CORPORATE CULTURE AND LEADERSHIP STRATEGY

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CORPORATE CULTURE AND LEADERSHIP STRATEGY

• BESIG Conference, Bonn, 2008
• Luminita Cocarta, Sorin-Toma Andrei

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Theoretical background

• There is certainly a connection between
• business strategy
• culture
• Starting from two important names in the Business
  literature
• Michael Porter Generic strategy typology
• Geert Hofstede Dimensions of culture

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Theoretical background

• cultural dimensions have an important influence
  on developing the guidelines for improving the
  multinational business strategy

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The world of multinationals

• The general conclusion of the authors is
• the longevity of a multinational depends on the
  cultural distances among co-workers
• Culture may be a determinant in the capacity of
  co-workers in a multinational to work reasonably
  well together

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The world of multinationals

• People usually belong to more than one culture
• national culture
• business/professional culture
• organizational/corporate culture

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The world of multinationals

• Companies usually do not integrate the
• cultural variable along with the
• experience and efficiency variables
• The strictly economic point of view wont do any
  longer labour force doesnt mean only
  efficiency, working hours and profit, it comes
  with a lot of needs, among which intercultural
  communication

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The world of multinationals

• In the relationship between parent companies and
  subsidiaries
• - Stereotypes and cultural recipes may be
  misleading in the attempt to implement management
  strategies
• - It is not sufficient that the McDonalds
  in India dont use beef (as we know the cow is a
  sacred animal in Indian culture)
• - it is the same with multinationals in
  Romania

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Comparative Cultural Approach

• The present research focuses on two cultures
• Romanian
• Anglo-Saxon/ especially the American one

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Comparative Cultural Approach

• We started from the following questions
• 1. Does national culture influence strategy?
• 2. Does national culture predispose firms within
  that nation toward one or another generic
  strategy? (Porters strategies 1.cost
  leadership, 2.differentiation and 3.focus). We
  will focus on cost leadership

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Porters generic strategies

• Cost Leadership Strategy
• This generic strategy calls for being the low
  cost producer in an industry for a given level of
  quality. The firm sells its products either at
  average industry prices to earn a profit higher
  than that of rivals, or below the average
  industry prices to gain market share. In the
  event of a price war, the firm can maintain some
  profitability while the competition suffers
  losses. Even without a price war, as the industry
  matures and prices decline, the firms that can
  produce more cheaply will remain profitable for a
  longer period of time. The cost leadership
  strategy usually targets a broad market.
• Some of the ways that firms acquire cost
  advantages are by improving process efficiencies,
  gaining unique access to a large source of lower
  cost materials, making optimal outsourcing and
  vertical integration decisions, or avoiding some
  costs altogether. If competing firms are unable
  to lower their costs by a similar amount, the
  firm may be able to sustain a competitive
  advantage based on cost leadership.
• The next image shows that all 10 variables in the
  pie depend on culture cultural dimensions

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Culture and strategy
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Geert Hofstedes cultural dimensions

• Power distance (p.d) the extend to which a
  society accepts the unequal distribution of power
  within its institutions
• Masculinity/ feminity dimension m- associated
  with earnings, recognition, opportunities for
  advancement and distinct gender roles f-
  associated with strategy, democracy
• Uncertainty avoidance (u.a) denotes a
  preference for stability, order and
  predictability
• Long/short term orientation

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Comparative approach
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Comparative approach
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Comparative approach
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Comparative approach
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Comparative approach
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Comparative approach

• A too traditional approach may slow innovation
  (Romanians)
• A concern for quick results may undermine
  relationships (Americans)

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Conclusions

• Culture is seen as more and more important in the
  strategy process within multinationals and it
  should be explicitly examined as a part of this
  process
• In general, high power distance and uncertainty
  avoidance scores indicate a preference for
  centralized hierarchical organizations and large
  scale production and they send to those firms
  that practise cost leadership strategies

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Conclusions

• A long-term orientation usually sends to those
  cultures in which stable relations in
  hierarchical organizations are preferred to
  adventurous/risky relations
• Cultural dimensions affect working relations in
  multinationals, because effective partnership
  implies communication, coordination, relational
  commitment, trust and time to develop expectations