Importance of Understanding Cultural Differences in International Organizations

Importance of Understanding Cultural Differences in International Organizations

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Executive Summary

Cultural factors in history are documented to influence the communication and operational capacities of organizations and their competitors. Cross-cultural awareness is a tool that determines how a firm functions and behaves ion a culturally diverse environment especially in the international market. Cultural factors act as blind limitations to effective communication, skill development, and competitive advantage that firms attempt to capture in international markets. This paper makes an in depth analysis of cultural differences in international markets as depicted in the Google Inc Quarterly. Culture affects various internal and external variables in international marketing within the globalized economy of the modern world. These variables include advertising, decision making, employee retention, social justice, business relationships, and international business management among many others. An organization wishing to penetrate successively the international market requires more than basic understanding of international management skills and cultural differences. The document concludes with the recommendation that international organizations should join head quarter and oversee cultures into one work based culture that all employees apply in functionality.

Introduction

Google Inc Company in a 2011 publication argued that it finds it baffling as to why its stations operate successfully in domestic markets, but has varying results in international bazaars. According to their article, the author argues that the economic spotlight has shifted production to developing markets. This phenomenon is one that necessitates global companies to rethink their operational strategies in order to maintain risks, people, and costs. At the core of the issues, arising from international operations is cultural diversity that limits strategic confidence as people act as both assets and risk to the global organizations. An internal survey made by the company found out that the firm bled from poor communication, employee conflicts, and slack talent development as compared to the growth of emerging markets. The resultant implications were continued losses in terms of operational advantage that the company came with while expanding operations to the developing market. To address the cultural problems, the company implemented cultural intelligence strategies that aimed at data collection and analysis to provide better understanding of cultural differences. Cultural differences in international business management necessitate a company to explore novel and diverse means of operation and organization.

Challenges and Issues Arising from Cultural Differences

Cross Cultural Conflicts

A conflict is defined as a general disagreement between two or more persons or groups in which the attainment of one individual’s goals discourages the other person’s ability to capture their desired objective. Conflicts are no new problem to cross cultural teams in organizations. The manners in which individuals, think, innovate, communicate and act may be contrasting and insulting to other parties within cross-cultural teams (Kolapo, 2008). For instance, Hindus may find it insulting that a company opts to offer dairy products at a workplace event because they consider cattle sacred. Management could have had the view that dairy products are less expensive and nutritious, but Hindus will not share the same view. The implication of the act is isolation and conflict with Hindus within the cross-cultural teams.

Parochialism

This phenomenon restricts the cultural adaptations of an organization to the foreign environment. The phenomenon occurs when the social system of the foreign state is different from that of the expanding organization (Guang & Trotter, 2012). The novel social system adversely affects the responses (flexibility) of employees, management, and stakeholders of the firm. Parochialism in low level is identified in employees who are posted from domestic to international markets exhibit a number of varying behaviours (Guang & Trotter, 2012). These behaviours are normally reflecting those of the domestic country resulting in communication breakdowns. Behavioural differences make operational progress insignificant as employees relate the value of development in different ways.

Elevated Operational Costs

International organizations are faced with elevated costs in human resource as they attempt to mitigate cultural distances. Cultural distance as according to Wu refers to the management distance that a global firm has to cover to align operations with the immediate social environment (Wu, 2008). Global firms are necessitated to establish compensation and benefit systems as a function of ascertain employee satisfaction and retention. A study in China reveals that employee leave in search for better pay is higher than rates of employee retention in qualified positions (Wu, 2008). This suggests top-level workers who migrate to foreign markets to work are given high salaries. Moreover, it is difficult for a foreign firm to engage with the local employees. Multinational companies are forced to hire extra expatriate teams to assist in the establishment of production operations (Wu, 2008). The local employees themselves have to be given job-training functions in order to elevate quality of service. These activities add on the operational costs experienced by multinational companies.

Communication Breakdown

Communication represents one of the greatest functions that the entire organization needs to master in order to ascertain success within the global competitive market. The profitability of a firm is determined partly by its communication strategy, as business intelligence achieved through information sharing is part of communication processes (Singh, 2011). Neglect of cultural differences in top management in a multinational firm results in various adverse consequences that constrain the general functionality of the company. Communication breakdowns can occur between employees, employees and the firm or the firm with governing bodies. Guang and Trotter argue that communication breakdowns can occur between the multinational company and the local society through poor advertisements and adherence to customer preferences (Guang & Trotter, 2012). Communication breakdowns are the factors that encourage cross-cultural conflicts between employees within diverse project teams.

Factors Promoting Issues in Cultural Differences

Individuals grow up in separate restricted environments that determine behavioural aspects such as habits and stereotypes. Societies share different pervasive beliefs, values, and norms that determine everyday life of the respective groups. The different and shared approaches to life are the factors that promote cultural issues. The factors include:

Verbal and Non-Verbal Communication Styles

Different geographical regions in the international market contain a diverse divergence in verbal and non-verbal communication styles. The distinctions in verbal communication styles are divided into high text and low text languages. Low context languages are when the speaker converse directly and explicitly (Singh, 2011). The meaning is contained precisely in what he or she says requiring no further interpretations. In high context languages, the speaker codes the meaning of his message by conversing in an implicit and indirect way. In order to decode the meaning of the message, the listener must pay attention to the timing, intonation, facial and tonal attributes of the speaker (Singh, 2011). Non-verbal communication is distinct in terms of syntax and semantics. Different cultures have divergent ways of using physical space in the transfer of body language. The divergence result in cultural misconceptions and message interpretations.

Individualism

Analysis of the Google Inc narration on cultural differences puts individualism as one of the top factors that led to the slack development and poor entry to the novel market. Individualism refers to the emphasis on personal uniqueness and self-determination over that of other persons (Ahlstrom & Bruton, 2010). Persons who value individualism tend to work independently identifying themselves as sole entities. The mindset increases cultural differences because it refuses to acknowledge other important values entailed in other cultures. Acting against collectivism, individualists act as managerial risks in cross-cultural teams within a multinational organization.

Lack of Standardized Public Policies

Multinational companies such as Google Inc are required to conform to established economic and political policies in the foreign market. Foreign policies are normally differentiated from domestic polices as they aim to derive maximum benefits for the local market (Kolapo, 2008). In this approach, foreign government put local standards above international ones constraining global relations at high level. The approach taken by the government has a direct impact on the attitudes of its citizen. Policy differences facilitate development of cultural resistance that international managers try to address through elevated compensation and benefits for its workers. Given poor adherence to foreign policy, multinational firms risk probable property damage, worker strikes, and operational shutdowns.

Geographical Isolations

Geography plays a big role in the cultural development of any location. Mountains, rivers, valleys and other geographical characteristics determine the livelihood practices of any culture. Moreover, the nature of the land isolates communities allowing them to develop their culture that is different to other persons who are equally geographically isolated (Singh, 2011). Cultural differences are encouraged through the lack of commercial and social interactions between divergent communities. For instance, India is differentiated in culture irrespective of the dominant Arabic culture in the West and Asian culture in the North. This is because of isolation by the desert on the West and mountains in the North. This allowed the region to develop its own separate culture. Indians have different language patterns, rituals, oral and writing models and dressing approaches. The geographical isolations are the reason why the Republic of India continues to struggle in its development of a pluralistic society that will enable it to bond with the rest of the Asian subcontinent.

Theories Explaining Issues in Cultural Differences

Cross-cultural studies carried out by Hofstede and Trompenaars classify cultural differences into four dimensions that affect human reasoning, behaviour and feeling. He same dimensions used to explain cultural differences represent the same constraints that any multinational company has to overcome in order to ascertain successful market entry in a foreign market. The dimensions are grouped as either relations between persons, motivational orientations and attitude towards time. There are two secondary dimensions categorized as socio-cultural. Broken down, the theoretical dimensions provide basic explanations to managers on cultural differences and issues arising from divergence.

Individualism vs. Collectivism

As stated earlier, individualism refers to the extent to which persons’ looks at themselves within a group. The solo-based approach to functionality is one of the basic issues that societies and organizations face in terms of cultural divergence. The bonding between persons within an individualistic culture is loose as each individual is accountable for looking after him or herself (Kawar, 2012). Collectivism is the opposite of individualism. Persons with a collective mindset have strong in-group relationships. Collectivism reflects the desired cultural value that organizations attempt to establish within a diverse workforce (Kawar, 2012).

Femininity vs. Masculinity

The theory refers to the division of emotional roles using gender as the basis of distribution. The theory represents the most prevalent and fundamental issue faced by any society. Different societies approach the duality of sexes in divergent way adding to the gap in cultural differences. Past literature, teach that the feminine gender attaches importance to social objectives such as relationships and maintenance of the physical environment (Kawar, 2012). Men on the other hand attach significance to social goals revolving around wealth, power and career (Kawar, 2012). Hofstede’s data reveals that the level of importance to objectives varies in different communities and geographical regions differentiating the manner in which gender roles are divided.

Long Term vs. Short Term Orientation

The theory and dimension refers to the degree to which a culture influences its members in terms of accepting delayed emotional, material and social requirements. The theory explains cultural differences through integration of economic variables where developing countries have low long-term orientation indexes while developed countries have high indexes. The theory divides cultures in terms of economic functions. Long-term indexed cultures have the objective to establish strong economic positions in their respective markets while short-term indexed cultures do not have the imperative to establish strong economic positions (Guang & Trotter, 2012). International business management employs the theory to determine level of time and resources afforded to managers in certain economic cultures.

Power Distance

The dimension refers to the degree in which low-level employees accept and anticipate power to be disseminated unequally within an institution or organization. The theory looks at the consequences of human inequality as a factor for cultural differences. Human inequality determines the level of functionality of any society with high levels resulting in null operability (Tiwari, 2013). Cultures with low power distance indexes are favourable for multinational organizations in their operation expansion activities.

Maslow’s Hierarchy of Needs

The theory classifies cultures in terms of social requirements as a function for international motivation employed by multinational companies. Maslow in this theory determined that when an inferior requirement is satisfied (food, clothing), the subsequent need becomes dominant and the individual adds his attention to accomplishing the highest ranked requirement (Griffin & Pustay, 2010). The theory similar to power distance is another economic dimension employed to expound on cultural differences. The theory is employed by multinational managers in the determination of degree of compensation and benefits offered to local workers in order to satisfy the inferior ranked requirement. Cultures with great degrees of need hierarchy are unfavourable for international corporations to operate.

Strategies in International Management that Deal with Cultural Differences

Cultural Intelligence

This is the first and most common strategy employed by modern multinational companies in the addressing of issues arising from cultural differences. Cultural intelligence entails the firm acknowledging the divergences between the cultures within its operation environment. These are differences in perceptions, evaluation of social events, verbal and non-verbal styles, interpretations, and personal behaviours (Griffin & Pustay, 2010). Recognition of cultural differences is considered the first phase of good corporation and mutual understanding between persons and groups. The second phase of cultural intelligence is establishing respect for foreign cultures. No judgment is placed in cultural differences, as no society is considered superior to the other (Griffin & Pustay, 2010). The second phase establishes mutual relationships between the domestic and foreign cultures. The third phase involves the implementation of a sole intelligent culture specific to internal entities of the international firm. The sole culture integrates all the positives of the different cultures while negating the negatives. In the Google Inc article, cultural intelligence was employed in modified human resource recruitment practices in an attempt to structure a collective workforce.

Organizational Culture

A strategy that entails cognitive transformation of employees away from the beliefs, values and practices that they were brought up with to one of a workplace nature (Tiwari, 2013). It is the view that personal beliefs and values are weak and insufficient in facilitating skill and career development for a worker. The labourer is required to learn and harness knowledge and skill sets vital for organizational conformity, adaptation and functionality (Tiwari, 2013). Workplace cultures have defined characteristics such as behavioural regularities, philosophies, policies, rules, norms and hierarchy. The strategy is achieved through employee training and implementation of cultural intelligence in management architecture.

The Internalization Theory

The strategy is one that emphasizes on the need for multinational firms to search for, develop and set up their own resources cross-global boundaries. The theory is meant to ascertain that a company takes full advantage of asymmetries in employee expertise, capabilities and operational knowledge. The strategy gives firms a multidimensional rationale for international business management as it allows prioritization, location positioning and selection of preferred market entry modes (Clausen, 2007). The rationale facilitates control of operational costs that arise from cultural differences such as policy adherence. Opportunistic exploitation in the strategy cuts down coordination and transaction expenses (Clausen, 2007).  The Google Inc Company employed the internalization theory in risk management through reduction of complexity costs.

Change Management

Essential in the modern economic world, change management refers to a structured approach that ascertains thorough implementation of processes that address production shifts in the operating market space of a company (Ahlstrom & Bruton, 2010). The strategy focuses on long-term impacts therefore entails systematic firm-wide changes from employee to stakeholder level. Change management functions under the principle that the organization should never change; rather its employees should undertake the required transformations (Ahlstrom & Bruton, 2010). The strategy is employed to determine the building blocks required for continuous and elevated functionality. Various models such as Kotter’s Eight Step model are integrated in change management. Change management is considered effective when more than seventy-five percent of managerial functions are transformed.

Conclusion

Google Inc Company, an American based multinational company was finding it hard to comprehend why it was receiving mixed economic results in its various overseas stations. In the domestic market, the company’s performance was of superior natures, but its results in foreign markets were varying because of its neglect of cultural differences. Google Inc acts as a representation of the problems faced by multinational companies in foreign markets because of cultural differences. Cross cultural matters when left neglected in adverse extremes could result in null operations for a foreign company. There is pressing need for companies to acknowledge cultural differences in order to establish mutual understanding between market parties. Divergence can be addressed through tested strategies such as cultural intelligence, internalization and organizational culture. Important is to avoid bias or individualist mindsets that may result in antagonism with local forces. Imperative to capture is effective communication, conflict resolution, and policy adherence and employee satisfaction. The history and future of international business management continues to highlight production challenges given the dynamic natures of the globalized market. Globalization puts cross-cultural management vital as a function for flexible and long-term functionality.

 

 

 

 

References

Ahlstrom, D., & Bruton, G. D. (2010). International management: Strategy and culture in the emerging world. Australia: South-Western Cengage Learning.

Christopher, Eby. (2011). Google in China: Finding Creative Solutions to Cultural Differences. Proteus: Spring 2011. 27. 1. 57-64.

Clausen, Lisbeth. (2007). Corporate Communication Challenges: A ‘Negotiated’ Culture Perspective. International Journal of Cross Cultural Management. 7. 317-334.

Griffin, R. W., & Pustay, M. W. (2010). International business. Upper Saddle River, NJ: Prentice Hall.

Guang, T., & Trotter, D. (2012). Key Issues in Cross Cultural Business Communication: Anthropological Approaches to International Business. African Journal of Business Management. 6. 22. 6456-6464.

Kawar, T., I. (2012) Cross-cultural Differences in Management. International Journal of Business and Social Science. 3.6. 105-112.

Kolapo, F. J. (2008). Immigrant academics and cultural challenges in a global environment. Amherst, NY: Cambria Press.

Singh, Diwakar. (2011). Managing Cross-cultural Diversity: Issues and Challenges in

Global Organizations. IOSR Journal of Mechanical and Civil Engineering. 2278. 334. 43-50.

Tiwari, Neha. (2013). Managing Human Resources in International Organizations. Global Journal for Management and Business Studies. 3. 4. 355-360.

Wu, Jianlian. (2008). An Analysis of Business Challenges Faced by Foreign Multinationals Operating the Chinese Market. International Journal of Business and Management. 3. 12. 169-175.

 

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