3/27/2020 0 Comments Fair Value Accounting EssayThis paper attempts to answer the questions: Is Fair Value Fair? In so answering the question there is a need to determine whether the use of fair value accurately portray the value underlying financial and economic transactions; to determine whether there is basis to have one universal standard of valuing the assets and obligations of all firms; to find out whether accounting standards would allow for both historical and fair value and still produce meaningful information for decision making; and establish one is more important between relevancy and reliability and whether one’s the importance each depend upon the financial user. 2. Analysis and Discussion 2. 1 What is meant by being fair? To be fair means giving what is due to a person. If applied to an asset purchased or liability assumed in business, fair value would simply mean that said asset or liability is neither overpriced nor underpriced as a matter of perception. Under the law of economics, fair value would refer to that market price which is approximated by the equilibrium price of a thing or good, which is the value of the something from a seller that is not forced to sell or from a buyer that is not forced to buy. In a business transaction there are always are investors, creditors, and other persons who must get their due in transactions that they will enter into. An investor will know what is fair if the person or entity will earn just enough return above cost of capital and in exchange for the risk that such person or entity is taking. The same must be true with a creditor that the person must also get paid on time on his credit plus a sufficient return for the risk in form of interest and penalties. In terms of viewing the corporation as a business entity, what is fair to it is what will allow it to have a sufficient return for the risk that it is taking above its cost of doing business or cost of capital. To arrive at what is fair the investors and creditors who are called users of financial information, these users must know the true or accurate information about of the company so that they will know whether they are going to earn or lose and make the necessary decision whether they will sell, buy or hold to their investments. In other words, to have the chance of being treated fairly from a transaction, one must have the opportunity to have the true or accurate value of asset or liability being dealt with in a business transaction. The opportunity is thus normally supplied by financial reports prepared by companies and which are made public. It is in these financial reports where values whether fair or historical are reported in accordance with prescribed accounting standards that may come from the Financial Accounting Standards Board (FASB) in the case of US companies and IFRS in case of companies operating in the European Union and in other countries which have adopted the IAS or IFRS. Fair value accounting was made pursuant to FAS 157 as issued by US FASB for companies to reflect the accounting information on how much are the real values of assets, liabilities and equity in the balance sheet as contrasted with presenting the information using the historical cost accounting. The purpose of FAS 157 then was built on a framework whereby financial users are given the chance about the true state or fair value of assets, liabilities and equity for decision making under the impression that things will be fair to users of financial information about a company. Incidentally, FAS 157 defines fair value almost very closely to what was discussed and analyzed so far. It is the price that would be received “to sell an asset or paid to transfer a liability in an orderly transaction between market participants in a measurement date†(Sortur, 2007). 2. 2 Does the use of fair value accurately portray the value underlying financial and economic transactions? To the extent that fair value concept is discussed so far, there is the presumed proposition that the use of fair value will accurately portray the value underlying the financial economic transaction. As to whether this is true, this subsection will have to evaluate the subsequent result on what happened upon the application of 157. In the case of banks, there are those who have to write down the value of assets because of their perception that values have declined due to existing market conditions (Chasan, 2008: Rees-Mogg, 2007). The economic effects however were not favorable to affected interested parties since this action of the banks has produced a backlash. Investors of these banks have lost values of their investments. As a result, the banks have become more risky and depositors lost their trust too in the banking system. If indeed the banks were just reflecting the true values of the assets, how come the reaction of these banks as matter of complying with the requirements of the FAS I57 was not good for many of the affected parties? Would it proper then to deduce that the application of FAS 157 is not fair or that FAS 157 fair value is not fair? If the answers to both of these questions are in the affirmative, then this would have the connotation that what is unfavorable to others is not fair. But how if the values being reflected in the write down are indeed the true values, would the fact that users of financially information get adversely affected make the FAS 157 not fair any more? It would seem that it would be not correct to say fair value accounting or the use of fair value will not be fair if users get affected or have the perception of not getting what they feel or perceive to deserve even if the information is indeed accurate. Otherwise, fair value accounting would be equated with sure profits which could never be within the contemplation of the use of information in decision making. Being fair therefore must first and foremost be characterized to represent the true and accurate information and consequence would be justified by such quality of information. To answer squarely whether the use of fair value accurately portray the value underlying financial and economic transactions, this paper would have to answer in the affirmative. Based on foregoing analysis the FAS 157 aims to reflect the values what would approximate the market price since it is “the price to sell an asset or paid to transfer a liability in an orderly transaction between market participants in a measurement date†(Sortur, 2007). FAS 157 fair value is therefore the result of the business transaction using the exit price (Sortur, 2007) and is determined by the buyers and sellers in the market. It is therefore not the job of FAS 157 to create what is unfair but would have only to reflect the true values of assets or liabilities that would have to be reported. Therefore, fair value accounting or the use of fair value must be upheld to be fair if it would reflect or would cause the reflection of what are true values. Indeed, it must be the capital markets or the buyers and sellers who will determine the market value or fair value and not the accounting standard. The only role of the accounting standard is to cause its reflection in financial reports of companies because of the requirement to make public their financial statement to investors which would reflect the fair values of assets and liabilities. There is argument that the intention of 157 Accounting rule FAS 157 is good but one cannot prevent people from taking advantage of the new rule to what could further their interest. It is further argued that in whatever one would like to look at it, the generic thing about business is still the desire for profit by which people are motivated with their personal interest to get more wealth (Brigham and Houston, 2002). In response, the use of fair value does consent to allowing people to be taken advantage but cannot prevent those who would want to and those who do not know how to process information for decision making. If the banks which wrote down asset values are indeed taking advantage of the use of fair value accounting, it is still the transactions between the previous buyer or seller that have caused the reaction which started it and the role of accounting standard is just to reflect them (Meigs and Meigs, 1995). If the requirement to report what is happening is unfair, what will then be fair? Chasan (2008) narrated about some investors expressing their doubts on the effectiveness or fairness of fair value accounting method used especially in the context of evaporating markets caused by the financial crisis. The author however admitted that the use of FAS 157 as an accounting standard was made to improve transparency to investors. Citing big write-downs being made big companies like Citigroup and Merrill Lynch & Co Inc. which has made multibillion-dollar reductions on subprime-related asset-backed securities and other assets described as hard-to-price assets, the issue of whether fair value is still fair has become a controversial question (Chasan, 2008). The argument being asserted is about the volatility of being caused the use of fair value. Rephrased simply, can fair value justify the volatility? Volatility is a term used in business which connotes changes in market prices and which causes risks to investors (Droms, 1990; Helfert, 1994). It is feared that with the desire to create transparency, increased risk from the use of fair value is coming out as a result. To resolve the issue, the previous answer to the question on whether the use of fair value could justify big losses if what is being reflected or reported about company values are still true, would in effect cover the issue of volatility being blamed on the use of fair value. Hence, this paper believes, that fair value which stands for what is true must be upheld as argued earlier. There are concerns that because of volatility caused by the use of fair value accounting, the money makers would just be benefiting hedge funds since they are those to profit from volatility (Chasan 2008). In answer, it could argued that such is the nature of fair value accounting, to allow the market forces to move freely without people being compelled to enter into buying and selling transactions. If there are losers, there are also losers and they are part of the process. It is also argued that those who are complaining about the effects of credits being blamed on the use of fair value accounting are investors or groups of them, who may have been instrumental in pushing for the shift to fair value accounting. One of these groups is called the CFA Centre for Financial Market Integrity, with analysts and portfolio managers composing the group (Chasan 2008). The group and other groups 2007 had their aggressive lobbying to use fair value more in financials. These investor groups could not be only be winners in a market transaction, they could also be losers sometimes; otherwise the market is not operating efficiently. 2. 3 Should there be one universal standard of valuing the assets and obligations of all firms? The issue of whether there should be universal standard for valuing the assets and obligation may be very ideal since when one now talks of universal fair value as a universal standard for example, one will have to consider macroeconomic conditions of the different companies in the world. Since not all nations are similarly situated, at least economically, there is the strong probability that universal value could not be implemented. The question is being propounded to help in setting what is the fair value in accounting like the universality of human rights. However its impracticality will prevent the attainment of the objective. Accounting values are not human rights. Another thing is the difficulty of measuring the risks in business in different countries which are factors in determining the cost of capital of doing business. The difference in risks depends upon many factors including macroeconomic conditions which are affected by political developments. In answer therefore to the question, it will have to plainly say that the vision of universal standard is laudatory and this could be a part of an approximate desire to the internationalization of accounting in many part of the world. There is the plan to harmonize all accounting standards in the world. The FAS 157 definition was actually made part of the plan of IASB which makes IFRS, to adopt the former for the use of those using the IAS or IFRS (Sortur, 2007). In other words, efforts are made to approximate universality of standard in valuing the assets and obligations of all firms but its realization could only possibly become when the time will come for a universal government. 2. 4 Can accounting standards allow for both historical and fair value and still produce meaningful information for decision making? Accounting standards are in effect guides to users to help users make informed decisions in business. Having both historical and fair value must strike the balance of getting to the extreme of having one and disregarding the other. In other words, one needs to know what is historical for comparison to what is fair value or market value to make an informed judgment. Accounting standards must then work for the attainment for the creation of balance between the two values. As to whether the accounting standards can allow for both historical and fair value and still produce meaningful information for decision making, is answered again in the affirmative. This can be tackled better by breaking the given statement into two propositions first and then combine them latter. The first proposition would be declared settled in the fact the accounting standards can allow both historical and fair value together. The second proposition is that the use of both will still produce meaningful information. This first proposition is accomplished since the practice have been done for a long time already since in the case of valuing of inventories, accounting standards allow the valuing them of lower of cost or market under the IAS 2. (Deloitte Touche Tohmatsu, 2008). The fact that inventories can be valued at cost means the historical cost is maintained but requirement of presenting the fair value of inventory if it has gone down in the market is also a part of the standard which in effect allows the working of fair value concept. There are other IAS concepts which allowed fair value accounting and historical value accounting. Thus this section is not much of a problem. The second proposition appears to also to have been fulfilled by the use of IAS as illustrated. More meaningful information is in fact reflected by allowing a combination of fair value and historical cost in the valuation of assets and liabilities of companies. By combining the validation done is confirming the application of two proposition, it could be sufficient to strongly answer the question in the affirmative. 5. Relevancy and Reliability: Is one more important than the other, depending upon the financial user? Both relevancy and reliability are requirements for qualitative characteristics of accounting information. Forcing one to be is more important than the other would be asking the wrong question if the objective is only to determine whether preparing financial information using their fair values is fair. In fact to say that an information must be relevant carries the presupposition that the information must also be reliable. This is on premise that reliability connotes objectivity of information which is very much akin to being truth or fair. Information is relevant or has is relevancy character if it influences one’s decision about a particular issue. On the other hand, reliability deals with the objectivity or accuracy of the information. How could a decision maker consider information as relevant when there is no reliability of the information? On the other hand having reliable information would be of no value if the same is not needed in the decision to be made. The two characteristics must therefore go together. 3. Conclusion The issue of whether fair value accounting or the use of fair in accounting for company assets and liabilities is fair must be answered in the affirmative. What is fair is not what has caused much damaged to a person or entity if such damage was a result of failure to follow the basic rules of making investment. The effect of fair value should not be used to allow one to just justify greed while disregarding the rights of others. A loser under a fair value accounting is comparable to a person who is taking too much risk thus the return could also be high but could be low because of the working of the market. As long as buyers and sellers are not being compelled to complete their transaction, fair value is still fair. Fair value accounting will lead to the truth but its value will also depend on the users of information after they have done their roles in the market. The user will still need to make a comparison with what is historical and what is the current fair value as caused by economic conditions. Present accounting standards have caused the reporting of both kind of information but users must also be intelligent in doing their part. Fair value as a concept in accounting standard was just made to correct the apparent failure of purely historical cost accounting. If fair value accounting is fair, it does not imply that the standard must go back to historical accounting but historical information must still be reported and allow the user to make a difference in how to process the information. Since fair value and historical cost could co-exist together, the same must be the better option as it will provide a balance between historical and fair value accounting. References: Brigham and Houston, Introduction to Financial Management, Thomson-South Western, USA, 2002 Chasan, Emily (2008), Is fair value accounting really fair? {www document} URL, http://www. reuters. com/article/reutersEdge/idUSN1546484120080226, Accessed October 20, 2008 Deloitte Touche Tohmatsu (2008), Summary of IFRS for IAS 2, {www document} URL http://www. iasplus. com/standard/ias02. htm , Accessed October 21, 2008. Droms (1990) Finance and Accounting for Non Financial Managers, Addison-Wesley Publishing Company, England Helfert, Erich (1994), Techniques for Financial Analysis, IRWIN, Sydney, Australia Meigs and Meigs, 1995, Financial Accounting, McGraw-Hill, Inc, London, UK Rees-Mogg (2007), Why FAS 157 strikes dread into bankers, {www document} URL http://www. timesonline. co. uk/tol/comment/columnists/william_rees_mogg/article2852547. ece, Accessed October 21, 2008. Sortur (2007) Fair Value Measurement, The Chartered Accountant {www document} URL, http://icai. org/resource_file/96471564-1574. pdf, Accessed October 21, 2008. ]
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Diversity in hospitality industry: One of the biggest impacts of globalization for those managing companies and organization is dealing with a more culturally diverse pool of employees (Lim and Noriega, 2007). Lim and Noriega (2007) further argue that in a world where over 50% of world’s are owned and controlled by TNCs and MNCs they are bound to deal with workforces from different cultural backgrounds due to their cross boundary operations, their attempt to attract talent from various parts of globe, and at times governments’ pressure for greater diversity at workplace (Stanley, 2008). Stanley (2008) note that, the same rule of thumb applies to the hospitality industry, which has seen a surge in workforce diversity. Lim and Noriega (2007) advocate that rapid growth in the hospitality industry in areas such as East and Southeast Asia (e.g. China) have presented the hospitality MNCs such as Hilton and Sheraton with the much needed space to grow. Stanley’s (2008) study of international hotel chains in Asia continent reveals that Hilton is planning to add another 300 branches to its existing 50 branches in the region. According to a report by Xinhua (2008) many international hospitality organizations showed readiness to tap into the Chinese market in the face of the Beijing 2008 Olympics. Such aggressive battle for market share in this flourishing region has already made its mark on the labour market where there is a tight competition among these companies to attract the talented employees (Doherty et al, 2007). Doherty et al, (2007) argue that the real competition in the labour market is to absorb the kind of managers that are able to deal with employees from a different cultural background. Thus, the important task for these MNCs is to attract the type of management talent (often expatriates) who are able to deal with multicultural work environments while these managers receive the right king of support from the head office to overcome the type of problems these environments pose due to cultural differences (Zhang, 2010). The increasing importance of dealing with cultural differences, especially in management level has resulted in creation of a vast body of literature on this subject. One of the earliest works on this subject were presented by Hofstede (1980) who introduced a conceptual framework that is based on 5 dimensions of; “power distance, individualism vs. collectivism, masculinity vs. femininity, uncertainty avoidance, and long term vs. short term orientation†(Hostede, 1980). Other theories of culture are developed by scholars such as Klutchhohn and Strodtbeck (1961) who introduced the cultural orientation framework and Hall (1971) who develop the cultural contexts concept. In the this paper the main aim of the author is to compare and contrast these three cultural concepts on the basis of their advantages, disadvantages and suitability to the management of Chinese employees in the context of hospitality industry. However, firstly this author is going to provide a brief introduction on culture and its various definitions as well as debating why it is important to understand culture and cultural differences. What is culture? Culture has been studied and analysed from various different perspective, which tend to provide varying, but yet at times similar definitions of this term. For instance, Keesing (1974) defines culture as “systems (of socially transmitted behaviour patterns) that serve to relate human communities to their ecological settings. These ways of life of communities include technologies and modes of economic organization, settlement patterns, modes of social grouping and political organization, religious beliefs and practices, and so on†(pp. 5). Binford (1968) provides the following definition: “Culture is all those means whose forms are not under direct genetic control . . . which serve to adjust individuals and groups within their ecological communities†(p. 323). Based on these interpretation culture can be defined as a group of behaviours and beliefs associated to a certain group that may reside in a certain geographical location. However, what make culture and cultural studies important is the perceived differences among between cultures and the implication of these differences for the world commerce. Solomon and Schell (2009) argue that “today it’s not uncommon to manage business functions in other countries with direct reporting relationships to functional teams in many countries; it’s also not unusual to interact with colleagues at home who have a variety of backgrounds and diverse personal styles, all of which respond to different management techniques†(pp. 111). Morris (2011) also notes that understanding cultural differences is an important aspect of managing diverse pools of employees and asserts that “a (manager) who interprets employees from different cultural groups without awareness of cultural norms can miss or misread important signals in their communicationâ€. Thus, so far it is established that cultural awareness is an integral and important part of management; the following sections will aim to review the previously mentioned cultural theories in the context of hospitality management of foreign or expatriate managers in China. Hofstede’s five dimensions: Hofstede’s (1980) five dimensions was produced on the back of many interviews and observations, and as evident from the title it is based on five dimensions (mentioned earlier) and assumes that cultures vary from one another on the basis of these five aspects. In trying to relate the five dimensions concept to the hospitality industry there are difficulties and confusions as the concept was developed on the back of interviews of employees who mainly worked in a similar industry (Newman, 1996). However, in trying to relate this concept to management of the Chinese hospitality companies’ managers can hugely benefit from the five dimensions; whether it is about learning how to lead and manage, motivate, resolve problems and etc. (Rogers, Hart and Miike, 2002). As it can be seen from the table below, countries do vary in the way they react to inequalities in distribution of power. As a result, the construct of the organizations vary depending on this very fact (Miroshnik, 2001). Based on this observation, one of the major problems that a hospitality manager would face in China is getting the manager subordinate distance right. In other words, while in Western organizations and companies the management style is rather flat and two way communication is encouraged, in China the hierarchical management style is very dominant and the communications channels are normally top-down (Tuttle et al, 2009). Therefore, a manager who is used to a more democratic style of management is now faced with the reality of a wok place that does not support or understand this management model. One way of course would be to attempt to change the culture and introduce a new management style into a multi-national hotel chain’s (e.g. Hilton) operations in China; however, as it can be seen from the past experiences cultural shifts are not as easy and fluent as one may like them to be (Choi et al, 2004). Thus, the easier and more effective approach in the short to medium term is to understand and embrace the local culture. For instance, a foreign or expatriate manager who is managing a multinational hospitality firm in China needs to understand the fact that China is a masculine and collective society where uncertainty is largely avoided and people have a very long term orientation in life and work and historically advocated great power distance (Li, 2008). A glance at the table above shows that in a society like China low individualism that is inherent in the culture implies that individuals are more concerned about the harmony at work, for which they are willing to suppress their emotions, and the achievement of the group and respecting the traditions is an integral part of their work ethics. The most important aspect of this dimension ought to be that part of Chinese culture that emphasizes on ‘working for the intrinsic reward’. Although this trait is slowly diminishing in China as a result of globalization and emergence of a ‘global culture’ (Tuttle et al, 2009) the older generation still upholds these values. Thus, managers should be mindful of this mind-set when it comes to devising strategies to motivate the employees.  An interesting aspect of Hostede’s (1980) five dimensions is the masculinity vs. femininity issues. A lack of understanding of this factor can cause problems for managers and discontent among employees. Jacob (2005) postulates that in masculine societies tasks are developed and assigned base on their nature. In other words, tasks are either masculine or feminine and managers need to have a good appreciation of this fact before engaging in developing tasks and responsibilities. From a personal perspective this author can confirm that in China [still] there is a great degree of emphasis on masculinity and femininity and assigning a feminine task to a man can be considered offensive. This is especially true in case of hospitality industry where tasks such as housekeeping are considered to be predominantly feminine tasks. Cultural orientation: This concept was developed by Kluckhohn and Strodtbeck (1961) and was one of the first comparative cultural studies to look at cultures from a multi-dimensional perspective (Hills, 2002). This concept has been recognised and acknowledged for its psychological study of human values (Russo, 2000 and Hofstede, 2001) and its approach to value as an all-encompassing attribute that goes beyond the positive and negative of the attitudinal studies (Hills, 2002). Authors such as Segal et al, (1999) and Smith and Bond (1998) argue that this concept is not relevant to management as the authors did not specify the implication of this study for business management. Nonetheless, this author finds dimensions Two (person’s relationship to others people) and Six (the conception of space) relevant to management and to hospitality industry. These two dimensions are highly similar with that of Hofstede’s individualism vs. collectivism. Therefore, an understanding of this dimension would equip managers to deal with the dilemmas that may arise from dealing with those who operate under different value systems. For instance, in this case understanding that individual relationship with others in the organization is based on hierarchy and collective effort can be hugely advantageous. This is especially useful in task development where managers would focus more on cooperative (collective) as opposed to competitive (individual) tasks. Hall’s high vs. low context culture: This concept refers to the degree of formality that is applied in communications between members of society (Guffey, 2009). According to Solomon (2011) in high context societies a great deal of communication is non-verbal and the culture itself explains the situation as opposed to words. As such, in a high context society the choice of words one utters are very important and metaphorical statements are frequently used. Furthermore, in a high context society there is huge emphasis on distinguishing the insider from outsider; for instance, in China the word ‘Guanxi’ specifically refers to this issue (Xin and Pearce, 1996). Grainger (2002) argues that in a high context society such as China, one’s understanding and respect of the superiors’ position is the key to developing good relationships and creating opportunities. The same principle applies to foreign or expatriate managers who are running hospitality or any other type of businesses in China. In an article titled “Gifts, Favours and Banquets: the art of social relationships in China†Yang (1994) reveals the secrets of developing meaningful and successful business relationships in Middle Kingdom and provides invaluable advice on how to engage in with officials and businessmen in a way accepted and understood in Chinese culture. Grainger (2002) provides a case study of the Roaring Dragon Hotel in South-West China and reveals how after the merger of the hotel with a European hospitality group some of the employees who were finding it difficult to work with the Western Manager use their Guanxi with the a Chinese senior manager to be transferred to a branch run by a local. Grainger (2002) further adds that many foreign managers in hospitality industry fail to secure good deals as they lack the expertise and right links to do so. There is no denial about the fact that in China favours are performed frequently, but only at the right price and to the right persons. The very concept of Guanxi is a euphemism for favouritism and subtle bribery (Yang, 1994). However, to a foreign manager the dilemma is how to go about asking for favours without exposing themselves or those who are able to provide the right opportunities (Park and Luo, 2001). Such situations perfectly highlight the importance of understanding different culture (Chinese in this instance) and finding ways of accommodating for the needs and requirements of that specific culture. In an article published in New York Times (2009) Selignon argues that many foreign managers do not understand the importance of building Guanxi not only with local authorities and business owners, but also with the employees. She goes on explaining that majority of Western managers follow the same practices that they would do back home and fail to understand the importance of building relationships with their subordinates. In Chinese context employee and manager relationship goes beyond the office hours and interactions expand to house visits, dinner gatherings and etc. (Yang, 1994). Therefore, to most hospitality managers deployed in China success or failure is a matter of understanding or failing to understand these differences. Understanding customers from their cultural perspective: Kandampully et al, (2001) postulate that hospitality managers in China are predominantly dealing and catering for the Chinese customer, although the number of foreign customers in China is on the rise, which only adds to the diversity of the cultural differences that should be understood and accommodated. This point is confirmed by Reisinger and Turner (1997) who assert that: “Greater cross-cultural awareness, understanding, and acceptance of cultural differences is needed by tourism practitioners†(pp. 1). However, in a strictly Chinese context it is upon the foreign manager to gain insight into the needs and wants of the Chinese customers in order to meet or exceed their expectations. Park and Luo (2001) argue that to a foreign manager of a hospitality firm the main point of contact with the cultural requirements of the customers are the local employees. Thus, in order to understand the market and its requirements managers must be able to get through the first hurdle which is to get through the management issues they will face with their employees. Reisinger and Turner (1997) assert that “managers of services firms deployed to foreign countries have to deal with the perpetual dilemma of learning, understanding and adapting to what can best be described as untested waters; their failure or success solely depends on their ability to overcome the cultural one by one through continuous learning and adaptationâ€. Conclusion: Cultures as value systems that permeate human beings’ lives and determine how they behave, act and react are increasingly gaining in importance and over the past few decades a large body of literature has been developed to aid the commercial world in dealing with the ordeals of dealing with cultural differences and difficulties that arise from these cultural incongruities. This paper tried to highlight how an understanding of cultural differences can play a crucial role in helping foreign hospitality managers deployed in China to make a successful cultural transition across cultures. In the course of this paper it was discussed that culture as unwritten manuals of behavioural patterns play a significant role in how many interactions develop and flourish into meaningful relationships. Moreover, it was highlighted, through provision of real life examples, how a lack of understanding of cultural differences can limit or block the success of foreign managers in China. As a means of substantiating this argument this paper looked at three different concepts (i.e. Hofstede’s five dimentions, Klutchohn and Strodtbeck’s cultural orientation and Hall’s cultural context) each one of which was studied and analysed in terms of its relevance to the context of management (hospitality specifically). In conclusion, this paper reveals that while the two concepts of Five Dimensions (Hofstede) and Cultural Context (Hall) carry greater fit and are more applicable to management issues than cultural orientation concept (Klutchohn and Strodtbeck). Nonetheless, overall impact of such concepts and cultural intelligence on facilitating successful cultural transition for managers cannot be over emphasized. As it was noted in this study in-depth cultural learning and transition not only allows managers to be more effective in managing their human resources, it will also allow them to negotiate access to better opportunities for greater development and profitability. Therefore, understanding cultures and finding ways of bridging the cultural gap is an essential when it comes to managing across cultures. In this way a manager would be able to improve his/her efficiency through understanding the host culture as well as reducing the risk of misunderstandings and possible disagreements that can otherwise be avoided. References: Grainger, S., (2002) “Guanxi Neglect at the Roaring Dragon in South-west China: The Demise of an International Management Contractâ€, Proceedings of the 15th Annual Conference of the Association for Chinese Economics Studies Australia (ACESA) Guffey, Mary Ellen (2009). Essentials of Business Communication. South-Western/ Cengage Learning Hills, M. D. (2002). Kluckhohn and Strodtbeck’s Values Orientation Theory. Online Readings in Psychology and Culture, Unit 4. Retrieved from http://scholarworks.gvsu.edu/orpc/vol4/iss4/3 1/11/2012 Hofstede, G. (1980). Culture’s Consequences: International differences in work related values. Beverly Hill, CA, Sage. Kluckhohn, F. R. & Strodtbeck, F. L. (1961). Variations in value orientations. Evanston, IL: Row, Peterson. Luo, Y. (1997) Guanxi: Principles, philosophies, and implications, Human Systems Management, 16: 43 – 51. Newman, K. L. (1996). “Culture and congruence: The fit between management practices and national culture.†Journal of International Business Studies 27(4): 753. Park, S. H. & Luo, Y. (2001), Guanxi and Organisational Dynamics: Organisational Networking in Chinese Firms, Strategic Management Journal, 22, pp 455 – 477. Russo, K. W. (Ed). (2000). Finding the middle ground: Insights and applications of the Value Orientations method. Yarmouth, ME: Intercultural Press. Samovar, L. A. and Porter. R. E. (2004) Communication Between Cultures. 5th Ed. Thompson and Wadsworth. Segall, M. H., Dasen, P. R., Berry, J. W., & Poortinga, Y. H. (1999). Human behavior in global perspective: An introduction to cross-cultural psychology (2nd ed). Boston, MA: Allyn and Bacon Seligman, Scott D. (1999). Guanxi: Grease the wheels of China. China Business Review. Sep/Oct, Vol. 26 No. 5, pp 34-38. Smith, P. B., & Bond, M. H. (1998). Social psychology across cultures (2nd ed.). London, UK: Prentice Hall. Solomon, Michael (2011). Consumer Behavior: Buying, Having, and Being. Pearson/ Prentice Hall Yang, M. (1994) “Gifts, Favours and Banquets: the art of social relationships in Chinaâ€. Ithaca, NY: Cornell University Press.
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