Cultural factors are powerful shapers of the business environment and thus the study of cultural environment for the students and managers of international business is a must. To be precise following are the reasons for studying it:
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i. The study is important because culture explains and determines many aspects of human behavior and no international business can be performed without human beings and understanding of their behavior pattern.
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ii. An increased growth in trade and investment means you have to interact more and more with people from different cultures (customers, suppliers, employees, etc). Those who cannot effectively interact with them shall have less and less opportunities for career development.
iii. Foreign consumers differ from domestic consumers in all aspects (may be partially) – what, why, who, how, when, and where of buyer behavior. To be successful, international manager must adapt to specific consumer tastes and sensitivities.
iv. Cultural awareness is equally important for the workplace as all human resource policies relating to motivation, leadership, communication, empowerment, etc shall all be dependent on the local peculiarities. These policies must be different in different cultures.
v. Nowadays mergers, acquisitions, and joint ventures being very prominent modes of international business, bring together employees of at least two different firms – each one having its own distinct corporate culture. Success or failure depends upon integration of these different cultures. There are many studies notifying the obstacles to smooth integration.
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The 1998 Daimler (German Company) / Chrysler (American Company) merger remained uneasy for many years because of the cultural approaches of the two nations (Germany- engineering solution; America- marketing solution). When General Electric Co. (GE) of the USA acquired Cie. Generale de Radiologic of France, it faced more and more of problems as it wanted to impose the GE values on French employees.
However, the Japanese Owned car factories located in the UK proved to be the most productive in Europe as Japanese did not export in wholesale the Japanese practices. “For a German, following a process or regard to authority is extremely important.
But people in Italy and Benelux tend to be less worried about processes, and are temperamentally more straight-forward.” A German finishes a job in half of the time given, whereas, the Italians, by comparison, would be struggling to hit the tail end of the target. Godrej Consumer Products Ltd (GCPL) which made seven acquisitions in the recent past, also decided not to acquire a few companies as they were culturally mismatch.
vi. Cultural differences often create ethical problems. What is moral in one culture may be immoral in another. What would be your stand would depend upon personal circumstances, but ‘truth’ should no way hamper results – the prime concern of a manager.
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vii. Understanding culture is important because people and governments feel strongly about protecting local cultural institutions, icons, and practices and the foreign firm should not make any offensive gesture. Foreign firms must adapt and adjust to the host country environment.