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What do you think is your strongest component of cu ltural intelligence
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LaTrobe University

Faculty of Law and Management

School of Management

MGT1FOM: Foundations of Management

Tutorial Review Questions: Answer Guide

Topic 4: Managing in a global environment


What do you think is your strongest component of cu

ltural intelligence? Your

weakest? How would you go about shoring up your wea


Understanding the work undertaken by Hofstede and t

he GLOBE project is one

approach to addressing weaknesses.


What policies or actions would you recommend to an


Australian business wanting to do business in Asia,

Europe or the USA?

The first thing a business should do is analyse the

environment that it is hoping to enter.

It should look at the economic environment, especia

lly the regional economics groups

such as the EU, ASEAN and NAFTA. The legal and poli

tical environment should be

considered in deciding which country to enter first

. The socio-cultural environment will

also influence this decision. Next, the company mus

t determine its entry strategy.

Exporting is the most likely strategy for a small e

ntrepreneurial business. It requires the

smallest investment and the least amount of risk, b

ut it also returns the least amount of

profit. Licensing and direct investment should also

be considered. Other factors such as

the correct organisational structure and type of ma

rketing strategy must also be



What steps could a company take to avoid making pro

duct design and

marketing mistakes when introducing new products in

to a foreign country?

The basic need is an understanding of the foreign c

ulture and how the product will

relate to it. One technique for adapting to foreign

cultures is to use foreign nationals in

the design and implementation of new products. This

can be accomplished through


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decentralisation of product design decisions to the

foreign country, so that managers of

foreign affiliates have control over operations. An

other technique is to use foreign

nationals in a consulting capacity to give advice o

n the design and marketing of new

products. Yet another technique is to provide cultu

ral training and indoctrination to

managers and their families who are assigned to for

eign posts. Cultural sensitivity can

also be used as a criterion for selecting individua

ls to be given foreign managerial

assignments. Each aspect of product design – includ

ing labelling, colour, and function –

should be checked with people who are intimately fa

miliar with the foreign culture in

order to determine the kind of impact and acceptanc

e the product will have.


Compare the advantages associated with the foreign-

market entry strategies of

exporting, licensing and wholly owned subsidiaries.

Of these three entry strategies, exporting is consi

dered to be low risk and low cost. The

reason is that the firm keeps its production facili

ties in its home country and uses

middlemen, foreign distributors or the Internet to

market its products abroad, thereby

avoiding the costs of setting up its own marketing

channels. The problem with

traditional exporting is that the firm has little c

ontrol over the marketing of its product

and no direct contact with foreign customers. Forei

gn licensing requires a somewhat

greater capital investment, and licensees are apt t

o have better contacts and greater

experience with marketing in their own countries. T

he international firm also maintains

some control over foreign production and marketing,

and will have some opportunity

for direct contact with foreign producers and custo

mers. The problem with licensing is

that licensees may eventually become competitors, a

nd they also may fail to maintain

rigid quality standards in production or marketing,

thereby damaging the reputation of

the international firm. A wholly owned subsidiary r

epresents the greatest costs and the

greatest risks, but also the greatest potential ret

urn. Owning a subsidiary gives the firm

more control over production and marketing than eit

her exporting or licensing. The firm

and its managers are close to the market and may ac

tually send managers to the foreign

countries to run the business in the host country.

If the business is successful, the

international firm will get to keep the profits. Th

e problem with wholly owned

subsidiaries is that establishing operating product

ion facilities in foreign countries is

costly and directly exposes the firm’s assets and p

ersonnel to economic and political





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