Culture, Management Style, and Business Systems Chapter 5 McGraw-Hill/Irwin© 2005 The McGraw-Hill Companies, Inc. All rights reserved.

Chapter Learning Objectives 1. The necessity for adapting to cultural differences 2. How and why management styles vary around the world 3. The extent and implications of gender bias in other countries 4. The importance of cultural differences in business ethics 5. The differences between relationship-oriented and information- oriented cultures

Introduction Recognize business culture, management values, and business methods and behaviors as important for success in international market Thus, management style has to be adapted in international marketing Importance of developing friendship, human relations, and attaining a level of trust before beginning business negotiations Knowledge of foreign business practices and successful business relations Need to recognize that patterns of thinking, local business tempo, religious practices, political structure, and family loyalty, are different and impact business transactions

Required Adaptation Adaptation is a key concept in international marketing To successfully deal with individuals, firms, or authorities in foreign countries, managers should exhibit: Adaptation is a key concept in international marketing To successfully deal with individuals, firms, or authorities in foreign countries, managers should exhibit: 1.open tolerance, 2.flexibility, 3.humility, 4.justice/fairness, 5.ability to adjust to varying tempos, 6.curiosity/interest, 7.knowledge of the country, 8.liking for others, 9.ability to command respect, and 10.ability to integrate oneself into the environment

Cultural Imperatives, Electives and Exclusives Cultural imperatives are the business customs and expectations that must be met, conformed, recognized and accommodated if relationships are to be successful Cultural electives relate to areas of behavior or to customs that cultural aliens may wish to conform to or participate in but that are not required Cultural exclusives are those customs or behavior patterns reserved exclusively for the locals and from which the foreigner is barred and must not participate

The Impact of American Culture Ways in which U.S. culture has influenced management style include, but are not limited to, the following: 1.“Master of destiny” viewpoint 2.Independent enterprise as the instrument of social action 3.Personnel selection and reward based on merit 4.Decisions based on objective analysis 5.Wide sharing in decision making 6.Never-ending quest for improvement 7.Competition yielding efficiency

Management Styles Around the World Management values, and behaviors vary around the world. Differences in the contact level, communications emphasis, tempo, and formality of foreign businesses are encountered from culture to culture. Ethical standards and sales interactions and negotiation styles differ substantially.

Management Styles Around the World Cross-cultural differences influence management styles in the following areas: 1.Authority and Decision Making 2.Management Objectives and Aspirations 3.Communication Styles 4.Formality and Tempo 5.P-Time versus M-Time 6.Negotiations Emphasis

Differences in Management Styles Around the World 1.Differences in Authority and Decision Making In high-PDI countries subordinates are not likely to contradict bosses, but in low-PDI countries they often do 1.Differences in Authority and Decision Making In high-PDI countries subordinates are not likely to contradict bosses, but in low-PDI countries they often do 2.Differences in Management Objectives and Aspirations towards: Three typical patterns exist: top-level management decisions, decentralized decisions, and committee or group decisions Security especially of lifetime employment Affiliation and Social Acceptance by neighbors and fellow workers Power and Achievement Orientation sought by managers Importance of personal/family life over work and profit

Differences in Management Styles Around the World 3.Differences in Communication Styles According to Edward T. Hall, the symbolic meanings of time, space, things, friendships, and agreements, vary across cultures “In some cultures, messages are explicit; the words carry most of the information. In other cultures... less information is contained in the verbal part of the message since more is in the context” Communication in a high-context culture depends heavily on the contextual (who says it, when it is said, how it is said) or nonverbal aspects of communication Communication in a low-context culture depends more on explicit, verbally expressed communications Hall places eleven cultures along a high-context/low-context continuum

Differences in Management Styles Around the World 4.Differences in Communication Styles Level of formality in addressing business clients by first name Level of formality in addressing your boss by first name Tempo or speed in getting “down to business” Perception of time varies in many cultures 5.Differences in Negotiations Emphasis Differences with respect to the product, its price and terms, services associated with the product, and finally, friendship between vendors and customers

Differences in Management Styles Around the World 6.P-Time versus M-Time M-time, or monochronic time, typifies most North Americans, Swiss, Germans, and Scandinavians Most low-context cultures operate on M-time concentrating on one thing at a time P-time, or polychronic time, is more dominant in high-context cultures P-time is characterized by multi-tasking and by “a great involvement with people”

Gender Bias in International Business The gender bias against women managers exists in some countries Gender bias poses significant challenges in cross-cultural negotiations Women are not accepted in upper level management roles in Asian, Middle Eastern, and Latin American

Business Ethics Business ethics is complex in the international marketplace because value judgments differ widely among culturally diverse groups The Foreign Corrupt Practices Act 1997: Imprisonment for bribery Existence of different levels of corruption, bribery, and fraud Corruption varyingly defined from culture to culture Bribery creates a major conflict between ethics and profitability

Bribery: Variations on a Theme Bribery: Voluntarily offered payment by someone seeking unlawful advantage Extortion: Payments are extracted under duress by someone in authority from a person seeking only what they are lawfully entitled

Bribery: Variations on a Theme Lubrication: Involves a relatively small sum of cash, a gift, or a service given to a low-ranking official in a country where such offerings are not prohibited by law Subornation: Involves giving large sums of money—­frequently not properly accounted for—designed to entice an official to commit an illegal act on behalf of the one offering the bribe; involves breaking the law

Ethical and Socially Responsible Decisions Areas of decision making where ethical issues arise: 1.employment practices and policies, 2.consumer protection, 3.environmental protection, 4.political payments and involvement in political affairs of the country, and 5.basic human rights and fundamental freedoms

A Framework for Ethical Precepts Three ethical principles that provide a framework for distinguishing between right and wrong: (1) Utilitarian ethics (2) Rights of the parties (3) Justice or fairness Does the action optimize the “common good” or benefits of all constituencies? And, who are the pertinent constituencies? Does the action respect the rights of the individuals involved? Does the action respect the canons of justice or fairness to all parties involved?

Culture’s Influence on Strategic Thinking Culture influences managers’ thinking about business strategy The British-American “individualistic” view of capitalism typifies adversarial relationships among labor, management, and government The “communitarian” form of capitalism in Japan and Germany are typified by cooperation among government, management, and labor, particularly in Japan The Chinese emphasis on guanxi (one’s network of personal connections) is a kind of capitalism manifested by culture