UNIVERSAL STYLE OF MANAGEMENT ACROSS NATIONAL/CULTURAL BOUNDARIES?

Manuel Lucangeli MA International Business Cross- Cultural Management London Metropolitan University April 2004

Universal style of management across national/cultural boundaries?

Contents
1. Introduction...............................................................................................................3 2. Corporate Culture across national/cultural boundaries.............................................4 3. Management “best practices” ..................................................................................6 4. Market Adaptation....................................................................................................7 5. HRM and cultural diversity......................................................................................8 6. Strategies for managing cultural differences: ethnocentric vs. synergistic organisations...............................................................................................................11 7. Conclusion..............................................................................................................13 8. References...............................................................................................................16

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Universal style of management across national/cultural boundaries?

Drawing on the Ikea case and on relevant research and theory in the field of cross-cultural management discuss how far you think it possible for an international corporation to adopt a “universal” style of management applicable across national/cultural boundaries

1. Introduction
Contact across cultures is becoming more common than ever. People around the world wear similar clothes and listen to similar music. Companies from different places in the world use the same technology and operating methods and sell the same products and services.

The idea underlining this assumption is that technology drives the world towards convergence and as a result of that, boundaries between countries disappear (Ohmae, 1989), and global markets emerge, which are characterised by standardised consumer products on a large scale (Levitt, 1983)1. In the words of Ohmae (1989, p. 80)2, “the pressure for globalization is driven not so much by diversification or competition as by the needs and preferences of customers. Their needs have globalized…”

This globalisation of culture is showed by many examples nowadays: for instance, one person who lives in England may drive a German car, wear Italian clothes, have a Japanese digital camera, eat Chinese food, and drink French wine.

1

Levitt, T. (1983) ‘The Globalization of Markets’, In Bartlett, C. A., Ghoshal, S., and Birkinshaw, J. (2004) Transnational Management: Text, Cases, and readings in Cross-Border Management, McGraw-Hill/Irwin, pp. 287-297. 2 Ohmae, K. (1980) ‘Managing in a Bordeless World’., In Bartlett, C. A., Ghoshal, S., and Birkinshaw, J. (2004) Transnational Management: Text, Cases, and readings in Cross-Border Management, McGraw-Hill/Irwin, pp. 71-80.

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Universal style of management across national/cultural boundaries?

In that context, frequently firms undertake foreign expansion in order to exploit a competence they have developed within the domestic market. The IKEA case shows a similar company’s approach to new markets, and in that regard, the case study suggests that “the belief of those in IKEA is that their way of managing has universal appeal” (Grol, Schoch and CPA, 1997, p. 100).

On the other hand there are those who maintain that the globalisation process is just going “on the surface” (Schneider and Barsoux, 2003, p. 3), but cultural differences remain between cultures, defining differences in management styles and practices.

In the context which has been described and considering corporate culture and management “best practices”, this essay will discuss how far it possible for an international corporation to adopt a “universal” style of management applicable across national/cultural boundaries.

2. Corporate Culture across national/cultural boundaries
The decision within IKEA was that “their way of managing has universal appeal”. In this sense, they adopted an international style of management, which preserved a “Swedish flavour”(Grol, Schoch and CPA, 1997, p. 100), in agreement with the idea that their own corporate practices have an advantage on other styles of management.

Considering that “national culture can interact with corporate culture in ways in which may converge, creating opportunities for competitive advantage”, “Ikea leverages the Scandinavian reputation for egalitarian and pragmatic values reflected

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Universal style of management across national/cultural boundaries?

in its low cost, home-assembly and unfussy designed products” (Schneider and Barsoux, 2003, p. 73).

IKEA built a strong corporate culture based on some core values of the company’s founder, which are basically the same in every country in which IKEA operates (Grol, Schoch and CPA, 1997, p. 93).

The term corporate culture refers to the “shared beliefs top managers in a company have about how they should manage themselves and other employees, and how they should conduct their business” (Lorsch, 1986, p. 2)3. Within a strong corporate culture the vision is shared by most of the company's employees.

Nevertheless, although strong corporate cultures may influence national culture, “however objective and uniform we try to make organisations, they will not have the same meaning for individuals from different cultures. The meaning perceived depend on certain cultural preferences” (Trompenaars and Hampden-Turner, 1997 p. 13).

Those differences between cultures are related to values and norms, which are product of a number of factors at work in a society. Nationalism and language differences are important factors that affect the link between cultures, but also these factors include the political and economic philosophy, the social structure of a society, religion and education (Schneider and Barsoux, 2003).
3

Lorsch, J. Cited in Ming, T. and Wong, S. (1999) ‘Culture and International Business’, Faculty of Business Administration Simon Fraser University Burnaby, B.C. CANADA. Paper adapted from Tung, R.L. (1995) “International Organizational Behavior”, In F. Luthans (ed) Virtual O.B. Electronic Database, McGraw-Hill Inc., pp. 487-518. It was presented in May 21, 1999 at the symposium, The Importance of Cultural Diversity in International Business and International Relations, sponsored by the Center for International Business at Western Washington University in Bellingham, Washington. From http://www.cbe.wwu.edu/CIB/papers/tung.PDF

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Universal style of management across national/cultural boundaries? Therefore, differences in values, perceptions and communications styles make important to understand the nature of the host culture and operate with behavioural patterns and local cultural restrictions.

3. Management “best practices”
For the same reason explained before, Hofstede (1980)4 questioned the universal validity of management theories developed in one country when are applied in other country because of differences in environmental culture.

In the same way it could be said that “best practices are based on characteristics of organisation, which are assumed to have common definition for all the people, in everywhere, at all times, but in fact cultures structure the perceptions of what that people experience” (Trompenaars and Hampden-Turner, 1997, p. 13).

Therefore, there are limitations for applying theories “…when the organisation employs people for whom the theories were not originally conceived”. As a consequence, “organisation’s policies can lose their effectiveness when its cultural environment changes”. Identical policies may have different impact in different countries, not only because of different employees values, but also different government policies and legislation (which also are influenced by a cultural position), and differences in labour market situations and labour union positions. These differences may have consequences for performance, costs, quality and other

4

Hofstede, G. (1980) ‘Motivation, Leadership and Organization: Do American Theories Apply Abroad?’, In Pugh, D. (1997) Organisation Theory, Penguin, pp. 223-249.

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Universal style of management across national/cultural boundaries?

important issues. Because of this, “often, the original policy will have to be adapted to fit local culture and lead to the desire effect” (Hofstede, 1980, p. 248)5.

Under these circumstances global companies have to balance the need for efficiency with the need for local adaptation: “as market globalise, the need for standardisation in organisational design, systems and procedures increases. Yet managers are also under pressure to adapt their organisations to the local characteristics of the market, the legislation, the fiscal regime, the socio-political system and the cultural system. This balance between consistency and adaptation is essential for corporate success” (Trompenaars and Hampden-Turner, 1997 p. 3).

Accordingly, global companies have to consider that cultural differences across national borders may have an important impact on business, conditioning the application of a universal style of management and global standardisation of products and services, practices and operating methods.

4. Market Adaptation
It has been said that cultural differences conditioned global standardisation of management styles, products and services, practices and operating methods. Related to the market, because of “different preferences and tastes, consumers and customers in foreign countries may not use the same products and/or services demanded by domestic consumers and customers. Even where there is a demand, adaptations may have to be made to the product/service and/or the advertising message” (Ming and Wong, 1999 p. 11)6.
5 6

See note 4. See note 2.

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Universal style of management across national/cultural boundaries? For IKEA, although adapting to new markets was relative easy in Western Europe, expanding into the US market was more difficult since the culturally requirements for home furnishing in US were considerably different from Europe. By the mid90’s, “IKEA had became a large international organisation and, in an effort to adapt to the requirements of its many domestic markets, its product range had grown from 10.000 to 14.000 items” (Grol, Schoch and CPA, 1997, p. 110).

There are other examples of multinational corporations like IKEA, which are famous for selling standardised products around the world, which have had to adapt their products, practises or operating methods to suit national cultures. For instance, Brazilian McDonald’s adapted their characteristics to the local market. They use exclusively Brazilian ingredients and have developed its own products, such as passion fruit juice, banana tart and guava sauce for ice cream 7. Even when Brazil is no stranger to anti-imperialist sentiment, McDonald’s has not been affected, maybe because people see it as a local company. Even Coca-Cola adapts its advertising, pricing and distribution from one country to another and, in addition to the familiar Coca-Cola beverage they try to meet the demands of local tastes and cultures with nearly 400 different brands around the world8.

5. HRM and cultural diversity
As for HRM, “Any international company hoping to implement a global strategy must choose the human resource policies and practices that will best support that

7 8

Source: http://www.mcdonalds.com.br/home.shtml Source: http://www.coca-cola.com/worldwide/flashIndex1.html

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Universal style of management across national/cultural boundaries?

strategy. Unfortunately, the same policies will not produce the same effects in different cultural contexts” (Schneider and Barsoux, 2003, p. 148).

For IKEA, transmitting the Swedish style of management was not easy within Germany, France or US, for different reasons. Germans adhere to precisely defined rules and instructions and need procedures and forms. The French judge informality as a sign of weakness or indecisiveness and also are accustomed to formal rules and strong hierarchy. American employees are more used to rules and procedures decided by managers who take responsibility for quick decision-making. Also, IKEA’s low-key image and lack of structured career paths are not easy to sell to “high potentials” (Grol, Schoch and CPA, 1997, pp. 102-104 and pp. 108-109).

Considering dimensions defined by Hofstede (1980, 2001) and Troompenars (1997)9, it is possible to analyse and explain why these differences exist and condition the transferability of the same style of management among different national cultures:

Anglo/Nordic cultures are characterised by low uncertainty avoidance (which means less level of formalisation) and low power distance (which means less importance of hierarchy), high individualist, low context, task oriented, time is monochronic, and doing and achievement are more important than being and ascription. There are particular differences related to a high level of masculinity in the USA but femininity in Sweden and equity in the USA but equality in Sweden. German culture shows low uncertainty avoidance but high power distance, individualistic, low context, task

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Source: Scheider, S. C. and Barsoux J. L. (2003) Managing Across Cultures – 2nd ed., Pearson Education Limited. Those theories and concepts are not explained in this work, considering the reader has already known all of them.

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Universal style of management across national/cultural boundaries?

oriented, time is monochronic, doing is more important than being, high masculine but in which equality is emphasised. Finally, French culture shows high uncertainty avoidance and high power distance, individualistic and low context, but relationship oriented, time is polychronic, being and ascription are more important that doing and achievement, and femininity and equality are emphasised.

Additionally, the study conducted by Stevens10 about cultural profiles also helps to understand national culture characteristics: Anglo/Nordic cultures are decentralised, generalist, people as free agents, entrepreneurial, flexible, high level of delegation, co-ordination through informal, personal communication and output control. Germanic culture is defined as a “well-oiled machine”: decentralised decisionmaking, specialist, technical competence is emphasised and discretion is limited by expertise, strong role of staff experts, organised by function, co-ordinated by routines and rules, in which solution are structural, throughput control is used, and efficiency is an important value. French culture is within the Latin cultures, a traditional bureaucracy or “pyramid of people”, in which predominates centralised decisionmaking, co-ordination at the top, low delegation, high specialisation, an strong role of the staff, analytic ability, informal relationships, elitism (power and authority) and input control.

10

Stevens, O.J., cited in Scheider, S. C. and Barsoux J. L. (2003), p. 91.

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Universal style of management across national/cultural boundaries?

These differences in national cultures define the need to adopt specific solutions for each particular cultural environment, adapting management styles, systems and practices in the way that lead the achievement of the company’s objectives. In this sense, IKEA had to develop specific solutions for each country.

6.

Strategies for managing cultural differences: ethnocentric vs. synergistic organisations

The strategy used for IKEA when going international was to consider their style of management had a “universal appeal” (Grol, Schoch and CPA, 1997, p. 100). This strategy also implies a way for managing cultural differences.

Following the analysis carried on by Higgs (1996), the “IKEA way” (Grol, Schoch and CPA, 1997, p. 89) responds to the characteristics of an ethnocentric organisation (“our way is the best way”), which considers culture diversity has a negative impact and may cause problems for the organisation. The strategy for managing the impact of cultural diversity consist in minimise the differences trying to select a monocultural work force. Therefore, problems are reduced as diversity is decreased while the possibility of creating advantages are ignored or eliminated.

In its first stage towards internalisation IKEA considered the foreign market as an extension of the domestic market, the headquarters and affiliates of the firm were identified by the nationality of the home country (Sweden) and the key managerial positions were reserved for Swedish executives. IKEA select people whose values are similar to those of the organisation and, regardless of nationality, employees have

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Universal style of management across national/cultural boundaries?

preferences for co-operative informal relations, with a high degree of independence (Grol, Schoch and CPA, 1997, p. 100).

The assumption of the ethnocentric approach is convergence in management practices because of technological and economical development, and therefore, home country policies and practices are transferable and necessary in order to maintain quality, service and standards. At the same time this approach tries to minimise cultural differences developing a global corporate culture o establishing strong systems of reporting and control. Going international, this approach may be work, but in very special cultural environments which have cultural similarities which the host country. Under different circumstances, which often characterise the diversity of cultural environments of global companies, local adaptation is required when local product standards, market conditions, labour force characteristics or other aspects which impact on business are very different11 (Schneider and Barsoux, 2003).

On the other hand, a synergistic organisation (“the combination of our way and their way may be the best way”) considers cultural diversity can simultaneously lead to problems and advantages for the organisation. Therefore, the strategy consists on train organisational members to recognise cultural differences and use them to create advantages for the organisation. The outcomes of this strategy are advantages to the organisation, which will be realised and recognised while some problems will continue to occur and will need to be managed (Higgs, 1996).

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Perlmutter considers the following types: Ethnocentric, Polycentric, Regiocentric and Geocentric (Synergistic according to Higgs). It could be said IKEA passed from an ethnocentric to a polycentric/regiocentric approach when was entering into new markets and became a multinational company.

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Universal style of management across national/cultural boundaries?

In contrast to the ethnocentric approach, the synergistic approach values and tries to find ways to utilise diversity. It considers that cultural differences can create competitive advantage increasing the ability to respond to cultural preferences of local markets, recruit the best employees of different backgrounds, reduce cost utilising country managers, improve decision making and creativity and enhance organisational flexibility to changing environments. In order to be competitive, this “multiparadigm” thinking has to be adopted for companies with global aspirations (Schneider and Barsoux, 2003, p. 284). In the words of Philip Watts, chairman of the committee of managing directors of Shell, “Our latest scenarios illustrate the need for global companies to be truly multinational, trusted in communities all over the world, while harnessing their worldwide experience to deliver best practice everywhere. They must to be open to new ideas, different perspectives and changing expectations. In Shell we start with great competitive advantages – our geographical spread, locally-rooted operating units, the diversity of shell people and our shared values. But we certainly cannot rest on our laurels. We must value this diversity and ensure that everybody throughout our operations feels included and able to achieve their best” (Diversity and Inclusiveness at Shell, p. 0).

7. Conclusion
Taking into account the experience of IKEA when they internationalised their business and drawing on relevant research and theory in the field of cross cultural management it could be said that, despite the actual globalisation process, cultural differences continue dividing the world into regions and condition the possibility of

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Universal style of management across national/cultural boundaries?

adopting a universal style of management and global standardisation of products, services and operating methods.

Therefore, differences in values, perceptions and communications styles make important to understand the nature of the host culture and operate with behavioural patterns and local cultural restrictions. This issue may concern aspects as marketing, product development, organisational structure, HRM, and other management issues.

Understanding behavioural differences is crucial because they define the way in which people do businesses. Therefore, international companies must evaluate their business practices to ensure that regional norms in behavioural characteristics are considered.

It could be asked whether the globalisation process will change this scenario in the future. Regarding to that, it could be said that the understanding what cross-border knowledge produces in people does not imply creating similar people throughout the world, all with the same behaviour patterns and all buying the same global brands. The globalisation process may be creating subcultures within countries, because of the influence of people from other countries. This factor may produce future problems in defining culture along national lines. Subcultures may transcend the borders, and people may have more in common with similar groups in foreign countries than with different groups in their own country (Schneider and Barsoux, 2003). This situation continues supporting the idea of local or regional adaptation to conform to the value system and norms of those new cultures.

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Universal style of management across national/cultural boundaries?

In this context of cultural diversity, leading global companies will be those that adopt a synergistic approach, which consist of recognising, valuing and utilising cultural diversity as a factor of competitive advantage.

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8. References
Bartlett, C. A. and Ghoshal, S. (1991) Managing Across Borders: The Transnational Solution, Harvard Business School Press.

Bartlett, C. A., Ghoshal, S., and Birkinshaw, J. (2004) Transnational Management: Text, Cases, and readings in Cross-Border Management, McGraw-Hill/Irwin.

Cook, C. W., and Hunsaker, Ph. L (2001) Management and Organizational Behavior, Third edition, McGraw Hill.

Grol, P., Schoch, C. and CPA (Centre de Perfectionnemet aux Affaires), Paris, France (Paris chamber of Commerce and Industry) (1997) ‘IKEA: Managing Cultural Diversity’, In Oddon, G and Mendenhall, M. (1998) Cases in International Behavior, Blackwell, pp. 88-112.

Higgs, (1996) Overcoming the problems of cultural differences to establish success for international management teams, Team Performance Management, pp. 36-43.

Hoecklin, L. (1994) Managing Cultural Differences: Strategies for competitive advantage, Addison-Wesley Publishers and The Economist Intelligence Unit.

Hofstede, G. (1980) ‘Motivation, Leadership and Organization: Do American Theories Apply Abroad?’, In pp. 223-249. Pugh, D (1997) Organisation Theory, Penguin,

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Hofstede, G. (2001) Culture's Consequences: Comparing values, behaviors, institutions, and organizations across nations - 2nd ed., Sage Publications, Inc.

Holden, N. (2002) Cross-cultural management: a Knowledge Management Perspective, Pearson Education Limited, pp. 17-40.

Jackson, T. (1993) Organizational Behaviour in International Management, Contemporary Business Series, Butterworth-Heinemann Ltd.

Jackson, T. and Aycan, Z. (2001) ‘International Journal of Cross Cultural Management – Towards the Future’, International Journal of Cross Cultural management, 2001 Vol. 1(1): 5-9, SAGE Publications.

Kamal Fatehi (1996) International Management: A Cross Cultural Approach, Prentice Hall, Inc.

Levitt, T. (1983) ‘The Globalization of Markets’, In Bartlett, C. A., Ghoshal, S., and Birkinshaw, J. (2004) Transnational Management: Text, Cases, and readings in Cross-Border Management, McGraw-Hill/Irwin, pp. 287-297.

Mead, R. (1994) International Management: Cross Cultural Dimensions – 2nd ed., Blackwell Publishers Ltd.

Ming, T. and Wong, S. (1999) ‘Culture and International Business’, Faculty of Business Administration Simon Fraser University Burnaby, B.C. CANADA. From http://www.cbe.wwu.edu/CIB/papers/tung.PDF

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Ohmae, K. (1989) ‘Managing in a Bordeless World’, In Bartlett, C. A., Ghoshal, S., and Birkinshaw, J. (2004) Transnational Management: Text, Cases, and readings in Cross-Border Management, McGraw-Hill/Irwin, pp. 71-80.

Scheider, S. C. and Barsoux J. L. (2003) Managing Across Cultures – 2nd ed., Pearson Education Limited.

Shell (2001) ‘Diversity and Inclusiveness at Shell, Foundation for the Future’, Cross cultural management module read pack, 2004, London Metropolitan University.

Perlmutter, H. V. (N. D.) ‘The Tortuous Evolution of the Multinational Corporation’, In Bartlett, C. A., Ghoshal, S., and Birkinshaw, J. (2004) Transnational Management: Text, Cases, and readings in Cross-Border Management, McGrawHill/Irwin, pp. 61-70.

Trompenaars, F. and Hampden-Turner, Ch. (1997) Riding the Waves of Culture: Understanding Cultural Diversity in Business, Nicholas Brealey Publishing.

Wright, S. (N. D.) Anthropology of Organizations, Romtledge, pp. 1-31.

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