Cross Cultural Management Chapter 4

striving for stability
pressure to change
On the one hand organizations are designed for stability and continuity. On the other hand organizations face a constant pressure to change due to changes in target setting, overcoming and organizational learning.
Individuals typically reject changes

drivers of resitance
Drivers of resistance to change are in most cases not clearly evident!

Drivers of resistance to change:
– individual motives (e.g. fear to abandon the usual, lower satisfaction of needs)
– organizational motives ( e.g. change of established hierarchies)
– not invented here sydrome (e.g. nature of resistance is in most cases solely emotional)
– structural inflexibility of organizations
– lock-in according to path dependence theory

Golden Rules by Lewin:
Concept to initiate successful organizational change
1. Active participation
– participation in change process
– detailed information on the background of the planned change
– participation in change decisions

2. Group
– groups are a central vehicle for change
– change process in groups causes less concerns and are typically completed faster

– cooperation with participants
– cooperation encourages self-fulfillment and willingness to change

4. Build-up
– period do loosen up is required in change process

the relevance of Lewin’s four elements differs across cultures
Active participation:
important in a culture which stresses individualism and low power distance

important in a culture which stresses collectivism

important in a culture which stresses low power distance

important in a culture which stresses long-term orientation

Eight steps to master change in organizations
1. Create awareness for the brisance of the situation
2. Build a coalition of innovators
3. Develop a vision for the organization
4. Spread the vision
5. Encourage others to act according to the vision
6. Plan short-term successes
7.Further expand successes
8. Fix the new approach firmly in the organization
Key results of chapter 4.1
Need for change is caused by internal and external influences

Change often faces resistance in organizations that is in most cases not clearly evident and has to be overcome

According to Lewin, there are four Golden Rules to initiate a successful change process – their relevance differs across cultures

Corporate Governance considers the interest of various stakeholders of a company
– suppliers
– employees
– customers
– creditors
– state
– managers
– owners
– society
A Corporate Governance system encompasses three elements
legal elements:
-superordinate target of the organization
– involvement of employees

actual elements (capital market):
– shareholder structure
– debt-to-equity ration

socio-cultural elements
– governance atmosphere, that encompasses all values relevant to governance of a society

Corporate Governance

the Anglo-Saxon model
the European model

low share vs. high share of debt
little vs. strong interrelation
directiorial vs. collegial
shareholder vs. stakeholder approach
standards have to be defined on different levels to consider different cultural principles in multinational companies
culture specific principles (have to be unterstood and observed by the local subsidiary)
situation-dependent principles (parent company and local subsidiary have to decide about consideration jointy)
universal principles ( can be established by the parent company in a global code of conduct)
key results of chapter 4.2
the term Corporate Governance refers to good and responsible governance

there are two fundamentally different Corporate Governance models – the Anglo-Saxon and the European model

the design of single elements of the Corporate Governance model is influenced by national culture, e.g. the role of top mgmt which is reflected in executive compensation

in multinational companies, country specific elements of Coporate Governance have to be designed in addition to firm wide standards

cross-cultural communication happens in different forms
– written
– spoken

– voice volume
– voice accentuation
– intonation
– pauses

– facial-expressions
– gestures
– body language
– space behavior
– touch behavior
– gaze behavior

four levels of non-verbal communication
1.time language (e.g. punctuality)
2. body language (e.g.hand gestures)
3. contract language (e.g.closing)
4. spacial language (e.g. body spacing between discussion partners)
key results of chapter 4.3
in addition to verbal communication, communication also happens on a para-verbal and a non-verbal level

in cross-cultural communication, misunderstandings can occur particularly in para-verbal and non-verbal communication

different forms of cooperation
– export
– franchising
– cooperation/ joint venture
– minority holding
– merger/ acquisition
Joint Venture
Joint Ventures are a common form of market entry to gain initial experience in a foreign culture.

A Joint Venture is a cooperation of companies from different economic regions or countries. Despite of intense cooperation and mutual dependence, partners remain legally independent.

Germany – China
Motives of Germans for Joint Ventures are:
– large sales market
– low utility prices and labor costs
– local knowledge and market expertise
– access to business networks, sales channels and authorities (Guanxi)
Motives of Chines companies:
– western innovations
– techonological know-how
– modern management
– sufficient capital

Challenges of Joint Ventures
Challenges of Joint Ventures primarily arise from communication and leadership problems between the deifferent cultures.
four phases of realization of merger
1. preparation
2. transition
3. integration
4. consolidation

If two cultures connect permantently, a process of cultural adaption takes place.

problems occuring during a merger process
During a merger process, several problems can occur – many of them can be prevented through planning and preparation.

– communication
– potential cultural differences
– motivation of employees
– revenue generation
– staffing
– products/ services
– duplication of job functions
– compensation

key results of chapter 4.4
There are different forms of cross-border cooperation that vary with regard to the scope of financial and legal relations – the joint venture is often chosen in the initial stage of cooperation.

The merger of two or more companies can lead to a clash of cultures – thorough planning can faciliate the cultural adjustment process.