Case Analysis: Doing Business Abroad

Case Analysis: Doing Business Abroad

As businesses grow to the point that they operate globally, it becomes important for the personnel within the company to understand the cultural differences between the home office and the overseas operations. Every region of the world has its unique cultural idiosyncrasies. These idiosyncrasies can prove to be challenging if a manager is not prepared to deal with the cultural differences in a respectful, appropriate way. Some of the specific ways that cultural differences can affect international business relations are group mechanics, employee behavior, and norms.

Professor Geert Hofstede initially developed a model that identified four primary dimensions to assist in differentiating cultures: Power Distance index - PDI, Individualism - IDV, Masculinity - MAS, and Uncertainty Avoidance Index - UAI. Geert Hofstede later added a fifth dimension after conducting an additional international study with a survey instrument developed with Chinese employees and managers. That dimension, based on Confucian dynamism, is Long-Term Orientation Ð'- LTO. For our purposes, we will focus on three cultural dimensions: Power Distance Index's relationship to behavior and group mechanics; Individualism's relationship to group mechanics; and Masculinity's relationship to norms.

In societies that have opposing Power-Distance Indices, the manager needs to understand the effect that the Power-Distance Index (PDI) has on both group mechanics (dynamics) and individual employee behavior. Power-Distance Index refers to the inequalities of power and wealth within the society. Societies with a high PDI are more likely to follow a caste system that does not allow significant upward mobility of its citizens whereas societies with a low PDI are more likely to have equal opportunity for all its citizens.

When a company conducts operations in a country with a significantly different PDI, the cross-cultural effect on group mechanics can be a difficult hurdle to overcome. Employees that live in a high PDI country will be less likely to speak their mind and participate in the group discussion. Employees from a low PDI country will be more likely to speak their mind and participate in the group thought process. Whether they realize it or not, the group will tend to take on the personality of the employees from the low PDI country because their thoughts and ideas are the ones that surface.

PDI effect on employee behavior is similar to that in the group. Employees from countries with a high PDI will be less likely to communicate their thoughts and beliefs because they grew up in a culture that restricts their ability to say what is on their mind. These employees may have some great money-saving or production ideas but do not feel comfortable speaking out. In addition, expatriate managers may deal with the appropriate level of subordinate management but in fact, they may not be talking to the person that has the details that they need because the caste system prevents the expatriate manager from dealing with anyone below the subordinate manager.

The successful manager needs to communicate effectively and foster mutual respect within the workplace for all employees, drawing out their thoughts and ideas equally. If the company has a choice, I believe that they should select a manager from the country with the lower PDI because he will be more comfortable and receptive to receiving input from all employees than a foreign-national manager that grew up in a high PDI society. In the case of a US company, an expatriate manager may be a better choice than selecting a foreign-national to manage overseas operations.

In societies that have opposing levels of Individualism, the manager needs to understand the effects that the differences will have on group mechanics. Individualism refers to how well individual citizens within the society view their individual rights. Societies with high individualism tend to form a larger number of looser relationships, preferring their anonymity whereas societies with low individualism tend to prefer to be associated with groups.

Individualism affects group mechanics more than anything else does. Employees that grew up in societies with low individualism want to be associated with the group. They view the group as an extension of who they are. As such, they are more likely to want to participate in the group dynamics, providing their thoughts and ideas to improve the group's product.

To be successful in this environment, the manager needs to engender cooperation amongst the employees, create a shared vision within the group and organization, and effectively communicate with his employees. Either expatriate or foreign-national managers can be successful working with these employees. All things being equal between the two managers, because of the cost benefits of employing foreign-national managers, I would recommend hiring a foreign-national manager to run overseas operations when dealing solely with the dimension of Individualism.

In societies that have opposing levels of Masculinity, the manager needs to understand the effect that the difference will have on the norms of the employees. Masculinity refers to the society's degree of gender differentiation. In countries that have a high degree of gender differentiation, males dominate a significant portion of the society, whereas in countries that have a low degree of gender differentiation, females are treated equally