6-1 McGraw-Hill/Irwin© 2003 The McGraw-Hill Companies, Inc.,All Rights Reserved.

6-2 McGraw-Hill/Irwin© 2003 The McGraw-Hill Companies, Inc.,All Rights Reserved. Part Two: The Role of Culture International Management, 5th ed.

6-3 McGraw-Hill/Irwin© 2003 The McGraw-Hill Companies, Inc.,All Rights Reserved. International Management, 5th ed. Hodgetts and Luthans Chapter Six Managing Across Cultures

6-4 McGraw-Hill/Irwin© 2003 The McGraw-Hill Companies, Inc.,All Rights Reserved.  EXAMINE the impact of globalization and national responsiveness on international strategic management  DISCUSS cross-cultural differences and similarities  REVIEW cultural differences in select countries and regions, and note some of the important strategic guidelines for doing business in each Objectives of the Chapter

6-5 McGraw-Hill/Irwin© 2003 The McGraw-Hill Companies, Inc.,All Rights Reserved. Strategy for Managing across Cultures  MNC strategies must address the cultural similarities and differences in their varied markets  Globalization  Production and distribution of products and services of a homogeneous type and quality on a worldwide basis  National responsiveness  Need to understand the different consumer tastes in segmented regional markets and respond to different national standards and regulations imposed by autonomous governments and agencies  Need to adapt tools and techniques for managing the local workforce

6-6 McGraw-Hill/Irwin© 2003 The McGraw-Hill Companies, Inc.,All Rights Reserved. Figure 6-1 Globalization vs. National Responsiveness National responsiveness (differentiation) Low High Low Globalization (integration) National responsiveness (Multi-domestic strategy) Globalization strategy Mixed strategy (International strategy) Mixed strategy (Transnational strategy)

6-7 McGraw-Hill/Irwin© 2003 The McGraw-Hill Companies, Inc.,All Rights Reserved. Managing across Cultures (cont.)  Meeting the Challenge  Globalization imperative  Belief that one worldwide approach to doing business is the key to both efficiency and effectiveness  Factors that help develop strategies for different cultures  Diversity of worldwide industry standards  Continual demand by local customers for differentiated products  Importance of being an insider  Difficulty of managing global organizations  Need to allow subsidiaries to use their own abilities and talents and not be restrained by headquarters  Challenges of adjusting global strategies to regional markets  MNC must stay abreast of local market conditions  MNC must know the strengths and weaknesses of its subsidiaries  MNC must give subsidiary autonomy to address local demands

6-8 McGraw-Hill/Irwin© 2003 The McGraw-Hill Companies, Inc.,All Rights Reserved. Cross-Cultural Differences and Similarities  Parochialism  Tendency to view the world through one’s own eyes and perspectives  Problem for managers from advanced economies who believe that their knowledge is sufficient for doing business in less developed countries  Simplification  Process of exhibiting the same orientation toward different culture groups  Orientation reflects one’s basic culture

6-9 McGraw-Hill/Irwin© 2003 The McGraw-Hill Companies, Inc.,All Rights Reserved. Table 6-1 Six Basic Cultural Variations Orientations Range of Variations What is the nature of people?Good(changeable/unchangeable) A mixture of good and evil* Evil (changeable/unchangeable) What is person’s relationship to nature?Dominant* In harmony with nature Subjugation What is person’s relationship to others?Lineal (hierarchic) Collateral (collectivist) Individualist* What is the modality of human activity?Doing* Being and becoming Being What is the temporal focus of activity?Future* Present Past What is the conception of space?Private* Mixed * Indicates dominant U.S. orientation Public

6-10 McGraw-Hill/Irwin© 2003 The McGraw-Hill Companies, Inc.,All Rights Reserved. Cross-Cultural Differences and Similarities (cont.)  Similarities across Cultures  Some similarities across cultures have been uncovered by researchers  Russian and U.S. managers both:  Carry out traditional management, communication, human resources, and networking activities  Use organizational behavior modification successfully  Korean and U.S. employees both:  Are more committed to the organization when they occupy higher level positions, have more tenure in their position, and are older  Are more committed to the organization when the structure is more employee-focused and the organizational culture is perceived in a more positive light

6-11 McGraw-Hill/Irwin© 2003 The McGraw-Hill Companies, Inc.,All Rights Reserved. Cross-Cultural Differences and Similarities (cont.)  Many Differences across Cultures  MNCs have discovered that they must understand the cultures where they plan to do business and modify their approaches appropriately  Foreign subsidiaries differ in the standards used to:  evaluate personnel  provide wages and benefits  Based on Hofstede’s work, can link cultural clusters to compensation strategies  Useful to develop a contingency model to analyze HRM practices on a country-by-country basis  Conventional wisdom and common assumptions about HRM practices in certain countries often are incorrect

6-12 McGraw-Hill/Irwin© 2003 The McGraw-Hill Companies, Inc.,All Rights Reserved. Table 6-2 Cultural Clusters Power Uncertainty Distance Individualism Masculinity Avoidance Pacific Rim Hong Kong, Malaysia, Philippines, Singapore Japan South Korea, Taiwan EU and United States France, Spain Italy, Belgium Portugal Greece Denmark, Holland Germany Great Britain, Ireland, United States

6-13 McGraw-Hill/Irwin© 2003 The McGraw-Hill Companies, Inc.,All Rights Reserved. Cultural Differences in Selected Countries and Regions  Doing Business in China  China is trying to become a power in the world economy  Still difficult for foreign MNCs to do business in China or to make a profit  Technical competence is the primary criterion for doing business in China  Time is the major cultural difference between many Western countries and China  Guanxi  Good connections that result in lower costs, increased business, greater prospecting opportunities, and facilitation of future transactions

6-14 McGraw-Hill/Irwin© 2003 The McGraw-Hill Companies, Inc.,All Rights Reserved. Cultural Differences in Selected Countries and Regions (cont.)  Doing Business in China (cont.)  When dealing with the Chinese, one must:  Be a good listener  Realize that China is a collective society  Understand that the Chinese are less animated than Westerners  Understand that the Chinese place values and principles above money and expediency  Allow Chinese host to signal the beginning of a meeting  Understand that Chinese are slow to decide on a course of action, but stick to the decision once made  Understand that reciprocity is important in negotiations  Not display emotions during negotiations  Rely on a long-term perspective to view negotiations

6-15 McGraw-Hill/Irwin© 2003 The McGraw-Hill Companies, Inc.,All Rights Reserved. Cultural Differences in Selected Countries and Regions (cont.)  Doing Business in Russia  When dealing with the Russians, one must:  Build personal relationships with partners  Use local consultants  Consider business ethics  Be patient  Stress exclusivity  Deal with just one firm at a time  Keep financial information personal  Research the company  Stress mutual gain  Clarify terminology  Be careful about compromising or settling things quickly

6-16 McGraw-Hill/Irwin© 2003 The McGraw-Hill Companies, Inc.,All Rights Reserved. Cultural Differences in Selected Countries and Regions (cont.)  Doing Business in India  Growing number of MNCs have been attracted to India  Government has helped attract foreign investment by lifting bureaucratic restrictions  Most Indian businesspeople speak English  Indians are tolerant of outsiders  When dealing with Indians, one must:  Be on time for meetings  Avoid asking personal questions  Use formal titles when addressing others  Avoid public displays of affection  Use the namaste gesture to greet people

6-17 McGraw-Hill/Irwin© 2003 The McGraw-Hill Companies, Inc.,All Rights Reserved. Cultural Differences in Selected Countries and Regions (cont.)  Doing Business in France  French culture is markedly different from U.S. culture  Social class and status are very important in France  In contrast to Americans, the French are:  More sardonic  More tolerant of different points of view  More inclined to determine a person’s trustworthiness on the basis of personal characteristics rather than accomplishments  Less motivated by competition  More inclined to have highly centralized organizations with rigid structures  Less moved to industriousness and more concerned with the quality of life

6-18 McGraw-Hill/Irwin© 2003 The McGraw-Hill Companies, Inc.,All Rights Reserved. Cultural Differences in Selected Countries and Regions (cont.)  Doing Business in Arab Countries  Arab cultures are distinctly different from Anglo cultures  Arabs have a different understanding of time  Less commitment to punctuality  Arabs are fatalistic  Destiny is in the hands of God, not under the control of an individual  Status in Arabian society determined by family, and not necessarily by personal achievements  Arabs often act on the basis of emotion rather than logic  Arabs rely on elaborate and ritualized greetings  Arabs avoid displays of superiority  Arabs don’t take credit for joint efforts  Arabs rely on administrative channels to get most work done