Understanding on National and Organizational Culture in International Business

Today’s business is highly globalized, trading has been much liberalized, with enterprises operating both on the local and global market, having numerous links with entities from different countries. For instance, an American might drive in a car designed in Germany which was assembled in Mexico by Ford from components made in the United States and Japan that were fabricated from Korean steel and Malaysian rubber. A vast majority of enterprises operates in the international environment, where the cross-cultural factor is of tremendous importance, exerting a major influence on the success of transactions and maintenance of good relations between counterparties or employees of different cultural background employed in one enterprise, while apprehending cultural differences can be essential for gaining and sustaining competitive advantage. Globalization and international business are a cross-cultural contact understood as a meeting between individuals from different cultures, having different traditions and hierarchies of value. While there are a number of ways to define culture, put simply it is a system of values and norms that are shared among a group of people and that when taken together constitute a design for living (Textbook).

Moreover, determinants of culture are manifested through language, religion, social structure, education, political philosophy and economic philosophy. In order to understand and influence consumers’ wants and needs, foreign enterprises must able to handle cultural differences, as lack of cross-cultural knowledge can lead to conflicts and misunderstandings, caused large losses. For instance, Best Buy unable to come to grips with the cultural differences between China and the United States, therefore it unable to find footing and gain traction in the booming Chinese marketplace. First, it did not gauge the price sensitivity of the Chinese consumers that they will not pay for Best Buy’s overly expensive products unless they are brand like Apple. Second, it did not understand Chinese consumers’ shopping preferences, such as preferring smaller, more conveniently located retailers due to the shortage of parking spaces and the extreme amount of traffic congestion in many Chinese cities. These seemingly easy-to-understand cultural issues have created difficulties for Best Buy. Meanwhile, eBay failed to recognize the power of the China established market leader (TaoBao) and the core feature provided by this market leader, which is the built-in instant messaging.

Chinese customers prefer to develop trust through their interactions with sellers rather than eBay’s seller rating system that based on feedback from past buyers. Customers valued, depended on able to see a seller’s online status and communicate with them easily. Clearly, built-in instant text messaging is a solvable obstacle in doing business in China Another example of corporation failed in expanding international business is Walmart unable to operate in Germany and South Korea. Walmart, a well-known American founded discount retailer has made forays into numbers of foreign markets but been unable to replicate its original success in Germany and Korea due to Walmart not fine-tuning the shopping experience to the local culture. For instance, in Germany, many people utilize the convenient public transportation systems, therefore driving to the undesirable locations Walmart bought was somewhat unrealistic to expect of German consumers. Moreover, Walmart did not adapt its products or strategies to accommodate the German culture as well. For instance, walking into a Walmart store in the United States, it is a common practice to be greeted by a smiling associate at the door. However, this same demeanor has made Germans felt uncomfortable to being greeted by someone they do not know with a smile (Macaray, 2011).

Furthermore, according to The New York Times (), Walmart closure in South Korea are contributed to customers could find groceries for lower price at local stores and consumers preferences for buying small packages at various stores rather than to buy in bulk. These are classic examples of not understanding cultural differences. Furthermore, Tesco, a very successful British multinational grocery retailer also made a cultural mistake while entering the United States. For instance, it did not utilize coupons, has failed to embrace Americans’ love of coupons and opened small stores that only around one-fifth of average American grocery store, which catered more toward European shoppers, since American grocery shoppers prefer large stores where they can purchase everything needed in one stop.

Moreover, Tesco operating model in U.S has reduced to a minimum face-to-face interaction with customers which American grocery shoppers tend to favour. These mistakes had resulted in fewer customers and less sales, lead to Tesco left American marketplace. As shown all the four companies have struggled in lacking local cultures and consumer preferences knowledge. Therefore, to attract and retain local customers, firm needs to tailor its offerings to local preferences and economic conditions, as firms entering a foreign market should not expect consumers to change their buying habits. KFC’s successful venture in China has attributed to it acquire cross-cultural knowledge in international business. KFC China has not only adapted to Chinese culture, but has diligently striven to know its customers, tailored its product specifically to Chinese tastes for local communities. For instance, they came out with the highly localised menu includes Beijing Chicken Roll (à la Beijing Duck) served with scallion and seafood sauce; Spicy Diced Chicken resembling a popular Sichuan-style dish, and also the latest creation, Chinese dough fritters.

As seen products localization has been implemented to integrate the inherent qualities of the Chinese markets. Moreover, by infusing a Western brand with Chinese characteristics, the company’s managers sought to stretch the brand so that consumers would see KFC not as a fast-food chain selling inexpensive Western-style items but as restaurants offering the variety of foods and the traditional dishes that appeal to Chinese customers. Besides, religion has played an important factor of cultural differences, as different religion shared difference perceptions and belief which derive local communities’ preference.

Religion may be defined as a system of shared beliefs and rituals that is concerned with the realm of the sacred. One of the examples of religion factors that affect international business can be found in McDonald in India. Hinduism in India challenged McDonald as Hindu culture has very strong belief and it has remained unbroken and largely unchanged for at least five thousand years. In line of Indian’s Hindu culture that has revered the cow and do not eat the meat of the scared cow, India is the first country in the world where McDonald’s does not offer any beef or pork items. McDonald's has redesigned their core products to cater for the religious needs of the market by developing a menu with vegetarian selections to suit Indian tastes and culture. It has also re-engineered its operations to address the special requirements of vegetarians, such as special care is taken to ensure that the vegetable products are prepared separately, using dedicated equipment and utensils.

Changes are further evident in the restaurant management system with different menu boards - green for vegetarian and purple for non-vegetarian products. Similarly, separate restaurant kitchens for meat and non-meat were established with kitchen employees wearing different uniforms to distinguish their roles. Furthermore, Confucianism and Confucian ethics influence behaviour and shape culture in parts of Asia. Confucian ethic is central to the Chinese concept of guanxi, which refers to relationship networks supported by reciprocal obligations. Guanxi means relationships, although in business settings it can be better understood as connections. Today, the society of China lacks a strong rule-based legal tradition, and thus legal ways of redressing wrongs such as violations of business agreements, guanxi is an important mechanism for building long-term business relationships and getting business done in China. The importance of guanxi can be shown in the management of DMG-Shanghai. Dan Mintz, the founder of DMG, had no prior experience in the fields of advertisement. He had no contact in China, even no Mandarin skills. However, he had guanxi with two young Chinese who have connections with people of various levels.

Making their connections as bedrock of the company’s guanxiwang, they were able to emerge as one of the China’s fastest growing advertising agencies. Overall this is an advantage that DMG was able to acquire due to the fact that Wu was a recognized national champion and Xiao has political connections. To conclude, Confucianism stresses the importance of relationships, therefore establishing connections with Chinese individuals with access to high ranking government official are critical to the success of the company, as it will help you work around the law and it can open doors for your business that normally cannot be opened in China. Besides, Johnson & Johnson corporation’s product development teams have responded to different religion issue by developing Listerine Zero for Muslim countries, which is alcohol-free and appropriate for Muslim communities where sprits are forbidden. Culture determinants of education and language have played a critical role in managing employees from different culture, which can be seen from venture of Hyundai Motors in India. Hyundai Motor India Ltd. is a sub division of the giant South Korean multinational, the Hyundai Motor Company. It is Korea’s top automobile manufacturer, capturing the Indian market and giving a strong competition to its rivals in the same segment.

The company success story is based on a profitable Indian – Korean partnership, where Indian skills and workmanship combine with Korean design and technology to produce one of the best cars. However, the relatively low education level and skill among Indian labour correspond to Korea, has created tension between Korean managers and technical advisers that posted to HMC India and the Indian local management. Therefore, the demarcation line between different employees’ segments are also greater as workforce is more segmented and there is a more hierarchical structure in India. Thus, availability of a pool of skilled and educated workers seems to be a major determinant of the likely economic success of a country. Another important contributing factor related to the management style displayed by Hyundai Motor’s Korean employees, which Indian workers felt unfriendly to dominating Korean language in India. They criticized that their Korean colleagues interacting with each other in the Korean language habitually, which precluded Indians from making decision. While, Korean managers also demanded that the Indians lacked strong working principle and thus a more sternly regulation is important to achieve required levels of productivity.

Koreans also claimed that the caste scheme intervened with the effective operation because some Indian managers were assigned to arrangement according to their own caste position rather than on merit basic. While, HMC has gained from this failure and therefore if it was ambitioned to be part of player in automobile manufacturing globally, it need to develop a more extensive and organized approach to working relations As seen from the example above, language is one of the major issues when it comes to communicating and interacting with local consumers and business partners effectively (Tayeb, 1998).

Several studies showed that a link exists between successful company performance in winning new business in foreign markets and the ability of the company to conduct its business in the language of the customer. In addition, Walmart’s successful venture in Mexico has attributed to its consideration for local language issue. Walmart is a successful retail store in the United States and has lots retail chain in the world. However, when Walmart first entered the Mexican market, a string of management missteps and cultural conflicts has caused Walmart to incur significant net losses. Thus, to survive in Mexico, Walmart has provided much effort to blend in with the indigenous landscape, including to adapt local languages. For example, in the southwestern-central highlands of Mexico, Walmart used the Zapotec language—a Mesoamerican language—in its stores to connect with local consumers (Cornell 2010). It hired Zapotec-speaking interviewers to make local applicants comfortable.

At morning sales meetings, the customary Walmart cheer is now shouted in Zapotec (‘‘Gimme a W!’’ is ‘‘Dane Na Ti W!’’) as well. Moreover, advertisements are now broadcast in Zapotec by female speakers in traditional flowing skirts and ornate blouses. Inside the store, shoppers hear the vociferous trumpets and cymbal clashes of local melodies, called sones de Tehuantepec (Lyons 2007). These strategies that applied to adapt local language issues has caused Walmart being able survive no matter what environment they are in.

Generally, culture’s effect in international business also include negotiating international business ventures. People with different cultural backgrounds often do not share the same basic assumptions and this has an influence on international business negotiations on several levels. For example, the trust between parties, attitudes toward each other during negotiations and tactics and flexibility while negotiating can be affected. According to Chang (2003), to conduct successful business negotiations in a cross-cultural context, it must think in the other side of culture, such as understand the various negotiation styles and the cultural issues that influence behaviour during negotiation. Different cultures use different negotiation styles, and a party‘s style in negotiating directly impacts the terms of the final agreement.

Generalizing from the examples above, companies that do business internationally must understand the organizational and national culture of others, while adapting those culture prevails in countries they do business able to avoid cultural mistakes. To develop cross-cultural literacy, international businesses need to employ host-country nationals, build a cadre of cosmopolitan executives, and guard against the dangers of ethnocentric behavior. Moreover, to combat the danger of being ill-informed, international businesses can consider employing local citizens to help them do business in a particular culture. To conclude, it is inevitable when a company is going abroad, culture must always be considered as an important issue that affects the entire cooperation in the foreign country.