Importance of culture in International Business

Terrorism, development of ethnic violence, gender inequalities, poverty and diseases…etc. has driven societies to be more opaque, uncertain about their future. Since the 11th of September 2001, the cultural issue has been imposed at the forefront of political concerns. The Johannesburg World Summit on the theme Sustainable Development in 2002 has recognized the importance of culture and determines culture as the 4th pillar of development.

Moreover, with the increase globalization, national corporate cultures are under heavy 

pressure to adapt regional thinking in to their management strategies. The current activity of international exports and imports come out with the following question: what is the importance of culture in international business?

Corporations planning internationalization might face many legal and cultural barriers when planning their market entry strategies. Those barriers are quite ambiguous as cultural differences stem from many different cultural variables such as material culture, social organization, religion, language, aesthetics and popular culture. These factors need to be successfully implied to local corporate culture. Culture affects in many business practices from day-to-day operational processes, like negotiations, management, hiring, communication and performance evaluations. One of the biggest challenges when operating business globally is understand and benefit from cultural differences. In fact, many businesses have failed to enter new markets and cultural understanding is crucial for every corporation to avoid misunderstandings, bad relationships, inefficiency or cost and to succeed in the marketplace.

The first part of this paper will be devoted to define the culture and its different elements. The second part will determine the fundamental factors to succeed abroad; and finally, the paper will propose further recommendations for culture businesses.

What’s culture?

High and low context cultures

The culture (from the Latin cultura stemming from colere, meaning “to cultivate”) is a term that has different meanings. It can be defined as the socialization process, in reference to the friends, the education of parents…etc who play a veritable role in the people life. The approach can have different interests (geographic, psychology, sociologic…).

The key elements of culture for the business world are: the language, the religion, the values, the customs and the history and each of them are important.

Source: « The knowledge exchange »

The major elements of culture

The language

The language is one of most important key to understand a culture. There are over 3,000 languages and as many as 10,000 dialects worldwide. For that reason, English language is chosen as the business language and as an official language to communicate between societies. “See APPENDIX 1”

The religion

Religion can have an impact on international business through influencing a culture’s values and attitudes toward entrepreneurship, consumption and social organization. The impact will vary depending on the strength of the dominant religious tenets. International managers must be aware of the differences among religions. For instance Islam, followed by one-quarter of the world’s population, has a huge influence in Muslims’ life. What makes it influential is that it governs all facets of life for a Muslim including economic, cultural and social aspects- through the Sharia (law of Islam). At an individual level, a Muslim is circumscribed by religious principles-by a code of conduct for interpersonal relations-in social and economic activities. Religion is paramount in all areas of life. The Muslim lives in a social structure that is shaped by Islamic values and norms of moral conduct. “See APPENDIX 2”. Another example with Mac Donald’s: In the Gulf Arabic countries, the firm will propose rather hallal products, but in UK that will be rather products like the “winter feast” at base of bacon, emmental, chorizo, tomato, steak… “See APPENDIX 3”

The education

Education takes a significant part in our life as it transmits any principles, attitudes and skills, either at children or people. From generation in generation, the customs and manner are transmitted from father to son. Education gives us the knowledge of the environment that surrounds us. It gives us a perspective of looking at life. Education is the basis of culture and civilization. It is instrumental in the development of our values and virtues. Education cultivates us into mature individuals, individuals capable of planning for our futures and taking the right decisions.

2.1.2. Basic elements of culture

2.1.2.1 The values and attitudes

Culture also affects and reflects the values and attitudes of members of society.

The values and attitudes are convictions that people have regarding what is good and bad, right and wrong, important and unimportant. Values influence culture, for example, Russians believe that McDonald’s cuisine is superior to their own; that is a value judgment. Similarly, France champagne manufacturers know that US customers believe France Champagne products are of high quality (value).

The manners and customs

The customs are common; dictate how things are to be done. For example, in Arab countries, it is considered bad manners to attempt to shake hands with a person of higher authority unless this individual makes the first gesture. In US, it’s the contrary. The example,

Michelle Obama, wife of U.S. President Barack Obama, puts her arm around Britain’s Queen Elizabeth II at the reception at Buckingham Palace in London. Whereas, a protocol dictates that touching the Queen of England is a big no-no.

Finally, Customs also dictate the way companies advertise and market their products, for example, in the US, orange juice is considered as a breakfast drink, but in France, it is sold as refreshment because the French don’t drink orange juice with breakfast.

Also, Mac Donald’s proposes any menus different totality, for example, in Spain; the products will be different than in France.

The law and politic

In many countries, laws are considered like powerful and the countries’ policy must be adapted, but however the change of laws is evidence because the world changes all the times.

For example, Egypt ratified CEDAW with a number of reservations. This meant that Egypt agreed to only abide by some, but not all of the convention articles. The inequality of women was a major premise of the shari’a, the Muslim system of religious law. Additionally, the patriarchal culture of the country stood as a potential barrier to implementing the convention.

However, in their 2001 report, the Egyptian delegation proudly announced that it had passed a new family law that allowed women to divorce their husbands unilaterally.

The law was justified in terms of Egyptian “culture and religion.” Rather than view the convention as an external law that would displace local cultural values, proponents of the law argued that Islam actually supported gender equality, as per “Merry, Sally Engle. 2003”

This example shows the difference between two sexes.

The technology and material culture

The material culture results from technology and shows how a society can organize its economic activity. Internet is a very useful tool which permits to transmit a lot of information as cultural information for example. It’s a tool, which is used to facilitate the exchange of ideas, data…etc. In fact, individuals can explore new cultures through the use of internet without leaving their house. The satellite or the CD, again, is another example that describe the importance of the technology in the approach of the culture.

The aesthetic

Aesthetics refers to attitudes towards beauty and good taste in the music, art… of the culture. The expressions can mean different things according to the countries. There is also the advertising related to sex which are prohibited in few countries like Saudi Arabia or Iran while in the occidental countries, they can do of advertising on this theme.

It’s the same thing for the creation of a product because the firm must choose the colour, the name and the symbols, in keeping with the mores of country. We cannot do anything without paying attention to countries.

The Hofstede’s theory

In 1974, Hofstede conducted a study in IBM subsidiaries based on 13,000 questionnaires. From one country to another, respondents are similar in all respects except nationality. HOFSTEDE cut into four main dimensions of the criteria by which national cultures differ:

Power distance: it is one of the “dimensions national cultures”. It reflects the range of responses from various countries to the basic question of how society tolerates unequal distribution of power in organizations and institutions.

In countries where power distance is short, there is a limited dependence of subordinates to their superiors and a preference for consultation (interdependence between superiors and subordinates). The emotional distance between them is relatively small: subordinates easily approach and contradict their superiors.

Uncertainly avoidance: indicates the extent to which a society feels threatened by uncertain and ambiguous situations and tries to avoid by providing greater career stability, in establishing more formal rules, etc.

Individualism: indicates a society in which the links between individuals are lost: each is supposed to take care of himself and his immediate family. The collectivism, in contrast, shows a society where people are since birth embedded in a strong and cohesive group, which protect them throughout their lives in exchange for unquestioned loyalty.

If the use of the name “Employee of the Month” to reward a particularly deserving worker is probably likely to improve productivity in the West countries, this politic is catastrophic in Asia, where the community takes precedence over the individual. For if there is a winner, there is a loser.

Masculinity: expresses the extent to which the dominant values in society are “masculine”, such as putting forward, the hard temperament men, the taste for money and the material goods, and not the concern of others or the quality of life (values called “feminine”).

In summary, the collectivism and the individualism dimension has generated a great deal of research. The power distance dimension was closely linked with it in Hofstede’s study and was here presented as resulting in vertical and horizontal kinds of collectivism and individualism.

Example: Power Distance Comparison

Average = 51

Analysis:

Many of you who will remain in Arizona after graduation will be supervising employees from Mexico. The high power distance ranking of this culture indicates that your employees may not be willing to openly disagree with their manager. They may prefer a boss who acts more like a father figure (paternalistic management style) because they believe that the boss should have the answers. They are less likely to question authority and may not expect to have the same privileges management has.

Individualism & Collectivism

Analysis:

Individualistic societies feel that people are responsible for themselves and their immediate family. In the collective society responsibility is extended to the larger part of the family including uncles, aunts, cousins, grandparents. Collective cultures feel a strong loyalty to everyone in the extended family and feel that it is their responsibility to protect them.

The strengths and weaknesses of Hofstede’s model

The strengths are:

The model is based on a data of 30 years (1980) and no study since hasn’t been realised because it considers that the results are always of actuality, and has been done on such a large sample (116,000 respondents).

The four dimensions have deep cultural values which permit to make significant comparisons between national cultures.

The questions asked to the respondents relate to issues of importance to international managers.

There isn’t other comparison because this model is considered as the best.

The weaknesses are:

In few countries, there are several cultures and it’s difficult to evaluate these countries such as the USA, Spain (Catalan, Basque, and Castilian), Belgium (Flemish and French).

To conclude, the important dimension of cultural variation has been uncovered by Hofstede. We can tell that the dimensions have generated a great amount of research and have been highly influential in the entire social. “See APPENDIX 4”

The importance of culture in International Business

3.1 Be performed through the culture

The main managers try, in using culture as a leadership tool, to promote extraordinary performance through three key managerial tools.

Tool: Selecting and recruiting people for culture fit

A company must choose the best employees. The approach to select them will take, in account, the person-culture fit in addition to person job fit. For instance, Jaguar sees candidates who can bring change as an opportunity, not a threat and have a passion for excellence. In addition, language will constitute any qualities which the difference between people who are, and are not, successful at Jaguar.

The company garnered a lot of experiences and in hiring people whose skills fit their entry-level jobs, it will permit to future employees to obtain multiple jobs within the firm. All these new entrances will bring a better culture fit.

Cross cultural management

Tool: Leadership and Communication; Two important keys for the companies.

Leadership:

For a company, a group (team) can be considered as strength by the democratic and participative sides. At the opposite side, the individualism can be seen as a very chaotic politic. According to “Ronald W. Clement”, the importance of a leadership is to deal with organizational culture. The priority is that rather than changing culture directly, firms must work with and through the existing culture to transform the organization. The important objective is to improve the company.

Example: Culture and leadership across the World

The GLOBE Book of in depth studies of 25 Societies is the second major publication of GLOBE (Global Leadership and Organizational Behaviour Effectiveness), a ground breaking, large scale project on international management research featuring contributions from nearly 18,000 middle managers from 1,000 organizations in 62 countries perhaps the largest project of its kind ever undertaken.

This volume effectively presents a complex collection of global research addressing the culture of particular countries, leadership qualities within those countries, and recommendations on how managers should conduct business in countries other than their own. Source: The Globe Book: Edited by Jagdeep S. Chhokar, Felix C. Brodbeck and Robert J. House

Communication:

This point is unavoidable because the language can be the prominent factor to communication and to cooperation. We can know that English is spoken by 5.6 % of the world population (Third after the Mandarin 14.4 % and the Hindi 6 %). Source: www.census.gov.

English is the official business language, used by the North Americans, the British, the Australians and the Neo Zealand…etc.

Now less people learn others language than English. But for few businesses, the language is primordial and the acquisition of another language is necessary; so, it’s at the moment that the culture take a role because the negotiation will must deal with any principles which respect the culture of country. For example, all negotiations with India, China or Arabic countries take, in condition, the culture.

Sign a sales agreement between two countries can bring some problems because of culture difference. The finalisation is, then, very difficult and sometimes destroyed. That is called the culture clash. For example, Words can have different meanings in a language, as per the “Rugman’s Book”, the Japanese word hai does mean “yes” but it often means “yes, I understand what you are saying” not “yes, I agree with what you are saying”. ‘Saying No’ may not mean ‘No’ when translated. Many misunderstandings can be compounded because directly uttering ‘No’ is considered very polite in Japan. The Non-Verbal Communication: Members of a society communicate with each other using more than words. Research highlights that 80% of all information is transmitted between people by means other than language. Non-verbal communication includes facial expressions, hand gestures, intonation, eye contact, and body positioning and body posture.

Managing cultural differences

After analysing the factors that influence the firm activity, we can now determine the making decision strategy adopted by the international marketers.

Not all markets are considered as good promising markets (further), we need to adapt cultural specifics. We can cite as example the punctuality, it considers as extremely important in few countries as Germany, Swiss, or Australia where if you have a meeting at 10.00am and you arrive at 10.06am you are considered late. We can considered, indeed, this analyse as pertinent because the culture take over. Culture can and does influence the business sector in different parts of the world to function in distinct ways.

Another example, Vietnam has the special features including the primacy of personal relationships, community spirit and the concept of face still exert influences, at both individual and group on everyday behaviour, the mentality, the thinking, perceive things, to establish communication. In short, these are points which are likely to cause misunderstandings and / or tensions or conflicts in the interpersonal communication that are questioning the Vietnamese and foreign managers.

The presentation of the business card at USA is totality different than Japan. The cultural factors will bring at an influence business relationships. Source: BBC news

Moreover, in all human cultures, the decisive fact in the command is that it depends on the obedience of individuals. To arrive at a typology of leadership styles, we must cross the scale of individualism with that of power distance. We can distinguish five styles of command:

Large power distance, with very mentality Community: most third world countries. Autocratic style, made acceptable by the support of the family.

Fairly high power distance, with community mentality: the others countries of third world and Japan. Style slightly less autocratic, more individual initiatives.

Fairly high power distance, with individualistic mentality: the France and other Latin countries of Europe. Paternalistic style, moderated by the individualism of subordinates.

Distance hierarchical average, with mentality individualist: Anglo-Saxon countries. Style Advisory, the initiative to consult the base comes from the boss.

Low power distance, with an individualism way: germanophone countries and Scandinavia. Style participatory, in consultation with the group

This analyse is very important to understanding the cultural approach.

The effects of cultural dimensions on ethical division making

Ethical decision making (EDM) between Taiwanese and American sales agents was compared to determine differences in EDM within Hofstede’s cultural framework. The cultural typology of Hofstede, which encompasses culture’s major components and a number of work-related values such as individualism and power distance, has been widely used in different management and marketing contexts.

Some recent findings revealed a similarity between the deontological norms of Taiwanese and American sales agents. Lastly, Hofstede’s cultural framework was found useful in examining the effects of culture on EDM.

This example between Taiwan and Americans shows well the EDM.

Moreover, there are things to respect as ethical behaviours to most ethical decision making. We can illustrate it through a schema, according to “Svend Hollensen”:

Most ethical Spirit of morality

High commitment to ethical questions

Practical standard Adherence to the law

Some commitment to ethical decisions

(Use of common sense)

Least ethical Just adherence to the law

(Low commitment to ethical decisions)

Not ethical:

Unacceptable Not following the law

Ethical behaviour

We can establish a rank as per the following six major issues:

Political relations with environmental protection, tax, bribery…

Industrial relations with infrastructure development, technology transfer and research.

Customer relations with the quality, advertising, pricing, after sales.

Employee relations with norms such as non-discrimination, training, sexual harassment, safety and compensation….

Economic relations including local reinvestment, the taxation, the financial…

Organizational relations with the strategic alliances and rivalry (competition).

Recommendations and Conclusion

The marketing of the twenty first century is characterised by short product life cycle and severe competition for the same customers in the market. Exploring the country culture before entering the market is regarded as an indispensable means for companies to compete efficiently and effectively against competitors and to achieve long term competitive advantage in the marketplace.

Today, there are many countries trying to impose their cultures through the international business. However, if the countries don’t want to face at the culture clash, then they must adapt their politics business. After analyzing the results, we can say that the international business development rely not only in companies, but the countries as well.

Countries must facilitate the relations with other countries and be more open-mind. They should open their borders and try to understand the culture of their neighbours. All these issues must be taken off by countries to develop international business. Furthermore, understanding the culture is fundamental for businesses making decision. If you want to select a target group then you need to understand their behaviour and lifestyle. Therefore, there is a need of more empirical research to better understand the culture. In addition, Hostede framework has 30 years old and the elements begin to become obsolete. We need more recent data to analyse the culture around the world.

To sell successfully to foreign customers, companies require culturally sensitive adaptations to services marketing products and advertising. We can evaluate through the graph that the socio-cultural variables are distinct for all countries. The company success relies in the company commitment to understand the culture of the country. It needs to understand the internal culture but also learn to relate their skills in a local culture that will never change these principles. The culture is very consequent for the international business.

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APPENDIX 1

Source: www.census.gov

APPENDIX 2

Source: www.census.gov

APPENDIX 3

Source: Flickr

APPENDIX 4

Source: Geert Hofstede: Sage Publications, 2001;  www.geert-hofstede.com