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Cross Cultural differences has become vital in order for organizations to consider for survival in international business . Drucker (1995).
Dutch cultural anthropologist Geert Hofstede defines culture as a Software of the mind with set of learned core beliefs , values, standards, morals, behaviors that are shared by societies and individuals determining an individual feelings and view and others to act in a International Business environment. Hofstede (1980) & Alder (1991).
Chinese people while dealing with judgments and general knowledge's shows bigger overconfidence's (Yates et al., 1989) than Americans which is due to their culturally influenced cognitive customs. These cross-cultural variations in Chinese were due to the fact that the custom demands people to generate many arguments for an issue according to their education system and to draw characterization based on historical precedence's logic rather than directly on the judgment of decision tree (Yates et al., 1989)
Thus culture which consists of both unconscious and conscious values, attitudes, symbols and ideas shapes a human behavior which is transmitted across generation after generation and hence forth it a learned response to frequent situations. (Hill ,2007)
Executives and Multinational corporations engaged in global business can't afford to turn blind on a nations culture when developing inter-relationships with countries and individuals for prosperity and growth .Drucker (1995).
The language of friendship
Culture is prescriptive, enduring, cumulative, and subjective and facilitates communication. The Culture Norms and value systems are a evolutionary product (Hill, 2003) of several factors like religion, political philosophy, religion, social structure , Aesthetics , national culture, material elements and language which are considered as the determinants of culture (Hill, 2003) .
Each of these products might have significant differences in Multinational Corporations and so the management aspects and process might need to vary with operations in different countries (Mead, 1994) that need to be considered as culture relates to value in workplace.
Elements like national culture, Language, religion, values and manners, Aesthetics, Social interaction and material elements are of relevant importances in dealing with International Business (Chui et al., 2002) have huge impacts on business activities from an organizations capital structures to group performances Adler (1991).
Impacts to International Business, are also seen in religion which causes cultural Disparities Alder (1991) that affect the planning decisions and the way in which strategy is implemented .Religious philosophies within a culture have a greater impact on an individual's approaches to international business if even that person is not a follower of a particular region. As an instance in the Arab World, all the conversations are normally sprinkled with "Inshallala" which means God willingly. Aspects of Muslim religion are seen reflected here in attitudes and values of individuals and society that shapes the behavior and practice of members here which becomes essential for consideration in business negotiations.
As a instance , Attitudes and Behavioral patterns of Work culture in Middle east is different to American Culture as Muslim Religion is being practiced there which changes the planning decisions like Lunch Break timings, prayer timings ,Friday weekend etc . Thus impact of religion does have enormous impact on the way international business is conducted, which is seen in a cultures attitudes and values towards social organization, entrepreneurship and consumption.
The art of giving
The Chinese ethnical system Confucianism requires higher loyalty and ethical conduct. In this Confucian culture (Seligman, 1999) one has to be loyal to their superiors and superiors for the organizations show greater reciprocal obligation to their employees thus ensuring better cooperation between management and employees. In China this concept of reciprocal obligations is often seen strengthening international relationships. This is often termed as 'gaunxi' which is essential in China for building long term relationships for getting business in China. Similarly Japanese employers show loyalties to their employee's hard work by giving lifetime employment schemes. (Dore ,1987). All of these are seen as leading to much improved performances economically to an international organization.
A case study of Guanxi (Seligman, 1999) relates to American Food major McDonald business in 1992 in Beijing.
Mc Donald's Business lacked the 'guanxi' of Li Ka-shing who was a Hongkong developer when it started its operations .Within two years of its business there , Mc Donald's were issued a notice to move out of the business even thou Mc Donald had the lease agreement for 20 years . (Dore, 1987). Mc Donald's lacked the fundamentals during that time to build relationships forcing them to move out of the business even thou they tried to enforce the lease legally with no hope.
In such societies which lacked rule based legal traditions Mc Donald had to include Confucianism which meant and taught Chinese respect and give respect, loyalty to their superiors. Loyalty was a duty here and McDonald's had to pay its price and to build its relationships they should have done favors like gifts to meet its obligations. (Hill, 2007).
Business practices in countries are different and a clear difference of how a business in the West which is driven by framework of laws and doing business in China was portrayed in this case study which are essential for international business success.
Education: A good understanding of how society values education (Mead, 1994). can help in determining how a person need to process information for getting business in a country as Formal education is given greater value in certain cultures .
At times listing qualifications like higher degrees and educational qualification can help business partners in getting instant respects while in certain cultures there exists risk of being labeled as pretentious windbag. (Hill, 2007).
International Business is also impacted by language .Language in an international business environment shape the way individuals identify the world. Language differences create cultural differences.
In international business today English is the recognized global business language (Mead, 1994) & Goodman (1992). Language could also be and most nonverbal clues are often culturally bound. Failure in understanding them could mean a failure of communication in international business as well. As an instance Thumbs up gesture in USA and Europe indicates that "it's all right" but in cultures like Greece this is obscene.
Social Organizations : The social structure of a society refers to the social organization. An organizations organizational chart, regulations of the government and an individual's tendencies to link groups and the way in which these groups are led reveals about a culture's decision making process.
Culture also has significance on arts, and other symbololic forms of color and music of a nation.
International Corporations need to be ready to combat cultural differences as culture changes over time and is never constant (Hill ,2007 ). As an instance corporations in early 60's , women were not welcome to hold most of senior management positions in an American society but today in the American culture we can see women in Business world . (Mead , 1994)
Similarly the traditional model of a Japanese worker was pictured as being loyal to the boss and sacrificing his pleasures like evenings, vacations and weekends to serve organizations. But today we see a cultural shift in traditional Japanese workers to a westernized culture like not living for the company and looking for better offers to move on from his job thus showing a move towards greater individualism. Improved Education and Urbanization are functions of economic progress but both may lead to declining emphasis on traditional values.
As international business is different to national business and cultures are found to change as time passes, organizations need to develop three major things which can bring success to a firm
1 Developing cross Cultural Literacy
2 Significance of Business Ethics and Culture for decision making
3 Link between culture & national competitive advantages
Developing Cross Cultural Literacy
Organizations that are ill-informed about practices of a different culture will likely run into problems when establishing operations abroad. Adaptation to norms and value systems of a culture embraces all aspects of an organization in a foreign land.
As an instance the pay scales, naming a product for marketing and way in which product promotions are carried out etc are all sensitive issues to culture. Management should take care to understand what might work well in one culture may be offensive in other culture and might not work.
To combat problems like this, organization should embrace local culture to build business relationship like employing local nationals to gain cultural knowledge. By suitably mixing overseas cosmopolitan executives at frequent intervals could bring greater adaptability with people and work place.
Organizations should be on constant guard of also ethnocentrism which means some people of culture have a superior belief over other cultures and this could mean contempt for other ethnic groups.
Significance of Business Ethics and Culture for decision making
A connection between competitive advantage in global market place, of an organization and culture is very important factor for international business.
A good connection is essential for mainly two reasons. It gives a better choice for organizations to explore countries to expand or locate their productions to do business. A good example to this would the location of hot spot - America's outsourcing of business services functions to India, China etc.
Similarly cultural factors could be greatly attributed to Japan's surge as economic power during second half of 20th century .In return for received reciprocal obligations to their employees the organization won greater long term relationships, loyalties that enhanced the competitiveness of Japanese firms. Similarly according to (Hill, 2003 pg 114) "Reciprocal obligations and honesty help foster an atmosphere of trust between companies and their suppliers. This encourages them to enter into long term relationships with each other to work on inventory reduction, quality control and joint design - all of which have shown to improve organizations competitiveness". Thus Culture does have impact on the competitive advantages of organizations.
Business ethics and Culture
Despite cultural differences there are many ethical principles that are universally held in the world like not to steal, kill etc.
Business agreements and economic growth can't take place if general principles of trusting each other are not followed. It's very unethical to breaking business agreements even thou there are laws in countries to deal with exceptions in international business.
Certain business ethics are also culturally bound. E.g. In an American culture attempts to give gifts to build better relationships to officials could be treated as bribery while the system of 'guanxi' networks are associated with gift giving in China are essential for building inter relationships
International business should adapt to values and customs of a country as business customs vary according to countries and firms need to be aware of it. The respect for local traditions of a country, respect for human rights and a certainty that context matter in deciding what is wrong or right are ways through which organizations could deal with ethical problems in international business.
Case Study Analysis:
Cultural Challenge of India and America
India is taken in our Case study as it represents a hot spot of Outsourced American business services functions. While interacting with American teams, Indian counter parts should consider five elements of the business culture of America
Meaning of Agreements and Commitments:
During business interactions Americans take commitments quite seriously. They become uneasy with indistinguishable general commitments as seen in India which is a bit flexible in approach.
In America failure to follow commitments precisely could be viewed in an angle that the person is not at all trust worthy.
2 . Mindset about Management Hierarchy:
Title and rank are not given much importance in American culture. American culture expects their subordinates to offer suggestions speak up and take initiatives rather than to just do what they are told to do so. In this authorities are more delegated and decisions less top-down. Team members are expected by their managers to take responsibilities
3. Process Orientation vs. Results:
The adherence to proper rules and correct process implementations are much valued in an Indian Business culture rather than giving greater emphasis on the desired goal. American individuals are more concerned about results rather than following established processes and hence
In Indian Business culture, implementing right process and following rules are valued high however American business culture values only results. Americans get impatient and dislike being told something cannot be done or has not been done due to procedural reasons.
4. Attitudes towards Appointments and Deadlines:
American business culture requires strict adherences to time. Commitments on time are seen as acts of courteous behavior and a principle of professionalism. The more open-ended and flexible time approaches in India's business culture could create unfavorable impressions and even tension to their American counterparts.
5. Directness in Addressing Disagreements
Style of American communication is typically candid, directed and also relatively unconcerned with avoiding conflict .Indians on the other end normally try to avoid conflicts and loss of face often when compared to Americans in Dealing with problematic issues addressing disagreements which could be problematic to international business. Americans deal disagreements straightforwardly and open with a plain "yes or no" in a "tell it like it's" means.
Awareness to each other's culture is extremely essential to adapt effectively in international business environment. Cross cultural competencies in offshore teams can be improved by providing internal training by specialized outside expertise that have expertise knowledge in fields of cross cultural communications.
By using some strategies like educating the offshore teams the ground rules of American Business culture which includes behavior norms, thought patterns and attitudes of what is expected from Indian Business Services might ensure success while working with Americans.
Culture is particularly relevant in the context of international business operation. So Corporations involved in Global Business development should understand with much importance , cross cultural differences and should take in importance of considering cultural aspects of countries for developing competitive advantages. .
International Corporations need to be ready to combat cultural differences as Culture changes over time and is never constant.
Frequent Travel, experiential knowledge and updated written materials like magazines, business journals are good sources of Cultural knowledge's and organizations need to be well aware of considering a nations culture in account.