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THE IMPACT OF CULTURE
International Business
PRESENTATIONS FROM
G09 AND G10
Culture
International Business
1st of February 2010
INTERPRETING AND RESPONDING TO
STRATEGIC ISSUES:
THE IMPACT OF NATIONAL CULTURE
Summary by Rakel Ármannsdóttir
INTRODUCTION
Article written by Susan C. Schneider and
Arnoud Meyer.
Published in the Strategic management Journal
in May
Attempt to explore the impact of national culture
on interpreting and responding to strategic issue.
4
PERCEPTION, INTERPRETATION AND RESPONSE
Strategic issues are environmental events that
may have an important impact on organizational
performance.
Assessments are often influenced by subjective
perceptions and interpretation.
Perception of environmental
threats/opportunities influences how managers
choose to respond to issues.
5
MODEL OF PERCEPTION, INTERPRETATION AND
RESPONSE
6
METHOD
303 subjects representing 16 countries
Executives and MBA students
Questionnaires and case discussion.
5 country clusters
Demographic data did not differ significantly
across cultures, except for the Anglo cluster.
7
HYPOTHESIS
Hypothesis 1: National culture will influence the
interpretation and respond to strategic issues.
Supported.
Hypothesis 2: Relative to other managers, Latin
European managers will interpret strategic issues
as threats. Partially supported.
Hypothesis 3: Relative to other managers, Latin
European mangers will choose strategic responses
that are of greater magnitude and more internally
focused. Partially supported.
CONCLUSION
The study demonstrates that national culture
will influence interpretations and respond to
strategic issues.
Although cultural differences were found in
interpreting and responding to strategic issues,
the underlying reasons for this remain unknown
9
ICELANDIC COMPANY AND FINAL PROJECT
Useful for all Icelandic companies, as the
knowledge can provide competitive advantages in
facing international competitors and in
cooperating with international partners in the
global arena.
10
ARE STRATEGIST FROM MARS AND
ETHICS FROM VENUS?
MICHAEL BEHNAM AND ANDREAS
RASCHE
Summary by Wolfgang Hering
INTRODUCTION
What is strategy?
Strategy content-ethics: principal-agent theory
Strategy context-ethics: enviromental economics
Strategy process-ethics:
What do we want to archieve?
Similarities: strategy process – ethical reflection
12
STRATEGY PROCESS VS. ETHICAL
REFLECTION
EXPLORING FORMAL SIMILARITIES
Orientation towards action principle
Normative character
Clear advise for action
Individual and environmental factors
Changing environmental factors
Exploring functional similarities
Certainty-enhancing structure
Integrating character
EXPLORING PROCEDUAL SIMILARITIES
MANAGERIAL IMPLICATIONS
Intensify connection between strategy and ethics
management in company structure
Broaden perspective of strategist and ethic
managers
Strong strategic identity offers strong possibilies
in ethic orientation
Chances to act in moral upright way
LONG – VS. SHORT-TERM PERFORMANCE
OF WESTERN EUROPEAN, JAPANESE AND
US COUNTRIES: WHERE DO THEY LIE?
Summary by Andrea Abbate
INTRODUCTION
Article written byRobert M. Peterson, C. Clay
Dibrell and Timothy L.
Published in Journal of World Business in winter
2002.
Subject of the article: examining the differences
between Eastern and Western companies
Focus: long- vs short-term orientation
18
MAIN FEATURES
CULTURE AND BUSINESS
The principal motivation to be short- or long-
sighted comes from the national culture
U.S. companies are extremely short-sighted, the
Japanese are long-sighted and in Western
Europe there's not a main trend
UPPER ECHELON THEORY
It's based upon a top management team forming
cognitive maps or mental guides based upon past
personal and work experience
Their experiences are influenced by the
managers' country of origin, that's why is
common to find management team extremely
homogeneous
THE STUDY
Were chosen two global industry: chemical and
transportation, in the period 1986-1995
The industries were categorized basing upon
their country of origin
Measures adopted: for long-term results is
RDINT that is R&D divided by company sales
and for short-term results are return of assets
(ROA) and return of investment (ROI)
RESULTS CHEMICAL INDUSTRY
RESULTS TRANSPORTATION INDUSTRY
CONCLUSION
The Western Europe tends to finish with the
highest means in nearly all of the long- and
short-term measurements in the study.
One explanation is that the institutional forces of
a particular nation can interfere with market
forces and thus, skew data results.
25
THE PSYCHIC DISTANCE PARADOX
Summary by Signý Hermannsdóttir
INTRODUCTION
Article written by Shawna O'Grady and Henry W. Lane
Published in Journal of International Business Studies in
1996
Purpose of article is to analyze the concept of psychic
distance and add to the existing literature
The authors introduce a term they call The psychic
distance paradox
PSYCHIC DISTANCE
“A firm's degree of uncertainty about a foreign market
resulting from cultural differences and other business
difficulties that present barriers to learning about the
market and operating there”
Firms often choose psychically close markets to gain
organizational learning and experience before entering
distant markets
THE PSYCHIC DISTANCE PARADOX
Perceived similarity can cause decision makers to fail
because they do not prepare for the differences
Even in close countries, there may be significant cultural
differences that can affect the ability of managers to
conduct business
Relying only on low psychic distance can result in poor
performance and even failure
The failure lies in the managerial decision-making of the
internationalization process
THE STUDY
Canadian retail companies that had entered the United
States
Phase 1:
Clinical study, 10 Canadian managers asked about their
decision making when entering the US
Literature research comparing the two cultures
Phase 2:
Questionnaire, Canadian/US companies: To discover if the
findings from Phase 1 could be generalized
ICELANDIC COMPANY AND FINAL PROJECT
Icelandic company?
Useful for Icelandic companies that want to start the
internationalization process
Knitting Iceland: Instead of assuming that markets are
similar because they are close, they could focus on the
differences to avoid pitfalls when entering
PSYCHIC DISTANCE, PSYCHIC DISTANCE
PARADOX AND BEHAVIORAL ECONOMICS:
MODELING ENTRY BEHAVIOR IN FOREIGN
MARKETS
Summary by Sigurður Jón Björnsson
ARTICLE
Written by Hamid Hosseini
Published in December 2008 by The Journal of Socio-Economics
Can be found online at: http://econpapers.repec.org/article/eeesoceco/v_3a37_3ay_3a2008_3ai_3a3_3ap_3a939-948.htm
Subject of the article; Modeling MNC (multinationals) entry behavior in foreign markets.
THE CONCEPT OF PSYCHIC DISTANCE - HISTORY
In the article Mr Hosseini gives us a historical discussion on the concept of psychic distance and psychic distance paradox
The concept Psychic distance was initially utilized in 1956
Suggesting that psychically close countries should improve company‟s chances of successes in these markets
THE FACTORS
The factors affecting the decisions of the MNC choosing the next export market or entry mode according to most of those who have been discussing the matter since 1956 are in terms of cultural, business and political differences. i.e.
differences in language
political and legal systems
trade practice
industry structure
level of education
level of industrial development, etc.
BEHAVIORAL ECONOMICS
The behavioral economics tries to make economic
theory consistent with the accumulated body of
knowledge in all social and behavioral science,
taking into account:
sociology
organization theory,
decision science,
and in particular psychology.
In behavioral economics the non-economic
variables are of importance.
Mr. Hosseini´s CONCLUSION
MNC´s decisions about their international projects cannot be made on the basis of psychic distance alone
the existence of the psychic distance paradox suggest that MNC´s decision makers must go beyond psychic distance in deciding about their international projects
He argues that the newly developed field of behavioral economics is capable of explaining the MNC decision while taking into account both the psychic distance, and the psychic distance paradox
Utilizing the behavioral economics based model which was initially suggested by Heiner, we are able to explain all of the above at the same time. This suggests that behavioral economics can be an integral component of the tools used by international business
EXAMPLE OF AN ICELANDIC
COMPANY – Psychic distance paradox
Dominos Pizza Iceland
Venture capital backed Icelandic franchise from DPI with license to open Dominos Pizza bakeries in Scandinavia.
Success in Iceland gaining about 80% market share and strong cash flow. Number one stores in the world
In 1999 decision taken to grow into the market the investors thought they knew the Danish market. Same owners as Dominos Pizza Iceland.
Decision based on market research. Managing director based in Denmark to prepare for 6 - 9 months selecting locations and recruiting key personnel.
Lessons learned
Consumers in Denmark say they take quality over price and do not act accordingly
Community and individual rights are much higher than company's, specially foreign companies rights
Danish people are not looking for American brands they rather buy cheap pizza on the corner “Mamas Papas”.
Employee´s are not willing to take the companies needs over their own. No flexibility in work forece
Labor unions act like gorillas and threaten to put glass in your production if you do no join the union
Icelandic investors pulled out after opening 8 stores and huge losses, taken the debt over by the Icelandic operation and giving the operation to the management
Relationship between the articles
In his article Mr. Hosseini adds to the theory of
psychic distance, and psychic distance paradox
that by adding “behavioral economics” function
into the decision model MNC´s can strengthen
the decision when MNC plan to enter an foreign
market.
Close neighbours and distant friends –
perceptions of cultural distance
Authors:
Malcom Chapman, Hanna Gajewska-De Mattos,
Jeremy Glegg and Peter Jennings Buckley
Published: January 2008
Svanhildur Ásta Kristjánsdóttir
CULTURAL DISTANCE
Should be considered as relative not absolute
Be on bilateral basis
Primarily inspired by Geert Hofstede
Different meaning to:
Culture and induvidual
Cultural value and individual perceptions
Main focus is on individual perception
RESEARCH METHOD
German/Poland vs. UK/Poland
History matters
12 companies in Germany, the UK and Poland
63 face-to-face in depth interviews, initially with
general manager from each of the companies
CONCLUSION
Some issues similiar to Hofstede´s dimensions
German/Poland realationship: Distant past
Deep roots
Less facility to change
The UK/Poland: Some similarity to the Germans and the Poles
Less strongly marked
Less strongly insisted upon
Less complex
Incomplete understanding of the cultural
distance concept
CLOSE NEIGHBOURS – DISTANT FRIENDS
Relationship between Danish and Icelanders
History does matter
Cultual distance
SUPPORT TO THE FINAL PROJECT
IMR was founded in 2001
It provides knowledge on meteorology and
climatological issues
Focus research and development in atmospheric
sciences
IMR is embarking on marketing its services and
core competences in commercial applications on a
wider market
Thanks
The Uppsala model internationalization process model revisited: From liability of foreignness to liability of outsidership
Summary by Brynhildur Lilja Björnsdóttir
INTRODUCTION
Article written by Jan Johanson and Jan–Erik
Vahlne
Published in Journal of International Business
Studies in May 2009
The Uppsala internationalization model is
revisited in the light of changes in business
practices and theoretical advances that have
been made since 1977
Not a meta analysis but rather...
...a collection of research that support the
Uppsala model
THE ORIGINAL UPPSALA MODEL
Empirical observation
How companies go to new markets
Foreign market close to domestic market in
terms of psychic distance
Intermediaries – agents
Sales organizations
Own manufacturing in foreign markets
Model of rational internationalization
REVISITED UPPSALA MODEL
Importance of networks
Experience of executives
Existing business relationships
Developing opportunities
The model should be equally applicable to large
and small firms
THE DIFFERENCE
CONCLUSIONS
Clear evidence of the importance of networks in
the internationalization of firms
The concept of relationship
Emotional dimensions should be explicit
The neglect of opportunities in experiential
learning
ICELANDIC COMPANIES
Capacent
Operations in Iceland, Denmark, Sweden, Finland &
Norway
Just opened in Vietnam
Experienced workers
Future: a Ghostbuster in W-Europe
Varma (Blik by Varma design)
Varma exports other products to Canada, Germany,
Denmark, Norway, Sweden & Faroe Island
Wants to export the new collection to Canada
Little experience – little knowledge of the Canadian market
Future: needs to sell the collection abroad – a lot of money
has been invested in the collection
DOES PSYCHIC DISTANCE
MODERATE THE MARKET SIZE-
ENTRY SEQUENCE
RELATIONSHIP?
BY PAUL D. ELLIS (2008) JOURNAL OF INTERNATIONAL BUSINESS
STUDIES, 39(3), 351-369.
Summary by Jessica Bowe
March 8, 2010
DEFINITIONS
Internationalization process of the firm
The set of decisions that alter both the location
and the mode of control of an organization‟s
international production and marketing
activities. (Ellis, 2008)
Psychic distance
Factors preventing or disturbing flows of
information between firm and market.
(Johanson and Wiedersheim 1975)
FME
Foreign Market Entry
INTERNATIONALIZATION &
PSYCHIC DISTANCE
Two most popular “camps” of
internationalization research: Neoclassical economics
FME emphasis is on market opportunities (i.e.
size of market) and return-on-investment (e.g.
OLI Paradigm)
Uncertainty-avoidance*
FME will be constrained by costs resulting from
uncertainties due to culture or psychic distance
(e.g. Uppsala Model)
*most scholars in the 2nd camp believe psychic distance is the
key driver in a firm’s internationalization process.
HYPOTHESIS
H1: Psychic distance moderates the relationship
between market size and FME sequence.
H2: The ability to detect the moderating effect of
psychic distance will be context dependent, as
follows:
H2(a): seller-initiated exports – larger effect
H2(b): non-seller-initiated exports – weaker
effect
H3: The moderating effect of psychic distance
will be stronger for early FMEs than for later
FMEs
METHODOLOGY
Sample of Chinese exporters; 316 questionnaires
Managers asked to rate psychic distance from
home market out of list of 55 markets
rating of 1 – 100, with China being „1‟
Final database contained information on 924
FMEs from 302 firms
Included export histories, dates of entries,
markets, type of initiations (i.e. seller or buyer-
initiated), control modes, etc.
Results calculated using moderated regression
analysis on the database and other statistical
methods to measure effects of psychic distance
RESULTS
Psychic Distance is…
not the key driver in export-specific FMEs
but rather acts as moderator; market size is
still crucial determinant for exporters (H1)
less influential in importers; exporters and
importers view psychic distance differently –
importers focused on service/price (H2 a/b)
a stronger factor early in the FME process
but gradually diminishes after managers
gain experience and confidence (H3)
CONCLUSION
According to this study…
Exporters are entrepreneurial in nature and
are driven primarily by market opportunities
Psychic Distance is used as a moderator to weigh
the benefits against the costs of entry
This study is not “one-size-fits-all”
it should not be used as an explanation of all types
of FMEs (i.e. acquisitions, greenfields, etc.)
Research on Psychic Distance tends to be
“Eurocentric”
the author stresses the need for more research in
regions beside Europe & N. America
APPLYING THEORY TO
FINAL PROJECT
Internetid.is
Product = SmartDVD touchscreen system for DVD rentals in Iceland
Foreign expansion plans:
Entering the book market in the UK Size of UK book market in 2008 was $ 5.2 billion
(Data Monitor, 2009)
Big differences in retail markets & consumer demographics between UK & Iceland (e.g. internet usage, socioeconomic classes,
commuter culture, population, etc.)
Ways to mitigate Psychic Distance issues market research, UK-based consultant, & pilot
locations
QUESTIONS?
A new framework in the quest for cultural
understanding using Australia, Thailand and
Japan as an example
Summary by Rakel Óskarsdóttir
8. Mars 2010.
INTRODUCTION
Article is written by Robert J. Keating and Neil
R. Abramson.
Published in International Journal of Business in
June 2009.
The purpose of this article, to answer the calls in
the International Business literature for research
to further understand the role of culture in cross-
cultural business.
How? By building a framework using
Temperament Theory and Derrida´s
Deconstruction Method.
PART I: THE TEMPERAMENT THEORY-KTSII
The theory is a variant of the Myers-Briggs Type
Indicator (MBTI) that measures personality type.
Introvert(I)-extravert(E), intuiting(N)-sensing(S),
feeling(F)-thinking(T) and perceiving(P)-judging(J).
David Keirsey named the temperaments, or
leadership styles, Artisans, Guardians,
Idealists and Rationalists.
Understanding our temperament pattern is
important.
LEADERSHIP STYLES
Artisans: (SP‟s – ISTP, ESTP, ISFP & ESFP)
Guardians: (SJ‟s – ISTJ, ISFJ, ESTJ & ESFJ)
Idealists: (NF‟s – INFJ, INFP, ENFJ & ENFP)
Rationalists: (NT‟s – INTJ, INTP, ENTJ & ENTP)
Part II: Derrida Deconstructionist Method
The method recommends an analysis of the
“difference-to-oneself” within each culture.
AN EMPIRICAL EXAMPLE USING
THE NEW FRAMWORK
Australian, Thai and Japanese undergraduate
business students were used as proxies for actual
managers.
The sample size was 48 Australian, 64 Japanese
and 44 Thai students.
Results:
Keirey Results:
Artisan Rational Guardian Idealist
Australia 5% 43% 48% 4%
Japan 29% 28% 30% 13%
Thailand 8% 9% 78% 5%
RESULTS:
Derrida Analysis:
Thai have only one dominant style
Australians have two dominant syles which could be
a problem.
Japan have three co-dominant styles.
Australia versus Thailand:
Guardian predictable and easy negotiating
Rational very strategically oriented
Australia versus Japan:
Artisan deal with concrete problems, is practical and
good in negotiations.
For Guardians deadlines are important and can
easily get impatient.
THE ARTICLE AND ICELAND
The failure of the Icelandic business vikings?
What could be learn?
Study the new markets and business partners
Find out how to apprach
Be patent....
QUESTIONS?
Thanks!
THE IMPACT OF NATIONAL CULTURE
AND COMMUNICATION ON EXPORTER-
DISTRIBUTOR RELATIONS AND ON
EXPORT PERFORMANCEBY ERIK B.NES, CARL ARTHUR SOLBERG AND RAGNHILD SILKOSET
Summary by Sólrún Björk Guðmundsdóttir
March 8, 2010
INTRODUCTION
Article by Erik B. Nes, Carl Arthur Solberg and
Ragnhild Silkoset
Published in International Business Review in
2007
A study that explores the impact of cultural
differences
Developed a model that incorporates the effects of
cultural distance and commitment
THE FACTORS THAT INFLUENCE
ORGANIZATIONAL PERFORMANCE
Cultural distance
Trust
Communication
Commitment
Outcomes of relationship
commitment: performance
THE MODEL
HYPOTHESIS
H1. The degree of cultural distance between the exporting and the
importing nations negatively affects the exporter‟s trust in its local
foreign middleman.
H2. The cultural distance between the exporting and importing
nations negatively affects the communication between the exporter
and its local foreign middleman.
H3. Communication between the exporter and its local foreign
middleman affects positively the trust in this middleman by the
exporter.
H4. Communication between the exporter and its local foreign
middleman affects positively the commitment of the exporter to this
middleman.
H5. The trust that the exporter feels towards its foreign middleman
is positively related to the degree of commitment that the exporter
feels towards its foreign middleman.
H6. Exporter commitment to the local foreign middleman affects
positively the perceived financial performance in that market.
METHODOLOGY
Data collected by 161 groups of 3 third
year business students
Sample of Norwegian export firms
situated in 13 different regions across
Norway
Out of 161 interviews 41 were
disregarded
In all 169 cases of indipendent entry
modes
RESULTS
All of the six hypotheses were supported
statistically
CONCLUSION
The study confirms that national cultural
distance, may impact relations in a
negative way through decreased trust and
communication, and that national cultural
distance influence communication and
trust.
Two-way communication has a key role in
international marketing.
The findings should lead managers within
international marketing to consciously
work to improve and strengthen the
commitment with their relationship
partners.
AN ICELANDIC COMPANY
A large Icelandic pharmaceutical
wholesale company
The company has many foreign suppliers
Was having difficulties getting shipments
from its suppliers to Iceland
The suppliers which they had a strong
relationship with , were the ones that
granted them extended payment terms
and shipped the orders to Iceland.
CULTURE AND INTERNATIONAL
BUSINESS: RECENT ADVANCES AND
THEIR IMPLICATIONS FOR FUTURE
RESEARCH
Summary by Þyrí Dröfn Konráðsdóttir, G12.
INTRODUCTION
Article written by Kwok Leung, Rabi S
Bhagat, Nancy R Buchan, Miriam Erez
and Cristina B Gibson.
Published in Journal of International
Business Studies in February 2005.
Subject of article: State – of –art review of
several innovative advances in culture
and international business to stimulate
new avenues for future research.
OBJECTIVES
1. Cultural convergence and divergence
2. Cultural changes
3. Novel constructs of culture
4. Experimental approaches to the study
of culture
1. CULTURAL CONVERGENCE
AND DIVERGENCE
Joint ventures, international mergers
and acquisitions.
Technology
2. CULTURAL CHANGES
Culture changes slowly
Multi-level approach
3. NOVEL CONSTRUCTS OF
CULTURE
Hofstedes dimensions
Research by Leung on employees in joint
ventures in China
Culture differences are something that is
not possible to overcome
4. EXPERIMENTAL APPROACHES
It becomes easier to define individuals,
groups and etc.
When broadening the understanding of
culture both approaches and researches
highlight the comprehension of the
manifestations of culture such as
education, political systems and methods of
economic exchange.
EXAMPLES OF ICELANDIC
FIRMS
Marel and Össur
Consider culture
In country of entrance
Company they are combining with
THANK YOU