Chapter 11 Cross-Cultural Management
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Transcript of Chapter 11 Cross-Cultural Management
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Chapter 11
Cross-CulturalManagement
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Basic AssumptionsMeaning
Behaviour
Values, BeliefsPreferences
Invisible, unconscious, taken for grantedExample: “Time is limited", "All men are equal"
Explicit, Declared, Example: “Time is Money”,
Authority has to prevail
Observable, ManifestE.g. Looking at your watch,
banging on the table
Source: André Laurent
The various dimensions of culture
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The different sources of culture in businessCORPORATE
COMPANYCULTURE
PROFESSIONALINDUSTRYCULTURE
NATIONALETHNIC
CULTURE
• History of the company (accumulated experiences: good and bad)• Leadership and dominant coalition• Ownership• Stage of development• Business diversity
• Functional orientation:MarketingFinanceEngineeringR and D
• Industry norms:TechnologyChangeKey success factorsTypes of customers
• Country history• Education• Social organisation• Religion, philosophy
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Anthropological and sociological cultural research relevant for business
HOFSTEDE’s STUDY:Four dimensions:
Power distance/IndividualismUncertainty avoidance /Masculinity-feminity
ANDRÉ LAURENT’s STUDIES:Management and organisational principles
TROMPENAARS’ STUDIES:Value Orientation
RONEN and SHENKAR’s STUDIES:Country Clusters
HALL and HALL’s STUDY: Silent Language
REDDING and WITTBusiness system
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Silent LanguagePerception of Time
Perception of Space
Language of Material Goods
Friendship
Agreement/Disagreement
Context
SequentialScarce
PunctualityDeadline
E.g.: German
DelaysPostponmentE.g.: Arabic
CircularFluid
Abundant
HighDistance
Avoid physicalemotionalproximity
E.g.: British
LowDistance
Physical contactshowing emotionE.g.: Latin
Financialwealth
gives statusE.g.: USA
Materialistic Non-materialistic
Educationfamily
senioritygives status
E.g.: Malaysia
Quickand superficial
Operationalfactual
relationshipE.g: USA
Longand deep E.g.: Japan
ExplicitDocumented
Westernlegailisticcountries
ImplicitVerbal
Asiancountries
The personmatters more
than the content
The contentmatters more
than the personAnglo-Saxon
GermanicNordic
African,AsianLatin American
countries
Source: Adapted from Hall(1960)
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INDIVIDUALISM100806040200
POW
ER D
ISTA
NCE
100
80
60
40
20
0
Anglo-Saxon/ScandinavianEqalitarian/Individualists
Latin EuropeanHierarchical/Individualists
Asian/Latin AmericanHierarchical/Collectivists
Hofstede: Mapping of cultures on power distance and individualism
Source adapted from :Hofstede, 1980
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10 17 18 2327
3844 46
5366
7377
78
0102030405060708090
100
S NL USA DK UK CH B D F I INDO SPAIN JAPAN
“It is important for a manager to have at hand precise answers to most of the questions that subordinates may raise about their work”
André Laurent/INSEAD
Percent agreement rate across countries
Laurent’s studies on management values
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The main reason for having a hierarchical structure is so that everybody knows who has authority over whom
8370
504342
3434
3130
2617
0 20 40 60 80 100
INDONESIA
CHINA
JAPAN
FRANCE
ITALY
SPAIN
UK
NL
SWEDEN
GERMANY
USA
André Laurent/INSEAD
Laurent’s studies on management values
Percent agreement rate across countries
9
7459
5651
4544
4336
3532
26
0 20 40 60 80
SPAIN
CHINA
ITALY
INDONESIA
GERMANY
NL
FRANCE
JAPAN
UK
USA
SWEDEN
In order to have efficient work relationships, it is often necessary to bypass the hierarchical line.(Q. 2)
Source: Andre Laurent
Percent disagreement rate across countries
Laurent’s studies on management values
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Ronen and Shenkar Country Clusters
Source: Ronen and Shenkar, 1985
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Trompenaar’s Five Value Orientations
VALUE ORIENTATION
EXAMPLES
1 UNIVERSALISM : vs.
PARTICULARISM :
Rules -based behaviour Relationship -based behaviour
Germanic countries Asian countries
2. INDIVIDUALISM : vs.
COLLECTIVISM :
Individual's rights are supreme Group's rights are supreme
Western countries Asian countries
3. NEUTRAL : vs.
AFFECTIVE :
Emotions are subdued and expressed indirectly Emotions are expressed freely and directly
Asian countries Western countries
4. DIFFUSE : vs.
SPECIFIC :
Focus is on context of situation Focus is on specific issues
Asian countries Germanic countries
5. ACHIEVEMENT : vs.
ASCRIPTION :
Status and respect are achieved by 'doing' Status and respect are ascribed by 'being'
Western countries Asian countries
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What is a business system?
Modes of coordination and control of economic action, firms and management
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• Ownership:• Predominant form of ownership• Governance mechanisms• Span of sectors and integration of production chains
• Networks: • How do firms connect to each others?• How do firms collaborate?
• Management:• How are decisions made?• How much is delegated to employees?
Sources: *Gordon, Redding, The Thick Description and Comparison of Societal Systems of Capitalism, Journal of International Business Studies, (2005)
* Michael Witt and Gordon Redding, China's Business System and its Future Trajectory, Asia Pacific Journal of Management, January 2009
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The architecture of a business system?BUSINESS SYTEM
Ownership Networks Management
BUSINESS ENVIRONMENTCapital Human Capital Social Capital
Role of the State
CULTURERationale Identity Authority
Source: Redding and Witt
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The institutions and constraints that shape the conditions under which business operates:
Business environment
• Capital:• Financing of firms (Market, Banks, Informal)• Rules of capital allocation• Patience of capital
• Human Capital: • Structure and Quality of Education • Employment policies• Presence and role of trade unions
• Social capital:• Degree of trust in institutions and individual relationships
• Role of the State• Interventionism and mechanisms of intervention
Source: Redding and Witt
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Values and norms that form the base of society
Culture
• Rationale:• Goal of business• Appropriate means to achieve goals
• Identity : • Individualism vs Group• If group what is the reference group? (family, clans,
company…)
• Authority:• What determines hierarchy in society ? ( wealth, religion,
cast…)Source: Redding and Witt
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Anglo/American German and Nordic
European
French and Latin
European
Japan Korea Overseas Chinese
Rationale The societal ends are agreed as well as the means of pursuing them
Material success
Democratic process
Rational system
Rules-led competition
Community
Democratic
Consensus-led co-operation
Democratic
Negotiation-led conflict resolution
Employ people
Democratic
Consensus-led national
Growth
Autocratic
National
Militaristic
Wealth for Family
Autocratic
Familistic
Authority The ground rules for vertical order
Origin of power
Constitution
Law decentralisation
Law decentralisation
State
Law centralisation
State
Corporations
Decentralisation
State
Corporations
Centralisation
Family centralisation
Identity The ground rules for horizontal order
(What makes society stick together)
Individual rights contracts
Heterogeneity (microcultures)
Social welfare
Homogeneity
Social welfare
Cultural identity
Heterogeneity (microcultures)
National belonging
Cultural identity
Homogeneity
Nationalism
Cultural identity
Homogeneity
Clans
Ethnic bonding
Differences in economic cultures
Sources: Albert (1991); Berger and Dore (1996); Whitley (1999); Trompenaars (2000); Hampden-Turner and Redding (2001).
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Sources: Albert (1991); Berger and Dore (1996); Whitley (1999); Trompenaars (2000); Hampden-Turner and Redding (2001).
Capital How financial capital is found and channelled
Financial markets
Low gearing
Banks
Medium gearing
State and market
Medium gearing
Banks
High gearing
State
High gearing
Family
High gearing
Human capital How human skills are developed Academic
performance-ledAcademic and apprenticeship
Academic elitist Academic plus on-the-job elitist
Academic elitist Academic plus on-the-job elitist
Social capital How trust is created High-trust contracts
Legal institutions
High-trust contracts Low-trust
Negotiation
High trust within groups
High trust within groups, low outside
High trust within family, low outside
Ownership Who owns enterprises Shareholders Banks, employees
Shareholders
State, shareholders Banks
Cross-shareholding
Business groups
Cross-shareholdings
Family groups
Networking How economic agents relate to each other
(The rules of business transactions)
Contracts Contracts
Some elitist relationships
Elitist relationships
State interventionism
Elitist relationships Personal relationships
State intervention
Personal Relationships
Managing How employees are induced to co-operate in the firm
System-led
Motivation
Performance measures
Hierarchical
Technical competence
Hierarchical bureaucracy
Negotiation
Corporate identity
Corporate loyalty
Hierarchical
Corporate loyalty
Hierarchical
Family Loyalty
Anglo/ American
German and Nordic
European
French and Latin
European
Japan Korea Overseas Chinese
Differences in economic cultures
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The impact of international cultural differences for management
• MULTICULTURAL TEAMS- “Expatriates” vs. “Locals”- Group building/working/relationships/- Conflict resolutions
• PARNERSHIPS/TRANSACTIONS- Contracts negotiations- Joint ventures/Partnerships- Official meetings- Community events/Social events
• INTERPERSONAL RELATIONSHIPS- Communication- Etiquette- Decoding attitudes and
behaviour- Understanding “silent” language
• HIERARCHICAL /MANAGERIAL INTERACTIONS
(Boss/Colleagues/Subordinates)- Feedback- Control- Reward/Punishments- Personal space-Motivations
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Multicultural vs. Mono-cultural teams
MULTICULTURAL TEAMS
PERFORMANCE
MONO-CULTURAL TEAMS
LOW HIGH
DISASTER SYNERGY
Source: André Laurent/INSEAD
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Major obstacles to performance in multi-cultural situations (1)
• Discussion of differences perceived as uncomfortable,inappropriate, threatening or illegitimate.
• Assumption of similarity/homogeneity.
• Cultural diversity is denied, lost as a potential resourceand transformed into a significant handicap.
• Richness of diversity lost on the way.Source: André Laurent/INSEAD
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• The gap between pretended similarity and inner convictionof actual difference widens and creates uncomfortablesituations.
• Cautious behavior and unproductive costly politeness emergeas coping mechanisms to handle the situation.
• This leads to low risk taking, avoidance of confrontation and achievement of the smallest common denominator.
Source: André Laurent/INSEAD
Major obstacles to performance in multi-cultural situations (2)
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• Western individualism.
• Fear of stereotyping
• Parochial mindset (only one way of thinking/acting).
• Ethnocentric mindset (the best way of thinking/acting).
• Blindness to one’s own cultural conditioning.
Major obstacles to performance in multi-cultural situations (3)
Source: André Laurent/INSEAD
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Major obstacles to performance in multi-cultural situations (4)
• Perception of the other culture as unfortunate deviationfrom the norm.
• If diversity is neither recognized, understood, acknowledgednor discussable, how could it possibly be appreciated, valued and utilized?
• Cultural diversity then re-enters as a handicap likely tolead to failure. Any synergy between cultures becomesinaccessible.
Source: André Laurent/INSEAD
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Negotiation Framework
SELLER
BUYERBargainingRange Given
• Calculated Value
• ConstraintsSellers’s Walk Awayprice
Buyer’s Walk Away Price
Opening offer
Opening offer
Uncertainty range
Uncertainty range
Given• Calculated
Value• Constraints
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Preparation
Negotiation Rounds
Closing
Negotiation Process
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Preparation• Constitution of negotiation team• Role assignment• Set your objectives: What exactly do you want to buy?• Set your constraints• Calculate:
Valuation of:Stand aloneHypothesis on synergiesWalk Away price
List Buyer‘s Objectives/constraintsInternal/external
Hypothesis onBuyer’s Walk Away price
Valuation of:Stand aloneSynergiesWalk Away price
List Seller’s Objectives/constraintsInternal/external
Hypothesis onSeller’s Walk Away price
Seller Buyer
Determine bargaining range
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Negotiation Team
Business Development ExecutivesFinancesLegalOperational input Advisors
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First RoundFirst OffersExplain the logic of the offer
Second RoundCounter offers Explain the logic of the offersArguments
In between:
In between
Third Round++ Reaching agreement
Negotiation Process
ClosingTechnicalities of the dealLegal procedureSigning agreement
Recalculation and revision: Unofficial discussions
Recalculation and revision: Unofficial discussions
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Salacuse (2005) and Brett (2001)
COMMUNICATION
Negotiation Attributes
One Leader
Risk TakingINFLUENCINGRISK TAKING
TEAM ORGANISATION
FLOW PROCESS
FORM OF AGREEMENT
EMOTIONSTIME
STYLEATTITUDE
GOAL
INFLUENCINGRISK TAKING
TEAM ORGANISATION
FLOW PROCESS
FORM OF AGREEMENT
EMOTIONSTIME
COMMUNICATIONSTYLE
ATTITUDEGOAL
Examples of culturesFollowing this style
Examples of culturesFollowing this styleFollowing this style
ContractWin-LoseFormalDirectStrict
SpecificHidden
Deductive
Direct
ContractWin-LoseFormalDirectStrict
SpecificHidden
DeductiveOne Leader
DirectRisk Taking
Informal
Indirect
Win-WinRelationship
IndirectFlexible
ExpressedGeneral
InductiveConsensus
Risk adverse
Informal
Indirect
Win-WinRelationship
IndirectFlexible
ExpressedGeneral
InductiveConsensus
Risk adverse
US, UK, French
US, German
Asian
US, Germany
Japan
US, German
US, French
Chinese
French
US
Western Europe,North America
US, UK, French
US, German
Asian
US, Germany
Japan
US, German
US, French
Chinese
French
US
Western Europe,North America
US
Japanese
Asian, Arabic
Asian, Arabic
Asian
Japanese
Japanese
Latin
Arabic, Chinese, Latin
Asian, Arabic
Japanese
US
Japanese
Asian, Arabic
Asian, Arabic
Asian
Japanese
Japanese
Latin
Arabic, Chinese, Latin
Asian, Arabic
Japanese
Negotiation Styles
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Negotiation Styles: American vs JapaneseNegotiation Parameters Typical American Typical Japanese
Attitude toward silence during negotiations
Strongly averse; uncomfortable; “fill the void”
Essential: for decorum; and for non-verbal communication and empathy (haragei)
Reaction to cross-cultural signals
Unaware; or consider it unimportant
Aware indifference
Attitude toward sequential bargaining and negotiating progress
Strongly attracted to both Unimportant
Attitude toward sharing information
Open; willing Collect it avidly, but do not give it out
Attitude toward closure Essential for a successful negotiation; results-oriented, not process-oriented
Not necessary or even important; take the long view
Form of the contract Long; detailed; covering all foreseeable contingencies
Prefer very short; and limited to general principles and affirmations
Commitment to the contract
Total binding Weak; the relationship is what counts, not the document; and inevitable changing conditions will necessitate later amendments
Source : Sunshine, 1990
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Basic approach to business in general
Transactional; profit-oriented; detail-conscious; legalistic
Structured; strategic; starting from trust
Central purpose of the negotiation
Reaching agreement on a contract Launching a long-term relationship
Selection criteria for negotiator(s) Verbally articulate generalists; technical competence; “rational abilities”
Rank; position; “social competence”
Appropriate number of negotiators
Few Many: in order to demonstrate seriousness and for functional coverage, including learning.
Appropriate role(s) of lawyers(s) Key participant: leader, contract advisor, and/or draftsperson
None: seen as adversarial troublemakers.
Attitude toward decision-making process, and appropriate degree of delegation of authority to negotiators
Top-down decision-making; very high degree of delegation of authority
Consensual, middle-up decision-making (ringi seido); little or no authority delegated to negotiators
Appropriate tone for negotiation and communication
Direct; informal; familiar; egalitarian; candid
Highly indirect; highly formal; hierarchical; reserved
Negotiators’ interest in personal feelings and values of counterparts
Little or none; irrelevant or improper; logic more important than emotions; issues more important than personalities
Acute; personal rapport essential to establish trust (ningen kankei)
Appropriateness of socializing with counterparts
Inappropriate; unacceptable; risks conflict of interest and loss of personal control
Highly appropriate; and traditional release; also, ritualised gift-giving
Attitude toward time during negotiations
Acutely time-conscious; “time is money”; impatient
Patience is the key
Source : Sunshine, 1990
Negotiation Styles: American vs JapaneseNegotiation Parameters Typical American Typical Japanese
Source : Sunshine, 1990
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Chinese business negotiating style
Source: Tony Fang, 1997
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ETIQUETTE
Addressing
How to name the other person
In Malaysia nobility titles are the proper way to address (Encik, Tan, etc..)
In France people are addressed by their title (Monsieur le Directeur)
In the USA first name is normal In Japan, the exchange of business cards is critical
Gesturing
How to position oneself and how to
use body language
Showing the soles of one’s feet is offensive to Arabs Shaking the left hand is not proper in Muslim countries Finger pointing is considered as highly threatening and
impolite in Asia Dressing Dress code Malaysian businessmen use jacket and ties while in
Singapore long sleeves shirts is normal business attire
Eating Importance of meals in business
dealing. Behaviour at the table
French business transactions usually take place at a lunch or dinner table
Chinese banquets and sometimes drinking punctuate deals
Timing How to control time Signs of impatience are considered as improper in many cultures
Lengthy preliminaries are usual in the Middle East Talking Importance of verbal communication Silent pauses are the norms in Chinese or Japanese
Differences in business practices: Examples
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RELATIONS
Engaging
Importance given to establishing personal relationships in business transactions
Most Asian countries privilege the personalisation of contacts before engaging in business transactions
Contracting
Importance given to overall agreements on principles versus details
Legal contracting is the norm in the USA while broad agreements are considered satisfactory in Japan
COMPETING
Advantages
Product’s technology versus connections as a source of competitive advantage
In China, connections (Guanxi) are still a very important factor of competitive advantage
Supplying
Preferences given to friends and families in supplies contracts
In Asia the notion of “extended families” implies that preferential treatment be given to families and friends for supplier contracts.
Differences in business practices: Examples