The Cultural Challenges of Doing Business Overseas

The Cultural Challenges of Doing Business Overseas

Nancy Kelley

University of Phoenix

MBA 501: Forces Influencing Business in the 21st Century

A. Lutz

February 2007

Globalization and overseas business expansion has brought about the need for in-depth understanding of culture differentiation. When conducting or contemplating cross cultural business ventures, it is important to understand the culture before communicating one's desires.

This paper will focus on the cross cultural challenges of doing business overseas, with special attention being placed on the Czech Republic.

The Situation

Steve Kafka, an American of Czech decent is contemplating expanding his franchise, Chicago Style Pizza, into Prague, Czech Republic. Steve currently franchises his business in the U.S. Steve must thoroughly investigate and become familiar with the Czech culture to realize opportunities and mitigate risks to meet his end-state goal of expanding his Chicago Style Pizza business into the Prague, Czech Republic

Czech Culture and Comparative Advantages

Czech culture focuses on indirect communication and politeness. Czechs are non-confrontational and prefer to do business over the course of several meetings. Americans are usually upfront and to the point in business negotiations.

When conducting business in the Czech Republic it is important to realize that Czechs are not as direct as Americans. A direct approach may be seen as confrontational and rude. In order to avoid this type of conflict, Steve must carefully plan his approach to doing business to ensure that there are open lines of communication, with respect to Czech cultural norms. It will be necessary to accommodate cultural communication differences, to insure meeting end-state goals.

Steve must contemplate alternatives to reduce potential conflict when introducing his business venture to Czech culture. It is important that he realizes that Czechs will not openly express their disdain for unstructured situations, due to their norms of humbleness and politeness. It would be helpful for him to consult with existing family members and friends to help create a non-conflicting environment, in which to operate his business.

Hofstede's Four Primary Dimensions

Hofstede's four primary dimensions are power distance, uncertainty, avoidance, individualism and masculinity (Hodgetts & Luthans, 2005, p. 102). Power distance in Czech culture is low. Low power distance will be an advantage for Steve. Low power distance cultures tend to have more qualified people for work; therefore Steve may have a competent pool of people to draw from to help run his business venture. Although, he must keep in mind that employment regulations are more rigid than in the U.S. (Weidenbaum, 2006).

Uncertainty avoidance is somewhat high in Czech culture. Czechs dislike uncertainty and ambiguity. The business manner in Czech culture is predominantly formal and cautious. Therefore, Steve must step lightly and make himself clearly aware of rules and regulations that encompass doing business in Czech culture and adapt adherent strategies, while still achieving his end-state goals. One advantage that he does have is that Czech society extends the same opportunities to foreigners as they do to citizens. So Steve will be afforded the same opportunities as Czech citizens.

Individualism is a trend that is becoming part of Czech culture as they become more westernized and continue to exhibit a strong democratic tradition (Weidenbaum, 2006). Currently, members of society are tending to focus on looking after themselves and family. This could possibly pose a problem for Steve, because his family that lives in the area may expect him to look to them for support and include them as stakeholders in his venture; although, his family is just a small piece of the puzzle. Steve will likely be able to function very similar to the ways he functioned in American culture, due to the fact that Czech culture practices a democratic lifestyle and is becoming more like the western cultures.

Masculinity is not a dimension of Czech culture that is prevalent. Czech culture is more focused on cooperation, friendliness and employment security. Low masculinity in Czech culture is also a sign that small scale enterprises are favored over large scaled enterprises. This can be an advantage for Steve because he is somewhat familiar with the culture and his business venture is of a small scale.

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