Cross Cultural management

1
Cross Cultural management
Goals and Corporate Missions

• Seyla Tith, Mba From France

Angkor Khemra University, Chhba Morn City, KSP
April 2011
2
Introduction

• Brief course description
• Emphasis on the main core elements of culture in
  general.
• Basic strategy for managing cultural differences.
• Case studies in doing business in different
  cultures and doing business in Cambodia.

3
Introduction

• Learning outcomes
• On a successful completion of this course,
  students will be able to
• Understand the importance of culture in business
  and general management.
• Use basic strategy to manage businesses in
  different countries.
• Be able to work effectively in a multi-cultural
  working environment.
• Identify Cambodian business culture.

4
Introduction

• Assessment
• Attendance and participations (10)
• Mid-term exam (20)
• Quizz and group assignment (10 to 15 pages) (20)
• Final exam (50)

5
Introduction

• Lecture schedule
• Sunday 1 The meanings and Dimensions of Culture
• Sunday 2 The meanings and Dimensions of Culture
  (2)
• Sunday 3 Managing Across Cultures
• Sunday 4 Managing Across Cultures (2)
• Sunday 5 Case studies and Cambodian
  contextualization
• Sunday 6 Group presentation

6
Introduction

• Text and supporting materials
• Doh P. Jonathan and Luthans Fred, International
  Management Culture, Strategy, and Behavior,
  McGraw-Hill, Seventh edition, 2009, USA.
• Mead Richard and Andrews G. Tim, International
  Management Culture and Beyond, Wiley, 2009,
  England.
• Scarborough Jack, The Origins of Cultural
  Differences and their Impact on Management,
  Quorum Books, 1998, USA.

7
Chapter 1 The Meanings and Dimensions of Culture

• The nature of culture
• Cultural diversity
• Values in Culture
• Hofstedes cultural dimensions
• Power distance
• Uncertainty avoidance
• Individualism
• Masculinity
• Intergrating the dimensions

8
Chapter 1 The Meanings and Dimensions of Culture

• Trompenaarss cultural dimensions
• Universalism vs. Particularism
• Individualism vs. Communitarianism
• Neutral vs. Emotional
• Specific vs. Diffuse
• Achievement vs. Ascription
• Time
• Environment
• Cultural patterns or clusters

9
1.1. The Nature of Culture

• The word  culture  comes from Latin
   cultura , which refers to cult or worship.
• In management aspect,  culture  means acquired
  knowledge that people use to interpret experience
  and generate social behavior.
• This knowledge forms values, creates attitudes,
  and influences behavior.

10
1.1. The Nature of Culture

• Caracteristics of culture
• Learned
• Shared
• Transgenerational
• Symbolic
• Patterned
• Adaptive
• If international managers do not know something
  about cultures of the countries they deal with,
  the results can be quite disastrous. For example
  Asians name.

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1.1. The Nature of Culture

• 1.1.1. Cultural diversity
• Most importantly, culture affects how people
  think and behave.
• Therefore, cultural differences have impacts on
  international mamangement.
• An example of handshake
• American (firm), Asian (gentle), British (soft),
  French (light and quick), Latin American
  (moderate grasp)
• Priorities of cultural values are not the same in
  different countries or groups of countries.

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1.1. The Nature of Culture

• 1.1.1. Cultural diversity
• Basic believes and behaviors that can directly
  affect management approaches
• Centralized vs. Decentralized decision making
• Safety vs. Risk
• Individual vs. Group rewards
• Informal vs. Formal procedures
• High vs. Low organizational loyalty
• Cooperation vs. Competition
• Short-term vs. Long-term horizons
• Stability vs. innovation

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1.1. The Nature of Culture

• 1.1.1. Cultural diversity
• Case business customs in South Africa
• Arrange a meeting before discussing business over
  the phone.
• Appointments should be made as far in advance as
  possible.
• When introduced, maintain eye contact, shake
  hands, and provide business cards to everyone.
• Women are highly respected.
• Make business plans clear.
• Patience between proposition and answer.
• Keep presentation short and concise.

14
1.1. The Nature of Culture

• 1.1.1. Cultural diversity
• Using graphics to depict cultural diversity
• Concentric circles

15
1.1. The Nature of Culture

• 1.1.1. Cultural diversity
• Using graphics to depict cultural diversity
• Normal distribution comparing cultures as
  overlapping normal distribution and stereotyping
  from the cultural extremes

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1.1. The Nature of Culture

• 1.1.1. Cultural diversity
• Using graphics to depict cultural diversity
• The cultural differences are depicted in the
  first graphic. The two curves have only limited
  overlap.
• In the second graphic, the tail ends of the two
  curves identify the stereotypical views held by
  members of one culture about the other.
• This stereotype is often exaggerated and helping
  reinforce the differences between the two
  cultures, thus reducing the likelihood of
  achieving cooperation and communication.
• This is one reason why an understanding of
  national culture is so important in the study of
  cross-cultural management.

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1.1. The Nature of Culture

• 1.1.2. Values in culture
• Values are basic convictions that people have
  regarding what is right and wrong, good and bad,
  important and unimportant.
• These values are learned from the culture in
  which the individual is reared, and they help
  direct the persons behavior.
• Differences in cultural values often result in
  varying management practices.

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1.1. The Nature of Culture

• 1.1.2. Values in culture
• Value differences and similarities across
  cultures
• There are both differences and similarities
  between the work values and managerial values of
  different cultural groups.
• Personal-value questionnaire (PVQ) 66 concepts
  related to business goals, personal goals, ideas
  associated with people and groups of people, and
  ideas about general topics, such as ideology and
  philosophy.

19
1.1. The Nature of Culture

• 1.1.2. Values in culture
• Value differences and similarities across
  cultures
• The result of the survey found out that Japanese
  managers placed high value on respect to
  superiors and company commitment. Korean managers
  placed high value on personal forcefulness and
  low value on recognition of others. Indian
  managers place high value on the nonaggressive
  pursuit of objectives.

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1.1. The Nature of Culture

• 1.1.2. Values in culture
• Value differences and similarities across
  cultures
• However, when they examined the managerial values
  among the U.S., Japanese, Australian, and Indian
  managers, they found that more successful
  managers appear to favor pragmatic, dynamic,
  achievement-oriented values, while less
  successful managers prefer more static and
  passive values.

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1.1. The Nature of Culture

• 1.1.2. Values in culture
• Values in transition
• Do value change over time?
• Normally, personal value systems are relatively
  stable and do not change rapidly.
• However, changes are taking place in managerial
  values as a result of both culture and
  technology.
• Example of Japanese managers who work in Japanese
  firms based in the United States.

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1.1. The Nature of Culture

• 1.1.2. Values in culture
• Values in transition (Example of stateside Jap)
• Lifetime employment
• Formal authority
• Group orientation, cooperation, conformity, and
  compromise
• Seniority
• Paternalism
• Era of personal responsibility at home (in
  Japan) dynamism and revitalization of the
  society.

23
1.1. The Nature of Culture

• 1.1.2. Values in culture
• Values in transition What bout Cambodia? Is our
  value changing? If yes, to which direction?
• A recall on evolutionary theory of Charles
  Darwin, a biological theory which is highly
  applicable to human society.
• Example of your real life problems and solutions.

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1.2. Hofstedes Cultural Dimensions

• Geert Hofstede is a Dutch researcher who tried to
  indentify why people from various cultures behave
  as they do.
• He introduced 4 main dimensions of any culture
  into his research.
• 116 000 respondents from over 70 different
  countries around the world. (The largest
  organizationally based study ever conducted.)

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1.2. Hofstedes Cultural Dimensions

• Power distance
• The extent to which less powerful members of
  institutions and organizations accept that power
  is distributed unequally.
• Countries in which people blindly obey the
  orders of their superiors have high power
  distance. This should be observed at lower levels
  or even upper levels.

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1.2. Hofstedes Cultural Dimensions

• Uncertainty avoidance
• The extent to which people feel threatened by
  ambiguous situations and have created beliefs and
  institutions that try to avoid these.
• Countries populated with people who do not like
  uncertainty tend to have a high need for security
  and a strong belief in experts and their
  knowledge examples include Germany, Japan, and
  Spain.

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1.2. Hofstedes Cultural Dimensions

• Individualism
• The tendency of people to look after themselves
  and their immediate family only.
• Collectivism (in contrast to individualism) is
  the tendency of people to belong to groups or
  collectives and to look after each other in
  exchange for loyalty.
• Hoftstedes findings show that the wealthy
  countries have higher individualism scores and
  poorer countries higher collectivism scores. (GNP
  based wealth)

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1.2. Hofstedes Cultural Dimensions

• Masculinity
• A cultural characteristic in which the dominant
  values in society are success, money, and things.
• In contrast, femininity is the term used by
  Hofstede to describe a situation in which the
  dominant values in society are caring for others
  and the quality of life.

29
1.2. Hofstedes Cultural Dimensions

• Integrating the dimensions
• A description of the four dimensions of culture
  is useful in helping to explain the differences
  between various countries.
• Hofstedes research has extended beyond this
  focus and shown how countries can be described in
  terms of pairs of dimensions.
• Pairings and clusters can provide useful
  summaries for international environment.
• Example of pairing between PDI and UAI

30
1.3. Trompenaarss Cultural Dimensions

• Another Dutch researcher who also gains a lot of
  attention on his research is Fons Trompenaars.
• He has conducted a research over a 10-year
  period. Over 15 000 questionnaires were
  administered with managers from 28 countries.
• Trompenaars derived five relationship
  orientations that address the ways in which
  people deal with each other. He also include
  attitudes towards time and environment.

31
1.3. Trompenaarss Cultural Dimensions

• Universalism vs. Particularism
• Universalism is the belief that ideas and
  practices can be applied everywhere in the world
  without modification.
• Particularism is the belief that circumstances
  dictate how ideas and practices should be applied
  and that something cannot be done the same
  everywhere.

32
1.3. Trompenaarss Cultural Dimensions

• Individualism vs. Communitarianism
• Communitarianism refers to people regarding
  themselves as part of a group.
• Individualism refers to people regarding
  themselves as individuals.

33
1.3. Trompenaarss Cultural Dimensions

• Neutral vs. Emotional
• Neutral culture is a culture in which emotions
  are held in check.
• Emotional culture is a culture in which emotions
  are expressed openly and naturally.

34
1.3. Trompenaarss Cultural Dimensions

• Specific vs. Diffuse
• A specific culture is a culture in which
  individuals have a large public space they
  readily share with others and a small private
  space they guard closely and share with only
  close friends and associates.
• A diffuse culture is one in which public space
  and private space are similar in size and
  individuals guard their public space carefully,
  because entry into public space affords entry
  into private space as well.

35
1.3. Trompenaarss Cultural Dimensions

• Achievement vs. Ascription
• Achievement culture is a culture in which people
  are accorded status based on how well they
  perform their functions.
• Ascription culture is a culture in which status
  is attributed based on who or what a person is.

36
1.3. Trompenaarss Cultural Dimensions

• Time
• Sequential people tend to do only one activity
  at a time, keep appointments strictly, and show a
  strong preference for following plans as they are
  laid out and not deviating from them.
• Synchronous people tend to do more than one
  activity at a time, appointments are approximate
  and may be changed at a moments notice, and
  schedules generally are subordinate to
  relationships.

37
1.3. Trompenaarss Cultural Dimensions

• Environment
• Inner-directed what-happens-to-me-is-my-
  own-doing attitude.
• Outer-directed Sometimes-I-feel-that-I-do-not-hav
  e-enough-control-over-the-directions-my-life-is-ta
  king attitude.
• Cultural clusters Anglo cluster, Asian cluster,
  Latin American cluster, Latin European cluster,
  Germanic cluster.

38
Chapter 2 Managing Across Cultures

• The main objectives of the chapter is to
• Examine the strategic dispositions that
  characterize responses to different cultures.
• Discuss cross-cultural differences and
  similarities.

39
Chapter 2 Managing Across Cultures

• The strategy for Managing Across Culgture
• Strategic predispositions
• Meeting the challenge
• Cross-cultural differences and similarities
• Parochialism and simplification
• Similarities across cultures

40
2.1. The strategy for managing across cultures

• As MNCs become more transnational, their
  strategies must address the cultural similarities
  and differences in their varied markets.
• A good example of Renault, a French auto giant.

41
2.1. The strategy for managing across cultures

• Strategic predispositions
• Most MNCs have a cultural strategic
  predisposition toward doing things in a
  particular way.
• Four distinct predispositions have been
  identified ethnocentric, polycentric,
  regiocentric and geocentric.

42
2.1. The strategy for managing across cultures

• Ethnocentric
• Ethnocentric predisposition is a nationalistic
  philosophy of management whereby the values and
  interests of the parent company guide strategic
  decisions.

43
2.1. The strategy for managing across cultures

• Polycentric
• Polycentric predisposition is a philosophy of
  management whereby strategic decisions are
  tailored to suit the cultures of the countries
  where the MNC operates.

44
2.1. The strategy for managing across cultures

• Regiocentric
• Regiocentric predisposition is a philosophy of
  management whereby the firm tries to blend its
  own interests with those of its subsidiaries on a
  regional basis.

45
2.1. The strategy for managing across cultures

• Geocentric
• Geocentric predisposition is a philosophy of
  management whereby the company tries to integrate
  a global systems approach to decision making.

46
2.1. The strategy for managing across cultures

• Orientation of an MNC under different profiles
• Mission
• Ethnocentric Profitability
• Polycentric Public acceptance
• Regiocentric Both profitability and public
  acceptance
• Geocentric Both profitability and public
  acceptance

47
2.1. The strategy for managing across cultures

• Orientation of an MNC under different profiles
• Governance
• Ethnocentric Top-down
• Polycentric Bottom-up
• Regiocentric Mutually negociated between region
  and its subsidiaries
• Geocentric Mutually negociated at all levels of
  the corporation

48
2.1. The strategy for managing across cultures

• Orientation of an MNC under different profiles
• Strategy
• Ethnocentric Global integration
• Polycentric National responsiveness
• Regiocentric Regional integration and national
  responsiveness
• Geocentric Glogal integration and national
  responsiveness

49
2.1. The strategy for managing across cultures

• Orientation of an MNC under different profiles
• Structure
• Ethnocentric Hierarchical product divisions
• Polycentric Hierarchical area divisions, with
  autonomous national units
• Regiocentric Product and regional organization
  tied through a matrix
• Geocentric A network of organizations

50
2.1. The strategy for managing across cultures

• Orientation of an MNC under different profiles
• Culture
• Ethnocentric Home country
• Polycentric Host country
• Regiocentric Regional
• Geocentric Global

51
2.1. The strategy for managing across cultures

• Orientation of an MNC under different profiles
• Technology
• Ethnocentric Mass production
• Polycentric Batch production
• Regiocentric Flexible manufacturing
• Geocentric Flexible manufacturing

52
2.1. The strategy for managing across cultures

• Orientation of an MNC under different profiles
• Marketing
• Ethnocentric Product development determined
  primarily by the needs of home country customers
• Polycentric Local product development based on
  local needs
• Regiocentric Standardize within region, but not
  across regions
• Geocentric Global products with local variations

53
2.1. The strategy for managing across cultures

• Orientation of an MNC under different profiles
• Finance
• Ethnocentric Repatriation of profits to home
  country
• Polycentric Retention of profits in host country
• Regiocentric Redistribution with region
• Geocentric Redistribution globally

54
2.1. The strategy for managing across cultures

• Orientation of an MNC under different profiles
• Personnel practices
• Ethnocentric People of home country developed
  for key positions everywhere in the world
• Polycentric People of local nationality
  developed for key positions in their own country
• Regiocentric Regional people developed for key
  positions anywhere in the region
• Geocentric Best people everywhere in the world
  developed for key positions everywhere in the
  world

55
2.1. The strategy for managing across cultures

• Meeting the challenge
• Despite the need for and tendency of MNCs to
  address regional differentiation issues, many
  MNCs are committed to a globalization imperative.
• Globalization imperative is a belief that one
  worldwide approach to doing business is the key
  to both efficiency and effectiveness.

56
2.1. The strategy for managing across cultures

• Meeting the challenge
• One study, involving extensive examination of 115
  medium and large MNCs and 103 affiliated
  subsidiaries in the United States, Canada,
  France, Germany, Japan, and the United Kingdom,
  found an overwhelming majority used the same
  strategies abroad as at home.

57
2.1. The strategy for managing across cultures

• Meeting the challenge
• Despite these tendencies to use home strategies,
  effective MNCs are continuing their efforts to
  address local needs.
• A number of factors are helping facilitate this
  need to develop unique strategies for different
  cultures, including
• The diversity of worldwide industry standards
  such as those in broadcasting, where television
  sets must be manufactured on a country-by-country
  basis.

58
2.1. The strategy for managing across cultures

• A number of factors are helping facilitate this
  need to develop unique strategies for different
  cultures, including
• A continual demand by local customers for
  differentiated products, as in the case of
  consumer goods that must meet local tastes.
• The importance of being an insider, as in the
  case of customers who prefer to buy local
  product.
• The difficulty of managing global organizations,
  as in the case of some local subsidiaries that
  want more decentralization and others that want
  less.

59
2.1. The strategy for managing across cultures

• A number of factors are helping facilitate this
  need to develop unique strategies for different
  cultures, including
• The need to allow subsidiaries to use their own
  abilities and talents and not be restrained by
  headquarters, as in the case of local units that
  know how to customize products for their market
  and generate high returns on investment with
  limited production output.

60
2.1. The strategy for managing across cultures

• By responding to cultural needs of local
  operations and customers, MNCs find that regional
  strategies can be used effectively in capturing
  and maintaining worldwide market niches.

61
2.1. The strategy for managing across cultures

• Example of the cosmetics marketing which varies
  greatly in consumer use.
• Germans want advertising that is factual and
  rational they fear being manipulated by the
  hidden persuader. The typical German spot
  features the standard family of two parents, two
  children, and grandmother.
• The French avoid reasoning or logic. Their
  advertising is predominantly emotional, dramatic,
  and symbolic. Spots are viewed as cultural events
  or art for the sake of money and are reviewed as
  if they were literature or films.

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2.1. The strategy for managing across cultures

• Example of the cosmetics marketing which varies
  greatly in consumer use.
• The British value laughter above all else. The
  typical broad, self-depreciating British
  commercial amuses by mocking both the advertiser
  and consumer.

63
2.1. The strategy for managing across cultures

• In some cases, however, both the product and the
  marketing message are similar worldwide.
• This is particularly true for high-end products,
  where the lifestyles and expectations of the
  market niche are similar regardless of the
  country.
• Example of Heineken beer, Hummer car, and the
  Financial Times. Regardless of geographic locale,
  these products appeal to all the consumer niches
  that are homogeneous.

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2.1. The strategy for managing across cultures

• The same is true at the lower end of the market
  for goods that are impulse purchases, novel
  products, or fast food, such as Coca-Colas soft
  drinks, pop music, ice-cream bars, etc.

65
2.1. The strategy for managing across cultures

• However, it is most necessary to modify products
  as well as the market approach for the regional
  or local market.
• One analysis noted that the more marketers
  understand about the way in which a particular
  culture tends to view emotion, enjoyment,
  friendship, humor, rules, status, and other
  culturally based behaviors, the more control they
  have over creating marketing messages that will
  be interpreted in the desired way.

66
2.1. The strategy for managing across cultures

• The need to adjust global strategies for regional
  markets presents three major challenges for most
  MNCs.

67
2.1. The strategy for managing across cultures

• First, the MNCs must stay abreast of local market
  conditions and sidestep the temptation to assume
  that all markets are basically the same.
• Second, the MNCs must know the strengths and
  weaknesses of its subsidiaries so that it can
  provide these units with the assistance needed in
  addressing local demands.
• Third, the MNCs must give the subsidiary more
  autonomy so that it can respond to changes in
  local demands.

68
2.1. The strategy for managing across cultures

• These are the overall findings of a report that
  looked into the development of customized
  executive education programs.
• Specifically, there are 10 factors or guidelines
  that successful global firms seem to employ.

69
2.1. The strategy for managing across cultures

1. See themselves as multinational enterprises and
   are led by a management team that is comfortable
   in the world arena.
2. Develop integrated and innovative strategies that
   make it difficult and costly for other firms to
   compete.
3. Aggressively and effectively implement their
   worldwide strategy and back it with large
   investments.
4. Understand that innovation no longer is confined
   in the US and develop systems for tapping
   innovation abroad.

70
2.1. The strategy for managing across cultures

1. Operate as if the world were one large market
   rather than a series of individual, small
   markets.
2. Have organization structures that are designed to
   handle their unique problems and challenges and
   thus provide them the greatest efficiency.
3. Develop a system that keeps them informed about
   political changes around the world and the
   implications of these changes on the firm.

71
2.1. The strategy for managing across cultures

1. Have management teams that are international in
   composition and thus better able to respond to
   the various demands of their respective markets.
2. Allow their outside directors to play an active
   role in the operation of the enterprise.
3. Are well managed and tend to follow such
   important guidelines as sticking close to the
   customer, have lean organization structures, and
   encouraging autonomy and entrepreneurial activity
   among the personnel.

72
2.2. Cross-Cultural Differences and Similarities

• The way in which MNCs manage their home
  businesses often should be different from the way
  they manage their overseas operations.
• Because of this cultural difference, MNCs are
  endangered for drifting toward parochialism and
  simplification, the two things that MNCs must
  avoid.

73
2.2. Cross-Cultural Differences and Similarities

• Parochialism is the tendency to view the world
  through ones own eyes and perspectives.
• Simplification is the process of exhibiting the
  same orientation toward different cultural
  groups.
• Example of a member of the purchasing department
  of a large European oil company who was
  negotiating an order with a Korean supplier.

74
2.2. Cross-Cultural Differences and Similarities

• To avoid the simplification, we must understand
  the range of variations in cultural orientations.

75
2.2. Cross-Cultural Differences and Similarities

• What is the nature of people?
• Good (changeable/unchangeable)
• A mixture of good and evil
• Evil (changeable/unchangeable)
• What is the persons relationship to nature?
• Dominant
• In harmony with nature
• Subjugation

76
2.2. Cross-Cultural Differences and Similarities

• What is the persons relationship to other
  people?
• Lineal (hierarchic)
• Collateral (collectivist)
• Individualist
• What is the modality of human activity?
• Doing
• Being and becoming
• Being

77
2.2. Cross-Cultural Differences and Similarities

• What is the temporal focus of human activity?
• Future
• Present
• Past
• What is the conception of space?
• Private
• Mixed
• Public

78
2.2. Cross-Cultural Differences and Similarities

• Similarities across cultures
• Russians and Americans
• Koreans and Americans

79
2.2. Cross-Cultural Differences and Similarities

• Many differences across cultures
• Netherlands
• France
• Germany
• Britain

80
2.2. Cross-Cultural Differences and Similarities

• HR management aspect
• A partially completed contingency Matrix for
  International Human Resource Management
• Germany
• Mexico
• Japan
• China