International Business Strategies Impact Of Culture Management Essay
With an increase in globalization, culture seems to become less important for international business; however, according to Geert Hofstede, “culture is still the root cause of all problems associated with marketing products overseas”. Culture is especially significant for some culturally sensitive countries such as some Asian countries, and it can directly decide the success of foreign companies. In this essay, the extent of the importance of developing business strategies under different culture will be evaluated comprehensively.
Impact of culture on international business strategies
Culture is defined as a set of beliefs, customs, practices and the ways of thinking shared within a group of people. There are three layers of culture: the outer layer is explicit products, norms and values are in the middle and the core is assumptions about existence (Trompenaars and Hampden-turner, 2011). The businesses strategies include all activities from entering a new market to serving the end customers. The most important aspects which can be impacted upon by culture will be discussed as follows.
2.1 Entry strategies in different cultures
When a business decides to enter to a foreign market, there are three basic decisions with which a firm should be concerned: which markets to enter, when to enter and on what scale. The choice of entry model is important, as it is influenced by a number of factors, including transportation fees, trade barriers, political risks, economic risks, business risks, costs, and firm strategy (Hill, 2008).
The government policy and regulation will impact on the choice of entry strategies. JCB was the largest British manufacturer of construction equipment; it entered India in 1979 by joint venture with Escort which is an Indian engineering conglomerate. There are a number of factors that drive JCB joint venture with that company. Firstly were the tariff barriers for direct import to India market. Secondly, at that time the regulations of India government did not allow foreign companies to go it alone in India, and the government required foreign companies to create joint ventures with local companies. Thirdly, JCB found that India has a large growth rate in the construction market. Twenty years later, the backhoes of JCB have 80 percent market share in India and with the regulation changes JCB purchasing all control back to its own. With the change of regulation, JCB not only set wholly own subsidiaries in India but also set it in China (Hill, 2008).
2.2 Marketing mix in different cultures
Culture will also influence the marketing mix and it simply appears through language, religion and common courtesy. Cultural differences are easily reflected in languages. The name of a product in different languages may have totally different meanings (Trompenaars and Woolliams 2003). It may make some misunderstandings and errors when transferring a product name from one language to another and these mistakes may also happen in large international companies. For example, when KFC invested in China, it met a problem with the phrase “finger lickin’ good” which when translated into Chinese means “eat your fingers off”. And Pepsi also made a similar mistake when it came to China, the slogan of Pepsi: “Come Alive with the Pepsi Generation” translated into Chinese has become “Pepsi Brings Your Ancestors Back from the Grave” which caused misunderstandings (Articlebase, 2008).
Communication is a way to exchange information and information is the transfer of meaning, so culture will have a significant effect on advertising and promotions. Advertisements, symbols, or gestures in different cultures may reflect totally opposite meanings. Red means danger in Western cultures, while in Chinese culture, red also means successful or jubilant (Trompenaars and Woolliams, 2003). For example, Sony provides and promotes several products in China using the Chinese Red as their promotion slogan in China to attract consumers.
A company may also provide specific products in specific cultures, and this may especially be reflected in the food industry. Take McDonald’s as an example, which has a high degree of respect for the local culture and the Big Mac is a signed product. However, in Middle East, the Big Mac is a vege-burger and is served with rice instead of fries in Asia (Trompenaars and Woolliams, 2003). Especially to satisfy the special requirement of the tastes and culture of India, McDonald’s has developed a special menu for vegetarian selections. To respect the local culture, McDonald’s does not offer any beef or pork products in India which is the only country in the world. To make sure the products for vegetarians is totally vegetarian, McDonald’s has also re-engineered operations and provided special care to ensure that the vegetable products are prepared separately, using dedicated equipment and utensils. This separation of vegetarian and non-vegetarian products is used in a number of stages, such as cooking and serving. Even the mayonnaise and the soft serve are completely vegetarian. Also in India, only vegetable oil is used as a cooking medium (McDonald’s India, not dated. Ritzer, 2010).
For large retailers, Carrefour is one of largest French international retailers. The author saw that Carrefour (Lille) provides a numbers of self-brand products in France while in China it only has a limited numbers of self-brand products (Figure 1). The reason is the different concept of customer. Chinese usually consider self-brand products to often have lower quality and value than other famous brand products. The differences not only appeared on the products but also on the business hours. In China, Carrefour is closed at 22:00 or 22:00, however, in France, it closed at 20:00. This is because of the different life styles in these two countries. The French tend to spend their spare time by themselves and Chinese tend to go shopping after working at night.
Figure 1- Carrefour Self-brand Products
Daily Use Products
2.3 Business negotiation in different culture
Business negotiation is the process to satisfy at least two organizations with common or conflicting interests and try to reach an agreement of mutual benefit. This definition indicates that negotiations take place within the context of the four Cs: common interests, conflicting interests, compromise, and criteria (Wild. et al, 2008). Cross cultural negotiation is one of many specialized areas within the wider field of cross cultural communications. Successful business negotiation will help organizations get business or more profits than they expect. There are a number of aspects that should be considered in business negotiation. Eye contact in the UK and most northern European countries reflects sincerity and confidence. However, in some cultures such as Japan, long eye contact with others is rude and generally avoided. The personal space in Asia such as China and Japan is characterised by uncommonness for leaving a gap of four feet during a conversation while business people in Europe and North America usually leave a certain space (Trompenaars and Woolliams, 2008).
To have a successful business negotiation, there are three interconnected aspects that should be considered before entering into cross cultural negotiation.
The Basis of the Relationship: relationship in some cultures is significantly important, so fir instance, in South America and much of Asia, business is personal, partnerships are only be made with those they knows and based on the people with whom they trust and feel comfortable. People build relationships before conducting business in those cultures. However in much of Europe and North America, business does not involve personal relationships, it is contractual in nature. It is seen as unhealthy if personal relationships are added into business as they can cloud objectivity and lead to complications.
Information at Negotiations: In Western countries, it is important to use statistics and facts to clearly present and rationally argue business proposals. Other business cultures rely on similar information but with differences. For example, in South Americans people may prefer information presented by speech or using maps, graphs and charts.
Negotiation Styles: there are various ways of negotiating and it may be slightly different in different cultures. For example, in the UK, pressure tactics and imposing deadlines are the methods to come to an agreement; on the contrary, in Greece this would not work or even be counterproductive. The Japanese will negotiate in teams and decisions will be based on the agreement which is made by both. While in China, the decisions are usually made by the most senior figure or head of a company or organization. In Germany, organizations need to analyse information and statistics before making decisions. In the Middle East rather than approaching topics sequentially, negotiators may discuss issues simultaneously. South Americans can become quite vocal and animated (Warner and Joynt, 2002. Mead, 2005. Trompaars and Hampden-turner, 2011).
2.4 Human resources management under different cultures
It is important for a company to manage human resources (HRM). International HRM is different from domestic HRM. If a company uses the expatriates, they must consider the issues such as inconvenience and stress of living in an unfamiliar culture. Intel created the world’s first microprocessor in 1971 and now the annual revenue is 39 billion dollar, 75 percent earned outside the USA. It has almost ten thousands employees worldwide and Intel should deal with many issues when managing people. Inter wants all its employees to be culturally astute. For example, when Intel sends a manager from the USA to Japan, firstly, Intel should train this manager to understand the culture of Japan so that he can easily manage the Japanese employees in the right way (Hill, 2008. Guirdham, 1999). The success of failure in cross-border business has been linked to effective HRM.
There are four types of staff policy of transnational business: ethnocentric, polycentric, geocentric and region-centric, and companies should especially avoid the ethnocentric approach and develop staff to have a global insight (French, 2007). For example, Bicester village is one of the most famous discount outlets in the UK, and travellers come shopping here from all over the world and because of huge amount of Chinese customers shopping here, almost every store has at least one Chinese guide to help the those who cannot speak English. When the author was travelling to the non-English speaking countries, such as the Netherlands and France, in a big department store, the shopping guides can speak at least two languages, French and English. It is important to hire and train the staff who can serve and satisfy the consumer’s requirements.
The pay and rewards under different cultures are also different, and sometimes effective reward strategies are the key to attract, retain and motivate staff. The workers’ motivation can be influenced by the personal needs, beliefs and values in different cultures. For example, the performance-based pay and incentive-linked pay in different cultures will have different impacts. In Australia and the United States they are not effective while in North America they felt that this would encourage staff and benefit the company (French, 2007).
Culture some times is a side dish, however, on developing international business strategy, culture always has a significant potential impact including several aspects. Companies should pay attention to those cultural differences which may impact on the strategies developing cross culture business such as the policy impact of entry strategy, religion impact of products mix under different cultures, preference of negotiation ways and the individual recognition will also influenced on the HRM strategy.