When companies enter foreign markets, their decisions are
typically shaped by the cultural values they bring with them from home. But the
most successful firms, according to this paper, ease their entry into a new
environment by consciously controlling the impact of their national culture on
decision making and by adopting approaches that sometimes run counter to their
traditional beliefs.
The
researchers examined questionnaires completed by the CEOs of 528 small and
medium-sized companies based in the United States, the United Kingdom, Greece,
and Cyprus. A wide range of industries and service sectors were represented in
the sample. The companies were all engaged in key internationalization projects
— ventures that involved significant commitments of resources. Elements of the
projects were often “unplanned or spontaneous,” and managers made decisions on
the fly. Those decisions, the researchers found, often reflected the managers’
cultural values, which sometimes put the companies at odds with their new
markets.
The
authors chose the four countries listed above because they belong to different
cultural groups that place very different values on individualism, uncertainty,
and the distribution of authority — all key components of strategic decisions.
Anglo-Saxon cultures place a high value on decentralized decision making,
strong individual personalities, and a willingness to let employees think
creatively. By contrast, Greek and Cypriot cultures (similar to each other, but
not identical) are characterized by more autocratic institutions, better
teamwork and group decision making, and more formalized training procedures
that employees are urged to follow.
In
addition, the researchers noted, the countries’ markets, demographics, and
levels of economic development vary widely, which increases the applicability
of the study’s findings.
The
researchers looked at three elements of strategic decision making: the
distribution of authority throughout the organization; communication across
different departments; and whether the firm’s policies, rules, charts, and
plans were formally spelled out and adhered to. They measured performance on a
five-point scale that asked CEOs to compare their own firms with their direct
competitors in terms of sales, market share, return on investment,
profitability, and overall satisfaction with performance.
The
companies that performed best in foreign markets adopted a blend of cultural
approaches that was very similar across markets despite the differences in
their national origins, the researchers found. Performance was highest in firms
with decentralized power (in line with Anglo-Saxon values), where managers were
expected to communicate across different levels and departments. This approach
allowed companies to engage with locally hired managers to find out more about
a foreign market’s challenges and opportunities. But the most successful firms
also used, in line with Greek/Cypriot values, a formal process to shape their
decisions — thus reining in the propensity for managers on the ground to fall
back on their cultural roots when calling the shots.
“Companies
should consciously adopt a blend of approaches that help optimize performance,
while always being aware of their cultural traits,” said lead researcher
Andreas Petrou in an interview. “If managers do not do that consciously, they
most likely will revert to their cultural characteristics” in unanticipated
ways, which could well have negative consequences in a foreign market.
The
researchers found that when firms used a blend of approaches, they were better
able to collect and analyze information, create common goals throughout the
company, and implement strategic decisions. What’s more, the researchers said,
enhanced international performance could have a long-term effect on strategic
decision-making processes throughout the firm, leading to success in future
international endeavors.
