IMChap005

Chapter 5: Managing Across Cultures

Learning Objectives and Chapter Summary

1.
EXAMINE the strategic dispositions that characterize responses to different cultures.

One major problem facing MNCs is that they sometimes attempt to manage across cultures in ways similar to those of their home country. MNC dispositions toward managing across cultures can be characterized as (1) ethnocentric, (2) polycentric, (3) regiocentric, and (4) geocentric. These different approaches shape how companies adapt and adjust to cultural pressures around the world.

2.
DISCUSS cross-cultural differences and similarities.

One major challenge when dealing with cross-cultural problems is that of overcoming parochialism and simplification. Parochialism is the tendency to view the world through one’s own eyes and perspectives. Simplification is the process of exhibiting the same orientation toward different cultural groups. Another problem is that of doing things the same way in foreign markets as they are done in domestic markets. Research shows that in some cases, this approach can be effective; however, effective cross-cultural management more commonly requires approaches different than those used at home. One area where this is particularly evident is human resource management. Recruitment, selection, training, and compensation often are carried out in different ways in different countries, and what works in the United States may have limited value in other countries and geographic regions.

3.
REVIEW cultural differences in select countries and regions, and note some of the important strategic guidelines for doing business in each.

Doing business in various parts of the world requires the recognition and understanding of cultural differences. Some of these differences revolve around the importance the society assigns to time, status, control of decision making, personal accomplishment, and work itself. These types of cultural differences help to explain why effective managers in China or Russia often are quite different from those in France, and why a successful style in the United States will not be ideal in Arab countries.

The World of International Management: Apple vs. Samsung: Comparing Corporate Culture

1.
Summary: This vignette discusses two smartphone companies with a combined 50 percent share of the market. The two companies have very different cultures and differ greatly in approach to innovation, supply chain, product lines, and ideas about intellectual property rights.
2.
Suggested Class Discussion:

1. Discuss similarities and differences across cultures regarding the individual versus the collective for Apple and Samsung.

2. Discuss the differences in the approach to the supply chain and manufacturing processes at Samsung and Apple.

3. Discuss the product focus at Apple and how it differs from that at Samsung.

4. Discuss the results of cultural differences between Apple and Samsung in regarding intellectual property and the resulting legal conflicts for each.

5. Analyze which strategy is working and why.

3.
Related Internet Sites:

Apple: {http://www.apple.com/}.
Samsung: {http://www.samsung.com/}

Chapter Outline with Lecture Notes and Teaching Tips

The Strategy for Managing Across Cultures

1) As MNCs become more transnational, their strategies must address the cultural similarities and differences in their varied markets.
a) Renault’s strategic decisions include buying controlling stakes in Nissan (Japan, Samsung (South Korea), and Dacia (Romania) and building factories in Brazil and Russia.
b) Renault’s quest for greater global market share continues to progress. The company’s recent experiences underscore the need to carefully consider different national cultures and practices when developing international strategies.

Strategic Predispositions

1) There are four distinct strategic predispositions.
a) Ethnocentric predisposition―a nationalistic philosophy of management whereby the values and interests of the parent company guide strategic decisions.
b) Polycentric predisposition―a philosophy of management whereby strategic decisions are tailored to suit the cultures of the countries where the MNC operates.
c) Regiocentric predisposition―a philosophy of management whereby the firm tries to blend its own interests with those of its subsidiaries on a regional basis.
d) Geocentric predisposition―a philosophy of management whereby the company tries to integrate a global systems approach to decision making.

Teaching Tip: There are a number of consulting firms that help firms “go global.” Your students might be interested in knowing a little bit about these companies.

Teaching Tip: There are many resources available on the Internet to help businesses become acquainted with foreign cultures, tastes, and customs. An example is the "Travlang Site," which contains a wide variety of information on cultural and language issues. Some features of interest: international calendars of holidays, online translating dictionaries, common phrases for business travelers, currency exchange rates, and hotel directories. The site is available at {http://www.travlang.com/}.

Meeting the Challenge

1) Despite the need for and tendency of MNCs to address regional differentiation issues, many MNCs are committed to a globalization imperative, which is a belief that one worldwide approach to doing business is the key to both efficiency and effectiveness.
a) Factors facilitating the need to develop unique strategies for different cultures:
i) The diversity of worldwide industry standards such as those in broadcasting, where television sets must be manufactured on a country-by-country basis. ii) A continued demand by local customers for differentiated products, as in the case of customer goods that must meet local tastes. iii) The importance of being an insider, as in the case of consumers who prefer to "buy local." iv) The difficulty of managing global organizations, as in the case of some local subsidiaries that want more decentralization and others that want less.
v) 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.

2) Responding to the cultural needs of local operations and customers, MNCs find that regional strategies can be used effectively in capturing and maintaining worldwide market niches.

3) Globalization versus national responsiveness varies greatly from culture to culture. The need to adjust global strategies for regional markets presents three major challenges for most MNCs.
a) Stay abreast of local market conditions and sidestep the temptation to assume that all markets are basically the same
b) Know the strengths and weaknesses of its subsidiaries so that it can provide these units with the assistance needed in addressing local demands
c) Give the subsidiary more autonomy so that it can respond to changes in local demands

Cross-Cultural Differences and Similarities

1) As shown in Chapter 4, culture can be similar or quite different across countries. The challenge for MNCs is to recognize and effectively manage these similarities and differences.

Parochialism and Simplification

1) Parochialism and Simplification
a) Parochialism―the tendency to view the world through one's own eyes and perspectives. This can be a strong temptation for many international managers, who often come from advanced economies and believe that their start-of-the-art knowledge is more than adequate to handle the challenges of doing business in less developed countries. In addition, many of these managers have a parochial point of view fostered by their background. The implications of the different perspectives on technology, labor, and production need to be fully grasped by all parties.
b) Simplification―the process of exhibiting the same orientation toward different cultural groups. For example, the way in which a U.S. manager interacts with a British manager is the same way in which he or she behaves when doing business with an Asian executive.
c) Understanding the culture in which they do business can make international managers more effective. Most international managers are not culturally knowledgeable, so they often misinterpret what is happening.
d) Malaysia, for example, has a high-context culture:
Relatively long-lasting relationships, deep personal involvement
Implicit communication
Those in authority feel personally responsible for actions of subordinates
Spoken agreements over written
Distinguishable insiders and outsiders; typically no move to enter inner group
e) U.S. is a low-context culture:
Relatively short relationships; deep personal involvement not valued greatly
Explicit communication
Diffused authority; personal responsibility hard to pin down
Written agreements preferred
Difficult to distinguish insiders and outsiders; encouragement to join inner circle
f) Not everything is totally different. Some approaches that work at home also work well in other cultural settings.

Similarities across Cultures

1) When internationalization began to take off in the 1970s, many companies quickly admitted that it would not be possible to do business in the same way in every corner of the globe. There was a secret hope, however, that many of the procedures and strategies that worked so well at home could be adopted overseas without modification. This has proved to be a false hope. At the same time, some similarities across cultures have been uncovered by researchers.
a) Luthans and associates found that Russian managers carried out traditional management, communication, human resources, and networking activities and that networking increased opportunities for promotion and communication was a predictor of performance.
b) Another study found that social rewards and positive feedback contributed to quality; Russian supervisors were also taught to give corrective feedback to reduce wrong behaviors.
c) A study in Korea found other similarities with U.S. firms: included (1) as organizational size increased, commitment declined; (2) as structure became more employee-focused, commitment increased; and (3) the more positive the perceptions of organizational climate, the greater the employee commitment.

Many Differences across Cultures

1) Despite similarities between cultures in some studies, far more differences than similarities have been found.

Teaching Tip: For information about foreign governments and their approaches to international trade, visit the Electronic Embassy at {http://www.embassy.org}. This site provides links to all of the foreign embassies located in Washington D.C.

2) Human resource management (HRM) utilized in the selection of employees can further form the culture that international managers will oversee. Understanding the HRM strategies before becoming a manager in the industry can aid in effective performance.

3) Evaluations can be quite different from country to country because what iss regarded as the most important criterion in one subsidiary might be ranked much lower on the evaluation list of another subsidiary. Other HRM differences can be found in areas such as wages, compensation, pay equity, and maternity leave.

4) It is possible to link cultural clusters and compensation strategies (see Table 5–3). Figure 5–2 shows how specific HRM areas can be analyzed contingently on a country-by-country basis.

5) Managing across cultures re­quires careful understanding of the local environment. Cultural differences must be addressed.

Cultural Differences in Selected Countries and Regions

1) Certain regions of the world have similar cultures. Since there is an increasing frequency of managers and executives from one part of the world assuming leadership roles in another, it is important for managers today to learn about their business and the emerging markets environment through formal classes, mentoring, and experience.

Doing Business in China

1) The People’s Republic of China (PRC or China) is rapidly trying to close the gap between itself and economically advanced nations and to establish itself as a power in the world economy. It is a member of the WTO, and is a major trading partner of the United States.

2) Despite its global presence and economic potential, many U.S. and European multinationals have found that doing business in the PRC can be a long, grueling process. Very few outside firms have yet to make a profit in China. One primary reason is that Western-based MNCs do not appreciate the important role and impact of Chinese culture.
a) Patience is critically important.
b) Guanxi―In China, it means good connections, networking.
c) It is important to be a good listener.

3) The Chinese take pride in being members of a group: avoid using self-centered conversation. They avoid open displays of affection and do not appreciate loud, boisterous behavior.

4) Guidelines:
a) Values and principles above money and expediency
b) Business meetings typically start with pleasantries.
c) Chinese host will indicate when a meeting is ready to begin and end.
d) Chinese tend to stick with their decisions.
e) In negotiations, reciprocity is important.
f) Chinese use intermediaries to avoid losing face.
g) Do not to show excessive emotion.
h) Negotiations involve investing in a long-term relationship.

Doing Business in Russia

1) The Russian economy has experienced severe problems, and the risks of doing business there cannot be overstated. At the same time, however, by following certain guidelines, MNCs can begin to tap the potential opportunities.

2) Guidelines:
a) Build personal relationships with partners.
b) Use local consultants.
c) Consider business ethics.
d) Be patient.
e) Stress exclusivity.
f) Personal relations are important.
g) Research the company.
h) Stress mutual gain.
i) Clarify terminology.
j) Be careful about compromising or settling things too quickly.
k) Written contracts are not as binding as to Westerners.

Doing Business in India

1) In recent years, India has begun to attract the attention of large MNCs. Unsaturated consumer markets, coupled with cheap labor and production locations, have helped make India a desirable market for global firms.

2) Be aware of food customs, proper attire. Other guidelines:
a) Be on time for meetings.
b) Do not ask personal questions.
c) Use titles.
d) Avoid public displays of affection.
e) Beckon with palm down.
f) Use right hand to eat and accept things; left is considered unclean.
g) Greet with Namaste gesture.
h) Bargaining is common.

Doing Business in France

1) Many in the United States believe that it is more difficult to get along with the French than with other Europeans. This feeling probably reflects the French culture, which is markedly different from that in the United States.

2) The French are status-conscious, friendly, humorous, and sardonic (sarcastic). They determine trustworthiness based on firsthand evaluation; they are not motivated by competition or the desire to emulate fellow workers. Organizations are highly centralized and have rigid structures.

3) Guidelines
a) Quick, light handshake
b) Be on time.
c) Avoid personal questions during meals.
d) Important to be neat and cultured.
e) Avoid early friendliness, casualness.
f) French wait to reveal their hand.
g) They don’t like to be rushed into decisions.
h) They are precise and logical.

Teaching Tip: This is a website sponsored by the European American Chamber of Commerce (French). The site provides information about the legal, financial, and human resource implications of doing business in France. The site is available at {http://www.eaccfrance.com/}.

Doing Business in Brazil

1) Brazil is considered a Latin American country, but it is important to highlight this region since some characteristics make it markedly different to manage as compared to other Latin American countries.

2) Guidelines:
a) Physical contact is an acceptable form of communication.
b) Face-to-face preferred; time flexible
c) They do not trust; strong relationship needed
d) Appearance is important; dress well
e) Patience
f) Be prepared and consistent.

Doing Business in Arab Countries

1) The intense media attention given to the Iraq War, terrorist actions, and conflicts in the Middle East have pointed out that Arab cultures are distinctly different from Anglo cultures. Americans often find it extremely hard to do business in Arab countries, and a number of Arab cultural characteristics can be cited for this difficulty.

2) Arab cultural belief that generally holds is that destiny depends more on the will of a supreme being than on the behavior of individuals. A higher power dictates the outcome of important events, so individual action is of little consequence. This thinking affects not only Arabs’ aspirations but also their motivation. An appearance of helplessness can be used as a source of power.

3) Arabs often act based on emotion rather than logic. There are often interruptions in meetings. Status and rank are important.

4) Other guidelines:
a) Never display feelings of superiority.
b) Do not take credit for joint efforts.
c) Go through administrative channels.
d) Connections are important.
e) Patience is critical.
f) Important decisions are made in person.

Teaching Tip: The website entitled "ArabNet" contains information covering culture, government, history, geography, tourism, and business related issues for over 20 Arab countries. The site is available at {http://.arabnet.me/}.

The World of International Management - Revisited

Questions & Suggested Answers

1.
Which aspects of Apple's culture have helped it succeed in its global growth and which may have impeded it?

Answer: Apple prides itself on groundbreaking innovation and individual achievement and excellence. Apple outsources the entirety of its production. On the other hand, the company must be sensitive to the cultures of countries where it manufactures. It must also be able to respond to critics of outsourcing and of bad working conditions in their factories offshore.

2.
Which aspects of Samsung's culture have helped it succeed in its global growth and which may have impeded it?

Answer: At Samsung, the emphasis is on extending innovations and applications and on group achievement and collective responsibility, all geared toward company-wide success. Samsung manufactures more than 90 percent of Its products in company-owned factories. On the other hand, Samsung appears to “copy” Apple and other innovators.

3.
What might Apple learn from Samsung and Samsung learn from Apple?

Answer: Apple could learn the value of more control over production sites, while Samsung could learn to be innovative.

4.
How would you characterize Apple and Samsung in terms of the four basic strategic predispositions?

The four basic strategic predispositions are ethnocentric, polycentric, regiocentric, and geocentric. Apple appears to be geocentric, while Samsung appears to be ethnocentric.

Key Terms

Ethnocentric predisposition―A nationalistic philosophy of management whereby the values and interests of the parent company guide strategic decisions
Geocentric predisposition―A philosophy of management whereby the company tries to integrate a global systems approach to decision making
Globalization imperative―A belief that one worldwide approach to doing business is the key to both efficiency and effectiveness
Guanxi―Chinese for “good connections”
Parochialism―The tendency to view the world through one’s own eyes and perspectives
Polycentric predisposition―A philosophy of management whereby strategic decisions are tailored to suit the cultures of the countries where the MNC operates
Regiocentric predisposition―A philosophy of management whereby the firm tries to blend its own interests with those of its subsidiaries on a regional basis
Simplification―The process of exhibiting the same orientation toward different cultural groups

Review and Discussion Questions

1.
Define the four basic predispositions MNCs have toward their international operations.

Answer:
1) Ethnocentric Predisposition―A nationalistic philosophy of management whereby the values and interests of the parent company guide the strategic decisions.
2) Polycentric Predisposition―A philosophy of management whereby strategic decisions are tailored to suit the cultures of the countries where the MNC operates.
3) Regiocentric Predisposition―A philosophy of management whereby the firm tries to blend its own interests with those of its subsidiaries on a regional basis.
4) Geocentric Predisposition―A philosophy of management whereby the company tries to integrate a global systems approach to decision-making.

2.
If a locally based manufacturing firm with sales of $350 million decided to enter the EU market by setting up operations in France, which orientation would be the most effective: ethnocentric, polycentric, regiocentric, or geocentric? Why? Explain your choice.

Answer: The effectiveness of the orientation used will depend on a number of factors. For example, if the firm uses a flexible manufacturing system, a regiocentric or geocentric orientation would be appropriate, whereas a batch production system would warrant a polycentric orientation and a mass production system would warrant an ethnocentric orientation.

An ethnocentric predisposition is one in which the values and interests of the parent company guide the strategic decisions. For example, this MNC's orientation would be toward top down authority relationships, product development determined by the needs of the home country, and personnel of the home country developed for key positions worldwide.

A polycentric predisposition results in strategic decisions that are tailored to suit the cultures of the countries where the MNC operates. For example, there would be an emphasis on public acceptance, more bottom up authority relationships, local product development based on local needs, retention of profits in the host country, and people of the local country would be developed for key positions in their own country.

A regiocentric predisposition results in the MNC trying to blend its own interests with those of its subsidiaries on a regional basis. Governance is often mutually negotiated between the region and its subsidiaries. Both profitability and public acceptance are important, and profits are often redistributed within the region. Further, regional people are developed for key positions anywhere in the region.

A geocentric predisposition results in the company trying to integrate a global systems approach to decision-making. This requires a global integrative and national responsiveness strategy. A network of organizations would exist, including some stakeholders and some competitor organizations. The product orientation would be global with some local variations, and profits would be redistributed globally. The best people worldwide would be developed for key positions everywhere in the world.

The firm's strategy is another important factor. Is the firm concerned with global integration, national responsiveness, regional integration, or a combination of the three? The existing structure of the firm, and the firm's willingness to deviate from its existing structure will be another important factor. If the firm is set on a hierarchial product division structure, it will tend to adopt an ethnocentric orientation. If the firm is currently using, or is open to the possibility of a matrix structure, a regiocentric structure may be more appropriate. These factors, and a number of others which make up the profile of the firm, will ultimately determine which orientation is likely to be most effective.

3.
In what way are parochialism and simplification barriers to effective cross-cultural management? In each case, give an example.

Answer: They are barriers because they can dramatically alter perceptions. Even a simple concept such as a handshake can have dramatic implications if not done correctly. Stress the importance of understanding the many cultural differences around the world. This will prevent managers from misinterpreting what is happening in a given situation.

4.
Many MNCs would like to do business overseas in the same way that they do business domestically. Do research findings show that any approaches that work well in the United States also work well in other cultures? If so, identify and describe two.

Answer: Stress that this is a recent area in management. Little by little, we are understanding what works and what doesn't work globally. One practical example is to discuss how different compensation systems will have different impacts on different cultures.

On the other hand, some management practices that have been developed in the West are generalizable to other cultures. You could draw on the examples listed in the book, or have a class discussion with the international students assessing what they would think the impact of such management practices as feedback, merit compensation, or participation in decision making would have on workers from their home countries.

5.
In most cases, local managerial approaches must be modified for doing business overseas. What are three specific examples that support this statement? Be complete in your answer.

Answer: There are many different examples listed in the text. Make sure that they have a theoretical foundation, such as the Hofstede or the Trompenaars dimensions. You can use Figure 5‑1 as a general guideline.

6.
What are some categories of cultural differences that help make one country or region of the world different from another? In each case, describe the value or norm and explain how it would result in different behavior in two or more countries. If you like, use the countries discussed in this chapter as your point of reference.

Answer: The way in which the country views time, the collectivistic/individualistic dimension, attitude toward affection, the nature of business conversations, negotiating styles, protocol for meetings, eating behaviors, and dress are all examples of cultural differences that are different in various cultures around the world.

Internet Exercise: Haier’s Approach

Suggestion for Using the Exercise

1.
After your students have investigated the issues pertaining to Heier suggested in the exercise, ask your students to visit the Disney website and answer the same questions {http://www.disney.com}. This will give your students a perspective of the challenges of international marketing from both an Asian and an American point of view.

In The International Spotlight: Mexico

Questions & Suggested Answers

1.
Why would multinationals be interested in setting up operations in Mexico? Give two reasons.

Answer: One reason why Mexico is of interest to multinationals is that the work force is quite productive and turns out high quality goods. This is particularly evident from the information in the case related to Ford's Hermisillo plant. A second reason is that the Mexican economy is growing and this means a local market for goods and services. So by setting up operations in Mexico, multinationals can tap this market.

2.
Would culture be a major stumbling block for American firms doing business in Mexico? For European firms? For Japanese firms? Explain your answer.

Answer: Culture is always a major problem for those not aware or sensitive to differences. Since U.S. firms are closer to Mexico and have more experience there, they would undoubtedly have fewer problems than Europeans and especially the Japanese.

One barrier discussed previously is the concept of time. Because Mexicans have a different concept of time than U.S. managers, this could be a major stumbling block if it is not understood.

3.
Why might MNCs be interested in studying the organizational culture in Mexican firms before deciding whether or not to locate there? Explain your logic.

Answer: One reason why MNCs would be interested in studying the organizational culture of Mexican firms is because of the differences in organizational culture. While the national cultural differences would help identify general differences between the multinational and the local personnel, the organizational culture differences would help explain the way things are done within the firm. MNCs could learn a great deal by finding out how Mexican employees are accustomed to doing things, rather than simply trying to transplant their operating philosophy and style on the local employees. The next chapter looks at managing organizational cultures and diversity in depth.

International Management in Action: Ten Key Factors for MNC Success

Summary

1.
There are 10 factors or guidelines that successful global firms seem to employ. These are listed in the text.
2.
The 10 factors could be discussed in terms of the firms addressed at the beginning of the chapter: Apple, Samsung, Renault.

International Management in Action: Managing in Hong Kong

Summary

1.
Managing across cultures:
• Practical school of management thought: Do little to help expatriates change their basis cultural values or specific managerial behaviors
• Cross-cultural school of management thought: Effective managerial behavior is a function of the specific culture.
2.
Successful managerial action in the U.S. may not be effective in Hong Kong. Because firms do not include in their selection criteria individual characteristics such as cognitive flexibility, cultural flexibility, degree of ethnocentricity, etc., they end up sending individuals on international assignments who keep the same set of managerial behaviors they used in the U.S. and not adjust or adapt. Simplistic assumptions about culture are erroneous. Important to training people about intercultural differences.