Cross Cultural
management
Seyla Tith,
Mba From France
Angkor Khemra University, Chhba Morn City, KSP
April 2011
Introduction
 Brief course description:
Emphasis on the main core elements of culture
in general.
Basic strategy for managing cultural differences.
Case studies in doing business in different
cultures and doing business in Cambodia.
2
Introduction
 Learning outcomes
On a successful completion of this course,
students will be able to:
Understand the importance of culture in
business and general management.
Use basic strategy to manage businesses in
different countries.
Be able to work effectively in a multi-cultural
working environment.
Identify Cambodian business culture.
3
Introduction
 Assessment
Attendance and participations (10%)
Mid-term exam (20%)
Quizz and group assignment (10 to 15 pages)
(20%)
Final exam (50%)
4
Introduction
 Lecture schedule
Sunday 1: The meanings and Dimensions of
Culture
Sunday 2: The meanings and Dimensions of
Culture (2)
Sunday 3: Managing Across Cultures
Sunday 4: Managing Across Cultures (2)
Sunday 5: Case studies and Cambodian
contextualization
Sunday 6: Group presentation
5
Introduction
 Text and supporting materials
Doh P. Jonathan and Luthans Fred,
International Management: Culture, Strategy,
and Behavior, McGraw-Hill, Seventh edition,
2009, USA.
Mead Richard and Andrews G. Tim,
International Management: Culture and Beyond,
Wiley, 2009, England.
Scarborough Jack, The Origins of Cultural
Differences and their Impact on Management,
Quorum Books, 1998, USA.
6
Chapter 1: The Meanings and
Dimensions of Culture
 The nature of culture:
Cultural diversity
Values in Culture
 Hofstede’s cultural dimensions:
Power distance
Uncertainty avoidance
Individualism
Masculinity
Intergrating the dimensions
7
Chapter 1: The Meanings and
Dimensions of Culture
 Trompenaars’s cultural dimensions
Universalism vs. Particularism
Individualism vs. Communitarianism
Neutral vs. Emotional
Specific vs. Diffuse
Achievement vs. Ascription
Time
Environment
Cultural patterns or clusters
8
1.1. The Nature of Culture
 The word « culture » comes from Latin
« cultura », which refers to cult or worship.
 In management aspect, « culture » means
acquired knowledge that people use to
interpret experience and generate social
behavior.
 This knowledge forms values, creates
attitudes, and influences behavior.
9
1.1. The Nature of Culture
 Caracteristics of culture:
1.
2.
3.
4.
5.
6.
Learned
Shared
Transgenerational
Symbolic
Patterned
Adaptive
 If international managers do not know
something about cultures of the countries
they deal with, the results can be quite
disastrous. For example: Asians’ name.
10
1.1. The Nature of Culture
 1.1.1. Cultural diversity
Most importantly, culture affects how people
think and behave.
Therefore, cultural differences have impacts on
international mamangement.
An example of handshake:
American (firm), Asian (gentle), British (soft),
French (light and quick), Latin American (moderate
grasp)
Priorities of cultural values are not the same in
different countries or groups of countries.
11
1.1. The Nature of Culture
 1.1.1. Cultural diversity
Basic believes and behaviors that can directly
affect management approaches:
Centralized vs. Decentralized decision making
Safety vs. Risk
Individual vs. Group rewards
Informal vs. Formal procedures
High vs. Low organizational loyalty
Cooperation vs. Competition
Short-term vs. Long-term horizons
Stability vs. innovation
12
1.1. The Nature of Culture
 1.1.1. Cultural diversity
Case: business customs in South Africa
Arrange a meeting before discussing business
over the phone.
Appointments should be made as far in
advance as possible.
When introduced, maintain eye contact, shake
hands, and provide business cards to everyone.
Women are highly respected.
Make business plans clear.
Patience between proposition and answer.
Keep presentation short and concise.
13
1.1. The Nature of Culture
 1.1.1. Cultural diversity
Using graphics to depict cultural diversity:
Concentric circles
The implicit assumption
that guides people’s
behavior
The norms and values
that guide the society
The explicit artifacts and
products of the society
14
1.1. The Nature of Culture
 1.1.1. Cultural diversity
Using graphics to depict cultural diversity:
Normal distribution: comparing cultures as
overlapping normal distribution and stereotyping
from the cultural extremes
15
1.1. The Nature of Culture
 1.1.1. Cultural diversity
 Using graphics to depict cultural diversity:
The cultural differences are depicted in the first
graphic. The two curves have only limited overlap.
In the second graphic, the tail ends of the two
curves identify the stereotypical views held by
members of one culture about the other.
This stereotype is often exaggerated and helping
reinforce the differences between the two cultures,
thus reducing the likelihood of achieving cooperation
and communication.
This is one reason why an understanding of national
culture is so important in the study of cross-cultural
management.
16
1.1. The Nature of Culture
 1.1.2. Values in culture
Values are basic convictions that people have
regarding what is right and wrong, good and
bad, important and unimportant.
These values are learned from the culture in
which the individual is reared, and they help
direct the person’s behavior.
Differences in cultural values often result in
varying management practices.
17
1.1. The Nature of Culture
 1.1.2. Values in culture
Value differences and similarities across
cultures
There are both differences and similarities
between the work values and managerial values
of different cultural groups.
Personal-value questionnaire (PVQ): 66
concepts related to business goals, personal
goals, ideas associated with people and groups
of people, and ideas about general topics, such
as ideology and philosophy.
18
1.1. The Nature of Culture
 1.1.2. Values in culture
Value differences and similarities across
cultures
The result of the survey found out that
Japanese managers placed high value on
respect to superiors and company commitment.
Korean managers placed high value on
personal forcefulness and low value on
recognition of others. Indian managers place
high value on the nonaggressive pursuit of
objectives.
19
1.1. The Nature of Culture
 1.1.2. Values in culture
Value differences and similarities across
cultures
However, when they examined the managerial
values among the U.S., Japanese, Australian,
and Indian managers, they found that more
successful managers appear to favor pragmatic,
dynamic, achievement-oriented values, while
less successful managers prefer more static
and passive values.
20
1.1. The Nature of Culture
 1.1.2. Values in culture
Values in transition
Do value change over time?
Normally, personal value systems are relatively
stable and do not change rapidly.
However, changes are taking place in
managerial values as a result of both culture
and technology.
Example of Japanese managers who work in
Japanese firms based in the United States.
21
1.1. The Nature of Culture
 1.1.2. Values in culture
Values in transition (Example of stateside Jap)
Lifetime employment
Formal authority
Group orientation, cooperation, conformity, and
compromise
Seniority
Paternalism
Era of personal responsibility at home (in
Japan): dynamism and revitalization of the
society.
22
1.1. The Nature of Culture
 1.1.2. Values in culture
Values in transition: What bout Cambodia? Is
our value changing? If yes, to which direction?
A recall on evolutionary theory of Charles
Darwin, a biological theory which is highly
applicable to human society.
Example of your real life problems and
solutions.
23
1.2. Hofstede’s Cultural Dimensions
 Geert Hofstede is a Dutch researcher who
tried to indentify why people from various
cultures behave as they do.
 He introduced 4 main dimensions of any
culture into his research.
 116 000 respondents from over 70 different
countries around the world. (The largest
organizationally based study ever
conducted.)
24
1.2. Hofstede’s Cultural Dimensions
a) Power distance:

The extent to which less powerful
members of institutions and organizations
accept that power is distributed unequally.

Countries in which people blindly obey
the orders of their superiors have high
power distance. This should be observed at
lower levels or even upper levels.
25
1.2. Hofstede’s Cultural Dimensions
b) Uncertainty avoidance
 The extent to which people feel threatened
by ambiguous situations and have created
beliefs and institutions that try to avoid
these.
 Countries populated with people who do
not like uncertainty tend to have a high
need for security and a strong belief in
experts and their knowledge; examples
include Germany, Japan, and Spain.
26
1.2. Hofstede’s Cultural Dimensions
c) Individualism
 The tendency of people to look after
themselves and their immediate family only.
 Collectivism (in contrast to individualism) is
the tendency of people to belong to groups
or collectives and to look after each other in
exchange for loyalty.
 Hoftstede’s findings show that the wealthy
countries have higher individualism scores
and poorer countries higher collectivism
scores. (GNP based wealth)
27
1.2. Hofstede’s Cultural Dimensions
d) Masculinity
 A cultural characteristic in which the
dominant values in society are success,
money, and things.
 In contrast, femininity is the term used by
Hofstede to describe a situation in which
the dominant values in society are caring
for others and the quality of life.
28
1.2. Hofstede’s Cultural Dimensions
e) Integrating the dimensions
 A description of the four dimensions of
culture is useful in helping to explain the
differences between various countries.
 Hofstede’s research has extended beyond
this focus and shown how countries can be
described in terms of pairs of dimensions.
 Pairings and clusters can provide useful
summaries for international environment.
 Example of pairing between PDI and UAI
29
1.3. Trompenaars’s Cultural
Dimensions
 Another Dutch researcher who also gains a
lot of attention on his research is Fons
Trompenaars.
 He has conducted a research over a 10year period. Over 15 000 questionnaires
were administered with managers from 28
countries.
 Trompenaars derived five relationship
orientations that address the ways in which
people deal with each other. He also
include attitudes towards time and
environment.
30
1.3. Trompenaars’s Cultural
Dimensions
a) Universalism vs. Particularism
 Universalism is the belief that ideas and
practices can be applied everywhere in the
world without modification.
 Particularism is the belief that
circumstances dictate how ideas and
practices should be applied and that
something cannot be done the same
everywhere.
31
1.3. Trompenaars’s Cultural
Dimensions
b) Individualism vs. Communitarianism
 Communitarianism refers to people
regarding themselves as part of a group.
 Individualism refers to people regarding
themselves as individuals.
32
1.3. Trompenaars’s Cultural
Dimensions
c) Neutral vs. Emotional
 Neutral culture is a culture in which
emotions are held in check.
 Emotional culture is a culture in which
emotions are expressed openly and
naturally.
33
1.3. Trompenaars’s Cultural
Dimensions
d) Specific vs. Diffuse
 A specific culture is a culture in which
individuals have a large public space they
readily share with others and a small
private space they guard closely and share
with only close friends and associates.
 A diffuse culture is one in which public
space and private space are similar in size
and individuals guard their public space
carefully, because entry into public space
affords entry into private space as well.
34
1.3. Trompenaars’s Cultural
Dimensions
e) Achievement vs. Ascription
 Achievement culture is a culture in which
people are accorded status based on how
well they perform their functions.
 Ascription culture is a culture in which
status is attributed based on who or what a
person is.
35
1.3. Trompenaars’s Cultural
Dimensions
f) Time
 Sequential: people tend to do only one
activity at a time, keep appointments
strictly, and show a strong preference for
following plans as they are laid out and not
deviating from them.
 Synchronous: people tend to do more than
one activity at a time, appointments are
approximate and may be changed at a
moment’s notice, and schedules generally
are subordinate to relationships.
36
1.3. Trompenaars’s Cultural
Dimensions
g) Environment
 Inner-directed: what-happens-to-me-is-myown-doing attitude.
 Outer-directed: Sometimes-I-feel-that-I-donot-have-enough-control-over-thedirections-my-life-is-taking attitude.
h) Cultural clusters: Anglo cluster, Asian
cluster, Latin American cluster, Latin
European cluster, Germanic cluster.
37
Chapter 2: Managing Across Cultures
 The main objectives of the chapter is to:
Examine the strategic dispositions that
characterize responses to different cultures.
Discuss cross-cultural differences and
similarities.
38
Chapter 2: Managing Across Cultures
 The strategy for Managing Across Culgture
Strategic predispositions
Meeting the challenge
 Cross-cultural differences and similarities
Parochialism and simplification
Similarities across cultures
39
2.1. The strategy for managing
across cultures
 As MNCs become more transnational, their
strategies must address the cultural
similarities and differences in their varied
markets.
 A good example of Renault, a French auto
giant.
40
2.1. The strategy for managing
across cultures
 Strategic predispositions
 Most MNCs have a cultural strategic
predisposition toward doing things in a
particular way.
 Four distinct predispositions have been
identified: ethnocentric, polycentric,
regiocentric and geocentric.
41
2.1. The strategy for managing
across cultures
 Ethnocentric
Ethnocentric predisposition is a nationalistic
philosophy of management whereby the
values and interests of the parent company
guide strategic decisions.
42
2.1. The strategy for managing
across cultures
 Polycentric
Polycentric predisposition is a philosophy of
management whereby strategic decisions
are tailored to suit the cultures of the
countries where the MNC operates.
43
2.1. The strategy for managing
across cultures
 Regiocentric
Regiocentric predisposition is a philosophy of
management whereby the firm tries to
blend its own interests with those of its
subsidiaries on a regional basis.
44
2.1. The strategy for managing
across cultures
 Geocentric
Geocentric predisposition is a philosophy of
management whereby the company tries to
integrate a global systems approach to
decision making.
45
2.1. The strategy for managing
across cultures
 Orientation of an MNC under different
profiles
 Mission:
 Ethnocentric: Profitability
 Polycentric: Public acceptance
 Regiocentric: Both profitability and public
acceptance
 Geocentric: Both profitability and public
acceptance
46
2.1. The strategy for managing
across cultures
 Orientation of an MNC under different
profiles
 Governance:
 Ethnocentric: Top-down
 Polycentric: Bottom-up
 Regiocentric: Mutually negociated between
region and its subsidiaries
 Geocentric: Mutually negociated at all levels of
the corporation
47
2.1. The strategy for managing
across cultures
 Orientation of an MNC under different
profiles
 Strategy:
 Ethnocentric: Global integration
 Polycentric: National responsiveness
 Regiocentric: Regional integration and
national responsiveness
 Geocentric: Glogal integration and national
responsiveness
48
2.1. The strategy for managing
across cultures
 Orientation of an MNC under different
profiles
 Structure:
 Ethnocentric: Hierarchical product divisions
 Polycentric: Hierarchical area divisions, with
autonomous national units
 Regiocentric: Product and regional
organization tied through a matrix
 Geocentric: A network of organizations
49
2.1. The strategy for managing
across cultures
 Orientation of an MNC under different
profiles
 Culture:




Ethnocentric: Home country
Polycentric: Host country
Regiocentric: Regional
Geocentric: Global
50
2.1. The strategy for managing
across cultures
 Orientation of an MNC under different
profiles
 Technology:




Ethnocentric: Mass production
Polycentric: Batch production
Regiocentric: Flexible manufacturing
Geocentric: Flexible manufacturing
51
2.1. The strategy for managing
across cultures
 Orientation of an MNC under different
profiles
 Marketing:
 Ethnocentric: Product development
determined primarily by the needs of home
country customers
 Polycentric: Local product development based
on local needs
 Regiocentric: Standardize within region, but
not across regions
 Geocentric: Global products with local
variations
52
2.1. The strategy for managing
across cultures
 Orientation of an MNC under different
profiles
 Finance:
 Ethnocentric: Repatriation of profits to home
country
 Polycentric: Retention of profits in host country
 Regiocentric: Redistribution with region
 Geocentric: Redistribution globally
53
2.1. The strategy for managing
across cultures
 Orientation of an MNC under different
profiles
 Personnel practices:
 Ethnocentric: People of home country
developed for key positions everywhere in the
world
 Polycentric: People of local nationality
developed for key positions in their own country
 Regiocentric: Regional people developed for
key positions anywhere in the region
 Geocentric: Best people everywhere in the
world developed for key positions everywhere
in the world
54
2.1. The strategy for managing
across cultures
 Meeting the challenge
 Despite the need for and tendency of MNCs
to address regional differentiation issues,
many MNCs are committed to a
globalization imperative.
 Globalization imperative is a belief that one
worldwide approach to doing business is the
key to both efficiency and effectiveness.
55
2.1. The strategy for managing
across cultures
 Meeting the challenge
 One study, involving extensive examination
of 115 medium and large MNCs and 103
affiliated subsidiaries in the United States,
Canada, France, Germany, Japan, and the
United Kingdom, found an overwhelming
majority used the same strategies abroad as
at home.
56
2.1. The strategy for managing
across cultures
 Meeting the challenge
 Despite these tendencies to use home
strategies, effective MNCs are continuing
their efforts to address local needs.
 A number of factors are helping facilitate this
need to develop unique strategies for
different cultures, including:
 The diversity of worldwide industry standards
such as those in broadcasting, where television
sets must be manufactured on a country-bycountry basis.
57
2.1. The strategy for managing
across cultures
 A number of factors are helping facilitate this
need to develop unique strategies for
different cultures, including:
 A continual demand by local customers for
differentiated products, as in the case of
consumer goods that must meet local tastes.
 The importance of being an insider, as in the
case of customers who prefer to buy “local
product.”
 The difficulty of managing global organizations,
as in the case of some local subsidiaries that
want more decentralization and others that
want less.
58
2.1. The strategy for managing
across cultures
 A number of factors are helping facilitate this
need to develop unique strategies for
different cultures, including:
 The need to allow subsidiaries to use their own
abilities and talents and not be restrained by
headquarters, as in the case of local units that
know how to customize products for their
market and generate high returns on
investment with limited production output.
59
2.1. The strategy for managing
across cultures
 By responding to cultural needs of local
operations and customers, MNCs find that
regional strategies can be used effectively in
capturing and maintaining worldwide market
niches.
60
2.1. The strategy for managing
across cultures
 Example of the cosmetics marketing which
varies greatly in consumer use.
 Germans want advertising that is factual and
rational; they fear being manipulated by “the
hidden persuader.” The typical German spot
features the standard family of two parents, two
children, and grandmother.
 The French avoid reasoning or logic. Their
advertising is predominantly emotional,
dramatic, and symbolic. Spots are viewed as
cultural events or art for the sake of money and
are reviewed as if they were literature or films.
61
2.1. The strategy for managing
across cultures
 Example of the cosmetics marketing which
varies greatly in consumer use.
 The British value laughter above all else. The
typical broad, self-depreciating British
commercial amuses by mocking both the
advertiser and consumer.
62
2.1. The strategy for managing
across cultures
 In some cases, however, both the product and
the marketing message are similar worldwide.
 This is particularly true for high-end products,
where the lifestyles and expectations of the
market niche are similar regardless of the
country.
 Example of Heineken beer, Hummer car, and
the Financial Times. Regardless of geographic
locale, these products appeal to all the
consumer niches that are homogeneous.
63
2.1. The strategy for managing
across cultures
 The same is true at the lower end of the
market for goods that are impulse
purchases, novel products, or fast food,
such as Coca-Cola’s soft drinks, pop music,
ice-cream bars, etc.
64
2.1. The strategy for managing
across cultures
 However, it is most necessary to modify
products as well as the market approach for
the regional or local market.
 One analysis noted that the more marketers
understand about the way in which a
particular culture tends to view emotion,
enjoyment, friendship, humor, rules, status,
and other culturally based behaviors, the
more control they have over creating
marketing messages that will be interpreted
in the desired way.
65
2.1. The strategy for managing
across cultures
 The need to adjust global strategies for
regional markets presents three major
challenges for most MNCs.
66
2.1. The strategy for managing
across cultures
 First, the MNCs must stay abreast of local
market conditions and sidestep the
temptation to assume that all markets are
basically the same.
 Second, the MNCs must know the strengths
and weaknesses of its subsidiaries so that it
can provide these units with the assistance
needed in addressing local demands.
 Third, the MNCs must give the subsidiary
more autonomy so that it can respond to
changes in local demands.
67
2.1. The strategy for managing
across cultures
 These are the overall findings of a report
that looked into the development of
customized executive education programs.
 Specifically, there are 10 factors or
guidelines that successful global firms seem
to employ.
68
2.1. The strategy for managing
across cultures
1. See themselves as multinational enterprises
and are led by a management team that is
comfortable in the world arena.
2. Develop integrated and innovative strategies
that make it difficult and costly for other firms
to compete.
3. Aggressively and effectively implement their
worldwide strategy and back it with large
investments.
4. Understand that innovation no longer is
confined in the US and develop systems for
tapping innovation abroad.
69
2.1. The strategy for managing
across cultures
5. Operate as if the world were one large
market rather than a series of individual,
small markets.
6. Have organization structures that are
designed to handle their unique problems
and challenges and thus provide them the
greatest efficiency.
7. Develop a system that keeps them informed
about political changes around the world and
the implications of these changes on the
firm.
70
2.1. The strategy for managing
across cultures
8. Have management teams that are
international in composition and thus better
able to respond to the various demands of
their respective markets.
9. Allow their outside directors to play an active
role in the operation of the enterprise.
10.Are well managed and tend to follow such
important guidelines as sticking close to the
customer, have lean organization structures,
and encouraging autonomy and
entrepreneurial activity among the personnel.
71
2.2. Cross-Cultural Differences and
Similarities
 The way in which MNCs manage their home
businesses often should be different from
the way they manage their overseas
operations.
 Because of this cultural difference, MNCs are
endangered for drifting toward parochialism
and simplification, the two things that
MNCs must avoid.
72
2.2. Cross-Cultural Differences and
Similarities
 Parochialism is the tendency to view the
world through one’s own eyes and
perspectives.
 Simplification is the process of exhibiting the
same orientation toward different cultural
groups.
 Example of a member of the purchasing
department of a large European oil company
who was negotiating an order with a Korean
supplier.
73
2.2. Cross-Cultural Differences and
Similarities
 To avoid the simplification, we must
understand the range of variations in cultural
orientations.
74
2.2. Cross-Cultural Differences and
Similarities
 What is the nature of people?
 Good (changeable/unchangeable)
 A mixture of good and evil
 Evil (changeable/unchangeable)
 What is the person’s relationship to nature?
 Dominant
 In harmony with nature
 Subjugation
75
2.2. Cross-Cultural Differences and
Similarities
 What is the person’s relationship to other
people?
 Lineal (hierarchic)
 Collateral (collectivist)
 Individualist
 What is the modality of human activity?
 Doing
 Being and becoming
 Being
76
2.2. Cross-Cultural Differences and
Similarities
 What is the temporal focus of human
activity?
 Future
 Present
 Past
 What is the conception of space?
 Private
 Mixed
 Public
77
2.2. Cross-Cultural Differences and
Similarities
 Similarities across cultures
 Russians and Americans
 Koreans and Americans
78
2.2. Cross-Cultural Differences and
Similarities





Many differences across cultures
Netherlands
France
Germany
Britain
79
2.2. Cross-Cultural Differences and
Similarities
 HR management aspect
 A partially completed contingency Matrix for
International Human Resource Management:




Germany
Mexico
Japan
China
80