The Importance of Understanding Culture in International Business

Today's global economy can be a mixture of different cultures, symbols, beliefs, traditions, and
social practices. Because the global market grows and adapts to societies and companies that
cross over into different groups, having a cultural influence can be an important factor to
guarantee global accomplishment. Understanding the role and significance of culture in
international business is key to surmounting cultural obstacles that hinder corporate progress.
As the international economy transcends borders and cultures, the cultural aspects of the global
enterprise have a significant impact on the organizational structure of the enterprise. However,
corporate culture includes a much broader definition. Corporate identity includes the vision,
values, ethics, beliefs, and ideals of an organization.
In business, culture means the morals, principles, objectives, behaviors, practices, and
communication systems of a particular organization that affect its business operations, decisions,
and relationships. Corporate culture combines many ways - it includes various aspects, including
work rules, customer relations, service codes, organization, etc. A country's culture and
traditions, international trade, economic conditions, and the nature and size of the company
affect its corporate culture.
Culture has distinct definitions, however, in easy words, culture means social values, beliefs,
ideas, attitudes, and behavior of individuals or society. In a way, culture is the return of different
practices, morals, principles, and beliefs that affect the performance and part of the community, a
chosen person, or a group. Some important aspects of culture include faith, language, gender
roles, values and power, traditions, laws, and customs.
The most comprehensive definition of culture was given by the British anthropologist Edward
Tylor. According to him, culture is “That complex whole which includes knowledge, belief, art,
morals, law, custom and any other capabilities and habits acquired by man as a member of
society” (Taylor, 1871) Culture has been shown to impact International Business, particularly on
the side of group performance (Gibson, 1994)
Cultural variation in international business incorporates organized culture likewise to domestic
cultures and traditions. It assists companies in owning a much better awareness of how native
businesses and also manpower operate. Culture is an important part of international business (IB)
and international management (IM) speculation and practical investigation. Key topics, like
transnational enterprise (MNE), group action, and cross-country activities, unsurprisingly
connect with culture as a broad context that can't be ignored. (Kwok Leung, 2005).
Most recently, scholars have begun to look at culture as variable influencing business activities,
especially in terms of cross-border integration and acquisition in multinational companies. Let’s
cross-check some aspects of the importance of culture in global business to raised perceive how
it shapes world companies:
Entry into new markets: Doing business internationally involves entering new markets.
Companies should be familiar with different cultures when approaching foreign buyers or when
creating marketing campaigns for their foreign partners. Business leaders should start by learning
about local market principles, ethics, and traditions. (Casson, 1st September, 1998)
Business negotiations: Diverse cultures have different views on business discussions while
some view them as an authorized agreement between two companies, others read it as the start of
a serious relationship. Therefore, you want to understand how your colleague understands the
purpose of this discussion, whether it can be a long and rewarding relationship or a square, some
view it as a one-time bribe. (Donald W.. Hendon, 1996)
Personal designs: International business culture has a strong influence on personal appearance,
from the perspective of graduate clothing and relationships with others. Every culture has
practices and processes for business talks and meetings. Therefore, realizing the intricacies of
foreign cultures and following the accepted procedures helps a long way to create the right
opinion in business transactions is very important.
Team organization: Culture can be a determining factor that affects how different organizations
negotiate while some belief in making decisions by consent, others believe in the authority of
one leader, the UN agency, to take all the decisions. whether or not the culture promotes good
work or equality, these principles apply to all aspects of the business. Therefore, business leaders
need to understand how groups from distinct cultures organize themselves and contribute to
decision-making.
Inclusion and diversity: An organization that embraces individuals, ideas, and cultures of the
graduate society creates a reference as a comprehensive and diverse space. The sensitivity and
acknowledgment of different cultures make the production of workers strong and competent.
Also, these principles leave a lasting impression on consumers, customers, financiers, and
sponsors.
Today, the world of business is packed with cut-throat competition and most businesses are
attempting to expand their business globally. When doing business worldwide, various factors
like culture, economy and civil system of the opposite countries ought to be analyzed. Among
them, culture contains an important influence on international business. By culture, we tend to
mean language, education system, attainment rate, food habits, lifestyle, social systems, other
ways of communication prevailing within the country, etc. Once an organization expands its
business to an overseas country, language variations could produce some issues. Thus, necessary
action should be taken to employ workers who understand the language of that country.
As a result, communication plays an important role in the accomplishment of a business and
language is the core part of any reasonable communication. The learning system of a country
plays a significant role in the national culture. Hence, the company ought to deeply evaluate the
country’s learning system, and based on that communication ought to be done. Literacy rate and
culture square measure closely connected. The means of communication of literate individuals
are different from the means of communication of illiterate individuals. The food habit of the
individuals in a very explicit place contains a nice impact on the business, particularly within the
business-related that is managing the food things.
Hofstede's cultural dimension will help to study the influence of culture on international
business. According to him, cultures that think only about themselves (I-mind) will be different
from cultures that think about others (we-know). And, the different social concepts of men and
women, the way people move from the lower level to the social relations, and the character of
the people to avoid confusion show the culture of the people. Cultural dimensions by Geert
Hofstede are discussed below:
Power Distance Index (PDI): It is the limit to which members of a strong organization
recognize and assume that power is distributed unfairly. A country with a high PDI score means
that it tolerates an unequal division of power. Low PDI means energy is shared and spread out
everywhere, people don't think about situations where energy is unevenly distributed. Malaysia
is a country with a high PDI. (Sweetman, April 10, 2012) Team members don't bring anything,
but they like to be directed to get the job done. If the manager does not take responsibility, he
feels that the responsibility is not important.
Individualism v/s Collectivism: This section examines the degree of social cohesion within a
group. A high IDV score means that people do not take responsibility for the actions and
outcomes of others. A community is made up of loyal people who look out for each other's
interests. Central American states, Panama and Guatemala, have low IDV scores. (Teoh, 2021)
For example, in these countries, marketing communications are more likely to be understood and
accepted if people feel they belong to a particular group.
Masculinity v/s Feminity: In a masculine society, men are expected to behave and be brave.
Showing success and being strong and fast is considered good. Whereas, in women's society,
modesty is considered a virtue. Relationships with immediate supervisors are very important. As
Japan has a high MAS score, it means that if a company is opened in Japan, it is built with
leaders and patriarchal culture. (Jin, 2017). Sweden on the other hand is a very feminine society
where people focus on managing through compromise and negotiations (Jeff Hearn, March
22,2012).
Uncertainty Avoidance Index (UAI): It means how well people deal with anxiety. In societies
with high UAI people try to make their lives obvious. If they think that they cannot control their
life they might stop trying and put everything on fate. On the contrary, in low-scoring UAI
societies, people are more relaxed, friendly, and inclusive. Greece is a country with a high UAI
score which means there is a cultural inclination for members to make the best and most
conventional decisions despite any emotional outburst (Hagan, 2013).
Long-term v/s Short-term Orientation: Countries with long-term orientation are reasonable,
feasible, and more careful for example China, Japan South Korea. In short-term oriented
countries, people put more emphasis on principles, permanence, and truth and they are more
patriotic. The U.S is an example of short-term orientation as it is indicated in the country’s
consistent sense of patriotism and social standards (Qingke Guo, 2018).
Indulgence v/s Restraint (IVR): Countries with high IVR support the satisfaction of free
people's feelings. While low IVR scores put more effort into dissatisfaction and there are strong
social norms. Countries in Eastern Europe have low IVR. These countries are defined by a
rational culture where there is a pessimistic mindset. (Lia Blanchard , 2016).
For any successful MNC, it's essential to know the distinctions between the various cultures. The
selling of the same products within markets that are entirely different in terms of their cultural
backgrounds has forever been evidenced to be quite a tough task. Also, the services shouldn't
violate any rule or regulation supported by the culture of the country’s operative. The
promotional campaigns should also be designed by the culture of the country where the product
is going to be launched. Successful cases of different brands are discussed to explain the
importance of understanding culture in international business.
MNCs need to consider various variables that are essential to their development in different
districts. One of the most amazing positions to be cited here is of McDonald's which has been
fruitful and is an exceptionally perceived brand working in worldwide business sectors. Keeping
in mind the all-encompassing consistency of the brand across the globe, McDonald's is viewed as
a worldwide advertising endeavor since it changes itself by nearby necessities. (Zanoni, 2012)
McDonald's accepts in contriving its methodologies appropriately and fosters the district’s
explicit menu. In 2003, it sent off McArabia which is a flatbread sandwich in its Center East
cafés. Essentially, it additionally sent off its Macarons for its menu in France.
Coca-Cola is a company that has grown in different cultures, expanding it’s business and
globalization. The organization is organized around two financial institutions, its brand, and its
people. Founded in 1886, Coca-Cola runs in more than 200 countries and marketplaces with
more than 450 brands and 2,800 beverages. These include drinks, such as water, juice, tea,
coffee, sports, and energy drinks. The company owns the four largest soft drink brands in the
world, together with Coca-Cola, Diet Coke, Sprite, and Fanta.
The company focuses on important workplace activities that make it successful in its
commitment to embrace the similarities and differences of people, cultures, and ideas. (Banutu-
Gomez, November, 2012) Coca-Cola goods are produced by local people, using local resources.
Because suppliers and business partners are critical to business success, through the geographic
areas in which the Coca-Cola Company operates worldwide, they support regional economies.
A complete and comprehensive study of traditional resources is important when adapting a
product or service to a new market. Domino's Pizza began with the new home delivery service
that Americans love. To build its brand, Domino's pointed to international markets. Domino's
keeps most of the same things as America, but with a few different details. Domino's Pizza has
opted to stick with its traditional pizza delivery and take the business model across the globe.
Domino rules here and rules the market.
However, as Domino's became international and centered on research and development, they
realized that every state and culture looks at pizza differently. Does anyone think pizza is quick
and easy? Some see it as something suitable for fast food, others see it as high quality, and yet,
others see it as a simple escape. Because of this, Domino's now has many tables in its stores;
However, the luxury of maintaining and cleaning servers when the truth is not. People will help
themselves and clean up.
Domino’s prepares and changes its reports in the various departments in which it operates. As
mentioned, Domino's has included more tables in its stores to meet the needs of customers in
different countries. They have also catered to the needs of people from different countries.
(Tandon, 2012) By adapting to the needs of consumers, Domino's can provide consumers
anywhere with the pizza and experience they want. Since the majority of Indians are Hindus,
many of the pizzas featured at Domino's are vegan.
They furthermore offer oregano spice mix packs as opposed to Parmesan cheddar packets to
attract Indian culture. Likewise, the advertisement in India is different as pizza in India isn't seen
as everyday cheap food, but as an extraordinary feast food. Additionally, Domino's stores in
India are sited in extremely populous regions, for example, shopping centers to make more buzz
and attraction while in the US, the case is the opposite. While in the US deliveries are made via
car, in India, Domino's, involves mopeds for conveyance. On the roads of India, there is lots of
traffic and to finish a quick delivery, mopeds appeared to be the better choice for Domino’s.
If a business organization does not take enough care in communicating with people of different
cultures, it may result in a heavy loss of money and reputation. Different countries have different
religions and cultures. A gesture may have one meaning in one religion, but it may have other
meanings in other religions. So, when a person works overseas, or a company does business
globally, maximum care should be taken to reduce cultural errors. Moreover, companies should
try to enhance the way of business communication. Once a corporation expands its business to
any foreign country, it ought to be able to settle for the customs and tastes of that specific
country which differ from native customs and tastes. Some cases of failures due to cultural
differences are discussed.
Walmart has come into various overseas markets but has failed to imitate its initial victory in
some places. Walmart's lack of reasonable regulation of the shopping experience based on local
culture is the origin of the problem. In South Korea, the company doesn't understand locals'
inclinations for purchasing small packs at local stores, and buyer preferences are changing, The
New York Times reported. (Franco Gandolfi, April, 2008) Similar problems have led Walmart to
shut down its businesses in Germany, where groceries are being sold at lower prices. (Sahibzada
Hamza, November, 2016) Walmart took a stake in Japan's Seiyu Co. and tried to implement its
successful strategies in Seiyu stores, such as the "Everyday Low Prices" campaign. However,
BusinessWeek noted that Japan has a different tone than the U.S., as customers are skeptical of
shopping there because they associate low prices with cheap quality. (Geisler, May 11, 2012)
Dunkin' Donuts has apologized after showing an advertisement featuring a woman with
'blackface' makeup in Thailand. This ad is for Dunkin' Donuts, a "charcoal doughnut". It had
been called "racist and bizarre" by a major human rights group. Dunkin Donuts' chief manager
defended the campaign in Thailand, and a spokesman for the company told The Guardian on
Friday that it would immediately stop planned TV ads featuring the images. "Dunkin' Donuts
recognized the insensitivity of this advert and apologized on behalf of the Thai franchisees and
their companies for any offense it has caused," Karen Raskopf, chief communications officer at
Dunkin' Brands, said in a declaration provided to The Guardian. The statement said they are
working with their franchisees to pull down TV commercials and redesign campaigns
immediately.
These cultural differences can be dealt with in various ways. Before entering the host country,
find out about its traditions, practices, history, and political scene. Learning a couple of
keywords and involving them in the discussion can make them feel great. The brand’s voice and
message should be established in a language that doesn’t wind up distancing the new crowd. The
audience should be targeted in their language while communicating the brand. Work with
language specialists, preferably local speakers, who know about local dialects to confine the
brand’s marketing efforts to the interest group appropriately.
In a nutshell, Cultural awareness makes discovering the world easy. It helps us to understand our
differences moreover knowing a different culture stops us from upsetting others. As a result, we
work more efficiently across cultures. Awareness of culture helps to promote active
communication and productive globalization. Every company should make cultural awareness
the main concern. A more culturally varied and inclusive environment empowers organizations
to cooperate and interact easily. Cultural diversity enhances the working environment of an
organization. In this culturally diverse world, people feel connected to each other.
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