Cross-Cultural Management - INBU 2201, Class 17

Cross-Cultural Management - INBU 2201, Class 17

• The Manager as Decision Maker
• Rational decision making is typically divided into two approaches, prescriptive and descriptive.
• Prescriptive: This approach is based on assumptions about how decisions should be taken, assuming managers aim for an optimal choice between alternatives.
• Descriptive: This details how managers actually make decisions. Rational decision making is often seen as following the prescriptive approach.
• Steps in the rational decision process include defining the problem, identifying decision criteria, weighting criteria, generating alternatives, evaluating alternatives and selecting the optimal solution.
• Cultural differences affect decision-making optimization, including when a problem is identified (doing vs. being), the amount of information gathered before making decisions, and the weighting of criteria (short-term vs. long-term orientation). Also, who is making the decision (power distance and collectivism) influences outcomes.

Desirable Characteristics of an Acquisition Target

• USA Managers prioritize target's product demand, discounted cash flow, returns on investment, attractiveness of industry, and management talent.
• South Korean Managers value industry attractiveness, sales revenue, market structure, manufacturing capabilities, and research and development capabilities.

Ringi-sei Decision-Making Process in Japan

• The ringi system is a bottom-up decision-making process common in Japanese bureaucracy.
• Lower-level managers develop initial plans.
• These plans are then circulated upwards for approval by higher-ranking officials.
• The goal is a consensus and the process is considered democratic.
• However, there's criticism that the ringi system obscures responsibility for decisions.

Factors Affecting Rational Decision Making

• Cultural Constraints
• Cognitive Limits, including motivation biases.
• The optimization model (rational decision making).

Rational Decision Making

• The optimization model assumes decision-makers can accurately define problems, identify all relevant criteria, accurately weigh criteria, be aware of all alternatives, and assess them accurately.
• However, human judgment is bounded by limitations in acquiring and processing information. This leads to a satisficing model (seeking acceptable, rather than optimal, solutions).

Cultural Constraints on Rationality

• The conflict model of decision making recognizes various strategies used by decision-makers to cope with stress.
• Vigilance involves careful fact-gathering and consideration of alternatives.
• Complacency means ignoring or taking immediate action.
• Defensive avoidance includes passing the decision to others, delaying it, or downplaying its importance.
• Hypervigilance is making hasty, poorly considered decisions.
• Cultural influences, such as Japanese preference for vigilance, influence decision-making styles.

How International Managers Deviate From Rationality

• Heuristics are rules of thumb used to simplify complex decisions.
  • They often involve focusing on one aspect while ignoring others, creating trade-offs like speed vs. quality.
• Three common heuristics include:
  • Availability: Judging the probability of events based on ease of recall.
  • Representativeness: Assessing likelihood based on stereotypes and similarity.
  • Anchoring and adjustment: Relying too heavily on initial information.
• Cultural variations influence the use and impact of these heuristics.

Availability

• Availability is a mental shortcut where people make judgments about the probability of events based on how easily examples come to mind.
• An event easily imagined or evoking emotion is recalled more easily than vague or bland events.
• Cultural differences in life experiences can lead to systematically different availability heuristics.

Representativeness

• Managers' assessments of likelihood are influenced by how similar the event is to a mental representation or stereotype.
• Misconception of chance: probability is ignored in favour of representativeness heuristics.
• Collectivist vs. individualistic societies differ in how much they expect similar cause-effect relationships.
• Once a decision is made, people in collectivist cultures are more confident; individualistic cultures consider more potential outcomes.
• Escalation of commitment is more common in collectivist cultures.

Anchoring and Adjustment

• Anchoring and adjustment is where humans rely heavily on initial information (the anchor) when making decisions.
• Starting from an initial value, adjustments to reach a plausible outcome are often insufficient.
• Both the source of the anchor and the norms for adjustment can vary across cultures.

Explore the nuanced role of the manager as a decision maker in cross-cultural contexts. This quiz will cover the rational decision-making process, differentiating between prescriptive and descriptive approaches while highlighting how cultural factors influence decision optimization. Understand how cultural differences play a crucial role in shaping managerial decisions.