Due to progress in communication, transformation and technologies which have performed in development of world’s economy, people from different nations, cultures, languages and backgrounds are now communicating, meeting and doing business with each other more than ever. As there is increase in business activities between people from different nations, cultures, languages and backgrounds, companies who are operating internationally or which are going to be a global they have to concentrate on many factors to be a successful in international market. One of the significant factors among them is a culture. For the success of any business in variety of countries or regions it requires to have understanding of how cultural differences across and within nations can affect the way business is practiced. The main determinants of culture are religion, political philosophy, economical philosophy, education, language, social structure etc. Businesses have to understand and match with all this cultural determinants, as cultural sensitivity is a crucial factor in a company’s international business success.
Cultural sensitivity means being aware that cultural differences and similarities exist and have an effect on values, learning and behavior. Culture is defined by many authors as “collective programming of the minds that distinguishes the members of one group of people from another. It is in various forms which cover the areas such as politics, history, faith, mentality, behavior and lifestyle. To be a successful in international markets any business must have to determine the specific role culture plays in the company’s product markets. Culture may influence business success by consumer culture and business culture.
In international business the situation is more difficult due to differences in culture between stakeholders and customers which may lead to different views and behavior of people even in similar products markets. Therefore even in similar product markets across the countries it is crucial for the international marketers to understand the cultural differences and similarities exist to be a successful.
Consumer culture deals with the factors determining consumer decision making and behavior therefore to be a successful international businesses are required to understand such determinants.
- Social learning: Social learning is one of the important factors determining consumer decision. People may take decisions on base of what they thinks, feels and what they have learnt. Most of the learning takes place in groups of people such as family, occupational group, religious groups etc. Such learning is a result of shared knowledge and views of people from a particular group. For example generally people behave in a way of what they think and what they have learnt which may be from family or from groups of people of the same age, sex, occupation, interests, religion etc.
- Subcultures: Every culture has different subcultures such as religions, regions, racial groups etc. Group of people with similar values, views, habits, consumption preferences formulate subcultures. It is very important for the businesses to understand each subculture as it helps them to make the products or services according to needs of specific group. For example, In U.S., there are various subcultures depending on different ethnic, religious and regional groups. Each group in its own way influence the performance of business, consumer and buyer’s behavior. For e.g., Campbell’s sells different flavors of tomato soup depending on region of the country. Tomato soup sold in Montana is not as spicy as that sold in Texas.
- Education: Education level is important for success of any business locally or internationally. From an international business perspective, education plays a vital role in determining the national competitive advantage. The main reason behind this is the availability of skilled and educated workforce is the main determinant of economic success of any country or business. International businesses can choose the location of doing business on the base of educational level of that region. For example, now a days India is a good choice of destination to outsource information technology jobs, which is result of Indian education system. International businesses can also design their marketing activities according to the level of education of particular country or region.
- Language: Language is one of the important characteristic of culture. It is a mean of communication which plays a crucial part in understanding the culture, values, perceptions, beliefs and attitudes of the particular region or country. Therefore language is considered as a key to establishing excellence business relationship. For example if German company is marketing their product in India, it is necessary for the company to understand or get knowledge of different Indian languages depending on regions, religious etc. and if the company fails to do that it would affect overall success of the company in that country.
- Religion: It is necessary for any international company to understand religious factors while doing business in any country because such factors plays a important role in determining consumer choice and view about that company. For example, In India there is a large amount of Hindus and Muslims. Therefore international company like McDonald would not be successful if they keep selling the foods containing beef and pork. To be accepted by the population of the particular region or country, it has to follow the culture in which country it is operating in.
- Political Philosophy: Political philosophy means system of government in particular country. Success of any international company in particular region is depends on how the political factors of that country facilitate or obstruct the business. For example: Due to the government laws some international country might be able to run the business in particular country but if the people of that country are might be encouraged to go for domestic substitutes, then it can affect the success of any international business.
Business Culture deals with all cultural factors influencing business behavior. Same as consumer culture which influence personal consumption pattern and buyer behavior, business culture is equally important to determine accepted business behavior. There is a significant effect of society’s culture on the workplace of international business operations. Geert Hofstede has given five cultural dimensions as given below which gives better understanding about the intercultural differences within regions and between countries.
- Power distance: This focus on the equality or inequality between the people in society of particular country or in organisation. It indicates how society or organisation deals with the fact that people are unequal in physical and intellectual capabilities. Hofstede states that high power distance cultures were found at the places that let them grow overtime into inequalities of power and wealth whereas low power distance culture were found at places that tried to lower down such inequalities as much as possible and culture of low power distance is better for smooth running and overall success of any business.
- Individualism Vs Collectivism: This focus on relationship between individuals and their fellows. In individualistic societies ties between members are loose whereas in collectivism it is tight. For success of any business Collectivism culture is more preferable.
- Uncertainty avoidance: It deals with the society’s tolerance for uncertainty. It measures the level to which different cultures socialize their member to tolerate uncertain situations. Members in high uncertainty avoidance cultures requires strict laws and rules to minimize the possibilities of such situations whereas in lower uncertainty avoidance cultures, members are ready to take risks and less emotional resistance to change. Required level of uncertainty avoidance is depends on types of business though, high Level of uncertainty avoidance is preferable up to certain limit as in such culture people resist change, which is sometime not preferable for well-being of the company.
- Masculinity: This focus on the relationship between gender and work roles. In masculine cultures organisation makes difference between sex roles while handover particular job or task whereas Feminine culture does very less difference between sex roles. Very little difference is made between men and women in the same job.
- Long-term Orientation (LTO): It focuses on the level to which the culture holds the long-term orientation. High LTO shows that the country or organisation imposes long term commitment and respect for the traditions whereas in low LTO its vice-a-versa. In low LTO, change can take place much faster as traditions and commitments don’t turn into barriers to change.
Thus any international businesses have to follow the business culture depending on the countries they are operating in.
- Ethnocentric: It is the view that one’s own culture is better than others. Ethnocentrism can be seen in many aspects of culture–myths, folktales, proverbs, and even language. As per ethnocentric culture, home country’s culture is used to define the culture of the whole company i.e. such companies use their domestic culture in all the countries they are operating in. This may could be unaccepted for the people and management working in different countries due to their own beliefs, values and culture which might be totally different than company’s culture which could affect the success of company in other countries.
- Polycentric: As per the polycentric, host country culture is dominant within the MNE i.e. international companies are likely to accept culture of the countries they are operating in. Management follows the traditions, values, styles and customs of local staff. That means there is no common culture in whole company which may create a gap in its operation in different countries. However more often such companies are more likely to be accepted in any countries as companies follow the traditions, values and customs of host country.
- Geocentric: It indicates that instead of following home country culture or host country culture, companies formulate a hybrid culture across the company. In geocentric companies management consider organisation’s overall goals and plans from a wider view rather than simply follow the culture or traditions of the company. The companies which implements geocentric approach can make best possible use of its available resources and achieve the highest possible overall performance. Companies are more likely to follow geocentric culture to be a successful internationally as well as to avoid internal and external conflicts related to its operations.
Thus after understanding all above different point we can understand that the cultural sensitivity is crucial for company’s international business success. It is the company who decide which kind cultural sensitivity i.e. ethnocentric, polycentric or geocentric is required to be a successful international company though geocentric approach is preferable for the companies to follow as it formulate the cross-culture instead of following host or home county’s culture and simply gives importance to goals of the company. Due to such kind of approach employees familiarize with both countries culture which also helps to socialize them with each other which is necessary to avoid conflicts due to the cultural gaps between the employees of different countries. This results in smooth running of operations of the company and thereby it leads company towards success.
Along with the cultural sensitivity it is also important for the international companies to understand the consumer culture and business culture of the country they are operating in. Consumer culture helps companies to understand demand of the consumers of the particular country depending on different factors such as language, religion, religious, beliefs, education etc. Whereas business culture helps companies to design their operations or activities based on business culture of the country they are operating in. For e.g. If Indian company operating in UK where power distance is much lower compared to India, it has to follow the culture of UK otherwise employees are unlikely to behave or perform well which can affect the overall success of the company. Therefore companies are also required to understand consumer and business culture as it plays a crucial role in overall success of international companies.