Cultural Differences And Business

Nowadays, the term globalization has turned to be a reality. Advancement in the area of information and technology, as well as, liberalization in the investment and trade have increased the speed and ease with which companies are able to manage and carry their global operations (Morling, Kitayama and Miyamoto, 2002). Because of globalization, various companies are now establishing and operating their operations in more than one area and country. The crossing of the limits of geographical boundaries by various companies gave birth to the development of multicultural organization where individuals from different countries are work together (Krishna, Sahay, & Walsham, 2004). It may be consistent that these companies are finding the expansion of their work at a global level to be lucrative and attractive but operating, as well as, managing the business globally is normally very tough and difficult in comparison to the management of a local company. There are various factors by which the global business gets affected like differences in socio, cultural, economic, political, and legal environments. Moreover, the global businesses are also vulnerable to a various number of risks such as currency risks, political risks, cross-cultural risks, etc (Zetik and Stuhlmacher, 2002). This review article will include the factors that will help in overcoming the barriers of cultural differences in the businesses. Moreover, this review article will be focused on the analysis of the article based on the “Managing changes in globalizing business: how to manage cross-cultural business partners,” by Graen et al.

The main aim of the article by Graen et al. was presenting an approach, which can be helpful and beneficial in building the partnerships between two different cultures and nationalities. The approach that was being used in this study for the establishment of partnerships between cross-cultural or cultural-national was the development of third cultures and its use as a foundation for developing effective business partnerships. The utilization of the cross-cultural diversity and effective knowledge can help in providing a source of innovative thinking and experience for enhancing the organization’s competitive position globally. However, cultural differences and diversity may interfere and hinder the successful completion of the goals of the organization in today’s multicultural community of global businesses. Hence, to avoid the origin of these cultural misunderstandings, the managers of the organization should be focused on cultural sensitivity and should promote motivation and creativity through flexible leadership (Van Boven and Thompson, 2003).

As everyone is familiar that people across different cultures and nations have different beliefs and behavior, managing these differences in different cultures involves knowledge and understanding of how events or objects are defined and described in various cultures. Language, behavior, and institutions are the specific phenomena that are different in every nation and culture and are known to be as nominal differences. While, the other type of differences called the systematic differences consists of various fundamental differences existing in the types of values, philosophy, and beliefs of social regulation, which drives the manifested, observed phenomena in a culture or nation. Hence, to manage these cross-cultural or cross-national partnerships in an effective manner, there should be a well understanding, as well as, management of both systematic and nominal differences existing between the partnerships (Graen & Hui, 1996).  

Historically, the intercultural cooperation was used to be attained by dominating the one culture by the other. However, this approach resulted in various dysfunctional outcomes involving resistance by means of violent and nonviolent methods. In the article published by Graen et al., this approach is addressed by the name of “Two cultures.” According to Graen et al., two cultures is when the two partners are not willing to accept the cultures of each other and try to enforce their cultures and beliefs on each other. The management of cross-cultural differences by this type come into force when a corporate body impose its whole system on the partners from cross-cultures and do not pay any or slight regard to their systematic or nominal cultural differences. This approach is based on the short-term focus and leads to the confrontation and competition within the organization partnership. In this case, business partners are focused on a win-lose position, where each partner wants his/her gain in comparison to the other partner. As the two cultures concept was not a reliable method of overcoming the barriers of cultural differences, it failed to achieve the desired outcome of the organizations globally. Hence, a new concept of “Third culture” was established by which a cross-cultural management could be approached (Graen & Hui, 1996).

The third culture is focused on transcending and bridging of the two different cultures. In the process of bridging the existing cultural differences,  the third cultures consist of different ways to convey compromises between the two distinct cultural practices. Moreover, this approach not only focuses on the nominal differences but also recognizes the systematic differences. Hence, through bridging the existing cultural differences, the partners from the different culture find methods to come up with the management programs and techniques, as well as, organizational practices that are acceptable to both the cultures (Graen & Hui, 1996). According to Graen et al., the absence of the third culture can result in the failures very easily in the cross-cultural or cross-national business partnerships, while cultivation and use of a third culture often lead to the success. The evidence for his findings has been supported by a case study of a Japanese company. The Japanese company’s venture in Australia failed due to the failure of developing a cross-cultural partnerships between Australians and Japanese. As they never developed a third culture in their partnership they failed to mature into cross-culture partnerships. However, after few years when they developed a third culture during establishing a new venture in America, it leads to the successful venture. There was a development of a cross-cultural partnerships between the American and Japanese managers, which allowed sharing of “insider” hopes, solutions, and fears. They attained real understanding, knowledge and formed third culture procedures for decision-making. Hence, clearly describing the importance of the third culture in the management of cross-cultural partnerships. Graen et al. described the ways by which a third culture could be established and the requirement of transcultural for establishing the third culture. To become transcultural, the following characteristics are required, which are cultural adventurers, cultural sensitizer, discrepant cultural insider, comparative culture judges, and socializing sensitizers (Graen & Hui, 1996).

There are various researchers who are in support for the concept of third culture, like according to Wendi et al., third culture is the multi-cultural partner’s shared schema, which not only consists of knowledge of team and work, but also contains a shared system of values, beliefs, as well as, norms established in the two different cultures of the partnership members and helps in overcoming the cultural differences existing between the cross-cultural partnerships (L. Adair, H. Tinsley, & S. Taylor, 2006). Useem et al. defined the third culture to be shared and learned behavior patterns of the individuals from distinct cultures who are communicating with each other. A third culture consists of a “shared understanding” consisting of work affliated norms, as well as, worldviews, thus helping to understand the cultural differences (Useem, Useem, & Donoghue, 1963). According to Earley et al., third culture also called as a hybrid culture, is an simplified and emergent set of norms, rules, roles, and anticipation that members of the team share and act, thus offering a common approach to identity, which turns to be specific to a team and helps in facilitating the team interaction (Earley & Mosakowski, 2000). Casmir (1993), states that third culture includes shared systems of values, frameworks, and communication systems, which  evolves when individuals from different culture interacts to share the resources for achieving a common goal (Casmir, 1993). The third culture helps in successful achievement of the task as this approach is and involves information not only about the team knowledge and the task but helps in understanding the cultural values, beliefs, and norms of the two culturally diverse teams (Mannix & Brett, 2002).

The management of cross-cultural diversity is undoubtedly important and greatly impact the success of global business operations. The research has shown that the management of the international business is inseparable from the concept of cultural differences because culture represents the shared norms, beliefs, symbols, and values that direct life of people of different groups (McIntyre and Foti, 2013). Moreover, the use of traditional two cultures is inadequate of solving the cultural diversities in the period of globalization (Demoulin and de Dreu, 2010). Hence, I also believe that the idea and development of the third culture is beneficial in overcoming the barriers faced by the culturally different environment in the organization and agrees with the author’s point of view. As the third culture helps in identification and understanding of the cultures and beliefs of both the partners, it decreases the rise of conflict that can originate from the two different teams having different beliefs and values. Moreover, besides understanding the culture of both the partners it also transcends both the cultures and works for both of them (Earley & Mosakowski, 2000). It is not just a concept based on the compromises, but also a new method of thinking and performing tasks in a way that are compatible to both the sides of the partnership and works effectively in accordance with the company’s technology. Hence, development of the third culture is very beneficial and effective for the success of the international business work organizations and in overcoming the cultural barriers.

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