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FONTS TROMPENAARS is Director of Tromenaars Hampden-Turner (THT),an inovative centre of excellence in intercultural management, He is the world's foremost authority on cross-cultural management and is author of several books, including Did the Pedestrian Die?, 21 Leaders for the 21st century and the worldwide bestseller, Riding the Waves of Culture.
PETER WOOLLIAMS is Professor Of International Business at Anglia Business School. He is also an owner/partner in Trompenaars Hampden-Turner.
For Geert Hofstede
Thank you for teaching us the basics of cross-cultural management. We will not forget that our work is built on the shoulders of giants.
Introduction
Many business historians often start from the perspective of a world without organizations and even question why they should exist. They consider the exchanges between the individual buyer and seller and how these can be achieved at the lowest cost. Coase argued, as far back as 1937, that creating an organization only made sense if the transaction costs resulting from purchases in the market were greater than the costs of setting up and running the organization (Griffiths and Wall, 2004),
However, technology and globalization have shifted the balance towards the market and away from hierarchical organizations. Individuals could obtain all they needed (needed, not wanted, as discussed later) through the marketplace by initiating the transaction themselves. Markets are the means whereby buyers and sellers can be brought together and thus work best to the benefit of all except when they become inefficient. On the other extreme, the communist centralized planning model placed all transactions within the organization.
In western thinking, a free market has the following features (Colebatch and Lamour, 1993):
There are a large number of buyers and sellers-so the buyer has a choice of suppliers.
The buyers know what they want.
They are able to pay for it.
They act independently of each other.
The sellers are each free to enter or leave the market.
Information about products, services, and processes is free and accessible.
There are no overhead costs in the actual transaction-simply the price.
The market model is based on the assumption that social activity derives from the private dealings between individuals or groups.
Hierarchies work best when the transactions between the parties:
are certain,
occur frequently,
require specific investments in time, money, equipment, and technology, and
are not easily transferred to the open market.
These fundamental models that lie at the extreme ends of a bipolar spectrum have been debated and explored at length by western economists. However, as we shall demonstrate throughout this book, when we begin to include other cultures as either buyers and sellers, or both, not only do these basic models fail the marketer because of cultural differences, but an entirely different logic is also required, one that transcends this bipolar western thinking.
In western thinking, marketing has become an all-embracing business discipline. The Chartered Institute of Marketing in the UK defines marketing as: "The management process that identifies, anticipates, and supplies customer requirements efficiently and profitably." This implies both an external orientation-looking outward and studying the nature of existing and potential markets-and an internal orientation, to ensure an organization manages its resources effectively in order to meet those needs. Strategic marketing is the process of ensuring a good fit between these extremes.
Marketing as a discipline had (and still has) less significance when goods are scarce and demand exceeds supply. In such an environment, an organization can sell all it can make, so why bother to spend time and effort in trying to understand customer needs? In addition there may be little motive for being efficient if an organization has a monopoly. The East German Trabant car pleased very few of its purchasers, yet some manufacturing plants had waiting lists of up to 20 years. This was in sharp contrast to the West German market, where increasing competition resulted in excess supply. Western manufacturers then had to modify their products to reflect consumers' changing desires. A lower sales price, higher product quality, and other benefits could only be achieved by efficient production. With the reunification of Germany, the Trabant came to an abrupt end, as western manufacturers seized the opportunity presented by an extended and, in effect, new marketplace.
Production orientation sometimes returns to an otherwise competitive market-such as during periods of bad weather, strikes, acts of terrorism-or simply changes in consumer tastes or demand, like ice cream on a hot day at a beach cafe. However, the situation which organizations faced more frequently was one of increasing competition and thus many had to "shout louder" in order to entice customers to buy what they had produced (Palmer and Worthington, 1992). Little or no thinking was applied to identifying the benefits to the customer of the products that were being offered on sale; there were no attempts to identify customer needs in order to define what should be produced. Sales techniques such as promotions and personal selling were developed to emphasize what was on offer. Heavy advertising and promotion of package holidays during the 1970s and 80s was based on this mentality. This shift towards sales orientation still did little to focus on satisfying customer needs.
Marketing orientation developed as competitive markets shifted in the buyers' favor. If a product had benefits that a customer wanted, then the customer would buy. As Peter Drucker stated in The Practice of Management, published in 1973:
The aim of marketing is to make selling superfluous. The aim of marketing is to know and understand the customer so well that the product or service fits him [sic] and sells itself. Ideally, marketing should result in a customer who is ready to buy. All that should be needed is to make the product or service available.
This marketing orientation first achieved prominence in industries manufacturing products that were largely undifferentiated; it was their route to survival. Much of the theory was developed from Anglo-Saxon and US-led research, and is heavily biased towards these cultures. Even services in the public sector became increasingly attracted to this approach. Hospitals, schools, and government departments all began talking in terms of business objectives. Hospital patients became "clients" and rail passengers became "customers." However this was often driven more by governments allocating resources to service providers that were popular, rather than cost efficiently creating a "have and have not" society.
Thus we have arrived at an era in which marketing has become a business ideology, with the customer as the locus. However, with the internationalization of business, marketing professionals and strategists have become increasingly aware of the need to include culture as a fundamental component in their thinking. To their anguish, established theories break down and are insufficient when organizations are faced with new global markets with different cultural orientations.