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INDU1033: Managing Across Cultures Written Report U Veersma

Course School/Level Assessment Weight Submission Deadline

BU/PG 30.00% 06/12/2010

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Managing across Cultures Group work

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-INDU1033: Course Cultures

Managing

Across

Coursework - Written Report Tutor

-Wim Vandekerckhove
-6-12-2010

Due date

Why Russia? Let me take pride in explaining why we have selected Russia as our home country and Iran as our host country. Every news, newspapers and bankers are seen taking of emerging markets BRICK countries, Russia is very interesting country with collapse of Soviet Union, and ended up with many economical, social and political problems. The prospects of Russia are very high, as one of the largest emerging markets highly dependent on state energy market including oil, natural gas, and other forms of natural resources. Keeping in mind, the future of Russian as the major player in the world market in next 30 years. Why Lukoil? The company which is the best example of public as well as Private Corporation, the basis of the company is made on mergers, the biggest and the across culture vehicle for expansion of its present and future lukoil. The company lukoil is the merger of three major state-run, western Siberian companies, Langepasneftegaz, Urayneftegaz, and Kogalymneftegaz. Lukoil and subsidiaries, the largest multinational corporation and the fifth largest supplier of oil of the world, the company is best to be considering for the group assignment because of its diverse corporate governance control by its financial strength both in international and domestic stock exchange like Russian, London stock exchange (LSE) and NYSE.

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Why Iran? The country which ruled by its strict rules and regulation by Islam, country whose 80% exports are oil and petroleum product. The country which is geographically in Middle East/ Arab but, its history has much more common with south Asian countries. Iranian culture and language are historically rooted from Indian culture. The country which has international pressure from USA regarding their internal and external affairs.

Company overview For production of crude oil & gas, and their refining into petroleum products and petrochemicals, LUKOIL is one of the world's biggest vertically integrated companies. Both in Russia and International market, the Company is the leader in its core business. Millions of people in 30 countries of the world buy their products. It is also found that the company is successfully running its business by employing more than 150,000 people. Creating value, maintaining business stability and increasing the return on investment by the means of asset value appreciation and cash dividends are the objectives of the company. Production of oil & gas, production of petroleum products and petrochemicals, and marketing of these products are the major activities of the company. Although its main resource is based in Western Siberia, most of the exploration and production movement of the company is located in Russia, The Company's products are marketed not only in Russia but also Eastern and Western Europe. The Companys global oil reserve is around 1%. The Russian energy sector is dominated by LUKOIL, with 18.6% of total Russian oil fabrication and 18.9% of total Russian oil refining. A noteworthy oil refining facility is owned by the LUKOIL both in Russia and outside Russia. There company owns 4 refineries in Russia and the total capacity of LUKOIL facilities is 45.1 million tons of oil per year.

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Russian culture: The usual greeting is handshake while maintaining straight eye contact whilst giving the appropriate greeting for the time of day. With the index and middle finger of the right hand resting on the thumb, a gesture linked to the Russian Orthodox religion is to cross themselves.

Entering a room: It is well-mannered to release the door and let women or the guest to come into the room first and to remove their shoes upon entering a home. The guests are often given a pair slippers (tapki) to help keep the place clean. Attire: There are some differences between man and women to choose colour such as women usually wear a dark coloured coat, leather or wool and men typically wear thick soled loafers, blue jeans, sneakers or sweatshirts. In general their uniforms are very formal and conservative. For example- Subdued business suits with skirts that cover the knees are worn by women and business suits with highly polished shoe are worn by men.

Family structure: In general, Russian family life is dependence. Russians are mostly attached to their family members because it is usual for many Russians to live in small apartments in large blocks, with 2-3 generations living together. In Russia, it is quite normal that single children lives with their parents and married children with spouse lives with one of the parents.

Attitudes to residential care:

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Residential care is seen by elderly Russian people as the last option and other in home support programs will be accessed to prolong independence for as long as possible. It is equivalent to them to Leave home and move into any other communal arrangement.

Mergers and Acquisitions: A merger is defined as the "union of two or more commercial interests or corporations. Mergers are known to be an aggressive stance to lessen competition. Although M&A activity is predominantly driven by a rational-economic model, cultural attitudes are likely to play a role in influencing selection decisions and management integration practices (Curtwright and cooper, 1997). A merger can be made between two companies in order to obliterate competition in their market or to demolish competition in two different markets all together, which in turn, can lead to higher prices, reduced availability of goods or services, lower quality of products, and less innovation. Some mergers create a scrupulous market, while others produce a single firm to increase prices. To become successful in merger and acquisition, cultural integrations should be considered as the heart of merger difficulties. For example, in a 2004 transatlantic study of executives involved in M&A deals, 75 percent of them cited harmonising culture and communicating with employees as the most important factors for successful post-merger integration (mmc.com).

A key challenge is integration process is cultural differences both in terms of organizational culture and national culture. In the context of M&A, the culture can be viewed practically by observing the following three intertwined elements:

- The individual and organisational behaviours themselves (Behaviours) - The business outcomes they produce (Outcomes) - Those factors that influence patterns of behaviours (Drivers)

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The behaviour patterns explain how the people of an organization are managed that means whether the management power is centralized or decentralised. However, an organisations culture can be seen as the aggregation of those individual behaviours that make up how work gets done. In another way, if different business results are required, then the behavioural patterns that make up the current culture must change. Therefore, one important question is- What happens when a change event such as an acquisition, joint venture or divestiture occurs? Almost by definition, the parties to the deal expect a diverse set of outcomes (such as greater revenue, cost savings or market share). Some level of behaviour change and therefore some change in behavioural drivers are required to achieve these new outcomes. Therefore, in the culture change management process, all phase of integration decisions are drivers of organisational behaviour, including business design and work processes, leadership and organisational design, people practices, and the way the organisation is engaged. Iran Lukoil entry: The company lukoil was set of in year 1991 as mention above. Form the year 1991 till date lukoil is the company that is an example of merger and acquisition growth. The year 2003 lukoil stepped in Iran with Anaran project. Lukoil enjoys 25% exploration venture with Norways- Norsk hydro block. Countrys cultural and resource history: PRESENT: Iran the country with over 60 million people, is suffering with societal and economic mystifying. Iran the country with Extremist and confrontational policies with both inside and outside, that is most powerful over every business process. Its state owned corporations and religious charity institutes manage over 80% of non-agricultural economy fails to create employment and the result creates approx one million unemployed Iranians. Majority of unemployed youth fall in to the category of Brain draining. The post-revolutionary regime has resulted in two social issues 1)the countries slow-

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moving economic performance cause results low standard of leaving. 2) Era of militant came up with Islamic attitudes resulted strict code of behaviour. The major problem with cultural understanding of Iranian is they are geographically Arab but managerial and leadership qualities of Iranian ended up like south Asian cluster similar as India, Indonesia, Philippines and Malaysia. (Outcomes of the study conducted by GLOBE), the finding that Iran is cultural cluster of south Asian and not Arab/Middle- East.

Source: www.geert-hofstede.com Power distance index: Russian is very well known for their obeying the rules and do what is expected. Where in high power index culture like Russia inequalities are seen in every decision as compare to Iran it is almost 40% less. In Iran where there is low PDI scores compare to Russia the Russian have to take care of involving other team members in decision making process or them.

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Individualism Individualist side of both country is more or like totaly similar and have same collective society.in Russia and Iran they both value group and collectively working with each other. History shows Russian as collectivist people example of USSR. Masculinity: With the help of globalization and close proximity with Europe Russian are changing there high masculinity and well-coming feminist to there culture but the prominent figure in hierarchical is always male. Under the present theocratic regime, Iranian women still have uphill struggle to reduce gender in equality. Womens are not allowed to share physical space with male in profession. Uncertainty Avoidance: It deals with a society's tolerance for uncertainty and ambiguity; it ultimately refers to man's search for Truth. It indicates to what extent a culture programs its members to feel either uncomfortable or comfortable in unstructured situations. The Russian are likely to accept the surprise and work according to the situations where Iranian are not made to follow it as per their long history. In Russian there is strict way of following the things and they have to obey the process and follows in high uncertainty avoidance group. Where in Iran there can be sudden plan changes according to leaders and their leaders. Long-term: As per the graph there is no data available for long term orientation, but from other research materials we can say that Iranian are a group of people ,love performance- orientated culture with short- time horizon. In terms of future orientation behaviours there is no aspiration. The Russian are more lucrative from European and western culture and the are very well in planning and future goals.

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The comparison between Russian and Iranian management characteristics Point difference Characteristics of manager Managers in both private and foreign Iranian managers do not expect an of Russia Iran

Good firms are expected to be entrepreneurial, elaborate process of decision- making hard working and earns their employees with broad participation. They follow respect and compliance their leaders vision.

Most of the managers are very high risk They are eager to learn about every taker and lead by example. Loyalty part of the firm

Loyalty is towards family and group, Loyalty is towards family, employers mobility of employees to foreign firms and group, due to the recent political population is

are high. Employments options open up and social imbalance broadly.

shifting to other countries. Iranian has long-term and stable relationship with the company

Hiring

Employees are often hired because they In iran there is differentiation of cast have family relations with in the with Persian and Islam drives the company company hires the person.

Motivation

Employees in Russia are generally Due to in- group orientation Iranian is motivated through group, Russian are co-operative and they are motivated by more of collectivist. Performance both group and individual

management is increasingly common as achievement. a source of reform.

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Compensation

In the past, employers use to pay less In Iran its more of religious affairs in salary but offer more different benefits. both professional life and social life. Majority of firms in Russia is based on Iranian needs jobs safety as their main energy and offers free house, gas and benefits. other basic.

Source Authority

of In companies like where there is Management in Iranian companies are western corporate governance the more often authoritarian and autocratic.

direction of flow of authority are both sides from lower to higher. general Russian are But in of

flowers

hierarchical. Information sharing Russia sees information as the form of Iranian employees are expected to power and has informal network and maintain personal connections. harmonious relationships

within the company. Respects to the supervisors are on higher nature.

Decision making

Decision-making

is

extremely Iranian follows the leader blindly, and

centralized and strongly hierarchical. does what is said. The most powerful Russian doesnt make mistakes, and decision is made based on Islamic they are punished for mistakes. rules.

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Conclusion: Managers who perform internationally should be aware that now two countries of different parts of the world have similar cultures. The managers should act according to the culture of the particular country where the company is trying to operate by adapting its culture. The cultures may be individualistic or collectivistic; the managers should be able to plan the strategies according to the environments which favour the company existence. The culture may differ by its political policies which may show effect on their operations. Coming to the case study of LUKOIL one of the world's biggest vertically integrated companies is to establish its operations in Iran, should operate keeping in mind about the culture and government policies of Iran References:

1. Calori, R., Lubatkin, M., & Very, P. (1994). Control mechanisms in cross border acquisitions: An international comparison. Organisation Studies, 15, 361379.

2. Cartwright, S., & Cooper, C. L. (1997). Managing mergers, acquisitions and strategic alliances:interpreting people and cultures. Oxford: Butterworth Heinemann.

3. http://www.mmc.com/knowledgecenter/Mercer_impactCultureM&ATransactions.pdf

4. www.lukoil.com

5. Excerpt: Managing Across Cultures 6. barsoux, s. a.-l. (2003). managing across culture. england: pearson education limited. 7. dastmachian, m. j. (2003). culture and leadership in iran. academy of managment excutive , 127-138. Managing across Cultures Group work

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