Doing Business with Multinational Organizations

Topics: Globalization, International trade, World Trade Organization Pages: 15 (4546 words) Published: March 20, 2013
INTRODUCTION Owing to the fast evolution of information and technology organization are operating in an environment where the geographical boundaries are none existent and a company with a subsidiary in another continent operates as if they are in the same city. This paper seeks to identify how this has affected way of doing business by multinational organization by looking and four aspects, which are cultural differences, ethical issues, strategy and industrial or business.


1. CULTURAL DIFFERENCES Culture plays a very important aspect in various aspects of business especially for multinational corporations (MNC) operation on a global level. Cultural variations affect the way a firm conducts its business in different geographical regions and around different cultural settings so that they widen their market base, increase revenue and reduce conflicts resulting from cultural differences(Deresky,2008). Managers of MNCs have to understand what implications cultures have on various business transactions. The main areas where cultural factors affect multinational corporations are: 1.1. Influence on Strategy that will be used A multinational company must research on the cultural aspects of a new market they would like to venture in. They have to understand the likes and dislikes, preferences, what is considered right or wrong, what is valued, what is the common belief in the area they are going to operate in. An example is in Saudi Arabia where religion dictates what happens in normal business transactions and daily activities for instance for Muslims who pray five times a day, departmental stores and other businesses created room to allow the Muslim customers and employees to pray moreover during the month of Ramadan, most businesses are closed during the day as the Muslims are fasting and are less active during the day and opt to open in the evenings when people are more active. 1.2. Communication Language and non-verbal communication are cultural cues that affect passing of messages from one party to another. Communication between parties that come 2

from different cultures becomes more challenging because of the differences elements of culture and what they value in communication. Different cultures have different communication styles (Gallois and Callan ,1997). These communications styles are: 1.2.1. Explicit Vs Implicit Communication

Explicit communications is where someone when someone talks it is straight to the point and unambiguous for example Americans. Implicit communication is usually indirect and inexact for example Indonesian communication. For instance a mother telling a man that he is not compatible with her daughter serves him with tea and bananas instead of telling him directly (Gallois and Callan ,1997). 1.2.2. Direct Vs Indirect Communication

Direct communication states direct action for example ‘has this report done before you go home’. When someone hears direct speech they know what is to be done. Greek employees prefer this kind of communication as they prefer orders as compared to their contribution in management decisions. Indirect communication is not authoritative and encourages input from the listener. American managers prefer this kind of communication as it goes with their managerial style of participatory management. 1.2.3. Silence Vs Verbal exaggeration

Silence is also seen as a way of communication but different cultures perceive silence in different contexts. The Japanese use silence during negotiations as a strategy to control the negotiation process however if their counterparts are 3

Americans, they would see this silence as lack of knowledge or an indication to move to the next point. On the other hand some cultures dramatization and over emphasize to express the gravity of the matter. This has been observed in the Arab states where common words are used at the end of sentences and pronouns will be repeated for emphasis also used are graphical similes and metaphors....
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