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Companies that follow a geocentric strategy consider the entire world their marketplace for conduct- ing business—from production to sales and distribution. Geographic decisions for conducting busi- ness are made based on relative overall costs and projected return on investment. With this geocentric strategy, companies also source their operations in different countries to provide them with the flexibility of rapidly moving operations and minimize losses—even continue profitability—to locations that are not hindered or threatened by obstacles presented by governments, unions, erupting social conflicts, or natural disasters.

In June 2005, the Bush Administration in the United States announced tough new trade measures aimed at saving U.S. textile-industry jobs from fierce Chinese competition. And just weeks later these new trade-restricting measures were definitely saving and even creating jobs—in Mongolia, however, not the United States. To escape the new limits on shipments to the United States of cotton shirts, trousers, and underwear made in China, Chinese companies immediately began shifting production to plants in countries like Mongolia, which were not affected by the trade restrictions. This shift has meant a sudden surge of business activity in neighboring Mongolia, a poor country of 2.8 million in one of the world’s most remote and least likely commercial locations. “All the Chinese are . . . building up their production facilities and starting up new factories,” says Ron Zeidel, executive director of Magic Suit, the Mongolian subsidiary of a U.S. company. “It’s going to be a haven for companies coming here from China to get around this quota.”

Source: Adapted from D.J. Lynch, “Limits on Imports Save Jobs—Overseas: China Shifts Work to Companies It Owns in Other Countries,” USA Today, 3 June 2005, 5B.

tions. A shift has taken place in the international management literature from a “fit” between strategy and structure to a “process” perspective that assumes that the ways in which an organization’s members make sense of their organization and the global environment enhances or inhibits competitive advantage.24 _{Therefore, in this book} we will focus on “process” that facilitates the development of organizations capable of meeting challenges of both global integration and local responsiveness. In the past international human resource management has played a reactive or a supplementary role in supporting an MNC’s competitive strategy and organizational structure. In- creasingly now and in the future, the strategic role of human resource management needs to be proactive in influencing the optimal competitive strategy and designing an appropriate structure.

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Being an effective global leader requires a combination of three competency clus- ters: business acumen, relationship management, and personal effectiveness. First, it is necessary to have a comprehensive understanding of the overall business and an excellent foundation in the professional knowledge and skills required to do the job. Second, a global leader must be able to cultivate quality relationships to take advantage of the diversity of managers from different cultural backgrounds. He or she also must be able to meet the challenges involved in cross-cultural workforce management. When global leaders have a clear understanding regarding the expec- tations of host country workers, they can provide appropriate incentives and rewards that more effectively fulfill the workers’ needs. Acculturation capability comprises the manager’s ability to integrate into the foreign environment and to adapt to the international assignment. Strong cross-cultural communication skills, relational abili- ties, and a non-ethnocentric mind-set are critical to this adaptation, as are personal characteristics such as emotional stability and the effective handling of stress. Be- cause adjustment to a new culture may result in intense emotional strain, the ability to deal with feelings of hostility, isolation, and loss of control is crucial to successful acculturation.

Third, developing effective global leadership is also strongly influenced by the motivation to live abroad. Managers with a keen interest in international assign- ments usually possess a desire for personal and professional growth and perceive an international assignment to be of high value in their career development. In other words, global leaders must have the desire and maturity to experience the unfamiliar world around them with an open mind. Such individuals tend to have a global orien- tation or worldwide perspective, which enhances acculturation ability. A geocentric mind-set results in a globally socialized manager whose scope and mental geographic context contribute to acculturation ability and effective international management.

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It is almost mandatory that MNCs transfer managers from one location to another to transfer best practices. Otherwise the MNC will lose out on a vital knowledge resource

within the organization—the individual and tacit know-how of its employees. Most of what an employee knows is located in this “soft side.” Unfortunately, many companies are not adequately harnessing the more personalized form of internal knowledge.

It is obvious that in our opening case of Accenture, East Asian culture does not foster formal knowledge sharing to the extent that the organization’s American offices do. Because of the East Asian culture’s view of knowledge and the existing language differ- ences, knowledge contributions remain severely biased toward the American offices, thus exposing a serious knowing-doing gap problem. Despite acknowledging the ex- treme emphasis Accenture places on the KX, person-to-person contact and personal net- works are more important in conducting business in high-context countries such as those in East Asia. This emphasis reflects those cultures’ traditional focus on interactive rela- tionships, social cohesion, and a team-oriented mentality. A more personalized system facilitates the flow of tacit knowledge with greater ease than a codification-based one.

The problem arises from the fact that although Accenture pursues a global competi-