We speak to our customers in a language they can understand about benefits they can understand
-FRANCISCO CAMACHO, TELM5X-MANR,
- WAktrZTREET JOURNAL, 1998.
This is a watershed in the history of telecommunications
competition in Mexico.
-ROLAND ZUBIRAN, PRESIDENT OF ALESTRA, www.FT.com, JANUARY 2, 2001.
When U.S. phone giants AT&T and MCI Communications started up long-distance business in Mexico in 1997, they got a surprising lesson about competition from Telefonos de Mexico SA (Telmex), the former state-owned monopoly. At that time. AT&T and MCI (now MCI Worldcom, Inc. after the merger) had a combined market share of about 25 percent.
Telmex, apparently, has shown them how to do busines in the developing world, by understanding its markets and its people. The company used its understanding of the way of life of Mexican people, took advantage of its familiarity of Mexico's feeble regulatory and legal systems, and engaged, in smart marketing.
Much of Telmex's success, according to AT&T and MCI executives, comes from intricate cultural understanding in a country where influence often counts more than the law.
In 2001. however, the tables turned on Telmex, ending years of legal clashes designed to open up Mexico's $12 billion telecom market. Avantel and Alestra (partly owned by U.S. carriers Worldcom and AT&T), had claimed that Telmex was operating a near-monopoly. The United States had a complaint before the World Trade Organization. Mexico's antitrust agency declared that Telmex was in fact dominant in its services, but Telmex still evaded court efforts to
restrict its reach. However, Telmex eventually agreed to provide fair access. This set the stage for President Vicente Fox's efforts to open up a new era of investment and economic development. Mexico has a population of 97 million. but only 11 .5 million telephone lines-one of the lowest penetration rates compared with other large Latin American countries. As part of the agreement. Alestra and Avantel agreed to pay Telmex for past interconnection fees, amounting to $180 million.
As of February 2001, however, Telefonos de Mexico S.A. still controlled 98 percent of local lines and 81 percent market share for long-distance service. Perhaps its cultural savvy has given it a foothold difficult to penetrate by outsiders.
This chapter's Opening Profile describes how understanding of the local culture and business environment can give managers an advantage in competitive industries; foreign companies-no matter how big-can ignore those aspects to their peril. Such differences in culture and the way of life in other countries necessitate that managers develop international expertise to manage on a contingency basis according to the host-country environment. Powerful, interdependent factors in that environment-political, economic, legal, technological, and cultural-influence management strategy, functions, and processes.
A critical skill for managing people and processes in other countries is cultural savvy: that is, a working knowledge of the cultural variables affecting management decisions. Managers have often seriously underestimated the significance of cultural factors. According to numerous accounts, many blunders made in international operations can be attributed to a lack of cultural sensitivity.1 Examples abound. Scott Russell, senior vice president for human resources at Cendant Mobility in Danbury, Connecticut, recounts that:
An American company in Japan charged its Japanese HR manager with reducing the workforce. The Japanese manager studied the issue but couldn't find a solution within cultural Japanese parameters; so when he came back to the Americans, he reduced the workforce by resigning-which was not what they wanted.
Cultural sensitivity, or cultural empathy, is an awareness and an honest caring about another individual's culture. Such sensitivity requires the ability to understand the perspective of those living in other (and very different) societies and the willingness to put oneself in another's shoes.
International managers can benefit greatly from understanding the nature, dimensions, and variables of a specific culture and how these affect work and organizational processes. This cultural awareness enables them to develop appropriate policies and determine how to plan, organize, lead, and control in a specific international setting. Such a process of adaptation to the environment is necessary to implement strategy successfully. It also leads to effective interaction in a workforce of increasing cultural diversity, both in the United States and in other countries.
Company reports and management studies make it clear that a lack of cultural sensitivity costs businesses money and opportunities. One study of U.S. multinational corporations found that poor intercultural communication skills still constitute a major management problem American managers' knowledge of other cultures lags far behind their understanding of other organizational processes.3 In a synthesis of the research on cross-cultural training, Black and Mendenhall found that up to 40 percent of expatriate managers leave their assignments early because of poor performance or poor adjustment to the local environment. About half of those who do remain are considered only marginally effective. Further, they found that cross- cultural differences are the cause of failed negotiations and interactions, resulting in losses to U.S. firms of over $2 billion a year for failed expatriate assignments alone.4
We also have evidence, however, that cross-cultural training is effective in developing skills and enhancing adjustment and performance. In spite of such evidence, little is done by U.S. firms to take advantage of such important research and to incorporate it into their ongoing training programs, whose purpose is ostensibly to prepare managers before sending them overseas. Too often, the importance of such training in developing cultural sensitivity is realized much too late, as seen in the following account of the unhappy marriage between America's AT&T and Italy's Olivetti, the office-equipment maker:
One top AT&T executive believes that most of the problems in the venture stemmed from cultural differences. 1 don't think we or Olivetti spent enough time understanding behavior patterns, says Robert Kayner, AT&T group executive. We knew the culture was different, but we never really penetrated. We would get angry, and they would get upset. Mr. Kayner says AT&T's attempts to fix the problems, such as delays in deliveries, were transmitted in curt memos that offended Olivetti officials. They would get an attitude, 'Who areyou to tell us what to do, he says. Or the Olivetti side would explain its own problems, and AT&T managers would simply respond, Don't tell me about your problems. Solve them. AT&T executives are the first to admit, now, that one of the greatest challenges of putting a venture together is that partners frequently see the world in very different-and potentially divisive-ways.
In this chapter, we provide a conceptual framework with which companies and managers can assess relevant cultural variables and develop cultural profiles of various countries. We then use this framework to consider the probable effects of cultural differences on an organization and their implications for management. To do this, we need to examine the powerful environmental factor of cultural context. First, we explore the nature of culture, its variables and dimensions, and then we consider specific differences in cultural values and their implications for the on-the-job behavior of individuals and groups. We discuss cultural variables in general in this chapter. The impact of culture on specific management functions and processes will be discussed in later chapters.
Opening Profile: Telmex's Cultural Advanlage Undermined by Global Competition : Effects of Organizations article from Culture Management Catagory Opening Profile: Telmex's Cultural Advanlage Undermined by Global Competition
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