Concept Of Culture Within International Business Management Commerce Essay

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The aim of this report is to increase the awareness of the impact of culture on business and suggest how effective cross-cultural management can contribute positively towards the success of an organisation. In today's global world, managers should take into account cultural differences when dealing with colleagues and customers across a range of countries or regions and when managing multicultural teams. By looking at Hofstede's dimensions of national culture and comparing the business culture of China and the United States, this report provides a better understanding of cultural diversity at the workplace.


Understanding national and international culture is vital in today's globalised world. The number of workers employed by foreign-owned companies has increased drastically in the past 20 years due to the expanding activities of international and global businesses all over the world (Rugman, Collinson & Hodgetts, 2006). The growing multicultural workforce makes it important to understand how people's beliefs, values and norms differ. As more and more people from different cultural background are entering the hospitality industry, managing cultural diversity is becoming challenging issue, especially to the HR managers.

Culture. Concept of culture within international business management

Culture is defined by Hofstede et al. (2010:6) as "the collective programming of the mind that distinguishes the members of one group or category of people from others". Rugman, Collinson & Hodgetts (2006:129) describe culture as the "acquired knowledge that people use to interpret experience and to generate social behaviour" and this knowledge is developed throughout one's life and is influence by the family, friends, education etc. Culture is not innate; it is learned and derives from one's social environment (Brown, 1998; Rugman, Collinson & Hodgetts, 2006; Hofstede et al., 2010). There are many definitions of culture but in general, culture can refer to the behaviour or the lifestyle of a certain group of people.

Trompenaars & Hampden-Turner (1997) suggest that culture can be presented like an onion with three layers (see Figure 1). The outer layer consists of artifacts and products - the visual reality of behaviour, clothes, language, housing, etc. This is the explicit culture. The middle layer refers to the norms and values held in the community - what is considered as right or wrong (norms) or good and bad (values). Values and norms structure the way people in a particular culture behave. The inner level is the deepest and its core consists of basic assumptions - rules and methods to deal with the usual problems. It is difficult to describe or explain these basic assumptions as every culture has developed its own set of them.

The notion that the culture is acquired through the process of learning has important implications in the international business (Ferraro, 2009). Such and understanding can lead to greater tolerance for cultural differences and hence better intercultural communication within the business environment. Being able to learn your own culture means that one should be able to learn to function in other cultures as well which could be really beneficial for the business. From an HR perspective, foreign workers lacking certain job-related skills should be able to learn those skills in the future due to the learned nature of culture, if a relevant training program is provided.

The relationship between national and organisational culture and its influence on management. Cross-cultural management

National and organizational culture is interrelated and has complex relationship (Hofstede, 1991). While national culture is focused on values, at the organizational level cultural differences reside mostly in practices and less in values. Hofstede et al. (2010:344) define organisational culture as "the collective programming of the mind that distinguishes the members of one organisation from others" and this is valid not only for the employee-employer relationship but also for the company's stakeholders.

Li (2008) emphasizes that national culture possesses dominant position and it affects the employees more than the organisational culture. An example is the Chinese employees in international hotels who are affected more by their national culture (Chinese culture) than by the hotel groups' corporate/organisational culture (Li, 2008). In addition, some of Hofstede's dimensions of national culture have immediate impact on organizational culture. Power distance and uncertainty avoidance, for example, create low autonomy in the organization. On the other hand, the relationship between national and organizational culture can be seen as a double-edged sword to globalization (Naor, Linderman & Schroeder, 2010). Sharing best practices globally can provoke conflicts with national cultural values when, for example, a large multinational company try to superimpose its own culture in different countries where it operates; the so called ethnocentrism.

Managerial philosophy and practice are considered as part of the organisational culture at the national level (Yang, 2012). Cultural and national differences have a strong impact on the expectations and attitudes of different groups of people towards work and on-the-job behaviour. In Korea for example, there is a strong hierarchical structure in the company and if employees do not know how to do the job, they will never ask their managers because this is not allowed in their society. Contrary, this will rarely happen in the Western countries.

In order to anticipate and accommodate these differences, organisations and managers in particular should develop strong cultural sensitivity (Mead, 2004). Deresky (2003:83) describes cultural sensitivity or cultural empathy as "awareness and an honest caring about another individual's culture ". Such cultural empathy is really important for international managers in order to develop appropriate policies and agree on how to plan, organize, lead and control in a specific international environment.

Edwards & Rees (2011) conclude that national culture affects organisations in many ways such as attitudes in negotiations, leadership styles, behaviour, attitudes towards jobs and career development etc. The cultural differences should not be ignored as they influence the business in many ways. That is why cross-cultural management plays a vital role in today's international organisations. Mead (2004:16) defines cross-cultural management as the "development and application of knowledge about cultures in the practice of international management, when the people involved have different cultural identities". Cross-cultural management is rapidly becoming everyone's challenge as the expanding international trade and the continuous migration of people mean that more and more people from different cultures would work together.

Hofstede's dimensions of national cultures

Professor Geert Hofstede is a Dutch organisational Anthropologist whose name is associated with culture. He provided a universally applicable framework for classifying cultural patterns. He identified four basic dimensions to express differences between national cultures - Power Distance (PDI), Uncertainty Avoidance (UAI), Individualism versus Collectivism (IDV) and Masculinity versus Femininity (MAS). In addition, two more dimensions were added at a later stage - Long Term Orientation (LTO) in 1991 and Indulgence versus Restraint (IVR) in 2010.

Power Distance

Power Distance refers to the degree of social inequality that exists and is accepted among people with and without power; the way the power is distributed within an organisation (see Appendix 1for differences between low and high power distance at the workplace). Countries which scored high on power distance such as Malaysia, India, Arab countries do not expect the managers to consult with their subordinates in the decision-making process. On the other hand, the low power distance cultures (e.g. Denmark, Sweden, New Zealand) give the employees more power, flexibility and autonomy and encourage them to make decisions even without a managerial approval.

Uncertainty Avoidance

Uncertainty Avoidance is related to the degree of anxiety society members feel when they should deal with uncertain or unknown situations (see Appendix 2 for differences between weak and strong uncertainty avoidance societies at work). This is also related to the control of aggression and the expression of emotions. In high uncertainty avoidance cultures (Greece, Japan, Portugal), people try to avoid uncertain situations by keeping to strict codes of behaviour. For example, in Japan the concept of lifelong employment was used to minimise the uncertainty which may influence the career of the people (Taras, Steel & Kirkman, 2011). Contrary, in low uncertainty avoidance cultures (Sweden, Denmark, Jamaica) there are less formal rules and guidelines on how to carry out the work.

Individualism versus Collectivism

Individualism versus collectivism refers to the relationship between an individual and the group or how people define themselves and their relationship to others (see Appendix 3 for collectivist and individualist societies in terms of workplace). The individualist countries such as the U.S., Canada, Great Britain, Australia assume that people are looking mainly after themselves, their own interests and the interests of their immediate family (wife, husband, children); management is about managing an individual. In contrast, collectivists countries such as Japan, Mexico, Brazil, South Korea assume that the person belongs to a tight group (clan, family, tripe) from which he/she cannot detach; management is about managing a group.

Masculinity versus Femininity

Masculinity versus Femininity is about the relationship between sex/gender and the social and emotional behaviour. It is about the degree to which masculine values (assertiveness, earnings, promotion etc.) and feminine values (friendly environment, leisure time spending, cooperation etc.) dominate (see Appendix 4 for the difference between feminine and masculine societies at the workplace). In the masculine countries like Japan, Italy, Austria employees are motivated to perform better, get promoted faster and be successful in their career. On the other hand, in more feminine countries like Denmark, Finland, Norway, Sweden people tend to maintain warm interpersonal relationships and promote the social well-being and this motivates them at their workplace.

According to Mead (2004) Hofstede's model is very useful but its limitations should be respected. It is used as a benchmark for national culture but cannot be applied to describe organisational culture or individual psychology. The model offers sets of comparisons but does not present entire analysis of individual cultures. Thai culture, for example, is more collectivist than Australian culture, but more individualist (and less collectivist) in comparison with the Malaysian culture (Mead, 2004). Understanding Hofstede's national dimensions is a simple way of understanding different cultures and adjust the managerial approach in a more effective way. One of the biggest mistakes a manager can make is to ignore the cultural differences of the team members and the different cultures in which the business operates.

Cultural diversity - China versus the United States

According to Hofstede's dimensions of national culture, there are some significant differences between China and the US (See Figure 2). China accepts the inequality amongst people and the subordinate-superior relationship while in the United States both managers and employees expect to be consulted and to share information. There is a significant difference between collectivist culture in China where people act in the interest of the group, and the individualist culture of the United States. The US scores 46 for uncertainty avoidance indicates the society is with fewer rules and does not try to control all results. China's lower score indicates an even more liberal society. The only similarity is that both counties are classified as "masculine" societies where success is key and people are result-orientated.

In the Chinese business culture, the business is usually family-owned and family operated. For Americans who do business with the Chinese, it is important to know who has the most power in the company and deal with him directly. In China, it is always more appropriate to use a person's last name than the first name. In a business setting, the person's title should be used, followed by the last name. When exchanging business cards in China, both hands should be used to present and receive the name cards. When receiving the business card, it is better to spend short time reading it than putting it away immediately. It is also considered offensive if one puts the business card in the back pocket or sits on it.

The Chinese business culture influences the negotiation process as well. Negotiation in China begins with socialising and personal "guanxi" (connection) rather than business discussion. Deresky (2003) emphasize that negotiating with Chinese is one of the toughest negation in the world and American managers should develop and anticipate various tactics. While a handshake is polite in China, physical contact or personal discussions are not well accepted.

While it is normal in America to disclose financial information and publish it officially (e.g. large corporations), the Chinese prefer to keep this private. When doing business with the Chinese it is advisable to maintain respectful distance concerning financial matters.

Punctuality is important for the Chinese and the American concept of "fashionably late" is not understood. When invited to a business dinner, one should be prepared to share dinner with the others. This is vital for the Chinese culture as in this way the relationship is getting stronger. Drinking is an inevitable part of a business dinner. When partaking in a toast, it is important to finish the entire drink as this shows respect. It is expected to give a gift to Chinese hosts, usually at the end of a meeting. Gifts are not usually opened in front of the person giving the gift. For more differences between Chinese and US culture, please refer to Appendix 5.


Mead (2004) outlines that cultural diversity at the workplace has its strengths and weaknesses. Some problems that may occur include difficulties in communicating with the others and hence make it harder for people to integrate within the company's environment. Diversity among the employees may cause problems because of misunderstanding and cannot work well when working in a team and hence decrease the productivity. Another major problem may appear when the head quarter of an international company adopts its practices across the board and this may cause great loss for the business. As it is widely known, what works well in one country does not necessarily work in another.

On the other hand, diversity can benefit companies in many ways as people from different cultural background think differently and can generate better ideas. These multinational companies tend to be more flexible, open to new ideas and aware of consumers' needs and wants. When managed successfully, it brings economic benefits and provides the company with a competitive edge. The organisation's ability to attract, retain and motivate employees from different cultural background can be beneficial in terms of cost structures, physical structures, creativity and problem solving and adapting to change in general. In addition, cultural diversity gives opportunities for synergy which contributes positively to the organisation (Mead, 2004).

Culture contributes towards organisational effectiveness and hence contributes towards the success at the market place. Internationalization has emphasized on the importance of cultural diversity and managers should acquire different tools and methods to turn cultural diversity into a competitive advantage. Strong organisational culture can be used as a competitive edge for the company as it promotes consistency, co-ordination and control, enhances motivation and reduces uncertainty (Brown, 1998).