Cross Cultural Management

Frank McDonald Bradford Centre in International Business

4 October 2011 Copyright Bradford University School of Management

www.bradford.ac.uk/management

Outline of Talk
Importance of cultural differences National/sub-national and organizational culture & cultural space The changes to culture How to managing cultural differences Sources of help

Why are cultural differences important?

What you can do in one to two weeks in Europe can take months here Chris Chenug commenting on SMEs doing business in China (EIU, 2011) This is often considered to be a problem of bureaucracy and/or corruption but in essence these are often closely connected to different cultural attitudes

Obstacles to SME exporting

Source: EIU, 2011 FedEx Report on SME and emerging markets

Failure of Cross-cultural Management

Iridium a 26 country satellite venture went into liquidation in 1999 after it proved incapable of managing cross-cultural problems. o According to one person who was there, several partners refused to talk to him after the meeting. (Fitzgerald Communications. Transcript of a conference Call regarding Iridium Satellite LLC, December 12, 2000)

Measuring Cultural Differences

Hofstedes measures o Power distance index (PDI) - the extent to which the less powerful members of society accept that power is distributed unequally o Individualism (IDV)- the importance of individual (rather than collective or group) rights and achievements o Uncertainty Avoidance Index (UVI) - the degree of acceptance of uncertain outcomes in the face of changing circumstances

http://www.geert-hofstede.com/

Measuring Cultural Differences

o Masculinity (MAS) - the distribution of emotional roles - masculine values are more associated with competition and ambition, while feminine values are more associated with relationships and quality of life issues o Long Term Orientation (LTO) - degree of acceptance of long term time horizons future as opposed to present outcomes

http://www.geert-hofstede.com/

Cultural Differences

Source: http://www.geert-hofstede.com/

Example of Negotiations differences with Asian and Western parties

Goal - Thai, Chinese, and Japanese negotiators value long-term relationships. Western negotiators aim at signing a contract. Communication - Thais tend to speak softly and use almost no gestures, and prefer indirect language. Americans are direct and prefer a straightforward presentation with a minimum of game playing.
Numprasertchai & Swierczek, 2006, Journal of Intercultural Communication

Example of Negotiations differences with Asian and Western parties

Time - Americans are sensitive to time. They view it as a limited resource that must not be wasted. Japanese spend time to learn about their counterparts. Thais have a very relaxed attitude to time and scheduling Nature of agreements - Thais generally respect contracts, but personal commitment has more value. Germans are detail-oriented and prefer specific provisions.
Numprasertchai & Swierczek, 2006, Journal of Intercultural Communication

Typical Openings of a Meeting in Different Cultures (Source: Lewis 2000)

Germany

. formal introduction, sit down, begin.

Finland

formal introduction, coffee, sit down, begin.

U.S.

informal introduction, coffee, jokes, begin.

UK

formal introduction, tea & biscuits, 10 minutes small-talk, (weather, comfort, sport), begin. formal introduction, 15 minutes small-talk (politics, scandals etc.), begin.
formal introduction, prescribed seating arrangements, green tea, 15- 20 minutes small-talk (courtesies), abrupt signal of highest-ranking member, begin.

France

Japan

Spain / Italy Minuten Minutes 0

20 - 30 minutes small-talk (soccer, family), while other participants arrive, begin, when all have arrived.

10

15

20

25

30

National Culture
Culture is the collective programming of the human mind that distinguishes the members of one human group from those of another. Culture in this sense is a system of collectively held values. -- Geert Hofstede

Organizational Culture
Culture is the deeper level of basic assumptions and beliefs that are shared by members of an organization, that operate unconsciously and define in a basic taken for granted fashion an organization's view of its self and its environment. -- Edgar Schein

Sub-national Culture
Many countries have distinctive sub-national cultures eg north and south Italy; north and south India; Scotland, England & N Ireland in the UK Some of these sub-national cultures have more in common with ethnic groups in neighbouring countries than within their own country eg Kurds in Iran, Iraq and Turkey, Basques in France and Spain Countries such as Indonesia are so cultural diverse as to call into question the value of national concepts of culture

Cross-cultural Space within a Country

Space of cultural interaction for firm

National Culture

Sub-national Culture

Organizational Culture

Cross-cultural Space across countries

Space of cultural interaction

Space for firm from country A

Space for firm from country B

Incremental and Radical Change in Culture

Radical Change
Most social factors and fundamental economic & political factors change slowly

Incremental Change
Minor changes in views on social, economic and political factors

Rare for radical change but can reach a tipping point leading to crises and radical change

Near continuous minor changes to cultural which accumulate and can lead to significant changes overtime

Evolution of culture space positive outcome

Space of cultural interaction before changes to culture

Space after cultural changes take affect

Space after changes embedded into society

Evolution of culture space negative outcome

Space after cultural changes embedded into society

Space after cultural changes take affect

Space before cultural changes

No interaction in crosscultural space

No common space

Space for firm in country A

Space for firm in country B

Solutions
If high benefits from doing business in such cases can seek to move your space sufficiently to make business possible. If benefits are high but not sufficiently high to cover costs of moving your space use indirect exporting and agents If benefits are not sufficient for costs of indirect exports/agents dont do business

Interaction of cross-cultural space

Common space

Space for firm in country A

Space for firm in country B

Cross Cultural Management (CCM) of Common Space

CCM training to make key agents in your company aware of CCM fundamentals and to gain knowledge on how to do effective CCM Negotiation strategies Expanding common space to make it easier & therefore lower cost to develop business

Training in CCM lots of programmes available key issues are

Evaluate training
Evaluation of acquisition of desired skills Evaluation of training programme by attendees
CCT - Type -Length - Mode of delivery

Evaluation of enhancement of job performance

Negotiation strategies (Weiss)

Low familiarity with counterparts culture Employ agent or advisor or involve mediator Induce counterpart to follow ones own script Moderate familiarity Adapt to the counterparts script Coordinate adjustment for both parties High familiarity Embrace counterparts script Improvise or effect symphony

Expanding Common Space

Develop CCM skills Identify foreign partners with high benefits to costs of developing common space Specialise division of labour Develop CCM resources buying in expertise is often cheaper than making it

Benefits to Costs of CCM

Benefits low to costs Benefits medium to costs
Ignore Buy in CCM if potential to increase benefits to costs

Ignore/buy in CCM

Develop internal CCM if potential high benefits to costs and cheaper than buying CCM resources

Benefits high to costs

Buy in if expensive to develop internal CCM

Develop internal CCM if cheaper than buying CCM resources

Virtuous Cycles
Invest in internal CCM

Improve benefits to costs

Develop CCM skills for dealing with partners

Expand common space

Improve CCM with partners

Degenerative Cycles
Invest in internal CCM

No change or decline in benefits to costs

Develop CCM skills for dealing with partners

Expand common space

Improve CCM with partners

Sources of help
Various governmental (UKTI, Commercial sections of Embassies) A host of consultancy companies Online help some of it free From University of Bradford School of Management Placement students, MBA and Master projects, KTPs etc
19 July 2011 Copyright Bradford University School of Management