Managing Across Cultures

Chapter 5

Chapter Outline

Strategic orientations of global companies Ethnocentric orientation Polycentric orientation Regioncentric orientation Geocentric orientation

The globalization imperative vs. pressures for regional and national responsiveness

Chapter Outline (2)

Doing business around the world China Russia India France Poland

Ethnocentric Strategic Orientation

The values and interests of the parent company guide strategic decisions

Ethnocentric Strategic Orientation (2)

Mission is profitability. Top down decision making – major decisions are

made at headquarters Global strategy, determined at headquarters. Global product (based on needs of home country) Home country managers hold key positions

everywhere. Profits from subsidiaries are repatriated (go back) to corporate headquarters

Headquarters makes decisions about budgets, profit targets, and capital investment for the subsidiaries.

Polycentric Strategic Orientation Strategic decisions are tailored to suit the

cultures of the countries where the company operates.

Polycentric Strategic Orientation (2)

Mission is public acceptance (legitimacy) Subsidiaries set their own strategic objectives. Subsidiaries use national responsiveness strategies

(based on local needs). Products are based on host country needs. Most profits are retained by the subsidiary. Subsidiary makes decisions about its budget and

capital investment. Local citizens are trained for key positions.

Regioncentric Strategic Orientation

The firm tries to balance its own interests with the interests of its subsidiaries on a regional basis.

Regioncentric Strategic Orientation (2)

Mission is profitability and public acceptance. Strategy is based on regional integration and national

responsiveness. Strategic objectives are negotiated between regional

headquarters and subsidiaries. Regional product, often with local adaptations Most profits are retained in the region. Capital investment decisions are made on a regional

basis. Managers are trained for key positions anywhere in the

region.

Geocentric Strategic Orientation

The company uses a global approach to decision making.

Geocentric Strategic Orientation (2)

Mission is profitability and public acceptance.

Strategy is global integration and national responsiveness.

Strategic objectives are negotiated among subsidiaries, regions, and headquarters.

Global product, with local variations

Geocentric Strategic Orientation (3)

Headquarters redistributes profits among subsidiaries to meet capital investment and budget needs.

The best managers are developed for key positions anywhere in the world.

Combines best features of geocentric and polycentric strategies.

Requires more coordination and communication than other strategies.

Globalization Imperative

The "globalization imperative" is a belief that one worldwide approach to doing business is the key to both efficiency and effectiveness. In response to pressures for national and

regional responsiveness, a growing number of firms have switched to regioncentric or geocentric strategies.

Pressures for National and Regional Responsiveness

Different product standards Different customer needs and tastes Businesses or consumers prefer locally made

products Managing details in a global organization is

difficult and complex. Subsidiaries know local market needs and

management practices better than headquarters.

Employees in subsidiaries seek promotion opportunities.

Technical competence is the primary criterion for doing business in China *

Time is the major cultural difference between many Western countries and China – Chinese are patient negotiators and may take advantage of American impatience or time constraints.

Guanxi :Good connections that result in lower costs, increased business, and better business opportunities.

Doing Business in China

Be a good listener Realize that China is a collective society Understand that the Chinese are less animated

than Westerners. China is a neutral culture Early negotiations are likely to focus on

general principles. The Chinese will be reluctant to change those later.

Older Chinese may place values and principles above money and expediency. They value the good of their country or group.

Doing Business in China (2)

Allow Chinese host to signal the beginning of a meeting

Understand that Chinese are slow to decide on a course of action, but stick to the decision once made

Chinese negotiators expect concessions but do not always make a concession in return.

Do not display emotions during negotiations Take a long-term perspective toward business

opportunities.

Doing Business in China (3)

Doing Business in Russia

Build personal relationships with partners

Use local consultants Be careful to uphold your own business

ethics and the policies of your company Be patient Stress exclusivity

Deal with just one firm at a time Do not share your company's financial

information

Doing Business in Russia (2)

Research the company and the business environment

Stress mutual gain Clarify business terminology Be careful about compromising or settling

things quickly – most concessions should be made at the end.

Russians believe that contracts are binding only if they are mutually beneficial. Continue to stress the benefits of the deal to them.

Do not get into a dispute with the government.

Doing Business in India

Many business people speak English. When dealing with people from India,

one should Be on time for meetings Avoid asking personal questions Use formal titles when addressing others Avoid public displays of affection

Doing Business in France

Social class and status are more important in France than in the United States

In contrast to Americans, the French are: More tolerant of different points of view More inclined to determine a person’s

trustworthiness on the basis of personal characteristics rather than accomplishments

Doing Business in France (2)

In contrast to Americans, the French are: (2) More inclined to have highly centralized

organizations with rigid structures Top-level managers are more autocratic and

less likely to be questioned. Less moved to industriousness and more

concerned with the quality of life

Doing Business in France (3)

Typical behavior of French negotiators They try to find out about the other company’s

objectives at the beginning of negotiations They don’t reveal their own objectives until

the last stages of negotiations Do not like to be rushed into making a

decision Usually will not make a decision during a

meeting with another company Usually will not make concessions unless you

give them a logical reason for doing so

Doing Business in Poland

Design products for Poland and use a Polish advertising agency.

Do your homework. Poles are often shrewd negotiators.

Be prepared to provide data. People are not impressed by "sales talk".

Be prepared to make a long-term commitment.

Take time to build relationships and gain trust. Be willing to "give something back" to the

community.

Doing Business in Poland (2)

Don't be afraid to ask questions about things that you don't understand.

It's okay to ask sensitive questions, but be polite.

If a question is important, keep asking until you get an answer. You may have to ask the question differently.

Local governments have a large role in business regulation. Some areas are more conducive to business than others.

Doing Business in Poland (3)

When dealing with older Poles, use professional titles (example: engineer), and do not call people by their first names until you are invited to do so.

Business entertainment is less elaborate than in the U. S. Entertainment should be reciprocated.

Be patient. Establishing a business will take longer than it would in the U. S.

Many of these points would also apply in the Czech Republic and Slovakia.