corporate culture and leadership strategy

CORPORATE CULTURE AND LEADERSHIP STRATEGY,BESIG Conference, Bonn, 2008Luminita Cocarta, Sorin-Toma Andrei,Theoretical background,There is certainly a connection between business strategy cultureStarting from two important names in the Business literature Michael Porter Generic strategy typology Geert Hofstede Dimensions of culture,Theoretical background,cultural dimensions have an important influence on developing the guidelines for improving the multinational business strategy,The world of multinationals,The general conclusion of the authors is:the longevity of a multinational depends on the cultural distances among co-workersCulture may be a determinant in the capacity of co-workers in a multinational to work reasonably well together,The world of multinationals,People usually belong to more than one culture national culture business/professional culture organizational/corporate culture,The world of multinationals,Companies usually do not integrate the cultural variable along with the experience and efficiency variablesThe 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,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,Comparative Cultural Approach,The present research focuses on two cultures: Romanian Anglo-Saxon/ especially the American one,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,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,Culture and strategy,Geert Hofstedes cultural dimensions,Power distance (p.d) the extend to which a society accepts the unequal distribution of power within its institutionsMasculinity/ feminity dimension m- associated with earnings, recognition, opportunities for advancement and distinct gender roles; f- associated with strategy, democracyUncertainty avoidance (u.a) denotes a preference for stability, order and predictabilityLong/short term orientation,Comparative approach,Comparative approach,Comparative approach,Comparative approach,Comparative approach,Comparative approach,A too traditional approach may slow innovation (Romanians)A concern for quick results may undermine relationships (Americans),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 processIn 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,Conclusions,A long-term orientation usually sends to those cultures in which stable relations in hierarchical organizations are p