Intercultural Mgt and HR 1

Intercultural Management and HR Introduction and Warm-up

Assessing and Measuring Culture

Nathalie Lugagne September 6, 2011

Agenda

• Introduction to the course • Facts and Figures about Globalization • Why and Where Going Global • Share your experience • Break • Dr. Kim’s letter • What is Culture? • How to Measure Culture? • How do Cultures affect Organizations? • Wrap up

2011/09/06 2 Intercultural Management and HR 1

What is Globalization? An English princess with an

Egyptian boyfriend crashes in a French tunnel, driving a German car with a Dutch engine, driven by a Belgian who was high on Scottish whiskey, followed closely by Italian Paparazzi, on Japanese motorcycles, treated by an American doctor, using Brazilian medicines! And this is sent to you by a Canadian, using US technology. And you are probably reading this on your computer using Taiwan-made chips, and Korean-made monitors, assembled by

Bangladeshi workers in a

Singapore plant, transported by lorries driven by

Indians, unloaded by

Indonesians and finally sold to you by

Chinese. That's Globalization!!!

2011/09/06 Intercultural Management and HR 1 3

A definition


Short history of Globalization

• Globalization 0.0 Ancient civilizations

• Globalization 1.0 1492-1820

• Globalization 2.0 1820-2000

• Globalization 3.0 2000-…


Theories of Globalization

• Neo-liberalism or reign of NGOs?

• Regionalization or globalization?

• Is it really happening?

• Does it produce convergence?

• Does it undermine nation-state authority?

• Is a global culture emerging?


Measures of Globalization

• How often do you eat foreign food?

• How often do you listen to foreign music?

• How often do you buy foreign products?

• How many countries have you visited?

• How many languages do you speak?

• In how many countries have you lived?

• What proportion of your friends or relatives are not from your country?


Measures of Globalization


0

10

20

30

40

50

60

70

80

90

100

Ch

ina

Pe

ru

Thai

lan

d

Ko

rea,

Rep

.

Turk

ey

Sou

th A

fric

a

Leb

ano

n

Ku

wai

t

Ukr

ain

e

Jap

an

Qat

ar

Ru

ssia

n F

ed

erat

ion

Isra

el

Mal

aysi

a

Gre

ece

Un

ite

d S

tate

s

New

Zea

lan

d

Un

ite

d K

ingd

om

Po

lan

d

Ital

y

No

rway

Au

stra

lia

Ger

man

y

Sin

gap

ore

Slo

vak

Rep

ub

lic

Spai

n

Luxe

mb

ou

rg

Fran

ce

Cze

ch R

epu

blic

Irel

and

Hu

nga

ry

Fin

lan

d

Po

rtu

gal

Can

ada

Den

mar

k

Swed

en

Swit

zerl

and

Net

her

lan

ds

Au

stri

a

Bel

giu

m

political globalization

social globalization

economic globalization

KOF index of globalization / 2007 Swiss Economic Institute Zurich

Drivers of Globalization

Globalization

Reduced Costs of

Transport

Technological Innovation

Differences in Cost Factors

De-regulation of Financial

Markets

Falling Barriers to

Trade


Pros and Cons of Globalization

• Do you believe globalization is mostly good or mostly bad?

• Do you believe international trade is good or bad for the economy? For your standard of living? For the environment? For job security?

• Do you believe allowing FDI is necessary and positive or dangerous?

• Thinking of the latest economic developments, how fairly do you think benefits and burdens have been shared?


World Surveys on Globalization


worldpublicopinion.org / 2006

worldpublicopinion.org / 2007 worldpublicopinion.org / 2007

worldpublicopinion.org / 2008

High purchasing power > 20,000 USD Low growth Efficient infrastructure

Low purchasing power 3,000-20,000 USD High growth Rapid industrialization

Very low purchasing power < 3,000 USD Basic needs not met No infrastructure

World Economic Pyramid


Mature Economies

0.5 billion p.

Emerging Economies

2 billion p.

Survival Economies

4 billion p.

Source: World Resource Institute, 2006

Influence of Globalization on Labor

• Migration of people 10% of population in W. Europe/US are immigrants

3% of global population live in a country different from where they were born

• Migration of work 1960s-1970s : low-skill jobs

1980s-1990s: routine service work

1990s-2000s: knowledge work

• Migration of students 2 millions of international students, 70% to 5 countries

2011/09/06 13 Intercultural Management and HR 1 © Ulrich, 2005

MNEs in the World Economy • Number of enterprises: 77,000 parents with 770,000

affiliates (2006)

• Cross border Mergers and Acquisitions: 716 in 2005

• Total assets of foreign affiliates: US$ 45,546 billion (2005), growing +21% between 1996-2000

• Sales of foreign affiliates: US$ 22,171 billion (2005), growing +10.1% between 1996-2000

• Employment of foreign affiliates: 62,095 (thousands), growing +11% between 1996-2000

• In 2005, MNEs sales of foreign affiliates may account for as much as 50% of world GDP, up from 25-30% in mid-1980s.

Source: Dunning & Lundan 2008/UNCTAD


World’s leading Global Non-Financial MNEs

Source: UNCTAD, 2007

Multi-National Enterprise Ranked by Foreign

assets in USD Bn

Total assets in USD Bn

General Electric, USA 420 795

Vodafone, UK 231 255

Royal Dutch/Shell,

NL/UK

197 270

British Petroleum, UK 185 236

Exxon Mobil, USA 175 242

Toyota Motor, Japan 153 285

Total Oil, France 144 167

EDF, France 129 274

Ford Motor, USA 128 277

EON AG, Germany 123 202


Trends in FDI

• Both flow and stock increased in the last 30 years

• FDI has grown more rapidly than world trade

• Shift from extractive and manufacturing industries to services (2/3 of all FDI stock)

• Most FDI has been done by OECD-based firms

• US has historically been the largest source of FDI (along with UK, France, Germany, Netherlands and Japan). Combined 6 nations accounted for 60% of total global stock of FDI in 2006

• Developed nations received the largest share of FDI

• FDI into emerging economies is recently increasing particularly into China (since WTO entry), Latin America, SE Asia and India

2010/09/27 16 International Management 1

Source: Boyd, 2007

FDI Outflows 1982-2006 (billion USD)

Source: Boyd, 2007 2010/09/27 17 International Management 1

FDI Inflows by Region (billion USD)


Cumulative FDI Outflows (billion USD) 1998-2005


Intercultural Management and HR 1

Why Do Firms Go Abroad?

• Firms have to overcome the Liability of Foreignness, i.e. the disadvantage of being non-native.

• Reasons:

• Differences in institutions, regulations, language, culture.

• Customers’ discrimination practices against foreign firms.

2011/09/06 20



• To overcome this disadvantage, foreign firms must possess resources and capabilities.

– Superior resources

– Superior technologies

– Superior organizational, marketing, and financial capabilities

2011/09/06 21



• Not every firm is ready for going abroad.

– May be harmful to performance, especially for smaller firms

• Factors underlying the motivation to go abroad:

– Size of the firm

– Size of the domestic market

2011/09/06 22


Firm Size, Domestic Market Size, and

Propensity to Internationalize

2011/09/06 23

Source: Global Strategy, Peng, 2009


Where to Enter?

• Location-Specific Advantages

– Geographical features difficult to match by others

• Singapore, Austria, Turkey, Miami

– Clustering of economic activities

• Knowledge spillover

• Skilled labor force

• Specialized suppliers and buyers

2011/09/06 24

Where to Enter?

Source: Global Strategy, Peng, 2009

25 Intercultural Management and HR 1 2010/10/04 2011/09/06

Where to Enter?

• Geographic Distance

• Cultural Distance

– Difference between two cultures

• Institutional Distance

– Similarity or dissimilarity between regulations and institutions of two countries

– Ex: common-law vs. civil-law countries, ex-colony-ex-colonizer

26 Intercultural Management and HR 1 2010/10/04 2011/09/06

Where to Enter?

• Two schools of thought:

– firms enter culturally similar countries during the first stage of internationalization and, as they gain confidence, enter culturally more distant countries in later stages

– considerations of strategic goals such as market and efficiency are more important than cultural/institutional considerations

27 Intercultural Management and HR 1 2011/09/06


Where to Enter?

• Developed economies

– 80% of global GDP

• Emerging economies

– 20% global GDP

– 12 largest emerging economies (75% of the 20%) Argentina India Poland Brazil

Indonesia Russia Thailand China

Mexico South Africa Turkey Taiwan

• High risk, high return?

2011/09/06 28

Share your experience

When living and studying abroad, when interacting with people from other countries,

have you faced challenges or difficulties ? What types ? How did you overcome these

difficulties ?

29 2011/09/06 Intercultural Management and HR 1 29

Dr. Kim’s Letter

• Take a few minutes to read the letter

• In pairs, try to think about the following questions – What does it tell you about culture?

– How is it possible to define a specific culture?

– Can you describe Dr. Kim’s cultural adjustment?

• Be prepared to share your discussion with the larger group


What is Culture?

Think of 10 ways in which we use the word culture

or cultural.


Edward Burnett Tylor (1832-1917)

“Culture or civilization, taken in its wide ethnographic sense, is that complex whole which includes knowledge, belief, art, morals, law, custom, and any other capabilities and habits acquired my man as a member of society.”

What is Culture in Anthropology?


What is Culture in Management?

Culture is a characteristic way of behaving and believing that a group of people have developed over time and share (Briscoe)

The way people communicate (Hall)

The collective programming of the mind (Hofstede)

The way in which a group of people solves problems

(Trompenaars)


Culture is a way of life

Material

Objects

Ideas

Attitudes

Values

Behavior

Patterns

“Everything that people have, think, and do as members of a

society” (Ferraro, 2008)


Culture is like an iceberg Language

Artifacts

Behaviors

Codes

Customs

Etc…

Beliefs, values, and attitudes twrds:

Time

Power

Individuals/groups

Risk

Work

Emotions

Change

Harmony

Communication

Gender

Environment

etc…


Culture is like spectacles through which a group of people looks at life

• We do not see the world as it is but as we are

• We can’t see what we don’t see

• It is hard to be conscious of the eyes through which we look


What culture is not

• Neither right nor wrong : relative

• Not about individual behavior : about groups

• Not inherited : learnt and acquired

PERSONALITY

Individual

Inherited / Acquired

CULTURE

Group

Learnt

Human nature

Universal

Inherited


Characteristics of Culture

Culture is learned

Culture is shared

Culture is integrated

Culture is symbolic

Culture is dynamic

Culture is relative


Culture is learned

How do we learn our culture?

Socialization / Enculturation 2011/09/06 Intercultural Management and HR 1 39

Culture is shared


Culture is Integrated

Kin-ship

Reli-gion

Politi-cal

inst.


Education

Economics

Law

Culture is Symbolic


Culture is Dynamic


1950s 2000s

2011/09/06

Culture is Relative

Intercultural Management and HR 1 44

Communicate

Integrate

Differentiate

Give a sense of identity

Control

Adapt

What is the Function of Culture?


Influences on Culture

Culture History

Language

Religion

Traditions

Geographical environment


Can all differences be attributed to culture?

• Other influences: organizational culture / industry / education

• Beware of simplistic views

• Level of analysis : attitudes, behaviors, tools, artifacts, etc.

• Cross-cultural pitfalls


Cross-cultural pitfalls

Parochialism “Others are

like me”

Ethnocentrism

“Mine is Better”

Prejudices

Stereotyping

Discrimination

Exclusion


Examples of stereotypes

Heaven is where…

Cooks are French

Mechanics are German

Policemen are English

Lovers are Italians

And it is all organized by the Swiss


Hell is where…

Cooks are English

Mechanics are French

Policemen are German

Lovers are Swiss

And it is all organized by the Italians

Examples of cross-cultural misunderstandings Behavior American understanding Greek understanding

A: How long will it take you to finish the report?

I asked him to participate. He is the boss. He should tell me.

G: I don’t know. How long should it take?

He refuses to take responsibility.

I asked him for an order.

A: You are in the best position to analyze time requirements.

I press him to take responsibility.

What nonsense!

G: 10 days. He is unable to estimate time, it is too short.

I’d better give an answer.

A: Let’s say 15. Is it OK? I offer a contract. This is what I was waiting for, an order.

After the 15th day A: Have you finished with the report? We agreed it would be ready today. G: It will be ready tomorrow.

I must teach him to fulfill a contract.

He gave me a wrong estimate and does not appreciate that I did a 30-day job in 16 days. I can’t work for such a boss.

50 © Deresky, 2007

2011/09/06 Intercultural Management and HR 1

Overcome cross-cultural pitfalls

2011/09/06 Intercultural Management and HR 1 51 AWARENESS

LEAR

NIN

G

• The stress or disorientation associated with

adapting to a new culture or unusual context

• Causes

– Loss of usual cues, signs and signals

– Collapse of normal interpersonal interaction

– Sense of danger to our personal unity

• Stages: Honeymoon, Homesick, Hate, Home

Culture Shock

52 2011/09/06 Intercultural Management and HR 1

Cycle of Culture Shock

Phase 1:

Euphoria or

Honeymoon

Phase 2:

Crisis

Phase 3: Gradual

Adjustment

Phase 4:

Adaptation

53 2011/09/06 Intercultural Management and HR 1

Test your cultural intelligence


Cognitive CQ Behavioral

CQ

Motivational

CQ

I plan how I'm going to relate to people from a different culture before I meet them.

It's easy for me to change my body language (for example, eye contactor posture) to suit people from a different culture.

I am certain that I can befriend people whose cultural backgrounds are different from mine.

Most common cultural dimensions

Individual or Group Affiliation

Equality or Hierarchy

Risk versus Stability

Assertiveness

Task or Relationship

Attitudes toward time

Explicit or Implicit Communication


Attitude towards Time

• Think of the past, present and future as being in the shapes of circles.

• Draw 3 circles on the sheet in front of you representing past, present and future.

• Arrange these circles in any way you want that best shows how you feel about the relationship of the past, present and future. You may use different size circles.

• When you have finished, label each circle to show which one is past, which one is present and which one is future.

“Circle Test” Tom Cottle


Trompenaars’ Results

France

Japan

USA

China

Riding the Waves of Culture: Understanding Diversity in

Global Business, Trompenaars and Hampden-Turner,

McGraw-Hill 2nd edition 1998

2010/12/4 57 Intercultural Management and HR 1 57

What is a Company: a System or a Social Group?

Which sentence more accurately describes your perception of a company (which do you think is usually true and which would most people in your country opt for?)

• A) One way is to see a company as a system designed to perform functions and tasks in an efficient way. People are hired to perform these functions with the help of machines and other equipment. They are paid for the tasks they perform.

• B) A second way is to see a company as a group of people working together. They have social relations with other people and with the organization. The functioning is dependent on these relations.

Intercultural Management and HR 1 58 2011/09/06 58


2730

36 39 39 40 40 40 41 42 43 43 43 44 45 46 46 46 4648 48 48 49 50 50 50 51 52 52

54 54 5456 57

60 61 6163 63 64

6769

71 72

0

10

20

30

40

50

60

70

80

A Company: A System or a Group of peoplePercentage of respondents opting for a system rather than a group of people





Who gets the Credit?

Which kind of job is found more frequently in your organization?

– A) Everybody works together and you do not get individual credit.

– B) Everybody is allowed to work individually and individual credit can be received.



4043 43 44

47 49 49 49

56 56 57 57 59 59 59 61 62 62 62 64 64 66 66 6669 69 70 70 70 71 72 72 74 75 76

79 8084 86 88

0

20

40

60

80

100

Who Gets the Credit?Percentage of respondents where individual credit is received





The Car and the Pedestrian

You are riding in a car driven by a very close friend, and he hits a pedestrian. You know he was going at least 45 mph in an area of the city where the maximum is 30 mph. His

lawyer says that if you testify under oath that his speed was only 30 mph, it may save your friend from serious consequences. There are no other witnesses.What right does

your friend have to expect you to protect him?

– As a friend he has a definite right to expect me to testify that he was only going 30 mph.

– As a friend he has some right to expect me to testify that he was only going 30 mph.

– As a friend he has no right to expect me to testify that he was only going 30 mph.



97 93 93 92 91 91 90 87 8374 73

69 6864 57

5447 44

37 36 32

0

20

40

60

80

100

120

Friend has no right and you would not help(% of respondants by country)






High Power Distance

Low Power Distance

France South Korea

US

Do you accept unequal distribution of power in society?

Hofstede 1980

Is meaning explicit in language or is surrounding information important to

understand?


Implicit Explicit

Japan France Germany Hall, 1960

Competition or care for people ?


Masculine Feminine

Japan France Sweden Hofstede 1980

Cultural dimensions France US Japan

Individualism (Hosftede, 1980) Middle High Low

Power distance (Hosftede, 1980)

High Low Middle

Uncertainty avoidance (Hofstede, 1980)

High Low High

Masculinity (Hofstede, 1980)

Low Middle High

Universalism (Trompenaars, 1993)

Middle High Middle

Inner direction (Trompenaars, 1993)

High High Low

Synchronized time (Trompenaars, 1993)

High Low Low

Holistic approach (Trompenaars, 1993)

High Low High

Context (Hall, 1960)

Middle Low High 67 2011/09/06 Intercultural Management and HR 1 67

Cultural Clusters


Source: Ronald Inglehart and Christian Welzel, "Changing Mass Priorities: The Link Between Modernization and Democracy." Perspectives on Politics June 2010 (vol 8, No. 2) page 554.

Impact of Culture on Management

“Eastern and Western management is for 95% the same and differs in every important

aspect.”

Takeo Fujisawa (Honda)


Key learning points

• Globalization is a historical process producing an increased integration of national economies

• MNEs have become powerful actors in the globalization process

• Culture is an effective concept to understand cross-national differences

• Measuring culture is challenging and may lead to over-simplification

• Increase your cultural awareness and develop your skills to adapt to other cultures


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