How Does Culture Impact On International Business Management Essay

Introduction

The study of (Pothukuchi, Damanpour, Choi, Chen, Park, 2002) examines the effect of dimensions of national and organizational culture differences on the performance of international joint venture (IJV). They used the data from a survey of executives from joint ventures between Indian partners and partners from other counties to do the research. Finally, Pothukuchi, Damanpour, Chen, Park (2002) found that there is a negative effect from culture distance on the performance of international joint venture originates from differences in national culture and differences in organizational culture. What’s more, they found that the presumed negative effect from culture distance on the performance of international joint venture originates more from differences in organizational culture than from differences in national culture. Therefore, from the study of (Pothukuchi, Damanpour, Choi, Chen, Park, 2002), we can know that differences in national culture have a negative impact on the performance of international joint venture. Moreover, differences in organizational culture also have a negative impact on the performance of international joint venture. Now, we know that differences in national culture and differences in organizational culture both have a significant impact on the performance of the international business. Differences in culture between partners have a significant impact on the international business. Therefore, it is very important and necessary for the international business people to study and understand how culture impact on the international business.

Moreover, Sirmon and Lane (2004) said that when the domain of a social group is closer to the value-creating activities of an alliance, cultural differences between the partners’ members of that social group will be more disruptive. From Sirmon and Lane (2004), we can know that when cultural differences between the partners are very relevant to the value-creating activities of an alliance, cultural differences will significantly affect the performance of the international business. Therefore, it is very important and worthy to study how the cultural differences between the partners impact the performance of international alliance. What’s more, Sirmon and Lane (2004) found that when the domain of a social group is closer to the value-creating activities of an alliance, organizational culture differences between the partners’ members of that social group will be more disruptive than national culture differences. Furthermore, they also found that professional culture is the most relevant to the value-creating activities of an alliance. Therefore, when the domain of a social group is closer to the value-creating activities of an alliance, the professional culture differences between the partners’ members of that social group will be the most disruptive.

From the study of (Pothukuchi, Damanpour, Choi, Chen, Park, 2002) and the study of (Sirmon and Lane, 2004), the culture differences have a significant impact on the international business when the domain of a social group is closer to the value-creating activities of an alliance.

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This essay will discuss how the culture impact on the international business. Moreover, this essay will discuss how the culture differences impact the international business based on three main readings: (Morrison, 2006, p.168), the study of (Pothukuchi, Damanpour, Choi, Chen, Park, 2002) and the study of (Sirmon and Lane, 2004). Section 2 is definition of culture and international business. Section 3 is discussion and analysis of how the culture differences impact the international business. Section 4 is the conclusion and some suggestions.

Section 2

Definition of Culture and International business

Culture

In order to discuss how the culture differences impact the international business, we must understand what culture is first. Culture can be broadly defined as , ‘a learned, shared, compelling, interrelated set of symbols whose meanings provide a set of orientations for members of a society’ (Terpstra and David, 1991, p.6). From (Morrison, 2006, p.169), we can know that culture has many aspects, for example, value, behavior, beliefs, communication, sport, music and customs.

International Business

In order to discuss how the culture differences impact the international business, we should also understand what international business is. From (Morrison, 2006, p.5), we know that an international business forms when business activities of a company straddle two or more countries. A global business forms when a company expands to the extent that a large portion of its business is outside its home country (Morrison, 2006, p.6). Salk and Shenkar (2001, p.163) said that ‘International alliances reside at the confluence of different cultures which include national, organizational and occupational cultures.’ Therefore, it is very important to study and understand how different cultures impact on the international business.

Section 3

Discussion and analysis of how the culture differences impact the international business.

Pothukuchi et al. (2002) found that partners’ cultural differences may have more influence on the performance of international alliance as those differences become more directly related to the alliance’s primary value-creating activities. An international alliance’s performance is driven by the alliance’s effectiveness in achieving its primary value-creating activities. Moreover, Harrison et al. (2001) said that resource complementarity between partners of international alliance is often a necessary condition to optimize this value creation. Therefore, in order to share, combine and leverage complementary resources, the partners’ employees must interact effectively. Many researchers found that national and organizational culture differences between these employees affect their interactions. This means that differences in national and organizational culture have a significant impact on the performance of international business. It is very important and necessary for the international business people to study and understand different national cultures and organizational cultures.

(Morrison, 2006, p.168) also said that culture differences can directly impact the success or failure of a project. He also said that achieving a successful outcome will depend on sensitivity to differences in cultures between partners. This means sensitivity to differences in norms of behavior, value systems and languages between the partners will impact the success or failure of a project. What’s more, Trompenaars (1994) also said that for international business, grasping the interacting cultural dynamic between the global and the local is the key to be successful. Therefore, for international business, sensitivity to differences in cultures and grasping the interacting cultural dynamic between the global and the local is very important because culture differences can directly affect the success or failure of a project.

Moreover, Sirmon and Lane, (2004) said that cultural differences stems from national, organizational and professional cultures. The differences in national, organizational and professional culture can inhibit international alliance partners’ employees’ ability to interact effectively. This essay will discuss how the culture differences affect the international business from three different aspects: national culture, organizational culture, and professional culture.

National Culture

We know that different countries have different cultures. From (Morrison, 2006, p.172), nations are distinguishable from each other by a shared cultural history, for example, religion, language, or racial identity. Moreover, all these distinguishing characteristics blend into a national culture. Common language, shared religious, shared moral values, shared history, relationship between the individual and group, and attitudes to education are all the elements of national culture. National culture relates primarily to deep-seated values (Hofstede et al., 1990). National culture influences family life, organizational culture, education, and economic and political structures (Morrison, 2006, p.172). Sirmon and Lane, (2004) also said that the influence of national culture is strong and long lasting. Organizations, while they may develop their own specific values and behavior, are also highly influenced by the national culture of their home country (Morrison, 2006, p.202). Moreover, Hofstede (1991) found that national culture explains 50% of the differences in managers’ attitudes, beliefs, and values. Albert (1991) said that national culture differences are clearly seen in economic and political systems, educational systems, and other institutions. Therefore, Sirmon and Lane, (2004) said that national culture differences between partners of the international alliance can challenge the development of successful relationships. Park and Ungson (1997) said that these challenges stem partially from the lack of shared norms or values. Moreover, this lack of common understanding may undermine the partners’ interpretation of each other’s strategic intent, which is crucial in global markets and partnerships (Hitt et al., 1995). What’s more, Hennart and Zeng’s (2002) research findings also suggests that differences in national culture can disrupt collaboration and learning between partners of the international alliance. Furthermore, Sirmon and Lane, (2004) said that a lack of shared values and norms may reduce effective communication, trust and knowledge sharing in joint ventures. They said that all these problems have been found to lead to lower the performance of the international business.

However, differences in national culture can be beneficial. For example, when the managers work with the foreign partners, they will spend more effort on avoiding misunderstandings in international alliances than they would in domestic alliances. In this case, differences in national culture can lead to high-level communication and a more sustained collaboration. Therefore, differences in national culture also have a good and positive impact on the international business.

What’s more, Chui et al. (2002) and Gibson (1999) also said that National culture has been shown to impact on major business activities, from capital structure to group performance. Now, we know that differences in national culture have a significant impact on the international business. Therefore, it is very important to study and understand how the national culture impact on the international business. This essay will also discuss how the national culture impact on the international business by discussing and analyzing how language and religions impact on the international business.

(1). Languages

Common language is an element of national culture. Language is the basic means of communication between people. Language facilitates social interaction and fosters a system of shared values and norms (Morrison, 2006, p.174). If partners of international alliance cannot have common language to communicate, they cannot cooperate and interact because they cannot communicate. Business people cannot do business with the people who speak different languages. Nowadays, the importance of English as a global language extends far beyond the number of native speakers. English as a global language and common language helps people who speak different languages to communicate. English language is an intercultural means of communicating. Business people can use English in their international business activities. Business people now can do business with the people who speak different languages by using English. English helps the business people overcome the problems of intercultural communication in their international business activities. Therefore, having a common language is a very important necessary condition for international business. Today, most of South America is Spanish-speaking, moreover, in recent years Spanish companies have expanded in the region, attracted by a perceived affinity with these markets derived from a common language(Morrison, 2006, p.175-176). Moreover, in a low-context culture, communication is clear and direct, such as America. In a high-context culture, much goes unsaid because ambiguity is the norm and directness is avoided, such as Asian cultures (Morrison, 2006, p.174-175). Difference in language culture will also impact international alliance partners’ employees’ communication and inhibit their ability to interact effectively. Therefore, knowing and understanding the partner’s language culture well is also very important for international business.

(2). Religions

The system of values and beliefs that characterizes a culture may be embodied in a particular religion (Morrison, 2006, p.179). As well as religious power, religion may exercise considerable political power. It can form a major unifying force in society. In countries where religion is a major element of the cultural environment, sensitivity to local religious beliefs and practices is particularly important in building business relations (Morrison, 2006, p.180). Research has identified over 15,000 distinct religions and religious movements among the world’s population (Barrett, 1997). Therefore, there are many people who have religious beliefs in this world. Knowing the local religious beliefs and the business partners’ religious beliefs well is very important for the international business.

Moreover, many social associations and political parties in many countries are commonly based on religious affiliations. Moreover, these form an essential dimension of the business environment. For example, the growth in membership and influence of large churches in parts of the US impacts on the social and cultural environment of the communities in which they are located. If there is an established religion in a location, a business must take account of its wide ramifications. If there are multiple religions in locations, a business as a good corporate citizen should not discriminate (Morrison, 2006, p.181-182). Knowing the business partner’s religious beliefs well will help to achieve good outcomes. Do not know the business partner’s religious beliefs well may lead to the failure of your business. Therefore, we can know that it is particularly important and necessary for the international business to know the business partners’ local religious beliefs well.

What’s more, many aspects of business life are directly (or indirectly) affected by religious beliefs and practices. For example, particular foods that are forbidden such as beef for Hindus; ban or restrictions on consumption of alcoholic drink; religious festivals during which work may be forbidden; clothing requirements; requirement for women and men to be segregated in the work environment in Muslim societies; and the ban on Sunday shopping in some countries (Morrison, 2006, p.187).

Organizational Culture

From the study of (Pothukuchi, Damanpour, Choi, Chen, Park, 2002), we know that the negative effect on the performance of international joint venture originates more from differences in organizational culture than from differences in national culture. What’s more, from the study of (Sirmon and Lane, 2004), we know that when the domain of a social group is closer to the value-creating activities of an alliance, organizational culture differences between the partners’ members of that social group will be more disruptive than national culture differences. Therefore, from the study of (Pothukuchi, Damanpour, Choi, Chen, Park, 2002) and the study of (Sirmon and Lane, 2004), we can know that organization culture has more impact on the international business. Organizational culture is very important for the international business.

Therefore, in order to discuss how the culture differences impact the international business, we must understand what organizational culture is. From (Morrison, 2006, p.195), organizational culture or corporate culture, like national culture, focuses on values, norms and behavioral patterns shared by the organization. An organizational culture is one that is deliberately fostered among employees, who may have come to the company from a variety of different cultural background. Characteristics of organizational culture include that, for example, common language, shared terminology, norms of behavior, and dominant values of the organization. Hofstede et al. (1990) said that whereas national culture relates primarily to deep-seated values, organizational culture relates primarily to shared beliefs in organizational practices and processes.

Weber et al. (1996) found that different organizational cultures between acquirer and target could decrease top managers’ positive attitudes toward the merger and decrease their cooperation. Therefore, Sirmon and Lane, (2004) said that organizational culture is very important for the success of mergers and acquisitions. They thought that when the partners have the same organizational culture, satisfaction, learning and effectiveness of interactions will be increased. Therefore, same organizational culture between the partners has positive impact on the success of mergers and acquisitions. What’s more, they also thought that if the partners have different organizational cultures, satisfaction, learning and effectiveness of interactions will be decreased. Moreover, from (Sirmon and Lane, 2004), we know when learning, satisfaction and effectiveness of interactions are decreased, the business processes used to share combine and leverage resources will be inhibited. Sirmon and Lane, (2004) said that it will be more difficult for partners who have different organizational cultures to effectively achieve the primary value-creating activities.

Professional culture

From (Van Maanen and Barley, 1984; Jordan, 1990¼›Brown and Duguid, 1991; Lave and Wenger, 1991), we know that professional cultures develop through the socialization. Individuals receive the socialization during their training and occupational education. Then this socialization will be reinforced through the individuals’ professional experiences and interactions that lead to a broad understanding of how their occupation should be conducted. Moreover, Trice and Beyer (1993) said that professional cultures form as people, who span individual organizations, share a set of norms, values and beliefs related to their occupation. Sirmon and Lane’s (2004) research findings suggests that professional culture differences are often the most relevant and salient cultural differences that the interacting employees face, and thus professional culture differences are the most disruptive to the alliance’s effectiveness in achieving its primary value-creating activities

Section 4

Conculsion

This essay discussed and analyzed that how the culture impact on the international business. Moreover, this essay discussed how the culture differences impact the international business based on three main readings: (Morrison, 2006, p.168), the study of (Pothukuchi, Damanpour, Choi, Chen, Park, 2002) and the study of (Sirmon and Lane, 2004). After discussing how the culture differences impact the international business, we know that:

An international alliance’s performance is driven by the alliance’s effectiveness in achieving its primary value-creating activities. Moreover, resource complementarity between partners of international alliance is often a necessary condition to optimize this value creation. In order to share, combine and leverage complementary resources, the partners’ employees must interact effectively. However, national and organizational culture differences between these employees affect their interactions. Therefore, partners’ cultural differences may have more influence on the performance of international alliance as those differences become more directly related to the alliance’s primary value-creating activities.

Achieving a successful outcome will depend on sensitivity to differences in cultures between partners. This means sensitivity to differences in norms of behavior, value systems and languages between the partners will impact the success or failure of a project. Therefore, culture differences can directly impact the success or failure of a project.

Cultural differences stems from national, organizational and professional cultures. The differences in national, organizational and professional culture can inhibit international alliance partners’ employees’ ability to interact effectively.

Differences in national culture lead to the lack of shared norms and value. The lack of shared values and norms may reduce effective communication, trust and knowledge sharing in the international business. Moreover, this lack of common understanding may undermine the partners’ interpretation of each other’s strategic intent, which is crucial in global markets and partnerships. All these problems have been found to lead to lower the performance of the international business. Therefore, differences in national culture can disrupt collaboration and learning between partners of the international alliance. Differences in national culture may have a negative impact on the performance of the international business.

In some circumstance, differences in national culture can lead to high-level communication and a more sustained collaboration between the partners. Differences in national culture also have a good and positive impact on the international business. Therefore, differences in national culture can also be beneficial for the international business.

Knowing and understanding the partner’s language culture well is also very important for international business.

In countries where religion is a major element of the cultural environment, sensitivity to local religious beliefs and practices is particularly important in building business relations.

When the domain of a social group is closer to the value-creating activities of an alliance, organizational culture differences between the partners’ members of that social group will be more disruptive than national culture differences. Therefore, the negative effect on the performance of international joint venture originates more from differences in organizational culture than from differences in national culture. Moreover, different organizational cultures between acquirer and target could decrease top managers’ positive attitudes toward the merger and decrease their cooperation. Organizational culture is very important for the success of mergers and acquisitions.

Professional cultures form as people, who span individual organizations, share a set of norms, values and beliefs related to their occupation. Professional culture differences are often the most relevant and salient cultural differences that the interacting employees face, and thus professional culture differences are the most disruptive to the alliance’s effectiveness in achieving its primary value-creating activities.

Some suggestion for the international business which reside at the confluence of different cultures:

Morrison, (2006, p.202) said that in the international environment, a polycentric approach will make it easier for the international organization to adapt to the different cultural environments of foreign operations. (Morrison, 2006, p.168) also said that joint ventures is a good way to make international business relationships successful.

What’s more, cultures are not fixed and static. Cultures can change. Therefore, organizations should be capable of change as they expand internationally because there are interactions between cultures and growth of international markets and global brands.

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