Steve_Kafka

Cultural Challenges; Steve Kafka Steve Kafka, an American and a franchisor for Chicago Style Pizza, has decided to expand his business to Greece. He knows it is a risky decision because when he became a franchisor, he had to overcome many difficulties. Despite the risks, Steve wants to pursue foreign territory for his franchise Chicago Style Pizza in Athens, Greece. Although he was born in the United States, he has family and friends in Athens, Greece who speak the native language fluently, and whom he has visited in this country several times. Steve feels confident in his knowledge about the country and feels he could be very successful in his endeavor. Greece is a mountainous country in Europe covers about 50,949 square miles. It is also known as the Hellenic Republic. It is smaller than the state of Alabama with a population of 10.7 million people growing at a rate of .11 percent annually. Greeks see themselves as individualistic, brave and hardworking. The older generation Greeks value family, religion, tradition, education, while the younger generations value friendships and economic status. They value their culture while eager to stay technologically competitive and relevant. The society is generally dominated by men as they hold majority of the powerful positions in the country. With regard to food, while tastes vary between urban and rural populations there are some foods that are common to Greeks. These foods include lamb, seafood, olives, and cheese. Olive oil is used in cooking as well as garlic, onions, and other spices. Salads are often served with the main meal, while eggplant, zucchini, stuffed tomatoes and pasta are all favorites to the population . The United States of America stretches across the central portion of North America which includes Alaska, and Hawaii. It covers 3794100 square miles and is the fourth largest country in the world with a growing population of 310.2 million people which makes its population the third largest in the world . About twenty percent of the population is younger than the age of 15, and eighty percent of all Americans live in urban areas. Americans tend to be frank and outspoken. They value innovation, independence, industry and integrity. They enjoy a good sense of humor which includes sarcasm. Most Americans will laugh at themselves as well as at others. Americans often criticize their government but most are patriotic and believe the United States is one of the greatest countries in the world. They strongly value their freedom, and independence as a nation and as individuals. Unlike Greece, it is difficult to name a national dish. There are an abundance of fast food restaurants which would make it seem as though the Americans love hamburgers, French fries, pizza and chicken. However, these foods most often reflect a busy lifestyle and not a preference for these foods. People in the United States eat beef, pork, chicken and turkey, fresh vegetables and fruits all year round. Many also consume large amounts of junk food which includes potato chips, soda, candy and ice cream . Are there major differences and incompatibilities between U.S. and cultures in your chosen foreign country' Will these differences create major business risks for Steve' How might Steve mitigate these risks' Culturally the major differences between Greece and the United States are quite apparent. Grecians typically have better diets, are concerned with family, structure, social order, and thoroughly enjoy leisure activities. Americans are busier, have poor diets, but are very patriotic even though their criticism against the government could make it seem as though there is little or no respect for the laws and policies that govern America. One way that Steve will be able to mitigate the risks of cultural incompatibilities to ensure his business is successful is to understand the culture in Greece. According to the chapter, culture is any acquired knowledge that people use to interpret experience and generate social behavior. This knowledge then forms values, creates attitudes, and influences behavior. The model of culture will help Steve identify and depict the cultural diversity in Greece through concentric circles. The graph below provides an example. The outer ring consists of products of the culture such as language, food, art, and buildings. The middle ring contains the norms and values of society, while the inner circle describes the assumptions that govern behavior. By understanding the environment in which he will operate his business on a more intimate level other than language and family, he can understand how to fuse into the Greek culture and be successful in his business. Model of Culture Graph What comparative advantages exist in the foreign country' Can Steve take advantage of these' Greece has an open economy with the state continuing to play an important role despite an ongoing privatization program. Although it is one of the smallest economies in the EU, in the last decade, the Grecian economy experience both strong economic growth and domestic demand. In turn, this growth led to solid gains in employment, substantial wage increases while narrowing the gap in per-capita income. Large fiscal and external imbalances were significant causing inflation as well as labor cost growth in Greece. That surpassed its trading partners, which ultimately eroded competitiveness. With a Grecian style pizza, Steve can take advantage of the current economic, trade and political platforms by franchising his “American” business in Athens to help create jobs in a city that contributes to the country’s 9% unemployment rate. This will also create a small advantage for the city of Athens for consumption will increase if more jobs are created. Because Greece is a part of the EU, he can take advantage of the fact that capital is free to flow anywhere in the EU countries . Will Hofstede’s four primary dimensions help Steve evaluate the foreign business environment' What are the likely results of this evaluation' According to Hofstede’s four primary dimensions, power distance (the extent to which less powerful members of institutions and organizations accept that power is distributed unequally), uncertainty avoidance (the extent to which people feel threatened by ambiguous situations and have created beliefs and institutions that try to avoid these), individualism (the tendency of people to look after themselves and their immediate family only), and masculinity (a culture in which the dominant values in society are success, money and things) will help to explain how and why people from various cultures behave as they do. If analyzed correctly, Steve will be able to identify Greece’s business culture, and how to succeed with the locals. Although this method is highly criticized he will be able to recognize where how to adapt to the local culture in order to appeal to consumers to ultimately be profitable. The likely results of this evaluation are: Greece has low uncertainty avoidance, a low power distance, collectivist not individualist, and low masculinity based on the charts in chapter 6 in the text. What kinds of trade barriers would Steve need to be aware of' Steve needs to be aware of the EU’s trade policy since it Grecian policies are the same as the EU. The EU weighted average tariff rate was 1.3% in 2008, but also has high agricultural and manufacturing tariffs, however non tariffs exist on agricultural and manufacturing subsidies, quotas, import restrictions and bans on some goods and services. It may be a good idea for Steve to participate in thorough research to find out what these restrictions are. Greece also has a high income tax rate and moderate corporate tax rate which makes up 34.4% of tax revenue as a percentage to GDP in Greece. How would Steve assess the demand for pizza at different prices' How would he assess the cost structure he would face' What could Steve infer about the price and income elasticities of pizza' Steve could assess the demand for pizza at different prices by first understanding the price elasticity of demand for pizzas. Modest price changes will cause large quantities of price to change, therefore the price for the pizzas need to be set at a level where demand is elastic for profit maximization. Interpretations of this data will lead him to understand that demand is elastic if a percentage change in price results in a larger percentage change in quantity demanded. He can then conduct the total revenue test to understand the importance of elasticity for his pizza shop to reflect the correct price changes on total revenue and profits.