Culture and International Business
As global competition is getting tougher, more and more companies are being “forced” to engage in international business if they are to survive. Companies depend on a variety of factors, such as a high level of administrative competence from their managers in order to achieve success. One factor that is frequently being referred to as a critical success factor is cross-cultural literacy. This means that there is an increasingly need for business people to understand how cultural differences across and within nations can influence the way business is practiced.
On the other hand, many may argue that, because of the Globalization Phenomena, differences between nations are getting smaller or even disappearing because of the raise of a global culture. Supporters of this idea probably share the same view as Levitt (1983) who claimed that “effective global strategy is all about product standardization”. He also believed that a unified world marketplace would be created and that localizing the marketing mix would be unnecessary. Consequently, if Levitt were right, this would probably suggest that cultural differences would not really have any consequences for international business and management anymore.
It is possible to agree with Levitt to some extent about product standardization when it comes to markets for industrial goods and materials that serve a universal need the world over. However, this does not mean that because a firm has adopted standardization strategy, people working in the different subsidiaries share the same social culture, norms and practices. That is true even in firms that have a strong corporate culture. Hofstede proves this in his famous research about cultural differences with IBM employees in several different nations.
To illustrate how culture still matters, I will be discussing some challenges managers meet in international business because of lack of
References: Book: Hill, Charles W.L.. 2011. International business: Competing in the Global Marketplace. 8th ed. McGraw-Hill/Irwin Articles: Javidan, Dorfman, de Luque and House. In the Eye of the Beholder: Cross Cultural Lessons in Leadership from Project GLOBE. 2011. Tony Fang, Camilla Fridh, Sara Schultzberg. 2004. Why did the Telia–Telenor merger fail? http://www.tonyfang.se/images/tf-images/journals/FangEtAl(2004)WhydidtheTelia-Telenormergerfail.pdf Tor Grenness. The Impact of National Culture on CEO Compensations and Salary Gaps Between CEOs and Manufacturing Workers. 2011.