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1	Introduction and Overview Strategic International Management

Welcome to the fascinating world of international organisations. This book will introduce the internationalisation process in its rich diversity and sometimes astonishing complexity. Each section is preceded by learning objectives that explain the knowledge gained in reading through the subsequent pages. The objectives for section one are presented here:

Readers are able to navigate effortlessly through the book and its supplementary information. They understand the concept of globalisation and related consequences from an organisational perspective. Readers also know how to correctly name and address motives for internationalisation processes and how to recognise their interdependencies. Forces for global integration and local responsiveness are familiar and different forms of internationally operating organisations can be distinguished. The contribution of holistic management models to supporting leadership decisions and activities is recognised. The most important international models can be classified. Readers are familiar with the general approach of the EFQM Excellence Model including its fundamental concepts and RADAR logic.

Learning objectives are always followed by a visual overview of the main issues covered in the respective section. Such a graphic is called a concept map. The map created for chapter 1 is supplied in Figure 1-1.

Figure 1-1: Concept Map “Introduction and Overview”

1.1	Introduction

1.1.1

How to Use This Book

This book is meant for everybody who seeks well-founded and practical advice on how to manage the internationalisation process of an organisation. It covers the internationalisation issue from a top management perspective and builds upon established and state-of-the-art methods, using a globally recognised holistic management model – the EFQM Excellence Model - as guidance. Therefore, it caters to the needs of different groups of readers:

 Practitioners working for and with organisations that are on their way to becoming truly international,

 students of business, economics and related sciences that want to prepare themselves for doing exactly that in their future career and

 all people planning or conducting the implementation of a holistic management model (EFQM Excellence Model or Baldrige) in their organisations.

In order to facilitate the use of this book, supplementary information is provided for further illustrating the theoretical concepts discussed. This additional information is marked by distinct symbols, as listed in Figure 1-2.

Figure 1-2: Symbols Used for Special Information Employed Throughout this Book

The principles presented in this book are equally relevant for all kinds of organisations - companies, individual enterprises and non-profit organisations alike. Therefore, the term organisation instead of company is used consequently. However, in some parts for easier understanding the terms “business” or “business sectors” are utilised as many readers might find it easier to link the purpose of an organisation to the term “business” than to a more general description. In the sense used, non-profit organisations also have a business (or mission or duty) they pursue – which could be the business to save the environment or the business to protect people from injustice. The employment of classical management terminology should not distract from the fact that the principles and tools explained here are relevant for all imaginable international management situations.

1.1.2

From Gradual Globalisation to Transnational Organisations

Globalisation, understood as the worldwide integration of cultures, political systems, markets, industries and economies, is a determinant in the management of contemporary organisations. Whether an organisation decides to join the international competition or decides to stay out – the issue has to be raised. A google search of the term “globalisation” produces presently 12 million hits within less than one second, which clearly illustrates its current relevance.

Reasons and motives for internationalising an organisation are multi-faceted, as illustrated in Figure 1-3. For most organisations the primary motive is still the search for markets to ensure sustainable growth. Underlying reasons might be the (assumed) existence of attractive customer segments, demand for the offered products and services, a generally huge market size or an attractive market growth. Sometimes, the decision in favour of entering a new market is paired with a requirement to avoid the related tariffs or other trade barriers and to partake in public loan programmes offered by the respective government. In this case, opening new or relocating existing production sites is a logical consequence of the original market-seeking intent. Another important motive that appears individually or agglomerated is the necessity to ensure the availability of raw materials or other crucial and scarce resources. Cost-efficiency seekers try to establish production facilities in locations that provide essential resources at low cost (for example cheap labour costs), ensure a shorter time-to-market through cutting the distance to the customers or realise faster production cycles due to the immediate availability of efficient and good suppliers. Strategic asset seekers internationalise their business because they have a high need of well-trained people with special skills (for example in finding innovations) or are looking for international partners to complement their own product portfolio or research activities. Pushing internationalisation processes out of a risk diversification perspective is a motive on the rise due to an increased emphasis on risk management. Finally, many organisations feel obliged to mimic the international actions of their main competitors, which is labelled follow-the-leader motive.¹

Figure 1-3: Multi-Faceted Motives for Internationalisation Processes²

When the need for internationalisation is recognised, organisations have different possibilities to start the internationalisation process. The classical Uppsala Model from Johanson and Vahlne (1977) assumed that companies build up their presence in foreign markets incrementally along typical steps. This establishment chain was discovered based on case studies of Swedish companies and considered on the one hand the continuing acquisition and use of knowledge about the foreign market and on the other hand the commitments to the foreign market. The chain starts with irregular export activities and gradually evolves to the use of independent representatives, the founding of own sales subsidiaries and finally the establishment of a manufacturing plant in the foreign country. The authors observed also that the process was usually started in markets that had many common characteristics with the home market and that the international establishment took longer in case the knowledge of the target market was very low, or in other words the market was deemed exceptionally foreign in nature. From these observations they derived the concept of “psychic distance”, defined as the sum of factors inhibiting the flow of information to and from the foreign market. These factors are supposed to be mainly based on differences in culture, language, business practices and industrial development. An organisation naturally tends to start international activities in a market with low psychic distance, for example in a neighbouring country using the same language where the organisation feels to have a good knowledge of. Gradually, market knowledge of other countries further along the psychic distance chain will be collected. If the endeavour of internationalisation was implemented successfully in the first market, the internationalisation will be extended to the next country along the psychic distance chain.³ According to this theory, a German company would be expected to start with exporting its products to Austria followed by the later establishment of a sales subsidiary there. The next internationalisation step could then be exporting its products to Denmark or the Netherlands.

The establishment chain is nowadays not deemed an appropriate view of internationalisation processes. Organisations use business contacts and partner networks to collect information and share investment risks. This enables them to develop their international presence at a jump, starting for instance directly with a manufacturing plant in China instead of gradually testing export opportunities. Also, the emergence of “born globals” demands attention, referring to organisations that directly resume their business activities on a global scale as this is a dominant part of their business model (e.g. google). The current scientific landscape is defined by many different theories of internationalisation processes, which all focus on special aspects, for example motives, risk or competition drivers or certain industries.⁴ Mainly the promotion of the importance of partnerships and networks could be singled out as a common denominator. Although these theories provide interesting insights into trends and patterns, they are not suitable for supporting managerial decisions. Therefore it will be desisted from further discussion.

Not every organisation that establishes routine cross-border activities is already a truly international organisation or even a “global player”. Such a classification would require the extension of the organisation’s management system and processes in a manner that laws and customs of other countries gain a considerable influence on the way the organisation acts. Terms coined for these kinds of organisations include Transnational Enterprise (TNE), Multinational Enterprise (MNE), Multinational Corporation (MNC) or Transnational Corporation (TNC), that are all basically used as synonyms. There are many different definitions mainly based on the aforementioned distinction available. The most widely accepted stems from the UNCTAD and is used for its Transnational Corporation Statistics: “A transnational corporation (TNC) is generally regarded as an enterprise comprising entities in more than one country which operate under a system of decision-making that permits coherent policies and a common strategy. The entities are so linked, by ownership or otherwise, that one or more of them may be able to exercise a significant influence over the others and, in particular, to share knowledge, resources and responsibilities with the others.”⁵ It is to be noted that this definition does not comprise a specific majority control, although internationally a minimum equity capital stake of 10% or any equivalent including voting power is common. Therefore an exact classification might require selecting the main parent company for a considered associate enterprise, which is usually the one with the highest percentage of ownership. The relevance of TNCs is not derived from mere transnational ownership but instead from the fact that they are considered to be organisations “with formidable knowledge, cutting-edge technology, and global reach”⁶. In 2009, the UNCTAD reported the existence of 82.000 TNCs, with 80 million workers employed and their foreign affiliates accounting for a share of 11% in global gross domestic product.⁷ Additionally, these TNCs can be classified by their transnationality index, that provides information on the relevance of the activities outside an organisation’s home country and is calculated as the average of the three ratios foreign to total sales, foreign to total assets and foreign to total employment. The German Metro AG for example reached 2011 a comparatively high transnationality index of 0,62 and reported 33 countries of operation.⁸

From a scientific perspective, Bartlett and Goshal’s Integration/Responsiveness Framework provides a clear strategic distinction between different kinds of organisations with relevant cross-border activities, as depicted in Figure 1-4. Their portfolio contrasts environmental pressures for global integration with the pressures of local responsiveness as two independent dimensions whose combination of low or high value, respectively, suggest a certain configuration of the organisation. Typical forces for global integration stimulate specific reactions. The importance of multinational customers or competitors (often stimulated by trade liberalisation) combined with high investment intensity for example activates further strategic coordination. Forces like homogeneous tastes and needs, high technological intensity as well as the need for realising cost reductions induce looking for economies of scale, economies of scope, economies of experience and/or worldwide innovation lead to operating integration. The second dimension, pressures for local responsiveness, includes differences in customer needs and tastes, (local) needs for substitutes, individual market distribution structures or host country government demands. In these cases, it is important to assimilate to the special requirements by establishing individual processes for the local environment or by offering local variations of the products or services in order to be attractive for customers and partners alike.⁹

Figure 1-4: The Global Integration/Local Responsiveness Framework¹⁰

This Integration/Responsiveness Framework advises upon the choice of a global strategy for organisations facing high global integration pressures (for example due to a strong global competition) but being able to offer a highly standardised product as the pressures for local responsiveness are low. Organisations choosing this approach typically build cost advantages through centrally managed global-scale operations. These global organisations constitute the classic case of a global player, as most of the strategic decisions, responsibilities, resources and assets are centralised in the (home country) headquarters, which exerts a tight control over all overseas operations that deliver the products to a global market. Typical representatives of this kind of organisations are found for example in the aircraft or consumer electronics industry. In contrast, organisations facing low global integration pressures but instead high environmental forcers for local responsiveness follow a multinational (also called multidomestic) strategy approach and are formed as a decentralised federation of independent organisations. Many of their key decisions, responsibilities and assets are decentralised in order to better meet the individual market needs. The relationship between headquarters and subsidiaries is comparatively informal and usually focused on financial control. Multidomestic or multinational organisations are mainly found in industries whose products depend on languages or culture-specific tastes like for example publishing houses, foods and beverages. In cases where both forces contemplated are low, the resulting international organisations are largely based on transferring the products or processes of the parent company to their subsidiaries for worldwide diffusion. Foreign activities are seen as remote outposts that are highly dependent on the headquarters’ resources and support the parent company with their profits. Therefore, the organisation’s management and strategy is oriented towards the home country, exercising a tight control over their foreign subsidiaries but without systematically integrating host country organisations and their perspectives. These organisations are found for example in the textile industry.¹¹

So far, all introduced strategies are dominated by a single strategic demand. However, in the current global competition organisations increasingly face high forces of global integration and high pressures for local differentiation with a growing emphasis on worldwide innovation. According to Bartlett and Goshal, the appropriate transnational strategy to compete effectively in this extremely demanding environment requires the simultaneous development of “global competitiveness, multinational flexibility and worldwide learning capabilities”¹². Transnational organisations are truly interdependent and make selective centralising or decentralising decisions. Essential resources are centralised within the home country headquarters to protect the core competencies and in part realise economies of scale. Other resources and learning opportunities are geographically dispersed in specialised locations which ensures the necessary flexibility. Products are adapted to local requirements where necessary despite being part of an integrated production process that provides standard components from a single location to all relevant subsidiaries worldwide. Improvements and innovations are promoted in all subsidiaries and headquarters alike and outcomes are shared between all operations and subsequently diffused around the globe. Transnational organisations are characterised by large flows of knowledge, capital, people and products between subsidiaries and between headquarters and subsidiaries. The resulting organisation can be described as an integrated network. The environment described is typical for the telecommunication, pharmaceutical and media industry. More and more industries are gradually developing towards the transnational sector, as is the case for example with the automobile and banking industry. It is obvious that a transnational strategy with its high demands on integration and coordination provides a huge challenge. Therefore, successful examples are rare.¹³

When an organisation pursues a transnational strategy, decisions become far more complex, as multiple market requirements and the needs and capabilities of many different subsidiaries have to be taken into account and balanced out. In addition to that, non-business matters or soft factors require more management attention, especially the need for productive and harmonious cross-border relationships despite cultural differences and language barriers. Whereas the challenges presented by strategic, organisational and operational matters are anticipated and considered, corresponding soft factors are regularly ignored. A global survey of 572 executives explored internationalisation challenges and especially the role of cross-border collaboration and communication. More than 50 % of the respondents rated cross-border collaboration as very important, not only with all kinds of external partners but also within their business unit and their whole organisation. 64% reported cross-border collaboration as having been a critical factor in performance improvement. Despite its relevance, 51% admitted that linguistic and cultural diversity make it very difficult. Communication misunderstandings were reported to have stood in the way of establishing major cross-border transactions several times (6%) or a few times (43%) with incurred financial setbacks. Interestingly, due to a generally enhanced command of English, the diversity of languages across countries is no longer seen as the crucial cause for misunderstandings (only 27% reported this as most likely reason), instead different norms of workplace behaviour (49%) and differences in cultural traditions (51%) constitute the main challenges. Factors such as local customs and languages were stated to hamper their company’s international expansion plans significantly, especially in Russia (89%), Spain (88%), Brazil (70%) and China (67%).¹⁴

In summary, dealing competently with intercultural issues constitutes one of the most important factors for a successful internationalisation. The basics of cross-cultural competence will therefore be addressed in detail in chapter 2 which is dedicated to this key issue.

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1.2	The Use of Holistic Management Models

Managing any kind of organisation is a complex process and is made even more complex in an international and therefore usually unknown environment. The smaller and the more focused an organisation is, the easier it is for its (top) managers to rely on their experience and instincts for good management decisions. Consequently, the more an organisation is diversified, the more people are contributing to its success and the more it is dispersed over different locations, the more a clear structure is needed in order to not involuntarily overlook important matters.

Holistic management models were developed to ensure a balanced and complete view on all management matters of different types of organisations. They provide generalised issues that have to be solved in order to steer an organisation effectively to longterm success. These models are used for guidance in the management process, for assessing the maturity of an organisation’s management system and for electing the best organisations at quality or excellence price competitions.

Since the 1970s several holistic management models were published. To date, there are three models with international relevance: the (New) St. Galler Management Model, the model of the Baldrige Excellence Program and the EFQM Excellence Model.

The New Management Model is an integrative framework that provides a system-oriented view of a company and is edited by the Management Institute St. Gallen. It therefore presents predominantly a scientific view. The distinctive graphic as presented in Figure 1-5 shows the company as a productive system in the centre of its surrounding network. It consists of six essential concepts: environmental spheres, stakeholders, interaction issues, structuring forces, processes and modes of development. These depict central dimensions of the management function. Whereas environmental spheres and stakeholder expectations have to be analysed with regard to important changes, interaction issues combine manageable matters concerning communication and resource allocation. Structuring forces should be set up to arrange the daily routines coherently, forming the company’s framework for value creating and other activities that are logically combined to consistent processes. Modes of development explain basic patterns of entrepreneurial change processes. The main aim of the St. Galler model is to support sustainable business solutions and organisational development. The University of St. Gallen uses this model as a basic guideline for executive management studies.¹⁶

Figure 1-5: Survey of the New St. Gallen Management Model¹⁵

The National Institute of Standards and Technology (NIST) is an agency of the U.S. Department of Commerce. It promotes U.S. innovation and industrial competitiveness by advancing measurement science, technology and standards with the help of cooperative programs. The Baldrige Performance Excellence Program is one of those. Driven by a more practical need, criteria were developed in order to evaluate organisations and their competitiveness and to provide guidelines for organisational improvement. The Baldrige criteria and their systems perspective are used for assessing the applications for the Malcolm Baldrige National Quality Award (MBNQA) that is awarded yearly by the U.S. president.¹⁷

The requirements of the Baldrige Criteria for Performance Excellence for business and non-profit organisations are embodied in seven categories, as shown in Figure 1-6. These categories are integrated and connected in the Baldrige framework or systems perspective. Its top basic element is the “Organizational Profile”. It sets the context for the way an organisation operates as it includes its competitive environment, relationships and its strategic situation. Core values and concepts form the basis for the actual Performance Management System. This is first composed of six Baldrige categories: the leadership triad with Leadership (category 1), Strategy (category 2), and Customers (category 3) which sets the organisational direction, and the results triad with Workforce (category 5), Operations (category 6) and Results (category 7). All actions taken by the organisation’s workforce and key operational processes produce its overall performance results. The seventh category forms the system’s foundation, as Measurement, Analysis, and Knowledge Management (category 4) are critical to a factbased, knowledge-driven and effective management system. The central part “integration” stresses the model’s holistic and integrated perspective. The criteria categories are subdivided into overall 17 process and results items, each focusing on a major requirement. Each item consists of one or more areas to address that define more specific requirements. This third level of the whole model is the level that organisations should address in order to explain their particular solutions and approaches when applying for the MBNQA.¹⁸

Figure 1-6: Baldrige Criteria for Performance Excellence Framework 2015¹⁹

Besides its predominant use in the U.S., the Baldrige model or its equivalent was used for national excellence awards in more than 20 countries worldwide in 2010, for example in Hong Kong and New Zealand.²⁰

The third internationally recognised model is the EFQM Excellence Model. As it represents the red thread through this textbook, it will be explained explicitly in the following chapter 1.3.

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1.3	The Approach of the EFQM Excellence Model

The most successful and widespread holistic management model is the EFQM Excellence Model. Leaders that face an internationalisation challenge are in need of a clear structure of their organisation’s existing management system as well as of ideas for integrating new approaches and different cultures. The EFQM Excellence Model provides through its non-descriptive and structured framework a very good tool for this purpose. Consequently, its building components will be explained in detail in the following subdivisions.²¹

1.3.1

Background Information: The EFQM and its Model

The EFQM is a global non-for-profit membership foundation, established in 1988 by 14 CEOs of internationally recognised companies (Nestlé, Robert Bosch, Volkswagen et al.) with the goal of developing a management tool for increasing the competitiveness of European organisations. In alignment with its vision of “a world striving for sustainable excellence”²² the EFQM is organiser of the prestigious European Excellence Award that yearly recognises organisations for their sustainable achievements using the EFQM Excellence Model as assessment tool. To date, the EFQM records about 500 international members from many different industries and more than 50 countries.²³ Its model is used by over 30 000 organisations in Europe for development and assessment purposes.²⁴ According to a research conducted in 2010, the EFQM Excellence Model or its equivalent is used for national excellence awards in more than 35 countries worldwide, not only in European countries like Germany (Ludwig-Erhard-Preis), Finland, United Kingdom and the Russian Federation but also in Turkey and the United Arab Emirates.²⁵

Due to its background the EFQM Excellence Model was developed from a practical European management perspective. Accordingly, it sets a strong focus on people and sustainability. The inclusion of relevant leadership matters affecting all sorts of global organisations is one of its strong features. Keeping it up-to-date is a major prerequisite for its on-going success; therefore the model is reviewed every 3 years in a rigorous and widespread review process. The latest reviews were carried out with more than 200 representatives from academics, large organisations, EFQM partners and assessors, allowing work groups to comment and test draft versions before the final version was published. The 2013 version of the EFQM Excellence Model now emphasises emerging trends like innovation, risk management and corporate governance. The in-depth revision achieved also a full integration of its main building blocks: the 8 fundamental concepts, the 9 model criteria and the RADAR assessment tool.

1.3.2

The Fundamental Concepts of Excellence

Every management model is based on key concepts that explain the underlying management philosophy. These concepts provide important guidance on the interpretation of model criteria in case they are not self-explanatory. Before using any kind of model it is always advisable to compare its basic philosophy with one’s own because incompatibilities in this respect can reduce the usefulness of a tool considerably.

Figure 1-7: EFQM Fundamental Concepts of Excellence²⁶

The EFQM Excellence Model supports any kind of organisation in its endeavour to attain excellence with the goal of meeting or exceeding the expectations of its stakeholders by achieving and sustaining superior levels of performance. The essential foundation of this quest is built by 8 underlying principles called the Fundamental Concepts as depicted in Figure 1-7.

Figure 1-8: EFQM Fundamental Concepts: Definitions and Best Practices²⁷

Each Fundamental Concept of Excellence is defined against the backdrop of a management approach of an excellent organisation. These definitions are augmented by aspects of what excellent organisations do to transfer these principles into practical activities. The main definitions and some of their constitutive best practices are specified in Figure 1-8. The management approach described in the Fundamental Concepts is cast in a structure of a holistic management model with 9 criteria: the EFQM Excellence Model.

1.3.3

The EFQM Excellence Model Framework 2013

The EFQM Excellence Model 2010 offers through its non-descriptive framework a guiding structure for any kind of organisation striving for excellence. It is presented in Figure 1-9. The nine criteria and their subdivisions allow depicting precisely an organisation’s way of offering value (“enablers”) and the resulting goal attainment (“results”).

Figure 1-9: The EFQM Excellence ModelFramework201328

Figure 1-10: Definitions ofthe EFQM Enabler Criteria29

The five enabler criteria on the left side of the model cover what an organisation does to fulfil the various expectations of its stakeholders and how it does it. They consist of the criteria 1 Leadership, 2 Strategy, 3 People, 4 Partnerships & Resources and 5 Processes, Products and Services. The results stem from the enablers and depict what the organisation achieves. The balanced view on results is expressed by the four criteria 6 Customer Results, 7 People Results, 8 Society Results and 9 Business Results. As any excellent organisation is a learning organisation, the dynamic of continuous improvement through feedback is represented by the arrow at the base of the model stating “Learning, Creativity and Innovation”. Each criterion is clearly defined in order to explain its general meaning. An overview of the criteria definitions is provided in Figure 1-10 (for enablers) and Figure 1-11 (for results).

Figure 1-11: Definitions of the EFQM Results Criteria30

The high level definitions of the criteria only allow a very rough structure of a management system. For assessing the maturity of an organisation as well as its strengths and weaknesses, a more detailed approach is necessary. Therefore, the nine criteria are subdivided in criterion parts and these are further elaborated in guidance points. The 32 criterion parts describe different facets of what an excellent organisation typically does in the area of the defined criterion and what therefore should be considered during an assessment. On the third and lowest level of the model, the guidance points provide tangible best practice examples of how to implement the ideas. These guidance points link the EFQM Excellence Model to the Fundamental Concepts. Some of them provide an adaption of one part of a Fundamental Concept to fit the specific context of the criterion part. Other guidance points repeat the text from the Fundamental Concept precisely. Through the guidance points, the structure of the model allows to grasp connections between the different criteria and by that to identify management approaches that are able to integrate several goals at once. This adds another dimension to the otherwise two-dimensional model. These links are depicted by the connecting lines in the EFQM Excellence Model Framework. A graphic example of the EFQM levels is provided in Figure 1-12.

Figure 1-12: Exemplary Levels of the EFQM Excellence Model³¹

It is important to keep in mind that the 119 guidance points used for exemplifying the five enabler criteria are not meant as a check list, so it is not necessary for an organisation to follow them all. Nor is the list of guidance points meant to be exhaustive, as there are other ideas and approaches that fit into a criterion part without being mentioned in a guidance point. The EFQM Excellence Model as an open and non-descriptive model allows and expects individual solutions that match business sector, size, culture and strategy of a specific organisation. However, the guidance points facilitate the search for a fitting improvement measure, in this respect being proper guides for a leader facing management challenges.

Figure 1-13: Exemplary Red Threads Through the EFQM Excellence Model³²

It is possible to follow certain ideas or aspects of management through the model as they are referred to in several guiding points. The EFQM depicts in their 2013 model brochure the integration of their fundamental concepts into the model by highlighting those criterion parts of the enablers where the text of a certain fundamental concept is reflected directly in one of the attached guiding points.³³ This exercise can also be done in a broader sense for any aspect a manager would like to focus on, for example customers or ideas and impacts of the introduction of a risk management system. As shown in Figure 1-13, each of these aspects can be followed through the model. Ideas how to optimise the benefit from the customer’s perspective can be found for example in 1c (leaders are transparent and accountable to their customers and encourage them to participate in activities that contribute to the wider society), in 2a (gather customer’s needs and expectations as strategy input), 2b (analyse current performance trends, for example how customer expectations and promises to the customers are kept), 2d (communicate their strategy to their customers), 3b (attract the right people and ensure that all employees have the necessary competencies to fulfil the needs of the customers), 4a (identify and work together with partners to ensure enhanced value for the customers), 4c (optimise the impact of their product lifecycle and services on public health and safety including that of the customers), 4d (involve customers in the development and deployment of new technologies to maximise the benefits generated), 4e (establish approaches to engage relevant customers and use their knowledge in generating innovation), 5a (design and manage processes to optimise customer value – also beyond the boundaries of the organisation), 5b (develop products and services that create optimum value for customers), 5c (define different customer groups and anticipate their needs and expectations), 5d (produce and deliver products to need or exceed customer needs and expectations), and 5e (manage and enhance customer relationships). The outcomes of these approaches are measured in 6a and 6b (customer perceptions and performance indicators with impact on the perceptions of customers). Explanations concerning the depicted relevant criterion parts for people are provided online at the accompanying website combined with the solution to the following exercise.

Exercise: Familiarise yourself with the EFQM structure (online)

The internationalisation process that forms the structure of this textbook is based on the EFQM criteria. Therefore, more details of each criterion and the associated criterion parts will be explained at the beginning of the corresponding chapters. As this book will only present selected parts of the EFQM Excellence Model, it is highly recommended to acquire the original brochure of the model which can be obtained at www.efqm.org.

1.3.4

The EFQM RADAR Logic

For assessing the excellence level of an organisation the EFQM offers a logical method based on the Deming or PDCA Cycle. According to the Deming Cycle a continuous improvement of processes or systems is based on several successive phases starting with establishing plans, processes and (measurable) objectives to the delivery of a certain output (PLAN), implementing and executing these plans (DO), reviewing the actual results (CHECK) and taking corrective actions in case significant differences between the actual results and the planned objectives occur (ACT).³⁴ The PDCA-Cycle lies at the heart of all improvement-related management models and is used for example in the ISO 9001 quality management systems’ requirements.

The EFQM calls its derived approach RADAR® logic. It consists of four consecutive phases that an organisation needs to execute in order to ensure continuous improvement and sustainable outcomes and is represented in Figure 1-14. In the first phase, the organisation determines the RESULTS it wants to achieve according to its strategy. In the second phase the organisation plans and develops an integrated set of comprehensive APPROACHES to deliver the results from an actual and future-oriented perspective. In the third phase the approaches are DEPLOYED systematically to ensure a successful implementation. In the fourth phase the organisation has to ASSESS and REFINE its approaches according to the analysis of the achieved results and based on its on-going learning activities. Therefore, the cycle starts again with defining the desired results. The degree to which an organisation is able to consequently follow this rigorous improvement cycle is the basis for assessing its level of excellence. For an EFQM assessment, a detailed set of requirements and possible levels of fulfilment based on the RADAR® cycle was invented that is depicted in the so called RADAR tools. One RADAR tool (also called RADAR matrix) deals with the results, as it depicts the first phase of the cycle and is thus used for the result criteria. The second RADAR matrix is used for the assessment of the enabler criteria and depicts the phases two to four of the RADAR logic.

Figure 1-14: The EFQM RADAR® Logic35

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1.4	Process Model “Managing Internationalisation”

Figure 1-15: The Internationalisation Process

The management logic of the EFQM Excellence Model can be used to define the path through the internationalisation process, as shown in Figure 1-15. The management process itself starts with leadership awareness and competence to steer the organisation through the internationalisation process. This is followed by the definition of an international strategy which sets the path for the following implementation. The strategy is implemented through the following steps: managing people in an international environment, managing international partners and resources as well as managing products and processes globally. Based on a sustainability approach the results achieved will be compared with the (strategic) goals set, defined by ways of an individual balanced scorecard. A strategy review based on the outcomes will follow to ensure that the longterm vision of the company is still valid and the path to be followed seen as appropriate. These internationalisation steps are supported by the development of crosscultural competence, which is required for every action and decision in internationally operating organisations. Therefore it defines the starting point for the following elaborations of this book.

1.5	Citations & Notes

¹ Morschett, D., Schramm-Klein, H., & Zentes J. (2010), pp. 71-82; Holtbrügge, D., & Welge, M. K. (2010), pp. 25-26.

² Contents based on Morschett, D., Schramm-Klein, H., & Zentes J. (2010), p. 72, figure 4.1; Holtbrügge, D., & Welge, M. K. (2010), p. 24, tab. 1-7

³ Johanson, J., & Vahlne, J.-E. (1977)

⁴ A good overview of theories dealing with foreign direct investments is provided in Holtbrügge, D., & Welge, M. K. (2010), pp. 54-78

⁵ UNCTAD (2013b)

⁶ UNCTAD (2010), p. iii

⁷ UNCTAD (2010), p. XVIII. Unfortunately, the newer World Investment Reports concentrate on FDI inflows and outflows but do not offer a recent count of TNCs.

⁸ UNCTAD (2014), p. 16

⁹ Bartlett, C., & Ghoshal, S. (1986); Bartlett, C., & Ghoshal, S. (1987a); Bartlett, C., & Ghoshal, S. (1987b); Ghoshal, S., & Nohria, N. (1993); Bartlett, C., & Ghoshal, S. (1998)

¹⁰ Based on Bartlett, C., & Ghoshal, S. (1986), p. 377; Kutschker, M., & Schmid, S. (2011), p. 300

¹¹ Bartlett, C., & Ghoshal, S. (1986); Bartlett, C., & Ghoshal, S. (1987a); Bartlett, C., & Ghoshal, S. (1987b); Ghoshal, S., & Nohria, N. (1993); Bartlett, C., & Ghoshal, S. (1998). Industry examples from Morschett, D., Schramm-Klein, H., & Zentes J. (2010), pp. 43-44 and Kutschker, M., & Schmid, S. (2011), pp.301-304.

¹² Bartlett, C., & Ghoshal, S. (1998), p. 18

¹³ Bartlett, C., & Ghoshal, S. (1986); Bartlett, C., & Ghoshal, S. (1987a); Bartlett, C., & Ghoshal, S. (1987b); Ghoshal, S., & Nohria, N. (1993); Bartlett, C., & Ghoshal, S. (1998); Morschett, D., Schramm-Klein, H., & Zentes J. (2010), pp. 34-35; Kutschker, M., & Schmid, S. (2011), pp.301-304.

¹⁴ Economist Intelligence Unit (2012)

¹⁵ Rüegg-Stürm, J. (2004a), p. 12

¹⁶ Rüegg-Stürm, J. (2004b). More information about the use of this integrative approach can be obtained at the website of Universität St. Gallen: http://www.es.unisg.ch/en/custom-programs/approach/intergrative-approach.php (access 01.03.2015); A good overview offers the author’s German publication (Rüegg-Stürm, J. (2004a)). An extract of it is obtainable online: http://www.michaelegli.ch/html/img/pool/Neues_St._Galler_Managementmodell.pdf (retrieved 01.03.2015).

¹⁷ US Department of Commerce & NIST (2015). The model will be updated yearly and the recent brochures are for sale and partly displayed at the NIST website. Information about the use of this model for awards in different countries can be obtained from US Department of Commerce & NIST (2005). As “Home of the Baldrige Performance Excellence Program” the NIST offers also many publications of MBNQA winners with best practices free of charge, true to their mission to foster improvements.

¹⁸ US Department of Commerce & NIST (2015); graphics also available from http://www.nist.gov/baldrige/graphics.cfm

¹⁹ US Department of Commerce & NIST (2015); graphics also available from http://www.nist.gov/baldrige/graphics.cfm

²⁰ NIST (2010)

²¹ EFQM & ILEP (2012). A short introduction to the EFQM itself, the EFQM model, its Fundamental Concepts and possible uses can be retrieved from the official EFQM website (www.efqm.org). A short overview of the model is offered as pdf publication free of charge: EFQM. (2012). An overview of the EFQM Excellence Model. Retrieved from www.efqm.org/sites/default/files/overview_efqm_2013_v1.1.pdf. The EFQM offers at its website model related publications in several languages, mainly for sale. For German users that work internationally, the dual language version (German/English) used here can be highly recommended. For some award processes, free information on best practices concerning selfassessments and the award process is provided on the internet. For example for the German Excellence Price called Ludwig-Erhard-Preis (www.ilep.de)

²² EFQM (2015d)

²³ EFQM (2015e)

²⁴ EFQM (2015f)

²⁵ NIST (2010)

²⁶ EFQM & ILEP (2012), p. 6

²⁷ Definitions taken from EFQM & ILEP (2012), pp. 8-14

²⁸ EFQM & ILEP (2012), p. 16

²⁹ Definitions assembled from EFQM & ILEP (2012), pp. 18-31

³⁰ Definitions assembled from EFQM & ILEP (2012), pp. 34-40

³¹ Definitions from EFQM & ILEP (2012), p.18

³² General idea and parts of the attribution based on EFQM & ILEP (2012), p. 42

³³ EFQM & ILEP (2012), p. 42

³⁴ Deming, W. E. (2000), p. 88. (Deming calls it in his own book the “Shewhart Cycle” but notes that it has been called Deming Cycle since he introduced it in Japan in 1950). The PDCA cycle is referred to regularly in books about (Total) Quality Management, for example Juran, J. M., & De Feo, J. A. (2010), pp. 204-205 or Oakland, J. S. (2014), pp. 120-125 (with various decuctions and uses for example pp. 250-252, 263-266, 296).

³⁵ EFQM & ILEP (2012), p. 44