Impact of Culture
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What is it? Measures?
General management activities
Communication and meaning
International strategy
Multi-cultural management
Entry modes and alliances
HRM (Lincoln Electric)
Culture…What is it?
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Value system
Norms, beliefs, behaviors
Common way of thinking
Society’s communicable knowledge
Society’s characteristics passed on
generation by generation
Power Distance
• Small - trusting, less formal organizations
• Large - mistrusting, hierarchical organizations
Uncertainty Avoidance
• Weak - risk is non-threatening; diversity is appreciated
• Strong - risk averse, diversity is threatening
Individualism
• Collectivist - belonging to groups ideal; group decision
making
• Individualist - individual initiative and achievement;
leadership is the ideal
Masculinity
• Feminine - quality of life; people and relationships come first
• Masculine – results-oriented; performance; assertiveness
Implications for Management
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INTERPERSONAL
Punctuality
Interpersonal distance
Tempo of business
Negotiations
Bribery
Linear vs. circular
communication
High vs. low context
communication
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ORGANIZATIONAL
Organizational structure
Decision making
Leadership
Adaptation of products
HRM policies
Entry mode choice
Location of valuecreating activities
Multicultural Management:
Japanese-American Context
Cultural
Differences
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• Job dissatisfaction
• Lack of commitment
towards company
• Propensity to quit
Evidence of a Problem?
• “If Americans ‘fail’ on a project, they are
never given another chance. Yet, Americans
are rarely explicitly told what their authority
is.”
• “In Japan, formal job descriptions don’t
exist. This can lead to role ambiguity in the
U.S.”
• “One source of frustration for Americans is
the lack of input in decision making.”
Evidence of a Problem?
• “Our engineers leave because of the constraints
placed on innovativeness and flexibility”
• “I seem to have several bosses, which can be
confusing.”
• “My supervisor doesn’t spend enough time
preparing me for this position.”
• “There’s a lack of open, honest communication.”
• “I can’t make your meeting, Wally, because
two of our middle managers just quit.”
How to Address Cultural Problems
Negative
Attitudinal
Outcomes
“Chain of causality”
often neglected
Intermediate
Perceptions …”teachable”?
Supervisory
Behaviors … receive scant attention in
most training programs
Cultural
Differences … basics commonly understood.
Supervisory Behaviors
• Mentoring
– Psycho-social
– Career-related
• Delegation
– Authority-specific
– Task-related
• Communication
– Effectiveness
– Formalization
• Monitoring
– General
– Corrective
– Intrusive
• Interpersonal Exchange
– Exchange Quality
– Acculturating Exchange
– Abusive Exchange
Delegation Model
Procedural
Justice
Commitment
Authority
Delegation
Trust
Job
Satisfaction
Cultural
Difference
Role
Ambiguity
Task
Delegation
Role
Conflict
Low
Propensity
to Quit
Mentoring Model
Psychosocial
Mentoring
Procedural
Justice
Commitment
Trust
Cultural
Difference
Careerrelated
Mentoring
Jobrelated
Feedback
Job
Satisfaction
Role
Ambiguity
Role
Conflict
Low
Propensity
to Quit
Culture and Organizations
• Organizing demands answers to two
questions:
– Who has the power to decide what?
– What rules or procedures will be followed to
attained desired ends?
• Power Distance and Uncertainty Avoidance
are most important
National and Organizational Culture
Low Power Distance
High Power Distance
Autonomy
Need for Authority
Results-oriented
Process-oriented
Low Uncert. Avoid
Ambiguity OK
Open-system decisions
High Uncert. Avoid
Needs security
Closed-system decisions
Leadership
• Perceived levels of power
• Quality/characteristics of exchange
with subordinates
• Communication patterns
• Trust (both ways)
• Delegation of tasks
Organizational Structures/Systems
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Formality of policies and rules
Hierarchical vs. “flat” organizations
Mechanistic vs. organic
Authoritative vs. consensual decision
making
• HRM systems
• Accounting systems
Motivation and Reward
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Formation/role of setting goals
Achievements
Compensation system
Job satisfaction
Organizational commitment
Low
Context
Explicit:
Written/
Spoken
High
Context
Context:
Surroundings/
Non-verbal
MEANING
Communication and Meaning
(Hall & Hall)
Impact of Culture on Strategy
and Entry Mode
Adaptation vs. Standardization
• Product
• Marketing
• HRM
Germany
U.S.
Mexico
Entry
• Resources
• Control
• Risk
Malaysia
Entry, Alliances ,and Culture
• Entry: JVs preferred when:
– Target country-market culturally different (CD)
– Initiating firm high UA
• Structure: Majority ownership preferred when:
– Initiating firm high PD
Impact of Culture on Alliances:
A Strategic Option View
External Forces
Equity
Alliance
Internal Forces
Buyout
Dissolution
Strategic Option View of Alliances
External Forces
Value
Uncertainty
& Risk
High UA
Buyout
Equity
Alliance
High Market
Value
Internal Forces
High PD
Dissolution
Culture and Alliances as Options
• Partnership buyouts more likely when:
– Initiating firm high PD
• Alliance portfolios (U.S. vs. Japan):
– Japanese hold equity alliances longer
– Japanese hold larger number of smaller alliances
– Japanese more likely to invest further/acquire
partner
– Americans more likely to spin off partners (success)
– Americans faster to terminate alliance (failure)
Alliances and Culture cont.
• Longevity: JVs terminate faster/earlier when:
– Partners are culturally different (CD)
• Mistrust: Suspicions of poor performance when:
– Initiating firm high UA
• Trust: Expectations of good performance when:
– Partners are culturally similar
Managing Overseas Assignments
• High Failure Rates…US Expatriates:
– 25% are recalled
– 30-50% under perform
– 77% get “demoted” after returning
• Higher Costs (+ 100-200%):
– Base salary
– Housing, school, travel, spousal allowances
PROS
EXPATS
Knows company & products
Knows country, local market
Strong links to HQ
No spouse problem
Has technical skills lacking in
local market
Cheaper
Rare
Steep learning curve for hightech products
Expensive, spouse problem
CONS
LOCALS
High failure rates
Short-sighted focus
Likely to leave upon return
Weak links to HQ
Dual pressures: company AND
country