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Cultural Challenges

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Running Head: The Cultural Challenges of Doing Business Overseas

The Cultural Challenges of Doing Business Overseas

Tonka Terry

University of Phoenix

The Cultural Challenges of Doing Business Overseas

The decision to expand a business outside of an individual's own culture has many difficulties. There are many reasons why an entrepreneur wants to take on this responsibility. Some wants to have the chance to expand their business and others view it as a challenge. In this case we will focus on Steve Kafka. Steve Kafka, an American citizen with Czech origin has decided to open a franchise Chicago Style Pizza in the Czech Republic. Although Steve has many family and friends there, and has visited numerous times, Steve needs to weigh out all his options before going forward with his business adventure. It s not quite clear if Steve is aware of the turmoil and the complication that he will potentially be face with, however he was successful in opening his business in the United States and feels that he is well inform about the business arena and will be able to open another store in Prague.

This paper will evaluate some of the cultural dilemmas, any possible comparative advantages the Czech Republic has to offer, Hofstede's cultural dimensions and how they will help Steve evaluate the business environment and the demand and cost structure of pizza.

The word culture comes from the Latin cultura, which is related to cult or worship. In its

broadest sense, the term refers to the result of human interaction. For the purposes of the

Study of international management, culture is acquired knowledge that people use to interpret experience and generate social behavior. This knowledge forms values, creates attitudes and influence behavior. (Hodgetts, Luthans, and Doe, 2005).

One of the most challenging aspects of doing business internationally is the ability to become accustomed to cultures that are not familiar to us. Such adaptation requires an understanding of cultural diversity, perceptions, stereotypes, and values. (Hodgetts, Luthans, and Doe, 2005).

Even a cultural common handshake could affect Steve's business. Culturalgrams (2007) identified the cultural differences of both countries, "U.S. culture uses a firm handshake but German culture uses the brusk and firm handshake and repeats on arrival and departure". The basic beliefs and behaviors of the workers and business partner are the major cultural impact on Steve Kafka's management. There has been a great deal of study perform on cultural dimensions and attitudes. The findings have proved to be extremely useful in providing integrative profiles of various international cultures (Hodgetts, Luthans, and Doe, 2005). As a word of caution, "it must be remembered that stereotypes and overgeneralizations should be avoided; there are always individual differences and even subcultures within every country" (Hodgetts, Luthans, and Doe, 2005).

As we research further, we will find that there are many differences in value as well as some similarities between Czech Republic and the United States. For example the Czechs initial eat three meals a day with the heaviest at lunch. Likewise, it is customary for Americans to eat three meals a day however the heaviest is usually dinner. A major difference is that it is not a common practice for Czechs to invite someone to there home unlike Americans who is always willing to extend an invitation for dinner. Values are basic convictions that people have regarding what is right and wrong, good and bad, important and unimportant. In order for Steve's business to have any chance of success it is very crucial that Steve appreciate these values since difference in cultural often result in varying management practices. (Hodgetts, Luthans, and Doe, 2005).

Agriculture is very important to the United States' economy. Because we produce many crops domestically, this could be an advantage for Steve since wheat and hops could be used to make the pizza and the beer which is a common drink in the Czech Republic. Pizza is considered a snack in the Czech Republic and since families don't eat out a lot, one major challenge for Steve will be to bring families into his establishment and for them to treat this as a full meal. On the other hand, opening a fast food chain that is new and different gives him the opportunity to enter into a monopolistic market.

Steve Kafka is very familiar with the people of Czech Republic since he has family and friends there. That fact the he speaks there language very fluently can be nothing but an advantage for him and could possibly play an important role in his business success as well.

Being reared in the United States has thought Mr. Kafka a lot about values and he is well informed about the values in the U.S. and the responses that are expected. How well he accepts these new values will help determine the success of his business.

Studies have shown that there is a great amount of differences in the area of work ethics and managerial skills. Like there are differences, there are also similarities in some values do exist. In fact the research show that one advantage that Steve will have when it comes to personal values is that he will share some of the same ideas as that of managers from other countries as it relates to business success. (Hodgetts, Luthans, and Doe, 2005).

A Dutch researcher by the name of Geert Hofstede found there are four dimensions of culture. They are power distance, uncertainty avoidance, individualism, and masculinity. Power distance is "the extent to which less powerful members of institutions and organizations

accept that power is distributed unequally." (Hodgetts, Luthans, and Doe, 2005). If Steve wants to be a successful businessman in the Czech Republic he must have a strong desire to expand and practice the Czech culture and customs as well as moral demeanor.

A second dimension is individualism. Hodgetts, Luthans, and Doe define individualism as "the tendency of people to look after themselves and their immediate family only." Hofstede measured this cultural difference on a bipolar continuum with individualism at one end and collectivism at the other (Hodgetts, Luthans, and Doe, 2005). This dimension should work to Steve's advantage since



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