International Management: Principles & Practices

By Luke Ike

This book produces a clear and concise introduction to principles and concepts of international management as required by practicing managers and those in colleges and universities who are aspiring to become managers in international organizations.

• Language: English
• Publisher: Xlibris UK
• Release date: Feb 6, 2017
• ISBN: 9781524597559

Luke Ike

Dr Luke Ike is a lecturer and management consultant. He obtained his MSc degree in Business Administration from the University of Innsbruck, Austria Europe, and PhD degree in Business Administration from the University of Economics and Business Administration Vienna, Austria Europe. He completed post graduate studies in Ethnic and Minority Small Business Management at the London Guildhall University, United Kingdom, (now London Metropolitan University). He also obtained Post Graduate Certificate in Education (PGCE) from University of Greenwich, London, United Kingdom. Dr Luke Ike is the founder and CEO of COLNNECT Ltd Centre for Education, Management Studies and Consultancy, London, United Kingdom. He is also the author of many classic business textbooks such as - Management (Principles & Practices), Risk Management & Captive Insurance, International Management (Principles & Practices), Strategic Management (Concepts & Practices), International Business (Environments & Operations), Business Strategy (An Introduction), Entrepreneurship (Initiating and Developing a New Venture), Marketing (Traditional, Digital and Integrated). ContactE-mail:[e-mail]

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Copyright © 2017 by Luke Ike.

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Rev. date: 02/03/2017

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CONTENTS

Introduction to the Book

Part 1

Introduction To International Management

Introduction

Chapter 1

The Nature Of International Management

1.1 The Meaning of International Management

1.2 Basic Terms Associated With International Management

1.3 Why Study International Management

1.4 Why Firms Go International

1.5 Significance of International Firms

1.6 Criticisms of International Firms

Case Study

Further Reading

Part 2

The Envronment Of International Management

Introduction

Chapter 2

The Business Environment

2.1 Introduction

2.2 The Internal Business Environment

2.2.1 The Company

2.2.2 The Company Situation Analysis

2.3 The External Business Environment

2.3.1 The Task Environment

2.3.2 The General Business Environment- PESTELI

2.3.2.1 Political Factors and Analysis

2.3.2.2 International Negotiation

2.3.2.3 Negotiation Tactics

2.4 Economic Factors and Analysis

2.4.1 Intercontinental Development and Economic Issues

2.4.2 Country Levels and Economic Issues

2.5 Social Factors and Analysis

2.6 Cultural Factors and Analysis

2.7 Technological Factors and Analysis

2.8 Legal Factors and Analysis

2.9 International / Global Factors and Analysis

2.10 Business Ethics

2.11 Social Responsibility

Case Study

Further Reading

Part 3

International Management Tasks

Introduction

Chapter 3

Planning, Strategy, And Decision Making

3.1 Planning

3.1.1 The Meaning of Planning and Strategic Planning

3.1.2 Purposes of Strategic Planning

3.1.3 The Planning Premise

3.1.4 Corporate Strategic Planning

Case Study

Further reading

3.2 Strategy

3.2.1 Introduction

3.2.2 Corporate Strategy

3.2.3 Business Strategy

3.2.4 Functional Strategy

3.2.5 Operating Strategy

3.2.6 International Management Strategy

3.2.7 Types of Strategy

3.3 Gathering Planning Information

3.3.1 Introduction

3.3.2 Methods of Gathering and Analysing

Planning Information

3.3.3 Country Evaluation and Selection

Case Study

Further Reading

3.4 Decision Making

3.4.1 Introduction

3.4.2 Centralised/Decentralised Decisions

3.4.3 Strategic Decisions

3.4.4 Tactical Decisions

3.4.5 Programmed /Non Programmed Decisions

3.4.6 Dependent/ Independent Decisions

3.4.7 Decision Conditions

3.4.8 Factors Affecting Decision Making

3.4.9 The Influence of Culture in Decision Making

Further Reading

Chapter 4

Organising International Operations

4.1 Introduction

4.2 Basic Principles of Organising

4.3 Theories of Organisation Structure

4.4 Structural Designs

4.4.1 Introduction

4.4.2 Types of International Structures

Case Study

Further Reading

Chapter 5

Leading

Introduction

5.1 Leadership in the International Context

5.1.1 Leadership and Power

5.1.2 Response to Power in Organisations

5.1.3 Leadership Theories

5.1.3.1 Trait Leadership Theories (Classical theories)

5.1.3.2 Style or Behavioural Theories of Leadership

5.1.3.3 Contingency/Situation Theories of Leadership

5.1.4 Leadership Practices

Further Reading

5.2 Culture In The International Context

5.2.1 Introduction

5.2.2 Analysing Corporate Culture

5.2.2.1 Introduction

5.2.2.2 Hofstede’s Cultural Dimensions

5.2.2.3 Trompenaar’s Cultural Dimensions

5.2.2.4 Other Considerations

5.3 Motivation in the International Context

5.3.1 Introduction

5.3.2 Motivation Theories

5.3.2.1 Content Theories of Motivation

5.3.2.2 Process Theories of Motivation

Further Reading

Chapter 6

International Human Resource Mangement

6.1 Introduction

6.2 What is Human Resource Management (HRM)?

6.3 HRM Approaches of International Firms

6.4 Sources of International Human Resources

6.5 The Human Resource Management Process

6.5.1 Attracting An Effective Workforce

6.5.2 Developing An Effective Workforce

6.5.3 Maintaining An Effective Work Force

6.6 Labour Relations

6.7 International Structure of Labour Unions

Case Study

Further Reading

Chapter 7

Controlling

7.1 Introduction

7.2 Control Focus

7.3 Control Methods

7.4 Management Control Systems

7.5 The Use of Total Quality Control

7.6 Information Systems for International Management Control

7.7 Management Control Techniques

Case Study

Further Reading

References

ACKNOWLEDGEMENTS

I am highly indebted to Almighty God for the wisdom behind this book, and dedicate this book to the glory of God in Jesus name –Amen.

Special thanks to my wife and children for providing a supportive and caring environment for this undertaking.

Luke Ike

INTRODUCTION TO THE BOOK

International management is not a new phenomenon. However the significance of international management has increased dramatically and the study of international management has become increasingly important to many individuals and firms in recent years. A number of developments around the world have helped fuel public and business interest and management activity.

The pace of the rapidly changing global world has increased over the years, leading to the demand on countries to produce, expand, develop and advance globally, as economies of nations become more tightly intertwined and interdependent, and the economic health of many nations become more dependent on one another. International competition for goods and services has therefore, gone beyond national boundaries.

The globalisation of consumer tastes and the unabated construction of global electronic highways have improved communication and transport systems, as well as the possibility for foreign investment and trade, which has helped to transform the world into a massive business community – shifting the business world towards a truly integrated global business world. In reactions, more firms both large and small, are now becoming global business.

The nature of businesses activities today has become intensively competitive in a rapidly changing world. The result is that the nature of doing business has gone international and global, bringing managers from one country into ongoing contact with those in others, including their employees, creating the need for efficient and effective international management. Managers are now faced with the reality that the task of managing has changed, and there is need for international or global perspective in management.

Managing an international firm differs in many ways from that of managing a purely domestic firm. The differences arise from the simple fact that the environments are different in as much as countries are different.

The emergence of international and unfamiliar political, social, legal, and cultural environment meant that international managers must deal with multi- national business environment in a way that will allow them to attain their competitive advantage.

International firms also operate in an environment of a diverse workforce. The workforce is more diverse in many ways, in terms of religion, ethnic background culture, gender and age (as the workforce now includes more women and older persons and large increase of immigrant workers from various countries).

Managers from today’s international firm must learn to work effectively with those from many countries. They must learn to work efficiently with those from many different countries. They are now recognising the increasing necessity for developing skills, aptitudes and knowledge to compete effectively in international markets.

Differences between countries and workforce, now requires that international managers vary their practices when and where necessary, when managing an international business. The need to respond to these pressures affects companies of all sorts.

Firms operating in the international environment are finding the need to engage international managers who have the skills and expertise to interface efficiently with a broad spectrum of people and cultures – managing multiracial, multiethnic, multilingual workforce. Firms that will have the best chance for success now and the future, are those that are best able to meet these global challenges. They need to make sure that their managers learn necessary new skills needed to manage different human beings in a changing world. What these firms do now or fail to do will determine the future competitiveness of their business. This means international firms must ensure that international management skills can be acquired. International management has therefore increasingly become a phenomenon in today’s management world, and the study of international management has become increasingly important in recent years.

In this book, the reader will be introduced to international management principles and basic concepts of international management that enables the reader gain excellent knowledge and understanding of international management.

PART 1

INTRODUCTION TO INTERNATIONAL MANAGEMENT

Introduction

This part introduces the first chapter of the book.

As explained in the introduction, managers in the twenty –first century are facing challenges to in their bid to deliver efficient and effective international management in today’s increasingly complex, interdependent, and dynamic global environment.

To compete aggressively and successfully, international firms need to employ the services of well trained managers with the skills essential to working effectively in multinational and multicultural environment.

This part provides us with the general background introduction to international management and international firms – that will help us understand the rest chapters on the subject of study in this book.

This first chapter, Chapter 1 introduces the nature of international management that includes the meaning of international management, basic terms associated with international management, reasons for the study of international management, why firms go international, the significance of international firms and criticisms associated with international firms.

CHAPTER 1

THE NATURE OF INTERNATIONAL MANAGEMENT

Aim

To introduce the nature of international management.

Objectives

After studying this chapter you should be able to:

• Understand the meaning of international management and explain what international managers do.

• Outline basic terms associated with international management activities.

• Describe reasons for the study of international management.

• Explain why firms go international.

• Describe the significance of international firms.

• Outline criticisms of international firms.

1.1 The Meaning of International Management

International management could be described as the process of applying management concepts and techniques in a multi-national environment or international environment - that usually involves managers making one or more management mix decisions across national boundaries. It could also be described as the process of developing and implementing effective management principles and practices around the world to ensure sustained competitive advantage of the international firm.

These descriptions of international management provide a wider approach to the application of the basic management principles and concepts that could be traced back to early management theories or models, especially the classical theorist Henri Fayol (1949), and his understanding of what managers basically do - To forecast and plan, to organise, to command and to control.

Other writers are noted to have followed Fayol’s basic principles with different emphases in choices of words rather than principles. For examples, Brech (1957), defined management as –…consisting of planning, control, coordination, motivation. According to Koontz (1984), management is an operational process best dissected by analysing the managerial function: the five essential managerial functions are planning, organising, staffing, directing and leading and controlling.

By taking these basic management principles to a wider context, it is possible to understand what managers do when managing an international firm, operating in an international environment. This is reflected in the writers approach to the definition of international management.

.In this book international management is defined as:-the attainment of organisational goals efficiently, and affectively, in an international environment through management activities (tasks) of planning, organising, leading and controlling of organisational resources.

This definition pays attention to action (inputs) of managers, (outputs) of managers i.e. results, as well as the business environment (international environment), thereby exposing three important areas that is worthy of recognition:

1. The four functions of management i.e. planning, organising, leading and controlling.

2. The attainment of organisational goals efficiently and effectively.

3. The international context.

The four functions of management as described above are those activities managers have to carry out when managing in an international environment.

These are the main tasks carried out by managers in the process of achieving goals and objectives of the organisation. At whatever their level, people who perform these tasks in organisations are managing. The amount of each task varies with the job and the person, and they do not perform them in any particular sequence. They do so more or less simultaneously, switching rapidly between them as the situation requires- but these tasks make up the content of management work.

Efficiency and effectiveness are also important themes associated with the management activity because successful organisations are ones which attain organisational goals effectively and efficiently.

An Organisation is usually described as a system (open system as described in detail in chapter 3), which is a set of interrelated elements that transform inputs into outputs within an environment. Management responsibility is to coordinate this system such that resources will be used efficiently and effectively to accomplish organisation goals. Organisations efficiency pertains to an organisation’s ability to attain its goals by using resources efficiently and effectively. Efficiency therefore, refers to the amount of resources used to achieve an organisation’s goals. It is usually based on how much raw materials, money and people necessary for an organisation to produce a given volume of output. This can be calculated as the amount of resources used to produce a unit of output usually at the lowest cost- expressing - the ability of an organisation to do the right thing.

Organisational effectiveness on the other hand, is the degree to which an organisation achieves stated goals/objectives. It patterns to a successful relationship of an organisation with external environment- the ability of an organisation to do the right thing. One particularly influential writer on the subject of managerial effectiveness is Prof Hill Redden of the University of New Brunswick who considers it essential for the job of management to be judged on output rather than by input, and by achievement rather than by activities.

In his book Management effectiveness (1970), he argues that the differences between efficient managers and effective managers are that efficient managers seek to solve problems and reduce costs whereas effective managers usually seek to produce creative alternative and increase profits. Here we argue that management needs both. Acquiring excellent resources and managing them in a superior fashion is how a firm attains performance.

The context of the management activities is also important. As explained in the introduction of this book, differences between countries have now required that international managers should vary their practices when and where necessary, when managing an international business- to respond to environmental pressures that affects companies at their different international locations.

1.2 Basic Terms Associated With International Management

It is useful to begin by clarifying some of the terminologies used in the literature of international management. The terms international business, multinational business, global business and transnational business are often used interchangeably. This can be a cause of serious confusion, so it is important to define and distinguish between these terms.

The importance of this distinction lies in the fact that a spectrum of international business activity can be identified depending on the nature and extent of business’s involvement in international markets, the degree of co-ordination, and integration of geographically dispersed operations depending on the breath of international presence. Therefore, business and management issues facing an organisation will vary considerably depending on the breath of international presence.

Some of the terms associated with internal management include:

• International business.

• Multinational business.

• Multinational corporations (MNCs).

• Global business.

• Transnational business.

International Business

The term international business simply implies that an organisation is operating in more than one country. In this sense, it is a generic term.

Multinational Business

A multinational business is one conducting international business and operating in several countries. In addition the term implies some decentralisation of strategy and management decision making to overseas subsidiaries, with little co-ordination of activities and subsidiaries across national boundaries. In other words, subsidiaries operating in different countries are allowed considerable autonomy in terms of their strategies, which are largely determined by local conditions.

Multinational Companies or Corporations -MNCs

Many books also use the term MNC’s in place of multinational business. MNCs have been defined in many ways by business scholars and researchers such as:

Firms having operations in more than one country, with international sales, and nationality mix of managers and owners (Thompson 2006).

An organisation that produces in, markets in, and obtains components of products from one or more countries for the purpose of increasing benefits to the overall enterprise (Abbass1995).

Global Business

A global business is one conducting its activities in a large range of countries across the world with a strategy that is highly co-ordinated and integrated throughout the world. Company strategy is determined centrally and subsidiaries have little autonomy in their operations. Global corporations sell similar goods in all areas.

Transnational Business

The term transnational business describes the situation when an organisation conducts its activities across national boundaries with varying degrees of co-ordination, integration and local differentiation of strategy and operations, depending on market and business conditions.

NOTE

International management could be described as the management of all types of international operations across the border, or in more than one country- that include international business, MNCs, global businesses, and transnational businesses.

In this book, we shall be using the term international firm to describe all types of international businesses.

1.3 Why Study International Management

As explained in the introduction of this book, the study of international management has become increasingly important as the study of international management has become increasingly important to many individuals and firms in recent years.

However, international business management is much more complicated than a pure domestic business management because international business management involves managing across countries, and countries differ in many ways.

Countries have different political, economic social-cultural and legal systems. International managers operate in an environment of a diverse workforce. The workforce is more diverse based on age, creed, religion, ethnic background or gender. Also political, socio-cultural and legal practices can vary dramatically and countries involved may have different levels of economic development.

International managers must not only be sensitive to all these differences, but they must also adopt the appropriate management principles for coping with them. They need to approach their business operations from an international or global standpoint. They need to understand their business environment and operational relationship, and that the best way of doing business abroad may not be the same as at home.

The study of international management will help international managers gain adequate information about international business environments, understand them better, and be able to make more informed business decisions as may be necessary in various environments in which they are carrying out business operation, to achieve desired organisational performance.

Firms around the globe are now recognising the increasing necessity for their organisations to develop the skills, aptitudes and knowledge of their managers to be able to compete effectively in the international marketplace. They are therefore, finding it imperative to develop the skills and knowledge of their managers in international management through the study and understanding of the principles and techniques of international management. An understanding of international management can therefore have major impact the necessary knowledge and application of business practices in different countries.

For example, marketing a product in Brazil may require different approach from marketing the product in Germany, managing USA workers might require different skills than managing Japanese workers, maintaining close relations with a particular level of government may be very important in Mexico and irrelevant in UK, the business strategy pursued in Canada might not work in South Korea, etc.

In today’s international or global business environment, a new breed of global managers or transnational managers is truly emerging. These new managers are part of a growing group of international executives who can manage across borders, and are now in great demand by international firms.

1.4 Why Firms Go International

There are a number of reasons why firms engage in international business. These reasons could be categorised under the following headings:

• Growth

Some firms engage in international business to open up markets for their firms to improve business performance. Such firms always want growth and if they have slow growth in their country they search for new markets outside the home country.

Firms operating in mature markets in developed countries experience a growth imperative to look for new opportunities in emerging markets, when expansion opportunities become limited at home. Such firms like McDonald’s are often driven to seek expansion through international markets. A mature product or service with restricted growth in its domestic market may have new life in another country where it will be at an early stage of the life cycle. In addition, new markets abroad provide a place to invest surplus profits as well as employ underutilized resources in management, technology and machinery.

• Obtain greater profits

There are firms that engage in international business to increase their chances of obtaining greater profit for their firms especially, when they are faced with tief competition at home, and there is an ever pressing need to go ahead of the competition. I usually when there is less competition abroad, these firms may be able to take advantage of the opportunity to service the foreign market better and as such make more profit abroad.

• Reduce cost of production and gain competitive advantage

A firm may also engage in international business to reduce the cost of production at home because, producing overseas in other countries may be less expensive, where it is possible to produce at lower cost as a result of low cost of input materials, such as low cost raw materials energy, and labour etc - especially in developing countries.

Firms gain competitive advantage by improving their resource base. They are also looking for anything that will give them competitive advantage. They seek out products, services, resources and components from foreign countries to gain competitive advantage. Sometimes it is because domestic suppliers are inadequate. Sometimes this means acquiring a resource that cuts costs. Sometimes, just the prospect of shifting production overseas improves competitiveness at home.

• Expanding sales

A firm may go international to expand sales of its products and services because logically, there are more potential consumers and sales in the world than any single country. Increased sales should be a reason for a firm to expand overseas into international markets.

• General product or customer demand overseas

The demand for a firm’s product overseas can also prompt a firm to engage in international business. A home based firm may be expanding rapidly, but not rapidly enough to keep up with market demand overseas.

Operations in foreign countries frequently start as a response to customer demands or as a solution to logistical problems. Certain foreign customers, for example, may demand that their supplying company operate in their local region so that they have better control over their supplies, forcing suppliers to comply or lose the business. McDonald’s is one company that asks its domestic suppliers to follow it to foreign ventures. Meat supplier OSI Industries does just that, with joint ventures in seventeen countries so that it can work with local companies making McDonald’s hamburgers.

• Protect domestic markets

A firm may decide to engage in international business to protect its domestic market by going abroad. By moving its facilities to a country where its competitor is located, the firm can enjoy the same advantage in terms of low cost of labour, raw materials, energy, and as such be able to compete favourably.

• Protect foreign markets

Some firm often go into international business for defensive reasons, such as to counter advantages gained by competitors in foreign markets that might hurt their activities in foreign markets.

• Globalisation of competitions

One of the most common reactive reasons that prompt many firms to go overseas is global competition. Global competition has led many firms who have before felt comfortable doing business domestically to react to threats from overseas businesses and look for more opportunities over eases. If they do not take the opportunities created by globalisation other competitors who already have overseas operations or investments may get so entrenched in foreign market that it becomes difficult for new forms to enter at a later time. In addition, the lower costs and markets power available to these competitors operating globally may also give them an advantage domestically.

• Regulations and restriction

Regulations and restrictions by a firm’s home government may become so expensive that a firm may seek out less restrictive foreign operating environment to survive and grow. Firms from different countries may decide to merge to avoid host or home country regulations. An example is the merger between U.S. pharmaceutical maker Smith line and Britain’s Beecham. The merger helped these firms become insiders in both Europe and America, and guaranteed that they would avoid licensing and regulatory hassles in these two large markets: Western Europe and United States.

• Minimising risks

Operating in countries with different business cycles can minimise swings in sales and profits. The key is the fact that sales decrease or grow more slowly in a country that is in recession and increases or grow more rapidly in one that is expanding economically. In addition by drawing or obtaining supplies of products and components from different countries, an international firm may be able to soften the impact of demand and price swings or resource shortages in one country.

1.5 Significance of International Firms

The significance of international firms can be felt by both the home country and host country where the international firm is in operation.

International firms create benefits for both home and host countries where they operate.

The most immediate benefit is the reduction in unemployment in countries of operation. They create employment through investments which directly and indirectly, increase employment opportunities and the numbers of persons employed that may help raise the real standard of living, particularly in lower income groups.

By injecting capital into another economy, international firms can also contribute to skill and manpower development of the people or population, allowing further development to take place in the form of technology transfer.

In many cases, international firms make investments often in the form of plant and equipment that allows production to take place and in some cases, encourage more extensive capital investment that may lead to industrialisation of particular location and improvement in location infrastructure.

International firms also increase tax revenue for governments. By importing materials, employing workers, exporting finished products, the international firm exposes itself to taxation of all forms and different levels, although there are some big international firms who use legal loopholes to try to avoid tax.

1.6 Criticisms of International Firms

International firms have been faced with a number of criticisms. These criticisms have been increasing in recent years due to the increasing number of international firms, and the level of awareness of what is expected of international firms, in relation to their environment and the society.

Some of these criticisms include:

• Exploitation of raw materials from developing countries.

• Having vast economic and sometimes political power.

• Use of blackmail and threat of discontinuity of operation when suited.

• Host country dependency.

• Control of local market.

• Lack of corporate responsibility.

International firms are often criticised and accused of exploitation of raw materials and unskilled labour of developing countries without any offsetting development of a modern economic infrastructure that will help improve the economic and social conditions the developing countries. In other words, they are accused of achieving their self interest with total neglect of the interest of the environment and people existing where they operate - acquiring profits on the back of the poor. Many criticise the main goal of an international firm as simply, maximising profit, regardless of any national or host country social policy.

International firms are also criticised for acquiring and retaining vast economic and sometimes political power in the international political and economic space. They are accused of having so much wealth that some of them have a budget much bigger than that of many small countries and even greater the entire budgets of some developing countries. This gives them a very strong bargaining power to manipulate things to their favour. It is argued that small relatively weak governments are often unable to compete with the economic power of big and powerful international firms in their territories.

There is a genuine fear of loss of sovereignty and independence exhibited by many countries as a result of their inability to control social and economic policies expressed in many complaints. The inability to take independent decisions in their own locality without influence from international firms, due to their powerful influence, has increased this fear, creating an atmosphere of distrust on the part of many governments in many countries.

The vast financial strength and investment or divestment capabilities of international firms put them in control of many economies to some degree, giving them political power to influence government directions and activities that in many cases may favour the international firm, irrespective of the needs of the host country.

Related to lack of control is the fear of blackmail and threats by international firms. The threat of reduced or discontinued operation can have serious destabilising effects for weak governments or poor countries- breeding resentment of any international firm’s action and presence.

There is also the fear of becoming dependent on international firm and losing even control over internal policies in a particular country of operation as a result of inability to control activities and decisions of international firms in a particular area or country. This is always the case with many developing countries that are desperate for investment to create job opportunities and are therefore, exposed to accepting any international negotiation condition to get things going.

In most cases, domestic firms lack the capital and expertise to provide effective challenges for international firms creating an atmosphere of mistrust between the foreign and domestic firms in various locations.

The control that international firms enjoy over the local capital markets of host countries, their credit standing and borrowing capacity outweigh that of weaker indigenous firms. This dominance tends to be discouraging investment initiative by local businesses and creating a virtual monopoly for international firms.

International firms have also been criticised for their attempts to reduce their tax burdens. Some international firms operating in many countries try to set a tax minimising strategy, which can mean shifting income to lower tax areas.

Case Study

GENERAL ELECTRIC (GE) – shift to global business

General electric was founded by Thomas Edson.

The company has been operating and selling overseas for decades, producing a wide array of goods and services, from medical equipment, power generators, jet engines and home equipments, to financial services and even television broadcasting such as NBC.

Although the company was doing business abroad, GE remained a very much an America under the leadership of Jack Welch, as the company pursued opportunistic foreign direct investment strategy.

Under the leadership of the succour Jeffery Immelt, GE became a true global company.

Revenues from international sources grew faster than domestic revenues, passing 50 percent of the total in 2007, powered by the dynamic economies of Asia, particularly from sales from engines for wide body jets to India and China. GE also benefited from the huge infrastructural investments in Airports, Railways, and Power stations at that time.

By 2012 the firm was generating 55 -60 percent of business internationally.

To reflect the shifting sources of business revenue, Jeffery Immelt had to change the way GE was organised and operating, shifting the strategic and operational directions of the company.

Because Jeffery Immelt believed that for the company to succeed, it will need to have a global business focus, in order to be close to its customers. As such he had to make necessary changes to this effect.

Until 2004, all of GE’s major business has had head offices in the U.S and are highly controlled from the centre.

Jeffery Immelt moved the GE head office of the health care business from the U.S to London, the home of Amersham, a company GE has just bought.

He also relocated the headquarter s for the unit that sales equipment to oil and gas companies to Florence, Italy.

In 2008, headquarter for GE- Money division was moved to London. In addition, country managers have been given more power.

The move of GE Money to London, for example, was prompted by the desire to be closer to customers in London because it allows for easier fights to anywhere in the world.

Jeffery Immelt also shifted resources overseas. He opened research and development centres in Munich, Germany, Shanghai, China, and Bangalore, India. The belief is that by locating in those economies that are growing rapidly, GE can better design equipment that is best suited to local needs. For example, GE’s Chinese research centre designed MRI scanners that was priced lower than normal than usual, and gained sales in the developing world.

Jeffery Immelt also globalised the outlook and structure of GE senior management. He shifted emphases to getting overseas assignments to non American.

Once viewed as a company that preferred to hire managers from the Midwest because of the strong work ethics, foreign accents are now frequently heard among the higher ranks and you see non American doing the big jobs, important jobs as the company sourced the best from all around the world.

Jeffery Immelt has found that local nationals are invaluable when trying to sell to local companies and governments, where a deep understanding of local language and culture is often critical.

In China for example, the government is a large customer, and working closely with government bureaucrats requires a cultural sensitivity that is difficult for outsiders to gain.

To improve and maintain its global outlook and performance GE‘s American managers are encourages and sponsored for overseas as training where necessary, for cross- cultural management training.

Sources: GE website and other published information.

Case questions

1. How would you describe GE’s management under the leadership of Jack Welch?

2. How would you describe GE’s management under the leadership of Jeffery Immelt?

3. What external factors contributed to Jeffery Immelt’s change of management and business focus of GE?

4. What factors contributed to the growth of GE’s global business?

Further Reading

Deresky, H. (2005) International Management – Managing Across Borders and Cultures, Person Education International.

Doole et al (2005), International marketing Strategy- Analysis, Development and Implementation Thomson Edition.

Drucker, P. (1999), ManagementChallenges for the 21th century, Butterworth, London.

Geert, Hofstede. (1980), Culture’s Consequenses; International Differences in World-Related Values Beverly Hills, CA, Sage.

Hill, et al, (2008), Global Business Today, McGrayw – Hill, International Editions.

Ike, L. (2016), Management: Principles and Techniques, Xlibris Publication United Kingdom.

Mintzberg (1973), The Nature of Management Work, Prentise hall.

Mintzberg, H., Ahlstrand, B and Lampel J. (1998), Strategy Safari, Prentice Hall Europe.

Philips, J. (2014), Strategic Management Prencice Hall Europe.

Robin . J. et al (2003), International business- Global Business Strategy, Thomson.

Taylor, FW. (1917), The Principles of Scientific Management, Harper, New York.

Thompson, G. (2015), Strategic Management