Cultural Determinants of International Management PDF

Cultural Determinants of International Management Dr. Elaine Berkery 1 Lecture Objectives To understand how culture affects all aspects of international management To understand Hofstedes Dimensions of National Culture To understand Trompanaars dimensions of culture To understand the concept of...

Cultural Determinants of International Management Dr. Elaine Berkery 1 Lecture Objectives To understand how culture affects all aspects of international management To understand Hofstedes Dimensions of National Culture To understand Trompanaars dimensions of culture To understand the concept of cultural risk To differentiate between the different approaches to managing culture To understand the Ethno approach to management styles 2 This Photo by Unknown author is licensed under CC BY-NC-ND. 3 1 Culture • As managers and organisations have expanded their horizons and embarked on new business ventures in other countries, they have encountered different cultures. • The increased pace of globalisation has heightened such exposure. • Understanding cultural differences and learning to manage them effectively is critically important for international business. This Photo by Unknown author is licensed under CC BY-SA. 4 Defining Culture • There is no widely used and commonly accepted definition of culture • However, there is a strong consensus that the key elements of culture include language, religion, values, attitudes and opinions of a particular group or society • Its elusive and intangible • In simple terms… Culture is a word for people's 'way of life', meaning the way different groups do things. • A culture is passed on to the next generation by learning, whereas genetics are passed on by heredity 5 • • • Definitions of Culture • • • Hofstede (1980) – “the collective programming of the human mind” Trompenaars & Hampten Turner (1997)– “the way in which people solve problems and recognise dilemmas” Peters and Waterman (1982)“ A dominant and coherent set of shared values conveyed by such symbolic means as stories, myths, slogans, legends and anecdotes” O’ Reilly (1983)“strongly, widely shared core beliefs” Morrison (2008) “culture is shared, learned values, norms of behaviour, means of communication and other outward expressions which distinguish one group of people from another” Culture can be defined as “a system of values and norms that are shared among a group of people and that when taken together constitute a design for living” (Tiernan and Morley 2019) 6 2 Defining Culture • Consensus regarding the main features: • Culture is shared – its not an individual but group property • Culture is intangible – its not only about things but also meaning • Culture is confirmed by others – need to observe it to fully understand it • Understanding the values and behaviours of potential customers, employees and the wider society of global business locations is essential for any organisation. 7 Meaning Meanings for colours, objects, actions, phrases etc hold different meanings in different cultures. 8 9 3 What does the colour red symbolise in different cultures? • Western Cultures- excitement, energy, passion, stop, love, and danger. • Asia- good luck, joy, prosperity, celebration, happiness, and a long life. • India- purity, sensuality, and spirituality. • Africa- death. • Turkey-death. • Nigeria- aggression and vitality. • Egypt- lucky charm. • Iran -good fortune and courage. This Photo by Unknown author is licensed under CC BY-SA. 10 Culture & International Management • Critical to international management • Culture is a key ingredient in the “liability of foreignness” which is a key MNC obstacle• All additional costs a firm operating in a market overseas incurs that a local firm would not incur • Its both a divisive and unifying force • Recognizing the importance of culture in the business world is an important step toward success in the global marketplace. • Understanding a country’s culture is a sign of respect. It also helps to foster effective communication, a vital factor in business success. 11 Culture & International Management • Management can never change a national culture, it can only understand and use it. • Employees will carry on their national culture into organizational environment. • Challenge for businesses is to understand national culture and use it to their advantage. • Organisations need to be responsive to national culture. 12 4 Understanding Culture • To fully understand cross cultural differences, we need to consider the origins of different cultures and the factors that have shaped them. • It’s possible to identify three broad factors which have shaped cultures in general. This Photo by Unknown author is licensed under CC BY-SA-NC. 13 Source: Tiernan and Morley 20018 14 1. Shared history and national identity • Cultural groupings frequently have a shared national history and sense of identity, and consequently the nation state is a useful starting point for understanding cultural differences. • A nation is a group of people whose distinctive culture binds them together • National culture - culture including a sense of common identity & belonging, language, shared history which distinguishes and unites, linking them to a shared homeland • However, it is possible to find multiple cultures in existence within one nation, for example, Belgium which has two distinct cultural and language groupings (Flemish and Walloons). 15 5 1. Nation states • Subcultures can also develop overtime where minority groups in a country hold values which are different to the dominant national culture. • Patterns of migration have accelerated the development of subcultures and diversity-USA is a good case in point where it’s possible to identify at least ten regional subcultures 16 2. Social, Ethnic & Religious groupings • Social groupings may overlap with national cultures • Ethnic grouping; people drawn together by a sense of common identity, sense of belonging, religion or a belief in common descent This Photo by Unknown author is licensed under CC BY-SA. 17 2. Social, Ethnic & Religious groupings • Religion is also a powerful force shaping culture, with religious values influencing patterns of values and behaviour • Given that there are many different religions worldwide it’s not surprising that differences emerge. • Two largest groupings Christianity and Islam are both monotheistic religions • Minority religions can suffer from discrimination 18 6 3. Language & Communication • Defining expression of culture • Instills basic socialisation themes & determines how values and norms are expressed & communicated • Idioms can cause confusion when translated This Photo by Unknown author is licensed under CC BY-SA-NC. 19 3. Language & communication • Language exists in a cultural context • Translation often occurs as linguistic code alone whereas in real life language is always in context • Pepsi Comes Alive – “brings your ancestors back from the dead” This Photo by Unknown author is licensed under CC BY-SA-NC. 20 When General Motors introduced the Chevy Nova in South America, the company was unaware that “No Va” meant “It won’t go” Lost in Translation In Italy, a campaign for Schweppes Tonic Water translated into “Schweppes Toilet Water” In China, the Coca-Cola name was first read as “ke-kou-ke-la”, meaning “Bite the wax tadpole”, or “Female horse stuffed with wax”, depending on the dialect Beer manufacturer Coors tried to translate its slogan, “Turn it loose”, into Spanish. It went horribly wrong when it was read as “Suffer from diarrhoea” 21 7 3. Language & Communications • Non-verbal communication – facial expressions & gestures that convey meaning within a linguistic context • The same gesture can have different meanings in different cultures • Silence carries meaning • Cultures rich in non-verbal pose difficulties for the uninitiated This Photo by Unknown author is licensed under CC BY-NC-ND. 22 Hall’s High- and Low-Context Typology of Culture Copyright © 2014 Pearson Education Inc. 23 24 8 Culture Theories • To international managers the nation is the most visible layer of culture • Researchers have sought to classify and understand differences in culture and the role it plays in shaping international management practice. • Much of this work has focused on the country as the unit of cultural analysis, and sought to analyse and understand how national cultures differ. 25 Hofstedes Dimensions of Culture • The most famous classification is Hofstedes who studied 100,000+ IBM employees worldwide • He identified four underlying cultural dimensions • Later uncovered a two others 26 Hofstede's Dimensions of Culture This Photo by Unknown author is licensed under CC BY-ND. 27 9 Power Distance (PD) • The extent to which hierarchical difference are accepted in society • For example deference to authority • Cultures with a high PD score display a strong deference to authority. • In a work context, countries with a high PD score have tall hierarchies, high centralization, more supervisory staff and larger wage differentials. • Not the same as actual distribution of power & wealth – Israel lower on PD but high income inequality 28 Power Distance - High Philippines Mexico India Brazil • Greater Centralisation • Tall hierarchies • More supervisory staff • Large wage differentials • White collar job value Japan 29 Power Distance - Low Austria Israel Sweden Norway • Less Centralisation • Flatter hierarchies • Less supervisory staff • Small wage differentials • Manual & clerical work equally valued 30 10 Uncertainty Avoidance (UA) • The Uncertainty Avoidance dimension expresses the extent to which the members of a society tolerate uncertainty and ambiguity, and how society deals the future, by either trying to control it or just letting it happen. • Countries with a high score try to avoid uncertainty by standardising behaviour and rules and are intolerant of unorthodox behaviour and ideas. This Photo by Unknown author is licensed under CC BY-NC-ND. 31 Uncertainty Avoidance (UA) - Low Denmark Sweden UK USA India • Less structuring of activities • Fewer rules • More generalists • Variability • Great willingness to take risk • Less ritualistic behaviour 32 Uncertainty Avoidance (UA)- High Greece Portugal Japan France Peru • More structuring of activities • More rules • More specialists • Standardisation • Less willingness to take risk • More ritualistic behaviour 33 11 Individualism / Collectivism (IC) • Extent to which the self or group constitutes the center point of identification for the person • High collectivism means that the pursuit is conducted within acceptable group frameworks with group norms guiding individual behaviour with group harmony 34 Collectivism Columbia Mexico Greece Taiwan • Organisation as family • Organisation defends employee interests • Practices based on loyalty & group participation 35 Individualism USA UK Australia Canada Netherlands • Organisation is more impersonal • Employees defend own interests • Practices encourage individual initiative 36 12 Masculinity Femininity • The extent to which traditional masculine values such as aggressiveness and assertiveness are emphasized • MNCs from feminine cultures such as Volvo and Saab tend to emphasize social rewards and benefits in the workplace that are sometimes viewed as excessive by parent firms This Photo by Unknown author is licensed under CC BY-SA-NC. 37 Masculinity - High Japan Austria Italy Mexico • Gender roles differentiated • Organisations may interfere to protect interests • Fewer women in jobs • Aggression, competition rewarded • Work valued as central life interest 38 Masculinity - Low Sweden Denmark Finland • Gender roles minimized • Organisations don’t interfere to protect interests • More women in jobs • Soft, intuitive skills rewarded • Social rewards are valued Thailand 39 13 This refers to cultural attitudes to time/future, and how societies maintain some links with its own past, while dealing with the challenges of the present and the future. Long Term Orientation (LTO) Low scores on LTO, prefer to maintain time-honoured traditions and norms, while viewing societal change with suspicion. High scores take a more pragmatic approach, encouraging thrift and education as a way to prepare for the future. Cultures high in LTO are likely to adopt a longer planning horizon and defer on investment, with individuals also ready to delay gratification. In the business context, this dimension is referred to as “(short-term) normative versus (long-term) pragmatic”. 40 Defined as the extent to which people try to control their desires and impulses, based on the way they were raised. Cultures can, therefore, be described as Indulgent or Restrained. Countries high on indulgence -US, Canada & Australia 6. Indulgence V Restraint Countries high on restraint- India, China & Russia People with a high score in Indulgence generally exhibit a willingness to realise their impulses and desires with regard enjoying life and having fun. They possess a positive attitude and have a tendency towards optimism. Place a higher degree of importance on leisure time, act as they please and spend money as they wish. 41 Restraint societies are more likely to believe that such gratification needs to be curbed and regulated by strict norms. Restrained societies do not put much emphasis on leisure time and control the gratification of their desires. 6. Indulgence V Restraint People with this orientation have the perception that their actions are restrained by social norms and feel that indulging themselves is somewhat wrong. Implications for reward systems and motivation Countries high on indulgence include USA, Canada and Australia, with India, China and Russia higher on restraint. 42 14 Criticism of Hofstede 1. A single company's data – IBM which has a strong corporate culture 2. Time dependent results – collected between 1967-1973 and analysed in the late 1970s. Much has changed since then; globalisation, exposure to transnational media, technological advances, & role of women in the workforce 3. Based on self report data 4. Non exhaustive list of dimensions – time and spatial orientation not included 5. Western bias – meaning of certain items 6. Attitudinal rather than behavioural measures 43 Trompenaar s Relational Dimensions Relative rather than absolute • Derived 7 relationship orientations that address the way in which people deal with each other, as well as looking at the environment and time. • Sought to present a theory of cultural dimensions designed to guide managers in practical situations. • Offers practical advice on how MNCs can do business in various countries. • These dimensions are relative, ie relative to the host environment rather than absolute categories 44 1.Universalism V Particularism How people live with respect to relationships and rules • Universalism-oriented- People place a high importance on laws, rules, values, and obligations. They try to deal fairly with people based on these rules, but rules come before relationships. • Rules are something that shapes and defines one’s behavior in most situations • Switzerland, Canada, United States • Particularism-oriented- People believe that each circumstance, and each relationship, dictates the rules that they live by. Their response to a situation may change, based on what's happening in the moment, and who's involved. • Relationships and situations often trump rules • Korea, Russia, China 45 15 2. Neutral V emotional How we express our emotions, inward vs outward • In a Neutral-oriented culture people make a great effort to control their emotions. Reason influences their actions far more than their feelings. People don't reveal what they're thinking or how they're feeling. • U.K., Sweden, the Netherlands, Finland, and Germany • In an Emotional-based culture people want to find ways to express their emotions, even spontaneously, at work. In these cultures, it's welcome and accepted to show emotion. • Italy, France, Spain, and countries in Latin-America 46 3. Individualism V Communitarianism Individual v Group • In Individualism-oriented cultures people believe in personal freedom and achievement. They believe that you make your own decisions, and that you must take care of yourself. • The Individualism-oriented cultures people see themselves first as these cultures tend to ascribe success and blame to the individual • U.S., Canada, the U.K, Scandinavia, New Zealand, Australia, and Switzerland. • In Communitarianism-oriented cultures people believe that the group is more important than the individual. The group provides help and safety, in exchange for loyalty. The group always comes before the individual. • The communitarian-oriented culture recognizes that the group is superior and supports actions which are for the common good • These cultures tend to ascribe success and blame to the organization • Latin-America, Africa, and Japan. 47 4. Specific V diffuse Focus on contract v whole person • In a Specific-oriented culture people keep work and personal lives separate. As a result, they believe that relationships don't have much of an impact on work objectives, and, although good relationships are important, they believe that people can work together without having a good relationship. • In a specific-oriented culture the boss may be the boss at the office, but a friend at a restaurant, a colleague in some situations, and even an inferior in others • U.S., the U.K., Switzerland, Germany, Scandinavia, and the Netherlands. • In a Diffuse-oriented culture people see an overlap between their work and personal life. They believe that good relationships are vital to meeting business objectives, and that their relationships with others will be the same, whether they are at work or meeting socially. People spend time outside work hours with colleagues and clients. • In a Diffuse-oriented culture, the boss is the boss, the boss is the superior, in all relationships • Argentina, Spain, Russia, India, and China 48 16 5. Achievemen t V ascription Judged on achievement V status and connections • In an Achievement-oriented culture, people believe that you are what you do, and they base your worth accordingly. These cultures value performance, no matter who you are. • Achievement-oriented status results from doing • U.S., Canada, Australia, and Scandinavia • In an Ascription-oriented culture, status is based on such things as social position, age, etc. • Ascription-oriented status results from being • France, Italy, Japan, and Saudi Arabia 49 Sequential vs Synhronic 6. Sequential vs Synchronic • Sequential cultures view time in a sequential or linear fashion; order comes from separating activities • Germany, the U.K., and the U.S • Synchronic- several events juggled at the same time • Japan, Argentina, and Mexico Single tasks vs multitasks 50 7. Internal direction vs outward direction The extent to which people believe they control the environment, or the environment controls them Internal direction vs outward direction: • Internal direction: focus on controlling the environment. This includes how they work with teams and within organizations. • Israel, the U.S., Australia, New Zealand, and the U.K • Outward direction: focus on living in harmony with nature. At work or in relationships, employees focus their actions on others, and they avoid conflict where possible. People often need reassurance that they're doing a good job. • China, Russia, and Saudi Arabia 51 17 Cultural Risk • Whenever an organisation enters a new market it encounters cultural risk • Defined as ‘ a situation or event in which a cultural misunderstanding puts some human value/activity at stake’ • Cross cultural misunderstandings can ruin business deals, hurt sales & firm reputation • High context cultures prefer to build buisness relationships slowly and like to get to know people first. • In direct contrast, low context cultures prefer to get down to business quickly, and are frequently puzzled when introductions and negotiations move at a very slow pace. • Developing an appreciation of and sensitivity for cultural differences has become imperative for any manager This Photo by Unknown author is licensed under CC BY. 52 Rooted in home culture • Many MNCs are steeped in home culture • Cultural distance in the business context the degree to which a firm is unfamiliar with the culture of a foreign business location • Differing outlooks can be placed along a continuum from polycentric to ethnocentric • In international business a polycentric approach which is more flexible and adaptable to local differences is likely to have a competitive advantage over the more inflexible approach of ethnocentric firms This Photo by Unknown author is licensed under CC BY-NC-ND. 53 Ethnocentrism • Ethnocentrism: using our own culture as the standard for judging other cultures (home country orientation) • Most of us are raised in a single culture, therefore we primarily view the world from our own perspective • Ethnocentric tendencies are widespread and entail the belief that one’s own race, religion, group etc is superior to another 54 18 Polycentrism • Perlmtter argued that managers engaging in cross border business should give up ethnocentric operations in favour of polycentric or geocentric orientations • Polycentrism: refers to a host country mind set in which the organisation /manager develops a strong affinity with the country in which he/she conducts business (host country orientation) 55 Geocentrism/Global Staffing Apporach • Geocentrism: refers to a global mind set in which the organisation /manager is able to understand a business or market without regard to country boundaries (global cognitive orientation) • A cognitive orientation that combines an openness to, and awareness for, diversity across cultures. • Managers will adopt new ways of thinking, learn how to analyse culture and avoid the temptation to judge different behaviours as being somehow inferior 56 Cultural Risk • Cultural risk is heightened by ethnocentrism – whybelief that our own race, religion or ethnic group is superior • Organisations with a geocentric orientation minimise cultural risk as they focus on efforts to develop skills for successful social behaviour with members of other cultures This Photo by Unknown author is licensed under CC BY-NC-ND. 57 19 Cultural Risk • A geocentric approach which is more flexible and adaptable to local differences is likely to have a competitive advantage over the more inflexible approach of ethnocentric firms 58 Minimising Cultural Risk 1. Fact Finding & Knowledge Interpretation 2. Develop a keen interest in the target culture 3. Avoid Cultural Bias 4. Develop Cross Cultural Skills 59 An Ethno approach to management styles • Examines the role played by people, values and culture in determining management practice • The argument is that each national culture produces a distinctly different approach to solving managerial problems and decision making 60 20 Culture: Converging or Diversifying? • Cultural homogeneity and heterogeneity are not mutually exclusive; they generally occur together. • But cultural flows are diverse – just as McDonald’s is popular in Japan, so too is Vietnamese food in the United States and Japanese sushi in Europe. • While globalization will eclipse some past ways of life, the process can also ‘liberate’ people by providing new ideas and challenging conformity and nationalism. 61 This Photo by Unknown author is licensed under CC BY-SA-NC. • Cultures vary depending on tradition, religion, language and social or ethnic grouping. Summary • Each country tends to have a unique mixture of values and attitudes which drive behaviour. It’s important that organisations understand what is valued in the national culture and similarly what is deemed unacceptable behaviour. • It’s only by having a full appreciation of cultural differences that organisations can navigate their way through international business. 62 21