Michael Porters View On Country Level Factors Commerce Essay

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Rather than seeing culture as a problem to be solved, there is evidence that culture can provide a source of competitive advantage. Michael Porter has argued that nations derive competitive advantage from a set of country-level factors such as the availability of resources, the size and sophistication of the market, the nature of government intervention, and the type of strategic linkages or networks. For example, he attributes the success of the shoe industry in a particular region in northern Italy to the network of relationships between suppliers, manufacturers, and distributors. The strategic link between business and university research centers is credited with the development of insulin in Denmark. And Holland is the world's export leader in the flower business due to unique resources, such as top research institutes.

Although difficult to separate out, culture is deeply embedded in these institutions arrangements. For example, given the importance placed on the collective it is not surprising to find such linkages among businesses, or between businesses a government which in more individualist countries would be considered unjust collision or undue interference. The network of tight relationships between customers and suppliers relies on a high degree mutual trust, which is rare in countries which place more value on individual initiative and independence. Thus culture and institutional configurations work interactively to create potential competitive advantage or disadvantage.

In France's many industrial innovations can be attributed to the nature the education system which places high value on engineering and administration and the close relationship between state and industry. These very features considered responsible for technological success, however, are being challenged given a more competitive and international business environment as potential impediments commercial success.

The point of this examples is to demonstrate that each country has its unique institutional and cultural characteristics, which can provide sources of competitive advantage at one point, only to become liabilities when the environment changes. Managers therefore need to evaluate the extent to which national culture can interfere with their company's efforts to respond to strategic requirements, now and in the future.

Cultures clash

There is no shortage of evidence of cross-cultural friction between businesses. In every cross-border alliance there are seeds of potential cultural conflict and misunderstanding. The problem is that this cultural malaise may go unrecognized. It may therefore be some time before cultural differences are surfaced and diagnosed. In one Franco-American joint venture the problem was only recognized after eight years of collaboration. Called in to investigate problem of cooperation, a French consultant interviewing American managers was shocked at the litany of complaints aimed at their French counterparts. Such complaints may seem trivial at first glance, but were apparently rather important, as eight years of collaboration had not resolved them. The belated realization that cultural problems were responsible for poor cooperation alerts us to the need to anticipate potential misunderstanding. Failure to pay attention to culture can, in fact, have disastrous consequences.

The reason behind the preceding disasters is not only that behavior, values, and beliefs and different across cultures, but also that their importance to those cultures should not be underestimated. What people in one culture value or perceive as sacred may be considered irrelevant in another culture. The trouble is that it is difficult to recognize just what matters and how much to another culture-especially when we find it so hard to recognize what is important in our own

Whether engaging in strategic alliances, setting up operations abroad, or attracting the local market, companies need to discover how culture can be harnessed to drive business forward. Companies also need to analyze the potential for cultural clashes that can undermine good intentions. Managers involved in these cross-border adventures need to recognize the symptoms of cultural malaise and to find out what is causing the irritation. To capture the potential benefits while limiting the potential misunderstanding, managers must be prepared to articulate how they see their own culture and to recognize how others may experience it. This, however, is not as easy as it seems.

Cultural difference is desirable

I think Cultural difference is desirable. Although there are multiple cultural spheres of influence which interact in ways that can provide competitive advantages or disadvantages. But I think if the company's management can through self-disclosure and feedback, they can become more aware of the potential blind spots in how we can see ourselves and how others see us that may interfere with effective interaction and properly resolve or avoid cultural conflict cultural difference brought a stronger competitive advantage than disadvantage.

Task 2

Greeting rituals

The importance of these rituals should not be overlooked. Some countries, such as the US, tend to pay less attention to protocol, but for others it is taken quite seriously. For example, failure to show respect by carefully exchanging and inspecting business cards in Japan can get business negotiations off to a very bad start.

In France, greetings are highly personal and individual. A general wave of the hand to say hello to everyone when arriving at the office, as in the US, in considered insulting to French co-workers who expect to be greeted individually by name, say hello, shaking hands and making eye contact. Should you say hello again, when passing later in the hallway, you will be corrected: say hello again. Otherwise, you have signaled that you do not remember having greeted that person in the first place and therefore that they are not important to you. Leaving rituals follow the same procedure.

Another part of the ritual that generates a fair amount of confusion is the degree of body contact expected in greeting. Are women supposed to shake hands? Are men expected to embrace one another? For example one student from Hong Kong was quite distressed and uncomfortable when her French male colleagues insisted in kissing hello and goodbye. The French are, however, taken by surprise when, in the US, mere acquaintances might greet them with a hug. One Brazilian executive attending an international management seminar lamented the coldness of the farewell rituals - handshaking and kissing - missing the hug that would have demonstrated for him the close feelings of comradery.

Making contact

Another aspect of the initial encounter is the amount of physical space considered necessary to be comfortable. Northern Europeans tend to require a larger personal space or 'protective bubble' than their Latin Europeans counterparts. Northern Europeans feel more comfortable with somewhat greater than arm's length distance. Southern Europeans want to move in closer (within arm's length) in order to feel the connection.

A northern Europeans feels uncomfortable when people are standing or for that matter diving too close for comfort. This can also be observed in queuing behavior. While standing in line, northern Europeans who leave a space for comfort should not be surprised if it quickly gets filled by a Latin Europeans. The northern Europeans and Anglo-Saxon guests became quite annoyed with the Latin Europeans filling in the gaps, as they interpreted it to be breading in line. The idea of intrusion is not just physical. It is also psychological. Thus, what many North Americans consider a perfectly friendly line of questioning may be deemed impertinent or overly familiar by non-Americans. This difference is particularly likely to manifest itself at the 'getting to know each other' stage of an international negotiation or prospective collaboration.

Observations of how people get to know each other, the degree of formality and personal contact preferred, reveal underlying assumptions about what is considered to be public versus private space. Americans tend to be more open, informal, and easy to approach than Europeans or Asians. However, Europeans often complain that relationships with Americans tend to be superficial. While it may be more difficult to get to know a European, the relationship once established is often more enduring.

Dress codes

Another cultural artifact, the prevailing dress code, also differs in degree of formality and can serve as a subtle signaling mechanism. Northern European managers tend to dress more informally than their Latin counterparts. At conferences, it is not unlikely for the Scandinavian managers to be wearing casual clothing while their French counterparts are reluctant to remove their ties and jackets.

For the Latin managers, personal style is important, while Anglo and Asian managers do not want to stand out or attract attention in their dress. French women managers are more likely to be dressed in ways that Anglo woman managers might think inappropriate for the office. The French, in turn, think it strange that American businesswomen dress in 'man-like' business suits sometimes with running shoes. In addition, corporate dress seems to be color-coded. Women working in the United Kingdom have been advised not to wear red or brightly colored suits and dresses. Bankers at one Dutch bank eschew brown suits.

Dress code may also signal task orientation. For example, rolled up shirt sleeves are considered a signal of 'getting down to business' (U.S.) or 'relaxing on the job' (France). One very hot day, at an in-house company seminar at a beautiful lakefront conference center, a German manager arrived in a dark tie and jacket. His colleagues arrived in more casual attire. When asked why he was so dressed up, he replied sternly, 'We here to work'.

Idea currently in vogue regarding dress code includes 'dressing down days' and 'dressing for the customer'. Some U.S. companies have designated certain days, such as Fridays, as days when people are encouraged to come to work in more casual clothes, like those they would wear at home. This created problems in London.

Task 3

Hofstede's findings

Under the result of Hofstede's findings survey, which asked people for their preferences in terms of management style and work environment, Hofstede identified four 'value' dimensions on which countries differed: power distance, uncertainty avoidance, individualism/collectivism, and masculinity/femininity.

Hofstede think Power distance indicates the extent to which a society accepts the unequal distribution of power in institutions and organizations. Uncertainty avoidance refers to a society's discomfort with uncertainty, preferring predictability and stability. Individualism/collectivism reflects the extent to which people prefer to take care of themselves and their immediate families, remaining emotionally independent from groups, organizations, and other collectivities. And the masculinity/femininity dimension reveals the bias towards either 'masculine' values of assertiveness, competitiveness, and materialism, or towards 'feminine' values of nurturing, and the quality of life and relationships.

Given the differences in value orientations, Hofstede has long questioned whether American theories could be applied abroad and discussed the consequences of cultural differences in terms of motivation, leadership, and organization. He argued, for example, that organizations in countries with power distance would 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.

In countries with high uncertainty avoidance, organizations would tend to have more formalization evident in a greater amount of written rules and procedures. Also there would be greater specialization evident in the importance attached to technical competence in the role of staff and in defining jobs and functions. Manager would avoid taking risks and would be motivated by stability and security. The role of leadership would be more one of planning, organizing, coordinating, and controlling.

In countries with a high collectivist orientation, there would be a preference for group as opposed to individual decision-making. Consensus and cooperation would be more valued than individual initiative and effort. Motivation derives from a sense of belonging, and rewards are based on being part of the group (loyalty and tenure). The role of leadership in such cultures is to facilitate team effort and integration, to foster a supportive atmosphere, and to create the necessary context or group culture.

In countries ranked high on masculinity, the management style is likely to be more concerned with task accomplishment than nurturing social relationships. Motivation will be based on the acquisition of money and things rather than quality of life. In such cultures, the role of leadership is to ensure bottom-line profits in order to satisfy shareholders, and to set demanding targets. In more feminine cultures, the role of the leader would be to safeguard employee well-being, and to demonstrate concern for social responsibility.

National cultural difference

Under the result of Hofstede's findings survey USA are the small power distance, weak uncertainty avoidance, high individualism and masculinity country. France is the large power distance, strong uncertainty avoidance, higher individualism and femininity country. South Africa is the large power distance, weak uncertainty avoidance, collectivism and masculinity country.

Hofstede think some countries such as France, which ranked high both on power distance and uncertainty avoidance would be expected to be more 'mechanistic' or what is commonly known as bureaucratic. In this corner we find the Latin countries.

In the opposite quadrant, countries which rank low both on power distance and uncertainty avoidance are expected to be more 'organic' - less hierarchic, more decentralized, having less formalized rules and procedures. Here we can find USA.

In societies where power distance is low but uncertainty avoidance is low, organizations resemble families or tribes. Here, 'the boss is the boss', and the organization may be described as paternalistic. Subordinates do not have clearly defined task roles and responsibilities (formalization), but instead social roles. Here we find the South Africa where business enterprise is often characterized power and personalized relationships.

Task 4

Creating a sense of purpose

One of the most important elements of successful teams is having a 'shared sense of purpose'. This purpose has to be developed within the team whether or not its mandate comes from on high. Often teams are formed with no cleat idea of their rationale, other than it seemed like a good idea at the time. These groups quickly lose their motivation, unless able to turn the situation into one of defining their own reason for being. Yet creating a sense of shared purpose is not an easy task, particularly when first allegiances may be to functional, business, or country units. In addition, different cultures have different assumptions about the reason for teams: to share information and discuss problems, to make decisions and take actions, or to renew contact and build social relationships. This will determine issues such as the frequency of meetings and contacts, who should attend, whether the meetings can take place through conference calls or need to be face to face, and the time needed to be set aside expressly for socializing.

For those cultures with strong informal network, what goes on at the bar, over coffee, or during lunch may be as important as what is said in meetings. The real decisions are taken outside the meeting room. Thus the purpose of the meeting may be more to encourage and to assess members'willingness to implement the decision. This is particularly frustrating to those who expect that the purpose of the meeting is to arrive at decisions, not to confirm them. This may be the case of negotiating teams where the responsibility for decision - marking is diffuse, and probably lies outside the team.

The perceived purpose of the team will determine 'who needs to be involves'. In task - oriented cultures only those who are directly concerned, and with the appropriate knowledge and skills will be invited. The objective is to get the job done. In cultures where hierarchy is important, members may be assigned to teams because of their power and influence in the organization, rather than their knowledge per se. The presence of powerful members may signal the importance attached to the team, as well as the likelihood of a decision being made. The idea of team members being drawn from more or less the same hierarchical level, so as not to have any one member pull rank, would seem like a bizarre idea.

Creating a sense of purpose not only means agreeing on what the group is expected to accomplish overall, but also 'setting specific performance goals and objectives'. Given the different expectations of the purpose of teams, these goals and objectives may differ. In fact, common prescriptions for making shared purpose explicit and setting precise goals and objectives can be taken as somewhat naïve, if not impossible. In high - context cultures, the sense of purpose may be more implicit. Spelling it out, clearly articulating a vision, is seen as robbing it of some of its subtlety or sophistication. Purpose or vision is experienced more as a feeling, something more intuitive, rather than concrete and tangible.

Structuring the task

Teams also have to decide on how they will structure the task: setting agendas, when and where to have meeting, what needs to be done by when, and who needs to do what.

Setting agendas

Setting agendas is one area where cultural differences can be a source of potential confusion and friction. Indeed cultures differ in expectation as to whether an agenda is set at all, or whether the flow of the meeting should take its own course.

These reactions reveal different notions of time - monochromic or polychromic. In monochromic cultures, agenda items are expected to be dealt with systematically, decisions taken, deadlines respected, and one person speaks at a time. In polychromic cultures, rigid agendas are likely to be perceived as inhibiting creativity in meetings, deadlines serve more as guidelines than unalterable facts, and it is, on the whole, more acceptable for several people to talk at the same time without it being experienced as chaos.

Assigning roles and responsibilities

Teams also need to decide who is to what. This means assigning roles and responsibilities within the team. In more individualistic cultures team members often prefer a 'go it alone' approach and are eager to split up the tasks so that everyone can go off and work on their own. Later on, the different pieces are expected to be integrated through group discussion, or indeed by one person taking responsibility for pulling it all together.

In more collectivist cultures, assigning individual responsibility seems somewhat strange. They expect the work of the group to be done together, interdependently. The idea that each goes off and does their own work independently makes no sense. Thus team members from collectivist culture, having been assigned their part may go off and do nothing, much to the frustration of their counterparts from more individualist cultures. One frustrated Swedish expatriate manager in Hungary complained that team members did not seem to realize that reaching a decision in the meeting was not enough: something had to be done between meetings.

The very fact of working in a team is more appealing to some than to others. Rugged individualists tend to feel constrained by teams and have little patience when it comes to trying to understand the other's point of view, and having to reach consensus. Furthermore, they want to be rewarded for their individual effort and resent 'free riders', those members of the group who do not pull their weight.

Reaching decisions

Culture also influences how teams decide and on what basis decisions are taken: majority rule, consensus, or compromise. Reaching decisions by voting, or majority rule, may be seen as fundamental to the democratic process wherein individual opinions are represented. Voting rests on assumptions of egalitarianism, and individualism; everyone's vote counts equally. It neglects the role of voice and silence, and of power and influence.

When asking 'All those in favor? All those opposed?' Americans often assume that silence means agreement. This approach also often neglects the formation of coalitions and the subtle pressures for conformity or willingness to go along with the group. Voting also creates winners and losers which may create problems in cultures where consensus is valued and saving face is more important.

Task 5

Role of government

Vogel argues that the prevalence of private rather than state ownership in the United States makes corporate social responsibility and philanthropy 'primarily an American phenomenon'. In Europe, until the 1990s, business has been largely state-owned, and composed of small rather than large private organizations. Thus the responsibility of business was more narrowly defined. The government was considered primarily responsible for economic development and social welfare.

In the United States private ownership and 'big' business put more of the onus and spotlight on company behavior. According to Vogel, 'Because the public's expectations of business conduct are so high, the invariable result is a consistently high level of public dissatisfaction with the actual ethical performance of business. It seems more likely, however, that the experience with big business has been such that there is a greater perceived need to be vigilant. Given a history of questionable business practices, some of the richest Americans, the Rockefellers, Carnegies, and Kennedys, were held morally (and legally) suspect in low they made their fortunes.

Rather than the 'values of 'business civilization' [being] so deeply engrained', as Vogel argues, it is more likely that the perceived excesses of capitalism have to be carefully checked. For example, the oil shortages in the 1970s were viewed by the public as having been manipulated by the oil companies for profit at their expense. This created an outcry that turned some of them into corporate philanthropists, demonstrating concern for social responsibility by creating foundations and by providing highly visible endowments to the arts.

Regulation: the legal context

Differences in legal context, the nature of regulation and the likelihood of enforcement, also play an important role. In Germany, strict environmental laws make these issues more salient. Yet, there are few laws against bribery, kickbacks, and pay-offs in the corporate sector. In France, the 'commission des operations de la bourse' has become a more powerful watchdog. However, in Britain, enforcement remains infrequent, despite the conviction of Ernest Saunders in the Guinness affair. Many were surprised at the lenient ruling on the Maxwell brothers, accused of misappropriating pension funds.

Many US companies have adopted codes of conduct and training programs to reduce liabilities and potential fines: $1-2 million fines could be knocked down to $50,000 if they had comprehensive programs such as codes of conduct, ombudsmen, employee hotlines, and mandatory training programs.

The role of the media

Public scrutiny of ethical behavior in companies has been made possible by the increased attention to these issues by the media. Ethical breaches have become front-page news: Enron and Arthur Andersen's questionable accounting practices, misuse of company funds at Elf (now part of TotalFinaElf) in France, Union Carbide's Bhopal disaster, and the Barings fiasco. Journalists are increasingly becoming the 'moral watchdogs' of corporate behavior. This has led to the dictum for managers: 'Don't do anything that you wouldn't want to read in the newspaper'.

Media attention can also promote 'good behavior'. Companies have come to realize that well-publicized ethical actions could provide a competitive edge in the 'caring nineties'. Company image is enhanced not only with consumers but also internally, with the workforce. Company pride can serve as a powerful motivator. Best company rankings provided by business journals such as Fortune or Business Week (which take into account ethical behavior) not only attract investment and customers but also top talent.

The role of stakeholders

Company stakeholders - the local community, customers, employees as well as shareholders - play an increasingly important role in monitoring ethical behavior. Striking employees protest over the closing of factories. Employees may also 'blow the whistle' on unethical activities

Customers boycott companies engaged in questionable practices, for example refusing to buy grapes picked by migrant workers in California. Local communities have become much more active in insisting on environmental protection

There is also growing pressure to hold company boards of directors more accountable. In the United States, members of the board are subject to increased personal liability for company actions and risk landing in jail or receiving heavy fines. Shareholders have become more vigilant and vocal in questioning the behavior of top management. In France this has led to the resignations of CEOs accused of using company resources for private purposes. In Switzerland it has led to the former CEOs at ABB paying back what was considered to be excessive compensation.

Despite the reasons, both cultural and institutional, for similarities and differences in ethical behavior, as discussed above, the question remains: to what extent should personal values, parent company, or home-country values and rules apply? Head-office efforts to insist on ethical practices or to install ethics programs in foreign subsidiaries may be taken as another sign of cultural imperialism. These efforts may even be disparaged as moral hypocrisy.

Task 6

The rational/economic view

Many of the strategic management frameworks mentioned above including the prescribed tools and techniques, affirm the belief and value of a 'rational analytic' approach. This approach takes for granted certain assumptions. It assumes, for example, that the environment and the organization are objective realities that are similarly perceived and analyzed by intelligent mangers.

Yet those managers marking strategic decisions often find themselves confronted with environmental uncertainty, ill-structured problems, and socio-political processes. In fact, rather than taking them as objective realities, it can be argued that both environments and organizations are subjective realities that are perceived and enacted in different ways. This means that managers see different things, create different realities, and then act accordingly. Thus multiple interpretations of and responses to supposedly similar situations are likely. As such, national culture can play an important role in determining different types of strategic behavior.

The rational analytic approach also assumes that managers making strategic decisions follow a similar route, gathering all relevant information, generating all possible alternatives, evaluating the costs and benefits of each alternative, choosing the optimal solution, and then acting upon it. While widely acknowledged that managers and organizations are limited in their capacity to digest all this information, thus subject to 'bounded rationality' the precise ways in which rationality in decision-making is limited, or more specifically culture-bound, have remained unexplored. In other words, how does culture the way managers gather and interpret information, choose between decision alternatives, and establish criteria for action?

Clearly, much of the discussion to date regarding strategic management has been based on beliefs that environments and organizations are objective realities and that strategic decision-making is a rational and analytic process. Digging deeper, we discover underlying assumptions that environments are intelligible and predictable and that by taking action, or doing, strategic objectives can be achieved. This functionalist, instrumental view of the world, however, may be challenged in other cultures.

The dynamic view

Underlying this notion of strategy we find dramatically different cultural assumptions. It highlights the role of feelings, or emotions, not just analytic rationality. It questions the nature of truth as determined by facts and figures, and logic, rather than by spiritual purpose. Furthermore, it views strategy as a collective process, and as dynamic what is needed is to go with the flow.

Here too, assumptions regarding the nature of truth and reality are different: that reality cannot be boxed into two-by-two matrices; and that truth cannot be determined by simplistic theories of cause and effect.

Other Western management scholars have also challenged the rational analytic approach. Consider these comments by Henry Mintzberg, who has been a rather outspoken opponent to the 'strategic planning' approach: 'Strategy formation is a process of learning only partially under the control of conscious thought… Strategies emerge informally, sometimes gradually, sometimes spontaneously, usually in a collective process'. Rather than planned, strategy is considered as emergent, or as evolutionary. This view assumes that managers have less control over their environments which are difficult to know, and that taking action does not necessarily make things happen. Strategy unfolds in response to current events, within the historical as well as organizational context (structures and procedures). Thus the 'intended' strategy and the 'emergent' one may not necessarily coincide. Strategies designed at the top and those that emerge through more autonomous activities further down the organization may be more or less loosely coupled. Strategies as such are thought to emerge and to evolve over time, as 'a pattern in a stream of decisions'.

More recently in the field of strategic management, there has been a growing interest in developing organizational resources and capabilities. There resource-based and core competencies views suggest that building 'corporate' character (or developing resource bases) provides the capability and flexibility to respond to environmental events. These approaches reflect different underlying assumptions by placing the emphasis on what the company is versus what the company does (being versus doing at the corporate level). The focus is on having the 'right stuff' or strategic traits, rather than necessarily making the 'right moves', or strategic actions.

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