GLOBALPURCHASING:Culturaldifferencesinbusinesspracticesand theirimpactonglobalpurchasingdecisions
Individual Assignment for Purchasing
2022-2023
ManuelBegonha Studentnº S5214866
MScMarketingManagement
Wordcount:1744
Dr. Aline Seepma
Dr. Aline Seepma
VALUE PROPOSITION
Understandingandbeingawareofculturaldifferencesinbusinesspracticesisimportantfora varietyofreasons.Inaglobalizedeconomy,itisincreasinglycommonfororganizationsto engageincross-bordertransactionsandbuildpartnershipswithsuppliers,customersand stakeholdersindifferentregions.
Ignoringculturaldifferencescanleadtomiscommunicationsandpotentiallyconflicts.By adaptingtheircommunicationanddecision-makingstylesaccordingly,organizationscanmore effectivelynavigatecross-culturalbusinessinteractionsandbuildstrong,long-lasting relationshipswiththeirglobalpartners.
Thisbook´sobjectiveistoenhancetheimportancethatculturaldifferenceshaveandhowthey canaffectthewaythatinformationiscommunicated,thewaythatdecisionsaremade,andthe waythatrelationshipsareformed.Thewholebook,incontrastwithotherpurchasingbooks, relatesbothconceptsofculturaldifferencesinbusinesspracticesandhowtheyimpactglobal purchasingdecisionsandconnectsthem.
Ontheonehand,abookbyDavidC.ThomasandKerrInkson“CulturalIntelligence:AGuide toWorkingwithPeoplefromOtherCultures”explorestheconceptofculturalintelligenceand howitcanhelpsindividualsandorganizationsnavigateculturaldifferencesinthebusinessworld (DavidC.Thomas&KerrInkson,2009).Itprovidesaframeworkforunderstandingand adaptingtoculturaldifferencesincommunication,decision-makingandinterpersonal relationships.IncontrasttoDavid&Kerr´sbook,theaboveonenotonlycoversthecultural differencesinbusinesspracticesbutalsoemphasizestheeffectthattheyhaveonglobal purchasingdecisions.
Ontheotherhand,thebook“GlobalPurchasingandSupplyManagement”,byVictorH.Pooler, DavidJ.PoolerandSamuelD.Farney,providesacomprehensiveoverviewofglobalsourcing.It alsogivesaclearexplanationofpurchasingandsupplymanagementhelpingreadersunderstand howtoeffectivelyincorporateexternalsuppliersintotheircompany'ssupplychain.Eventhough itprovidesacomprehensiveoverviewofthemanyotherfactorsthatmustbeconsideredwhen sourcinggoodsandservicesfromaroundtheworld,itdoesnotaddresstheculturaldifferences thatmayimpactpurchasingdecisions.
Then,thegapthatbothbooksleavetogetheris“Howculturaldifferencesinbusinesspractices impactglobalpurchasingdecisions?“. Thisbookaddresseshowtodealwithculturaldifferences inordertohaveapositiveimpactinpurchasingdecisions.Peopleshouldreadthisbook to understandthathavingagoodconnection,respectthemoralvalues,culturesandtraditionsfrom otherregionswillhaveapositiveimpactinfuturepurchasingdecisionsandwillfacilitate businessandnegotiationsbetweencross-bordercompanies.
Table of content:
-Chapter1:TheImportanceofCulturalAwarenessin GlobalPurchasing
-Chapter2:TheImpactofCultureonBusinessPractices
-Chapter3:TheRoleofCultureintheDecision-MakingProcess
-Chapter4:NegotiatingAcrossCultures:Strategies forSuccessfulCross-CulturalNegotiations
-Chapter5:LegalandRegulatoryIssues:CulturalDifferencesinthelegalandregulatory environment
-Chapter6:HowCulturalDifferencesHaveImpactedGlobalPurchasingDecisions
-Chapter1:TheImportanceofCulturalAwarenessinGlobalPurchasing
Culturalawarenessisimportantinglobalpurchasingbecauseitcanhelporganizationsand individualsnavigateculturaldifferencesinbusinesspracticesandbuildsuccessfulandmutually beneficialrelationshipswiththeirglobalpartners.Culturaldifferencescanimpactthewaythat informationiscommunicated,thewaythatdecisionsaremadeandthewaythatrelationshipsare formed.Failingtoassessculturaldriversandtounderstandthecomplexrelationshipbetween cultureandbusinesshasdevastatingconsequenceswithincross-bordertransactions(Holden, 2002).
Beingawareofandrespectfulofculturaldifferencescanhelpanorganizationavoiddamagingits reputationandwillstrengthentherelationshipbetweencompanies.Employeescanlearn differentaspectsofculturetoenhanceanabilitytoworkacrossculturesinpurchasingandsupply management(H.Zhang,2018).
Moreover,culturaldifferencescanalsoimpactthelegalandregulatoryenvironmentinwhicha globalpurchasingtransactiontakesplace.Forexample,certainculturalpracticesmaybein violationoflocallawsorregulations,ormaybeseenasunethicalbycertainstakeholders. Beingawareofthisdifferencescanhelporganizationsavoidlegalandregulatoryissuesand ensurethattheirglobalpurchasingpracticesareconsistentwiththeirvaluesandethical standards.
Insomeculturesitisimportanttobuildpersonalrelationshipsandtrustbeforedoingbusiness, whileinothersamoretransactionalapproachispreferred.Additionally,purchasingliterature
affirmsthatculturaldifferencesconstitutebarrierstointegrationandincreasecosts(Kogutand Singh,1988;Weberetal.1996;Ahernetal.2015).
ThemodelsofCartwrightandCooper(1993)andChatterjee(1992)conclude,thatcorporate culturedifferentialshaveanegativeimpactonthefinancialperformanceofbuyingfirms. Furthermore,theevidencetheypresentedshowedthatthedegreeofculturalintegrationhasa negativeeffectonshareholdervalue,whichdecreasesasculturalintegrationbecomesstronger. Inconclusion,culturalawarenessiscriticaltothesuccessofglobalpurchasingefforts.By understandingandbeingawareofthedifferencesbetweenworldwideregionsandcultures, organizationscanavoidmiscommunicationsthatcouldcausenegativeconsequencesfor cross-bordertransactions.Thatmeanswehavetounderstandourownprioritiesandthoseofour foreignpartners.Wealsoneedtounderstandourownlanguageandcommunicationstyleto becomeeffectiveinterculturalmanagers(Kameda,2013).Researchersfoundthatcross-border mergersandacquisitionstendtobemoresuccessfulasthedistancebetweenpartiesinvolved increases.AccordingtoVeryetal.(1996),acculturativestresscanbeinfluencedbythe nationalitiesofthefirmsinvolvedincross-culturalbusinessinteractions.Insomecases,cultural differencesmayactuallybeperceivedasattractiveratherthancausingacculturativestress.
-Chapter4: NegotiatingAcrossCultures:StrategiesforSuccessfulCross-Cultural Negotiations
Successfulcross-culturalnegotiationsrequireanunderstandingoftheculturaldifferencesthat canimpactthenegotiatingprocess.Theseculturaldifferencescanincludedifferencesin communicationstyles,decision-makingprocesses,andthewaythatrelationshipsareformedand maintained.Inaddition,cross-bordermergersandacquisitionsbetweencountrieswithsignificant culturaldifferencescanallowmultinationalcompaniestoimprovetheperformanceofthe combinedfirmbyutilizingdiverseroutinesandrepertoiresandimplementingthemosteffective elementsofbothcultures(Barney,1991).
Tonegotiateeffectivelyacrosscultures,itisimportanttodosomeresearchaboutthecultureof theotherparty:understandingtheotherculturecanhelptoanticipatetheirnegotiatingstyleand identifyanypotentialculturalpitfallstoavoid.Additionally,itisalsoimportanttocommunicate clearlyandeffectively.Byusingaclearandconciselanguageandbeingmindfulofanypotential misunderstandingsthatcouldariseduetoculturaldifferencesincommunicationstyles.Being flexible:Companiesshouldbe“open“toadaptthenegotiatingstyleandapproachto accommodateculturaldifferences.Thiscaninvolvemakingcompromisesoradjustingthe companyexpectations.
OnestrategystudiedbytheSwedishBusinessTheoristsin1977istheUppsala InternationalizationProcessModel.AccordingtotheUppsalamodel,whichisbasedonthe behavioraltheoryofthefirm,theinternationalizationprocessisinfluencedbyafirm´spast practicesandroutines(Cyert&March,1963;Benito,G.&Gripsrud,1992).Additionally, outlinestheprocessbywhichfirmsgraduallyincreasetheirinvolvementinforeignmarketsas theygainmoreexperienceandknowledgefromtheirdomesticoperations.Thisprocessisdriven byaprocessoflearning,whichisakeyfactorinafirm'sdecisiontointernationalize(Forgsren, 2002).Inaddition,thelearningprocessthatoccursduringinternationalizationcanalsoinfluence theregionsthatfirmschoosetoenterandthemethodstheyusetooperateinforeignmarkets (Carlson,1975).
Moreover,cross-borderfirmsshouldfindcreativesolutionsthatmeettheneedsofboth companiesfromdifferentcountries.Itisimportanttobeabletocompromiseandtobewillingto makeconcessionsinordertoreachamutuallybeneficialagreement. Anotherstrategythatcanbeimplementedcanbetheuseofinterpretersandtranscriberswhen necessary.Incasethatexistslanguagebarriers,thesetranslatorswillfacilitatethe communicationandthenthenegotiationitself,toassurethattheconversationsareaccurately conveyed.
Overall,successfulcross-culturalnegotiationsrequireanunderstandingofculturaldifferences thatcanimpactthenegotiatingprocessandtheabilitytoadaptthefirm´snegotiatingstyle.
Fig.1.Theinternationalizationprocessofthefirm(JohansonandWiedersheim-Paul,1975)-Chapter5: LegalandRegulatoryIssues:CulturalDifferencesinthelegalandregulatory environment
Companiesneedtobeawareoftheplacetheyaretakingaction.Intheglobalizedworldthatwe arelivingin,therearedifferentrules,legalactionsandregulationsthatchangefromcountryto country.Additionally,itisimportanttoberemindedthatlegallanguagesarenotuniversaland areshapedbytheirrespectivehistories.Thatbeingsaid,companiesandfirmsneedtobeaware ofthejurisdictionintheregiontheywanttodobusiness,purchasesoranothertypeof negotiation.Asaresult,thetranslationoflegalconceptsisverycomplexandcanleadtosevere misunderstandings(Goode,2014).
Sometimesthoselegalandregulatorydifferencesmaychangenotonlyfromcontinentto continentbutalsofromonecountrytoanotheronewhichisrightnextto,forexample,the propertylawinPortugalandGermany.InGermany,forinstancethepropertytax,property ownersarerequiredtopayapropertytax(Grundsteuer)ontheirrealestate.Thistaxisbasedon thevalueofthepropertyandisusedtofundlocalgovernmentservices.InPortugalproperty ownersarealsorequiredtopayapropertytax(IMI),butthetaxrateandcalculationmethodmay differbetweenthetwocountries.Anotherexamplecanbethetenancylaw.InGermany,tenancy lawisgovernedbytheCivilCodeandotherrelevantlawsandregulations.InPortugal,tenancy lawisalsogovernedbytheCivilCodebutalsowiththeLawonUrbanLeases(“Leido ArrendamentoUrbano”).Thespecificrightsandresponsibilitiesoflandlordsandtenantsmay differbetweenthetwocountries.
ThefactthatGermanyisaFederalState(article20ofthe“Grundgesetz”) (Portugalisan unitarianstate-article6ofthePortugueseConstitution)impliesthatthereisacertainfreeroam foreachfederatedstatetodecideontheirtaxpolicy.Thatbeingsaid,thetaxationdiffersinmost ofcases.
Anotherscenariowhereculturaldifferencesplayanimportantroleinthelegalandregulatory environmentcanbeforexamplegesturesthatareconsideredpositiveorneutralinoneculture maybeperceivedasrudeoroffensiveinanother.Forexample,makingthe“OK”signwiththe firstandsecondfingersintheUnitedStatesisabenignaction,butinSouthAmericancountries likeVenezuela,itcanbeinterpretedasahighlyinsultingmessage(TamarFrankel,2019).
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