Managing Cultural Differences in Buyer-Supplier Relationships
Larry R. Smeltzer
Larry R. Smeltzer, Professor, Arizona State University, Tempe, AZ 85287-3706, 602/965-6824
81st Annual International Conference Proceedings - 1996 - Chicago, IL
The Issue. The increase in global sourcing means that purchasing managers must understand, value and manage cultural differences. To help achieve this goal, a knowledge of the underlying dimension of a culture is helpful. In particular, it is beneficial to have an understanding of a culture's industrial history, relationship to technology, natural resources, religion and geography. An understanding of these dimensions will assist managers value and mange the differences necessary for effective buyer-supplier relationships.
Introduction. The three NAFTA countries amassed $50 billion in new trade in l994. And this is only NAFTA. Dramatic increases are also being experienced in trade with traditional Asian and European partners. Concurrently, tremendous opportunities are beginning to be realized in India, Korea and China. What this means is that purchasing managers must be ready to do business in any number of countries. We have heard much about the shrinking world, but this definitely puts increased pressure on the purchasing manager. It is now necessary to recognize worldwide sourcing opportunities and be ready to maximize potential whether it is in North Korea, Canada or Hungary (Atron & Davies, 1991). Furthermore, this means that it is necessary for purchasing professionals to UNDERSTAND, VALUE and MANAGE cultural differences. The purpose of this discussion is to provide a framework that will help purchasing managers source materials within the context of diverse cultures.
Before specific rules for a culture are meaningful, it is important to understand some general concepts about the culture (Laurent, 1983). Much has been written about what constitutes intercultural competence but disagreement exists (Martin, l993). However, it is possible to go to almost any bookstore see a book that has exhaustive lists on the behavior appropriate for any given country (Artell, 1985). But so many different situations exist among and between cultures that a list can not possibly cover every situation. To adapt to the differences, it is first necessary to understand and value some general differences. Once this is accomplished, it may be possible to effectively manage supplier relationships in different cultures. In particular, it is important to understand differences in: industrial histories, relationships to technology, natural resources, religions and geography. An understanding of these differences will help lead to an appreciation or valuing of the cultural differences which, in turn, will help us manage the differences. But first, it is necessary to understand what we mean by culture.
What do we mean by culture? When discussing culture do we mean characteristics of a racial, ethnic or gender group? Or does culture refer to a national group such as French or Chinese? For our discussion, we will take a broad perspective of culture by saying it refers to any identity group that shares a common perception. Accordingly, it could be a national, ethnic or gender group.
This is an important distinction because of the increase of culture diversity within U.S. firms. Consider the following statistics: the number of women entering the U.S. work force will continue to increase during the next two decades; minorities will account for 30 percent of the new entrants in the U.S. work force between 1995 and 2000; Hispanics are predicted to account for 27.5 percent of the increase. No doubt purchasing managers will face cultural differences among international as well as domestic suppliers. But in addition, diversity will become an increasing issue for internal activities such as cross functional teams.
Why do groups have different cultures? Every group of people throughout the history of the world have used individualized approaches to adapt to their environment. From the Anasi of North America to the Vikings of the Nordic countries, people have adapted to diverse environments in a variety of ingenious ways. These differences evolve over centuries of adaptation and gradually develop into cultures. In turn, these different cultures lead to behavioral differences. To understand and appreciate these behavioral differences, it is first necessary to have a brief understanding of the some of the dynamics that have made up contemporary cultures. Following is a brief discussion of some of these differences.
Industrial Histories. Consider a group of people who have an manufacturing history compared to a group that have an agrarian history. Manufacturing is based on precision of machines and the timely coordination of groups in order to assure that materials and processes can be coordinated. Manufacturing cultures are accustomed to the time clock. Meanwhile, agrarian cultures schedule work according to the weather. This is where the phrase originates, "Make hay while the sun shines." In agrarian cultures, schedules are frequently determined by a power greater than the worker rather than by a human system. The agrarian culture does not believe that productivity is under its control. Furthermore, it is not necessary to begin work at 8:00 a.m because it is not as necessary to coordinate with other groups. Rather, in the agrarian society, work takes place when nature's conditions allow.
This understanding of schedules helps us appreciate that some cultures are not as oriented to time schedules as others. For instance, compare the Mexican's time perspective to that of the British. Britain has historically been a manufacturing nation while Mexico's economy is traditionally based on agriculture. We all know that schedules are much easier to establish and maintain in Britain than in Mexico.
Consider two other cultural variables: quantification and precision. Some cultures such as the U.S. like highly quantitative and precise information whereas most Latin cultures prefer qualitative information and it does not have to be precise. Why? The Latin cultures are not accustomed to highly organized manufacturing routines that must meet specific standards. Rather, they are accustomed to informal, interpersonal relationships to meet the needs of their economies. In one culture everything must be precise to keep the economic machine running while in the other culture ambiguous interactions may suffice.
Related to industrial history is the attitude toward the industrial state. Cultures that have emerged in Eastern Europe or China may very likely believe that business and the means of production should belong to the state or to the people collectively. On the other hand, the U.S., Canadian or Japanese cultures state that the means of production should belong to individuals in sole proprietorships, to several individuals in partnerships, or to numerous people in corporations. In other words, a people's perspective on free enterprise is related to its industrial history. In turn, this history is related to such variables as schedules and quantifaction of information.
An understanding and valuing of these differences indicates how purchasing relationships would differ among the cultures. Time is naturally less important in some cultures than others. It will not be possible to impose change on a culture that has evolved over hundreds of years. A highly quantified and precise contract will be difficult to obtain with suppliers from certain cultures; however, it may be possible to trust an ambiguous "contract" with some cultures because that is what they are accustomed to.
Let's take this a step further. Americans may find it extremely frustrating to develop written contracts in some countries. This does not imply that these cultures are inefficient but rather than the industrial history differs. Technology. The appreciation for technology is highly related to industrial history. Technology is also highly related to science. Science is reflected in an interest in order, control, objectivity, and calculation that is the hallmark of an engineering or manufacturing civilization. When a culture has a history of technological intervention to solve problems, it will appreciate technology to a greater extent. The development of the U.S. is highly related to technical advancement. The automobile dramatically changed the course of development in the U.S. But compare this to Ireland. Because such countries as Ireland have not seen the power of technology to the same extent as the U.S., the Irish in general will not have the same appreciating for technology as Americans.
Imagine a purchasing manager in the U.S. who tries to work with Irish suppliers to develop their quality by means of technological advancement. The Irish supply firm may be less interested in technical advancement than the U.S. purchasing manager. Therefore, discussions may quickly fall apart if the American doesn't understand and value the differences. An important consideration is that the Irish manager had not seen the impact of technical advancements. Furthermore, even if the Irish has seen the impact of technology, it may not be appreciated to the same extent by the Irish as the American.
Thus far it can be seen that when an American manager understands and values industrial history and technological differences, management procedures must differ. More emphasis must be placed on informal, qualitative arrangements in some cultures than in others.
Natural Resources. Are natural resources to be used for the advancement of a group's life style or are they to be respected and seen as part of a higher power? Many groups of Native Americans will not alter the landscape even if it contains valuable minerals. The same is true in parts of Asia. A U.S. mining company tried to develop a potential supplier in the Western U.S. by dramatically expanding their mining operation. The potential supplier was owned by a Native American tribe. When the supplier was not interested in developing the natural resources, the purchasing group considered the supply firm apathetic and uninterested in improving its quality of life. The purchasing managers did not understand and value the fact that the Native Americans perceived the land as part of their historical existence. To destroy the land is to destroy their heritage. Meanwhile, many mainstream Americans feel that altering the landscape is part of progress. A new building is better even if trees are cut down and mountains flattened. The problematic difference rests in each culture's attitude toward natural resources.
A quick look at the United States' history gives an appreciation for how Americans may differ from many other cultures in their perceptions of natural resources. The U.S. was basically developed because of the availability of resources. Water, wood, and minerals were plentiful and were an incentive for the Europeans who crossed the Atlantic. The contemporary American culture still values resources as something to be used and not preserved. Although the U.S. is now becoming more concerned about waste, conservation is not the issue in the U.S. to the extent it is in other countries. Consider the Middle East and their use of water. The middle eastern cultures take fewer showers than U.S. citizens simply because water is less abundant.
This attitude toward natural resources implies that bigger is better. Unfortunately, in negotiations and other supplier relationships, Americans may assume that all cultures believe that bigger is better. Too many instances exist where Americans used this value in their unsuccessful attempts at supplier cooperation.
Again, Ireland provides an example in contrast. An American electronics firm was working with an Irish supplier as the Americans wanted the Irish firm to increase its capacity. In their attempts to persuade the Irish, the Americans explained this would mean an enlarged plant and new roads. Unfortunately, the Irish were not interested in these "advancements."
Religion. For well over four thousand years, people have concluded that they depend on powers in nature or elsewhere that are external to themselves (Samovar & Porter, 1991). Although there are literately thousands of religions, they can generally be reduced to several categories: Christian at about 33 percent of the world population, Islam with approximately 21 percent, Hinduism with about 15 percent, followed by Buddhism and other Eastern Religions with 9 percent of the world population. Most religions provide guidelines for behavior such as the Ten Commandments, the Eightfold Path of Buddha and the Five Pillars of Islam.
A brief review quickly indicates how these guidelines could affect supplier relationships differently. For instance, with Islam there is no separation of church and state and nothing, even the most important negotiations, should interrupt the five prayer times during the day. Also, Islam produces a strong belief in fatalism: Whatever happens is according to God's will. If an important business arrangement fails, it is God's will rather than a failure in negotiations. Conversely, Christians believe that the creation of secular goods can be part of the commitment people make to their Creator. It can quickly be seen that a Muslim and Christian would look upon a difficult business arrangement differently. Now consider Hinduism. The Hindu holds materialism in abeyance and instead emphasizes introspection. In addition, intellect is subordinated to intuition and dogma is subordinated to experience.
An understanding or appreciation of religious differences assist in managing cultural differences. A Christian purchasing manager would make allowances for Muslim prayer time just as a Muslim would not schedule a meeting on a Sunday morning. Likewise, it would be difficult to convince a follower of Hinduism by using highly structured intellectual arguments based on what is seen as dogmatic truths. During supplier-buyer discussions, it would be much more necessary to use intuition and experience....a strange process for a Christian coming from a western culture.
Geography. We all know that life in an urban setting is different than that in a rural environment and business operates differently in an arctic than in a tropical climate. A person has to be in a tropical climate for only a short time in July or August to appreciate the siesta. It is difficult to become excited about business in the heat of the day. Conversely, a person's entire demeanor is probably going to be at a quicker pace in a cold climate than a tropical environment.
Much is said about personal contact when discussing international business. An interesting note is that high contact cultures are generally located in warm countries and low-contact cultures in cool climates. Explanation for these latitudinal variations have included energy levels, climate, and metabolism.
Cultures in cool climates tend to be interpersonally distant. Even within the United States, people in warm latitudes tend to exhibit more contact than people in cold areas. Research indicates that people will tolerate less personal distance in the south than in the north: northerners need more distance (Andersen, 1994).
Another interesting perspective is that technology is needed for survival in colder climates so it may well be that technology and climate are highly related (Hofstede, l982). Verification of this assertion is that most technological nations are in cooler climates such as Britain, Germany and the U.S. An interesting point is that all of the E7 countries experience snow to some extent in one of their geographical regions.
An understanding and appreciation of geography should assist in managing such factors as time and schedules. People are not "lazy" in tropical climates. Due to the heat, it is customary to move slower and be less concerned about schedules. Aware purchasing managers, even though they may be in a hurry, may have to adapt to the siesta when working with certain cultures.
Integration and Application. The statement was made earlier that simply learning guidelines has limited value for adapting to different cultures. To adapt to the many different situations that a purchasing manager may face in supplier relationships, it is important to understand and value the differences in order to effectively manage them. For instance, most managers know that Mexico may be best known as the land of ma–ana. This use of time may not be the most misunderstood cultural difference when working with Mexicans; however, it certainly can cause difficulties. But if managers from the U.S. understand that Mexicans have a much different industrial history, relationship to technology and climate, the Americans would begin to value the difference and appreciate that not everything is suppose to proceed like clock-work. They would manage the difference by not demanding rigorous schedules for each meeting. They would understand that production schedules would be more difficult to maintain in Mexico so they would have to build in a certain amount of flexibility in their materials planning.
To effectively manage cultural differences, an understanding of each cultural dimension--industrial history, relationship to technology, natural resources, religion and geography--must be integrated. For instance, it is not possible to consider religion without technology. Remember that the Hindu religion places much less emphasis on material goods than does Christianity; therefore, it is easy to understand why Christian based cultures tend to place more emphasis on industrial advancement. But this is not always the case. Some Christian cultures are located in tropical climates which are generally less technologically advanced. Each cultural dimension must be considered separately but it must also be integrated with the other dimensions.
This discussion has generally implied that cultural differences are the same as international differences. As mentioned earlier, however, we all know that the U.S. is becoming a much more culturally diverse nation. No such thing exists as a pure American culture. An understanding of the history of a culture within the U.S. can help us understand differences. For instance, the culture for doing business in Louisiana is markedly different than that of Michigan. Why? The paucity of natural resources and the lack of emphasis on manufacturing along with the climate in Louisiana may explain many of the differences.
Gender differences must also be considered. The differences that men and women bring to the workplace is well documented (Gray, 1992; Tanner, 1990). Many arguments can be made than women and men have developed their values in different environments even though they have been born and raised in the same country. Their perceptual differences on industry and religion, as well as other dimensions, mean they bring different behavior to the work place.
This discussion has not meant to be a definitive explanation for cultural differences. The intent is to provide an overview that will help the purchasing manager understand, value and manage cultural diversity in supplier relationships. No shortcuts exist for managing diversity. Understanding and valuing must occur for truly effective relationships to evolve.
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