International Business Environment in Terms of Globalisation - Essay Example

?International Business Environment Introduction Globalisation brought forth cross border trade liberalisation, which in turn intensified the rate ofstrategic business alliances between organisations from different countries. Globalisation and associated changes resulted in the emergence of another concept called economic globalisation, which refers to high level of economic interdependence among national economies. The process of globalisation enhanced the cross border movement of items such as capital, labour, culture, and ideas (Bhandari & Heshmati 2005). In total, globalisation and related pressures greatly added to the development of a global economy. Although the ideas of cross border trade and global economy significantly promoted trade and national economic growth, they cause a number of cultural issues across the globe. Globalisation also made labour globally mobile, because the new environment greatly assisted nations to do business jointly with overseas countries and hire skilled foreign workers (Jaumotte & Tytell, n.d.). It is obvious that cultural aspects and consumer behaviour vary from country to country and hence organisations face numerous cultural barriers while operating in a foreign country. Studies show that cultural aspects can have a great influence on an individual’s physical and psychological levels of personality, which plays a notable role in developing an organisation’s worksite culture. As Siadat et al (2012) argue, cultural integrity is necessary for an organisation to improve its productivity because a culturally diverse worksite would not promote worksite coordination. In addition, the issue of general acceptability of other cultures may come into play in a culturally diverse worksite. Under such circumstances, there will be conflict among workers and it will adversely affect the efficiency of the worksite environment as a whole. Under a culturally diverse worksite, employees may react differently to different events and therefore it would be difficult for the management to frame a common operational policy for such a workplace. Likewise, consumer behaviour is greatly related to culture; therefore, an international company cannot effectively influence consumer behaviour if it practices same marketing and business strategies in all countries (Univrsity of Minho 2004). In other words, an organisation would not succeed in a foreign country unless the organisation accurately understands the country’s cultural and social norms. In short, cultural multiplicity is turning out to be a growth impediment to multinational organisations as they are forced to spend more on cultural diversity management. Each organisation has a unique culture and this element is of considerable importance in determining the organisation’s market position. Lowe (2012) points out that the concept of organisational culture is of a great value as it directly impacts an organisation’s unity, loyalty, competition, direction, and identity. While evaluating the impact of culture on western countries and china, it seems that both these regions have totally different views on culture. In case of western countries, they have a more socially developed or liberalised culture whereas China still follows traditional cultural views and norms in terms of business structure and operations. Therefore, impact of culture is more evident in China as compared to western countries. To illustrate, the Chinese culture has notable impact on product design, supply chain activities, and marketing campaigns. This paper will discuss various cultural difficulties likely to be encountered when a multinational company from a western economy contemplates a joint venture with a foreign partner in China. Importance of national cultures The Western society, especially Europe and the US, is an agglomeration of different cultures mainly because these countries constitute the ultimate destination for job migrants. Hence, a unique culture is not visible in the Western world. Cultures of the majority of the Western counties have been evolved from Christianity based views and beliefs (Stansberry 2008). As a result, an element of Christian ideology is visible throughout the Western culture history. Western culture is widely considered as an advanced culture since its values and ides enhance the growth and sustainability of advanced civilisation. Technology and innovation are of greater significance in the Western culture because these two elements notably improve people’s living standards. In addition, the Western countries pay particular attention to environmental safety and cleanliness. Therefore, they will never allow people, organisations, or communities to engage in activities that would hurt the balance of environment. Since Western countries give less importance to national culture, currently the Western culture does not exist in its perfect and complete form. Over the last two decades, the Western culture has been largely mixed with the non Western cultures. In other words, the Western culture gives particular focus on ‘objective reality and universal human nature’ and it is open to all despite geographic and racial barriers (Reisman 1992). Although the national culture is less important to Western countries, they still emphasise the ‘open to all’ aspect. In contrast to Western countries, China gives greater importance to cultural aspects. While thoroughly analysing the Chinese business operations and government activities in terms of culture, it is evident that events like Cultural Revolution could not reduce the importance of culture in China. From a business perspective, importance of culture in China noticeably varies in accordance with whether the western marketer is buying or selling in China (Harrison and Hedley 2012). It is observed that China makes it necessary for foreign marketers to strictly follow Chinese culture whereas this norm is not applicable to individuals or companies that import from China. For instance, companies like Starbucks and Dell, that entered the Chinese market without a proper cultural understanding, lost huge amounts of money in the initial stages. Chinese people are very gracious to foreigners especially if they are willing to spend money there. As Bradsher (2010) points out, even though the Chinese government encourages foreign investors, the country imposes a number of operational restrictions to foreigners in order to preserve the nation’s traditional values and beliefs. Unlike many other emerging countries, China will never compromise its cultural values to achieve financial benefits. As Qian (2012) reports, importance of culture is increasing in China every day as the Chinese government and business firms believe that such a policy would intensify the nation’s economic growth. China tries to make its people aware of the country’s cultural uniqueness from primary classes. While closely evaluating the nation’s social transformation from tradition to modernity, it seems that the country has given particular focus to cultural uniqueness throughout this change process. Cultural differences While compared to Western countries, the Chinese culture is more complex and unique. In the 2008 Beijing Olympics opening ceremony, China showed its complex culture and cultural traditions before the world. While analyzing Western counties in terms of business practices, it is identified that their costs are comparatively higher and not negotiable. In contrast, Chinese business firms offer relatively lower costs that are more appealing to customers (What, 2008). The concept of individualism is the base of Western culture (Basu 2011). For instance, in the United States, people and other interest groups particularly focus on individual rights instead of allowing the whole society to exercise power over individuals; in contrast, Chinese culture is based on collectivism and individuals are placed under the society or family (ibid). The Western culture is adventurous and innovation based. Westerners always like to develop new ideas, explore new techniques, and expand outwards. For instance, adventurous activities like bungee jumping are very common in Western culture whereas it is difficult to find someone doing such an activity in China. While the Western culture tries to resolve nature’s relationship by connecting all phenomena to science, the Chinese culture fuses human and heaven as one so as to define the relationship between men and nature (China history forum 2005). Similarly, Westerners apply law to judge people and people’s relationship. Since Chinese culture pays specific attention to humanism and people, it does not maintain well established laws. For nearly 2000 years, the Chinese tradition followed human relationship rather than law (ibid). Therefore, the Chinese culture applies ethics and tolerance to judge people and people’s relationship. When the Western society widely depends upon god and religion to deal with human and spiritualism relationship, the Chinese culture uses internal cultivation. In addition, the Chinese society teaches its people to pay special homage to earth and heaven while keeping a strong devotion to the homeland (Chinese cultural studies 1995). Whereas the Western culture attempts to develop outwards, the Chinese culture focuses on the internal expansion of its culture. Notably, the Chinese culture has some disadvantages while evaluating it from a business view point. Firstly, debase women and chauvinism are the major weaknesses of the Chinese culture as these issues hinder the scope of foreign marketers (The invisibles, n. d.). Secondly, the Chinese culture lacks pragmatism or it gives overemphasis to past history instead of focusing on present. Organizational culture in joint venture A firm’s organisational culture will notably change once it jointly operates with another company. It is clear that every firm maintain distinctive corporate governance practices on organisational affairs such as power structures, management styles, control systems, and investment risk attitudes. Hence, when two individual firms enter a joint venture plan, they cannot continue their existing corporate governance practices or organisational culture as both firms need to consider each other’s interests. Scholars point out that parties involved in a joint venture necessarily need to share their assets and ownership, gather skills and knowledge together, integrate employees, and share management cultures. As stated, “a joint venture is the coming together of two (or more) independent businesses for the sole purpose of achieving a specific outcome that would not have been achievable by any one of the firms alone” (Wallace 2004, p.7). Unlike an individual business, a joint venture business plan involves factors like cultural multiplicity and knowledge transfer. According to the Trompenaars’ theory, organisational cultures can be linked to seven cultural dimensions, which he developed jointly with Charles Hampden-Turner (Lee and Lee 2003, p.1986). One of the central aspects of Trompenaars theory is that people organise themselves in way their problem-solving efficiency is improved (ibid). Referring to the Trompenaars theory, various combinations of the seven stated cultural dimensions constitute the differences in organisational culture in joint ventures. According to Pothukuchi et al, if the parties to a joint venture differ in their practices, such a situation may lead to conflicting behaviours and thereby misunderstandings and interaction problems. Hence, it can be stated that an integration of individualism and collectivism might be the major feature of a joint venture between a Western economy and China. A reshaped worksite environment would be the most noticeable difference in organisational culture in case of a joint venture plan. Under a joint venture setting, employees may not be allowed to speak their local language as this situation would limit the scope of workforce coordination. Hence, a globally accepted language (probably English) may be recommended if a Western economy jointly operates with China under a joint venture deal. As Pothukuchi et al point out, a joint venture between two culturally different organisations would lead to the formation of an organisational culture characterized with diverse psychological environments; and this situation may cause differences in practices which in turn would negatively affect the organisation’s overall performance. Referring to the authors’ views, while considering a joint venture between a Western economy and China, the degree of cultural fit is more likely to affect the success of the planned venture. Impacts of national differences on JV success and fail Relative to differences in organisational cultures, national differences are more likely to affect the planned joint venture between a Western economy and China. A study by Ghemawat and Reiche (n. d.) point out that while organisations from the same country may differ only in their organisational practices, organisations from culturally different nations may differ in their basic values too. Researchers also point out that strategic alliances between organisations from culturally similar countries are more likely to achieve desired goals than those between culturally dissimilar organisations (ibid). These study results directly indicate that national differences can have a great influence on the success or failure of a JV. Hofstede’s cultural dimensions theory reflects how a society’s culture may affect its members’ values and how these values and behaviour are related using a framework based on factor analysis (Omran 2007, p.81). Hence, this theory can be best applied to analyse how differences in national culture influence the performance of a joint venture between a Western economy and China. As we discussed earlier, Western culture is based on individualism whereas the Chinese culture is based on collectivism. These two concepts are contrary to each other and hence it would be very difficult to set an effectively integrated culture of individualism-collectivism. Evidences indicate that a JV between culturally dissimilar partners is likely to cause serious communication issues. Primarily, communication issues significantly affect operational efficiency of a JV. Referring to the ideas put forward by Silverthorne (2005), as a result of communication barriers, two types of ideological conflicts occur in joint ventures between Western and Chinese firms. First, Western managers generally consider their Chinese counterparts’ silence as an indication of consent and hence Westerners often fail to realize actual feelings of their Chinese colleagues; and secondly, Chinese managers misinterpret their Western colleagues’ direct adversarial arguments as an indication of intolerance and disrespect (ibid). Evidently, such situations cause many misunderstandings which in turn affect the smooth flow of the joint business. In addition to communication, other issues like ineffective conflict resolution, cooperation, commitment, and coordination arising as a result of JV partners’ cultural differences may hinder the interaction efficiency and overall performance of the business. National differences influence a firm’s values and organisational behaviour to a great extent. In the view of Pothukuchi et al, “values and behavioural differences between culturally distant partners influence interpretation and response to strategic and managerial issues, compounding transactional difficulties in international joint ventures” (as cited in Svishchev 2005). Increased influence of national cultures on behaviour and other management systems is most likely to cause unresolved conflicts. This issue is worsened when an individualistic organisation operates a joint venture with a collectivist organisation. Pothukuchi et al (2005) clearly say that individualist and collectivist cultures may have varied cooperation generating mechanisms mainly because of dissimilarities ‘in their instrumental and expressive motives’. In addition, commitment generating mechanisms may also vary between two dissimilar cultures. Hence, such issues will certainly affect a Western economy-China JV as these countries have entirely different cultural views and beliefs of their own. Recommendations The works of Hofstede and Trompenaars depict various cultural dimensions in an international business context. Their theories are greatly helpful to understand how cultural differences may affect people’s behaviour or worksite environment. Hence, their models would be helpful to ensure the success of a JV between culturally distant partners. According to Steers et al (2010), while two culturally dissimilar organisations operate a joint venture, the management should not make instant judgements or assumptions about working style or worksite practices of people from different cultures. In case of a Western-Chinese joint venture, Western and Chinese official must do some research on each other’s culture so as to get a cultural understating of their colleagues. Also, leaders have to assess how their leadership might be perceived by team members with different cultural values and beliefs (Laughton & Ottewill 2003). Such an assessment is necessary for leaders working under a cross cultural environment to effectively influence their followers. For successfully managing such a cross cultural joint venture, leaders must possess adequate leadership communication skills and other capabilities necessary for addressing the needs of a culturally diverse worksite environment. While operating international business settings, it is often misinterpreted that all worksite issues are the result of cultural differences. In fact, personal, technical, or commercial issues also may lead to worksite conflicts or other organisational problems. Hence, it is advisable for top executives to develop proper mechanisms to identify the root causes of worksite issues and other errors. As discussed earlier, the Western-Chinese JV involves the mixing of individualism and collectivism; and hence it is a difficult task too. Therefore, the management should appoint efficient and experienced whistleblowers to identify various cultural conflicts developing in the organisation. Another important point is that managers should not give any undue consideration to the workers on the ground of their culture or nationality (Chasen, n. d.). In addition, workers should not be allowed to speak their local language in the workplace (if possible) because use of local languages may often result in the formation of an unhealthy worksite environment. A work rotation policy would be an effective way to provide workers with an opportunity to know more about the culture of each other. This strategy may also build up interpersonal relationships between employees. People from the same culture or nationality should not be allowed to work together for a long time as such condition may lead to issues like groupism or extremism, which will certainly affect the JV performance. While forming the proposed Western-Chinese joint venture, specific focus must be given to the native country’s socio-cultural aspects. The management must get a clear view of the native country’s cultural values before setting its product, price, place, and promotion strategies. In short, the JV should adopt all practices possible to make the business appealing to the native consumers. Conclusion From the above discussion, it is clear that if a company from a Western economy plans to operate a joint venture with a Chinese partner, the firm must be ready to address a series of cultural issues. Culture is of significant importance in international business since culture directly affects consumer behaviour and workplace management. Globalisation increased cultural diversity in the workplace and therefore organisations are losing huge amounts money for the management of cultural multiplicity in the worksite. In terms of business structure and operations, the element of culture has great significance to China relative to Western countries. The Western culture is based on individualism whereas the Chinese culture focuses on collectivism. According to Hofstede and Trompenaars theory, different cultural dimension affect people’s behaviour to a great extent and this in turn plays a notable role in developing organisational culture in international settings. As compared to differences in organisational cultures, national cultural differences highly influence a joint venture. It is identified that a joint venture between culturally similar partners may perform better than JV between culturally distant partners. However, a leader with proper communication skills and other leadership capabilities can eliminate those cultural barriers to large extent. References Bhandari, A. K and Heshmati, A., 2005. 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