Cross-Cultural AlliancesCross-Cultural Alliances

Experience Helps – Sometimes

• Sometimes cross-cultural joint ventures can reap enormous benefits, especially for companies that are experienced in doing them.

• Example :

– Alliance between Corning and Samsung Success

– Alliance between Corning and Vitro Group in Mexico Failure

– An example of a successful intercultural collaboration on a grand scale (Airbus)

• There are subcultures within many country cultures

• It is important to verify whether the cultural assumptions that you are making are valid for the specifics of your alliance issues

• Example : The degree of formality

Cross-Cultural Learning Exchanges

• A benefit that is often undervalued in cross-cultural alliances is the transfer of techniques that work in a non-U.S. - based alliance back to this country’s operations.

• Senior management often expresses a desire for 2-way learning

• workers who are on the front lines operation can see successful practices in foreign operations of the same company as a threat to their job security.

• Example: Motorola Management in Malaysia

The Cross-Cultural Interpreter

• Someone who either comes from or has lived at length in both your and the partner’s cultures

• Understanding value across cultures It’s difficult for an organization to compete in the global arena

without international partners and alliances

This is not only because of the need to defray immense fixed costs, but also in order to truly understand cultural perceptions of value.

The strategy of selecting the right partner is also important in developed countries where chances of failure are exacerbated because of cultural miscommunications.

Riding Political Waves

• Understanding the political culture and issues is critical for success abroad

• Often times, acceptable profits for one country may be unacceptable for anotherEx: U.S.A and Japan

• You must assess the situation; Is staying in the protected environment of your home country the best way to compete in the future global economy?

The Right Leaders

• It is important to put the right people in the right places

• An executive with a solid understanding of the culture and the business will more than likely be best suited to run the subsidiary abroad

• There are differences in rules, legislations, reportings, and regulations abroad

Globalism and Progression

• English has become the dominant language throughout the world and more and more people are jumping on board

• It is essential in large multinational companies to have a strong understanding of English and preferably American culture

• In terms of progression of a company, when we start a new subsidiary venture, we must have someone in place that has been there since the beginning and is capable of carrying on in an efficient way and that you can rely on

Elements of Country Culture

1) Power Distance: extent that culture accepts power hierarchy in organiazation

2) Uncertainty Avoidance: extent that corporate culture is afraid of uncertainty

3) Individualism/Collectivism: common thought of in-groups and the right people

4) Masculinity/Femininity: male-dominated, female-dominated, acceptance?

Cultural Differences• Each culture, including corporate cultures have their

own unique differences and similarities, it is essential for companies to analyze and develop the appropriate framework to synergize with these companies if they intend to do business with them

• Arranging for management teams from other cultures where professional management is more readily available is a possibility, con’t

Cultural Differences

• However, it is important to note that that manager, or management team will need to take into account the national management characteristics of the dominant culture

• Choosing the wrong partner, or manager for cross-cultural management can be devastating to both organizations

Cultural Differences

• Delegating Authority: It is essential that there is a relationship built on a solid foundation of trust and mutual benefits, corporate culture must be included in the fore-thought of the alliance, it is no longer an after-thought of alliance

2. Delegating Authority• Delegate responsibilities to subordinates• Japan 72%• Sweden 70%• U.S. 68%

• Adventurer - needs to get things done by himself - leads to weak management structure and lack of management depth

3. Marketing Push and Product Quality• Abilities of managers to sell product and how these

abilities related to the quality of the product sold.

• The highest reputation for both market push and high-quality products- Japan- Switzerland - Sweden- Denmark

• U.S. is ranked as the second in marketing push and fourteenth for product quality.

4. Willingness to Create and Exploit Technological Innovation• The relationship between the stated readiness of corporations

to exploit innovation and the average number of patents granted per 100,000 inhabitants of the country.

• In the past, U.S. has been perceived worldwide as the most innovative culture and the most embracing of novel ideas and technologies.

• In fact, the survey shows that Japan is a world leader in technological innovation.

• The willingness to exploit innovation is backed by- huge capital- low interest government subsidies - policy supporting industrial research

• Innovation characteristics must be interrelated with national cultural norms.

Planning the Cross-Cultural Alliance

• The key skills of managers.- work in ambiguous, unfamiliar, cross-functional, and transcultural relationships.

• The team must include a cultural interpreter.• The home office has to recognize the constraints as

well as the opportunities in international markets• Integrate local product needs and management

attitudes and adjust own perceptions of time, leadership, and reward into the plans

• The omission of these critical perspectives increase the failure potential of international alliances.

Culture Clash : Making Shoes in China

• American company operating in China• Problems

- manufacturing process- not good quality- late production- slipping delivery schedules

• Causes- different cultures- poor communication and misunderstanding how to make decisions- collectivism and femininity vs individualism

Culture Clash: Bringing Swedish Pharmaceuticals to

the U.S.A

• a strong commitment or responsibility • sense of identification with the corporate entity

National cultural characteristic :

Culture Clash: Bringing Swedish Pharmaceuticals to

the U.S.A• Purpose of both companies: Open up their market in

a particular area of medical devices and diagnostics. • U.S company interest: the technology developed by

the Swedish firm • Swedish company interest: the experience and

knowledge of how to negotiate and succeed in the FDA approval process and want to penetrate the U.S. market and create distribution network to generate sales.

Culture Clash: Bringing Swedish Pharmaceuticals to

the U.S.A• Cause of Failure:

• 1) The U.S. Company does not create a joint implementation plan with the Swedes and independently decides on the composition of the team for the new division and staffing it with scientists and planners.

• 2) The Swedish Company thinks that the U.S. partner which is large, reputation, and experience in U.S. market know exactly what they are doing.

Culture Clash: Bringing Swedish Pharmaceuticals to

the U.S.A• These two points imply:

• 1) Lack of cross-functional teams containing the talent necessary to achieve the goals of the parties.

• 2) Misalignment of the partners’ objectives.

Culture Clash: Bringing Swedish Pharmaceuticals to

the U.S.AGetting worse when: • U.S. team starts to reengineer the Swedish product and

the planners push the FDA application date further out

• the U.S. representatives explain that they only present the highest quality products with their imprint and scientific expertise to the FDA

Trust destroyed

The problems can be analyzed both strategically and culturally:

First• The Swedes purpose is low on the Pyramid of

Alliances– required less capital – lower risk – less use of human resources

The U.S. Company sees the alliance as being higher up on the Pyramid of Alliance

- R&D which is required higher risk

The problems can be analyzed both strategically and culturally:

Second• The Swedish company was a Start-up and their

project was Bet the Farm • This means that the willingness to wait for U.S.

Company to bring the product to market is limited. • they want to see market entry and revenue increased

within a fairly short period of time. In contrast, U.S. Company sees the project as Experimental. They allocate resources, but the wrong ones.

HOW THESE MISALIGNMENTS WERE HANDLED HAS TO DO PRIMARILY WITH CULTURAL MISCOMMUNICATION, BOTH CORPORATE AND COUNTRY.

1. Miscommunication - from he very beginning o the Mature company. The adventurer mangers might thought that they know what they are doing or look how successful hey have been. The FDA process is complicated and takes time, so best is to wait.

2. Cultural issue: The Swedes part, “We will let them know that we are concerned about the loss of a market window of opportunity”. “We see the stereotype of all U.S> companies as market savvy and also a cultural reluctance o confront”

HOW THESE MISALIGNMENTS WERE HANDLED HAS TO DO PRIMARILY WITH CULTURAL MISCOMMUNICATION, BOTH CORPORATE AND COUNTRY.

• The American part, they see to gain access to Swedish technology as the achievement of their primary goal. Once they had examined and evaluated the technology, obtaining FDA approval was something they intended to do.

The result is completely breakdown of the relationship which are no trust, no confidence, and loss of face and opportunity on both sides.

Migratory and Embedded Knowledge and Country Culture

• crucial to understand the issue of cultural differences in the way information communicated

• communication will be interpreted differently according to the rules of each culture

In China-U.S. joint ventures, misunderstanding can be occurred because U.S. partner will state goals clearly, namely and access to the Chinese market. Whereas, the Chinese partner indirectly approaches the relationship and hind its real agenda

Unintended Knowledge Transfer to China

• Transfer of embedded knowledge also led to strong feeling of being taken advantage of

EX. Chinese representatives came to visit continuously to the U.S. Company to update information.