Managerial Decision-Making Process in the Modern Business Conditions in the EU: Importance of Cultural Influence

Managerial Decision-Making Process in the Modern Business Conditions in the EU: Importance of Cultural Influence

Boban Melovic (University of Montenegro, Montenegro), Slavica Mitrovic Veljkovic (University of Novi Sad, Serbia), Dragana Cirovic (University of Montenegro, Montenegro) and Ivana Djakovic Radojicic (University of Novi Sad, Serbia)
DOI: 10.4018/978-1-7998-1188-6.ch020

Abstract

This chapter analyzes the differences of decision-making process in the EU member countries, caused by differences in main dimensions of national culture of each of them. The influence of different cultural dimensions on decision-making process is explained. Thanks to the application of qualitative research method and deductive approach, there are conclusions about specificities of decision-making process, in particular EU countries. Using the inductive approach, content analysis method and method of synthesis, the EU countries were grouped regarding to the decision-making styles that are the most appropriate in each of them, based on the characteristics of the cultural framework that exist within them. Obtained results may help managers to better understand their decision-maker role in different cultural environment and it would enable them to apply the appropriate decision-making style, which would increase the quality of business decisions that are being made.
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Introduction

Managerial decision-making is a process aimed at resolving identified problems and enabling effective and efficient performance of business activities. It is a cognitive process of making choice between more options, based on available information, knowledge, experience and beliefs of decision-makers. It involves the rational and irrational mechanisms of thinking and all depending on the complexity of the decision that managers make, time that they have available for making decision and the circumstances which condition the criteria for deciding (Ashkanasy & Ahlstrom, 2014). Decision-making is an integral part of the most of managerial activities and it is crucial for successful tasks resolving and achieving business goals (Al-Tarawneh, 2012). Therefore, it is an essential process of modern management representing, in every field, the core function for the manager (Andronaceanu and Ristea, 2014).

Management helps organizations to realize the business goals by planning, organizing, leading and controling certain resources. However, in order to realize any activity, it is necessary to make a decision. Managers should make functional decisions, which are for the moment adequate and of quality and which will contribute to the improvement of work processes and the relationship with the environment. Making a good decision implies knowledge of all environmental factors that may potentially influence business performance. This is particularly important for enterprises that operate in international market, such as EU. Although EU makes a unique market with free flow of people, capital, goods and services based on common legal framework adopted by its members, still many differences that exist in economical, political, social and cultural environment of different member countries may not be neglected. All these differences should be cautiously considered in decision-making process in order to achieve defined business goals.

Modern business conditions in the EU, characterized by often (even daily) changes in market, competition and overall business environment make decision-making process difficult and risky. The organization in its life cycle also goes through different phases which require the necessary changes and adjustments. Therefore, the risk becomes an inevitable part of making most of managerial decisions and it is particulary expressed in business acitivities which take place in international market, such as EU (Figueira-de-Lemos et al., 2011; Liesch et al., 2014). In general, risk may be defined as the probability of an adverse event. All future decisions are a subject of risk, because it is unknown what their outcomes will be. Regardless of the planned return of invested resources, there is always a possibility that some unpredictable event might lead to its reduction. For this reason, the management should reduce the impact of adverse effects to minimum and seek solutions that could bring competitive advantages and secure position within the market segment in which it achieves its mission (Nielsen & Nielsen, 2011). The organization needs to pay attention to changes in the environment and to respond to them. Passivity in relation to the instability of the environment and the changes it brings is a danger. The main task of the organization is to overcome all the dangers that may jeopardize or prevent its further growth and development.

Expanding business on the international market, such as EU, makes decision-making even more risky. Outside the national borders, economical, social, political, legal and cultural environment is much more diversified and complex, which makes it hardly predictable and more suceptible to changes (Cavusgil et al., 2014). Therefore, each business decision should be based on the analysis of all specificities of domestic and international market and on anticipated important changes in the way it functions (Linkov et al., 2006). Managers try to analyze carefully characteristics of economical, legal and political framework of EU countries during the decision-making process. Still, most of them ignore cultural differences which exist between these countries and its impact on the quality of the decisions that have been made (Johnson et al., 2006). Therefore, cultural barriers often become one of the main reasons for failure in achieving business goals in the EU market.

Key Terms in this Chapter

European Union: An economical and political union of 29 member countries forming common market, with free flow of people, capital, good and services and that are subject to the obligations and the privileges of the membership.

Decision Making Process: A process of creating value for business, through planning, controlling and evaluating performance.

Decision: The choice between several possibilities (also called alternatives) that are at manager’s disposal.

Manager: Person performing the function of management in all organizations.

Cultural Dimensions: A specific value construct used to describe certain characteristics of a culture or to enable comparison of different cultures.

Systems for Decision-Making Support: Computer-based interactive systems that help management in the use of data and models to solve unstructured problems in the decision-making process.

Risk: Possibility to achieve the unintended consequences of some events.

Circumstances: Factors that may directly or indirectly influence the decision-making.

Culture: A set of specific beliefs, customs, values and norms widely adopted in one society, that shapes the behavior of its members.

Risky Situation: A situation where the outcome is unknown to the decision-maker, i.e. he/she is not sure which outcome will occur and the uncertainty may lead to erroneous choices.

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