Culture Affects International Business Management

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A critical analysis of how culture affects international business management, with specific reference to culture in the HSBC and Dell companies

International business is the result of gradual evolution of Globalization. As the development of international business, Multinational Corporations (MNCs) emerge. The term Multinational Corporation refers to business corporations that have two or more companies in different countries with one of the countries being the host country. (Baumueller, 2007) Culture involves habits, beliefs, values, laws, ways of life and work. Further, culture is the artificial part of the environment. (Phatak, Bhagat, Kashlak, 2005a) Recently, culture shock has been a severe problem in international business management. MNCs have to face the problems of cultural conflict which occurs in different countries. Cultural differences in international business are one of the crucial challenges which MNCs have to face and overcome. Moreover, the companies’ culture not only affects the brand image, it is also connected with the management of employees, the sale of the product and the satisfaction of the customers. Management styles need to be adaptable in order to mesh with the cultural elements in diverse areas.

This essay will analyse the important position of culture in international management. This analysis will consist of four aspects. Firstly, this essay will analyse the problems of cultural conflict in the MNCs. Secondly, it will analyse the success of HSBC bank in cultural management. Thirdly, it will analyse the failure of cultural management of Dell computer company in China in its initial years. Finally, it will offer solutions for the cultural conflict.

The problems of cultural conflict in the MNCs
In 1982, Peters and Waterman (cited in Kelly, 2009a) indicated that culture is merely concerned with the marketplace, it is not important for management. However, Ahlstrom and Bruton (2010a) argue that a series of issues are brought about by the cultural differences in the MNCs, such as the misconstruction between managers due to the language obstacles which cause a divergency in decision making. It is commonly acknowledged that culture is becoming a significant problem during the cross-cultural management as the development of MNCs. Moreover, cultural conflict in the MNCs derives from the different cultures interacting in different surroundings. It is mainly reflected on the aspects of communication, customs, law, policy and employees’ reward and punishment.

Communication is an essential factor in international business management. (Deresky, 2008a) It can be suggested that communication affects whether or not it is successful to negotiate with clients or to cooperate amongst employees. The meaning of words can be distorted when two people from different countries communicate using a common foreign language. Some mistakes are difficult to avoid because the same words have different meanings in another country. For instance, the Bran Buds cereal means burned farmer in Sweden, which causes Kellogg to assign a new name for it. (Wild, Wild, Han, 2008a) In addition to language, nonverbal communication is also affected by different cultures. Not every motion has the same significance in different countries. For instance, most Europeans express their satisfactions or praises by thumbs up, whereas it means an impolite gesture in Greece. (Hill, 2001)

It can be suggested that it is important to be acquainted with the local custom before a MNC develops the target market in one area. Local custom is closely related with development of MNCs. For instance, the Indians do not normally eat beef. However, McDonalds had made a mistake in using oil with a beef extract for frying. The severe damage to its brand was averted by McDonald’s rapid dealing with the issue. (Phatak, Bhagat, Kashlak, 2005b) Furthermore, according to Wild, Wild and Han (2008b) climate also has a far-reaching effect on...
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