Understanding of culture is vital to succeed in international business

II anyone was asked to describe me my own culture, what would I say? Describing one`s culture
in Iact is not an easy task. It is a bit like asking a Iish in water, what it is like to swim in the
water. Washed up on the beach, the Iish quickly recognizes the diIIerences, but may not be able
to describe it. Its immediate objective is to get back into the water. Culture serves as a lens
through which we perceive the other. Like the water surrounding the Iish, culture distorts how
we see the world and how the world sees us. ThereIore, understanding the diIIerences in culture
is the Iirst step to succeeding in international business encounters.

Working outside oI one's own home country is not as easy as it sounds. This means struggling
with a new language, a diIIerent culture and more importantly understanding diverse values in
the workplace. An expatriate should be very careIul in the application oI practices and methods
that were successIul in his/her country; they might not work in the host country. Operations can
and oIten do meet with Iailure when applied to another environment iI the local customs and
values are not considered.


Importance of culture in international business:

How well one prepared to conduct business in cultures other than one`s own? Is he/she Iamiliar
with the cultural Iactors that play a Iundamental role in international business transactions? One
needs to appreciate that diIIerent cultures require diIIerent behavior patterns by exporters.
Factors like products, strategies and technologies which are appropriate in one culture might be
dismal Iailures in another one. One oI the primary challenges oIIered by international business is
the ability to operate eIIectively in Ioreign cultural settings. The challenge Ior business managers
is to transcend blinders imposed by home cultures, a somewhat diIIicult but essential task iI
operations in Ioreign cultures are to succeed.


BeIore entering a new market, it is important to understand how culture can aIIect our research.
For instance, in Muslim countries, social norms require people to insist that they would not drink
alcoholic beverages. In actuality, alcoholic beverages are popular in some areas oI Muslim
countries.

Levels at which culture can affect business transaction:

Buying behavior:
This has to do with the perceptions people oI a culture hold regarding imported products, the
value oI brand equity in a society, the existence and strength oI brand loyalty, and the impact oI
social norms on buying behavior.
Consumption characteristics:
Issues in consumption include the product versus service consumption in the culture, social class
and reIerence group inIluences, and urban versus rural sector consumption patterns. An example
oI this would be Iood consumption in Brazil. In the urban areas, Brazilians are beginning to eat
on the run, Iavoring snacks and quick meals. In the rural areas, however, the traditional large, sit-
down meal is still predominant.
Disposal:
Resale, recycling, and remanuIacturing considerations constitute the disposal level. In addition,
some cultures are strongly inIluenced by social responsibility and environmental implications oI
product disposal.


What are the implications of cultural differences in international business?

International business is diIIerent Irom national business because countries and societies are
diIIerent. Societies diIIer because their cultures vary. Their cultures vary because oI proIound
diIIerences in social structure, religion, language, education, economic philosophy, and political
philosophy. Two important implications Ior international business Ilow Irom these diIIerences.
The Iirst is the need to develop cross-cultural literacy. There is a need to appreciate not only that
cultural diIIerences exist but also to appreciate what such diIIerences mean Ior international
business. A second implication Ior international business centers on the connection between
culture and national competitive advantage.

Cross-Cultural Literacy:
One oI the biggest dangers conIronting a company that goes abroad Ior the Iirst time is the
danger oI being ill inIormed. International businesses that are ill-inIormed about the practices oI
another culture are likely to Iail. Doing business in diIIerent cultures requires adaptation to
conIorm to the value systems and norms oI that culture. Adaptation can embrace all aspects oI an
international Iirm`s operations in a Ioreign country. The way in which deals are negotiated, the
appropriate incentive pay systems Ior salespeople, the structure oI the organization, the name oI
a product, the tenor oI relations between management and labor, the manner in which the product
is promoted, and so on, are all sensitive to cultural diIIerences. What works in one culture might
not work in another culture.
To combat the dangers oI being ill-inIormed, international businesses should consider employing
local citizens to help them do business in a particular culture. They must also ensure that home -
country executives are cosmopolitan enough to understand how diIIerences in culture aIIect the
practice oI international business. TransIerring executives overseas at regular intervals to expose
them to diIIerent cultures will help build a cadre oI cosmopolitan executives.

Culture and competitive Advantage:
The value systems and norms oI a country inIluence the costs oI doing business in that country.
The costs oI doing business in a country inIluence the ability oI Iirms to establish a competitive
advantage in the global marketplace. It can be argued that the class-based conIlict between
workers and management Iound in British society, when it leads to industrial disruptions, raises
the costs I doing business in that culture. Similarly, the ascetic 'other worldly ethics oI
Hinduism may not be as supportive oI capitalism as the ethics embedded in Protestantism and
ConIucianism. Also, Islamic laws banning interest payments may raise the costs oI doing
business by constraining a country`s banking system.
For the international business, the connection between culture and competitive advantage is
important Ior two reasons. First, the connection suggests which countries are likely to produce
the most viable competitors. Second, this connection has important implications Ior the choice oI
countries in which to locate production Iacilities and do business.


Conclusion:
As a global company, Wal-Mart is expanding its branches all over the world. With extraordinary
adaptability to diIIerent consumer purchase behaviors in Ioreign countries, it has achieved great
success, with $165 billion sales in 2002.
In China, people are used to getting everything in one stop and buying larger quantities. To
match their buying pattern, Wal-Mart's supercenters in China provide a broad array oI
merchandise, Irom Iermented bean curd to Gerber baby products to German Bosch tools made in
China. In this way, some Ioreign Wal-Mart supercenters can ring up 15000 sales on heavy days,
twice as many as a U.S. supercenter.

In order to cope with ever changing needs oI the business, companies should train and update
their managers and business consultants on a regular basis. Personal Ilexibility, excellent
communication skills, and creative thinking are major requirements Ior today's competitive
managers. Many US based multinationals, such as Coco Cola, McDonald's, and IBM derive
signiIicant revenues Irom international operations. ThereIore, the development oI eIIective
marketing strategies that are sensitive to cultural diIIerences across countries is oI considerable
importance Ior success in the global marketplace.










#eferences:

Hath M.J. The Dynamics of Organi:ational Culture. In Academy oI Management
Review,4/2000. pp. 657-693.
Adler N. International dimensions of organi:ational behavior. Belmot, CA: Wadsworth, 1999.
Gancel CH, Rodgers I., Raynaud M. SuccessIul Mergers, Acquisitions and Strategic Alliances.
London: McGraw-Hill, 2002.
Firoz, Nadeem M,Ramin, Taghi , Understanding Cultural Jariables is Critical to Success in
International Business
http://www.allbusiness.com/trends-events/talks-meetings/13482076-1.html#ixzz1bdNBgP4N
Bonvillian, Gary & William A. Nowlin (2001). Cultural Awareness. An Essential Element Of
Doing Business Abroad. (Pg, 44-50).

L Hurley Created on: October 21, 2007 Last Updated: March 08, 2009, The importance of
understanding cultural differences in business, Irom
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ssignment 01
Act 330




Prepared By:
Name: Abdulla Al Amin
ID: 0920138030
Prepared For:

Shushmita Jahangir

Date of Submission: 21/11/2011