Management Systems for Cross-Border Businesses

Sketch of approach

The scope of the current endeavor is that of assessing the need and applicability of practical management systems in the administration of cross-border business operations. The first step in conducting this assessment is that of introducing the topic, materialized in a twofold direction — the need for the analysis within the modern day context and the definition of practical management systems.

The second step is represented by the analysis of the available literature, embodied at this level by articles in specialized journals. The journals represent a special means of data collection as they are characterized by two specific features — they are based on relevant and current data (information contained is often more current than that used in books, but less current than that used in magazines or internet articles); the data is peer reviewed and as such reliable.

As the review of the literature is completed, the future stage is represented by the analysis of the findings. Finally, the project comes to an end with a section on concluding remarks which restates the most important findings of the project.

2. Introduction

The contemporaneous business society is more dynamic than ever before. It has undergone a wide array of changes and is now able to present the economic agents with countless opportunities and threats. One specific generator of both opportunities and threats is represented by the ability to operate across-borders. This ability was generated by the intensifying forces of globalization, which allowed economic agents to transcend boundaries and launch operations in foreign regions as well. Two goals are generically followed with cross-border operations — the increase in the market onto which the company’s products are sold and the ability to operate in a means which is more efficient, due to cost efficiencies, resource abundance, technologic expertise and so on.

In this new context of international operations, the process of cross-border management appears as complex and this complexity is due to a wide array of issues, such as cultural, social or legal barriers and differences. In order to help economic agents overcome these challenges, numerous systems of practical management are devised. At a generic level, practical management is understood as the presentation of actions managers should implement in order to attain their pre-established objectives. Practical management draws on the theory of management, such as models, history and others such, and strives to apply these within the real life contexts, with as much practicality as possible.

3. Literature review

Leonard H. Friedman (2001) states that the managerial act is a highly complex process, in which the leaders have to fully comprehend the interactions between the various variables within the organization at the level of the structures, parts or units. And in the context of cross-border operations, this complexity further increases. The author, by reviewing the works of Gregory a. Daneke, argues that organizational systems are highly complicated and that it is tedious — if not impossible — to construct practical management systems.

This conclusion is based on the fact that practical management systems would be constructed on the principles of linearity. In other words, it would be assumed that certain events occur and influence the other variables in a specific manner. Nevertheless, linearity within the modern day context is impossible to attain and it stands for idealism within the business community as well as the theoretical community (Friedman, 2001).

A similar conclusion is presented by Lee Gardenswartz and Anita Rowe (1994) in their article about practical management within the health care sector. The two quote GE’s chief executive officer Tack Welch, who stated: “If you’re not confused, you don’t know what’s going on” (Gardenswartz and Rowe, 1994). This statement is the result of the numerous complexities within the business community, which make the modern day business environment difficult to foresee as well as intricate to manage. In spite of this realization nevertheless, Gardenswartz and Rowe believe that a crucial component of practical management systems is represented by the integration and management of diversity.

And the need to integrate diversity is increasing within the cross-border operations as both an internal need to ensure operational efficiency, communications and so on, but also as a necessity at the level of business ethics. The definition of business ethics is approached by numerous sources, yet a universally accepted meaning has yet to be devised. Susan B. Shurden, Juan Santandreu, Michael C. Shurden (2010) for instance look at business ethics through the lenses of general ethics and argue that these represent “a system of morals which guides the behavior of an individual when confronted with doing right or wrong” (Shurden, Santandreu and Shurden, 2010). On the other hand, Douglas B. Rasmussen and Douglas J. Den Uyl (2009) find that it is first important to understand the meaning of business as the united efforts of organizational agents to attain their value maximization objectives. George D. Chryssides and John H. Kaler (1993) then argue that business ethics is “simply ethics as it applies to business.”

Returning to Lee Gardenswartz and Anita Rowe (1994), the two believe that it is operationally and ethically necessary to integrate diversity. And in order to create a practical management system in dealing with diversity, they reveal the need to remove the following barriers: the costs of implementation, the fear of hiring underskilled and uneducated employees, the inadequate implementation of merits systems, discriminatory practices, distorted perception of progress, negligence of diversity, inertia or the fear of the changes diversity integration would generate within the entity.

As these barriers are eliminated, Gardenswartz and Rowe (1994) argue that the actual practical system of diversity is channeled onto three specific directions — the impacts of individual attitudes and beliefs on organizational processes and performances, the interface between employees and management and third, the organizational values, norms and policies. At a particular level, the following stages are proposed in the practical management of diversity:

Ensuring commitment at the executive level

Assessing the diagnose

Setting up the diversity task force

Solving the problems and the systematic issues

Developing training programs to raise awareness, knowledge and skill needs

Measuring and evaluation

Following up on the implementation and the progress (Gardenswartz and Rowe, 1994).

Cross-border management needs often arise when mergers and acquisitions are completed within the international arena. H. Donald Hopkins (2008) however argues that the success of these operations is often limited as the economic agents fail to adapt to the differences between the politics, economics and cultures of the two different regions. The author states that the success rates of the cross-border mergers and acquisitions can however increase if enough attention is placed on the strategic research and selection of the merger / acquisition, as well as the integration of the two parties in the aftermath of the merger / acquisition. “Cross-border mergers are frequently unsuccessful. However, care given to two elements seems to increase the chance for success. The first is strategy. Though the research on exactly what the best strategy actually is very limited, strategy does appear to matter” (Hopkins, 2008).

Other sources are however more punctual when it comes to practical models of cross-border management. The following lines pin point some notable opinions related to practical management in cross-border business operations:

Witold Nowinski (2006) states that it is essential to restructure the company in the aftermath of the merger / acquisition

Christoph Dorrenbacher (2007) argues that cross-border management ought to be based on solid and trustworthy relationships constructed by the owners and the managers. In other words, he emphasizes on relational management as opposed to strategic management.

Martha S. Peyton (2002) believes that the greatest challenge — and as such the greatest concern of cross-border management — is represented by the perception of risk and the administration of the risk involved in international operations.

4. Analysis and discussion

The modern day economic agents are presented with numerous challenges and opportunities, and cross-border operations represent sources of both opportunities as well as threats. In order to minimize the threats while maximizing the opportunities, economic agents look at the theory of management and administration. Under the umbrella of ethics, the most important practical model is based on the need to recognize, integrate and embrace diversity. Under a more strategic observation, emphasis falls on research, risk mitigation or strategic integration.

All of the models for practical management systems presented within the specialized literature are valid and this validity is constructed on the fact that they are based on numerous theories and academic research. Nevertheless, these practical systems can be divided into two categories, based on the sources used at their bases. In this order of ideas, the first category is represented by models based on general theory, which assume the existence and manifestation of certain variables within cross-border operations. The second category is represented by practical management models based on specific situations and contexts. Christoph Dorrenbacher for instance assesses cross-border management within a German company’s subsidiary in Hungary. Witold Nowinski discusses cross-border management in the context of the Polish market. This specifically means that the practical management models are either too generalist, either they are too specific. Subsequently, they cannot be implemented and succeed in all situations of cross-border business operations.

Based on this realization, the usefulness of devising practical management systems within the specialized literature is a dual one. On the one hand, these models are highly useful as they introduce the novice international manager to the elements which need to be taken into consideration upon engaging in cross-border management. On the other hand however, they are only limitedly useful as they do not apply in all circumstances. For instance, an economic agent in the United States looking to expand its operations in China or in Mexico would find little applicability of the practical management system devised by Christoph Dorrenbacher.

All in all then, the final finding is that the practical management systems within the specialized literature do represent a valid starting point, but that economic agents have to devise their own models which are customized to their own contexts and variables.

5. Conclusions

Within the modern day context of globalization and opening boundaries, economic agents are presented with the ability to launch cross-border operations. This ability is nevertheless a source of both opportunities as well as threats. In order to maximize the opportunities while in the same time minimizing the threats, the academic community devises a wide array of practical management systems which come to support managers in their international administration processes and decisions.

The specialized literature is filled with examples of practical models of cross-border management and these focus on the issues considered of importance for the authors. Leonard H. Friedman finds that international management is too complex to be integrated in a single model. Lee Gardenswartz and Anita Rowe focus on the need to integrate diversity; Witold Nowinski emphasizes the need for restructuring; Christoph Dorrenbacher strengthens the need for relational management, whereas Martha S. Peyton militates for risk management.

The discussion which was conducted as a result of the literature review indicated that the usefulness of practical management system models is a twofold one. First, this need exists and is given by its ability to introduce the novice manager to the complexities of international administration. Secondly however, the usefulness of the systems is decreased by their inability to apply to all real life contexts, situations in which the models have to be customized.

References:

Chryssides, G.D., Kaler, J.H., 1993, an introduction to business ethics, 2nd edition, Cengage Learning EMEA

Dorrenbacher, C., 2007, Inside the transnational social sphere: cross-border management and owner relationship in a German subsidiary in Hungary, Journal for East European Management Studies, Vol. 12, No. 4

Friedman, L.H., 2001, Nonlinear dynamics and practical management: Administrative Science Quarterly, Vol. 46, No. 2

Gardenswartz, L., Rowe, a., 1994, Diversity management: practical application in a health car, Frontiers of Health Services Management, Vol. 11, No. 2

Hopkins, H.D., 2008, Cross-border mergers and acquisitions: do strategies or post-merger integration matter? International Management Review, Vol. 4, No.1

Nowinski, W., 2006, an assessment and forecast highlighting the importance of restructuring and integration in cross-border acquisitions in Poland, an analysis of M&a experts’ opinions, Journal for East European Management Studies, Vol. 11, No. 1

Peyton, M.S., 2002, Cross border capital flows — perspectives from a mixed asset portfolio investor, Journal of Real Estate Portfolio Management, Vol. 8, No.4

Rasmussen, D.B., Uyl, D.J.D., 2009, Making room for business ethics: rights as metanorms for market and moral values, Journal of Private Enterprise, Vol. 24, No. 2

Shurden, S.B., Santandreu, J., Shurden, M.C., 2010, How student perceptions of ethics can lead to future business behavior, Journal of Legal, Ethical and Regulatory Issues, Vol. 13, No. 1