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In terms of globalization, it is important for enterprises to take culture into account for business activities and better interaction, especially for a merger and acquisition with the company from different culture background. Culture difference takes place in international business and gives rise to additional challenges.
Culture is an evolving set of shared beliefs, values, attitudes, and logical processes which provide cognitive maps for people within a given societal group to perceive, think, reason, act, react, and interact. (Tung, 1995). In global business both culture between different countries and peoples, as well as corporate culture within a company needs to be considered. Each organization has its own culture to achieve the success in the different specific working environments.
Corporate culture is established by the founder of the business and adjusted to the needs and goals of the company which organizes its workflow, quality, employee attitude, behaviour, salary, troubleshooting, innovation power and market position etc. (Franck, 2008). The success of an organization can be measured by achieving profits and company growth, also to provide the higher quality of products and services in the long term using the appropriate corporate culture which reflects the performance of the company in both short term and long term. Corporate culture reflects characteristics of an organization and can support its business strategy, through developing processes and ways of working.
While national culture is allied with corporate culture. Each region has its distinctive culture due to the power of distance. In 1997, Hofstede pointed out National culture can be distinguished by differences in religion, language, population and history of a nation; culture values are usually the products which portray national heritage. These heritages are not used to change the mindset of people but modelling them to have better performance. Different national cultures have significant influences on merging international businesses due to unique localised company strategy and leadership styles. It is essential for international business managers to understand and distinguish national cultures as they present themselves within international businesses.
Corporate culture and national culture play an important role in deciding international business strategies in particular mergers and acquisitions. Cultural differences can be present even between similar companies and different corporate culture from two companies may have a negative effect on each company. Good integration and management of different corporate culture helps the success of merger activities which requires new strategies for the combined organization. Creation of new corporate cultures should contain the best elements from the both companies. According to a KPMG International study, 83% of mergers and acquisitions fail due to mismanagement of cultures. Therefore it is important to analyse and understand both companies' current culture before the merger. Merging balance sheets it turns out is far easier than merging cultures. (Imoukhuede, 2010). Lack of the culture fit can cause merger failure.
Consider the culture fit of a Chinese and African company using the theoretical model of Hofstede and Trompennars to explain the ways we can reduce the culture differences by using international management interventions and techniques. Due to the cultural diversification of African nations, the West Africa (countries such as Ghana, Nigeria and Sierra Leone) are chosen for this essay.
Geert Hofstede (1991) pointed out that there is no such thing as a universal management method or management theory across the globe. Even the word 'management' has different origins and meanings in countries throughout the world. Management is not a phenomenon that can be isolated from other processes taking place in society. It interacts with what happens in the family, at school, in politics, and government. It is obviously also related to religion and to beliefs about science. Hofstede model of culture an important model that examines national cultural affects on business performance it can also be used to compare the national cultural differences between Chinese and African organizations based on the five dimensions: power distance, individualism versus collectivism, masculinity versus femininity, uncertainty avoidance and long term versus short term orientation.
Hofstede points out that power distance(PD) is the extent to which the less powerful members of organizations and institutions (like the family) expect and accept that power is distributed unequally' (1991) which shows the degree of inequality among people. The culture with high PD normally exists within the hierarchy organization where the power controlled depends on the status of the employees, while the managers and subordinates have equal power levels within the low PD liberal democratic decentralized organizations. Hofstede highlights the West African nations have a high Power distance index (77) while Chinese have the highest score (80) among the all the Asian countries. In this dimension, the culture between those two nations is similar. Chinese companies may benefit from this in the business operations with Africa. In such hierarchy organizational structure, managers should encourage their employees to express their doubts and motivate them to bring new ideas for the company.
In a country high in individualism, People normally only focus on themselves, their family and the organizations they work with. While people work in collectivism, they work as a group and look after each other at work together to achieve the success. According to the scale of Hofstede, both Chinese and West African nations (20) work in a collective manner while the most of European and American employees work in an individual manner due to the stress on their individual rights and personal achievement. In the collective culture, managers should be represented as humble and get involved in group work rather than working individually. The direct confrontation should be avoided to create a harmonious working environment which is more like a family in turn of the loyalty from the employees.
Hofestede describes the masculinity as assertiveness and competitiveness while the femininity is more modesty and caring which emphasises on interpersonal relationship (1991). The social role value of man and woman is differentiated and emphasised in this dimension. China (66) has masculine culture which shows people live for work, focus more on income, achievement and expansion with the challenging and stressful work. West Africa (46) has a femininity culture that they work to live. The quality of life is concerned with the slow pattern and it is important for them to help others. In masculine culture managers only focus on business with a straight forward communication style and self promotion become a comparative advantage. Due to the change of national strategy of those countries, not only the growth of the organization should be emphasised but also the social responsibilities. With the femininity culture, the personal time is valuable. It is important to build up trust which is considered even more than the profit margin in business.
People in the nation prefer structured situations rather than uncertainty and ambiguity which threat them and try be avoided by established beliefs, rules, laws and safety. In most of West African countries, they have high uncertainty avoidance (54) while it's comparatively lower in china (40) and Hong Kong (29). West African nations are more carefully planned to avoid the uncertainty and keen on the stable situations due to their high needs for security which related to their national cultures, it is more difficult for them to accept new ideas. Employees from china are more ambitious with more chance for creation and innovation and willing to accept risks with less security concerned. Thus the solutions will be suggested differently due to the UA culture difference.
In long term orientation, the actions and attitudes are valued towards future; people are more likely to save the money for future expenditure. The short term orientation is more focused on past and present. Chinese culture is influenced by Confuciusm. They are most future concerned among all the nations which has a top score of 118 on hofstede's scale. The most West African countries are short term orientated that have the lowest score (16).
Power Distance Index (PDI)
Uncertainty Avoidance Index(UAI)
(Figure 1: Geert Hofstede cultural dimensions index, 2009)
Chinese and West African companies in general have some similarities in culture, which enable them to work harmoniously together, however there are some major cultural differences that would need to be managed carefully in order for a company from China to work successfully with a company from West Africa who pay particular attention to long term orientation, uncertainty avoidance and masculinity.
Another model that can be used to measure cultural differences is that of Trompennar & Hampden Turner. Trompennar defined culture as the way in which a group of people solves problems and reconciles dilemmas. Along with Charles Hampden-Turner, he developed a model of seven cultural dimensions to compare national cultures which should cope with the social interaction, relationship to environment and the passage of time. Those three problems can be divided into seven dimensions (Trompennar & Hampden-Turner, 1997). In some certain points, the dimension of individualism vs. collectivism from this model is the same as Hofestede's.
In high integration of universalism nationals, the applications can be done according to the rules or contracts rather than personal relationships. In a particularism, relationships and trust between friends are more focused. It is essential and takes time to build up the trust to do the businesses with Chinese who strongly believe in friendship. They build up relationships even within the negotiation and enough room will be spared for the change of future situations. While the African nations are particularism as well, they focus on friendships rather than written contacts.
The social orientation of Trompennar is the same as the one in the Hofestede's model. The cultures from both nations are collectivism that they believe in the group work which they belong to.
People from neutral culture nations hold back their emotions while communications and emotions should not affect their decision making. Such inter cultural difference should be considered and understood within a multinational teams. In high emotional culture, people express their emotions more freely and straight forward. Chinese naturally show their emotions verbally or gestures. Emotions are often used in business decision making. Africa are quite appropriated on emotions which less influenced on their business. They express their feeling subtly and carefully which leads the misunderstanding in some circumstances.
Specific culture refers to the low degree of the privacy and people are more enjoy and freely to share the public sectors. In business, they are straight to the point. The employees are motivated to be given a task and paid according to the achievements. People from diffused background are high degree of privacy concerned that normally takes longer time for them to get to the point to avoid confrontations. It is important to build up close personal relationships for business in the diffuse culture in china. African are diffused, they are open in the social relationships and willing to build up friendship beyond their work.
Statues indicate the position of an individual or group in the society which could be different due to the different social background. The performance of the job is the measurement of the statues in achievement culture. In compare with the ascription culture nation like china, the statue is defined according to who is that person and the interpersonal relationships in the society. The person who has the statues is respected and influences the people around. In Africa, the statues are accorded by nature rather than by achievement in which shows they are more willing to accept the high power distance culture.
Past, present and future of time orientation reflects the decision making and action taking. Different culture views the times as sequential that people concentrate one thing at a time, time is more concerned and the performance is valued according to the present and future potentials. In synchronous culture, such as in African nations, people carry out more than one thing at a time and less time punctured, the valuation of the performance is related to the past contributions. The individual situation varies; the time is flexible which is after the relationship. Chinese are more time oriented in contrast with African; time has a high value keeps their business running and the future plans of the business are often extended to cope with their business strategies.
This dimension reflects the relationships between individual and nature environment which can either be controlled and used or live with it in harmony. Chinese are outer directed who believe has the close relationship with nature and live in harmony. As well as African who prefers natural and peaceful living due to their rich nature resources and close relationships among people. For organizations with the close significance to the environment, it helps them to win a great market shares and easy to build up trustable relationships with their business partners.
Importance of rule and relationship
The Degree of emotion express
Degree of responsibility
The accord of statues
(Figure 2, the dimensions comparison between Chinese and African cultures, writer, 2011)
In 1988, Nahavandi & Malekzadeh pointed out that it is important to consider the degree of relatedness of two firms, the multiculturalism of the acquirer and the strength of the acquired firm's culture to determine how the culture of two organizations should be merged. The culture issue should be aware as important as the finance which directly affects the failure or success of the merger. It is challengeable to create a combined organized culture from different individual cultures.
The managers who lead the team from both countries for the proposed merger should realize the similarities and differences between Chinese and Africa cultures which influence the way those nations applying organizational strategies and seek to improve the culture understandings.
China and West African has certain culture fit that they are both collective with a high level of power distance. Chinese companies will benefit if they merger with the African companies due to this similarity. On the other side, they have very different culture dimensions that Chinese are masculine, lower Uncertainty avoidance with the long term orientation than the average West African nations which has a femininity, low acceptance of uncertainty and short term orientated culture. It is important for managers to concern all those culture differences between them when making decisions and operating the business. According to Trompennars' model, Chinese and African have the similar social interactions with the time orientation difference which should be taken into account when the merger and acquisition or business activities are taking place.
The government policies should be considered in the cross nation merger. It is difficult to engage the international capital with communism national such as china and African. China benefits from the investment from Africa from economic dimension that due to the rich resources in Africa and political dimension by which the civil society organizations are operated that helps them to share more information and experiences. For the African, it is essential to build up the trust and transparency of the CSO to monitor and avoid government corruptions. The CSO in china represents the benefit for government. To make the collaboration on this difference, the written measures and plan can be created based on the current policy database; the strategies can be shifted to focus more on human rights.
Due to the high power distance culture, Chinese companies has a very centralized decision making style. There's culture fit for them to enter into the African nation that also has centralization working. The restriction on communication requires the local manager with experiences and respect can be chosen to fit that position and deal with the relationship with employees, suppliers and customers. A connector who has the real power and specific responsibilities with the good language skills helps in decision making and it is important for them to adapt themselves into the local business culture. The cooperation between Chinese and African managers can be carried out to analyse the connectivity and promote the skill transferring.
Different training programmes can be run for managers who are from different culture background in merger activities. Cross culture training programmes and Inter cultural diversity training helps the Chinese African managers familiar with the culture differences, realize the strength of organization values and share the corporate information, skills and knowledge from each other. Indentify and define the culture differences and influences between Chinese and African corporations helps to minimize those culture gaps, better management skills can be used to create the new business strategies for the merged organization.
In any time, personality and culture clashes cause the high failure on merger and acquisition. Effectiveness communication can be the way to reduce the misunderstanding and lead the success. Before the merger between Chinese and African companies, the employees can understand the benefits for themselves and company by presenting the clear vision of the merger which creates the motivation for them. The positioning of the company points the directions that employees should work towards. The communication training programmes can be run for employees who close relate to the customers and suppliers often find out the acceptance of change and get feedbacks from them is the good internal communication channel to ensure the success of the merger.
In conclusion, it is essential to analyse the cultures difference between Chinese and African culture and find out the culture gaps. To minimize these gaps is one of the main tasks for managers who need to clearly understand and respect those cultures differences rather than make their own assumptions. In order to avoid the culture clash, it is essential to compare the existing culture with the goal of merged companies to create new organizational cultures and match their new business strategies. When the culture gap gets wider during the merger, it should be realized and discussed promptly.
The organization value reflects the strategies the way how they deal with the relationship between their employees and the world. To realise the value of an organization helps the success of merger. The direction of merged organization for the new strategy should be contained in the strategic plan in advance to gain higher market value.
Culture difference can be explored by communication which has a great impact on the deal of the merger activities and the culture management. Different training programmes can be provided for the company staffs for better communication purpose internally and externally.