utb 8616

Eine Arbeitsgemeinschaft der Verlage

Böhlau Verlag · Wien · Köln · Weimar

Verlag Barbara Budrich · Opladen · Toronto

facultas · Wien

Wilhelm Fink · Paderborn

A. Francke Verlag · Tübingen

Haupt Verlag · Bern

Verlag Julius Klinkhardt · Bad Heilbrunn

Mohr Siebeck · Tübingen

Nomos Verlagsgesellschaft · Baden–Baden

Ernst Reinhardt Verlag · München · Basel

Ferdinand Schöningh · Paderborn

Eugen Ulmer Verlag · Stuttgart

UVK Verlagsgesellschaft · Konstanz, mit UVK/Lucius · München

Vandenhoeck & Ruprecht · Göttingen · Bristol

Waxmann · Münster · New York

Dedication

Für alle, die Elefanten das Fliegen beibringen

For all those who teach elephants how to fly

Patricia Adam

Managing Internationalisation

UVK Verlagsgesellschaft mbH · Konstanz

mit UVK/Lucius · München

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Preface

Despite being popular with thousands of organisations worldwide, the EFQM Excellence Model is still hardly recognised by the academic community. Unfortunately, it shares this fate with other holistic models. Textbooks about International Management usually present holistic management models as an afterthought or in a niche chapter, but hardly focus on their inner logic or unique management perspective. Although the awareness of the need for leadership guidance in the ever more complex global environment is apparent, the contribution of these models is often overlooked.

We were therefore delighted when the author, Patricia Adam, approached us and explained her intention to create a textbook that bridged the gap between management reality and academic development. By drawing on her own experience of using the EFQM Model in self-assessment and Award Assessments, this book is intended to give the reader practical insights, combined with the conscientious use of business-related research findings. Whilst this might seem like a “common sense” approach, it’s been proven all too often that “common sense ain’t that common”. This makes the book a great companion for students and management practitioners alike; a pragmatic guide that translates the theory into practical application, with relevant examples and illustrations.

We wish this unique book an excellent reception and its author many positive reviews… although (sorry Patricia) we also hope it doesn’t remain unique for too much longer. May this book support international leaders in their demanding pursuit of successful internationalisation and inspire students to put theory into practice. After all, theory without experience is only theory!

Matt Fisher

Chief Operating Officer EFQM

Acknowledgements

Table of Contents

Preface

Acknowledgements

Table of Figures

1 | Introduction and Overview Strategic International Management
1.1 | Introduction
1.1.1 | How to Use This Book
1.1.2 | From Gradual Globalisation to Transnational Organisations
| VIPs
1.2 | The Use of Holistic Management Models
| VIPs
1.3 | The Approach of the EFQM Excellence Model
1.3.1 | Background Information: The EFQM and its Model
1.3.2 | The Fundamental Concepts of Excellence
1.3.3 | The EFQM Excellence Model Framework 2013
1.3.4 | The EFQM RADAR Logic
| VIPs
1.4 | Process Model “Managing Internationalisation”
1.5 | Citations & Notes
2 | Key Issue: Developing Cross-Cultural Competence
2.1 | The Importance of Intercultural Understanding for International Business Issues
2.2 | Hofstede’s Framework: Cultures and Organisations
2.2.1 | Culture as a Part of Human Mental Programming
| VIPs
2.2.2 | An Introduction to Hofstede’s Dimensions
2.2.3 | Power Distance
2.2.4 | Individualism/Collectivism
2.2.5 | Masculinity/Femininity
2.2.6 | Uncertainty Avoidance
2.2.7 | Long-Term Orientation
2.2.8 | Establishing Country Clusters
2.2.9 | Adding a New Dimension: Indulgence versus Restraint
| VIPs
2.3 | The Dilemma Approach of Trompenaars & Hampden-Turner
2.3.1 | A View of Culture Based on Dilemmas
| VIPs
2.3.2 | Universalism versus Particularism
2.3.3 | Individualism versus Communitarianism
2.3.4 | Neutrality versus Affection
2.3.5 | Specificity versus Diffusion
2.3.6 | Achieved versus Ascribed Status
2.3.7 | The Concept of Time
2.3.8 | Inner versus Outer Direction
2.3.9 | Reconciling Dilemmas
| VIPs
2.4 | Globe Study: More Issues Arising
| VIPs
2.5 | Critical Acclaim
2.5.1 | Typical Problems of Cross-Cultural Research
2.5.2 | Critical Acclaim of Hofstede’s Dimensions
2.5.3 | Critical Acclaim of Trompenaars & Hampden-Turner’s Dilemmas
2.5.4 | Critical Acclaim of the GLOBE Study
2.6 | Citations & Notes
3 | Leading the Internationalisation Process
3.1 | Good Leadership
3.1.1 | The Coherent Leadership Approach
| VIPs
3.1.2 | Excellent Leaders: EFQM Criterion 1
3.2 | Developing the Mission, Vision, Values and Ethics
3.2.1 | Defining and Communicating the Core Purpose of an Organisation
| VIPs
3.2.2 | Acting as Role Models for Ethical Behaviour
3.2.2.1 | Corporate Ethics and Social Responsibility
3.2.2.2 | Ethical Behaviour in International Business
| VIPs
3.2.3 | Communicating Direction and Uniting the Organisation’s People
3.2.5 | Developing and Reviewing Leadership Culture
3.2.5.1 | Developing and Supporting a Shared Leadership Culture
3.2.5.2 | Reviewing and Improving Leadership Behaviour
| VIPs
3.3 | Driving Performance and Engaging with External Stakeholders
3.4 | Reinforcing a Culture of Excellence
3.4.1 | Developing an Excellent Organisational Culture
3.4.2 | Promoting and Encouraging Diversity
| VIPs
3.5 | Managing Change
| VIPs
3.6 | Citations & Notes
4 | Defining and Delivering an International Strategy
4.1 | Strategy and the Strategy Management Process
4.1.1 | Popular Strategy Definitions
4.1.2 | Comprehensive Strategy Management Processes: EFQM Criterion 2
4.2 | Scanning the Environment
4.2.1 | Understanding the Needs and Expectations of Stakeholders
4.2.2 | Analysing Industry and Markets
4.2.3 | Identifying and Understanding Environmental Key Trends
4.2.4 | Predicting Future Developments and Changes
| VIPs
4.3 | Analysing Internal Performance
4.3.1 | Understanding Operational Performance and Capabilities
4.3.2 | Determining Competencies of Partners and Potential Impacts of Changes.
4.3.3 | Bringing It All Together: Portfolios
| VIPs
4.4 | Developing the Strategy
4.4.1 | Strategy Levels
4.4.2 | Generating a Sustainable Business Model
4.4.3 | Business Model Choices
4.4.4 | Establishing a Strategy Development Process
| VIPs
4.5 | Communicating and Implementing the Strategy
4.6 | Citations & Notes
5 | Deploying Strategy through People
5.1 | International Human Resource Management
5.1.1 | The International HRM Function
5.1.2 | Managing People: EFQM Criterion 3
5.2 | Supporting the Strategy through People Plans
5.2.1 | Steering Human Resource Management Strategically
| VIPs
5.2.2 | Planning Global Mobility
| VIPs
5.2.3 | Closing the Loop: People Feedback
| VIPs
5.3 | Developing People and Their Performance
5.3.1 | Developing People’s Skills and Competencies
| VIPs
5.3.2 | Helping People to Improve Their Performance
| VIPs
5.3.3 | Appraising Performance Systematically
5.3.4 | Empowering and Involving People
| VIPs
5.4 | Communicating Effectively
| VIPs
5.5 | Recognising People
| VIPs
Citations & Notes
6 | Managing International Partners and Resources
6.1 | A Broad View on Resources: EFQM Criterion 4
6.2 | Establishing International Partnerships for Mutual Benefit
6.2.1 | Selecting an Appropriate Foreign Operation Mode
6.2.1.1 | Cross-Border Strategic Alliances
| VIPs
6.2.1.2 | Contractual Agreements in International Operations
6.2.1.3 | International Joint Ventures
6.2.1.4 | Mergers & Acquisitions across Borders and Cultures
6.2.2 | Managing International Partners
| VIPs
6.3 | Managing Finance and Governance Processes
6.3.1 | Optimising Organisational Financial Management
| VIPs
6.3.2 | Ensuring Compliance
| VIPs
6.3.3 | Managing Risks
| VIPs
6.4 | Managing Knowledge and Information
6.4.1 | Managing Knowledge Systematically
| VIPs
6.4.2 | Establishing Integrated (Management) Information Systems
6.5 | Citations & Notes
7 | Managing Processes and Products Globally
7.1 | Delivering Stakeholder Value: EFQM Criterion 5
7.2 | Managing Processes
| VIPs
7.3 | Managing Products and Services Based on ISO 9001
7.3.1 | Introducing a Certifiable Quality Management System
| VIPs
7.3.2 | Managing Products and Services Globally
| VIPs
7.3.3 | Enhancing Customer Relationships
7.4 | Citations & Notes
8 | Achieving and Monitoring Balanced Results
8.1 | EFQM Results Criteria
8.2 | Introducing the Balanced Scorecard Concept
| VIPs
8.3 | Monitoring Achievements by Designing Meaningful Dashboards
| VIPs
8.4 | Citations & Notes
9 | Assessing the Organisation’s Management Model
9.1 | Establishing Strategy Reviews for Continuous Improvement
| VIPs
9.2 | Implementing Self-Assessments
9.2.1 | Introducing Self-Assessment Tools
| VIPs
9.2.2 | Conducting a Simulated Award Assessment
| VIPs
9.3 | Achieving External Recognition and Winning Excellence Awards
| VIPs
9.4 | Citations & Notes

References

List of Abbreviations

Glossary

Index

Table of Figures

Figure 1-1 | Concept Map “Introduction and Overview”
Figure 1-2 | Symbols Used for Special Information Employed Throughout this Book
Figure 1-3 | Multi-Faceted Motives for Internationalisation Processes
Figure 1-4 | The Global Integration/Local Responsiveness Framework
Figure 1-5 | Survey of the New St. Gallen Management Model
Figure 1-6 | Baldrige Criteria for Performance Excellence Framework 2015
Figure 1-7 | EFQM Fundamental Concepts of Excellence
Figure 1-8 | EFQM Fundamental Concepts - Definitions and Best Practices
Figure 1-9 | The EFQM Excellence Model Framework 2013
Figure 1-10 | Definitions of the EFQM Enabler Criteria
Figure 1-11 | Definitions of the EFQM Results Criteria
Figure 1-12 | Exemplary Levels of the EFQM Excellence Model
Figure 1-13 | Exemplary Red Threads Through the EFQM Excellence Model
Figure 1-14 | The EFQM RADAR® Logic
Figure 1-15 | The Internationalisation Process
Figure 2-1 | Concept Map “Cross-Cultural Competence”
Figure 2-2 | The Cultural Iceberg
Figure 2-3 | Developmental Model of Intercultural Sensitivity
Figure 2-4 | Three Levels of Uniqueness in Human Mental Programming
Figure 2-5 | The Hofstede Onion - Manifestations of Culture
Figure 2-6 | Hofstede’s Five Dimensions as a Control Panel
Figure 2-7 | Key Differences between Cultures with Small and Large PDI
Figure 2-8 | Selected PDI Country Ratings
Figure 2-9 | PDI Values for Six Categories of Occupations
Figure 2-10 | Key Differences between Cultures with Small and Large IND
Figure 2-11 | Selected IND Country Ratings
Figure 2-12 | Key Differences between Feminine and Masculine Cultures
Figure 2-13 | Selected Country Scores for MAS
Figure 2-14 | Key Differences between Cultures with Weak and Strong UAI
Figure 2-15 | Selected Country Scores for UAI
Figure 2-16 | Key Differences between Cultures with high or low LTO
Figure 2-17 | Selected Country Scores for LTO (WVS)
Figure 2-18 | Cultural Cluster of Germanic Countries
Figure 2-19 | Country Clusters Based on the Four Original Hofstede Dimensions
Figure 2-20 | Key Differences between Indulgent and Restrained Cultures
Figure 2-21 | Selected Country Scores for IVR
Figure 2-22 | Cultural differences Expressed as Normal Distributions
Figure 2-23 | Percentages Opting for Telling the Truth
Figure 2-24 | Typical Characteristics of Universalistic vs. Particularistic Cultures
Figure 2-25 | Percentages Opting for Individual Freedom
Figure 2-26 | Percentages Opting for Not Expressing Emotions Overtly
Figure 2-27 | Percentages Not Painting the House
Figure 2-28 | Percentages Opting for Getting Things Done
Figure 2-29 | Circle Diagrams for Past, Present and Future
Figure 2-30 | Differences of Past, Present and Future Orientation
Figure 2-31 | Average Time Horizon
Figure 2-32 | Percentages Agreeing to What Happens to Me is My Own Doing
Figure 2-33 | The Three-Step-Approach
Figure 2-34 | Reconciling Globalism and Localism
Figure 2-35 | GLOBE - Nine Cultural Dimensions
Figure 2-36 | GLOBE - Country Clusters
Figure 3-1 | Concept Map “Leading the Internationalisation Process”
Figure 3-2 | Aspects Influencing Leadership Success
Figure 3-3 | One-Dimensional Behavioural Leadership Theories Based on Participation
Figure 3-4 | Two-Dimensional Behavioural Leadership Theories
Figure 3-5 | Contingency Models
Figure 3-6 | Relationship-Based Leadership Approaches
Figure 3-7 | The Big Five Personality Factors and Their Facets
Figure 3-8 | EFQM Criterion 1 “Leadership” and Its Criterion Parts
Figure 3-9 | EFQM Criterion Part 1a and Its Guidance Points
Figure 3-10 | Corruption Risks Within Domains of Corporate Activities
Figure 3-11 | Percentages Opting for Blaming an Individual
Figure 3-12 | GLOBE - Six Global Leader Behaviours
Figure 3-13 | JOHARI Window and the Importance of Feedback
Figure 3-14 | 360° Feedback
Figure 3-15 | Trompenaars and Hampden-Turner’s Four Corporate Cultures
Figure 3-16 | Preferences for Corporate Cultures in Different Countries
Figure 3-17 | Dimensions of Diversity
Figure 3-18 | Lewin’s Three Steps of Change
Figure 3-19 | Eight Steps for Leading Change
Figure 4-1 | Concept Map “Defining and Delivering an International Strategy”
Figure 4-2 | Strategy Development and Implementation – Overview
Figure 4-3 | EFQM Criterion 2 “Strategy” and Its Criterion Parts
Figure 4-4 | Environmental Scan
Figure 4-5 | Generalised Stakeholder Map
Figure 4-6 | Industry Analysis Based on Porter’s Five Forces (Expanded Model)
Figure 4-7 | Overview Competitor Analysis
Figure 4-8 | Selected PESTEL Variables
Figure 4-9 | Sources for Analysing Countries and Markets
Figure 4-10 | The Global Competitiveness Index Framework
Figure 4-11 | Sample Steps of a Scenario Analysis
Figure 4-12 | Issues Priority Matrix for Key Driver Selection
Figure 4-13 | Levels of Competence Sustainability
Figure 4-14 | Organisational Analysis Based on Porter’s Value Chain
Figure 4-15 | SWOT Analysis
Figure 4-16 | Great Jeans’ SWOT Matrix
Figure 4-17 | Choice of Location and Market
Figure 4-18 | The Growth-Share Matrix (BCG-Matrix)
Figure 4-19 | Different Strategy Levels
Figure 4-20 | The Nine Building Blocks of the Business Model Canvas
Figure 4-21 | Sketch of Great Jeans Canvas (Basic Model)
Figure 4-22 | Epicentres of Business Model Innovation
Figure 4-23 | Great Jeans’ Innovative Business Model
Figure 4-24 | Porter’s Three Generic Strategies
Figure 4-25 | A Selection of Business Models
Figure 4-26 | Patterns of Business Models on Business Model Canvas
Figure 4-27 | Business Model Development Process
Figure 4-28 | From Purpose to Strategy Implementation
Figure 5-1 | Concept Map “Deploying Strategy through People”
Figure 5-2 | The Human Resource Management Process
Figure 5-3 | Labour Regulation Aspects in International HRM
Figure 5-4 | EFQM Criterion 3 “People” and Its Criterion Parts
Figure 5-5 | Four Generic HRM Strategies
Figure 5-6 | Internationalisation Strategies and HRM Policies
Figure 5-7 | The Optimal Global Assignment Process
Figure 5-8 | Phases in Cultural Adjustment – Customised W-Curve
Figure 5-9 | People Portfolios
Figure 5-10 | Obtaining Feedback
Figure 5-11 | KODE® Enhanced Atlas of Competencies
Figure 5-12 | KODE®X Process
Figure 5-13 | Levels of Hypercultural Competence
Figure 5-14 | Drivers of Motivation Processes
Figure 5-15 | Kehr’s 3K-Model of Work Motivation
Figure 5-16 | Job Characteristics Model
Figure 5-17 | Heckhausen’s Model of Achievement Motivation
Figure 5-18 | Attribution Characteristics and Their Influence on Motivation
Figure 5-19 | Reconciling the Reward Dilemma through Co-Opetition
Figure 5-20 | Team Empowerment Dilemma
Figure 5-21 | Control & Autonomy Dilemma
Figure 5-22 | Multiple Dimensions of Inter-Organisational Communication
Figure 5-23 | The Communication Tool Cube for Internal Communication
Figure 5-24 | Characteristics of Low and High Context Communication
Figure 5-25 | Work/Life Balance - Causes, Nature and Consequences
Figure 6-1 | Concept Map “Managing International Partners and Resources”
Figure 6-2 | EFQM Criterion 4 “Partnerships & Resources” and Its Criterion Parts
Figure 6-3 | Overview of Foreign Operation Modes
Figure 6-4 | Characteristics of Selected Foreign Operation Modes
Figure 6-5 | Relevant Fits in Strategic Alliances
Figure 6-6 | Pitfalls of Strategic Alliances
Figure 6-7 | Typical Forms of Licensing Agreements
Figure 6-8 | Approaches to Joint Venture Management
Figure 6-9 | Chosen Perspectives on M&A Strategies
Figure 6-10 | Synergies and Barriers of M&A Projects
Figure 6-11 | Varieties of Acculturation in M&A Processes
Figure 6-12 | Guiding Matrix for Make-or-Buy Decisions
Figure 6-13 | Organisational Financial Management - Overview
Figure 6-14 | The Three-Lines-of-Defence Model
Figure 6-15 | ISO High Level Structure for Management Systems
Figure 6-16 | Compliance Management Process Based on ISO 19600:2014
Figure 6-17 | Risk Management Process Based on ISO 31000:2009
Figure 6-18 | Sample Risk Map
Figure 6-19 | Organisational Cultures and Risk Orientation
Figure 6-20 | Knowledge Dimensions
Figure 6-21 | Organisational Learning Cultures
Figure 6-22 | Organisational Knowledge Management Process and Activities
Figure 6-23 | Pyramid of Organisational Information Systems
Figure 7-1 | Concept Map “Managing Processes and Products Globally”
Figure 7-2 | EFQM Criterion 5 “Processes, Products and Services” and Its Criterion Parts
Figure 7-3 | From Function Orientation to Process Orientation
Figure 7-4 | Aligning Process Management and Business Strategies
Figure 7-5 | Overview of Business Process Management
Figure 7-6 | Sample Process Diagrams
Figure 7-7 | Example of ARIS Items and Event-Driven Process Chain
Figure 7-8 | BPM Process Levels in a Sample Process Map
Figure 7-9 | The ISO 9000 Family of Quality Management Standards
Figure 7-10 | Mapping ISO/DIS 9001:2014 on the EFQM Model
Figure 7-11 | Structure of Quality Requirements for Value Creating Processes
Figure 7-12 | How (Not) To Conduct an Optimal Product Design Process
Figure 7-13 | Simple Supply Chain of Great Jeans
Figure 7-14 | A Global View on Great Jeans’ Supply Chain
Figure 7-15 | Customer Relationship Management Based on the IDIC Approach
Figure 8-1 | Concept Map “Monitoring and Achieving Balanced Results”
Figure 8-2 | EFQM Result Criteria and Their Criterion Parts
Figure 8-3 | The Allocation of Results
Figure 8-4 | Kaplan & Norton’s Balanced Scorecard
Figure 8-5 | Balanced Scorecards Aligned Across All Organisational Levels
Figure 8-6 | Mapping the BSC Concept on the EFQM Excellence Model
Figure 8-7 | Poorly Designed Dashboard
Figure 8-8 | Adequate Dashboard for Great Jeans
Figure 9-1 | Concept Map “Assessing the Organisation’s Management Model”
Figure 9-2 | Drucker’s Five Most Important Questions Asked about an Organisation
Figure 9-3 | Basic Self-Assessment Process
Figure 9-4 | Classification of Different Self-Assessment Tools
Figure 9-5 | Self-Assessment Matrix of ISO 9004:2009 – Sample Element
Figure 9-6 | Exemplary Award Simulation Process
Figure 9-7 | RADAR Elements for the Analysis of Enablers
Figure 9-8 | Composition of the Enabler Matrix
Figure 9-9 | RADAR Elements for the Analysis of Results
Figure 9-10 | Criteria Weightings of the EFQM Excellence Model 2013
Figure 9-11 | EFQM Recognition Scheme
Figure 9-12 | Global Distribution of Awards Using the EFQM or Baldrige Model
Figure 9-13 | Overview of EEA and MBNQA Award Categories

1
Introduction and Overview Strategic International Management

Welcome to the fascinating world of international organisations. This book will introduce the internationalisation process in its rich diversity and sometimes astonishing complexity. Each section is preceded by learning objectives that explain the knowledge gained in reading through the subsequent pages. The objectives for section one are presented here:

Readers are able to navigate effortlessly through the book and its supplementary information. They understand the concept of globalisation and related consequences from an organisational perspective. Readers also know how to correctly name and address motives for internationalisation processes and how to recognise their interdependencies. Forces for global integration and local responsiveness are familiar and different forms of internationally operating organisations can be distinguished. The contribution of holistic management models to supporting leadership decisions and activities is recognised. The most important international models can be classified. Readers are familiar with the general approach of the EFQM Excellence Model including its fundamental concepts and RADAR logic.

Learning objectives are always followed by a visual overview of the main issues covered in the respective section. Such a graphic is called a concept map. The map created for chapter 1 is supplied in Figure 1-1.

Figure 1-1: Concept Map “Introduction and Overview”

1.1
Introduction

1.1.1
How to Use This Book

This book is meant for everybody who seeks well-founded and practical advice on how to manage the internationalisation process of an organisation. It covers the internationalisation issue from a top management perspective and builds upon established and state-of-the-art methods, using a globally recognised holistic management model – the EFQM Excellence Model - as guidance. Therefore, it caters to the needs of different groups of readers:

 Practitioners working for and with organisations that are on their way to becoming truly international,

 students of business, economics and related sciences that want to prepare themselves for doing exactly that in their future career and

 all people planning or conducting the implementation of a holistic management model (EFQM Excellence Model or Baldrige) in their organisations.

In order to facilitate the use of this book, supplementary information is provided for further illustrating the theoretical concepts discussed. This additional information is marked by distinct symbols, as listed in Figure 1-2.

Figure 1-2: Symbols Used for Special Information Employed Throughout this Book

The principles presented in this book are equally relevant for all kinds of organisations - companies, individual enterprises and non-profit organisations alike. Therefore, the term organisation instead of company is used consequently. However, in some parts for easier understanding the terms “business” or “business sectors” are utilised as many readers might find it easier to link the purpose of an organisation to the term “business” than to a more general description. In the sense used, non-profit organisations also have a business (or mission or duty) they pursue – which could be the business to save the environment or the business to protect people from injustice. The employment of classical management terminology should not distract from the fact that the principles and tools explained here are relevant for all imaginable international management situations.

1.1.2
From Gradual Globalisation to Transnational Organisations

Globalisation, understood as the worldwide integration of cultures, political systems, markets, industries and economies, is a determinant in the management of contemporary organisations. Whether an organisation decides to join the international competition or decides to stay out – the issue has to be raised. A google search of the term “globalisation” produces presently 12 million hits within less than one second, which clearly illustrates its current relevance.

Reasons and motives for internationalising an organisation are multi-faceted, as illustrated in Figure 1-3. For most organisations the primary motive is still the search for markets to ensure sustainable growth. Underlying reasons might be the (assumed) existence of attractive customer segments, demand for the offered products and services, a generally huge market size or an attractive market growth. Sometimes, the decision in favour of entering a new market is paired with a requirement to avoid the related tariffs or other trade barriers and to partake in public loan programmes offered by the respective government. In this case, opening new or relocating existing production sites is a logical consequence of the original market-seeking intent. Another important motive that appears individually or agglomerated is the necessity to ensure the availability of raw materials or other crucial and scarce resources. Cost-efficiency seekers try to establish production facilities in locations that provide essential resources at low cost (for example cheap labour costs), ensure a shorter time-to-market through cutting the distance to the customers or realise faster production cycles due to the immediate availability of efficient and good suppliers. Strategic asset seekers internationalise their business because they have a high need of well-trained people with special skills (for example in finding innovations) or are looking for international partners to complement their own product portfolio or research activities. Pushing internationalisation processes out of a risk diversification perspective is a motive on the rise due to an increased emphasis on risk management. Finally, many organisations feel obliged to mimic the international actions of their main competitors, which is labelled follow-the-leader motive.¹

Figure 1-3: Multi-Faceted Motives for Internationalisation Processes²

When the need for internationalisation is recognised, organisations have different possibilities to start the internationalisation process. The classical Uppsala Model from Johanson and Vahlne (1977) assumed that companies build up their presence in foreign markets incrementally along typical steps. This establishment chain was discovered based on case studies of Swedish companies and considered on the one hand the continuing acquisition and use of knowledge about the foreign market and on the other hand the commitments to the foreign market. The chain starts with irregular export activities and gradually evolves to the use of independent representatives, the founding of own sales subsidiaries and finally the establishment of a manufacturing plant in the foreign country. The authors observed also that the process was usually started in markets that had many common characteristics with the home market and that the international establishment took longer in case the knowledge of the target market was very low, or in other words the market was deemed exceptionally foreign in nature. From these observations they derived the concept of “psychic distance”, defined as the sum of factors inhibiting the flow of information to and from the foreign market. These factors are supposed to be mainly based on differences in culture, language, business practices and industrial development. An organisation naturally tends to start international activities in a market with low psychic distance, for example in a neighbouring country using the same language where the organisation feels to have a good knowledge of. Gradually, market knowledge of other countries further along the psychic distance chain will be collected. If the endeavour of internationalisation was implemented successfully in the first market, the internationalisation will be extended to the next country along the psychic distance chain.³ According to this theory, a German company would be expected to start with exporting its products to Austria followed by the later establishment of a sales subsidiary there. The next internationalisation step could then be exporting its products to Denmark or the Netherlands.

The establishment chain is nowadays not deemed an appropriate view of internationalisation processes. Organisations use business contacts and partner networks to collect information and share investment risks. This enables them to develop their international presence at a jump, starting for instance directly with a manufacturing plant in China instead of gradually testing export opportunities. Also, the emergence of “born globals” demands attention, referring to organisations that directly resume their business activities on a global scale as this is a dominant part of their business model (e.g. google). The current scientific landscape is defined by many different theories of internationalisation processes, which all focus on special aspects, for example motives, risk or competition drivers or certain industries.⁴ Mainly the promotion of the importance of partnerships and networks could be singled out as a common denominator. Although these theories provide interesting insights into trends and patterns, they are not suitable for supporting managerial decisions. Therefore it will be desisted from further discussion.

Not every organisation that establishes routine cross-border activities is already a truly international organisation or even a “global player”. Such a classification would require the extension of the organisation’s management system and processes in a manner that laws and customs of other countries gain a considerable influence on the way the organisation acts. Terms coined for these kinds of organisations include Transnational Enterprise (TNE), Multinational Enterprise (MNE), Multinational Corporation (MNC) or Transnational Corporation (TNC), that are all basically used as synonyms. There are many different definitions mainly based on the aforementioned distinction available. The most widely accepted stems from the UNCTAD and is used for its Transnational Corporation Statistics: “A transnational corporation (TNC) is generally regarded as an enterprise comprising entities in more than one country which operate under a system of decision-making that permits coherent policies and a common strategy. The entities are so linked, by ownership or otherwise, that one or more of them may be able to exercise a significant influence over the others and, in particular, to share knowledge, resources and responsibilities with the others.”⁵ It is to be noted that this definition does not comprise a specific majority control, although internationally a minimum equity capital stake of 10% or any equivalent including voting power is common. Therefore an exact classification might require selecting the main parent company for a considered associate enterprise, which is usually the one with the highest percentage of ownership. The relevance of TNCs is not derived from mere transnational ownership but instead from the fact that they are considered to be organisations “with formidable knowledge, cutting-edge technology, and global reach”⁶. In 2009, the UNCTAD reported the existence of 82.000 TNCs, with 80 million workers employed and their foreign affiliates accounting for a share of 11% in global gross domestic product.⁷ Additionally, these TNCs can be classified by their transnationality index, that provides information on the relevance of the activities outside an organisation’s home country and is calculated as the average of the three ratios foreign to total sales, foreign to total assets and foreign to total employment. The German Metro AG for example reached 2011 a comparatively high transnationality index of 0,62 and reported 33 countries of operation.⁸

From a scientific perspective, Bartlett and Goshal’s Integration/Responsiveness Framework provides a clear strategic distinction between different kinds of organisations with relevant cross-border activities, as depicted in Figure 1-4. Their portfolio contrasts environmental pressures for global integration with the pressures of local responsiveness as two independent dimensions whose combination of low or high value, respectively, suggest a certain configuration of the organisation. Typical forces for global integration stimulate specific reactions. The importance of multinational customers or competitors (often stimulated by trade liberalisation) combined with high investment intensity for example activates further strategic coordination. Forces like homogeneous tastes and needs, high technological intensity as well as the need for realising cost reductions induce looking for economies of scale, economies of scope, economies of experience and/or worldwide innovation lead to operating integration. The second dimension, pressures for local responsiveness, includes differences in customer needs and tastes, (local) needs for substitutes, individual market distribution structures or host country government demands. In these cases, it is important to assimilate to the special requirements by establishing individual processes for the local environment or by offering local variations of the products or services in order to be attractive for customers and partners alike.⁹

Figure 1-4: The Global Integration/Local Responsiveness Framework¹⁰

This Integration/Responsiveness Framework advises upon the choice of a global strategy for organisations facing high global integration pressures (for example due to a strong global competition) but being able to offer a highly standardised product as the pressures for local responsiveness are low. Organisations choosing this approach typically build cost advantages through centrally managed global-scale operations. These global organisations constitute the classic case of a global player, as most of the strategic decisions, responsibilities, resources and assets are centralised in the (home country) headquarters, which exerts a tight control over all overseas operations that deliver the products to a global market. Typical representatives of this kind of organisations are found for example in the aircraft or consumer electronics industry. In contrast, organisations facing low global integration pressures but instead high environmental forcers for local responsiveness follow a multinational (also called multidomestic) strategy approach and are formed as a decentralised federation of independent organisations. Many of their key decisions, responsibilities and assets are decentralised in order to better meet the individual market needs. The relationship between headquarters and subsidiaries is comparatively informal and usually focused on financial control. Multidomestic or multinational organisations are mainly found in industries whose products depend on languages or culture-specific tastes like for example publishing houses, foods and beverages. In cases where both forces contemplated are low, the resulting international organisations are largely based on transferring the products or processes of the parent company to their subsidiaries for worldwide diffusion. Foreign activities are seen as remote outposts that are highly dependent on the headquarters’ resources and support the parent company with their profits. Therefore, the organisation’s management and strategy is oriented towards the home country, exercising a tight control over their foreign subsidiaries but without systematically integrating host country organisations and their perspectives. These organisations are found for example in the textile industry.¹¹

So far, all introduced strategies are dominated by a single strategic demand. However, in the current global competition organisations increasingly face high forces of global integration and high pressures for local differentiation with a growing emphasis on worldwide innovation. According to Bartlett and Goshal, the appropriate transnational strategy to compete effectively in this extremely demanding environment requires the simultaneous development of “global competitiveness, multinational flexibility and worldwide learning capabilities”¹². Transnational organisations are truly interdependent and make selective centralising or decentralising decisions. Essential resources are centralised within the home country headquarters to protect the core competencies and in part realise economies of scale. Other resources and learning opportunities are geographically dispersed in specialised locations which ensures the necessary flexibility. Products are adapted to local requirements where necessary despite being part of an integrated production process that provides standard components from a single location to all relevant subsidiaries worldwide. Improvements and innovations are promoted in all subsidiaries and headquarters alike and outcomes are shared between all operations and subsequently diffused around the globe. Transnational organisations are characterised by large flows of knowledge, capital, people and products between subsidiaries and between headquarters and subsidiaries. The resulting organisation can be described as an integrated network. The environment described is typical for the telecommunication, pharmaceutical and media industry. More and more industries are gradually developing towards the transnational sector, as is the case for example with the automobile and banking industry. It is obvious that a transnational strategy with its high demands on integration and coordination provides a huge challenge. Therefore, successful examples are rare.¹³

When an organisation pursues a transnational strategy, decisions become far more complex, as multiple market requirements and the needs and capabilities of many different subsidiaries have to be taken into account and balanced out. In addition to that, non-business matters or soft factors require more management attention, especially the need for productive and harmonious cross-border relationships despite cultural differences and language barriers. Whereas the challenges presented by strategic, organisational and operational matters are anticipated and considered, corresponding soft factors are regularly ignored. A global survey of 572 executives explored internationalisation challenges and especially the role of cross-border collaboration and communication. More than 50 % of the respondents rated cross-border collaboration as very important, not only with all kinds of external partners but also within their business unit and their whole organisation. 64% reported cross-border collaboration as having been a critical factor in performance improvement. Despite its relevance, 51% admitted that linguistic and cultural diversity make it very difficult. Communication misunderstandings were reported to have stood in the way of establishing major cross-border transactions several times (6%) or a few times (43%) with incurred financial setbacks. Interestingly, due to a generally enhanced command of English, the diversity of languages across countries is no longer seen as the crucial cause for misunderstandings (only 27% reported this as most likely reason), instead different norms of workplace behaviour (49%) and differences in cultural traditions (51%) constitute the main challenges. Factors such as local customs and languages were stated to hamper their company’s international expansion plans significantly, especially in Russia (89%), Spain (88%), Brazil (70%) and China (67%).¹⁴

In summary, dealing competently with intercultural issues constitutes one of the most important factors for a successful internationalisation. The basics of cross-cultural competence will therefore be addressed in detail in chapter 2 which is dedicated to this key issue.

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1.2
The Use of Holistic Management Models

Managing any kind of organisation is a complex process and is made even more complex in an international and therefore usually unknown environment. The smaller and the more focused an organisation is, the easier it is for its (top) managers to rely on their experience and instincts for good management decisions. Consequently, the more an organisation is diversified, the more people are contributing to its success and the more it is dispersed over different locations, the more a clear structure is needed in order to not involuntarily overlook important matters.

Holistic management models were developed to ensure a balanced and complete view on all management matters of different types of organisations. They provide generalised issues that have to be solved in order to steer an organisation effectively to longterm success. These models are used for guidance in the management process, for assessing the maturity of an organisation’s management system and for electing the best organisations at quality or excellence price competitions.

Since the 1970s several holistic management models were published. To date, there are three models with international relevance: the (New) St. Galler Management Model, the model of the Baldrige Excellence Program and the EFQM Excellence Model.

The New Management Model is an integrative framework that provides a system-oriented view of a company and is edited by the Management Institute St. Gallen. It therefore presents predominantly a scientific view. The distinctive graphic as presented in Figure 1-5 shows the company as a productive system in the centre of its surrounding network. It consists of six essential concepts: environmental spheres, stakeholders, interaction issues, structuring forces, processes and modes of development. These depict central dimensions of the management function. Whereas environmental spheres and stakeholder expectations have to be analysed with regard to important changes, interaction issues combine manageable matters concerning communication and resource allocation. Structuring forces should be set up to arrange the daily routines coherently, forming the company’s framework for value creating and other activities that are logically combined to consistent processes. Modes of development explain basic patterns of entrepreneurial change processes. The main aim of the St. Galler model is to support sustainable business solutions and organisational development. The University of St. Gallen uses this model as a basic guideline for executive management studies.¹⁶

Figure 1-5: Survey of the New St. Gallen Management Model¹⁵

The National Institute of Standards and Technology (NIST) is an agency of the U.S. Department of Commerce. It promotes U.S. innovation and industrial competitiveness by advancing measurement science, technology and standards with the help of cooperative programs. The Baldrige Performance Excellence Program is one of those. Driven by a more practical need, criteria were developed in order to evaluate organisations and their competitiveness and to provide guidelines for organisational improvement. The Baldrige criteria and their systems perspective are used for assessing the applications for the Malcolm Baldrige National Quality Award (MBNQA) that is awarded yearly by the U.S. president.¹⁷

The requirements of the Baldrige Criteria for Performance Excellence for business and non-profit organisations are embodied in seven categories, as shown in Figure 1-6. These categories are integrated and connected in the Baldrige framework or systems perspective. Its top basic element is the “Organizational Profile”. It sets the context for the way an organisation operates as it includes its competitive environment, relationships and its strategic situation. Core values and concepts form the basis for the actual Performance Management System. This is first composed of six Baldrige categories: the leadership triad with Leadership (category 1), Strategy (category 2), and Customers (category 3) which sets the organisational direction, and the results triad with Workforce (category 5), Operations (category 6) and Results (category 7). All actions taken by the organisation’s workforce and key operational processes produce its overall performance results. The seventh category forms the system’s foundation, as Measurement, Analysis, and Knowledge Management (category 4) are critical to a factbased, knowledge-driven and effective management system. The central part “integration” stresses the model’s holistic and integrated perspective. The criteria categories are subdivided into overall 17 process and results items, each focusing on a major requirement. Each item consists of one or more areas to address that define more specific requirements. This third level of the whole model is the level that organisations should address in order to explain their particular solutions and approaches when applying for the MBNQA.¹⁸

Figure 1-6: Baldrige Criteria for Performance Excellence Framework 2015¹⁹

Besides its predominant use in the U.S., the Baldrige model or its equivalent was used for national excellence awards in more than 20 countries worldwide in 2010, for example in Hong Kong and New Zealand.²⁰

The third internationally recognised model is the EFQM Excellence Model. As it represents the red thread through this textbook, it will be explained explicitly in the following chapter 1.3.

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1.3
The Approach of the EFQM Excellence Model

The most successful and widespread holistic management model is the EFQM Excellence Model. Leaders that face an internationalisation challenge are in need of a clear structure of their organisation’s existing management system as well as of ideas for integrating new approaches and different cultures. The EFQM Excellence Model provides through its non-descriptive and structured framework a very good tool for this purpose. Consequently, its building components will be explained in detail in the following subdivisions.²¹

1.3.1
Background Information: The EFQM and its Model

The EFQM is a global non-for-profit membership foundation, established in 1988 by 14 CEOs of internationally recognised companies (Nestlé, Robert Bosch, Volkswagen et al.) with the goal of developing a management tool for increasing the competitiveness of European organisations. In alignment with its vision of “a world striving for sustainable excellence”²² the EFQM is organiser of the prestigious European Excellence Award that yearly recognises organisations for their sustainable achievements using the EFQM Excellence Model as assessment tool. To date, the EFQM records about 500 international members from many different industries and more than 50 countries.²³ Its model is used by over 30 000 organisations in Europe for development and assessment purposes.²⁴ According to a research conducted in 2010, the EFQM Excellence Model or its equivalent is used for national excellence awards in more than 35 countries worldwide, not only in European countries like Germany (Ludwig-Erhard-Preis), Finland, United Kingdom and the Russian Federation but also in Turkey and the United Arab Emirates.²⁵

Due to its background the EFQM Excellence Model was developed from a practical European management perspective. Accordingly, it sets a strong focus on people and sustainability. The inclusion of relevant leadership matters affecting all sorts of global organisations is one of its strong features. Keeping it up-to-date is a major prerequisite for its on-going success; therefore the model is reviewed every 3 years in a rigorous and widespread review process. The latest reviews were carried out with more than 200 representatives from academics, large organisations, EFQM partners and assessors, allowing work groups to comment and test draft versions before the final version was published. The 2013 version of the EFQM Excellence Model now emphasises emerging trends like innovation, risk management and corporate governance. The in-depth revision achieved also a full integration of its main building blocks: the 8 fundamental concepts, the 9 model criteria and the RADAR assessment tool.

1.3.2
The Fundamental Concepts of Excellence

Every management model is based on key concepts that explain the underlying management philosophy. These concepts provide important guidance on the interpretation of model criteria in case they are not self-explanatory. Before using any kind of model it is always advisable to compare its basic philosophy with one’s own because incompatibilities in this respect can reduce the usefulness of a tool considerably.

Figure 1-7: EFQM Fundamental Concepts of Excellence²⁶

The EFQM Excellence Model supports any kind of organisation in its endeavour to attain excellence with the goal of meeting or exceeding the expectations of its stakeholders by achieving and sustaining superior levels of performance. The essential foundation of this quest is built by 8 underlying principles called the Fundamental Concepts as depicted in Figure 1-7.

Figure 1-8: EFQM Fundamental Concepts: Definitions and Best Practices²⁷

Each Fundamental Concept of Excellence is defined against the backdrop of a management approach of an excellent organisation. These definitions are augmented by aspects of what excellent organisations do to transfer these principles into practical activities. The main definitions and some of their constitutive best practices are specified in Figure 1-8. The management approach described in the Fundamental Concepts is cast in a structure of a holistic management model with 9 criteria: the EFQM Excellence Model.

1.3.3
The EFQM Excellence Model Framework 2013

The EFQM Excellence Model 2010 offers through its non-descriptive framework a guiding structure for any kind of organisation striving for excellence. It is presented in Figure 1-9. The nine criteria and their subdivisions allow depicting precisely an organisation’s way of offering value (“enablers”) and the resulting goal attainment (“results”).

Figure 1-9: The EFQM Excellence ModelFramework201328

Figure 1-10: Definitions ofthe EFQM Enabler Criteria29

The five enabler criteria on the left side of the model cover what an organisation does to fulfil the various expectations of its stakeholders and how it does it. They consist of the criteria 1 Leadership, 2 Strategy, 3 People, 4 Partnerships & Resources and 5 Processes, Products and Services. The results stem from the enablers and depict what the organisation achieves. The balanced view on results is expressed by the four criteria 6 Customer Results, 7 People Results, 8 Society Results and 9 Business Results. As any excellent organisation is a learning organisation, the dynamic of continuous improvement through feedback is represented by the arrow at the base of the model stating “Learning, Creativity and Innovation”. Each criterion is clearly defined in order to explain its general meaning. An overview of the criteria definitions is provided in Figure 1-10 (for enablers) and Figure 1-11 (for results).

Figure 1-11: Definitions of the EFQM Results Criteria30

The high level definitions of the criteria only allow a very rough structure of a management system. For assessing the maturity of an organisation as well as its strengths and weaknesses, a more detailed approach is necessary. Therefore, the nine criteria are subdivided in criterion parts and these are further elaborated in guidance points. The 32 criterion parts describe different facets of what an excellent organisation typically does in the area of the defined criterion and what therefore should be considered during an assessment. On the third and lowest level of the model, the guidance points provide tangible best practice examples of how to implement the ideas. These guidance points link the EFQM Excellence Model to the Fundamental Concepts. Some of them provide an adaption of one part of a Fundamental Concept to fit the specific context of the criterion part. Other guidance points repeat the text from the Fundamental Concept precisely. Through the guidance points, the structure of the model allows to grasp connections between the different criteria and by that to identify management approaches that are able to integrate several goals at once. This adds another dimension to the otherwise two-dimensional model. These links are depicted by the connecting lines in the EFQM Excellence Model Framework. A graphic example of the EFQM levels is provided in Figure 1-12.

Figure 1-12: Exemplary Levels of the EFQM Excellence Model³¹

It is important to keep in mind that the 119 guidance points used for exemplifying the five enabler criteria are not meant as a check list, so it is not necessary for an organisation to follow them all. Nor is the list of guidance points meant to be exhaustive, as there are other ideas and approaches that fit into a criterion part without being mentioned in a guidance point. The EFQM Excellence Model as an open and non-descriptive model allows and expects individual solutions that match business sector, size, culture and strategy of a specific organisation. However, the guidance points facilitate the search for a fitting improvement measure, in this respect being proper guides for a leader facing management challenges.

Figure 1-13: Exemplary Red Threads Through the EFQM Excellence Model³²

It is possible to follow certain ideas or aspects of management through the model as they are referred to in several guiding points. The EFQM depicts in their 2013 model brochure the integration of their fundamental concepts into the model by highlighting those criterion parts of the enablers where the text of a certain fundamental concept is reflected directly in one of the attached guiding points.³³ This exercise can also be done in a broader sense for any aspect a manager would like to focus on, for example customers or ideas and impacts of the introduction of a risk management system. As shown in Figure 1-13, each of these aspects can be followed through the model. Ideas how to optimise the benefit from the customer’s perspective can be found for example in 1c (leaders are transparent and accountable to their customers and encourage them to participate in activities that contribute to the wider society), in 2a (gather customer’s needs and expectations as strategy input), 2b (analyse current performance trends, for example how customer expectations and promises to the customers are kept), 2d (communicate their strategy to their customers), 3b (attract the right people and ensure that all employees have the necessary competencies to fulfil the needs of the customers), 4a (identify and work together with partners to ensure enhanced value for the customers), 4c (optimise the impact of their product lifecycle and services on public health and safety including that of the customers), 4d (involve customers in the development and deployment of new technologies to maximise the benefits generated), 4e (establish approaches to engage relevant customers and use their knowledge in generating innovation), 5a (design and manage processes to optimise customer value – also beyond the boundaries of the organisation), 5b (develop products and services that create optimum value for customers), 5c (define different customer groups and anticipate their needs and expectations), 5d (produce and deliver products to need or exceed customer needs and expectations), and 5e (manage and enhance customer relationships). The outcomes of these approaches are measured in 6a and 6b (customer perceptions and performance indicators with impact on the perceptions of customers). Explanations concerning the depicted relevant criterion parts for people are provided online at the accompanying website combined with the solution to the following exercise.

Exercise: Familiarise yourself with the EFQM structure (online)

The internationalisation process that forms the structure of this textbook is based on the EFQM criteria. Therefore, more details of each criterion and the associated criterion parts will be explained at the beginning of the corresponding chapters. As this book will only present selected parts of the EFQM Excellence Model, it is highly recommended to acquire the original brochure of the model which can be obtained at www.efqm.org.

1.3.4
The EFQM RADAR Logic

For assessing the excellence level of an organisation the EFQM offers a logical method based on the Deming or PDCA Cycle. According to the Deming Cycle a continuous improvement of processes or systems is based on several successive phases starting with establishing plans, processes and (measurable) objectives to the delivery of a certain output (PLAN), implementing and executing these plans (DO), reviewing the actual results (CHECK) and taking corrective actions in case significant differences between the actual results and the planned objectives occur (ACT).³⁴ The PDCA-Cycle lies at the heart of all improvement-related management models and is used for example in the ISO 9001 quality management systems’ requirements.

The EFQM calls its derived approach RADAR® logic. It consists of four consecutive phases that an organisation needs to execute in order to ensure continuous improvement and sustainable outcomes and is represented in Figure 1-14. In the first phase, the organisation determines the RESULTS it wants to achieve according to its strategy. In the second phase the organisation plans and develops an integrated set of comprehensive APPROACHES to deliver the results from an actual and future-oriented perspective. In the third phase the approaches are DEPLOYED systematically to ensure a successful implementation. In the fourth phase the organisation has to ASSESS and REFINE its approaches according to the analysis of the achieved results and based on its on-going learning activities. Therefore, the cycle starts again with defining the desired results. The degree to which an organisation is able to consequently follow this rigorous improvement cycle is the basis for assessing its level of excellence. For an EFQM assessment, a detailed set of requirements and possible levels of fulfilment based on the RADAR® cycle was invented that is depicted in the so called RADAR tools. One RADAR tool (also called RADAR matrix) deals with the results, as it depicts the first phase of the cycle and is thus used for the result criteria. The second RADAR matrix is used for the assessment of the enabler criteria and depicts the phases two to four of the RADAR logic.

Figure 1-14: The EFQM RADAR® Logic35

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1.4
Process Model “Managing Internationalisation”

Figure 1-15: The Internationalisation Process

The management logic of the EFQM Excellence Model can be used to define the path through the internationalisation process, as shown in Figure 1-15. The management process itself starts with leadership awareness and competence to steer the organisation through the internationalisation process. This is followed by the definition of an international strategy which sets the path for the following implementation. The strategy is implemented through the following steps: managing people in an international environment, managing international partners and resources as well as managing products and processes globally. Based on a sustainability approach the results achieved will be compared with the (strategic) goals set, defined by ways of an individual balanced scorecard. A strategy review based on the outcomes will follow to ensure that the longterm vision of the company is still valid and the path to be followed seen as appropriate. These internationalisation steps are supported by the development of crosscultural competence, which is required for every action and decision in internationally operating organisations. Therefore it defines the starting point for the following elaborations of this book.

1.5
Citations & Notes

¹ Morschett, D., Schramm-Klein, H., & Zentes J. (2010), pp. 71-82; Holtbrügge, D., & Welge, M. K. (2010), pp. 25-26.

² Contents based on Morschett, D., Schramm-Klein, H., & Zentes J. (2010), p. 72, figure 4.1; Holtbrügge, D., & Welge, M. K. (2010), p. 24, tab. 1-7

³ Johanson, J., & Vahlne, J.-E. (1977)

⁴ A good overview of theories dealing with foreign direct investments is provided in Holtbrügge, D., & Welge, M. K. (2010), pp. 54-78

⁵ UNCTAD (2013b)

⁶ UNCTAD (2010), p. iii

⁷ UNCTAD (2010), p. XVIII. Unfortunately, the newer World Investment Reports concentrate on FDI inflows and outflows but do not offer a recent count of TNCs.

⁸ UNCTAD (2014), p. 16

⁹ Bartlett, C., & Ghoshal, S. (1986); Bartlett, C., & Ghoshal, S. (1987a); Bartlett, C., & Ghoshal, S. (1987b); Ghoshal, S., & Nohria, N. (1993); Bartlett, C., & Ghoshal, S. (1998)

¹⁰ Based on Bartlett, C., & Ghoshal, S. (1986), p. 377; Kutschker, M., & Schmid, S. (2011), p. 300

¹¹ Bartlett, C., & Ghoshal, S. (1986); Bartlett, C., & Ghoshal, S. (1987a); Bartlett, C., & Ghoshal, S. (1987b); Ghoshal, S., & Nohria, N. (1993); Bartlett, C., & Ghoshal, S. (1998). Industry examples from Morschett, D., Schramm-Klein, H., & Zentes J. (2010), pp. 43-44 and Kutschker, M., & Schmid, S. (2011), pp.301-304.

¹² Bartlett, C., & Ghoshal, S. (1998), p. 18

¹³ Bartlett, C., & Ghoshal, S. (1986); Bartlett, C., & Ghoshal, S. (1987a); Bartlett, C., & Ghoshal, S. (1987b); Ghoshal, S., & Nohria, N. (1993); Bartlett, C., & Ghoshal, S. (1998); Morschett, D., Schramm-Klein, H., & Zentes J. (2010), pp. 34-35; Kutschker, M., & Schmid, S. (2011), pp.301-304.

¹⁴ Economist Intelligence Unit (2012)

¹⁵ Rüegg-Stürm, J. (2004a), p. 12

¹⁶ Rüegg-Stürm, J. (2004b). More information about the use of this integrative approach can be obtained at the website of Universität St. Gallen: http://www.es.unisg.ch/en/custom-programs/approach/intergrative-approach.php (access 01.03.2015); A good overview offers the author’s German publication (Rüegg-Stürm, J. (2004a)). An extract of it is obtainable online: http://www.michaelegli.ch/html/img/pool/Neues_St._Galler_Managementmodell.pdf (retrieved 01.03.2015).

¹⁷ US Department of Commerce & NIST (2015). The model will be updated yearly and the recent brochures are for sale and partly displayed at the NIST website. Information about the use of this model for awards in different countries can be obtained from US Department of Commerce & NIST (2005). As “Home of the Baldrige Performance Excellence Program” the NIST offers also many publications of MBNQA winners with best practices free of charge, true to their mission to foster improvements.

¹⁸ US Department of Commerce & NIST (2015); graphics also available from http://www.nist.gov/baldrige/graphics.cfm

¹⁹ US Department of Commerce & NIST (2015); graphics also available from http://www.nist.gov/baldrige/graphics.cfm

²⁰ NIST (2010)

²¹ EFQM & ILEP (2012). A short introduction to the EFQM itself, the EFQM model, its Fundamental Concepts and possible uses can be retrieved from the official EFQM website (www.efqm.org). A short overview of the model is offered as pdf publication free of charge: EFQM. (2012). An overview of the EFQM Excellence Model. Retrieved from www.efqm.org/sites/default/files/overview_efqm_2013_v1.1.pdf. The EFQM offers at its website model related publications in several languages, mainly for sale. For German users that work internationally, the dual language version (German/English) used here can be highly recommended. For some award processes, free information on best practices concerning selfassessments and the award process is provided on the internet. For example for the German Excellence Price called Ludwig-Erhard-Preis (www.ilep.de)

²² EFQM (2015d)

²³ EFQM (2015e)

²⁴ EFQM (2015f)

²⁵ NIST (2010)

²⁶ EFQM & ILEP (2012), p. 6

²⁷ Definitions taken from EFQM & ILEP (2012), pp. 8-14

²⁸ EFQM & ILEP (2012), p. 16

²⁹ Definitions assembled from EFQM & ILEP (2012), pp. 18-31

³⁰ Definitions assembled from EFQM & ILEP (2012), pp. 34-40

³¹ Definitions from EFQM & ILEP (2012), p.18

³² General idea and parts of the attribution based on EFQM & ILEP (2012), p. 42

³³ EFQM & ILEP (2012), p. 42

³⁴ Deming, W. E. (2000), p. 88. (Deming calls it in his own book the “Shewhart Cycle” but notes that it has been called Deming Cycle since he introduced it in Japan in 1950). The PDCA cycle is referred to regularly in books about (Total) Quality Management, for example Juran, J. M., & De Feo, J. A. (2010), pp. 204-205 or Oakland, J. S. (2014), pp. 120-125 (with various decuctions and uses for example pp. 250-252, 263-266, 296).

³⁵ EFQM & ILEP (2012), p. 44

2
Key Issue: Developing Cross-Cultural Competence

Readers are aware of the importance of recognising and respecting cultural differences for facilitating international relations of any kind. They are able to explain and compare different frameworks for distinguishing organisational or national cultures. The awareness about their own cultural perspectives and resulting judgements is heightened and the ability to reconcile cultural dilemmas enhanced.

Knowledge about intercultural differences and their manifold effects on the building blocks of the management system is a key prerequisite for a successful internationalisation. This section explains typical pitfalls of mono-cultural thinking in a global business environment and provides different business-related frameworks for distinguishing cultures. The use of these frameworks in designing and implementing international management systems can foster an organisational climate embracing the opportunities of multicultural approaches for doing business. Figure 2-1 delivers the concept map for treatment of the key issue Cross-Cultural Competence.

Figure 2-1: Concept Map “Cross-Cultural Competence”

2.1
The Importance of Intercultural Understanding for International Business Issues

Culture is still one of the most iridescent concepts in science. When people first think about culture, it is usually about the obvious aspects like behaviour, traditions and customs. French people carrying baguettes, African people in colourful caftans and the formal bows in Japanese greetings – all these observations shape our perception of culture. But these observations form only the tip of the (cultural) iceberg. The famous cultural iceberg metaphor (usually attributed to Edward T. Hall from his book published 1976, although he does not use the term)¹ illustrates that the essential cultural differences lie underneath the visible spectrum, as depicted in Figure 2-2. Dissimilarities in beliefs, values and thought patterns are far more relevant for intercultural misunderstandings than different traditions that are more prominently displayed and therefore create awareness more easily.

Figure 2-2: The Cultural Iceberg

Understanding cultural-induced behaviour is a prerequisite for successful business operations in any international context. A lack of cross-cultural competence gives rise to manifold faults in information retrieval, decision making, negotiating and leading that might become disastrous for the organisation’s long-term achievements. Throughout the EFQM Excellence Model, the correct assessment of cultural beliefs and values is presumed for finding effective responses. For example, leaders can only act as role models if their ideas of how to act with integrity and how to follow high standards of ethical behaviour are in line with the respective expectations of all of their team members. As these expectations vary from culture to culture, acceptance can only be ensured by a thorough research of possible misunderstandings. In dealing with customers and stakeholders, cultural misunderstandings can be of even more dramatic consequences. A misinterpretation of customer requirements might lead to the development of non-marketable products. A violation of unspoken negotiation rules might ruin a bid for a long-term contract.

The development of intercultural sensitivity is the most effective countermeasure for this kind of intercultural conflicts. Intercultural sensitive people are able to apply skills of empathy and adaptation of behaviour to any cultural context with varying degrees of sophistication. Unfortunately, this ability does not come naturally. It is something that has to be learned and grows whenever a person is exposed to foreign cultures with an open mind. Milton Bennett describes typical stages in this very individual development process from first denial to final integration in his Developmental Model of Intercultural Sensitivity as illustrated in Figure 2-3.² People growing up in a monocultural environment accept the culture they grew up with as the only one existing. Exposure to other cultures leads first to denial of differences. When denial is no longer possible, people start experiencing their own culture as more advanced and “better” than the other, known as the defense phase. This phase is usually accompanied by the use of stereotypes in order to confirm prejudices. Both early phases of cultural development could take exaggerated forms of aggressively eliminating foreign cultures and their representatives or – on the contrary – romanticising them. After realising existing similarities between their own and the foreign culture (usually in superficial aspects like customs or food), people tend to minimise the fundamental differences, believing that there are generally recognised patterns of human behaviour that enable effortless and successful communication. With the next step, the ethnocentric stages are overcome and people enter the ethnorelative stages of intercultural development. These start with a genuine acceptance of differences in cultures and of the right to use different solutions to typical human problems. This does not include an agreement with the solutions a certain culture exhibits, which are continually scrutinised in order to accumulate more knowledge. Expanding the view of the word leads to the ability to understand other cultures and to behave appropriately in their cultural frameworks. In this adaption phase, people are able to shift their frame of reference and use empathy for the benefit of good communication. The final stage “integration” allows a person to move in and out of different worldviews at will. For these people, a specific culture is no longer a constitutive part of their definition of self.

Figure 2-3: Developmental Model of Intercultural Sensitivity³

Some people will never be able to overcome inner fears and will keep their prejudices, being stuck in the defense phase. However, for a prosperous career in the globalised economy it is imperative to reach at least the first ethnorelative stage of acceptance.

The best way to reach the higher ethnorelative stages in the personal development are intensive encounters with people from foreign cultures in agreeable and positive circumstances. This could be ensured by a high grade of open-mindedness as well as careful preparation. Knowledge about foreign cultures can be obtained through many sources like travel and culture guides, internet research and enquiries of people from the respective country or of travellers with experience in the region required. It is important to notice that these sources have to be used with a critical view on their cultural background and potential prejudices. Sometimes, a book written from an American about the French culture can be quite misleading. Therefore, the most important source of comparative intercultural information is provided by scientific research. In the next chapters, the main frameworks for distinguishing cultures in a business context will be introduced.

2.2
Hofstede’s Framework: Cultures and Organisations

One of the pioneers in intercultural studies is Geert Hofstede. With the first issue of his original book “Culture’s Consequences” he revolutionized the way differences in cultures were assessed. His ground-breaking survey covered a significant number of countries and helped to create the area of comparative intercultural research and theory. Since its first publication Hofstede’s work is cited extensively in scientific articles worldwide. It influenced consultants and professionals in many areas all over the world focussing on human resource management, leadership training and varied business applications.⁴

2.2.1
Culture as a Part of Human Mental Programming

Hofstede was fascinated by Human Mental Programming and strived to understand how people’s values and beliefs were formed. When dealing with humans, three unique levels of mental programming can be distinguished (Figure 2-4):

Figure 2-4: Three Levels of Uniqueness in Human Mental Programming⁵

The basic level, labelled “human nature”, steers the basic programmes of the mind every child inherits. The resulting behavioural patterns and reactions like fear, joy, love and the need to band together with others are universal for all human beings. The second level is specific for a certain group or category of human beings and is referred to as “culture”. The “dos” and “don’ts” of this level are learned from other members of the group. The third level forms the personality. The resulting behaviour is, by concept, partly inherited and partly learned.

Based on these levels of human mental programming culture is defined by Hofstede as “the collective programming of the mind that distinguishes the members of one group or category of people from others”⁶.

Figure 2-5: The Hofstede Onion: Manifestations of Culture⁷

Culture manifests itself on different levels that can be depicted as an onion as introduced in Figure 2-5. The innermost level consists of values, defined as “broad tendencies to prefer certain states of affairs over others”⁸ and defines if something is deemed as for example moral or immoral, dirty or clean or else evil or good. Values are hidden deeply and cannot be perceived whereas the three following levels of culture can be observed openly, forming the cultural practices. These consist of rituals, heroes and symbols. Rituals are socially essential collective activities. They serve group matters like reinforcing group behaviour or ensuring group cohesiveness and include the way greetings are carried out or the way language is used. Rituals cover far more than only official or religious ceremonies. A typical example is the French way of kissing on the cheek when greeting friends and acquaintances. Cultural heroes serve as role models for desirable behaviour. They show characteristics that are highly respected in a particular culture. Barbie’s beauty, Asterix’s cleverness or Batman’s sense of justice are typical examples. Symbols form the surface area of culture. They include all kinds of gestures, words, objects or pictures that carry a particular meaning that is familiar only to those who are part of the same culture. Typical group symbols are special expressions (“jargon”), status symbols, dresses or hairstyles. Symbols are subject to quick changes and are easily copied by others.

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2.2.2
An Introduction to Hofstede’s Dimensions

Hofstede’s research dates back to the 1960s when he worked together with IBM and created a questionnaire in order to analyse the values of similar IBM employees in different countries. The “IBM Study” revealed universal problems, but with solutions that differed from country to country. The problems could be clustered in the areas “social inequality”, including the relationship with authority; “the relationship between the individual and the group”; “concepts of masculinity and femininity”, concerning the social implications of having been born as a boy or a girl and “the ways of dealing with uncertainty”, relating to the control of aggression and the expression of emotions. These four areas of basic problems were understood to represent independent dimensions of cultures.

In 1985 Chinese researchers developed a Chinese Values Survey (CVS) that produced one dimension that was not correlated with any of the dimensions Hofstede used so far. It was based mainly on typical Confucian principles and dealt with an orientation towards the future or towards the past. This concept was added 1991 as a fifth dimension to the Hofstede model, at first using only the scores for the 23 countries included in the CVS.

A “dimension” is seen as an aspect of one culture that can be measured relative to other cultures. Consequently, the discovered basic problem areas correspond to five dimensions that form a model of differences among all kinds of cultures – for example gender cultures, professional cultures, company cultures or national cultures. An overview of the five Hofstede dimensions and their measurement scales in the shape of a control panel is provided in Figure 2-6. The dark-blue controllers denote one culture, the light blue controllers another culture. Their position on each scale represents the average value of their culture concerning the contemplated dimension.

Figure 2-6: Hofstede’s Five Dimensions as a Control Panel

Hofstede’s model gains its importance from the fact that his findings were repeatedly verified in replica studies. For example, six major replications of his IBM research were carried out by different researchers from 1990 to 2002, using people from different backgrounds (elites, employees, pilots, consumers, municipals, bank employees) and comparing between 14 and 28 countries. All studies confirmed the first four dimensions of the Hofstede research as valid. Consequently, this 5-dimensional Hofstede model is currently the most renowned cultural framework in the business environment. The basis for the cultural comparison is regularly widened and the number of countries integrated broadened. In the most recent editions of the Hofstede model, more than 90 different countries are characterized by a score on each of the five cultural dimensions.

Before continuing with the application of this framework to different countries it is important to emphasize that the scores mentioned below are mean scores of all survey participants of each culture, computed of the values given for the respective survey items in defined ways. Therefore, the scores do not at all imply that all people of one culture are equal. As Hofstede remarks concerning his Power Distance Index: the correlation on the country scores on the three underlying questions are more than 0.5, providing a coherent pattern for distinguishing one country from another. At the same time, the correlation across the individual answers to these questions is nearly zero.⁹ This emphasizes that such a concept only measures characteristics of systems, not of individuals.

In the following chapters, each of the five dimensions will be explained in detail.

2.2.3
Power Distance

The Power Distance Index (PDI) measures the degree of inequality in a group or society. This concept was derived from three items of the original survey that were answered by non-managerial employees only: their anxiety to express disagreement with their managers, the perception of their supervisor’s decision-making style and their personal preference for their supervisor’s decision-making style. The PDI provides the group-specific answers to the basic question of how to handle the fact that people are unequal. Typical characteristics of countries with large power distance in comparison to countries with small power distance are depicted in Figure 2-7. It is to be noted that not every country with a high PDI shows all typical characteristics because some of these might not fit to typical characteristics of other dimensions. This is true for all tables showing key differences in opposite culture scores. This highlights the fact that countries with comparable scores in one dimension are not similar. Although they share the same basic idea, its expression in forms of cultural artefacts (as behaviour, customs and the like) is very individual. In large PDI countries, for example, the use of status symbols is very common and expected. However, the type of status symbols relevant in a certain business environment can be very dissimilar and ranges from using office-provided smartphones to driving cars from prestigious (foreign) producers, inhabiting a huge office space with windows or employing several secretaries.

Figure 2-7: Key Differences between Cultures with Small and Large PDI¹⁰

Figure 2-8: Selected PDI Country Ratings¹¹

Typical large power distance countries are Slovakia, Russia, China and the Philippines. Countries with a small PDI include Austria, Finland, Germany, UK and Switzerland. An overview of selected country ratings is provided in Figure 2-8.

Hofstede’s PDI scores are of special practical relevance for the expected behaviour of leaders or members of teams in business situations. Imagine the culture clash that is likely to occur when an employee from a (very) low PDI country is delegated to a supervisor from a (very) high PDI country. The employee will feel offended by the strict rules he has to follow, the close control of routine tasks by his supervisor and the lack of (management) information provided. He expects to be seen as an expert in his own right and therefore is used to being asked about his opinion on business matters. On the other hand, the supervisor will not feel treated according to his rank. He will regard the questions his employee poses about the business development and new initiatives as something that does not befit an employee, understanding this information as classified. Requests of a flexible interpretation of the rules will be met with a lack of understanding as this is - in the supervisor’s point of view – a criticism of his higher judgement. He is not used to employees presenting their own ideas and will see this as an attitude lacking respect. Without knowledge and acceptance of intercultural differences this situation will cause both sides to react with mistrust and frustration. Appreciating the different views on equality in the workplace will enable leader and employee to adapt a stance of openness and composure without the emotional turmoil of feeling dishonoured and rejected.

As already mentioned above, Hofstede’s framework is meant to distinguish between cultures of all sorts, not only national cultures. The PDI scores proved to be interesting for profiling different attitudes of workers and managers based on their skill levels. Using IBM data from Great Britain, France and Germany Hofstede assigned PDI values for six different categories of occupations. The scores show (not surprisingly) that groups of people with high-skilled occupations generally demonstrate a lower PDI score in comparison to those with unskilled or semi-skilled occupations. This is also true for the management level. Details can be obtained from Figure 2-9.

Figure 2-9: PDI Values for Six Categories of Occupations¹²

Exercise: Familiarise yourself with Hofstede’s PDI (online)

2.2.4
Individualism/Collectivism

The second dimension of Hofstede’s framework measures the ties between people. When connections between individuals are loose, the respective culture is called individualistic. When a country scores high on individualism (IND), everyone is expected to look after himself, including (only) his immediate family. The opposite is true for societies with low individualism, the so-called collectivistic cultures. From birth onward people are integrated into very strong and cohesive “in”-groups that will continue to protect them throughout their lifetime. In return the group expects unquestioning loyalty.

In the IBM survey, this dimension is measured by a set of 14 work goals. Participants were questioned about the importance of these goals in an ideal job (from 1 = of utmost to 5 = of no importance). Individualism is strongly associated with high importance of the following work goal items: sufficient time for personal or family life, freedom to adopt own approach to the job and challenging work that creates a personal sense of accomplishment. Collectivistic cultures with low scores on IND value especially training opportunities, good physical working conditions and the full use of skills and abilities. Typical characteristics of each extreme are presented in Figure 2-10.

Figure 2-10: Key Differences between Cultures with Small and Large IND¹³

High scoring and therefore individualistic countries include the United States, Australia, Hungary and the Netherlands. Truly collectivistic countries include Guatemala, Ecuador and Venezuela as well as Pakistan, Indonesia and Taiwan. An overview of selected countries is supplied in Figure 2-11.

Figure 2-11: Selected IND Country Ratings¹⁴

2.2.5
Masculinity/Femininity

The third dimension measures how desirable assertive behaviour is in comparison to modest behaviour. This is strongly related to conventions about role-typical behaviour of men and women in a society. These conventions are not based on absolute biological differences of males and females but on expectations about acceptable – or desirable - behaviour in certain situations that lead to culturally-determined roles. Consequently, the dimension expressing this is called masculinity (MAS). Societies with high MAS scores favour assertiveness, but predominantly from men, that are supposed to be tough and focused on material success. Women, on the contrary, are supposed to be tenderer, modest and concerned with the quality of life. Masculine societies are therefore characterised by clearly distinct emotional gender roles. In countries with low MAS scores these emotional gender roles overlap. All members, men and women, are supposed to be modest, caring, and concerned with the quality of life. These societies are called “feminine”. Typical dissimilarities between both sorts of cultures are listed in Figure 2-12.

Figure 2-12: Key Differences between Feminine and Masculine Cultures¹⁵

The MAS dimension was measured in the IBM study by the importance attached to a set of 14 work goal items. Masculinity was strongly associated with special importance of high earnings, recognition for a job well done, advancement opportunities and challenging work. Femininity was strongly associated with good working relationship with the direct manager, good cooperation in the team, living in a desirable area and employment security.

Countries with extreme values in masculinity include Slovakia, Japan, Hungary and Austria. Typical feminine countries are Sweden, Norway, Latvia, the Netherlands and Denmark. Further examples of MAS scores can be obtained from Figure 2-13.

Figure 2-13: Selected Country Scores for MAS¹⁶

Exercise: Age-effects on MAS scores (online)

2.2.6
Uncertainty Avoidance

Another dimension of the Hofstede framework measures the intolerance of ambiguity in society, or in other words: the extent to which the members of a culture feel threatened by unknown or ambiguous situations. This uncertainty avoidance index (UAI) is deducted from measurements ranging from strong to weak on the following three items: job stress, agreement with “company rules should not be broken – even when the employee thinks it is in the company’s best interest” and the intent to stay with the company for a long-term career (more than five years or until retirement). Cultures with a high UAI score use all kinds of structural or organisational measures to avoid risks and vague conditions. Typical aspects of cultures with weak or strong UAI are compiled in Figure 2-14.

Figure 2-14: Key Differences between Cultures with Weak and Strong UAI¹⁷

Countries with strong UAI values comprise Greece, Portugal and Guatemala whereas countries as Singapore, Jamaica, Denmark and Sweden display only weak UAI values. An overview of selected country scores concerning UAI offers Figure 2-15.

Figure 2-15: Selected Country Scores for UAI¹⁸

2.2.7
Long-Term Orientation

The fifth dimension was originally derived from the Chinese Value Survey (CVS) carried out by Chinese researchers in 1985 by asking students from 23 countries around the world. These researchers asked questions that contrasted values without any previous equivalent in Hofstede’s IBM study. Mainly based on Confucian values, these questions were simply not asked by Westerners before. This dimension indicates a societies’ time perspective and an attitude of persevering that means, overcoming obstacles with time, if not with will and strength. A high score on this so-called long-term orientation (LTO) index combined the values persistence, thrift, ordering relationships by status and having a sense of shame. People are respected for their willingness to subordinate themselves for a purpose and to foster virtues towards future awards. Consequently, the original study found high (LTO) scores for countries of the Far East like China (118), Hong Kong (96), Taiwan (87) und Japan (80). In contrast, countries with short-term orientation were Pakistan (0), UK (25), US (29), Germany (31) and Sweden (33). Interestingly, this dimension was found to be correlated with recent economic growth and to predict future economic growth. Typical characteristics of longterm versus short-term oriented cultures are shown in Figure 2-16.

Figure 2-16: Key Differences between Cultures with high or low LTO¹⁹

The analysis of the World Values Survey (WVS) enabled the researchers to expand the database of LTO considerably. A meticulous scouring of the WVS database unearthed items that were conceptually similar and significantly correlated with the items of the LTO found in CVS: thrift as a desirable trait for children, national pride and importance of service to others. Based on these, new LTO scores for 84 (later 93) countries were calculated. A selection of these new LTO scores (based on the WVS) is presented in Figure 2-17. It is quite clear that the ideas are close but still lead to different results. This could be illustrated by looking at the scores for Germany: the LTO-CVS score for Germany was 31 which equals a short-term oriented culture. In the LTO-WVS score Germany is listed with 83 which equals a long-term oriented culture. The WVS data fits very well to the extraordinary high savings ratio in Germany and the focus on long-term business relations that can be observed. This alteration underlines that the way certain ideas are phrased has an influence on the ratings given by survey participants and that through this the culture of the survey developers and their way of expressing and understanding certain aspects has a direct impact on the findings.

Figure 2-17: Selected Country Scores for LTO (WVS)²⁰

2.2.8
Establishing Country Clusters

When dealing with intercultural issues in internationalisation, the psychic distance of business partners is of high importance. According to the Uppsala Model for example, the internationalisation of enterprises follows a psychic distance chain. Generally speaking, an organisation first gains international experience on markets in foreign markets that were close to the domestic market in terms of psychic distance, meaning that on these markets exist less factors that make it difficult to understand the foreign environment. The organisations would then gradually enter others with a higher psychic distance.²¹ Some research suggests that the higher the psychic distance between business partners is, the more problems evolve in all aspects of cooperation from business setup to leadership. According to Holden and Burgess (1994)²² psychic distance is as a combination of cultural distance, mistrust und social distance. As the concept of cultural distance itself is still subject of an on-going scientific discussion it should be defined here very generally as a gap between the culture of two different groups or societies. Possible descriptions of cultural gaps are provided by Hofstede’s dimensions. Assuming that a very low cultural distance is helpful to avoid disruptive influences in management or leadership, the establishment of clusters of countries with high cultural closeness would be beneficial. In the 1991 edition of his book “Cultures and Organizations”, Hofstede included culture maps that formed cultural clusters of countries with quite similar values, each based on two dimensions of his framework. Studying these it becomes quite clear that some cultures are quite close to each other concerning two dimensions but are set widely apart in other dimensions. For example, Germany and Finland have quite similar scores on IND and PDI but differ tremendously concerning MAS – Germany being a masculine, Finland a feminine country. It is also problematic where to draw the line between clusters. A distinction of feminine cultures below a score of 50 and masculine cultures with scores above is quite academic, as this would divide countries with quite similar scores of 48 and 52. So the definition of clusters ends up to be quite subjective and should not involve the scores only but more knowledge about the expression of them in daily life in the respective countries.

However, taking the original four dimensions into account, there are a few countries that show quite similar ratings in all four original dimensions (PDI, IND, UAI, MAS) and thus could be seen to form cohesive patterns. A very consistent cluster is formed for example by Germanic countries (Germany, Austria, Switzerland) with all being low PDI, individualistic, masculine, strong UAI and short-term (CVS) respectively longterm oriented (WVS) countries, as depicted in Figure 2-18.

Figure 2-18: Cultural Cluster of Germanic Countries²³

Further clusters that could be identified on this basis include a Nordic cluster (formed by Denmark, Finland, Norway, Sweden and in addition the Netherlands) and an Anglo cluster (Australia, Canada, Ireland, New Zealand, the United Kingdom, the United States and additionally South Africa). “Added” countries show a larger variation in one of the four dimensions. Figure 2-19 provides an overview of possible country clusters based on Hofstede’s original four dimensions. As these clusters fit quite closely to the country clusters proposed by Ronen and Shenkar in 1985²⁴, the same cluster denominations are used here.

Figure 2-19: Country Clusters Based on the Four Original Hofstede Dimensions

Exercise: Familiarise yourself with country clusters (online)

2.2.9
Adding a New Dimension: Indulgence versus Restraint

The above mentioned World Values Survey (WVS) included items that dealt with happiness or, as scientists prefer to label it, “subjective well-being”. Three of these items form the core of a new dimension and questioned to what extent people would say that they are happy, if they feel that they have complete freedom of choice over their lives and how high the importance of leisure time is rated. If many people of a culture answered to be very happy, felt that they have a great deal of control over their live and saw leisure time as very important, the culture is understood to show high indulgence. Indulgence stands for comparatively high happiness, describing a tendency to permit relatively free satisfaction of basic human desires related to having fun and enjoying life. The opposite pole with low scores is called restraint and reflects a conviction that such pleasure needs to be restricted and regulated by firm social norms. Basic characteristics of both poles of this indulgence versus restraint (IVR) dimension can be obtained from Figure 2-20 .Thanks to the extent of the WVS, scores for 93 countries are available for this dimension. A selection of these is shown in Figure 2-21.

Figure 2-20: Key Differences between Indulgent and Restrained Cultures²⁵

Figure 2-21: Selected Country Scores for IVR²⁶

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2.3
The Dilemma Approach of Trompenaars & Hampden-Turner

From a business point of view, it is not interesting to study culture per se but to use information about cross-cultural differences in order to derive a guideline for meeting the leadership challenges of the 21st century. This view was taken by the management consultants Trompenaars & Hampden-Turner when they deduced their “Seven Dimensions of Culture” from an extensive research database. The 2012 edition of their book “Riding the Waves of Culture” comprises data from 25 years of research with a sample of 80,000 participants (75% of them managers) from a diverse range of companies spanning more than 60 countries.²⁷ Its aim is to help explain national and organisational cultural differences and to provide advice on managing (with) these.²⁸

2.3.1
A View of Culture Based on Dilemmas

Trompenaars & Hampden-Turner define culture based on Schein: culture is “the way in which a group of people solves problems and reconciles dilemmas.”²⁹ In a broader sense, culture is basically understood as a dynamic process of solving human problems, that can be stated as dilemmas, in the general areas of human relationships, time orientation and nature dependency. The problems posed for humans are identical everywhere but the solutions usually can be approached from two different sides. For example, some people start with a generalisation and use this to define detailed standards or others sstart with the look at an individual case and then generalise from this experience. Both approaches are in themselves logical and consistent. Even the outcome could be quite similar, but the approach from two opposite poles requires acceptance and understanding in an environment where both sorts of people have to cooperate. What starting point people take is deeply rooted in their cultural background, far below the waterline of the cultural iceberg of Figure 2-2. The implicit culture created by norms and values includes basic assumptions about the right way to approach certain problems. In easy cases, where problems posed are not of special individual relevance, different approaches are usually tolerable. But when it comes to problems that touch the core of each individual – the belief of the sacredness of friendship, for example – solutions differing from the culturally based basic assumptions are hard to accept. These special kinds of problems, where basic assumptions come to light in lack of easy solutions, are called dilemmas. Trompenaars’ and Hampden-Turner’s dilemma framework lists seven (cultural) value dimensions that describe certain situations and measure the percentage of survey participants preferring a certain specified option. The value dimensions were mainly derived from former research of other scientists, but the dilemma approach itself is unique.

Figure 2-22: Cultural differences Expressed as Normal Distributions³⁰

Trompenaars & Hampden-Turner stress that people from one culture are not at all alike in their norms and values. For each culture, however, a kind of normal distribution of norms and values based on the preferred options could be shown. This allows the depiction of a most predictable, average behaviour. Problems occur when the normal distribution of two cultures display significant differences – meaning that the “typical” behaviour differs significantly and people of one culture will most probably opt for a solution that is usually not deemed acceptable for people of the other culture. According to Trompenaars and Hampden-Turner, the values of the observed parameters that are furthest away from the normal distribution of one country also create the basis for stereotypes. This idea is expressed in Figure 2-22. US-Americans expect French people to be emotional, flamboyant and even arrogant (blue area) whereas the French see the US-Americans as aggressive, unprincipled workaholics (grey area). As this example illustrates, people tend to notice differences rather than commonalities. The observed “odd” behaviour is exaggerated and caricatured, thus creating a very limited view on the average or “typical” behaviour of people in a certain environment. Stereotyping could therefore be defined as the ascription of extreme forms of behaviour to people from other cultural groups. In any kind of international business environment, an exertion of this extreme and limited view endangers adequate managerial responses to usual challenges, be it on the individual, team or company level.

The following chapters explore Trompenaars and Hampden-Turner’s seven dimensions of culture in detail.

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2.3.2
Universalism versus Particularism

The description of the first dilemma is probably the most famous of all. The vignette is called “the car and the pedestrian”: imagine you are riding in a car that is driven by your close friend. You know that the speed limit is 30 kilometres per hour as this is an inner city area. You know that he drives 50 km/h which is too fast. Suddenly, your friend hits a pedestrian. There are no other witnesses than you. This case will go to trial. The lawyer of your friend says that he will have to bear serious consequences if you do not testify under oath that he was driving only 30 km/h. The questions posed in the survey were the following:

- | What right has your friend to expect you to protect him? Possible answers were “my friend has a definite right to expect me to testify to the lower speed” or “he has some right” or “he has no right”.
- | What do you think you would do when considering the obligations of a sworn witness and the obligation to your friend? The two options of choice were “testify that he was going 30 km/h” and “not testify that he was going 30 km/h”.

Figure 2-23 indicates the percentage of people in the respective countries that would tell the universal truth as they witnessed it, meaning they would testify to the (correct) higher speed and not in favour of their friend. (Please note that in all figures related to the dilemma framework scores for countries indexed with “*” are not available in the main reference and might be obtained from a different source. Refer to the connected endnote for details).

Figure 2-23: Percentages Opting for Telling the Truth³¹

This dilemma sheds light on the basic assumption if the universal truth (expressed in rules, laws, codes and generalisations) takes precedence over unique relations and the needs of friends and other relationships where exceptions would be made for special circumstances. Hence the two opposing values are called Universalism and Particularism. Typical characteristics of universalistic and particularistic cultures are compiled in Figure 2-24.

Figure 2-24: Typical Characteristics of Universalistic vs. Particularistic Cultures³²

Exercise: Cultural clashes in business situations (online)

2.3.3
Individualism versus Communitarianism

Ensuring a better life for all is a goal everybody would agree to. Again, the way to this ultimate goal can start on two different sides. Some cultures start the journey with the individual, thinking that it is obvious that if an individual has as much freedom as possible and the maximum opportunity to develop itself, the quality of life will improve. Others start at the opposite end, paying first attention to the advancement of the community and demanding from its members to take continuous care of their fellows so that the quality of life for all will improve, even if this approach might lead to obstruction of individual freedom and development. Not surprisingly, the Western countries and Israel have the highest percentage of their population choosing individual freedom, as depicted in Figure 2-25.

Figure 2-25: Percentages Opting for Individual Freedom³³

How these basic assumptions shape business solutions can be observed by the introduction of pay-for-performance systems. This will be discussed in detail in chapter 5.3.3.

2.3.4
Neutrality versus Affection

One dilemma affecting all kinds of interactions deals with the extent to which people of a culture tend to display their emotions. In affective cultures people express their emotions overtly and usually seek direct emotional response. In neutral cultures the general convention is to control emotions carefully. This does not mean that people in these cultures are emotionally distant or cold; they just do not vent their emotions immediately. Figure 2-26 provides an overview of the percentage of inhabitants of selected countries that would not express the feeling of being upset openly at work (considering such behaviour as being unacceptable and unprofessional).

Figure 2-26: Percentages Opting for Not Expressing Emotions Overtly³⁴

2.3.5
Specificity versus Diffusion

Some cultures need to define specifically and precisely the constructs they use, putting everything in an assigned place and an exact perspective. Other cultures prefer more diffuse systems where the overall configurations are still put together as patterned wholes. Specific cultures are very analytic in what they do; diffuse cultures are more holistic in their approaches. This very general value is measured by Trompenaars & Hampden-Turner in various dilemma vignettes, each showing a distinct facet of this enigmatic concept.

When looking at the degree of (specific) involvement in relationships, this dimension shows if managers isolate task-related relationships they have with their subordinates from other matters like private relationships or if every level of personality and relationship is the same. In specific cultures, people might be addressed differently in different situations, depending on the relationship mode they want to stress in this specific moment – for example, using the doctoral title at work but not outside. In diffuse cultures, this differentiation does not exist. So a manager in a diffuse culture expects to be treated with the same respect at work and outside. This is mirrored in the vignette used for this aspect: imagine your boss comes to you and asks you to paint his house at the weekend. There were two examples for possible reactions provided. One was seen from the perspective of the colleague, stating that it is not necessary to paint the house if one does not feel like it. The boss is only the boss in the company, outside he has little authority. The second argument stems from a subordinate’s perspective. It states that despite the fact that he does not feel like it he would paint the house anyway. The boss is the boss and this cannot be ignored outside work either. Figure 2-27 shows the percentages of people taking the colleague’s perspective of not painting the house.

Figure 2-27: Percentages Not Painting the House³⁵

It is obvious, that intercultural misunderstandings are quite probable for example between a Chinese supervisor and a Finnish teammember. In case that a Chinese boss truly expects his Finnish subordinate to come to him on weekends for private domestic services, he will not only be surprised to find that his wish is ignored. Already with this request he will have lost his teammember’s trust and respect, as this is perceived as an illegitimate behaviour. Knowledge about cultural differences in diffuse and specific relationships, however, might allow them both to understand the underlying reasons for the respective behaviour and thus regain mutual trust and appreciation.

2.3.6
Achieved versus Ascribed Status

Differences in status can be observed in all cultures. Some cultures accord status to its members based on their achievements in life. Others ascribe status by virtue of what a person is and not what a person does. These ascriptions could be based on – for example - age, education, profession, social connections, wealth or gender. This dilemma is approached by measuring the importance of achievement versus the importance of the family background. Figure 2-28 shows the percentage of people in the respective country not agreeing with the statement, that the most important thing in life is to act as really suits them even if they do not get things done. So cultures with high percentages consist of a majority of people that perceive achievement or “getting things done” as vital.

Figure 2-28: Percentages Opting for Getting Things Done³⁶

2.3.7
The Concept of Time

In a business context, the understanding of time is crucial for many endeavours. Differences in the concept of time can be observed by several aspects that need to be investigated separately.

The main question is the relative importance of past, present and future. Cultures assign different meanings to these aspects of time that could be expressed through drawings of three circles, each representing one of these aspects. The configuration of these circles, especially their size and interrelation, provides insights into the time orientation. Distinctive examples of circle patterns for some of the countries considered above are shown in Figure 2-29.

Figure 2-29: Circle Diagrams for Past, Present and Future³⁷

It is obvious that for example in Japan all three aspects of time are viewed as fully integrated whereas in Russia there is no connection between them. Germany and the UK see a partial overlap of all three aspects with the present being the most important of the three in Germany and being the least important in the UK. This view could influence for instance the importance of strategies that is especially stressed in those countries that emphasise the future or the willingness to learn from past experience and build on that.

Typical characteristics of cultures with past orientation versus cultures with present or future orientation are listed in Figure 2-30.

Figure 2-30: Differences of Past, Present and Future Orientation³⁸

The second aspect deals with the magnitude of the time horizon. This aspect considers how long people tend to plan ahead. Participants of the survey were asked to assign scores for the duration of past, present and future in order to indicate the relative time horizons. Scores ranged from 1 = seconds over 2 = minutes, 3 = hours, 4 = days, 5 = weeks and 6 = months to 7 = years. Thus, they calculated an average score per country as depicted in Figure 2-31. In a business environment, a long-term vision spanning decades stands in sharp contrast to a short-term thinking in quarterly reports.

Figure 2-31: Average Time Horizon³⁹

The third aspect of cultural differences concerning time covers whether time is seen as a sequential process, expressed by a series of linear continuing events, or of a synchronic nature where many things can happen in parallel. People with sequential (or monochronic) orientation prefer to engage in only one activity at a time, they follow the original plans and favour to be evaluated based on goals to be reached by a certain time. These people schedule meetings and strictly keep appointments. Organisations with a sequential culture idealise the efficient, most direct route to reach their goals that could be symbolised by a straight line. In contrast, people with a synchronic (or polychronic) orientation have a more flexible and diffuse view of time. They subordinate schedules to relationships and are inclined to spend time with significant others although they might be expected at an arranged meeting. These people prefer to do several things at once and assess their own achievements in context of their whole history with the company and their future potential. Companies with a synchronic culture idealise the interaction of past experience, present opportunities and future potentials, which could be symbolised by an interacting circle. This aspect causes cultural clashes on the staff level, as sequential people judge others doing several things at once as being distracted, unreliable and chaotic whereas synchronic people judge the one-at-a-time maxim as narrow-minded, inflexible and restricting.

Separating the aspect concerning the handling of schedules leads to the wider-ranging differentiation of clock time cultures (where punctuality and keeping schedules is cherished and time is money) versus event time cultures that “give time to time”.⁴⁰

2.3.8
Inner versus Outer Direction

The seventh dilemma deals with the relationship of people and the natural environment. The two opposing views constitute that nature should be (and is) controlled by people – men subduing the earth – or that humans are only a part of nature and therefore have to go along with its forces and laws. The belief that the environment can be controlled stems from a mechanistic world view that stresses the possibility to influence the outcomes and is therefore described as inner-directed perception in opposition to its outer-directed counterpart.

Figure 2-32: Percentages Agreeing to What Happens to Me is My Own Doing⁴¹

In order to find out about their inclination, people were asked to choose between “what happens to me is my own doing” and “sometimes I feel that I do not have enough control over the direction my life is taking”. As all people are quite aware that both positions hold true elements, having to choose between them poses again a dilemma that could be used to reveal their basic assumptions. Figure 2-32 provides the percentages of participants from selected countries opting for the inner-directed view.

2.3.9
Reconciling Dilemmas

The seven dilemmas of culture are designed to help leaders to gain a broader understanding of the range of possible solutions to common problems. For a successful leadership practice, however, understanding these dilemmas is not enough. Trompenaars & Hampden-Turner postulate transcultural competence as the primary leadership competence in an international business environment and define it as the propensity to reconcile seemingly opposing values to a higher level. This propensity follows a three step approach from Recognition through Respect to Reconciliation as depicted in Figure 2-33. First, (inter) cultural issues have to be recognised as such, which requires an awareness of one’s own cultural perspective. This should be followed by respecting and appreciating the culturally different views without prejudice or minimisation. Finally, these differences have to be resolved in a reconciliation process.

Figure 2-33: The Three-Step-Approach⁴²

The reconciliation of any kind of dilemma is an innovation process that requires the willingness to challenge and change existing solutions continuously until a higher level is reached. Trompenaars & Hampden-Turner depict this process in a two-dimensional map of cultural space (sometimes also called dilemma grid) where each axis represents one side of the dilemma. The differing positions of the two dilemmas are found at the highest point of each axis (position 10/1 or 1/10). A compromise solution that could be depicted as a point in the middle of the map (5/5) is not beneficial as only a very limited value would be achieved and both sides still feel that they gave up something precious. So a true reconciliation of both dilemmas should discover an innovative and truly unique approach that enables the involved parties to combine the underlying values of both positions to achieve a higher level (position 10/10). Such a solution is never made by a single decision but involves a continuous improvement process instead. This process will start from one perspective and requires an unremitting search for better ways to achieve the desired solution, moving in the direction of the opposing dimension (taking some ideas of this position and incorporating them into the existing processes or solutions) and then swinging back towards the original viewpoint. This development process is depicted as a spiral that moves upwards towards the 10/10 point. It could rotate clockwise when starting with the x-dimension or anticlockwise when choosing the y-dimension as starting point. A reconciliation of the classical business challenge of globalism versus localism based on the first Trompenaars & Hampden-Turner dilemma of universalism versus particularism is presented in Figure 2-34. This dilemma could be reconciled by creating an innovative solution that uses transnational specialisation – so that each nation (or subsidiary) within the global corporation specialises in a field where it excels. Leadership of these particular functions would then shift to the respective nation/subsidiary as a “transnational centre of excellence” that guides the global organisation in this defined field of expertise.

Figure 2-34: Reconciling Globalism and Localism⁴³

The journey to reconciliation starts with an understanding of the complementarity of both seemingly opposing values, the use of humour to make dilemmas “digestible” to all participants and the deliberate use of language to pose the right questions. Practical advice provided by Trompenaars & Hampden-Turner concerning the reconciliation process includes mapping out a cultural space through interviews or questionnaires in order to find the basic dilemma in the problem provided. This helps to gain a deeper understanding. Other useful techniques include drawing meta frames of the dilemma with text and pictures, accepting waves and cycles as a natural way to resolve difficult issues and appreciate synergy of two values as mutually enhancing.⁴⁴ Further examples will be discussed in the suitable chapters.

VIPs

2.4
Globe Study: More Issues Arising

The influence of culture on business issues is still a favourite topic for many researchers worldwide. One truly international approach was endeavoured in the so called GLOBE study. The acronym GLOBE stands for “Global Leadership and Organisational Behaviour Effectiveness” and was conducted as a multi-method and multiphase research programme. It was designed to conceptualise, operationalise, test, and validate a cross-level integrated theory of the relationship of culture and societal, organisational, and leaders effectiveness. During the phases 1 and 2 in the middle of the 1990s altogether 170 researchers throughout the world combined their efforts to collect and analyse survey data from 17,300 (middle) managers in 951 organisations and 62 societies. The first omnibus publication edited by House et al. (2004) provided findings about culture, leadership and organisations on 800 pages.⁴⁵ Additional in-depth studies of 25 societies were published by Chhokar et. al. in 2008.⁴⁶

The GLOBE research project defined culture as “shared motives, values, beliefs, identities, and interpretations or meanings of significant events that result from common experiences of members of collectives that are transmitted across generations.”⁴⁷ This definition was applied on the societal and organisational level. Culture was examined based on practices and values. Practices were defined as “the way things are done in this culture” whereas values were defined as judgements about “the way things should be done”.⁴⁸ The methodological approach followed was very sophisticated and based on multiple methods and checks. The research was designed by multicultural teams with the clear intention to bypass typical cultural biases already in the setup of the survey.

Finally, GLOBE used nine major attributes or dimensions of culture, several of them based on Hofstede’s research. An overview of these is provided in Figure 2-35. Special emphasis was laid on the analysis of the cultural dimensions and several dependent variables, for instance the Human Development Index, Gross National Product per capita, measures of welfare of society members as well as certain leadership dimensions. Details of these findings will be discussed in the respective chapters dealing with these issues.

Figure 2-35: GLOBE: Nine Cultural Dimensions⁴⁹

The GLOBE study grouped 62 participating societies in 10 distinct country clusters, based on previous empirical studies and other factors such as common language, geography, religion, and historical accounts. These are depicted in Figure 2-36.

Figure 2-36: GLOBE: Country Clusters⁵⁰

VIPs

2.5
Critical Acclaim

The three previously introduced models of culture are subject to profound criticism concerning the defined concepts of culture, the measurement of culture “per se”, the dimensions utilised in comparison to alternative dimensions used by other scientists and the applied methodology.

2.5.1
Typical Problems of Cross-Cultural Research

All cross-cultural research is subject to various criticisms based on typical challenges arising from the extremely complex and opaque research topic itself. These include:⁵¹

1 Definition problems of all terms used. These concern the definition of “culture” itself as well as all terminology used in questionnaires or interviews. A special problem is the translation of the defined concepts in other languages.

2 Assuming incorrect equivalencies concerning functions, concepts, instruments, and measurement. People from different cultures might have a different understanding of certain (business) functions, of concepts like loyalty or might interpret the scales in the questionnaires in different ways.

3 Choosing non-representative participants. If all participants of the survey originate from the same background, for example one organisation or one profession or one company level, it is possible that these do not represent a fair sample of the countries studied. Their views might be influenced by a very distinct (sub-)culture.

4 Methodological simplicity, as the methodology is for example often based on one ethnocentric pattern and one timeframe, providing bias, misinterpretation and inaccuracies. Therefore, many critics claim the basic principle that a cultural research should be based on a multi-disciplinary approach.

Many scientists, especially psychologists and sociologists, claim that cross-cultural research providing country scores only produces stereotypes, which is not an appropriate way to deal with cultural issues. Fons Trompenaars defends the usefulness of crosscultural models by arguing that all models categorise and are therefore in fact stereotypes. Using models for cultures can be acceptable if the people dealing with this kind of stereotype meet two conditions. The first is that they are conscious about it and the second is that they postpone judgement. For example, the sixth dilemma illustrates that Asians are more polychronic and Westerners are more monochronic. This is obviously an exaggeration. There certainly are polychronic Westerners and sequential Asians. This stereotype mainly warns that the chance that there are people with the other inclination is higher when meeting people from the other culture.⁵² This warning might lead to negative consequences if people immediately put a critical judgement on it. When they are able to postpone judgement and treat this issue as a reminder to accept different solutions with an open mind, the knowledge about this stereotype can facilitate all kinds of international encounters.

2.5.2
Critical Acclaim of Hofstede’s Dimensions

The criticism concerning the Hofstede model is based on some of the points cited in 2.5.1.⁵³

To 1.: The level of culture researched is not clearly defined, as Hofstede tries to approach values by questioning behaviour. There is a controversy concerning the legitimacy of such an approach, as the basic assumptions that are seen to form the most important (and hidden) parts of culture are not touched.

To 3.: All participants of the study are employees or managers of IBM. Some argue that the strong company culture of IBM leads to uniformity of their personnel in certain aspects, which provides a bias to the study. Hofstede argues the opposite and explains that just because of this certain homogeneity he is able to ascribe the differences observed to country cultures. Also, the IBM background enables him to avoid equivalency problems (as defined in 2.)

To 4.: Hofstede’s methodology is criticised in several aspects. His dimensions are not seen as appropriately selective and their denomination as not completely accurate. His comparison of different cultures is seen as superficial as it is not based on a thorough analysis of the culture described. Especially the equalisation of culture and countries is criticised, as many countries have within their borders several (sub)cultures that should be researched separately. Another critical aspect (also referred to by Trompenaars & Hampden-Turner in 1997) concerns the questions he employed that were seen as mainly an imitation of questions used in various US-based psychological profile tests.

The existence of a cultural bias in the setup of the original study was proven impressively in the findings of the Chinese Value Survey. However, Hofstede acknowledged these findings willingly and added them to his framework. It is natural for research issues that corrections and additions occur over time, given the willingness of more researchers worldwide to contribute to the original findings. In this respect Hofstede managed to induce many following studies.

Altogether, Hofstede’s framework and the range of his data collection for nowadays more than 90 countries has an outstanding effect on academics and practitioners dealing with cultural issues worldwide. As his model was the first to allow not only the classification of countries based on different criteria but also a sound comparison of them, it highly contributed to the inclusion of intercultural issues in the research of strategy, leadership, organisation, marketing and finance. It was also instrumental in the implementation of business systems for international companies, for example in the definition of compensation practices, training design, leadership styles and management control systems.

2.5.3
Critical Acclaim of Trompenaars & Hampden-Turner’s Dilemmas

After their early publications, one of their main critics was Hofstede himself in 1996 who argued, that Trompenaars & Hampden-Turner essentially measure Hofstede’s dimensions Individualism and Power Distance by using dilemmas that were interrelated. He also accused Trompenaars & Hampden-Turner of tuning their messages to what they think their customers like to hear, being more interested in commerce than in scholarship.⁵⁴ The first edition of their dimensions was mainly tailored to the needs of professionals and consequently lacked detailed information about their methodological approach. This was the main area of criticism from other scientists. In a very measured response in 1997, Trompenaars & Hampden-Turner defended their approach and provided detailed information about their research methodology.⁵⁵

Notwithstanding, the dilemma approach of Trompenaars & Hampden-Turner is subject to intense criticism based on the typical problems reviewed in 2.5.1.⁵⁶

To 2.: The findings of Trompenaars & Hampden-Turner are visibly subject to incorrect equivalencies. One very obvious example is mentioned by Trompenaars & Hampden-Turner themselves concerning the percentages for not painting the house in their dilemma “specific versus diffuse”. They mention that the figures provided for Japan are probably based on a cultural misunderstanding of concept, as Japanese people generally do not paint houses, preferring wooden houses anyway.⁵⁷

To 3.: The selected respondents where all participating in Trompenaars and Hampden-Turner’s management trainings that should sensitise for cultural issues. Some argue that these people were in the preparation of visiting a foreign country and hence already unusually self-conscious to intercultural issues. This would not be representative for inhabitants of a country in general.

To 4.: It remains unclear how Trompenaars & Hampden-Turner arrived at the identified 7 dimensions. As they rely heavily on former research from other scientists, they chose some of the dimensions at random from mainly a literature analysis. Also, the operationalisation of the dilemmas is criticised. It is not seen as proven, that the chosen statements really measure what they should measure. Some of the dimensions are even measured by different constructs, which could be seen as constituting different sub-dimensions that are not clearly defined. Trompenaars & Hampden-Turner provide differing dimensions and findings in different publications – some of them only with slightly changed denominations, some with differing contents. As a result, a claim to absolute right concerning the 7 dimensions is not accepted.

Despite the criticism, the dilemma approach of Trompenaars & Hampden-Turner is widely used in international management trainings and research. Their basic claim, that the behaviour in and of companies is affected by culture, is an important counterpoint to the predominant US-based notion of universally valid management approaches. The generally understandable language and the abundance of practical examples allow an easy use for practitioners. The database offers detailed information on countries that are not explicitly covered in Hofstede’s research, especially concerning Eastern Europe. They vehemently promote an increased awareness of cultural diversity within countries based on ethnic differences, for example within the US. This is complemented by the consequent consideration of differing cultures of companies (in mergers, for example), business sectors, professions and genders. Their detailed reconciliation process constitutes one of the few practical step-by-step approaches for prevalent leadership challenges in international organisations.

Apart from that, the success of the framework could partly be ascribed to Fons Trompenaars outstanding achievements as consultant and speaker.⁵⁸

2.5.4
Critical Acclaim of the GLOBE Study

The designers of the GLOBE study considered many of the above mentioned points of criticism in their research approach:⁵⁹

1 The definitions were discussed extensively with an international research team. The questionnaire was scrupulously tested by translation and retranslation as well as content analysis of documents, thus minimising definition problems.

2 In order to achieve certain equivalencies, all respondents were middlemanagers. This should ensure a certain comparability of the results for different cultures. The testing of terms also helped to prevent differences of understanding of the concepts used.

3 The respondents came from more than 900 different companies and 3 different business sectors of more than 60 different cultures, thus avoiding the influence of a distinctive company or business culture.

4 The concept includes a clear distinction of two cultural levels: the value level (how it should be) and the behaviour level (how it is), mirroring the state-of-the-art differentiation of percepta-level and concepta-level that are not always in harmony. As the approach was defined by 170 researchers from different nations and regions and from different professional backgrounds, the GLOBE study represents an outstanding multicultural effort. The dominance of an ethnocentric pattern can therefore be eliminated completely. The applied research and analysis methodology was highly sophisticated and thoroughly challenged.

Despite these efforts, several points of criticism still remain. Some critics stress for example the possible distortions due to the sole use of middle managers as respondents. The equalisation of countries and cultures is still a point for heated discussions, although GLOBE made some allowance for relevant sub-cultures as for example the separation of South Africa in a black sample and a white sample.

Hofstede criticised the multitude of inter-correlated dimensions that could have been condensed to fewer meta-dimensions. As nearly all dimensions show positive correlations of national welfare, these dimensions are influenced by the national welfare itself and do not have to be explained by cultural peculiarities.⁶⁰ The GLOBE authors argue with exactly the opposite train of thought: the correlation shows that cultural peculiarities influence the national welfare; therefore the correlations of the differing dimensions are of special interest for researchers.

The objection of the maximisation of the number of countries studied instead of detailed analyses of single countries was met with the publication of the second GLOBE volume concerning the in-depth analysis of 25 countries by Chhokar, Brodbeck and House in 2008.

Due to the open publication of the compiled data and the number of researchers and research institutes involved, GLOBE could be expected to induce additional cultural research over the next decade. As its findings constitute a unique basis for country and (intercultural) leadership development their further inclusion into management theory and practice can be predicted.

2.6
Citations & Notes

¹ Hall, E.T. (1976). He uses instead the terms “hidden dimensions of unconscious culture” or “cultural/collective unconscious”.

² Bennett, MJ. (1993)

³ Adapted from Bennett, M. J. (1998)

⁴ All of the following information in this chapter is taken from: Hofstede, G.H., Hofstede, G.J., & Minkov, M. (2010). A more detailed and scientific description of the Hofstede framework could be found in Hofstede, G.H. (2006).

⁵ Based on Hofstede, G.H., Hofstede, G. J., & Minkov, M. (2010), p. 6

⁶ Hofstede, G.H., Hofstede, G. J., & Minkov, M. (2010), p. 7

⁷ Based on Hofstede, G.H., Hofstede, G. J., & Minkov, M. (2010), p. 8

⁸ Hofstede, G.H., Hofstede, G. J., & Minkov, M. (2010), p. 9

⁹ Hofstede, G.H. (2006), pp. 87-88

¹⁰ Based on Hofstede, G.H., Hofstede, G. J., & Minkov, M. (2010), pp. 72-83

¹¹ Scores from Hofstede, G.H., Hofstede, G. J., & Minkov, M. (2010), pp. 57-59

¹² Based on Hofstede, G.H., Hofstede, G. J., & Minkov, M. (2010), p. 65

¹³ Based on Hofstede, G.H., Hofstede, G. J., & Minkov, M. (2010), pp. 117, 124

¹⁴ Scores from Hofstede, G.H., Hofstede, G. J., & Minkov, M. (2010), pp. 95-97

¹⁵ Based on Hofstede, G.H., Hofstede, G. J., & Minkov, M. (2010), pp. 159, 170

¹⁶ Scores from Hofstede, G.H., Hofstede, G. J., & Minkov, M. (2010), pp. 141-143

¹⁷ Based on Hofstede, G.H., Hofstede, G. J., & Minkov, M. (2010), pp. 203, 208, 217

¹⁸ Scores from Hofstede, G.H., Hofstede, G. J., & Minkov, M. (2010), pp. 192-194

¹⁹ Based on Hofstede, G.H., Hofstede, G. J., & Minkov, M. (2010), pp. 243, 251

²⁰ Scores from Hofstede, G.H., Hofstede, G. J., & Minkov, M. (2010), pp. 255-258

²¹ Johanson, J., & Vahlne, J.-E. (1977), pp. 23-32

²² Holden, N., & Burgess, M. (1994), p. 33

²³ Scores from Hofstede, G.H., Hofstede, G. J., & Minkov, M. (2010), pp. 59, 95-96, 141, 193, 255-256 and Hofstede, G. J. (2001), pp. 256-257 (CVS)

²⁴ Ronen, S., & Shenkar, O. (1985). Their research revealed the following clusters: Anglo, Arabic, Germanic, Latin American, Latin European, Near Eastern, Nordic and Far Eastern. The countries Brazil, India, Israel and Japan were considered as independent from others.

²⁵ Based on Hofstede, G.H., Hofstede, G. J., & Minkov, M. (2010), pp. 291, 297

²⁶ Scores from Hofstede, G.H., Hofstede, G. J., & Minkov, M. (2010), pp. 282-285

²⁷ Trompenaars, F., & Hampden-Turner, C. (2012), pp. 1-2

²⁸ All following information was derived from Trompenaars, F., & Hampden-Turner, C. (2012). This book is highly recommendable as it combines research and practical examples on doing business with different cultures. Also recommendable are the older books providing more insights into the practical relevance of the defined dilemmas, especially Trompenaars, F., & Hampden-Turner, C. (2004); Trompenaars, F., & Woolliams, P. (2003); & Trompenaars, F., & Prud’ homme, P. (2004).

²⁹ Trompenaars, F., & Hampden-Turner, C. (2012), p. 8

³⁰ Based on Trompenaars, F., & Hampden-Turner, C. (2012), pp. 33-34

³¹ Percentages from Trompenaars, F., & Hampden-Turner, C. (2012), p. 56. Percentages for countries marked with “*” were derived from the connected Trompenaars database, access usually granted via the website http://ridingthewavesofculture.com. Due to problems with the website, the scores were provided via email by Trompenaars Hampden-Turner/KPMG People & Change, 10.03.2015.

³² Based on Trompenaars, F. (2004, November 16), p. 12 (A9)

³³ Percentages from Trompenaars, F., & Hampden-Turner, C. (2012), p. 66. Percentages for countries marked with “*” derived from the connected Trompenaars database, access usually granted via the website http://ridingthewavesofculture.com. Due to problems with the website, the scores were provided via email by Trompenaars Hampden-Turner/KPMG People & Change, 10.03.2015.

³⁴ Percentages from Trompenaars, F., & Hampden-Turner, C. (2012), p. 88. Percentages for countries marked with “*” were derived from the connected Trompenaars database, access usually granted via the website http://ridingthewavesofculture.com. Due to problems with the website, the scores were provided via email by Trompenaars Hampden-Turner/KPMG People & Change, 10.03.2015.

³⁵ Percentages from Trompenaars, F., & Hampden-Turner, C. (2012), p. 109. Percentages for countries marked with “*” were derived from the connected Trompenaars database, access usually granted via the website http://ridingthewavesofculture.com. Due to problems with the website, the scores were provided via email by Trompenaars Hampden-Turner/KPMG People & Change, 10.03.2015. For Japan (marked with #) please note that this figure is based probably on a cultural misunderstanding of concept, as Japanese people generally do not paint houses, preferring wooden houses anyway.

³⁶ Percentages from Trompenaars, F., & Hampden-Turner, C. (2012), p. 129. Percentages for countries marked with “*” were derived from the connected Trompenaars database, access usually granted via the website http://ridingthewavesofculture.com. Due to problems with the website, the scores were provided via email by Trompenaars Hampden-Turner/KPMG People & Change, 10.03.2015.

³⁷ Based on Trompenaars, F., & Hampden-Turner, C. (2012), p. 156

³⁸ Based on Trompenaars, F., & Hampden-Turner, C. (2012), p. 170

³⁹ Percentages from Trompenaars, F., & Hampden-Turner, C. (2012), p. 158; for countries marked with “*” no percentage was made available.

⁴⁰ Inspiring insights into the differentiation of clock time and event time cultures are provided in Levine, R. (1997).

⁴¹ Percentages from Trompenaars, F., & Hampden-Turner, C. (2012), p. 176. Percentages for countries marked with “*” were derived from the connected Trompenaars database, access usually granted via the website http://ridingthewavesofculture.com. Due to problems with the website, the scores were provided via email by Trompenaars Hampden-Turner/KPMG People & Change, 10.03.2015.

⁴² Based on Trompenaars, F. (16 November, 2004)

⁴³ Based on Trompenaars, F., & Wooliams, P. (2003), p. 41

⁴⁴ Details and examples concerning successful reconciliation processes are provided in Trompenaars, F., & Hampden-Turner, C. (2012), pp. 247-261 and in Trompenaars, F., & Hampden-Turner, C. (2004), pp. 267-294.

⁴⁵ House, R. J., Hanges, P. J., Javidan, M., Dorfman, P. W., & Gupta, V. (Eds.). (2004). This volume is the basis for all following information about the GLOBE study.

⁴⁶ Chhokar, J. S., Brodbeck, F. C., & House, R. J. (Eds.). (2008)

⁴⁷ House, R. J., Hanges, P. J., Javidan, M., Dorfman, P.W., & Gupta, V. (Eds.). (2004), p. 15

⁴⁸ House, R. J., Hanges, P. J., Javidan, M., Dorfman, P.W., & Gupta, V. (Eds.). (2004), p. XV

⁴⁹ Based on House, R. J., Hanges, P. J., Javidan, M., Dorfman, P.W., & Gupta, V. (Eds.). (2004), pp. 11-13

⁵⁰ Based on House, R. J., Hanges, P. J., Javidan, M., Dorfman, P.W., & Gupta, V. (Eds.). (2004), p. 190

⁵¹ University of Wollongong (Ed.). (2007); Kutschker, M., & Schmid, S. (2011), pp. 731-734

⁵² Trompenaars, F. (2011, Jully 11)

⁵³ For an overview of criticism on Hofstede refer to Kutschker, M., & Schmid, S. (2011), pp. 731-734 or Jones, M. L. (2007). For criticism on his methodology and analysis refer to, amongst others, McSweeney, B. (2002); in defense of Hofstede refer to Søndergaard, M. (2002). Please note: So far the criticism published refers to the outdated versions of Hofstede’s research and not his most recent publication.

⁵⁴ Hofstede, G. (1996)

⁵⁵ Hampden- Turner, C., & Trompenaars, F. (1997)

⁵⁶ For an overview of criticism on Trompenaars and Hampden-Turner refer to Kutschker, M., & Schmid, S. (2011), pp. 740-744 or Browaeys, M. J., & Price, R. (2008), pp. 87-88

⁵⁷ Trompenaars, F., & Hampden-Turner, C. (2012), pp. 109-110

⁵⁸ According to the Trompenaars and Hampden-Turner website Trompenaars Hampden-Turner. (2014) (http://www2.thtconsulting.com/about/people/fons-trompenaars/), Fons Trompenaars was mentioned as one of the top 5 management consultants in a Business magazine in 1999, voted one of the top 20 HR Most Influential International Thinkers 2011 by HR Magazine and ranked in the Thinkers50 to be one of the most influential management thinkers alive in November 2011.

⁵⁹ For an overview of criticism on the GLOBE study refer to Kutschker, M., & Schmid, S. (2011), pp. 761-765

⁶⁰ Hofstede, G. H. (2006)

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