Cross Cultural Management and International Business

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Table of Contents

Introduction
Literature Review
Management in international business
Importance of cultural management
Conclusion
References

Introduction

The technological advances and achievements have brought people from different parts of the world and diverse cultural backgrounds very close. People having different cultural identities are communicating are working together (Lauring, 2011).

It is good to be close to one another and know about different cultures, however having cultural diversity at workplaces may also create havoc. There are certain things that are permissible in one culture and some are considered as cultural taboos.

Organizational management requires execution of various tasks such as establishing procedures and developing strategies. Besides this, the organizations need to motivate their workforce to accomplish selected tasks. A sound understanding of the cultural diversities is necessary for carrying out these tasks (Kawar, 2012).

Cross cultural management is a stream of management that emphasizes on the processes and policies involving the management of workers coming from diverse cultural backgrounds. It also facilitates the implementation of management tasks by regulating the impact of cultural differences (Søderberg & Holden 2002, p.103).

The contributions of two pioneers, Adler (International Dimensions of Organizational Behaviour 1991) and Hofstede (Culture’s Consequences 1980) is very significant in the field of cross cultural management.

In this essay we will focus on the role of culture in international business situations and also the strategies and frameworks that are appropriate in cross-cultural management.

Literature Review

The concept of culture

According to Hofstede Geert, culture is “the collective programming of the mind distinguishing the members of one group or category of people from another” (cited in Kawar 2012, p.105).He studied cultural diversity mainly between the nationalities (Kawar 2012).

Similarly Gudykunst and Kim (1992) identified culture as a ‘“systems of knowledge shared by a relatively large group of people” (Jameson, 2007, p.203). By large groups they meant different countries.

While interacting with people in an intercultural business situation, it is important to reconceptualise one’s cultural identity in order to understand others’ frame of mind Edward Hall (1959) describes culture as an influential force in casting one’s identity.

He defines culture as “a mould in which we all are cast and it controls our lives in many unsuspected ways” (Jameson, 2007, p.199). Cross-cultural relationships are very complex and unique in nature. Hence, there has to be individual consideration for each situation (Gullestrup, 2002).

Cross-cultural differences and international business

International managers face the challenge of working on different premises at one time including their own culture, culture of the working place or culture of their organization. Every culture has a distinct notion for terms like “authority, accountability, verification, good fellowship, creativity bureaucracy (Trompenaars & Hampden-Turner, 1998, p.3).

It is noteworthy that our cultural prejudices and habituated behaviours may be different. Cultural values intervene in the accurate transfer for messages between culturally diverse people (Peltokorpi, 2010).

While interacting with people in an intercultural business situation, it is important to reconceptualise one’s cultural identity in order to understand others’ frame of mindCross cultural differences are studied by various authors using different paradigms.

Hofstede’s four dimensions of cultural differences

According to Hofstede (1980), culture can be analysed in four different ways. They are:

Individualism and Collectivism: Different cultures have different preferences about the individuals and groups. Some cultures prefer the individual over group whereas others give more importance to the group rather than the individual (cited in Kawar 2012, p.106). Individualism emphasizes on valuing one’s own interests or the interests of one’s family.
Countries that cherish individualism are United States and Great Britain etc. On the other hand collectivism emphasizes on group feeling and thinks about others interests owing to loyalty. India and Singapore etc. have the traits of elevated collectivism.
Power Distance: It refers to the acceptance level of employees regarding the unequal distribution of power in the organization. The high power distance cultures such as India, Mexico, and Philippines etc. relate bypassing the superiors to noncompliance; low power distance cultures do not hesitate in bypassing the boss for their own interest. Countries like USA and Israel belong to thecategory of low power distance culture (Kundu 2001).
Uncertainty avoidance: According to Hofstede every culture doesn’t accept changes in the same manner. Some cultures take change as an experiment while others do not take it in this way (cited in Kawar 2012, p.106). Adler (1997) believes that high uncertainty avoidance cultures such as Japan foster permanent jobs whereas low uncertainty avoidance cultures such as Hong Kong and India witness job mobility quite frequently (cited in Kundu, 2001, p. 2).
Masculinity and Femininity: Masculine societies cherish materialistic values including achievement, money and possessions whereas feminine societies lay emphasis on interactions among people, empathy for other people, and the quality of life.
Countries having masculine features are India, Austria USA and Italy etc. On the other hand countries like Denmark, Norway and Sweden etc. follow femininism (Kundu 2001).
Besides the above four dimensions, Adler (1997) introduced one more dimension called Confucian Dynamism. This relates to workers commitment to work ethic and admiration for their tradition. Hong Kong, Singapore, South Korea, and Taiwan demonstrate robust work ethic and hence are called the four tigers of Asia. They are highly committed to traditional Confucian principles (cited in Kundu 2001, p 5).

Hall’s context and time theory

Hall introduced a different dimension to cross-cultural differences. He proclaimed that culture can be differentiated on the basis of context and time.

High and low context cultures: High context culture: People representing high context culture have a non-verbal behaviour. They depend more on signs and symbols and body language etc. The communication is often through codes and the agreements are spoken and flexible. The relationships are permanent and cherish a sound mutual involvement in extensive families and friendship network.
Low context cultures: People representing low context culture communicate openly with clear information. They prefer putting their preferences in different sections. Communication is more clear and formal. They require detailed information regarding any decision making. Agreements are written and obligatory.
The bureaucratic system leads to distribution of power, however it is difficult to identify anyone’s personal identity.
Sequential or Monochronic Time theory: People representing this culture give much importance to time in their life. They stress on the proper utilization of time and sitting idle, wait for someone or having spare time is not appreciated at all. Time is money for them.
Synchronic or polychromic Time theory: Time is just like the other occurrences in life for people in synchronic cultures. Human relations are more important than the time schedules for them. Time is considered a flexible commodity that can be manipulated according to the requirements.

The Five dimension theory of Trompenaars

Trompenaars believes that all cultures face similar challenges, but their solution differ on the depending on their attitude regarding relationship to time and nature and also with other people. He found five dimensions to his cross cultural theory:

Universalism/Particularism: Universalism binds people in rules and regulations that are unchangeable, whereas particularism does not hesitate in breaking them for family and friends. Particularism directs people to change their behaviour and practices depending on the circumstances.
Affective/Neutral: Affective cultures are dominated by emotions and people freely express their emotions whereas in neutral cultures reason is given more importance, people control their emotions.
Diffuse/ Specific: People from specific cultures have a separate large public space and a small private space that is restricted to close acquaintances only whereas in diffuse cultures people have a common public and private space.
People in specific cultures are not much cautious about their public space but in diffuse culture they are extra cautious as a peep into their public space will reveal their personal space too.
Achievement/Ascription: Achievement oriented cultures attribute status depending on the achievements whereas in ascription cultures age, gender and class etc decide the status of an individual.
Individualism/ Communitarianism: Individualism gives preferences to the interests of the individuals whereas communitarianism puts the interest of community over individual interest, (Ming-xiang, 2012

Management in international business

The basic requirements of international management include: examining the new environment and supposing its influence on the home enterprise, implementing relevant strategies and management skills to adapt to the new situation in a virtuous manner. International management emphasises on applying the appropriate management systems and methods based on the prerequisites of particular country and associated people (Adekola & Sergi, 2012).

It is mandatory for the managers to refine their cross cultural communication and negotiation skills and polish their etiquettes in order to successfully manage their business at international level. Global managers need to efficient and skilled in dealing with the challenges of like globalization, technological progress, changing environment and competition (Steers et al, 2010).

Organizations encourage their managers to travel abroad in order to learn innovative skills and coordination through cross-cultural communication that would help them in managing cultural differences. This global acquaintance provides managers to experience the cultural diversity of other places.

According to Yu (2007), globalization in business leads to “a compelling need for standardization in organizational design, management strategies, communication patterns because managers will find themselves faced with multiple challenges originating from domestic and cultural issues and socio-economic systems. Adaptation is critical and essential for corporate success” (cited in Okoro, 2013, p.2).

Competency of firms at national and international level and their efficiency in communicating with the stakeholders determines their success in international situations. The expansion of a great number of multinational companies in various countries of the world has increased in the past few years.

These companies are having expansion either through direct investments or partnership arrangements that is done with the local operations. These trends are indicative of the fact that successful completion of the investment plans of corporations depends on strategic management, negotiation and communication cross-cultural business situations.

Chaney &Martin (2011) believe that “a good understanding and appreciation of the culture in which business is conducted can make international managers both effective and productive” (cited in Okoro, 2013, p.3). Sensible management of cultural diversity can benefit organizations with growth and wellbeing and sustain the competition at global level.

Some authors believe that companies having employees with cultural diversity witness better decentralization and authorization at local level (Dupriez as cited in Søderberg & Holden, 2002).

Importance of cultural management

The significance of cross cultural management can be realized in the situations where cultural differences give rise to confusions and conflicts. Cultural differences may also cause miscommunication of ideas and instructions. It is essential for managers in international business to practice cross cultural management in order to avoid misjudgement and mistakes while dealing with the customers, and stakeholders and suppliers (Søderberg & Holden, 2002)

International business management highly requires efficiency in cross cultural management so as to avoid corporate undoing and sustain long lasting partnerships. Cultural differences are considered a barrier in communication and often create confusion and misunderstandings.

However, there is also a prevailing notion that cross cultural diversity is helpful in the competitive world of international business. Cross cultural interactions can be advantageous as they allow transfer of knowledge and experiences from one cultural to another. Schneider and Barsoux (1997) believe that appropriate management of cross cultural issues lies in

“treating diversity as a resource rather than a threat that is essential for responding to the demands of a global market economy, for reaping the full benefits of cross-border alliances, and for enhancing organizational learning” (as cited in Søderberg & Holden 2002, p.105)

Cultural diversity can be acknowledged as a prospect for goal attainment as it provides ample solutions resulting in substantial competitive benefit. International businesses can utilize their resources efficiently by improving multicultural strategies and creative problem solving practices (Majlergaard, 2006).

Further, Morosini (1998) and Gertsen and Søderberg (2000) declare on the basis of their studies on the subject that internal discussions and comparisons of management styles may prove beneficial for the organizations. They believe that international mergers oblige the employees to reveal their indigenous cultural distinctiveness and organizational performances.

These cultural identifications and activities are interconnected with those originating from the new working environment. Thus intermingling of these cultural identifications creates a new cultural identification associated with the new combined organization.(cited in Søderberg & Holden 2002).

Considering both the notions, it is evident that culture plays a significant role in the global marketing economy and requires appropriate handling by the international marketers. Søderberg & Holden (2002)proclaim that “The core task of cross cultural management in a globalizing business world is to facilitate and direct synergistic interaction and learning at interfaces, where knowledge, values and experience are transferred into multicultural domains of implementation” (p. 113).

Cross cultural management becomes more significant in the world of multinational companies where co-operation may be difficult due to different cultural backgrounds of the workforces. Globalization has resulted in the establishment of several companies all round the world.

It has increased communication across diverse cultures. Culture is learnt through communicating in different ways involving coding and decoding language and relevant symbols. Hence, culture and communication complement each other in a given situation (Kawar 2012).

This case study will look into the cultural context of India and the U.S. in order to identify the cultural similarities and differences embedded within both the nationalities. Based on Hofstede’s five dimensions of cultural difference, we can evaluate the cross-cultural difference as obstacles and some commonalities that may occur as facilitators in business relations between India and the U.S.

Indians believe in collectivist value system. The Indian social system is based on the hierarchical pattern where the head of the family is the decision making authority. Family is given more importance than work. Respect for elders, parents’ financial backing, joint family system and family owned businesses are the other features of Indian society.

In the U.S. individual needs and achievements are of prime importance for the people. Decisions are not influenced by others and every individual is encouraged to pursue his personal choices. Americans have separate value for their carrier and family.

Second distinction between the two countries is based on the power distance. India has a much higher score in power distance as compared to the U.S. The cultural hierarchy in India provides all authority to the boss, and employees are expected to follow the orders without raising any issues.

In the U.S. this kind of power hierarchy is not found. Power is not accumulated at some levels, rather distributed equally. People are appreciated for their upward mobility and have the freedom to approach the senior managers easily (LeFebvre, 2011).

Level of context is another dimension that differentiates Indian culture from American culture In the U.S. communication is more explicit and straightforward. In view of the ethical behaviour in business the U.S. depends on in on professional behaviour whereas India gives more importance to relationships.

American managers believe in using an analytical approach whereas Indians prefer using an intuitive approach based on the contextual circumstances while deciding ethical issues (Christie, 2000 as cited in LeFebvre, 2011).

Indian culture is a high-context culture

Indian and American culture has some common characteristics that make business transactions possible between them. Both the countries have roots from British colonization. People dealing in business are well aware of the rules and regulations of the business world.

Kaptein (2004) studied the frequency of business codes at an international level and found that India, England and the U.S. were at the top among countries which follow business codes. 6. Recommendations: These cultural differences may pose problems for the international managers.

It is important for the managers to build trust for doing business in different cultural environments. Mangers require using their managerial skills in dealing with these cross-cultural differences. For example Americans may have to adjust with ‘Boss is always right system’ in India whereas Indians will have to adapt to the openness in the hierarchical system of the organization prevalent in American culture.

In cross-cultural business environments, the differences in attitude towards work can be handled with patience and determination. Time is money for Americans and they cannot afford wasting it whereas Indians are flexible about schedules and appointments.

It is very important to learn about the culture of the business partners before venturing into international business. Good communication skills and adaptability to different cultural environments can help in managing cultural diversity.

Conclusion

Sensible management of cultural diversity can benefit organizations with growth and wellbeing and put up with the competition at global level. Cross cultural management becomes more significant in the world of multinational companies where co-operation may be difficult due to different cultural backgrounds of the workforces.

International management emphasises on applying the appropriate management systems and methods based on the conditions of particular country and associated people.

References

Adekola, A. & Sergi, B.S., 2012, Global Business Management: A Cross-Cultural Perspective, Ashgate Publishing, Ltd, Hampshire, England.

Adler, N.J. 1983, ‘Cross-Cultural Management: Issues to Be Faced’, International Studies of Management & Organization, vol. 13, no. ½, pp. 7-45.

Gullestrup, Hans, 2002, ‘The complexity of intercultural communication in cross-cultural management’, Intercultural communication, Issue 6.

Jameson, D.A., 2007, ‘Reconceptualizing, cultural identity and its role in intercultural business communication’, Journal of Business Communication, vol. 44, no. 3, pp. 199-235.

Kaptein, M., 2004, ‘Business Codes of Multinational Firms: What Do They Say?’ Journal of Business Ethics, vol. 50, no. 1, pp. 13-31.

Kawar, T.I., 2012, ‘Cross-cultural Differences in Management’, International Journal of Business and Social Science, vol. 3, no. 6, pp. 105-111.

Kundu, S.C., 2001, ‘Managing cross-cultural diversity: A challenge for present and future organizations’, Delhi Business Review, vol. 2, no. 2, pp. 1-8.

Lauring, J. 2011, ‘Intercultural Organizational Communication: The social organizing of interaction in international encounters’, Journal of Business Communication, vol. 48, no.3, pp. 231-255.

LeFebvre, R., 2011, ‘Cross-cultural comparison of business ethics in the U.S. and India: A study of business codes of conduct’, Journal of Emerging Knowledge on Emerging Markers, vol. 3, pp. 390-408.

Majlergaard, F. D. Release the power of cultural diversity in international business, 2006. Web.

Ming-xiang, L. 2012, ‘Comparison of the Studies on Intercultural Communication’, US-China Foreign Language, vol. 10, no. 5, pp. 1207-1213.

Okoro, E. 2013, ‘International Organizations and Operations: An Analysis of Cross-Cultural Communication Effectiveness and Management Orientation’, Journal of Business & Management, vol.1, no.1.

Peltokorpi, V. 2010, ‘Intercultural communication in foreign subsidiaries: The influence of expatriates’ language and cultural competencies’, Scandinavian Journal of Management, vol. 26, pp. 176—188.

Søderberg, A.& Holden, N. 2002, ‘Rethinking Cross Cultural Management in a Globalizing Business World’, International Journal of Cross Cultural Management, vol. 2, pp. 103-121.

Steers, R.M., Sanchez-Runde, C.J. & Nardon, L., 2010, Management across cultures: challenges and strategies, Cambridge University Press, New York, USA.

Trompenaars, F. & Hampden- Turner, C., 1998, Riding the waves of culture, 2^nd edn, Nicholas Brealey Publishing Ltd, London, UK.

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