I presented to the International Roundtable of the University of Chicago\'s Graduate School of Business on April 12, 2012

1. University of Chicago, International Roundtable
Ruth-Ann McKellin
April 18, 2012

2.  Grew up in West Germany
 Returned in the early 1990s and worked with
German consulting firm
 Reunification project:
◦ Client was the Sozialministerium of Thuringen
◦ Project was privatizing healthcare facilities:
 Hospitals
 Clinics
 Orphanages
 Health spas (yes, they are part of the healthcare
system!)

3.  1945
◦ Germany is split into two
parts—East Germany
controlled by the
Communist Soviet Bloc,
and West Germany aligned
to Capitalist Europe.
◦ Berlin divided into four
parts, controlled by Soviet
Union, United States,
United Kingdom, and
France.

4.  1952
◦ East German
government closed the
West German border
 1961
◦ August 13: Berlin Wall is
built in the dead of
night to keep East
Berliner from fleeing to
West Berlin. 3.5 Million
had escaped since
1945.

5.  1989
◦ Hungarian border fence removed and thousands of
East Germans escaped to the West
◦ “Peaceful Revolution” led to the removal of the
Berlin wall

9.  25% of western Germans  12% of eastern Germans
would like the Wall put would like to be
back separated again
 25% feel they have  33% feel they have not
suffered financially improved financially
because of the
since the fall of
unification
communism
 X% unemployment
 2X% unemployment
 $100 Billion in 2004
 Infusion of investment is
pumped into eastern
Germany too much too little
 “Jammer-Ossies”
 “Besser-Wessies”
12% of western Germans 8% of eastern Germans
were still unhappy with the were still unhappy with the
reunification reunification
Forsa-Institut, September 2004

10. As of July 2010, unemployment in the
east (11.5%) was nearly double what it
was in the West (6.6%)
An astonishing 50 percent of the 80
billion euros ($103 billion) in annual
developmental subsidies transferred
from west to east is eaten up by social
benefits and welfare payments.

11. Results of reunification leave Merkel satisfied (26. 9. 2010)
“Merkel, who grew up in East Germany, said since 1990
Germans in the east have done “unbelievably” well in adjusting
to life under the federal constitution of the former West
Germany. “
The solidarity pact, under which
the eastern states still receive aid
for development from those in
the west, would not need to
continue beyond its planned
phasing-out in 2019…
The prosperity levels in the
eastern states would approach
those in the west by that time.

12.  Communist  Federalist
 Socialist  Capitalist
 Antiquated  Modern
infrastructure infrastructure
 Inadequate social  Developed social
systems systems
 Low global status  High global status
 No unemployment  Low unemployment
 DM had little value  DM was strong
What did East Germany have to offer?

13.  History
 Traditions
 Language (with dialects, of course)
 Strong work ethic
 Cultured (music, art, architecture,
etc.)
 Christian Religion

15.  Culture: “It refers to the way people think,
feel, and act. Geert [Hofstede] has defined it
as ‘the collective programming of the mind
distinguishing the members of one group or
category of people from another.’ The
‘category’ can refer to nations, regions within
or across nations, ethnicities, religions,
occupations, organizations, or the genders. A
simpler definition is 'the unwritten rules of
the social game.‘”

16.  Continuing, there are six national culture
dimensions that have been evaluated in 50+
countries based on these attributes:
◦ Power Distance
◦ Uncertainty Avoidance
◦ Individualism vs. Collectivism
◦ Masculinity vs. Femininity
◦ Long-Term Orientation
◦ Indulgence versus Restraint

17.  Power Distance
Power Distance is the extent to which the less powerful
members of organizations and institutions (like the family)
accept and expect that power is distributed unequally. This
represents inequality (more versus less), but defined from
below, not from above. It suggests that a society's level of
inequality is endorsed by the followers as much as by the
leaders. Power and inequality, of course, are extremely
fundamental facts of any society and anybody with some
international experience will be aware that "all societies are
unequal, but some are more unequal than others".

18.  Uncertainty avoidance
Uncertainty avoidance deals with a society's tolerance for uncertainty
and ambiguity. It indicates to what extent a culture programs its
members to feel either uncomfortable or comfortable in unstructured
situations. Unstructured situations are novel, unknown, surprising,
different from usual. Uncertainty avoiding cultures try to minimize the
possibility of such situations by strict laws and rules, safety and security
measures, and on the philosophical and religious level by a belief in
absolute Truth: "there can only be one Truth and we have it". People in
uncertainty avoiding countries are also more emotional, and motivated
by inner nervous energy.
 The opposite type, uncertainty accepting cultures, are more tolerant of
opinions different from what they are used to; they try to have as few
rules as possible, and on the philosophical and religious level they are
relativist and allow many currents to flow side by side. People within
these cultures are more phlegmatic and contemplative
 and not expected by their environment to express
 emotions.

19.  Individualism vs. Collectivism
Individualism on the one side versus its opposite, collectivism, is
the degree to which individuals are integrated into groups. On
the individualist side we find societies in which the ties between
individuals are loose: everyone is expected to look after
her/himself and her/his immediate family.
 On the collectivist side, we find societies in which people from
birth onwards are integrated into strong, cohesive in-groups,
often extended families (with uncles, aunts and grandparents)
which continue protecting them in exchange for unquestioning
loyalty. The word collectivism in this sense has no political
meaning: it refers to the group, not to the state. Again, the issue
addressed by this dimension is an extremely fundamental one,
regarding all societies in the world.

20.  Masculinity vs. Femininity
Masculinity versus its opposite, femininity, refers to the distribution of
emotional roles between the genders which is another fundamental issue
for any society to which a range of solutions are found. The IBM studies
revealed that
◦ (a) women's values differ less among societies than men's values; (b)
men's values from one country to another contain a dimension from
very assertive and competitive and maximally different from women's
values on the one side, to modest and caring and similar to women's
values on the other. The assertive pole has been called masculine and
the modest, caring pole feminine.
◦ The women in feminine countries have the same modest, caring
values as the men; in the masculine countries they are more assertive
and more competitive, but not as much as the men, so that these
countries show a gap between men's values and women's values.

21.  Long-Term vs. Short-Term Orientation
Long- term oriented societies foster pragmatic virtues oriented towards
future rewards, in particular saving, persistence, and adapting to
changing circumstances.
 Short-term oriented societies foster virtues related to the past and
present such as national pride, respect for tradition, preservation of
"face", and fulfilling social obligations.

22.  Indulgence versus Restraint
◦ Indulgence stands for a society that allows relatively free
gratification of basic and natural human drives related to
enjoying life and having fun.
◦ Restraint stands for a society that suppresses gratification of
needs and regulates it by means of strict social norms.

23.  Process-oriented versus Results-oriented,
 Job-oriented versus Employee-oriented,
 Professional versus Parochial,
 Open systems versus Closed systems,
 Tightly- versus Loosely-controlled, and
 Pragmatic versus Normative.

24.  Managing international business means
handling both national and organization
culture differences at the same time.
 Organization cultures are somewhat
manageable while national cultures are given
facts for management
 Common organization cultures across
borders are what holds multinationals
together.

25.  Eurostat, Unemployment Rates in Europe, Last updated: Apr 9, 2012.
http://www.google.com/publicdata/explore?ds=z8o7pt6rd5uqa6_&met_y=unem
ployment_rate&idim=country:de&fdim_y=seasonality:sa&dl=en&hl=en&q=german
+unemployment+chart#!ctype=l&strail=false&bcs=d&nselm=h&met_y=unemploy
ment_rate&fdim_y=seasonality:sa&scale_y=lin&ind_y=false&rdim=country_group
&idim=country:de&ifdim=country_group&tstart=664264800000&tend=1329631
200000&hl=en_US&dl=en
 Forsa-Institut, September 2004
 Hofstede, Geert. Culture. http://geerthofstede.nl/culture.aspx and National
Cultures http://geerthofstede.nl/dimensions-of-national-cultures
 Kristin Zeier, Reunified Germany is a nation of many faces and variable success,
Deutsche Welle, 27.09.2010, http://www.dw.de/dw/article/0,,6025610,00.html
 Richard Connor (AP/AFP/Reuters), Results of reunification leave Merkel satisfied,
Deutsche Welle, 26.09.2010. http://www.dw.de/dw/article/0,,6046204,00.html
 Staff, FindingDulcinea. "On This Day: East and West Germany Reunited."
FindingDulcinea. 3 Oct. 2011. Web. 19 Apr. 2012.
http://www.findingdulcinea.com/news/on-this-day/Oct/Germany-Reunited.html
 Wirtz, Michael, German Reunification Provides Lessons for EU Expansion, January
28, 2005, VOA news, http://www.gmfus.org/archives/german-reunification-
provides-lessons-for-eu-expansion