www.bradford.ac.uk/management

Cross Cultural Management

Frank McDonald

Bradford Centre in International Business

4 October 2011 Copyright Bradford University School of 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

• Hofstede’s 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)

Minuten 0 5 10 15 20 25 30

Italy

UK

France

U.S.

Germany

Japan

.

20 -begin, when all have arrived.

Minutes 0 5 10 15 20 25 30

Spain /

UK

Finland

Japan

formal introduction, sit down, begin.

formal introduction, coffee, sit down, begin.

informal introduction, coffee, jokes, begin.

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.

20 - 30 minutes small-talk (soccer, family), while other participants arrive,

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

Cross-cultural Space across countries

Space of cultural

interaction

Incremental and Radical Change in Culture

Evolution of culture space – positive outcome

Evolution of culture space - negative outcome

No interaction in cross-cultural space

No common space

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 don’t do business

Interaction of cross-cultural space

Common space

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

Negotiation strategies (Weiss)

• Low familiarity with counterpart’s culture– Employ agent or advisor or involve mediator– Induce counterpart to follow one’s own script

• Moderate familiarity– Adapt to the counterpart’s script– Coordinate adjustment for both parties

• High familiarity– Embrace counterpart’s 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

Virtuous Cycles

Degenerative Cycles

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