Multinational corporations (MNEs) are extending their operations and activities across the globe, gathering teams of experts from different parts of the world. Challenges may be viewed and solved from diverse angles with insightful methods and a new experience base. However, international organizations also encounter various barriers when cultural features are considered within a business context. Culture can be defined as a set of norms and standards accepted and followed by society. It acts as a differentiating factor when it comes to a lifestyle where beliefs, customs, and moral codes are respected by a group of agents. Business operations can be affected by cultural properties in a positive or negative direction. Hence, it must receive proper attention so as not to cause misunderstandings and difficulties in communication.
Cultural Dimensions theory, created by Geert Hofstede, is a structure that assists in the understanding of the cultural differences on an international level, determining the procedures of the business running. In other words, MNEs use the model to assess the potential impact of gaps between cultures, affecting their performance and productivity. Overall, there are five dimensions: power distance, individualism, masculinity-feminity, uncertainty avoidance, and long-term orientation (Beugelsdijk, Kostova, and Roth, 2016). The theory helps to grasp “where each country places value,” thus, their inclinations and preferences can be appreciated (Taylor and Zhou, 2019, p. 125). For example, individualism, opposite to collectivism, implies greater significance in achieving personal objectives. On the contrary, collectivism indicates group-oriented goals where the welfare of a team as a whole is more important. To illustrate, research has shown that on individualism, on a scale from 0 to 100, China was rated with an insignificant 20 points, while the United States obtained 91 points (Taylor and Zhou, 2019, p. 125). Therefore, it can be derived that such a wide dimension may result in problems when workers from both countries try to cooperate. Hofstede’s framework is useful for the estimation of the effect of national culture on MNE operations.
The extent to which national culture can be helpful in successful business activities may be examined through the lens of specific values, features, and tendencies. First of all, MNEs, which function in diverse social and cultural environments, necessitate tactics founded on knowledge, experience, acceptance, and respect of distinguishing factors (Srivastava, Singh, and Dihr, 2020). With a sense of the cultural background of prospective business partners, there is the opportunity to adapt words, gestures, and actions to make be more understandable and familiar to them. The recognition, in turn, will positively affect their sympathy and increase the likelihood of a favorable deal. For example, it is worthwhile to put efforts into the comprehension of the distinctions between “Chinese and Western diet” culture to fulfill initiatives posed by MNE (Li and Xiao, 2019, p. 103). Moreover, according to Ajmal, Helo, and Kassem (2017, p. 5), trust “reduces perceived risk,” facilitates the establishment of a reliable relationship, and forms “organizational and project opportunities,” boosting the performance level. Thus, it is clear that perception of culture, that is, the ability and willingness to explore cultural gaps, has a significant impact on MNE efficiency.
Ignorance of cultural disparities and disregard of the peculiarities of national cultures can lead to conflict situations. When launching a marketing campaign in another country, a preliminary market survey should always be carried out. Levels of conservatism, gender perceptions, and ideologies can vary significantly across cultures. A campaign that contravenes certain cultural norms may offend the target audience and, as a result, fail. In turn, an adequate understanding of the cultural specificities of the country will help to narrow down the target audience. Additionally, political developments, both past, and present have the potential to influence how a person or a company conducts business. Some cultures have strong feelings of patriotism or nationalism, so companies in such countries are more willing to engage with firms from economies with similar policies. The current divergences between nations can have a significant impact on the outcome of business negotiations. Globalization enabled active interactions between economies, situated halfway around the world. Hence, deviations also influence time convenience, where being late can be an impermissible mistake or seen as an act of disrespect. Thereupon, factors akin to market targetting, political and economical conditions, and etiquette attributes can cost the reputation and status of MNE.
National culture can become an obstacle and imperil MNE operations. Business meeting, involving the communication of culturally diverse employees, is an “inherently dynamic process” where results are derived in solely diverse engagement and circumstances (Szkudlarek et al., 2020, p. 2). What is more, there are many cases of unsuccessful attempts to sell a product simply because its name is perceived to be incorrect or has a distorted meaning. Therefore, accurate professional translation and proficient knowledge of foreign languages play a critical role in international relations (Zhang and Rohlfer, 2016). Referring back to Hofstede’s theory, it is estimated that miscommunication, that is, the influence of national culture, is found to impose marked detrimental effects on trade (Kristjansdottir et al., 2017). Indeed, when social interaction in a multinational organization involves translation from one language to another, it creates additional issues of comprehending the exact meaning. Communication difficulties may also arise if foreign partners use speech circuits in which the formal meaning of the words does not coincide or contradicts their genuine sense of them. Thereby, national culture’s magnitude rests on appropriate and concise communication, which may undermine the trade activities of MNE.
In the context of the increasing trend towards international economic cooperation between countries, the importance of national culture plays a part in defining business operations. There are certain convergence and growing similarities in strategies for the development of organizations, production technology, innovation. On the other hand, the cultural values, as well as inherent differences in governance, are sustainably preserved. Hofstede’s model contributes to the examination and assessment of the degree of influence of cultural disparities. On the whole, aspects such as politics, economics, social tendencies, and language barrier affect MNE’s trading activities, overall performance, and image in the market.
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Kristjánsdóttir, H., Guðlaugsson, P., Guðmundsdóttir, S., and Aðalsteinsson, G. (2017) ‘Hofstede national culture and international trade’, Applied Economics, 49(57), pp. 5792-5801.
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