Cultural Differences in Business Life –
Understanding German and American Business Culture

by: Ulrike Ditzel

TABLE OF CONTENTS

1. INTRODUCTION 1

2. NECESSITY OF INTERCULTURAL UNDERSTANDINGS 2

2.1 WHAT IS CULTURE?  3
2.2 THEORETICAL CONSTRUCTS OF CULTURE  4

2.2.1 Hofstedes Dimensions of Culture  4
2.2.2 Halls Model of Cultures  6

3. DIFFERENCES IN AMERICAN AND GERMAN BUSINESS CULTURES  7

3.1 DIFFERENT WAYS OF SAYING  8
3.2 HOFSTEDES MOST SIGNIFICANT DIFFERENCES 12

3.2.1 Individuality versus Collectivism 12
3.2.2 Uncertainty Avoidance 13
3.2.3 Motivation  14

3.3 FURTHER DIFFERENCES 15

4. CONCLUDING REMARKS 16

BIBLIOGRAPHY  18
 

1. Introduction

Globalization has led to remarkable changes in the way we conduct the world’s business. International Mergers and acquisitions are en vogue today. The advantages quoted by managers include advantages of scale, increased shareholder value, access to new markets, lower overheads and so on. The number of international mergers and acquisitions between German and American companies increased a lot during the last years, as well.

At the beginning there are high hopes and elation connected with the deal. But the longterm reality, however, is much the opposite. At least 50 percent of all international mergers and acquisition activity fails, no matter how the success is measured.¹ There are also lots of companies who failed, who are therefore not able to benefit from some positive synergy effects like cost reductions. Why did that happen? A survey tried to analyze the reasons for this. The surprising result was that just 30% of the failures were attributed to the “hard factors” of business, like planning, finance or technology. For the rest, the reason lay in the so-called “soft factors”, which contain cultural and organizational behaviour. ²

Somewhat less acknowledged, although hardly disputed, is the positive and negative impact of cultural aspects on the success of M&A activity.³ The following work reveals the differences between American and German business culture and also analyzes its historical and social background. Thereby, the main goal is to disprove that American and German business styles are almost similar. Furthermore, at the end the reader should know more about the existing differences between the two nations, because their unawareness leads to the failures of M&A. In the second chapter there is theoretical basis information which helps to reach a better understanding of this work. Thereafter comes the main part about the existing differences between Germans and Americans. Because there are plenty of them, it is just possible to take a brief view on a certain field of life. For this reason the author picks a few, those which seem to be the most relevant differences between the German and American business world. In every part, the author is going to illustrate the differences by means of examples⁴. The main question which is answered in this work is: WHY do these different characteristics exist? Where do they come from?

2. Necessity of Intercultural Understandings

As the reader has seen in the introduction part, the main reason for the failure of M&A laid in the “soft-factors” containing cultural and organizational behaviour. The main problem of many persons in leading positions is the fact that they are not aware of the existing cultural differences, or just underestimate them. And this is a major problem between Americans and Germans. Executives in both countries say that their cultures are almost the same. On the one hand this seems to be true. Both countries have a strong Anglo – Saxon background, which means they are quite pragmatic in the way they do business. In addition, Germans and Americans have a propensity to concentrate on one activity at a time. Both value punctuality, are results-oriented, as well as competitive and practical.⁵ Another fact which causes this opinion is that many Germans speak English very well, if not even excellent. The common western mindset of these two cultures intensifies that they appear to be similar.⁶

As a result both sides expect each other to think, communicate and behave the same. People, who share this opinion, tend to become a victim of the most common mistake in U.S. – German business relations – the “trap of similarity”,⁷ the synonym for the fact, that the German and American culture looks very similar at the surface. But beneath there are existing differences. And because they are not expected, their effect can be even more damaging for every business relation between a German and an American company. The most important thing to do is to make you aware of the cultural differences – or more general – aware of the differences in the “soft factors”, including also the organizational differences. But to be able to do this you need to know about the existing differences and even more important you need to get an understanding about your own culture and the culture you are dealing with. Therefore it is necessary to analyze “What is culture?” and afterwards describe the differences.

2.1 What is Culture?

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1 Forstmann, St. (1998), p. 57.

2 Schmidt P., (2002b)

3 Forstmann, St. (1998), p. 57.

4 Which we will see, is also a typical German attribute.

5 www.agcc.de

6 www.german-connection.com

7 www.amcham.com