Culture Impact on International Business

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With the increasing countries opening their domestic markets, the new markets and more opportunities are created and the competition becomes intensified. The present economic situation is that the globalization becomes universal, which forces firms to expand their businesses across borders. These firms acquire new customers and new partners in new environments, and also confront the different values, attitudes and behaviour during the business. Those are cultural differences. What is the culture?

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Normally, people think culture is mutual, scholarly principles, standards of conduct, resources of contact and one-time superficial lingo that varies a segment from remaining.

Culture is the creation of material wealth and spiritual wealth in the process of human social and historic development. One culture is formed in the very long time and quite unique in different societies, regions and nations. Culture is primarily passed on from parents to their next generation, but also transmitted by social organizations, government, special interest groups, churches and schools. Culture includes many elements, such as social structure, language, communication, religion, values, customs, behaviours and attitudes.

Therefore, the different cultures have the significant influence on international business. If the multinational corporations want to successfully enter into a country, they should understand that the culture of that place and should adapt the cultural differences. The purpose of this essay is to evaluate how the culture impact on international business. The question will be analysed according to the basic elements of the culture.

Social Structure

Social structure is the basic component of a social system. Relations, regulation, financial system, faith and group of all belong to the communal framework.

The notion of social stratification is that society is separated into different levels. The different regions have the different social structures which urge business people to adopt the corresponding business practices and strategies.

In the Middle East

In this area, people think highly of relationships, such as family members, tribe members, network members and close friends. Family and extended family are the fundamental social unit throughout society and the dominant force in every relationship (Schuster, Camille P and Cpoeland, Michael J, 2006). People have the strong loyalty and responsibility to the family. The Middle Eastern area also has the strong hierarchy. Not only can the top-man make the important decisions for everyone in the family or organisation, but also his authority cannot be challenged. The top man in the firm can control and manage everything.

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The members completely follow the top decisions in firm or in family. The Middle Eastern normally does not trust people outside his family or the circle of his personal relationship. Therefore, business people want to conduct the business in the area, they should negotiate and make the decisions with the top man. Besides, a foreign firm which enters into these markets should be through a local partner. Due to the strong concept of relationship, they are unwilling to do business with strangers. The local partner can make introductions, offer the advice, resolve the conflict and accumulate and explain the local information.

In Japan

Japan also has the strong hierarchy and think highly of relationships. According to one’s background, family, education and personal achievements, everyone is put into a particular position within society. Mutual dependence and concern are the fundamental element of Japanese culture. Japanese personal relationship is the interdependence with family members, schoolmates, colleagues or close friends. In the business, employees’ social networks are precious resources in a company. Japanese also advocate the group-ism; Japanese society emphasizes the importance of working together in the groups and maintaining social harmony. So, in the companies, Japanese are willing to cooperate with others instead of competing.

In America

The United States is a country of immigrants. People who come from different places with different background respect each other and accept the diverse cultures and values. Hierarchy is not obvious in America. People advocate the individualism and emphasize individual freedom and personal achievement. Thus, the American has the strong consciousness of competition. The American society also advocate the value of equality, it is a relatively small power distance country. The American workers are not prone to accept the concept of administrative privileges; the employees generally consider that the bosses are the same with me.

They can make an appointment with their boss and express their opinion freely and make the decisions together. Therefore, in the United States, the relationships between employees and managers are more equal and harmonious, which make employees achieve personal values. In the American firm, nobody cares who one’s parents are and how was his past. People just care a person’s ability and job performance.

Language and Communication

Language is different at different regions. Communication is only effective if sender sends his complete message clearly and effectively and the receiver understands the message of sender and provides his feedback. Language has been considered the mirror of culture. It is a tool of expressing ideas and exchanging ideas and has its specific cultural connotation. Language can be classified into the verbal language and nonverbal language. Information can be conveyed by words and sentences. In the nonverbal way, information can be conveyed by gestures, eye contact and facial expressions.

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Language capability serves four distinct roles in international business (Ricks, David A, 2000) :

  1. Language aids in information gathering and evaluation.
  2. Language provides access to local society.
  3. Language provides more than the ability to communicate.

Therefore, when firms conduct some international trade activities, it is essential to translate between different languages and understand the nonverbal behaviors. Languages differences can lead to the communicating difficulties, which also affect the international business transaction. Language is the first and important barrier which should be conquered.

Verbal language

The common way to communicate is the verbal language. Verbal language is to express one’s feelings, thoughts and ideas, etc in words. There are several languages used in various regions of the world like, English, Spanish, Dutch, French, Arabic, Urdu and a lot more. However, English is the most common international language. The same words or sentences in the different nations and cultures have different meanings, which may cause the misunderstanding and unhappiness. For example, even if the United Kingdom and the United States use the same language, they have the significantly different English terms.

In negotiations, “tabling a proposal” means that they want to postpone making a decision for the US negotiators, but for the UK negotiators this means that immediately take some actions. This is kind of situation also commonly happens when the firms advertise their products or services in the foreign markets. The advertising as a competitive weapon can attract more customers if the company uses it in a right way because culture differences or language differences affect advertising’s success and failure. For example, in the streets of United States, the body of taxi is written “I am yellow”, but the color of taxi is not yellow. Many Chinese people feel confused. Actually, “yellow” has other implication which is “taxi”. “I am yellow” means “I am taxi” (Mitchell, Joni, 1970).

Mitchell and Joni stated that “This song is about taking things for granted and then missing them when they’re gone. In the first verse she uses Waikiki, Hawai’i as an example. It used to be paradise but now it’s a fake tourist destination. When you fly over the islands all of the other islands are nice and green, but when you go over O’ahu you see Waikiki and Honolulu buildings” (Mitchell, Joni, 1970).

In the western countries, some advertisements are sexy, pretty and successful, but fail in the Asian market. The culture of some Asian countries is traditional and conservative, and people cannot accept these advertisements which also affect the firms’ development.

Nonverbal language

According to the different nations and cultures, nonverbal language (gesture, behavior and facial expression) sometimes has completely different meaning and convey different information to others. For example, normally, people nods their heads which means “yes” and approving something, but when Nepalese, Sri Lankans and some Indians and Eskimos say something with the nod, it means “no”. In order to avoid some misunderstandings and give the great impression to partners, managers should analyze and be familiar with this nonverbal language.

In the business conversation, individuals have their own behaviors according to different cultures, Arabs and Latin Americans prefer to stand close to people when they talk, but British people feel uncomfortable at such close range.

If both sides from the different countries want to keep the long-term relationships, they should be sincere and respect and understand other’s culture. Extended social acquaintance and the establishment of appropriate personal rapport are essential to conducting business. Businessmen should know their business partner on a personal level before transactions can occur. Rushing straight to business will not be rewarded because deals are made on the basis of not only the best product or price, but also the entity or person deemed most trustworthy (Schuster, Camille P and Cpoeland, Michael J, 2006). Therefore, a great cooperation is partly based on the good communication.

Religion

Religion is something that influences all aspects of life up to the maximum extent. From eating habits to clothing style and from internal feelings to once personality, religion highly influences one’s lifestyle, personality and almost everything.

There are different religions and millions of followers of each religion. Religion can be identified in many cases through one’s outlook. For example, Muslims female followers are easily recognized by their hijaab. Hijaab is like scarf that is used to cover head, etc. in Muslims, exposing body, hair and other parts is not allowed at all. Similarly Christians can be identified as most of them wear cross sign lockets.

Christianity (including Roman Catholic, Protestant and Eastern Orthodox), Islam, Hinduism, and Confucianism are the four dominant religions in world. Religion affects its followers on work, consumption, attitude for life and individual responsibility. For example, the Protestant ethic emphasizes individual hard work, frugality and achievement as ways of glorifying God. The Protestant ethic insists people should possess the virtues of having high savings rates, constant struggling for efficiency and reinvestment of profits to improve future productivity, which helps to generate the development of capitalism economy.

On the other hand, Hinduism stresses spiritual achievement rather than economic success. A Hindu should be ascetic and pursue the pure life. The request for material possessions may delay the cycles of death and rebirth of people. Therefore, the capitalistic activities such as investment, wealth accumulation, and the constant quest for higher productivity and efficiency in Hindu countries and regions are not supported.

For international business, different religions have their own customs and rules according to different countries. The business people should respect these religions. Due to religious differences, these three cases commonly happen in the international business:

  • female status
  • staff’s religious needs
  • misunderstanding on God.
  1. Taking Saudi Arabia as an example, 99 percent population of this country is Muslim. Saudi religious tradition is that the female cannot be seen in public. Women should be covered from head to foot and cannot go out in their own. Of course, they are not allowed to work. Therefore, Female executives of Western firms have to face the great obstacle in this place. People definitely do not work with women. The different religions have the different view on the role of women. This issue should be paid attention by every international company.
  2. The Britain and the United States have the high level of immigrant population; multicultural societies have to deal with the impact of religion. The famous and multinational companies, such as IBM, Wal-Mart and HSBC Bank, have lots of employees and customers which are from Christianity, Hinduism, and Confucianism and so on. Companies should take into account differences in religious holidays, special services, language restrictions or dietary customs and so on. Company should respect employees’ religion, meet customers’ needs and create a harmonious environment in order to avoid suffer from low morale, low performance and low profit.
  3. McDonalds made a mistake in Saudi Arabia. During the World Cup Finals, McDonalds printed the flags of the 24 soccer teams on the paper takeout bags, which included the Saudi Arabia. McDonalds wrote a sacred inscription under the Saudi flag, which was “There is no God, but Allah, and Mohammed is His Prophet.” Muslims in Saudi Arabia and other countries became angry and inimical. They believed that Islam had been insulted by using the name of Allah on the paper bags that would be thrown into garbage cans. This was a completely unacceptable behavior which disrespected their religion. McDonalds had to take some actions which were to apologize and stop using the bags. This mistake had badly impacted the impression of McDonalds on the mind of Muslims.

Values and Approach

Culture also impacts people’s principles and approaches in the international business. Values are people’s views about what is right and wrong and what is important in life. Values relate to moral principles and individuals’ responsibilities and duties. Attitudes relate to people’s actions, feelings and thoughts for work, life and society. In the international business, the differences of values and attitudes can determine whether the foreign companies are accepted by the local markets and influence companies’ management methods. Therefore, values and attitudes impact international business on such factors as ethics, national relationships and education.

Business ethics

Nowadays, corporations increasingly enter into overseas markets, but suddenly finding themselves confronted with diverse ethical issues. Moral values, which are taken for granted in the home market, may cause some questions as soon as corporations engage in the foreign markets (Donaldson, T, 1996). For example, attitudes toward race and gender in the Western countries may significantly differ from those in the Middle Eastern countries.

Similarly, in developed countries, the law strictly regulates employees’ working hours and relevant wages, whilst in some developing countries; employees always work beyond their working hours and do not get the relevant wages. Furthermore, the Europeans consider using child labour as completely unethical, whilst child labour is a very common phenomenon in some Asian countries. As a businessman, it is tough to judge the right and wrong of these different values and attitudes. Businessman should adjust to the rapidly changing markets and insist on the basic and essential business principles.

National Relationships

The history between two nations may influence the international business. Due to historical reasons such as wars, aggression and abruption, the domestic citizens boycott the products from that countries which they dislike. For example, Japan once invaded South Korea many years ago, which leads to Korean boycott Japanese companies and products. Many old and traditional citizens believe that buying Japanese products is unpatriotic. These values and attitude are formed for a long time which seriously influences the sale and competitive competencies. What is more, the relationships between two governments also may impact international business. If two governments’ relationship becomes friendly and cooperative, the business between two countries is more convenient and mutually advantageous.

Citizens are more willing to accept and trust these companies. If the governments become strained and confrontational, the development of business will be limited. People are unwilling to buy their products. For example, a few years ago, China and France had some conflicts. France intervened in the internal affairs of China, which made Chinese people so angry. They boycotted Carrefour in China, which made Carrefour suffer the crisis. Therefore, the external factors, such as history, politics may impact individuals’ values and attitudes and then change the views on international business.

Education

A nation’s system of public and private education is the main transmitter and reflection of a society’s cultural values. People’s values and views of the outside world are imparted and impacted through education. In the America, there is a special focus on education for the individuals’ achievement and they also emphasize on the development of self-reliance, creativity and self-esteem. America has the highest level of education and attract numerous students from everywhere in the world. It is a junction of the different cultures. The Americans communicate with different people who have different background.

The whole society has a great compatibility and inclusiveness, which make international business easier and convenient. People are willing to accept the alien corporations. In contrast, in the Middle East, due to the inadequate education system, children cannot open their eyes and know the world widely, but they are proud of their outstanding and long cultural heritage. People live their own circles and possess their own values and attitudes. Related to international business, to conduct the business in the Middle East is more difficult in America. Businesspeople should strive to make these nations open their markets and conquer the cultural difference and resolve the conflict.

In conclusion, culture can impact on international business in diverse ways. Social structure, language and communication, religion, values and attitudes are the main aspects. There are some other factors, such as manners, customs, materia elements, aesthetics and social institutions. Anjali stated that “Materia elements are manifested in the availability and adequacy of the basic economic, social, financial and marketing infrastructure for the international business in a market” (Khurana, Anjali, 2009).

However, the essential approaches of conducting the business in another country are to understand the other side, analyze the other side, more effectively build a relationship with the other side, evaluate the other side’s expectation, reduce the possibilities of conflict and develop more effective strategies. Before going to the foreign market, the firms should make the full preparation. Businesspeople should do the research and analyze the environment and advantages of this foreign market and make the comprehensive business plan. According to the change of the market and development of society, every company should take the immediate action and change itself to adapt to the new environment.

Culture is a collection of various factors and is formed through the long time history. Firms cannot change one society’s culture and should follow and respect the culture. The companies, such as McDonalds, KFC, Wal-Mart and P&G Company, are all very successful multinational corporations. McDonalds designs the entirely different menu according to the different cultures and tends to localization. The Indians do not eat beef, so the Big Mass is made of Lamb. In China, Chinese like the light food, so McDonalds has the vegetable soup and gruel. Therefore, culture has the profound influence on international business; every businesspeople should seriously treat this issue.

References

Donaldson, T. 1996. Values in tension: Ethics away from home. Harvard Business Review.

Mitchell, Joni. 1970. Big Yellow Taxi. Web.

Ricks, David A. 2000. Blunders in International Business. Blackwell, Malden.

Schuster, Camille P and Michael J Cpoeland. 2006. Global Business Practices: Adapting for Success. The Thomson Corporation.

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