Question:
Disucss about the Changing Business Environment.
International trade has become an essential component of any business organization that wants to a substantial growth in the age of globalization. It can simply explain “as the increase of rate and expansion of the interdependence of economic and business activities across national boundaries” (Wood & Wilberger, 2015). Whereas, International Business can be expire as the business activities and transactions of resources, products, services, skills and knowledge without affected by physical boundaries. For the customers, globalization or internationalization of business means, more product options to choose from with varied quality and pricing as well as an increasing hazy identity and source of the products or service. With the expansion of international business, it increased the dependency of economic and business behavior across physical boundaries. International business organizations gain competitive advantage, as well the reason for, the rising interdependence among economies and forming one global economy.
One of the common limitations against International Trade and globalization is it deprives countries of their autonomy and sovereignty. In this essay, the author is analyzing the impact of cultural difference have when a business organization considers penetrating a new international market. Based on the analysis the study tries to explain the cultural factors, which act as a barrier for new business expansions on foreign markets.
Culture as a barrier in international business ventures:
In the age of technologically innovated world environment, the business environment is changing in a successive manner, and the effect cannot ignore. Therefore, to recognize and manipulate consumers’ want and desires, international business organizations should be aware of the different cultures. “The term culture can briefly explain as the collective programming of the mind which distinguishes the members of one group or category of people from another” (Moran et al., 2014). The business organizations, operating in more than one culturally different market often face problems regarding attitude, beliefs, and values of the society or communities. As a result, the international business organizations should learn the strategic rules of the game and make an implementation to mimic the societal values and beliefs to gain the confidence and acceptance by showing respect to the concerned society or nation. Any other way, the business organization will face challenges and subsequent financial loss.
Each society and communities have own set of cultural values and beliefs. These fundamentals of culture are established along linguistic (verbal and nonverbal), belief, principles and attitude, behavior and traditions and knowledge. Adoption of the mentioned attributes depends on the level of market penetration by the business organization. The most important factor is cultural analysis, which assists the markets to plan strategically for market penetration.
For instance, China is a nation state with enormous trade opportunities for foreign business organizations, but performing trade in China has a significant cultural challenge. A vibrant cultural melting pot attracts many individuals to experience the heart of its energetic environment.
The factors that are important for foreign expansion by business organizations are, on the magnitude of the domestic market, the production facility and ability, and the availability of resources on the foreign market. The motive here is business organizations can position on an internationalization level ranging from the domestic market to globalization.
Thus, business functions commonly improve when individuals from different cultural background identify new approach to general problems, creating solutions by involving cultural aspects and skills to view issues from different angles. Often the problem of “Ethnocentrism” occurs, i.e. when an individual feels culturally superior to others. The situation creates chaos and misunderstanding within the organization.
Linguistic Barrier and communication:
According to scholars, language becomes one of the major barriers when it comes to negotiating among the foreign trade partners and customers. Though is not possible to be multi-linguistic in all the time, but studies show that there is a strategic market plan to succeed in communication in the linguistic diverse market. “When interacting with group from different cultures, communicating in a neutral pitch and making a alert attempt to be considerate of others’ input, even if it is given in an approach to which many business organizations are not habituated, but is can help promote effective business communication” (Ferraro & Brody, 2015 ). International Business Communication is build up when the management understands the areas of commonality. The problem arises when an international business hires talents from different background and country, the diverse workforce fails to communicate and understand others. A language failure among cultures usually comes as 1) inappropriate translations; 2) cultural diversity between speakers of the similar language.
Environment and Technology:
The world economy is expanding in the age of innovative technology, which helps business organizations to conduct business overseas. However, business organizations may face some adversities in conducting overseas business. Technology helps business organizations easily connect with the stakeholders and distributors easily, but few rules and protocols should maintain. For instance, Spanish business organizations have longer lunch breaks than British or Americans have, so it is favorable to connect any Spanish businessperson during lunch hours. Also, if a business organization plans to launch technologically improved gadgets or appliances where people are less used to or not accustomed with updated technology and culturally more traditional; the product will not gain popularity in the particular market.
Target Audience:
When a business organization, plans to expand in the foreign market for the new business opportunity, it is advisable to conduct a proper analysis of the target audience in the selected market. The factors like, gender preferences, beliefs and attitude, ideologies, traditions and level of conservatism changes and vary in large amount from society to society and country to country. Therefore, if a particular product, service, or promoting a campaign hurts sentiments of a community or the target audience can create difficulty for the brand image of the product or service. “Being conscious of cultural norms can also help your company narrow down the target audience” (Pieterse, 2015). For instance, McDonalds’ has launched vegetable products in India like McAloo, VegPizzaMcPuff, McAloo Wrap with Chipotle Sauce, MCVeggiee, McSpicy Paneer, etc. primarily targeting the larger vegetarian customers residing in India. Thus, McDonalds’ penetrated the large customer base in India and gained popularity especially among the younger generation and urban areas modifying their product according to local customs and beliefs.
Customs:
A business organization, which functions in different diversely cultured countries, it is important to maintain all the cultural norms and ethics to avoid any chaos or misunderstanding in business process, which includes the fundamental traditions, mannerisms, and gestures of a cultural group. A business practice in one country may represent unethical or absurd in another. For instance, conducting informal business meetings in Australia is quite natural and often conducted in large corporate organizations, whereas in the USA business, meetings are always formal and taken attendees should be formally dressed and formal in conversations. Therefore, an American businessperson may find it shocking when interacting with Australian counterparts for the first time.
Concept of power:
Different societies have different viewpoint towards power and authority, which affects the interaction in the business situation notably since it forms the outlook of how communication will received, based on the relative position of the communicator the recipient. To be precise, conceptions of power manipulate the forms that decision-making and other business communications occur in a business organization. “In functioning with cultures in countries like Israel and Sweden, which have a comparatively decentralized power idea, one may expect better recognition of a ‘participative communication management model’ than in business cultures such as France and Belgium where participative management models are less utilized and relying as an alternative on authority-based decision making”(Moran et al., 2014).
Cultural Influence on Customer’s Behavior:
Figure: Cultural Influence on Customer’s Behavior Source: Created by Author.
In the above figure, the author has presented the cultural influence on Customer’s Buying behavior in a typical country. Culture in each society considered by three elements: cultural forces, cultural communication, and customer decision practice. The national identity, Educational knowledge and family background visibly influence cultural factors. Ethics and principles, behavior and roles and plan manipulate cultural messages. Culture also influenced from universal requirements and desires of the society and consumer trends. The culture differs by the change in nations. The international business organization should analyze and manage the cultural diversity and connect the stress to bring harmony in the process of business. Combination and synthesis of the cultural diversity the international business organization can incorporate diverse cultural perspectives and look for vibrant results the upcoming challenges.
Strategically decisions to manage cultural diversity in international business:
Despite many limitations and adversities, Globalization of business can bring sustainable growth to any business organization if the cultural diversities managed carefully. Abilities and skills in successfully manage cultural diversity are a necessary among business leaders in the age of globalization. Cultivating cultural difference in a business organization is the crucial step towards the sustainable business development. Managing diversity is a skill and ability, which takes long practice by a leader to excel in it. The initial is by understanding and knowing the cultural pattern of the domestic market. By accepting how individual and social values shape attitudes, perception and behavior, it is easier to expand to manage differences. The motive is not to evaluate but through dialogue and communication to generate better options for wider societal benefits. The suggested steps to manage diversity in new market expansion are:
Conclusion:
Disregarding diversity issues include revenue, time, capital, and incompetence. Successful managing of the cross-cultural edge is a vital source of a business organization’s competitive advantage. Management and leaders should develop not only empathy and patience toward cultural diversity but also obtain an adequate amount of accurate information about the beliefs and values of selected market. In the above study, the author has studied why business organizations face cultural differences when expanding globally and the different aspects and factors that can come up as a challenge in the process of internationalization. It is vital to recognize how the cultural diversity influences performance, enthusiasm, achievement, and communications with others. As internationalization of business organizations is quickly reshaping, so it is important for business leaders to manage the diversity and differences to bring effective performance.
Reference:
Hirst, P., Thompson, G., & Bromley, S. (2015). Globalization in question. John Wiley & Sons.
Beck, U. (2015). What is globalization. John Wiley & Sons.
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Pieterse, J. N. (2015). Globalization and culture: Global mélange. Rowman & Littlefield.
Shao, K., & Maher, P. (2013). Pedagogy Through IT Globalization: The Effects of Changing Business Dynamics on Academia. Global Learn. Retrieved in March, 915-921.
Yeung, H., & Olds, K. (Eds.). (2016). The globalisation of Chinese business firms. Springer.
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Cavusgil, S. T., Knight, G., Riesenberger, J. R., Rammal, H. G., & Rose, E. L. (2014). International business. Pearson Australia.
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Moran, R. T., Abramson, N. R., & Moran, S. V. (2014). Managing cultural differences. Routledge.
Forsgren, M., & Johanson, J. (2014). Managing networks in international business. Routledge.
Peterson, M. F., Arregle, J. L., & Martin, X. (2012). Multilevel models in international business research. Journal of International Business Studies,43(5), 451-457.
Ferraro, G., & Brody, E. K. (2015). Cultural Dimension of Global Business. Routledge.
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