Business Management in International Context Assignment Title: The importance of understanding culture in international business.

Assignment ONE

Banner ID: B00262224

Dated: 08 November 2013

The importance of understanding culture in international business. Globalization and internationalization increasingly derives companies from different culture to interact with each other, not only for opportunities for cross-culture to have a potential benefit but for serious cross-culture misunderstandings. The cross border requirements of businesses enhances awareness and sensitivity to differentiate behavioural norms, values and even in language. Nowadays companies are facing challenges for preventing and expanding globally and they should fully understand that specific market in which they are planning to expand in. As far as effective cross-culture communication has become more important, companies shouldn't neglect long-term process of assimilation, comprehension and integration which is undoubtly the key factor for successful business expansion globally. So In short, if a company is planning to start a business or negotiating with different culture, they must investigate that some practices are clearly unacceptable in all cultures and will cause uncomfortable environment between organisation. Culture is a complex concept, as we know that it has variety of definition and very difficult to explain precisely. Komin (1994) refer to 'total pattern of values, ideas, beliefs, customs, practices, techniques, institutions, objects and artefacts'. Hofstede (1991) writes it as a 'array of symbols, beliefs values and ideas together and talks of a collective mental programming'. in other words , culture is a sum of values that feed into behaviour and also influence it, combined acquired experience and response of distinct group. As human being is a social animal and culture is a form of constant interaction with each other and from this we learn acceptable ways of thinking, behaving, and acting. In our day to day lives we learn how to cope up with different situations, act in different circumstances, creating(modelling) our behaviour on people around us for coherent set of preferences, values and beliefs to build a cultural context. There are two features of culture which separates it from other attributes. Firstly, it is enduring and changes very little from time to time. Secondly, it is expressed as a part of a community which is a social context. Culture has a large impact on international business and can be analysed in various levels and across various dimensions. Distinctively, there are two important dimensions from business perspective. The first one is National culture and the another one is Organizational culture which is also called Corporate culture. National culture is basically an external to the firm but it provides the environment and context in which the firm sits and influence the firm within the company. On the other hand Organizational culture is internal culture for a company point of view. At this level companies try to shape their corporate culture for attaining the key objective. If we link both of them, national culture will help to determine corporate culture for a firm. While describing the importance of culture in international business, every company has different business protocol. Like South Americans prefers to de business face to face,

Russians decisions are made by top level management which takes long time to make business agreements. Japanese have learnt the art of silence in dealings and contract but Americans are not used to it and desperately take it in a wrong way ( something has gone wrong) and turns down the business proposal when it was not compulsory. Many attempts have been made to identify different national cultural characteristics. For Example: Hall (1976) drew a distinction between 'Low-' and 'High-context' cultures. Lowcontext cultures are mainly focused on explicit communication and it should be clear and unambiguous. Countries like US are the best example of Low-context culture. In Highcontext culture, information is conveyed unclear and outside the word actually spoken. in this context individual must interpret body language and have a knowledge of unwritten and unspoken ways of communication. like mostly Asian countries comes under this culture. Geert Hofstede (1980-1991) discussed on business culture widely and researched on identifying different national cultures within MNE's: IBM. Using the survey of 160,000 employees in 50 countries he identified four cultural dimensions, namely Power Distance, Individualism, Uncertainty avoidance, and Masculinity/ Femininity to which later on he added the fifth one named as Short- versus Long-term Orientation. Hofstede explains Power Distance dimension as the extent to which the power of decision making is structured hierarchal and distributed unequally. Subordinates in this type of company are dependent on High level management. Southern European countries, Latin America, Asia, Africa are large power distance countries. Uncertainty Avoidance measures the threat, uncertainty and unknown situation to the member of that society. Under this situation business is conducted in less formal manner with limited rules and regulations and high risk. Japan, South Korea, Pakistan and European Countries tend to score uncertainty avoidance. Individualism versus Collectivism defines the degree to which the interests of individuals or of the group takes priority. In this frame work of individualistic culture society, individuals take their own responsibility and are responsible for their decisions. Anglo-Saxon Countries are mostly individualistic societies. while in Collectivistic cultural societies, the whole group looks after the every single individual and take cares of their rights in the society. Countries like Japan, Asian countries, Latin America are categorized in Collectivistic Cultural Societies. Masculinity versus Femininity explain societies in which the social gender males are prominently distinctive. In these societies men's are considered to be more assertive and acquisitive, and have material possession. Femininity refers to the culture in which both men's and women's are considered equal, modest and they are more concerned with their life standards. Later on Hofstede mention fifth dimension to classify national culture which is Long- versus Shot-term Orientation." Long- versus Shot-term Orientation defines dealing with the society's search of virtue. Long term orientation means focusing on the future and implies a cultural trend toward delaying immediate gratification by practising persistence and thriftiness. Short term orientation means a greater focus on the present and a more

immediate gratification of need, such as spending to support current consumption even if this means borrowing money" (Wall and Rees, p. 178). National culture plays a vital role in mentoring the business. For example: US managers, researchers found that they are performance oriented and highly assertive as compare to other managers. They interact directly using facts and figures, logic, measurable outcomes, which is their main focus of workplace interaction. As compared to Americans, Greeks and Russians are less individualistic and have low level of uncertainty avoidance. Similarly Swedes may find American style more unfriendly and aggressive. Those example doesn't means that managers should change their behaviour of culture and values. They should resolve these problems by striking a balance between one's own principles, values and norms and those of foreigners. They should completely adopt the ethnocentric corporate culture. Researchers summarize a lot of strategies for developing inter-cultural competencies. A question comes in mind that how a manager designs his own intercultural competencies as well as for his team members. Research showed at least five major factors reflecting different aspect of national and corporate culture for healthy group process. Those strategis were: Every single individual must have similar cultural norms. These norms must be manifested in the group. Team must have a common language to maintain the level of fluency. Effective group behaviour constitutes expectation and communication styles. Last but not the least strategy should be management styles of a team leader. Different researchers mentioned bulk of strategies to create culturally responsive joint Alliance. By following this multi-step process, it systematically effects on both companies cultural dimensions to every single management of the company. By working on these strategies means that values are deeply rooted and brought to the surface level before they damage the corporate alliance. While discussing multi-cultural teams in workforce, they generate an unbalanced and frustrating management environment differences in culture creates obstacles to effective teamwork which are very difficult to analyze and recognize until a proper damage has been done. The key challenge in managing multicultural workforce is to recognize the conflict and bring teams back on the track. Corporations assumes that challenges of multi- culture arises from difference in style of communication and interaction. Still at the end, cultural challenges are manageable. It depends on management and team members to chose the right strategy and do not impose Single cultural environment on Multi-cultural situation. At the end concluding the whole discussion Globalization significantly effects cultural issues within the firm. Every organization has its own cultural norms, values, common language and terminology, informality/formality and so on. Organizations should follow the local culture either for the purpose of profit maximization or as a basic necessity. Globalization gather different cultures into contact to each other and creates a challenge for managers

and now a day culture is an essential aspect for efficient management of multinational ventures. --------------------------------------------------------------------------------------------------------

References: Idesli. (May 2013). THE IMPORTANCE OF CULTURE IN INTERNATIONAL BUSINESS. Available: http://idesli.wordpress.com/2013/05/02/the-importance-ofculture-in-international-business/. Last accessed 07/11/2013. Alan M. Rugman and Simon Collinson.. (2008). International Culture. In: Alan M. Rugman International Business. Financial Times Prentice Hall, 2008.: Alan M. Rugman, Simon Collinson and Richard M. Hodgetts. 2006.. p129-p158. Pearson Higher Education. (2008). Culture and International Business. Available: http://www.pearsonhighered.com/assets/hip/us/hip_us_pearsonhighered/samplec hapter/0205645283.pdf. Last accessed 08/11/2013. Debra Johnson and Colin Turner. (2010). International business. 2nd ed. London: Routledge, 2010.. p304-p322. S. Tamer Cavusgil, Gary Knight, John R. Riesenberger. (2008).International Business. 2nd ed. Upper Saddle River, N.J. ; Harlow : Pearson Education, 2011.: Pearson Education, 2011.. p655. Wall, Stuart. (2004). International Business. 2nd ed. Harlow: Financial Times/Prentice Hall, 2004.. p171-p187.