Culutral Challenges of Doing Business Overseas

A major challenge of doing business internationally is to adapt effectively to different cultures. Steve Kafka, an American of Czech origin and a franchiser for Chicago Style Pizza has decided to expand his business to Czech Republic. This is a risky decision and Steve anticipates he will face obstacles as he goes about setting up the new pizza outlet at this new location, Prague.

In international management, culture is acquired knowledge that peoples use to interpret experiences and generate social behavior. This knowledge forms values, creates attitudes and influences behavior. Because different cultures exist in the world an understanding of the impact of culture on behavior is critical in the international management. There are many way of examining culture differences and their impact on international management. Culture can affect technology transfer, managerial attitude, managerial ideology and even business-government relations. Cultural affects a host of business-related activities, even the including the common handshake. For example, in the United States, the standard greeting is a smile, often accompanied by a nod, wave and it may sometimes include verbal greeting. In business situations, a firm handshake is used. Feeble handshakes are viewed as negatively as weakness. Men usually wait for women to offer their hand before shaking. As in the Czech Republic, shake hands, firmly but briefly, with everyone (including children) when introduced. It is also customary to shake hands once again upon departure. Men should wait to see if women extend their hands in inter-gender meetings. Also, avoid keeping the left hand in one's pocket while shaking hands with the right. In the Czech Republic, politics and other complicated issues, such as religion and culture, are acceptable topics of discussion in most European countries. The Czechs, like other European, tend to be well informed about politics and to have their own opinions. While a conversation of such issues is not discouraged, visitors should not expected Eastern Europeans to be entirely approving of Western concepts, ideas and political viewpoints. On the other hand, in the United States, until one knows a person well, it is best to avoid discussing religion, money, politics, or other controversial subjects. Some common topics of conversation include place and type of work done, travel foods (and diet), exercise, sports, music, movies and books. In business endeavors, expect a lengthy decision-making process. Many countries in Europe, like the Czech Republic, have adopted the German tendency to use methodical and painstaking care will all business planning and to consider all business dealings with meticulous specificity. One should be prepared for a lengthy timeline and attention to microscopic detail. Western business practices are quickly becoming the norm across Europe, including such things as business lunches. One should not, however, enter into business discussions without some light introductory conversation, politesse and other such niceties. In this regard, it is acceptable to ask about your counterpart's family. If the lunch or dinner is your idea, you should insist on payment being your responsibility.

The political situation in the Czech Republic is still evolving and the economic trends are rising. The notion of ownership and entrepreneurship has not yet matured in the Czech people's minds, but a light version on entrepreneurship seems to be experiencing growing success: the franchising system. Franchises represent an attractive solution for business creation, because. Generally speaking, a franchise is an effective method to achieve economic growth rapidly. Annually, U.S. franchises generate $1 trillion dollars in the U.S. economy (Cohen, 2001). But after decades of Communism, the Czech people are willing to learn about markets and competition. In the context of emerging and developing country such as the Czech Republic there can be hundreds of possible opportunities to open new businesses in Central Europe. Using generic data gathered from research and information provided by the Czech Franchise Association, it is possible to develop a profile of franchising systems in the Czech Republic. Franchising provides an opportunity to prospective entrepreneurs to learn from the experience if large and usually international companies. The Czech Franchise Association was created for the "purpose of enforcing, supporting, and developing franchising form of enterprise" (Czech Franchise Association, 2004b, pg.2). The representation by sectors of activity is presented in Table 1 (Czech Franchise Association 2004a, p.65).

Table 1

ACTIVITY SECTOR NUMBER OF FRANCHISORS FOREIGN FRANCHISOR

Car, Automotive Services 2 0

Building and Home Services 6 2

Beauty products 4 3

Photography 1 0

Hotels, Restaurant, fast-food 13 5

Telecommunications 1 0

Food, Nonfood 10 1

Clothes, Fashion 3 2

Total 40 13

The current situation in the Czech Republic creates enormous potential for franchising on the demand side. It also creates a growing interest among franchisors. A competition has grown over the past five years, but the educated population has quickly adapted to the rules of the market economy. Popularization of franchising systems in the Czech Republic is the bases for expectations for strong annual growth in the coming years. The range of franchising networks is growing, although Food and Hotel-restaurants are established systems that will continue to expand. The entrepreneurship trends will accelerate thanks to the openness of the Czech markets to globalization. Steve can choose from two different paths. He can invest in a foreign pizza franchise that offers the advantages of experienced international companies providing operational and marketing support, or he can develop Czech concepts with the intention of considering the international expansion of their pizza model within the European Union (EU) in countries like Hungry, Slovakia, Poland, Austria and