Impact of Culture 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? Value system Norms, beliefs, behaviors Common way of thinking Society’s communicable knowledge Society’s characteristics passed on generation by generation

Uncertainty Avoidance 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 INTERPERSONAL Punctuality Interpersonal distance Tempo of business Negotiations Bribery Linear vs. circular communication High vs. low context communication ORGANIZATIONAL Organizational structure Decision making Leadership Adaptation of products HRM policies Entry mode choice Location of value-creating activities

Multicultural Management: Japanese-American Context Job dissatisfaction Lack of commitment towards company Propensity to quit ? Cultural Differences

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 Low Propensity to Quit Role Conflict

Mentoring Model Procedural Psycho- Justice social Commitment Mentoring Trust Career- related Mentoring Job Satisfaction Cultural Difference Role Ambiguity Low Propensity to Quit Job- related Feedback Role Conflict

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 High Uncert. Avoid Ambiguity OK Needs security Open-system decisions 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 Formality of policies and rules Hierarchical vs. “flat” organizations Mechanistic vs. organic Authoritative vs. consensual decision making HRM systems Accounting systems

Motivation and Reward Formation/role of setting goals Achievements Compensation system Job satisfaction Organizational commitment

Communication and Meaning (Hall & Hall) Low Context Explicit: Written/ Spoken MEANING Context: Surroundings/ Non-verbal High Context

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 Equity Alliance Value Uncertainty & Risk High Market Value High UA High PD Internal Forces Buyout 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

EXPATS LOCALS PROS CONS Knows company & products Strong links to HQ Has technical skills lacking in local market Knows country, local market No spouse problem Cheaper PROS Rare Expensive, spouse problem High failure rates Short-sighted focus Likely to leave upon return Steep learning curve for high- tech products Weak links to HQ Dual pressures: company AND country CONS