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The International Business Collection

S. Tamer Cavusgil • Michael R. Czinkota • Gary Knight Editors

Successful Cross-Cultural Management
A Guide for International Managers

Parissa Haghirian

www.businessexpertpress.com

Contents
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 PART 1 Chapter 1 Chapter 2 Chapter 3 PART 2 THREE MAIN CROSS-CULTURAL MANAGEMENT CHALLENGES . . . . . . . . . . . . . . . 5 Does Culture Really Matter? . . . . . . . . . . . . . . . . . . . . . 7 Dealing With Culture Shock and Emotional Stress . . . 19 When in Rome, Shall I Do as the Romans Do? . . . . . . 29 THEORETICAL FOUNDATIONS OF INTERNATIONAL AND CROSS-CULTURAL MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 Objectives of Cross-Cultural Management. . . . . . . . . . 41 How Does Culture Influence Management?. . . . . . . . . 53 IMPROVING YOUR CROSS-CULTURAL MANAGEMENT SKILLS . . . . . . . . . . . . . . . . . . . . 73 Cross-Cultural Competence: How Can I Learn and Improve It? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75 GUIDELINES FOR THE SUCCESSFUL INTERNATIONAL MANAGER . . . . . . . . . . . . . . . 91 Communicating Effectively Across Cultures . . . . . . . . 93 International Negotiations and Solving Cross-Cultural Conflicts . . . . . . . . . . . . . . . . . . . . . . 107 Successful Leadership Across Cultures . . . . . . . . . . . . 123

Chapter 4 Chapter 5 PART 3 Chapter 6

PART 4 Chapter 7 Chapter 8 Chapter 9

Chapter 10 Creating Successful Cross-Cultural Training Programs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 131

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Chapter 11 Challenges Beyond Culture When Living and Working Overseas . . . . . . . . . . . . . . . . . . . . . . . . . . . 149 Appendix. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 153 Notes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 163 References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 167 Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 171

Introduction
Two decades ago Western companies could assume that consumers and clients all over the world loved to buy their (Western) products and wanted to be like them. Western ideas, movies, products, and “culture” were expected to have the most important influence in developing economies all over the world. Business researchers expected customers to become more alike, all wanting similar products, leading to greater profits for companies providing them. Well, things have turned out differently. Western companies are confronted with millions of clients, business partners, and customers who like their products, but who do not want to be like them. Suddenly they face millions of self-confident consumers who demand products adapted to their needs and interests. Former developing countries have turned into economic power players who not only have massive market power, but also have millions of well-educated and demanding customers. And culture does its trick. Most of these power players—first of all, China— have taken the way business is done in the West only as an example, not as a system to adopt. Their own cultures and traditions are too strong, dominating many activities, and especially management activities. It is naïve to believe that they should or will be abandoned within the next generation or two. Businesses and managers have felt these changes too. In an interview series with long-term expatriate managers from American and European managers that I conducted 10 years ago, most of my interview partners liked the countries they had lived and worked in and remembered their times in international management very fondly. They could only speak their mother tongue and they all had a “colonial” attitude, perceiving themselves as paternal and knowledgeable educators for their foreign employees who “showed them how business is really done.” This attitude is completely outdated today. Cross-cultural competence and the ability to adapt to local business practices are prerequisites for international business. An increasing number of Western managers

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are busy pleasing consumers in former developing countries and have learned to react quickly to changes in taste and interest. Goals must be achieved, money is at stake, and risks are high, even if management practices in international environments are not familiar. Linguistic misunderstanding, differing opinions, and problem solutions have to be dealt with and can often lead to confusion and stress. Many international managers therefore speak foreign languages, because if they do not, new clients can hardly be found and business will suffer. Business processes, too, had to be adapted to local preferences. In cases where this does not happen, business is lost and consumers are often gone forever. Still, many businesses are not fit for this challenge. Companies set up business processes in the past and did not anticipate that culture and adaption to other cultures would play such an important role. International managers are in a dilemma. They know that they should adapt their thinking and processes to other cultures, but get little support in doing this. But how can this be done efficiently? The number of questions to be answered is seemingly endless: • How can international managers find out about the cultural preferences of my international clients, employees, and suppliers? • Do they need to learn a foreign language or do all foreign business partners speak English? • When is it time to adapt to local standards and when can they stick to their own country’s rules and regulations? • How can cross-cultural conflict and misunderstandings be avoided? • How can culture shocks be avoided? • How can the corporation succeed in a globalized world? In this book I want to provide answers for these questions. Building on my experiences in bridging cultures for the last few decades this book discusses the most important challenges when doing international business. It targets practitioners in the field of cross-cultural business and communication. The book not only discusses the general aspects of how cultures can differ, it also shows which effects these differences can have on business processes and business success.

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Successful Cross-Cultural Management: A Guide for Managers will show you what happens when you are exposed to a foreign culture for the first time and how you can react. It will help you find out about differences between your cultural programming and others and will show you how to deal with culture shock. This book also provides an overview of which aspects of foreign cultures can really differ from your home culture. The main part of the book discusses challenges that international managers will face in their overseas workplace. Here I will provide suggestions on how to deal with cross-cultural negotiations and team building and what international business ethics really means in a modern multinational corporation. Finally I will present some guidelines on how to improve your cross-cultural management skills and how to prepare a multinational organization for a cross-cultural business future. My aim is to provide practical advice on how to address and deal with cross-cultural challenges in business as well as in other aspects of life. This book is therefore not only written for international managers and students of international managers, but also for people who are interested in cross-cultural friendships and relationships. Parissa Haghirian Sophia University Summer 2011

PART 1

Three Main Cross-Cultural Management Challenges

CHAPTER 1

Does Culture Really Matter?
Globalization comes with many cross-cultural challenges. A few decades ago multinational companies could assume that the international business world was based on Western standards and they could export their traditional management styles around the world. But the picture in recent years has changed fundamentally. In particular, the rapid and successful development of former developing countries has strengthened the confidence of companies in these markets and will lead to the development of many culturally different management styles. Today these markets still present great business opportunities for many Western firms, as the attitude toward business and management practices have changed very much. To succeed in international business these new expectations must be met. Many emerging markets show a lot more confidence in their “own way of doing things” and expect their suppliers in the West to do so as well. Cross-cultural issues therefore invade every aspect of business and will continue to do so. Western managers need to question their traditional and familiar management practices and may have to adjust them to conform to other cultures to secure long-term business success. But this is a lot more challenging than many multinational corporations realize. For example, Toyota, a company that very successfully internationalized and adapted to consumer wishes worldwide, still found it extremely difficult to react in a Western (or non-Japanese) way to a public-relations disaster. Even if companies perceive themselves as modern and international, their corporate culture and management operations are dominated by the home country culture of the organization. Cross-cultural management processes therefore play an increasingly important role in international management. But only in recent years, culture and cultural difference between management styles are being more widely discussed in international management research

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and in organizations. The reason: too big the financial losses based on cross-cultural mistakes, too high the number of misunderstandings or conflicts. Although the idea of “cross-cultural management” is more accepted, it is very difficult to develop this fundamental theory or to define rules or measures to prevent errors. The reasons are found mainly in the complexity and exoticism of the subject. The more markets in which a company operates, the more multicultural staff, and their attitudes must be observed and learned. This makes it even more difficult for companies to prepare employees for possible challenges in international business. This chapter introduces basic ideas about culture and how influential it is on management processes. The focus lies on national culture, and I will explain major aspects to consider when doing business overseas. Upon completion you will understand • why business is not the same in every country; • why culture plays an increasingly important role in international management; • which aspects of culture are most important when managing overseas; • why we experience cross-cultural conflicts; and • why it is so difficult to change your cultural program.

Doing Business in Foreign Countries
“Business is the same all over the world” is a statement that we still hear very often. But this is not quite true anymore. As the following case study shows, business is very clearly about money all over the world, but the way it is conducted differs according to culture. The following conversations are typical cross-cultural negotiation between U.S. and Asian business people.

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U.S. Negotiations in Japan
Sam Brown is an international sales representative for a U.S. firm. He visits Japan to meet Mr. Yamamoto, who is a procurement manager at a big Japanese firm. When he enters the meeting room right at four o’clock, the meeting time, Mr. Yamamoto awaits him already. To lose no time, right after a short greeting Sam starts to discuss major issues. Brown: I printed out an overview on our latest products, their prices, and their features. Maybe you would like to have a look at them? Yamamoto: Today is a nice day. Brown: Well, yes. Nice weather, a bit hot today. But let’s get back to the topic. I think this product is the one that your company was most interested in. Yamamoto: Hhmm. Brown: I can only recommend it. It’s our best seller. Yamamoto: Hmm. Brown: Is price the problem? Yamamoto: Well . . . Brown: Of course, I can give you a better price if you like. Yamamoto: I will have to talk to my superiors. Brown: Is it the price? Well I can give you a 5% discount if you take a certain amount. Yamamoto: Yes. Brown: Do we have a deal? Yamamoto: Hai. I will discuss this with my superiors. Brown: Great! On the way back to the hotel Mr. Brown calls his manager back in the United States and tells him that he is very sure they got the deal, but that he had to lower the price a bit. He is very content with the meeting’s outcome. What he does not know is that the deal will not take place.

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So why did Sam not get the deal? From his point of view he did everything right. He was on time, talked openly and in a friendly way about the company and its products, promoted and praised the product, and even gave a discount in the end. He is a successful salesperson, and his style has proven very effective over the past years. Mr. Yamamoto, however, did not perceive the meeting with Sam the same way. He and his colleagues did not know the U.S. company very well yet. He was expecting to build a stronger relationship with Sam, learn more about the company and its products, and after this, go back to his colleagues to report. They would then make a decision about whether to buy the product or not and let Sam know in a few weeks. Sam’s direct selling was perceived as aggressive and impolite and left a bad impression with Mr. Yamamoto. Stories like this are common in today’s international business. Deals fail and the reasons are unclear. Both negotiators, Sam and Mr. Yamamoto have a very particular idea about how business is done. In the past and during most of their careers both have been very successful with this approach, advanced far in their careers, and cannot imagine that business can be completely different somewhere else. So they both continue in their traditional ways and when meeting, obvious differences cannot be dealt with.

Experiencing Cultural Challenges When Doing Business
At the beginning of every cross-cultural management process is an encounter between two or more members of different cultures. In this encounter both participants communicate, watch, and react to each other’s behavior. This behavior and communication is often not interpreted in the correct way, but according to the cultural program of the observer. Because it is difficult to understand the other’s thinking, interpretation is often wrong and does not allow insights into the attitudes and values of the communicators or interactors. These misunderstandings do not lead to the expected outcome. Sam did not sell his product; Mr. Yamamoto, on the other hand, experienced frustration with the U.S. negotiation style. Future business interaction may also be impossible after that meeting. This cross-cultural business negotiation clearly failed. Many international business encounters end

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in emotional stress and the feeling of helplessness. And, even worse, both communicators do not get information on how to behave differently or to interpret the situation. Negative stereotypes or prejudices are strengthened and can even lead to a complete collapse of the business relationship between the two companies. In international management culture is certainly not the only important factor.1 Next to cultural differences, local industry structure and business practices, laws and the economic situation, and customer taste and consumer behavior also play important roles when developing business practices for overseas markets or when attempting to sell a product in a foreign country. Thus, cross-cultural management is a topic often neglected in business schools and management programs or considered a “soft skill,” less important than hard skills like operations management or other classic management disciplines. Many managers still believe that business practices and industry rules are the same in most places and cannot really differ so much even when doing it on the other side of the globe. So, culture and cultural differences do matter in international business and if ignored can pose serious barriers to international business success. But what is culture really about and how does it influence our management practices?

Does Culture Really Matter?
There are numerous concepts describing culture and how it influences our behavior. The most popular is the iceberg model, in which we can see that only some aspects of culture are visible to us and many more are hidden. Like an iceberg where we can only see the top reaching out of the water, culture only shows us a few visible aspects and hides most of it under the sea (or in our case in societies that we visit or encounter). Culture can best be described through three main concepts: values, attitudes, and behavior. All three signify culture and allow us to differentiate from other cultures. “The cultural orientation of a society reflects the complex interaction of values, attitudes, and behaviors displayed by its members.”2 Values and attitudes shape and influence actions and behavior of human beings. They cannot be seen and understood easily. The visible parts of culture are behavior, language, symbols, rituals, and artifacts.

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Symbols Attitudes

Behavior

Values Artifacts Rituals

Language
Figure 1.1. Layers of culture.

Values
“Values . . . reflect general beliefs that either define what is right and wrong or specify general preferences.”3 Values clearly define priorities set in a society; they tell us which behavior is accepted in a society or country and which is not. They are often expressed in forms of goals or ideals and give us guidelines for orientation. On top of a societal value system each person may have a personal value system based on upbringing or religious orientation. Values are so deeply embedded in our psyche that we do not question them at all. A classic example of a Western value is self-fulfillment or the wish, intention, or even the feeling that it is an individual’s right to live exactly the way he or she thinks is most fulfilling. Many Asian cultures, however, do not look at the world in the same way; living in cooperation and harmony with other members of society is most important, even if one’s own wishes cannot always be fulfilled.

Attitudes
The second layer is attitude, which can be described as that which “expresses values and disposes a person to act or react in a certain way toward something. Attitudes are present in the relationship between a

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person and some kind of object.”4 Attitudes express how certain aspects are managed; for example, the cooperation between people in a firm or the interaction between individuals. They can be best expressed with the phrases, “It is better to” or “I should” or “I’d rather.” In our example we can define the attitudes in U.S. society as follows. “It is better to fulfill my dreams even if other members of society do not agree,” meaning that it is socially acceptable to take care of one’s well being first, not thinking of others right away (of course this does not naturally mean that other individuals have to be treated badly). In Asian societies, however, this is not an acceptable attitude. Here taking care of one’s own wishes without considering others is considered selfish and ignorant and will lead to strong negative reaction in these societies, such as dismissal from the group or organization. The attitude most acceptable here is, “It is better to find solutions for individual problems that are in accordance with other members of society” or “I’d rather listen to my peers, parents, and group members to support society by appropriate actions.”

Behavior
Both values and attitudes build the foundations of our behavior. Behavior can be defined as “any form of human action.”5 This behavior also includes communication and any form of human interaction. Behavior is the visible part of culture—it is the tip of the iceberg. In our case study differences in values and attitudes lead to very different actions in the end. Whereas Sam likes to promote his ideas and consequently his product, his Japanese counterpart expects to be treated and taken care of as a group member. Sam speaks out openly about what he expects, would like to happen, and can do, but Mr. Yamamoto is vague and refers to group members.

Other Visible Parts of Culture
Next to behavior and communication, which we can easily observe in our business lives, there are other visible parts of culture that should not be neglected.

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Table 1.1. Behavior, Attitudes, and Values as Expressions of Cultural Programs Layer of culture
Behavior and communication (visible) Attitude (invisible)

Example of Western culture (USA)
Contradiction, if an opinion is not shared, pushing one’s idea or opinion It is better to fulfill one’s dreams even if other members of society do not agree or like it Self-fulfillment

Example of Asian culture (Japan)
No open contradiction, attempts to ease conversation It is better to find solutions for individual problems that are in accordance with other members of society Living in harmony with other members of society

Values (invisible)

Artifacts Artifacts or things play an important role in every culture. Things surround us and often have similar meanings in many cultures. Status symbols also fall in this category. They show and communicate a certain status of their owners and allow them to communicate aspects of their lives nonverbally. Cars, for example, are used to transport individuals, but can also express status and financial success. Typical Western status symbols in corporations are corner offices, although often not understood as status symbols in other countries. In Asia, where employees—even managers—work in cubicles in a big office, working separately in a different room is sometimes perceived as antisocial and leads to fear of missing out on important company communication and rumors. Symbols Symbols, however, can also be words, gestures, signs, or colors that hold a special meaning for members of a certain culture. They are often visible when visiting a foreign culture, such as signs on religious sites, colors of textiles in a country, or certain gestures or expressions that are unique in a certain place, but cannot be understood without explanations. The color white, for example, symbolizes purity in many Western cultures, but does not have this meaning in other places. Symbols can be very easily

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misunderstood and have often led to misunderstandings in cross-cultural management practices. Especially in international marketing, all symbols, colors, or objects used in advertising should be carefully checked by local employees and market researchers. Rituals Rituals are conventionalized patterns of behavior in certain situations, for example, certain routines when greeting or introducing a person. Rituals play a very important role in supporting cooperation between members of a culture by having very clear instruction on how they should be performed. They provide guidance to manage and solve difficult situations and major questions in each community. A good example is the marriage ritual, which differs greatly among cultures, but in all of them shows how important the bond between two people and families is for society. In a corporate context, rituals support cooperation among company members and the coordination of management practices and tasks. Company dinners, for example, improve relationships between clients and the firm, increase trust, and strengthen the relationships between all participants. Many corporations have special events to greet and integrate new employees and show them that they are welcome to the firm and help them become part of the community. Here rituals are used to support corporate goals in communicating appreciation and support.

Why Are There Cross-Cultural Conflicts?
The simple model explains how our behavior and our management practices are influenced by our national culture. But how does cross-cultural conflict occur? How can a cross-cultural encounter end in conflict? When looking at Table 1.1 again, we can see that most parts of the model are not very obvious to people of the other culture. Meeting people who have a different cultural background, we only see their behavior but hardly ever learn much about their values and attitudes. In our earlier example an American’s direct expression of interest or in other cases disagreement may lead to shock and stress when being observed by a Japanese individual. On the other hand, a Japanese individual’s indirect and vague way of communicating and expressing opinions may lead to an

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impatient reaction on the U.S. side. In any event both parties misunderstand each other. The different ways of dealing with disagreement are obvious; what is not understood between the negotiation partners are the attitudes and values behind them. These differences, however, help us understand the other’s behavior, maybe show more patience, and also develop new practices, communication styles, and processes that may be more useful in reaching negotiation goals. Little misunderstandings as described earlier can lead to major conflicts if they are not addressed and taken care of by all participants. In today’s international management, these misunderstandings increase and often have very negative effects on the workplace, its practices, and in the long run, also on profits and market success of a firm.

Table 1.2. Explaining Cross-Cultural Conflict Visibility to members of other cultures
Visible

Level

Example Western culture (USA)
Contradiction, if an opinion is not shared

Crosscultural conflict potential
Different reactions can lead to misunderstanding or even conflict Interpretation of U.S. behavior is based on Japanese values and attitudes Interpretation of Japanese behavior is based on U.S. values and attitudes

Example Asian culture (Japan)
No open contradiction

Behavior, communication (can be observed) Attitude (hidden to the other party)

Invisible

It is better to fulfill one’s idea even if other members of society do not agree

It is better to find solutions for individual problems that are in accordance with other members of society

Invisible

Values (hidden to the other party)

Self-fulfillment

Living in harmony with other members of society

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Recognizing Your Own Cultural Program
Cross-cultural misunderstandings often have very deep roots. Even if we speak with people in English and communicate directly what we want to say, the message seems to come across as different. Recognizing the strength of our cultural programs in business is a difficult task. “Our company is very successful and we have always done things like this,” “We use international standards,” or “How can others not see that this is the best way to do things?” are sentences that I often hear from MBA students or consulting clients when discussing cross-cultural conflicts in their workplace. Most of us, being born and bred in a very particular cultural environment, can only perceive and understand the world, our deeds, and our counterparts’ reactions through our own cultural perspective. This perspective is a strong filter through which we understand, interpret, and process information in a particular way. And in most cases, we do not recognize this filter. Our own culture and way of doing business seems so very logical and “normal” that we can hardly think of a better or different way of doing things and managing in our firms. But this view is also true for managers who grew up on the other side of the world; they have their own (very logical and often very successful) ideas about how to do business.

Summary
When we speak of culture in a business context, we talk mostly about national culture. Culture is a concept that is difficult to describe and analyze. To simplify things, we can divide culture into visible and invisible parts. Visible parts of culture are first of all our actions, communication symbols, artifacts, and rituals. Beyond those visible aspects culture consists mainly of invisible aspects such as values and attitudes. • Values are defined by very general rules that define acceptable and nonacceptable behavior (good and bad, right or wrong) in each culture. An example of a value is individualism, which can be found in most Western industrialized countries, or the wish to seek self-fulfillment. In Asian cultures, however, the wish

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to create a harmonious environment with one’s peers is a most important value that influences all other cultural aspects. • Attitudes are based on those values and refer to an expression of a value as it relates to a tendency of behavior. They are expressed mostly by sentences beginning with, “It’s better to . . .” or “I should . . .” An example for an attitude based on individualistic values is the intention to take care of one’s interest even if other members of a society do not support this. • The most important and visible aspect of a culture is behavior. Behavior is based on values and attitudes, which strongly define our behavior. Action based on individualist values and attitudes are contradictions in a discussion of performing very individualistic tasks. Behavior is the most visible part of culture; values and attitudes cannot always be seen or understood as easily. Cross-cultural misunderstandings are based on the fact that we only see each other’s behavior, but not the attitudes and values that explain it. If a Western person with individualistic values and attitudes openly contradicts other team members or even his or her boss, this may be considered very rude and inappropriate by an Asian person who often has more group-oriented values and attitudes and would rather not speak up to avoid possible conflict. In most cases only behaviors or messages are exchanged, whereas values and attitudes are hardly communicated. International managers can inadvertently make mistakes when communicating with foreign business partners or employees.