International

Business and Management (MGT3059)

Contact
Email

Hours: 90 Hours Tutor: Rajesh Sannegadu

r.sannegadu@uom.ac.mu Room No:2.29 Phone:4037881 Address:

International Business Management

Lecture 4: Managing Diversity and Cross Cultural Differences

International Business Management

Lecture 4: Managing Diversity and Cross Cultural Differences

Learning Objectives:
Understand the Definition of Culture. Understand the Determinants of Culture. Review the Hofstede and Trompenaars models Appreciate that managerial practices and theories are culture bound and need to be adapted based on different cultural situations.

International Business Management

Lecture 4: Managing Diversity and Cross Cultural Differences

Introduction
The number of MNEs has increased significantly

since the 1990s. More and more firms are conducting cross border transactions by setting production plant in foreign countries. Managing resources to attain specific goals in a foreign country is complex.

International Business Management

Lecture 4: Managing Diversity and Cross Cultural Differences

Introduction

It is imperative that managers consider the local culture in every aspect. Managerial style that is effective in one culture will not necessarily be effective in another (Rodrigues,1998) It is argued that MNE should adapt to the foreign culture in order to be successful. When you are in Rome, live in the Roman style, when you are elsewhere live as they live elsewhere. St. Ambrose cited in Keegan (1998)

International Business Management

Lecture 4: Managing Diversity and Cross Cultural Differences

Culture Defined
Several definitions (more than 150) of culture.
Mostly used is that of Geert Hofstede who defines Culture as:

The collective programming of mind which distinguishes the members of one human group from another. pp: 84) Geert Hofstede (in Hill, 1998, Different connotations have been used to define culture
such as: Way of living Social Behaviour

Languages

International Business Management

Lecture 4: Managing Diversity and Cross Cultural Differences

Determinants of Culture

1. Religion (Shared Belief and Rituals)

Religion (Christianity, Islam, Buddhism and Hinduism) influences the attitude, behaviour and belief of people which, impact on different areas of the business, including: Marketing For example, religious taboos, customs, rituals may influence the Marketing Mix (Product, Place and Promotion). Human Resource- For example, in Islamic countries, women are not allowed to work and consideration to prayer time.
International Business Management 7

Lecture 4: Managing Diversity and Cross Cultural Differences

Determinants of Culture

2. Political Philosophy
The legal and political systems of a country shape social behaviour and norms of local citizens. For example, the culture of entrepreneurship is more visible in liberalised economy such as the US compared Communist countries.

3. Language
Refers to both spoken and unspoken communication. Structures the way we perceive the world. English is the official business language. means of

International Business Management

Lecture 4: Managing Diversity and Cross Cultural Differences

Determinants of Culture
4. Education
A process of transmitting skills, ideas and attitudes that serves to shape culture. Values and norms are taught at school. Considered as a determinant of national competitive advantage.

5. Social Culture Refers to how people relate to each other.

Describe how people are stratified race, class and caste etc. Social behaviour differs from one to stratum to another
International Business Management 9

Lecture 4: Managing Diversity and Cross Cultural Differences

Cross Cultural Management

Cross Cultural Management Studies the behavior of people in organizations around the world. Trains people to work in organizations with employee and client. It describes organizational behavior within countries and cultures. It compares organizational behavior across cultures and countries. It seeks to understand and improve the interaction of coworkers, clients, suppliers, and alliance partners from different countries and cultures. (Alder,10 International Business Management

Lecture 4: Managing Diversity and Cross Cultural Differences

Dimensions of National Culture- Hofstedes Model

Hofstede pointed out the following dimensions of culture : 1. Power Distance 2. Uncertainty Avoidance 3. Individualism Collectivism 4. Masculinity- Feminity 5. Long-term vs. short-term orientation (Hofstede and Bond, 1988)

International Business Management

11

Lecture 4: Managing Diversity and Cross Cultural Differences

Dimensions of National Culture- Hofstedes Model Power Distance

The extent to which the less powerful members of institutions and organizations within a country expect and accept that power is distributed unequally. The extent to which a society accepts the unequal distribution of power in institutions and organizations.

International Business Management

12

Lecture 4: Managing Diversity and Cross Cultural Differences

Dimensions of National Culture- Hofstedes Model

Power Distance
Two extremes: 1. High Power Distance (E.g. India, Singapore, Brazil) High hierarchy levels. Power is centralised- Centralised Decision making. Authoritative Leadership Style. Subordinates expect rules. Wide salary range.

International Business Management

13

Lecture 4: Managing Diversity and Cross Cultural Differences

Dimensions of National Culture- Hofstedes Model

Power Distance
Two extremes: Low Power Distance (E.g. USA, Germany, Finland, UK) Minimize the unequal distribution of power. All people have equal rights and should be interdependent. Decentralised Organisation- Flatter structure & matrix organizations. Consultative decision making.

Narrow salary range.

International Business Management 14

Lecture 4: Managing Diversity and Cross Cultural Differences

Dimensions of National Culture- Hofstedes Model

Power Distance- Implications for Management

Helps to:
Determine the structure of the organisation (i.e. layers of hierarchy). Assign responsibilities. Determine the leadership style. Determine the pay structure

International Business Management

15

Lecture 4: Managing Diversity and Cross Cultural Differences

Dimensions of National Culture- Hofstedes Model

Individualism- Collectivism
Individualism ( USA, Australia, France & Italy)
Pertains to societies in which the ties between individuals are loose i.e. everyone is expected to look after him/herself and his/her immediate family. Management of individuals. 2. Task prevails over relationship. 3. Contract between employer and employee is based mutual advantage.
1.
International Business Management 16

Lecture 4: Managing Diversity and Cross Cultural Differences

Dimensions of National Culture- Hofstedes Model

Individualism- Collectivism
Collectivism (Spain, Indonesia, Japan)
Collectivism pertains to societies in which people from

birth join in a strong and cohesive group and they expect loyalty in exchange for lifelong protection.
Management of Group. 2. Relationship prevails over task. 3. Employee- Employer relationship is perceived in moral terms.
1.
International Business Management 17

Lecture 4: Managing Diversity and Cross Cultural Differences

Dimensions of National Culture- Hofstedes Model

Individualism-Collectivism-Implications
Management

for

Helps to:
Determine the employer-employee contracts and negotiations.

International Business Management

18

Lecture 4: Managing Diversity and Cross Cultural Differences

Dimensions of National Culture- Hofstedes Model

Masculinity- Feminity
Masculinity ( Japan & Italy)
Pertains

to societies which favour assertiveness, competitiveness materialism and the desire to achieve recognition by doing a good job. Managers are expected to be decisive and assertive. 2. Driven by competition and performance. 3. Resolution of conflicts by fighting them out.
1.

International Business Management

19

Lecture 4: Managing Diversity and Cross Cultural Differences

Dimensions of National Culture- Hofstedes Model

Masculinity- Feminity
Feminity ( France & Scandinavian Countries)
Pertains to societies characterised by consescus seeking, concern for interpersonal relationship and the environment and cooperation.

Managers use intuition and strive for consensus. 2. Equality, solidarity and Quality of life. 3. Nurturing role
1.

4. Resolution of conflicts by compromise and negotiations.

International Business Management 20

Lecture 4: Managing Diversity and Cross Cultural Differences

Dimensions of National Culture- Hofstedes Model

MasculinityManagement

Feminity-

Implications

for

Helps to:

Define the role Sharing of responsibilities

International Business Management

21

Lecture 4: Managing Diversity and Cross Cultural Differences

Dimensions of National Culture- Hofstedes Model

Uncertainty Avoidance
The extent to which individuals feel threatened by uncertain or unknown situations and create institutions to minimise uncertainty.

Strong Uncertainty Avoidance (Japan, France & Germany)

People feel uneasy in situations of uncertainty. 2. Resistance to innovations. 3. Motivated by security and esteem. 4. Prefer structure and direction. 5. Demand more information before making a decision.
1.
International Business Management 22

Lecture 4: Managing Diversity and Cross Cultural Differences

Dimensions of National Culture- Hofstedes Model

Uncertainty Avoidance
Weak Uncertainty Avoidance
Uncertainties are taken as being part of life. 2. People relatively tolerant of uncertainty and ambiguity. 3. Require considerable autonomy and lower structure. 4. Motivated by achievement and esteem. 5. More likely to take risks.
1.

International Business Management

23

Lecture 4: Managing Diversity and Cross Cultural Differences

Dimensions of National Culture- Hofstedes Model

Uncertainty
Management Helps to:

Avoidance

Implications

for

1.Determine the organisational structure, for example,

Strong Uncertainty Avoidance-Organisational Structure that provides security. Weak Uncertainty Avoidance- Lower Organisational Structure that provides relatively more challenge. 2.Evaluate the degree and factors of motivation.

International Business Management

24

Lecture 4: Managing Diversity and Cross Cultural Differences Dimensions of National Culture- Hofstede & Bond 1988

The Confucian Dynamism/Long Term Orientation

1. Later in 1988, Hofstede and Bond conducted research on the national culture of East Asian countries including China, Korea, Japan, and Vietnam. 2. They noted that the national culture of these countries was: completely different from the Western Countries Based on Confucian Philosophy, characterized by: Relationship with people- Group Orientation Loyalty , honesty and obedience Respect for tradition
International Business Management 25

Lecture 4: Managing Diversity and Cross Cultural Differences

Cultural Classification and some of their Influences on Management Cultural Classification Managerial Influences (Rodrigues,1998)
Large Power Distance
Small Power Distance Collectivism Individualism Strong Uncertainty Avoidance Weak Uncertainty Avoidance

Authoritative decision making

Participative/Consultative decision-making Team Approach, heavy reliance on informal control Team Approach not very applicable, heavy reliance on formal control Mechanistic Organisation may work best (Formal Structure) Organic Structure may work best
International Business Management 26

Lecture 4: Managing Diversity and Cross Cultural Differences

Cultural Classification and some of their Influences on Management (Rodrigues,1998)
Cultural Classification Confucianism Managerial Influences Organisations may rely more on informal than on formal controls, individuals prefer authoritative decision making and leadership.

International Business Management

27

Lecture 4: Managing Diversity and Cross Cultural Differences

Dimension of National Culture Trompenaars (1994) Model

A tenyear study examining the responses of over 15,000 managers from 23 countries.

Trompenaars has identified 7 main dimensions of culture:

i. ii. iii. iv. v. vi. vii. The Universal Truth Versus The Particular Instance Individualism Versus Collectivism Affective Versus Neutral Relationships Specific Versus Diffuse Cultures Achieving Versus Ascribed Status Time Sequential Versus Synchronic Nature / Environment Orientation
International Business Management 28

Lecture 4: Managing Diversity and Cross Cultural Differences

Dimension of National Culture Trompenaars (1994) Model

The Universal Truth Versus The Particular Instance The Universal Approach

Belief that ideas and practices can be applied everywhere in the world without modification. Based on formal rules, systems, standards, consistency, uniform procedures

International Business Management

29

Lecture 4: Managing Diversity and Cross Cultural Differences

Dimension of National Culture Trompenaars (1994) Model

The Universal Truth Versus The Particular Instance The Particular Instance Belief that circumstances dictate how ideas and practices should be applied and something cannot be done the same everywhere.

gives greater attention to obligations of relationships, commitment to friendship, family obligations. unique circumstances rather than one right way of doing things. Flexibility, pragmatic, make exceptions.
International Business Management

30

Lecture 4: Managing Diversity and Cross Cultural Differences

Dimension of National Culture Trompenaars (1994) Model

Individualism Versus Collectivism Individualism

a prime orientation to the self.

People regard themselves as individuals. Individual rights and rewards have priority.

Individuals take care of themselves.

International Business Management

31

Lecture 4: Managing Diversity and Cross Cultural Differences

Dimension of National Culture Trompenaars (1994) Model

Individualism Versus Collectivism Collectivism

a prime orientation to common goals and objectives.

Stimulate Team Cooperation. Individuals are strongly connected to the community which they expect would protect them in return. Seek consultation and mutual consent before making decisions.
International Business Management 32

Lecture 4: Managing Diversity and Cross Cultural Differences

Dimension of National Culture Trompenaars (1994) Model

Affective Versus Neutral Relationships

Affective Culture
People are encouraged to, openly and naturally, divulge their feelings in relationship. (Extrovert)
People smile, talk loudly, greet each other with enthusiasm Neutral Culture Culture in which emotions are not shown, i.e. People try not to show their feelings (Introvert)
International Business Management 33

Lecture 4: Managing Diversity and Cross Cultural Differences

Dimension of National Culture Trompenaars (1994) Model

Specific Versus Diffuse Culture Specific Culture Work and private life are sharply separated. Relationship is direct based on work contract - Subordinate will most probably refuse to give a helping hand to paint his boss house since same is not in his work duties.

International Business Management

34

Lecture 4: Managing Diversity and Cross Cultural Differences

Dimension of National Culture Trompenaars (1994) Model

Specific Versus Diffuse Culture Diffuse Culture

Work and private life often are closely linked. Loyalty is given great importance. Relationship tends to be close and indirect.
Subordinate will accept to give a helping hand to paint his boss house so as to maintain a good relationship with the latter.

International Business Management

35

Lecture 4: Managing Diversity and Cross Cultural Differences

Dimension of National Culture Trompenaars (1994) Model

Achieving Versus Ascribed Status Achievement

Culture in which people are accorded status based on how well they perform their functions.
Related to the personal performance of an individual.

Promotion within an organization based on capabilities.

skills and

International Business Management

36

Lecture 4: Managing Diversity and Cross Cultural Differences

Dimension of National Culture Trompenaars (1994) Model

Achieving Versus Ascribed Status Ascribed

Culture in which status is attributed based on who or what a person is.

Status may be accorded on the basis of age, gender, or social connections. Promotion within an organization based on relations, age or gender.

International Business Management

37

Lecture 4: Managing Diversity and Cross Cultural Differences

Dimension of National Culture Trompenaars (1994) Model

Attitude to Time - Sequential Vs Synchronic Approach Sequential Approach A series of passing events Values are posited towards the past and present Synchronic Approach Past, present and Future interrelated

International Business Management

38

Lecture 4: Managing Diversity and Cross Cultural Differences

Dimension of National Culture Trompenaars (1994) Model

Nature / Environment Orientation Inner-Directed

People believe in controlling environmental outcomes.

Outer-Directed People believe in allowing things to take their natural course of actions.

International Business Management

39

Lecture 4: Managing Diversity and Cross Cultural Differences

Lesson Learnt :
The job of an international manager is very complex as there is need to reconcile a number of key dilemmas, which are common to all cultures. Difficulties to adapt to new culture: Cost US business $2 Billion a year (Gregersen and Mendenhall, 1992). Resulted in failure of 30% within US multinational (Schneider and Barsoux, 2002)

International Business Management

40

Lecture 4: Managing Diversity and Cross Cultural Differences

The International Manager Cross Cultural Skills

Hofstede (1980, p. 398 in Harris & Kurma,2000) argues that the key cross-cultural skills are: (1) the capacity to communicate respect; (2) the capacity to be non- judgemental; (3) the capacity to accept the relativity of one's own knowledge and perceptions; (4) the capacity to display empathy; (5) the capacity to be flexible; (6) the capacity for turn-taking (letting everyone take turns in discussions); and (7) tolerance for ambiguity
International Business Management 41

Lecture 4: Managing Diversity and Cross Cultural Differences

Competencies of International Manager (Schneider and Barsoux, 2002)

Strong Track Record at home Interpersonal Skills- Ability to form relationship to integrate social fabric of the host culture.

Linguistic

Ability- To establish relationship and demonstrate the willingness to communicate and connect with host national. Motivation to work and live abroad- Including families Ability to tolerate and cope with uncertainty Patience and respect
International Business Management 42

Lecture 4: Managing Diversity and Cross Cultural Differences

Competencies of International Manager (Schneider and Barsoux, 2002)

Cultural Empathy- Appreciate the thoughts, feelings and experience of others. Sense of humour- For relationship building, to fight against stress, uncertainty & confusion. It also reinforce power distance.

Understand interdependencies between different parts of

the organisation world subsidiary and head office) wide (relationship between Respond to different cultures simultaneously Be willing to share power- Delegate Rapidly learn and unlearn
International Business Management 43