international strategic management - SUDZUCKER company Germany
CORP 5039: International Strategic Management, Markets and Resources Culture in an International Context
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Outline
Definitions of culture
Edgar Schein’s view of organisational culture
Strategic drift, path dependency & cultural ‘lock-in’
Strategy-culture compatibility
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What is Organisational Culture?
All organisations have their own unique cultures.
Successful strategies require congruence with culture at the implementation phase.
It is important to recognise culture’s influence on strategy development is bi-directional.
Strategic choices may also shape culture.
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Definition of Culture
“…a pattern of basic assumptions invented, discovered, or developed by a given group as it learns to cope with its problems of external adaptation and internal integration – that has worked well enough to be considered valid and, therefore, to be taught to new members as the correct way to perceive, think and feel in relation to those problems.”
Schein, (1985:9)
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Deconstructing Schein’s Definition
Six core components of organisational culture:
a pattern of basic assumptions
invented, discovered, or developed by a given group
as it learns to cope with its problems of external adaptation and internal integration –
that has worked well enough to be considered valid
and, therefore, to be taught to new members
as the correct way to perceive, think and feel in relation to those problems
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Understanding Culture
“We observe two Japanese businessmen facing each other and leaning forward, one more so than the other. Curious, we go and ask the one who is leaning more what he is doing. He responds, ‘bowing’. Why is he doing that? He responds that the other person is his boss. ‘So what?’ we ask. ‘So I have to show my respect’, he answers, slightly puzzled. Again we ask ‘Why?’ Trying not to show his irritation, he responds that one should show respect to one’s seniors. And again when asked, ‘Why?’ he answers ‘because they have wisdom’. Now confused, we ask ‘Why?’ He looks at us, unsure if we are mad or just stupid, and responds, ‘Because that is just the way it is’.”
Schneider, S and Barsoux, J-L (2003:23)
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Spatial Analysis of Organisational Culture
ARTEFACTS
ESPOUSED VALUES
ASSUMPTIONS
Visible Organisational
Structures.
Strategies, Goals,
Philosophies
Unconscious taken for
granted beliefs, perceptions,
thoughts and feelings.
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Culture and Strategic Drift (Johnson et al, 2011)
Strategic drift is the tendency for strategies to develop incrementally on the basis of historical and cultural influences but fail to keep pace with a changing environment
The tendency towards strategic drift may be encouraged by:
Managers building on the familiar
Core rigidities
Relationship shackles
Lagged performance effects
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Strategic Drift
Johnson et al. (2008)
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Cultural Frames of Reference
Source: Johnson et al, Exploring Strategy 2011: 169
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Cultural Frames of Reference
Organisational field: defined as a community of organisations that interact more frequently with one another than with those outside the field and that have developed a shared meaning system. (Johnson et al, 2011: 169)
Shared attributes may include; technology, regulations or education and training.
Hence coherence around specific assumptions, norms and routines
E.g. field of Justice: lawyers, police, courts, prisons and probation services.
Parties in an organisational field form a self-reinforcing network, which may lead to behavioural lock-in.
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Cultural Frames of Reference
Organisational Subcultures
Although organisational culture is representative of the entire organisation, it is still possible to identify aspects of culture that are peculiar to different divisions or functions (subcultures)
Subcultures may relate directly to the structure e.g. differences in geographical divisions or functional groups
Divisional differences are often apparent where growth occurs through acquisition and such divisions pursue different strategies
Subcultures can also rise due to differences in business functions e.g. upstream/downstream activities of oil companies
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National Culture
Key Theorists:
Fons Trompenaars
Geert Hofstede
Dimensions to National Culture:
Power distance
Individualism/collectivism
Masculinity vs femininity
Uncertainty avoidance
Long term vs Short term orientation
Indulgence vs restraint
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Hofstede’s Cultural Dimensions
Initial findings gathered in from survey conducted between 1967-1973
116,000 questionnaires
Completed by IBM employees
Over 70 different countries
Largest organisationally based culture study ever conducted
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Hofstede’s Cultural Dimensions
Extent to which the less powerful members of organizations and institutions expect and accept equal distribution of power
Extent to which individuals are integrated into groups
Assertiveness and
competitiveness versus modesty and caring.
Societal preference for competition as opposed to cooperation/consensus
Extent of tolerance for uncertainty and ambiguity (principles vs. practice)
Deals with value placed on persistence. Traditional or future orientation.
Modified as Pragmatic (truth subjective relating to situation, context & time; strong ability to adapt traditions) vs. Normative (desire for absolute truth; respect for tradition)
Extent to which gratification of wants and needs are permitted or suppressed (e.g. By strict social norms)
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Power Distance
Individualism vs collectivism
Masculinity vs femininty
Uncertainty avoidance
Long term orientation (added 1991)
Indulgence vs Restraint (added 2010)
Critique of Hofstede’s National Cultures (Sweeney, 2002)
Sweeney offers a critique of Hofstede’s work on national cultures :
Produced a 30 page article critiquing primarily from a methodological perspective
Small representative sample: only 6 countries had more than 1000 respondents over two surveys; 15 had less than 200
Assumption of homogeneity of national populations & cultures
Assumption of existence of singular organisational culture in IBM
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Types of Corporate Cultures Thompson et al (2010)
Strong versus Weak Cultures
Strong cultures are characterised by deeply rooted values and operational approaches which regulate organisational conduct
Factors contributing to strong culture include leadership, long-standing commitment to traditional values, and concern of key stakeholders – customers, employees and shareholders
Weak cultures on the other hand lack values and principles that are consistently preached or widely shared and therefore provide little assistance in strategy implementation
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Types of Corporate Cultures Thompson et al (2010)
Adaptive Cultures
Refers to corporate cultures characterised by willingness of members to accept change and act to ensure long-term organisational success
Two distinctive traits are important in adaptive cultures:
Changes in operating practice and behaviours must not compromise core values
Changes must satisfy legitimate stakeholder interests
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Culture-Strategy Fit
Organisational cultures can act as allies or obstacles to strategy execution
Culture-Strategy fit exists where the work climate promotes attitudes and behaviours required for effective strategy execution
E.g. cultures characterized by frugality and thrift would be well-aligned with successfully executing a low-cost strategy
However, where a mismatch exists between the culture and actions/behaviours needed to successfully implement a new strategic course for the organisation, there may be need to change the culture
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Culture’s Influence on Strategy Development
1. When faced with a stimulus for action e.g. Declining performance, managers initially attempt to respond with existing strategies (e.g. Lower cost; improve efficiency
2. Where ineffective, a change of strategy may occur but in line with existing culture e.g. New market development
3. However, strategic change can require change in culture’s emphasis (e.g. From bureaucracy to customer-orientation)
Source: Johnson et al (2011: 175)
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Assessing Strategy-Culture Compatibility
Is the planned strategy compatible
with the current culture?
Tie changes into the culture.
Introduce minor
Culture-changing
activities.
Can the culture be easily modified to
make it more compatible with the new strategy?
Is management willing and able to make major
organisational changes and accept probable
delays and a likely increase in costs?
Manage around the culture by establishing
a new structural unit to implement
the new strategy.
Find a joint-venture partner or contract
With another company to carry out the strategy.
Is management still committed to
Implementing the strategy?
Formulate a different strategy
YES
YES
YES
YES
NO
NO
NO
NO
Wheelan and Hunger (2002) Concepts in Strategic Management and Business Policy, p.226
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Changing a Problem Culture
Identify facets of present culture dysfunctional to new strategic initiatives
Step 1
Clearly define actions, behaviours and practices to be prominent in ‘new’ culture
Step 2
Talk openly about problems of present culture and how new behaviours will improve performance
Step 3
Follow-up with visible and focused actions to ingrain new set of behaviours, practices and cultural norms
Step 4
Adapted from: Thompson et al (2010: 399)
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Strategy-Culture Fit in Multinational and Global Firms
According to Thompson et al (2010:407), establishing a workable fit would require multinational firms to build their corporate culture around values and practices that travel well across country borders
Management may minimize subcultures and promote cultural uniformity by:
Trainings to communicate common values and encourage common operational approaches
Encouraging climate of adopting best practices and pursuing operational excellence
Allowing for flexibility among local managers where adherence to company-wide traditions is difficult and also allowing for discretionary authority to motivate and incentivize
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References
Johnson, G., Whittington, R. and Scholes, K. (2011) Exploring Strategy, 9th Ed. Harlow: Pearson.
Schein, E.H. (2010) Organizational Culture and Leadership 4th Ed. San Francisco, CA: Wiley.
Schneider, S. and Barsoux, J-L (2003) Managing Across Cultures. Harlow: Pearson.
Thompson, A.A., Strickland, A.J. and Gamble, J.E. (2010) Crafting and Executing Strategy 17th Ed. New York: McGraw-Hill.
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