Cultural Challenges Doing Business Overseas

Introduction

The open market in the Czech Republic has opened the opportunity for Steve Kafka to invest in a franchise of Chicago Style Pizza. To be able to accomplish his new business venture Steve needs to identify differences and incompatibilities between U.S. and Czech Republic cultures. Steve needs to identify comparative advantages, apply Hofstede’s Fourth Dimensions in the Czech environment, learn how to deal in the Czech’s business environment and learn the opportunities and risks that he can encounter investing in the Czech Republic.

Major Differences and Incompatibilities between U.S. and Czech Cultures

Prague is the capital of Czech Republic a small place where word mouth reputation is extremely important. Good or bad news are spread quickly. The Czechs are usually more reserved than the Americans and this create nervousness in the Czech culture. To create a business relationship with the Czechs the person interested in a business venture must start slowly. The person must wait until it Czechs friends presents other business contacts and in this way create relations inside the business. The Czechs finds suspicious that a person try to establish it business through emails or in a rush (Doing Business in the Czech Republic, 2008).

The Czechs prefers to know the person and the company background and if they feel comfortable with the person they will make a deal with the person in a follow up meeting. Is important for the Czechs the establishment of long-term relationships (Doing Business in the Czech Republic, 2008).

In contrast, to the American culture the Czechs do not smile as social signal of greeting. This can cause the impression that the Czechs are cold and unfriendly. The Czechs are formals in contrast to the Americans. This is the way used to show respect in their business relations (Doing Business in the Czech Republic, 2008).

Punctuality in business meetings is very important for both, Americans and Czechs. The meetings should be arranging with weeks of anticipation. The dress code for the Czech is more formal; they prefer dark business suits and ties and expect the same from other cultures. Dressing causal is a turn-off for the Czechs (Doing Business in the Czech Republic, 2008).

In the Czech business culture the first name is never used. They feel offended if their visitors use the first name without being invited to do it. Weeks can pass to establish a more relaxing environment (Doing Business in the Czech Republic, 2008).

The Czechs offers tea, coffee, juice, water and cookies to their visitors. In contrast to the American culture the Czech can feel offended if their visitors do not accept at least of the items offered (Doing Business in the Czech Republic, 2008).

Comparative Advantages in Czech Republic

The Czech Republic has a free market and an open economy with a high level of liberalization. Foreign people and legal entities do not encounter any restrictions. The Czech Republic has a stable and continuously growing economy, a standard political system, a high educated and skilled labor force and it’s localized in a good geographical area in the European Market. The amount of foreign inversions exceeds the 50 billions in Euros. The Czech Republic is compared with others new market economies in Europe (Peterka & Partners, 2007).

Hofstede’s Four Primary Dimensions evaluating the Czech Business Environment

According to Hofstede’s Cultural Dimensions the power index (PDI) in the Czech Republic is slightly higher than the U.S. PDI. In the masculinity dimension U.S. and Czech Republic are relatively equal. That means that both countries experiences higher degrees of differentiation of roles (Hofstede, 1967-2003). The male dominates a significant portion of the society and power structure. The biggest differences among the U.S. and the Czech Republic are the Individualism and the Uncertainty Avoidance Index (UAI). The U.S. Individualism is real high in contrast with the Czech Republic and the UAI is higher in contrast with the U.S., that means that the U.S. society have a more individualistic attitude and relatively lose bonds with others while the Czech Republic with the high UAI index represents a society with higher rules and attempt to control all outcomes and results. In addition, The Czech’s society has a lower level of tolerance for a variety of ideas, thoughts and beliefs (Hofstede, 1967-2003).

Trade Barriers

The following are trade barriers that Steve’s needs to be aware while is processing to open he’s franchise in the Czech Republic. The Czech Republic is committed to a free market and maintains an open economy, with few barriers to trade. Adoption of EU technical barriers to some imports of agricultural and food products. Steve needs to be aware to these barriers when he establishes his franchise in Prague, Czech Republic. Normally the government interferes with free trades starting with Protective tariffs are taxes for imports goods. These are design to protect the local market from foreign competence (McConnell & Brue, 2004). Import quotas delay the international commerce. All the imports are prohibited once the quota is filled (McConnell & Brue, 2004). Non tariff barriers means that the nations requires that importers of foreign goods obtain licenses and restrict the numbers of licenses issued (McConnell & Brue, 2004). Export Subsidies consists in government payments to domestic producers that exports goods. These subsidies help to reduce costs and enable producers to charge lower prices and sell more exports in the world market (McConnell & Brue, 2004). Success on the Czech market can be complicated by the lack of needed standardized products on the local market. An example is the failure of Prague's first Pizza Hut which closed down because too many ingredients had to be imported for the one existing restaurant. The added expense for importing ingredients made operating