As globalization process continues to take shape and business organizations expanding their operations beyond national borders, the challenge to most multinational business enterprises or companies remains how to manage across cultures. Culture has been variously defined by different authors. In strategic business management context, culture may mean the organizational business beliefs, customs, practices and way of doing things that distinguishes one particular business enterprise or company from all the others. That is, each business organization and people in a national culture has a unique way of doing business transactions. However, the most widely accepted definition was given by a Dutch professor, Geert Hofstede. As cited in Peng (2014).
According to Peng, Hofstede defined culture as the “collective programming of the mind which distinguishes the members of one group or category of people from another” (Peng, 2014, p.105). Culture normally influences how people within an organization or country behave, think and communicate and cultural differences from one state to another impact on almost every facet or aspect of international business. It is thus important for business leaders and managers to understand how to effectively manage their businesses across cultures. This paper will critically evaluate, using in particular Hofstede’s five dimensions of culture, how culture influences the operations of multinational business enterprises in terms of management.
Analysis and Discussion of Hofstede’s Five Dimensions of Culture and how they relate to Global Business Environment
According to Hofstede, elements of culture such as communication, social organizational structure, religion, values, language and attitude all affect businesses in different ways and hence foreign companies have to adapt to these conceptual cultural dimensions. He identified dimensions such as uncertainty avoidance, individualism versus collectivism, power distance, and short versus long term orientation, masculinity versus femininity and indulgence versus restraint (Hofstede, 2011, p. 1). Usunier (2010) describes how language and communication as elements of culture can be a barrier and a challenge for multinational businesses in terms of high and low context communication through web sites. According to this author, these dimensions or aspects of each national culture have a profound impact on the way multinational enterprises carry out their business interactions.
Uncertainty Avoidance
This cultural dimension relates to the reaction or response to risk and how different cultures tolerate ambiguity. While some cultures are averse to risk, others are less fearful of risks associated with operating business. This relates to the global or international business environment in terms of the cultural differences that exist among countries in terms of the level, extent and nature of business risks that vary from one national culture to another. The legal global environment is normally uncertain since countries keep changing their business laws and regulation, hence multinational enterprises have to adapt to such uncertain business environments. According to Learning (2009) high uncertainty avoidance cultures are those in which formal rules, regulations and predictability are valued while in low uncertainty avoidance cultures, risk is easily tolerated and creativity or flexibility as values are promoted.
Power Distance
According to Hofstede (2011), this is “the extent to which the less powerful members of organizations and institutions) like the family) accept and expect that power is distributed unequally” (p.9). This dimension appreciates the power differences that exist among countries and organizations globally with some wielding more power in terms of resource endowment than others. This related to global business environment in that the business environment at the international plane is normally made up of both powerful and less powerful companies in terms of their investments and hence more often than not business resources are not distributed equally. Multinational companies from economically rich cultures usually dominate the international market. Further, the more the power distance increases internally within organizations, the more employees feel less attached to the company and its management hence affecting its operations.
Individualism/Collectivism
Individualistic cultures are those where individual personal effort, autonomy and contribution is given more significance while collectivist cultures ae those where group action , obligations and team work is encourage (Learning, 2009). There are countries like China and India where business culture encourages collectivism and frowns upon individualism while the business culture in countries like the United States, UK and Canada encourages individualism. As a matter of fact, business organizations and managers have to adapt to such cultural dimensions and attitudes in order to operate effectively in either culture. Moreover, this is related to the global business environment which is multicultural and hence multinationals have to realign their businesses to conform to these cultures.
Masculinity/Femininity
This kind dimension of culture relates to the view that different national cultures have on what kind of gender can effectively perform certain roles and duties. In some organizations and even countries, there are certain jobs that can only be performed by a given gender. Learning (2009) states that in masculine cultures, competitiveness are valued while in feminine cultures relationship creation in business is valued more than anything else. Hence, this relates to international business environment in the manner in which gender perspectives and stereotype are held by different business organizations and cultures. These two dimensions also relate to the competitive nature of some business environments.
Long and Short Term Orientation
The dimension connotes the past and future challenges or actions that a society considers. Similarly, the international business environment is made up of countries that are business development oriented and others whose priority is not in rapid business growth.
The Cultural Blunders of Multinational Enterprises (MNEs)
Most international business enterprises, not cognizant and appreciative of the influence that culture has on international business operations, normally fall prey of a number of cultural blunders. According to Peng (2014), multinational corporations normally face challenges of norms and ethical challenges due to cultural differences. The writer gives examples of Coca-Cola in Africa and Microsoft in China and the cultural mistakes they made. He argues that these multinational enterprises made both communication and marketing blunders due to their failure to understand the African and Chinese cultures respectively when they first established business in these cultures. For example, in India Coca cola was forced to change its marketing message after discovering that Indians don’t take soft drinks after meals and reserve them for special occasions and guests as a culture. Also in Japan, the company had to change its soft drink message from diet coke to light coke after it emerged that I the term ‘diet’ implied something embarrassing in Japanese business culture. Further, multinational enterprises tend to make mistakes of ethnocentrism, cultural unawareness and abuse of culture. According to Antunes, Barandas-Karl and Martins (2013), “the dynamic of the international business and its dimensional nature requires the understanding of the complexities of different contexts dictated by cultural differences between countries” (p.38)
These practices are considered cultural blunders because they are avoidable mistakes that business organizations make as a result of failure to take local cultural perspectives into account when making major business decisions in foreign countries with different cultures from theirs. Cultural blunder according to Peng (2014), is a form of cultural ignorance or misunderstanding that most multinational enterprises and their managers l portray in international business management. The impact of cultural blunders on the specific country or culture is that it makes citizens or members of the affected culture feel that their unique cultural values and principles are not respected by the multinational enterprises. In the case of Coca Cola, the company was forced to change its marketing strategies and replace its marketing messages that were considered culturally obscene and embarrassing in the local context with more appropriate cultural connotations.
In order to avoid the cultural blunder, Coca Cola should have carried out a cultural impact study to learn the cultural dimensions and elements of the Indian and Africa. Also, the company should have done cross-cultural awareness study to learn about the Indian and African culture before beginning its activities there. According to Scheffknecht (2011), in order for multinational enterprises to effectively manage organizational cultural differences, they need to develop some global or universal corporate culture that integrates or incorporates the values of other cultures (p.76). The author suggests that “it is important that not too much energy within the organization is lost through cultural barriers; therefore, many multinational enterprises try to establish an own organizational culture to fins a common ‘language’ or way to collaborate all around the world” (Scheffknecht, 2011, p. 73). A study by Antunes et al. (2013) found out that differences in national cultures have great impacts or influence on the business strategies of subsidiaries of multinational enterprises. Hence, companies should make adjustment to be relevant culturally.
In summary, culture has tremendous impact and influence on the business operations and management of multinational business enterprises. This is because of cultural differences that exist across countries and organizations. For example, cultural factors affect consumer preferences, needs, practices and religious values. Further, the principles of strategic management may differ across organizations globally due to cultural contexts. Thus, in order to effectively manage business enterprises across borders, it is important for managers to be culturally aware and understand the cultural differences that exist in the global business environment and how they influence business interactions and operations. Further, according to Learning (2009), “understanding differences in national and organizational cultures can help managers anticipate the likely success or failure of particular strategic options” (Learning, 2009, online).
References
Antunes, I., Barandas-Karl, H., & Martins, F. V. (2013). The impact of national cultures on international marketing strategy and subsidiary performance of Portuguese SMEs. The International Journal of Management, 2(3), 38-45.
Hofstede, G. (2011). Dimensionalizing cultures: The Hofstede model in context. Journal of Online Readings in Psychology and culture, 2(1), 1-25.
Learning, F. [FL]. 2009, November, 3. The impact that different national cultures can have on the strategy followed by corporate managers. [Video File]. Retrieved from https://www.youtube.com/watch?v=Au4qqpMGIWc
Peng, M. W. (2014). Global business. Mason, OH: South-Western Cengage Learning.
Sheffknecht, S. (2011). Multinational enterprises-Organizational culture vs national culture. I n t e r n a t i o n a l J o u r n a l o f M a n a g e m e n t C a s e s, 73-78.
Usunier, J.-C. (2010, April). The influence of high- and low-context communication styles on the design, content, and language of business-to-business web sites. Journal of Business Communication,, 13(2), 189-227. Retrieved January 7,2015, from http://eds.b.ebscohost.com.proxy1.ncu.edu/eds/pdfviewer/pdfviewer?sid=845e21bf-96a2-4514-9efe-23727fcdbbf0%40sessionmgr110&vid=1&hid=122
