Part I Theory and background

KOZMINSKI UNIVERSITY

Cross-cultural Management

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How does culture(cultural impact) impact on the planning and carrying out of international strategy and negotiations Andrii Dykyi, 28020 09.05.2014

Academic Year 2013/2014

Semester: Spring

I hereby certify that I am the author this paper and all sources I used have been reported.

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Kozminski University 2013

Table of content:

1. Introduction ……………………………………………………………………………3

2. Part I Theory and background …………………………………………………………4

3. Part II Planning and Working …………………………………………………………6

4. Conclusion ……………………………………………………………………………9

5. References ………………………………………………………………………….10

Introduction

“I imagine hell like this: Italian punctuality, German humour and English wine.”
Peter Ustinov

Nowadays, global market goes though the high completion, where more international companies spread their area of influence and cooperation. Such situation leads to the fact that the strategic miscalculations in the development of the company’s business cost more expensive. Cultural business environment invades and penetrates INTO all the functions and actives of the company. Most of the company`s strategies are based on the local culture of the region, due to the fact that culture is a subject which IS difficult to modified (modify)or import.

Moreover, culture permeates most of all social and business areas. Thus, most of the culturAL facts are related between each other, and significant for foreign business. However, dominant amount for people working in business are trying to keep their cultural behavior and thinking traits. Most of the cultural factors are much more complicated and ambiguous than others, such as economical or political ones.

Furthermore, many international companies are adapting corporate strategies and using power of culture, in order to produce and cell SELL their goods and serviceS.

‘Most studies on cultural effects have been made on strategic alliance and joint ventures with various factors such as credibility between partners (Parkhe, 1993; Tiessen, 1997; Tyler and Steensma, 1998, Weaver et al., 2000), cultural difference and control levels (Kogut and Singh, 1988; Erramilli and Rao, 1993; Padmanabhan and Cho,1996; Annad and Delios, 1997), and ownership structure of foreign subsidiaries (Erramilli, 1996; Hennart, 1998)’ (An Analysis of Cultural Impact on International Business Performance via Foreign Market Entry, 2010)

Part I Theory and background

Starting from the definition of culture, national culture and organization culture by Professor Geert Hofstede. He created one of the most importANT scientific works about influence of culture on business and workplaces in general. He took 70 countries for this reached(RESEARCH) in order to present reliable date (DATA) on almost 40 of those countries, where he also created groups of managers, students, regular works to receive data.

So, according to Hofstede ‘Culture is the collective programming of the mind distinguishing the members of one group or category of people from others’. However, culture differs from country to country, and due to this fact professor created 6 main dimensions: power distance, individualism versus collectivism, masculinity versus femininity and uncertainty avoidance, long-term orientation and the six one is indulgence versus restraint.

In this manner, power distance index is’ Power distance is the extent to which the less powerful members of organizations and institutions (like the family) accept and expect that power is distributed unequally.’(Hofstede, 2010)

Other is sub-topic is individualism versus collectivism. In this case, individualism is a degree where person is interested to present work or anything by himself. In contrast, collectivism society or individuals in-group presented themselves as A unit, and as a group.

Uncertainty avoidance index is another importANT issue where people is(ARE) mostly interesED in avoiding uncertainty by their social group or personally.

Masculinity vs femininity, the main statement in this theory is distribution of roles among genders. In this case, masculinity way is to accept materialism and competitiveness. (WHAT ABOUT WOMEN?)

Long-term orientation – is the most common approach in the East and Central Europe where society presentS more information and details to the future.

Next, is indulgence versus restraint, where restraint (restrained)society is trying to hide and control emotional part of their(its) life. In comparison to this, indulgence (indulgent)society is more open for showing its emotions and impulse. Example of such confrontation can be Italy and German society. In on case, Italian people are more emotional and impulse (impulsive) rather then Germans. In addition to this, we can observe example on car manufactures. Most of German cars are present in comfort (comfortable) and confident manner, rather while Italian cars are aggresse (aggressive)and looks more attractive. (Hofstede, 2010)

However, this topic also consists of organization culture, which includes organization strategies, expectations, management of work, and links with the environment. In this case, organization cultures are combination of a local culture and feature of the company and its influence of (on)social culture. Most of the organizations have their written and verbal set of rules and regulation in order to keep and protect their corporate culture (Bussiness dictionary, Organization 2013). It can consist of how company presentS freedom for their employees at work, customers care, power and information flow inside the company. One of such examples is P&G Company, which introduced global-matrix structure.(P&G, 2006). Organization structure and culture is ARE extremely importANT for international corporations and local firms in order to increase their performance and productivity, by adapting their services and goods to the customs and demand of customers, as well as, employees satisfaction.

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