Topic Review

BUSI 1546

Foundations of Scholarship

Student: Vincent Williams-Savery Submitted to: Dr Sara Gorgoni Date: November 1st 2011

Effective understanding of cultural differences will be key to successful business operations in the 21st century. Discuss this statement using examples from two sectors.

Introduction This essay will discuss how effective understanding of cultural differences are key to successful business operations in the 21st century. Much research has been completed on the significance of cultural differences in successful businesses operations. Culture may be classified as either Organizational Culture or National Culture. The focus of this essay will centre on the role of National culture. Cultural differences affect businesses operating within their nation of origin as well as those businesses operating across national borders. The essay will primarily highlight issues pertaining to cultural differences across borders. There is extensive documentation on the increasing numbers of Multi-National Corporations (MNC; s), both successful and unsuccessful enterprises. Successful MNCs include those such as McDonalds, Coca~Cola, Ikea, Wal-mart, Toyota Motor and HSBC. Such companies have been successful because they have researched their markets and adjusted their products and operations specific to the markets that they serve. These adjustments were driven by observations of cultural differences. This essay will not provide analysis on why they have been successful. Instead, it will examine reasons why some MNCs are faced with challenges. A major contributor to the challenges experienced by some multinational enterprises has been the lack of cultural understanding. This essay will identify and discuss aspects of culture that play a role in successful enterprise.

There are many versions of the definition of culture. The noted business author and scholar Geert Hofstede describes culture as the "the collective programming of the mind which distinguishes the members of one category of people from another"(Hofstede 1994). Culture consists of patterned ways of thinking, feeling and reacting (Kluckhohn 1962 cited in Thomas 2002, p.27)
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and culture dictates what groups of people pay attention too (Hoecklin 1995). Cultures are often separated by region and language. However, the commonality of a language does not imply a common culture, nor should a difference in language always involve a difference in cultural values (Hofstede et al 2010). Hofstede describes National Culture as part of the mental soft-ware we acquired during the first ten years of our lives, in the family, in the living environment, and in school, and they contain most of our basic values (Hofstede et al 2010, p. 346). In contrast, Organizational Culture is more superficial and refers to the values and norms that employees of an organization share (Hill 2009, p.134). The world is getting smaller. Technology has increased the rate, frequency and ease at which different cultures and regions interact and exchange both socially and economically. However, to effectively collaborate and communicate we are also required to understand cultural differences and share cultural information (Iivonen M. et al 1998). Assumptions that consumer behavior is homogeneous may result in less than desired expectations. Cultural differences limit a firms ability to use the same marketing message and selling approach worldwide. What works well in one country may not be as successful in another. A number of scholars, however, have argued that the advances in technology, communication and transportation will create or lead to a common culture worldwide. In 1983 progressive-minded Professor Theodore Levitt published an article in the Harvard Business Review, The Globalization of Markets, in which he predicted that technology and modernity would lead to a worldwide convergence of consumer preferences. Levitt anticipated that this convergence of wants and needs would enable global companies to develop standard brands with universal marketing and advertising programmes (Hofstede et al 2010). Hower, Trompenaars did not agree completely with Levitt, as demonstrated by the argument that even products that are considered to be homogenous in the world market, such as McDonalds, are different in each region. He supports this statement by positioning that McDonalds is attributed different values in selected countries. In Moscow, for example, dining at McDonalds is a show of status, where as in New York it is seen as inexpensive, fast food
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(Trompenaars 1993 cited in Hoecklin 1995). This argument is further supported by Hill (2009) as he notes that McDonalds also customizes it menu for each region. Globalization and the increased international trade during the past few decades has highlighted the importance of cultural differences in business operations. As a result of globalization, economic actors from around the world are continuously interacting and negotiating across cultures. The potential for frustration, costly misunderstandings and even business failures increases significantly when dealing with people with differing languages, customs and values. However, when there is a mutual respect and understanding of cultures, differences in can lead to innovative business practices and sustainable sources of competitive advantage (Hoecklin 1995). Trade involving MNCs and people of differing cultures is rising. It is vital that leaders of MNCs understand the significance of having personnel proficient in the cultures and customs of trading partners. The success or failure of a company, or business transaction depends on the level of culturally equipped people. If people involved are not familiar with the culture, customs or business environment, then frustration, misunderstandings, and a breakdown in communication can occur, leading to a dissipation of the business relationship. However, for those business that are equipped culturally, they may find that their cultural adaptation can provide them with a deserved competitive edge. Pollitt (2007) cautions that managerial success at a home based operation does not automatically transfer to success managing an overseas extension. Some may have difficulties adjusting to the differences in culture as well as the way of doing business in countries such as Asia, Africa or eastern Europe where other factors such as attitude to time, personal relationships and family issues impinge on deadlines, creating immense frustration in the successful westerner (Brown R cited in Pollitt D 2007).

At the forefront of exchange between businesses are human beings. The extent of ones cultural awareness is limited to what I shall refer to as individuals Previous Exposure and Preparation (PEP). The lack of PEP would prohibit one from knowing, suspecting, or even guessing that

matters of gestures, greetings, and leg crossings might fuel cultural sensitivities and faux pas (Tovey 1996, p.23).

China is the fasted growing economy in the world. However, for multinational businesses considering investing in China there is much to learn. It will involve much more than simply finding an interested partner, meeting over details and then signing the deal. Understanding the cultural differences and social customs, in addition to business rules of engagement, and negotiation techniques can make or break the business relationship (Zhang 2006) (Marks 2006). OKeefe summarizes that the sources of these difficulties include language barriers, cultural barriers and the complex structure of the Chinese state organizations (OKeefe 1997). In China, time dedicated to learning of the traditional Confucian roots of Chinese behaviour will assist in avoiding misinterpreting the behaviour of their business colleagues. This can help to minimize the conflict (OKeefe 1997). This will also help to clarify any assumptions that the management and negotiating styles of the country of origin will succeed without modification in the partner nation.

The China example shows that business success, as in other countries requires cross-cultural literacy. Cross cultural literacy is defined as the understanding of how cultural differences across and within nations can affect the way business is practiced (Hill 2009, p88). When McDonalds Corporation entered the Indian Market, it wisely adjusted its product line up. McDonalds is the worlds largest user of beef (Hill 2009, p. 103). However, in India, the consumption of beef is a grave sin (Hill 2009, p. 103). Significant portions of the population of India are Hindu and Muslim. Muslims do not eat pork. Under these cultural constraints, McDonalds altered its menu from the inclusion of its infamous Big Mac Hamburger, to Maharaja Mac (mutton) and the McAloo Tikki (Chicken) Burger.

Lack of PEP of the Chinese culture would allow the possibility of embarrassing yet avoidable business situations to arise. For example, in China, the number four should be avoided as the Chinese word for four sounds like the word for death and is very unlucky (Zhang, 2006). The
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number five is also avoided as it is negative, as opposed to the number eight means fortune and therefore is a lucky number (Zhang, 2006). Language is a defining characteristic of culture. In countries with more than one language is spoken, we tend to find more than one culture (Hill 2009, p. 116). A common cultural slip up in MNCs is one attributed to faulty language translation. Even nations that speak the same language can have challenges as a result of country specific understanding of words and phrases. The common slip up of faulty translation has caused the most blunders in international business. These situations frequently arise during the literal translations of brand names or slogans into other languages. Examples include the introduction of the Chevy NOVA in Mexico by General Motors only to find out that no va in Spanish means does not go (Ricks 2006) Translation is the most basic level at which international marketing must adapt to cultural differences. (Hoecklin 1995) Cultural barriers are message that mean one thing in one country may mean something quite different in another .The best way for a firm to overcome cultural barriers is to develop a crosscultural literacy. In addition it should use local input, such as local advertising agencies, in developing its marketing message. (Hill 2009). "Most of the problems caused by cross-cultural clashes are usually the result of the failure by some or all parties involved to recognize and account for differences in culturally-based communication styles. (Adams, John 1998) .Another potential pitfall to international negotiations is different communication styles. Westerners see themselves as behaving as effective communicators by dealing with work and performance issues directly and to the point. The Chinese, however, view this behaviour in quite a different light. They find the foreigners to be offensive in their directness. They view them as intentionally insulting others by pursuing issues in a culturally inappropriate way or by providing feedback that is not requested and is unwanted. Owing to their collective orientation and desire to be group members rather than independent individuals, the Chinese resent receiving either praise for exemplary individual performance or negative criticism, in public or private settings. (OKeefe)
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Conclusion This essay has highlighted the significance of understanding cultural differences as an element of successful business operations. A successful relationship between culturally different partners is based on the level of cultural understanding. The odds of a successful multinational business transaction are against you if PEP is lacking. .Although the world has become a smaller place; this has not reduced the significance that cultural understanding plays in successful business operations. As global trade increases and the number of multinational companies grow, interaction and exchange involving people of different cultures will also increase. The manner and level of communication between the types certainly the world has become a much smaller place and business today does take place in a global market. Business activities, however, still take place through and with people. In conclusion, poor cross cultural awareness has many consequences, some serious others comical. It is imperative that in the global economy cross cultural awareness is seen a necessary investment to avoid such blunders as we have seen above.

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Iivonen M., Sonnenwald D. H. , Parma M. and Poole-Kober E. (1998), Analyzing and Understanding Cultural Differences: Experiences from Education in Library and Information Studies, International Federation of Library Associations and Institutions, 1998 Jia F. and Rutherford C. (2010), Mitigation of supply chain relational risk caused by cultural differences between China and the West, The International Journal of Logistics Management Vol. 21 No. 2, 2010 pp. 251-270 Levitt T. (1983) The Globalization of Markets The Harvard Business Review. May-June 1983 61(3), 92-102 Marks R. (2006) Global Success: Understanding Cultural Differences is Vital to International Dealmaking, Inside Counsel October 2006 10 Mujtaba B. G. and Karadjova-Stoev G. (2009) Strategic Human Resource Management Global Expansion Lessons From The Euro Disney Challenges In France International Business & Economics Research Journal January 2009 Volume 8, Number 1 69 OKeefe H. and OKeefe W.M. (1997) Chinese and Western Behavioural Differences: Understanding the Gaps International Journal of Social Economics, Vol. 24 No. 1/2/3, 1997, pp. 190-196 Pollitt D. (2007) Languages Unlock Business Success, Human Resource Management

International Digest Vol. 15 No. 4 2007, pp. 32-34, Ricks D.A. (2006) Blunders in International Business (4th edition), Australia, Blackwell Publishing Thomas D.C. (2002) Essentials of International Management: A Cross-Cultural Perspective, California, Sage Publications Tovey J.(1997)Addressing Issues of Cultural Diversity, Business Communication Quarterly March 1997 vol. 60 no. 1 19-30 Zhang T. (2006) Avoiding the china crisis Manufacturing Engineer | Institute of Manufacturing and Technology, February/March 2006 pp 48
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