The Research paper; A Conceptual Framework for Instilling a Global Mindset in Business Students, Journal of Teaching in International Business. This paper is so outstanding and covers so many concepts you will use in the Strategic Development for Global Business Management. Even though the paper is from a Journal of Teaching, it is almost like a "Manual" for understanding and going after the global market.
Q. After you read the paper, pick any and all aspects that impacted you. Share this impact with the class and tell us why.
A Conceptual Framework for Instilling a Global Mindset in Business Students Kam C. Chana, Anna Fungb, Hung-Gay Fungc, and Jot Yaud
aDepartment of Finance, Western Kentucky University, Bowling Green, Kentucky, USA; bDepartment of Management and Organization Behavior, University of Washington, Seattle, Washington, USA; cCollege of Business Administration, University of Missouri, St. Louis, Missouri, USA; dDepartment of Finance, Albers School of Business and Economics, Seattle University, Seattle, Washington, USA
ABSTRACT This article proposes a conceptual framework for instilling and fostering a global mindset among students of business in general and international business in particular. Students learn- ing to become global managers must first have an open mind- set and be aware of changes in themselves. When managers encounter problems at a global firm, they need to consider the unique situations that cause problems and create appropriate solutions. Different settings or environments require different approaches, reflecting the complexity of heterogeneity and indeterminacy in decision-making. We suggest pedagogical methods for teaching international business by instilling a global mindset in business students.
KEYWORDS Curriculum development; Global mindset; Teaching international business
“Think global and act local” is a cliché repeated by management when it attempts to enter foreign markets by integrating local conditions into its global expansion strategy. This cliché presumes that managers have a global mindset that enables them to formulate and implement such a strategy. Thus a global mindset is one that adjusts effectively to various global forces in international business to address regional and country-specific issues (Kedia & Mukherji, 1999).
As mindsets shape people’s views and lead to actions, managers must build upon global mindsets to confront challenges and succeed in a global envir- onment. First, from a pedagogical perspective, these managers must first understand this concept and its implications while they are students. Although the need to have a global mindset seems intuitive, it is not well understood. Using a conceptual framework, we elaborate upon its underlying assumptions. Second, beyond purely academic knowledge, having a global mindset is a prerequisite for global managers if they wish to compete successfully (Gupta & Govindarajan, 2002; Paul, 2000). Thus students who
CONTACT Kam C. Chan [email protected] Department of Finance, Western Kentucky University, 1 Big Red Way, Bowling Green, KY 42101, USA.
JOURNAL OF TEACHING IN INTERNATIONAL BUSINESS 2018, VOL. 29, NO. 1, 4–19 https://doi.org/10.1080/08975930.2018.1455907
© 2018 Taylor & Francis Group, LLC
desire to become global managers must fully embrace this concept to prepare for a successful career.
This article has two objectives. First, we explain the nature and impor- tance of a global mindset in international business and how it shapes global strategies. By integrating the literature on mindsets, we develop a conceptual framework on a global mindset for global strategies. Second, we propose approaches for acquiring and developing a global mindset to help formulate a sound global strategy. We pay particular attention to developing critical thinking skills and building strategic options, which can be further enhanced and enriched by improving the curriculum at business schools.
Although we focus on teaching international business in a general setting, our approach can easily be extended to teaching students in different business disciplines around the world. We also highlight some of the issues in educating students that arise from a business curriculum that is often segregated into silos or functional areas. As many countries closely follow the U.S. model of business education, they should also note the problems that continue to confront American educators and refine their approaches to teaching in their own countries.
2. Conceptual framework
2.1. Growth and having a fixed mindset
A mindset is a frame of mind that leads us to look at the world in a certain way, shaping our daily decisions and behaviors. This helps explain how we behave and why we respond to situations in a particular way. Dweck (2007) introduces two types of mindsets: fixed and growth mindsets. A person with a fixed mindset believes that people have only a certain amount of natural ability—such as intelligence, personality, and moral character. Over time, some people accept certain ideas, norms, and values as the benchmark and become unwilling to make additional adjustments. People with a fixed mind- set are not receptive to new ideas, as they have preconceptions on how things should operate. In contrast, the growth mindset suggests that a person’s basic abilities can be cultivated through effort and may change over time. People may differ in their initial talents, interests, or temperaments, but these can change and grow through application, learning, and adaptation. Thus a person with a growth mindset can overcome obstacles and continuously strive for success. For example, an existing paradigm may be widely accepted, but as more new phenomena surface with environmental changes, it insuffi- ciently explains the observed patterns. In this case, people will naturally develop alternative ways of thinking, potentially leading to a paradigm shift. This trajectory reflects the prevalence of the growth mindset, which is
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willing to make changes and implicitly assumes a linear way of thinking as existing conditions are accepted as given.
Two extensions can be derived from Dweck’s (2007) conceptualization. First, having a growth mindset is not enough. If these initial preferences are incomplete, out of date, or false, one needs to have an open mindset that goes beyond the fixed or growth mindset. An open mindset is one that is receptive to new information and ideas. An open mindset has no preconceived notions of value or judgment, allowing the person to look at things more objectively and change behaviors in response to changes in the environment without necessarily committing to existing conditions or accepted norms. Thus, an open mindset allows a nonlinear way of think- ing. For example, a manager may consider a management-by-objective approach to allow his subordinates to complete the required task, without micromanaging the subordinates. This process allows managers to con- sider potential changes in the environment and how they may be able to adjust over time. The open mindset is intuitively appealing, but it is not easy to internalize because our behaviors are often governed by ingrained paradigms and norms. For example, diversification is generally perceived to be good for firms. However, diversification can be bad if managers do not know why diversification is needed: If stockholders can diversify by themselves, firms do not need to diversify for them (Markides, 1997). Likewise, diversifying away from the core competency of the firm can be harmful if the firm loses strength and competitiveness for long-term survival. In addition to having an open mindset, critical thinking to evaluate and assess alternatives is equally important, a result confirmed in an article in The Wall Street Journal arguing that many colleges are not teaching students to think critically (Belkin, 2017). Thus business curricu- lums must emphasize critical thinking through having an open mindset as part of students’ mandatory skill set.
The second extension from Dweck’s (2007) conceptualization is that in a rapidly changing world, in which human behavior is influenced by norms that are also changing, having an open mindset is even more critical. The changing technology shapes the behavior of individuals and firms. For instance, Bitcoin, a cryptocurrency, and its associated blockchain algo- rithm/technology that facilitates a secured, nonreplicable technical platform for financial payments are changing how millennials pay for things: they use applications (apps) on smartphones instead of cash (Lee, 2017). When we have a closed mindset, we subconsciously block out information or signals that might be important, making our behavior slowly diverge from the optimal behavior in a changing world. For our students and within ourselves, we need to promote both an open mindset that is sensitive to changes in the environment and a growth mindset that helps us continuously strive to improve ourselves.
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2.2. Mindset in global business
In the international business literature, four perspectives have been proposed to describe the mindset orientations that influence diverse aspects of the firm— such as firm structure, strategy orientation, resource allocation, and firm pro- cesses (Kyvik, Saris, Bonet, & Felicio, 2013; Levy, Beechler, Taylor, & Boyacigiller, 2007; Heenan & Perlmutter, 1979; Perlmutter, 1969). These four perspectives are home-country orientation, host-country orientation, world- orientation, and region-centric orientation. First, the home-country orientation assumes nationals of the home country are more reliable and credible than foreign nationals at headquarters or at subsidiaries. The second approach relies on host-country orientation to “do as the Romans do”; if firm managers do not know enough about a foreign culture, they should not impose their own country’s values. The third approach suggests that managers with a global mindset take a universalistic approach to managing multinational firms. As such, nationality and cultural differences are less important in determining the outcome than the objective merit of ideas and the ability of individuals to solve problems. Finally, the regionally oriented approach is positioned toward regional values, not relying on home-country or world orientation.
Previous studies suggest two important assumptions that underscore the global mindset (Levy et al., 2007). First, they emphasize cosmopolitanism, openly reconciling differences in global versus local issues. Second, they have strategic implications, in which managers at different firms embrace varia- tions in demands and opportunities across borders and manage resources using capabilities. Thus, a specific viable solution must consider all factors and evaluate all tradeoffs that may change over time. In contrast, we often assume that the environment is static, and subsequent solutions are tailored to address these static problems. These solutions, though workable at that time, may have unintended consequences. For example, a product recall may appear to address an immediate problem, but it does not necessarily reveal alternative methods for running the firms that might avoid similar problems in the future. Thus, we need to consider decision-making in a cyclical environment (Fung, 2014), discussed in the following section.
2.3. Decision-making in a cyclical/changing environment
We examine two aspects of decision-making in a changing or cyclical environment. First, we examine how current decisions may have complex, unintended future consequences. When managers make decisions today, they look at the current situation to develop a strategy relevant to the current problem. This theoretical approach drives the SWOT (strength, weakness, opportunities, and treats) analysis, which is widely used in practice (Jackson, Joshi, & Erhardt, 2003). This approach oversimplifies current decision-
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making in a rapidly changing environment. A better approach recognizes the endogeneity of strengths and weaknesses in the changing environment and avoids future adverse consequences.
A case in point is Audi, the German automaker, which entered the Chinese market in late 1980s with the advantage of early market leadership (“Who’s Gonna Buy,” 2017). Initially, it reaped the benefits of growing sales because of the booming consumption in China; it was ranked China’s top luxury car brand, with one-third of the market share. This early success implies that Audi successfully researched and delivered well-designed pro- ducts: Market timing can be key for profit, such as when to launch a new enterprise or product or reposition the company in the marketplace. Typically, companies that are successful early on advertise their differentiated products to attract targeted customers, but as competition intensifies, pro- motional campaigns are insufficient to address the changing supply and demand. For example, Ford has long since ceased to implement strategies to sell its Model T as the environment changed with technology and market saturation. Audi’s early success, however, may have made the firm somewhat complacent.
In 2015 and 2016, as the Chinese car industry changed, Audi suffered losses because of low employee morale due to the absence of bonuses after an unrea- listic sales target was not achieved. This sales target with more added ventures had been a quick fix by the company as competition arose not only between Audi and other competitors but also among its own excessively numerous dealerships. Audi’s losses reflect the company’s failure to foresee the forthcom- ing challenge without a well-coordinated strategy. Strengths to identify early market potential, which initially helped Audi, ultimately created complacency that made the firm vulnerable.
This is far from an isolated case: firms may have developed routines that capitalize on existing gains as a first mover but can become obsolete if they ignore changes in the market environment. They cannot rest on their laurels to sustain success. Their routines for success can prove particularly proble- matic when environmental change is frequent and discontinuous. Firms with established new product development capabilities tend to pursue incremental product improvements along existing trajectories, rather than to explore radically different innovations (Levinthal & Myatt, 1994; Sørensen & Stuart, 2000). The empirical study by Leonard-Barton (1992) corroborates this view, showing that product development routines created dysfunctionality that hindered the exploration of alternatives. Further illustrative evidence comes from Helfat et al. (2007, 49ff.).
Another interesting case is related to Qualcomm’s international business pricing strategy in China as it fails to anticipate increasing protectionism by regulations restricting on foreign firms there (Clark, 2015). In 2014, Qualcomm’s profit of $13.2 billion in China raised eyebrows among
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Chinese regulators. In 2015, Qualcomm paid a $975 million fine to the Chinese government to settle a high-profile antitrust case involving the company’s patent-licensing practices. To avoid further penalties, Qualcomm agreed to a new licensing formula that reduced its royalties for some handsets sold in China. In the current environment of regulatory reform that calls for protectionism for highly profitable foreign firms, deci- sions made today need to consider what the anticipated future response might be as the Chinese government is continuously looking for ways to generate more revenue from foreign firms. Global firms must also consider whether their decisions will inspire blowback from domestic Chinese firms operating in what has become a more protectionist market.
In light of the difficulty of predicting the future and confronting a chan- ging environment, as discussed above, we have to consider whether current investments or decisions have the potential to create benefits in the future, by building a safety margin to protect against the future, which is naturally difficult to predict. This is an interesting aspect of decision-making in the context of the cyclical nature of environments or markets and thus sheds light on the critical aspects of planning decisions over time. Economic models typically assume a one-period or static model that does not change over time. In reality, if we consciously make decisions or investments today with a future benefit, we create strategic options that can be exercised later (Luerhrman, 1998).
Strategic options extend to crisis management. A crisis is a low-probability, high-impact event that can threaten the viability and survival of a firm (Pearson & Clair, 1998). Yet much research deals with addressing a crisis and its con- sequences. Building established strategic options into decisions can mitigate or avoid the impact of the crisis. The most effective way to deal with crisis is to be proactive. By anticipating different potential crises, the firm might mitigate the potential adverse impact of those crises. This reinforces our first point: that we can make decisions today to minimize adverse outcomes tomorrow. An open mindset is critical for considering alternative strategies. A flaw in today’s economic theories on decision-making is that problems are typically analyzed in a static framework; however, the real world has “known unknowns,” which relate to known uncertainties, and “unknown unknowns,” which relate to uncertainties that are inconceivable. These uncertainties cannot be analyzed in simple probabilistic terms (Fung, Wu, & Yau, 2012; Kay, 2011). Thus economic analysis should be complemented with strategic options that consider unquan- tifiable factors in decision-making (Harrigan, 1985; Zanoni, Vernizzi, & D’Anna, 2014). In reality, many crises are triggered by earlier actions and thus are theoretically preventable. Audi and Qualcomm exemplify that crises could be averted if prior decisions had incorporated changing demand and regula- tions. Thus a moderate, safer approach may beat an aggressive, risky approach that could lead to a serious problem later on.
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2.4. The conceptual framework
Integrating these arguments for an open and global mindset, we propose a conceptual framework, shown in Figure 1. Decision-makers, whether man- agers or leaders, need to be open-minded and not inject too much personal subjective judgment. At the beginning, when looking at the same public data to form all strategies, decision makers must consider and evaluate all viable options and alternatives without indicating their subjective preference. If they are made without an open mind set and critical thinking, policies made today may lead to future problems because we have not considered all alternatives of viable options when confronting the current situation.
Implementing a strategy requires awareness of positioning relative to competitors: whether we are stronger or weaker or have the advantage over our competitors. This is related to the left-hand-side box in the third level of Figure 1. The SWOT analysis may play a role in this situation. That is, we need to assess our current positioning relative to that of our competitors in terms of strengths and weaknesses, as well as resources and constraints. At the same time, reconciling a global mindset with local forces will be impor- tant. We also need to embrace variations in internal capabilities as well as demands in the external environmental and opportunities across borders
Open Mindset of Managers
Recognition of Changes
Relative Positioning of the Firm in a Multinational Setting Environment
Timing and Cycles of Environment
Global Strategy Formulation and Implementation
Figure 1. A Conceptual Framework for Teaching International Strategy.
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(Fung et al., 2012; Levy et al., 2007). Two firms in the same industry investing in the same foreign country may have different strategies because of differ- ences in their resources. They cannot simply replicate an old approach (or standard) in a new situation.
The other dimension is to consider decision-making with respect to the cyclical nature of the environment and market. This aspect is on the right- hand side of the box in the third level of Figure 1. We have to anticipate both potential environmental changes and likely reactions by the government, as in the case of Qualcomm, whose pricing was affected by regulatory changes that may call for protectionism, and in the case of Audi, which could not capitalize on its early leadership in China’s retail automobile industry. In many cases, what we once considered opportunities (i.e., maximizing short-term profit) may turn out to be threats (i.e., a loss in competitiveness or financial penalties). Thus we need to carefully consider the long-term implications of using SWOT analysis. In 2010, Foxconn, a Taiwanese firm heavily invested in China to produce digital equipment such as tablets, mobile phones, and laptop computers for big-name clients, was accused of running a sweatshop employing 350,000 mostly Chinese migrant workers in Shenzhen, a southern Chinese city (Heffernan, 2013). Foxconn produced low-cost mobile phones that were highly profitable because of its low labor costs. However, it also maintained harsh working conditions, which prompted a dozen workers to commit suicide on the factory premises. After substantially improvements were made in employee working conditions and wages, the suicide attempts abated. Thus a CEO with a global mindset who would recognize the changing labor conditions in China would not only look at profits today but also consider the morale of workers who may cause future troubles for the firm, a critical part of crisis management.
Additionally, we need to consider underlying trends in factors that are unique in making the firm’s decisions. Each firm has to creatively map out a unique, firm-specific plan. This creativity does not imply that an idea comes from nowhere. Steve Jobs said that creativity is just a matter of connecting things.1
Thus recognizing and connecting different dots help firms find a more mean- ingful solution to real problems. The best global executives, by looking at public data, identify issues that others ignore, with potentially important consequences. The implication is that we need to think outside the box whenmaking decisions.
The final step in the conceptual framework is devising detailed, step-by- step plans to achieve goals (targets). The desired goals are difficult, if not impossible, to attain in the absence of creating plans and addressing potential obstacles. At the same time, when unpredictable obstacles occur, plans need to be modified without losing sight of the goal.
Next, we present teaching plans for students to apply the framework, explained in the following section.
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3. Applying the conceptual framework
3.1. Critical thinking and striving for excellence
An open mindset requires critical thinking. When students learn a theory, they often follow the predictions of the theory without understanding its underlying assumptions or limitations. If future situations have different assumptions, the misapplication can have troublesome ramifications. Critical thinking implies nonlinear thinking, that is, multidirectional think- ing. We characterize critical thinking as follows.
● It includes the mental ability to understand the endogeneity and the cyclicality of nature. For example, peaks and troughs alternate; oppor- tunities generate threats and vice versa. Thus, one needs to think dynamically beyond the SWOT analysis.
● It implies a curiosity about the world and a commitment to becoming smarter about reality. Critical thinking implies the ability to visualize emerging trends associated with underlying forces (Gupta & Govindarajan, 2002).
● At times, things may appear random and chaotic, but they may be related. Thus, it is important to ask how dots can be connected, as suggested by Steve Jobs. The converse is also true; things may appear to be connected but in fact may be spuriously correlated. Critical thinking is necessary to differentiate these possibilities.
● It comprises the ability to reflect and the willingness to change in order to improve and excel.
Although we optimistically plan to implement strategies, real life may intro- duce twists and turns throughout the implementation stage. We often must modify our plans to overcome hurdles. In many cases, we may be knocked down, but we need to stand up again. Achievement requires grit; more accomplishments require greater effort and perseverance, and perseverance can only be sustained by passion. Duckworth (2016) shows two sequential relations: talent × effort = skill; and skill × effort = achievement. Effort counts twice toward achievement, indicating its importance; this continual effort could also be characterized as perseverance. Duckworth (2016) also suggests four internal forces: compassion, practice, purpose, and hope (i.e., optimism) to increase one’s grit. External forces may simultaneously impose high demands while providing support. These factors provide insights as to how business students can be taught and motivated in the international business program in business schools worldwide as well as in more specific training.
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3.2. Strategic options
In this section, we discuss different types of strategic options that we can develop to mitigate future uncertainty. In other words, we should develop certain human capital (assets) to create future opportunities or mitigate suffer- ing from future misfortunes. Typically, the frequency and openness of interac- tion between two persons or organizations depend on the strength of their interpersonal, social ties and organizational rigidity. The more successful a company is at cultivating interpersonal and social ties among people based at different subsidiaries, the more effectively it can integrate diverse perspectives and knowledge bases. As a result, several types of capital should be developed by managers to strengthen their abilities and pinpoint opportunities.
3.2.1. Personal capital Personal capital consists of attributes of a person or manager that should include an open mindset to appreciate different perspectives. Global man- agers need to be aware of their endowments, strengths, and weaknesses in order to acquire complementary resources. At the same time, managers need to be aware of the changing environment. Someone who lacks these personal capital attributes will have challenges in working with other people and fostering good teamwork.
One important attribute of personal capital as a leader is credibility. Credibility plays a key role in connecting people and in maintaining good relationships. As credibility may take a long time to establish, it is more effective than working together virtually and can accomplish more in a face- to-face meeting because of the human touch. Other good personal capital attributes include humility, motivation, and the willingness to accept other people’s advice and suggestions. This personal capital helps people continu- ously improve and succeed.
3.2.2. Social network capital For individuals and corporations to access key resources worldwide, they must develop and coordinate global networks. Building global networks helps replace nationally held views with a collective global mindset and has been shown to facilitate trusting relationships with people from other parts of the world (Javidan & Walker, 2012; Paul, 2000). Managers tend to identify and act on emerging opportunities in foreign markets if they have close friends or colleagues in foreign countries and are willing to look beyond cultural differences to solve business problems. Thus first or early movers may have specific social capital to help them do so.
Social capital helps firms obtain financial resources, expertise, and knowledge. Many different types of social capital can be acquired at global firms. For example, a good board of directors at a firm provides a
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social network that may facilitate tapping into different types of external resources. Professional social networks, such as business and technology associations, are also important, providing channels for accessing and distributing specific knowledge, information, and resources and helping firms generate creative ideas (Qiao, Ju, & Fung, 2014).
Political connections form a unique social relationship that enables an individual to achieve goals because of increased resources, information, and support. Many U.S. multinational and domestic firms invest heavily across the political spectrum in terms of lobbying and financial con- tributions, and to gain a competitive advantage through political clout. Having good political connections in China helps in securing more bank loans and lower interest costs (Su & Fung, 2013).
3.2.3. Knowledge-based capital International business today is complicated by evolving technologies, changing regulations in home and host countries, cultural diversity, and different modes of business practice. Knowledge-based capital relates to the intellectual capability of the manager who has the expertise to balance tradeoffs and competing interests. This is a special analytical skill set with a global vision to understand and deal with underlying forces that may give rise to problems.
In addition to expertise in one particular area, broad-based knowledge is critical, as international business is multidisciplinary, …