The Cultural Challenges Of Doing Business Overseas Mba 501

Introduction

There are many challenges to doing business in the U.S. and there are additional challenges that occur when the decision is made to do business in a foreign country. In this paper I will discuss the challenges Steve Kafka will face as he opens his business in the Czech Republic. Per the information given to me in the assignments, Steve Kafka is an American of Czech origin and he a franchisor for Chicago Style Pizza. He has decided to expand his business into the Czech Republic, knowing this is a risky decision. When he first became a franchisor, he had to overcome many difficulties and he expects he will face some of these difficulties again as he opens up his business in the new location in Prague, Czech Republic. Steve was born in the United States and has family and friends in the Czech Republic. Although, he speaks Czech fluently and has visited the country several times, he believes he knows the people and the culture. This paper will examine some of the challenges he may face, the risks that may be involved and factors Steve may want to evaluate as he takes on this new and exciting opportunity.

Discussion

A: Are there major differences and incompatibilities between the U.S .and Czech cultures?

Overall, the Czech culture is remarkably similar to the U.S. culture. Following the breakup of Czechoslovakia, the Czech Republic is one of the most stable and prosperous countries and has one of the most developed and industrialized economies (www.countrywatch.com.) Czech people generally have upper middle income and are well educated. There are many minor cultural differences between the U.S. and Czech people. In regard to eating, Czechs rarely dine out and when they do meals are served a la carte; empty glasses are quickly refilled, and the customers do not pour their own drinks, beer is commonly consumed with meals (CultureGrams, 2007.)

Dating is usually done in groups and usually consists of movies, dancing or outdoor activities. This is in contrast with the U.S. culture where families dine out often, many accoutrements are served with the meal (i.e. salad and bread) and restaurants offer pitchers of beverages that the customers pour themselves. Typical dates in the U.S. include dinner, or some other meal, at a restaurant followed by a movie or dancing. In the Czech Republic, hotdogs and pizza are popular snack foods that are purchased from sidewalk vendors; which is slightly different from the U.S. culture where hotdogs can be purchased from street vendors in large cities, not in smaller towns. Pizzerias are found in most every town in the U.S. and the pizza is either eaten in the restaurant or taken home, not purchased from street vendors. Another difference is regarding the difference is business hours; Czech businesses do not stay open as late as U.S. businesses. Czechs also celebrate different holidays than U.S. Christmas Eve is the most important part of Christmas to the Czech people, where Christmas Day is more important in the U.S.

B: Will these differences create major business risks for Steve? How might Steve mitigate these risks?

The differences may create a major business risk for Steve is that pizza is considered a snack food in Czech culture not a main meal. Steve will have to take these differences in dining preferences into consideration at his new location. Since most Czech people do not dine out because most meals are prepared at home or eaten at work, and most businesses do not stay open late, Steve’s pizzeria may not succeed unless he alters his business hours and shop style. Where his U.S. customers would prefer certain things, these same preferences may offend the Czechs. As Prague is the largest city in the Czech Republic, there will be large cultural diversity and a larger western influence. Steve should mitigate these risks by educating his wait staff, serving beer at his establishment and perhaps initially incorporate a small take-out counter or sidewalk vendor stand to distribute pizza.

C: What comparative advantages exist in the Czech Republic? Can Steve take advantage of these?

The comparative advantages that exist in the Czech economy are low wage costs, the interest rate differential, the macroeconomic and foreign exchange rate stability, the substantial scope for portfolio investments and the expanding room for direct investments (http://tcc.export.gov.) The Czech Republic produces grains and hops which will be beneficial for Steve for use in crusts and beer. Steve can take advantage of these with his new restaurant as he will pay out less in wages and can invest more of his profits. The stability of the economy will permit him greater success with his new business as the people will be more likely to patronize his establishment since they do not have to worry about economic instability.

D: Will Hofstede’s four primary dimensions help Steve evaluate the Czech business environment? What are the likely results of this evaluation?

Hofstede’s four primary cultural dimensions are Power Distance Index (PDI), Individualism (IDV), Masculinity (MAS) and Uncertainty Avoidance Index (UAI). There is also a fifth cultural dimension, Long-Term Orientation (LTO) versus short-term orientation (STO), which is about values. Values associated with LTO are thriftiness and determination, whereas values associated with STO are upholding tradition, following through on commitments, and preserving one's dignity (www.geert-hofstede.com.)

Power Distance Index (PDI) is how the people view that distribution of power within the culture (www.geert-hofstede.com.) The Czech Republic has a parliamentary democracy government with a president that is elected to a five year term, an 81-seat Senate and a 200-seat Chamber of Deputies (www.coutrywatch.com.) The voting age is 18, as it is in the U.S.

Individualism (IDV) versus collectivism is the degree to which individuals are integrated into groups. If the society is more individualistic the ties between individuals are loose and each person is expected to look after themselves and his or her immediate family; where if a society is more collectivistic, people are integrated into groups, often with extended families living under the same roof (www.geert-hofstede.com.) The Czech culture consists of tightly knit families, grandparents help with child care and adult children care for their aging parents (CultureGrams, 2007.)

Masculinity (MAS) versus femininity