The Applicability of Western Management Practices in LDCs

Diplomarbeit von Annette Julien

Abstract:

Nowadays firms have to interact on the international level to pursue their business. In doing this they might be conducted to deal with LDC firms or even establish a subsidiary in a developing country. The aim of this study is to examine to what extent Western management practices are applicable to specific LDCs environments. First the main differences between in business environment are highlighted. Then the whole lifecycle of establishing and managing a venture abroad will be discussed critically. Results are always presented in a concrete and practical form to that managers might use it as a handbook.

Every organisation functions as an open system and is affected by the demographic, cultural, economic and political specificities of his surroundings Management practices are also determined by their environment. It is hence substantive to comprehend social underlying values and attitudes when dealing with colleagues and workers, as well as to grasp the reasons and dynamics of the political and economical framework. This necessity is emphasised in developing countries as brusque changes in a company’s domain might have serious consequences if the management is taken unaware. To reduce environmental risks and allow a company to plan its activities it can be useful to set up an information system and become conscious of one’s own cultural determination – as a first step toward cultural empathy.

Some aspects of Indian management are presented as a conceptual framework for the second part, where the experience of French and Germany companies will be integrated. It may also serve as an example to follow when analysing a country’s work culture. India seems to be a collectivist, feminine country with a low uncertainty avoidance and high power distance. Though this may explain the predominance of a nurturant-task leadership style, a whole multitude of management styles ca be found across industries.

The entry strategy decision in a LDC can be facilitated by analysing the transaction cost and the strategic motivations of the foreign company. Foreign direct investments can take the form of joint-ventures or WOSs, within which flexibility, control and risk differ. Restrictive governmental regulations often bias the deliberation by urging towards the joint-venture, as part of development policies. Selecting a compatible partner and negotiating the venture’s contractual base need careful proceeding as many future problems can be avoided at that stage. Continuous commitment, cultural awareness and long-term planning are imperative to manage successfully the joint-venture. Clear responsibilities have to be attributed to the different partners to limit frictions.

Being confronted with an especially uncertain financial environment, management ought to find out best ways to handle inflation, minimise foreign exchange exposure and finance its long-term operations. Appropriate methods and environmental screening might even turn into a competitive advantage.

Human resource management will have the delicat task to find out a working personnel combination. Sufficiently skilled local workers have to be recruited and retained, training is therefor essential. Though expatriates are quite expensive, they are helpful when transferring technology an knowledge. They will partly need to adapt their management styles to the work culture of their colleagues and employees.

Optimising production operations will begin with choosing a fitting production technology and probably handling its transfer. Due to environmental constraints, substitution opportunities will have to be sought after to reduce dependence on scarce inputs. The central problem when procuring and producing locally is low quality. To bring up among suppliers and workers a quality consciousness and technical know-how to achieve it, companies might have to engage in training and technical assistance programs.

Finally when marketing imported or local products, further adaptations might be inevitable. Especially advertising and product policy are sensitive to their typical socio-cultural environment. Pricing strategy can turn out more aggressive as consumer switchovers are pursued. To reach satisfactory results in market research and with distribution, companies may need to consider taking on these activities.

By and large, managers confronted to the specific business environment of developing countries will have thus to adapt culturally and technically to function optimally.

Table of Contents: