and it is not appreciated to be open minded “between authority stages”. I am also convinced that Austrians tend to be risk averse and don´t like change. But also in this context I believe there may be a difference between older and younger generations. Younger people often have more international education, don´t want to work for the same company and in never changing structures their whole life as older ones like to do. Globalization enhances the willingness for change and development also for Austrians.
I completely agree with you and Hofstede that Austria is dominated by masculine orientations.
Anyway you mentioned that you will address how foreign managers could adapt their practices in Austria. I did this vice versa, what should Austrian managers take into consideration managing people in the US?
Additionally to country specific scores Hofstede provides on his homepage an interesting article about an approach called R-STAR steps in the cycle of managing people. This model helps to discuss the impacts of Hofstede´s study on human resource management or how to motivate people in different countries (find more under http://www.itim.org/managing_people_across_cultures.pdf)

Due to this model 5 aspects should be taken under consideration:

R – Recruting: What defines a good candidate?
Basically we have to differentiate between more or less individualistic societies. US people are supposed to be highly individualistic; Austrians could be seen in the midrange. Americans identity is based in the individual, the management is a management of individuals, the relationship employer – employee contract is based on mutual advantage. People are outspoken and have strong opinions. Hiring Americans would mean to be aware of these differences otherwise the sales manager could come to wrong conclusions in the assessment process.

S – Setting targets:
Low Power Distance cultures like the US and Austria (with a score of 40 in comparison to Austria with 11) negotiate targets, the gap of salaries between the top and the bottom management should not be too high. Based on Hofstede´s analysis Americans accept more guidelines and hierarchy oriented structures. Austrians are setting their targets on a more democratic way.
Also Masculinity should be taken into consideration in this context. People in Masculinity oriented cultures live in order to work and are used to be in competition among colleagues and performance. Targets are supposed to be operationalized by a motivated staff. It is surprising that Austrians are above Americans in the range of Masculinity. But I think this aspect is important for Austrian managers in the US also concerning women in management positions. Women seem to be more accepted in different roles in the US than in Austria.

T – Training
Societies with higher Power Distance prefer instructors who tell them how to do things. Lower Power Distance countries such as Austria and the US prefer more interactive lessons with debates and case studies. Based on my experience doing my MBA at the California Lutheran University I could hardly believe that Austria has a lower Power Index than the US -

A- Appraisal
Cultures with low Power Distance and high Individualism tend to use more direct feedback. Austria´s cores are an interesting mixture. Austria demonstrates a lower score in Power Distance than the US but also a lower score in Individualism. I guess, direct feedback is appreciated also in Austria, but I think Austrians tend to paraphrase and to find very polite wordings. An Austrian manager could be straighter forward in the US than in Austria.

R-Reward
Cultures with high Individualism such as Americans are high cash-oriented and work with individual performance-related bonuses. More Feminine cultures such as the Norwegians pay more attention on facts like greater responsibility, larger span of control and wider territories.
Comparing Austria and America is interesting, because Americans have a higher score in Individualism but Austrians a higher score in Masculinity, which means that they are also oriented on money and status but there seem to be a gap between men and women. I guess as mentioned above Americans don’t differentiate concerning men and women in the same way, but both cultures seems to fit concerning performance-orientation and rewards.

I am sure there are a lot of other aspects to deal with doing international or global business. In my opinion intercultural skills and knowledge will become more and more important.

Comment on #95 Management, Austrian-Style by Armin Kammel

Armin Kammel — Sat, 16 Mar 2013 19:40:55 +0000

The blog-post nicely describes some of the typically Austrian dimensions to management by highlighting some of the cultural aspects one has to consider when dealing with Austrians. Being familiar with numerous others cultures, in particular in North America and Southeast Asia, my experience and understanding is that one has to be aware that the described Austrian aspects are fairly unique and are therefore not necessarily comparable with other cultures (such as the German) even in the European context for numerous reasons:
First, Austrians show an interesting ambiguity between tradition and innovation. This means that although certain values are considered to be hugely important, Austrians are – especially in the well-educated segment of the population – very interested in innovation. Numerous high-tech companies which are successful world-market leaders reflect this ambiguity as well as the fact that often these companies are located in the provincial areas of Austria and not necessarily in the cities such as Vienna or Salzburg. Just remember that the headquarter of Red Bull is in a rather small city in the province of Salzburg or that niche-market leaders such as KLH or IBS are located near Murau in Styria.
Second, Austrians value quality. Throughout Austria you will often hear sayings like “we want quality and that has its value”. This indirectly implies that often cheaper competition from abroad is not always perceived positive. This may imply the common belief that often local stuff is better than imports but it also shows the Austrian approach to make things better at home. Of course this is not something that applies to everything but the above-mentioned niche-market leaders are a result of this approach. Pretty often aspects such as environmental friendliness, sustainability and the efficient use of natural resources play a crucial role in this context.
Third, Austrians do show a certain resistance to change. Although this statement is partly true since Austrians typically approach attempts to change with statements such as “why change, it has worked well like that”, they can be convinced to change their habits with good arguments. Probably Austrians need more powerful arguments to accept change than other cultures. In addition to this, unlike in the past, Austrians tend to think in much smaller scale dimensions than let’s say Americans. Not surprisingly, you will often be exposed to sentiments like “yeah but Austria is not affected” or “this will not happen in Austria” because the Austrian typically first thinks in the context of the borders of his small home country in the heart of Europe and then later on maybe in the European or international context. This approach often leads to a certain degree of ignorance of things happening outside the Austrian borders.
Fourth, I do not necessarily agree with the statement that Austrians do not like direct communication. On the contrary, Austrians tend to be – also in my European experience – much more direct than others such as French or Scandinavians. It may not be that Austrians state their opinions right away but if they state them, they are direct, exact and to the point which might sometimes be insulting. However, the typical Austrian is known for its charm also in the international context which is normally positively perceived by others but may sometimes be tricky to be fully understood.
Fifth, the mentioned Austrian charm combined with the Austrian ability to adapt to different environments result in successful market entries and business stories in particular in Central and Eastern Europe (CEE) as well as niche-market players at international level. However, often such successes are not visible at first sight because Austrians often tend to be too modest and make extensive use of understatements.
Against this background, I want to conclude that Austrians – if they are convinced of something – can be very persistent, so watch out, because the “I’ll be back” slogan really applies to them very well and Arnold Schwarzenegger is one of Austria’s most famous sons and he also proved to be very successful in business with persistence and charm…

Comment on #95 Management, Austrian-Style by Martin Kollegger

Martin Kollegger — Sat, 16 Mar 2013 17:14:52 +0000

Very interesting example how different cultures influence nowadays our daily business. What I experienced in my life most of the crucial decisions depends on the individual behavior. Try always to manage in an open mind of innovation and shown a willingness to learn. Yes, I am with the statement in the article Austrians very resistant about change processes ( why should we chance, it works quite well the past 20 years……). Therefore it is essential to sensitizing employees how important is a stable change and learning process to create a good position for future competition and growth. It is more difficult to bring people to the willingness to change than to think what the required new software program is or which process should be improved. But I think this behavior generated on our small country where we never learned to think big – we live in small downs or communities and we do not look what have happened outside. But on the other side people prepared to help each other and they act very familiar.
I do not agree with the point in Austria, people don’t like to be direct. In my personnel environment I see more and more direct communication. First I am very familiar with direct communication and prefer this style because it opens fast new possibilities and make conversations easier for all participants. And second direct creates the necessary trust which is very important in relationships and certainly for friendships. Of course Austrians use of foreign languages often brings up curios situations – but if you did it in a friendly manner everybody will forgive you!
The traditional values of Austria in my opinion should be better established for enter new markets. I feel every time very comfortable when explain my foreign business partners where I come from and feel goodwill. The main point is Austrians are not the marketing experts as the US guys are – here is a huge lack and potential to emerge. But from day to day we learn and if many Austrian companies shown they developed well marketing strategies and entered many different markets to offer our well known high quality products.

Comment on #69 The Globalization of Healthcare by Stefan Schmid

Stefan Schmid — Fri, 15 Mar 2013 13:15:55 +0000

Reading the globalization of healthcare three basic concepts came into my mind right away: Competition, privacy and future potentials.

1.) Competition
As in all other industries, including many areas of public services, markets started to develop and competition became stronger due to globalization. Healthcare has been so far in the hand of the public in many western but also eastern countries. In countries which are not well developed yet it essential that the public sector takes care of this essential and highly state duty.
Regarding the current situation in Western Europe, including Austria, Germany, Italy and many other countries there is a real problem with the efficiency and effectiveness of the current system. Besides, poor management, high operating costs and poor process innovation in hospitals and health care institutions is often the case. If anyone has visited a public hospital for ambulant treatment lately it is obvious many times that with overcrowded waiting rooms and doctors and nurses with more than 60 hour weeks the current supply and quality standards probably do not meet the market’s demand.
Globalization and a certain private component in health care is a necessity in my point of view and for sure it will increase competition and the number of competitors on a certain defined market.
Regarding the quality level of the services provided, standardization, as also in many other industries becomes an important issue. Without proper standardization, there will be a risk that WHO high ranked countries (http://www.who.int/whr/2000/media_centre/press_release/en/) like France, Italy, Singapore and Austria will lose their standards, whereas lower developed countries on the world health organization like countries in Africa, Russia and Brazil will benefit from higher standards. Nevertheless, health care companies will mainly expand to countries with already high wealth standards or fast developing economies like the BRIC countries, unfortunately not supporting third world countries which still lack minimum health care standards.
As mentioned earlier, the private sector also play an important role in healthcare, as seen in WHO’s ranking with France on first place with a combination of public and private companies serving the population for health regards.

2.) Privacy
With many different privacy laws and regulations throughout the world, how will privacy be handled, if a patient ‘s data from a high privacy country is transferred to a low privacy country due to the laboratory there? How can insurance companies claim diagnostic reports and clinical evidence if they legally have no access to it? How will global companies, many times managed by investment funds secure this very sensitive topic? How can they guarantee security?
Those are all questions that need to be answered prior to globalization and liberalization of the health care market.

3.) Future Potentials
On a scientific level, healthcare is already an international topic with professionals exchanging information, holding congresses and seminars on special fields of health care, surgery and treatment. Many surgeries are already performed on a global basis with doctors performing surgical activities electronically with monitors and high end IT systems.
Transforming experiences from other industries, it is well known that the private sector often performs more efficiently than the public sector due to differences in organization, management, strategy, human resource planning and investment opportunities.
The public sector on the other hand is also inevitable since it makes and executes laws and legislation and defines certain industry standards and has a distinct long term orientation. To me this perfect combination of public and private, global and local healthcare will provide optimum service for a country’s population.

Comment on #96 McDonald’s Not So Flat World of Ads by Iris Egger

Iris Egger — Wed, 13 Mar 2013 14:57:36 +0000

In my point of view the truth is somewhere in the middle – Thomas Friedmann as well as Pankaj Ghemawat are both right. If your company (no matter if it is a big or a small one) runs through a internationalisms-process from the first thought (am I able to become international? Is the Cooperation ready to step outside) to the successful implementation in the market the world has no boarders at all – because you are prepared well. If you are not prepared you will recognize boarders you cannot overcome. They are not only in a “psychical” way between countries, those boarders are in the heads and being unprepared could destroy your whole business – no matter if you are successful in your home base. On the other hand legal and administrative barriers could break you neck because this stuff taken time, a long time and much resources. I guess it is important to understand that what works in your home base must not work somewhere else because of differences especially in cultures. McDonalds has a good marketing strategy – they are like a chameleon: no matter in which cultural surrounding they adapt the necessities to their business model there. No matter if it is religious inspired like in India, or celebrities inspired like in China or home region celebrated ingredients like in Austria – it works and that is the essential thing for sustainable success, to see the world through customer or different culture eyes and to adapt the product in that way. After all I guess a company should be aware of all risks/threats when they start going international – but if you do it right (and that means on a long-term a certain amount of preparation in my point of view) you have a lot of opportunities and could enlarge your sustainable success – like McDonalds or other companies showed us.

Kind regards and thy for the interesting blog entry
Iris