The 21st Century has witnessed integration and increased cultural interaction among people on a previously unprecedented scale. This frequent interaction between people from varied countries and cultures has risen mostly as a result of the advances that have been made in transport and communication technologies (Gudykunst & Mody 2002, p.12).
As a result of this interaction, there has been the major integration of economies and cultures in a process known as globalization. Rosenbloom and Larsen (2003, P.309) advance that as a result of globalization, “businesses from various parts of the world interacting and dealing with each other is expected to be the normal state of affairs for the majority of businesses”. Businesses that were once confined to a particular country will therefore seek relationships all over the world as a result of the communications and transportation technologies that have made such endeavors possible.
However, despite the ease with which international business can be conducted in modern times, culture still continues to present a huge challenge to global businesses. Becker (2000, p.1) reveals that a lack of emphasis on the importance of culture by key players in international business has resulted in many costly errors.
Considering the fact that “culture impacts virtually every construct of concern to marketers”, it shall be of great importance to review the impact of culture on international business (Schumann 2009, p.48). This paper shall therefore set out to articulate the various significant impacts that culture has on international business. The paper shall first begin by giving a brief review of the issues that have resulted in cultural convergence and then precede to highlights the impacts that culture has on international business.
Reasons for Increased Cultural Interactions
Culture is defined as “a system of values and norms that are shared among a group of people and that, taken together, constitute a design for living” (Vance & Paik 2006, p.39). From this definition of culture, it is evident that culture has a huge bearing on the lives of individual. This encompassing influence of culture results in culture impacting either negatively or positively business dealings. International business which in most cases involves the interaction of people from differing cultural backgrounds must therefore be looked at in the context of culture. This is because culture will have huge implications on the business dealings. However, it is important to note that culture is a dynamic concept that changes with time.
While there are many factors that have resulted in intercultural interactions, globalization is arguably the single biggest factor. Globalization is defined as a process characterized by major integration of economies and cultures. This process has become rife and with it an evident shift in the way business and societies operate.
As communication technologies advance and transportation means become faster and more affordable, the world is slowly turning into a global village where reduction of barriers between nations is upper most in the mind of international businessmen. Masteralexis, Barr and Hums (2008) alludes that this trend has as its basis the philosophy that products and services that have the same appeal and generate the same demand all over the world can be developed. Globalization also includes the increased mobility of capital across the globe with huge implications on the national economies of individual countries.
As a result of globalization, there has been an increased interdependence in trade among countries. Leung (2005, p.358) documents that in present times, international trade has culminated in the emergence of a global economy which now has a direct bearing on the domestic economic growth and prosperity of each individual country. This being the case, international business ventures have risen and with this, the cultural differences that exist have been accentuated. Businessmen who have moved to exploit the global business opportunities are therefore forced to face the implications that national cultures bring.
Impacts of Culture on International Business
One of the distinguishing features of different groups is their communication system and language. Language forms an important part of a culture’s communication system and it must be taken into consideration in international business. Adair (2009, p.34) states that there exist numerous styles of communication and the styles adopted by a person are mostly as a result of cultural and individual factors.
A firm operating in the international sphere must take into serious consideration the hazards that the multi cultural environment of international business presents. Failure to consider this may result in miscommunication which is mostly as a result of sloppy translations. Such mistakes result in businesses incurring losses from low sales as well as damage to their credibility and reputation. In addition to the spoken language, non-verbal communication must also be taken into consideration. This presents a difficulty since some physical gestures convey different meanings to different cultures.
Local values, rights afforded to the individual and even human rights differ from one culture to another. This is a factor that must be taken into consideration when conducting business in the international setting. While globalization purports to harmonize these by importing or exporting values which are to be adopted by all nations, this is not always possible. As such, players in the international business scene must take into consideration local values and avoid the assumption that the locals will welcome or adopt their foreign values.
Culture dictates the managerial style and management decisions that can be made by the managers of a particular organization. The cultural dimension will have a huge implication on the managerial conduct. For example, in an individualistic culture the employees are provided with a lot of personal freedom and they are allowed to make decisions based on their perception of what is the best course of action. On the other had, in a collectivistic culture, people belong to groups and they look after the interests of each other.
In a collectivist culture, people are pressured to conform to some set norms and standards. The distinction between individualism and collectivism will influence performance evaluation systems that a manager can come up with. Vance and Paik (2006, p.42) assert that “while in an individualistic culture the emphasis will be on individual merit and achievements, the emphasis in a collectivistic culture will be contribution to teamwork and group achievements”. A study by Ralston et al (2008) indicated that the managerial work values were dictated by the national culture and economic ideology in existent (where economic ideology is defined as the workplace philosophy that pervades the business environment. Individualism and collectivism values present great differences in work values which a manager must take into consideration when dealing people from cultures which hold the respective values.
Culture influences the extent to which people are likely to react to risky or ambiguous situations. This is through the uncertainty avoidance dimension which indicates that “people in a low uncertainty avoidance society are more willing to take risks and appreciate flexibility and informality in the workplace” (Vane and Paik (2006, p.40). Different cultures have different levels of tolerance for uncertain situations. This has huge implications on international businesses.
Research indicates that people who are culturally inclined to avoid risks will be reluctant to try out new technological developments. As a result of this, regions which have a high uncertainty avoidance culture present less favorable environments for technological development. An organization which wishes to invest in technological projects in such a region must take this into consideration when looking at the feasibility of the project. A less risk aversive culture will provide a better market for such an organization since the people there will be less afraid to try out new technology.
Different cultures have different power distances and this dictates the manner in which international business may be conducted. Power distance refers to “the extents that people have an equal distribution of power” (Vance & Paik 2006, p.41). High power distance implies that power is concentrated at the top in the hands of few people and in such cultures; there is a rigid hierarchical order. Small power distance cultures have power distributed among the society members.
Wenzhongh and Grove (1999, p.123) states that in the Western world, efforts to promote an ethic of egalitarianism (at least superficially) are in play. In such a setting where social mobility is high, there is low authoritarianism and little preoccupation with maintaining a rigid hierarchical order. In societies where there is a high power distance, managers can be expected to give specific instructions to subordinates since the subordinates are expected to respect authority and not engage their own creativity. In a small power distance culture, a more participative and egalitarian management style may be favored (Vance & Paik 2006, p.41). The reason why different countries have different perceptions of power distance is because the national culture determines the extent to which power distance is accepted and supported by the social environment (Schumann 2009, p.64).
Culture dictates the time consciousness of people. Katsioloudes and Hadjidakis (2007, p.41) go on to document that the sense of time differs by culture and while some are exact, others are relative. This has huge implications in business since while some cultures reward timeliness and promptness; others are more casual in their dealings. In cultures such as the US and Germany where time is perceived as being a tangible asset almost like money, people try to spent it in the most efficient manner possible and values such as punctuality and keeping schedules are applauded.
In cultures such as the Latin America, the attitude towards time is less strict and vague terms such as “some time in the future” are common as opposed to precise times (Katsioloudes & Hadjidakis 2007, p.41). Managers can therefore experience a lot of conflict and frustration because of differences in the concept of time around the world. In particular, there are cultures where promptness is dictated by the age or socio-economic status of a person. In such cultures, it may be typical for the subordinates to arrive to work or for meetings on time while the top executives have the liberty to arrive late.
Culture determines the perceptions regarding private and public space and how each is handled. Vance and Paik (2006, p.47) theorize that the treatment of space by cultures can be grouped as specific verses diffuse cultures. In specific cultures, people have a tendency to separate their public and private life and each respective role should ideally not overlap or influence the other. In a diffuse culture, the distinction between private and public spaces is unclear and business relationship may sometimes influence or overlap with an individuals personal life. When conducting business in a diffuse culture, establishing a long-tern relationship with the people with whom you are conducting business is crucial for the success of the business.
Negotiation plays a major role in all businesses and good negotiation skills are necessary for the success of a business. Negotiation is defined as “communication for the purpose of persuasion (Shamir 2003; Goldberg, Sander & Rogers, 1992). The negotiation process is therefore a process by which parties to a dispute discuss possible outcomes to their conflict with each other. The parties make proposals, demands and argue out until an acceptable solution is arrived at.
Ideally, negotiation is based on concession trading where each party is required to reduce their demands or aspirations so as to accommodate the other party. Silkenat et al (2009, p.49) reveals that while negotiations are crucial in the international sphere, the risks associated with negotiation escalates when the negotiator is perceived as “foreign” by the locals. This perception is as a result of cultural characteristics which may serve as impediments to international negotiations since they influence the manner in which the negotiators respond.
Communication is the corner stone on which any successful relationship, be it business or personal is built. Efforts to ensure effective communication are therefore a priority to the managers in all organizations. Culture influences communication efforts and for one to communicate effectively with a person from another culture, one must be able to decode the message properly. Rosenbloom and Larsen (2003, p.310) assert that people from different cultures may see or hear the same message but develop different interpretations for the same as a result of their cultural backgrounds.
This may result in miscommunication with dire consequences for a business. The cultural context must therefore be taken into consideration when sending or receiving messages in a multicultural setting. A research by Rosenbloom and Larsen (2003) on the significance of culture in communication in international business to business marketing channels revealed that cultural distance affected communications and therefore necessitated more human involvement in channel communication. This human involvement was necessary to help clarify and expedite communication therefore avoiding misunderstandings that could result from cultural differences.
According to the authority on cultural studies, Hofstede, cultural dimensions may be grouped as masculinity vs. Femininity. A masculine dimension is based on achievements motivation. Such a culture is performance driven with rewards and recognition for performance being the major motivational factors for achievement. In a masculine culture, “the major innovations are the outcome of financial gains and prestige for an individual” (Vance & Paik 2006, p.42).
A feminine culture on the other hand is driven by the concern for the well being of others. In such a culture, the major driving force is the welfare of the other members of an organization. How to deal with people from these different cultural backgrounds will therefore be different. In the masculinity culture, encouraging competition may be the best way in which to reap the maximum benefits. In the femininity culture, cooperation must be fostered in order to achieve optimal results for the business.
In their existences, organizations and companies are constantly being pressured by the competitive forces around them to increase their productivity and raise their performance levels. This is the case in both the national and international business setting which is rife with aggressive behavior and rampant competition which force businesses to look for innovative means to give them a competitive advantage therefore assure that they are not forced out of the market. One of the means through which this can be achieved is by motivating the workforce.
Motivation is defined as a “process of stimulating people to action to accomplish desired goals” (Kondalkar 2002, p.245). Since it is the manager’s task to marshal the organization’s resources to accomplish some organizational goal, it is part of the role of managers to motivate their staff to achieve certain desired goals. There are various motivation techniques that can be employed and culture influences that particular technique that a manager can use in a given location. In a highly individualistic culture, the monetary incentives and individual rewards for achievements may be a great driving force to the workers. In a collectivistic culture, job security and improvement of work conditions for all members of the work force may be a greater motivator than the promise for personal gains.
While globalization has been hailed by many as a positive force, it is not without its misgivings and discontents. Leung et al (2005, p.358) reveals that strong opposition to globalization usually originates from “developing countries that have been hurt by the destabilizing effects of globalization. In addition to this, some western economies are also opposed to globalization due to the loss of jobs as a result of outsourcing to low-wage countries.
This situation results in some cultures in the affected countries being hostile to international business. Moran R, Harris & Moran V (2007, p.133) asserts that cultural hostility dictates the degree to which conditions locally are threatening to organizational goals. In a culture with is hostile to the business, the indigenous environment will be malevolent; characterized by lack of cooperation and acceptability of the international business. It is of great importance for a business to gauge the cultural hostility in their host nation since this will determine the level of success they achieve. Too much cultural hostility has been know to result in companies being forced to leave certain regions
Despite global and regional integration of economies and the move towards cultural homogenization, cultural differences in the world still remain strong. Huntington (1993, p.25) proposes that the reason why culture will continue to be such an important factor in human lives is because the difference between cultures has taken centuries or even millenniums to cement and as such, these differences cannot be expected to disappear overnight. The impact that culture has when conducting international business is therefore significant and managers need to recognize the need to adapt management practices to the local environment.
Moran R, Harris and Moran S (2007, p.139) declare that it is imperative for global leaders to appreciate and understand the impact of culture on people and their organizations. This is because successful international businesses are dependent to a great degree on the people and their culture at a given point in time. A study conducted by Ralston et al (2008) indicated that while it may be possible to come up with a global corporate culture where values are assimilated across cultures, there are many work value differences across cultures for this to be a realistic approach in international business. As such, effort should be focused more on understanding and coordinating the different cultural values for businesses to reap optimum benefits in the international sphere (Ralston et al (2008, p.20).
This paper set out to highlight some of the cultural dimensions in existence so as to demonstrate the impact that culture has on international business. To this end, this paper has made use of Hofstedes dimensions to identify some of the cultural dimensions that may have an impact on international business. Though this paper, it has been demonstrated that different cultures may have varying systems of values and norms which have a huge significance in the lives of the individual. All international businesses which involve inter cultural relations must therefore consider this cultural contexts. Failure to take these factors into consideration may have a negative impact on the business and result in its eventual failure.
The discussions presented herein have also demonstrated that it is imperative that the international business adapts seamlessly into the larger culture in which it functions. Only then can a business hope to be successful in the international sphere. From this paper, it can be authoritatively stated that an understanding of different cultural values and their impact on business activities is paramount for the success of any international business venture.
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