The role of culture in the international managerial decisions

SECOND CRITICAL SUMMARY (PAPER NOS) AN ANALYTIC STUDY OF THE NATIONAL CULTURAL DIMENSIONS: ROLE OF CULTURE IN THE INTERNATIONAL MANAGERIAL DECISIONS» Student: Area Co-ordinator: Tutor: Course of Reference Lecture of Reference Date: Luis Felipe Sáez Collantes Prof. Joachim Móller Pott. Huenu Carvajales Course Number Ten Prof. Agnes Havril, Intercultural competence 15 / 08 / 2009 PACE 1 cooe • JOint Europea M to View nut*ge Development TABLE OF CONTENTS Acronyms List of Tabl Local Abbreviations and ion 1. Chapter One: Cultural Differences 1. 1. Culture 1. 2. Understanding Culture 1. 3. Hofstede’s Cultural Framework 1. 3. 1.

National Culture . 3. 2. Dimensions of Culture 2. Chapter Tvvo: The Influence of Culture in Managerial Effectiveness 2. 1. The Organizational Culture Perspective 2. 2. Culture and Perspectives of International Business 3. Chapter Three: The Influence of Culture in European Marketing Decisions 3. 1. The Influence of Cultural Differences in the International Marketing Decision Process 3. 2. The Advertising in West European Market 3. 3. Analysis of Relationship between Dimension of Culture and Advertising in Western European Markets 4. Conclusions 4. 1 . The Role of Culture in Creating International Expertise 4. 2. Cultural Differences Affecting

Managerial Effectiveness 5. Appendices 5. 1 . Appendix 1:

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Culture and International Business 6. Bibliography 11 11 12 12 14 16 18 18192121 232345666778999 LIST OF ABBREVIATIONS AND ACRONYMS•• A. T. CDI CIN EFIL EPRE EU GNP DV MAS MNCs OTH P. P. PDI PRE R 2 Audio Transmission Confucian Dynamism Cinema European Federation for Intercultural Learning Estimate Value of Press European Union Gross National Product Individualism VIS. Collectivism Masculinity vs. Femininity Multinational Companies Other Media Poster/Placard Power Distance Press Coefficients of Determination of Advertising Investment Television Uncertainty Avoidance

SAI W CIAI CoDe -Joint European Master in Comparative Local LIST OF FIGURES • Figure 1. 1 Figure 3. 2 Figure 3. 3 Figure 3. 7 Figure 4. 1 Figure 6. 1 Figure 6. 2 Figure 6. 3 Hofstede’s Cultural Layers (2001 ) Advertising Investment in Different Media Western Europe on 1996 in Percentage of Advertising Investment at Gross Domestic Product in Percentage Relations between PDI, PRE & EPRE Influence of culture in Managenal Decisions Globalization Vs Localization Factors that Influence the International Decisions of Managers International Marketing Decision Process LIST OF • • • • Table 3. Table 3. 4 -rabie 3. 5 Table 3. 6 Values for five Dimensions Of Hofstede’s Cultural Typologies and the Principal Media for Advertising Lineal Regression Values Obtained Lineal Regression Values Obtained II Estimated Values of PRE (EPRE) 4 20F 18 IN THE INTERNATIONAL MANAGERIAL DECISIONS» ONE WORLD? ONE CULTURE? Introduction National environments are different on many dimensions.

They also differ in terms of political systems, government regulation of domestic and foreign companies, social norms, and cultural values of its population. These local differences forces managers to be sensitive and receptive to social, economic, and political national differences, among others n host countries in which they operate around the globe. Far from being overshadowed by the forces of globalizations, the impacts of these localizing forces were being felt with increasing intensity and urgency.

In particular, many MNCs that had so successfully ridden the wave of globalization began to feel the strong need to became much more sensitive to host-country economic and political forces. Corporations realize that it is necessary to develop localized knowledge to compete efficiently in the global marketplace or to serve specialized market niches. Products must be culturally responsive to guarantee company uruival and to gain competitive edge.

For that reason, any organization need develop cultural sensitiveness to take full advantage of the benefits of globalization, that mean being sensitive to cross-cultural differences, and being able to manage operations separated by the barriers of distance, language, time and culture. 1 . Chapter One: Cultural Differences Considering that Culture has been examined and defined by a variety of disciplines and the abundance of definitions already formulated (e. g. ore than 154 definitions were def 8 disciplines and the abundance of definitions already formulated (e. g. ore than 164 definitions were defined by the anthropologists Kroeber and Kluckhohn (1952), the purpose of this chapter is not to add a new one to the discusslon, instead the aim is emphasize the different meanings and approaches that the concept of culture have, and introduce a relevant model for its understanding as a tool for analyzing the differences that the national cultures have. . 1 . Culture In my opinion the definition provided by Schein (1985): a set of basic assumptions – shared solutions to universal problems of external adaptation (how to sumive) and internal integration (how to stay together) which have evolved over time and are handed down from one generation to the next» (Adapted from Kluckhon and Strodtbeck, 1961), captures better the essence of culture, while emphasizing the cohesive nature of culture as something necessary for the survival of a group. . 2. Understanding Culture In View of the framework of Local Development, the definition of cultures formulated by Moran (2007) allow understand better What is culture and what it is does not, particularly when we talk about the relation among people and Our Style of live as society. As such, Culture gives 6 CoDe – Joint European Master in Comparative Local eople a sense of who they are, of belonging, of how they should behave, and of what they should be doing’.

However, culture is a large and an inclusive subject (Stohl, 2001 therefore it is important understand what effects the culture have in our behawor, morale, and productivity; taking into consideration it 40F 18 culture have in our behavior, morale, and productivity; taking into consideration its consequences in values and patterns that finally influence as well the attitudes and actions of people, and shape the distinctiveness ofthe organizations. Essentially culture affects Our perception, Our verbal and nonverbal language and Our identity (Cooper, Thomas and Simonds (2007)). 1-3.

Hofstede’s Cultural Framework Due to the broad possibilities that exit for to define culture, I consider important develop in this paper only a methodological understanding that allows effectively determine the effect of cultural differences in the managerial decisions process. Therefore, according with other researchers (Harris, et al, 2005) and regardless the various criticism, believe that the cultural dmensions of Hofstede’s model the most suitable framework to utilize in this paper in order to explore the influences of national culture in the decision making process Müller and Turner, 2004; Müller et al, 2007). . 3. l. National Culture While culture can be understood on many levels as illustrated in Figure 1. 1, culture on the national level can be consider as unique due to the completeness of a national society as a cultural unit. Although a nation may be comprised of many groups, these groups Still share common characteristics and trac, and thus can be considered part of one cohesive entity. 7 Figure 1. Hofstede’s Cultural Layers (2001) SYMBOLS FEROES RITUALS VALUES the parameters of national cultures (Hofstede, 1980) are relatively table over long penods of time, for that reason can sen,’e as an appropriate denominator for classification and like a platform to national cultural studies (Slvakumar and Nakata, 2001). 1. 32. Dimensions of Culture Hofstede presents a framework based on cultural dimensions by examining differences and similarities in cultural patterns in a quantitative study with a large empirical base.

These dimensions are polarized, value-based constructs which can be seen throughout all levels in the society, from basic units such as families, economic units such as companies and national units such as governments. In that sense, Hofstede 2001) was able to distinguish five key elements or «dimensions» of culture as described. In other words, Hofstede specified five original major dimensions along which the dominant value systems in the countries that can be ordered. Power Distance (PDI) Uncertainty Avoidance (UAI) Individualism VIS.

Collectivism (‘DV) Masculinity vs. Femininity (MAS) Confucian Dynamism (CDI) 8 2. Chapter Two: The Influence of Culture in Managerial Effectiveness 2. 1 . The Organizational Culture Perspective Accepting the critical role played by people in all organizations, Johnson and Scholes (1998) purpcrted the concept of a «cultural ecipe»; consequently is the nature and intensity of the cultural recipe, which result in one organization developing greater competitive advantage over another, although ostensibly both have access to similar resources.

Culture affects the way in which 60F 18 another, although ostensibly both have access to similar resources. Culture affects the way in wh ch people consciously and subconsciously think make decisions and ultimately the way in which they perceive, feel and act towards opportunities and threats presented by the internal and external environments. That is reason why by definition it is reflected in the economic erformance of any organization.

Consequently, the influence of culture on management clearly affects their perception of what is happening in the internal and external environments, and Will manifest itself in their ultimate reaction; the way haw they perceive and respond to internal and external opportunities and threats Will be determined by the prevailing cultural recipe to which they conform.

In View ofthat, efficiency in the management would depends of the management ability to adapting to local and national requirement; thats means first understand the local culture and then transform that knowledge in information Direct and shorter paths of information), in order to development simultaneously the ability to react very fast at any environment changes (ability to react and reaction speed). 2. 2.

Culture and Perspectives of International Business A large body of academic research provides strong evidence that nationality plays an important role in shaping the assumptions, beliefs, 9 and values of individuals. However, cultural differences are also reflected in nationally differentiated consumption patterns: the way people dress or the foods they prefer (Bartlett, C. 2003). Therefore, to succeed in

Therefore, to succeed in a world of such diversity organizations often had to modify their quest for global efficiency through standardization and find the way how to respond to the needs and opportunities created at local level (Localizationl) by cultural differences (Meffert 2001), as for example describe the Figure 6. 1 in the Appendix 1 with the standardization potential of different product categories, according with his dependency of culture. As well, the critical element for success in international business, process or projects is not so much related with the size of the organization, in this regards the Figure 6. in the Appendix 1, illustrate some of the main factors that can affect the international managenal declslon, where the culture is just one of them. Finally, taking into consideration that the strategy approach to global business is veo,’ close to marketing analyses and decisions process, and base on the theoretical model of international marketing decision process in one hand and the information available from the European advertising as way of validation on the other, the Figure 6. in the Appendix 1 describe and highlight in red letters, some of the mains factors related with the culture that according with the criteria of the author, nfluence some ofthe basic decislons of the firms in View of: • • • Markets and the company’s ability to serve them successfully Company’s global strategic position and marketing-entry strategy How the marketing-mix polices and decisions have to be planned considering their financial impact in an international marketing enviro 18 decisions have to be planned considering their financial impact in an international marketing environment 1 Localization: the process of adapting a product or sewice to a particular language, culture, and desired local «lo ok-and-feel_ i'(http://searchcio. techtarget. com/sDefinition/O, 10 . Chapter Three: The Influence of Culture in European Marketing Decisions 3. 1.

The Influence of Cultural Differences in the International Marketing Decision Process In arder to understand and explain how Cultural Differences affecting the International Marketing Decision Process and thus the Managerial Effectiveness, this part of the paper Will focus in analysis the relation between the values of the cultural dimension in 14 Western European countries, according with the Hofstede’s Cultural Typologies, the investment leve’ in Media Advertising and the share of advertising investment at Gross Domestlc product (Table 3. ) in the same countries. Table 3. 1 Values of five Dimensions of Hofstede’s Cultural Typologies and the Investment in Media Advertising2 The Table 3. 1 contain the values of the Dimensions of Culture based on Mr. Geert Hofstede’s research on cultural differences and is taken from «Promoting a European Dimension of Intercultural Learning – Developing School Materials», EFIC Seminars, Vienna 17-20 April and Lisbon, 26-29 June 1997. 1 relationship between the values of the dimensions of culture (Hofstede’s cultural typologies), and the principal media for advertising elected for the managers in each market or country, s a mode to demonstrate the influence of cultural differences in the effectiveness of the managerial decisions among the nations. 3. 2. The Advertising in West European Market In this regard the Figure 3. 2 illustrate the advertising investment in different media in some western European countries in 1996 and the Figure 3. 3 demonstrate the share of advertising investment at gross domestic product during the same year; the data clearly show that each country has diferent levels of expenditure on advertising and used with different intensity each diverse media.

Therefore, despite being all European countries, their differences re evident not only in its cultural aspects, such as in this case of advertising investment level. 12 Figure 3. 2 Advertising Investment in Different Media Western Europe on 1995 In percentage spain (SPA) switzenand (SWI) sweden (SWE) portugal (POR) Nov,’ay (NOR) Netherlands (NET) Italy (ITA) Ireland (IRÉ) Great Britain (GBR) Greece (GRE) France (FRA) Finland (FIN) Germany (FRG) Denmark (DEN) Belgium (BEL) 0% 10% 42 20% PRE TV A. T. P. P. CIN 50 77 36 OTH 9 40 37 40 72 42 18 12 3647 52 52 48 57 1221 12 32 26 5941 3997 62623267477338 1331863101051001 15104021 061020 701610701 0430630 113020100%