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Due to globalization, changing trends and increased competition organizations need to constantly change their goals and face corporate cultural conflicts. Culture is an ideology where competition occurs over understanding of values and beliefs between group of people within a nation or with the other nations who resist those values and beliefs. The institutional features are again a set of values and practices limited to the respective institution but while opting for international business the institutions should analyze the business ethics, working culture, economy etc of the host nation and adapt to the culture to successfully establish the business (Czinkota et al., 2004). The paper discusses the business culture differences between United States of America and France. The paper also discusses the cost of doing business, the implications of economic conditions of these countries on the business. In the end the paper discusses ethical issues in both the cultures and its implications on the business.
Comparative Analysis of Cultural and Institutional Features between US and France
United States of America is world's most powerful nation. US has the largest economy in the world and is considered powerful in terms of technological developments. The country has population of approximately 316 million and consists of people from different ethnic groups. The country has the largest GDP in the world but it is increasing at a lower rate and currently the GDP growth rate is 1.7 percent (Whitehouse, 2012). The country is a federal constitutional republic and practice democracy, equality before law and supports its citizen's freedom of religion and speech. It strongly opposes to political corruption and citizens are expected to support the government and its regulations (Behrens, 2009). The democracy process in the USA has been consistent and uninterrupted. United States has the most ethnically diverse population and largely consists of European Americans. And also has sizeable population of African Americans and Asians. United States has been pioneer of many technological inventions and has been the leader in the automobile industry, telecommunications, information technology, space expeditions etc (Behrens, 2009). The legal system is slightly non uniform, across states but the constitution and federal laws overpower the differing laws across the states. For companies, it is essentially to know the state laws before starting the business since local laws and taxations vary greatly.
France is one of the modern European nations and is vastly different in its operation of economy as compared to other modern economies. France is a republic and has unitary semi-presidential rule and strongly follow democracy (About-France, 2012). The population of the country is approximately 65 million and 40 percent of it is descendants off ethnic ancestry such as Spaniards, Portuguese, Poles and Greeks and it also accepts around 1 million immigrants. France is one of the leading industrial economies in the sectors such as automotive, aerospace, cosmetics, luxury goods, telecom, hospitality etc (About-France, 2012). But the economy faces issues such as strikes, powerful unions rule the businesses and free enterprise is virtually not possible. The country uses civil legal system and the law is divided in to private and public law which deals with civil and criminal law and administrative and constitutional law respectively.
Culture is set of values, beliefs, attitudes that shapes and influences perception and behavior of a group of people is passed down from generation to generation and varies between different communities and societies (Gudeman, 2001). According to Schein (1992) culture is more about assumptions and beliefs while others define culture as a product of values. Greet Hofstede defines culture as "collective programming of mind which distinguishes member of one human group from another".
Americans value innovations, creativity and 'thinking outside the box' rather than just being highly educated. They value family reputation but do not discriminate or value financial status much. They are patriotic but do not have too much of nationalism in them and equally respect other culture and traditions (Datesman et al., 2005). The French give lot of importance to education, family reputation and financial status and measure the success depending on these factors. They are the most patriotic people in the world and are proud of their culture, heritage and way of life (Carroll & Volk, 1990).
Americans are extroverts and open, friendly warm and are tolerant of foreigners and immigrants (Datesman et al., 2005). French are reserved and private and do not entertain foreigners much and have different set of rules of behavior for people within their social circle.
Americans have a strong individualistic character and want to achieve everything on their own and they immensely value achievements earned as an individual. They also take personal responsibility for their failures. French are the collectivists and they believe working in group is more powerful. French blame other people if something goes wrong (Tomalin & Nicks, 2010).
Americans respect every ethnic group and culture and accept them well (Datesman et al., 2005). French have lot of nationalism spirit and are chauvinistic about their culture and expect the people from different nation to act and behave like them and expect them to follow the French rules strictly (About-France, 2012).
American institutional feature includes excellent customer service whereas effective customer service is nonexistent in France (Datesman et al., 2005). Being an entrepreneur is something people aspire to do but in France it is believed that people end up as entrepreneur only if one is desperate for a job and unable to find one (Carroll & Volk, 1990).
Americans are workaholics and work much longer hours and are involved in some activity all the time such shopping, working, classes, busy with family or friends whereas French are just the opposite and are very laid back and get lot of holidays in a year and they make time for doing nothing (Tomalin & Nicks, 2010).
Americans are divergent in their operations since they look for options, new ideas and new approaches towards any process so that they don't end up making wrong decision. French are convergent and make decisions on their operations or tasks on basis of data gathered and analyze right or wrong from it on their own and just perform the task accordingly (Carroll & Volk, 1990).
Thus though both the nations are economically and politically strong and do not have a vast difference in the ethnicity of the people but there are lot of differences in their culture and institutional operations.
Influence of Culture on Costs of Doing Business
The differences in culture lead to conflicts in the business operations which can also lead to reconfiguration of social and economic relations. The cultures of traditional communities and societies are strong and differentiated whereas a modern societies have fragmented and homogenous cultures. There are many researchers who developed organizational culture profile through various literature review and surveys and identified several dimensions such as outcome orientation, respect for people, team orientation, stability, etc (Vargas-Hernández & Noruzi, 2009). which differ from nation to nation and which influence the way the organizations work. The institutional structure of national business systems are linked to national culture. According to Lazear culture is shared expectations and patterns of behavior among individuals. Culture is set of codes which organizations develop to help coordinate activities in an efficient manner and carry out efficient economic exchange (Zelizer, 2010). Culture influences the corporate activities since there can be conflicts between the organizational members in terms of their irrational behavior and their basic assumptions towards a situation or process. According to Czinkota (2004) the cultural factors have significant implication on the business flow of a nation. Few of the factors are language, ethnic background, values and beliefs, customs, education and social institutions.
Globalization has led to transformation of economy and cultural diversity. Globalization has influenced the economic condition of a country. It is an attempt made by the organizations to bring together the culturally diverse talent together for growth and profits of the company. The economy of a nation is influenced by cultural factors such as innovation, efficiency, resources, objectives etc (Vargas-Hernández & Noruzi, 2009).
Monetary aspects in the United States highly influence the rest of the world because of its economy size and dollar being considered as major reserve currency and medium of exchange for international transactions. The inflation rate of America stands at 3.1 percent as per the records of 2011. The country is exporting products worth $1.497 trillion and is the third highest exporter in the world. The foreign exchange reserve and gold is $148 billion (Whitehouse, 2012). The labor force available is 153.6 million and in the fields of managerial, other professional and technical position along with sales and office staff. The country has introduced reforms and consumer protection acts which protect the customers from financial corruptions thus making the country financially unstable (Whitehouse, 2012). The country has also introduced accountability and transparency in financial system. America has the strongest economy in the world but due to recession the growth has been slowed down. There is availability of workforce but need huge investments since the government aids would not be available due to debts and other economical requirements of the country. The cost of labor is high consumer spending is low hence cost of business would be high.
Inflation rate of France is 2.3 percent and the unemployment rate is 9.3 percent. The country exports commodities such as oil and electricity worth $ 587 billion and has reserves of foreign exchange worth $ 171 billion (Emerging Markets Monitor, 2010). The country has labor force of 29.6 million. France's socialist leader decides on the tax policies and social spending which reduced income disparity and has increased borrowing cost which has deteriorated public finances of France (Datamonitor, 2010). The country is in a similar condition as United States and the cost of business is high since huge investment need to be done and the labor cost is more.
Americans tend to focus on execution of projects in a less timeframe (Behrens, 2009). French consider this as deliberative process and prefer doing in depth research before executing any project and consider US method as hurried and incomplete.
Americans have a bureaucratic organizational structure under which decision making power is divided throughout the ranks (Behrens, 2009). French have a highly hierarchical power structure and the decision-making is done at the highest level of an organization.
American employee's growth opportunities entirely depend on their individual performance at work, creativity and other skill sets required by the position and not measured by the education level of the employee (Datesman et al., 2005). But in case of French employees upward mobility in an organization is highly correlated with the university they attended. The country has a highly competitive higher-education system and gives lot of importance to the education level and the employees are promoted mainly on that basis irrespective of his/her competences.
Americans prefer working with talented people from diverse cultures, ethnicities and languages (Behrens, 2009). France believes in preserving its tradition and believe that they should restore their heritage by working with people from within the community since they would have similar social business behavior.
American business people are not particular about dress codes and prefer being casual on the day-to-day activities. French business people give lot of importance to the dress code and wear high-end clothing.
Americans look for business sustainability which would lead to profitability and competitive advantage whereas France emphasizes on corporate responsibility and not profit (Behrens, 2009). The American employees input more than 40 hours per week and are willing to work for more hours whereas French employees do not work for more than 35 hours a week and are not at all workaholics (Datesman et al., 2005).
Thus it can be concluded that Americans are more innovative, hardworking, and flexible and give importance to faster business growth by taking necessary actions whereas French business people invest lot of time to arrive at a decision or form a strategy for any business process (Tomalin, 2006).
Influence of Culture on Economic Development
After the recession period from 2007 to mid 2009 the economy of the United States made a steady recovery and by mid 2011 the GDP had surpassed the growth rate of 2007-09. The real GDP till March 2012 is at $15.3 trillion dollars and the employment rate has fallen to 8 percent Consumer spending which contributes to about 70 percent of GDP has rose. There is also growth of nominal personal income by 3.9 percent during 2011. Business fixed investment has grown by 7.3 percent annually during 2011. The Bureau of Economic Analysis had initiated investments in intangible capital in 1999 by spending on computer software industry which directly adds to the GDP. In 2013 it plans to invest on scientific research and development which would add to the GDP (Whitehouse, 2012). Some researchers have argued on investments on intangibles and stated that it should be defined even more broadly. Investment by businesses on strategic planning new business process, employee training new products would add significantly to future productivity and government should consider investing in the same. Real exports have grown by 5.2 percent and demand for goods and services abroad are on rise which would help in creating jobs for U.S workers and would support the government's goal of doubling nominal exports by the end of 2014 (Whitehouse, 2012). The economy of the country is growing at a moderate pace and the unemployment rate is expected to decrease significantly and the credit conditions would continue to ease which would increase aggregate demand. With different reforms for business developments and investments on research and development ensure that US would still be the most powerful economy in the world.
The economy of France has featured extensive government ownership and intervention but due to euro-zone crisis the government has started privatizing many large companies partially or fully. The major contributor to the country's economy is tourism. The euro-zone crisis has rose the public debt to 86% and the Real GDP growth rate is 1.7 percent (Schott, 2009). The unemployment rate is around 9 percent. Due to high payroll taxes at 43 percent burdens the French business and has led to increase in unemployment rate (Emerging Markets Monitor, 2010). The high corporate taxation has made French industry to be less competitive in global market. The newly elected President Hollande has already initiated pro-growth economic policies such as advising banks to separate their process of lending activities and traditional deposit taking activities for more speculative businesses, increasing tax rate on profits made by banks, applying new brackets of income taxes for people earning over $1.3 million. Currently the economy of France is sluggish but the government proposes that it will be stable and growing by 2017 (About-France, 2012). Due to economic downturn in the European nations the French economy is not very sound and due to the French working system it might take longer for the economy to be stable as compared to United States.
Influence of Culture on Business Practices
The businesses in America do not have any intervention from the government and has a scientific approach wherein the there is a constant search for effective methods to improvise the business environment the employees are hired on the basis of their skill sets and not just their education.
Business in France has two major elements which are government intervention and importance of type of education. The government introduces several policies which have been largely accepted by business and the French education system supports the government by pushing the brightest students of elite schools in large commercial organizations (Tomalin, 2006). Thus the business is mainly dependent on government policies and employs only elite students which shows the business settings are closed one and do not support diversity.
American business structures are not hierarchical but the relationship between employer and employee is a transactional one wherein the employees perform the assigned tasks efficiently as long as they are with the company and leave when they find better opportunity. Americans have an individualistic management style (Behrens, 2009). French business enterprises have a hierarchical structure and rigid functionality. Thus the top management can be considered as directive rather than collaborative. Thus there is one-way governance which creates gaps between ranks (Tomalin, 2006).
Meetings in America are of confrontational approach and are aggressive the employees openly debate all relevant issues and the junior level employees also can have their say (Behrens, 2009).French follow hierarchical organizational structure hence their meetings are more of dissemination of decisions which are already made and only the perceived difficulties are discussed during the meetings. The meetings are very formal and the employees do not contradict the boss openly
In America employees work as teams for a given task or project and aim to work together towards a common goal and everybody is committed to work with dedication and ensure the goals are achieved. The teams then break up after the tasks are complete and move on to carry out other activities thus the working environment is very flexible and employees have flexible nature. In the French working environment team work is not encouraged since they have a sense of rivalry and competition from early age to perform the best in their schools to get in to a good job. Thus people set their own goals rather than work in team. When teams are formed to execute a particular project the loyalties are divided between the project team (About-France, 2012).
America does see considerable amount of corporate corruption Libor scandal is one which involved manipulation of most important interest rates (BBC, 2012). It determines the rate of interest people pay on their mortgage and car loans and return on savings of millions of people (BBC, 2012). More than sixty-two percent of Americans believe corruption is widespread in corporate America and do not completely trust the financial institutions any more. Comparatively there are very less number of corruption cases in France and are mostly political.
French businesses do not involve any bribery and has measures to protect against active and passive bribery (About-France, 2012). America does see bribery but at larger levels and is almost nil in the business areas. Both France and America are among the 37 countries who have signed on to the OECD's Anti-Bribery Convention (Datamonitor, 2010).
The expectable practices of America are they look for transparency in business dealings and discussions. Time is money for them so they expect the tasks to be completed on the schedule time with the desired output (Tomalin & Nicks, 2010). The expectable practices of France are they look for people who follow the French business etiquettes such as being formally dressed for business meetings and discussion would expect people to do the business in the hierarchical structure. They would not prefer anyone interfering in their personal matters.
Culture plays an important role in institutions and economy of a nation. The key issues of France is terms of business is the intervention of government bodies in formation of business strategies which does not allow the organization owners to independently apply their own business strategies which might be more effective and the planning and implementation takes much of time since they do not prefer hurrying up on any issues which has economic implications. America on the other hand faces great deal of corporate corruption which can end up in bad reputation of the business and can lead to economic downturn. The cost of doing business would be the same as in US since the economic conditions almost similar but the labor law and taxation differs. Since the French employee has a 35 hour week with benefits against 40 hours of US workers and the taxes paid is 47% of salary against 24% of US workers. The individualistic approach of Americans has allowed them to face issues more effectively and capable of taking risk whereas French prefer taking calculated risks due to their collectivism approach. Americans being workaholics has led them to be the most strongest economy in the world whereas the French are laid back and generate most of their revenues from non-technical institutions such as tourism and luxury products.