DPI Unit 3 Theory PDF

International Project Management Unit 3. International and Multinational projects International Business Project Management Degree in International Relations Faculty of Law University of Alicante Unit 3. International and Multinational...

International Project Management Unit 3. International and Multinational projects International Business Project Management Degree in International Relations Faculty of Law University of Alicante Unit 3. International and Multinational projects 1  International Project Management Unit 3. International and Multinational projects Unit 3. International and Multinational projects 1. International and Multinational projects 2. Key elements in internationalization. Political, cultural, legal and geographical environment 3. International negotiation 4. Contract and international arbitration 5. Organizational models for multi-country programs 6. The management of international and multinational team 2  International Project Management 1. International and Multinational projects Unit 3. International and Multinational projects 1. International and Multinational projects Frequent CATEGORIES of international projects Efforts by governments International aid agencies Expansion and new markets Mergers & Acquisitions (M&A) Support for standardization Marketing initiatives 3  International Project Management Unit 3. International and Multinational projects 1. International and Multinational projects What are the benefits that organizations seek in international projects? Economies of scale Strength in size. For many firms there are major benefits to increased size. Penetration of new markets and increased sales. Access to human resources. Many firms are challenged with labour problems such as a lack of staff with specific skills or high labour costs. Lower cost of operations. Maintenance and expansion of the firm’s competitive position. 4  International Project Management Why is internationalization possible? Unit 3. International and Multinational projects 1. International and Multinational projects Telecommunications Networking Mobile communications Hardware and Computer systems Internet and systems software World Wide Web 5  International Project Management Unit 3. International and Multinational projects Differences between a standard and an international project Project management tools and techniques that apply for standard projects also apply for international projects but there are differences in dimensions and magnitude. The management of international projects requires more disciplines and skills. Attribute Standard Projects International Projects Organizations Single Multiple organizations and departments, each with their own self-interest Systems and technology Homogeneous Multiple systems that require local knowledge and support Society Single and common culture Multiple, varied cultures Company culture Single Variations in each area due to local factors and history of the firm in each location Organization Can be focused on the May other competing demands for resources project Self-interest More easily understood More complex to understand Regulations Understood and known Harder to understand; more subject to interpretation 6 the differences comes from the dimension and the magnitud of the project  International Project Management Characteristics of an International Project Unit 3. International and Multinational projects 1. International and Multinational projects Uniqueness Diversity Risk International International Project Project Dynamics Complexity Limited Resources 7  International Project Management Unit 3. International and Multinational projects 1. International and Multinational projects What determines the Why international projects success of an fail? international project? Strong commitment of the project Treatment of the international team and initial clarify of goals project as a standard project Establishment of smooth Excessive management communication and supporting attention infrastructure Lack of sensitivity to the local Adequate project team capabilities culture A consideration of context and Failure to take into account self- culture interest The right balance between Overdependence upon common methodology and technology flexibility Lack of measurement 8  International Project Management Unit 3. International and Multinational projects 2. Key elements in internationalization 2. Key elements in internationalization. Political, cultural, legal and geographical environment Politics Language Education Attitudes Geography Culture Values Aesthetics Legal 9  International Project Management Unit 3. International and Multinational projects 2. Key elements in internationalization 2. Key elements in internationalization Political environment Political changes can be determining factors (favorable or unfavorable) The companies and the project managers must know the political conditions to avoid problems with the local authorities and their legal order. This aspect must be constantly monitored. The situation of each country must be known because some countries offer important opportunities. Reports are regularly published by public and private entities. Unfavourable or Favourable attitude towards the country of the project company will bring a better or worse perception of the company, its products or services. 10  International Project Management Unit 3. International and Multinational projects 2. Key elements in internationalization Cultural environment One of the most relevant differential aspects in practice. In the initial phases of internationalization, companies demonstrate a strong preference for closer and comparable cultures, with a minor cultural distance. Sometimes global strategies are adopted considering similar cultural characteristics but those that are different are ignored, what triggers the failure of the project. Exposure to cultures from different countries requires preparing the project manager and the entire organization to manage multiculturalism (internal selection of people, internal training with intercultural experts…) Project manager must seek to culturally intelligent professionals, providing training and education to increase their chances of cultural understanding. It is not only about languages and curricular training; it is also necessary to look for attitudes that facilitate this adaptation. 11  International Project Management Unit 3. International and Multinational projects 2. Key elements in internationalization a) Language Language is the most obvious difference between different cultures. Project managers should educate staff on correct or incorrect uses of language and even provide a guide. In many countries, the use of a phrase in the local language at the right time (lunch, dinner, negotiations) can be a decisive factor. Using the same local language does not guarantee a perfect understanding 12  International Project Management Unit 3. International and Multinational projects 2. Key elements in internationalization What the British say What the Bristish means What others understand That´s not bad That’s good That’s poor Oh, incidentally/by the way The primary purpose of our That is not very important discussion is I was a bit disappointed that I am annoyed that It doesn´t really matter Very interesting That is clearly nonsense They are impressed I’ll bear it in mind I`ve forgotten it alredy They will propably do it I’am sure it’s muy fault It’s your fault Why do they think it was their fault? You must come for dinner It’s not an invitation, I’m just being I will get an invitation son polite I almost agree I don´t agree at all He´s not far from agreement I only have a few minor Please re-write completely He has found a few types comments Could we consider some oher I don´t like your idea They have not yet decided options  International Project Management Unit 3. International and Multinational projects 2. Key elements in internationalization b) Education, attitudes, values and aesthetics The level of education conditions of the consumer usually coincides with the level of economic development. Values and attitudes determine what is considered correct or appropriate. Tastes, appreciation of colours, shapes, music, design, etc, vary by culture. These differentiations affect purchasing decisions for consumer. Projects must assess aspects that may suppose susceptibility with the values considered acceptable in the country of the project. The project manager will especially take these attitudes and values into account when recruiting and working with local staff and when planning the project to avoid complications in the execution. 14  International Project Management Unit 3. International and Multinational projects 2. Key elements in internationalization Legal and geographic environment Company must be informed of the different markets legislations. In all countries there are a series of barriers that can affect the project, such as: o Legal restrictions, for foreign companies to operate in certain sectors o The need to have administrative authorization for the development of certain activities o Technical barriers, such as approval and certifications o Fiscal barriers It is advisable to use local legal experts to identify the possible risks. Legal problems affect both companies and their expatriate employees (Aspects related to accessibility, project location, supply and transport, capacity, temperature, etc.) 15  International Project Management Unit 3. International and Multinational projects 3. International negotiation 3. International negotiation Some of common aspects related to international negotiations are: Hierarchy of negotiators. Similar levels are desirable. Autonomy in decision-making Illicit payments and collections Negotiation model Negotiation style Attitude towards contracts Main objectives: International negotiation must be planned: Acquiring a deep knowledge of the To the smallest details and well in advance culture. taking into account the specific country, the Establishing closer and lasting links. information on the negotiators and the Intercultural competences beyond company, linguistics competences the physical environment of the Not to limit expectations to 16 negotiation. stereotypes.  International Project Management 3. International negotiation Unit 3. International and Multinational projects 3. International negotiation 17  International Project Management Unit 3. International and Multinational projects 4. Contract and international arbitration 4. Contract and international arbitration International Contract International contract is an agreement of wills agreed between two or more parties that have their domiciles or residences in different states and affects two or more legal systems. The existence of different applicable laws is a factor of complication and uncertainty: o Multiplicity of legal structures o Variety of uses and customs applicable to the contract o Plurality of jurisdictions capable of intervening in the international contract. Regulation may differ in many aspects: formalization of the contract, delivery of the goods, means of payment, transport, insurance of the goods, import, export customs, exchange control, etc. Incoterms are a series of 11 pre-defined rules, of voluntary use, which define the responsibilities of sellers and buyers and provide a common language for international trade activities. They are published by the International Chamber of Commerce (ICC) https://iccwbo.org/ 18  International Project Management Unit 3. International and Multinational projects 4. Contract and international arbitration Main legal risks derived from an international project The uncertainty of the law generates serious problems due to the multiplicity of contact points between laws. There are also technological, commercial, economic, financial or political risks. It is common to sign documents that reflect the initial understanding between parties, called MOUs (“Memorandum of understanding”) or LOI (“Letter of intent”). International Arbitration International Commercial Arbitration is a mechanism to solve conflicts between parties in an international context, as a neutral solution. The arbitrator will offer a quick, technical and confidential solution. Advantages with respect to a jurisdictional solution: o Difficulty to find a court that can take charge of all aspects of a contract. o National jurisdiction is usually slow o International arbitrators are people who have a deep knowledge of the world of international business and its usual uses. 19 o Arbitration preserves trade secret  International Project Management Unit 3. International and Multinational projects Organizational models of multinational programs 5. Organizational models for multi-country programs Multinational Companies Multinational Consortia Organizational Models Subcontracting and Outsourcing Offset 20  International Project Management Unit 3. International and Multinational projects Multinational Companies 5. Organizational models for multi-country programs A company located in several countries, with tasks and responsibilities distributed among the different production centers. Global Multinational Model Transnational Model or Insourcing Applicable in companies whose Companies located in multiple countries products, are aimed at a global which must adapt their products to the customer, without adapting the requirements of the local customers. product to the needs of the local Requires a decentralized management of customer. (E.g. automotive companies) the programs and more autonomous in their delegated centers, even hiring local Product and program management are staff to adapt the company to the culture, centralized. norms, regulations and local labor laws. 21  International Project Management Unit 3. International and Multinational projects Multinational consortium 5. Organizational models for multi-country programs A long-term union between companies which acquires the character of a new legal entity that must comply with the existing legal regulations in the country where it is registered. Consortia are created to develop multinational programs, usually of high technical complexity, long development time and very high investment costs (Defense and infraestructure mainly) Key concepts: Workshare Workshare is the percentage of participation in the development of work sharing between companies that are part of a program. Workshare is apply both technical capacities and economic participation. Contracting Agencies Departments, offices, divisions, boards or bureaux create by the main client (usually governments) as an executive branch to manage the consortium. They performs the functions of “single client” funding the programme and being a single interface with the contractor consortium. 22  International Project Management Unit 3. International and Multinational projects Subcontracting and Outsourcing 5. Organizational models for multi-country programs Strategic decision that depends on many factors: the technological and production strategy, type of program, innovation level required, development costs, etc. Effective subcontracting management can be very advantageous for both parties, contractor and subcontractor, and in some cases by establishing long-term partnerships. Outsourcing: a cost-cutting measure in which tasks performed in-house are now being completed by persons or businesses outside the company and not affiliate with it. Subcontracting: when a company hires another person or business to perform a specialized task that cannot normally be done in-house. Positive factors Risks Long-term loss of the technologies that are Saving labour and infrastructure subcontracted. (Captive client of the costs subcontractor) Optimal use of existing resources The subcontractor may become a competitor Reduction of risks in new in the market. developments. Subcontractor does not evolve technologically or does not invest in 23 innovation.  International Project Management Unit 3. International and Multinational projects Industrial Offset Programs (OFFSET) 5. Organizational models for multi-country programs Offset programs are generated as a consequence of large technological acquisitions from third countries usually by governments. The government that carries out the acquisition seeks the return of the investments made in the form of technology transfers, “Know-how” or work packages to their local companies. Type of OFFSET programs OFFSET programs management Direct offsets: Programs directly Key elements: related to the product or system There are multiple parties involved purchased. The original manufacturer in defining the compensation has to assign the production license agreement. and transfer knowledge, technical The valuation criteria. Valuations are specifications and the material often higher than the actual cost of resources and equipment. the work packages being Indirect offsets: Programs not directly transferred, given the intangible related to the purchased system. The knowledge. original manufacturing company These are long-term programmes. transfer different work packages to Strict control of commitments is the acquired system. applied. 24  International Project Management Unit 3. International and Multinational projects Industrial Offset Programs (OFFSET) 5. Organizational models for multi-country programs Eurofighter Typhoon 25  International Project Management Unit 3. International and Multinational projects 6. The management of international and multinational teams 6 In international projects the organizational structure becomes horizontal located in different geographic areas. Teamwork involves ensuring that the team has clear objectives and an individual sense of contribution and added value. Need for implementation of clear and common processes, acceptance of cultural differences, clear team structure, implementation of knowledge transfer mechanism and “best practices” and an effective communication 26 strategy.  International Project Management Unit 3. International and Multinational projects Advantages of employing local staff 6. The management of international and multinational teams Decrease in salary costs and simplification of legal and contractual requirements in the project country. Corporate Social Responsibility policies. Improvement of the company image in the project countries. Local staff have no cultural barriers. Ensures continuity in the management of the subsidiary, avoiding continuous substitutions of expatriates. Career opportunities in local staff. Better acceptance of the company in the country of destination by customers. Local managers provide a complementary vision in the decision-making processes. Better relations with the administration of the country. 27  International Project Management Unit 3. International and Multinational projects Advantages of employing expatriates 6. The management of international and multinational teams Guarantee greater security for matrix company. Multinational companies tend to use expatriates only in key positions. The unavailability of qualified staff in the destination country. Trustworthy profiles when major cultural differences. Need to transfer tacit knowledge which cannot be encoded and transmitted through manuals, reports… (in both directions). The company uses expatriates who know how the organization operates. These managers act as a coordination mechanism, knowing both local conditions and corporate interest. Increase the communication channels between the subsidiary and the headquarter. 28  International Project Management Unit 3. International and Multinational projects Difficulties and challenges 6. The management of international and multinational teams Higher salary costs. Additional remuneration packages to maintain the standard of living. Travel costs and families benefits. Lack of adaptation and demotivation of relocated managers. Significant personal capacity to coordinate work teams and suppliers. Relationships with both the client and the country’s authorities. Use of a language (usually English) not common or not native to some of the participants. Different management and work methodologies and processes used by different companies, subcontractors and suppliers. Varying labour laws and regulations in diverse geographical areas and differences in the political, economic, cultural and social environment. 29  International Project Management Unit 3. International and Multinational projects Managing global teams 6. The management of international and multinational teams Managing multinational teams requires leadership and management skills that ensure the coordination of global teams as well as suppliers, subcontractors and customers. LEADERSHIP SKILLS Resolution of Long distance uncertainty and risks conviction ability MANAGEMENT SKILLS Delegation Objectives Processes Team Resources Meetings Motivation Conflict management Changing the Communication Status Quo Establishing relationships with employees 30  International Project Management Unit 3. International and Multinational projects 6. The management of international and multinational teams Management competences Leadership competences Clear delegation of responsibility Establish and maintain long-distance Managing by objectives relationships with teams. Clear and defined processes Invest in building relationships with Established and regular meetings employees with the team and when necessary. Be convincing even at a long distance Promoting efficient communication Have the ability to manage conflicts Adequately resourcing Be willing to change the state of the Personal-individual motivation programme and implement organisational and process improvements. 31