Cross-Cultural Alliances
Experience Helps – Sometimes
• Sometimes cross-cultural joint ventures can reap enormous
benefits, especially for companies that are experienced in
doing them.
• Example :
– Alliance between Corning and Samsung  Success
– Alliance between Corning and Vitro Group in Mexico  Failure
– An example of a successful intercultural collaboration on a
grand scale (Airbus)
• There are subcultures within many country cultures
• It is important to verify whether the cultural
assumptions that you are making are valid for the
specifics of your alliance issues
• Example : The degree of formality
Cross-Cultural Learning Exchanges
• A benefit that is often undervalued in crosscultural alliances is the transfer of techniques
that work in a non-U.S. - based alliance back to
this country’s operations.
• Senior management often expresses a desire for
2-way learning
• workers who are on the front lines operation can
see successful practices in foreign operations of
the same company as a threat to their job
security.
• Example: Motorola Management in Malaysia
The Cross-Cultural Interpreter
• Someone who either comes from or has lived at length in
both your and the partner’s cultures
• Understanding value across cultures
 It’s difficult for an organization to compete in the global arena
without international partners and alliances
 This is not only because of the need to defray immense fixed
costs, but also in order to truly understand cultural perceptions of
value.
 The strategy of selecting the right partner is also important in
developed countries where chances of failure are exacerbated
because of cultural miscommunications.
Riding Political Waves
• Understanding the political culture and issues is critical for
success abroad
• Often times, acceptable profits for one country may be
unacceptable for another
Ex: U.S.A and Japan
• You must assess the situation; Is staying in the protected
environment of your home country the best way to compete
in the future global economy?
The Right Leaders
• It is important to put the right people in the right places
• An executive with a solid understanding of the culture and
the business will more than likely be best suited to run the
subsidiary abroad
• There are differences in rules, legislations, reportings, and
regulations abroad
Globalism and Progression
• English has become the dominant language throughout the
world and more and more people are jumping on board
• It is essential in large multinational companies to have a
strong understanding of English and preferably American
culture
• In terms of progression of a company, when we start a new
subsidiary venture, we must have someone in place that has
been there since the beginning and is capable of carrying on
in an efficient way and that you can rely on
Elements of Country Culture
1) Power Distance: extent that culture accepts power
hierarchy in organiazation
2) Uncertainty Avoidance: extent that corporate culture is
afraid of uncertainty
3) Individualism/Collectivism: common thought of in-groups and
the right people
4) Masculinity/Femininity: male-dominated, female-dominated,
acceptance?
Cultural Differences
• Each culture, including corporate cultures have their own
unique differences and similarities, it is essential for
companies to analyze and develop the appropriate
framework to synergize with these companies if they intend
to do business with them
• Arranging for management teams from other cultures
where professional management is more readily available is
a possibility, con’t 
Cultural Differences
• However, it is important to note that that manager, or
management team will need to take into account the national
management characteristics of the dominant culture
• Choosing the wrong partner, or manager for cross-cultural
management can be devastating to both organizations
Cultural Differences
• Delegating Authority: It is essential that there is a
relationship built on a solid foundation of trust and mutual
benefits, corporate culture must be included in the forethought of the alliance, it is no longer an after-thought of
alliance
2. Delegating Authority
•
•
•
•
Delegate responsibilities to subordinates
Japan
72%
Sweden
70%
U.S.
68%
• Adventurer - needs to get things done by himself
- leads to weak management structure
and lack of management depth
3. Marketing Push and Product Quality
• Abilities of managers to sell product and how these abilities
related to the quality of the product sold.
• The highest reputation for both market push and highquality products
- Japan
- Switzerland
- Sweden
- Denmark
• U.S. is ranked as the second in marketing push and
fourteenth for product quality.
4. Willingness to Create and
Exploit Technological Innovation
•
•
•
•
•
The relationship between the stated readiness of corporations to
exploit innovation and the average number of patents granted per
100,000 inhabitants of the country.
In the past, U.S. has been perceived worldwide as the most
innovative culture and the most embracing of novel ideas and
technologies.
In fact, the survey shows that Japan is a world leader in
technological innovation.
The willingness to exploit innovation is backed by
- huge capital
- low interest government subsidies
- policy supporting industrial research
Innovation characteristics must be interrelated with national
cultural norms.
Planning the Cross-Cultural Alliance
• The key skills of managers.
- work in ambiguous, unfamiliar, cross-functional, and
transcultural relationships.
• The team must include a cultural interpreter.
• The home office has to recognize the constraints as well as
the opportunities in international markets
• Integrate local product needs and management attitudes
and adjust own perceptions of time, leadership, and reward
into the plans
• The omission of these critical perspectives increase the
failure potential of international alliances.
Culture Clash : Making Shoes in China
• American company operating in China
• Problems
- manufacturing process
- not good quality
- late production
- slipping delivery schedules
• Causes
- different cultures
- poor communication and misunderstanding how to make
decisions
- collectivism and femininity vs individualism
Culture Clash: Bringing Swedish
Pharmaceuticals to the U.S.A
National cultural characteristic :
• a strong commitment or responsibility
• sense of identification with the corporate entity
Culture Clash: Bringing Swedish
Pharmaceuticals to the U.S.A
• Purpose of both companies: Open up their market in a
particular area of medical devices and diagnostics.
• U.S company interest: the technology developed by the
Swedish firm
• Swedish company interest: the experience and knowledge
of how to negotiate and succeed in the FDA approval
process and want to penetrate the U.S. market and create
distribution network to generate sales.
Culture Clash: Bringing Swedish
Pharmaceuticals to the U.S.A
• Cause of Failure:
• 1) The U.S. Company does not create a joint implementation
plan with the Swedes and independently decides on the
composition of the team for the new division and staffing it
with scientists and planners.
• 2) The Swedish Company thinks that the U.S. partner which
is large, reputation, and experience in U.S. market know
exactly what they are doing.
Culture Clash: Bringing Swedish
Pharmaceuticals to the U.S.A
• These two points imply:
•
1) Lack of cross-functional teams containing the talent
necessary to achieve the goals of the parties.
• 2) Misalignment of the partners’ objectives.
Culture Clash: Bringing Swedish
Pharmaceuticals to the U.S.A
Getting worse when:
• U.S. team starts to reengineer the Swedish product and the
planners push the FDA application date further out
• the U.S. representatives explain that they only present the
highest quality products with their imprint and scientific
expertise to the FDA
Trust destroyed
The problems can be analyzed both
strategically and culturally:
First
•
The Swedes purpose is low on the Pyramid of Alliances
–
required less capital
–
lower risk
–
less use of human resources
The U.S. Company sees the alliance as being higher up
on the Pyramid of Alliance
-
R&D which is required higher risk
The problems can be analyzed both
strategically and culturally:
Second
•
The Swedish company was a Start-up and their project
was Bet the Farm
•
This means that the willingness to wait for U.S. Company
to bring the product to market is limited.
•
they want to see market entry and revenue increased
within a fairly short period of time. In contrast, U.S.
Company sees the project as Experimental. They allocate
resources, but the wrong ones.
HOW THESE MISALIGNMENTS WERE HANDLED HAS TO DO
PRIMARILY WITH CULTURAL MISCOMMUNICATION, BOTH
CORPORATE AND COUNTRY.
1.
Miscommunication - from he very beginning o the Mature
company. The adventurer mangers might thought that
they know what they are doing or look how successful hey
have been. The FDA process is complicated and takes
time, so best is to wait.
2.
Cultural issue: The Swedes part, “We will let them know
that we are concerned about the loss of a market window
of opportunity”. “We see the stereotype of all U.S>
companies as market savvy and also a cultural reluctance o
confront”
HOW THESE MISALIGNMENTS WERE HANDLED HAS TO DO
PRIMARILY WITH CULTURAL MISCOMMUNICATION, BOTH
CORPORATE AND COUNTRY.
• The American part, they see to gain access to Swedish
technology as the achievement of their primary goal. Once
they had examined and evaluated the technology, obtaining
FDA approval was something they intended to do.
The result is completely breakdown of the
relationship which are no trust, no confidence,
and loss of face and opportunity on both sides.
Migratory and Embedded Knowledge and
Country Culture
•
crucial to understand the issue of cultural differences in the way
information communicated
•
communication will be interpreted differently according to the
rules of each culture
In China-U.S. joint ventures, misunderstanding can be
occurred because U.S. partner will state goals clearly,
namely and access to the Chinese market. Whereas,
the Chinese partner indirectly approaches the
relationship and hind its real agenda
Unintended Knowledge Transfer to China
• Transfer of embedded knowledge also led to strong feeling
of being taken advantage of
EX. Chinese representatives came to visit continuously to
the U.S. Company to update information.