Abstract
Globalization has reduced distances among the countries but there are still some obstacles that hinder the countries to freely do business with each other. The top among these factors is the cross-cultural differences. Despite these differences, the companies are up to an aim of globalizing their businesses. Management teams of the foreign companies have learnt several ways how to reorient themselves in host countries but still it is one among the most important factors that needs to be focused when globalizing the business. This study is aimed at exploring the elements of culture that affect business practices of the foreign companies and how important is it to consider each factor.
Introduction
Taking business at an international level has become a norm today. Even small companies are competing on a global scale. However, the company has to face several challenges when globalizing the business. The top among the challenges is the culture that has a direct impact on success of the business. Therefore, it is crucial to understand the culture, ethics and societal values of the country where the company is operating.
In broad terms, culture refers to the common practices of the people at certain area or country and the way they think. It includes all sorts of things like how they dress up, eat, play, work, communicate and interact. It is the culture that shapes up the personality of people and stands them out from the rest of the cultures. People respect their culture and usually not welcoming for the change in culture. It is therefore important for the companies, moving to host countries, to learn about their culture, society, economy, history and their mindset and run business as according to the culture else the entire operation may be destroyed.
When companies are up to learning about the cultures, it is important to understand that usually practices cannot be defined as right or wrong globally. It is the culture that develops people perceptions and defines right or wrong. Cross-cultural understanding requires that companies reorient their mindsets so that to understand the attitude, gestures, and the statement of the people of certain country.
There are certain protocols that the company must follow when planning to expand its business to another country. For example, in some countries, people don’t like being touched by the strangers like back slap, hand shake, hug or any other contact. Similarly, snapping fingers, putting feet on desk or chair or whistling is considered as bad manners. However, these are common practices in Asian countries. If Asian company globalizes business to such country then it will have to put in much effort to merge in their culture else host country’s culture would not accept it. There are number of examples of the companies who failed to operate in the host countries because of wrongly adapting the culture. Therefore, companies must focus critically on the cross-cultural strategies as mistakes done once in like scenarios are difficult to correct.
Elements of Culture and their Impact on Business Practices
The common elements of culture are language, values and attitudes, religion, manners and customs, aesthetics, social institutions, and education. Foreign companies can excel through critical cultural analysis that would help them in taking future decisions. If the company decides to expand its business to the country that has similar cultural values as their home country then many obstacles can be minimized. Foreign companies may also make a contract with the local company and expand its business. This would also help in understanding the foreign culture. Such strategies improve cultural understanding and also reduce the company cost and risks involved.
Language barriers are one of the most important issues for the foreign company to consider. First, if the foreign company and the host country don’t have the same native language then it can be difficult for the top line manager and employers to communicate with the host country candidates and common public. However, even if they have the same native language, then there may be difference between the ways of speaking between the two. In Germany and United States, it is common to speak loudly, and be more aggressive or assertive when sharing ideas or directing. Whereas, in Japan, people speak softly when making suggestions or sharing ideas and speaking loudly is considered as bad manners. If company from Germany or United States expands its business to Japan, then managers must be careful about language ethics else the company may lose its clients. In such scenarios, foreign companies usually hire local employees from the host country who are proficient in both languages.
Politics is considered as another important factor of international businesses. Most of the foreign companies make decisions of moving to another country on basis of current, past and probable future political conditions of the host country. If political parties have understanding and are not involved in any disputes then it leaves fine impression over the foreign companies. This way, the door of investments is opened for the host countries.
South America is considered as one of the most attractive and biggest market for foreign companies due to the fact that it is full of contrasts and promises. In South America, there is a head to head competition between nationalism and globalization. In this region, the most important factor is the government that provides opportunities for the private sector. Low labor cost and potential growth opportunities make this country even more promising for the foreign businesses.
Talking about the Brazilian market, it is a combination of different cultures mainly, European, Asian and American. This combination is opportunistic for many foreign companies but at the same time, this combination hardens the competition and challenges for the managers. The foreign company has to consider different cultures at the same time and make strategies accordingly. Moreover, the foreign company has little opportunities for profits as the focused sample is usually small .
Negotiations are another important factor of cultural differences. The way of negotiations by the countries may be different from other. For example, European countries have different ways than that of Brazil. In Brazil, usually negotiations take a long time, commitment, and trust and bargaining is its important part. So, when operating in the Brazilian market, the foreign businesses must have to follow this norm of negotiation rather than hurriedly making a deal. Similarly, South American’s are friendly and relaxed as compared to Sweden people. South American’s are more interested in building relationships apart from business. They do not keep hard feelings even if the negotiation went tough. Foreign companies should keep such trends and norms of negotiations in consideration before moving towards the host country.
There are number of countries that differentiate on basis of gender. In some countries females working at the business level are not given respect and are very masculine. In most of the Asian countries, females are yet not allowed to leave their homes for work. However, taking an example of South America, it is not the case. Organizations never experience any issues regarding female workers and believe on equal employment opportunity. Therefore, if any South American company moves to Asian countries, then it must keep this issue in mind .
Attitude of the managers leaves a great impact on the employees. If employees are not comfortable with an attitude of the manager then it may destroy the functions of the company. It is therefore important for the foreign company’s manager to understand the psychology, culture and attitude of its employees and provide them with the best culture they can fit in else it would increase the turnover rate in the company. The managers are not only required to develop strategies for changing the attitude but also the organizational structure. Since, organizational structure is another factor that may affect the ethical business practices.
Religion is one of the most important factors that can affect the organizational practices. People of different religions have different beliefs and rituals. Religious discussions among the staff members of different beliefs can make an environment intense and thus it may affect the organizational productivity. Moreover, if an office has employees from different religions, then the manager has to develop schedules accordingly. For example, Christians take holidays for Christmas or Easter, whereas Muslims take on Eid.
Economy of the country decides the pricing of the products. If the country experiences inflation then the company has to decide the prices of their products as according to the purchasing power of the customers. Economy may also affect the business practices in many other ways. Therefore, it is important for the foreign company to study the economic situation of the host country first, before moving the business .
When the company expands internationally, first it does complete cultural analysis, decide whether it is suitable to move on or not and then develop a plan accordingly. These plans are very crucial for the foreign companies as once these impressions are built up internationally, then it can not only affect company’s reputation in a certain country or culture but the entire world.
References
Deari, H., Kimmel, V., & Lopez, P. (n.d.). Effects of Cultural Differences in International Business and Price Negotiations. International Marketing Strategy.
Schmitz, A. (2012). Challenges and Opportunities in International Business.
WorkSpan. (2012). Country's Culture Affects Global Business Success. World at Work .
