The Cultural Challenges Of Doing Business Overseas

Steve Kafka was born and raised in the United States. He is a successful businessperson in the United States. He is a franchisor for Chicago Style Pizza, overcoming many difficulties to achieve this success. Steve is familiar with living, working and doing business in the United States, an open business economy and a very diverse culture. Doing business in Prague, Czech Republic is going to be different from doing business in Anytown, USA.

Although Steve has knowledge of the Czech Republic's culture, has he done is homework in regards to doing business in the Czech Republic? Has he examined the economic and social climates of the country? Does it make good business sense to open a pizza business in the Czech Republic?

Cultural Differences

Researcher and developer of the Cultural Dimensions Professor Geert Hofstede did not actually study the Czech Republic; however, ITIM International developed an estimate of how the Czech Republic would score on the four dimensions of culture, based on European countries, which will help Steve evaluate the business and social cultural environments. The traditional four culture dimensions are power distance index, individualism, masculinity, and uncertainty avoidance index.

The Czech Republic became a democratic nation January 1, 1993 after being under communist rule for 75 years. The Czech Republic is in a state of transition from communism to democracy, a country cannot change its culture overnight. Still today, the communist ideals influence the culture of the democratic Czech Republic.

The highest-ranking culture dimension for the Czech Republic according to Geert Hofstede is uncertainty avoidance. The world average score is 64, the Czech estimated score is 74, the United States score is 46 (Hofstede). In the Czech business culture, businessmen avoid risks or take a very practical approach in business dealings. This could pose a problem in attracting Czech entrepreneurs to invest in Steve's franchise. To mitigate this difference Steve will need to continually reassure investors and be very patient in dealings with them. The Czech retail sector is undergoing a transformation as rising incomes and changing preferences create new consumer habits. Czech entrepreneurs looking to take advantage of these trends are increasingly turning to franchising. Studies show that the majority of new businesses fail. But, franchise businesses experience a success rate that is six times greater - meaning more profits and greater security for business owners (BUYUSA).

The estimated score for the individualism dimension of culture according to Hofstede is 58 for the Czech Republic compared to 91 for the United States (Hofstede). This is a significant difference between the two cultures. This culture dimension Steve will need to address. Owing to strong tradition, Czechs still mostly eat at home (Global). The family unit is the focal point of Czech social structure. Family ties are much closer and more deeply rooted than in other countries (Communicaid). According to research done by Public Opinion Research Centre of the Institute of Sociology of the Academy of Sciences in 2003 only 6% of families eat out almost everyday, and 20% never eat in restaurants. Only 17% have lunch and 3% eat dinner in restaurants or fast food outlets. Choosing to expand his franchise in Prague, the largest Czech city will give the business venture the greatest opportunity for success. The busy lifestyles and the younger generation who live in Prague will be a good market for a pizza franchise.

The next lowest ranking dimension is masculinity. The world average score is 50, Czech estimated score is 45, while the United States score is 62 (Hofstede). Masculinity is the second lowest culture dimension for the Czech Republic while it is the second highest dimension in the United States. This would suggest that Steve would have to back off and not be as assertive when developing business relationships in the Czech Republic as he would in the United States. Relationships will take time so Steve will have to be patient.

The lowest ranking dimension is the power distance index, the estimated score is 35 for the Czech Republic compared to the United States' score of 40 (Hofstede). The scores are in the low to mid range, suggesting that both countries recognize that there is a hierarchical system but it is not a major factor. However, according to Global Communications the Czech Republic has a much higher regard for structure and hierarchy. Leadership and authority is vertical in structure. Czech managers maintain their status and separate themselves from subordinates. Decision-making power is centralized