Cultural Challenges Of Doing Business Oversees

Introduction

Taking risks in making business decisions is ingrained into American culture and has been the key to success in American corporate world. Steve Kafka, an American by birth and Czech by origin realized this fact when he became a franchisor for Chicago Style Pizza. Steve has now decided to expand his business into Czech Republic. Steve overcame several difficulties when he first became a franchisor, and now he anticipates similar hurdles at the new location in Prague. Steve still has close family and friends in the Czech Republic, he speaks Czech fluently and has visited his home country several times. Nevertheless, he was born in the United States probably needs to understand Czech people and culture a bit more in order to make his business venture successful.

Influence of culture on global business perspectives

"Culture" is the acquired, often unwritten knowledge and rules that people use to interpret experience and generate social behavior. Culture creates values, work attitudes and influences behavior. It is often transgenerational and adaptive (Hodgetts, 2005, p.120). Culture defines an organizational behavior as well, such as, centralized vs. decentralized decision making, risk tolerance, reward system (group/individual), formality of procedures, employee loyalty, cooperation vs. competition, stability vs. innovation, individualistic view vs. collectivistic view and so on (Class Notes). Culture is the implicit, and basic assumptions that guide people's behavior.

Therefore, it is important for a venture capitalist or an individual or an organization to learn and gauge a country's culture if they want to succeed. They have to study the norms and values of that society because differences in cultural values may very well result in varying managerial practices.

Allocation of operations and resources for comparative advantage

Extensive data has been collected through research (Hodgetts, 2005, p.107) to attempt clustering countries into similar cultural groupings using mathematical technique of nonparametric multivariate analysis, known as smallest space analysis (SSA). The SSA maps thus produced by Ronen and Kraut (Hodgetts, 2005, p. 108) showed five country clusters. An important aspect of this study is the potential for practical applications by multinational organizations. Knowledge of relative similarities among countries can guide the smooth placement of internal resources and establishment of compatible regional units. These organizations can leverage on the strength of one country's culture by optimizing their resource utilization.

Differences between U.S. and Czech cultures

It is important for Steve Kafka to identify the differences and incompatibilities between the two cultures if he wants to become successful. Czech people tend to be more formal when talking to people and would like to address them by their last name, often with prefixes, such as, professor, doctor and mister. They do not tend to use others' first names until they are well acquainted. In the United States people in groups tend to be very informal, with people often addressing others by their first name. In Czech republic, men usually wait for women to extend their hands for a handshake, whereas, in the United States no such formalities are observed. Maintaining eye contact, sometimes amounting to staring in public places, is important in Czech Republic and on the other hand, while maintaining eye contact is important in the United States, staring is considered impolite. Czech people remove their footwear before entering a home and often leave them in the entryway. In the United States wearing shoes inside homes is considered a norm (CultureGrams, 2007, p.2).

Aside from cultural differences, Steve should expect a lengthy decision-making process in Czech Republic. Many countries in Europe, including the Czech Republic have adopted the German tendency to use methodical and painstaking care with all business planning and to consider business dealings with meticulous specificity. Steve should be prepared for a lengthy timeline and attention to microscopic detail (CountryWatch, 2007, p.116).

Although there are differences in the cultures of Czech Republic and the United States, there are many similarities. People from both cultures love outdoor activities. Involvement in sports is encouraged. Both value education, individual achievement and wealth. Moreover, the United States has been traditionally known for its cultural diversity and pluralism. The uniqueness of this country is that the unique subcultures are integrated into main American culture (Wikipedia). Steve has visited Czech Republic and speaks Czech fluently. These factors and the adjustments to differences will help Steve Kafka with his venture. Just as any business plan, there are risks with the venture Steve is undertaking, however with planning, backed up by his experience in the United States, it is very likely that he will succeed. The lengthy decision-making process involving meticulous planning helps Steve address all aspects of business development in Czech Republic. Much of the possible risk mitigation tactics are discussed under Hofstede's dimensions of culture.

Eating habits in Czech Republic are different compared to the United States. Lunch is the main meal whether it is at work or at school and they do not dine out as often as the Americans do. Street vending of pizza is very common in Czech Republic as well. The opportunity costs are lower in the Czech Republic compared to the United States and the labor as well as the capital equipment is cheaper also.

Hofstede's four primary dimensions of culture

Dutch researcher Geert Hofstede found that there are four dimensions of culture that help to explain how and why people from various cultures behave as they do (Hodgetts, 2005, p.101). Even though his study was limited to the local branches of IBM Corporation, it is widely respected because of the survey controls that Geert used in his study.

1. Power Distance: The extent to which less powerful members of institutions and organizations accept that the power is distributed unequally. Higher the index, larger the gap between the wealthy and the poor (uneven distribution of wealth) and the distance between the "have"s and the "have-not"s grows larger and larger.

The Power Distance Index value for United States of America is estimated at 40, whereas it is estimated to be 57 for Czech Republic (ClearlyCultural). This means that that the distance between the wealthy and the poor is higher in Csech Republic than the USA. Higher index values also indicate