Impact of Cultural Differences on Corporate Strategies of Multinational Firms

Topics: Culture, Cross-cultural communication, Geert Hofstede Pages: 13 (3826 words) Published: April 11, 2013


Culture is extremely powerful. The rules of the game, what behavior is ethical and accepted, the mood of the organization, and the enthusiasm of employees are all contained in the culture. So, culture can be a powerful, hidden asset or it can be a liability - a time bomb waiting to go off. If your leadership team has not pro-actively created a corporate culture to support the company's purpose, then chances are that the culture is a hidden liability. Every business has its own character which is unique and called corporate identity. It has one major part, corporate culture, often described as the “personality of an organization”. In that case multinational firms play a major role in this, as knowing how to communicate through their point of view is a great advantage. To answer the relevant question it is essential to understand what the corporate culture is especially its meanings to a multinational firm. This essay will examine it by explaining the cultural dimensions of G. Hofstede in general and in respect of global business. The corporate culture is also called organizational culture. It includes the mission statement, which makes clear the purposes, values and direction of the organization, as well as the beliefs and expectations. Culture shows up in both visible and invisible ways. Some manifestations of this energy field called "culture" are easy to observe. You can see the dress code, work environment, perks, and titles in a company. This is the surface layer of culture. These are only some of the visible manifestations of a culture.

Importance of Cultural difference of multinational firms:

“Culture is the different ways in which people behave, act, or think towards themselves, families, and other people in the society. It includes customs connected with social, political, family, and religious values. Different cultures have deviating values for time and its use, for personal space, and for family values and chats. These differences must be identified and recognized to bridge the gaps between cultures and for real communication to take place”.

These definitions overlook the importance of cultural objects which have a symbolic value in creating collective memory for a nation or a civilization. The importance of culture of multinational firms when they do there business activities of international business they must be to a practices cultural variation of different countries or different nation. As a multinational firms is the more important thing to understanding cultural difference when they offering a new product in international business field. The corporate culture is notably more important to multinational firms than for domestic companies. This is the reason why a multinational firm can not copy the Corporate Culture very easily. To have a good knowledge about cultural difference is very important at the time of acquisition, merger, or FDI in a foreign country. The corporate culture of multinational firms is shaped by numerous factors. One of the determinant factors is the national culture of the leader and the employees of this enterprise or subsidiary.

Cultural differences are dynamic and context-dependent. Consistent with this perspective, cultural differences in indirectness vary depending on the contextual cues that make different relational styles more or less accessible. Within the context of work, American managers activate a particular relational schema that diverges from their East Asian counterparts.

The hypothesis that international diversification and firm performance should be positively related has been tested in numerous ways such as tracking company performance longitudinally as global expansion occurs, comparing the performance of two or more groups of firms differing in their international involvement, and examining the regression effects of foreign involvement on firm performance. Unfortunately, research findings have been contradictory,...
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