My aims and objectives of this essay are to define how culture impacts on international business. Geert Hofstede defines culture as:
‘The collective programming of the mind which distinguishes the members of one human group from another. Culture, in this sense, includes systems of values; and values are among the building blocks of culture.’ (Geert Hofstede 1984).
International business involves profitable activities that cross national borders. It involves movement of good, capital, services, employees and technology, importing and exporting, cross boarder transaction, buying and selling in foreign countries and the importing that takes places between two or more nations. Organizations start international business actions in order to generate more sales, a need to use resources from different countries or expand their activities. I will define how religion impacts international business, government involvement, corruption, values and attitudes, language, communication, time and use Hofstede’s cultural dimension model to examine the influence on international business. I will use examples of international organizations that have been majorly impacted by culture and how culture has influenced managerial styles and management decisions.
Numerous Organizations such as McDonald’s, Burger King, KFC, Subway and Pizza Hut etc. have expanded their processes across boarders over India and China, these huge multinational organizations serves customers in more than 100 countries around the world, however they are still acquiring new customers and new partners in new countries. McDonald’s is a well-known fast food chain that is undoubtedly the best-run public fast food restaurant chain in history, McDonald’s has approximately 30,000 restaurants in more than 120 countries and serves around 50 million customers a day, however McDonald’s will still need to understand cross-cultural literacy differences and to determine similarities across the Indian culture and come up with a strategy in order to be successful. For example McDonald’s has expanded to India, which raises the question and makes you consider the fact that India is a vegetarian country. The McDonald’s menu in India has entirely no beef or pork on it as Indians believe cows are sacred animals and there are roughly 140 million Muslims living in India who don’t eat pork. In conjunction to this McDonald’s have created a primarily vegetarian menu, with the Chicken Maharaja Mac. This is a prime example how culture impacts international business and that cultural competence must be recognized by McDonald’s in order to survive in India to cater for vegetarian consumers. McDonald’s capability to adapt and meet their customer’s needs in India to a meat-less culture is astonishing when you contemplate the fact that McDonald’s is usually best known to sell millions or beef big macs and hamburgers. McDonald’s have implemented cultural adaptability and flexibility with the appreciation of Indian beliefs and have successfully expanded to India. In conjunction to this McDonald’s faced a lawsuit in 2001 and were sued over allegations that they used a ‘miniscule’ amount of beef extract in their oil, this became a huge case in India which led McDonald’s to settle the suit for $10 million and McDonald’s apologized to Hindu’s, conversely due to the fact that the beef oil was used it bought extremist to the streets of Delhi where Hindu’s vandalized a McDonald’s restaurant which caused a $45,000 in damage and the Hindu’s called upon the prime minister to shut down the McDonald’s stores in India. This gave McDonald’s a negative publicity and the consumers were raged with anger with McDonald’s. Eventually McDonald’s carried on opening restaurants In India and by 2007 there was another 130 restaurants opened and McDonald’s have plans to open three times as March by 2011, this example illustrates that culture impacts international business as the organization differs from domestic business and for McDonald’s to success they had to customize their menu and preferences to the Hindu culture.
There are at least three levels of culture; the three levels of culture include national and regional culture, which is within a country or region, corporate culture in an organization and professional culture where particular functions are within an organization.
Managers of multinational companies (MNC’s) should be aware of the importance of different cultural factors that are faced when doing business in foreign markets around the world, so they take into consideration peoples religion, values and attitudes. Cultural differences affect consumer’s reactions towards advertisements and promotions.
In Spain, a Burger King store had an advertisement that shows a picture of Lakshmi (Hindu God) about to eat one of the beef burgers, which are forbidden under Hindu religion. “The poster was titled “La Merienda Es Sagrada”, which roughly translates, as “Snack is sacred” and shows a meat-cheese sandwich with few other products for 1.75 Euros.” Burger King was forced to apologize immediately to Hindus after it revealed a respected Indian goddess with a ‘forbidden’ Whopper burger. Burger King then withdrew the advertisement from stores in Spain after Hindu’s around the world complained at the belittling of their religion. The advertisement caused great anger towards Hindus as it suggested that Hindus eat beef, which offended Hindus by the lack of sensitivity from Burger King, Burger King removed the advertisement advert out of respect for the Hindus. This example for a marketing blunder causing huge impact and lead to problems, which puts Burger King under target by the media, involves the government and people who are offended by their advertisement, primarily this causes bad reputation for Burger King. Crates a negative impact.
Burger King was put into the media again for offending Mexican’s on their advertisement, which was of their national cuisine. Burger King had described their famous Texican Whopper as “inspired by the land where a man ‘aint afraid to sink his teeth into something hot and spicy”. This advert caused an outrage as it offended Mexican’s with the stereotypical campaign view. The advert was in Spain and described that the Texican tasted like Texas with a little spicy Mexican. The advert contained a picture of a Texan cowboy challenging a Mexican wrestler. However the printed version of the advert had the Mexican flag as a cloak. Mexico’s ambassador wrote a letter stating that the advert used a stereotypical image of Mexicans, Jorge Zermeño asked Burger King to remove the ad and apologize for offending Mexican cuisine. Burger King being unaware of Mexican’s culture they didn’t realize that Mexico has got strict rules about exploiting the Mexican flag. The government was forced to get involved and take action, in 2008; the government fined the foreign owned publishing house for offending and disrespecting the country’s flag that was in a video post online. This example clearly states how culture impacts on international business; Burger King clearly was unaware of the differences in Mexican societies as cultures vary.
‘Achieving sustainability will need to be motivated by a shift in values. Without change of this kind, even the most enlightened legislation, the cleanest technology, the most sophisticated research will not succeed in steering society towards the long-term goal of sustainability. Education in the broadest sense will by necessity play a pivotal role in bringing about the deep change required in both tangible and non-tangible ways.’
UNESCO (1997) Educating for a Sustainable Future: A Transdisciplinary Vision for Concerted Action, paragraph 103.
Education is considered as a vital point in society, education enables individuals to learn languages, theoretical and mathematical skills that are used in the modern society we live in today. For example in Japan there is numerous skilled and educated people. The educational system that Japan has is a reflection and an important factor on Japans success. The Japanese culture of education impacts on international business as it gives a competitive advantage and gives good location for international business. Another example is India’s educational system; India produces highly skilled and educated engineers, which has given many outsourcing engineering jobs in India.
Language is an element of culture that involves communication that can be carried by verbal words, non-verbal means such as body language, gestures and eye contact. Being able to communicate in different languages is important in international business, managers should also be aware of hidden language which involve time, space and business agreements etc. countries that have more than one language often have more than one culture. In international business improper translation are common that have an impact on their organization and show the difficulties of words translated directly in English. The famous blunder by Chevrolet when it was first launched its Chevrolet Nova in the Spanish market. Chevrolet didn’t realize that Nova means ‘No go’ in Spanish. On the other hand in Sweden Kellogg had to rebrand the cereal called Bran Buds as in Swedish translation it meant ‘burned farmer’. In Tokyo a hotel posted this sign: “You are respectfully requested to take advantage of the chambermaids.”
In order for culture to have a positive impact on international business (Susan Carol Stone) said that the firm or organization operating in another culture they will need to accept, acknowledge and respect the foreign countries culture.
The Chinese have a strong cultural tradition that goes back as early as 2,000-year-old ideology, which still influences the way business is done in China. ‘Guanxi’ is an imperative element when it comes to dong business in China; ‘Guanxi’ means relationships, in China they believe the business will be successful using the right ‘Guanxi’ hence its so vital. It is common for workers to give each other gifts such as wine; this helps build relationships and networks. Culture impacts international business in China as the Chinese culture is distinguished from the Western culture, for example the Chinese choose to do business with whom they trust and have good relations with. The relationship should be with individuals as well as the organization, which is an ongoing process even when business is complete. For example DMG’s campaign for Volkswagen helped the German company to become global in China. The German ads used traditional Chinese characters, which was primarily banned and needed the consent of the Chinese government in Beijing. However DMG filmed inside Beijing’s Forbidden City, even though it was against the law to film. New Yorker Dan Mitz said we don’t stop when we come across regulations, you have to get round them and get things done.’
In different cultures there is a different attitude towards time. Countries in Northern Europe and United States are very conscious about scheduling meetings and aggravated when time is wasted and meetings are not started promptly as they don’t like to be kept waiting. On the other hand in Arab and Mediterranean cultures time has no essence and scheduling a meeting and attending it on time is less important as there is a mutual understanding with people. This culture has an impact on international business for example if an American was waiting for 30 minutes the person would be annoyed. Most countries cultures value and respect time. In Germany if a scheduled meeting was for 1.30pm will promptly begin at 1.30pm most Germans usually get there before the time 1.30pm they feel it is much more respectful, organized and gives them enough time to focus on the meeting before it begins. While in Spain time has no essence to them, in order to have a positive impact on Germans you need to be on time or before the meeting is scheduled, by being aware and implemented this you can have a positive outcome in the meeting.
Hand gestures mean different things in different cultures as well as body language, nonverbal language in high context cultures is more important because it plays a vital part in negotiations. In Japan looking down in front of the higher is a sign of respect. If you are operating, for example in Nigeria if there is a presentation it is acceptable for people to talk, while in Germany they expect your 100% focus, people separate their social life from their working life.
Hofstede’s five ‘cultural dimensions’ model is a famous model that gives importance for international business with functions in different countries and how the society affects people’s values within the organization. The five dimensions of culture model focused on:
Individualism versus Collectivism
Masculinity versus Femininity
Long term orientation vs short term orientation
Hofstede collected more than 100,00 data samples which led him to compare scopes of culture across 40 countries. This model is highly useful and helps enable you to witness a close cultural fit between two countries or a substantial cultural difference. This tool has been effective as it evaluates the differences in national culture from a business perception. For example Japan is a country that is known to be more male dominant and has the highest uncertainty avoidance whilst as Sweden and Denmark both have low uncertainty avoidance and very low masculinity which means there is more importance on feminine views and values. Culture also affects consumer behavior, consumer behavior is the study of when, why, how, and where people do or do not buy products (Sandhusen, Richard L.: Marketing (2000, S. 218). Customers will have their own reason why they buy products, when, how and where they buy it from. A key area is that cultures have different values and affect international business relationships, for example culture clashes are common in many western cultures peoples choices are restricted and people prefer not to take risks. To build trust and a working framework you need to understand the western culture so there is a mutual understanding and trust when doing business.
Wal-Mart is one of the world’s largest retailers, it employs approximately 1.8 million people and has 3,900 stores in the U.S.A. and 2,700 stores across the world, and Wal-Mart generates sales of $345 billion in fiscal 2007. $77 billion was of those sales was generated in 15 nations outside of the United States. Wal-Mart started its expansion in he 1990’s in Mexico, Wal-Mart teamed up with a joint venture with Cifra, which is Mexico’s biggest retailer. Wal-Mart didn’t realize that in Mexico the shopping habits are different and that in Mexico majority of the people preferred to buy fresh products such as meat, fruits, vegetables and tortillas. In Mexico many people don’t own huge cars such as U.S.A. and don’t even sop in huge bulks. Wal-Mart had to change its strategy and hire Mexican mangers that already understood the Mexican culture, Wal-Mart changed its strategy building smaller stores, which were walking distance and had a wider selection of fresh products. Wal-Mart had plans to change Mexicans shopping habits, today Wal-Mart is Mexico’s largest retailer and is knows for the successful joint venture. In conjunction to this Wal-Mart also expanded into Great Britain, Germany and South Korea. Wal-Mart is known for its low cost products however in these particular countries Wal-Mart was less successful as the countries already had products that were price matched, the three countries also preferred higher quality products there, they were not matched to Wal-marts discount strategy, after a few years Wal-Mart decided to pull out of Germany and South Korea in 2006. During this period Wal-Mart had started to expand to china where it opened is first store, walamrt discovered that the Chinese were into low prices and bargains and their strategy worked and the Chinese were more Americanized than Europeans. In order for Wal-Mart to succeed in china they had to adapt their merchandising strategy and operations strategy so it fitted into he Chinese culture. For example, Wal-Mart learnt that the Chinese shoppers insisted that the food must be freshly collected or even killed in front of them. However Wal-Mart offended the Chinese consumers by trying to sell them dead fish and packed meat in Styrofoam and cellphone material. This lead Wal-Mart to install fish tanks and uncovering their meat. Their sales increased and sore rapidly. The culture has impacted international business as walmrt learnt that to succeed in china the company had to join unions, as china is arm of the state, proving funding for the collectivist party.
To conclude how culture impacts on international business, the bigger the cultural difference gap between countries the bigger the risks and implications will be doing business internationally. Countries that have more than one language often have more than one culture. The case studies on McDonald’s, Burger King and Wal-Mart are prime examples how international business have failed and succeed in foreign markets with adjustments, changes in strategy, customizing to peoples tastes and learning the different cultures the world has to offer. A lack of awareness and sensitivity to ones culture creates huge problems in international business as there a huge societies where groups of people share the same common values and norms. Not only may it lead to bad publicity but also lead to Government involvement like the McDonald’s and Burger Kings case study. Cross-cultural literacy should be taken into account and understood thoroughly on how cultural differences within nations can affect the way business is accomplished. Being aware of people’s values, attitudes, religion and beliefs all come into the category of social awareness and structure. On the other hand language, education, government involvement, corruption, values and attitudes, language, communication and time are all important factors that impact international businesses. Nevertheless MNC’s and other organizations that expand to different countries such as India and China should research cultures and make sure they avoid any negative impact as bad publicity can cause a collapse in the operation. In order for companies to have a positive impact they will need to education and adapt themselves to the culture. Organizations need strong cultural skills, having cultural training will help organizations maximize their effectiveness doing international business. Hofstede’s five cultural dimensions model gives you an insight of the power distance, uncertainty avoidances, and masculine vs. femininity, individualism vs. collectivism and long and short term orientation. The model gives a basic research on different cultures and may help assist organizations and people doing business internationally giving them a better understanding of the intercultural differences between different countries.
“Culture is more often a source of conflict than of synergy. Cultural differences are a nuisance at best and often a disaster.” – Dr. Geert Hofstede
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