Cultures corporations - how national cultural preferences manifest themselves in organizational cultures?
Analysis of some key elements of the transition process in the organizational culture due to a change of ownership on the example of a large transnational telecommunications company. Acquaintance with the main features of organizational culture.
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Cultures corporations - how national cultural preferences manifest themselves in organizational cultures?
Е. Szamely
Annotaton
“Organisational culture comprises emotionally acquired behavioural and action controlling value judgements and think ing practices. In the process of socialization within an institution, culture develops steadily and sets people's attitudes and experiences for generations” [3. P. 97] claims Z. Tanczos in his definition of organisational culture. At the same time Geert Hofstede has empirically proved that national culture highly influences not only the culture but also the structure of organisations. The question rises, what happens to an organisational culture when the ownership of a corpo ration changes hands? This paper seeks to analyse some of the key elements of transition process in organisational cul ture due to ownership change through a case study of a large multinational telecommunication company.1
Keywords: organizational culture, corporation, form of ownership, national preferences, G.Hofstede's concept, man agement, masculinity versus femininity.
Introduction. Personal control by expatriates
Conflicts within an organisation or in a community are often about the nature of the organisation or community, what should it be like? During the 1960s the Aston Group has found in their quantitative as sessment of differences in structures of organisations that companies differed along two aspects: the concentration of authority and the structuring or regulating of activities. A couple of decades later Geert Hofstede has empirically proved that these characteristics were relatively steady across nations.
With the ever growing globalisation where mergers and acquisitions of large multinational corpora tions are daily routines and the nationality of the ownership may change from one day to the next the question may become more and more relevant how company cultures react to such changes?
This study seeks to assess the organisational influences of changes in the nationality of the ownership of corporations through a concrete case of a multinational telecommunication company.
First, the concept of organisational culture is reviewed and McKinsey's 7S Framework, as a compre hensive tool, is adopted for the assessment of the company measures that were introduced within the first quarter of ownership change. Secondly Hofstede's “Six national cultural dimensions theory” is revisited for the analysis of the national character. finally, after the evoking of the relativity of reality by nationality of the management practices in general, the assessment of the particular case is conducted by the application of the McKinsey 7S Framework and the Hofstede 6-D model©.
Defining organisational culture
Although organisational culture has a significant role in management studies, as an important asset in business performance, till today there is no general agreement in the literature on how to define it. The diffi culty of definition may come partly from the fact that companies had already implemented corporate cultural measures before academic literature could have provided a theoretical foundation for it. On the other hand, although many attempts have been made, quantifying organisational culture remains problematic [3].
Nonetheless, throughout the 1980s primary American, British and German management research pro fessionals, through the examination of the outstanding productivity of Japanese corporations at the time, have come to the understanding, that corporate culture has to do with social relationship among employees of a company and their relations to the organisation as a whole. Two often sited American management profes sors define organisational culture to some extent differently. According to Bruce Buchowicz corporate cul ture is a “pattern of shared employee beliefs, customs, values, behaviours, and ways of doing and thinking about the business” [1. P. 45], which are learned, shared and transmitted by and through the organisation's/ The author was an employee of the company of case study at the time of ownership change.
Employees
At the same time, leadership must be concerned with the shaping, controlling and influencing of these processes, as in the absence of such directions, cultural beliefs can blunt or may even void the impacts of strategic programmes and decisions [1. P. 45-55]. While Charles Fombrun puts the concept in a wider, societal context, emphasising that the internal company culture heavily depends on the impacts of higher level structures.
Perhaps the most commonly used definition by management practitioners for the concept of organisational culture is the one defined within the McKinsey 7S Framework, a management model developed by business consultants Robert H. Waterman, Jr. and Tom Peters. The 7 “S” s refer to structure, strategy, systems, skills, style, staff and shared values as it can be seen in Image 1.
In the 7S Framework by Strategy it is meant how an organization plans to achieve its goals in the mar ketplace, how it will gain a comparative advantage over its competitors. Structure is meant how the organization structures its resources, including human, material as well as financial resources. The Systems element include all processes and daily activities that are undertaken by the people who work in the organization, and the tools they use to help them with those processes. Style in this model is the informal rules of the organization, it covers the typical behaviour patterns of key groups, such as managers, and other professionals. Staff would mean the demographic, educational and attitudinal characteristics of the organisation's human resources. Skills are the core competencies and distinctive capabilities of the organisation. Finally, Shared Values are the core values of the organization that permeates all areas and aspects of the organization. In the original version of the 7S Framework, this was called Superordinate Goals. These values need to reinforce what the organization is trying to achieve.
Image 1 - McKinsey 7S Framework
The original objective of the model was to identify the key elements which in turn will enable assess ment how well a corporation is organised in order to achieve its intended goals. The model is based on the the ory that, for an organisation to perform well, these seven elements need to be aligned and mutually reinforcing.
Thus, the model is intended to be used by top management to help identify what needs to be realigned to im prove performance, or at least to maintain it during times of change. Whatever the type of change may that be restructuring, introduction of new processes, organisational merger, new systems implementation, change of leadership, etc. the model can be used to understand how the organisational elements are interrelated, and thus to ensure that the wider impact of changes made in one area is taken into consideration.
According to the model and as Image 1. shows, all these seven organisational elements are interconnected and there is no real hierarchy exist between them, which means they are equally important. The seven elements can be classified into two theoretical groups; structure, strategy and systems are considered to be hard element whereas skills, staff and style are the soft elements. The distinction is important in the sense that the hard areas are easy for the management to influence and change. While soft areas are more woolly and influenced by the culture of the organization. Positioning Shared Values in the centre of the 7Ss indi cates that the organization's values are central to all elements.
6-D model© - Hofstede's cultural dimensions
Dutch social psychologist Geert Hofstede has developed his 6-D model©, the “Six cultural dimension theory” which may be considered as a breakthrough in social psychology in the sense that it provides a framework which enables the measuring of differences in culture along the so-called cultural dimensions, allowing the dealing with the differences in thinking, feeling and acting of people around the globe, which may serve as a basis for common understanding.
Hofstede's definition of culture
Hofstede defines culture as the common mental programming that distinguishes the members of one group or category of people from another. In other words, it is the set of unwritten shared rules how to be a good member of a society, group or category of people. People have the basic ability to deviate from it and react to situations in new and creative ways, thus this mental programming only indicates what reactions are likely and understandable given one's past social environments [4. P. 5-6].
In Hofstede's concept of culture, it consists of two parts; values and practices. The core element, which is learnt from a very early age and therefore it is the more unconscious part of culture, is values, which are tendencies - feelings - to prefer certain states of affaires over others, and which are passed on from gen erations to generations relatively unchanged. Practices are the visible parts of culture they consist of sym bols, heroes and rituals, which can be learnt throughout a lifetime and therefore are more conscious to those who hold them. Practices are the outer layers of culture; they may change relatively fast and are more af fected by technological changes.
Hofstede together with his team have conducted a comprehensive research on how values in the work place are influenced by national culture. As a result of it, Hofstede revealed a common structure in the variety of differences in thinking and has thus developed which was later named as the “Six cultural dimension theory” or the 6-D model©, based on an analysis over 100.000 respondents from over 70 countries in the world. The theory claims that the actual value scores of the six dimensions give us the opportunity to measure and thus better comprehend the differences and similarities of national cultures.
Hofstede et al not only have shown that the cross cultural differences in basic value preferences remain relatively stable over time but pointed out that among these, the most basic values primarily affect the gender, the national, or in some cases the regional layers of culture. Layers of culture which are acquired later in life tend to be more changeable such as organisational cultures [4. P. 20]. Since the more stable part of culture is values a comparative study of culture should start with the measurement of values.
The six national cultural dimensions
Hofstede invents the term cultural dimension, by which he means an aspect of a culture that can be measured relative to other cultures. The dimensions have been derived by statistical factor analysis, on the survey questions of statistically matched samples from altogether over 70 countries over the years. With a statistical standardisation, each dimension has been expressed on a scale that runs from 0 to 100. The two extreme poles signify the two opposing typologies of the dimensions; however, the majority of countries in reality lie somewhere in between.
The six dimensions found by Hofstede and his research team were named as follows; Power Distance, Individualism vs. Collectivism, Masculinity vs. Femininity, Uncertainty Avoidance, Long term vs. Short term orientation and Indulgence vs. Restraint.
The Power Distance dimension deals with the fact that all individuals in societies are not equal - it expresses the attitude of the culture towards these inequalities amongst us. Power Distance is defined as the “extent to which the less powerful members of institutions and organisations within a country expect and accept that power is distributed unequally” [4. P. 61].
The fundamental issue addressed by the Individualism vs. Collectivism dimension is the degree of in terdependence a society maintains among its members. It has to do with whether people's self-image is de fined in terms of “I” or “We”. In Individualist societies people are supposed to look after themselves and their direct family only. In Collectivist societies people belong to `in groups' that take care of them in ex change for loyalty.
A Masculine society will be driven by competition, achievement and success, with success being de fined by the winner and/or the best in field - a value system that starts in school and continues throughout organisational life. While in a Feminine society the dominant values are caring for others and quality of life. A Feminine society is one where quality of life is the sign of success and standing out from the crowd is not admirable. The fundamental issue here is what motivates people, wanting to be the best (Masculine) or liking what you do (Feminine).
The Uncertainty Avoidance dimension has to do with the way that a society deals with the fact that the future can never be known: should we try to control the future or just let it happen? This ambiguity brings anxiety and different cultures have learnt to deal with this anxiety in different ways. The extent to which the members of a culture feel threatened by ambiguous or unknown situations and have created beliefs and insti tutions that try to avoid these is reflected in the score on Uncertainty Avoidance.
Long term vs. Short term orientation dimension describes how every society has to maintain some links with its own past while dealing with the challenges of the present and future, and societies prioritise these two existential goals differently. Normative societies, which score low on this dimension, for example, prefer to maintain time-honoured traditions and norms while viewing societal change with suspicion. Those with a culture which scores high, on the other hand, take a more pragmatic approach: they encourage thrift and efforts in modern education as a way to prepare for the future.
One challenge that confronts humanity, now and in the past, is the degree to which small children are socialized. Without socialization we do not become “human”. The Indulgence vs. Restraint dimension is de fined as the extent to which people try to control their desires and impulses, based on the way they were raised. Relatively weak control is called “Indulgence” and relatively strong control is called “Restraint”. Cul tures can, therefore, be described as Indulgent or Restrained.
Cultures in organisations
Using his own model, Hofstede has also investigated the possible impacts of nationality on the com pany culture. Most often, conflicts within an organisation or in a community arise about what an organisation or a community should be like. During his investigation of organisational cultures Hofstede has found that two out of the six national cultural dimensions are particularly important; Power Distance, i.e. questions about hierarchy versus equality or in other words who has the power to decide and Uncertainty Avoidance, e. regulating uncertainty or in other words what rules to follow in order to attain desired ends? By having plotted Uncertainty Avoidance scores of countries against their scores in Power Distance he has identified four archetypes of organisations, depending on the quadrant, whether rigorous or more easy going, personal power centred or distant from personal power, as it can also be seen in Image 2.
Points of view - the relativity of rationality
Inherently, people consider their country as corner store of reference as the following example will demonstrate.
Image 2 - Power Distance Versus Uncertainty Avoidance by Hofstede [4. P. 303]
Image 3 - Political world map - Robinson projection - in different centred views4
Map A shows Europe and Africa in the middle, the Americas to the west, and Asia to the east. The terms “the West” and “the East" are clearly products of a Euro-centred worldview. Map B shows the Pacific Ocean in the centre, Asia and Africa on the left and Europe, tiny, in the far upper left-hand corner, and fi nally the Americas to the right. The Americas-centred Map C is even more striking in the sense, that from this point of view “the East” lies west and “the West” lies east! We may imagine a south-hemisphere- centred world map where all of this would be upside down: south on top and north at the bottom. Now, which of these maps is right? All of them, of course; the Earth is round, and any place on the surface is as much the centre as any other. All peoples have considered their country as the centre of the world. Such evidence is also manifested in the names of countries. In Chinese, for example, China is called the “Middle Kingdom” (zhongguo), also, the ancient Scandinavians called their country similarly (midgardr) [4. P. xiii].. This suggests that even today, most citizens, including politicians as well as academics in any country feel in their hearts that their country as a corner stone of reference, and so they act correspondingly.
Management professionals are also human
In the 1970s, an American INSEAD professor, Owen James Stevens, used as an examination assess ment for his organisational behaviour course a case study of a conflict between two departments. Among his students the three largest national contingents were the French, the Germans and the British. Stevens noticed that the students' nationality mattered in the way of handling the case. he investigated about two hundred examination works, where students analysed the problem then suggested a solution for them.
The results were astounding. The majority of the French students saw the problem as the negligence of the general manager to whom the two department heads reported to. They offered the solution that the common boss should give instructions for setting the dilemmas. It can be seen from Image 2 that France has high scores in both, Power Distance and Uncertainty Avoidance. Hofstede named companies with these characteristics as the model of Pyramid of People.
On the other hand, the majority of German students diagnosed the case as a lack of structure and a lack of clear roles and responsibilities of the two departments. The German students saw the solution in establish ing procedures by preferably external consultants or by nominating task force with a common boss. As Im age 2 shows, Germany has low Power Distance but high Uncertainty Avoidance scores. Thus, management intervention should be limited to exceptional cases and rules should settle daily issues. Hofstede named this model as “Well Oiled Machine”.
Finally, the majority of British students saw the whole case as a human relations problem, where the conflicting departments were poor negotiators. Their preferred solution was to send the conflicting depart ment heads to management courses, ideally together. Britain lies in the higher left hand quadrant in Image 2 with relatively low Power Distance and Uncertainty Avoidance scores. Hofstede named this model as “Vil lage Market”, where nor rules, neither hierarchy but rather the demands of the situation determine what should happen.
Later on, as more Indian and Indonesian students arrived at the business school, the fourth model was identified from the missing quadrant. This model resembled and was named as the “Extended Family” as there was a permanent referral to the (almighty) boss representing a concentration of power without the structuring of activities.
Case study of ownership change in a large multicultural organisation
In 2018 the European competition authorities gave licence to change of ownership of four subsidiaries of a telecommunication company from the formerly Norwegian state majority share holder to the Czech national PPF group with its Czech national private individual owners. The sales process was relatively fast within six months of the first media leaks of the acquisition the ownership changed hands. Although the company is a publicly listed company, the ownership structure regarding its majority ownership was and has become relatively simple from a point of view of the owners' nationality.
Immediate organisational measures introduced
Just as the whole acquisition process went staggeringly fast the first organisational measures were in troduced just a few weeks after the change of ownership. For the assessment the first eight weeks are investi gated and regarding the types of measures introduced the McKinsey 7S Framework has been applied, as it has been discussed earlier.
McKinsey 7S Framework claims that Strategy is a hard element and as such leadership can more easily influence it, and although the timeframe of investigation may be too short for a whole new business plan to be produced, there was a visible change in the communication of company the focus. The new owners emphasised the importance of innovation and the entrance into new, innovative markets.
Structure as being the second hard element according to the McKinsey 7S Framework, supposed to be withdrawal of play stations displayed at the disposal of the employees to relax and have fun time at work no matter what hours of the work day. The new management gave a very clear explication and message to the employees that the focus at the workplace and during work hours should be 100 percent on the work and tasks. It is not the place and the time for playing.
The communication style and content of management communication towards employees has changed. Instead of having regular live forums dominated by a pleasant ambiance with a strong encourage ment of two way communication and interaction; a short video messages were sent at a regular base to em ployees with messages of strategic targets and expected conduct of work. The content of the communication forums of the former management concentrated on gratitude and recognition of past performance as well as on the importance of teamwork as well as giving hints of vision of the company group's future, while this seemed to carry the importance of working
Image 4 - Comparing Czech Republic to Norway along Hofstede's 6-D model©5 industriously
The former CEO set always together with the employees at an open-planned office had no private of fice, was very easily approachable and communication with her was much encouraged. The CEO representing the new owner introduced a new system. An entire open-planned office which used to host 120 employees before was the take over was converted to his private office and a new security system replaced the old system so that employees had no access to his office. Personal meeting with him was only made possible by prearranged formal meeting request.
Analysis
Image 4 shows an overall picture of comparison using Hofstede's 6-D model© in the case of Czech Republic and Norway.
Power Distance
Norway scores low on this dimension (31) which means that the following characterises the Norwe gians style: Being independent, hierarchy for convenience only, equal rights, superiors accessible, coaching leader, management facilitates and empowers. Power is decentralized and managers count on the experience of their team members. Employees expect to be consulted. Control is disliked and attitude towards managers are informal and on first name basis. Communication is direct, participative and consensus orientated.
The Czech Republic has a relatively high score on this dimension (57). This means it is a hierarchical society. This means that people accept a hierarchical order in which everybody has a place and which needs no further justification. Hierarchy in an organisation is seen as reflecting inherent inequalities, centralisation is popular, subordinates expect to be told what to do and the ideal boss is a benevolent autocrat.
Individualism versus Collectivism
Norway with a score of 69 is considered an Individualist society. This means that the “Self' is important and individual, personal opinions are valued and expressed. Communication is explicit. At the same time the right to privacy is important and respected. There are clear lines between work and private life. Job mobility is higher and one thinks in terms of individual careers. The employer-employee relationship is based on a contract and leaders focus on management of individuals. Feedback is direct and nepotism is not en couraged.
The Czech Republic, with a score of 58 is an Individualist society. This means there is a high preference for a loosely-knit social framework in which individuals are expected to take care of themselves and their immediate families only. In Individualist societies offence causes guilt and a loss of self-esteem, the employer/employee relationship is a contract based on mutual advantage, hiring and promotion decisions are supposed to be based on merit only, management is the management of individuals.
Norway scores 8 and is thus the second most Feminine society (after the Swedes). This means that the softer aspects of culture are valued and encouraged such as leveling with others, consensus, “independent” cooperation and sympathy for the underdog. Taking care of the environment is important. Trying to be better than others is neither socially nor materially rewarded. Societal solidarity in life is important; work to live and DO your best. Incentives such as free time and flexibility are favoured. Interaction through dialog and “growing insight” is valued and self development along these terms encouraged. Focus is on well-being, status is not shown. An effective manager is a supportive one, and decision making is achieved through in volvement.
The Czech Republic scores 57 on this dimension and is thus a Masculine society. In Masculine countries people “live in order to work”, managers are expected to be decisive and assertive, the emphasis is on equity, competition and performance and conflicts are resolved by fighting them out.
Uncertainty Avoidance
Norway scores 50 and thus does not indicate a preference on this dimension.
The Czech Republic scores 74 on this dimension and thus has a high preference for avoiding uncertainty. Countries exhibiting high Uncertainty Avoidance maintain rigid codes of belief and behaviour and are intolerant of unorthodox behaviour and ideas. In these cultures there is an emotional need for rules (even if the rules never seem to work) time is money, people have an inner urge to be busy and work hard, precision and punctuality are the norm, innovation may be resisted, security is an important element in individual motivation.
Long Term versus Short term Orientation
With a relatively low score of 35, Norwegian culture is more normative than pragmatic. People in such societies have a strong concern with establishing the absolute Truth; they are normative in their thinking. They exhibit great respect for traditions, a relatively small propensity to save for the future, and a focus on achieving quick results.
With a high score of 70, Czech culture is shown to be pragmatic. In societies with a pragmatic orientation, people believe that truth depends very much on situation, context and time. They show an ability to adapt traditions easily to changed conditions, a strong propensity to save and invest, thriftiness, and perseverance in achieving results.
Indulgence
Norway has an intermediate, therefore inconclusive, score of 55 in this dimension. The low score of 29 means that Czechs are generally not Indulgent. Societies with a low score in this dimension have a tendency to cynicism and pessimism. Also, in contrast to Indulgent societies, Restrained societies do not put much emphasis on leisure time and control the gratification of their desires. People with this orientation have the perception that their actions are Restrained by social norms and feel that indulging themselves is some what wrong.
Concluding remarks
Although the very case study seems to support Hofstede's 6-D model©, there may also be other than aspects than the nationality of the owner which may be plausible explanations for the quick introduction of such notable organisational measures. The first one is the structure of the ownership. Before the sell, the company's majority's stake holder was a state while after the sale it was a private individual. Another explanation may also be that the owner's portfolio of assets deemed a different business strategy. Finally, it also needs to be mentioned that as markets change and mature, different organisational strategies are demanded.
References
culture transnational company
1. Buchowicz B., (1990): Cultural transition and attitude change. Journal of General Management. Vol. 15 No. 4 Summer 1990. pp. 45-55.
2. Harzing A.W., Sorge A. (2003): The relative impact of country of origin and universal contingencies on internation alization strategies and corporate control in multinational enterprises: Worldwide and European perspectives. Organization Studies 24 (2): pp. 187-214.
3. Heidrich B., (1994): A vallalati kulthra sajatossagai a nemzeti kulturak tukreben. Dimenziok2. 1994/1. 97-109.
4. Hofstede G., Hofstede G.J., Minkov M., (2010): Cultures and organisations: software of the mind: intercultural cooperation and its importance for survival. 3rd ed. New York: McGraw-Hill Education.
5. Hofstede, G., (1994): Management Scientists Are Human. Management Science, Vol. 40, No. 1, Focused Issue: Is Management Science International? Jan. 1994, pp. 4-13.
6. Pugh D., Hickson D.J., (ed) (1996): Writers on Organizations. 5th edition 1996; Penguin Books, London.
7. Redding S. Gordon, (1990) The Spirit of Chinese Capitalism, Walter de Gruyter, Berlin.
8. Szamely E., (2019): How does history explain us current Europe's cultural set up? Hyphens (koto-jelek) 2018. Under publication.
9. Waterman Jr. R.H., Peters T.J., (2006): In Search of Excellence: Lessons from America's Best-Run Companies. Re print Edition. Published 2006 by Harper Business.
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