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Culture denotes the way we lead our lives in our daily walk of life. Schein (1992) says that culture is viewed as phenomenon that surrounds us at all times, being constantly enacted and created by our interactions with others.For example Indians eat their food with their hands and some of them may lick their fingers too, whereas Chinese use chopsticks to eat noodles. An Englishman on the other hand may not relish his food until a fork and knife are given to him. All this forms a part of the culture which pervades all forms of living standards.
As far as the definition of culture is concerned, culture is defined differently by different thinkers. For example, Hofstede (1980, P.21) defines culture as "the collective programming of the mind, which distinguishes the members of one group or category from another". Krober and Kluckhohn (1952) suggested a very comprehensive definition as:" culture consists of patterns, explicit and implicit of and for behaviour acquired and transmitted by symbols, constituting the distinctive achievements of human groups, including their embodiment in artifacts; the essential core of culture consists of traditional ideas and especially their attached values''.
Hofstede (1980, P.21) distinguished culture from human nature on one side, and from individual's personality on the other. For Hofstede human nature is what all human beings have in common. For example American corporation's value independence in the work place, on the other hand the Japanese corporations value dependence. American corporation value honesty in business practices; if someone says they can do something it means just that. Japanese corporations, on the other hand, value "saving face," and to admit that they can't produce what you are asking for is an embarrassment.(Hall,1959, P.72).Victor (1992, P.135) concludes, "Business people should remain aware of the way in which the values to which a culture adheres affect international communication".
Impact of culture on International business and implications for Multinational enterprises:
Triandis (1994) describes culture as a challenging task for different areas of social research. Schwartz (1996, P.26) asserted that culture is an aggregate of individual values at a national level. There might be a variation in the individual's value priorities depending on the personal experiences and shared societal values that shape the views of individuals equally. At a national level the concept of culture tries to capture the typical individual priorities in a society which in turn contributes towards their shared enculturation. Culture differs from country to country. Rokeach (1973); Hofstede (1980) contends that cross border business involve interaction with different societal value systems. Although national boundaries do not always correspond with homogenous value systems, there are strong forces within nations to create and maintain a shared culture. Schwartz (1999) admits that adapting to local cultural values that are transmitted through nations political economy, education, religion and language may create and additional burden for multinational enterprises (MNEs) operating in different countries. Ricks et al (1990) have identified that the study of principle differences in national cultures between the home country of the MNEs and their countries of operation, that is, cultural distance, has gained a broad interest in international business research.
One of the major driving forces underlying the other environments is culture. Culture and environments always go hand in hand to exert their influence. A related phenomenon of this is nothing but the business culture. Business culture largely depends on the interaction between the culture and the environment and details the appropriate behavior in business settings such as dress code, being punctual, gift-giving, etc., which vary from culture to culture and country to country. Kaynak, Erdener (Ed.). (1991) identified that international marketer needs to understand the effect of cultural distance on entry mode choice. The European attitude that corn is to be used as an animal feed, and is not fit for human consumption slows down their product's European acceptance. Another example would be the Hindu prohibition of consuming beef leading McDonald Corp. to market veggie burgers in India. Coca-Cola among other American brands was seen in several Islamic countries as a challenge to their culture and this took considerable time and effort to overcome.
Trying to make sense of cross-cultural differences when hundreds of countries and cultures are involved is an extremely difficult task. One way to make things easier is to identify the core set of values that are shared by specific country clusters. Such clusters will help the companies modify their management tactics to meet the customer needs in different groups of countries Romen and Shenkar (1985) created clusters based on their exhaustive and comprehensive review of their research. Hofstede in his initial study has highlighted the fundamental building blocks of culture. Hofstede (1980) contended that culture includes values and norms. Values are concerned with ideas as to what society believes to be good, right and desirable (Hofstede 1980) According to Hofstede; values include the attitude of individuals towards their freedom, loyalty, justice, responsibility and personal relations. On the other hand norms are the rules and regulations which prescribe the behaviors which should be followed by individuals in certain situations. Hofstede (1980) has contended that by understanding the cultural dimensions a company can target the consumers by providing products which suit to the culture of respective country. There are many examples of companies which have gained success in the market by understanding the culture of the country. Cross cultural issues have an impact on multinational enterprises because they influence the cost of doing business in the country. These examples highlight the importance of considering cross cultural issues which need to be understood by the marketers before framing adequate marketing strategies for targeting the company.
An example how the CEO of Black & Decker "transformed an entire corporate culture, replacing a complacent manufacturing mentality with almost manic, market driven way of doing things." (Fortune article).Similarly the success of Food Lion (a $3 billion food-market chain that has grown at an annual rate of 37% over the past 20years with the annual returns on equity of 24%) is attributed to a culture which emphasizes "hard work, simplicity, and frugality.
Culture is always not a positive force. There are instances when companies run into difficulties of not understanding cross cultural issues. According to Hofstede (1980), national cultures can be mapped according to their fit into a four-dimensional framework of (a) weak versus strong uncertainty avoidance, (b) individualism versus collectivism, (c) small versus large power distance, and (d) masculinity versus femininity. In Hofstede's (1980) study, the highest scores on uncertainty avoidance were obtained for countries such as Greece, Japan, and most of Catholic countries in Latin America whereas low scores are obtained for Hong Kong, Singapore and Scandinavian countries. With individualism versus collectivism, we are mainly concerned with the relationships between individuals and organizations in the society. At the individualistic end our main focus is on the individuals self interests in the domain of work and non-work. On the other hand if we look at the collectivist end we find societies in which social ties or bonds between individuals are very tight and people learn between their own in-groups and out- groups. Hofstede (1980, 1983) has shown that different cultures possess different distribution of power in their organizational and social hierarchies and the power distance norm can be used as a criterion for characterizing societal cultures. Tannenbaum, Kavcic, Rosher, Viahello and Weiser (1974), in their analysis of hierarchy in work organizations in five countries, also found that differences in rewards, privileges and opportunities among various levels of managements. Examples of large power distance countries include the Philippines, Mexico, France, Peru, Turkey, Brazil and India. Small power distance countries include Austria, Denmark, Sweden and Israel. With the fourth dimension, masculinity versus femininity, we are concerned with the extent to which the dominant values in the society emphasize assertiveness, acquisition of money and status. In masculine cultures there are sharp distinctions between assertive roles that men perform and service roles that women are expected to fulfill. Hofstede (1983) noted that in a masculine society, the public hero is a successful achiever, an aggressive entrepreneur, and that "big is beautiful" (P.85).In contrast feminine societies emphasize quality of life, preservation of environment, helping others, and putting relationships before money and achievement. The emphasis is on "small is beautiful" (P.85) .Japan is the most masculine country in the world.
Contrary to the usual perception, surveys of International business failures [Altman 1983] reveal that, compared to US., business failure rates in culturally dissimilar countries (e.g., Japan) are not significantly different from those of culturally similar countries (e.g., Canada or UK).The Japanese rate of business failure in recent years is at least as large as that of United States. Although bankruptcies in Japan are concentrated in small and medium-size firms, especially those that do not enjoy protection of an affiliated group of companies (keiretsu), a number of large firms listed on the first section of Tokyo stock exchange has also failed (about fifty from 1963 to 1978) (Altman 1983).Japan is also an important case for testing hypotheses about effects of national characteristics on FDI behavior and performance. The cultural distance of Japan from Western industrial countries has been identified as a negative factor in its participation in foreign direct investment (Yoshino 1976; Ozawa 1979).Even with the international expansion of organizational boundaries; managers in these firms are likely to be influenced by the dominant country culture (Hofstede 1980; Johanson and Vahlne 1977). Kogut and Singh (1980) provided evidence that cultural distance and attitudes towards uncertainty avoidance influence the selection of entry modes. A study by Erez-Rein et al. (2004) demonstrated how a multinational company that acquired an Israeli company that develops and produces medical instruments changed the organizational culture of the acquired company. The study helped in identifying the gap between the two companies, with Israeli company being higher on the cultural dimension of innovation and lower on the cultural dimension of attention to detail and conformity to rules and standards as compared with the acquiring company. The latter insisted on sending the Israeli managers to intensive courses in Six-Sigma, which is an advance method of quality improvement, and a managerial philosophy that encompasses all organizational functions. Dunning (2003) has recently argued for a more responsible global capitalism that incorporates the interests of individuals, corporations, NGOs, governments and supranational agencies. Criticisms have been especially sharp in relation to the activities of multinational companies- such as Nike, Levi's, United Fruit, and others- whose sourcing practices in developing countries have been alleged to exploit low-wage workers, take advantage of lax environmental and workplace standards, and otherwise contribute to social and economic degradation. Many governments, international organizations, and both local and multinational NGOs have criticized the low cost labor seeking behavior of MNEs in developing countries, suggesting such firms scan the globe for the cheapest, least regulated, and most exploitive situations in which to source raw materials and semi-finished products (Singer 2002).Another example here is the interpretation of the cues employed and any attitude or emotions elicited by them vary from culture to culture as is witnessed by the American interpretation of the English expression, "Knocking someone up in the morning." In England this means to awaken them by knocking on their door, very different from its meaning in America.Differences like this prompted Churchill to quip that America and Britain were two nations separated by a common language. It is not only words and their connotation that can cause miscommunications. An American Airline on its inaugural flight on a route touching down in several American cities, crossing the Pacific, touching down in several Asian cities, and ending its route in Australia had its flight crew wear white orchids in their uniform lapels. There were two instances of employing an inappropriate cultural symbol in this. White is the colour of death in many Asian cultures and it is used at funerals. The orchid is also associated with funerals. Green symbolizing youth and life in many western countries stands for the dangers of the jungle in many South East Asian countries. These are the good examples of the different uses of colours in different cultures. Another example would be the slow acceptance of consuming uncooked (marinated) fish in America.
There are many examples of companies which have gained success or failure as a result of understanding or failure to understand cross cultural issues in international marketing arena. Hofstede (1980, 2001) in his model has identified the importance of understanding the various dimensions of culture by a marketer who is entering into a foreign market. Hofstede (2001) observed that not only will the cultural diversity among countries persist but also new technologies might even intensify the cultural differences between and within the countries. As per his studies and research it was proved that it's essential to understand the different dimensions of culture before targeting a new country. An international marketer needs to understand the cross cultural issues apart from just understanding the economic environment of the host country to attain success and grab the market.