Nowadays, an increasing number of companies want to enter into the international business. Nevertheless, the competition is harder due to the increasing of business in the international market. That is why engaging in the international market is a challenge. The cultural differences are one of the aspects that affect the operation of the International Business.
Entrepreneurship is a lever of wealth creation and jobs. They can overcome the cultural dimensions affecting the behaviour of managers. Many researchers stress the importance of cultural influence on economic behaviour: "If we retain something of the history of economic development, it is that culture makes all the difference", said David S. Landes, a professor of economics at Harvard University. Managers in emerging countries, with their own ritual values, have become as entrepreneurial as those in developed countries. Olivier Torres, professor of entrepreneurship and a doctorate in management, shows that entrepreneurship is a global phenomenon that takes different forms across the country because of the culture varies from one country to another.
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If we accept that culture influences the business, how does it influence? Many researchers believe that culture, deeply rooted and unconscious, determines the thoughts and actions of managers throughout the entrepreneurial process. Since the intention to enterprise development, culture is part of the entrepreneurial system. In sum, the main research question of the present study is how culture affects on International Business.
In the first part, we can see the different aspects of the culture. Then in the second part, we will study the impact of culture on International Business.
A. L. Kroeber and C. Kluckhohn count more than 150 scientific definitions of the concept of culture. Historians, anthropologists (Levi Strauss C.), economists and sociologists (Weber M.), psychologists (McClelland D. C.) are studying a long time. In management science, many researchers were interested in this concept as Geert Hofstede. The majority of them agreed on four key characteristics of culture: a historical construction, multidimensional, sustainable and generator.
Culture distinguishes members of a group of another with the collective programming of the mind. Culture is patterned ways of thinking, feeling and reacting. It acquired and transmitted generally by symbols. Moreover, it is the guider of selection of appropriate responses in social situations, social interactions and business interactions. It is a learned behaviour.
According to Geert Hofstede, an expert on cross-cultural differences and management, culture is defined as following: "A system of values and norms that are shared among a group of people and that when taken together constitute a design for living". The values are distinct by abstract ideas about what a group of individual thinks to be good, fair and desirable. Values are the context in which societal norms are established. It is the bedrock of a culture. While norms are societal rules, that recommend appropriate behaviour in specific situations. Norms comprise folkways and mores. Moreover, society refers to a group of individuals who share a common set of values and norms.
Over time, the culture is changing. However for a company, the modifications in value systems can be long and tedious. The inevitable consequence of this cultural change is the social turmoil. While countries strengthen their economies, it is more often that the culture changes. The values and norms of a culture are the results of the evolution of certain factors in a society such as social structure, religion, language, education, political and economic philosophies.
A society's basic social is a reflection of social structure. There are two dimensions to consider as the extent to which society is group or individually oriented and the degree to which a society is stratified into classes or castes. (John Barkai, 2006)
The religion is shared beliefs with rituals. In the world, there are four dominant religions: Christianity, Islam, Hinduism and Buddhism. Religion influences human behaviour and their way of life. It is essential that companies consider this factor. For example, Buddhism does not emphasize on wealth creation and so entrepreneurial behaviour is not worried. However, because Buddhism does not accept the caste system contrary to Hindus, so they can work with individuals from different classes.
Language refers to the spoken (verbal cues) and unspoken (body language) means of communication. It is one of the defining characteristics of culture. Countries with more than one language often have more than one culture. Chinese is the mother tongue of many people so this is the language most often spoken in the world. However, English has become the international language of business. Nevertheless, the knowledge of the local language is important and can sometimes depend on the business success.
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Formal education is the means by which people learn many of the language, conceptual and mathematical skills. In a modern society, it is indispensable. It is essential in determining a nation's competitive advantage. The overall level of education can also be a good indicator for the types of products that could sell in a country. For instance in countries with low literacy levels as Somalia, advertisers would avoid written communications and favour radio advertising with an audio message or visual media such as billboards. (Rajesh Asrani, 2003)
The work-related values are determined by culture management process therefore must be tailored to country. Companies must understand how the culture of a society affects the workplace values, it is essential. Geert Hofstede has identified four dimensions of culture: power distance, uncertainty avoidance, individualism against collectivism and masculinity against femininity.
Power distance concentrates on the way a society treats the fact that people are unequal in physical and intellectual abilities. Arab countries are very high (80) on the cultural scale of Hofstede's analysis and the power distance of Austria (11) is very low while Great Britain is in the middle (35). Between rich and poor, Great Britain has no great difference. However, there is a strong belief in equality for each citizen.
Uncertainty avoidance extents the degree of different cultures socialize their members to accept ambiguous situations and tolerating ambiguity. In Sweden (29) and Denmark (23), there is a low uncertainty avoidance compared to in Germany with reasonable high uncertainty avoidance (65). Germans are not strong on uncertainty, by carefully planning everything they attempt to avoid uncertainty. In this country, it is a society based on rules, laws and regulations.
Individualism against collectivism concentrates on the relationship between the individual and his ilk. France may be regarded as individualistic with a relatively high score (71) on Hofstede's scale in relation to a country as Panama (11) because they have a strong collectivism.
Masculinity against femininity focuses on the connection between gender and work roles. United States has a masculine culture (62) on the scale of Hofstede while Netherlands has a feminine culture (14).
Although the results of Hofstede are interesting, one must be cautious about reading too much into them because it implies a relationship one-to-one between culture and nation-state. It seems obvious that a nation can include several cultures. However, it is a starting point for understanding how cultures differ and the implications of those differences for managers. (Sondergaard M., 1994)
The impact of culture affects consumer behaviour, local demand and buying decisions. The nature of business negotiations is too affected by culture. Moreover, culture influences managerial styles and management decisions. Culture is important in International Business in particular knowledge of Native culture is valuable in the case to home markets. Nevertheless, it has little value in the case to foreign markets. Culture acts like a hidden barrier to entry of a country. It can be surmounted with cultural sensitivity. Nevertheless, cultural sensitivity has its limitations. In some cases, it should not be culturally sensitive. For example in the case of globalization, it is the creation of a global business culture. Therefore dress in a local way, it may seem inappropriate in business. Moreover, cultural sensitivity must be in accordance with the business model. If the supply of products and services do not satisfy the demand of the buyer, no amount of cultural sensitivity will help.
Societies differ because their cultures vary. There are three important consequences that result from these differences. In first, there is a need to develop intercultural literacy. Then, there is a connection between culture and competitive advantage. And, there is a link between culture and ethics in decision-making.
The success of international business depends of cross-cultural literacy that is critical. Businesses ill informed from another culture may not succeed in a culture because they will not know the practices of this culture. An ethnocentric behaviour can be also a threat for managers. One of the biggest dangers for companies expanding abroad is to be misinformed. It is recommended for more knowledge of local culture in the company to hire local managers.
The link between culture and competitive advantage is significant because it suggests that countries are likely to produce the most sustainable competitors. This link has consequences for the selection of countries in which to locate production facilities and do business. (Hayton J.J., George G. & Zahra S.A., 2002)
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Culture across countries is not necessarily the same. The relationship between a society and a nation is not purely one-to-one. Nation-states are political creations, it may include one or several cultures. However, it is possible that a culture can embrace many nations. Some countries are multicultural as India, the United States, China and Russia. These countries have several sub-cultures, there are 51 different nations in China. However many other countries are monocultural, as for example the United Kingdom, France, Germany, Peru and Columbia.
According to Edward T. Hall, an anthropologist and cross-cultural researcher, culture is the "Silent Language" in International Business. He defines four criteria: relationship with time and space, high context, body language, low context cultures and direct or indirect behaving.
Managers face dilemmas due to cultural differences in cultures.
The first dilemma, it is modernization versus westernization. Westernization involves a process of rationalization or adaptation in traditional culture while modernization is a process in which tradition and modernity feed mutually. In Russia, the challenge of modernization is well understood by President Medvedev. On the other hand, he refused to equate it to any Westernization. The Russians have repeated the Chinese development model, which is to accept with humility the Western support and investments to build a modern power without sacrificing what makes the identity of the Russian nation.
The second dilemma, it is individualism versus collectivism in decision-making. An individualistic culture is predisposed to value personal achievement, individual responsibility and the accumulation of private wealth. A good example of an individualistic culture is America. In addition, it is often called the land of "rugged individualism". In Western cultures, individualism is predominant. A collectivist culture is predisposed to value group achievement, collective responsibility and social harmony. A perfect example of a collectivist culture is China. The country goes even to delete personal expression and criticism of the government for reasons of collective stability.
The third dilemma, it is attitudes to time which are different in each country. Brazilian culture is a perfect example. The way Brazilians live their everyday life is very revealing of how time plays an important role in their culture. The family time is essential in their culture, as well as time spent with their friends and the way they interact with the rest of the world. (Dahdrian Dailey, 2008)
The last dilemma, it is attitudes towards environment changing from one country to another. On the environmental, Europeans put their trust associations defending the environment and science. As can be seen regularly, businesses come in last place in the confidence rating (1%). A third of Europeans, the European Union is the most appropriate level for decisions to protect the environment. Among the solutions to most effectively solve environmental problems, the Europeans choose roughly the same proportions in the solution of the constraint and the idea of persuasion. For example, the implementation of stricter regulations and increase the general awareness on the environment.
In the world, there are different cultures with their own symbols, but these symbols are not the same for everyone. For example in Hong Kong, Korea and Taiwan, triangular shapes are regarded as a negative form. In addition, in every culture, there is a way of saying "hello" (kiss, bow or handshake).
The company's goal is the same everywhere. Nevertheless, the way to achieve them varies between countries. Global managers must be able to handle the difficulty for people to adapt to a new culture that is distinctly different from their own culture, which is called culture shock. Moreover, in different countries, similar opportunities do not mean similar business situations. In the case of the sale of alcohol in the Muslim world is a considerable loss of money and time because their religion prohibits it vigorously. Culture has always influenced management skills therefore in a new country, it is "back-to-basics" with regard to learning local culture.
The basis of "Way of doing Business" is formed by a set of acceptable and unacceptable behaviours, which defines culture. Managers must learn to do business, this process is called enculturalization and socialization. It consists to predict consumer behaviour, to examine what guides consumer behaviour and to learn to manage people, the supplier and his subordinates. According to Charles W. L. Hill, acceptable behaviour in business is usually acceptable behaviour in society.
Managers need of the cultural adaptation because they must avoid the mistakes of self-referencing. Self-referencing is a process by which one considers others actions in reference to its culture. Cultural adaptation is a competence acquired and should be controlled by global managers.
Gannon's metaphors provide a mental anchor for manager who should facing a new culture and cannot predict the unexpected. It is a simplified holistic view of a global culture. For example the United States with football, it is the idea of a sport: individualistic, specialized and competitive.
Global business must negotiate despite the culture and establish a good relationship and communication with partners (suppliers, customers and distributors). When managers are negotiating with a party of a different culture, they need to include their culture. They must consider how it may affect their worldview and behaviour. Managers must understand where they come from. Managers must know with whom they negotiate. For example in some cultures, 10 am means in the course of the morning. The real time clock is unimportant.
There are things to consider on the impact of culture in a negotiation. First, culture influences the type of response. Second, culture determines not only what is being negotiated, but also what is not negotiable. Third, cultural pride and status might form a wall that is impossible to climb. Finally, culture defines the importance of personal relationships in some cultures. It is essential to test the personal relationship before entering into details of the negotiations.
Managers need to establish business marketing tasks. They should put the global firm as a reliable supplier working on the local market. Managers must understand the position of buyer, people who influence the buying decision and role of the supplier in the buyer's business success. Thanks to these elements, the local buyer will deal global supplier as a local company. For instance, Cognizant is a U.S. multinational company providing computer services and consulting. It is headquartered in New Jersey in the United States. However, it has significant activity in India. (Dr. Aaron Caillouet, 2008)
Thanks to the archetype Clotaire Rapaille, the cultures are studied to facilitate understanding. It is described in several steps to decode the culture. The first idea is that people do not buy products but people buy relationships. Then culture can be an asset or a failure for the business. In all cultures, there are elements such as time, space and energy. Global companies have to do with the local business culture. The quality is the key to success for a company, only in different countries the word quality means different things: in Japan, it is perfection and in India, it means reliable. And the last idea, it is that cultural sensitivity is the key to international success.
In the entry of a foreign country, the culture will determine how to do business. It is important before the entry into a country that managers analyze and learn local cultures. Managers should establish a climate of trust and friendship so that the dialogue during the negotiations easier. They should know the strengths and weakness as seen by the local culture. They should learn what he can and cannot do. It should identify agents trusted local knowledge and recognize the danger signals. All managers know that the entry in a country with another culture is an operational risk. (Osland J. S. & Bird A., 2000)
To conclude, the success that global businesses are able to achieve in an international environment is determined by many factors. The cultural effectiveness is one of them.
The cultural effectiveness is an ability to reach business objectives in a culturally diversified international environment. The acceptance of cultural diversity is a part of corporate social responsibility.
The various reasons for interest in the study of culture are numerous, such as knowing the globalization of business, advances in technologies and data processing, the formation of global alliances, the growing diversity in the domestic workforce and the increasing mobility of workers across the world.
Culture affects heavily on International Business. To begin, culture influences management styles and management decisions. The global managers must know both cultures that are both local and home. For a business, sensitivity to local problems is essential to successfully. To be successful in a new country, global coordination is a necessity for global companies.
This study has demonstrated the many impacts that may have culture with regard to the international Business. She has proven through theories such as Hofstede and Gannon that culture is not something a manager should ignore. It is essential for doing business in a new country with another culture to know their values and norms.