Intercultural Business Management- case of Coca Cola in Italy

Fachhochschule Osnabrück University of Applied Sciences Faculty of Business Management and Social Sciences Bachelor of Arts B.A. (International Event Management)

Intercultural Business Management –

the Case of Coca Cola in Italy

Module Project in the Subject Cultural Management

Summer semester

Lecturer: Prof. Ravinder Kaur-Lahrmann

Author: Yan Sixian

Student ID: 443577

Submission date: 21st June 2010

I. Table of Contents

II. List of Abbreviations (3)

1.Introduction (4)

https://www.sodocs.net/doc/d618723106.html,anizational Culture of Coca Cola (5)

3.Cultural analysis of United States (5)

3.1 Figures and Facts in National Level (5)

3.2 Analysis.................. (7)

3.3 Differences between National and Organizational Culture (8)

4. Cultural analysis of Italy (8)

4.1 Figures and Facts in National Level (8)

4.2 Analysis (9)

4.3 Critical Succes Factors (10)

5. Cultural comparison of United States and Italy (11)

5.1 Facts (11)

5.2 Restrictions and Countermeasure (12)

6.Conclusion (12)

III. Bibliography (13)

List of Abbreviations

CSF Critical Success Factors

IDV Individualism

LTO Long-Term Orientation

MAS Masculinity

PDI Power Distance Index

UAI Uncertainty Avoidance Index U.S.A United States of America

1. Introduction

With increasing globalization and technological innovations, business opportunities and communication with people from other countries have become prevalent.1 Thus, there is a greater demand for skilful intercultural business communicators. At the same time, it is vital for managers and even normal stuff to hone skills in communicating effectively with people from different countries and cultures. Coca Cola is a multinational enterprise based in America which conducts business in a multicultural environment. Intercultural business management is especially important to Coca Cola. Coca Cola should understand critical success factors for business in different cultures, handle business transactions and communication in multicultural settings more effectively, avoid misunderstandings relating to multicultural communication and achieve better understanding and appreciation of differences in working relationships and in multicultural contexts. Taking Coca Cola in Italy as example, Hofstede’s Cultural Dimensions can be used to discover the difference between American and Italian cultures, the critical success factors for doing business in Italy and the appropriate way to optimize effectiveness in doing intercultural business.

1

Binh Thi Nguyen. (2009): Presentation

2. Organizational Culture of Coca Cola

Today, The Coca-Cola Company refreshes lives 1.6 billion times a day in more than 200 countries.When it comes to organizational culture, mission, vision and value are always the core part. Coca Cola’s mission is to refresh the world, to inspire moments of optimism and happiness and to create value and make a difference.2 Coca Cola’s vision describes what is needed to accomplish in order to continue achieving sustainable, quality growth. Coca Cola tries to be great place to work where people are inspired to be the best they can be, to bring to the world a portfolio of quality beverage brands that anticipate and satisfy people's desires and needs, to nurture a winning network of customers and suppliers, together we create mutual, enduring value, to be a responsible citizen that makes a difference by helping build and support sustainable communities, to maximize long-term return to shareowners while being mindful of our overall responsibilities and to be a highly effective, lean and fast-moving organization.3 And Coca Cola prefer leadership, collaboration, integrity, accountability, passion, diversity and quality as corporate values. According to the mission, vision and value, Coca Cola is more results-oriented than process-oriented, more employee-oriented than job-oriented, more professional than parochial, more tightly controlled than loosely and more normative than pragmatic.

3. Cultural analysis of United States

3.1 Figures and Facts in National Level

United States is such a diverse society that its culture is a mixture of different cultures. By using Geert Hofstede’s Cultural Dimensions, the characteristics and features of U.S.A can be sorted out. It includes five dimensions: Power distance, which is related to the different solutions to the basic problem of

2

The Coca Cola Company. (2009): p.2

3

The Coca Cola Company. (2009): p.1

human inequality; Uncertainty avoidance, which is related to the level of stress in a society in the face of an unknown future; Individualism, which is related to the integration of individuals into private groups; Masculinity, which is related to the division of emotional roles between men and women and Long-term orientation, which is related to the choice of focus for people’s efforts: the future or the present.4

Figure 1: Hofstede’s Cultural Dimensions of U.S.A

Source: Hofstede Geert. (2006): p.1

In America, it is customary to begin and end business meetings with a brief but firm handshake. Maintaining direct eye contact during this initial greeting and whenever in conversation is also essential, as it demonstrates to your American colleagues your interest and sincerity.5

Introductions should include one's title if appropriate, or Mr., Ms, Mrs. and the full name. Business cards are generally exchanged during introductions. Business conversation may take place during meals. However, many times you will find more social conversation taking place during the actual meal.6 During negotiations, it is important to remember that the aim of most business discussions in the US is to arrive at a signed contract.

4

Hofstede Geert. (2001): p.29

5

Communicaid Group Ltd. (2007): p.3

6

Agnes Bodi.(2006): p.44

Gift giving is discouraged or limited by many US companies. If you do give a gift, it should not appear to be a bribe.

Business suit and tie are appropriate in all major cities. Wear dark colored business suits in classic colors of gray and navy. For an important formal meeting, choose a white dress shirt, for less formal a light blue shirt will still give you a conservative appearance.7

3.2 Analysis

Individualism ranks highest and is a significant factor in the life of Americans. The high Individualism (IDV) ranking for the United States indicates a society with a more individualistic attitude and relatively loose bonds with others, even with family. American culture emphasizes individual initiative and personal achievement. Independence and self-reliance are highly valued and also extends to the workplace where business is frequently carried out autonomously.8

The next highest is Masculinity (MAS) with a ranking of 62. This indicates the country experiences a higher degree of gender differentiation of roles. The male dominates a significant portion of the society and power structure.

The lowest ranking of Long-term Orientation means greater flexibility and the freedom to react quickly to new opportunities.9

The next lowest ranking Dimension for the United States is Power Distance (PDI) at 40. This is indicative of a greater equality between societal levels, including government, organizations, and even within families.

The last dimension is Uncertainty Avoidance (UAI), with a ranking of 46. It indicates a society that has fewer rules and does not attempt to control all outcomes and results. It also has a greater level of tolerance for a variety of ideas, thoughts, and beliefs.

7

Agnes Bodi.(2006): p.44

8

Communicaid Group Ltd. (2007): p.1

9

Taylor Stephen. (2006): p.5

In conclusion, Americans tend to be more individual, more equal, more risky, more gender different and more short-term oriented.

3.3 Differences between National and Organizational Culture

There exist differences between national culture and organizational culture. National culture is a set of core values, beliefs, standards, knowledge, morals, laws and behavior shared by a nation while organizational culture is the glue, if you will, that holds an organization together. It incorporates an organization’s values, its norms of behavior, its policies and its procedures.10 Taking Coca Cola as example, the organizational culture of Coca Cola is more long-term oriented and tightly controlled while American culture tend to be more short-term oriented and loosely controlled. Coca Cola pay more attention on collaboration while individualism dominates in American culture.

4. Cultural analysis of Italy

4.1 Figures and Facts in National Level

Figure 2: Hofstede’s Cultural Dimensions of Italy

Source: Hofstede Geert. (2006): p.1

10

Mitchell Charles. (2000): p.148

Italians prefer to do business with high‐ranking people. Hierarchy is the cornerstone of Italian business. Italians respect power and age. Make sure your title is on your card. Italians like knowing how you fit within your organization.11

Appointments are mandatory and should be made in writing Italian 2 to 3 weeks in advance. Reconfirm the meeting by telephone or fax in Italian.

The goal of the initial meeting is to develop a sense of respect and trust with your Italian business colleagues. Decisions are not necessarily reached in meetings. It is common to be interrupted while speaking or for several people to speak at once in the meeting.

The exchanging of business cards should take place only at the beginning of the first business meeting. Ensure that your card is translated into Italian on one side and that you include any advanced educational qualifications and your full title and position.12

Punctuality in the Italian business environment, as a rule, is taken very seriously. However, even though you will be expected to arrive on time, your Italian counterparts may not always adhere to this rule.

Dressing well is a priority in Italy.Men should wear dark colored, conservative business suits. Women should wear either business suits or conservative dresses. Elegant accessories are equally important for men and women. Good conversational topics include Italian culture, art, food, wine, family, and films while religion, politics, and World War II are taboos for talking.

4.2 Analysis

Great emphasis is placed on individualism, masculinity, and uncertainty avoidance, while power distance is ranked considerately lower than the

11

Dubai Export Development Corporation. (2008): p.21

12Communicaid Group Ltd. (2007): p.3

others. Italy’s lower power distance score shows that Italy is working to deemphasize the differences between its citizen’s power and wealth.13 Individualism ranks highest and is a significant factor in the life of Italians. The high Individualism (IDV) ranking indicates individual responsibility and close family ties. This means that Italians will tend to take care of themselves and their immediate family first.14

The next highest is Uncertainty Avoidance (UAI), with a ranking of 75. This indicates the country doesn’t like to bear too many risks.

The ranking of Long-term Orientation means Italians tend to think more of the future. The last dimension is Masculinity (MAS). The male dominates a significant portion of the society and power structure.

In conclusion, Italians tend to be more individual but family-oriented, more equal in life, more stable, more gender different and more long-term oriented.

4.3 Critical Success Factors

The family is the centre of the social structure and provides a stabilizing influence for its members. In the north, generally only the nuclear family lives together; while in the south, the extended family often resides together in one house. The family provides both emotional and financial support to its members. Across Italy you will find many Italian businesses owned by individuals and families. In a business context, individualism influences an Italian's preference to do business with people they are already familiar with. The Italian bureaucracy and legal systems are rather slow. So the critical success factor for Coca Cola doing business in Italy is to develop long-term and firm relationship not only with business partners but also with the local government.

13

Taylor Stephen. (2006): p.5

14

Communicaid Group Ltd. (2007): p.3

5. Cultural comparison of United States and Italy

5.1 Facts

There exist differences between American culture and Italian culture.

Figure 3: Comparison of U.S.A and Italy in Hofstede’s Cultural Dimensions

Source: Hofstede Geert. (2006): p.1

In Hofstede’s Cultural Dimensions, the power distance index in Italy is a bit higher than that in U.S.A, which indicates Italy has relatively more strict hierarchy; individualism is more serious in U.S.A and Italy is family oriented; Americans prefer taking risks while Italians don’t; Italians are more long-term oriented than Americans.

In the aspect of business etiquette, in America the aim of most business discussions in the US is to arrive at a signed contract while in Italy decisions are not necessarily reached in meetings. Interruption is common is Italian meetings while is uncommon in America. First impression plays a more important role in business life in Italy than in America. Italians tend to develop firm relationship with business partners while Americans believe business is business.

5.2 Restrictions and Countermeasure

When conducting business in Italy, Coca Cola is facing cultural differences and shocks as an America-based enterprise. Restrictions will be established during management. The most challenging restriction for Coca Cola is to establish long-term and firm relationships with business partners and local government, not only business relationships but also personal relationships. Coca Cola should let Italians treat you as part of families. Secondly, Italy is proud of its language, history, arts and fashion. Coca Cola should combine corporate strategy with Italian language, history, arts and fashion. Last but not least, Coca Cola should do as the Romans do, when in Rome, following the Italian business etiquette and conducting localization.

6. Conclusion

People have lived all over the world. They have lived in different areas and environment. Over the years they have experienced different impressions. Each group and nation has its own specialty in communication.15 Doing business around the world needs a fair understanding of cultural practices and business etiquette. Aspects such as personal space, physical contact, gestures, gifts and basic pleasantries differ sometimes widely throughout the globe and all cultures will appreciate your being knowledgeable about, and your making an effort to accommodate, their particular preferences in these matters.16 As a multinational enterprise, Coca Cola faces cultural differences in Italy, which leads to a need of intercultural business management. Intercultural business management can help Coca Cola engage in Italian culture, minimizing deadweight loss.

15

Agnes Bodi.(2006): p.57

16

Dubai Export Development Corporation. (2008): p.3

Bibliography

Agnes Bodi. (2006): The Stereotypes and Etiquette of International Business Life. Budapest

Binh Thi Nguyen. Master in Linguistics and English Language Teaching from York University (2009) Presentation (07.11-17:00)

Communicaid Group Ltd. (2007): Doing Business in the USA

Communicaid Group Ltd. (2007): Doing Business in Italy

Dubai Export Development Corporation. (2008): Services Export: Business Etiquette in Focus Markets

Hofstede, Geert. (2001): Culture's Consequences, Comparing Values, Behaviors, Institutions, and Organizations Across Nations. Thousand Oaks. Sage Publications

Hofstede Geert. (2006):6 dimensions In: http://www.geerthofstede.nl/research--vsm/dimension-data-matrix.aspx(Retrieved: 01.05.2009)

Mitchell Charles. (2000): A Short Course in International Business Culture. California. World Trade Press

Taylor Stephen. (2006): Geert Hofstede Analysis United States of America

Taylor Stephen. (2006): Geert Hofstede Analysis Italy

The Coca Cola Company. (2009):2009 Annual Review

The Coca Cola Company. (2009):Our Company In:https://www.sodocs.net/doc/d618723106.html,/ourcompany/index.html(Retrieved: 20.05.2009)