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The main objective of this essay is to discuss the importance of Cultural Quotient for the successful management of the future. This essay will firstly provide a basic idea of what cultural quotient means and why it is important for global management. Then it would discuss the changes that have occurred in the global business environment over the past 20 years and how it may affect the commercial transactions carried out between different countries. The paper will conclude that culture affects all aspects of international management and the understanding of local culture and business environment can give managers an advantage in competitive industries.
To begin with, Ang & Van Dyne (2008) describes 'Cultural Quotient' as an individual's ability to function successfully across cultures which includes national, ethnic, and organizational. Cultural Quotient which is also addressed as "Cultural intelligence" is said to help leaders develop an overall viewpoint that results in more effective leadership. In other words it is an individual's willingness, ability and approach to understand others' cultural features as a means of linking communication and collaboration gaps. Therefore, cultural intelligence provides a research-based model for becoming a more effective leader in culturally diverse settings and across cultural settings (Ng, K.Y et al - 2009).
Earley and Ang (2003) suggest that managers with a high cultural quotient are likely to be effective when working across borders as they are said to have the skills to encounter any confusing situations that may arise due to cultural differences, think deeply about what is happening (or not happening), and make applicable alterations to how they understand, relate, and lead in the context of this different culture.
There are two major developments that have occurred which has changed the business environment dramatically over the past two decades. This includes technology and globalisation. As Coghill (1997) outlines globalisation may be defined as the sharply accelerated nearly worldwide integration of trade, finance, technology, production systems and information. Furthermore, Ohmae (2005) notes that the globalisation has resulted in the disappearance of cultural borders that has led to a "borderless" world. Globalisation has "flattened the worldâ€Ÿ and there is no escaping this major change in societal and business circumstances (Friedman, 2005; Greider, 1998; Sirkin et al, 2008). Therefore organisations are now able to conduct business anywhere and to expand operations beyond their national borders for both customers and employees. Yet Ang et al (2007) states that although the world has seemed to become "flatter" and "smaller", increasing cultural diversity has created challenges for individuals and organisations.
Sirkin et al (2008) points out that it is technology that has supported the business process outsourcing, world sourcing, off-shoring and near-shoring. Friedman (2005) on the other hand argues that advances in technology, particularly in computing and communication have failed to generate effectively operating business environments.
Based on the new global activities taking place, employees increasingly find themselves working in culturally diverse, geographically dispersed, multi-national teams and most successful businesses are usually being conducted in increasingly culturally diverse environments both domestically and internationally (Ang et al, 2007; Shapiro et al,2005). Therefore it is important for businesses to employ global leaders or in other words, managers with high cultural intelligence. This is because according to Caligiuri and Tarique (2009) effective global leaders are good at working with colleagues from other countries. These leaders are able to interact well with internal and external clients from other countries and can often speak another language. Their high skills for supervising employees who are of different nationalities, ability to develop strategic business plans on a worldwide basis and ability to manage a global budget are one of the prime assets a business would retain. Effective global leaders are also good at negotiating in other countries with people from other counties. They are highly skilled in managing foreign suppliers or vendors and can manage risk on a worldwide basis.
Over the past twenty years or so, the cultural values and norms have changed significantly across the globe which has an extensive impact on the global business environment as well. However not all aspects of cultural values have changed. Foreign cultures have different ways of doing business, for example when it comes to planning ahead and keeping delivery times. Therefore it is essential to adapt the different cultural aspects when trading with business partners from different countries of the world. This means the organisations with the capacity to manage cultural issues will out-perform those who are less able to accomplish these issues (Ang & Inkpen, 2008; Thomas & Inkson, 2004). Mayrhofer (2004) also points out that those companies, who want to be "a step ahead" of their competitors, need to be aware of the importance of the home-country factors. By this he means that companies should not neglect the cultural and institutional differences.
According to Zacharakis (1996), companies seeking international markets must consider cultural differences such as language, religion, political states, culture, values and attitudes, aesthetics, material elements and even demand types, before entering. Czinkota (2007) said that cultural factors have an important impact on the flow of business. The research further suggests that the companies are required to consider the risks and difficulties that an entering to an unknown country and culture means.
Tayeb (1998) suggest that language is one of the major issues when it comes to negotiations with trade partners from other cultures. However it is not always vital to be familiar with the partner's language, several studies shows that a link exists between successful company performance in winning new business in foreign markets, and the ability of the company to conduct its business in the language of the customer. Tayeb (1998) moreover states that there are some aspects of culture that manifest themselves in a negotiation situation. Beside the different language they may speak, the foreign partners may also have a tendency, for cultural reasons, to think in different ways and have different priorities in the way in which they do business.
For instance, in high-context cultures such as Asia, the Middle East, Africa and the Mediterranean may prefer to explicitly express their thoughts and feelings and most communication takes place within a context of extensive information networks resulting from close personal relationship. Especially the Saudi Arabians would like to build up personal and closer relationships first and establish the fidelity and trust of their trade counterparts before doing business contracts and activities with them. They would consider it rude if the business subjects are brought up before building a closer relationship. The Americans on the other hand might believe that the use of informal style and first name would signal that the partners are trusted and would prefer to bring up the business subject at the first opportunity available as they believe in effective use of time. The above examples shows that two partners from these different cultural backgrounds could easily misunderstand each other if they negotiate without a previous knowledge of one another's assumptions and values. Therefore a high level of cultural intelligence is desired.
According to Onkvisit (1993) the pricing negotiations may differ from culture to culture. To charge everybody the same price is common in for example USA, but in other cultures a flexible and negotiated price is common and the negotiation can take days. Therefore, it is very important to know which kind of price negotiations are to be expected in the country the company wishes to cooperate with.
Hofstede (2001) explains the cultural differences when it comes to gender. This issue is even included as one of the important points that Kwinstessential (2008) mentions that companies must consider while doing business in South America. Some cultures are more focused on this subject then others and can even be very masculine in the business world. However in countries such as South America this is not the case. But the overall impression created from the research is that a female is accepted in most of the countries and many times a female in the group can make the negotiation more relaxed and collected.
The research outlines that cultural differences can be seen in a wide range of basic, everyday things such as how close individuals stand when talking. For example, North Americans stand about one arm's length apart when talking, but people in other countries tend to stand much closer together. The nature of communication between individuals may also be different. For example, in Russia, China and Japan there is said to be a great hesitancy to say 'no' directly in response to a request while in Australia and the Unites States there is no such hesitancy. Another key aspect would be how influential each country's legal system is. This is because in China, the legal system has a great flexibility in how different laws are interpreted and enforced, while common-law countries such as United Kingdom or the United States rely on a large body of case law and commentary. Due to such key cultural disparities, the management is required to follow different practices in diverse areas of the world. In order to do so, the managers are mandatory to have a high level of cultural intelligence.
It appears to be the case that a great deal of cross-cultural misinterpretation can be outlined as a failure to understand each other's' basic assumptions about how decisions ought to be made (Brislin, 1993; Hofstede, 1991; Triandis, 1994). According to Condit's (1993) explanations', understanding the motives and behaviours of a discourse community initiates with an acknowledgement that its members are functioning according to rhetorical rules that make sense from within their own community.
Even though the fundamental reasons are not entirely clear, the research suggests that cultures around the world seem to vary their relationship rules along two key dimensions, striking a balance between individual identity and power and social allegiance and control.
To return to the initial statement, the influence that culture and norms have on international business or management is greater than anticipated. Therefore the management could never neglect its effects at every level of particular business in an international environment. Cultural miscommunication is very costly; one can imagine it in a context of negotiations and all the consequences that may face the company in the future due to it. Therefore it is vital for the future global leaders to adapt their management styles to these very crucial variables related to culture in order to succeed; Successful management comes through high cultural quotient levels.