Cross Cultural management

Seyla Tith,
Mba From France

Angkor Khemra University, Chhba Morn City, KSP

April 2011

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.

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

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
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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.
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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
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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
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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.

1.1. The Nature of Culture

Caracteristics of culture:
1. 2. 3. 4. 5. 6. 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.
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1.1. The Nature of Culture

1.1.1. Cultural diversity
Using graphics to depict cultural diversity: Concentric circles
The implicit assumption that guides peoples behavior
The norms and values that guide the society The explicit artifacts and products of the society

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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.
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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.
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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

a) 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

b) 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

c) 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

d) 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.

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1.2. Hofstedes Cultural Dimensions

e) 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
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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 10year 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.
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1.3. Trompenaarss Cultural Dimensions

a) 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.
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1.3. Trompenaarss Cultural Dimensions

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

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1.3. Trompenaarss Cultural Dimensions

c) 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.

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1.3. Trompenaarss Cultural Dimensions

d) 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.

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1.3. Trompenaarss Cultural Dimensions

e) 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.

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1.3. Trompenaarss Cultural Dimensions

f) 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.

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1.3. Trompenaarss Cultural Dimensions

g) Environment Inner-directed: what-happens-to-me-is-myown-doing attitude. Outer-directed: Sometimes-I-feel-that-I-donot-have-enough-control-over-thedirections-my-life-is-taking attitude. h) Cultural clusters: Anglo cluster, Asian cluster, Latin American cluster, Latin European cluster, Germanic cluster.
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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.

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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

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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.

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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.

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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.

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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.

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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.

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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.

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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

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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

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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

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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

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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

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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

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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
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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

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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

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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.

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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.

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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-bycountry basis.
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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.

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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.

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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.

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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.

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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.

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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.

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2.1. The strategy for managing across cultures

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

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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.

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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.

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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.

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2.1. The strategy for managing across cultures

5. Operate as if the world were one large market rather than a series of individual, small markets. 6. Have organization structures that are designed to handle their unique problems and challenges and thus provide them the greatest efficiency. 7. Develop a system that keeps them informed about political changes around the world and the implications of these changes on the firm.

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2.1. The strategy for managing across cultures

8. Have management teams that are international in composition and thus better able to respond to the various demands of their respective markets. 9. Allow their outside directors to play an active role in the operation of the enterprise. 10.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.

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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.

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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.
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2.2. Cross-Cultural Differences and Similarities

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

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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

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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
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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
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2.2. Cross-Cultural Differences and Similarities

Similarities across cultures Russians and Americans Koreans and Americans

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2.2. Cross-Cultural Differences and Similarities

Many differences across cultures Netherlands France Germany Britain

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2.2. Cross-Cultural Differences and Similarities

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

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