A word on CULTURE

Culture has a profound impact for managers of MNC's- An international firm's activities will undoubtedly be affected by cultural factors. Read this article if you're looking for a deeper understanding and insight into how culture affects your firm's international operations. 

Reflect back and think again: Have you taken the factors below into account when setting up shop outside your home country?

      Culture, although a broadly defined concept can be described as “the knowledge, beliefs, art, law, morals , customs and other capabilities of one group distinguishing it from other groups.”

-the question of difference between cultures is not as important in an international business context as is what happens when those cultures interact.   Many a time facile generalisations can be made with reference to what countries are best known for, a world where the French are the cooks, the Swiss are the organisers , the Italians are the lovers and so on it goes. In actuality, this is not necessarily the case. One would expect a german investment banker to share a lot in common with a British person of the same profession, than he would have in common with a german contractor, who is in fact his own compatriot.

In today’s world we live where cultural divergence between society has become much smaller. However on the contrary, due to globalisation, culture has become an even more issue in terms of the “need to preserve” and be aware of how different societies operate.

Culture, according to Huntington, can be both a source of cohesion among members as well as a point of friction between them and others.  Members of the same culture feel united, however cultural differences can cause friction, in particular when they are not respected.

It is challenging for firms to transplant practices from one country to others where they hope to seek a significant and sustainable competitive advantage. As such it is essential for managers of international firms to take the impact of culture into account when taking action whether it be based on business strategy or the decision to branch out to a new foreign country, as culture affects relationships, decisions, management styles, and transactions. Culture also plays a key role in international alliances and mergers, corruption and entrepreneurial behaviour.

We need to think about the cultural differences that shape managerial and leader attitudes when developing multinational management programs. for example, British managers value autonomy and individual achievement while Indian managers may emphasize more on culture and traditions. Hence as a result managers need to be familiar and understand other cultural norms to promote greater diversity. 

There are four relevant factors to take note of when assessing the impact of culture:-

-Firstly, cultural stereotypes refer to those individuals whom which authors often derive generalisations about societies from. They are an importance force in international business. For instance, they influence how headquarters and subsidiary staff perceive each other. 

-Secondly, self-reference criterion refers to how one may judge the behaviour of others, based on ones own cultural traits. For instance, bribing is acceptable to some in countries like India, or gender inequality is built into patterns of behaviour in Yemen. Often when interacting with other cultures, individuals and firms use their own culture as an anchor.

-The third factor relates to cross cultural literacy, whereby understanding others behaviour and making allowances when other behaviour differs from yours.

- Lastly, acculturation alludes to modifying your behaviour to make it compatible with that of others.

     --> Culture is correlated both with language and with religion.

•     Language: differences in language structure, use of slang and the meaning of nonverbal language gestures. These are just a few of the challenges that language differences present for managers. E.g. pepsi in china “comes alive” translates to “bring your ancestors back from the dead”. Such connotations are important for managers to consider when making decisions to move to new markets. 

• Religion: dictactes adherants’ way of life, therefore very important for international managers to understand any religion affecting their employees and customers alike. For instance, in muslim countries, a restaurant operator must respect that during the period of Ramadaan, lunchtime deals and operation may be irrelevant, as the majority of customers will be fasting, and it may be more lucrative to offer traditional buffet dinners after dark.

When we consider the above correlates in the context of culture, it poses communication and coordination challenges within the MNE but diversity is also a source of strength because it brings about different and new opinions and ideas from which the firm can benefit.

     -->When we consider culture, there are multiple systems for classifying national cultures, including those by Schwartz, GLOBE and Hampden Turner. The framework introduced by Ronen and Shenkar shows that it is possible to cluster countries according to the relative similarities of their cultures.

-However a widely used framework to take into account is the ideas bought about by Hofstede - analysing the impact of culture on the conduct of activities related to international business.Hofstede studied 100,000 IBM employees throughout the world and made observations along 5 key dimensions. i

     By means of using Hofstede’s research it is useful to international managers because they can:

-adopt relevant leadership styles
-develop a corporate culture that is more likely to be adopted by workers.
-managers can use these ideas to make better informed decisions in strategy formulation. 

  Distinction between corporate culture(CC) and national culture(NC):

Corporate culture: is the culture adopted, developed and disseminated by a company. It is of vital importance for instance for an MNC that adopts a global strategy and uses corporate culture as an integrator of its various units.

Note that corporate culture can vary from national culture- e.g Honda, although a Japanese automobile manufacturer, it deviates from the “typical Japanese firm” as it is said to be more traditional and open to change. Nonetheless, corporate culture is a lot more superficial than national culture, as the imprints on the latter alone reside in deeply embedded values, while national culture is formed through early socialisation.

In conclusion: it appears that corporate culture is embedded in national culture but is also notably different. CC is less deeply imprinted than national culture. Essentially CC is and add on to NC, which overlays the basic cultural patterns.

      -->Identifying other layers of culture:
-Ethnicity: e.g. In Asia, Chinese have long constituted much of the business elite in countries such as Thailand and Malaysia. Such variations need to be recognised by the MNCs as they can affect issues, ranging from consumption patterns to employee relations.

-Industry: cultures vary from sector to sector. E.g. in the technology sector, people are generally informal, flexible and innovative. It is probably the most “global” industry in terms of people having shared values and interaction.
     -Demographics: education, age, seniority affect differences in values, although not differences in practices. E.g. studies found that new generation of Chinese mangers are considerably more individualistic and adhere less to Confucianism than the previous generation.

-Ideology: less stable layer of culture. E.g. Maoist ideologies in China provided much of the beliefs and values in the country from the mid 1950 to mid 1970s.

In conclusion: these various layers of culture affect MNE strategy and operations in both the home and host countries.

Taking everything above into account, it is important to bear the below points in mind:

-     culture does not have a profound and equal impact on each and every division of the company. It is more sensitive in certain departments such as HR, Marketing and sales. It is much less eminent in practices such as R&D, production and IT. Nonetheless, a firm wants to exploit “best practices” and generate “some sensitivity” toward culture.

-culture does not explain EVERYTHING, particularly uncertainties. It is essential for managers to avoid making culture a “residual variable” (i.e. using culture to explain ambiguities). Overplaying the role of culture can have adverse outcomes. For instance, blaming poor sales in a new region on cultural differences may mean that managers miss the real picture behind weak revenues (e.g. incorrect pricing strategy, economic factors, etc).

Overestimating the impact of culture can have detrimental outcomes. For instance, Japan overplayed the role of culture in their economic success and as a result failed to make the governance and structural changes that could have salvaged them from a decade of stagnation. Thus, it is always important to consider in any context of uncertainty, the impact of non-cultural environmental variables.

All things considered..............

      respecting and working with cultural differences provides opportunity for sustainable long terms gains, as long as the manager avoids making culture the residual variable. A sound knowledge of culture is what will permit an international manager to comprehend questions like “what will work where?” correspondingly the managers will have  a better understanding of what buttons to press to yield optimal outcomes and which ones to avoid.   

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