Cross Cultural Management

CCIMP 2013:: Cross-Cultural Management

Nicosia Group

Ad Bhanthong (University College of London UK)

ė šra Nava šinskait Au Auš Navaš inskaitė (Vilnius University Lithuania)

Chrisowalandou Papaioannou (Hochschule Albstadt-Sigmaringen University Germany)

Constantinos Nicolaou (European University Cyprus)

Guillermo Rodriquez Fernandez (University of Leon Spain)

Markus Scham (Hochschule Albstadt-Sigmaringen University Germany)

Pantelis Georgiou (University of Nicosia Cyprus )

Submitted: 12 July 2013

Day 1: Contract Document: •

Capital investment of 50 million Euros with a 50% stake each for ITALIA LTD. and USA LTD.

•

In addition USA LTD. shall bear 20% of the profit for 5 years from the 1st of July

•

ITALIA LTD. shall retain their CEO on the condition that the CFO is a nominee of USA LTD.

•

ITALIA LTD. shall retain their business name while the memorandum shall specify clearly the joint ownership of the two companies.

Introduction – our strategy: Strategy of action is confined to the brief on the characteristics of the USA LTD. namely, risk aversion, diligence, adherence to deadline, strength of the human resource talents and investment potential. Our approach is to arrive at a win-win strategy, while taking into consideration the strengths and weaknesses of ITALIA LTD. Arrive at the negotiation table with a realistic plan, while maintaining diplomacy and being accommodative and positive. We anticipated reaching an agreement of a ceiling of 50 million Euros. First meeting: We made a first proposal of 40 million Euros, anticipating a negotiation to reach 50 million from ITALIA LTD. The unrealistic valuations were made adjustment for in the financial, management, and distribution channels in the USA market terms. The initial agreement was nearly accepted. Meeting was adjourned in order for us to fine-tune the details. Second meeting: The adjustment of proposal has been made according to our original strategy, i.e. 50 million Euro capital investment and to discount any

future risks, a further 20% of profits will be contributed by USA LTD. for the next five years instead of paying a lump-sum of 200 million Euro, as demanded by ITALIA LTD.

We encountered a high degree in the

second round, yet we remained accommodating and positive. The news of fire break-out at ITALIA’S China factory gave us further leverage at this situation, to maintain our offer at 40 million Euros, despite ITALIA LTD. demanding more. The meeting adjourned with ITALIA LTD. demanding 50 million for 50 % stake, 20% for five years, retention of CEO position for 7 years for further individual discussion.

Reflection It was decided to agree to most of ITALIA LTD.’s condition, but we would try to negotiate further as we can, as everything materialized as was planned initially. Third meeting The French intrusion with a higher offer added a high level of uncertainty to the negotiation, but the ITALIA LTD. chose to conclude the deal with us for confidence and trust in our business dealing. Factors for success: Early planning, of a clear strategy, nevertheless being adaptive to the changing situations. We entered the meeting with more positive attitude and a more lucrative deal than the French. Out win-win strategy was that they have achieved their anticipated price while at the same time we have reduced financial uncertainty by avoiding payment in lump-sum upfront. Team member member: Ad Bhanthong Markus Scham Alexander Witt

Neoptolemos Ioannou Aishwarya Baskaran Manushak Melikova

Day 2: Value of the values At the end of the game, 27 different social values were chosen. 22 values were democratically eliminated in order to enter to the last ranking for 5 most important group values, by the order of priority. The selection

process

was

conducted

under

the

environment

of

knowledge transfer, openness and friendliness, and togetherness.

Trust Trust is essential within any social or corporate group in order to ensure smooth functioning. It is a value that encompasses several other qualities. For instances, to trust others and to gain their trust in return, one must portray several other values which include but are not limited to integrity, honesty, communication, empathy, respectfulness, and equality. Trust in turn also influences and incorporates several others values like cooperation, transparency, commitment, equity and relational dependence.

Communication This is our third value; even we could include listening like a part of communication. We strongly think that if you want to understand, get affection, get trust and so on, you will need communication before all the process but not only communication, you will need a good (even great) communication which is a seldom value. Therefore we could consider communication like linker of all other mentioned values. As Edison said, “if there is no communication there is no humanity”

ntegrity Integrity Integrity can be defied as being truthful to oneself, on the attitudes, values and beliefs. It is closely related to being trustworthy, reliable and adheres to the moral principles. This is important in social relationship

because it enable sustainable relationship based on trust and virtue. It is implied that a person with integrity is more likely to accurately behave in the exactly same manner as expresses.

Optimism Optimism promotes a good quality of life through a positive mental attitude. An optimistic person has a tendency to look for the best outcome derived from any situations. Pessimist, on the other hand, sees the event differently. Even when the positive outcome is achieved, pessimist will see it as fluke and no hope for such occurrence again. Being sociable requires a great deal of optimism, as life is too short to be miserable.

Empathy Empathy has a critical value in social perspective as it is about the ability to understand human emotion and respond to it accordingly. It is a supporting tool to enhance positive relationship. Further more, the ability to express empathy reflect a genuine interest in bridging the difference and diversity among people, through effective means of communication.

All in all, we all agreed that trust, communication, integrity, optimism and empathy are the most important factors from the social perspective and they are strongly interrelated. Trust is an essential element in the social interaction and connects tightly with the rest values we think that are important. Communications and integrity also play fundamental roles and push the society growth in a healthy way. Optimism inserts positive energy and creates optimistic atmosphere in the society. Finally, empathy encourages the connection and understanding among the people and assists the growth of above values.

Group members Ad Bhanthong Guillermo Rodriguez Fernandez Izabella Nicolaidou Jingyang Fang

Kyrre Øystien Haugen Manana Malkaz Kurtannidze Manushak Melikova Vaishnavi Sharma

Day 3: As the world is getting smaller- with the aid of the increasing trade volumes, better communication and ease of transportation- cross cultural exchanges also occur much more frequently. Changes in the new environment can bring about positive or negative outcomes depending on the lenses the business travellers put to navigate through the transformation. The subsequent topics will help illustrating such effects cross-cultural transactions can bring about.

M&A It is reported that the common rate of success in M&A globally is around ± 50%. Though a great deal of due diligent was spent prior to the merge, the common failure occurred during the post merge activity. This is explained by the lack of understanding in the intangible factors exchanged between the two companies.

The successful integration will have to consider the pyramid of human culture, as in the very basic form of human nature and move up to the company culture, then personal character respectively. Consequently, an ideal M&A must be a holistic process that engages with the breadth and depth of the entire personnel, rather than leaving it to the managers’ efforts alone.

Cultural Journey

Culture crash can easily occur, as most of the cultural identities cannot be easily detected. It is, therefore, very common among international business travellers to experience some level of culture shock as one is facing with the phenomenon of living in a different environment. The event can be described according to the various stages of: •

Honeymoon- when all appears to be well during the arrival

•

Crisis- when differences in culture start to take effect

•

Intervention- when corrective adjustments are applied to suit the new environment

•

Breakthrough- when all normality is restored.

There are many ways individual can deal with cultural migration such as: •

Taking initiative

•

Understand the difference of cultures

•

Making the correct response to the situation

•

Hardiness must be prevail when all else fails

Ultimately, as experiences prevail, cultural intelligence- a synergy of behavioural skills, knowledge and mindfulness- is widely considered to be an aid to offer the transition from crisis to integration.

Knowledge Transfer Knowledge is one of the most powerful resources for the company. Knowledge is formed on many different aspects as on market/firm specific and explicit knowledge. However, it is considered that tacit knowledge is the most vital element in knowledge transfer, accounted for 95% of the knowledge body.

Transferring knowledge can be both beneficial and problematic, depending on attitude, context and behaviour of the parties involved.

For example, people in the countries high in individuality tend to be reluctant to share knowledge, as apposed to the countries high in collective countries.

Conclusion Culture plays vital roles in international management. In order to achieve success abroad, it is better to navigate the journey with an open mind and ready to be adaptive throughout the whole process of cross cultural exchange.

Day 4: Cultural difference: E & W There are some physical clues that may help identify the organisation culture. Nonetheless, we all still see the world through our eyes differently depending on the interpretation of our own experience against the layers of accessibility in visual artefacts, shared value and basic assumption.

There are three major contingents involved in organisation design: •

Organisation environment

•

Technology used in an organisation

•

Organisation strategy

Functional The collection of people who works together in the similar tasks and skills for the same purpose, for example, accounting, engineering or marketing. Pro Co-ordination •

easy communication among specialist

•

good decision

•

learning

motivation •

Facilitates performance evaluation for supervisor

•

Facilitate performance evaluation for peers

•

Create teamwork

•

Creates a career ladder

con •

serving needs of all products

•

co-ordination of different needs

•

serving needs of all regions

Divisional The combination of different functional units to perform as a group relationship as in product, market and geographic.

Pro Co-ordination •

Quality products and customer services

•

Improved decision-making is to improve performance

•

Customised management and problem solving

•

Facilitate teamwork

•

Facilitate decision-making

motivation •

Clear connection between performance and reward

•

Customize services

•

Identification with division

Con

•

High operating and managing costs

•

Poor communication between divisions

•

Conflict among divisions

East and West culture Cultural values, belief and time dimension, shared among group members in different cultures make people see meanings differently. Therefore, the key will be to be adapted to the market and to revolutionize it in order to keep the balance of the company.

Eastern cultures are strong in mutual harmony and stability. Whereas western is good in relationship making rules. Therefore, the variations in characteristics are always reflected in the way the contracts are written.

The West are specific about the wording, meaning and

binding period. On the other hand, the commitment is seen to be far stranger and bind longer than written words in the East on the contractual agreement.

In the larger context Lessem (1993) and De Beer (1997) have illustrated the world’s culture according to the orientation of work as the following:

World 1 Western Empiricism- focus on learning by doing as in USA, Canada and Austria

World 2 Northern Rationalism- often characterise in bureaucracy system such as France, Scotland and Germany

World 3

Eastern Idealism- emphasize on co-ordination and development of life such as Japan and China

World 4 Southern Humanism- sees co-creation in social community as in Africa and Southern Italy.

Ethic and culture

Ethic, a moral code governing human value and beliefs, can also be a factor contributing to culture shock. Ethic, a cultural goal post, need to be observed as its values can change through time, as the rules, institution evolve.

Theorists have noted two significant schools of thoughts on ethicutilitarian and deontological. Utilitarian focuses the belief on happiness of the majority based on moral ground. On the other hand, deontological put emphasis on the implication of rules, which is most important to the society.

Though people can see thing differently, acculturation always impose the influence of the dominant culture on the weaker one, such as the case of using child labour of which contrasting views are debated in the West and East. However, proper ethical behaviour is always preferred everywhere, both at the public, private and individual level.

Day 5: Business conducting in cross-cultural environment Effective communication carries significant importance in conducting business cross culturally. According to Gibson (2002), it is defined the exchange of meaning to reach the target information as intended.

Communications are exchanged at various levels, from a very small units to inter-departmental, nationwide and internationally.

Among this, good communications rely heavily on other elements beyond the implication of language, norm, value and purposes alone. Effective communications are filtered through the coding and decoding process from one transmitter to the receiver. Ultimately, it is the process that relies on the feedback to assess the meaning and perception then adjusted accordingly among the complex cultural environment.

Internationally, the communication styles can be defied as high and low context. In the high context society, the messages are highly code with the expectation that the listeners equip themselves with the ability to decode implies contextual meaning. Most of the Asian countries, including Middle Eastern and Latin America are considered to communicate in high context. On the other hand, low context explicitly stressed on the precision wordings in order to avoid all the ambiguity of the interpretation. The countries with high score in low context are Germanic and Scandinavians.

In general, it is perceived that verbal communication is a vital to conduct business negotiation. On this note, the styles of verbal communication can be distinguished into elaborating and succinct styles on the high context culture, whereas exacting style is predominantly used in the low context counterpart.

Not all the communication can be successfully transmitted and received. Common barriers, as in language, perceptual, and cultural can block the intended message. Non-verbal communication is believed to be the most important element to dictate the quality of the

communication, as it is accounted for almost 90% of the whole transmission.

Moreover, space will have to be carefully observed as different culture treat the essence of space differently. The four forms of human territory can be described as: public, interactional, home and body territory. Similarly, the interpretation of time and colour in the business environment will need to be observed carefully to ensure the efficiency of non-verbal communication context.

Recruitment & selection in the international context

HR in international context is critical to any business that operate internationally as the company will have to carefully plan the recruitment by taking into consideration many critical criteria. Factors affecting the global selection of the candidate ranges from the strategic assessment of the firm, the host country etiquettes, intracultural issues, needs and company specific needs, against the desirable quality of the candidates.

It is advised that effective global HRD is to consider thorough planning to integrate the international recruitment in the following areas:

•

Orientation / briefing

•

Cross-cultural / cultural training

•

HQ / local mentor

•

Local training / briefing

•

Support issues: housing, schools, spouse

•

Culture shock: cultural toughness of country

•

Coping strategies: active or passive

•

Training, knowledge transfer activities

•

Localisation

All business operations bear substantial costs. Global HR process, though being a long and exhaustive one, is considered to be a calculated business expense to minimise the cost of failure by the lack of planning.

Day 6: Marketing: a cross-cultural perspective Among many definitions of marketing, it is perceived to involve the process to satisfy customers’ need, through the carefully researched strategy leading to a profitable operation whilst remaining socially responsible.

The integral process of marketing activities will have to take in to consideration the internal and external factors. Internally, it will starts with knowing the product, price, promotion and distribution strategy. Concurrently, the marketing research conducted externally will collate the data on consumer/buyer, competitor analysis, together with the market segmentation and positioning.

Most of the marketing strategies fall within the matrix of mixed, global and local contingent versus the implication of product and promotion. This model will help paving the way to see if the company will adopt the standardization or adaptation strategy.

The benefits of standardization are commonly derived in economy of scale,

better

co-ordination

and

control.

On

the

other

hand,

adaptation always brings about enhancing the value delivery, increase sale by exploring their potentials in different market.

However, the key is to find balance between efficiency and effectiveness, for both the production and quality of the products. The conditions that the marketers look to interpret whether to adapt or standardize will be depending on the results of the continuum, situation specific and evaluation. Consumer behaviour plays a major role in defying the marketing strategy because it dictates the decision to make a purchase according to all rationale as in what, why, when, where and how they will make a purchase. Cultural and geographic differences reflects specific pattern of the purchasing behaviour on the interpretation of needs, values, distribution and legal structure.

We have to consider how to communicate to the audiences in order to align the product to the local culture. On this note, emotion and symbolism are integral to the selected strategies used in different cultures according to Hofstede model (1980).

Leadership and culture There are many various meaning of leadership. Yet, there is still no clear definition of what it is supposed to be. Nonetheless, it is appeared that the leaders generally possess the personality trait within their presence.

Ultimately, success is critically associated with leadership. The leader can always make influences to the follower to see the future benefits of the success. Other supportive characters are found to be in the selfconfidence, enjoyment, and the appreciation of knowledge.

Entrepreneurship: a cross-cultural perspective

Entrepreneurship largely associates with the ability to identify the innovative

opportunity

entrepreneurial

matrix

and has

turn

the

event

a close collation

into to

success.

The

the way the

management skills are applied when it comes to the creativity and innovation. Ranking by the order of low to high, they are the promoter, manager/administrator, inventor and an entrepreneur at the top of the pyramid.

In general, the entrepreneur will show the quality of being an agent of change with high motivation to convert the opportunity in creating the new ventures. However, there are risks involve in entrepreneurial activities. These can be defied as financial, career, family and social, including the psychological risks.

According to General Measure of Enterprising Tendencies (GET), entrepreneurship shows high degrees of need for achievement, creativity, desire for autonomy, risk-taking orientation and internal focus of control. It is reported that they are more likely to be triggered by the investment, creativity, autonomy, status, opportunity and money.

For all of the factors above, culture does influence the aspects of entrepreneurship. One approach is the aggregate psychological trait perspective where the entrepreneurship happens in the LPD, LUA, HI and HM. On the other hand, the dissatisfaction with life approach takes the influences from HPD, HUA, LI and HM.

Day 7: Cross cultural aspects on finance Globalisation affects the roles of a CEO in many ways, as the finance strategy will be defined according to the external environmental

challenges. Fluctuation in pricing, trade deficit and new markets are among many factors that the CEO needs to appreciate in order to remain competitive in the challenging cross-cultural environment. On the other hand, internal environment- a catalyst for growth- will have to be monitored to maintain the firm’s competitiveness.

In addition to the common financial analysis tools- the capital budgeting, financial discount and return on investment, the CEO will have to take into consideration the changing rule in financial reporting standard.

In view of a globalized, multicultural word, developing during the last years, the rules of the game have now change for the CFO reflecting a more uncertain, dynamic and global economic environment, in which businesses operate accompanied by rapid technological change.

The future role of the CFO can be summarized into the following major points:

•

Increasing regulations with which the CFO is obliged to confront with and apply.

•

Globalization requires the future CFO to work on a global diversified environment.

•

Technology is rapidly evolving requiring finance processes to change and apply “big data” analytics. With big data we mean millions of statistical data, which cannot be handled by regular computers and which are the result of globalization.

•

The nature of risks faced by organizations are changing, requiring a more effective risk management and a more appropriate corporate ethos.

•

Shareholders management and the face of the organization in the outside world, will become more important for the CFO.

•

CFOs will play a greater role in strategy formulation, becoming an important member of the Board of Directors, since strategic decisions have to be based on the analytical skills a CFO can bring.

•

Reporting requirements will broaden and continue to be burdensome for CFOs.

•

More talented people to staff the finance operations with a global background and experience will be needed, especially in the top finance roles.

All the issues analyzed above will shape a new blend of technical, business and behavioral capabilities that is a broader finance outlook.

Strategic decision among North American and Non-North American Environmental turbulence, entrepreneurial style and organization structure, are all significant predictors of strategic aggressiveness. From the

managerial

characteristics,

age,

education

and

the

job

preference inventory were also significant predictors.

The reason for the differences among the two country regions is basically cultural differences among Dutch and American managers.

Other findings of the study suggest that younger managers based strategic decisions on entrepreneurial style more than older managers.

Managers with accounting/finance experience were more likely to rely on organization structure as a determinant of strategic aggressiveness than were managers with more general backgrounds.

In conclusion, there exist differences in the strategic decision making in the financial institutions industry, among different countries which belong to different cultures, such as North America and North Europe, i.e. USA and Netherlands, due to cross cultural differences.

Building and monitoring trans-cultural competences Competence is one of the most important factors that may explain firm’s existence, boundaries, structure and development at all. In the international arena, the ability to correctly apply the cross-cultural competence in the behavior, attitude and policies will be a enabling factors to the successful implementation of the effective work.

Personal competence is therefore a prerequisite for all personnel operating abroad. The personal attributes and skills in this case is very much relating to the emotional intelligence attribute in which reflects the awareness and the control of the emotion of oneself, coupled with the motivation to interact with others in a strong degree of empathy to arrive at the positive engagement.

Further more, the cultural knowledge- both in general and specific- will have

to

interact

with

the

appropriate

degree

of

institutional

ethnocentrism and cultural distance. In doing this, a new set of adaptive

cultural

behavior

can

be

incorporated

into

environment, to arrive at the cross cultural competency level.

a

new

Though cross-cultural competence can be trained, there are general short coming in international training if not implemented properly. Those factors range between the wrong training, too specific exposure on any single culture, mental block and the lack of supervision in the process.

Therefore, by comparison to many physical products, cross-cultural training will have to be monitored closely. On this note, the purpose of monitoring will have to expand to cover the cultural intelligence of the individual, both pre and post operations. Relatively, the cognitive, motivational and behavioral attributes will be key to the latent construction of cultural intelligence.

Day 8: Economic shift of culture

There are constantly increasing global transactions to boost the nations’ economy, in order to expand the volume of trades beyond the limited home territory. When different cultures collide, economic activities can be affected by the shift in national cultures.

The paradigm of change is a dynamic exchange between values, artefacts, symbols and assumptions. The impact of the shift required for adaptation is depending on the national situational factor, whether it is stable, tectonic or under crisis. For the former, the change can be very minimal. At the higher tectonic degree, the adaptation can be based on the improvement of the existing values. Ultimately, when the country is in crisis, the changes required will have be at the revolutionary level.

One good example can be seen in the Greek economy. The country has always used to relaxed financial discipline, hence accumulate the nation’s debts to the near point of bankruptcy. When the debts were due, the nation was in no position to meet such demand. When austerity was imposed upon the nation, the people rose against such drastic measure on tax collection.

As much as change can be view as constant, the world’s economy is facing change at the rapid rate like never before. Globalization and increasing diverse markets reflect wider arrays of needs and unique characteristics the nations need to shape their understandings and adjust in order to become successful in the rapidly changing environment.

Styles of management and dimensions cultures Success in cross cultural management require the people to cultivate a long-termed global mindset to enrich ones’ cultural intelligence along side the hard socio-economical approach implemented by the management in general. Managing at the transnational level would require more than a rational approach to organise knowledge and strategies. It requires a higher discipline of emotional and irrational to make appropriate decision. It is summarised that global leadership need to manage the following issue well:

•

cultural understanding,

•

organisation,

•

knowledge base

•

ethic

•

countries

•

ambiguity

Among many researches, Hofstede’s model of culture (1980) is widely adopted to assess the effect of cultural values on management. His

model analyse the similarities and differences of the cultures, which trigger the response to the stimuli in the cross-cultural context.

(Source: Adapted from Hofstede, 1980)

The dimensional model of culture will help the manager to understand the reactions of people acting under different norms and beliefs. Though the model can be used as a starting point to assess the likely reaction, it is yet important to imply the detailed evaluation reflected from each encounter. The unknown can be less intimidated whilst corrective responses are being applied with confidence in multicultural background.

Day 9 Cross-cultural negotiation and decision-making

It is important to remember that perception, attitude and stereotyping play key roles in cross-cultural negotiation. For example, the Swiss are seen to be punctual whilst the Germans are task orientated and the American are energetic, etc.

With that foundation of knowledge, one must approach the negotiation process with the following attributes in mind:

•

Preparation

•

Relationship building

•

Exchange of task-related information

•

Persuasion

•

Concessions and agreement

Like in any business situation, negotiation may not go as smooth as plan. With various interests are at stake, a process of decision-making is crucial to the cultural variable scenario. Along these stages a competent negotiator will bear in mind at all times the objective of the negotiation, risk tolerance and locus of control- both internal and external. Regardless of the cultural specific adaptation, most of the negotiator will always remain calm and exercise the wide range of flexibility whilst maintain effective communication and adhere to the organization goals.

Cultures, subcultures and resistance to change

The belief in any culture takes a deeper root through the subconscious level. The path of such beliefs usually derived from the artifact and habit level, then interact with the value and basic belief and assumption.

Psychological factors form a set of behavior to a person enacting in each culture. These behaviors will affect the following attributes:

•

Personality

•

Learning, and

•

Motivation

•

Attitude

•

Perception

In addition to the main culture, subculture is found to be common to a deviant mean in groups- for example, ethnic minority culture among

immigrations and different practice at functional and divisional units in an organization. Generation is also considered to be a subculture in the main national culture, as different generation will normally uphold different views from the generations before.

Subculture is not necessary seen as counterculture. As long as the subculture improves the experience of the core values of the main culture, it will enhance the peripheral values. In orthogonal subculture, the main values of the strong culture remain will be upheld whereas minor differences are allowed in the subculture. It will only be considered counterculture when it holds completely different value against the main culture.

When all is well, people will conduct the relationship as they usually do according to the behavior they accustom to. The interpretation of response to change is a dynamic function between the content, context and process, whether to remain in the same behavioral pattern or resist to the imminent change. In the case of resistance, one must overcome the feeling of identity loss, foreign, unacceptable values, resource fears and irrational fears.

In order to integrate into the different cultures, it is always useful to decipher the culture by absorbing the environment, observe the situation and pay good attention to listening around.

Bibliography

De Beer, J. (1997). South African Myers-Briggs type distribution: A comparative study study. Unpublished doctoral thesis. Rand Afrikaans University, Johannesburg, South Africa. Gibson, C.B. (2002) Building Multicultural Teams: Learning to Manage Homogeneity and Heterogeneity. In N.A. Boyacigiller, R.A. Goodman and M.E. Phillips (Eds.) Crossing Cultures: Insights from Master Teachers. Blackwell Publishing. GET (1988) General Enterprising Tendency. Durham University: Durham Business School. Hofstede, G. (1980) Culture Culture’’s Consequences: international differences in work-related values values. Beverly Hills: Sage Publications.

Lessem, R. (1993) Four Worlds- the Southern African business sphere. In P. Christie, R. Lessem & L. Mbigi (Eds.) African management: Philosophies, concepts and applications. Randburg: Knowledge Resource. pp.17-40.