Borderless World

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International Business, Shenkar and Luo: Chapter 6
* Goodyear-Sumitomo partnership portrayed as a marriage of equals avoid ‘losing face’/acknowledgement of failure to takeover, must take into account cultural difference. * Importance of culture ranges from strategy formulation to FDI and organisation design. * Culture can influence how strategic moves are presented and can impact decisions. * Organisation behaviour processes such as perception, motivation, and leadership as well as human resources are also influenced by culture, as are management style, decision-making, and negotiations. * Culture affects not only how employees behave and interact but also the strategy that firms and business units employ. Culture does not explain everything

* Mistake to treat culture as a residual variable that explains everything that is different. Although culture plays an important role, we need to take into account other factors. The mistakes of ignoring the impact of culture - Correlates of culture Language

* Language blunders are common e.g. launching a hair product named “Mist Stick” in Germany, but mist is slang for manure. * Variations in the meaning of nonverbal cues may lead to embarrassing gaffes e.g. hand gestures to implore someone to come over is reserved in Korea for pets. * These mistakes have dire consequences for production and on management. * Although borderless, but other important aspects of culture such as language still different. The dominance of English does not imply that knowledge of other language is not necessary. In 1992, the constitution declared French the official language and in 1994, the use of foreign words was banned. * The adoption of English as a working language in an Italian-British joint venture helped the British get the upper hand because it meant adopting their routines. Therefore, if managers ignore this, they will be at a disadvantage. Religion and its influence on international business

* Implications for firms to adopt practices that will satisfy religious decrees without undermining modern business practices * E.g. banks in Muslim countries issue shares to depositors and charge borrowers fees and commissions to maintain profitability instead of charging interest because interest is prohibited under Islamic law therefore you cannot ignore this part of culture as it may result in failure. * In China birthrates tend to rise during the year of the dragon, creating opportunities for manufacturers of children’s clothes and toys – taking advantage of cultural opportunities for business. Hofstede’s dimensions of culture

Societal context such as culture creates differences in structure in different countries. * Power distance: the extent to which hierarchical differences are accepted in society and articulated. High power distance: tend to have more levels of hierarchy (vertical differentiation), a higher proportion of supervisory personnel (narrow span of control), and more centralized decision-making. Status and power would serve as motivators and leaders would be revered or obeyed as authorities. Problem: Lower-level crew members not allowed to challenge captains in the cockpit resulted in crashes.

* Uncertainty avoidance: the extent to which uncertainty and ambiguity are tolerated – most critical dimension for FDI because of its implications on risk taking and investment. High uncertainty avoidance: more formalization evident in greater amount of written rules and procedures. Greater specialization evident in the importance attached to technical competence in the role of staff and in defining jobs and functions. Managers would avoid taking risks and would be motivated by security and stability. Role of leadership more of planning, organizing, coordinating and controlling.

* Individualism/collectivism: the extent to which self or the group constitutes the centre point of identification for the individual. High collectivist...
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