Impact of Culture on International Business

International Accounting Culture

Changing something as important and far-reaching as the accounting standards followed by a business can be a massive undertaking. However, this sort of complex change can be made all the more complicated when there are intense or complicated social and international factors in play. The case study studied for this report describes exactly such a situation in Egypt. That study will be reviewed in this report and other sources covering the same general topic will also be explored.

Case & Research Analysis

As for the case study itself, it is quickly noted that Egypt is a developing country but they are most certainly transitioning to a market-based economy on par with more developed parts of the world like North America and western Europe. Egypt, like much of the world, was under colonial control and that was not ceded until the revolution that occurred in the 1950's. The prevailing accounting standard in Egypt was an international one until a system specific to Egypt was developed in 1997. The changes that occurred after that were fast and furious, with major updates coming in 2002 and 2006. The latter of those two replaced much of what was initially set up in 1996 or updated in 2002 (Dahawy, Shehata & Ransopher, 2011).

One major point of potential or actual dysfunction as the standards evolved and changed was the fact that the international standards used prior were in English while the Egyptian standards were obviously in Arabic. The amount of language translation between those international standards and Arabic was often poor to non-existent for important parts of the code to be followed. The amount of trust placed in the enforcement and market mechanisms of Egypt is not all that high and that has made investors behave in a tepid fashion. The case specifically notes that better (or a start) in enforcing the standards on the book is a prerequisite for Egypt to truly be taken seriously in international markets (Dahawy, Shehata & Ransopher, 2011).

Other research reveals how exposure and operation within countries like Egypt can lead to a culture shock upon arrival and even upon returning to one's home or usual country after leaving a country like Egypt. Indeed, the jolt that ushers a massive readjustment can happen when moving in either direction. It is also possible to get a feeling of biculturalism where one is able to exist within the confines and rule of each space while at the same time being productive and functional. However, it is also possible that there can be some irritation or hostility that happens while the adjustment process is underway (Carlo, 2006).

Another treatise reviewed for this report starts off by stating one of the major truisms of politics, and that is that all politics is local. Indeed, the article states that using a cookie-cutter approach from country to country can be disastrous because of the different social and cultural differences that exist. Even coming across as "too American" can engender feelings that will make the social and cultural blowback againat a firm quite palpable and consequential. Even global juggernauts like Starbucks failed in making segues to ostensibly Western markets like Israel due to vehement disagreements regarding how the business should be run and why (Gibson, 2006).

The final article reviewed for this report speaks of a major, but certainly unintentional, faux pas committed by Richard Nixon during a visit to Brazil in the 1950's. He flashed what is known as the "A-OK" sign in United State vernacular and gesticulation. That would seem innocent enough but the problem is that the "A-OK" sign is the equivalent of flipping the bird in that part of the world. The article uses a similar example of showing the sole of one's foot in Muslim countries vs. doing it in the United States. Showing the sole of one's foot in the United States is commonplace and most people do not pay it a second thought but it's a cultural problem to many Arabs as they see the sole of the foot as unclean and thus should not be exposed in any context or situation while in public (Wade, 2004).

Analysis

The author of this report has certainly seen the proverbial social and cultural "butting of heads" that is on par with the translation issues mentioned by the case study. Just as one example, many Muslim-oriented businesses specifically and intentionally operate with their Muslim faith in mind, up to and including the use of sharia law to help draw up, execute and resolve disputes surrounding legal contracts. Such entanglement between religion and the law countries like the United States is not heard of but legal decisions are usually based on the letter of the law, whether a contract exited, whether the contract was enforceable and little else.

There obviously has to be some mediation and understanding that is met when it comes to non-Egyptian countries operating in Egypt and Egyptian companies operating in foreign countries. While it's understandable that translation issues would lead to Egypt using their own standards, there is also a major trend in the international accounting world to use international accounting standards like the International Financial Reporting Standards (IFRS) and that is done in large part to keep things as consistent as possible from country to country and from world region to world region. It would probably behoove Egypt to re-join the international accounting trend if/when the translation issues get worked out. While they may prefer to keep things in-house, it will probably slow their progress with the international community and their integration into and it and lax enforcement standards and the following thereof is not going to help. The recent kerfuffle with Morsi taking power and then being deposed after he made a power grab is only going to slow things down until thing settle, assuming that they even do so in the foreseeable future.