W

INTERCULTURAL CHALLENGES

HOW TO COME TO AN AGREEMENT

For Asian companies

in partnering with

European companies

Christian Hofer

DINNER at home like a case study on

intercultural differences

American wife Trilingual Children: speaking

German at dinner, English

with my wife and French

with each other

How did I learn about cultural differences ?

BUSINESS TRAVEL CONSULTING Germany, Hungary, Czech Republic,

Poland, Russia, Denmark, Sweden,

Finland, England, France, Italy, Spain,

Switzerland, US, Pakistan, Thailand, South

Korea, China, Thailand, Japan, Hong

Kong, Singapore

Worked in different

countries and in different

corporate cultures.

Necessity to manage

differences between

companies, Divisions and

even teams

ABOUT ME Personal info and background

WHY? Importance of understanding differences

HOW? Understanding the concept of cultural differnces

OH NO! Corporate bloopers

PERSONAL Examples of interpersonal nature

BUSINESS Examples of corporate nature

MACRO Examples of rules & regulations

AHA! How to prepare

FULL CIRCLE Understanding and applying

What is the road that we are going to travel together today

and where will it take us?

Despite the Euro we cannot see Europe as one homogenous zone vast differences exist

Cultural differences may not be as visual as in the picture but in daily life you will find them quickly

They effect everything from personal interactions to how people think and act and finally to laws und regulations

Not knowing them or ignoring them exposes you to the risk of failed relations and missed business opportunities

Doing business in Europe ?

Treat Europe as one homogeneous market at your own risk!

Stereotype or

truth?

SEEMINGLY SMALL THINGS CAN CREATE SIGNIFICANT ISSUES

Businesses are

becoming

increasingly global

exposing them to

new cultures/issues

Some people, even

corporations are

ignorant to the cultural

differences and the

impact they can have

We must not judge from

our own perspective,

but rather think how

other people might

perceive our behavior

Ignorance can easily

destroy your personal and

corporate image in the

eyes of your business

partner

Why is the knowledge of intercultural differences

so important for todays business ?

Ignorance You have no knowledge

that any differences exist

at all Bad surprises

Limited awareness You know that differences exist but

have very limited knowledge you

just know that there is an issue but

cannot quite understand it

Limited competence You know some of the differences and

try to adjust your behavior. It does not

come naturally yet. You have a feeling

for how you come across

Subconscious competence Cultural appropriate behavior is

second nature to you. You can trust

your instincts

The 4 stages of intercultural awareness

What aspects of business are cultural differences affecting ?

Long vs. short term thinking

Table manners

Personal space

Greeting people and saying goodbye

Body language and eye contact

Communication style

Language barriers

Negotiation tactics

How to motivate people

Feedback and coaching

Target setting

Meetings and presentations

Corporate cultures

The role of government

Sexual harassment

Environmental laws

Labor laws and unions

Data protection

Buying and selling businesses

Regulations

Accounting standards

Macro level Business Personal

When to sit down?

Protocol on who sits where?

Wait to be seated?

Men besides women?

How to use knife and fork?

Finish everything on plate?

Asking for more?

Wait for the hosts toast before drinking Lady of the house puts napkin in lap first Place bread on tablecloth or bread plate

but not on normal plate

Tear bread into bite sized pieces Leave your hands above the table Pour wine glasses only full

FRANCE

Remain standing until told where to sit Look people in the eyes when toasting Do not begin eating before the host Everything on plate should be eaten Fork in left hand and knife in right hand

without switching like in US

GERMANY

Elbows on Table?

Hands above or below table?

Placing your napkin in lap?

Conversation during dinner?

Business during dinner?

How animated?

Cross cultural dining etiquette Personal

Carrying yourself and body language

Ok to give and receive things with whichever hand is available (right is better)

Stand straight up - bowing is not necessary

When you greet someone look them in the eyes

When you speak with someone look them in the eyes

When you toast someone look them in the eyes

This is irrespective of status and seniority

Otherwise you appear insecure and insincere

EUROPE GENERAL

Very animated while speaking

People will judge you on how you carry yourself

(Bella figura) Appearances are very

important Smaller personal space

ITALIANS

Appearances are very important

Fashion conscious like the Italians

Smaller personal space Language and logic is

very important

FRENCH

Quite reserved/private and not very animated Dont show emotions - stiff upper lip Bigger personal space

BRITISH

Personal

Greeting & saying Good Bye Shaking hands vs. kissing

Handshake is quick and firm Generally rather formal Last name and title Slight bow of the head Wait for host(s) to introduce

you Some kissing on cheeks for

younger generation Differences between South

and North

GERMANY

Handshake is light Generally rather formal Last name and title Even casual acquaintances

kiss on cheeks Usually 2x but 3x in Provence,

4x in Nantes and only 1x in Finistere

Good male friends kiss on cheeks as well

Old fashioned kissing a womans hand

FRANCE

Firm Handshake How do you do? as

question and answer In business highest rank

meets others in order of their position

No touching and kissing First name basis is more

common like in the US

UK

Personal

Importance of food

Business lunches are preferred to dinner; if dinner then

relatively late Eating (well) is a priority in

France

Business is not supposed to be discussed establish a personal

relationship

Several courses Wine served with lunch The person inviting is expected

to pay

Be careful about adding salt, pepper and ketchup

FRANCE

Dinner discussion often turns to business not much small talk

in Germany No business decisions made

during meals

Dont expect to be taken out every night Germans clearly

separate business & private life

Entertaining is not often at peoples homes

The person inviting is supposed to pay

For private invitations dont expect to be served

GERMANY

Food scene is one of extremes

High likely hood to be invited to a private dinner party

Dinner is mostly for sociable or celebratory entertaining

Business entertaining in restaurants, pubs and cafes

Invite people of the same background /professional

level

Business culture is informal often socializing in pubs

UK

cultural differences

BRITAIN, AUSTRALIA, NEW ZEALAND, MALTA: Up yours!

USA: Two GERMANY: Victory FRANCE: Peace

WESTERN COUNTRIES: Number 5 EVERYWHERE: Stop! GREECE AND TURKEY: Go to hell!

EUROPE: Two BRITAIN, AUSTRALIA, NEW ZEALAND: One USA: Waiter!

EUROPE AND NORTH AMERICA: OK

MEDITERRANEAN, RUSSIA, BRAZIL, TURKEY:

insult; sexual insult

TUNISIA, FRANCE, BELGIUM: Zero; worthless

Be careful signalling with your hands

or you will run into troubles Personal

Alcohol and Tobacco

Wine is the most widely drunk alcoholic beverage

You can expect to be served wine at business lunches

The French drink responsibly If bringing wine to a dinner

party it should be foreign

Many French smoke Smoking is illegal in all enclosed

work places

FRANCE

Alcohol consumption is amongst the highest

Drinking culture includes also business (dinners)

Hard liquor (Vodka) is one of the favorite drinks

There is considerable peer pressure to join drinking

A limited smoking ban was just introduced

RUSSIA

Beer is the most widely consumed drink

Alcohol consumption is amongst the highest

No need to drink during lunch but at dinner there is

some pressure to join in

When invited to a pub buy a round of drinks

Smoking is illegal in all enclosed work places

UK

Differences in communication style

Direct and factual Not much small talk Put truth and directness before

diplomacy

Speak up Get straight to the point Not much humor in business

there is a place and time for

everything

Very diplomatic language Non confrontational Use of first names Equate directness with open

confrontation

Humor is persuasive in business; especially to diffuse tensions

Better to be self deprecating then self promotional

GERMANY

Form is very important Love for elegant use of

language Moving process forward by

drawing distinctions might

appear controversial

Interruptions are accepted part of business etiquette

Admire logical, well defined ideas

UK FRANCE

I

Sales people were embarrassed to learn that Fresca is slang for "lesbian.

REASON

Animals are considered to be a form of low life and no self respecting Thai would wear anything worn by animals

Matador meant Killer which was a bad omen considering the countrys treacherous streets

It had to be mixed with water, needed to be sterilized, poor mothers where using less then prescribed leading to malnutrition and poor health

SOFT DRINKS The soft drink Fresca led to lots of laughter in Mexico.

EYE GLASSES An international manufacturer failed trying to promote its products in Thailand by advertising featuring cute animals wearing glasses.

CARS American Motors failed with its new car called Matador in Puerto Rico.

IMPACT OF CULTURAL DIFFERENCES

Examples of companies that got into trouble

because they did not consider cultural differences (1 of 2)

INFANT FORMULA Nestle was boycotted for promoting its infant formula in Africa.

Women in Business

Men earn about 40% more then women (20% pay/hour and 20%

more hours) Many women work (80%) France is a much more flirty

culture including kissing on

cheeks and generally

appreciating the other gender

Business women may invite a french man for lunch or dinner

and have no problem picking

up the bill

FRANCE

Women should extend their hand first when greeting

Men should hold a door for a women and stand when a

woman enters the room

British like their personal space Hugging, kissing and touching

is reserved for family and very

close friends

For women: Dont be insulted if called love, dearie, or darling.

These are commonly used

UK

More traditional picture of women in society

When introduced to a women wait if she extends

her hand

Men should walk to the left of a women

Traditionally a men should go ahead of a woman when

entering a public space

Dont be offended when he or she corrects your

behaviour policing each

other is a social duty

GERMANY

Business

Differences in feedback and coaching

Society is factual and very to the point

Feedback is tough, critical and to the point

You dont single out specific accomplishments or offer

praise unless it is truly

extraordinary

German professionals expect high-level, expert performance

GERMANY

Feedback is difficult since it is a diplomatic and non-

confrontational culture Almost a third of employees

never get feedback

Almost 50% give their bosses low people management skills

Feedback is hidden in diplomatic language

UK

Steep hierarchies make 360 and upward feedback

ineffective If it is part of a performance

appraisal system the system

must be approved by the

works council

High number of French employees are disengaged

Recognition, praise and caring is not natural to the

(business) culture

FRANCE

Business

Disgruntled employees

Loss of key staff (Head of R&D)

Delayed product launches

Layers of bureaucracy

Cost overruns and inefficiencies

Ouster of CEO

PROBLEM IMPACT

Case Study 01

WHAT DID UPJOHN DO?

SITUATION

Upjohn Company of the US and Pharmacia AB of Sweden (ops in Italy) merged in 1995

Upjohn more dominant

US scheduled meetings in the summer Implemented non-smoking, testing policies Command and control management system Strict reporting, budget controls, staffing updates Very centralized, top down management R&D HQ in London

PROBLEM

NATIONAL CULTURE CLASH

Swedes : Take off July Open, team based

management

Consensus behind decisions

Italian's: Take off August Workers (unions) vs.

managers Value on Family

(childcare, sick relatives)

Motivating in different cultures

Competence is highly valued superiors must understand what

employee is doing Dedication by superiors Motivation does not always

translate into productive action

hierarchical culture

Social events brings together and motivate people

Starting to use US style loyalty programs

FRANCE

Many people are self motivated commitment and

loyalty are important Money is important but not all Good working conditions are

expected

Factual culture: being clear and giving understandable

targets is important

Praise is only expected for extraordinary things

GERMANY

Education, experience and ability to maintain good

office climate is valued in boss

Ability to communicate and interact is important

Concept of punctuality is rather relaxed

Subtle approaches are important feedback in

private

Social events are appreciated

ITALY

Business

Long term versus short term thinking

Prefer to build up long term relationships

Dont like a hard sell Dont like people going after a

quick deal

Appreciate businesses that have grown over time

Younger generation is changing quickly though

Quite some public discussion about more short term thinking

(cutting funds, financial

institutions)

UK

Generally very short term Chasing next quarters profits Pulling in sales from the next

period to make this periods

numbers and bonus

Sometimes short time profit taking on the expense of long

term sustainable success

Throw away culture Houses are bought to build

equity or flipped for a profit

USA

Germans have a planning culture so things are rather

long term The planning with several

options should something

happen and Plan Bs give a

sense of security

High pressure tactics to get a deal quickly are counter

productive

Houses are (often) bought for a life time

GERMANY

Business

PROBLEM

Chrysler key executives resigned

or replaced

Conflicting values, goals, orders

Departments heading in different

directions

Share price collapsed in 4 years

from 95 to 40

IMPACT

PROBLEM

SITUATION

Merger of German Daimler with US Chrysler

Was at its time one of the biggest and most famous mergers

German engineering company together with a company with a huge distribution network

IMMENSE CORPORATE CULTURAL CLASH

Daimler:

Hierarchical, chain of command, authority Conservative, efficient, safe Reliability, highest quality Dominant and imposing Chrysler:

Team oriented, egalitarian Daring, diverse and creative Catchy designs, competitive prices

Case Study 02

1998 Daimler payed

$ 38 Billion

2007 Cerberus payed

$ 7.4 Billion

Language barriers and how to overcome them

Be conscious about areas where small differences are

important (negotiations, contracts etc.).

Hiring of a local service provider (attorney, translator)

may be the safest route

A lot of people in management positions speak very good

English BUT there are

exceptions!

Avoid colloquialism and jokes they often dont travel well

GENERAL

English language skills are generally very good

German communication is formal and people are

suspicious of hyperbole

As the culture is direct you should answer yes or no

ambiguities are disliked

Be careful of jargon Be specific

GERMANY

While many managers speak English it tends to be weaker

then in other countries and sometimes non existent!

Dont use slang, colloquialism and difficult vocabulary

Speak slowly not louder Learn at least a few words

and key phrases and people

will appreciate your effort

ITALY

Business

Importance of hierarchy in different countries

Most of the power is in the hands of a few managers

Large companies have a supervisory board which appoints

the management board

The management board is the final decision maker on policy

matters that affects management

Below the board strict hierarchical approach with roles and

responsibilities tightly defined

GERMANY

Very flat organizations Non hierarchical Collaborative decision making Pay differentials between

levels are very low

Structures defined to be pragmatic and to reduce

interruption

Matrix management works well in Sweden

SWEDEN

Rigid hierarchy and functionality with lots of

power for PDG (CEO) The PDG determines the

future direction of the

company

Vision is disseminated across the organization for

implementation

Management style is directive and top down

FRANCE

Business

When problems arise and flexibility, speed and quick changes are needed

Openness of communication and freedom of information might look anarchic to you

WEAKNESS LOOK OUT

IMPACT

PROBLEM

Japanese reluctant to take

orders from guests

Negative impact on overall

efficiency

Cross department

communication was very weak

Daimler refused to make any

more investments

IMPACT

PROBLEM

SITUATION

Daimler wanted foothold in Asia Created an alliance with Mitsubishi Ignored local practises and principles Imposed their own terms

MAIN DIFFERENCE WAS IN NATIONAL CULTURE

German:

Strictly fact based, pragmatic, dry Hierarchical, structured, clear authority Giving orders Dominant and imposing Japan:

Value personal relationships Long term oriented Were seeing German managers as guests

Case Study 03

Differences in presentation styles and techniques

Very factual and numbers oriented

Supporting details are very important if not enough it

weakens your argument

Putting truth and directness above all

Directness is seen as sign of respect and fundamental to

finding correct solutions

GERMANY

Formal presentations less used than in other countries

Presentations can seem stiff and academic

Usually smaller less formal meetings

Showing a lot of emotion and being theatrical gives

importance to the issue

Being reserved can be misinterpreted as disinterest

ITALY

Very important to start with details to show audience

that you have mastered the subject building credibility

Love and respect for elegance of language and

sophisticated presentation of

ideas

Admire logical well defined ideas

Drawing of distinctions is almost an intellectual goal

FRANCE

Business

Unfortunately it sounded a lot like a VERY vulgar word in several countries

The firm received complaints from many organizations and individuals as it was the name of the gas used by the Nazi regime to murder millions of Jews in concentration camps

CARS Honda had to rename a car called FIT in Nordic countries

VACUUMS Electrolux, a Scandinavian manufacturer failed by promoting his product in the US with the slogan: Nothing sucks like an Electrolux

FURNITURE Ikea, a Swedish furniture company advertised one of its workbenches in Canada as Fartfull Customers had a lot of fun embarrassing the sales people

SNEAKERS Umbro the UK sports manufacturer had to withdraw its new sneakers called the Zyklon.

Examples of companies that got into trouble

because they did not consider cultural differences (2 of 2)

REASON IMPACT OF CULTURAL DIFFERENCES

Deal making in - dont try to negotiate with a German like with a French

Small talk and building relationships are not priorities

Negotiations have to be supported by detailed

evidence backing up your

case

Decisions are not made based on sales technique or charm

cold hard facts!

Decisions are formed methodically

Do not try to rush or apply pressure

GERMANY

Italians prefer to do business with someone they know

introductions are key to success

Negotiations are slow Showing a sense of urgency is

seen as a sign of weakness!

A typical tactic is to dramatically change

demands at the very end to

unsettle partners or test heir

flexibility

ITALY

More emphasis on relationship building

Direct, probing questioning Negotiations can become

passionate

Argumentation is a means to analyse your case

Avoid exaggeration In a stalemate French will just

re-state their position it is up

to you to take apart their

argument

FRANCE

Business

Business etiquette

Good manners and courtesy are prized in Italy

15 minutes delay is normal Small talk is important Your conduct and the

presentation of yourself has to

be polished at all times

There are etiquettes and protocols for many situations

However, Italians rate considerateness above

behavioral formulas

Dress to impress

ITALY

Punctuality is important Humour is sometimes part of

business Business is rather formal Like to be rather understated

in their communication

Feel most comfortable interacting at their hierarchical

level

Older statesmen are very well respected for their aura

authority

UK

Punctuality is a serious issue Dont waste peoples time

be direct, short and to the point

Emotions and unnecessary content have no place in

conversations

Small talk is to be avoided Humour has generally no

place in business

Meetings are functional and stick to an agenda with start

and finish times

GERMANY

Business

The role of Government in daily life and how it can impact your business

Government is heavily involved in many aspects of life

Nutrition for schoolchildren and vending of junk food is

regulated

National mandatory healthcare of very high quality

24 months unemployment insurance

Stepping in when firms want to close plants

Stepping in for mergers/take overs of or with French firms

FRANCE

German federal Government plays a crucial role in the

economy Several ministries are involved

(like Bundeskartellamt)

Government policies have wide ranging effects

National mandated healthcare supplemented by

private insurance

GERMANY

Government involvement is in between continental Europe

and the US It has mandatory national

healthcare

Very limited unemployment benefits

Government is sometimes stepping in when there are

takeovers of firms

UK

macro

Data protection standards in different countries

The collection, processing and use of personal data are strictly

regulated Takes data protection

extremely serious

Many organizations appoint a Data Protection Officer

German law is unfortunately not always clear

Failure to comply with the law can have significant

ramifications

GERMANY

Subject needs to give permission to the usage of

data Subjects can request to review

and correct held data

Subjects can require that information may not be used

for direct marketing

Data must not be transferred out of the EU unless country

ensures protection for the

rights and freedoms of data

subjects

UK

Allow users to understand the processing/use of their

personal data Define how long personal

data will be retained

French authority launched enforcement action against

Google (June 2013)

Increased inspections of organizations transferring

data into and out of France

Coordinated action with 6 other countries

FRANCE

macro

PROBLEM

Key personal stayed in JLR

High motivation level

Trust between the companies

JLR was well integrated

IMPACT

WHAT DID TATA DO DIFFERENTLY?

SITUATION

Indian TATA acquired Jaguar Landrover (JLR)

Despite being acquirer it did not impose itself Respected corporate and national culture Left existing management structure in place Motivated managers by giving goals and

challenging them but also working with them

Help was given when requested Statements that it was Tatas responsibility to take

care of JLR

Willing to make investments if needed Tata visited JLR locations and requested feedback

Case Study 04

Accounting Systems

Somewhat closer to the US model but still stricter

Reports are geared toward sophisticated users rather then

regulatory bodies

The auditors judge whether the statements demonstrate a "true

and fair view

True and fair view concept is broader then US GAAP

UK

Banks heavily influence the accounting rules as they are

the main investors Accounting system is

extremely conservative

Reporting system is geared toward workers and investors

Dividends are constrained because of strict requirements

for significant reserves

Disclosure of vast amounts of information about firms (social

reporting)

GERMANY

The government is involved in the standard setting for

accounting Requirements for auditors are

quite stringent

Executives can be held accountable for a firms

bankruptcy

Accounting rules are very conservative

Apply the "true and fair view" like the British

FRANCE

macro

Cost of doing business

45% 66%

(up to) 47.5%

UK GERMANY FRANCE

24%-20% (21% IN 14)

34% 30%

UK GERMANY FRANCE

5.6 weeks (incl. Bank holidays)

9.5 weeks (worst case)

5 weeks (plus 9 public

holidays)

UK GERMANY FRANCE

21.9% 34.9% 31%

UK GERMANY FRANCE

Corporate Tax INCOME Tax

VACATION LABOR COST

Cop

What kind of due diligence should you do

before any business trip?

Research company and people you will meet. Opportunity to: ask informed questions and amaze people build good relationships Do you need a translator? Do you need specialized service firms (attorney, bank, consultans etc)? Business

What is of interest to you?

What do you want to get out of it? Be in control: show your hosts that you are interested tell them of personal time needed Think of loved ones at home Personal

Visa required? Vaccination needed? Not needed for Europe! Weather - clothing Formality of culture General web research on peculiarities of culture Look-outs Basics

Every trip is an opportunity to expand our horizon and learn

something new!

INTERNET Research

GOVERNMENT

OTHER SOURCES

Expatriate organisations

People having lived in that country for some time (info via Embassy)

Where can you get information about specific countries

and the peculiar differences in culture between them?

Bringing it full circle

How you can succeed in a different environment

At first glance terribly complicated und frustrating

Difficulty of remembering behavior that go against who we are

Fear of making a mistake Danger of appearing either

uneasy, low on self confidence or fake

SUMMING IT UP

Treating Europe as one culture?

Why knowing culture is important

Stages of awareness

Companies that got into trouble

Case studies

Details on country specific differences in many different categories

How to use your knowledge of cultural

differences to your advantage?

Age old truth: People prefer to do business with people they like

Being sensitive to their quirks will help you to be accepted as a trusted

business partner

Since people like you it will be easier to meet outside of business and gain

inside knowledge

You can understand people and know how to approach difficult topics

Where your competitors will give up you will persevere

You know how to succeed in the long term because you know how to make

it work with local people

GENERAL BUSINESS

How to use your knowledge of cultural

differences to your advantage?

Understanding people gives you the power to look through posturing

Knowing what to expect will prevent surprises

Understanding culturally ingrained behavior will prevent you from falling

into negotiation traps

You suddenly have the power to fine tune your offer/presentation to make it

more appealing to your counterpart

Do you have to be introduced via a business partner or does your offer stand

on its own because of facts and figures?

Should you take it slow or try high pressure tactics?

NEGOTIATIONS

Is there a magic bullet to help you solve this

complicated understanding of differences?

There is no magic bullet or secret recipe you can follow

Accept that you will make some mistakes/ avoid the big ones

Learn as much as you can about the country you will do business in

Realize that things that appear bizarre to you will be just that way the other way around

Pick out the things that interest you personally and show interest about it to your host everyone loves to show off something about their own country

Get trusted local help

Show passion about the business rather then the money

CHRISTIAN HOFER

If you have any ques.ons please feel free to contact me! You can download this presenta.on on slideshare

THANK YOU!

E-mail: hofer.chris5an@gmail.com Blog: www.produc5vity-toolkit.com Mobile: +33 615 689 624