Is It Necessary for the Employees to Know about the Impact of National Culture on Business - Term Paper Example

? ‘An awareness of the impact of (national) culture on people in work organisations’ is important in today’s world Introduction The notion of national cultural difference remained fairly stable over the last few decades. In this age of globalization and the intense business environment controlling firm specific and industry specific characteristics is one of the critical tasks. Studies have shown that the national culture of a country has a dominant role in determining the managerial practices pertaining to cross border investment. Due to the differences in national culture, a company not only faces complexity in choosing the most pertinent form of entry mode but along with that also faces tremendous amount of difficulties in integrating the foreign personnel into the culture of the organization. Furthermore, to compete in this globalized market, companies with cross border operation, commonly known as the MNCs are required to develop an ability that will help them to manage knowledge. Knowledge is imperative in international business principally because of the fact that it can reduce the managerial anxiety and uncertainty to a great extent. Along with that, new opportunities can also be identified with this approach. Levitt (1983) have stated that the importance of gaining knowledge about the subject of concern in more important if a company is operating in overseas locations. This knowledge can be in any form such as knowledge about the culture of the host country, consumer behaviour or it can be about the external environmental situation. In this project, the national culture of the country will be analysed and its impact on the business will be analysed. Furthermore, the study will also shed light on the significance of awareness of the impact of (national) culture of people in work organizations in today’s world. The next section of the study will discuss about the statement and will encompass different theories and model to authenticate the findings of the study. Lastly, on the basis of that a conclusion will be drawn. Discussion Furthermore, eminent scholars such as Shane (1995) stated that a business gets strongly impacted by the national cultures. Several studies have shown that the management styles, the technology in place are strongly impacted by the national culture of a country. Holden (2001) argues that a company planning to operate in the overseas location should frame a flexible business model that has the ability to change in accordance with the local lawsuits and the situation of the market. Thus, it is evident that standardization versus adaptation approach is extremely vital in the international business process as it drives an MNC’s ability to minimize the cost and respond to the demands of the local market. Bhagat, et al. (2002) in this respect have highlighted that national culture of a country has a strong influence on the decision of standardization versus adaptation for the management of knowledge. A number of research works carried out by Hofstede (1993) have shown that national culture influences the operations of a multinational corporation. For example, the areas which are mostly affected are marketing and communication practices and the human resource policy. In the similar way studies carried out by Bhagat, et al. (2002) have shown that the national culture of a country determines the organization’s activity pertaining to the management of knowledge, research and development activities, transfer of technology as well as the process of training. However, there is another set of authors who believe that the national culture of a country might also impact the knowledge management of an organization and therefore has a direct impact on the functioning of an organization. Takeuchi (2001) deems that with regards to the knowledge management convergence of approaches are evident among the companies. However, contradicting this point several researchers made it evident in their research papers that have not found any evidences pertaining to the differences in the national culture affecting the knowledge management practices of a country. For example, the study by Simonin (1999) regarding the strategic alliance of two companies in different countries hardly found any significant proof that establishes the cultural distance had any kind of negative effect in the process of knowledge and technology transfer. Interestingly, Gupta and Govindarajan (2000) also did not find any evidence that proves or makes it evident that, cultural differences is impacting the business operation of a firm. Hence, the studies make it evident that there is a contradiction among the scholars about the impact of cultural differences in the business operation of a firm. Another, factor that will be analyzed during the course of the study is the statement made by French (2008) where he argues that “an awareness of the impact of (national) culture of people in work organizations is important in today’s world” (p. 8). Therefore the question to be analysed is: considering today’s business scenario, is it necessary for the employees to have awareness about the impact of national culture in business? National culture has always been a difficult and complex construct to define. In this increasingly globalized world, the national culture of a country is increasingly colliding and connecting. As a result of that, finding even and distinctive characteristics of any national culture are becoming harder. The greater access to diversified database and knowledge domains has actually added to the complexity rather than simplifying one’s ability to distil and capture the essence of a nation’s culture. A number of studies have shown that it is not always essential to have in-depth knowledge or awareness about the cross cultural differences. According to these studies, a number of factors need to be taken into consideration before establishing the statement ‘cross cultural awareness is mandatory’. Regarding this aspect, the dependence on the industry and the type of business is extremely important. For example, some industries require greater cultural awareness than the other industries. In the similar way, cultural awareness also requires more of a country with high cultural sensitivity. This is because of the fact that some of the organizational functions specifically require cultural knowledge and some of the employees because of the roles and responsibilities they are assigned to carry out require cross cultural insight than the other individuals. It is obvious that information on the customer preferences, local rules and regulations and organizational talent will give the manager an upper hand when deadline with customers in the host country, however, in some cases, knowledge of culture becomes much more important. For example, companies such as KFC embrace much more knowledge about the cultures of different country because food habits have a strong correlation with culture. On the contrary, a telecommunication business will hardly bother about the culture of the host country. Therefore it can be stated that when it comes to the analysis of the relative importance of cultural awareness in the international business process, the landscape in purely uneven. In short, cultural awareness although important, is greatly determined by its context. Theorists in this context have stated that there are many factors that might assist in determining the level of emphasis a company should put in for gathering cultural insights and some of the common ones are economics, politics, priorities of the company, linguistic compatibility, legal aspect and the level of engagement of the of the company with the host country. Hence, it is evident that managers of a country working in some place will obviously find difficulties in working in some other countries where the national culture is different. Now the statement will be evaluated by using real life case studies and also identifying the differences in national cultures by using Hofstede’s 5D model. The company chosen for evaluating the statement is Foster‘s Group Limited, a renowned Australian beverage company. Through the activities and approaches of Foster’s the differences as well as the significance of cultural insights will be established. Fosters group is presently headquartered in Southbank, Melbourne, Australia and the company are the subsidiary of SABMiller, British multinational firm. The case study tried to assess the significance of national cultures and how it will impact Foster’s business in China. Therefore, to strengthen the discussion, a comparison of the Australian and Chinese culture is presented below and do that, Hofstede’s 5D model will be used. (Source: Geert-hofstede, 2013) The above diagram makes it evident that there are vast differences between the cultures of China and Australia. Only except the Masculinity / Femininity dimension, other dimensions have high differences. The differences are clearly derived below in a tabular form: - Factors Australia China Power distance In this factor the country scores 36, which reflects that equal importance is given to each group. In this regards, Australia scores 80 meaning that Chinese people value others in the society and is ‘we-centric’ rather than ‘I-centric’. Individualism In terms of individualism the country scores 90 thereby reflecting a highly individualistic culture. In terms of individualism the country scores 20 reflecting the society to be non-individualistic. Masculinity / Femininity Australia scores 61 in this aspect and therefore can be dubbed as masculine society. In this aspect the country scores 66 and hence a society driven by success. Uncertainty avoidance In this aspect the country scores 51 reflecting the country has moderate interest in predicting and forecasting the future. The score of China in uncertainty avoidance index is 30 which means they have low interest in future prediction, rather they like to act according to situation. Long-term orientation In this regards, Australia scores 31 which means the country believes in short term orientation. China scores 118 in this aspect and hence it is obvious the country has strong association with its history and believes in long term results. Now getting back to the case study, Foster’s, in the year 1992 started its business in China by Joint venture approach. The key focus of the company was on maintaining a competency in its production system and as a result of that the company hired people who were capable enough to produce international standard products. This is because of the fact that the management understood that the country is highly observant about the product quality. Furthermore, the company also had to make changes in the management structure due sheer requirement in the country. The management styles adopted by the country also differs greatly and the reason is the sheer differences in the national culture (Chung and Smith, 2006). Had the country been unaware of the national culture of China, it could have faced extreme difficulties in operating in the market. The above facts clearly portrays that it is necessary to have knowledge about the national culture of a country. Conclusion The question evaluated in the study was: Considering today’s business scenario, is it necessary for the employees to have awareness about the impact of national culture on business? The study was accomplished through various techniques such as a review of the literature, real life case study analysis and also evaluation of the cultural differences of two countries. The study made it evident that vast cultural differences can be observed between two countries and as a result of that the system of business operation greatly differs. In addition, the study also found that due to the cultural differences, approaches of marketing, management styles, management structure, practices and values and operation methods differ from one country to the other. Now, in the context of the research question, the study made it evident that although knowledge of national culture is not always mandatory but having an insight provides companies with competitive advantage. However, for some product knowledge of culture is extremely important. Therefore, considering the findings from the real life case analysis and in-depth review of the literature it can be concluded that an awareness of the impact of (national) culture of people in work organizations is important in today’s world and also provide competitive advantages to the firms. Reference List Bhagat, R. S., Kedia, B. L., Harveston, P. D. and Triandis, H. C., 2002. Cultural variations in the cross-border transfer of organizational knowledge: an integrative framework. The Academy of Management Review, 27 (2), pp. 204-21. Chung, M. and Smith, W., 2006. The Impact of Cultural Differences on an Australian Firm Doing Business in China. [pdf] Available at: [Accessed 30 October 2013]. Geert-hofstede, 2013. China. [online] Available at: [Accessed 30 October 2013]. Gupta, A. K. and Govindarajan, V., 2000. Knowledge flows within multinational corporations. Strategic Management Journal, 21 (4), pp. 473-96. Hofstede, G., 1993. Cultural constraints in management theories. The Academy of Management Executive, 7 (1), pp. 81-94. Holden, N., 2001. Knowledge management: raising the specter of the cross-cultural dimension. Knowledge and Process Management, 8 (3), pp. 155-63. Levitt, T., 1983. Globalization of markets. Harvard Business Review, May-June, pp. 2-11. Shane, S., 1995. Uncertainty avoidance and the preference for innovation championing roles. Journal of International Business Studies, 26 (1), pp. 47-68. Simonin, B. L., 1999. Ambiguity and the process of knowledge transfer in strategic alliances. Strategic Management Journal, 20 (7), pp. 595-623. Takeuchi, H., 2001. Towards a universal management of the concept of knowledge, managing industrial knowledge: creation, transfer and utilization, in Nonaka, I. and Teece, D.J. (Eds), Sage: London. Read More